[Federal Register Volume 73, Number 22 (Friday, February 1, 2008)]
[Proposed Rules]
[Pages 6073-6080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-1860]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 256

[Docket ID: MMS-2007-OMM-0064]
RIN 1010-AD44


Bonus or Royalty Credits for Relinquishing Certain Leases 
Offshore Florida

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Proposed rule.

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SUMMARY: The MMS proposes to amend its regulations for oil and gas 
leases on the Outer Continental Shelf to implement a mandate in the 
Gulf of Mexico Energy Security Act of 2006. This proposed rule would 
(1) provide a credit to lessees who relinquish certain eligible leases 
in the Gulf of Mexico; (2) define eligible leases as those within 125 
miles of the Florida coast in the Eastern Planning Area and certain 
leases within 100 miles of the Florida coast in the Central Planning 
Area; and (3) allow lessees to use the credits in lieu of monetary 
payment for either a lease bonus bid or royalty due on oil and gas 
production from most other leases in the Gulf of Mexico or to transfer 
the credits to other Gulf of Mexico lessees for their use.

DATES: Submit comments by April 1, 2008. The MMS may not fully consider 
comments received after this date. Submit comments to the Office of 
Management and Budget on the information collection burden in this 
proposed rule by March 3, 2008.

FOR FURTHER INFORMATION CONTACT: Marshall Rose, Chief, Economics 
Division, at (703) 787-1536.

ADDRESSES: You may submit comments on the rulemaking by any of the 
following methods. Please use the Regulation Identifier Number (RIN) 
1010-AD44 as an identifier in your message. See also Public 
Availability of Comments under Procedural Matters.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Select ``Minerals Management Service'' from the agency drop-down menu, 
then click ``submit.'' In the Docket ID column, select MMS-2007-OMM-
0064 to submit public comments and to view supporting and related 
materials available for this rulemaking. Information on using 
Regulations.gov, including instructions for accessing documents, 
submitting comments, and viewing the docket after the close of the 
comment period, is available through the site's ``User Tips'' link. All 
comments will be posted to the docket.
     Mail or hand-carry comments to the Department of the 
Interior; Minerals Management Service; Attention: Regulations and 
Standards Branch (RSB); 381 Elden Street, MS-4024, Herndon, Virginia 
20170-4817. Please reference ``Bonus or Royalty Credits for 
Relinquishing Certain Leases Offshore Florida, 1010-AD44'' in your 
comments and include your name and return address.
     Send comments on the information collection in this rule 
to: Interior Desk Officer 1010-AD44, Office of Management and Budget; 
202-395-6566 (fax); e-mail: [email protected]. Please also send 
a copy to MMS.

SUPPLEMENTARY INFORMATION:

Background and Summary of the Proposed Rule

    Congress passed, and on December 20, 2006, the President signed, 
the Gulf of Mexico Energy Security Act of 2006 (GOMESA), Public Law No. 
109-432.

[[Page 6074]]

Section 104(c) of that statute authorizes the Secretary of the Interior 
(Secretary) to issue a bonus or royalty credit for the exchange of 
certain leases located offshore of the State of Florida. The statute 
defines leases eligible for the credit as those in existence on the 
enactment date of the GOMESA and located both within specified Outer 
Continental Shelf (OCS) planning areas and distances from the Florida 
coastline. The statute sets the size of the credit as equal to the 
bonus and rental paid for the relinquished eligible lease, and limits 
its use to payments by lessees of bonuses and royalties for leases in 
the Gulf of Mexico (GOM) not subject to revenue sharing under section 
8(g) of the Outer Continental Shelf Lands Act (OCSLA) (43 U.S.C. 
1337(g)). Finally, the statute mandates a regulatory process for 
notifying the Secretary of a lessee's decision to exchange a lease for 
a credit, issuing the credit, allocating the credit among multiple 
lease owners, and transferring the credit to other parties.
    To implement section 104(c), MMS proposes to add a new subpart N to 
30 CFR part 256. Part 256 deals with OCS lease administration, 
including transfer and termination of a lease. After briefly reviewing 
the credit issuing process, the following discussion explains how MMS 
proposes to handle redemption of the credits.

Issuing Credits

    Section 104, together with the definitions in section 102(1), (4), 
and (5), identifies the offshore area in which existing leases are 
located to be eligible to be exchanged for the credit. Therein, 
reference is made to parts of the Central Planning Area (CPA) and the 
Eastern Planning Area, as designated in the Draft Proposed Program 
Outer Continental Shelf Oil and Gas Leasing Program 2007-2012, dated 
February 2006. However, the area does not include all of the CPA in the 
area eligible for the credits. The GOMESA limits the included part of 
the CPA to the portion of the CPA within 100 miles of the coastline of 
the State of Florida, and to the area that lies either within a 
particular area shown on a map that MMS published 10 years ago, or, 
east of a particular coordinate line on the Pensacola Official 
Protraction Diagram.
    The MMS previously delineated the area in which leases are eligible 
for the credit using Official Protraction Diagram (OPD) designations. 
The OPD, in conjunction with the OCS block numbers, uniquely identifies 
each OCS block by a designated numbering system. The planning area 
boundaries that were in effect when MMS published the referenced maps 
coincided with the OPD boundaries. After recent changes MMS made in the 
boundary between its Eastern, Central, and Western Planning Areas for 
the GOM, the new planning area boundaries do not coincide with the pre-
existing OPD boundaries. Thus, definitions added to Sec. Sec.  256.5 
and 256.90 propose to use OPD boundaries to define the western extent 
of the eligible area. The northern and eastern extent of the eligible 
area is the seaward boundary of the State of Florida.
    The GOMESA defines the southern extent of the eligible area by 
reference to the distance from the Florida coastline. Parts of three 
OPDs (Desoto Canyon, Destin Dome, and Pensacola) are both in the 
eligible part of the new CPA and within the requisite 100 miles of the 
Florida coastline. Other parts of these three OPDs, as well as other 
OPDs, are in the new Eastern planning area and within the requisite 125 
miles of the Florida coastline. These areas contain a total of 79 still 
active leases as of the end of calendar year 2006. The GOMESA makes all 
of these leases that were in effect on December 20, 2006, the date of 
enactment of the GOMESA, eligible for this exchange program. The MMS 
seeks comments on whether this interpretation of eligibility for the 
credits based on location and lease status complies with the 
requirements specified in GOMESA.
    Section 256.91 proposes to grant credits equal to the original 
bonus paid for the relinquished lease plus the cumulative rental paid 
on that lease since issuance. Because the GOMESA explicitly values the 
credits as equal only to the sum of these two costs, no authority 
exists to include reimbursement for any other costs. Thus, MMS will not 
credit or value any exploration costs incurred in connection with 
eligible leases for purposes of issuing credits; nor will MMS include 
time value of money (interest) in calculating the amount of a credit. 
The MMS estimates the aggregate value of credits available under the 
statutory formula as slightly more than $60 million.
    The following table lists each lease identified under the proposed 
interpretation of GOMESA that is eligible for the credit and the amount 
of the credit. MMS seeks comments about whether any variations exist 
between the data in this table and the information held by the lease 
owners.

                             Leases and Amounts Eligible for Bonus or Royalty Credit
----------------------------------------------------------------------------------------------------------------
                                                       Lease                      Rental paid to
                    Lease No.                     effective date    Bid amount      12/31/2006     Total credit
----------------------------------------------------------------------------------------------------------------
G06390..........................................        2/1/1984        $957,000         $86,400      $1,043,400
G06401..........................................        2/1/1984       1,103,450          51,265       1,154,715
G06402..........................................        2/1/1984       1,106,780          85,825       1,192,605
G06406..........................................        2/1/1984       1,607,800          69,120       1,676,920
G06407..........................................        2/1/1984       1,308,800         311,040       1,619,840
G06408..........................................        2/1/1984       1,106,430         103,105       1,209,535
G06409..........................................        2/1/1984       1,213,500         103,105       1,316,605
G06440..........................................        2/1/1984         918,500          82,032       1,000,532
G06464..........................................        3/1/1984       1,107,500          57,762       1,165,262
G06469..........................................        2/1/1984       1,613,500          75,038       1,688,538
G06470..........................................        2/1/1984       1,107,500          75,038       1,182,538
G06474..........................................        2/1/1984       1,610,800          75,038       1,685,838
G06475..........................................        2/1/1984       1,201,700          75,038       1,276,738
G06476..........................................        2/1/1984       1,107,500          75,038       1,182,538
G06477..........................................        2/1/1984         908,700          75,038         983,738
G08308..........................................        3/1/1987       2,877,000          77,866       2,954,866
G08309..........................................        3/1/1987       2,325,000          17,173       2,342,173
G08310..........................................        3/1/1987       1,165,000          17,173       1,182,173
G08333..........................................        2/1/1988       1,379,000          71,854       1,450,854
G08334..........................................        2/1/1988       1,379,000          71,854       1,450,854
G08346..........................................        2/1/1988       1,355,000          67,593       1,422,593

[[Page 6075]]

 
G08361..........................................        8/1/1986       1,837,000          59,107       1,896,107
G08362..........................................        8/1/1986         944,000          59,107       1,003,107
G08363..........................................        8/1/1986       3,276,000          59,107       3,335,107
G08364..........................................        8/1/1986       2,377,000          59,107       2,436,107
G08365..........................................        8/1/1986       1,857,000          59,107       1,916,107
G08366..........................................        8/1/1986         944,000          59,107       1,003,107
G08367..........................................        8/1/1986       1,363,000          59,107       1,422,107
G08368..........................................        8/1/1986       1,117,000          59,107       1,176,107
G10404..........................................        4/1/1990         157,000          52,100         209,100
G10405..........................................        4/1/1990         145,000          52,100         197,100
G10408..........................................        4/1/1990         149,000          52,100         201,100
G10409..........................................        4/1/1990         187,000          52,100         239,100
G10410..........................................        4/1/1990         209,000          52,100         261,100
G10413..........................................       11/1/1989         150,550          51,899         202,449
G10414..........................................       11/1/1989         150,550          51,899         202,449
G10415..........................................        4/1/1990         153,000          52,100         205,100
G10417..........................................       11/1/1989         306,200          64,811         371,011
G10426..........................................        6/1/1990         150,550          37,199         187,749
G10427..........................................        6/1/1990         150,550          37,199         187,749
G10428..........................................       11/1/1989         218,880         115,445         334,325
G10429..........................................       11/1/1989         155,300          41,827         197,127
G10430..........................................        6/1/1990         145,000          47,330         192,330
G10431..........................................        6/1/1990         938,500          41,649         980,149
G10432..........................................        6/1/1990         330,900          41,649         372,549
G10433..........................................        6/1/1990         900,600          41,649         942,249
G10434..........................................        6/1/1990         245,200          41,649         286,849
G10435..........................................        6/1/1990         376,500          41,649         418,149
G10436..........................................       11/1/1989       2,102,400         115,445       2,217,845
G10437..........................................       11/1/1989         910,080         115,445       1,025,525
G10438..........................................       11/1/1989         155,200          41,747         196,947
G10439..........................................       11/1/1989         167,200          76,387         243,587
G10440..........................................       11/1/1989         184,500          80,743         265,243
G10443..........................................       11/1/1989         560,600          80,743         641,343
G10446..........................................       10/1/1990         146,000          61,995         207,995
G10447..........................................       10/1/1990         146,000          61,995         207,995
G10448..........................................       10/1/1990         146,000          61,995         207,995
G10449..........................................       10/1/1990         153,000          61,995         214,995
G10450..........................................       10/1/1990         153,000          61,995         214,995
G10451..........................................       10/1/1990         145,000          61,995         206,995
G10452..........................................       10/1/1990         168,000          61,995         229,995
G10453..........................................       10/1/1990         153,000          61,995         214,995
G10454..........................................       10/1/1990         168,000          61,995         229,995
G10455..........................................       10/1/1990         148,500          41,922         190,422
G10456..........................................       10/1/1990         156,100          41,922         198,022
G10459..........................................       10/1/1990         181,500          41,922         223,422
G10460..........................................       10/1/1990         148,700          41,922         190,622
G10461..........................................       10/1/1990         159,200          41,922         201,122
G10462..........................................       10/1/1990         196,500          41,922         238,422
G10463..........................................       10/1/1990         151,700          41,922         193,622
G10464..........................................       10/1/1990         157,500          41,922         199,422
G10465..........................................       10/1/1990         147,300          41,922         189,222
G10466..........................................       10/1/1990         147,300          41,922         189,222
G10471..........................................       10/1/1990         163,500          41,922         205,422
G10472..........................................       10/1/1990         195,400          41,922         237,322
G10473..........................................       10/1/1990         192,600          41,922         234,522
G10477..........................................       10/1/1990         157,600          41,922         199,522
G10484..........................................       10/1/1990         145,000          61,995         206,995
G10485..........................................       10/1/1990         158,000          61,995         219,995
                                                 ---------------------------------------------------------------
79..............................................  ..............     $55,458,120       4,944,064      60,402,184
----------------------------------------------------------------------------------------------------------------

    The process proposed by Sec.  256.92 for claiming a credit would 
begin when all parties holding record title interests in an eligible 
lease notify the Regional Supervisor for Leasing and Environment in the 
MMS GOM Regional Office of the decision to exchange the lease. Parties 
holding record title interest in an eligible lease are permitted up to 
1 year from the effective date of the final rule to apply for these 
credits. After that date, MMS will no longer accept applications for 
the credits provided for in this rule. In addition to a request for a 
credit, the notification would include: (1) The name of a contact for 
each record title holder; (2) the percentage record title interest of 
each owner; (3) a list of the bonus and rental payments made by, or on 
behalf of, all current owners of the lease; and (4) the form

[[Page 6076]]

(Form MMS-152, Relinquishment of Federal Oil and Gas Lease) necessary 
to execute relinquishment according to Sec.  256.76. The MMS would 
confirm the percentage interest and payments claimed by the current 
owners and add any bonus bid or rental payments made by prior owners to 
determine the credit amount.
    Once the adjudication unit in the MMS GOM Region has approved the 
exchange, the MMS' Minerals Revenue Management (MRM) office would post 
the credits in the appropriate company payor accounts of the record 
title interest owners. The credit would become available when MMS sends 
a written certification to the record title interest owners of an 
eligible lease that this lease has qualified for a credit of a specific 
amount.
    In the case of multiple record title interest owners of an eligible 
lease, Sec.  256.93 proposes that MMS would allocate the credit to each 
record title interest owner based on its percentage of total ownership 
interest in the lease at the time the owners submit to MMS the request 
to exchange the lease.
    The MMS recognizes that the original lessee(s) would have made 
bonus payments. If the original lessee sells its record title interest 
in a lease, the financial terms of the sale will have compensated the 
original lessee, in some manner satisfactory to it, for the bonus 
payment it made for its record title interest. Thus, the current record 
title interest owners made the timely and legally binding investment to 
acquire and hold the right to explore for and produce the oil and gas 
that may underlie the seabed on that lease. Therefore, MMS would 
allocate current record title interest owners the credit usable to 
acquire an interest in another lease or to pay royalties on production 
from another lease. Moreover, if the terms of any particular operating 
rights assignment imply any right or interest in that credit on the 
part of the assignee, then the current record title holder and the 
assignee may resolve that issue between themselves.

Redeeming Credits

    Section 256.94(a) proposes to authorize current record title 
interest owners to redeem these credits as either payment of bonus bids 
or royalties paid in value. The notice MMS sends certifying that a 
lease has qualified for a credit would include the amount of the credit 
and instructions on how to apply the credit, either to a bonus payment 
due on a successful bid for new leases or to royalties reported due on 
Form MMS 2014--Report of Sales and Royalty Remittance for other leases.
    Under section 104(c)(3) of the statute, the credit may not be used 
in lieu of payments due under a lease subject to the revenue 
distribution provisions of section 8(g) of the OCSLA (43 U.S.C. 
1337(g)). Under section 8(g)(2), the Secretary pays 27 percent of 
bonuses, rents, royalties, and other moneys collected from leases lying 
within 3 nautical miles of the seaward boundary of a coastal state to 
that state (or 27 percent of the portion of such revenues corresponding 
to the portion of the lease that lies within 3 nautical miles of the 
state's seaward boundary). Proposed Sec.  256.94(a) contains this 
restriction.
    Provisions in section 105 of the GOMESA create certain other 
revenue distribution requirements in addition to the 8(g) provisions. 
Since Congress certainly knew of, but did not include, these newer 
revenue distribution programs in this exclusion, this proposal allows a 
bonus or royalty credit to be used for payments due from leases subject 
to these newer revenue distribution provisions.
    Because using a credit to pay a bonus or royalty in lieu of payment 
in cash results in the United States receiving less money than if the 
bidder or lessee paid in cash, it necessarily follows that any 
distribution of royalty or bonus payments to a state or coastal 
political subdivision under GOMESA section 105 would result in a 
corresponding reduction from what it would have been had the entire 
payment been made in cash. However, MMS projects that the financial 
impact of section 105 on the coastal states during fiscal years 2007 
through 2016 would be very limited. In that time period, under the 
definition of ``qualified Outer Continental Shelf revenues'' in GOMESA 
section 102(9), section 105's distribution requirements apply only to 
revenues derived from new leases issued after GOMESA's enactment in the 
portion of the 181 Area located in the Eastern Planning Area and to the 
181 South Area. Production and royalty from such leases will not occur 
anytime soon. Further, MMS allocates the portion of qualified Outer 
Continental Shelf revenues paid to Gulf producing states between those 
states based on an inverse distance formula. Therefore, any financial 
impact on a particular state of a reduction in a particular bonus 
payment for a new lease in the subject areas because of use of a bonus 
credit should be very minimal. In fact, lessees who obtain credits will 
more likely apply them to royalties due under other existing leases 
with no revenue distribution to non-Federal recipients, or transfer 
them to other parties for that purpose, thus further reducing the 
financial impact to states and localities from this treatment of 
credit.
    The GOMESA limits the credit to monetary payments. The MMS makes 
explicit in proposed Sec.  256.94(b) that the credit does not apply to 
royalty-in-kind (RIK) deliveries. Section 102 of the statute defines 
the credit as follows:

    The term ``bonus or royalty credit'' means a legal instrument or 
other written documentation, or an entry in an account managed by 
the Secretary, that may be used in lieu of any other monetary 
[emphasis added] payment for--
    (A) a bonus bid for a lease on the outer Continental Shelf; or
    (B) a royalty due on oil or gas production from any lease 
located on the outer Continental Shelf.

    The RIK deliveries are not monetary payments. Since the lessee 
fulfills its royalty obligations by delivering a volume of oil and gas 
to MMS, the lessee pays no money when paying the RIK. Thus, a lessee 
cannot use a monetary credit in lieu of delivering RIK. Under current 
circumstances, exclusion of RIK would confine the application of a 
royalty credit under the proposed rule to about 30 percent of the 
roughly $4 billion in royalty generated annually by GOM producers. 
Recent royalty collections from 8(g) sources in the GOM total about 3 
percent of all oil and gas royalties collected offshore in the GOM. 
Thus, annual royalties currently paid in cash, to which credits under 
this proposed rule may apply, total over $1 billion under leases on 
tracts in the GOM lying outside the ``8(g) zone''--more than 16 times 
the total value of credits that could be issued under this rule, even 
if no credits were applied to bonus payments in future lease sales.
    Section 256.94(c) proposes to address credits that remain unused 
after 5 years from the date MMS issues the credits. The section would 
state that if any credit remains unused after 5 years from the date MMS 
issued the credit, the MMS reserves the right to apply the remaining 
credit to the credit holder's ongoing obligations at MMS's discretion.
    Section 256.95 proposes to allow current record title interest 
owners to transfer credits to other parties. The transferee of the 
credit could use the full face amount of the credit. (Any discount in a 
payment from the transferee to the transferor of the credit would be a 
matter solely between those two parties.) This attribute of the credit 
would largely mitigate any perceived limitation imposed by restricting 
use of the credit to future bonus or royalty in-value due. As 
indicated, the expected aggregate size of the credits created

[[Page 6077]]

under section 104(c) constitutes only about 6 percent of the royalty 
in-value collected annually in the GOM. Thus, an ample market should 
exist for companies that wish to transfer rather than directly use 
credits they may receive.
    When MMS receives the necessary transfer information, MRM will 
adjust the financial accounts of the transferor and transferee 
accordingly. The credit becomes available when the MMS sends a written 
confirmation to the transferee. Rather than create a standard form that 
must be executed to effect a credit transfer, this rule proposes to 
rely on a ``Letter of Agreement'' signed by an authorized official of 
both the transferor and transferee companies to transfer a bonus or 
royalty credit. A more formal process does not appear warranted by the 
few companies involved, all of which have other Gulf of Mexico 
activities, and the size of the credits relative to authorized uses. 
The MMS seeks comments on whether a high volume of transfers would 
warrant a more formal credit transfer process like that used for lease 
assignments.
    To summarize, this proposed rule would offer credits equal to past 
bonus and rental payments made in connection with 79 offshore leases 
near Florida in exchange for relinquishment of these leases. The 
necessary restrictions that MMS proposes for the use of those credits 
would not compromise their value because the credits would have no 
expiration date, are transferable, and in aggregate are quite small in 
magnitude relative to the bonus or royalty-in-value payment obligations 
to which they can be applied. The credits may be used to meet future 
bonus or royalty-in-value payments for leases in the GOM outside the 
8(g) zone.

Procedural Matters

Regulatory Planning and Review (Executive Order (E.O.) 12866)

    This proposed rule is not a significant rule as determined by the 
Office of Management and Budget (OMB) and is not subject to review 
under E.O. 12866.
    (1) This proposed rule would not have an annual effect of $100 
million or more on the economy. It would not adversely affect in a 
material way the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities. The total value of the credit is defined by 
statute as bonuses and rental paid on the leases in the eligible area. 
The MMS records show 79 leases are eligible. Total bonuses and rentals 
paid in connection with these leases is about $60 million.
    (2) This proposed rule would not create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency 
because the credit is confined to leases in Federal offshore waters 
that lie outside the coastal jurisdiction of State and other local 
agencies.
    (3) This proposed rule would not alter the budgetary effects of 
entitlements, grants, user fees or loan programs, or the rights or 
obligations of their recipients.
    (4) This proposed rule would not raise novel legal or policy 
issues. The proposed rule would implement a statutory program that 
exchanges a credit against future obligations for the return of old, 
largely inactive leases in a sensitive area.

Regulatory Flexibility Act

    The Department of the Interior certifies that this proposed rule 
would not have a significant economic effect on a substantial number of 
small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.).
    This proposed rule applies to the lessees holding record title 
interests in the 79 offshore leases located near the coastline of the 
State of Florida. These lessees fall under the Small Business 
Administration's North American Industry Classification System (NAICS) 
code 211111, Crude Petroleum and Natural Gas Extraction. Under this 
NAICS code, companies with less than 500 employees are considered small 
businesses. Only one of the current record title owners of these 79 
leases has less than 500 employees. Moreover, this rule provides a 
clear benefit to the lessees. It specifies a valuable credit and a 
simple process for claiming a benefit for relinquishing a lease which 
the owners have had trouble operating due to access limitations.
    This proposed rule would create a relatively small amount of total 
credits in exchange for certain leases through a relinquishment process 
that all OCS lessees are accustomed to using. The credits could be used 
to fulfill any of a relatively large pool of routine bonus or royalty 
in-value OCS obligations under leases located in the GOM. The credits 
also would be freely transferable or assignable, and would have no time 
limit on use. Thus, should a small entity obtain a credit through a 
transfer, it would be able to use the credit for routine obligations or 
it could exchange the credit for approximately equivalent value in a 
potentially large market of other users. The provisions of this 
proposed rule would not have a significant adverse economic effect on 
offshore lessees and operators, including those that are classified as 
small businesses.
    Your comments are important. The Small Business and Agriculture 
Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were 
established to receive comments from small businesses about Federal 
agency enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to small 
business. If you wish to comment on the actions of MMS, call 1-888-734-
3247. You may comment to the Small Business Administration without fear 
of retaliation. Disciplinary action for retaliation by an MMS employee 
may include suspension or termination from employment with the DOI.

Small Business Regulatory Enforcement Fairness Act

    This proposed rule is not a major rule under the Small Business 
Regulatory Enforcement Fairness Act (5 U.S.C. 804(2)). This proposed 
rule:
    a. Would not have an annual effect on the economy of $100 million 
or more. This proposed rule would offer credits worth approximately $60 
million for the exchange of 79 leases in a sensitive area. Not all 
companies may choose to relinquish their leases for the credit offered. 
Even if all the credits were redeemed in 1 year, it would not have an 
annual effect on the economy of $100 million.
    b. Would not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, local government 
agencies, or geographic regions. The credit represents only a transfer 
of previous payments back to lessees. The relatively small amount 
returned by these credits would have little effect on markets, 
agencies, or regions.
    c. Would not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises. 
Productive activities have been restricted on the leases that would be 
returned, and the monetary credit received in exchange would be too 
small to have a perceptible effect.

Unfunded Mandates Reform Act

    This proposed rule would not impose an unfunded mandate on State, 
local, or tribal governments or the private sector of more than $100 
million per year. The proposed rule would not have a significant or 
unique effect on State, local, or tribal governments or the private 
sector. A statement containing

[[Page 6078]]

the information required by the Unfunded Mandates Reform Act (2 U.S.C. 
1531 et seq.) is not required.

Takings Implication Assessment (E.O. 12630)

    Under the criteria in E.O. 12630, this proposed rule does not have 
significant takings implications. The proposed rule is not a 
governmental action capable of interference with constitutionally 
protected property rights. A takings implication assessment is not 
required.

Federalism (E.O. 13132)

    Under the criteria in E.O. 13132, this proposed rule does not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment. As noted above, the potential revenue sharing 
effects are excluded either explicitly or implicitly by virtue of the 
treatment of the expected credit redemptions. This proposed rule would 
not substantially and directly affect the relationship between the 
Federal and State governments. To the extent that State and local 
governments have a role in OCS activities, this proposed rule would not 
affect that role. A Federalism Assessment is not required.

Civil Justice Reform (E.O. 12988)

    This rule complies with the requirements of E.O. 12988. 
Specifically, this rule:
    (a) Meets the criteria of section 3(a) requiring that all 
regulations be reviewed to eliminate errors and ambiguity and be 
written to minimize litigation; and
    (b) Meets the criteria of section 3(b)(2) requiring that all 
regulations be written in clear language and contain clear legal 
standards.

Consultation With Indian Tribes (E.O. 13175)

    Under the criteria in E.O. 13175, we have evaluated this proposed 
rule and determined that it has no potential effects on federally 
recognized Indian tribes. There are no Indian or tribal lands on the 
OCS.

Paperwork Reduction Act (PRA) of 1995

    This proposed rule contains a collection of information that will 
be submitted to OMB for review and approval under Sec.  3507(d) of the 
PRA. This proposed rule also refers to, but does not change, 
information collection burdens already covered and approved under OMB 
Control Number 1010-0006.
    As part of our continuing effort to reduce paperwork and respondent 
burdens, MMS invites the public and other Federal agencies to comment 
on any aspect of the reporting and recordkeeping burden. You may submit 
your comments on the information collection aspects of this rule 
directly to the Office of Management and Budget (OMB), Office of 
Information and Regulatory Affairs, OMB Attention: Desk Officer for the 
Department of the Interior via OMB e-mail: ([email protected]); 
or by fax (202) 395-6566; identify with 1010-AD44. Send a copy of your 
comments to the Regulations and Standards Branch (RSB), Attn: Comments; 
381 Elden Street, MS-4024; Herndon, Virginia 20170-4817. Please 
reference ``Bonus or Royalty Credits for Relinquishing Certain Leases 
Offshore Florida''--AD44 in your comments. You may obtain a copy of our 
submission to OMB for the new collection of information by contacting 
the Bureau's Information Collection Clearance Officer at (202) 208-
7744.
    The PRA provides that an agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number. The OMB is 
required to make a decision concerning the collection of information 
contained in these proposed regulations between 30 to 60 days after 
publication of this document in the Federal Register. Therefore, a 
comment to OMB is best assured of having its full effect if OMB 
received it by March 3, 2008. This does not affect the deadline for the 
public to comment to MMS on the proposed regulations. The title of the 
information collection is ``30 CFR Part 256, Bonus or Royalty Credits 
for Relinquishing Certain Leases Offshore Florida.''
    Respondents are those from the approximately 130 Federal oil and 
gas lessees who may earn or trade for the bonus or royalty credit. This 
rulemaking affects those companies that own record title interests in 
79 leases. Responses to this collection are required to obtain 
benefits. The frequency of response is on occasion. The information 
collection (IC) does not include questions of a sensitive nature. The 
IC involves requests for a bonus or royalty credit in exchange for 
relinquishing certain leases or the transfer of such credit to another 
entity. The MMS will use this information to track the possession and 
redemption of these special bonus or royalty credits.
    The OMB approved the collection of information required by the 
current 30 CFR part 256 regulations under OMB Control Number 1010-0006 
(17,058 burden hours, expiration 5/31/2010). When the final regulations 
take effect, MMS will consolidate the information collection burden 
approved for this proposed rulemaking into the primary 30 CFR part 256 
information collection under 1010-0006.
    The following table shows the two new paperwork burden estimates 
for this proposed rulemaking. We estimate a total of 45 burden hours, 
including the time for gathering the information and submitting the 
request to MMS for review. It should be noted that this rulemaking 
concerns only 79 current leases and will not affect future leases. 
Therefore, the associated information collection would be a one-time 
only burden should respondents holding eligible leases elect to take 
advantage of the bonus or royalty credits for relinquishing these 
leases.

----------------------------------------------------------------------------------------------------------------
                                                                                  Average No. of
 Citation 30 CFR part 256 subpart N   Reporting & recordkeeping     Hour burden       annual       Annual burden
                                             requirement                             responses         hours
----------------------------------------------------------------------------------------------------------------
92(a)..............................  Request a bonus or royalty                1              30              30
                                      credit and submit
                                      supporting documentation.
----------------------------------------------------------------------------------------------------------------
92(a)(5)...........................  Submit a request to            Burden currently approved under 1010-0006.*
                                      relinquish lease according
                                      to Sec.   256.76.
----------------------------------------------------------------------------------------------------------------
95.................................  Request approval to                       1              15              15
                                      transfer bonus or credit
                                      to another party with
                                      supporting information.
----------------------------------------------------------------------------------------------------------------
                                  TOTAL BURDEN                                                45             45
----------------------------------------------------------------------------------------------------------------
* 240 hours for this requirement are already approved under 1010-0006.


[[Page 6079]]

    The MMS specifically solicits comments on the following questions:
    (a) Is the proposed collection of information necessary for MMS to 
properly perform its functions, and will it be useful?
    (b) Are the estimates of the burden hours of the proposed 
collection reasonable?
    (c) Do you have any suggestions that would enhance the quality, 
clarity, or usefulness of the information to be collected?
    (d) Is there a way to minimize the information collection burden on 
those who are to respond, including the use of appropriate automated 
electronic, mechanical, or other forms of information technology?
    In addition, the PRA requires agencies to estimate the total annual 
reporting and recordkeeping ``non-hour cost'' burden resulting from the 
collection of information. We have not identified any, and we solicit 
your comments on this item. For reporting and recordkeeping only, your 
response should split the cost estimate into two components: (a) Total 
capital and start-up cost component and (b) annual operation, 
maintenance, and purchase of services component. Your estimates should 
consider the costs to generate, maintain, and disclose or provide the 
information. You should describe the methods you use to estimate major 
cost factors, including system and technology acquisition, expected 
useful life of capital equipment, discount rate(s), and the period over 
which you incur costs. Capital and start-up costs include, among other 
items, computers and software you purchase to prepare for collecting 
information; monitoring, sampling, drilling, and testing equipment; and 
record storage facilities. Generally, your estimates should not include 
equipment or services purchased:
    (1) Before October 1, 1995;
    (2) To comply with requirements not associated with the information 
collection;
    (3) For reasons other than to provide information or keep records 
for the Government; or
    (4) As part of customary and usual business or private practices.

National Environmental Policy Act (NEPA) of 1969

    We have analyzed this proposed rule in accordance with the criteria 
of the National Environmental Policy Act and the Department Manual at 
516 DM. We determined this proposed rule does not constitute a major 
Federal action significantly affecting the quality of the human 
environment. This proposed rule deals with financial matters and has no 
direct effect on MMS decisions on environmental activities; hence, an 
environmental impact statement is not required. Pursuant to Department 
Manual 516 DM 2.3A (2), Section 1.10 of 516 DM 2, Appendix 1 excludes 
from documentation in an environmental assessment or impact statement 
``policies, directives, regulations and guidelines of an 
administrative, financial, legal, technical or procedural nature; or 
the environmental effects of which are too broad, speculative or 
conjectural to lend themselves to meaningful analysis and will be 
subject later to the NEPA process, either collectively or case-by-
case.'' Section 1.3 of the same appendix clarifies that royalties and 
audits are considered routine financial transactions that are subject 
to categorical exclusion from the NEPA process. No exception to the 
categorical exclusion applies.

Data Quality Act

    In developing this rule we did not conduct or use a study, 
experiment, or survey requiring peer review under the Data Quality Act 
(Pub. L. 106-554).

Effects on the Energy Supply (E.O. 13211)

    This rule is not a significant energy action under the definition 
in E.O. 13211. A Statement of Energy Effects is not required.

Public Availability of Comments

    Before including your address, phone number, email address, or 
other personal identifying information in your comment, you should be 
aware that your entire comment--including your personal identifying 
information--may be made publicly available at any time. While you can 
ask us in your comment to withhold your personal identifying 
information from public review, we cannot guarantee that we will be 
able to do so.

Clarity of This Regulation

    We are required by E.O. 12866, E.O. 12988, and by the Presidential 
Memorandum of June 1, 1998, to write all rules in plain language. This 
means that each rule we publish must:
    (a) Be logically organized;
    (b) Use the active voice to address readers directly;
    (c) Use clear language rather than jargon;
    (d) Be divided into short sections and sentences; and
    (e) Use lists and tables wherever possible.
    If you feel that we have not met these requirements, send us 
comments by one of the methods listed in the ADDRESSES section. To 
better help us revise the rule, your comments should be as specific as 
possible. For example, you should tell us the numbers of the sections 
or paragraphs that you find unclear, which sections or sentences are 
too long, the sections where you feel lists or tables would be useful, 
etc.

List of Subjects in 30 CFR Part 256

    Administrative practice and procedure, Continental shelf, 
Government contracts, Mineral royalties, Oil and gas exploration, 
Public lands--mineral resources, Reporting and recordkeeping 
requirements.

    Dated: January 16, 2008.
C. Stephen Allred,
Assistant Secretary--Land and Minerals Management.
    For the reasons stated in the preamble, the Minerals Management 
Service (MMS) proposes to amend 30 CFR part 256 as follows:

PART 256--LEASING OF SULPHUR OR OIL AND GAS IN THE OUTER 
CONTINENTIAL SHELF

    1. The authority citation for part 256 is revised to read as 
follows:

    Authority: 31 U.S.C. 9701, 42 U.S.C. 6213, 43 U.S.C. 1334, P. L. 
No. 109-432.

    2. Section 256.5 is amended by adding definitions for ``Bonus or 
royalty credit,'' ``Central planning area,'' ``Coastline,'' ``Desoto 
Canyon OPD,'' ``Destin Dome OPD,'' ``Eastern planning area,'' and 
``Pensacola OPD'' to read as follows:


Sec.  256.5  Definitions.

* * * * *
    (m) Bonus or royalty credit means a legal instrument or other 
written documentation, or an entry in an account managed by the 
Secretary that a bidder or lessee may use in lieu of any other monetary 
payment for--
    (1) A bonus due for a lease on the outer Continental Shelf; or
    (2) A royalty due on oil or gas production from any lease located 
on the outer Continental Shelf.
    (n) Central planning area means the Central Gulf of Mexico Planning 
Area of the outer Continental Shelf, as designated in the document 
entitled ``Draft Proposed Program Outer Continental Shelf Oil and Gas 
Leasing Program 2007-2012,'' dated February 2006.
    (o) Coastline means the line of ordinary low water along that 
portion of the coast in direct contact with the open sea and the line 
marking the seaward limit of inland waters.

[[Page 6080]]

    (p) Desoto Canyon OPD means the official protraction diagram 
designated as Desoto Canyon which has a western edge located at the 
universal transverse mercator (UTM) X coordinate 1,346,400 in the North 
American Datum of 1927 (NAD 27).
    (q) Destin Dome OPD means the official protraction diagram 
designated as Destin Dome which has a western edge located at the 
universal transverse mercator (UTM) X coordinate 1,393,920 in the NAD 
27.
    (r) Eastern planning area means the Eastern Gulf of Mexico Planning 
Area of the outer Continental Shelf, as designated in the document 
entitled ``Draft Proposed Program Outer Continental Shelf Oil and Gas 
Leasing Program 2007-2012'', dated February 2006.
    (s) Pensacola OPD means the official protraction diagram designated 
as Pensacola which has a western edge located at the universal 
transverse mercator (UTM) X coordinate 1,393,920 in the NAD 27.
    3. A new subpart N consisting of Sec. Sec.  256.90 through 256.95 
are added to read as follows:

Subpart N--Bonus or Royalty Credits for Exchange of Certain Leases

Sec.
256.90 Which leases may I exchange for a bonus or royalty credit?
256.91 How much bonus or royalty credit will MMS grant in exchange 
for a lease?
256.92 What must I do to obtain a bonus or royalty credit?
256.93 How is the bonus or royalty credit allocated among multiple 
lease owners?
256.94 How may I use the bonus or royalty credit?
256.95 How do I transfer a bonus or royalty credit to another 
person?


Sec.  256.90  Which leases may I exchange for a bonus or royalty 
credit?

    You may exchange a lease for a bonus or royalty credit if it:
    (a) Was in effect on December 20, 2006, and
    (b) Is located in:
    (1) The Eastern planning area and within 125 miles of the coastline 
of the State of Florida, or
    (2) The Central planning area and within the Desoto Canyon OPD, the 
Destin Dome OPD, or the Pensacola OPD and within 100 miles of the 
coastline of the State of Florida.


Sec.  256.91  How much bonus or royalty credit will MMS grant in 
exchange for a lease?

    The amount of the bonus or royalty credit for an exchanged lease 
equals the sum of:
    (a) The amount of the bonus payment; and
    (b) All rental paid for the lease as of the date the lessee submits 
the request to exchange the lease under Sec.  256.92 to MMS.


Sec.  256.92  What must I do to obtain a bonus or royalty credit?

    (a) To obtain the bonus or royalty credit, all of the record title 
interest owners in the lease must submit the following to the MMS 
Regional Supervisor for Leasing and Environment for the Gulf of Mexico 
on or before [INSERT THE DATE THAT IS 1 YEAR AFTER THE EFFECTIVE DATE 
OF THE FINAL RULE IN THE Federal Register]:
    (1) A written request to exchange the lease for the bonus or 
royalty credit, signed by all record title interest owners in the 
lease.
    (2) The name and contact information for a person who will act as a 
contact for each record title interest owner.
    (3) Documentation of each record title interest owner's percentage 
share in the lease.
    (4) A list of all bonus and rental payments for that lease made by, 
or on behalf of, each of the current record title owners.
    (5) A written relinquishment of the lease as described in Sec.  
256.76. Notwithstanding Sec.  256.76, the relinquishment will become 
effective when the credit becomes effective under paragraph (b) of this 
section.
    (b) The credit becomes effective when MMS issues a certification to 
the record title interest owners that the lease has qualified for the 
credit.


Sec.  256.93  How is the bonus or royalty credit allocated among 
multiple lease owners?

    The MMS will allocate the bonus or royalty credit for an exchanged 
lease to the current record title interest owners in the same 
percentage share as each owner has in the lease as of the date of the 
request to exchange the lease.


Sec.  256.94  How may I use the bonus or royalty credit?

    (a) You may use a credit issued under this part in lieu of a 
monetary payment due under any lease in the Gulf of Mexico not subject 
to the revenue distribution provisions of section 8(g)(2) of the OCSLA 
(43 U.S.C. 1337(g)(2)) for either:
    (1) A bonus for acquisition of an interest in a new lease; or
    (2) Royalty due on oil and gas production after [INSERT THE DATE 
THAT IS 30 DAYS AFTER THE PUBLICATION DATE OF THE FINAL RULE IN THE 
Federal Register].
    (b) You may not use a bonus or royalty credit in lieu of delivering 
oil or gas taken as royalty-in-kind.
    (c) If you have any credit that remains unused after 5 years from 
the date MMS issued the credit, MMS reserves the right to apply the 
remaining credit to your ongoing obligations at its discretion.


Sec.  256.95  How do I transfer a bonus or royalty credit to another 
person?

    (a) You may transfer your bonus or royalty credit to any other 
person by submitting to the MMS Adjudication Unit for the Gulf of 
Mexico two originally executed transfer letters of agreement.
    (b) Authorized officers of all companies involved in transferring 
and receiving the credit must sign the transfer letters of agreement as 
indicated on the qualification card filed with MMS.
    (c) A transfer letter of agreement must include:
    (1) The effective date of the transfer,
    (2) The OCS-G number for the lease that originally qualified for 
the credit,
    (3) The amount of the credit being transferred,
    (4) Company names punctuated exactly as filed on the qualification 
card at MMS, and
    (5) A corporate seal, only if MMS used a corporate seal 
qualification process for your corporation.
    (d) The transferee of a credit transferred under this section may 
use it in accordance with Sec.  256.94 as soon as MMS sends a 
confirmation of the transfer to the transferee.

 [FR Doc. E8-1860 Filed 1-31-08; 8:45 am]
BILLING CODE 4310-MR-P