[Federal Register Volume 73, Number 142 (Wednesday, July 23, 2008)]
[Proposed Rules]
[Pages 42926-42975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16275]



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Part II





Department of the Interior





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Bureau of Land Management



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43 CFR Parts 3900, 3910, 3920 et al.



Oil Shale Management--General; Proposed Rule

  Federal Register / Vol. 73, No. 142 / Wednesday, July 23, 2008 / 
Proposed Rules  

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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Parts 3900, 3910, 3920, and 3930

[WO-320-1310-OSHL]
RIN 1004-AD90


Oil Shale Management--General

AGENCY: Bureau of Land Management, Interior.

ACTION: Proposed rule.

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SUMMARY: The Bureau of Land Management (BLM) is proposing regulations 
to set out the policies and procedures for the implementation of a 
commercial leasing program for the management of federally-owned oil 
shale and any associated minerals located on Federal lands. The Energy 
Policy Act of 2005 (EP Act) directs the Secretary of the Interior to: 
Make public lands available for conducting oil shale research and 
development activities; complete a Programmatic Environmental Impact 
Statement (PEIS) for a commercial leasing program for both oil shale 
and tar sands resources on the BLM administered lands in Colorado, 
Utah, and Wyoming; and issue regulations establishing a commercial oil 
shale leasing program.
    These proposed regulations would incorporate specific provisions of 
the Mineral Leasing Act of 1920 (MLA) and the EP Act relating to: 
Maximum oil shale lease size; maximum acreage limitations; rental; and 
lease diligence.
    These proposed regulations would also address the diligent 
development requirements of the EP Act by establishing work 
requirements and milestones to ensure diligent development of leases. 
The proposed rule would also provide for other standard components of a 
BLM mineral leasing program, including lease administration and 
operations.

DATES: Send your comments to reach the BLM on or before September 22, 
2008. The BLM will not necessarily consider any comments received after 
the above date during its decision on the proposed rule.

ADDRESSES: Mail: U.S. Department of the Interior, Director (630), 
Bureau of Land Management, Mail Stop 401 LS, 1849 C St., NW., 
Attention: 1004-AD90, Washington, DC 20240.
    Personal or messenger delivery: 1620 L Street, NW., Room 401, 
Washington, DC 20036.
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions at this Web site.
    You may also send comments on the information collection aspects of 
this proposed rule directly to: Interior Desk Officer (1004-AD90), 
Office of Information and Regulatory Affairs, Office of Management and 
Budget (OMB), (202) 395-6566 (facsimile); e-mail: [email protected]. Please also send a copy to the BLM.

FOR FURTHER INFORMATION CONTACT: Mitchell Leverette, Chief, Division of 
Solid Minerals at (202) 452-5088 for issues related to the BLM's 
commercial oil shale leasing program or Kelly Odom at (202) 452-5028 
for regulatory process issues. Persons who use a telecommunications 
device for the deaf (TDD) may call the Federal Information Relay 
Service (FIRS) at 1-800-877-8339, 24 hours a day, 7 days a week, to 
leave a message or question with the above individuals. You will 
receive a reply during normal business hours.

SUPPLEMENTARY INFORMATION:

I. Public Comment Procedures
II. Background
III. Discussion of the Proposed Rule
IV. Procedural Matters

I. Public Comment Procedures

A. How do I comment on the proposed rule?

    If you wish to comment, you may submit your comments by any one of 
several methods:
     You may mail comments to U.S. Department of the Interior, 
Director (630), Bureau of Land Management, Mail Stop 401 LS, 1849 C 
St., NW., Attention: 1004-AD90, Washington, DC 20240.
     You may deliver comments to Room 401, 1620 L Street, NW., 
Washington, DC 20036.
     You may access and comment on the proposed rules at the 
Federal eRulemaking Portal by following the instructions at that site 
(see ADDRESSES).

Please make your comments on the proposed rule as specific as possible, 
confine them to issues pertinent to the proposed rule, and explain the 
reason for any changes you recommend. Where possible, your comments 
should reference the specific section or paragraph of the proposal that 
you are addressing.
    The BLM may not necessarily consider or include in the 
Administrative Record for the final rule comments that we receive after 
the close of the comment period (see DATES ) or comments delivered to 
an address other than those listed above (see ADDRESSES).

B. May I review comments submitted by others?

    Comments, including names and street addresses of respondents, will 
be available for public review at the address listed under ADDRESSES: 
Personal or messenger delivery during regular hours (7:45 a.m. to 4:15 
p.m.), Monday through Friday, except holidays. The comments are also 
available for public review on http://www.regulations.gov.
    Before including your address, telephone number, e-mail address, or 
other personal identifying information in your comment, be advised 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 from public review your personal identifying 
information, we cannot guarantee that we will be able to do so.

II. Background

    The BLM is proposing these regulations to implement the EP Act (42 
U.S.C. 15927), which became law on August 8, 2005. Section 369 of the 
EP Act addresses oil shale development and authorizes the Secretary of 
the Interior to establish regulations for a commercial leasing program. 
The MLA of 1920 (30 U.S.C. 241(a)) provides the authority for the BLM 
to allow for the exploration, development, and utilization of oil shale 
resources on the BLM-managed public lands. Additional statutory 
authorities for these proposed regulations are:
    (1) The Mineral Leasing Act for Acquired Lands of 1947 (30 U.S.C. 
351-359); and
    (2) The Federal Land Policy and Management Act (FLPMA) of 1976 (43 
U.S.C. 1701 et seq., including 43 U.S.C. 1732).
    Oil shale is a fine-grained sedimentary rock containing organic 
matter from which shale oil may be produced. Oil shale is a marlstone 
and contains no oil; rather, it contains un-decayed algae called 
kerogen (not oil). In fact, the word kerogen is a Greek word 
interpreted to mean ``to produce wax''--``kero'' (wax), ``gen'' to 
produce. The waxy substance produced from oil shale rock is not the 
same as conventional crude oil. The kerogen only has a market value as 
an energy source after it has been refined and converted to synthetic 
crude oil.
    Oil shale is a solid rock and must be mined or treated in place to 
release the kerogen oil from the rock. Energy companies and petroleum 
researchers have, over the past 60 years, developed

[[Page 42927]]

and tested a variety of technologies on a small scale for recovering 
shale oil from oil shale and processing it to produce fuels and 
byproducts. Both surface processing and in-situ technologies have been 
examined. Generally, surface processing consists of three major steps: 
(1) Oil shale mining and ore preparation; (2) pyrolysis of oil shale to 
produce kerogen oil; and (3) processing kerogen oil to produce refinery 
feedstock and high-value chemicals. This sequence is illustrated below.

Conversion of Oil Shale to Products (Surface Process) Resource -->Ore 
Mining-->Retorting-->Oil Upgrading-->Fuel and Chemical Markets

    For deeper, thicker deposits, not as amenable to surface- or deep-
mining methods, the shale oil can be produced by in-situ technology. 
In-situ processes minimize or, in the case of true in-situ, eliminate 
the need for mining and surface pyrolysis by heating the resource in 
its natural depositional setting. This sequence is illustrated below.

Conversion of Oil Shale to Products (True In-Situ Process) Resource --
>In-Situ Pyrolysis-->Oil Upgrading-->Fuel and Chemical Markets

    The American Association of Petroleum Geologists estimates that the 
total world oil shale resources contain the equivalent of 2.6 trillion 
barrels of oil. According to estimates by the U.S. Geological Survey, 
the United States holds more than 50 percent of the world's oil shale 
resources.
    The largest known deposits of oil shale in the world are located in 
a 16,000 square mile area in the Green River formation in Colorado, 
Utah, and Wyoming (underlying the Piceance, Uinta, Green River, and 
Washakie Basins), which is estimated to contain the equivalent of 
between 1.5 and 1.8 trillion barrels of oil. Federal lands comprise 72 
percent of the total surface of oil shale acreage and 82 percent of the 
oil shale resources in the Green River formation.
    As stated in the June 9, 2005 call for nominations for the 
research, development, and demonstration (R, D and D) (70 FR 33753) 
leases, the BLM opted for a staged oil shale leasing program. The first 
stage is the research and development program followed by these 
proposed commercial leasing regulations.

 BLM oil shale initiatives since 1983.

    In 1973, four leases were issued in the oil shale prototype leasing 
program. During the 1973-74 oil shale prototype program, there were 
expectations of an economic boom in western Colorado which never 
materialized. The oil shale industry collapsed on May 2, 1982, commonly 
referred to as Black Sunday.
    In 1983, the BLM established an Oil Shale Task Force to address:
    (1) Access to unconventional energy resources (such as oil shale) 
on public lands;
    (2) Impediments to oil shale development on public lands;
    (3) Industry interest in research and development and commercial 
opportunities on public lands; and
    (4) Secretarial options to capitalize on these opportunities.
    On February 11, 1983, the BLM published a proposed rule for an oil 
shale leasing program (48 FR 6510). Due to apparent lack of interest in 
the development of oil shale, the BLM withdrew the proposed rule, 
effective September 25, 1985 (50 FR 38867).
    In order to be better able to expand and diversify domestic energy 
production, on November 22, 2004, the BLM published a notice in the 
Federal Register (69 FR 67935) requesting public comments on the 
potential for oil shale development within the Piceance Creek Basin in 
Colorado, the Uinta Basin in Utah, and the Green River and Washakie 
Basins in Wyoming. The Federal Register notice also requested comments 
on a proposed draft oil shale R, D and D lease form. Comments received 
were incorporated, as appropriate, into the final R, D and D lease 
form.
    On June 9, 2005, the BLM published a notice in the Federal Register 
(70 FR 33753) which initiated a R, D and D leasing program by 
soliciting nominations of 160-acre parcels of public land to be leased 
in Colorado, Utah, and Wyoming for conducting oil shale recovery 
technologies. In response to the 19 nominations of parcels that the BLM 
received, the BLM issued 6 R, D and D leases--5 in Colorado that were 
effective January 1, 2007, and an additional R, D and D lease in Utah 
that was effective on July 1, 2007. Each of the R, D and D leases 
contains a preference right for conversion to a commercial lease of 
additional acreage upon demonstration of a successful method of 
producing oil from shale rock.
    One of the purposes of the R, D and D leases, as stated in the 
notice was to provide the BLM, state and local governments, and the 
public with important information that could be utilized as the BLM 
works with communities, states, and other Federal agencies to develop 
strategies for managing the environmental effects of production. The R, 
D and D lease form was published as an attachment (Appendix A) to the 
June 9, 2005, Federal Register notice.

The PEIS and National Environmental Policy Act (NEPA) Compliance

    On December 13, 2005, the BLM published in the Federal Register a 
notice of intent (NOI) to prepare a PEIS (70 FR 73791) for oil shale 
and tar sands resources leasing on lands administered by the BLM in 
Colorado, Utah, and Wyoming. The NOI alerted the public that the BLM 
was intending to amend several resource management plans (RMPs) to open 
lands for oil shale and tar sands resources leasing in Colorado, Utah, 
and Wyoming. The NOI also informed the public of the development of the 
oil shale regulations required by Section 369(d)(2) of the EP Act. The 
RMPs are BLM planning documents prepared under Section 202 of the FLPMA 
that present guidelines for making resource management decisions.
    The draft PEIS evaluates the following RMPs for possible amendment:
    (1) Wyoming: Green River, Great Divide, and Kemmerer;
    (2) Utah: Price River, San Juan, San Rafael, Henry Mountain, Book 
Cliffs, and Diamond Mountain; and
    (3) Colorado: Grand Junction, White River, and Glenwood Springs.
    Although the PEIS covers planning for tar sands, these proposed 
regulations do not address tar sands leasing since the BLM has 
regulations in place that address tar sands leasing (see 43 CFR part 
3140).
    On December 21, 2007, the BLM published the notice of availability 
for the draft PEIS and has made the draft PEIS available for public 
comment (72 FR 72751). The BLM intends to finalize the PEIS before 
these regulations are final. The PEIS is primarily intended to analyze 
the impacts of land use allocation and not site specific oil shale 
leasing.

Advance Notice of Proposed Rulemaking

    The BLM recognizes that the creation of the rules governing the 
development of oil shale would need to address different possible 
technologies that have different associated impacts and costs. 
Therefore, to increase public participation and to aid in the 
development of oil shale regulations, the BLM published in the Federal 
Register an advance notice of proposed rulemaking (ANPR) (71 FR 50378) 
on August 25, 2006. The ANPR requested public comments on the following 
five

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key components of the proposed regulations:
    (1) What should be the royalty rate and point of royalty 
determination?
    (2) Should the regulations establish a process for bid adequacy 
evaluation,i.e., Fair Market Value (FMV) determination, or should the 
regulations establish a minimum acceptable lease bonus bid?
    (3) How should diligent development be determined?
    (4) What should be the minimum production requirement?
    (5) Should there be provisions for small tract leasing?
    On September 26, 2006, the BLM published a Federal Register notice 
reopening the comment period for the ANPR and extending the comment 
period until October 25, 2006 (71 FR 56085). In response to the ANPR, 
the BLM received 48 comments.
    Comments were received from individuals, public interest groups, 
and industry representatives. Although the ANPR focused on the 5 areas 
previously identified, commenters addressed a variety of topics, 
including whether or not they were supportive of a commercial oil shale 
leasing program. Below is a discussion of the ANPR organized by topic. 
Public comments BLM received on the ANPR are discussed in this preamble 
at the appropriate section of this rule.
    Royalty Rate and Point of Royalty Determination--Section 369(o) of 
the EP Act does not prescribe a royalty rate, but does provide that the 
royalty rate for oil shale should encourage development of the resource 
and should ensure a fair return to the United States. The ANPR comments 
received were extremely varied and recommended a wide range of royalty 
rates. Discussion of the ANPR royalty comments can be found in the 
discussion of section 3903.52 of this rule.
    Bid Adequacy Evaluation (Fair Market Value)--It is the policy of 
the United States, stated in Section 102(a) of FLPMA (43 U.S.C. 
1701(a)(9)) and Section 369(o)(2) of the EP Act, that the United States 
receive FMV for the issuance of Federal mineral leases. The BLM's 
purpose for requesting comments on the FMV it should receive for lease 
tracts was to solicit ideas on how FMV would be determined for a 
resource that has little or no history of comparable sales. The public 
comments received on the ANPR are discussed in section 3924.10 of this 
rule.
    Diligent Development--Section 369(f) of the EP Act requires that 
the BLM establish work requirements and milestones to ensure diligent 
development of Federal oil shale leases. The BLM requested public 
comment on diligent development to assist us in determining lease 
diligence requirements for an industry that has yet to be successfully 
established. A discussion of the ANPR comments we received on diligence 
can be found in section 3927.50 of this proposed rule.
    Minimum Production Requirement--The BLM specifically asked in the 
ANPR for suggestions from the public about what the minimum production 
requirement should be to assist us in determining lease production 
requirements for an industry that has yet to be successfully 
established. A discussion of the public comments we received on minimum 
production requirements can be found in section 3903.51 of this 
proposed rule.
    Small Tract Leasing--In the ANPR the BLM requested comments on 
whether there should be small tract leasing or leasing small acreages 
of land for oil shale development. A discussion of the public comments 
we received on small tract leasing can be found in section 3927.20 of 
this proposed rule.
    We also received several comments unrelated to the five questions 
in the ANPR. Those comments are discussed in the respective section 
discussions for the rule.

Listening Sessions With Governor's Representatives From Colorado, Utah, 
and Wyoming

    The BLM, in coordination with the Minerals Management Service 
(MMS), held three ``listening sessions'' with representatives of the 
governors of the States of Colorado, Utah, and Wyoming. The BLM and the 
MMS met with these representatives in Denver, Colorado (December 14, 
2006), Salt Lake City, Utah (April 26, 2007), and Cheyenne, Wyoming 
(August 8, 2007). The purpose of the listening sessions was to provide 
the governors' representatives the opportunity to share their ideas, 
issues, and concerns relating to the proposed commercial oil shale 
leasing regulations.
    Section 369(e) of the EP Act requires the Department of the 
Interior to consult with the governors of Colorado, Utah, and Wyoming, 
representatives of local governments, interested Indian tribes, and the 
public to determine the level of support for conducting oil shale lease 
sales. The BLM plans to consult with the affected states prior to 
conducting the first oil shale lease sale, and following publication of 
the final rule.

Consolidated Appropriations Act of 2008

    A provision in section 433 of the Consolidated Appropriations Act 
of 2008 (Pub. L. 110-161) prohibits the use of funds for the 
preparation or publication of final oil shale regulations, but does not 
apply to a proposed rule. Therefore, the BLM is publishing this 
proposed rule and will analyze comments received on the proposed rule, 
but will not prepare or publish a final rule using fiscal year 2008 
funds as provided by this Congressional directive.

III. Discussion of the Proposed Rule

Part 3900--Oil Shale Management--General

    This part would contain regulations on the general management of 
the oil shale program, including discussions of the descriptions and 
acreage in oil shale leases, qualifications requirements, fees, 
rentals, royalties, bonds and trust funds, and lease exchanges.

Subpart 3900--Oil Shale Management--Introduction

    This subpart would establish competitive oil shale leasing 
administrative procedures for implementing a long-term commercial oil 
shale leasing program.
    The proposed rule would contain specific provisions required by 
Section 369 of the EP Act. Many of the sections of the proposed rule 
contain regulatory requirements similar to the regulations in the BLM's 
existing mineral programs namely, coal, non-energy leasable minerals, 
and oil and gas. In creating a regulatory framework for this proposed 
oil shale commercial leasing program, the BLM proposes to adopt certain 
basic components and processes common to the BLM's leasing programs. 
Most of the BLM's leasing programs are governed by the MLA. The 
regulations governing those programs and this program would include the 
following types of provisions: Pre-lease exploration; leasing 
processes; bonding; operations (including plan of development); 
reclamation; and inspection and enforcement.
    Section 3900.2 would contain the definitions and terms used in 
these proposed regulations. Many of the terms and definitions found in 
this section would be similar to terms and definitions in the 
regulations of other BLM mineral leasing programs. Because most of the 
terms and concepts in this section are well-established, this section 
of the preamble does not address each of the definitions, but focuses 
only on definitions for certain terms that directly affect the reader's 
understanding of the regulatory framework of the oil shale leasing 
program or that are unique to these regulations.

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    The term ``commercial quantities'' means production of shale oil 
quantities in accordance with the approved Plan of Development for the 
proposed project through the research, development, and demonstration 
activities conducted on the lease, based on and at the conclusion of 
which a reasonable expectation exists that the expanded operation would 
provide a positive return after all costs of production have been met, 
including the amortized costs of the capital investment.
    The term ``infrastructure'' means all support structures necessary 
for the production or development of shale oil. The definition lists 
examples of the different types of support structures that the BLM 
would consider to be infrastructure. This term is defined in these 
proposed regulations because it is critical to the BLM's review of 
lease applications. Infrastructure impacts are a key component of the 
plan of operations that the BLM will review when undertaking various 
analyses such as those required by NEPA. Furthermore, the BLM believes 
that a detailed itemization of examples is necessary since installation 
of infrastructure is one of the proposed diligent development 
milestones.
    The term ``oil shale'' means a fine-grained sedimentary rock 
containing:
    (1) Organic matter which was derived chiefly from aquatic organisms 
or waxy spores or pollen grains, which is only slightly soluble in 
ordinary petroleum solvents, and of which a large proportion is 
distillable into synthetic petroleum; and
    (2) Inorganic matter, which may contain other minerals. This term 
is applicable to any argillaceous, carbonate, or siliceous sedimentary 
rock which, through destructive distillation, will yield synthetic 
petroleum.
    The BLM defined the term ``production'' to acknowledge the various 
technologies associated with operations for extraction of shale oil, 
shale gas, or shale oil by-products.
    Section 3900.5 would leave a place holder for the information 
collection requirements in parts 3900-3930 under 44 U.S.C. 3501 et seq. 
The BLM will add the OMB form number once we receive OMB's approval for 
information collection in the final regulations. The table in paragraph 
(d) of this section lists the subparts in the rule requiring the 
information and its title and summarizes the reasons for collecting the 
information and how the BLM would use the information.
    Section 3900.10 would identify which lands would be subject to 
leasing under parts 3900 through 3930. Section 21 of the MLA authorizes 
the issuance of oil shale leases (30 U.S.C. 241(a)).
    Section 3900.20 would address the right to appeal the BLM decisions 
issued under these regulations to the Interior Board of Land Appeals 
under 43 CFR part 4. This section would adopt standard appeals language 
found in the regulations of other BLM mineral programs.
    Section 3900.30 would contain standard language providing that 
documents (i.e., applications, statements of qualification, plans of 
development and supporting information, etc.) required by these 
proposed regulations be filed in the proper BLM office with the 
required fees. The term ``proper BLM office'' is defined in the 
definitions section of this rule.
    Section 3900.40 would address the multiple use mandate of FLPMA, by 
providing that the BLM's issuance of an exploration license or lease 
for the development or production of oil shale would not preclude the 
issuance of other exploration licenses or leases on the same lands for 
deposits of other minerals or other resource uses. This provision is 
similar to regulatory provisions in the BLM's other leasing programs, 
which also promote multiple use of the public lands.
    Section 3900.50 would clarify the relationship of land use plans 
and NEPA to the BLM's proposed commercial oil shale leasing program. 
This section would provide that any lease or exploration license issued 
under these regulations would be issued under the decisions, terms, and 
conditions of a comprehensive land use plan. The land use planning 
process is the key tool used by the BLM to protect resources and 
designate uses for BLM-administered lands. Compliance with NEPA and 
land use planning is required prior to the BLM's issuing a lease or 
exploration license.
    Section 3900.61 would address the procedures the BLM would follow 
concerning consent and consultation where the surface of public land is 
administered by other Federal agencies outside of the Department of the 
Interior and procedures for particular situations where the U.S. has 
conveyed title to or transferred control of the surface. Paragraphs (a) 
and (b) would address those procedures the BLM would follow concerning 
consent and consultation where the surface of public lands is 
administered by other agencies outside of the Department of the 
Interior. Paragraph (c) would provide procedures an applicant may 
pursue in challenging a decision issued by a particular agency outside 
of the Department of the Interior relating to special stipulations or 
refusal of consent. Paragraph (d) would not allow the BLM to issue a 
lease or license on National Forest Service lands without the consent 
of the Forest Service. Under paragraph (d), the BLM's decision whether 
to issue the lease or license is based on a determination as to whether 
the interests of the United States would best be served by issuing the 
lease or license. The provisions of this section closely mirror BLM 
regulations for oil and gas, coal, and non-energy leasable minerals. 
Paragraph (e) would provide that the BLM make the final decision as to 
whether to issue a lease or license in those cases not involving a 
Federal agency, where the United States has conveyed title to any state 
or political subdivision or agency, including a college or any other 
educational corporation or association, to a charitable or religious 
corporation or association, or to a private entity.
    Section 3900.62 would address situations where the BLM may require 
lease or exploration license stipulations to protect lands and 
resources. Stipulations are site specific provisions that the BLM may 
add to standard lease or license terms prior to issuance for the 
purpose of protecting Federal resource values and mitigating impacts to 
other values identified in a NEPA document. Stipulations frequently 
restrict operations on the lease or permit by limiting surface 
disturbance for the purpose of protecting the environment. This 
includes the protection of wildlife, plants, and cultural or other 
resources. This provision is similar to those found in the BLM's other 
mineral leasing programs.

Subpart 3901--Land Descriptions and Acreage

    Section 3901.10 would contain the BLM's requirements for land 
descriptions in applications or documents submitted to the BLM. This 
section is similar to the regulatory provisions addressing land 
descriptions found in other BLM leasing programs and would establish 
consistent standards for land descriptions in applications submitted to 
the BLM.
    Sections 3901.20 and 3901.30 would incorporate the provisions of 
Section 369(j)(2) of the EP Act that 50,000 acres would be the maximum 
acreage of oil shale leases on public lands that any entity may hold in 
any one state and that the oil shale lease acreage would not count 
toward acreage limitations associated with oil and gas leases. Another 
50,000 acres may be held on acquired lands. Since the provisions in 
this section relating to maximum acreage holdings are statutory, the 
BLM

[[Page 42930]]

does not have the authority to revise the requirements in this section.

Subpart 3902--Qualification Requirements

    Sections under this subpart would detail the various statutory 
requirements under Section 27 of the MLA relating to who can hold 
Federal oil shale leases and interests. These proposed regulations 
would mirror many of the qualification provisions of the BLM's other 
mineral leasing regulations, namely oil and gas (43 CFR subpart 3102), 
geothermal (43 CFR subpart 3202), coal (43 CFR subpart 3425), and non-
energy leasable minerals (43 CFR subpart 3502).
    Section 3902.10 would enumerate the requirements of the MLA 
relating to who is authorized to hold leases or interests in leases (30 
U.S.C. 181, 352). These requirements have a longstanding statutory and 
regulatory history and are found in the regulations for the BLM's 
mineral leasing programs.
    Sections 3902.21 and 3902.22 would explain the filing procedures 
for qualification documents, including when and where to file 
documents. Section 3902.21 would also require that all documentation 
submitted to the BLM as evidence of qualifications be current, 
accurate, and complete.
    Sections 3902.23 through 3902.29 would detail the type of 
qualifications documentation that the BLM would require from:
    (1) Individuals (section 3902.23);
    (2) Associations, including partnerships (section 3902.24);
    (3) Corporations (section 3902.25);
    (4) Guardians or trustees (section 3902.26);
    (5) Heirs and devisees (section 3902.27);
    (6) Attorneys-in-fact (section 3902.28); and
    (7) Other parties in interest (section 3902.29).
    The requirements proposed in these sections are similar to the 
standard requirements of other BLM regulations to show evidence of 
qualifications to hold a lease under the MLA.

Subpart 3903--Fees, Rentals, and Royalties

    For payments of required rental and royalties, sections 3903.20 and 
3903.30 would address the acceptable forms of payment (section 3903.20) 
and where to submit payment for processing or filing fees, rentals, 
bonus payments, and royalties (section 3903.30). The acceptable forms 
of payment listed in section 3903.20 would mirror the forms of payment 
accepted in the BLM's other mineral leasing regulations.
    Section 3903.40 would incorporate the requirement of Section 369(j) 
of the EP Act that the annual rental rate for an oil shale lease would 
be $2.00 per acre. Since the statute sets the rental rate, the BLM has 
no discretion to revise it.
    Section 3903.51 would address the minimal annual production 
requirement that would apply to every lease. It also would discuss 
payments in lieu of production beginning with the 10th lease year. The 
BLM would determine the payment in lieu of annual production, but in no 
case would it be less than $4 per acre. Payments in lieu of production 
are not unique to this proposed rule. They are a requirement of other 
BLM mineral leasing regulations and the BLM believes they provide an 
incentive to maintain production.
    Setting the payment in lieu of production at no less than $4 per 
acre should be an adequate payment to the Federal government to justify 
allowing the lessee to continue holding a lease absent production, but 
should not be high enough to cause the lessee to relinquish the lease. 
A payment in lieu of production of $4 per acre for the maximum lease 
size of 5,760 acres equals a payment of $23,040 per year.
    In response to the ANPR, the BLM received comments expressing 
various ideas concerning minimum production amounts and requirements. 
The comments are summarized as follows:
    (1) Minimum production should be 1,000 barrels a day;
    (2) Minimum production should be based on the viability of the 
operation;
    (3) Minimum production levels should be based on resource potential 
and production levels identified in the plan of development;
    (4) Minimum royalties should be assessed at the end of the primary 
term;
    (5) Minimum production should be based on a percentage of the 
projected resource base; and
    (6) There should not be a minimum production requirement.
    We agree with several of the commenter's suggestions. The 
suggestions to base minimum production on the approved plan of 
development and the specifics of the operation were incorporated into 
proposed sections 3930.30(c) and 3930.30(d). The suggestions related to 
defining the minimum production on a percentage of the resource base 
were not incorporated into the proposed rule because of the 
difficulties associated with defining the recoverable resource, the 
variables associated with the different development technologies, and 
the differing kerogen content of the shales. We consider the suggestion 
that identified 1,000 barrels a day as the correct minimum production 
requirement too inflexible a standard because it does not allow for 
differences in shale quality and differences in extraction technology.
Section 3903.52--Royalty Rates on Oil Shale Production
    Section 3903.52 would establish a royalty rate for all products 
that are sold from or transported off of the lease area. The BLM 
recognizes that encouraging oil shale development presents some unique 
challenges compared to BLM's traditional role in managing conventional 
oil and gas operations. We received a wide range of comments presenting 
alternative royalty approaches as part of the ANPR process, and we 
address those comments below. However, while we have narrowed the range 
of options based on the ANPR comments, we have not yet settled on a 
single royalty rate for this proposed rule. Instead, we are presenting 
two royalty rate alternatives in the proposed rule (as outlined later 
in this section), and requesting public comment on those specific 
alternatives. In addition, we are considering a third alternative, a 
sliding scale royalty rate (also outlined in this preamble), and we are 
seeking public comment on the appropriate parameters for the sliding 
scale royalty rate should the BLM choose to adopt this alternative. We 
anticipate adopting one of these alternatives, or variations on one of 
these alternatives, at the final rule stage.
    EP Act (Section 369(o)) directs the agency to establish royalties 
and other payments for oil shale leases that ``shall--
    (1) Encourage development of the oil shale and tar sands resources; 
and
    (2) Ensure a fair return to the United States.''
    The market demand for oil shale resources based on the price of 
competing sources (e.g., crude oil) of similar end products is expected 
to provide the primary incentive for future oil shale development. 
Additional encouragement for development may be provided through the 
royalty terms employed for oil shale relative to conventional oil and 
gas royalty terms, but we recognize that such incentives must be 
balanced against the objective of providing a fair return to taxpayers 
for the sale of these resources. Through the ANPR process, the BLM 
initially examined a wide range of royalty options, including:
    (1) 12.5 percent royalty rate on the first marketable product;

[[Page 42931]]

    (2) 12.5 percent royalty rate on the value of the mined oil shale 
rock, as proposed in 1983;
    (3) 8 percent royalty rate on products sold for 10 years with 
optional increases of 1 percent per year up to a maximum of 12.5 
percent, similar to the rates established by the State of Utah in 1980;
    (4) Initial 2 percent royalty to encourage production and a 5 
percent maximum upon establishment of infrastructure;
    (5) Sliding scale royalty rate tied to timeframes up to a maximum 
of 12.5 percent;
    (6) Sliding scale royalty rate tied to production amounts up to a 
maximum of 12.5 percent;
    (7) Sliding scale royalty rate with royalty rates tied to the price 
of crude oil;
    (8) Royalty rate of 1 percent of gross profit before payout and 
royalty rate of 25 percent net profit after payout--(Canadian oil sands 
model);
    (9) Royalty based on cents per ton as proposed in the 1973 oil 
shale prototype program; and
    (10) Royalty based on British Thermal Unit (Btu) content as 
compared to crude oil.
    In evaluating an appropriate royalty rate system for oil shale that 
would meet the dual EP Act objectives of encouraging development and 
ensuring a fair return to the government, the BLM also reviewed other 
Federal royalty rates for Federal minerals set by statute and under 
existing regulations administered by Department of the Interior 
bureaus, and royalty rates applied to oil shale production in other 
countries.
    The royalty rates for other Federal energy minerals vary. 
Specifically, current royalty rates for Federal energy minerals under 
Department of the Interior leasing programs include:
    (1) Onshore oil and gas (12.5 percent);
    (2) Offshore oil and gas (16.67 percent), Gulf of Mexico Region 
(18.75 percent);
    (3) Underground coal (8 percent);
    (4) Surface coal (12.5 percent) and
    (5) Geothermal (for new leases: 1.75 percent for the first 10 years 
and 3.5 percent thereafter. For leases issued prior to the EP Act, 10 
percent on net proceeds after deductions).
    Many of these programs allow for royalty rate relief under certain 
circumstances.
    The BLM also looked at royalty applications for oil shale and 
similar unconventional fuels in other countries, including:
    (1) For oil sands, Canada applies a royalty rate of 1 percent of 
the gross revenue before payout (before companies have recouped 
investment costs) with a 25 percent net profit royalty rate applied 
after payout;
    (2) Australia has a 10 percent gross royalty on the value of the 
shale oil produced;
    (3) Brazil applies a 3 percent gross royalty rate;
    (4) Estonia does not have a royalty; and
    (5) No information on a royalty rate for shale oil produced in 
China was available.
    It should be noted that Canada produces oil from oil sands, not oil 
shale. The oil in the sands is the same as crude oil, but dispersed in 
sand. Extraction and processing is more expensive than for conventional 
crude oil production, but less expensive than is anticipated for oil 
shale. Canadian operators have never reached the payout point due to 
the continued capital expenditures in new equipment, so to date, Canada 
has received a 1 percent royalty on oil sands production.
    Australian operations are using the Alberta Taciuk Process, which 
is the same type of technology currently used by the Oil Shale 
Exploration Company (OSEC) in Utah. Despite their 10 percent royalty 
rate, the Australian oil shale project (the Stuart Project) was heavily 
subsidized by the Australian government through other means (tax 
incentives). Even the government subsidies could not sustain oil shale 
operations in Australia. The last three operators went into bankruptcy 
after brief operations. Suncor, the founder of the Stuart Project and a 
successful developer of the Canadian tar sands, exited the Australian 
oil shale business after losing approximately one hundred million 
dollars.\1\ For its Utah demonstration project, OSEC is also expected 
to test the Petrosix horizontal retort process, which is currently 
being used by Petrobras, Brazil, for oil shale operations.
---------------------------------------------------------------------------

    \1\ Environmental News Service, July 22, 2005, http://www.ens-newswire.com.
---------------------------------------------------------------------------

    Australia and Brazil are the only other known countries that are 
producing or have produced oil shale using the same technologies as in 
the U.S. Oil shale developmental efforts in China and Estonia are owned 
by their respective governments. Because no other country has yet 
achieved successful commercial oil shale operations and because of the 
wide variety of oversight and revenue structures employed in each 
country, the BLM's review of these systems did not identify a useful 
model for a royalty system to be used for oil shale development on 
Federal lands in the U.S.
    In the ANPR, the BLM solicited public input on the royalty rate and 
point of royalty determination. The BLM's purpose for requesting 
comments was to solicit ideas on these royalty issues for a resource 
that has little or no history of commercial development.
    There were approximately thirty-one entities that provided comments 
through the ANPR process that were specific to royalty rate and royalty 
point of determination. The comments suggested royalty rates that 
ranged from a royalty rate of zero to a royalty rate of 12.5 percent. 
Of the royalty-related comments, three suggested that the royalty be 
set at 12.5 percent, the same rate as in BLM's oil and gas program, 
while some comments described a 12.5 percent royalty rate as 
unreasonable. It is contemplated that the primary products produced 
from oil shale will compete directly with those from onshore oil and 
gas production, which has a 12.5 percent royalty rate. However, the BLM 
recognizes that the nature of potential oil shale operations differs 
from that of conventional oil and gas operations and that these 
differences may suggest the need for a royalty system other than the 
traditional flat rate of 12.5 percent used for conventional onshore oil 
and gas operations.
    In determining the royalty rate for oil shale, it should be noted 
that there is a significant difference between oil shale mineral 
deposits and a conventional crude oil reservoir. As discussed in the 
Background section of this preamble, oil shale is a marlstone that 
contains no oil, but kerogen, that needs to be refined and converted to 
synthetic crude oil.
    Currently, proposed processes to extract kerogen from an oil shale 
deposit are also considerably different, as well as labor and capital 
intensive. Oil shale is a solid rock that must be mined or treated in 
place to release the kerogen. Two of these processes are discussed in 
the Background section of this preamble.
    Seven of the comments recommended that a ``very low royalty rate'' 
be established until after companies have recouped the costs of their 
investments (debt service and capital investment). Many among the seven 
recommended that a 1 percent royalty rate be the starting point, and 
they used the Canadian oil sands royalty scheme as an example. As 
discussed above, the BLM looked at royalty applications for oil shale 
and similar unconventional fuels in other countries. The Canadian tar 
sand model presents two challenges. First, because of the continual 
infusion of capital to acquire new equipment the payout point is never 
being reached.

[[Page 42932]]

Secondly, because of the complexity of determining when payout may 
occur, such a royalty scheme is subject to easy manipulation and higher 
administrative costs. Therefore, the BLM considered the investment 
payout scheme as inconsistent with the premise of ``a fair return'' to 
the taxpayers as mandated in EP Act.
    Three of the ANPR comments recommended that ``royalties must be 
high enough'' to support local communities and infrastructure; however, 
these comments did not provide specific royalty rates. Oil shale 
royalties are not designated for community and infrastructure support, 
but by statute are required to be split between the Federal Treasury 
and the states (30 U.S.C. 191). Presumably states could choose to 
direct a portion of the royalty revenues they receive to local 
community and infrastructure support, but that would be a state choice, 
and for the purposes of this rulemaking, these comments were not 
considered because they assume a use of royalty revenues not available 
under current law.
    Three comments suggested that royalties should not be charged on 
hydrocarbons unavoidably lost or used on the lease for the benefit of 
the lease, but did not directly address the royalty rate issue.
    One comment suggested the royalty be ``based on the material as it 
exists naturally in the land, and as it is removed from the land.'' 
This comment seems to suggest that royalty should be based on mined raw 
shale. While the BLM acknowledges the inherent differences between an 
oil shale deposit and other deposits from which similar products can be 
produced, this suggestion was not considered because there is no known 
value for raw oil shale since there is no oil shale industry or an 
established market for raw oil shale. However, it should be noted that 
in 1983 the BLM proposed a rule to establish a royalty rate equivalent 
to 12.5 percent of the value of oil shale after mining or resource 
extraction and before processing, as determined by the BLM. The 1983 
proposed rule was published on February 11, 1983 (48 FR 6510). The 1983 
proposed rule provided that ``the derivation methodology for this value 
shall be announced prior to the solicitation of bids.'' The proposed 
rule further stated that ``the royalty rate shall, to the extent 
practicable, not be levied on any value added by the production process 
after the point of resource extraction.'' It would be unreasonable to 
adopt such a proposal today, due to the changes in extraction 
methodology (in situ versus ex situ). It would also be challenging to 
develop a fair and transparent process to calculate the royalty 
equivalent in today's economic environment, and no values were assigned 
to the mined or unprocessed rock and tonnage in the 1983 proposed rule. 
As noted, the 1983 proposed rule deferred the determination of those 
parameters to a later date.
    In addition to ANPR comments received on royalty rates, the BLM 
looked at an initial 2 percent royalty to encourage production and a 
maximum 5 percent rate upon establishment of infrastructure. This 
method recognizes the high costs involved in producing shale oil. 
However, we dismissed this approach because of the difficulty involved 
in determining when necessary infrastructure is in place.
    The BLM also considered the 8 percent royalty rate established by 
the State of Utah for state oil shale leases. It was determined that 
this rate represents the historic base royalty rate for solid fuel 
minerals on the State of Utah School and Institutional Trust Lands 
Administration lands--including asphaltic sands, uranium, and coal. To 
date, none of the state leases in Utah have been developed. Based on 
these facts, the BLM determined that there is not currently a 
sufficient basis for simply adopting the State of Utah's royalty rate 
for oil shale on Federal lands.
    After examining the basis for setting rates, as suggested in the 
ANPR comments, the BLM determined that a flat 12.5 percent royalty rate 
for all future production may not allow oil shale to become competitive 
with traditional oil and gas development and therefore could be viewed 
as inconsistent with the requirements of EP Act. The BLM has decided to 
consider other alternatives in this proposed rule that may provide some 
additional incentive beyond that of a flat 12.5 percent royalty rate 
while also meeting the EP Act objective of providing a fair return to 
taxpayers.
Royalty Rate Alternatives Proposed for Further Consideration
    As noted previously, we are not proposing a single royalty system 
in the proposed rule. Based on the information the BLM has reviewed to 
date and considering the unique challenge of trying to set a royalty 
rate on oil shale production in light of the many uncertainties 
regarding the economics and technology of a potential future oil shale 
industry, we are instead presenting two different royalty rate 
alternatives in the proposed rule text:
    1. A flat 5 percent royalty rate; and
    2. A 5 percent royalty rate on a specific volume of initial 
production beginning within a prescribed timeframe, with a 12.5 percent 
rate applied thereafter.
    In addition, we are seeking comment on the appropriate parameters 
for a third option: A two-three tiered sliding scale royalty based on 
the market price of competing products (e.g., crude oil and natural 
gas). A further explanation of each of these proposals is presented 
below. We are requesting the public to comment on these specific 
options.
Option 1. Flat 5 Percent Royalty
    Although mitigated somewhat by the much greater geographic 
concentration of oil shale resources, there is a significant difference 
between the energy value of oil shale and crude oil. On a per-pound 
basis, very high quality oil shale rock generates 4,300 Btu, coal 
generates an average of 10,600 Btu, while crude oil generates 19,000 
Btu. Even wood has more heating capacity than oil shale rock, 
generating an average of 6,500 Btu. Applying the relative Btu value of 
oil shale to crude oil would result in a 2.6 percent royalty for oil 
shale. Using the same comparison to the royalty rate for underground 
coal would result in a 3.2 percent royalty rate for oil shale. In other 
words, it would require almost 5 times as much oil shale to produce the 
Btu value of crude oil and more than 2 times as much oil shale to 
produce the equivalent Btu value of coal.
    The BLM looked at royalty rates on leases issued under Interior's 
1973 Prototype Leasing Program. The prototype leases provided for 
royalties of $.12 per ton for oil shale with a quality of 30 gallons of 
oil per ton (30 g/t) with the addition of $.01 for every increase in 
gallon per ton of oil shale. In 1973, the average price of a barrel of 
oil was $3.89. At $.24 per ton of 42 g/t or one barrel/ton of oil 
shale, the royalty per barrel of oil would have been 5 percent. This 
rate is similar to the rate derived by comparing production costs to 
royalty rates as recommended by these proposed regulations.
    The BLM also estimated what royalty rates for shale oil might be, 
based on comparisons of production costs for similar products. The cost 
of removing oil from shale rock is currently estimated to be two to 
three times higher than the current cost of producing conventional 
crude oil from onshore operations. The current estimated production 
cost for shale oil ranges from about $37.75-$65.21 a barrel. The 
production cost for conventional onshore crude is

[[Page 42933]]

approximately $19.50 a barrel.\2\ The table below compares the 
estimated cost of shale oil production for different technologies with 
the estimated cost of current onshore U.S. conventional oil production. 
The table also estimates what royalty rates for oil shale production 
might be, for the different production methods, compared to a 12.5 
percent royalty rate for conventional oil production, if the higher 
anticipated production costs for oil shale are taken into account.
---------------------------------------------------------------------------

    \2\ Energy Information Administration, Crude Oil Production, 
dated July 3, 2008. http://www.eia.doe.gov/neic/infosheets/crudeproduction.html and http://www.eia.doe.gov/emeu/perfpro/tab_12.htm. The production cost at the time of analysis was 
approximately $18 per barrel.

----------------------------------------------------------------------------------------------------------------
                                                                   Royalty calculation based on       Adjusted
                                              Estimated shale   difference in production cost of a   royalty for
                Technology                    oil production     barrel of conventional oil versus    shale oil
                                             costs per barrel                shale oil                (percent)
----------------------------------------------------------------------------------------------------------------
Surface mining............................              $44.24  $19.50/$44.24 = 44.07% x 12.5% =            5.5
                                                                 5.51%.
Underground mining........................               54.00  $19.50/$54 = 36.11% x 12.5% =               4.5
                                                                 4.51%.
Fracturing and heating in place...........               65.21  $19.50/$65.21 = 29.90% x 12.5% =            3.75
                                                                 3.74%.
Heating only in place.....................               37.75  $19.50/$37.75 = 51.65% x 12.5% =            6.5
                                                                 6.46%.
----------------------------------------------------------------------------------------------------------------

    Adjusting royalty rates based on higher anticipated production cost 
for oil from oil shale is not a new concept and is similar to the 
situation in the coal program where underground coal operations compete 
with surface coal operations, which have lower production costs. 
Congress addressed this disparity in production costs by allowing for 
different royalty rates for coal mined underground versus coal mined at 
the surface.
    Please specifically comment on whether or not the anticipated costs 
of producing oil shale should be considered in establishing the royalty 
rate for all oil shale products and whether the BLM has chosen 
appropriate reference points for this production cost comparison.
    Therefore, one alternative that considers the decreased energy 
content and increased production costs, while encouraging production 
and ensuring an appropriate return to the government is to set a flat 
royalty rate of 5%. This alternative assumes that oil shale will 
continue to be more expensive to produce for many years when compared 
to new conventional oil.
Option 2. A 5 Percent Royalty on Initial Production, With 12.5 Percent 
Thereafter
    This alternative would provide a reduced royalty rate of 5% as a 
temporary incentive for early production of oil shale (similar to 
royalty incentives offered to spur initial Outer Continental Shelf 
(OCS) deepwater production), but with the standard 12.5% onshore oil 
and gas royalty rate applying to all oil shale production after a set 
timeframe and a set amount of production has taken place. Like the 
other royalty options, this option would require oil shale lessees to 
pay royalties on the amount or value of all products of oil shale that 
are sold from or transported off of the lease. This section would 
explain that the standard royalty rate for the products of oil shale is 
12.5 percent of the amount or value of production. However, under this 
option, for leases that begin production of oil shale within 12 years 
of the issuance of the first oil shale commercial lease, the royalty 
rate would be 5 percent of the amount or value of production on the 
first 30 million barrels of oil equivalent produced.
    The advantage of this alternative over a flat 5% royalty (Option 1) 
is that it provides a better return to taxpayers on later production if 
oil prices remain high and oil shale production becomes competitive 
with new conventional oil projects. At $60/barrel, this would amount to 
roughly $1.8 billion in production allowed per lease at the lower 5% 
royalty rate, providing roughly a $135 million in savings per lease 
compared to using the standard onshore oil and gas royalty rate of 
12.5%.
    One potential downside to this alternative is that offering royalty 
incentives without regard to oil prices increases the likelihood that, 
if oil prices remain high, the government will sacrifice revenue 
without affecting actual oil shale development. For example, at $120/
barrel, the savings would be worth $270 million, even though oil shale 
operations would be more profitable than at oil prices of $60/barrel.
    Therefore, we are also requesting comment on whether, if this 
proposal were adopted in the final rule, the temporary 5% royalty on 
initial production should also be conditioned on crude oil and natural 
gas prices (similar to OCS deepwater royalty incentives) and if so, 
what oil and gas price level would trigger payment at the higher 12.5% 
rate if prices exceeded the threshold. We would also like comments on 
the 12 year timeframe for reduced royalty.
Option 3. Sliding Scale Royalty Based on the Market Price of Oil
    Two comments suggested a sliding scale royalty format. One comment 
specifically suggested a sliding scale royalty scheme based on a 
royalty schedule that varies with the price of conventional crude, as 
follows:
    At $10 per barrel of conventional crude, the royalty rate should be 
zero;
    At $15 per barrel, royalty should be 0.25 percent and should 
increase by 0.25 percent for every $5 per barrel increase up to $35 per 
barrel;
    At $40 per barrel, the royalty rate should be 2 percent and should 
increase by 0.5 percent for every $5 per barrel increase in the price 
of conventional crude oil until the price of conventional crude reaches 
$100 per barrel; and
    At $100 per barrel, royalty rate should be 8 percent and should 
remain at 8 percent at prices above $100 per barrel.
    Another comment suggested two approaches to calculating royalty. 
The first part of the comment suggested that a simple way to accomplish 
royalty rates would be to index the value of barrels of oil equivalent 
to some percentage of NYMEX futures (say, 30 day average front month) 
prices. The commenter suggested that the index should be some fraction 
of the price, such as 50 to 65 percent. In the second part of the 
comment, the commenter suggested that, as an alternative to indexing, 
the BLM use a sliding royalty rate that is calculated on the difference 
between product price and the highest-cost production in the industry. 
The commenter cautioned that ``there need to be provisions that 
deferred portions of the royalty do not reduce mineral lease payments 
to the States, if an escalating royalty rate is used.''

[[Page 42934]]

    The BLM, in consultation with the MMS, evaluated these variable 
royalty options, but decided that as presented, they would be highly 
complex, and therefore, cumbersome to administer. With price volatility 
in the crude oil market, an intricate sliding scale royalty scheme 
could make enforcing compliance very difficult for the MMS. In 
addition, there is uncertainty about the types of products that would 
be derived from oil shale refining. Royalties based on oil shale 
quality would also be difficult for the BLM to administer when 
attempting to verify production quantities. For instance, if oil shale 
is extracted in an underground heating system, it would be extremely 
difficult for the BLM to determine how much oil or other product came 
from a particular volume or area of in-place oil shale.
    While the BLM and MMS are concerned about the complexity of 
administering some of the proposed sliding scale royalty proposals, we 
recognize that there is some merit to the sliding scale concept, and in 
a simpler form, a sliding scale royalty may prove useful in meeting the 
dual goals of encouraging production and ensuring a fair return to 
taxpayers from future oil shale development.
    One of the concerns that has been expressed regarding oil shale 
development is that potential oil shale developers may be reluctant to 
make the large upfront investments required for commercial operations 
if they believe there is a chance that crude oil prices might drop in 
the future below the point at which oil shale production would be 
profitable (i.e., competitive with new conventional oil production). A 
sliding scale royalty system could allow the government to at least 
partially mitigate this development risk by providing for a lower 
royalty rate if crude oil prices fall below a certain price threshold. 
The basic concept is that in return for the government accepting a 
greater share of the price risk that an operator faces when prices are 
low (in the form of a lower royalty), the government would receive a 
greater share of the rewards (through a higher royalty) when prices are 
high.
    The BLM has not decided on the specific parameters of a sliding 
scale royalty system, but is considering a simplified, two- or three-
tiered system based on the current royalty rates already in effect for 
conventional fuel minerals and with a 5 percent royalty rate (Option 1) 
representing the first tier. The applicable royalty rate would be 
determined based on market prices of competing products (e.g., crude 
oil and natural gas) over a certain time period. If prices remain below 
a certain point during the applicable period, the royalty rate on oil 
shale products would be 5 percent for that period. If prices are above 
that range for the period, a higher royalty would be charged. In a 
three-tiered system, a third royalty rate would apply if prices rise 
above a second price threshold during the applicable period.
    The BLM seeks comment on the specific parameters that could be 
applied to a sliding scale royalty system, should the BLM choose to 
adopt such a system in the final rule. More specifically, the BLM would 
like feedback on the following questions:
    1. Should a sliding scale system include two or three tiers? 
Assuming a 5 percent royalty for the first tier, what would be 
appropriate royalty rates for the second and/or third tiers?
    2. What are appropriate price thresholds to apply to each tier? 
Should the thresholds be fixed (in real dollar terms), or should they 
float relative to a published index?
    3. Should the sliding scale apply to all products, or should 
nonfuel products pay a traditional flat rate?
    4. Are there other ways to simplify a sliding scale royalty to 
reduce the administrative costs for BLM, MMS, and producers?
    Under a sliding scale system, if prices fall below the lower range, 
producers would have a ``safety net'' in the form of the lower 5% 
royalty rate. Whether or not the lower royalty kicks in at some point, 
simply having it in place provides some added certainty for investors 
that would help encourage oil shale production. In return for this 
``safety net'' that conventional oil and gas producers do not enjoy, 
oil shale producers would be required to pay a higher royalty rate(s) 
when crude oil and/or natural gas prices are high (and where oil shale 
is expected to be substantially more profitable).
    There are a couple of advantages of this alternative. It reduces 
the risk for oil shale operators that oil prices might fall below the 
point that continued oil shale production would be economic. However, 
it also ensures an improved return to the government if prices remain 
within one of the higher expected ranges at which oil shale may be 
profitable. One disadvantage is that taxpayers accept a greater risk of 
lower returns if prices fall and remain well below the lowest 
threshold. However, with the lowest royalty rate step set at 5 percent, 
this risk is no greater than under a flat 5 percent royalty system 
(Option 1).
Other Royalty Issues
    The BLM also received 5 comments specific to the royalty point of 
determination. Two of the comments suggested that royalty should be 
determined ``at the point at which the oil product exits a process 
facility in a marketable state.'' One comment suggested that ``the 
point of royalty determination be at the earliest point of liquid or 
gaseous product marketability.'' Another comment suggested that ``the 
oil produced should be measured at the point at which the oil product 
exits a processing facility in a marketable state.'' The last comment 
did not provide a specific suggestion; rather, it stated that the BLM 
``must set the royalty rate and point of royalty determination with 
reference to the economic cost of emissions that would be created from 
developing, and then burning, the oil shale resource.'' After a careful 
evaluation of these comments and consultation with the MMS, under the 
proposed rule the royalty would be assessed on all products of oil 
shale that are sold from or transported off of the lease. This proposed 
point of royalty determination is similar to points of royalty 
determination for other Interior Department minerals programs.
    The BLM received three ANPR comments relating to the oil shale 
research, development, and demonstration (R, D and D) program. One 
comment encouraged the BLM to ``continue the existing BLM R, D and D 
leasing program for access to oil shale for companies wishing to test 
unproven technologies.'' Another comment suggested that the BLM 
``should let several `boutique' small companies with large R, D and D 
budgets to develop a small number of sites,'' on the condition that 
those companies ``would have to agree to allow their findings to be 
shared.'' The last comment specifically requested that the ``commercial 
leasing regulations make clear that the BLM will not hold a commercial 
lease sale for Federal oil shale resources until successful 
technologies have been developed and demonstrated on R, D and D 
leases.'' These proposed regulations do not address the first comment. 
The Secretary has discretion under the EP Act to offer additional 
tracts for R, D and D leasing. These regulations do not decide whether 
additional R, D and D leasing is necessary. Although the BLM could 
require that proprietary information be made public as a condition of 
further R, D and D leasing, we believe that the industry would not be 
interested in leasing under such conditions.

[[Page 42935]]

    Furthermore, as previously explained, these regulations do not 
address any new R, D and D leases. The BLM could not incorporate the 
third comment, because it suggested a limitation that is inconsistent 
with the terms of the EP Act. Sections 369(c) and 369(e) of the EP Act 
authorize the commercial leasing of oil shale following promulgation of 
regulations and consultation with interested parties without the 
limitations sought by the comment.
    Finally, it is important to note that the proposed rule allows the 
Federal Government to readjust royalty rates on leases after the first 
20-year term.
    Currently, there is no oil shale industry and the oil shale 
extractive technology is still in its rudimentary stages; as such, 
commercial oil shale production does not exist anywhere in the world. 
As research and development of oil shale technology progresses, the BLM 
will have adequate time to reexamine and readjust royalty rates for oil 
shale production, either up or down. Please specifically comment on the 
time necessary to develop an oil shale industry.
    The BLM is proposing alternatives for the royalty rate and the 
products on which the royalties will be collected. The BLM anticipates 
selecting one of these alternatives, or based on public comment and 
further analysis, variations on these alternatives in the final rule in 
order to provide predictability for the industry and ease of 
administration both for the United States and for payers. However, the 
Department is not proposing corresponding MMS valuation regulations at 
this time. Because the oil shale industry is still in the research and 
development phase, it would be speculative to predict whether the 
industry as it matures would predominantly sell from its leases mined 
solid oil shale, shale oil, synthetic petroleum, shale gas, natural 
gas, or products in several different forms or stages of processing. It 
is also difficult to predict whether or when multi-buyer/multi-seller 
markets would develop that would provide FMV pricing for products of 
oil shale. Therefore, the MMS will promulgate royalty valuation 
regulations before oil shale leases are required to begin paying 
production royalties under this rule.
    To the extent possible, the MMS will ensure that any oil shale 
valuation regulation is consistent with other valuation regulations and 
will incorporate principles of simplicity, early certainty, and reduced 
administrative costs in the oil shale valuation regulations it 
promulgates. For example, the MMS could promulgate regulations similar 
to the current Federal oil valuation regulation to value crude oil 
produced from oil shale. Under this regulation, the value of oil sold 
at arm's-length would be based on gross proceeds less allowable costs 
of transporting oil to the point of sale. The value of oil not sold at 
arm's-length would be based on a market index price or the affiliate's 
arm's-length resale price. In both arm's-length and non-arm's-length 
situations, the regulations provide for adjustments for location, 
quality, and transportation allowances. Further, lessees also can 
petition for alternate valuation agreements that are situation specific 
when regulatory provisions do not apply.
    Royalties would not be payable on potentially valuable minerals or 
inorganic matter that are not sold or transported off the lease for 
commercial purposes. Those materials would be considered waste, and 
would be subject to management and reclamation requirements as provided 
in the lease or in an approved plan of development.
    The Department seeks comments on what future royalty valuation 
regulations need to contain. In particular, the Department is seeking 
comments on the potential types of oil shale products, the most 
equitable and practical point and method to determine the value on 
which to apply the royalty rate, and whether there are or should be 
opportunities to determine value by market proxy or indices. The 
Department also seeks comments on alternative approaches to valuation 
and royalty rates.
    In the economic analysis for this rule, the BLM analyzed the 
royalty implications of a range of royalty rates. Specifically, the BLM 
conducted a simulation-based analysis to estimate the revenue, profit, 
and royalty implication of a production scenario \3\ using three 
discount rates (7 percent, 3 percent, and 20 percent), three world 
crude oil price projections (EIA's 2007 reference, high, and low price 
projections \4\), and six different royalty rates (1 percent, 3 
percent, 5 percent, 7 percent, 9 percent, and 12.5 percent). The 
likelihood of a company, in the face of numerous technological 
challenges, having the incentive to develop Federal oil shale reserves 
and experiencing economic success will depend on a number of factors. 
However, because the simulated scenario analysis is based on a given 
production scenario and set production costs, the analysis did not 
assist in determining the project(s) economic viability due to the 
royalty rate applied. The analysis did, however, clearly identify world 
oil price as a critical variable determining a project's economic 
viability. Under EIA's 2007 low oil price projection all operations are 
assumed to be uneconomic based on the set production costs used in the 
analysis of the rule.
---------------------------------------------------------------------------

    \3\ America's Strategic Unconventional Fuels Resources, Volume 
III Resource and Technology Profiles, Task Force on Strategic 
Unconventional Fuels, September 2007, page III-17, Table III-4. 
Potential Oil Shale Development Schedule--Base Case, (http://www.unconventionalfuels.org).
    \4\ Department of Energy, Energy Information Administration, 
Annual Energy Outlook 2007, Report : DOE/EIA-0383(2007), 
February 2007.
---------------------------------------------------------------------------

    Section 3903.53 would require the filing of documentation of all 
overriding royalties associated with a lease and would require that the 
filing must occur within 90 days of the date of execution of the 
assignment. This section is similar to that of the BLM's other mineral 
leasing programs.
    Section 3903.54 would contain the requirements for filing an 
application for waiver, suspension, or reduction of rental or payment 
in lieu of production, or a reduction in royalty, or waiver of royalty 
in the first 5 years of the lease. As with the BLM's other mineral 
leasing programs, this section is intended to encourage the maximum 
ultimate recovery of the mineral(s) under lease. This section is 
similar to the BLM's coal leasing regulations and similarly includes a 
case-by-case processing fee under 43 CFR 3000.11.
    Section 3903.60 would provide that late payments or underpayment 
charges would be assessed under MMS regulations at 30 CFR 218.202.

Subpart 3904--Bonds and Trust Funds

    Sections in this subpart would address the requirements associated 
with bonding and trust funds, including the:
    (1) Types of bonds the BLM requires and when bonds would be 
required (section 3904.10);
    (2) When and where bonds would be filed (sections 3904.11 and 
3904.12);
    (3) Acceptable types collateral for personal bonds (section 
3904.13);
    (4) Individual lease, exploration license, and reclamation bonds 
(section 3904.14);
    (5) Amount of bond coverage (section 3904.15);
    (6) Default (section 3904.20); and
    (7) Long-term water treatment trust funds (section 3904.40).
    Since all of the BLM's mineral leasing programs require bonds, the 
requirements in subpart 3904 would be similar to the regulatory 
provisions in the BLM's other mineral leasing programs. The bonding 
requirements in this rule are consistent with the bonding

[[Page 42936]]

requirements under the BLM's mining law program. Both programs require 
that bonds cover the full cost of reclamation. Both programs also allow 
for the use of long-term trust funds as a mechanism to address 
potential long-term water issues.
    Bonding ensures performance at a cost up to the bond amount in the 
event of default by a lessee or licensee. Sections of this subpart 
would establish that the BLM would require two types of bonds; a lease 
or exploration license bond and a reclamation bond. This subpart would 
also explain that reclamation bonds would be required to be in an 
amount sufficient to cover the entire cost of reclamation of the 
disturbed areas as if they were to be performed by a contracted third 
party.
    Section 3904.10 would provide that prior to lease or an exploration 
license issuance, the BLM would require a lease or exploration license 
bond for each lease or exploration license to cover all liabilities on 
a lease, except reclamation, and all liabilities on a license. The bond 
would be required to cover all record title owners, operating rights 
owners, operators, and any person who conducts operations on or is 
responsible for making payments under a lease or license. This section 
would also require the lessee or operator to file a reclamation bond to 
cover all costs the BLM estimates would be necessary to cover 
reclamation on a lease. This is similar to the requirement found in 
other BLM mineral regulations.
    Section 3904.11 would require the lessee or operator to file a 
lease bond prior to issuance of a lease, file a reclamation bond prior 
to approval of a plan of development, and file an exploration bond 
prior to exploration license issuance. This section is similar to other 
BLM bonding regulations as it would require the filing of a bond before 
liabilities may accrue.
    Section 3904.12 would require that a copy of the bond with original 
signatures be filed in the proper BLM office and section 3904.13 would 
describe the different types of bonds that the BLM would accept. These 
sections are similar to the bonding regulations in other BLM mineral 
leasing programs.
    Section 3904.13 would address the types of personal and surety 
bonds the BLM would accept. Personal bonds would be limited to pledges 
of cash, cashier's check, certified check, or U.S. Treasury bond. The 
BLM state offices would list qualified sureties for bonds.
    Section 3904.14 would provide that the BLM will establish bond 
amounts on a case-by-case basis. These regulations would set the 
minimum lease bond amount at $25,000. Although the minimum lease bond 
amount is greater than that required in other BLM mineral leasing 
programs, the BLM believes that it is justified because the potential 
liability may be greater and there are still some unknowns. Reclamation 
and exploration bond amounts would be established to cover the costs of 
reclamation as if it were to be performed by a contracted third party.
    Past oil shale operations have required extensive reclamation, and 
this has demonstrated the need to have a reclamation bond that covers 
the full cost of reclamation. By requiring that the bond equal the 
estimated costs of having a third party perform the reclamation, the 
BLM anticipates that the cost of reclamation would be covered.
    This section would provide that the BLM may enter into agreements 
with states to accept a state-approved reclamation bond to satisfy the 
BLM's reclamation requirements and protect the BLM to the extent the 
bond is adequate to cover all the operator's liabilities on Federal, 
state, and private lands. This would avoid duplicate procedures and the 
inconvenience and cost of filing separate bonds with both the state and 
the BLM. Such agreements were recommended by state representatives at 
the BLM listening sessions and are also addressed in regulatory 
provisions of other BLM mineral leasing programs.
    Section 3904.15 would explain that under this proposed rule the BLM 
may increase or decrease the bond amount if it determines that a change 
in coverage is warranted to cover the costs and obligations of 
complying with the requirements of the lease or license and these 
proposed regulations. This section would also explain that the BLM 
would not decrease the bond amount below the minimum established in 
section 3904.14(a). This section would require the lessee or operator 
to submit a revised cost estimate of the reclamation costs to the BLM 
every three years after reclamation bond approval. If the current bond 
would not cover the revised estimate of the reclamation costs, the 
lessee or operator would be required to increase the reclamation bond 
amount to meet or exceed the revised cost estimate. This section is 
consistent with the bonding regulations that currently exist for other 
BLM minerals programs.
    Section 3904.20 would describe what actions the BLM would take in 
the event of a default payment from a lease, exploration, or 
reclamation bond to cover nonpayment of any obligations that were not 
met. It also would require the bond to be restored to the pre-default 
level. This section is similar to sections in the other BLM mineral 
regulations regarding default.
    Section 3904.21 would allow the termination of the period of 
liability of a bond. The BLM will not consent to the termination of the 
period of liability under a bond unless an acceptable replacement bond 
has been filed or until all of the terms and conditions of the license 
or lease have been fulfilled. Termination of the period of liability of 
a bond would end the period during which obligations continue to 
accrue, but would not relieve the surety of the responsibility for 
obligations that accrued during the period of liability.
    Section 3904.40 would establish trust funds or other funding 
mechanisms to ensure the continuation of long-term treatment to achieve 
water quality standards and for other long-term, post-mining 
maintenance requirements. Experience in other mineral programs has 
shown the need for a mechanism to ensure the long-term treatment of 
water. This provision is similar to regulations in the BLM's mining law 
program under 43 CFR 3809.552 and is designed to address similar long-
term water protection issues. In determining whether a trust fund will 
be required, the BLM will consider the following factors:
    (1) The anticipated post-mining obligations (PMO) that are 
identified in the environmental document and/or approved plan of 
development;
    (2) Whether there is a reasonable degree of certainty that the 
treatment will be required based on accepted scientific evidence and/or 
models;
    (3) The determination that the financial responsibility for those 
obligations rests with the operator; and
    (4) Whether it is feasible, practical, or desirable to require 
separate or expanded reclamation bonds for those anticipated long-term 
PMOs.
    The determination that a trust fund is needed and the amount needed 
in the fund may be made during review of the proposed plan of 
development or later as a result of further inspections or reviews of 
the operations.

Subpart 3905--Lease Exchanges

    This subpart would allow the BLM to approve oil shale lease 
exchanges.
    Section 3905.10 would explain that the BLM would approve a lease 
exchange if it would facilitate the recovery of oil shale and it would 
consolidate mineral interests into manageable areas. It also states 
that oil shale lease exchanges would be governed by the regulations 
under 43 CFR part 2200. Section 206 of FLPMA

[[Page 42937]]

authorizes land exchanges of interests in Federal lands for non-Federal 
lands (43 U.S.C. 1716).

Part 3910--Oil Shale Exploration Licenses

    The regulations proposed under this part would address exploration 
licenses. An exploration license would allow a licensee to enter the 
Federal land covered by an exploration license and explore for 
minerals, but it would not authorize the licensee to extract any 
minerals, except for experimental or demonstration purposes. Since 
regulatory provisions for the issuance and approval of exploration 
licenses are common to the BLM mineral leasing programs, this part 
would contain similar regulatory provisions, particularly with respect 
to:
    (1) Lands that are subject to exploration (section 3910.21);
    (2) Lands managed by agencies other than the BLM (section 3910.22);
    (3) Requirements for conducting exploration activities (section 
3910.23);
    (4) Application procedures (section 3910.31);
    (5) Environmental analysis (section 3910.32);
    (6) License requirements (section 3910.40);
    (7) Issuance, modification, relinquishment, termination, and 
cancellation (section 3910.41);
    (8) Limitations on exploration licenses (section 3910.42);
    (9) Collection and submission of data (section 3910.44); and
    (10) Surface use (section 3910.50).
    Section 3910.21 would authorize the issuance of oil shale 
exploration licenses on all Federal lands subject to leasing under 
section 3900.10, except lands within an existing oil shale lease or in 
preference right lease areas under the R, D and D program. This type of 
limitation on which lands the BLM may issue an exploration license is 
consistent with that of other BLM minerals exploration regulations.
    Section 3910.22 would make it clear that the consent and 
consultation procedures under section 3900.61 that apply to leases also 
apply to exploration licenses. The BLM would issue these licenses under 
the terms and conditions prescribed by the surface managing agency 
concerning the use and protection of the nonmineral interests in those 
lands. Section 3910.22 is similar to regulations for BLM's other 
mineral leasing regulations requiring consent and consultation for 
exploration licenses.
    Section 3910.23 would require the operator to have a lease or 
license before conducting any exploration activities on Federal lands. 
This section would also allow that under an exploration license small 
amounts of material may be removed for testing purposes only; however, 
any material removed cannot be sold. This is similar to regulations in 
other BLM mineral programs that recognize that some removal of material 
is necessary for testing purposes.
    Section 3910.31 would identify specific requirements for filing an 
application for an exploration license. Application requirements under 
this section would include:
    (1) Submission of a nonrefundable filing fee;
    (2) Description of lands covered by the application;
    (3) An exploration plan;
    (4) Compliance with maximum acreage limitations for an exploration 
license; and
    (5) Submission of information to prepare a notice of invitation for 
other parties to participate in exploration.
    Mirroring the coal regulations, this section would establish an 
acreage limit of 25,000 acres as the maximum size allowable for an 
exploration license. As is the case for other BLM leasing programs 
which provide for exploration licenses, there would be no required 
application form. The $295 filing fee for an exploration license is 
based on the current filing fee for a coal exploration license. The BLM 
anticipates that the time required to process an oil shale exploration 
license would be similar to that for a coal exploration license, and 
therefore believes the same filing fee is justified.
    Section 3910.32 would require the BLM to perform the appropriate 
NEPA analysis before issuing an exploration license. The section also 
explains that the BLM would include in an exploration license terms and 
conditions to mitigate impacts to the environment analyzed in a NEPA 
document and to protect Federal resource values of the area and to 
ensure reclamation of the lands disturbed by exploration activities.
    Section 3910.40 would provide that a licensee must comply with all 
applicable Federal laws and regulations and the terms and conditions of 
the license and approved exploration plan as well as applicable state 
and local laws not otherwise preempted by Federal laws, such as FLPMA.
    Section 3910.41 would explain provisions relating to the 
administration of the exploration license, including the license term, 
the effective date of an exploration license, conditions for approval, 
and provisions relating to the modification, relinquishment, and 
cancellation of an exploration license. Like exploration licenses for 
other BLM mineral leasing programs, the term of an exploration license 
would be 2 years. The requirements proposed here for oil shale 
exploration licenses are similar to existing requirements in 
regulations relating to exploration licenses in other BLM minerals 
programs, particularly coal.
    Section 3910.42 would provide that issuance of an exploration 
license would not preclude the issuance of a Federal oil shale lease 
for the same area. This section would also make it clear that if an oil 
shale lease is issued for an area covered by an exploration license, 
the BLM would cancel the exploration license effective the date of 
lease issuance.
    Section 3910.44 would address collection and submission of data 
relating to an exploration license and would include provisions 
relating to confidentiality of data. This section is similar to 
provisions in other BLM minerals programs.
    Section 3910.50 would address the issue of surface damage resulting 
from exploration operations and would require that exploration 
activities not unreasonably interfere with or endanger any other lawful 
activity on the same lands or damage any surface improvements on the 
lands. This is similar to other BLM minerals regulations that address 
surface use.

Part 3920--Oil Shale Leasing

    The foundation for the proposed oil shale leasing program would be 
a competitive leasing process similar to the BLM's coal leasing 
program. Prior to making areas available for consideration for leasing 
through a competitive lease sale, the BLM is proposing a 2-step process 
that would begin with a call for expressions of leasing interest 
(section 3921.30), to be followed by a call for applications (section 
3921.60) if the BLM determines that there is interest in a competitive 
lease sale. In addition to contributing to the orderly development of 
the resource, this process would facilitate compliance with NEPA by 
focusing the analysis on areas in which there is active interest in 
obtaining a lease.

Subpart 3921--Pre-Sale Activities

    The sections under this subpart would contain regulatory provisions 
relating to pre-leasing activities. Many of the sections would be 
similar to existing provisions of other BLM mineral leasing programs, 
particularly coal.
    Section 3921.10 would explain that a BLM State Director may 
announce in the Federal Register a call for

[[Page 42938]]

expressions of interest for those areas identified in the land use plan 
as available for oil shale leasing.
    Section 3921.20 clarifies that the appropriate NEPA analysis must 
be prepared for the proposed leasing area under the Council on 
Environmental Quality's regulations at 40 CFR parts 1500 through 1508 
and Department of the Interior methods and procedures developed 
pursuant to NEPA.
    Section 3921.30 would provide that the notice announcing calls for 
expressions of leasing interest would be published in the Federal 
Register and in at least 1 newspaper of general circulation in the 
affected state. The notice would allow a minimum of 30 days to submit 
expressions of leasing interest, including a legal land description and 
other specified information.
    Section 3921.40 would require that the BLM notify the appropriate 
state governor's office, local governments, and interested Indian 
tribes of their opportunity, after the BLM receives responses to the 
call for expression of leasing interest, to provide comments regarding 
the responses and other issues related to oil shale leasing. The BLM 
included this requirement in the proposed rule in response to 
discussion at the three listening sessions with the governors' 
representatives.
    Section 3921.50 would explain that after analyzing expressions of 
leasing interest, the BLM would determine a geographic area for 
receiving applications to lease. This section would also explain that 
the BLM may add lands to those areas identified by the public in the 
expressions of leasing interest.
    Under proposed section 3921.60, the BLM's call for applications 
would be published in the Federal Register and would identify the 
geographic area available for application under proposed subpart 3922. 
Under this section, the public would have at least 90 days to submit 
applications for lease.

Subpart 3922--Application Processing

    The sections under this subpart would contain regulatory provisions 
relating to application requirements, including:
    (1) A nonrefundable case-by-case processing fee (section 3922.10);
    (2) Content of application (section 3922.20);
    (3) Additional information (section 3922.30); and
    (4) Tract delineation (section 3922.40).
    These provisions are similar to existing regulations of other BLM 
mineral leasing programs.
    Section 3922.10 would require an applicant nominating a tract for 
competitive leasing to pay a cost recovery or processing fee that the 
BLM will determine on a case-by-case basis as described in 43 CFR 
3000.11 and as modified by provisions of section 3922.10. The section 
would provide that the applicant who nominates a tract will pay to the 
BLM the processing costs that the BLM incurs up to the publication of 
the competitive lease sale notice. That fee amount would be included in 
the sale notice. If the applicant is the successful bidder, the 
applicant would then also pay all processing costs the BLM incurs after 
the date of the sale notice. Payment of all cost recovery fees is 
required prior to lease issuance.
    If the successful bidder is someone other than the original 
applicant, the successful bidder would be required to submit an 
application under section 3922.20 within 30 days after the lease sale 
and would be responsible for paying to the BLM the fee amount included 
in the sale notice. In such circumstances, the BLM will refund the fees 
the original applicant paid to the BLM. The successful bidder would 
also be responsible for any processing costs the BLM incurs after the 
date of the sale notice. If there is no successful bidder, the 
applicant would be responsible for processing costs, and there would be 
no refund.
    With respect to costs incurred relating to the NEPA analysis to 
support a competitive lease sale, the BLM processing fees noted in the 
sale notice would include, if applicable, the BLM's costs associated 
with preparation of the NEPA analysis, which may include BLM costs 
incurred in contracting with a third party to perform the NEPA 
analysis. In cases where there are several applications that have been 
filed for the same area, it is likely that the BLM would prepare a 
single NEPA analysis, which would address issues related to 
environmental impacts identified in all applications that were filed in 
response to the call for applications.
    In the case where the successful bidder for a tract is not the 
original applicant, the successful bidder would be responsible for 
paying the fee noted in the sale notice and any additional BLM 
processing costs, including any additional NEPA analysis.
    For example, in the case where a successful high bidder is not the 
original applicant and the technology that the successful bidder 
proposes to use was not previously analyzed in the NEPA analysis, the 
successful bidder would be responsible for paying for the cost of that 
NEPA analysis and any additional NEPA analysis that would be necessary.
    It should be noted that an applicant would not be reimbursed for 
moneys the applicant (and not the BLM) may pay directly to third 
persons to perform studies, including any required analyses under NEPA.
    Under section 3922.10, the BLM is proposing adopting case-by-case 
processing fees for applications that would mirror case-by-case fee 
requirements applicable to the leasing of coal and non-energy leasable 
minerals offered through competitive lease sales. The BLM's minerals 
material sales regulations also contain case-by-case processing fees. 
Case-by-case fees would allow the BLM to recoup its processing costs by 
charging an applicant the reasonable costs the BLM incurs in processing 
a particular application. Cost recovery is authorized under the 
Independent Offices Appropriation Act of 1952, as amended, 31 U.S.C. 
9701, which states that Federal agencies should be ``self-sustaining to 
the extent possible'' and authorizes agency heads to ``prescribe 
regulations establishing the charge for a service or thing of value 
provided by the agency.'' The BLM also has specific authority to charge 
fees for processing applications and other documents relating to public 
lands, including Environmental Impact Statements (EISs), under Section 
304(b) of FLPMA (43 U.S.C. 1734(b)). Cost recovery policies are 
explained in Office of Management and Budget Circular A-25 (Revised), 
entitled ``User Charges.'' The general Federal policy stated in 
Circular A-25 (Revised) is that a charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public.
    Additionally, this section states that the BLM will not issue a 
lease offered by competitive sale without having first received an 
application from the successful bidder under section 3922.20. Under 
section 3922.10(b)(5) a successful bidder at a competitive lease sale 
who was not an applicant must file an application within 30 calendar 
days after the lease sale.
    Section 3922.20 would identify specific information that an 
applicant would be required to include in a lease application to enable 
the BLM to have sufficient information to prepare the appropriate NEPA 
analysis to evaluate the impacts of proposed leasing. The amount of 
information requested as part of an oil shale lease application differs 
from other mineral leasing programs because the methodology for 
recovering oil shale is not as standardized as it is for more 
conventional fuels. The NEPA

[[Page 42939]]

compliance documents at this stage in the leasing process are necessary 
because the PEIS addresses land use planning decisions and not leasing 
decisions and was unable to anticipate with any certainty the effects 
of oil shale leasing development due to the newness of the industry.
    The possible oil shale development technologies are very different 
from conventional mining methods associated with other BLM minerals 
programs, as are the impacts associated with each. The technologies are 
yet to be proven, or commercially viable and their associated impacts 
are unknown. Because the BLM is presently uncertain of the mining 
methods (and associated impacts) that may be used for oil shale 
development, additional NEPA analysis will be performed during the 
application and leasing process. When required by applicable law, the 
BLM will conduct site-specific NEPA analysis, including a period of 
public review, to evaluate the impacts on known resource values on the 
lands in any application. Although no specific form is required, 
information the applicant would be required to provide includes, but is 
not limited to:
    (1) Proposed extraction method (including personnel requirements, 
production levels, and transportation methods) and estimate of the 
maximum surface area to be disturbed at any one time;
    (2) Sources and quantities of water to be used and treatment and 
disposal methods necessary to meet applicable water quality standards;
    (3) Air emissions;
    (4) Anticipated noise levels from proposed development;
    (5) How proposed lease development would comply with all applicable 
statutes and regulations governing management of chemicals and disposal 
of waste;
    (6) Reasonably foreseeable social, economic, and infrastructure 
impacts of the proposed development on the surrounding communities and 
on state and local governments;
    (7) Mitigation of impacts on species and habitats; and
    (8) Proposed reclamation methods.
    Section 3922.30 would provide that the BLM could request additional 
information from the applicant, and explain that failure to provide the 
best available and most accurate information might result in suspension 
or termination of processing of the application or in a decision to 
reject the application. The BLM's ability to obtain additional 
information at this stage is essential to the NEPA analysis to support 
leasing. Failure to provide the needed information would have a direct 
impact on the adequacy of the NEPA analysis and therefore could greatly 
impact the BLM's decision to proceed with a lease sale.
    Section 3922.40 would make it clear that the purpose of tract 
delineation for a competitive lease sale is to provide for the orderly 
development of the oil shale resource. This section would also clarify 
that in addition to adding or deleting lands from an area covered by an 
application, where lands covered by applications overlap, the BLM may 
delineate those lands that overlap as separate tracts. The BLM may 
delineate tracts in any area acceptable for further consideration for 
leasing, regardless of whether it received expressions of interest or 
applications for those areas. The need to delineate tracts for adequate 
development of the mineral resource is recognized in all the BLM 
mineral leasing programs, and provisions similar to this are contained 
in the other BLM mineral leasing regulations.

Subpart 3923--Minimum Bid

    Section 3923.10 would implement the policy of the United States 
under Section 102(a) of FLPMA (43 U.S.C. 1701(a)(9)) that the Federal 
government should receive a FMV for leasing its minerals. Also, Section 
369(o) of the EP Act which requires that payments for leases under that 
section must ensure a fair return to the United States. Under section 
3924.10 of the proposed rule, the BLM sales panel would determine if 
the high bid reflects the FMV of the tract, which we equate to fair 
return. We anticipate that the sales panel will analyze the bids and 
make a determination, taking into account, among other things, the 
geology, market conditions, mining methods, and industry economics.
    The BLM recognizes the difficulty in determining a value for a 
resource (oil shale) that has tremendous potential, but has not yet 
been proven to be economic to develop. The risk of setting pre-sale 
FMVs that are too high and would discourage development of a commercial 
leasing program is very real. The BLM is also aware that the oil shale 
industry is presently in the research and development stage and 
comparable lease sales might be rare or unavailable when leasing first 
occurs under these regulations, but this will not always be the case. 
Competitive lease sales of Federal oil shale leases in the 1970s 
resulted in bids of $10,000 per acre, or higher, indicating that even 
though development risks are high, the potential reward is also high. 
Both the economic and the technological circumstances have changed 
since the 1970s, but the vast quantities of oil shale within the 
Federal acreage weigh in favor of high minimum bid amounts. For 
comparison purposes, the coal program has a minimum bid amount of $100 
per acre and the oil and gas program has a minimum bid amount of $2 per 
acre. This section would set a minimum bid of $1,000 per acre, but the 
BLM invites comments supporting reasonable alternative minimum bid 
amounts.

Subpart 3924--Lease Sale Procedures

    Provisions of this subpart would identify the process by which 
tracts of land would be made available for competitive lease sale. The 
BLM proposes to lease oil shale through a competitive bidding leasing 
procedure that would mirror competitive lease sales procedures 
currently in place for other solid minerals leasing programs, 
particularly coal.
    Section 3924.5 would detail the contents of the sale notice that 
the BLM would publish in the Federal Register and newspapers of general 
circulation in the area of the proposed lease. The purpose of the 
notice is to alert the public that the BLM will be holding an oil shale 
lease sale and to provide enough of the details about the proposed 
lease terms and conditions, lease area, and leasing limitations for the 
public to make an informed decision whether to participate in the lease 
sale. This section would be similar to other BLM mineral leasing 
regulations that require notification of the lease sale and is a 
necessary part of the oil shale leasing program.
    Section 3924.10 would detail competitive lease sale procedures, 
including receipt and opening of sealed bids, submission of the one-
fifth of the amount of the bonus bid, requirements for future 
submission of remaining installments of the bonus bid, and post-sale 
procedures for determining the successful bidder. This section would 
also address the actions of the sale panel in determining whether or 
not to accept the high bid, including a FMV determination. This section 
is similar to the BLM's competitive leasing regulations for coal and 
non-energy leasable minerals. The BLM is proposing to adopt this 
process because it has been successful in these other mineral leasing 
programs and because we believe this process is appropriate for oil 
shale leasing.
    The BLM will rely on the appraisal process to estimate the fair 
market value (FMV) for commercial oil shale leases under the proposed 
regulations. An appraisal is an unbiased estimate of the value of 
property. The appraisal process

[[Page 42940]]

is a systematic approach to property valuation. It consists of defining 
data requirements, assembling the best available data, and applying an 
appropriate appraisal method. The principles of property valuation are 
presented in the Uniform Appraisal Standards for Federal Land 
Acquisitions and in The Appraisal of Real Estate. The term ``fair 
market value'' is defined in the Uniform Appraisal Standards for 
Federal Land Acquisitions as the amount in cash, or on terms reasonably 
equivalent to cash, for which in all probability the property would be 
sold by a knowledgeable owner willing, but not obligated, to sell to a 
knowledgeable purchaser who desired, but is not obligated, to buy.
    In ascertaining that figure, consideration should be given to all 
matters that might be brought forward and substantial weight given in 
bargaining by persons of ordinary prudence. Factors that will affect 
the market value of an oil shale lease include the lease terms which 
encompass rental and royalty obligations. The bonus bid for the lease 
must be equal or greater than the lease FMV.
    There are three methodologies generally used in appraising real 
property: the comparable sales approach, income approach, and 
replacement cost approach. Normally, the replacement cost approach is 
not applied to appraisals involving property such as mineral leases.
    In the comparable sales approach, the value of a property is 
estimated from prior sales of comparable properties. The basis for 
estimation is that the market would impute value to the subject 
property in the same manner that it determines value of comparable 
competitive properties. When reliable comparable sales data are 
available, it generally is assumed that the comparable sales approach 
will provide the best indication of value.
    In the income approach, the value assigned to the property is 
derived from the present worth of future net income benefits. If 
sufficiently similar sales are not available, the FMV determination 
will generally rely on the income approach.
    The FMV determination follows a pre-existing valuation standard, 
which utilizes the circumstances of place, time, the existence of 
comparable precedents, and the evaluation principles of each involved 
party. In determining the FMV under this rule, our determination would 
be based on comparison with identical or similar past, actual, or 
expected services and goods relating to oil shale. It is the policy of 
the United States, stated in Section 102(a) of FLPMA (43 U.S.C. 
1701(a)(9)) and Section 369(o)(2) of the EP Act, that the United States 
receive FMV for the issuance of Federal mineral leases.
    In the ANPR, the BLM solicited public input on the process for bid 
adequacy evaluation and minimum acceptable lease bonus bid. The BLM's 
purpose for requesting comments on the FMV it should receive for lease 
tracts was to solicit ideas on how FMV would be determined for a 
resource that has little or no history of comparable sales.
    The public comments received were primarily concerned with the need 
to receive an appropriate value for the lease. The BLM received 
comments from 6 entities related to this question, specifically 
mentioning that: a FMV determination needs to reflect private sector 
valuations; competitive bidding should establish a lease's FMV; the 
process for establishing FMV should be modeled after the Federal coal 
leasing program; bonus payments are needed to stop speculation; and 
sealed bidding ensures the most competitive bonus bid. The comments 
also posed arguments for and against using a minimum acceptable bonus 
bid. In addition, the BLM received comments that bonus bids should be 
high and suggested that the 1974 bonus bid amounts pertaining to 4 oil 
shale leases that were offered in Colorado and Utah, with bonus bids 
that ranged from $74 million to $210 million, were indicative of 
expected bonus bid amounts.
    In response to the ANPR comments and other considerations, the BLM 
proposes to establish oil shale lease FMV using a process similar to 
that used in the Federal coal leasing program. This proposed process 
relies on the appraisal process in an attempt to estimate the market 
value for those leases. As such, the proposed process relies on many of 
the procedures used in private sector valuations, and where available, 
will rely on private sector transactions to establish the market value 
for Federal oil shale leases. The Federal coal leasing program and this 
proposed rule, utilize competitive bidding, specifically sealed 
bidding, for determining who receives the lease.
    In the rule, the BLM is proposing to establish a minimum acceptable 
bonus bid for Federal oil shale leases. The amount is not a reflection 
of FMV, but is intended to establish a floor value to limit or dissuade 
nuisance bids. The proposed rule requires a minimum acceptable bonus 
bid of $1,000 per acre. The assumption is that such an amount will not 
exceed FMV or be a deterrent to companies interested in bidding for the 
lease tracts. At the same time, the BLM has requested further comments 
on the value proposed.
    As per comments on specific values, the proposed rule does not 
attempt to establish actual FMV for future Federal oil shale leases. 
Values received in the 1970's may not be an accurate indicator for 
future values.

Subpart 3925--Award of Lease

    Section 3925.10 would provide that the lease would ordinarily be 
awarded to the qualified bidder submitting the highest bid which 
exceeds the minimum bid amount. It also contains requirements for the 
submission of the necessary lease bond, the first year's rental, any 
unpaid cost recovery fees, including costs associated with the NEPA 
analysis, and the bidder's proportionate share of the cost of 
publication of the sale notice. The provisions in this section are 
similar to regulations in the BLM's competitive leasing regulations for 
coal and non-energy leasable minerals.

Subpart 3926--Conversion of Preference Right for Research, 
Demonstration, and Development Leases

    Section 3926.10 would provide application procedures or 
requirements to convert R, D and D leases and preference rights 
acreages to commercial leases. Under this section, a lessee of any of 
the R, D and D lease would be required to apply for conversion to a 
commercial lease no later than 90 days after the BLM determines that 
commencement of production in commercial quantities had occurred. As 
stated in Section 23 of the R, D and D leases (issued in response to 
the BLM's call for nominations of parcels for R, D and D leasing (70 FR 
33753 and 33754, June 9, 2005) R, D and D lessees can acquire 
contiguous acreage of the remaining preference right lease area up to a 
total of 5,120 acres. In order to acquire the contiguous acreage and 
convert to a commercial lease, the lessee would be required to 
demonstrate to the BLM that the technology tested in the original lease 
would have the ability to produce shale oil in commercial quantities. 
In addition, the lessee, as required in R, D and D leases, would be 
required to submit to the BLM:
    (1) Documentation that there have been commercial quantities of oil 
shale produced from the lease, including the narrative required by 
Section 23 of R, D and D leases;
    (2) Documentation that the lessee consulted with state and local 
officials to develop a plan for mitigating the socioeconomic impacts of 
commercial

[[Page 42941]]

development on communities and infrastructure;
    (3) A bid payment no less than that specified in section 3923.10 
and equal to the FMV of the lease; and
    (4) Bonding as required by section 3904.14.
    The BLM would approve the conversion application, in whole or in 
part, if it determined that:
    (1) There have been commercial quantities produced from the lease;
    (2) The bid payment for the lease met or exceeded FMV;
    (3) The lessee consulted with state and local officials to develop 
a plan for mitigating the socioeconomic impacts of commercial 
development on communities and infrastructure;
    (4) The bond provided is consistent with section 3904.14; and
    (5) Commercial scale operations can be conducted, subject to 
mitigation measures to be specified in stipulations or regulations, 
without unacceptable environmental consequences.

Subpart 3927--Lease Terms

    Sections in this subpart would address lease form, lease size, 
lease duration, dating of leases, diligent development, and production.
    Section 3927.10 would provide that the BLM would issue oil shale 
leases on a standard form approved by the BLM Director. This section 
mirrors similar requirements in other BLM mineral leasing regulations.
    Section 3927.20 would set the maximum oil shale lease size at 5,760 
acres, which is the maximum size authorized under Section 369(j) of the 
EP Act. Several comments received in response to the BLM's ANPR 
included lease size recommendations varying from 500 acres to 10 square 
miles as the appropriate maximum lease size. Of those comments, one 
commenter supported a maximum lease size of 5,760 acres, which is 
consistent with the EP Act. One commenter stated that ``Leases need to 
be large enough to encourage development yet not outlandishly large to 
allow for speculation.'' The maximum lease size contained in this 
section is not discretionary since it was established by statute (see 
Section 369(j) of the EP Act).
    Although the EP Act does not establish a minimum lease size, in 
keeping with the size restrictions of the oil shale R, D and D leases, 
section 3927.20 would also establish 160 acres as the minimum size of 
an oil shale lease. The BLM received several comments relating to 
whether the BLM's commercial oil shale leasing regulations should 
include provisions for small tract leasing, all of which generally were 
in favor of making small lease tracts available. One comment suggested 
that smaller tracts would be particularly appropriate in the early 
years of the commercial leasing program in light of new technologies, 
and it recommended a minimum tract size of 1,280 acres. Recommendations 
relating to a minimum tract size stated in other comments ranged from 
over 320 acres to one square mile. Two comments suggested that there 
should be restrictions for small tract leasing. Of those comments, one 
commenter stated that small tract leasing should not be a mechanism to 
thwart potential development. Another commenter recommended that small 
tracts should only be allowed in cases where ``the tracts have been 
orphaned, in between larger leases, basin edge or other fee-owned 
lands.'' Although section 3927.20 would not formally establish small 
tract leasing, the 160-acre minimum lease size set by this section 
would provide a lessee the opportunity to develop a relatively small-
scale leasehold, identical to the lease size authorized under the BLM's 
oil shale R, D and D program. Thus, rather than the BLM incorporating 
small tract leasing as a separate component of the commercial oil shale 
leasing program, establishing a minimum lease size of 160 acres 
provides an opportunity for a lessee to utilize a preferred technology 
on a relatively small tract that is consistent with the size of 
existing R, D and D leases. For this reason, the BLM did not adopt ANPR 
comments that recommended a larger minimum lease size. With respect to 
the comment expressing concern that small tract leasing could thwart 
potential development and the comment recommending that small tract 
leasing should be allowed only in limited situations as stated above, 
it is the policy of the BLM, when delineating tracts to be offered 
through competitive lease sale, to make efforts to ensure that the 
configuration of any small acreage tracts would likely promote 
development of oil shale. The BLM believes that configuration of tracts 
in this manner would not impede development on any existing oil shale 
leases located in the vicinity of smaller tracts. As is the case in 
other BLM mineral leasing programs, the tract delineation process for a 
competitive lease sale includes the gathering of detailed information 
on tracts and conducting various analyses. Because the steps 
customarily included in the tract delineation process are designed to 
promote or encourage development of mineral resources, the BLM 
maintains that establishing a minimum lease size of 160 acres will not 
thwart potential development of oil shale resources. Likewise, the 
competitive leasing process and the required minimum bonus bids would 
discourage speculation.
    One comment endorsing small tract leasing also recommended that a 
small tract lease should include a preference right for additional 
adjoining acreage. The BLM is not adopting this recommendation since it 
maintains that the concept of a preference right for the future leasing 
of additional acreage--a key component of the R, D and D leasing 
program--is not a necessary provision in a commercial leasing program 
in light of lease modification provisions under proposed subpart 3932. 
In the event that a lessee of a small tract has interest in obtaining 
additional acreage adjacent to its lease, under the proposed rule the 
lessee could apply for a lease modification to include Federal lands 
adjacent to the lease, but not to exceed the maximum lease size (see 
section 3932.10).
    Two comments received in response to the ANPR contained 
recommendations relating to consolidation of leases into larger 
development units. One of the comments suggested that oil shale 
commercial leasing regulations should include a provision to allow for 
consolidation of multiple contiguous leases for individual leaseholders 
as long as there remains one operator. The BLM interprets these 
comments as a recommendation to establish a mechanism similar to a 
logical mining unit that exists in BLM's coal leasing program. As 
defined in the coal leasing regulations at 43 CFR 3480(a)(19), 
``Logical mining unit (LMU) means an area of land in which the 
recoverable coal reserves can be developed in an efficient, economical, 
and orderly manner as a unit with due regard to conservation of 
recoverable coal reserves and other resources.'' Due to the fact that 
the commercial oil shale leasing regulations proposed here today are 
aimed at establishing a new mineral leasing program; a program that 
does not have any history of oil shale development in the U.S., does 
not require any standardized extraction methods, and also adopts 
different diligence requirements than those of the coal leasing 
program, it is the BLM's position that establishing a mechanism similar 
to a LMU is not warranted at this time. After the promulgation of final 
regulations and after the oil shale industry is more well-established, 
if the BLM determines that the creation of a mechanism similar to an 
LMU is

[[Page 42942]]

warranted, then the BLM would pursue rulemaking to adopt this 
recommendation. Please specifically comment on whether or not the final 
rule should include provisions for the establishment of LMUs for oil 
shale leases.
    Section 3927.30 would provide that an oil shale lease will be for a 
period of 20 years and so long thereafter as the condition of annual 
minimum production is met. Section 21 of the MLA (30 U.S.C. 241(a)(3)) 
authorizes issuance of oil shale leases for ``indeterminate periods.'' 
The BLM chose a 20-year period for the original lease term for ease of 
administration because Section 21 of the MLA (30 U.S.C. 241(a)(4)) 
specifies that leases should be subject to readjustment at the end of 
each 20-year period. Lease readjustment is common to other BLM mineral 
leasing programs, including coal and certain non-energy leasable 
minerals.
    Section 3927.40 would identify the effective date of the lease and 
the process used to determine the effective date of the lease. This 
section is similar to regulations on the effective dating of leases 
under the BLM's coal program.
    Diligent development is a component of other mineral leasing 
programs such as coal and oil and gas and is required under Section 
369(f) of the EP Act.
    Section 3927.50 would require lessees to meet diligent development 
milestones and annual minimum production requirements. The BLM 
considers continued minimum annual production a necessary part of 
diligent development of the lease. This requires that a company 
continue to produce the minimum annual requirement or make payments in 
lieu of production in order to hold the lease.

Part 3930--Management of Oil Shale Exploration Licenses and Leases

    Sections in this part would address the requirements for 
exploration and leases, including general performance standards, 
operations, diligent development milestones, plans of development and 
exploration plans, lease modifications and readjustments, assignments 
and subleases, relinquishments, cancellations and terminations, post-
mining and development hazards, production and sale records, and 
inspection and enforcement.
    Sections 3930.10 through 3930.13 would explain the performance 
standards for exploration, development, production, and the preparation 
and the handling of oil shale under Federal leases and licenses. 
Additional standards may be required at the time of lease issuance and 
as operations proceed. The BLM used the coal program as basis of many 
of the performance standards for these sections because of the 
similarity of the mining and exploration methods and the possible 
impacts associated with those methods. The performance standards for in 
situ operations were derived from aspects of the standards used for 
exploration and standards applicable to the BLM's oil and gas program.
    Section 3930.20 would establish the various standard operating 
requirements associated with development of an oil shale lease, 
including requirements concerning the maximum economic recovery (MER) 
of the resource, how to report new geologic information, and compliance 
with Federal laws. The section would also address disposal and 
treatment of solid wastes. This section provides operational 
requirements that are common to other BLM mineral leasing programs.
    The BLM received 6 comments regarding diligent development in 
response to the ANPR. The comments received primarily expressed the 
view that diligent development requirements are necessary to prevent 
speculation, but that they should not be so onerous as to prevent 
investment in oil shale development. Most of the comments concerning 
the diligence provisions were related to either plan of development 
requirements or production requirements and requiring payment of a 
minimum royalty in lieu of production. The comments received suggested:
    (1) Making diligence a requirement of operations;
    (2) Not starting the diligence requirement until after the needed 
infrastructure is in place;
    (3) Requiring submittal of a plan of development;
    (4) Staging the permitting process to essentially define diligence 
as accomplishing necessary sequential steps in the development process;
    (5) Escalating minimum royalty;
    (6) Requiring minimum production levels; and
    (7) Requiring production of a percentage of the resource base.
    The BLM incorporated the following commenter's suggestions into the 
proposed rule:
    (1) Diligent development and staged development requirements 
(section 3930.30 (a));
    (2) Requirements for a plan of development (section 3930.30(a)(1)); 
and
    (3) Requirements for minimum production (section 3930.30(d)).
    The BLM's proposed diligent development requirements are based on 
fulfilling tasks necessary to reach production, such as applying for 
permits, submitting plans of development, and installing needed 
infrastructure within specified timeframes. Comments related to basing 
diligence on production of a percentage of the reserve base were 
considered, but rejected based on the difficulty of administering such 
a scheme with varying technologies, recovery rates, and shale 
characteristics. The comment regarding infrastructure was incorporated 
into the proposed rule as a diligence development step towards 
production.
    Section 3930.30 would list the milestones for diligent development 
of an oil shale lease. The requirement for establishing milestones is 
in Section 369(f) of the EP Act. The BLM considered many options when 
determining how to establish milestones that would ensure diligent 
development of the lease. The BLM considered requiring production based 
on a percentage of the resource similar to coal and requirements for 
minimum dollar expenditures per year similar to the BLM's geothermal 
program. Because the oil shale mining technology that is being tested 
is new, and there is little experience to rely on, it would be 
difficult to base milestones on production or monetary expenditures. 
Ultimately, the BLM determined that the milestones should be the series 
of steps necessary for the development of the oil shale. Defining 
milestones this way is logical because the steps are necessary to begin 
production and the BLM believes the requirement would encourage 
development. This section would require a lessee to meet the following 
five diligent development milestones:
    (1) Within 2 years of lease issuance, submit to the BLM a proposed 
plan of development which would meet the requirements of subpart 3931;
    (2) Within 3 years of lease issuance, submit a final plan of 
development;
    (3) Within 2 years after the BLM approves the plan of development, 
apply for all required permits and licenses;
    (4) Before the end of the 7th lease year, begin infrastructure 
installation, as described by the BLM approved plan of development; and
    (5) Begin production by the end of the 10th lease year.
    Each of the milestones in this section would be an opportunity for 
the lessee or operator to fulfill the statutory requirements and would 
provide

[[Page 42943]]

evidence of its commitment to diligent development of the resource.
    The requirement to maintain production under an approved plan of 
development is also in this section. Although it is not a milestone, 
the BLM would require yearly production as part of the diligent 
development of the lease. This section also would allow payments in 
lieu of production to meet the requirement of yearly production. 
Minimum annual production is required starting the 10th year of the 
lease. Payment in lieu of production in year 10 of the lease satisfies 
the milestone requiring production by the end of the 10th year of the 
lease.
    Section 3930.40 would identify the penalties for not achieving the 
required milestones. The BLM views these penalties as incentives for 
maintaining development of the resource and prevent speculation. Under 
this proposed rule, the BLM would assess a penalty of $50 per acre for 
each missed diligence milestone for each year until the operator or 
lessee complies with the diligence milestone. The BLM believes that 
this penalty process would provide operators incentive for diligent 
development of the resource, and also that the dollar amount of the 
penalties is high enough to be a deterrent to speculation.

Subpart 3931--Plans of Development and Exploration Plans

    Sections in this subpart would provide requirements for submission 
of a plan of development (section 3931.10), required contents of a plan 
of development (section 3931.11), reclamation of all disturbed areas 
(section 3931.20), suspending operations and production on a lease 
(section 3931.30), exploration on a lease prior to plan of development 
approval (section 3931.40), information to be included in the 
exploration plan (section 3931.41), modification of exploration or 
development plans (section 3931.50), maps of underground and surface 
mining workings and in situ surface operations (3931.60), production 
reporting (section 3931.70), geologic information (section 3931.80), 
and boundary pillars (section 3931.100).
    Section 3931.10 would require submission of a plan of development 
that details all aspects of development of the resource and protection 
of the environment, including reclamation. It would also identify the 
need for a similar plan for exploration activities. The plan of 
development is a key document that would detail the specifics of all 
activities associated with developing or exploring the lease.
    Section 3931.11 would list and describe the contents of a plan of 
development. Some of the contents include a general description of 
geologic conditions and mineral resources, maps or aerial photography, 
proposed methods of operation and development, public protection, well 
completion reports, quantity and quality of the oil shale resources, 
environmental aspects, reclamation plan, and the method of abandonment 
of operations. The information in the plan of development is necessary 
so that the BLM can review the plan and ensure that operations, 
production, and reclamation will occur consistent with Federal law and 
regulation and to ensure the protection of the resource and the 
environment.
    Section 3931.20 would describe the requirements for reclamation of 
all disturbed areas under a lease or exploration license. This section 
is similar to requirements in other BLM mineral program regulations 
requiring prompt reclamation of disturbed areas.
    Section 3931.30 would detail the requirements for suspending 
operations and production on a lease. Under this section, if the BLM 
determined it was in the interest of conservation, it may order or 
agree to a suspension of operations and production. If the BLM approved 
the suspension, the lessee or operator would be relieved of the 
obligation to pay rental, to meet upcoming diligent development 
milestones, or to meet minimum annual production, including payments in 
lieu of production. The term of the lease would be extended by the 
amount of time the lease is suspended. The need to suspend operations 
is well established and similar provisions are found in other BLM 
mineral leasing regulations.
    Section 3931.40 would provide the requirements necessary for the 
BLM to authorize exploration on an exploration license or on a lease 
prior to plan of development approval. Often, exploration is necessary 
after lease issuance to acquire the geologic information necessary to 
prepare a plan of development.
    Section 3931.41 would list the information required for an 
exploration plan. The information required is similar to that required 
in other BLM mineral regulations and is necessary to adequately 
evaluate the proposed exploration activities and the measures to 
protect or limit environmental impacts in accordance with applicable 
laws.
    Section 3931.50 would explain how the operator or lessee may apply 
for a modification of exploration or development plans to address 
changing conditions and situations that might develop during the course 
of normal exploration activities or to correct an oversight. This 
section would also explain that the BLM may, on its own initiative, 
require modification of a plan. Finally, this section would explain 
that the BLM may approve a partial exploration plan or plan of 
development in circumstances where operations are dependent on factors 
that would not be known until exploration or development progresses. 
These modification provisions are similar to those in other BLM 
minerals programs.
    Section 3931.60 would contain information relating to the format 
and certification of required maps of underground and surface mining 
workings and in situ surface operations. These maps are necessary for 
the BLM to properly assess the potential impacts associated with 
exploration and mining.
    Section 3931.70 would explain the requirements for production 
reporting, the associated maps and surveys for mining operations, and 
maps showing the measurement systems for in situ operations. This 
section would require accurate maps and production reports and would 
explain the requirements for production reporting. These are necessary 
requirements for the Federal government to track lease production 
accurately.
    Section 3931.80 would address requirements for handling geologic 
information resulting from exploration activities. Additional 
requirements related to abandonment operations, well conversions, and 
blow-out prevention equipment would also be addressed in this section. 
This section contains requirements similar to those in the BLM's oil 
and gas operations regulations.
    Section 3931.100 would detail the standards for boundary pillars 
and provisions to protect adjacent lands. This section would allow for 
the recovery of the pillars if the operator provided evidence to the 
BLM that the recovery activities would not damage the Federal resource 
or those of the adjacent lands. These provisions are similar to those 
in the BLM's coal program.

Subpart 3932--Lease Modifications and Readjustments

    Sections in this subpart would provide requirements for lease size 
modification, (section 3932.10), availability of lands for a lease 
modification (section 3932.20), terms and conditions of a modified 
lease (section 3932.30), and the readjustment of lease terms (section 
3932.40).
    Section 3932.10 would provide the requirements for lease size

[[Page 42944]]

modifications and is similar to sections in the other BLM mineral 
program regulations. This section would explain that the lands in the 
modified lease must not exceed the acreage limitation in section 
3927.20. The section also would explain what items are necessary for a 
complete application, including the filing fee and qualifications 
statements.
    Section 3932.20 would provide the land availability criteria for 
lease modifications. The language in this section is similar to 
language used in other BLM mineral program regulations and is necessary 
to facilitate effective development of the resource. This section would 
explain the conditions under which the BLM would grant a lease 
modification, and that the BLM may approve the modification (adding 
lands to the lease) if there is no competitive interest in the lands. 
This section would explain that before the BLM will approve a 
modification application, the applicant must pay the FMV for the 
interest to be conveyed. This section would also make it clear that the 
BLM will not approve a lease modification prior to conducting the 
appropriate NEPA analysis and receipt of the processing costs.
    Section 3932.30 would provide that the terms and conditions of any 
modified lease will be adjusted so that they are consistent with law, 
regulations, and land use plans applicable at the time the lands are 
added by the modification. Under this proposed section, the royalty 
rate of the modified lease would be the same as that in the original 
lease. Bonding and lessee acceptance requirements would also be 
addressed in this section. This section is similar to those in other 
BLM minerals program regulations.
    Section 3932.40 would provide that all oil shale leases are subject 
to readjustment of lease terms, conditions, and stipulations, except 
royalty rates, at the end of the first 20-year period (the primary term 
of the lease) and at the end of each 10-year period thereafter. Royalty 
rates would be subject to readjustment at the end of the primary term 
and every 20 years thereafter. The procedures for the readjustment of 
the lease would be detailed in this section. Under this section, the 
BLM would provide the lessee with written notification of the 
readjustment. This section would also allow lessees to appeal the 
readjustment of lease terms.

Subpart 3933--Assignments and Subleases

    Sections in this subpart would address various requirements related 
to assignments or subleases of record title (section 3933.31) and 
overriding royalty interests (section 3933.32). This subpart would also 
address requirements for:
    (1) Assigning or subleasing leases in whole or part (section 
3933.10);
    (2) Filing fees (section 3933.20);
    (3) Lease account status and assumption of liability (section 
3933.40);
    (4) Bonding (sections 3933.51);
    (5) Continuing responsibility (section 3933.52);
    (6) Effective date (section 3933.60); and
    (7) Extensions (section 3933.70).
    The sections in this subpart would be similar to the regulatory 
requirements of BLM's other mineral leasing programs.
    Section 3933.10 would provide that all leases may be assigned or 
subleased in whole or in part to any person, association, or 
corporation as long as the qualification requirements are met. Section 
30 of the MLA requires an assignee to obtain BLM approval for an 
assignment.
    Section 3933.20 would require payment of a $60 non-refundable 
filing fee for processing an assignment, sublease of record title, or 
overriding royalty. The filing fee would be the same fee required by 
the coal regulations for filing an assignment. The BLM anticipates that 
lease assignment, sublease of record title, or overriding royalty 
activities associated with an oil shale lease would be similar to the 
same activities in the BLM's coal program, and therefore believes the 
same filing fee is justified.
    Section 3933.31 would require that assignment applications be filed 
with the BLM within 90 days of the date of final execution of the 
assignment, and would list what must be included in the assignment 
application, including the filing fee. This section also explains that 
the assignment of all interests in a specific portion of a lease would 
create a separate lease.
    Section 3933.32 would explain that overriding royalty interests do 
not have to be approved by the BLM, but would be required to be filed 
with the BLM. The filing of overriding royalty interests provides a 
more complete record of the financial transaction affecting the Federal 
lease. The BLM has found this information to be useful in other mineral 
leasing programs, especially in making rent and royalty reduction 
determinations.
    Section 3933.40 would require that the lease account be in good 
standing before the BLM would process a lease assignment.
    Section 3933.51 would require that assignees have sufficient bond 
coverage before the BLM will approve the assignment. This is a 
necessary component of the bonding program and is similar to 
requirements of other BLM solid mineral leasing programs.
    Section 3933.52 would address the responsibilities, obligations, 
and liabilities of the assignor and assignee. In addition to stating 
expressly that an assignor is responsible after an assignment for 
accrued obligations, this section addresses joint and several 
liabilities of the lessee and operating rights owner. After the 
effective date of the sublease, the sublessor and sublessee are jointly 
and severally liable for the performance of all lease obligations, 
notwithstanding any term in the sublease to the contrary.
    Section 3933.60 would explain that the effective date of an 
assignment and sublease would be the first day of the month following 
the BLM's final approval, or if the assignee requested it in advance, 
the first day of the month of the approval. This is the customary 
effective date for an assignment in other BLM leasing programs.
    Consistent with other BLM mineral leasing programs, section 3933.70 
would provide that the BLM's approval of an assignment or sublease does 
not extend the readjustment period of the lease.

Subpart 3934--Relinquishments, Cancellations, and Terminations

    Sections in this subpart would contain requirements for 
relinquishments (section 3934.10), termination of leases and 
cancellation and/or termination of exploration licenses (section 
3934.30), written notice of cancellation (section 3934.21), cause and 
procedures for lease cancellations (section 3934.22), payments due 
(section 3934.40), and bona fide purchasers (section 3934.50). Sections 
in this subpart are similar to sections found in regulations for other 
BLM mineral leasing programs.
    Section 3934.10 would provide that the record title holder of a 
lease may relinquish all or part of the lease if the requirements in 
this section are met. This section would also contain provisions for 
the relinquishment of an exploration license. Prior to relinquishment, 
the licensee must give any other parties participating in the 
exploration license an opportunity to take over operations under the 
exploration license.
    Section 3934.21 would require the BLM to notify the lessee or 
licensee in writing of any default, breach, or cause of forfeiture, and 
the corrective actions that could be taken to avoid defaulting on the 
lease terms and lease cancellation.

[[Page 42945]]

    Section 3934.22 would explain the procedure for the BLM to cancel a 
lease. Section 31 of the MLA requires that lease cancellation take 
place in the United States District Court for the district in which all 
or part of the lands covered by the lease are located.
    Section 3934.30 would provide the reasons that the BLM may cancel a 
license, including:
    (1) The BLM issued it in violation of law or regulation;
    (2) The licensee is in default of the terms and conditions of the 
license; and
    (3) The licensee has not complied with the exploration plan.
    Unlike leases, the BLM may cancel an exploration license 
administratively.
    Section 3934.40 would provide that if a lease is canceled or 
relinquished for any reason, all bonus, rentals, royalties, or minimum 
royalties paid would be forfeited and any amounts not paid would be 
immediately payable to the United States.
    Section 3934.50 would address the rights of bona fide purchasers 
and provide that the BLM would not immediately cancel a lease or an 
interest in a lease if, at the time of purchase, the purchaser could 
not reasonably have been aware of a violation of the regulations, 
legislation, or lease terms.

Subpart 3935--Production and Sale Records

    Section 3935.10 would address books of account. Operators and 
lessees must maintain accurate records. This section would explain what 
records must be maintained, and that the records must be made available 
to the BLM during normal business hours.

Subpart 3936--Inspection and Enforcement

    Like other BLM minerals inspection and enforcement (I and E) 
programs, the objective of BLM's oil shale I and E program would be to:
    (1) Ensure the protection of the resource;
    (2) Ensure that Federal oil shale resources are properly developed 
in a manner that would maximize recovery while minimizing waste; and
    (3) Ensure the proper verification of production reported from 
Federal lands.
    The BLM would also be responsible for lease inspections to 
determine compliance with applicable statutes, regulations, orders, 
notices to lessees, plans of development, and lease terms and 
conditions. These terms and conditions would include those related to 
drilling, production, and other requirements related to lease 
administration.
    This subpart would address inspection of underground and surface 
operations and facilities (section 3936.10), issuance of notices of 
noncompliance and orders (section 3936.20), enforcement of notices of 
noncompliance and orders (section 3936.30), and appeals (section 
3936.40).
    Section 3936.10 would require operators or lessees to allow the BLM 
to inspect underground or surface mining and exploration operations at 
any time both to determine compliance with the plan of development and 
to verify oil shale production.
    Section 3936.20 would advise the operator, licensee, or lessee of 
the procedures the BLM would follow when issuing orders and notices of 
noncompliance. The section would also address delivery of notices and 
verbal orders.
    Section 3936.30 would explain the procedures the BLM would follow 
when enforcing notices of noncompliance. This section explains the 
action the BLM may take in cases of noncompliance, including orders to 
cease operations and the initiation of lease or license cancellation or 
termination procedures. An example of the type of non-compliance that 
might warrant the BLM issuing a cease operations order would be 
noncompliance with the BLM approved plan of development and refusal to 
comply with the notice of noncompliance.
    Section 3936.40 would allow a lessee or operator to appeal BLM 
decisions under 43 CFR part 4. This section would also provide that the 
BLM decisions and orders remain in full force and effect pending 
appeal, unless the BLM or the Interior Board of Lands Appeals decides 
otherwise. Appeals language in this section mirrors regulatory 
provisions in other BLM minerals programs.

IV. Procedural Matters

Executive Order 12866, Regulatory Planning and Review

    This document is a significant rule and the Office of Management 
and Budget has reviewed this rule under Executive Order 12866. We have 
made the assessments required by E.O. 12866 and the results are 
available by writing to the address in the ADDRESSES section.
    (1) This rule will have an effect of $100 million or more on the 
economy. It will 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. Please 
see the discussion below.
    (2) This rule will not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency. The rule 
addresses the issuance and administration of Federal oil shale leases, 
which by statute is under the jurisdiction of the Department of the 
Interior. The BLM worked closely with the MMS in drafting the royalty 
provisions of this rule, but the rule should have no effect on other 
agencies.
    (3) This rule does not alter the budgetary effects of entitlements, 
grants, user fees, or loan programs or the rights or obligations of 
their recipients. The rule would not impact any of these except that 
the rule institutes certain fees (discussed earlier in the preamble to 
this rule and in the economic and threshold analyses for the rule) in a 
manner that is consistent with BLM and Departmental policy.
    (4) This rule does not raise novel legal or policy issues. As 
stated earlier in this preamble, the legal and policy issues addressed 
by this rule are already dealt with in a similar manner in other BLM 
regulations currently in effect, therefore they are not novel.
    Executive Order 12866 requires agencies to assess, where practical, 
the anticipated costs and benefits of proposed regulatory actions to 
determine if the regulation is significant. As has been noted above, 
there is no domestic oil shale industry to help substantiate or form 
the basis for the projections and assumptions concerning what the 
future might hold for the leasing and development of oil shale 
resources on Federal lands. In addition, the assumption is that any 
significant production of shale oil is not likely to occur for a number 
of years. The potential events described, if they occur at all, may be 
in the distant future. As such, future costs and benefits must be 
discounted. The OMB's Circular A-94 states that a real discount rate of 
7 percent should be used as a base-case for regulatory analysis. In 
addition to analyzing the potential future costs and benefits using a 7 
percent discount rate, the BLM also used a discount rate of 20 percent 
to reflect these substantial risks and associated uncertainties in the 
opportunity costs that would not be reflected in the historic industry 
average of 7 percent. We also analyzed the future costs and benefits 
using a 3 percent discount rate.
    The proposed regulations have the potential to generate net 
economic benefits to the Nation by allowing for the development of our 
vast domestic oil shale resources, though there is substantial 
uncertainty about the magnitude and timing of these benefits. The most 
significant direct benefit of this regulatory action is to provide a 
vehicle for the leasing and development of Federal oil shale resources. 
Operators

[[Page 42946]]

will have the opportunity to obtain leases with the right to develop 
the oil shale and ultimately produce shale oil in an environmentally 
sound manner. Companies' willingness to take advantage of the leasing 
and development opportunities provided by this rule would determine the 
level of production of shale oil, exploration, development and 
production costs incurred, and conceivably the profits (or losses) to 
be enjoyed.
    The lack of a domestic oil shale industry makes it speculative to 
project the demand for oil shale leases, the technical capability to 
develop the resource, and the economics of producing shale oil. 
Projections that have been prepared vary significantly in not only the 
potential volume of shale oil that could be produced, but also the 
assumptions used to generate those projections. The recent report 
prepared by the Strategic Unconventional Fuels Task Force (Task Force) 
provided shale oil production projections under three scenarios. For 
our simulation-based analysis, we focused on the Task Forces' base case 
as a plausible scenario. This scenario presents a future without any 
subsidies in the form of tax credits or cost-sharing. The base case 
production of 0.5 million barrels per day is approximately 182.50 
million barrels per year, all from true in-situ projects. The Task 
Force's base case scenario assumes production commencing in 2015, with 
full production reached by 2020. Please comment on the uncertainty 
surrounding the quantity and quality of recoverable oil shale, 
specifically as it relates to potential production of shale oil.
    The Task Force estimates that resulting production could reduce the 
cost of oil imports by $0.41 billion per year in 2015 to $4.21 billion 
per year in 2035. This estimate is based on EIA's 2006 oil price 
projection. In their report, the Task Force also provides estimates of 
oil shale development's contribution to Gross Domestic Product (GDP). 
In the base case, annual direct contributions to GDP for the oil shale 
industry activity rises from $0.65 billion per year in the early years, 
to $5.72 billion per year in 2035.
    We estimated the revenue, profit, and royalty implication of the 
Task Force's base case production scenario using three discount rates 
(7 percent, 3 percent, and 20 percent), three world crude oil price 
projections (EIA's 2007 reference, high, and low price projections) and 
6 different royalty rates (1 percent, 3 percent, 5 percent, 7 percent, 
9 percent, and 12.5 percent). The following summarizes the findings 
based on the 7 percent discount rate and a 5 percent royalty rate. The 
full range of calculations is presented in the Economic Analysis.
    We estimate the value of the forecasted production, using EIA's 
2007 reference case assumptions, could be approximately $9.5 billion 
for 2020, up to $11 billion by 2035. The gross present value, using a 7 
percent discount rate, of all shale oil produced for the period of 
analysis (2007 to 2035) is estimated at about $50 billion. The gross 
present value of production for the year 2020 is estimated at about 
$3.9 billion using a 7 percent discount rate. The gross present value 
of the shale oil produced in 2035 would be approximately $1.7 billion 
with a 7 percent discount rate.
    Oil shale development is characterized by high capital investment 
and long periods of time between expenditure of capital and the 
realization of production revenues and return on investment. The Task 
Force estimated the breakeven price for true in-situ operations at 
$37.75 per barrel. Using the base case production projection, the cost 
to produce 182.50 million barrels annually would be almost $6.9 
billion. The present value of the production costs for 2020 would be 
about $2.9 billion using a 7 percent discount rate. For production 
occurring in 2035, the present value of those production costs would be 
about $1 billion. For the period of analysis (2007 to 2035), the 
present value of all production costs is estimated at about $34 billion 
using a 7 percent discount rate. Please specifically comment on the 
state of technology necessary to recover or produce oil from shale and 
the associated production costs.
    With the opportunity to lease and ultimately develop Federal oil 
shale resources, companies would be expected to generate profits from 
their commercial activities. Using the base case production scenario, 
cost projection assumptions, and EIA's reference oil price, by the year 
2020 lessees/operators could see profits from oil shale development of 
over $2.6 billion per year, with a net present value of $1 billion with 
a 7 percent discount rate. For 2035, we estimate the present value of 
the potential profit could be approximately $670 million using a 7 
percent discount rate. The net present value of shale oil produced in 
the period of analysis (2007 to 2035) is estimated at approximately 
$16.2 billion.
    Using EIA's high crude oil price scenario, calculated profits were 
substantially high. Total undiscounted profits for the period of 
analysis were $187 billion, with a present value of $50.6 billion using 
a 7 percent discount rate. For EIA's low oil price projection all 
operations are uneconomic regardless of the discount rate and/or 
royalty rate applied. In addition to these monetary costs and benefits 
associated with potential oil shale development, there could be 
significant environmental and socioeconomic costs and benefits. These 
potential costs and benefits could affect a wide range of resources, 
including groundwater quality and quantity, air quality, cultural 
resources, wildlife habitat, competing land uses, and local employment 
and infrastructure.
    Impacts on livestock grazing activities are generally the result of 
activities that affect forage levels, of the ability to construct range 
improvements, and of human disturbance or harassment of livestock 
within grazing allotments. Using the Task Force's base case scenario of 
three in-situ operations, with total maximum lease acreage of 17,280, 
and some fairly significant simplifying assumptions, there could be a 
loss of approximately 5,700 animal unit months (AUMs).
    Recreational use of BLM-administered lands within the three-state 
study area (Colorado, Utah, and Wyoming) is varied and dispersed. 
Impacts on recreation would be considered significant if potential oil 
shale development results in long-term elimination or reduction of 
recreation opportunities, activities, or experience, or they compromise 
public health and safety. As such, the significant of potential impacts 
from oil shale development could have on recreational opportunities 
will depend on the location of potential development.
    In addition to oil shale, the study area contains a wide range of 
energy and mineral resources. Mineral resource development conflicts 
may occur with oil shale development. The issuance of oil shale 
exploration licenses and leases does not preclude the BLM from issuing 
licenses and leases for other minerals. However, the BLM generally 
attempts to avoid issuing conflicting authorizations on the same lands.
    Many multiple use outputs from BLM land are not traded in markets 
and might not have measurable onsite expenditures associated with them. 
The absence of market price does not, however, mean an absence of value 
to society. Please specifically comment on the uses that oil shale 
production may displace under the base case scenario and the associated 
value of the displaced uses.
    In addition to land use conflicts, water consumption is a major 
concern in the arid intermountain region. Certain types of oil shale 
development

[[Page 42947]]

are anticipated to consume significant quantities of water. Increasing 
the demand for water resources in the arid West must be considered a 
major opportunity cost to society associated with oil shale development 
and fully analyzed before commercial development is allowed to proceed. 
Demand for reliable, long-term water supplies to support oil shale 
development could lead to the conversion of water rights from current 
uses. While it is not presently known how much surface water will be 
needed to support future development of an oil shale industry, or the 
role that groundwater would play in future development, it is likely 
that additional agricultural water rights could be acquired. Depending 
on the locations and magnitude of such acquisitions, there could be a 
noticeable reduction in local agricultural production and use.
    Prospective oil shale developers would need to employ appropriate 
control technologies to reduce potential air emissions which otherwise 
could result from construction and operation of surface facilities. In 
addition to the emissions associated with the operations themselves, 
extraction of oil from shale could consume immense quantities of 
electricity. This would necessitate the building of new power plants, 
which could further contribute air emissions. Impacts on air quality 
would be limited by applicable local, state, Tribal, and Federal 
regulations, standards, and implementation plans established under the 
Clean Air Act and administered by the applicable air quality regulatory 
agency, with EPA oversight.
    Using the assumption of 3 in-situ projects, solid waste generated 
would be the drill cuttings and those would be handled as they are for 
oil and gas, which is to bury them on-site, in compliance with the 
Solid Waste Disposal Act, as amended by the Resource Conservation and 
Recovery Act and the Hazardous Solid Waste Amendments of 1984 (42 
U.S.C. 6901 et seq.).
    Aquatic habitats include perennial and intermittent streams, 
springs, and flat-water (lakes and reservoirs) that support fish or 
other aquatic organisms through at least a portion of the year.
    The wildlife species that may be associated with any particular 
project would depend on the specific location of the project and on the 
plant communities and habitats present at the site.
    A total of 210 plant and animal species are either federally (U.S. 
Fish and Wildlife Service (USFWS) and BLM) or state-listed (Colorado, 
Utah, and Wyoming) and occurs or could occur in counties within oil 
shale basins. In the study areas, 32 species are listed or candidates 
for listing by the USFWS under the Endangered Species Act (ESA); 78 
species are listed as sensitive by the BLM; 24 are listed by the State 
of Colorado; 33 are listed by the State of Utah; and 121 are listed by 
the State of Wyoming. Species listed by the USFWS under the ESA have 
the potential to occur in all oil shale basins. The likelihood of 
occurrence in study areas cannot be fully determined at this time 
because actual project locations and footprints will not be determined 
until some later date. A complete evaluation of listed species in the 
study areas will be made at that time, before project activities begin. 
Project-specific NEPA assessments, ESA consultations, and coordination 
with state natural resource agencies will address project specific 
impacts more thoroughly. These assessments and consultations will 
result in required actions to avoid or mitigate impacts on protected 
species.
    Oil shale development, initially in the western states of Colorado, 
Wyoming, and Utah, requires infrastructure to support industry 
development and operation, including refining capacity, pipelines, and 
sources of natural gas and electricity.
    The socioeconomic environment potentially affected by the 
development of oil shale resources includes a region of influence in 
each state (Colorado, Utah, and Wyoming), consisting of the counties 
and communities most likely impacted by development of oil shale 
resources. Construction and operation of oil shale facilities could 
have a major affect on the local communities, impacting the economy and 
the social and demographic make-up of the affected communities. For 
example, oil shale industry development could result in the addition of 
thousands of new, high-value, long-term jobs in the construction, 
manufacturing, mining, production, and refining sectors of the domestic 
economy. Construction and operations could result in a direct loss of 
recreation employment in the recreation sectors and indirect effects 
such as declining recreation employee wage and salary spending and 
expenditures by the recreation section on materials equipment and 
services.
    The Task Force provided employment projections for their production 
scenarios, including their base case. Direct employment could range 
from 120 to 9,700 personnel in the base case. The total number of 
petroleum sector jobs (including indirect employment), estimated by the 
Task Force, ranges from 2,930 employees in 2015 to 20,830 in 2035 for 
their base case.
    A resource commitment is considered irreversible when direct and 
indirect impacts from its use limit future use options. Irreversible 
and irretrievable commitments of resources could occur as a result of 
future commercial oil shale projects that are authorized, constructed, 
and operated. The nature and magnitude of these commitments would 
depend on the specific location of the project development as well as 
its specific design and operational requirements. The construction of 
future commercial oil shale projects could result in the consumption of 
sands, gravels, and other geologic resources, as well as fuel, 
structural steel, and other materials. Water resources could also be 
consumed during construction, although water use would be temporary and 
largely limited to on-site concrete mixing and dust abatement 
activities. In general, the impact on biological resources from future 
project construction and operation would not constitute an irreversible 
and irretrievable commitment of resources. During project construction 
and operation, individual animals would be impacted.
    The potential effects of developing the oil shale resources are 
likely to be quite significant; however, at this point, with the 
significant unknowns as to what may be developed and how it may be 
developed, plus where and when development may occur, there is no 
practical way to quantify the potential environmental and socioeconomic 
consequences, much less put a monetary value on them.
    Before oil shale development could occur, additional project-
specific NEPA analyses would be performed at two points in time: (1) 
Prior to leasing; and (2) Prior to plan of development approval. These 
analyses would address environmental impacts of oil shale production 
including impacts to livestock grazing, recreation uses, energy and 
mineral resources, water use, air, aquatic habitat, and wildlife and 
would be subject to public and agency review and comment.
    The Act requires the Secretary to establish royalties, fees, 
rentals, bonus, or other payments for oil shale leases that encourage 
development of the resource, but also ensuring a fair return to the 
government. As a result of any leasing and development, the Federal and 
state governments will benefit from the revenue generated through the 
bonuses, rents, and eventually royalties. These bid, rental, and 
royalty payments are revenue to the public, but a cost to the lessee/
operator of obtaining,

[[Page 42948]]

holding, and producing from the Federal leases. Monetary payments, such 
as rents, royalties, and bonus bids, from the lessee to the government, 
do not affect total resources available to society and in the context 
of a benefit-cost analysis are considered transfer payments.
    The bonus is the amount paid by the successful high bidder when a 
parcel is offered for lease. By statute the parcel must be leased for 
fair market value. At this juncture there is no practical way to 
generate a meaningful estimate of the potential bonus bids or fair 
market values for potential lease parcels.
    Until the operation starts paying a production royalty, the lessee 
is required to pay the government a rental. The proposed regulations 
include a rental rate of $2 per acre. Maximum lease acreage is 5,760 
acres for a maximum annual rental payment per lease of $11,520 
(constant-dollars) per year until an operation commences shale oil 
production. Based on the Task Force's base case of three in-situ 
operations, with total maximum lease acres of 17,280 acres, those three 
leases could generate a rental income of $34,560 per year.
    Producing leases will be required to pay a production royalty. One 
alternative in the proposed regulations calls for a production royalty 
of 5 percent on all products of oil shale that are sold from or 
transported off of the lease. Using the production projections and 
other assumptions presented in the economic analysis, royalty payments 
for the period of analysis (2007 to 2035) could be almost $9.1 billion, 
with a net present value of $2.5 billion (7 percent discount rate). We 
also analyzed the Federal revenue implications of alternative royalty 
rates given constant production and production cost assumptions. These 
alternative royalty revenue calculations are presented in the economic 
analysis.
    Beginning in the 10th lease year, for leases that have not 
commenced production, the lessee is subject to a payment in lieu of 
production of no less than $4 per acre. For an operation with 5,760 
acres under lease and no production by the end of the eleventh lease 
year, the payment in lieu of production would be $23,040 (constant-
dollars) per year. Based on the Task Force's base case of three in-situ 
operations, with total maximum lease acres of 17,280 acres, should 
operations on those three leases not commence production, the payment 
in lieu of production could generate payments to the Federal Government 
of $69,120 per year.
    The proposed regulations require license and lease bonds for 
exploration licenses and oil shale leases. These bonds are intended to 
guarantee payments (rents, royalties, and deferred bonuses) the lessee 
may owe the government. The bond amount will be determined on a case-
by-case basis. The minimum lease bond is proposed at $25,000. The 
operator is also obligated to provide the BLM with a reclamation bond. 
The amount of these bonds will be based on the estimated cost for the 
government to contract with a third party to reclaim the operation 
should the operator be unable or unwilling to fulfill their reclamation 
obligations. The amounts of these reclamation bonds are likely to be 
quite significant; however, at this point there is no practical way to 
estimate the amount of these reclamation bonds.
    There will be increases in BLM administrative costs associated with 
the issuance of leases and licenses and review and approval of 
operational plans. Most of these costs are relatively minor and will be 
subject to cost recovery that will be paid for by the benefiting party. 
There will be some BLM actions that will not be subject to cost 
recovery, including increased costs associated with ongoing inspection 
and enforcement responsibilities.
    Above are various costs and benefits associated with the proposed 
rule. Some effects are directly tied to the provisions found in the 
proposed regulations, such as royalty rates of 5 or 12.5% percent of 
the value of the amount or value of production removed or sold from the 
lease. Other costs and benefits are tied to companies' ability and 
willingness to take advantage of the opportunities provided by the 
leasing regulations. The most significant of these costs and benefits 
include the value of shale oil that may be produced, the cost to 
produce the shale oil, and the environmental and socioeconomic 
consequences of resource development. The present values of the 
quantified monetary effects are expected to be in excess of the $100 
million annual threshold.
    We estimate the net present value of the potential monetary costs 
and benefits considered in this analysis to be approximately $13.6 
billion using a 7 percent discount rate, $28.5 billion using a 3 
percent discount rate, and $1.8 billion using a 20 percent discount 
rate. This conclusion is based on the calculated present value of the 
profit from shale oil produced from our analysis period (2007 to 2035) 
using EIA's reference oil price.
    This conclusion includes one significant caveat. The socioeconomic 
and environmental costs and benefits associated with oil shale 
development are likely to be quite large. As has been noted above, we 
have no reasonable way to generate meaningful scenarios to quantify the 
potential impacts for an industry that does not exist or technologies 
that have not been deployed. As such, the net present value of the 
benefits of the proposed rule may be significantly larger or smaller 
than the estimates presented in this analysis.

Clarity of the Regulations

    Executive Order 12866 requires each agency to write regulations 
that are simple and easy to understand. We invite your comments on how 
to make these proposed regulations easier to understand, including 
answers to questions such as the following:
    (1) Are the requirements in the proposed regulations clearly 
stated?
    (2) Do the proposed regulations contain technical language or 
jargon that interferes with their clarity?
    (3) Does the format of the proposed regulations (grouping and order 
of sections, use of headings, paragraphing, etc.) aid or reduce their 
clarity?
    (4) Would the regulations be easier to understand if they were 
divided into more (but shorter) sections? (A ``section'' appears in 
bold type and is preceded by the symbol ``Sec.  '' and a numbered 
heading, for example (Sec.  3902.24 Associations, including 
partnerships.)
    (5) Is the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble helpful in 
understanding the proposed regulations? How could this description be 
more helpful in making the proposed regulations easier to understand?
    Please send any comments you have on the clarity of the regulations 
to the address specified in the ADDRESSES section.

Small Business Regulatory Enforcement Fairness Act (SBREFA).

    This rule is a major rule under 5 U.S.C. 804(2), the Small Business 
Regulatory Enforcement Fairness Act. This rule:
    (1) Has an annual effect on the economy of $100 million or more. 
Please see the discussion of Executive Order 12866, above.
    (2) Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, state, or local government 
agencies, or geographic regions. Should production from Federal oil 
shale resources occur, it is anticipated that if there is any impact to 
costs or prices as a result of

[[Page 42949]]

additional production entering the market, it would be to decrease 
them.
    (3) Does 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. The 
issuance of Federal oil shale leases and production of oil shale 
resources from those Federal leases would not lead to adverse effect on 
any of the above because an increase in products from oil shale would 
tend to lead to a decrease in prices and potentially lead to increased 
competition, employment, investment, productivity, and innovation and 
the ability of U.S.-based enterprises to compete with foreign-based 
enterprises.

National Environmental Policy Act

    The BLM has prepared an environmental assessment (EA) and has found 
that the proposed rule would not constitute a major Federal action 
significantly affecting the quality of the human environment under 
Section 102(2)(C) of the National Environmental Policy Act of 1969 
(NEPA), 42 U.S.C. 4332(2)(C). A detailed statement under NEPA is not 
required. The BLM has placed the EA on file in the BLM Administrative 
Record at the address specified in the ADDRESSES section. The BLM 
invites the public to review these documents and suggests that anyone 
wishing to submit comments in response to the EA do so in accordance 
with the Public Comment Procedures section above.

Regulatory Flexibility Act

    Congress enacted the Regulatory Flexibility Act of 1980 (RFA), as 
amended, 5 U.S.C. 601-612, to ensure that Government regulations do not 
unnecessarily or disproportionately burden small entities. The RFA 
requires a regulatory flexibility analysis if a rule would have a 
significant economic impact, either detrimental or beneficial, on a 
substantial number of small entities. The RFA establishes an analytical 
process for determining how public policy goals can best be achieved 
without erecting barriers to competition, stifling innovation, or 
imposing undue burdens on small entities. Executive Order 13272 
reinforces executive intent that agencies give serious attention to 
impacts on small entities and develop regulatory alternatives to reduce 
the regulatory burden on small entities. To meet these requirements, 
the agency must either conduct a regulatory flexibility analysis or 
certify that the final rule will not have ``a significant economic 
impact on a substantial number of small entities.''
    Section 369 of the EP Act requires the Department of the Interior 
to establish regulations for a commercial oil shale leasing program. 
Although this rule would only affect entities that choose to explore 
and develop oil shale resources from land administered by the BLM, 
there is no way to determine which firms would hold exploration 
licenses or leases or operate on Federal lands in the future. The 
extent to which the proposed rule would have an actual impact on any 
firm depends on whether the firm would hold exploration licenses or 
leases or would operate on Federal lands.
    Currently, active oil shale research and development on Federal 
lands is limited to a few firms. Chevron, EGL Resources, Oil Shale 
Exploration Company, and Shell Oil Company hold R, D and D leases and 
are the only companies currently conducting operations on Federal oil 
shale leases. Of the four companies holding R, D and D leases, two are 
major oil companies and two are small research and development firms.
    With implementation of these regulations, technological advances, 
and favorable market conditions that would support oil shale 
development, the BLM anticipates an increase in the number of firms 
involved in oil shale development. However, the number of firms, large 
or small, involved in oil shale development on Federal lands would 
likely remain quite limited. Given the likely size of the industry that 
may eventually be involved in the leasing and development of Federal 
oil shale resources, it is reasonable to conclude that this rule would 
not significantly impact a ``substantial number of small entities.''
    This rule would provide for the leasing and management of oil shale 
resources on Federal lands. Provisions covered in this proposed rule 
include exploration license and competitive leasing procedures, 
requirements and terms, and plan of development and operational 
requirements.
    To explore on Federal lands, the operator would have to have an 
exploration license or an oil shale lease. The proposed process to 
obtain an exploration license would be relatively straightforward and 
would not entail significant fees, e.g., $295 nonrefundable filing fee. 
As proposed, commercial oil shale leases would primarily rely on a 
process of leasing parcels nominated by industry. The BLM may also 
choose to offer certain lands for lease. All leases would be offered 
competitively. The BLM would not collect an application or nomination 
fee; however, the successful high bidder would be required to pay 
certain costs associated with the BLM offering the tract for lease, in 
addition to the bonus bid. At the time of lease sale, the high bidder 
would be required to submit a payment of one fifth of the amount of the 
bonus bid. Leases would also be subject to a $2.00 per acre rental.
    The proposed terms and conditions for operating under an 
exploration license or commercial lease are those needed to protect the 
environment and resource values of the area and to ensure reclamation 
of the lands disturbed by the activities. Exploration and development 
plans must be submitted to the BLM for approval. All operations, 
whether under an exploration license or a commercial oil shale lease, 
are required to provide the BLM with a license or lease bond. In 
addition, operators are required to provide the government with a bond 
to cover the cost of site reclamation and closure.
    Production from commercial oil shale leases will be subject to a 
Federal royalty. A royalty on the amount or value of production removed 
or sold from the lease would apply to commercial production from these 
leases.
    The ability to obtain an exploration license and/or to compete for 
a commercial oil shale lease is not affected by the size of the 
company. Exploration licenses require a nominal filing fee ($295 per 
filing) and have no minimum acreage. Leases have minimum tract acreage 
of 160 acres; lease processing costs are paid by the successful bidder; 
and bonus bids may be deferred over a 5-year period. These aspects of 
the proposed licensing and leasing procedures allow small entities to 
better compete for Federal oil shale licenses and leases with larger, 
well capitalized companies. As required by the EP Act, all royalties, 
rentals, bonus bids, and other payments proposed in this rule are to 
encourage development of the oil shale resources while ensuring a fair 
return to the government. The proposed regulatory provisions, including 
filing fees, rentals, and production royalties, will not have a 
significant economic impact on lessees or operators, regardless of the 
firm's size.
    Therefore, the BLM has determined that under the RFA this proposed 
rule would not have a significant economic impact on a substantial 
number of small entities.

Unfunded Mandates Reform Act

    In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501 
et seq.) the proposed rule would not impose an unfunded mandate on 
state,

[[Page 42950]]

local, or tribal governments or the private sector, in the aggregate, 
of $100 million or more per year; nor would this rule have a 
significant or unique effect on state, local, or tribal governments. 
The rule would impose no requirements on any of those entities. 
Therefore, the BLM is not required to prepare a statement containing 
the information required by the Unfunded Mandates Reform Act.

Executive Order 12630, Governmental Actions and Interference With 
Constitutionally Protected Property Rights (Takings)

    The proposed rule is a not a government action capable of 
interfering with constitutionally protected property rights. A takings 
implication assessment is not required. The proposed rule does not 
authorize any specific activities that would result in any effects on 
private property. Therefore, the Department of the Interior has 
determined that the rule would not cause a taking of private property 
or require further discussion of takings implications under this 
Executive Order.

Executive Order 13132, Federalism

    The proposed rule will not have a substantial direct effect on the 
states, on the relationship between the national government and the 
states, or on the distribution of power and responsibilities among the 
levels of government. It would not apply to states or local governments 
or state or local governmental entities. The management of Federal oil 
shale leases is the responsibility of the Secretary of the Interior and 
the BLM. This rule does not alter any lease management or revenue 
sharing provisions with the states, nor does it impose any costs on the 
states. Therefore, in accordance with Executive Order 13132, the BLM 
has determined that this proposed rule does not have sufficient 
Federalism implications to warrant preparation of a Federalism 
Assessment.

Executive Order 12988, Civil Justice Reform

    Under Executive Order 12988, the BLM determined that this proposed 
rule would not unduly burden the judicial system and that it meets the 
requirements of sections 3(a) and 3(b)(2) of the Order.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    In accordance with Executive Order 13175, we have found that this 
rule may include policies that have Tribal implications. The proposed 
rule would make changes in the Federal oil shale leasing and management 
program, which does not apply on Indian Tribal lands. At present, there 
are no oil shale leases or agreements on Tribal or allotted Indian 
lands. If tribes or allottees should ever enter into any leases or 
agreements with the approval of the Bureau of Indian Affairs, the BLM 
would then likely be responsible for the approval of any proposed 
operations on Indian oil shale leases and agreements. In light of this 
possibility, and because Tribal interests could be implicated in oil 
shale leasing on Federal lands, the BLM has begun consultation with 
potentially affected Tribes on the proposed oil shale regulations, and 
will continue to consult with Tribes during the comment period on the 
proposed rule.

Information Quality Act

    In developing this proposed rule, we did not conduct or use a 
study, experiment or survey requiring peer review under the Information 
Quality Act (Section 515 of Pub. L. 106-554).

Executive Order 13211, Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    In accordance with Executive Order 13211, the BLM has determined 
that the proposed rule is not likely to have a substantial direct 
effect on the supply, distribution, or use of energy. Executive Order 
13211 requires an agency to prepare a Statement of Energy Effects for a 
proposed rule that is:
    A significant regulatory action under Executive Order 12866 or any 
successor order; and
    Likely to have a significant adverse effect on the supply, 
distribution, or use of energy.
    As discussed earlier in this preamble, the BLM believes that the 
rule will likely increase energy production and would not have an 
adverse effect on the supply, distribution, or use of energy, and 
therefore has determined that the preparation of a Statement of Energy 
Effects is not required.

Executive Order 13352, Facilitation of Cooperative Conservation

    In accordance with Executive Order 13352, the BLM has determined 
that this proposed rule would not impede facilitating cooperative 
conservation; would take appropriate account of and consider the 
interests of persons with ownership or other legally recognized 
interest in the land or other natural resources; properly accommodates 
local participation in the Federal decision-making process; and provide 
that the programs, projects, and activities are consistent with 
protecting public health and safety. State and local governments were 
cooperating agencies in the preparation of the PEIS. The BLM, in 
coordination with the MMS, held three ``listening sessions'' with 
representatives of the governors of the states of Colorado, Utah, and 
Wyoming. The purpose of the ``listening sessions'' was to provide the 
governor's representatives the opportunity to share their ideas, 
issues, and concerns relating to the proposed commercial oil shale 
leasing regulations. Section 369(e) of the EP Act requires that not 
later than 180 days after the publication of the final regulations, the 
Secretary (as delegated to the BLM), is to consult with the governors 
of the states with significant oil shale and tar sands resources on 
public lands, representatives of local governments in such states, 
interested Indian tribes, and other interested persons to determine the 
level of support and interest in the states in the development of oil 
shale resources. In addition, the proposed regulations contain a 
section providing for comments from state governors, local governments, 
and interested Indian tribes prior to offering lands for lease for oil 
shale. The comment period would occur prior to the BLM's publication of 
a call for nominations.

Paperwork Reduction Act of 1995 (PRA)

    This proposed rule would contain new information collection 
requirements. As required by the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)), the BLM has submitted a copy of the proposed 
regulations to the OMB for review. The BLM will not require collection 
of this information until OMB has given its approval.
    As part of our continuing effort to reduce paperwork and respondent 
burden, we invite the public and other Federal agencies to comment on 
any aspect of the reporting burden through the information collection 
process. Submit written comments by either fax (202) 395-6566 or e-mail 
([email protected]) directly to the Office of Information and 
Regulatory Affairs, OMB, Attention: Desk Officer for the Department of 
the Interior [OMB Control Number ICR 1004-New, as it relates to the 
proposed Oil Shale Management rule].
    The title of the new information collection request (ICR) is 
``Parts 3900-3930--Oil Shale Management--General.'' The intent of this 
proposed rulemaking is to establish regulations for a commercial 
leasing program. The BLM will collect information from

[[Page 42951]]

individuals, corporations, and associations in order to:
    (1) Learn the extent and qualities of the public oil shale 
resource;
    (2) Evaluate the environmental impacts of oil shale leasing and 
development;
    (3) Determine the qualifications of prospective lessees to acquire 
and hold Federal oil shale leases;
    (4) Administer statutes applicable to oil shale mining, production, 
resource recovery and protection, operations under oil shale leases, 
and exploration under leases and licenses;
    (5) Ensure lessee compliance with applicable statutes, regulations, 
and lease terms and conditions; and
    (6) Ensure that accurate records are kept of all Federal oil shale 
produced.
    Prospectively estimating the annual burden hours for the commercial 
oil shale program is difficult because the oil shale industry is at the 
research and development stage where there is a lack of available 
information and the future technology to be used is uncertain. The 
burden hour estimates in the following charts were derived from a 
previous ICR completed for the Federal coal program, as the information 
collection associated with that program is somewhat similar to the 
proposed oil shale leasing program. The coal burden hour estimates were 
adjusted to reflect differences in the two processes. It is also 
difficult to make a prospective estimate of the number of annual 
responses; therefore, the BLM has used one response for each activity 
as a starting point, except for the number of applications received. We 
anticipate that we could receive several applications after these 
regulations are promulgated. The BLM estimates that this ICR for the 
oil shale management program will result in 22 responses totaling 1,784 
burden hours at a total annual burden cost of $86,492 (Table 1). This 
estimate is based on the number of actions multiplied by the estimated 
burden hours per action multiplied by a $48.48 wage per hour (Table 2). 
Additionally, the BLM estimates that there will be processing/cost 
recovery fees in the amount of $526,592 (Table 3). See the following 
tables for burden hours and processing/cost recovery fees by CFR 
citation:

                                                               Table 1.--Burden Breakdown
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Average number
        Parts 3900-3930 burden activity                   Information collected             Hour burden      of annual    Average annual   Total annual
                                                                                                             responses     burden hours     burden cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Subpart 3904--Bonds and Trust Funds
--------------------------------------------------------------------------------------------------------------------------------------------------------
A lessee or licensee must furnish a bond before  Section 3904.12.--File one copy of the                1               1               1             $48
 a lease or exploration license may be issued     bond form with original signatures in
 or transferred or a plan of development          the proper BLM state office. Bonds
 approved. The BLM will review the bond and, if   must be filed on an approved BLM form.
 adequate as to amount and execution, will        The obligor of a personal bond must
 accept it in order to indemnify the United       sign the form. Surety bonds must have
 States against default on payments due or        the lessee's and the acceptable
 other performance obligations. The BLM may       surety's signature.
 also adjust the bond amount to reflect changed
 conditions. The BLM will cancel the bond when
 all requirements are satisfied
                                                 Section 3904.14(c)(1).--Prior to the                  1               1               1              48
                                                  approval of a plan of development, in
                                                  those instances where a state bond
                                                  will be used to cover all of the BLM's
                                                  reclamation requirements, evidence
                                                  verifying that the existing state bond
                                                  will satisfy all the BLM reclamation
                                                  bonding requirements must be filed in
                                                  the proper BLM office. The BLM will
                                                  use no specific form to collect this
                                                  information.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Part 3910--Oil Shale Exploration Licenses
--------------------------------------------------------------------------------------------------------------------------------------------------------
For those lands where no exploration data is     Section 3910.31.--The BLM will use no                24               1              24           1,164
 available, the lease applicant may apply for     specific form to collect the
 an exploration license to conduct exploration    information. The applicant will be
 on unleased public lands to determine the        required to submit the following
 extent and specific characteristics of the       information: (1) Name and address of
 Federal oil shale resource. The BLM will use     applicant(s); (2) A nonrefundable
 the information in the application to: (1)       filing fee of $295; (3) A general
 Locate the proposed exploration site; (2)        description of the area to be drilled
 Determine if the lands are subject to entry      described by legal land description;
 for exploration; (3) Prepare a notice of         and (4) 3 copies of an exploration
 invitation to other parties to participate in    plan that includes the exact location
 the exploration; and (4) Ensure the              of the affected lands, the name,
 exploration plan is adequate to safeguard        address, and telephone number of the
 resource values, and public and worker health    party conducting the exploration
 and safety                                       activities, a description of the
                                                  proposed methods and extent of
                                                  exploration, and reclamation.
The BLM will use this information from a         Section 3910.44.--Upon the BLM's                      8               1               8             388
 licensee to determine if it will offer the       request, the licensee must provide
 land area for lease                              copies of all data obtained under the
                                                  exploration license in the format
                                                  requested by the BLM. The BLM will
                                                  consider the data confidential and
                                                  proprietary until the BLM determines
                                                  that public access to the data will
                                                  not damage the competitive position of
                                                  the licensee or the lands involved
                                                  have been leased, whichever comes
                                                  first. Submit all data obtained under
                                                  the exploration license to the proper
                                                  BLM office.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Subpart 3921--Pre-Sale Activities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporations, associations, and individuals may  Section 3921.30.--The BLM will request                4               1               4             194
 submit expressions of leasing interest for       this information through the
 specific areas to assist the applicable BLM      publication of a notice in the Federal
 State Director in determining whether or not     Register and will use no specific form
 to lease oil shale. The information provided     to collect the information. The
 will be used in the consultation with the        expression of leasing interest will
 governor of the affected state and in setting    contain specific information
 a geographic area for which a call for           consisting of name and address and
 applications will be requested                   area of interest described by legal
                                                  land description.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 42952]]

 
                                                          Subpart 3922--Application Processing
--------------------------------------------------------------------------------------------------------------------------------------------------------
Entities interested in leasing the Federal oil   Section 3922.20 and 3922.30.--Lease                 308               3             924          44,796
 shale resource must file an application in a     applications must be filed in the
 geographic area for which the BLM has issued a   proper BLM state office. No specific
 ``Call for Applications.'' The information       form of application is required, but
 provided by the applicant will be used to        the application must include
 evaluate the impacts of issuing a proposed       information necessary to evaluate the
 lease on the human environment. Failure to       impacts of issuing the proposed lease
 provide the requested additional information     on the human environment, including,
 may result in suspension or termination of       but not limited to, the following: (1)
 processing of the application or in a decision   Name, address, telephone number of
 to deny the application                          applicant, and a qualification
                                                  statement, as required by subpart
                                                  3902; (2) A delineation of the
                                                  proposed lease area or areas, the
                                                  surface ownership (if other than the
                                                  United States) of those areas, a
                                                  description of the quality, thickness,
                                                  and depth of the oil shale and of any
                                                  other resources the applicant proposes
                                                  to extract, and environmental data
                                                  necessary to assess impacts from the
                                                  proposed development; (3) A
                                                  description of the proposed extraction
                                                  method, including personnel
                                                  requirements, production levels, and
                                                  transportation methods including: (a)
                                                  A description of the mining,
                                                  retorting, or in situ mining or
                                                  processing technology that the
                                                  operator would use and whether the
                                                  proposed development technology is
                                                  substantially identical to a
                                                  technology or method currently in use
                                                  to produce marketable commodities from
                                                  oil shale deposits; (b) An estimate of
                                                  the maximum surface area of the lease
                                                  area that will be disturbed or
                                                  undergoing reclamation at any one
                                                  time; (c) A description of the source
                                                  and quantities of water to be used and
                                                  of the water treatment and disposal
                                                  methods necessary to meet applicable
                                                  water quality standards; (d) A
                                                  description of the air quality
                                                  emissions; (e) A description of the
                                                  anticipated noise levels from the
                                                  proposed development; (f) A
                                                  description of how the proposed lease
                                                  development would comply with all
                                                  applicable statutes and regulations
                                                  governing management of chemicals and
                                                  disposal of solid waste. If the
                                                  proposed lease development would
                                                  include disposal of wastes on the
                                                  lease site, include a description of
                                                  measures to be used to prevent the
                                                  contamination of soil and of surface
                                                  and ground water; (g) A description of
                                                  how the proposed lease development
                                                  would avoid, or, to the extent
                                                  practicable, mitigate impacts to
                                                  species or habitats protected by
                                                  applicable state or Federal law or
                                                  regulations, and impacts to wildlife
                                                  habitat management; (h) A description
                                                  of reasonably foreseeable social,
                                                  economic, and infrastructure impacts
                                                  to the surrounding communities, and to
                                                  state and local governments from the
                                                  proposed development; (i) A
                                                  description of the known historical,
                                                  cultural, or archeological resources
                                                  within the lease area; (j) A
                                                  description of infrastructure that
                                                  would likely be required for the
                                                  proposed development and alternative
                                                  locations of those facilities, if
                                                  applicable; (k) A discussion of
                                                  proposed measures to mitigate any
                                                  adverse impacts to the environment and
                                                  to nearby communities; (l) A brief
                                                  description of the reclamation methods
                                                  that will be used; (m) Any other
                                                  information that shows that the
                                                  application meets the requirements of
                                                  this subpart or that the applicant
                                                  believes would assist the BLM in
                                                  analyzing the impacts of the proposed
                                                  development; and (n) A map, or maps,
                                                  showing: (i) The topography, physical
                                                  features, and natural drainage
                                                  patterns; (ii) Existing roads,
                                                  vehicular trails, and utility systems;
                                                  (iii) The location of any proposed
                                                  exploration operations, including
                                                  seismic lines and drill holes; (iv) To
                                                  the extent known, the location of any
                                                  proposed mining operations and
                                                  facilities, trenches, access roads, or
                                                  trails, and supporting facilities
                                                  including the approximate location and
                                                  extent of the areas to be used for
                                                  pits, overburden, and tailings; and
                                                  (v) The location of water sources or
                                                  other resources that may be used in
                                                  the proposed operations and
                                                  facilities. At any time during
                                                  processing of the application, or the
                                                  environmental or similar assessments
                                                  of the application, the BLM may
                                                  request additional information from
                                                  the applicant.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Subpart 3924--Lease Sale Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prospective lessees will be required to submit   Section 3924.10.--The BLM will request                8               1               8             388
 a bid at a competitive sale in order to be       the following bid information via the
 issued a lease                                   notice of oil shale lease sale: (1) A
                                                  certified check, cashier's check, bank
                                                  draft, money order, personal check, or
                                                  cash for one-fifth of the amount of
                                                  the bonus; and (2) A qualifications
                                                  statement signed by the bidder as
                                                  described in subpart 3902.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 42953]]

 
                      Subpart 3926--Conversion of Preference Right for Research, Demonstration, and Development (R, D and D) Leases
--------------------------------------------------------------------------------------------------------------------------------------------------------
The lessee of an R, D and D lease may apply for  Section 3926.10(c).--A lessee of an R,              308               1             308          14,932
 conversion of the R, D and D lease to a          D and D lease identified in subpart
 commercial lease                                 3926 must apply for the conversion of
                                                  the R, D and D lease to a commercial
                                                  lease no later than 90 days after the
                                                  commencement of production in
                                                  commercial quantities. No specific
                                                  form of application is required. The
                                                  application for conversion must be
                                                  filed in the BLM state office that
                                                  issued the R, D and D lease. The
                                                  conversion application must include:
                                                  (1) Documentation that there has been
                                                  commercial quantities of oil shale
                                                  produced from the lease, including the
                                                  narrative required by section 23 of R,
                                                  D and D leases; and (2) Documentation
                                                  that the lessee consulted with state
                                                  and local officials to develop a plan
                                                  for mitigating the socioeconomic
                                                  impacts of commercial development on
                                                  communities and infrastructure. (3) A
                                                  bonus payment equal to the FMV of the
                                                  lease; and (4) Bonding to cover all
                                                  costs associated with reclamation.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Subpart 3930--Management of Oil Shale Exploration and Leases
--------------------------------------------------------------------------------------------------------------------------------------------------------
The records, logs, and samples provide           Section 3930.11(b).--The operator/                   19               1              19             921
 information necessary to determine the nature    lessee must retain for one year all
 and extent of oil shale resources on Federal     drill and geophysical logs. The
 lands and to monitor and adjust the extent of    operator must also make such logs
 the oil shale reserve.                           available for inspection or analysis
                                                  by the BLM. The BLM may require the
                                                  operator/lessee to retain
                                                  representative samples of drill cores
                                                  for 1 year. The BLM uses no specific
                                                  form to collect the information.
                                                 Section 3930.20(b).--The operator must               19               1              19             921
                                                  record any new geologic information
                                                  obtained during mining or in situ
                                                  development operations regarding any
                                                  mineral deposits on the lease. The
                                                  operator must report this new
                                                  information in a BLM-approved format
                                                  to the proper BLM office within 90
                                                  days of obtaining the information.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Subpart 3931--Plans of Development and Exploration Plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
The plan of development must provide for         Section 3931.11.--The plan of
 reasonable protection and reclamation of the     development must contain, at a
 environment and the protection and diligent      minimum, the following: (a) Names,
 development of the oil shale resources in the    addresses, and telephone numbers of
 lease.                                           those responsible for operations to be
                                                  conducted under the approved plan and
                                                  to whom notices and orders are to be
                                                  delivered, names and addresses of
                                                  Federal oil shale lessees and
                                                  corresponding Federal lease serial
                                                  numbers, and names and addresses of
                                                  surface and mineral owners of record,
                                                  if other than the United States; (b) A
                                                  general description of geologic
                                                  conditions and mineral resources
                                                  within the area where mining is to be
                                                  conducted, including appropriate maps;
                                                  (c) A copy of a suitable map or aerial
                                                  photograph showing the topography, the
                                                  area covered by each lease, the name
                                                  and location of major topographic and
                                                  cultural features; (d) A statement of
                                                  proposed methods of operation and
                                                  development, including the following
                                                  items as appropriate: (1) A
                                                  description detailing the extraction
                                                  technology to be used; (2) The
                                                  equipment to be used in development
                                                  and extraction; (3) The proposed
                                                  access roads; (4) The size, location,
                                                  and schematics of all structures,
                                                  facilities, and lined or unlined pits
                                                  to be built; (5) The stripping ratios,
                                                  development sequence, and schedule;
                                                  (6) The number of acres in the Federal
                                                  lease(s) or license(s) to be affected;
                                                  (7) Comprehensive well design and
                                                  procedure for drilling, casing,
                                                  cementing, testing, stimulation, clean-
                                                  up, completion, and production, for
                                                  all drilled well types, including
                                                  those used for heating, freezing, and
                                                  disposal; (8) A description of the
                                                  methods and means of protecting and
                                                  monitoring all aquifers; (9) Surveyed
                                                  well location plats or project-wide
                                                  well location plats; (10) A
                                                  description of the measurement and
                                                  handling of produced fluids, including
                                                  the anticipated production rates and
                                                  estimated recovery factors; and (11) A
                                                  description/discussion of the controls
                                                  that the operator will use to protect
                                                  the public, including identification
                                                  of: (i) Essential operations,
                                                  personnel, and health and safety
                                                  precautions; (ii) Programs and plans
                                                  for noxious gas control (hydrogen
                                                  sulfide, ammonia, etc.); (iii) Well
                                                  control procedures; (iv) Temporary
                                                  abandonment procedures; and (v) Plans
                                                  to address spills, leaks, venting, and
                                                  flaring; (e) An estimate of the
                                                  quantity and quality of the oil shale
                                                  resources; (f) An explanation of how
                                                  MER of the resource will be achieved
                                                  for each Federal lease; and (g)
                                                  Appropriate maps and cross sections
                                                  showing: (1) Federal lease boundaries
                                                  and serial numbers; (2) Surface
                                                  ownership and boundaries; (3)
                                                  Locations of any existing and
                                                  abandoned mines and existing oil and
                                                  gas well (including well bore
                                                  trajectories) and water well
                                                  locations, including well bore
                                                  trajectories; (4)

[[Page 42954]]

 
                                                  Typical geological structure cross                 308               1             308          14,932
                                                  sections; (5) Location of shafts or
                                                  mining entries, strip pits, waste
                                                  dumps, retort facilities, and surface
                                                  facilities; (6) Typical mining or in
                                                  situ development sequence, with
                                                  appropriate time-frames; (h) A
                                                  narrative addressing the environmental
                                                  aspects of the proposed mine or in
                                                  situ operation, including at a
                                                  minimum, the following: (1) An
                                                  estimate of the quantity of water to
                                                  be used and pollutants that may enter
                                                  any receiving waters; (2) A design for
                                                  the necessary impoundment, treatment,
                                                  control, or injection of all produced
                                                  water, runoff water, and drainage from
                                                  workings; and (3) A description of
                                                  measures to be taken to prevent or
                                                  control fire, soil erosion,
                                                  subsidence, pollution of surface and
                                                  ground water, pollution of air, damage
                                                  to fish or wildlife or other natural
                                                  resources, and hazards to public
                                                  health and safety; (i) A reclamation
                                                  plan and schedule for all Federal
                                                  lease(s) or exploration license(s)
                                                  that details all reclamation
                                                  activities necessary to fulfill the
                                                  requirements of Sec.   3931.20; (j)
                                                  The method of abandonment of
                                                  operations on Federal lease(s) and
                                                  exploration license(s) proposed to
                                                  protect the unmined recoverable
                                                  reserves and other resources,
                                                  including: (1) The method proposed to
                                                  fill in, fence, or close all surface
                                                  openings that are hazardous to people
                                                  or animals; and (2) For in situ
                                                  operations, a description of the
                                                  method and materials to be used to
                                                  plug all abandoned development or
                                                  production wells; and (k) Any
                                                  additional information that the BLM
                                                  determines is necessary for analysis
                                                  or approval of the plan of development.
The BLM may, in the interest of conservation,    Section 3931.30.--An application by a                24               1              24           1,164
 order or agree to a suspension of operations     lessee for suspension of operations
 and production.                                  and production must be filed in
                                                  duplicate in the proper BLM office and
                                                  must set forth why it is in the
                                                  interest of conservation to suspend
                                                  operations and production. The BLM
                                                  will use no specific form to collect
                                                  this information.
Except for casual use, before conducting any     Section 3931.41.--The BLM will use no                24               1              24           1,164
 exploration operations on federally-leased or    specific form to collect this
 federally-licensed lands, the lessee must        information. Exploration plans must
 submit an exploration plan to the BLM for        contain the following information: (1)
 approval.                                        The name, address, and telephone
                                                  number of the applicant, and, if
                                                  applicable, that of the operator or
                                                  lessee of record; (2) The name,
                                                  address, and telephone number of the
                                                  representative of the applicant who
                                                  will be present during, and
                                                  responsible for, conducting
                                                  exploration; (3) A description of the
                                                  proposed exploration area, cross-
                                                  referenced to the map required under
                                                  section 3931.41, including: (a)
                                                  Applicable Federal lease and
                                                  exploration license serial numbers;
                                                  (b) Surface topography; (c) Geologic,
                                                  surface water, and other physical
                                                  features; (d) Vegetative cover; (e)
                                                  Endangered or threatened species
                                                  listed under the Endangered Species
                                                  Act of 1973 (16 U.S.C. 1531 et seq.)
                                                  that may be affected by exploration
                                                  operations; (f) Districts, sites,
                                                  buildings, structures, or objects
                                                  listed on, or eligible for listing on,
                                                  the National Register of Historic
                                                  Places that may be present in the
                                                  lease area; and (g) Known cultural or
                                                  archaeological resources located
                                                  within the proposed exploration area;
                                                  (4) A description of the methods to be
                                                  used to conduct oil shale exploration,
                                                  reclamation, and abandonment of
                                                  operations, including, but not limited
                                                  to: (a) The types, sizes, numbers,
                                                  capacity, and uses of equipment for
                                                  drilling and blasting and road or
                                                  other access route construction; (b)
                                                  Excavated earth-disposal or debris-
                                                  disposal activities; (c) The proposed
                                                  method for plugging drill holes; and
                                                  (d) The estimated size and depth of
                                                  drill holes, trenches, and test pits;
                                                  (5) An estimated timetable for
                                                  conducting and completing each phase
                                                  of the exploration, drilling, and
                                                  reclamation; (6) The estimated amounts
                                                  of oil shale or oil shale products to
                                                  be removed during exploration, a
                                                  description of the method to be used
                                                  to determine those amounts, and the
                                                  proposed use of the oil shale removed;
                                                  (7) A description of the measures to
                                                  be used during exploration for Federal
                                                  oil shale to comply with the
                                                  performance standards for exploration
                                                  (43 CFR 3930.10) and applicable
                                                  requirements of an approved state
                                                  program; (8) A map at a scale of
                                                  1:24,000 or larger showing the areas
                                                  of land to be affected by the proposed
                                                  exploration and reclamation. The map
                                                  must show: (a) Existing roads,
                                                  occupied dwellings, and pipelines; (b)
                                                  The proposed location of trenches,
                                                  roads, and other access routes and
                                                  structures to be constructed; (c)
                                                  Applicable Federal lease and
                                                  exploration license boundaries; (d)
                                                  The location of land excavations to be
                                                  conducted; (e) Oil shale exploratory
                                                  holes to be drilled or altered; (f)
                                                  Earth-disposal or debris-disposal
                                                  areas; (g) Existing bodies of surface
                                                  water; and (h) Topographic and
                                                  drainage features; and (9) The name
                                                  and address of the owner of record of
                                                  the surface land, if other than the
                                                  United States. If the surface is owned
                                                  by a person other than the applicant
                                                  or if the Federal oil shale is leased
                                                  to a person other than the applicant,
                                                  a description of the basis upon which
                                                  the applicant claims the right to
                                                  enter that land for the purpose of
                                                  conducting exploration and reclamation.

[[Page 42955]]

 
Approved exploration, mining and in situ         Section 3931.50.--The BLM will use no                24               1              24           1,164
 development plans may be modified by the         specific form to collect this
 operator or lessee to adjust to changed          information. The operator or lessee
 conditions or to correct an oversight.           may apply in writing to the BLM for
                                                  modification of the approved
                                                  exploration plan or plan of
                                                  development to adjust to changed
                                                  conditions or to correct an oversight.
                                                  To obtain approval of an exploration
                                                  plan or plan of development
                                                  modification, the operator or lessee
                                                  must submit to the proper BLM office a
                                                  written statement of the proposed
                                                  modification and the justification for
                                                  such modification.
Production of all oil shale products or          Section 3931.70.--(1) Report production              16               1              16             776
 byproducts must be reported to the BLM on a      of all oil shale products or by-
 monthly basis.                                   products to the BLM on a monthly
                                                  basis. (2) Report all production and
                                                  royalty information to the MMS under
                                                  30 CFR parts 210 and 216. (3) Submit
                                                  production maps to the proper BLM
                                                  office at the end of each royalty
                                                  reporting period or on a schedule
                                                  determined by the BLM. Show all
                                                  excavations in each separate bed or
                                                  deposit on the maps so that the
                                                  production of minerals for any period
                                                  can be accurately ascertained.
                                                  Production maps must also show surface
                                                  boundaries, lease boundaries,
                                                  topography, and subsidence resulting
                                                  from mining activities. (4) For in
                                                  situ development operations, the
                                                  lessee or operator must submit a map
                                                  showing all surface installations
                                                  including pipelines, meter locations,
                                                  or other points of measurement
                                                  necessary for production verification
                                                  as part of the plan of development.
                                                  All maps must be modified as necessary
                                                  to adequately represent existing
                                                  operations. (5) Within 30 days after
                                                  well completion, the lessee or
                                                  operator must submit to the proper BLM
                                                  office 2 copies of a completed Form
                                                  3160-4, Well Completion or
                                                  Recompletion Report and Log, limited
                                                  to information that is applicable to
                                                  oil shale operations. Well logs may be
                                                  submitted electronically using a BLM
                                                  approved electronic format. Describe
                                                  surface and bottom-hole locations in
                                                  latitude and longitude.
Within 30 days after drilling completion the     Section 3931.80.--Within 30 days after               16               1              16             776
 operator or lessee must submit to the BLM a      drilling completion, the operator or
 signed copy of records of all core or test       lessee must submit to the proper BLM
 holes made on the lands covered by the lease     office a signed copy of records of all
 or exploration license.                          core or test holes made on the lands
                                                  covered by the lease or exploration
                                                  license. The records must show the
                                                  position and direction of the holes on
                                                  a map. The records must include a log
                                                  of all strata penetrated and
                                                  conditions encountered, such as water,
                                                  gas, or unusual conditions, and copies
                                                  of analysis of all samples. Provide
                                                  this information to the proper BLM
                                                  office in either paper copy or in a
                                                  BLM-approved electronic format. Within
                                                  30 days after creation, the operator
                                                  or lessee must also submit to the
                                                  proper BLM office a detailed
                                                  lithologic log of each test hole and
                                                  all other in-hole surveys or other
                                                  logs produced. Upon the BLM's request,
                                                  the operator or lessee must provide to
                                                  the BLM splits of core samples and
                                                  drill cuttings.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Subpart 3932--Lease Modifications and Readjustments
--------------------------------------------------------------------------------------------------------------------------------------------------------
A lessee may apply for a modification of a       Section 3932.10(b) and Section                       12               1              12             582
 lease to include additional Federal lands        3932.30(c).--The BLM will use no
 adjoining those in the lease.                    specific form to collect this
                                                  information. An application for
                                                  modification of the lease size must:
                                                  (1) Be filed with the proper BLM
                                                  office; (2) Contain a legal
                                                  description of the additional lands
                                                  involved; (3) Contain a justification
                                                  for the modification; (4) Explain why
                                                  the modification would be in the best
                                                  interest of the United States; (5)
                                                  Include a nonrefundable processing fee
                                                  that the BLM will determine under 43
                                                  CFR 3000.11; and (6) Include a signed
                                                  qualifications statement consistent
                                                  with subpart 3902. Before the BLM will
                                                  approve a lease modification, the
                                                  lessee must file a written acceptance
                                                  of the conditions in the modified
                                                  lease and a written consent of the
                                                  surety under the bond covering the
                                                  original lease as modified. The lessee
                                                  must also submit evidence that the
                                                  bond has been amended to cover the
                                                  modified lease.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Subpart 3933--Assignments and Subleases
--------------------------------------------------------------------------------------------------------------------------------------------------------
Any lease may be assigned or subleased in whole  Section 3933.31.--(1) The BLM will use               10               1              10             485
 or in part to any person, association, or        no specific form to collect this
 corporation that meets the qualification         information. File in triplicate at the
 requirements at subpart 3902.                    proper BLM office a separate
                                                  instrument of assignment for each
                                                  lease assignment. File the assignment
                                                  application within 90 days of the date
                                                  of final execution of the assignment
                                                  instrument and with it include: (a)
                                                  Name and current address of assignee;
                                                  (b) Interest held by assignor and
                                                  interest to be assigned; (c) The
                                                  serial number of the affected lease
                                                  and a description of the lands to be
                                                  assigned as described in the lease;
                                                  (d) Percentage of overriding royalties
                                                  retained; and (e) Date and signature
                                                  of assignor. (2) The assignee must
                                                  provide a single copy of the request
                                                  for approval of assignment which must
                                                  contain a: (a) Statement of
                                                  qualifications and holdings as
                                                  required by subpart 3902; (b) Date and
                                                  signature of assignee; and (c)
                                                  Nonrefundable filing fee of $60.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 42956]]

 
                                             Subpart 3934--Relinquishments, Cancellations, and Terminations
--------------------------------------------------------------------------------------------------------------------------------------------------------
A lease or exploration license may be            Section 3934.10.--The BLM will use no                18               1              18             873
 surrendered in whole or in part.                 specific form to collect this
                                                  information. The record title holder
                                                  must file a written relinquishment, in
                                                  triplicate, in the BLM state office
                                                  having jurisdiction over the lands
                                                  covered by the relinquishment.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Subpart 3935--Production and Sale Records
--------------------------------------------------------------------------------------------------------------------------------------------------------
Operators or lessees must maintain production    Section 3935.10.--Operators or lessees               16               1              16             776
 and sale records which must be available for     must maintain accurate records: (1)
 the BLM's examination during regular business    Oil shale mined; (2) Oil shale put
 hours.                                           through the processing plant and
                                                  retort; (3) Mineral products produced
                                                  and sold; (4) Shale oil products,
                                                  shale gas, and shale oil by-products
                                                  sold; (5) Relevant quality analyses of
                                                  oil shale mined or processed and of
                                                  synthetic petroleum, shale oil or
                                                  shale oil by-products sold; and (6)
                                                  Shale oil products and by-products
                                                  that are consumed on lease for the
                                                  beneficial use of the lease.
                                                --------------------------------------------------------------------------------------------------------
    Totals.....................................  .......................................  ..............              22           1,784          86,492
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                         Table 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                BLS
                      Job category                         occupational     Mean hourly       40% for       Hourly rate     Weight (%)    Weighted value
                                                               code            wage*         benefits                                        per hour
--------------------------------------------------------------------------------------------------------------------------------------------------------
Attorney................................................         23-1011          $56.29          $22.52          $78.81              10           $7.88
Managerial..............................................         11-0000           45.53           18.21           63.74              20           12.75
Technical/Professional..................................         17-2151           38.44           15.38           53.82              40           21.53
Clerical................................................         43-0000           15.04            6.02           21.06              30            6.32
                                                         -----------------------------------------------------------------------------------------------
    Total Weighted Value per Hour.......................  ..............  ..............  ..............  ..............             100          48.48
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Derived from Bureau of Labor Statistics: May 2006 National Occupational Employment and Wage Estimates, (http://stats.bls.gov/oes/current/oes_nat.htm#b00-0000); and revised to reflect a 3.0 percent increase from the 2nd quarter of 2006 to the 2nd quarter of 2007 as reported in the Bureau of
  Labor Statistics Civilian Employer Costs for Employee Compensation (http://data.bls.gov/cgi-bin/surveymost?cm).

    Based on an average number of actions, we estimate the processing 
and cost recovery fees as follows:

                                                     Table 3
----------------------------------------------------------------------------------------------------------------
                                                                                         Estimated
                                                                                          case-by-      Total
Estimated collections from processing and cost recovery case-  Estimated    Processing   case cost    estimated
                        by-case fees                           number of     fee per      recovery      annual
                                                                actions       action      fee per     collection
                                                                                           action
----------------------------------------------------------------------------------------------------------------
Part 3910--Oil Shale Exploration Licenses...................            1         $295        (\1\)         $295
Subpart 3922--Application Processing........................            3        (\1\)     $172,323      516,969
The case-by-case processing fee does not include any
 required studies or analyses that are completed by third
 party contractors and funded by the applicant. The
 regulations at 43 CFR 3000.11 provide the regulatory
 framework for determining the cost recovery value.
Subpart 3925--Award of Lease................................            1           60        (\1\)           60
The successful bidder must submit the necessary lease bond
 (see subpart 3904), the first year's rental, and the
 bidder's proportionate share of the cost of publication of
 the sale notice.
Subpart 3932--Lease Size Modification.......................            1        (\1\)        9,208        9,208
Subpart 3933--Assignments and Subleases.....................            1           60        (\1\)           60
                                                             ---------------------------------------------------
    Totals..................................................            7  ...........  ...........     526,592
----------------------------------------------------------------------------------------------------------------
\1\ Not applicable.

    The BLM will consider comments by the public on this proposed 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the agency to perform its duties, including whether the 
information is useful;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;

[[Page 42957]]

    (3) Enhance the quality, usefulness, and clarity of the information 
to be collected; and
    (4) Minimize the burden on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.
    The OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 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 receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to BLM on the proposed 
regulations.

Authors

    The principal authors of this proposed rule are Charlie Beecham, 
II, and Mary Linda Ponticelli, Division of Solid Minerals (Washington 
Office); assisted by Mavis Love, BLM Wyoming State Office; James 
Kohler, Sr., BLM Utah State Office; Hank Szymanski, BLM Colorado State 
Office; Paul McNutt, Division of Solid Minerals (Washington Office); 
Kelly Odom, Division of Regulatory Affairs (Washington Office); and 
Richard McNeer, Department of the Interior, Office of the Solicitor.

List of Subjects

43 CFR Part 3900

    Administrative practice and procedure, Environmental protection, 
Intergovernmental relations, Mineral royalties, Oil shale reserves, 
Public lands-mineral resources, Reporting and recordkeeping 
requirements, Surety bonds.

43 CFR Part 3910

    Environmental protection, Exploration licenses, Intergovernmental 
relations, Oil shale reserves, Public lands-mineral resources, 
Reporting and recordkeeping requirements.

43 CFR Part 3920

    Administrative practice and procedure, Environmental protection, 
Intergovernmental relations, Oil shale reserves, public lands-mineral 
resources, Reporting and recordkeeping requirements.

43 CFR Part 3930

    Administrative practice and procedure, Environmental protection, 
Mineral royalties, Oil shale reserves, Public lands-mineral resources, 
Reporting and recordkeeping requirements, Surety bonds.
    Accordingly, for the reasons stated in the preamble and under the 
authorities stated below, the BLM proposes to amend 43 CFR subtitle B 
Chapter II as follows:

C. Stephen Allred,
Assistant Secretary, Land and Minerals Management.

    1. Add part 3900 to subchapter C to read as follows:

PART 3900--OIL SHALE MANAGEMENT--GENERAL

Subpart 3900--Oil Shale Management--Introduction
Sec.
3900.2 Definitions.
3900.5 Information collection.
3900.10 Lands subject to leasing.
3900.20 Appealing the BLM's decision.
3900.30 Filing documents.
3900.40 Multiple use development of leased or licensed lands.
3900.50 Land use plans and environmental considerations.
3900.61 Federal minerals where the surface is owned or administered 
by other Federal agencies, by state agencies or charitable 
organizations, or by private entities.
3900.62 Special requirements to protect the lands and resources.
Subpart 3901--Land Descriptions and Acreage
3901.10 Land descriptions.
3901.20 Acreage limitations.
3901.30 Computing acreage holdings.
Subpart 3902--Qualification Requirements
3902.10 Who may hold leases.
3902.21 Filing of qualification evidence.
3902.22 Where to file.
3902.23 Individuals.
3902.24 Associations, including partnerships.
3902.25 Corporations.
3902.26 Guardians or trustees.
3902.27 Heirs and devisees.
3902.28 Attorneys-in-fact.
3902.29 Other parties in interest.
Subpart 3903--Fees, Rentals, and Royalties
3903.20 Forms of payment.
3903.30 Where to submit payments.
3903.40 Rentals.
3903.51 Minimum production and payments in lieu of production.
3903.52 Production royalties.
3903.53 Overriding royalties.
3903.54 Waiver, suspension, or reduction of rental or payments in 
lieu of production, or reduction of royalty, or waiver of royalty in 
the first 5 years of the lease.
3903.60 Late payment or underpayment charges.
Subpart 3904--Bonds and Trust Funds
3904.10 Bonding requirements.
3904.11 When to file bonds.
3904.12 Where to file bonds.
3904.13 Acceptable forms of bonds.
3904.14 Individual lease, exploration license, and reclamation 
bonds.
3904.15 Amount of bond.
3904.20 Default.
3904.21 Termination of the period of liability.
3904.40 Long-term water treatment trust funds.
Subpart 3905--Lease Exchanges
3905.10 Oil shale lease exchanges.

    Authority: 30 U.S.C. 189, 359, and 241(a), 42 U.S.C. 15927, 43 
U.S.C. 1732(b) and 1740.

Subpart 3900--Oil Shale Management--Introduction


Sec.  3900.2  Definitions.

    As used in this part and parts 3910 through 3930 of this chapter, 
the term:
    Acquired lands means lands which the United States obtained through 
purchase, gift, or condemnation, and mineral estates that are not 
public domain lands, including mineral estates associated with lands 
previously disposed of under the public land laws, including the mining 
laws.
    Act means the Mineral Leasing Act of 1920, as amended and 
supplemented (30 U.S.C. 181 et seq.).
    BLM means the Bureau of Land Management and includes the individual 
employed by the Bureau of Land Management authorized to perform the 
duties set forth in this part and parts 3910 through 3930.
    Commercial quantities means production of shale oil quantities in 
accordance with the approved Plan of Development for the proposed 
project through the research, development, and demonstration activities 
conducted on the lease, based on, and at the conclusion of which, there 
is a reasonable expectation that the expanded operation would provide a 
positive return after all costs of production have been met, including 
the amortized costs of the capital investment.
    Department means the Department of the Interior.
    Diligent development means achieving or completing the prescribed 
milestones listed in Sec.  3930.30 of this chapter.
    Director means the Director, Bureau of Land Management.
    Entity means a person, association, or corporation, or any 
subsidiary, affiliate, corporation, or association controlled by or 
under common control with such person, association, or corporation.
    Exploration means drilling, excavating, and geological, geophysical 
or geochemical surveying operations designed to obtain detailed data on 
the physical and chemical characteristics of Federal oil shale and its 
environment including:

[[Page 42958]]

    (1) The strata below the Federal oil shale;
    (2) The overburden;
    (3) The strata immediately above the Federal oil shale; and
    (4) The hydrologic conditions associated with the Federal oil 
shale.
    Exploration license means a license issued by the BLM that allows 
the licensee to explore unleased oil shale deposits to obtain geologic, 
environmental, and other pertinent data concerning the deposits.
    Exploration plan means a plan prepared in sufficient detail to show 
the:
    (1) Location and type of exploration to be conducted;
    (2) Environmental protection procedures to be taken;
    (3) Present and proposed roads, if any; and
    (4) Reclamation and abandonment procedures to be followed upon 
completion of operations.
    Fair market value (FMV) means the monetary amount for which the oil 
shale deposit would be leased by a knowledgeable owner willing, but not 
obligated, to lease to a knowledgeable purchaser who desires, but is 
not obligated, to lease the oil shale deposit.
    Federal lands means any lands or interests in lands, including oil 
shale interests underlying non-Federal surface, owned by the United 
States, without reference to how the lands were acquired or what 
Federal agency administers the lands.
    Infrastructure means all support structures necessary for the 
production or development of shale oil, including, but not limited to:
    (1) Offices;
    (2) Shops;
    (3) Maintenance facilities;
    (4) Pipelines;
    (5) Roads;
    (6) Electrical transmission lines;
    (7) Well bores;
    (8) Storage tanks;
    (9) Ponds;
    (10) Monitoring stations;
    (11) Processing facilities--retorts; and
    (12) Production facilities.
    In situ operation means the processing of oil shale in place.
    Interest in a lease, application, or bid means any:
    (1) Record title interest;
    (2) Overriding royalty interest;
    (3) Working interest;
    (4) Operating rights or option or any agreement covering such an 
interest; or
    (5) Participation or any defined or undefined share in any 
increments, issues, or profits that may be derived from or that may 
accrue in any manner from a lease based on or under any agreement or 
understanding existing when an application was filed or entered into 
while the lease application or bid is pending.
    Kerogen means the solid, organic substance in sedimentary rock that 
yields oil when it undergoes destructive distillation.
    Lease means a Federal lease issued under the mineral leasing laws, 
which grants the exclusive right to explore for and extract a 
designated mineral.
    Lease bond means the bond or equivalent security given to the 
Department to assure performance of all obligations associated with all 
lease terms and conditions.
    Maximum economic recovery means that, based on standard industry 
operating practices, all profitable portions of a leased Federal oil 
shale deposit must be mined. This requirement does not restrict the 
authority of the BLM to ensure the conservation of the oil shale 
reserves and other resources and to prevent the wasting of oil shale.
    MMS means the Minerals Management Service.
    Oil shale means a fine-grained sedimentary rock containing:
    (1) Organic matter which was derived chiefly from aquatic organisms 
or waxy spores or pollen grains, which is only slightly soluble in 
ordinary petroleum solvents, and of which a large proportion is 
distillable into synthetic petroleum; and
    (2) Inorganic matter, which may contain other minerals. This term 
is applicable to any argillaceous, carbonate, or siliceous sedimentary 
rock which, through destructive distillation, will yield synthetic 
petroleum.
    Permit means any of the required approvals that are issued by 
Federal, state, or local agencies.
    Plan of development means the plan created for oil shale operations 
that complies with the requirements of the Act and that details the 
plans, equipment, methods, and schedules to be used in oil shale 
development.
    Production means:
    (1) The extraction of shale oil, shale gas, or shale oil by-
products through surface retorting or in situ recovery methods; or
    (2) The severing of oil shale rock through surface or underground 
mining methods.
    Proper BLM office means the Bureau of Land Management office having 
jurisdiction over the lands under application or covered by a lease or 
exploration license and subject to the regulations in this part and in 
parts 3910 through 3930 of this chapter (see subpart 1821 of part 1820 
of this chapter for a list of BLM state offices).
    Public domain lands means lands, including mineral estates, which:
    (1) Never left the ownership of the United States;
    (2) Were obtained by the United States in exchange for public 
domain lands;
    (3) Have reverted to the ownership of the United States; or
    (4) Were specifically identified by Congress as part of the public 
domain.
    Reclamation means the measures undertaken to bring about the 
necessary reconditioning or restoration of lands or waters affected by 
exploration, mining, in situ operations, onsite processing operations 
or waste disposal in a manner which will meet the requirements imposed 
by the BLM under applicable law.
    Reclamation bond means the bond or equivalent security given to the 
BLM to assure performance of all obligations relating to reclamation of 
disturbed areas under an exploration license or lease.
    Secretary means the Secretary of the Interior.
    Shale gas means the gaseous hydrocarbon-bearing products of surface 
retorting of oil shale or of in situ extraction that is not liquefied 
into shale oil. In addition to hydrocarbons, shale gas might include 
other gases such as carbon dioxide, nitrogen, helium, sulfur, other 
residual or specialty gases, and entrained hydrocarbon liquids.
    Shale oil means synthetic petroleum derived from the destructive 
distillation of oil shale.
    Sole party in interest means a party who alone is or will be vested 
with all legal and equitable rights and responsibilities under a lease, 
bid, or application for a lease.
    Surface management agency means the Federal agency with 
jurisdiction over the surface of federally-owned lands containing oil 
shale deposits.
    State Director means an employee of the Bureau of Land Management 
designated as the chief administrative officer of one of the BLM's 12 
administrative areas designated as states.
    Surface retort means the above-ground facility used for the 
extraction of kerogen by heating mined shale.
    Surface retort operation means the extraction of kerogen by heating 
mined shale in an above-ground facility.
    Synthetic petroleum means synthetic crude oil manufactured from 
shale oil and suitable for use as a refinery feedstock and for 
petrochemical production.

[[Page 42959]]

Sec.  3900.5  Information collection.

    (a) OMB has approved the information collection requirements in 
parts 3900 through 3930 of this chapter under 44 U.S.C. 3501 et seq. 
The table in paragraph (d) of this section lists the subpart in the 
rule requiring the information and its title, provides the OMB control 
number, and summarizes the reasons for collecting the information and 
how the BLM uses the information.
    (b) Respondents are oil shale lessees and operators. The 
requirement to respond to the information collections in these parts 
are mandated under the EP Act, (42 U.S.C. 15927), the Mineral Leasing 
Act for Acquired Lands of 1947 (30 U.S.C. 351-359), and the Federal 
Land Policy and Management Act (FLPMA) of 1976 (43 U.S.C. 1701 et seq., 
including 43 U.S.C. 1732).
    (c) The Paperwork Reduction Act of 1995 requires us to inform the 
public that an agency may not conduct or sponsor, and you are not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.
    (d) The BLM is collecting this information for the reasons given in 
the following table:

------------------------------------------------------------------------
   43 CFR parts 3900-3930,       Reasons for collecting information and
     general (1004-XXXX)                        how used
------------------------------------------------------------------------
Sections 3904.12,              A lessee or licensee must furnish a bond
 3904.14(c)(1).                 before a lease or exploration license
                                may be issued or transferred or a plan
                                of development approved. The BLM will
                                review the bond and, if adequate as to
                                amount and execution, will accept it in
                                order to indemnify the United States
                                against default on payments due or other
                                performance obligations. The BLM may
                                also adjust the bond amount to reflect
                                changed conditions. The BLM will cancel
                                the bond when all requirements are
                                satisfied.
Sections 3910.31, 3910.44....  For those lands where no exploration data
                                is available, the lease applicant may
                                apply for an exploration license to
                                conduct exploration on unleased public
                                lands to determine the extent and
                                specific characteristics of the Federal
                                oil shale resource. The BLM will use the
                                information in the application to:
                               (1) Locate the proposed exploration site;
                               (2) Determine if the lands are subject to
                                entry for exploration;
                               (3) Prepare a notice of invitation to
                                other parties to participate in the
                                exploration; and
                               (4) Ensure the exploration plan is
                                adequate to safeguard resource values,
                                and public and worker health and safety.
                               The BLM will use this information from a
                                licensee to determine if it will offer
                                the land area for lease.
Section 3921.30..............  Corporations, associations, and
                                individuals may submit expressions of
                                leasing interest for specific areas to
                                assist the applicable BLM State Director
                                in determining whether or not to lease
                                oil shale. The information provided will
                                be used in the consultation with the
                                governor of the affected state and in
                                setting a geographic area for which a
                                call for applications will be requested.
Sections 3922.20 and 3922.30.  Entities interested in leasing the
                                Federal oil shale resource must file an
                                application in a geographic area for
                                which the BLM has issued a ``Call for
                                Applications.'' The information provided
                                by the applicant will be used to
                                evaluate the impacts of issuing a
                                proposed lease on the human environment.
                                Failure to provide the requested
                                additional information may result in
                                suspension or termination of processing
                                of the application or in a decision to
                                deny the application.
Section 3924.10..............  Prospective lessees will be required to
                                submit a bid at a competitive sale in
                                order to be issued a lease.
Section 3926.10(c)...........  The lessee of an R, D and D lease may
                                apply for conversion of the R, D and D
                                lease to a commercial lease.
Section 3930.11(b),            The records, logs, and samples provide
 3930.20(b).                    information necessary to determine the
                                nature and extent of oil shale resources
                                on Federal lands and to monitor and
                                adjust the extent of the oil shale
                                reserve.
Section 3931.11..............  The plan of development must provide for
                                reasonable protection and reclamation of
                                the environment and the protection and
                                diligent development of the oil shale
                                resources in the lease.
Section 3931.30..............  The BLM may, in the interest of
                                conservation, order or agree to a
                                suspension of operations and production.
Section 3931.41..............  Except for casual use, before conducting
                                any exploration operations on federally-
                                leased or federally-licensed lands, the
                                lessee must submit an exploration plan
                                to the BLM for approval.
Section 3931.50..............  Approved exploration, mining and in situ
                                development plans may be modified by the
                                operator or lessee to adjust to changed
                                conditions or to correct an oversight.
Section 3931.70..............  Production of all oil shale products or
                                byproducts must be reported to the BLM
                                on a monthly basis.
Section 3931.80..............  Within 30 days after drilling completion
                                the operator or lessee must submit to
                                the BLM a signed copy of records of all
                                core or test holes made on the lands
                                covered by the lease or exploration
                                license.
Sections 3932.10(b) and        A lessee may apply for a modification of
 3932.30(c).                    a lease to include additional Federal
                                lands adjoining those in the lease.
Section 3933.31..............  Any lease may be assigned or subleased in
                                whole or in part to any person,
                                association, or corporation that meets
                                the qualification requirements at
                                subpart 3902.
Section 3934.10..............  A lease or exploration license may be
                                surrendered in whole or in part.
Section 3935.10..............  Operators or lessees must maintain
                                production and sale records which must
                                be available for the BLM's examination
                                during regular business hours.
------------------------------------------------------------------------

Sec.  3900.10  Lands subject to leasing.

    The BLM may issue oil shale leases under this part on all Federal 
lands except:
    (a) Those lands specifically excluded from leasing by the Act; and
    (b) Any other lands withdrawn from leasing.


Sec.  3900.20  Appealing the BLM's decision.

    Any party adversely affected by a BLM decision made under this part 
or parts 3910 through 3930 of this chapter may appeal the decision 
under part 4 of this title. All decisions and orders by the BLM under 
these parts remain effective pending appeal unless the BLM decides 
otherwise. A petition for the stay of a decision may be filed with the 
Interior Board of Land Appeals.


Sec.  3900.30  Filing documents.

    (a) All necessary documents must be filed in the proper BLM office. 
A document is considered filed when the proper BLM office receives it 
with any required fee.

[[Page 42960]]

    (b) All information submitted to the BLM under the regulations in 
this part or parts 3910 through 3930 will be available to the public 
unless exempt from disclosure under the Freedom of Information Act (5 
U.S.C. 552), under part 2 of this title, or unless otherwise provided 
for by law.


Sec.  3900.40  Multiple use development of leased or licensed lands.

    (a) The granting of an exploration license or lease for the 
exploration, development, or production of deposits of oil shale does 
not preclude the BLM from issuing other exploration licenses or leases 
for the same lands for deposits of other minerals. Each exploration 
license or lease reserves the right to allow any other uses or to allow 
disposal of the leased lands if it does not unreasonably interfere with 
the exploration and mining operations of the lessee. The lessee or the 
licensee must make all reasonable efforts to avoid interference with 
other such authorized uses.
    (b) Subsequent lessee or licensee will be required to conduct 
operations in a manner that will not interfere with the established 
rights of existing lessees or licensees.
    (c) When the BLM issues an oil shale lease, it will cancel all oil 
shale exploration licenses for the leased lands.


Sec.  3900.50  Land use plans and environmental considerations.

    (a) Any lease or exploration license issued under this part or 
parts 3910 through 3930 of this chapter will be issued in conformance 
with the decisions, terms, and conditions of a comprehensive land use 
plan developed under part 1600 of this chapter.
    (b) Before a lease or exploration license is issued, the BLM, or 
the appropriate surface management agency, must comply with the 
requirements of the National Environmental Policy Act of 1969 (NEPA).
    (c) Before the BLM approves a plan of development, the BLM must 
comply with NEPA, in cooperation with the surface management agency 
when possible, if the surface is managed by another Federal agency.


Sec.  3900.61  Federal minerals where the surface is owned or 
administered by other Federal agencies, by state agencies or charitable 
organizations, or by private entities.

    (a) Public domain lands. Unless consent is required by law, the BLM 
will issue a lease or exploration license only after the BLM has 
consulted with the surface management agency on public domain lands 
where the surface is administered by an agency outside of the 
Department. The BLM will not issue a lease or an exploration license on 
lands to which the surface managing agency withholds consent required 
by statute.
    (b) Acquired lands. The BLM will issue a lease on acquired lands 
only after receiving written consent from an appropriate official of 
the surface management agency.
    (c) Lands covered by lease or license. If a Federal surface 
management agency outside of the Department has required special 
stipulations in the lease or license or has refused consent to issue 
the lease or license, an applicant may pursue the administrative 
remedies to challenge that decision offered by that particular surface 
management agency, if any. If the applicant notifies the BLM within 30 
calendar days after receiving the BLM's decision that the applicant has 
requested the surface management agency to review or reconsider its 
decision, the time for filing an appeal to the Interior Board of Land 
Appeals under part 4 of this title is suspended until a decision is 
reached by such agency.
    (d) The BLM will not issue a lease or exploration license on 
National Forest System Lands without the consent of the Forest Service.
    (e) State's, charitable organization's, or private entity's 
ownership of surface overlying Federal Minerals. Where the United 
States has conveyed title to, or otherwise transferred the control of 
the surface of lands to any state or political subdivision, agency, or 
instrumentality thereof, other than another Federal agency, but 
including a college or any other educational corporation or 
association, to a charitable or religious corporation or association, 
or to a private entity, the BLM will send such parties written 
notification by certified mail of the application for exploration 
license or lease. In the written notification, the BLM will give the 
parties a reasonable time, not to exceed 90 calendar days, within which 
to suggest any lease stipulations necessary for the protection of 
existing surface improvements or uses and to set forth the facts 
supporting the necessity of the stipulations or file any objections it 
may have to the issuance of the lease or license. The BLM makes the 
final decision as to whether to issue the lease or license and on what 
terms based on a determination as to whether the interests of the 
United States would best be served by issuing the lease or license with 
the particular stipulations. This is true even in cases where the party 
controlling the surface opposes the issuance of a lease or license or 
wishes to place restrictive stipulations on the lease.


Sec.  3900.62  Special requirements to protect the lands and resources.

    The BLM will specify stipulations in a lease or exploration license 
to protect the lands and their resources. This may include stipulations 
required by the surface management agency or recommended by the surface 
management agency or non-Federal surface owner and accepted by the BLM.

Subpart 3901--Land Descriptions and Acreage


Sec.  3901.10  Land descriptions.

    (a) All lands in an oil shale lease must be described by the legal 
subdivisions of the public land survey system or if the lands are 
unsurveyed, the legal description by metes and bounds.
    (b) Unsurveyed lands will be surveyed, at the cost of the lease 
applicant, by a surveyor approved or employed by the BLM.


Sec.  3901.20  Acreage limitations.

    No entity may hold more than 50,000 acres of Federal oil shale 
leases in any one state. Oil shale lease acreage does not count toward 
acreage limitations associated with leases for other minerals.


Sec.  3901.30  Computing acreage holdings.

    The maximum acreage in any one state refers to the acres an entity 
may hold under a Federal lease on either public domain lands or 
acquired lands. Acquired lands and public domain lands are counted 
separately, so an entity may hold up to the maximum acreage of each at 
the same time.

Subpart 3902--Qualification Requirements


Sec.  3902.10  Who may hold leases.

    (a) The following entities may hold leases or interests therein:
    (1) Citizens of the United States;
    (2) Associations (including partnerships and trusts) of such 
citizens; and
    (3) Corporations organized under the laws of the United States or 
of any state or territory thereof.
    (b) Citizens of a foreign country may only hold interest in leases 
through stock ownership, stock holding, or stock control in such 
domestic corporations. Foreign citizens may hold stock in United States 
corporations that hold leases if the Secretary has not determined that 
laws, customs, or regulations of their country deny similar privileges 
to citizens or corporations of the United States.

[[Page 42961]]

    (c) A minor may not hold a lease. A legal guardian or trustee of a 
minor may hold a lease.
    (d) An entity must be in compliance with Section 2(a)(2)(A) of the 
Act in order to hold a lease. If the BLM erroneously issues a lease to 
an entity that is in violation of Section 2(a)(2)(A) of the Act, the 
BLM will void the lease.


Sec.  3902.21  Filing of qualification evidence.

    Applicants must file with the BLM a statement and evidence that the 
qualification requirements in this subpart are met. These may be filed 
separately from the lease application, but must be filed in the same 
office as the application. After the BLM accepts the applicant's 
qualifications, any additional information may be provided to the same 
BLM office by referring to the serial number of the record in which the 
evidence is filed. All changes to the qualifications statement must be 
in writing. The evidence provided must be current, accurate, and 
complete.


Sec.  3902.22  Where to file.

    The lease application and qualification evidence must be filed in 
the proper BLM office (see subpart 1821 of part 1820 of this chapter).


Sec.  3902.23  Individuals.

    Individuals who are applicants must provide to the BLM a signed 
statement showing:
    (a) U.S. citizenship; and
    (b) That acreage holdings do not exceed the limits in Sec.  3901.20 
of this chapter. This includes holdings through a corporation, 
association, or partnership in which the individual is the beneficial 
owner of more than 10 percent of the stock or other instruments of 
control.


Sec.  3902.24  Associations, including partnerships.

    Associations that are applicants must provide to the BLM:
    (a) A signed statement that:
    (1) Lists the names, addresses, and citizenship of all members of 
the association who own or control 10 percent or more of the 
association or partnership, and certifies that the statement is true;
    (2) Lists the names of the members authorized to act on behalf of 
the association; and
    (3) Certifies that the association or partnership's acreage 
holdings and those of any member under paragraph (a)(1) of this section 
do not exceed the acreage limits in Sec.  3901.20 of this chapter; and
    (b) A copy of the articles of association or the partnership 
agreement.


Sec.  3902.25  Corporations.

    Corporate officers or authorized attorneys-in-fact who represent 
applicants must provide to the BLM a signed statement that:
    (a) Names the state or territory of incorporation;
    (b) Lists the name and citizenship of, and percentage of stock 
owned, held, or controlled by, any stockholder owning, holding, or 
controlling more than 10 percent of the stock of the corporation, and 
certifies that the statement is true;
    (c) Lists the names of the officers authorized to act on behalf of 
the corporation; and
    (d) Certifies that the corporation's acreage holdings, and those of 
any stockholder identified under paragraph (b) of this section, do not 
exceed the acreage limits in Sec.  3901.20 of this chapter.


Sec.  3902.26  Guardians or trustees.

    Guardians or trustees for a trust, holding on behalf of a 
beneficiary, who are applicants must provide to the BLM:
    (a) A signed statement that:
    (1) Provides the beneficiary's citizenship;
    (2) Provides the guardian's or trustee's citizenship;
    (3) Provides the grantor's citizenship, if the trust is revocable; 
and
    (4) Certifies the acreage holdings of the beneficiary, the 
guardian, trustee, or grantor, if the trust is revocable, do not exceed 
the aggregate acreage limitations in Sec.  3901.20 of this chapter; and
    (b) A copy of the court order or other document authorizing or 
creating the trust or guardianship.


Sec.  3902.27  Heirs and devisees.

    If an applicant or successful bidder for a lease dies before the 
lease is issued:
    (a) The BLM will issue the lease to the heirs or devisees, or their 
guardian, if probate of the estate has been completed or is not 
required. Before the BLM will recognize the heirs or devisees or their 
guardian as the record title holders of the lease, they must provide to 
the proper BLM office:
    (1) A certified copy of the will or decree of distribution, or if 
no will or decree exists, a statement signed by the heirs that they are 
the only heirs and citing the provisions of the law of the deceased's 
last domicile showing that no probate is required; and
    (2) A statement signed by each of the heirs or devisees with 
reference to citizenship and holdings as required by Sec.  3902.23 of 
this chapter. If the heir or devisee is a minor, the guardian or 
trustee must sign the statement; and
    (b) The BLM will issue the lease to the executor or administrator 
of the estate, if probate is required, but is not completed. In this 
case, the BLM considers the executor or administrator to be the record 
title holder of the lease. Before the BLM will issue the lease to the 
executor or administrator, the executor or administrator must provide 
to the proper BLM office:
    (1) Evidence that the person who, as executor or administrator, 
submits lease and bond forms has authority to act in that capacity and 
to sign those forms;
    (2) A certified list of the heirs or devisees of the deceased; and
    (3) A statement signed by each heir or devisee concerning 
citizenship and holdings, as required by Sec.  3902.23 of this chapter.


Sec.  3902.28  Attorneys-in-fact.

    Attorneys-in-fact must provide to the proper BLM office evidence of 
the authority to act on behalf of the applicant and a statement of the 
applicant's qualifications and acreage holdings if it is also empowered 
to make this statement. Otherwise, the applicant must provide the BLM 
this information separately.


Sec.  3902.29  Other parties in interest.

    If there is more than one party in interest in an application for a 
lease, include with the application the names of all other parties who 
hold or will hold any interest in the application or in the lease. All 
interested parties who wish to hold an interest in a lease must provide 
to the BLM the information required by this subpart to qualify to hold 
a lease interest.

Subpart 3903--Fees, Rentals, and Royalties


Sec.  3903.20  Forms of payment.

    All payments must be by U.S. postal money order or negotiable 
instrument payable in U.S. currency. In the case of payments made to 
the MMS, such payments may also be made by electronic funds transfer 
(see 30 CFR part 218 for the MMS's payment procedures).


Sec.  3903.30  Where to submit payments.

    (a) All filing and processing fees, all first-year rentals, and all 
bonuses for leases issued under this part or parts 3910 through 3930 of 
this chapter must be paid to the BLM state office that manages the 
lands covered by the application, lease, or exploration license, unless 
the BLM designates a different state office. The first one-fifth bonus 
installment is paid to the appropriate BLM state office. All remaining 
bonus installment payments are paid to the MMS.

[[Page 42962]]

    (b) All second-year and subsequent rentals and all other payments 
for leases are paid to the MMS.
    (c) All royalties on producing leases and all payments under leases 
in their minimum production period are paid to the MMS.


Sec.  3903.40  Rentals.

    (a) The rental rate for oil shale leases is $2.00 per acre, or 
fraction thereof, payable in advance of the lease year. Rentals paid 
for any 1 year are credited against any production royalties accruing 
for that year.
    (b) The BLM will send a notice demanding payment of late rentals 
within 30 calendar days after receipt of the notification. Failure to 
provide payment within 30 calendar days after notification will result 
in the BLM taking action to cancel the lease (see Sec.  3934.30 of this 
chapter).


Sec.  3903.51  Minimum production and payments in lieu of production.

    (a) Each lease must have a minimum annual production amount of 
shale oil or make a payment in lieu of production for any particular 
lease year, beginning with the 10th lease year.
    (b) The payment in lieu of annual production is established in the 
lease and will not be less than $4 per acre or fraction thereof per 
year, payable in advance. Production royalty payments will be credited 
to payments in lieu of annual production for that year only.

Option 1


Sec.  3903.52  Production royalties.

    (a) The lessee must pay royalties on all products of oil shale that 
are sold from or transported off of the lease.
    (b) The royalty rate for the products of oil shale is 5 percent of 
the amount or value of production.

Option 2


Sec.  3903.52  Production royalties.

    (a) The lessee must pay royalties on the amount or value of all 
products of oil shale that are sold from or transported off of the 
lease.
    (b) The standard royalty rate for the products of oil shale is 12.5 
percent of the amount or value of production.
    (c) For any lease that begins production of oil shale within 12 
years of issuance of the first commercial oil shale lease issued under 
subpart 3925 or subpart 3926, the royalty rate is 5 percent of the 
amount or value of production on the first 30 million barrels of oil 
equivalent produced from that oil shale lease.


Sec.  3903.53  Overriding royalties.

    The lessee must file documentation of all overriding royalties 
associated with the lease in the proper BLM office within 90 calendar 
days after execution of the assignment of the overriding royalties.


Sec.  3903.54  Waiver, suspension, or reduction of rental or payments 
in lieu of production, or reduction of royalty, or waiver of royalty in 
the first 5 years of the lease.

    (a) In order to encourage the maximum economic recovery (MER) of 
the leased mineral(s), and in the interest of conservation, whenever 
the BLM determines it is necessary to promote development or finds that 
leases cannot be successfully operated under the lease terms, the BLM 
may waive, suspend, or reduce the rental or payment in lieu of 
production, reduce the rate of royalty, or in the first 5 years of the 
lease, waive the royalty.
    (b) Applications for waivers, suspension or reduction of rentals or 
payment in lieu of production, reduction in royalty, or waiver of 
royalty for the first 5 years of the lease must contain the serial 
number of the lease, the name of the record title holder, the operator 
or sub-lessee, a description of the lands by legal subdivision, and the 
following information:
    (1) The location of each oil shale mine or operation, and include:
    (i) A map showing the extent of the mining or development 
operations;
    (ii) A tabulated statement of the minerals mined and subject to 
royalty for each month covering a period of not less than 12 months 
immediately preceding the date of filing of the application; and
    (iii) The average production per day mined for each month, and 
complete information as to why the minimum production was not attained;
    (2) Each application must contain:
    (i) A detailed statement of expenses and costs of operating the 
entire lease;
    (ii) The income from the sale of any leased products;
    (iii) All facts showing whether the mines can be successfully 
operated under the royalty or rental fixed in the lease; and
    (iv) Where the application is for a reduction in royalty, 
information as to whether royalties or payments out of production are 
paid to anyone other than the United States, the amounts so paid, and 
efforts made to reduce those payments;
    (3) Any overriding royalties cannot be greater in aggregate than 
one-half the royalties paid to the United States.
    (c) Contact the proper BLM office for detailed information on 
submitting copies of these applications electronically.


Sec.  3903.60  Late payment or underpayment charges.

    Late payment or underpayment charges will be assessed under MMS 
regulations at 30 CFR 218.202.

Subpart 3904--Bonds and Trust Funds


Sec.  3904.10  Bonding requirements.

    (a) Prior to issuing a lease or exploration license, the BLM 
requires exploration license or lease bonds for each lease or 
exploration license that covers all liabilities, other than 
reclamation, that may arise under the lease or license. The bond must 
cover all record title owners, operating rights owners, operators, and 
any person who conducts operations or is responsible for payments under 
a lease or license.
    (b) Before the BLM will approve a plan of development, the lessee 
must provide to the proper BLM office a reclamation bond to cover all 
costs the BLM estimates will be necessary to cover reclamation.


Sec.  3904.11  When to file bonds.

    File the lease bond prior to lease issuance, file the reclamation 
bond prior to the plan of development approval, and file the 
exploration bond prior to exploration license issuance.


Sec.  3904.12  Where to file bonds.

    File one copy of the bond form with original signatures in the 
proper BLM state office. Bonds must be filed on an approved BLM form. 
The obligor of a personal bond must sign the form. Surety bonds must 
have the lessee's and the acceptable surety's signature.


Sec.  3904.13  Acceptable forms of bonds.

    (a) The BLM will accept either a personal bond or a surety bond. 
Personal bonds are pledges of any of the following:
    (1) Cash;
    (2) Cashier's check;
    (3) Certified check; or
    (4) Negotiable U.S. Treasury bonds equal in value to the bond 
amount. Treasury bonds must give the Secretary authority to sell the 
securities in the case of failure to comply with the conditions and 
obligations of the exploration license or lease.
    (b) Surety bonds must be issued by qualified surety companies 
approved by the Department of the Treasury. A list of qualified 
sureties is available at any BLM state office.

[[Page 42963]]

Sec.  3904.14  Individual lease, exploration license, and reclamation 
bonds.

    (a) The BLM will determine individual lease bond amounts on a case-
by-case basis. The minimum lease bond amount is $25,000.
    (b) The BLM will determine reclamation bond and exploration license 
bond amounts on a case-by-case basis when it approves a plan of 
development or exploration plan. The reclamation or exploration license 
bond must be sufficient to cover the estimated cost of site 
reclamation.
    (c) The BLM may enter into agreements with states to accept a state 
reclamation bond to cover the BLM's reclamation bonding requirements. 
The BLM may request additional information from the lessee or operator 
to determine whether the state bond will cover all of the BLM's 
reclamation requirements.
    (1) If a state bond is to be used to satisfy the BLM bonding 
requirements, evidence verifying that the existing state bond will 
satisfy all the BLM reclamation bonding requirements must be filed in 
the proper BLM office.
    (2) The BLM will require an additional bond if the BLM determines 
that the state bond does not cover all of the BLM bonding requirements.


Sec.  3904.15  Amount of bond.

    (a) The BLM may increase or decrease the required bond amount if it 
determines that a change in amount is appropriate to cover the costs 
and obligations of complying with the requirements of the lease or 
license and these regulations. The BLM will not decrease the bond 
amount below the minimum (see Sec.  3904.14(a) of this chapter).
    (b) The lessee or operator must submit to the BLM every three years 
after reclamation bond approval a revised cost estimate of the 
reclamation costs. If the current bond does not cover the revised 
estimate of reclamation costs, the lessee or operator must increase the 
reclamation bond amount to meet or exceed the revised cost estimate.


Sec.  3904.20  Default.

    (a) The BLM will demand payment from the lease bond to cover 
nonpayment of any rental or royalty owed or the reclamation or 
exploration license bond for any reclamation obligations that are not 
met. The BLM will reduce the bond amount by the amount of the payment 
made to cover the default.
    (b) After any default, the BLM will provide notification of the 
amount required to restore the bond to the required level. A new bond 
or an increase in the existing bond to its pre-default level must be 
provided to the proper BLM office within 6 months of the BLM's written 
notification that the bond is below its required level. The BLM may 
accept separate or substitute bonds for each exploration license or 
lease. The BLM may take action to cancel the lease or exploration 
license covered by the bond if a replacement bond is not provided 
within the time period stated in the notification.


Sec.  3904.21  Termination of the period of liability.

    (a) The BLM will not consent to termination of the period of 
liability under a bond unless an acceptable replacement bond has been 
filed or until all of the terms and conditions of the license or lease 
have been fulfilled.
    (b) Terminating the period of liability of a bond ends the period 
during which obligations continue to accrue, but does not relieve the 
surety of the responsibility for obligations that accrued during the 
period of liability.


Sec.  3904.40  Long-term water treatment trust funds.

    (a) The BLM may require the operator or lessee to establish a trust 
fund or other funding mechanism to ensure the continuation of long-term 
treatment to achieve water quality standards and for other long-term, 
post-mining maintenance requirements. The funding must be adequate to 
provide for the construction, long-term operation, maintenance, or 
replacement of any treatment facilities and infrastructure, for as long 
as the treatment and facilities are needed after mine closure. The BLM 
may identify the need for a trust fund or other funding mechanism 
during plan review or later.
    (b) In determining whether a trust fund will be required, the BLM 
will consider the following factors:
    (1) The anticipated post-mining obligations (PMO) that are 
identified in the environmental document or approved plan of 
development;
    (2) Whether there is a reasonable degree of certainty that the 
treatment will be required based on accepted scientific evidence or 
models;
    (3) The determination that the financial responsibility for those 
obligations rests with the operator; and
    (4) Whether it is feasible, practical, or desirable to require 
separate or expanded reclamation bonds for those anticipated long-term 
PMOs.

Subpart 3905--Lease Exchanges


Sec.  3905.10  Oil shale lease exchanges.

    To facilitate the recovery of oil shale, the BLM may consider land 
exchanges where appropriate and feasible to consolidate land ownership 
and mineral interest into manageable areas. Exchanges are covered under 
part 2200 of this chapter.
    2. Add part 3910 to subchapter C to read as follows:

PART 3910--OIL SHALE EXPLORATION LICENSES

Subpart 3910--Exploration Licenses
Sec.
3910.21 Lands subject to exploration.
3910.22 Lands managed by agencies other than the BLM.
3910.23 Requirements for conducting exploration activities.
3910.31 Filing of an application for an exploration license.
3910.32 Environmental analysis.
3910.40 Exploration license requirements.
3910.41 Issuance, modification, relinquishment, and cancellation.
3910.42 Limitations on exploration licenses.
3910.44 Collection and submission of data.
3910.50 Surface use.

    Authority: 25 U.S.C. 396(d) and 2107, 30 U.S.C. 241(a), 42 
U.S.C. 15927, 43 U.S.C. 1732(b) and 1740.

Subpart 3910--Exploration Licenses


Sec.  3910.21  Lands subject to exploration.

    The BLM may issue oil shale exploration licenses for all Federal 
lands subject to leasing under Sec.  3900.10 of this chapter, except 
lands that are in an existing oil shale lease or in preference right 
leasing areas under the research, development, and demonstration (R, D 
and D) program. The BLM may issue exploration licenses for lands in 
preference right lease areas only to the R, D and D lessee.


Sec.  3910.22  Lands managed by agencies other than the BLM.

    (a) The consent and consultation procedures required by Sec.  
3900.61 of this chapter also apply to exploration license applications.
    (b) If exploration activities could affect the adjacent lands under 
the surface management of a Federal agency other than the BLM, the BLM 
will consult with that agency before issuing an exploration license.


Sec.  3910.23  Requirements for conducting exploration activities.

    Exploration activities on Federal lands must be conducted under an 
exploration license or oil shale lease and an approved exploration plan 
under Sec.  3904.41 of this chapter. The licensee may not remove any 
oil shale for sale, but may remove a reasonable amount of oil shale for 
analysis and study.

[[Page 42964]]

Sec.  3910.31  Filing of an application for an exploration license.

    (a) Applications for exploration licenses must be submitted to the 
proper BLM office.
    (b) No specific form is required. Applications must include:
    (1) The name and address of the applicant(s);
    (2) A nonrefundable filing fee of $295;
    (3) A description of the lands covered by the application according 
to section, township and range in accordance with the public lands 
survey system or, if the lands are unsurveyed lands, the legal 
description by metes and bounds; and
    (4) An acceptable electronic format or 3 paper copies of an 
exploration plan that complies with the requirements of Sec.  3931.41 
of this chapter. Contact the proper BLM office for detailed information 
on submitting copies electronically.
    (c) An exploration license application may cover no more than 
25,000 acres in a reasonably compact area and entirely within one 
state. An application for an exploration license covering more than 
25,000 acres must include justification for an exception to the normal 
acreage limitation.
    (d) Applicants for exploration licenses are required to invite 
other parties to participate in exploration under the license on a pro 
rata cost share basis.
    (e) Using information supplied by the applicant, the BLM will 
prepare a notice of invitation and post the notice in the proper BLM 
office for 30 calendar days. The applicant will publish the BLM-
approved notice once a week for 2 consecutive weeks in at least 1 
newspaper of general circulation in the area where the lands covered by 
the exploration license application are situated. The notification must 
invite the public to participate in the exploration under the license 
and contain the name and location of the BLM office in which the 
application is available for inspection.
    (f) If any person wants to participate in the exploration program, 
the applicant and the BLM must receive written notice from that person 
within 30 calendar days after the end of the 30-day posting period. A 
person who wants to participate in the exploration program must:
    (1) State in their notification that they are willing to share in 
the cost of the exploration on a pro-rata share basis; and
    (2) Describe any modifications to the exploration program that the 
BLM should consider.
    (g) To avoid duplication of exploration activities in an area, the 
BLM may:
    (1) Require modification of the original exploration plan to 
accommodate the exploration needs of those seeking to participate; or
    (2) Notify those seeking to participate that they should file a 
separate application for an exploration license.


Sec.  3910.32  Environmental analysis.

    (a) Before the BLM will issue an exploration license, the BLM, in 
consultation with any affected surface management agency, will perform 
the appropriate NEPA analysis of the application.
    (b) For each exploration license, the BLM will include terms and 
conditions needed to protect the environment and resource values of the 
area and to ensure reclamation of the lands disturbed by the 
exploration activities.


Sec.  3910.40  Exploration license requirements.

    The licensee must comply with all applicable Federal, state, and 
local laws and regulations, the terms and conditions of the license, 
and the approved exploration plan.


Sec.  3910.41  Issuance, modification, relinquishment, and 
cancellation.

    (a) The BLM may:
    (1) Issue an exploration license, or
    (2) Reject an application for an exploration license based on, but 
not limited to:
    (i) The need for resource information;
    (ii) The environmental analysis;
    (iii) The completeness of the application; or
    (iv) Any combination of these factors.
    (b) An exploration license is effective on the date the BLM 
specifies, which is also the date when exploration activities may 
begin. An exploration license is valid for a period of up to 2 years as 
specified in the lease after the effective date of the license.
    (c) The BLM-approved exploration plan will be attached and made a 
part of each exploration license (see subpart 3931 of part 3930 of this 
chapter).
    (d) After consultation with the surface management agency, the BLM 
may approve modification of the exploration license proposed by the 
licensee in writing if geologic or other conditions warrant. The BLM 
will not add lands to the license once it has been issued.
    (e) Subject to the continued obligation of the licensee and the 
surety to comply with the terms and conditions of the exploration 
license, the exploration plan, and these regulations, a licensee may 
relinquish an exploration license for any or all of the lands covered 
by it. A relinquishment must be filed in the BLM state office in which 
the original application was filed.
    (f) The BLM may cancel an exploration license for noncompliance 
with its terms and conditions and parts 3900 through 3930 of this 
chapter after the BLM provides the licensee with reasonable notice and 
an opportunity to correct the noncompliance.


Sec.  3910.42  Limitations on exploration licenses.

    (a) The issuance of an exploration license for an area will not 
preclude the BLM's approval of an exploration license or issuance of a 
Federal oil shale lease for the same lands.
    (b) If an oil shale lease is issued for an area covered by an 
exploration license, the BLM will cancel the exploration license 
effective the date of the lease for those lands that are common to 
both.


Sec.  3910.44  Collection and submission of data.

    Upon the BLM's request, the licensee must provide copies of all 
data obtained under the exploration license in the format requested by 
the BLM. As authorized by the Freedom of Information Act, the BLM will 
consider the data confidential and proprietary until the BLM determines 
that public access to the data will not damage the competitive position 
of the licensee or the lands involved have been leased, whichever comes 
first. Submit all data obtained under the exploration license to the 
proper BLM office.


Sec.  3910.50  Surface use.

    Operations conducted under an exploration license must:
    (a) Not unreasonably interfere with or endanger any other lawful 
activity on the same lands;
    (b) Not damage any improvements on the lands; and
    (c) Comply with all applicable Federal, state, and local laws and 
regulations.
    3. Add part 3920 to subchapter C to read as follows:

PART 3920--OIL SHALE LEASING

Subpart 3921--Pre-Sale Activities
Sec.
3921.10 Special requirements related to land use planning.
3921.20 Compliance with the National Environmental Policy Act.
3921.30 Call for expression of leasing interest.
3921.40 Comments from governors, local governments, and interested 
Indian tribes.
3921.50 Determining the geographic area for receiving applications 
to lease.
3921.60 Call for applications.
Subpart 3922--Application Processing
3922.10 Application processing fee.

[[Page 42965]]

3922.20 Application contents.
3922.30 Application--Additional information.
3922.40 Tract delineation.
Subpart 3923--Minimum Bid
3923.10 Minimum bid.
Subpart 3924--Lease Sale Procedures
3924.5 Notice of sale.
3924.10 Lease sale procedures and receipt of bids.
Subpart 3925--Award of Lease
3925.10 Award of lease.
Subpart 3926--Conversion of Preference Right for Research, 
Demonstration, and Development (R, D and D) Leases
3926.10 Conversion of an R, D and D lease to a commercial lease.
Subpart 3927--Lease Terms
3927.10 Lease form.
3927.20 Lease size.
3927.30 Lease duration.
3927.40 Effective date of leases.
3927.50 Diligent development.

    Authority: 30 U.S.C. 241(a), 42 U.S.C. 15927, 43 U.S.C. 1732(b) 
and 1740.

Subpart 3921--Pre-Sale Activities


Sec.  3921.10  Special requirements related to land use planning.

    The BLM State Director may announce a call for expressions of 
leasing interest as described in Sec.  3921.30 of this chapter after 
areas available for leasing have been identified in a land use plan 
completed under part 1600 of this chapter.


Sec.  3921.20  Compliance with the National Environmental Policy Act.

    Before the BLM will offer a tract for competitive lease sale under 
subpart 3924 of this chapter, the BLM must prepare a NEPA analysis of 
the proposed lease area under 40 CFR parts 1500 through 1508 either 
separately or in conjunction with a land use planning action.


Sec.  3921.30  Call for expression of leasing interest.

    The BLM State Director may implement the provisions of Sec. Sec.  
3921.40 through 3921.60 of this subpart after review of any responses 
received as a result of a call for expression of leasing interest. The 
BLM notice announcing a call for expressions of leasing interest will:
    (a) Be published in the Federal Register and in at least 1 
newspaper of general circulation in each affected state for 2 
consecutive weeks;
    (b) Allow no less than 30 calendar days to submit expressions of 
interest;
    (c) Request specific information including the name and address of 
the respondent and the legal land description of the area of interest;
    (d) State that all information submitted under this subpart must be 
available for public inspection; and
    (e) Include a statement indicating that data which is considered 
proprietary must not be submitted as part of an expression of leasing 
interest.


Sec.  3921.40  Comments from governors, local governments, and 
interested Indian tribes.

    After the BLM receives responses to the call for expression of 
leasing interest, the BLM will notify the appropriate state governor's 
office, local governments, and interested Indian tribes and allow them 
an opportunity to provide comments regarding the responses and other 
issues related to oil shale leasing. The BLM will only consider those 
comments it receives within 60 calendar days after the notification 
requesting comments.


Sec.  3921.50  Determining the geographic area for receiving 
applications to lease.

    After analyzing expressions of leasing interest received under 
Sec.  3921.30 of this chapter and complying with the procedures at 
Sec.  3921.40 of this chapter, the BLM State Director may determine a 
geographic area for receiving applications to lease. The BLM may also 
include additional geographic areas available for lease in addition to 
lands identified in expressions of interest to lease.


Sec.  3921.60  Call for applications.

    If as a result of the analysis of the expression of leasing 
interest the BLM State Director determines that there is interest in 
having a competitive sale, the BLM State Director may publish a notice 
in the Federal Register announcing a call for applications to lease. 
The notice will:
    (a) Describe the geographic area the BLM determined is available 
for application under Sec.  3921.50 of this chapter;
    (b) Allow no less than 90 calendar days for interested parties to 
submit applications to the proper BLM office; and
    (c) Provide that applications submitted to the BLM must meet the 
requirements at subpart 3922 of this part.

Subpart 3922--Application Processing


Sec.  3922.10  Application processing fee.

    (a) An applicant nominating or applying for a tract for competitive 
leasing must pay a cost recovery or processing fee that the BLM will 
determine on a case-by-case basis as described in Sec.  3000.11 of this 
chapter and as modified by the following provisions.
    (b) The cost recovery process for a competitive oil shale lease is 
as follows:
    (1) The applicant nominating the tract for competitive leasing must 
pay the fee before the BLM will process the application and publish a 
notice of competitive lease sale;
    (2) The BLM will publish a sale notice no later than 30 days before 
the proposed sale. The BLM will include in the sale notice a statement 
of the total cost recovery fee paid to the BLM by the applicant, up to 
30 calendar days before the sale;
    (3) Before the lease is issued:
    (i) The successful bidder, if someone other than the applicant, 
must pay to the BLM the cost recovery amount specified in the sale 
notice, including the cost of the NEPA analysis; and
    (ii) The successful bidder must pay all processing costs the BLM 
incurs after the date of the sale notice;
    (4) If the successful bidder is someone other than the applicant, 
the BLM will refund to the applicant the amount paid under paragraph 
(b)(1) of this section;
    (5) If there is no successful bidder, the applicant is responsible 
for all processing fees; and
    (6) If the successful bidder is someone other than the applicant, 
within 30 calendar days after the lease sale, the successful bidder 
must file an application in accordance with Sec.  3922.20 of this 
chapter.


Sec.  3922.20  Application contents.

    A lease application must be filed by any party seeking to obtain a 
lease. Lease applications must be filed in the proper BLM state office. 
No specific form of application is required, but the application must 
include information necessary to evaluate the impacts of issuing the 
proposed lease or leases on the human environment. Except as otherwise 
requested by the BLM, the application must include, but is not limited 
to, the following:
    (a) Name, address, and telephone number of applicant, and a 
qualification statement, as required by subpart 3902 of part 3900 of 
this chapter;
    (b) A delineation of the proposed lease area or areas, the surface 
ownership (if other than the United States) of those areas, a 
description of the quality, thickness, and depth of the oil shale and 
of any other resources the applicant proposes to extract, and 
environmental data necessary to assess impacts from the proposed 
development; and
    (c) A description of the proposed extraction method, including 
personnel requirements, production levels, and transportation methods, 
including:

[[Page 42966]]

    (1) A description of the mining, retorting, or in situ mining or 
processing technology that the operator would use and whether the 
proposed development technology is substantially identical to a 
technology or method currently in use to produce marketable commodities 
from oil shale deposits;
    (2) An estimate of the maximum surface area of the lease area that 
will be disturbed or be undergoing reclamation at any one time;
    (3) A description of the source and quantities of water to be used 
and of the water treatment and disposal methods necessary to meet 
applicable water quality standards;
    (4) A description of the regulated air emissions;
    (5) A description of the anticipated noise levels from the proposed 
development;
    (6) A description of how the proposed lease development would 
comply with all applicable statutes and regulations governing 
management of chemicals and disposal of solid waste. If the proposed 
lease development would include disposal of wastes on the lease site, 
include a description of measures to be used to prevent the 
contamination of soil and of surface and ground water;
    (7) A description of how the proposed lease development would 
avoid, or, to the extent practicable, mitigate impacts on species or 
habitats protected by applicable state or Federal law or regulations, 
and impacts on wildlife habitat management;
    (8) A description of reasonably foreseeable social, economic, and 
infrastructure impacts on the surrounding communities, and on state and 
local governments from the proposed development;
    (9) A description of the known historical, cultural, or 
archaeological resources within the lease area;
    (10) A description of infrastructure that would likely be required 
for the proposed development and alternative locations of those 
facilities, if applicable;
    (11) A discussion of proposed measures to mitigate any adverse 
impacts to the environment and to nearby communities;
    (12) A brief description of the reclamation methods that will be 
used;
    (13) Any other information that shows that the application meets 
the requirements of this subpart or that the applicant believes would 
assist the BLM in analyzing the impacts of the proposed development; 
and
    (14) A map, or maps, showing:
    (i) The topography, physical features, and natural drainage 
patterns;
    (ii) Existing roads, vehicular trails, and utility systems;
    (iii) The location of any proposed exploration operations, 
including seismic lines and drill holes;
    (iv) To the extent known, the location of any proposed mining 
operations and facilities, trenches, access roads, or trails, and 
supporting facilities including the approximate location and extent of 
the areas to be used for pits, overburden, and tailings; and
    (v) The location of water sources or other resources that may be 
used in the proposed operations and facilities.


Sec.  3922.30  Application--Additional information.

    At any time during processing of the application, or the 
environmental or similar assessments of the application, the BLM may 
request additional information from the applicant. Failure to provide 
the best available and most accurate information may result in 
suspension or termination of processing of the application, or in a 
decision to deny the application.


Sec.  3922.40  Tract delineation.

    (a) The BLM will delineate tracts for competitive sale to provide 
for the orderly development of the oil shale resource.
    (b) The BLM may delineate more or less lands than were covered by 
an application for any reason the BLM determines to be in the public 
interest.
    (c) The BLM may delineate tracts in any area acceptable for further 
consideration for leasing, whether or not expression of leasing 
interest or applications have been received for those areas.
    (d) Where the BLM receives more than 1 application covering the 
same lands, the BLM may delineate the lands that overlap as a separate 
tract.

Subpart 3923--Minimum Bid


Sec.  3923.10  Minimum bid.

    The BLM will not accept any bid that is less than the FMV. In no 
case may the minimum bid be less than $1,000 per acre.

Subpart 3924--Lease Sale Procedures


Sec.  3924.5  Notice of sale.

    (a) After the BLM complies with Sec.  3921.20 of this chapter, the 
BLM may publish a notice of the lease sale in the Federal Register 
containing all information required by paragraph (b) of this section. 
The BLM will also publish a similar notice of lease sale that complies 
with this section once a week for 3 consecutive weeks, or such other 
time deemed appropriate by the BLM, in 1 or more newspapers of general 
circulation in the county or counties in which the oil shale lands are 
situated.
    (b) The notice of the sale will:
    (1) List the time and place of sale, the bidding method, and the 
legal land descriptions of the tracts being offered;
    (2) Specify where a detailed statement of lease terms, conditions, 
and stipulations may be obtained;
    (3) Specify the royalty rate and the amount of the annual rental;
    (4) Specify that, prior to lease issuance, the successful bidder 
for a particular lease must pay the identified cost recovery amount, 
including the bidder's proportionate share of the total cost of the 
NEPA analysis and of publication of the notice; and
    (5) Contain such other information as the BLM deems appropriate.
    (c) The detailed statement of lease terms, conditions, and 
stipulations will, at a minimum, contain:
    (1) A complete copy of each lease and all lease stipulations to the 
lease; and
    (2) Resource information relevant to the tracts being offered for 
lease and the minimum production requirement.


Sec.  3924.10  Lease sale procedures and receipt of bids.

    (a) The BLM will accept sealed bids only as specified in the notice 
of sale and will return to the bidder any sealed bid submitted after 
the time and date specified in the sale notice. Each sealed bid must 
include:
    (1) A certified check, cashier's check, bank draft, money order, 
personal check, or cash for one-fifth of the amount of the bonus; and
    (2) A qualifications statement signed by the bidder as described in 
subpart 3902 of part 3900 of this chapter.
    (b) At the time specified in the sale notice, the BLM will open and 
read all bids and announce the highest bid. The BLM will make a record 
of all bids.
    (c) No decision to accept or reject the high bid will be made at 
the time of sale.
    (d) After the sale, the BLM will convene a sale panel to determine:
    (1) If the high bid was submitted in compliance with the terms of 
the notice of sale and these regulations;
    (2) If the high bid reflects the FMV of the tract; and
    (3) Whether the high bidder is qualified to hold the lease.
    (e) The BLM may reject any or all bids regardless of the amount 
offered, and will not accept any bid that is less than the FMV. The BLM 
will notify in writing the high bidder whose bid has been rejected and 
include a statement of reasons for the rejection.
    (f) The BLM may offer the lease to the next highest qualified 
bidder if the

[[Page 42967]]

successful bidder fails to execute the lease or for any reason is 
disqualified from receiving the lease.
    (g) The balance of the bonus bid is due and payable to the MMS in 4 
equal annual installments on each of the first 4 anniversary dates of 
the lease, unless otherwise specified in the lease.

Subpart 3925--Award of Lease


Sec.  3925.10  Award of lease.

    (a) The lease will be awarded to the highest qualified bidder whose 
bid exceeds the minimum bid, except as provided in Sec.  3924.10 of 
this chapter. The BLM will provide the successful bidder 3 copies of 
the oil shale lease form for execution.
    (b) Within 60 calendar days after receipt of the lease forms, the 
successful bidder must sign all copies and return them to the proper 
BLM office. The successful bidder must also submit the necessary lease 
bond (see subpart 3904 of this chapter), the first year's rental, any 
unpaid cost recovery fees, including costs associated with the NEPA 
analysis, and the bidder's proportionate share of the cost of 
publication of the sale notice. The BLM may, upon written request, 
grant an extension of time to submit the items under this paragraph.
    (c) If the successful bidder does not comply with this section, the 
BLM will not issue the lease and the bidder forfeits the one-fifth 
bonus payment submitted with the bid.
    (d) If the lease cannot be awarded for reasons determined by the 
BLM to be beyond the control of the successful bidder, the BLM will 
refund the deposit submitted with the bid.
    (e) If the successful bidder was not an applicant under Sec.  
3922.20 of this chapter, the successful bidder must submit an 
application and the BLM may require additional NEPA analysis of the 
successful bidder's proposed operations.

Subpart 3926--Conversion of Preference Right for Research, 
Demonstration, and Development (R, D and D) Leases


Sec.  3926.10  Conversion of an R, D and D lease to a commercial lease.

    (a) Applications to convert R, D and D leases, including preference 
right areas, into commercial leases, are subject to the regulations at 
parts 3900 and 3910, this part, and part 3930, except for lease sale 
procedures at subparts 3921 and 3924 and Sec.  3922.40.
    (b) A lessee of an R, D and D lease must apply for the conversion 
of the R, D and D lease to a commercial lease no later than 90 calendar 
days after the commencement of production in commercial quantities. No 
specific form of application is required. The application for 
conversion must be filed in the BLM state office that issued the R, D 
and D lease. The conversion application must include:
    (1) Documentation that there has been commercial quantities of oil 
shale produced from the lease, including the narrative required by the 
R, D and D leases;
    (2) Documentation that the lessee consulted with state and local 
officials to develop a plan for mitigating the socioeconomic impacts of 
commercial development on communities and infrastructure;
    (3) A bid payment no less than specified in Sec.  3923.10 of this 
chapter and equal to the FMV of the lease; and
    (4) Bonding as required by Sec.  3904.14 of this chapter.
    (c) The lessee of an R, D and D lease has the exclusive right to 
acquire any and all portions of the preference right area designated in 
the R, D and D lease up to a total of 5,120 acres in the lease. The BLM 
will approve the conversion application, in whole or in part, if it 
determines that:
    (1) There have been commercial quantities of shale oil produced 
from the lease;
    (2) The bid payment for the lease met or exceeded FMV;
    (3) The lessee consulted with state and local officials to develop 
a plan for mitigating the socioeconomic impacts of commercial 
development on communities and infrastructure;
    (4) The bond is consistent with Sec.  3904.14 of this chapter; and
    (5) Commercial scale operations can be conducted, subject to 
mitigation measures to be specified in stipulations or regulations, 
without unacceptable environmental consequences.
    (d) The commercial lease must contain terms consistent with the 
regulations in parts 3900 and 3910, this part, and part 3930 and 
stipulations developed through appropriate NEPA analysis.

Subpart 3927--Lease Terms


Sec.  3927.10  Lease form.

    Leases are issued on a BLM approved standard form. The BLM may 
modify those provisions of the standard form that are not required by 
statute or regulations and may add such additional stipulations and 
conditions, as appropriate, with notice to bidders in the notice of 
sale.


Sec.  3927.20  Lease size.

    The maximum size of an oil shale lease is 5,760 acres and the 
minimum size of an oil shale lease is 160 acres.


Sec.  3927.30  Lease duration.

    Leases issue for a period of 20 years and continue as long as there 
is annual minimum production or as long as there are payments in lieu 
of production (see Sec.  3903.51 of this chapter). The BLM may initiate 
procedures to cancel a lease under subpart 3934 of part 3930 of this 
chapter for not maintaining annual minimum production, for not making 
the payment in lieu of production, or for not complying with the lease 
terms, including the diligent development milestones (see Sec.  3930.30 
of this chapter).


Sec.  3927.40  Effective date of leases.

    Leases are dated and effective the first day of the month following 
the date the BLM signs it. However, upon receiving a prior written 
request, the BLM may make the effective date of the lease the first day 
of the month in which the BLM signs it.


Sec.  3927.50  Diligent development.

    Oil shale lessees must meet:
    (a) Diligent development milestones;
    (b) Annual minimum production requirements or payments in lieu of 
production starting the 10th lease year, except when the BLM determines 
that operations under the lease are interrupted by strikes, the 
elements, or causes not attributable to the lessee. Market conditions 
are not considered a valid reason to waive or suspend the requirements 
for annual minimum production. The BLM will determine the annual 
production requirements based on the extraction technology to be used 
and on the BLM's estimate of the recoverable resources on the lease, 
expected life of the operation, and other factors.
    4. Add part 3930 to subchapter C to read as follows:

PART 3930--MANAGEMENT OF OIL SHALE EXPLORATION AND LEASES

Subpart 3930--Management of Oil Shale Exploration Licenses and Leases
Sec.
3930.10 General performance standards.
3930.11 Performance standards for exploration and in situ 
operations.
3930.12 Performance standards for underground mining.
3930.13 Performance standards for surface mines.
3930.20 Operations.
3930.30 Diligent development milestones.
3930.40 Penalties for missing diligence milestones.
Subpart 3931--Plans of Development and Exploration Plans
3931.10 Exploration plans and plans of development for mining and in 
situ operations.

[[Page 42968]]

3931.11 Content of plan of development.
3931.20 Reclamation.
3931.30 Suspension of operations and production.
3931.40 Exploration.
3931.41 Content of exploration plan.
3931.50 Exploration plan and plan of development modifications.
3931.60 Maps of underground and surface mine workings and in situ 
surface operations.
3931.70 Production maps and production reports.
3931.80 Core or test hole samples and cuttings.
3931.100 Boundary pillars.
Subpart 3932--Lease Modifications and Readjustments
3932.10 Lease size modification.
3932.20 Lease modification land availability criteria.
3932.30 Terms and conditions of a modified lease.
3932.40 Readjustment of lease terms.
Subpart 3933--Assignments and Subleases
3933.10 Leases subject to assignment or sublease.
3933.20 Filing fees.
3933.31 Record title assignments.
3933.32 Overriding royalty interests.
3933.40 Lease account status.
3933.51 Bond coverage.
3933.52 Continuing responsibility under assignment and sublease.
3933.60 Effective date.
3933.70 Extensions.
Subpart 3934--Relinquishment, Cancellations, and Terminations
3934.10 Relinquishments.
3934.21 Written notice of cancellation.
3934.22 Causes and procedures for lease cancellation.
3934.30 License terminations.
3934.40 Payments due.
3934.50 Bona fide purchasers.
Subpart 3935--Production and Sale Records
3935.10 Accounting records.
Subpart 3936--Inspection and Enforcement
3936.10 Inspection of underground and surface operations and 
facilities.
3936.20 Issuance of notices of noncompliance and orders.
3936.30 Enforcement of notices of noncompliance and orders.
3936.40 Appeals.

    Authority: 25 U.S.C. 396d and 2107, 30 U.S.C. 241(a), 42 U.S.C. 
15927, 43 U.S.C. 1732(b), 1733, and 1740.

Subpart 3930--Management of Oil Shale Exploration Licenses and 
Leases


Sec.  3930.10  General performance standards.

    The operator/lessee must comply with the following performance 
standards concerning exploration, development, and production:
    (a) All operations must be conducted to achieve Maximum Economic 
Recovery;
    (b) Operations must be conducted under an approved plan of 
development or exploration plan;
    (c) The operator/lessee must diligently develop the lease and must 
comply with the diligence development milestones and production 
requirements at Sec.  3930.30 of this chapter;
    (d) The operator/lessee must notify the BLM promptly if operations 
encounter unexpected wells or drill holes that could adversely affect 
the recovery of shale oil or other minerals producible under an oil 
shale lease during mining operations, and must not take any action that 
would disturb such wells or drill holes without the BLM's prior 
approval;
    (e) The operator/lessee must conduct operations to:
    (1) Prevent waste and conserve the recoverable oil shale reserves 
and other resources;
    (2) Prevent damage to or degradation of oil shale formations;
    (3) Ensure that other resources are protected upon abandonment of 
operations; and
    (f) The operator must save topsoil for use in final reclamation 
after the reshaping of disturbed areas has been completed.


Sec.  3930.11  Performance standards for exploration and in situ 
operations.

    The operator/lessee must adhere to the following standards for all 
exploration and in situ drilling operations:
    (a) At the end of exploration operations, all drill holes must be 
capped with at least 5 feet of cement and plugged with a permanent 
plugging material that is unaffected by water and hydrocarbon gases and 
will prevent the migration of gases and water in the drill hole under 
normal hole pressures. For holes drilled deeper than stripping limits, 
the operator/lessee, using cement or other suitable plugging material 
the BLM approves in advance, must plug the hole through the thickness 
of the oil shale bed(s) or mineral deposit(s) and through aquifers for 
a distance of at least 50 feet above and below the oil shale bed(s) or 
mineral deposit(s) and aquifers, or to the bottom of the drill hole. 
The BLM may approve a lesser cap or plug. Capping and plugging must be 
managed to prevent water pollution and the mixing of ground and surface 
waters and to ensure the safety of people, livestock, and wildlife;
    (b) The operator/lessee must retain for 1 year all drill and 
geophysical logs. The operator must also make such logs available for 
inspection or analysis by the BLM. The BLM may require the operator/
lessee to retain representative samples of drill cores for 1 year;
    (c) The operator/lessee may, after the BLM's written approval, use 
drill holes as surveillance wells for the purpose of monitoring the 
effects of subsequent operations on the quantity, quality, or pressure 
of ground water or mine gases; and
    (d) The operator/lessee may, after written approval from the BLM 
and the surface owner, convert drill holes to water wells. When 
granting such approvals, the BLM will include a transfer to the surface 
owner of responsibility for any liability, including eventual plugging, 
reclamation, and abandonment.


Sec.  3930.12  Performance standards for underground mining.

    (a) Underground mining operations must be conducted in a manner to 
prevent the waste of oil shale, to conserve recoverable oil shale 
reserves, and to protect other resources. The BLM must approve in 
writing permanent abandonment and operations that render oil shale 
inaccessible.
    (b) The operator/lessee must adopt mining methods that ensure the 
proper recovery of recoverable oil shale reserves.
    (c) Operators/lessees must adopt measures consistent with known 
technology to prevent or, where the mining method used requires 
subsidence, control subsidence, maximize mine stability, and maintain 
the value and use of surface lands. If the plan of development 
indicates that pillars will not be removed and controlled subsidence is 
not part of the plan of development, the POD must show that pillars of 
adequate dimensions will be left for surface stability, considering the 
thickness and strength of the oil shale beds and the strata above and 
immediately below the mined interval.
    (d) The lessee/operator must have the BLM's approval to temporarily 
abandon a mine or portions thereof.
    (e) The operator/lessee must have the BLM's prior approval to mine 
any recoverable oil shale reserves or drive any underground workings 
within 50 feet of any of the outer boundary lines of the federally-
leased or federally-licensed land. The BLM may approve operations 
closer to the boundary after taking into consideration state and 
Federal environmental laws and regulations.
    (f) The lessee/operator must have the BLM's prior approval before 
drilling any

[[Page 42969]]

lateral holes within 50 feet of any outside boundary.
    (g) Either the operator/lessee or the BLM may initiate the proposal 
to mine oil shale in a barrier pillar if the oil shale in adjoining 
lands has been mined out. The lessee/operator of the Federal oil shale 
must enter into an agreement with the owner of the oil shale in those 
adjacent lands prior to mining the oil shale remaining in the Federal 
barrier pillars (which otherwise may be lost).
    (h) The BLM must approve final abandonment of a mining area.


Sec.  3930.13  Performance standards for surface mines.

    (a) Pit widths for each oil shale seam must be engineered and 
designed to eliminate or minimize the amount of oil shale fender to be 
left as a permanent pillar on the spoil side of the pit.
    (b) Considering mine economics and oil shale quality, the amount of 
oil shale wasted in each pit must be minimal.
    (c) The BLM must approve the final abandonment of a mining area.
    (d) The BLM must approve the conditions under which surface mines, 
or portions thereof, will be temporarily abandoned, under the 
regulations in this part.
    (e) The operator/lessee may, in the interest of conservation, mine 
oil shale up to the Federal lease or license boundary line, provided 
that the mining:
    (1) Complies with existing state and Federal mining, environmental, 
reclamation, and safety laws and rules; and
    (2) Does not conflict with the rights of adjacent surface owners.
    (f) The operator must save topsoil for final application after the 
reshaping of disturbed areas has been completed.


Sec.  3930.20  Operations.

    (a) Maximum Economic Recovery (MER). All mining and in situ 
development and production operations must be conducted in a manner to 
yield the MER of the oil shale deposits, consistent with the protection 
and use of other natural resources, the protection and preservation of 
the environment, including, land, water, and air, and with due regard 
for the safety of miners and the public. All shafts, main exits, and 
passageways, and overlying beds or mineral deposits that at a future 
date may be of economic importance must be protected by adequate 
pillars in the deposit being worked or by such other means as the BLM 
approves.
    (b) New geologic information. The operator must record any new 
geologic information obtained during mining or in situ development 
operations regarding any mineral deposits on the lease. The operator 
must report this new information in a BLM-approved format to the proper 
BLM office within 90 calendar days after obtaining the information.
    (c) Statutory compliance. Operators must comply with applicable 
Federal and state law, including, but not limited to the following:
    (1) Clean Air Act (42 U.S.C. 1857 et seq.);
    (2) Federal Water Pollution Control Act, as amended (30 U.S.C. 1151 
et seq.);
    (3) Solid Waste Disposal Act as amended by the Resource 
Conservation and Recovery Act (42 U.S.C. 6901 et seq.);
    (4) National Historic Preservation Act, as amended (16 U.S.C. 470 
et seq.);
    (5) Archaeological and Historical Preservation Act, as amended (16 
U.S.C. 469 et seq.);
    (6) Archaeological Resources Protection Act, as amended (16 U.S.C. 
470aa et seq.); and
    (7) Native American Graves Protection and Repatriation Act, as 
amended (25 U.S.C. 3001 et seq.).
    (d) Resource protection. The following additional resource 
protection provisions apply to oil shale operations:
    (1) Operators must comply with applicable Federal and state 
standards for the disposal and treatment of solid wastes. All garbage, 
refuse, or waste must either be removed from the affected lands or 
disposed of or treated to minimize, so far as is practicable, their 
impact on the lands water, air, and biological resources;
    (2) Operators must conduct operations in a manner to prevent 
adverse impacts to threatened or endangered species and any of their 
habitat that may be affected by operations.
    (3) If the operator encounters any scientifically important 
paleontological remains or any historical or archaeological site, 
structure, building, or object on Federal lands, it must immediately 
notify the BLM. Operators must not, without prior BLM approval, 
knowingly disturb, alter, damage, or destroy any scientifically 
important paleontological remains or any historical or archaeological 
site, structure, building, or object on Federal lands.


Sec.  3930.30  Diligent development milestones.

    (a) Operators must diligently develop the oil shale resources 
consistent with the terms and conditions of the lease, plan of 
development, and these regulations. If the operator does not maintain 
or comply with diligent development milestones, the BLM may initiate 
lease cancellation. In order to be considered diligently developing the 
lease, the lessee/operator must comply with the following diligence 
milestones:
    (1) Milestone 1. Within 2 years of the lease issuance date, submit 
to the proper BLM office an initial plan of development that meets the 
requirements of subpart 3931. The operator must revise the plan of 
development following subpart 3931 of this part, if the BLM determines 
that the initial plan of development is unacceptable;
    (2) Milestone 2. Within 3 years of the lease issuance date, submit 
a final plan of development. The BLM may, based on circumstances beyond 
the control of the lessee or operator, or on the complexity of the plan 
of development, grant a 1 year extension to the lessee or operator to 
submit a complete plan of development;
    (3) Milestone 3. Within 2 years after the BLM approves the final 
plan of development, apply for all required Federal and state permits 
and licenses;
    (4) Milestone 4. Before the end of the 7th year after lease 
issuance, begin infrastructure installation, as required by the BLM 
approved plan of development; and
    (5) Milestone 5. Before the end of the 10th year after lease 
issuance, begin oil shale production.
    (b) Operators may apply for additional time to complete a 
milestone. The BLM may grant additional time for completing a milestone 
if the operator provides documentation that shows to the BLM's 
satisfaction that achieving the milestone by the deadline is not 
possible for reasons that are beyond the control of the operator.
    (c) Operators must maintain minimum annual production every year 
after the 10th lease year or pay in lieu of production according to the 
lease terms.
    (d) Each lease will provide for minimum production. The minimum 
production requirement stated in the lease must be met by the end of 
the 10th lease year and will be based on the BLM's estimate of the 
extraction technology to be used, the recoverable resources on the 
lease, expected life of the operation, and other factors the BLM 
considers.
    (e) Each lease will provide for payment in lieu of the minimum 
production for any particular year starting the 10th lease year. 
Payments in lieu of production in year 10 of the lease satisfies 
Milestone 5 in paragraph (a)(5) of this section.

[[Page 42970]]

Sec.  3930.40  Penalties for missing diligence milestones.

    The BLM will assess a penalty of $50 for each acre in the lease for 
each missed diligence milestone each year until the operator or lessee 
complies with Sec.  3930.30(a) of this chapter. For example: If the 
operator does not submit the required plan of development within 2 
years of lease issuance (the first milestone), the BLM will assess the 
operator an additional $50 per acre penalty each year until the 
milestone is met. If the operator does not meet the second milestone 
(apply for all required permits and licenses by 2 years after the BLM 
approves the plan of development), the BLM will assess the operator $50 
per acre penalty per year resulting in a total penalty of $100 per 
acre, per year. If the operator does not begin production by the end of 
the initial lease term, or make payments in lieu thereof, the BLM may 
initiate lease cancellation procedures (see Sec. Sec.  3934.21 and 
3934.22 of this part).

Subpart 3931--Plans of Development and Exploration Plans


Sec.  3931.10  Exploration plans and plans of development for mining 
and in situ operations.

    (a) The plan of development must provide for reasonable protection 
and reclamation of the environment and the protection and diligent 
development of the oil shale resources in the lease.
    (b) The operator must submit to the proper BLM office an 
exploration plan or plan of development describing in detail the 
proposed exploration, testing, development, or mining operations to be 
conducted. Exploration plans or plans of development must be consistent 
with the requirements of the lease or exploration license and protect 
nonmineral resources and provide for the reclamation of the lands 
affected by the operations on Federal lease(s) or exploration 
license(s). All plans of development and exploration plans must be 
submitted to the proper BLM office.
    (c) The lessee or operator must submit 3 copies of the plan of 
development to the proper BLM office or submit it in an acceptable 
electronic format. Contact the proper BLM office for detailed 
information on submitting copies electronically (see Sec.  3931.40 for 
submission of exploration plans).
    (d) The BLM will consult with any other Federal, state, or local 
agencies involved and review the plan. If the BLM denies the plan, it 
will indicate what additional information is necessary to complete the 
application.
    (e) All development and exploration activities must comply with the 
BLM-approved plan of development or exploration plan.
    (f) Activities under Sec.  3931.40 of this subpart, other than 
casual use, may not begin until the BLM approves an exploration plan or 
plan of development.


Sec.  3931.11  Content of plan of development.

    The plan of development must contain, at a minimum, the following:
    (a) Names, addresses, and telephone numbers of those responsible 
for operations to be conducted under the approved plan and to whom 
notices and orders are to be delivered, names and addresses of Federal 
oil shale lessees and corresponding Federal lease serial numbers, and 
names and addresses of surface and mineral owners of record, if other 
than the United States;
    (b) A general description of geologic conditions and mineral 
resources within the area where mining is to be conducted, including 
appropriate maps;
    (c) A copy of a suitable map or aerial photograph showing the 
topography, the area covered by each lease, the name and location of 
major topographic and cultural features;
    (d) A statement of proposed methods of operation and development, 
including the following items as appropriate:
    (1) A description detailing the extraction technology to be used;
    (2) The equipment to be used in development and extraction;
    (3) The proposed access roads;
    (4) The size, location, and schematics of all structures, 
facilities, and lined or unlined pits to be built;
    (5) The stripping ratios, development sequence, and schedule;
    (6) The number of acres in the Federal lease(s) or license(s) to be 
affected;
    (7) Comprehensive well design and procedure for drilling, casing, 
cementing, testing, stimulation, clean-up, completion, and production, 
for all drilled well types, including those used for heating, freezing, 
and disposal;
    (8) A description of the methods and means to protect and monitor 
all aquifers;
    (9) Surveyed well location plats or project-wide well location 
plats;
    (10) A description of the measurement and handling of produced 
fluids, including the anticipated production rates and estimated 
recovery factors; and
    (11) A description/discussion of the controls that the operator 
will use to protect the public, including identification of:
    (i) Essential operations, personnel, and health and safety 
precautions;
    (ii) Programs and plans for noxious gas control (hydrogen sulfide, 
ammonia, etc.);
    (iii) Well control procedures;
    (iv) Temporary abandonment procedures; and
    (v) Plans to address spills, leaks, venting, and flaring;
    (e) An estimate of the quantity and quality of the oil shale 
resources;
    (f) An explanation of how MER of the resource will be achieved for 
each Federal lease;
    (g) Appropriate maps and cross sections showing:
    (1) Federal lease boundaries and serial numbers;
    (2) Surface ownership and boundaries;
    (3) Locations of any existing and abandoned mines and existing oil 
and gas well (including well bore trajectories) and water well 
locations, including well bore trajectories;
    (4) Typical geological structure cross sections;
    (5) Location of shafts or mining entries, strip pits, waste dumps, 
retort facilities, and surface facilities;
    (6) Typical mining or in situ development sequence, with 
appropriate time-frames;
    (h) A narrative addressing the environmental aspects of the 
proposed mine or in situ operation, including at a minimum, the 
following:
    (1) An estimate of the quantity of water to be used and pollutants 
that may enter any receiving waters;
    (2) A design for the necessary impoundment, treatment, control, or 
injection of all produced water, runoff water, and drainage from 
workings; and
    (3) A description of measures to be taken to prevent or control 
fire, soil erosion, subsidence, pollution of surface and ground water, 
pollution of air, damage to fish or wildlife or other natural 
resources, and hazards to public health and safety;
    (i) A reclamation plan and schedule for all Federal lease(s) or 
exploration license(s) that details all reclamation activities 
necessary to fulfill the requirements of Sec.  3931.20;
    (j) The method of abandonment of operations on Federal lease(s) and 
exploration license(s) proposed to protect the unmined recoverable 
reserves and other resources, including:
    (1) The method proposed to fill in, fence, or close all surface 
openings that are hazardous to people or animals; and
    (2) For in situ operations, a description of the method and 
materials to be used to plug all abandoned development or production 
wells; and
    (k) Any additional information that the BLM determines is necessary 
for

[[Page 42971]]

analysis or approval of the plan of development.


Sec.  3931.20  Reclamation.

    (a) The operator or lessee must restore the disturbed lands to 
their pre-mining or pre-exploration use or to a BLM-determined higher 
use.
    (b) The operator must reclaim the area disturbed by taking 
reasonable measures to prevent or control onsite and offsite damage to 
lands and resources.
    (c) Reclamation includes, but is not limited to:
    (1) Measures to control erosion, landslides, and water runoff;
    (2) Measures to isolate, remove, or control toxic materials;
    (3) Reshaping the area disturbed, application of the topsoil, and 
re-vegetation of disturbed areas, where reasonably practicable; and
    (4) Rehabilitation of fisheries and wildlife habitat.
    (d) The operator or lessee must substantially fill in, fence, 
protect, or close all surface openings, subsidence holes, surface 
excavations, or workings which are a hazard to people or animals. These 
protected areas must be maintained in a secure condition during the 
term of the lease or exploration license. During reclamation, but 
before abandonment of operations, all openings, including water 
discharge points, must be closed to the BLM's satisfaction. For in situ 
operations, all drilled holes must be plugged and abandoned, as 
required by the approved plan.
    (e) The operator or lessee must reclaim or protect surface areas no 
longer needed for operations as contemporaneously as possible as 
required by the approved plan.


Sec.  3931.30  Suspension of operations and production.

    (a) The BLM may, in the interest of conservation, agree to a 
suspension of lease operations and production. Applications by lessees 
for suspensions of operations and production must be filed in duplicate 
in the proper BLM office and must explain why it is in the interest of 
conservation to suspend operations and production.
    (b) The BLM may order a suspension of operations and production if 
the suspension is necessary to protect the resource or the environment:
    (1) While the BLM performs necessary environmental studies or 
analysis;
    (2) To ensure that necessary environmental remediation or cleanup 
is being performed as a result of activity or inactivity on the part of 
the operator; or
    (3) While necessary environmental remediation or cleanup is being 
performed as a result of unwarranted or unexpected actions.
    (c) The term of any lease will be extended by adding thereto any 
period of suspension of operations and production during such term.
    (d) A suspension will take effect on the date the BLM specifies. 
Rental, upcoming diligent development milestones, and minimum annual 
production will be suspended:
    (1) During any period of suspension of operations and production 
beginning with the first day of the lease month on which the suspension 
of operations and production is effective; or
    (2) If the suspension of operations and production is effective on 
any date other than the first day of a lease month, beginning with the 
first day of the lease month following such effective date.
    (e) The suspension of rental and minimum annual production will end 
on the first day of the lease month in which the suspension ends.
    (f) The minimum annual production requirements of a lease will be 
proportionately reduced for that portion of a lease year for which a 
suspension of operations and production is directed or granted by the 
BLM, as would any payments in lieu of production.


Sec.  3931.40  Exploration.

    To conduct exploration operations under an exploration license or 
on a lease after lease issuance, but prior to approval of the plan of 
development, the following rules apply:
    (a) Except for casual use, before conducting any exploration 
operations on federally-leased or federally-licensed lands, the 
operator or lessee must submit to the proper BLM office for approval 5 
copies of the exploration plan or a copy of the plan in an acceptable 
electronic format. Contact the proper BLM office for detailed 
information on submitting copies electronically. As used in this 
paragraph, casual use means activities that do not cause appreciable 
surface disturbance or damage to lands or other resources and 
improvements. Casual use does not include use of heavy equipment, 
explosives, or vehicular movement off established roads and trails.
    (b) The exploration activities must be consistent with the 
requirements of the underlying Federal lease or exploration license, 
and address protection of recoverable oil shale reserves and other 
resources and reclamation of the surface of the lands affected by the 
exploration operations. The exploration plan must meet the requirements 
of Sec.  3931.20 and must show how reclamation will be an integral part 
of the proposed operations and that reclamation will progress as 
contemporaneously as practicable with operations.


Sec.  3931.41  Content of exploration plan.

    Exploration plans must contain the following:
    (a) The name, address, and telephone number of the applicant, and, 
if applicable, that of the operator or lessee of record;
    (b) The name, address, and telephone number of the representative 
of the applicant who will be present during, and responsible for, 
conducting exploration;
    (c) A description of the proposed exploration area, cross-
referenced to the map required under paragraph (h) of this section, 
including:
    (1) Applicable Federal lease and exploration license serial 
numbers;
    (2) Surface topography;
    (3) Geologic, surface water, and other physical features;
    (4) Vegetative cover;
    (5) Endangered or threatened species listed under the Endangered 
Species Act of 1973 (16 U.S.C. 1531 et seq.) that may be affected by 
exploration operations;
    (6) Districts, sites, buildings, structures, or objects listed on, 
or eligible for listing on, the National Register of Historic Places 
that may be present in the lease area; and
    (7) Known cultural or archaeological resources located within the 
proposed exploration area;
    (d) A description of the methods to be used to conduct oil shale 
exploration, reclamation, and abandonment of operations including, but 
not limited to:
    (1) The types, sizes, numbers, capacity, and uses of equipment for 
drilling and blasting, and road or other access route construction;
    (2) Excavated earth-disposal or debris-disposal activities;
    (3) The proposed method for plugging drill holes; and
    (4) The estimated size and depth of drill holes, trenches, and test 
pits;
    (e) An estimated timetable for conducting and completing each phase 
of the exploration, drilling, and reclamation;
    (f) The estimated amounts of oil shale or oil shale products to be 
removed during exploration, a description of the method to be used to 
determine those amounts, and the proposed use of the oil shale or oil 
shale products removed;
    (g) A description of the measures to be used during exploration for 
Federal oil shale to comply with the performance standards for 
exploration (Sec.  3930.10);
    (h) A map at a scale of 1:24,000 or larger showing the areas of 
land to be affected by the proposed exploration and reclamation. The 
map must show:

[[Page 42972]]

    (1) Existing roads, occupied dwellings, and pipelines;
    (2) The proposed location of trenches, roads, and other access 
routes and structures to be constructed;
    (3) Applicable Federal lease and exploration license boundaries;
    (4) The location of land excavations to be conducted;
    (5) Oil shale exploratory holes to be drilled or altered;
    (6) Earth-disposal or debris-disposal areas;
    (7) Existing bodies of surface water; and
    (8) Topographic and drainage features; and
    (i) The name and address of the owner of record of the surface 
land, if other than the United States. If the surface is owned by a 
person other than the applicant or if the Federal oil shale is leased 
to a person other than the applicant, include evidence of authority to 
enter that land for the purpose of conducting exploration and 
reclamation.


Sec.  3931.50  Exploration plan and plan of development modifications.

    (a) The operator or lessee may apply in writing to the BLM for 
modification of the approved exploration plan or plan of development to 
adjust to changed conditions or to correct an oversight. To obtain 
approval of an exploration plan or plan of development modification, 
the operator or lessee must submit to the proper BLM office a written 
statement of the proposed modification and the justification for such 
modification.
    (b) The BLM may require a modification of the approved exploration 
plan or plan of development.
    (c) The BLM may approve a partial exploration plan or plan of 
development, if circumstances warrant, or if development of an 
exploration or plan of development for the entire operation is 
dependent upon unknown factors that cannot or will not be determined 
until operations progress. The operator or lessee must not, however, 
perform any operation not covered in a BLM-approved plan.


Sec.  3931.60  Maps of underground and surface mine workings and in 
situ surface operations.

    Maps of underground workings and surface operations must be to a 
scale of 1:24,000 or larger if the BLM requests it. All maps must be 
appropriately marked with reference to government land marks or lines 
and elevations with reference to sea level. When required by the BLM, 
include vertical projections and cross sections in plan views. Maps 
must be based on accurate surveys and certified by a professional 
engineer, professional land surveyor, or other professionally qualified 
person. Accurate copies of such maps must be furnished by the operator 
to the BLM when and as required. All maps submitted must be in a format 
acceptable to the BLM. Contact the proper BLM office for information on 
what is the acceptable format to submit maps.


Sec.  3931.70  Production maps and production reports.

    (a) Report production of all oil shale products or by-products to 
the BLM on a monthly basis.
    (b) Report all production and royalty information to the MMS under 
30 CFR parts 210 and 216.
    (c) Submit production maps to the proper BLM office at the end of 
each royalty reporting period or on a schedule determined by the BLM. 
Show all excavations in each separate bed or deposit on the maps so 
that the production of minerals for any period can be accurately 
ascertained. Production maps must also show surface boundaries, lease 
boundaries, topography, and subsidence resulting from mining 
activities.
    (d) If the lessee or operator does not provide the BLM the maps 
required by this section, the BLM will employ a licensed mine surveyor 
to make a survey and maps of the mine, and the cost will be charged to 
the operator or lessee.
    (e) If the BLM believes any map submitted by an operator or lessee 
is incorrect, the BLM may have a survey performed, and if the survey 
shows the map submitted by the operator or lessee to be substantially 
incorrect in whole or in part, the cost of performing the survey and 
preparing the map will be charged to the operator or lessee.
    (f) For in situ development operations, the lessee or operator must 
submit a map showing all surface installations, including pipelines, 
meter locations, or other points of measurement necessary for 
production verification as part of your plan of development. All maps 
must be modified as necessary for adequate representation of existing 
operations.
    (g) Within 30 calendar days after well completion, the lessee or 
operator must submit to the proper BLM office 2 copies of a completed 
Form 3160-4, Well Completion or Recompletion Report and Log, limited to 
information that is applicable to oil shale operations. Well logs may 
be submitted electronically using a BLM-approved electronic format. 
Describe surface and bottom-hole locations in latitude and longitude.


Sec.  3931.80  Core or test hole samples and cuttings.

    (a) Within 30 calendar days after drilling completion, the operator 
or lessee must submit to the proper BLM office a signed copy of records 
of all core or test holes made on the lands covered by the lease or 
exploration license. The records must show the position and direction 
of the holes on a map. The records must include a log of all strata 
penetrated and conditions encountered, such as water, gas, or unusual 
conditions, and copies of analysis of all samples. Provide this 
information to the proper BLM office in either paper copy or in a BLM-
approved electronic format. Contact the proper BLM office for 
information on submitting copies electronically. Within 30 calendar 
days after creation, the operator or lessee must also submit to the 
proper BLM office a detailed lithologic log of each test hole and all 
other in-hole surveys or other logs produced. Upon the BLM's request, 
the operator or lessee must provide to the BLM splits of core samples 
and drill cuttings.
    (b) The lessee or operator must abandon surface exploration drill 
holes for development or holes for exploration to the BLM's 
satisfaction by cementing or casing or by other methods approved in 
advance by the BLM. Abandonment must be conducted in a manner to 
protect the surface and not endanger any present or future underground 
or surface operation or any deposit of oil, gas, other mineral 
substances, or ground water.
    (c) Operators may convert drill holes to surveillance wells for the 
purpose of determining the effect of subsequent operations upon the 
quantity, quality, or pressure of ground water or mine gases. The BLM 
may require such conversion or the operator may request that the BLM 
approve such conversion. Prior to lease or exploration license 
termination, all surveillance wells must be plugged and abandoned and 
reclaimed, unless the surface owner assumes responsibility for 
reclamation of such surveillance wells. The transfer of liability for 
reclamation will not be considered complete until the BLM approves it 
in writing.
    (d) Drilling equipment must be equipped with blowout control 
devices suitable for the pressures encountered and acceptable to the 
BLM.


Sec.  3931.100  Boundary pillars.

    (a) All boundary pillars must be at least 50 feet thick, unless 
otherwise

[[Page 42973]]

specified in writing by the BLM. Boundary and other main pillars may be 
mined only with the BLM's prior written consent or on the BLM's order.
    (b) If the oil shale on adjacent Federal lands has been worked out 
beyond any boundary pillar and no hazards exist, the operator or lessee 
must, on the BLM's written order, mine out and remove all available oil 
shale in such boundary pillar, both in the lands covered by the lease 
and in the adjacent Federal lands, when the BLM determines that such 
oil shale can be mined safely without undue hardship to the operator or 
lessee.
    (c) If the mining rights in adjacent lands are privately owned or 
controlled, the lessee must have an agreement with the owners of such 
interests for the extraction of the oil shale in the boundary pillars.

Subpart 3932--Lease Modifications and Readjustments


Sec.  3932.10  Lease size modification.

    (a) A lessee may apply for a modification of a lease to include 
Federal lands adjacent to those in the lease. The total area of the 
lease, including the acreage in the modification application and any 
previously authorized modification, must not exceed the maximum lease 
size (see Sec.  3927.20 of this chapter).
    (b) An application for modification of the lease size must:
    (1) Be filed with the proper BLM office;
    (2) Contain a legal land description of the additional lands 
involved;
    (3) Contain an explanation of how the modification would meet the 
criteria in Sec.  3932.20(a) which qualifies the lease for 
modification;
    (4) Explain why the modification would be in the best interest of 
the United States;
    (5) Include a nonrefundable processing fee that the BLM will 
determine under Sec.  3000.11 of this chapter; and
    (6) Include a signed qualifications statement consistent with 
subpart 3902 of part 3900 of this chapter.


Sec.  3932.20  Lease modification land availability criteria.

    (a) The BLM may grant a lease modification if:
    (1) There is no competitive interest in the lands covered by the 
modification application;
    (2) The lands covered by the modification application cannot be 
reasonably developed as part of another independent federally-approved 
operation;
    (3) The modification would be in the public interest; and
    (4) The modification does not cause a violation of lease size 
limitations under Sec.  3927.20 of this chapter or acreage limitations 
under Sec.  3901.20 of this chapter.
    (b) The BLM may approve adding lands covered by the modification 
application to the existing lease without competitive bidding, but 
before the BLM will approve adding lands to the lease, the applicant 
must pay in advance the FMV for the interests to be conveyed.
    (c) Before modifying a lease, the BLM will prepare any necessary 
NEPA analysis covering the proposed lease area under 40 CFR parts 1500 
through 1508 and recover the cost of such analysis from the applicant.


Sec.  3932.30  Terms and conditions of a modified lease.

    (a) The terms and conditions of a lease modified under this subpart 
will be made consistent with the laws, regulations, and land use plans 
applicable at the time the lands are added by the modification.
    (b) The royalty rate for the lands in the modification is the same 
as for the original lease.
    (c) Before the BLM will approve a lease modification, the lessee 
must file a written acceptance of the conditions in the modified lease 
and a written consent of the surety under the bond covering the 
original lease as modified. The lessee must also submit evidence that 
the bond has been amended to cover the modified lease and pay BLM 
processing costs.


Sec.  3932.40  Readjustment of lease terms.

    (a) All leases are subject to readjustment of lease terms, 
conditions, and stipulations at the end of the first 20-year period 
(the primary term of the lease) and at the end of each 10-year period 
thereafter.
    (b) Royalty rates will be subject to readjustment at the end of the 
primary term and every 20 years thereafter.
    (c) At least 30 days prior to the expiration of the readjustment 
period, the BLM will notify the lessee by written decision if any 
readjustment is to be made and of the proposed readjusted lease terms, 
including any revised royalty rate.
    (d) Readjustments may be appealed. In the case of an appeal, unless 
the readjustment is stayed by the Interior Board of Land Appeals or the 
courts, the lessee must comply with the revised lease terms, including 
any revised royalty rate, pending the outcome of the appeal.

Subpart 3933--Assignments and Subleases


Sec.  3933.10  Leases subject to assignment or sublease.

    Any lease may be assigned or subleased in whole or in part to any 
person, association, or corporation that meets the qualification 
requirements in subpart 3902 of part 3900 of this chapter to hold such 
lease. The BLM may approve or disapprove assignments and subleases.


Sec.  3933.20  Filing fees.

    Each application for assignment or sublease of record title or 
overriding royalty must include a nonrefundable filing fee of $60. The 
BLM will not accept any assignment that does not include the filing 
fee.


Sec.  3933.31  Record title assignments.

    (a) File in triplicate at the proper BLM office a separate 
instrument of assignment for each lease assignment. File the assignment 
application within 90 calendar days after the date of final execution 
of the assignment instrument and with it include the:
    (1) Name and current address of assignee;
    (2) Interest held by assignor and interest to be assigned;
    (3) Serial number of the affected lease and a description of the 
lands to be assigned as described in the lease;
    (4) Percentage of overriding royalties retained; and
    (5) Dated signature of assignor.
    (b) The assignee must provide a single copy of the request for 
approval of assignment which must contain a:
    (1) Statement of qualifications and holdings as required by subpart 
3902 of part 3900 of this chapter;
    (2) Date and the signature of the assignee; and
    (3) Nonrefundable filing fee of $60.
    (c) The approval of an assignment of all interests in a specific 
portion of the lands in a lease will create a separate lease, which 
will be given a new serial number.


Sec.  3933.32  Overriding royalty interests.

    File at the proper BLM office, for record purposes only, all 
overriding royalty interest assignments within 90 calendar days after 
the date of execution of the assignment.


Sec.  3933.40  Lease account status.

    The BLM will not approve an assignment of a lease unless the lease 
account is in good standing.


Sec.  3933.51  Bond coverage.

    Before the BLM will approve an assignment, the assignee must submit 
to

[[Page 42974]]

the proper BLM office a new bond in an amount to be determined by the 
BLM, or, in lieu thereof, documentation of consent of the surety on the 
present bond to the substitution of the assignee as principal (see 
subpart 3904 of part 3900 of this chapter).


Sec.  3933.52  Continuing responsibility under assignment and sublease.

    (a) The assignor and its surety are responsible for the performance 
of any obligation under the lease that accrues prior to the effective 
date of the BLM's approval of the assignment. After the effective date 
of the BLM's approval of the assignment, the assignee and its surety 
are responsible for the performance of all lease obligations that 
accrue after the effective date of the BLM's approval of the assignment 
of the lease, notwithstanding any terms in the assignment to the 
contrary. If the BLM does not approve the assignment, the assignor's 
obligation to the United States continues as though no assignment had 
been filed.
    (b) After the effective date of approval of a sublease, the 
sublessor and sublessee are jointly and severally liable for the 
performance of all lease obligations, notwithstanding any terms in the 
sublease to the contrary.


Sec.  3933.60  Effective date.

    An assignment or sublease takes effect, so far as the United States 
as lessor is concerned, on the first day of the month following the 
BLM's final approval, or if the assignee requests it in advance, the 
first day of the month of the approval.


Sec.  3933.70  Extensions.

    The BLM's approval of an assignment or sublease does not extend the 
readjustment period of the lease.

Subpart 3934--Relinquishments, Cancellations, and Terminations


Sec.  3934.10  Relinquishments.

    (a) A lease or exploration license or any legal subdivision thereof 
may be surrendered by the record title holder by filing a written 
relinquishment, in triplicate, in the BLM state office having 
jurisdiction of the lands covered by the relinquishment.
    (b) To be relinquished, the lease account must be in good standing 
and the relinquishment must be considered to be in the public interest.
    (c) A relinquishment will take effect on the date the BLM approves 
it, subject to the:
    (1) Continued obligation of the lessee or licensee and surety to 
make payments of all accrued rentals and royalties;
    (2) The proper rehabilitation of the lands to be relinquished to a 
condition acceptable to the BLM under these regulations;
    (3) Terms of the lease or license; and
    (4) Approved exploration plan or development plan.
    (d) Prior to relinquishment of an exploration license, the licensee 
must give any other parties participating in activities under the 
exploration license the opportunity to take over operations under the 
exploration license. The licensee must provide to the BLM written 
evidence that the offer was made to all other parties participating in 
the exploration license.


Sec.  3934.21  Written notice of cancellation.

    The BLM will provide the lessee or licensee written notice of any 
default, breach, or cause of forfeiture, and provide a time period of 
30 calendar days to correct the default, to request an extension of 
time in which to correct the default, or to submit evidence showing why 
the BLM is in error and why the lease or exploration license should not 
be canceled.


Sec.  3934.22  Causes and procedures for lease cancellation.

    (a) The BLM will take appropriate steps in a United States District 
Court of competent jurisdiction to institute proceedings for the 
cancellation of the lease if the lessee:
    (1) Does not comply with the provisions of the Act as amended and 
other relevant statutes;
    (2) Does not comply with any applicable regulations; or
    (3) Defaults in the performance of any of the terms, covenants, and 
stipulations of the lease, and the BLM does not formally waive the 
default, breach, or cause of forfeiture.
    (b) A waiver of any particular default, breach, or cause of 
forfeiture will not prevent the cancellation and forfeiture of the 
lease for any other default, breach, or cause of forfeiture, or for the 
same cause occurring at any other time.


Sec.  3934.30  License terminations.

    The BLM may terminate an exploration license if:
    (a) The BLM issued it in violation of any law or regulation, or if 
there are substantive factual errors, such as a lack of title;
    (b) The licensee does not comply with the terms and conditions of 
the exploration license; or
    (c) The licensee does not comply with the approved exploration 
plan.


Sec.  3934.40  Payments due.

    If a lease is canceled or relinquished for any reason, all bonus, 
rentals, royalties, and minimum royalties paid will be forfeited, and 
any amounts not paid will be immediately payable to the United States.


Sec.  3934.50  Bona fide purchasers.

    The BLM will not cancel a lease or an interest in a lease of a 
purchaser if at the time of purchase the purchaser was not aware and 
could not have reasonably determined from the BLM records the existence 
of a violation of any of the following:
    (a) Federal regulatory requirements;
    (b) The Act, as amended; or
    (c) Lease terms and conditions.

Subpart 3935--Production and Sale Records


Sec.  3935.10  Accounting records.

    (a) Operators or lessees must maintain records that provide an 
accurate account of, or include all:
    (1) Oil shale mined;
    (2) Oil shale put through the processing plant and retort;
    (3) Mineral products produced and sold;
    (4) Shale oil products, shale gas, and shale oil by-products sold; 
and
    (5) Shale oil products and by-products that are consumed on-lease 
for the beneficial use of the lease.
    (b) The records must include relevant quality analyses of oil shale 
mined or processed and of all products including synthetic petroleum, 
shale oil, shale gas, and shale oil by-products sold.
    (c) Production and sale records must be made available for the 
BLM's examination during regular business hours.

Subpart 3936--Inspection and Enforcement


Sec.  3936.10  Inspection of underground and surface operations and 
facilities.

    Operators, licensees, or lessees must allow the BLM, at any time, 
either day or night, to inspect or investigate underground and surface 
mining or exploration operations to determine compliance with lease or 
license terms and conditions, compliance with the approved exploration 
or development plan, and to verify production.


Sec.  3936.20  Issuance of notices of noncompliance and orders.

    (a) If the BLM determines that an operator, licensee, or lessee has 
not complied with established requirements, the BLM will issue to the 
operator, licensee, or lessee a notice of noncompliance.
    (b) If operations threaten immediate, serious, or irreparable 
damage to the environment, the mine or deposit being

[[Page 42975]]

mined, or other valuable mineral deposits or other resources, the BLM 
will order the cessation of operations and will require the operator, 
licensee, or lessee to revise the plan of development or exploration 
plan.
    (c) The operator, licensee, or lessee will be considered to have 
received all orders or notices of noncompliance and orders that the 
operator, licensee, or lessee receives by personal delivery or 
certified mail. The BLM will consider service of any notice of 
noncompliance or order to have occurred 7 business days after the date 
the notice or order is mailed. Verbal orders and notices may be given 
to officials at the mine or exploration site, but the BLM will confirm 
them in writing within 10 business days. The operator or lessee must 
notify the BLM of any change of address or operator or lessee name.


Sec.  3936.30  Enforcement of notices of noncompliance and orders.

    (a) If the operator, licensee, or lessee does not take action in 
accordance with the notice of noncompliance, the BLM may issue an order 
to cease operations or initiate legal proceedings to cancel or 
terminate the lease or license under subpart 3934 of this chapter.
    (1) A notice of noncompliance will state how the operator, 
licensee, or lessee has not complied with established requirements, and 
will specify the action which must be taken to correct the 
noncompliance and the time limits within which such action must be 
taken. The operator, licensee, or lessee must notify the BLM when 
noncompliance items have been corrected.
    (2) If the operator, licensee, or lessee does not comply with the 
notice of noncompliance or order within the specified time frame, the 
operator, licensee, or lessee must pay a fine of $500 per day until the 
noncompliance is corrected to the BLM's satisfaction.
    (3) Noncompliance with the approved exploration or development plan 
that results in wasted resource may result in the lessee or licensee 
being assessed royalty at the market value, in addition to the 
noncompliance fine.
    (b) If the BLM determines that the failure to comply with the 
exploration or development plan threatens health or human safety or 
immediate, serious, or irreparable damage to the environment, the mine 
or the deposit being mined or explored, or other valuable mineral 
deposits or other resources, the BLM may, either in writing or verbally 
followed with written confirmation within 5 business days, order the 
cessation of operations or exploration without prior notice.


Sec.  3936.40  Appeals.

    Notices of noncompliance and orders or decisions issued under the 
regulations in this part may be appealed as provided in part 4 of this 
title. All decisions and orders by the BLM under this part remain 
effective pending appeal unless the BLM decides otherwise. A petition 
for the stay of a decision may be filed with the Interior Board of Land 
Appeals.

[FR Doc. E8-16275 Filed 7-22-08; 8:45 am]
BILLING CODE 4310-84-P