[Federal Register Volume 81, Number 61 (Wednesday, March 30, 2016)]
[Rules and Regulations]
[Pages 18111-18176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06513]



[[Page 18111]]

Vol. 81

Wednesday,

No. 61

March 30, 2016

Part III

Book 2 of 2 Books

Pages 18111-18446





Department of the Interior





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Bureau of Ocean Energy Management



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30 CFR Parts 550, 556, 559, et al.



Leasing of Sulfur or Oil and Gas in the Outer Continental Shelf; Final 
Rule

Federal Register / Vol. 81 , No. 61 / Wednesday, March 30, 2016 / 
Rules and Regulations

[[Page 18112]]


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DEPARTMENT OF THE INTERIOR

Bureau of Ocean Energy Management

30 CFR Parts 550, 556, 559 and 560

RIN 1010-AD06
[Docket ID: MMS-2007-OMM-0069]


Leasing of Sulfur or Oil and Gas in the Outer Continental Shelf

AGENCY: Bureau of Ocean Energy Management (BOEM), Interior.

ACTION: Final rule.

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SUMMARY: This final rule updates and streamlines the existing Outer 
Continental Shelf (OCS) leasing regulations and clarifies 
implementation of the Federal Oil and Gas Royalty Simplification and 
Fairness Act of 1996, which amended the Federal Oil and Gas Royalty 
Management Act of 1982 (FOGRMA). The final rule reorganizes leasing 
requirements to more effectively communicate the leasing process as it 
has evolved over the years. The final rule makes changes to regulations 
which relate to the oil, gas, and sulfur leasing requirements. The 
final rule does not, however, include substantive changes to 
regulations which relate to bonding, which will be the subject of a 
separate new proposed rulemaking.

DATES: This final rule will become effective May 31, 2016.

FOR FURTHER INFORMATION CONTACT: Peter Meffert, Senior Regulatory 
Specialist, Office of Policy, Regulations and Analysis, Bureau of Ocean 
Energy Management, at [email protected], at 703-787-1610, or Jaron 
Ming, Regional Supervisor, Office of Leasing and Plans, Gulf of Mexico 
Region, Bureau of Ocean Energy Management, at [email protected], at 
504-736-2761, or David Diamond, Chief, Leasing Division, Bureau of 
Ocean Energy Management, at [email protected], at (703) 787-1251.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Executive Summary
    A. Background
    1. Why We Need to Publish a Rule
    2. What is covered by the rule?
    B. Abbreviations of Terms and Acronyms
    C. Final Rule as Adopted and Response to Comments
    1. Availability of Public Comments
    2. Effects of the Reorganization of MMS Into Three Distinct 
Agencies
    3. Definitions
    4. Delayed Provisions
    5. Other Editorial Improvements
II. Derivation Tables
    A. Derivation Table for 30 CFR part 550 (``Oil and Gas and 
Sulfur Operations in the Outer Continental Shelf'')
    B. Derivation Table for 30 CFR part 556 (``Leasing of Sulfur or 
Oil and Gas and Bonding Requirements in the Outer Continental 
Shelf'')
    C. Derivation Table for 30 CFR part 560 (``Outer Continental 
Shelf Oil and Gas Leasing'')
III. Section-by-Section Analysis of the Final Rulemaking
    A. Part 550--Oil and Gas and Sulfur Operations in the Outer 
Continental Shelf
    1. Subpart A--General Provisions
    2. Subpart D--Leasing Maps and Diagrams
    B. Part 556--Leasing of Sulfur or Oil and Gas and Bonding 
Requirements in the Outer Continental Shelf
    1. The Table of Contents for Part 556
    2. Subpart A--General Provisions
    3. Subpart B--Oil and Gas Five Year Leasing Program
    4. Subpart C--Planning and Holding a Lease Sale
    5. Subpart D--Qualifications
    6. Subpart E--Issuance of a Lease
    7. Subpart F--Lease Term and Obligations
    8. Commentary on Subparts G & H--Transferring Interests in a 
Lease
    9. Subpart G--Transferring All or Part of a Record Title 
Interest in a Lease
    10. Subpart H--Transferring All or Part of the Operating Rights 
in a Lease
    11. Subpart I--Bonding or Other Financial Assurance
    12. Subpart J--Bonus or Royalty Credits for Exchange of Certain 
Leases
    13. Subpart K--Ending a Lease
    14. Subpart L--Leases Maintained Under Section 6 of OCSLA
    15. Subpart M--Environmental Studies
    C. Part 559--Mineral Leasing: Definitions
    D. Part 560--Outer Continental Shelf Oil and Gas Leasing
    1. Subpart A--General Provisions
    2. Subpart B--Bidding Systems
    3. Subpart C--Operating Allowances
    4. Subpart D--Joint Bidding
    5. Subpart E--Electronic Filings
IV. Table of Comments and Responses
    A. General Comments
    B. Section-Specific Comments
V. Legal and Regulatory Analyses
    A. Statutes and Executive Orders
    1. Improving Regulation and Regulatory Review (Executive Order 
(E.O. 13563)
    2. Regulatory Planning and Review (E.O. 12866)
    3. Regulatory Flexibility Act
    4. Small Business Regulatory Enforcement Fairness Act (SBREFA)
    5. Comments from Small Businesses
    6. Unfunded Mandates Reform Act
    7. Takings Implication Assessment (E.O. 12630)
    8. Federalism (E.O. 13132)
    9. Civil Justice Reform (E.O. 12988)
    10. Consultation with Indian Tribal Governments (E.O. 13175)
    11. Paperwork Reduction Act (PRA)
    12. Other Changes in the Information Collection (IC) Between the 
Proposed and Final Rules
    13. Burden Breakdown Table
    14. National Environmental Policy Act of 1969
    15. Data Quality Act
    16. Effects on the Energy Supply (E.O. 13211)
List of Subjects

I. Executive Summary

A. Background

    On May 27, 2009, the Minerals Management Service (MMS) published a 
proposed rule (Notice of Proposed Rulemaking or NPRM) in the Federal 
Register entitled, ``Leasing of Sulphur or Oil and Gas and Bonding 
Requirements in the Outer Continental Shelf'' (74 FR 25177, May 27, 
2009). Since that time, the MMS was renamed the Bureau of Ocean Energy 
Management, Regulation, and Enforcement (BOEMRE) and then was 
reorganized and divided into three separate bureaus--the Bureau of 
Ocean Energy Management (BOEM), the Bureau of Safety and Environmental 
Enforcement (BSEE) and the Office of Natural Resources Revenue (ONRR). 
The leasing program is under the authority of BOEM, whose regulations 
reside in 30 CFR Chapter V.
1. Why We Need to Publish a Rule
    This final rule reorganizes and reorders the parts of the BOEM 
regulations concerning leasing, adds new sections to standardize or 
clarify practices in all three BOEM OCS regional offices, and 
eliminates redundant or otherwise unnecessary text. The final rule also 
includes regulatory provisions which, during the division of BOEMRE, 
were inadvertently assigned to an agency other than BOEM, but have 
proven necessary for BOEM's use and are therefore added back into these 
regulations. (In this Preamble, the BOEMRE regulations, as they existed 
before BOEMRE was divided into BOEM, BSEE, and ONRR, are sometimes 
referred to as the ``pre-split regulations.'')
    Additionally, this final rule also updates and clarifies processes 
required by legislation enacted since BOEM's regulations were last 
amended, such as those required by the Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1996, which amended FOGRMA, or by 
more recently promulgated regulations, such as the Department of the 
Interior's (Department or DOI) non-procurement debarment rules. The 
final rule also includes changes that will assist BOEM in meeting its 
stewardship responsibilities and performing its role as a responsible 
regulator.
2. What is covered by the rule?
    This final rule revises sections of the regulations at 30 CFR parts 
550, ``Oil and Gas and Sulfur Operations in the Outer Continental 
Shelf,'' 556, ``Leasing

[[Page 18113]]

of Sulfur or Oil and Gas in the Outer Continental Shelf,'' 559, 
``Mineral Leasing: Definitions,'' and 560, ``Outer Continental Shelf 
Oil and Gas Leasing.''
    The changes made in part 550, ``Oil and Gas and Sulfur Operations 
in the Outer Continental Shelf'' and those made in part 560, ``Outer 
Continental Shelf Oil and Gas Leasing,'' relate primarily to 
simplifying and clarifying the regulatory language, as well as creating 
new, and re-establishing pre-split, regulations that had been 
inadvertently deleted when the former BOEMRE was divided into three new 
agencies. For example, in October 2010 (as part of the direct final 
rule RIN 1010-AD70, Reorganization of Title 30, Code of Federal 
Regulations (75 FR 61051, October 4, 2010)), during the first split of 
the BOEMRE regulations, a regulation related to operating allowances 
was inadvertently deleted from the BOEM regulations and included only 
in the ONRR regulations. In order for ONRR's operating allowance 
regulations to be effective, however, they must have counterpart 
provisions in the BOEM regulations. The operating allowance regulation 
is re-established in BOEM's regulations by this final rule.
    Most of the final rule consists of revisions to part 556. Part 556 
includes regulations pertaining to: (1) The oil and gas leasing 
program; (2) preparing for a lease sale; (3) issuing, maintaining, 
transferring, and terminating a lease; and (4) bonding requirements. As 
explained in greater detail below, the final rule addresses the first 
three components, but the fourth component, bonding, is not addressed 
in this final rule, except to make minor editorial and conforming 
changes. Bonding and financial assurance will be further addressed in 
future rulemakings.

B. Abbreviations of Terms and Acronyms

    The following are abbreviations of terms used in the preamble:

API American Petroleum Institute
ASTM American Society for Testing and Materials
BAST Best Available and Safest Technology
BOEM Bureau of Ocean Energy Management
BOEMRE Bureau of Ocean Energy Management, Regulation, and 
Enforcement
BSEE Bureau of Safety and Environmental Enforcement
CFR Code of Federal Regulations
CID Conservation Information Document
CPA Central Planning Area of the GOM
CZMA Coastal Zone Management Act
DOI Department of the Interior
DOCD Development Operations Coordination Document
DOO Designation of Operator
DPP Development and Production Plan
EIA Environmental Impact Analysis
EO Executive Order
EP Exploration Plan
EPA Eastern Planning Area of the GOM
EPAct Energy Policy Act of 2005
ESIGN Electronic Signatures in Global and National Commerce Act of 
2000
FNOS Final Notice of Sale
FOGRMA Federal Oil and Gas Royalty Management Act of 1982
FOGRSFA Federal Oil and Gas Royalty Simplification and Fairness Act 
of 1996
FR Federal Register
G&G Geological and Geophysical
GDIS Geophysical Data and Information Statement
GOM Gulf of Mexico
GOMESA Gulf of Mexico Energy Security Act of 2006
GPEA Government Paperwork Elimination Act of 1998
H2S Hydrogen sulfide
IC Information Collection
IOAA Independent Offices Appropriations Act of 1952
LLC Limited Liability Company
MBB Mapping and Boundary Branch
MMS Minerals Management Service
MSL Mean Sea Level
NAD North American Datum
NAICS North American Industry Classification System
NEPA National Environmental Policy Act of 1969
NGPA Natural Gas Processors Association
NOAA National Oceanic and Atmospheric Administration
NPR Notice of Proposed Rulemaking
NTL Notice to Lessees
OCS Outer Continental Shelf
OCSLA Outer Continental Shelf Lands Act
OMB Office of Management and Budget
ONRR Office of Natural Resources Revenue
OPD Official Protraction Diagram
PDP Proved Developed Producing (reserves)
PNOS Proposed Notice of Sale
PRA Paperwork Reduction Act
PSI Pounds Per Square inch
RFA Regulatory Flexibility Act of 1980
ROW Right of Way
RSV Royalty Suspension Volume
RUE Right of Use and Easement
SBA Small Business Administration
SBREFA Small Business Regulatory Enforcement Fairness Act of 1996
SEC Securities and Exchange Commission
SLA Submerged Lands Act of 1953
US United States
U.S.C. United States Code
USCG U.S. Coast Guard
USEPA U.S. Environmental Protection Agency
UTM Universal Transverse Mercator Coordinate System
WPA Western Planning Area of the GOM

C. Final Rule as Adopted and Response to Comments

    On May 27, 2009, BOEM published a proposed rule entitled, ``Leasing 
of Sulphur or Oil and Gas and Bonding Requirements in the Outer 
Continental Shelf'' (74 FR 25177). In the six years since the proposed 
regulation was published, several developments have brought about the 
need for the final rule to appear different from the proposed 
rulemaking. The organization of the final rule is structured 
differently from that of the proposed rule to make the regulations 
easier for the public to read and follow. The major reasons for the 
other differences between the proposed rule and the final rule are 
explained below:
1. Availability of Public Comments
    BOEM received a total of eight comments from the American Petroleum 
Institute (API), Shell Oil Company, Chevron Oil Company, Anglo Suisse, 
Dynamic Offshore Resources, RLI Insurance Company, and two citizens, 
who commented to show their support of OCS leasing and the oil and gas 
program. Each comment was considered and some resulted in changes to 
the proposed rule. BOEM's responses are addressed in this Preamble.
    All comments can be viewed at www.BOEM.gov under the Regulations 
section and at www.regulations.gov.
2. Effects of the Reorganization of MMS Into Three Distinct Agencies
Background
    On May 19, 2010, the Secretary signed Secretarial Order 3299 
directing the split of MMS into three new bureaus, BOEM, BSEE, and 
ONRR. This split was accomplished in two phases. In 2010 MMS was split 
into two agencies, ONRR and BOEMRE. In 2011 BOEMRE was itself split 
into two agencies, BOEM and BSEE.
    Prior to October 4, 2010, the regulations of BOEM, BSEE, and ONRR 
were contained in one set of regulations (``pre-split'' regulations), 
which were issued by the MMS. On October 4, 2010, MMS published a final 
rule in the Federal Register (75 FR 61051), moving its regulations 
related to its royalty and revenue functions from MMS to ONRR and 
creating a new chapter XII. The name of the remaining organization was 
changed from the MMS to BOEMRE. On October 18, 2011, DOI published a 
final rule (76 FR 64432) splitting BOEMRE regulations into separate 
BOEM and BSEE chapters. Pursuant to that split, BOEM is responsible for 
the resource evaluation, planning, and leasing functions for offshore 
oil and gas. BSEE is primarily responsible for the safety and 
environmental enforcement of offshore oil and gas development 
activities. BOEM's regulations were recodifed into 30 CFR Chapter V. 
BSEE's regulations remained in 30 CFR Chapter II.

[[Page 18114]]

Assignment and Retention of Regulations
    As time has passed, it has come to light that some regulations were 
incorrectly assigned during the split. For example, some of the 
regulatory provisions assigned to BSEE or ONRR have proven necessary 
for BOEM. Regulatory provisions that fall into this category have been 
included in the final rulemaking, as explained in this Preamble. 
Because of the reorganization of the former MMS, some provisions of the 
proposed rule are now outside the scope of BOEM's responsibilities and 
are not included in this final rule.
    In addition, there are some regulatory provisions that appear in 
this final rulemaking that did not appear in the proposed rule. These 
regulatory provisions are not ``substantively new,'' however. They 
appeared in the former MMS regulations. The Final Rule also differs 
from the Proposed Rule in that the Final Rule retains certain 
provisions that the Proposed Rule suggested deleting. Instances of 
retention of prior sections of the regulations are also discussed in 
this Preamble.
Administrative Changes
    There are some wholly administrative changes from the proposed rule 
that appear in the final rule. These changes were also primarily 
necessitated by the division of MMS into three separate agencies. For 
example, the BOEM regulations are now found in a different chapter of 
Title 30 of the Code of Federal Regulations (CFR) than the chapter in 
which the BOEMRE regulations were found. Before the BOEMRE regulations 
were divided into two sets of independent agency regulations, they were 
all contained in Chapter II of Title 30 of the CFR, within parts 203 
through 291. This means that the first digit in the section number of 
each individual provision was a ``2.'' After the division of the 
regulations, all BSEE regulations remained in Chapter II, and thus 
retained the first digit ``2.'' And, because the proposed rule was 
published before the agency split, its provisions also begin with a 
``2.'' After the division, however, the BOEM regulations were moved 
into Chapter V. Thus, although the proposed rule provisions each began 
with a ``2,'' all final BOEM rule provisions begin with a ``5.'' Also, 
in the final rule, internal citations to section numbers were changed 
to maintain correct and consistent cross-references, and sections were 
re-numbered to maintain internal numerical order. Whenever appropriate, 
references to ``MMS'' from the proposed rule have been changed to 
``BOEM'' in the final rule. These administrative changes have no effect 
on the substance of the regulations, and therefore do not require 
notice and comment, but they do make the regulations clearer, more 
consistent, and easier to use.
Removed Provisions
    The proposed rule would have added a new ``expenses . . . with 
supporting documentation'' reporting requirement to the then-BOEMRE, 
now-BSEE regulatory sections 250.1717, 250.1729, and 250.1743. Section 
250.1717 addresses the information that must be submitted after well 
plugging and abandonment. Section 250.1729 addresses the information 
that must be submitted after removal of a platform or other facility, 
and section 250.1743 addresses the information that must be submitted 
after site clearance. The proposed rule added new requirements 
concerning the submittal of information on the costs of 
decommissioning.
    When BOEMRE was divided into two agencies, the operational aspects 
of decommissioning were placed within BSEE's rather than BOEM's 
purview. In the final rulemaking, therefore, BOEM decided to remove the 
three provisions proposing revisions to sections 250.1717, 250.1729, 
and 250.1743, as BSEE finalized the rule addressing the submittal of 
information on the costs of decommissioning in their rule entitled 
``Oil and Gas and Sulphur Operations in the Outer Continental Shelf; 
Decommissioning Costs,'' RIN 1014-AA24, published in the Federal 
Register on December 4, 2015.
    The other proposed provision that was removed from the final rule 
was proposed rule section 256.621, concerning the submission of reports 
about lease term pipelines when requesting BOEM's approval of a lease 
assignment. As with decommissioning, BSEE has been tasked with the 
administration of the operational aspects of pipelines on the OCS; 
therefore, the submission of reports on lease term pipelines is within 
BSEE's jurisdiction. BSEE has proposed to address the submission of 
reports concerning lease term pipelines in a rule entitled ``Pipelines 
and Pipeline Right-of-Way Safety,'' RIN 1014-AA27.
3. Definitions
    Several definitions have been added in the final rulemaking that 
did not appear in the proposed rulemaking to clarify the meaning of 
terms used in the regulations. In each case, the term either was 
defined in the BOEMRE regulations or its definition is apparent from 
the context of the prior regulatory language.
4. Delayed Provisions
    The proposed rule included a subpart E, ``Financial Accountability 
and Risk Management,'' which contained provisions addressing 
requirements for general and additional bonding, surety, and third-
party indemnity. After the proposed rule was published, BOEM identified 
possible conflicts between the proposed rule's use/definitions of 
certain terms and their use/definitions within BOEM's oil spill 
financial responsibility regulations (30 CFR part 553). Also, after 
publication of the proposed rule, BOEM began a process of reassessing 
its bonding and financial assurance policies, leading to a decision to 
publish this final rule with the text of existing subpart I (Bonding), 
with only limited conforming changes. This decision will enable BOEM 
and the regulated public to continue to rely on the existing financial 
assurance regulations until BOEM is ready to make necessary changes to 
its policies and to propose and seek comment on separate new 
regulations specific to bonding and financial assurance to implement 
these new policies.
5. Other Editorial Improvements
    A consistent change that was made in the final rule was to add, 
where appropriate, the word ``final'' before the phrase ``notice of 
sale.'' Another change is eliminating any references to ``Associate 
Director,'' since there are no longer any Associate Directors in BOEM. 
The word ``sulphur'' has been replaced with a more contemporary 
spelling of ``sulfur.'' All cross-references and section numbers within 
this final rule have been updated.

II. Derivation Tables

    The following derivation tables describe the source(s) of the 
regulations in the final rule relative to those in the prior 
regulations and/or those in the proposed rule. These tables are 
intended only to provide cross-references to the other materials. The 
section-by-section analysis that follows these derivation tables 
provides a detailed explanation of the changes made with this final 
rule.
    Most sections of the final rule reflect content from the proposed 
rule, however, in some cases, the organization of the regulations and 
the final section numbers have changed since the rule was proposed. The 
derivation tables compare the location of the various rule sections in 
the final rule to the prior section numbers in the prior regulations 
that have been modified and the corresponding section numbers from the 
proposed rule, if appropriate.

[[Page 18115]]

A. Derivation Table for 30 CFR part 550--Oil and Gas and Sulfur 
Operations in the Outer Continental Shelf

------------------------------------------------------------------------
                                   Prior regulation      Corresponding
                                    that the final      section number
       Final rule section          rule would modify   from the proposal
                                      for replace          (if any)
------------------------------------------------------------------------
Subpart A--General Provisions
PERFORMANCE STANDARDS:
    550.120--This section         None..............  This section was
     provides that BOEM will                           in the
     regulate activities under a                       regulations
     lease, right-of-use and                           before the split
     easement, or right-of-way,                        of MMS into three
     to promote the orderly                            different
     exploration, development,                         agencies and has
     and production of mineral                         been reinserted
     resources, while preventing                       for consistency.
     waste, protecting the
     environment and ensuring
     cooperation with other
     government agencies.
    550.121--This section         None..............  This section was
     provides that BOEM may                            in the
     require additional measures                       regulations
     to ensure the use of Best                         before the split
     Available and Safest                              of MMS into three
     Technology (BAST) as                              different
     identified by BSEE to avoid                       agencies and has
     the failure of equipment                          been reinserted
     that would have a                                 for consistency.
     significant effect on
     health, safety, property or
     the environment when
     economically feasible.
INFORMATION AND REPORTING
 REQUIREMENTS:
    550.197(b)--This subsection   550.197(b)........  Section
     provides that BOEM will                           256.100(b).
     generally release
     geological data and
     analyzed geological
     information two years after
     the required submittal date
     for such information or 60
     days after a lease sale.
    550.197(c)--This subsection   550.197(c)........  Section
     provides that BOEM will                           256.100(b).
     generally release
     geological data and
     analyzed geological
     information to individuals
     with a need to know that
     agree to maintain the
     confidentiality of the
     relevant information.
    550.197(d)--This section      None..............  New provision
     provides, in accordance                           required to
     with section 26 of OCSLA,                         conform the
     that no proprietary                               regulations to
     information received by                           the Outer
     BOEM will be transmitted to                       Continental Shelf
     any affected State unless                         Lands Act (OCSLA)
     the lessee, or the                                (43 U.S.C.
     permittee and all persons                         1352(c)).
     to whom such permittee has
     sold such information under
     promise of confidentiality,
     agree to such transmittal.
Subpart D--Leasing Maps and       ..................  New subpart.
 Diagrams
    550.400--This section         556.8.............  Section
     provides that any area of                         256.202(a).
     the OCS, which has been
     appropriately platted, may
     be leased for any mineral
     not included in an existing
     lease issued under the Act
     or meeting the requirements
     of subsection (a) of
     section 6 of the Act.
------------------------------------------------------------------------

B. Derivation Table for 30 CFR Part 556--Leasing of Sulfur or Oil and 
Gas and Bonding Requirements in the Outer Continental Shelf

------------------------------------------------------------------------
                                   Prior regulation      Corresponding
                                    that the final      section number
       Final rule section          rule would modify   from the proposal
                                      or replace           (if any)
------------------------------------------------------------------------
Subpart A--General Provisions
    556.100--This section states  556.2.............  None.
     that management of Outer
     Continental Shelf (OCS)
     resources is to be
     conducted in accordance
     with the findings,
     purposes, and policy
     directions provided by the
     Outer Continental Shelf
     Lands Act.
    556.101--This section sets    556.1.............  Section 256.102.
     forth the purpose of the
     regulations in this part.
    556.102--This section lists   556.4.............  Undesignated
     the statutory authorities                         authority
     for this part.                                    section.
    556.103--This section lists   556.7.............  None.
     related regulations.
    556.104--This section         556.0, 556.10.....  Section 256.100.
     provides the legal basis
     for BOEM's collection of
     information in connection
     with the administration of
     its OCS oil, gas and sulfur
     leasing program and
     describes how BOEM will
     handle and maintain
     proprietary information.
    556.104(c)--This subsection   556.10(a).........  Section
     describes BOEM's treatment                        256.100(b).
     of proprietary information
     received in response to a
     Call for Information and
     Nominations.
    556.105--This section         556.5, 556.40.....  Section 256.103.
     provides definitions for
     key terms used throughout
     this part of the
     regulations.
    556.106--This section         556.63............  Section 256.104.
     identifies administrative
     fees that BOEM requires for
     various services.

[[Page 18116]]

 
    556.107--This section sets    556.46, 556.54,     None.
     forth an alternative          556.95.
     procedure, to avoid the use
     of a corporate seal, for
     those electronic document
     submissions for which a
     corporate seal is otherwise
     required by these
     regulations.
Subpart B--Oil and Gas Five-Year
 Leasing Program
    556.200--This section         None..............  Section 256.200.
     reiterates those key
     provisions of OCSLA that
     require the Secretary to
     prepare an oil and gas
     leasing program that
     consists of a five-year
     schedule of proposed lease
     sales.
    556.201--This section         None..............  New provision
     reiterates the OCSLA                              based on 43
     requirement that BOEM                             U.S.C.
     consider multiple uses of                         1344(a)(2)(D).
     the OCS in its development
     of the Five-Year oil and
     gas leasing program.
    556.202--This section sets    556.16............  Section 256.202.
     forth the steps BOEM takes
     in initiating the Five-Year
     program.
    556.203--This section         556.17(a).........  Section 256.203.
     provides that BOEM will
     invite comments from
     governors on a draft
     proposed program at least
     60-days before it publishes
     a proposed Five-Year
     program.
    556.204--This section states  556.17(b).........  Section 256.204.
     the procedures to be
     followed to obtain inter-
     governmental and citizens'
     comments on the proposed
     Five-Year program.
    556.205--This section         556.17(c).........  Section 256.205.
     provides that the Secretary
     must provide a copy of the
     proposed Five-Year Program,
     or any significant revision
     thereto, to Congress and
     the President at least 60-
     days before approving it.
Subpart C--Planning and Holding
 a Lease Sale
    556.300--This section         556.22............  None.
     provides that BOEM will
     prepare a report describing
     the general geology and
     potential mineral resources
     of the area under
     consideration for a sale.
    556.301--This section         556.23............  Section 256.300.
     outlines the process BOEM
     uses to collect information
     to inform its determination
     as to which areas should be
     made available for leasing.
    556.302--This section         556.26, 556.10....  Section 256.301.
     explains the process used
     to arrive at the Area ID.
    556.303--This section sets    556.10, 556.25....  Section 256.302.
     forth the information that
     BOEM will provide to a
     State when an area proposed
     for leasing lies within
     three nautical miles of the
     seaward boundary of that
     State.
    556.304--This section         556.29............  Section 256.303.
     describes the process
     utilized to prepare a
     proposed notice of sale.
    556.305--This section         556.29, 556.31....  Section 256.304.
     outlines the process by
     which BOEM coordinates with
     affected States following
     the proposed notice of sale.
    556.306--This section         556.25(b)-(d).....  None. Added for
     provides a process for                            consistency with
     resolving issues or                               OCSLA section
     disputes that may arise                           8(g)(3), as
     between a State and the                           amended in 1986
     Federal government when a                         (43 U.S.C. 1337
     hydrocarbon-bearing area                          (8)(g)(3)).
     underlies both the Federal
     OCS and State submerged
     lands.
    556.307--This section         556.31............  Section 256.305.
     provides a description of
     the process that BOEM will
     use to evaluate comments
     and recommendations of
     governors and local
     governments.
    556.308--This section sets    556.28, 556.32....  Section 256.306.
     forth BOEM's procedures for
     conducting a lease sale.
    556.309--This section sets    556.12............  Section 256.206.
     forth BOEM's procedures for
     conducting a Supplemental
     Sale.
Subpart D--Qualifications
    QUALIFICATONS:
    556.400--This section         556.35............  Section 256.400.
     provides that, in order to
     bid on, own, hold, or
     operate a lease on the OCS,
     bidders, record title
     holders, and operating
     rights owners must first
     obtain a qualification
     number from BOEM.
    556.401--This section         556.35, 556.46....  Section 256.400.
     outlines BOEM's
     requirements for a
     prospective lessee to
     become a qualified bidder.
    556.402--This section         556.35............  Section 256.401.
     describes the types of
     evidence that BOEM will
     require in order to qualify
     a person to hold leases on
     the OCS.
    556.403--This section         556.35(c),          Section 256.402.
     describes the circumstances   556.46(h).
     under which a person may be
     excluded or disqualified
     from holding a lease on the
     OCS.
    556.404--This section         None..............  Section 256.403.
     details how to comply with
     the Department's non-
     procurement debarment rules.
    556.405--This section         585.109...........  Section 256.404.
     provides that lessees must
     notify BOEM of any merger,
     name change, or change of
     business form as soon as
     practicable, but in no case
     later than one year after
     the change or action.

[[Page 18117]]

 
Subpart E--Issuance of a Lease
HOW TO BID:
    556.500--This section sets    556.46(a)-(b).....  Section 256.410.
     forth the procedures for
     submitting a bid at a lease
     sale.
    556.501--This section         551.11, 551.12,     None.
     explains what geological      580.51.
     and geophysical information
     must be submitted with a
     bid at a lease sale.
RESTRICTIONS ON JOINT BIDDING:
    556.511--This section         556.41............  Section 256.411.
     prohibits joint bidding by
     major oil and gas producers
     under certain circumstances.
    556.512--This section         556.44............  Section 256.402.
     provides the circumstances
     under which a bid for an
     oil and gas lease will be
     disqualified and/or
     rejected.
    556.513--This section         556.40............  Section 256.412.
     explains the circumstances
     under which a lessee must
     prepare and send to BOEM a
     statement describing its
     oil and gas production and
     what the statement is to
     contain.
    556.514--This section         556.40, 556.43....  Section 256.413.
     details what production
     must be counted when
     determining whether a
     company should be
     considered a ``restricted
     bidder''.
    556.515--This section         556.41(d).........  Section 256.414.
     provides the circumstances
     under which a person may be
     exempted from joint bidding
     restrictions.
HOW DOES BOEM ACT ON BIDS:
    556.516--This section         556.47............  Section 256.416.
     outlines the procedures
     BOEM will follow when
     reviewing bids received for
     leases on the OCS and when
     handling tie bids.
    556.517--This section         556.47(e)(1)-(e)(3  Section 256.417.
     describes the                 ).
     reconsideration procedures
     that apply in the event
     that BOEM rejects a high
     bid.
AWARDING THE LEASE:
    556.520--This section         556.47............  Section 256.420.
     describes the steps
     involved in the lease award
     process.
    556.521--This section         556.50............  Section 256.421.
     explains when a lease
     becomes effective.
    556.522--This section         556.49............  Section
     provides that the terms and                       256.306(a)(2).
     conditions of the lease
     will be stated in the final
     notice of sale, as well as
     in the lease instrument
     itself.
Subpart F--Lease Term and
 Obligations
LENGTH OF LEASE:
    556.600--This section sets    556.37(a)-(b).....  Section 256.600.
     forth the primary term of
     an oil and gas lease.
    556.601--This section sets    556.37(a)-(b),      Section 256.601.
     forth the methods by which    556.70, 556.71,
     a lessee many maintain its    556.72.
     oil and gas lease beyond
     the primary term.
    556.602--This section sets    556.37(c).........  Section 256.602.
     forth the primary term of a
     sulfur lease.
    556.603--This section sets    556.37(c).........  Section 256.603.
     forth the methods by which
     a lessee many maintain its
     sulfur lease beyond the
     primary term.
LEASE OBLIGATIONS:
    556.604--This section         550.146, 556.62,    Sections 256.605
     outlines the rights and       556.64.             and 256.612.
     obligations of a record
     title holder of an OCS
     lease.
    556.605--This section         550.146, 556.62,    Sections 256.606
     outlines the rights and       556.64.             and 256.612.
     obligations of an operating
     rights owner of an OCS
     lease.
HELIUM:
    556.606--This section         556.11............  Section 256.630.
     provides that BOEM reserves
     the ownership of, and the
     right to extract, helium
     from all gas produced from
     an OCS lease, and describes
     what BOEM will do if it
     requests you to deliver
     helium from operations
     associated with a lease.
Subpart G--Transferring All or
 Part of the Record Title
 Interest in a Lease
    556.700--This section         556.62, 556.64....  Sections 256.610,
     describes how a company may                       256.611, and
     apply for approval to                             256.612.
     assign its whole, or a
     partial, record title
     interest in its lease, or
     in any aliquot(s) thereof,
     or to sublease operating
     rights.
    556.701--This section         556.62(a), 556.65.  Section 256.611.
     describes the process for
     obtaining BOEM approval of
     an assignment of a record
     title or operating rights
     interest in an OCS lease.
    556.702--This section         556.68............  Section
     describes when an                                 256.613(a)(2).
     assignment will result in a
     segregated (i.e., new)
     lease.
    556.703--This section         556.68............  Section
     addresses the effects of a                        256.613(a)(2).
     lease segregation.
    556.704--This section sets    556.62, 556.64....  Section 256.611.
     forth the circumstances
     under which BOEM would
     disapprove an assignment or
     sublease.
    556.705--This section         556.64(e)-(g).....  Section 256.614.
     outlines the procedures to
     follow to transfer an
     interest in an OCS lease
     from a deceased natural
     person.
    556.706--This section         None..............  Section 256.615.
     outlines the process for
     transferring record title
     interests in more than one
     lease to different parties.

[[Page 18118]]

 
    556.707--This section         556.67............  Section 256.615.
     outlines the process for
     transferring different
     types of interests in a
     lease to different parties.
    556.708--This section         556.64(a)(8),       Section 256.615.
     outlines the process for      556.67.
     transferring record title
     interests in more than one
     lease to the same party.
    556.709--This section         556.64............  Section 256.616.
     outlines the process for
     transferring the record
     title interest in one lease
     to more than one party.
    556.710 -This section sets    556.64............  Section 256.616.
     forth the effect of an
     assignment of record title
     on an assignor's liability
     under the lease.
    556.711--This section         556.64............  Section 256.616.
     provides that a record
     title holder who subleases
     operating rights remains
     liable for later accruing
     obligations of the lease,
     but is only secondarily
     liable for monetary
     obligations accruing
     thereafter.
    556.712--This section         556.62(c).........  Section 256.617.
     describes the effective
     legal date of the transfer
     of a record title interest
     in a lease.
    556.713--This section sets    556.62(e).........  Section 256.618.
     forth the effect of an
     assignment of record title
     on an assignee's liability
     under the lease.
    556.714--This section         556.64(i).........  Section 256.619.
     describes procedures to be
     used in assignments between
     those on the restricted
     joint bidders list.
    556.715--This section         556.64(a)(7)......  Section 256.620.
     provides that a lessee may
     create, transfer, or assign
     an economic interest in a
     lease without BOEM
     approval, but that such
     transferor must send BOEM a
     copy of each instrument
     creating or transferring
     such a lease interest
     within 90 days after the
     last party executes the
     transfer instrument.
    556.716--This section         550.143...........  Section 256.611.
     provides the circumstances
     under which the transfer of
     a record title interest
     triggers the need to file a
     new designation of operator
     form with BOEM.
Subpart H--Transferring All or
 Part of the Operating Rights in
 a Lease
    556.800--This section         556.62, 556.64....  Section 256.612.
     provides that an operating
     rights owner may assign all
     or part of its operating
     rights interests, subject
     to BOEM approval.
    556.801--This section         550.143, 556.64...  Section 256.613.
     describes the process by
     which an assignor of
     operating rights must
     obtain approval of such an
     assignment.
    556.802--This section sets    556.62............  Section 256.611.
     forth the circumstances
     under which BOEM may
     disapprove an assignment of
     operating rights.
    556.803--This section         556.67............  Section 256.615.
     addresses the assignment of
     operating rights interests
     in more than one lease to
     different parties.
    556.804--This section         556.64(a)(8)......  Section 256.615.
     addresses the assignment of
     operating rights interests
     in one lease to more than
     one party.
    556.805--This section sets    556.62(d).........  Section 256.616.
     forth the effect of an
     assignment of operating
     rights on an assignor's
     liability under the lease.
    556.806--This section         556.62(c).........  Section 256.617.
     describes the effective
     legal date of the transfer
     of an operating rights
     interest in a lease.
    556.807--This section sets    556.62, 556.64....  Section 256.618.
     forth the effect of an
     assignment of operating
     rights on an assignee's
     liability under the lease.
    556.808--This section         556.64(a)(7)......  Section 256.620.
     provides that an operating
     rights owner may create,
     transfer, or assign
     economic interests without
     BOEM approval, but that for
     record keeping purposes,
     the operating rights owner
     must send BOEM a copy of
     each instrument creating or
     transferring such interests
     within 90 days after the
     last party executes the
     transfer instrument.
    556.809.....................  Reserved..........  None.
    556.810--This section         550.143, 556.62...  Section 256.611.
     provides the circumstances
     under which the transfer of
     an operating rights
     interest triggers the need
     to file a new designation
     of operator form with BOEM.
Subpart I--Bonding or Other
 Financial Assurance
    556.900--This section sets    556.52............  Sections 256.500,
     forth general bonding/                            256.502, 256.510,
     financial assurance                               and 256.521.
     requirements for OCS leases.
    556.901--This section sets    556.53............  Sections 256. 501
     forth additional bonding/                         and 256.510.
     financial assurance
     requirements for OCS leases.
    556.902--This section sets    556.54............  Sections 256.502
     forth the requirements                            and 256.503.
     which a bond or other
     security must meet.
    556.903--This section sets    556.55............  Section 256.520.
     forth what must be done if
     a bond lapses.
    556.904--This section sets    556.56............  Section 256.512.
     forth the procedures for
     establishing lease
     abandonment accounts as a
     method of financial
     assurance.
    556.905--This section sets    556.57............  Section 256.511.
     forth the procedures for
     using a third-party
     guarantee as a method of
     financial assurance.
    556.906--This section sets    556.58............  Section 256.522
     forth the procedures for                          and 256.523.
     terminating the period of
     liability of, and
     cancelling, a bond.

[[Page 18119]]

 
    556.907--This section sets    556.59............  Sections 256.524,
     forth the procedures for                          256.525, and
     forfeiting a bond or other                        256.526.
     security.
Subpart J--Bonus or Royalty
 Credits for Exchange of Certain
 Leases
    556.1000--This section sets   556.90-556.95.....  Sections 256.900-
     forth the deadline for                            256.905.
     applying for certain bonus
     or royalty credits which
     had been available under
     the Gulf of Mexico Energy
     Security Act of 2006
     (GOMESA) (43 U.S.C. 1331
     note).
Subpart K--Ending a Lease
    556.1100--This section        556.37(b)-(c).....  Section 256.700.
     provides the circumstances
     under which a lease will
     expire at the end of its
     primary term.
    556.1101--This section sets   556.76............  Section 256.701.
     forth the procedures to
     follow for relinquishment
     of a lease.
    556.1102--This section        556.77............  Section 256.702.
     provides the circumstances
     under which BOEM may cancel
     or void a producing or a
     non-producing OCS lease.
Subpart L--Leases Maintained
 Under Section 6 of OCSLA
    556.1200--This section        556.79............  None.
     explains the relationship
     between BOEM's regulations
     and leases maintained under
     section 6 of OCSLA.
    556.1201--This section        556.80............  None.
     states that the existence
     of a lease for other
     minerals under section 6 of
     OCSLA in an area does not
     preclude the issuance of
     other leases in the same
     area.
Subpart M--Environmental Studies
    556.1300--This section        556.82............  None.
     provides that BOEM will
     conduct studies of any area
     or region included in any
     oil and gas lease sale, as
     needed, to assess and
     manage impacts on the
     human, marine and coastal
     environments which may be
     affected by OCS oil and gas
     or other mineral activities
     in such area or region.
------------------------------------------------------------------------


  Derivation Table for 30 CFR Part 560--Outer Continental Shelf Oil and
                               Gas Leasing
------------------------------------------------------------------------
                                   Prior regulation      Corresponding
                                    that the final      section number
       Final rule section          rule would modify   from the proposal
                                      or replace           (if any)
------------------------------------------------------------------------
Subpart A--General Provisions
    560.100--This section         Undesignated        Undesignated
     describes the authorities     authority section.  authority
     applicable to this part.                          section.
    560.101--This section         560.1.............  None.
     describes the purpose of
     this part.
    560.102--This section sets    559.001--559.002,5  None.
     forth the definitions         60.2.
     applicable to this part.
    560.103--This section         560.3.............  None.
     describes BOEM's
     information collection
     authority.
Subpart B--Bidding Systems
GENERAL PROVISIONS:
    560.200--This section         560.101...........  None.
     describes the purpose of
     this subpart.
    560.201--This section sets    560.102...........  None.
     forth the definitions
     applicable to this subpart.
    560.202--This section         560.110...........  None.
     describes the bidding
     systems that BOEM may
     utilize.
    560.203--This section         560.111...........  None.
     describes the terms and
     conditions that would
     apply, depending on the
     bidding systems that BOEM
     utilizes.
ELIGIBLE LEASES:
    560.210--This section         560.112...........  None.
     describes how royalty
     suspension volumes could
     apply to a lease.
    560.211--This section         560.113...........  None.
     describes when a lease may
     qualify for royalty
     suspensions.
    560.212--This section         560.114...........  None.
     describes how BOEM would
     assign royalty suspension
     volumes for eligible leases.
    560.213--This section         560.115...........  None.
     specifies how long royalty
     suspension volumes may be
     effective to eligible
     leases.
    560.214--This section         560.116...........  None.
     describes how a lessee
     should measure the natural
     gas production on an
     eligible lease, subject to
     the royalty suspension
     volume.
ROYALTY SUSPENSION LEASES:
    560.220--This section         560.120...........  None.
     describes how royalty
     suspensions apply to leases
     issued in a sale held after
     November 2000.
    560.221--This section         560.121...........  None.
     describes when a lease
     issued in a sale held after
     November 2000 is entitled
     to a royalty suspension.

[[Page 18120]]

 
    560.222--This section         560.122...........  None.
     describes how long a
     royalty suspension volume
     would be effective for a
     lease issued in a sale held
     after November 2000.
    560.223--This section         560.123...........  None.
     describes how to measure
     natural gas production for
     a lease subject to royalty
     suspension volumes issued
     in a sale held after
     November 2000.
    560.224--This section         560.124...........  None.
     describes how a royalty
     suspension would apply if
     BOEM assigns a lease issued
     in a sale held after
     November 2000 to a field
     that has a lease issued
     before the enactment of the
     OCS Deep Water Royalty
     Relief Act. (43 U.S.C.
     1337(3)).
BIDDING SYSTEM SELECTION
 CRITERIA:
    560.230--This section         560.130...........  None.
     describes what criteria
     BOEM uses for selecting
     bidding systems and bidding
     system components.
Subpart C--Operating Allowances
    560.300--This section         206.120...........  This section was
     explains that Operating                           originally part
     Allowances can be specified                       of MMS
     in an oil and gas leases.                         regulations at
                                                       section 206.120
                                                       and was
                                                       inadvertently
                                                       omitted from BOEM
                                                       regulations
                                                       during the split
                                                       of the MMS rules
                                                       into those of
                                                       three different
                                                       agencies. 75 FR
                                                       65051.
Subpart D--Joint Bidding
    Reserved....................  560.301--560.303..  The proposed rule
                                                       amended 30 CFR
                                                       part 260 by
                                                       removing subpart
                                                       D, which
                                                       consisted of
                                                       prior regulations
                                                       sections 560.301--
                                                       560.303.
Subpart E--Electronic Filings
    560.500--This section         None..............  This section is
     describes BOEM's electronic                       derived in part
     document and data                                 from proposed
     transmissions procedures.                         rule section
                                                       256.503(c).
    560.501--This section         None..............  None.
     describes how BOEM will
     maintain the
     confidentiality of
     electronic documents and
     data.
    560.502--This section         None..............  None.
     describes under what
     circumstances electronic
     document filings will be
     considered legally binding.
------------------------------------------------------------------------

III. Section-by-Section Analysis of the Final Rulemaking

A. Part 550--Oil and Gas and Sulfur Operations in the Outer Continental 
Shelf

1. Subpart A--General Provisions
    Section 550.120. What standards will BOEM use to regulate leases, 
rights-of-use and easement, and rights-of-way? This section provides 
that BOEM will regulate activities under a lease, right-of-use and 
easement, or right-of-way, to promote the orderly exploration, 
development, and production of mineral resources, while preventing 
waste, protecting the environment and ensuring cooperation with other 
government agencies. Final rule section 550.120 did not appear in the 
proposed rule, but it was in the pre-split regulations, at 30 CFR 
250.106. When BOEMRE was split into two agencies, this regulation was 
assigned to BSEE, and it therefore still appears at 30 CFR 250.106. As 
time has passed, however, BOEM has found itself hampered in properly 
evaluating and approving certain types of plans (such as exploration 
plans (EPs), development and production plans (DPPs), or development 
operations coordination documents (DOCDs)) without this provision in 
its regulations. This section has therefore been put into the final 
rule with minor word changes.
    Section 550.121. What must I do to protect health, safety, 
property, and the environment? This section provides that, when 
economically feasible, BOEM may require additional measures to ensure 
the use of Best Available and Safest Technology (BAST) as identified by 
BSEE, to avoid the failure of equipment that would have a significant 
effect on safety, health, or the environment. Final rule section 
550.121 did not appear in the proposed rule, but it was in the pre-
split regulations, at 30 CFR 250.107 and tracks section 21(b) of OCSLA. 
When BOEMRE was split into two agencies, this regulation was assigned 
to BSEE, and it therefore still appears at 30 CFR 250.107. As time has 
passed, however, BOEM has found itself hampered in properly evaluating 
and approving certain types of plans (e.g., EPs) without this provision 
in the BOEM regulations. It has therefore been put into the final rule 
with some changes necessary to conform the provision to the scope of 
BOEM's enforcement authority.
    Section 550.197(b)(5). Data and information to be made available to 
the public or for limited inspection. This section provides that BOEM 
will generally release geological data and analyzed geological 
information two years after the required submittal date for such 
information or 60 days after a lease sale. This final rule provision 
did not appear in the proposed rule, but did appear in the pre-split 
regulations at section 250.197(b)(5) (now BOEM regulation 
550.197(b)(5)). However, the prior section, 550.197(b)(5), states 
``[i]f the primary term specified in the lease is extended under the 
heading of `Suspensions' under this subpart, the extension applies to 
this provision.'' Since the agency split, the determination whether to 
grant a suspension is made by BSEE. Because BOEM does not make these 
determinations, ``suspensions'' are no longer addressed in this 
subpart. Accordingly, the text in this final rulemaking changes the 
statement to say: ``[i]f the primary term specified in the lease is 
extended, the extension applies to this provision,'' removing the

[[Page 18121]]

reference to ``suspensions'' and to ``this subpart'' while retaining 
the meaning of the earlier provision.
    Section 550.197(c). Data and information to be made available to 
the public or for limited inspection. This section provides that BOEM 
may allow limited data and information inspection, but only by a person 
with a direct interest in related BOEM decisions and issues in a 
specific geographic area, and who agrees in writing to maintain the 
confidentiality of geological and geophysical (G&G) data and 
information submitted under this part. Similar to the last-discussed 
provision, this section did not appear in the proposed rulemaking, but 
it did appear in the pre-split regulations, at 250.197(c) (now BOEM 
regulation 550.197(c)). The provision in the final rulemaking changes 
``MMS'' to ``BOEM'' and deletes a reference to ``part 203,'' which no 
longer exists in the regulations at Title 30. The pre-split regulation 
listed several activities done by MMS. Only the part of that list that 
is pertinent to BOEM is retained in this final rule section.
    Section 550.197(d). Data and information to be made available to 
the public or for limited inspection. This section provides, in 
accordance with section 26 of OCSLA, that no proprietary information 
received by BOEM will be transmitted to any affected State unless the 
lessee, or the permittee and all persons to whom such permittee has 
sold such information under promise of confidentiality, agree to such 
transmittal. The final rule includes this provision, which did not 
appear in the proposed rule, because section 26(c) of OCSLA requires a 
regulation providing for maintenance of the confidentiality of 
privileged or proprietary information received by BOEM. (43 U.S.C. 
1352(c)).
2. Subpart D--Leasing Maps and Diagrams
    This is a new subpart, which is being created as part of this rule.
    Section 550.400. Leasing maps and diagrams. This section provides 
that any area of the OCS, that has been appropriately platted, may be 
leased for any mineral not included in an existing lease issued under 
the Act or meeting the requirements of subsection (a) of section 6 of 
the Act. This section was in the pre-split regulations at section 256.8 
(now BOEM regulation 556.8), but was omitted in part from the proposed 
rule. The Derivation Table in the Preamble to the proposed rule said 
the language of 256.8 was ``simplified'' and placed in proposed rule 
section 256.202. Proposed rule section 256.202, however, is not 
sufficient to ensure that the substance of former 256.8 is retained in 
the regulations. After reviewing these provisions, BOEM has determined 
that the text of former section 256.8 (now 556.8) should be retained. 
Hence, it has been included in this final rulemaking as section 
550.400, which retains the text from prior section 556.8 without any 
changes.

B. Part 556--Leasing of Sulfur or Oil and Gas and Bonding Requirements 
in the Outer Continental Shelf

1. The Table of Contents for Part 556
    The Table of Contents for part 556 in the final rulemaking reflects 
a changed organization and structure from the proposed rule. After 
publication of the proposed rule, and after BOEMRE was divided into two 
agencies, BOEM analyzed the organization of part 556 and the way in 
which information was presented within the sections in the part, and 
decided to modify the organization of the part.
    The first three subparts in the final rule (subpart A--General 
Provisions, subpart B--Oil and Gas Five Year Leasing Program, and 
subpart C--Planning and Holding a Lease Sale), contain the same 
information as the first three subparts in the proposed rule; the 
fourth subpart, Subpart D, however, includes more significant 
organizational changes. In the proposed rule, Subpart D--Issuance of a 
Lease, contained five subtitles within it: Qualifications, How to Bid, 
Restrictions on Joint Bidding, How Does MMS Act on Bids?, and Awarding 
the Lease. In the final rule, Subpart D includes only one subtitle: 
Qualifications. BOEM made this change in order to separate out the 
qualifications provisions and set them out in a clearer, more 
sequential manner. Subpart E in the final rule picks up the other four 
subtitles from the proposed rule's Subpart D.
    In the proposed rule, Subpart E covered bonding and financial 
assurance. These topics are found in Subpart I in the final rule, but 
as previously noted, no substantive changes have been made to the 
provisions in this subpart in the final rule. Instead of adopting the 
proposed rule sections on these topics, BOEM will retain the prior 
bonding and financial assurance provisions--which, with minor editorial 
and conforming revisions, are found at final rule sections 556.900 
through 556.907--until such time as a new rulemaking is proposed for 
these topics.
    In the proposed rule, Subpart F was entitled, ``Maintaining a 
Lease,'' and it contained four subtitles: Initial Period of a Lease, 
Lease Obligations, Transferring Interest in All or Part of a Lease, and 
Helium. In the final rule, Subpart F contains three subtitles: Length 
of Lease, Lease Obligations, and Helium. These subtitles cover the same 
regulatory issues as Subpart F in the proposed rule, with the exception 
of the proposed rule's subtitle concerning transfers of interest. In 
the final rule, regulatory provisions concerning the transfer of a 
record title interest and those provisions concerning transfers of an 
operating rights interest have been split into two different Subparts--
Subpart G and Subpart H, respectively.
    The final rule's Subpart H was ``Reserved'' in the proposed rule. 
In the final rule, Subpart H includes provisions addressing the 
transfer of operating rights interests. As noted above, final rule 
Subpart I addresses BOEM's bonding and financial assurance 
requirements, which are substantively unchanged from the prior BOEM 
regulations. Provisions dealing with bonus or royalty credits in 
exchange for certain leases, found in final rule Subpart J, were found 
in proposed rule Subpart I. The final rule's Subpart K--Ending a Lease, 
was the proposed rule's Subpart G.
    Finally, final rule Subpart L--Leases Maintained under Section 6 of 
OCSLA (43 U.S.C. 1335), and Subpart M--Environmental Studies, did not 
appear in the proposed rule. The Derivation Table in the Preamble to 
the proposed rule proposed to eliminate both subparts as unnecessary, 
but BOEM has re-thought this elimination, and has decided to retain 
them. We do so because, in the case of Subpart L, there are extant 
``Section 6 Leases,'' and with respect to Subpart M, OCSLA section 20 
requires that the Secretary perform environmental studies. (43 U.S.C. 
1346).
2. Subpart A--General Provisions
    Section 556.100. Statement of Policy. This section states that 
management of Outer Continental Shelf (OCS) resources is to be 
conducted in accordance with the findings, purposes, and policy 
directions provided by OCSLA. The corollary to final rule section 
556.100 is prior BOEM regulation 556.2. Both sections set forth a 
general policy statement. The proposed rule did not contain a section 
setting forth a statement of policy. Although this section is new in 
the final rule, it is explanatory in nature and does not impose any new 
requirements on the public. Therefore, BOEM is including it in this 
final rule without prior public notice and comment.
    Section 556.101. Purpose. The proposed rule contained a statement 
of

[[Page 18122]]

purpose at section 256.102, ``What does this part cover?'' In the final 
rule, however, BOEM decided to retain the statement of purpose section 
from the prior regulations, which was found at 556.1.
    Section 556.102. Authority. In the final rule, BOEM decided to 
include a regulatory section setting forth the authority(ies) for the 
issuance of these regulations, which has been updated to reflect the 
amendments made to FOGRMA by the Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1996, (30 U.S.C. 1701 note). The 
proposed rule did not contain a regulatory section with a list of 
authorities, but did contain such a list at the end of the proposed 
rule's Table of Contents. The list needed to be updated since the 
publication of the proposed rule.
    Section 556.103. Cross references. The proposed rule did not 
contain a section setting out cross-references. Current BOEM 
regulations section 556.7 lists pertinent cross-references, and BOEM 
decided to include a cross-reference section in the final rule. We did 
so because cross-references enable the reading public to more quickly 
find related regulations. Cross-references do not impose any new 
substantive requirements that require prior public notice and comment.
    Section 556.104. Information collection and proprietary 
information. This section has two major provisions. The first provides 
the legal basis for BOEM's collection of information in connection with 
the administration of its OCS oil, gas and sulfur leasing program. The 
second provision describes how BOEM will handle and maintain 
proprietary information. Final rule section 556.104 contains the same 
information as the corresponding proposed rule section, section 
256.100. Subsection (b) of the proposed rule provision addressed 
``proprietary information,'' but it was unclear whether the subsection 
extended to all proprietary information, or only to such information 
received in response to a Call for Information and Nominations 
(``Call''). To rectify this situation, we drafted the final rule 
provision to address proprietary information generally, (section 
556.104(b)), and separately, proprietary information received in 
response to a Call (section 556.104(c)).
    Section 556.105. Definitions. This section provides definitions for 
key terms used throughout this part of the regulations. As explained 
further below, some of these definitions are retained from the 
preexisting regulations; others are identical to definitions included 
in the proposed rule; and finally, a few definitions are new to this 
final rule, but they define terms already used in the regulations.
    The terms and phrases listed in the next paragraph have been 
retained from the regulations as they existed before BOEMRE was divided 
into two agencies, and therefore, as the regulations were constituted 
at the time of publication of the proposed rule.
    The list of terms that have been retained from the pre-split 
regulations is as follows: Aliquot or Aliquot Part, Authorized officer, 
Average daily production, Barrel, Crude oil, Development block, 
Economic interest, Initial period, Lease term pipeline, Lessee, Natural 
gas, Operating rights, Operator, Outer Continental Shelf (OCS), Outer 
Continental Shelf Lands Act (OCSLA), Owned, Planning area, Regional 
Director, Regional Supervisor, Security, Single bid, Six-month bidding 
period, and Statement of production.
    In the following cases, we moved definitions of terms from a 
substantive regulation to this definitions section, with no change to 
the meaning expressed.
    Aliquot part. The definition of the term ``aliquot part'' from 
proposed rule section 256.611, which addresses transfers of lease 
interests, was moved into this definitions section (556.105).
    BOEM. The term ``BOEM'' was retained, from the prior regulations, 
in final rule section 556.105.
    Development block. The definition of the term ``development block'' 
was moved from section 556.12(c)(3) to this definitions section.
    Economic interest. The definition of the term ``economic interest'' 
was moved from section 556.40 to this definitions section.
    Western Planning Area. Pursuant to a commenter's recommendation, a 
definition of ``Western Planning Area'' was added, in final rule 
section 556.105.
    The following terms were retained unchanged from the prior BOEM 
regulations, or remain as described in the proposed rule: Act, Affected 
State, Authorized Officer, Coastal Environment, Coastal Zone, 
Coastline, Desoto Canyon OPD, Destin Dome OPD, Human Environment, 
Marine Environment, Pensacola OPD. The term ``person'' was added to the 
regulations, utilizing the definition from the proposed rule.
    The following definitions have been added in final rule section 
556.105 to define terms or concepts already used in the regulations, 
the definitions of which were apparent from the context of the prior 
regulatory language: BSEE, crude oil, designated operator, economic 
interest, initial period, primary term, joint bid, lease, lease 
interest, lessee, natural gas, natural gas liquids, operating rights, 
operating rights owner, operating rights tract, operator, owned, 
planning area, primary term, regional director, regional supervisor, 
RUE, ROW, security, single bid, six month bid period, and statement of 
production. A few of these terms were updated, as follows:
     Designated operator. The requirement to designate an 
operator is set out in prior BOEM regulations at section 550.143. 
Consistent with the ``designated operator'' requirements in that 
section, BOEM is including a definition of the term ``designated 
operator'' in the definitions section of the final rule. Prior section 
550.143(a) states that ``each lessee must submit a Designation of 
Operator (DOO) form'' to designate an operator. As implemented, this 
requirement applies to all record title owners and to those operating 
rights owners that own operating rights in the aliquots/depths in which 
the designated operator, to which the DOO form applies, will be 
operating. This interpretation is reflected in the definition of 
``[d]esignated operator'' in the final rule.
     Lease interest. The term ``lease interest'' appears, as 
``interests in . . . leases,'' in the first sentence of prior BOEM 
regulations at section 556.62. The final rule definition lists 
interests already recognized in the prior regulations.
     Minerals. The term has been redefined to better correspond 
to its meaning in OCSLA.
     Natural gas liquids. The definition of ``Natural gas 
liquids'' is taken from the prior term ``Liquefied petroleum 
products.'' 42 U.S.C. 6213 restricts joint bidding on leases for those 
producing more than an average worldwide daily production of 1.6 
million barrels of crude oil and/or its equivalent in natural gas 
liquids and natural gas during a 6-month period preceding a lease sale. 
Previously, regulations implementing 42 U.S.C. 6213 referred to 
``liquefied petroleum products'' rather than ``natural gas liquids,'' 
but then defined ``liquefied petroleum products'' as natural gas 
liquids. We dropped references to ``liquefied petroleum products,'' but 
there is no change in the concept; only the term has been changed.
     Operating rights owner. The definition of the term 
``Operating rights owner'' has been added into this definitions 
section. It is based on the definition of ``Operating rights'' in prior 
BOEM regulations at section 550.105.

[[Page 18123]]

     Right-of-use and easement. The prior BOEM regulations, at 
30 CFR 550.105, defined the terms ``Easement'' and ``Right-of-use'' 
separately. But the term that is actually used throughout the prior 
regulations is ``right-of-use and easement.'' (See, e.g., 30 CFR 
550.16--550.166). The term ``right-of-use and easement'' is also used 
in the proposed rule (see, e.g., proposed rule sections 256.502(c), 
256.410(a), and 256.511(a)). The term is defined in the final rule 
because it appears in final rule section 556.104, concerning BOEM's 
information collections and its handling of proprietary information.
     Right-of-way. The definition of ``Right-of-way'' in the 
final rule is based on the definition of ``Right-of-way pipelines'' in 
the prior BOEM regulations at section 550.105, but the definition has 
been updated to make clear that a right-of-way authorization is issued 
by BSEE.
     You. The term ``You'' was defined in proposed rule 
provision 256.103 by providing a list of individuals to whom it would 
apply. This list has been retained in the final rule, but an 
introductory sentence has been added to the definition that defines the 
word, rather than merely listing the individuals to whom the term 
applies.
    Section 556.106. Service fees. This section identifies various 
administrative fees that BOEM requires for various services. The 
language in the Service Fees section, 256.104(b), of the proposed 
rulemaking, ``payment . . . must accompany . . . submission,'' 
engendered comments as to whether the proposed rule would have required 
operators to send in checks with their submission(s). BOEM therefore 
changed the language of this provision in the final rule to reflect 
that evidence of payment of the required fee(s) via pay.gov must 
accompany document submission(s) or must be sent to the office 
identified by BOEM. The fees in this rule are being adjusted to reflect 
the Implicit Price Deflator change of 3.31 percent (inflation from 2011 
through 2013). The fees were last adjusted for inflation through 
calendar year 2011 (78 FR 5836).
    Section 556.107. Corporate Seal requirements. This section sets 
forth an alternative procedure, to avoid the use of a corporate seal, 
for those electronic document submissions for which a corporate seal is 
otherwise required by these regulations. BOEM's rules require the use 
of a corporate seal in several instances. The Federal Government is, 
however, moving rapidly toward an all-electronic filing and records 
retention system. Because of this, BOEM has added section 556.107 to 
the final rule, which permits document submitters to electronically 
file documents with BOEM using a secure electronic filing system 
without the use of corporate seals. The filer may choose to file a 
document electronically; electronic document submission is not required 
by the final rule.
    In order to maintain the legal validity of documents filed 
electronically without corporate seals, BOEM is requiring that those 
entities who choose to so file provide BOEM with a one-time filing of a 
document containing the entity's corporate seal, signed by an 
authorized party, and stating that the entity's filings made through a 
secure electronic filing system will be legally binding.
    Final rule section 556.107 also enables those who choose not to 
file documents electronically to forego repeated use of the corporate 
seal by filing a document similar to the document discussed in the last 
paragraph, which states that future non-electronic filings will be 
legally binding without the use of a corporate seal.
    BOEM further recognizes that not all States issue corporate seals. 
Therefore, final rule section 556.107 contains a paragraph (c), which 
states that an entity from a non-corporate seal State may file a 
document with BOEM stating that its state of incorporation does not use 
corporate seals. This document must be signed by an authorized party 
and must state that submissions made by this corporation will be 
legally binding.
    Final rule section 556.107 does not have a counterpart in the 
proposed rule, but notice and comment on this provision is unnecessary 
because the provision does not require that any member of the public do 
anything differently than was already required by the prior 
regulations. Section 556.107 will, however, reduce the burden on those 
who choose to use the options it provides by streamlining the document 
submission process for them. The provision is also in accord with the 
Federal-Government-wide effort to digitize government services. See, 
e.g., the Government Paperwork Elimination Act, Public Law 105-277, 112 
Stat. 2681 (1998).
3. Subpart B--Oil and Gas Five Year Leasing Program
    Sections under this subpart detail the steps BOEM takes to develop 
the Five-Year Oil and Gas Leasing Program. The final rule provisions 
set forth, sequentially, the stages in the development of the Five Year 
program, and closely mirror those in the proposed rule.
    Proposed rule section 256.206, ``Does MMS offer blocks in a sale 
that is not on the 5-year program schedule?'' appeared under this 
Subpart B in the proposed rule. In the final rule, this section was 
moved to the next subpart, Subpart C--Planning and Holding a Lease 
Sale, because the section is substantively concerned with holding a 
certain type of lease sale, not with the development of the Five Year 
program. BOEM believes this section is more appropriately placed within 
Subpart C.
    Section 556.200. What is the Five Year leasing program? This 
section reiterates those key provisions of OCSLA that require the 
Secretary to prepare an oil and gas leasing program that consists of a 
five-year schedule of proposed lease sales. Final rule section 
556.200(a) substantially repeats proposed rule section 256.200. BOEM 
received two comments on proposed rule section 256.200 (section 556.200 
in the final rule) that part of the section repeated language from 
OCSLA, and was therefore ``inconsistent with the streamlining that MMS 
has taken with the proposed regulations.'' BOEM considered these 
comments, but decided to retain the statutory language as it is 
important to explain the goals of the Five Year program. BOEM received 
no other comments on this subpart.
    Section 556.201. Does BOEM consider multiple uses of the OCS? Final 
rule section 556.201 reiterates the OCSLA requirement that BOEM 
consider multiple uses of the OCS in its development of the Five Year 
oil and gas leasing program. This approach derives from a requirement 
in Section 18 of OCSLA (43 U.S.C. 1344(a)(2)(D)) that the leasing 
program shall be prepared and maintained in a manner consistent with, 
among other things, ``other uses of the sea and seabed, including 
fisheries, navigation, existing or proposed sea lanes, potential sites 
of deepwater ports, and other anticipated uses of the resources and 
space of the outer Continental Shelf.'' Final rule section 556.201 
emphasizes that BOEM gathers information about multiple uses of the OCS 
to assist the Secretary in making decisions on the Five Year program, 
pursuant to the provisions of 43 U.S.C. 1344. For this purpose, BOEM 
invites and considers suggestions from States and local governments, 
industry, and any other interested parties, primarily through public 
notice and comment procedures. BOEM also invites and considers 
suggestions from Federal agencies.
    Section 256.201 from the proposed rule has been modified in the 
final rule. As originally worded, proposed rule section 256.201 might 
have been

[[Page 18124]]

considered confusing because it used the word ``consult'' in the 
context of the Five Year Program. The term ``consult'' is a term of art 
usually associated with consultation under the Endangered Species Act 
(16 U.S.C. 1531-1544) and government-to-government consultation with 
Indian tribes. The Endangered Species Act does not require consultation 
during the preparation of the Five Year program. OCSLA requires that 
BOEM invite and consider comments and suggestions from other agencies 
and from States during its Five Year program preparation process, 43 
U.S.C. 1344(c), and so the final rule addresses that in sections 
556.201 through 556.203.
    Section 556.202. How does BOEM start the Five Year preparation 
process? This section sets forth the steps BOEM takes in initiating the 
Five Year program. Final rule section 556.202 substantively repeats 
proposed rule section 256.202, but the final rule changes the statement 
in the proposed rule that ``[a]ny area properly included on the 
official 5-year diagrams and maps may be offered for lease for any 
mineral not already leased'' by substituting the explanation that any 
``area not already leased for oil and gas may be offered for lease.'' 
The statement in the proposed rule was inaccurate because the Five Year 
program applies only to the leasing of oil and gas.
    Section 556.203. What does BOEM do before publishing a proposed 
Five Year program? This section provides that BOEM will invite comments 
from governors on a draft proposed program at least sixty days before 
it publishes a proposed Five Year program. Final rule section 556.203 
repeats proposed rule section 256.203, with some minor wording changes.
    Section 556.204. How do governments and citizens comment on a 
proposed Five Year program? This section states the procedures to be 
followed to obtain inter-governmental and citizens' comments on the 
proposed Five Year program. Final rule section 556.204 repeats proposed 
rule section 256.204.
    Section 556.205. What does BOEM do before approving a proposed 
final Five Year program or a significant revision of a previously-
approved Five Year program? This section provides that the Secretary 
must provide a copy of the proposed Five Year Program, or any 
significant revision thereto, to Congress and the President at least 
sixty days before approving it. Final rule section 556.205 is 
substantively the same as proposed rule section 256.205.
4. Subpart C--Planning and Holding a Lease Sale
    Sections in this subpart address the process leading up to a lease 
sale, the conduct of a lease sale, and the circumstances under which a 
lease sale that is not on the Five Year Program schedule may be held. 
Subpart C in the final rule generally tracks Subpart C in the proposed 
rule, with certain differences, described in the following paragraphs, 
which discuss final rule sections 556.300 through 556.309.
    Section 556.300. What reports may BOEM and other Federal agencies 
prepare before a lease sale? This section provides that BOEM will 
prepare a report describing the general geology and potential mineral 
resources of the area under consideration. Although this final rule 
section did not appear in the proposed rule, it did appear in the prior 
BOEM regulations, at prior Subpart C--Reports from Federal Agencies, 
which consists of one section, 556.22, ``General.'' The Preamble to the 
proposed rule stated that the precursor to prior regulations section 
556.22 (i.e., 256.22) was ``[e]liminated as repetitive with [OCSLA].'' 
BOEM has decided to retain the section in the final rule because the 
regulated public will be looking to the regulations, and not to OCSLA, 
for guidance on BOEM's processes and requirements. Final rule section 
556.300 is substantively identical to the prior BOEM regulation 556.22.
    Section 556.301. What is a Call for Information and Nominations? 
The formal lease sale process usually begins with BOEM's publication of 
a Call for Information and Nominations, sometimes referred to as the 
``Call.'' The Call requests indications of interest from industry in 
the leasing of specific blocks, and requests comments on other relevant 
information that BOEM can use in developing a recommendation of leasing 
areas for the Secretary. This section outlines the process BOEM uses to 
collect information to inform its determination as to which areas 
should be made available for leasing.
    Final rule section 556.301 is substantively identical to proposed 
rule section 256.300, except for the addition of an additional topic on 
which the Call will request comments. The prior regulations, at section 
556.23(b), state that the Call ``shall also request comments on areas 
which should receive special concern and analysis.'' The proposed rule 
did not include ``areas of special concern and analysis'' as one of the 
topics on which the Call will request comments, but the Preamble to the 
proposed rule shed no light on why this topic was omitted, stating only 
that section 256.23 (now 556.23) was ``[r]eorganized.'' BOEM sees no 
reason to omit ``areas of special concern and analysis'' from the list 
of topics on which the Call will request comments, and so has retained 
it in the list of such topics stated in final rule section 556.301.
    Section 556.302. What does BOEM do with the information from the 
Call? Using the information received in response to the Call and 
further analysis of environmental issues, resource potential, stated 
interest, potential use conflicts, and other relevant information, the 
Director will develop a recommendation of the area to be included in a 
lease sale. This recommendation is often termed the ``Area 
Identification,'' or ``Area ID.'' This section explains the process 
used to arrive at the Area ID.
    BOEM received one comment on proposed rule section 256.301, on 
which final rule section 556.302 is based. The comment noted that the 
phrase ``as soon as possible,'' which appeared in the analogous prior 
regulation (section 556.26(c)), had been deleted by the proposed rule, 
resulting in the following statement in section 256.301(b) of the 
proposed rule: ``[w]e inform the public of any additions or deletions 
from the area proposed for leasing in the 5-year program that result 
from the call process.'' The commenter requested that the phrase be 
retained in the final rule because whether or not areas have been 
deleted from a sale area is of great importance to potential bidders 
that are preparing for lease sales. BOEM agrees with this comment and 
has re-inserted this phrase in final rule section 556.302(c).
    Section 256.301 of the proposed rule addressed the Area ID stage of 
BOEM's lease sale preparation, but omitted several aspects that 
appeared in the prior BOEM regulations at section 556.26. There is no 
reason given in the proposed rule as to why certain aspects of this 
stage of the lease sale process were left out, except the statement 
that prior section 256.26 was ``[r]eorganized.'' Final rule section 
556.302 contains the substance of proposed rule section 256.301, as 
well as several paragraphs from the prior section 556.26. Specifically, 
three aspects of prior section 556.26 were not in the proposed rule, 
but have been retained in section 556.302 of the final rule. First, 
subparagraph (a)(2) of final rule section 556.302 states that the 
Director may, on his or her own motion, include in his or her 
recommendation areas that were not indicated in response to a Call. 
(See section

[[Page 18125]]

556.26(a)). Second, the last sentence of final rule section 556.302(b) 
states that the Director may hold public hearings on the environmental 
analysis done on the areas identified for leasing. (See section 
556.26(b)). Third, subparagraph 556.302(e) of the final rule repeats 
the last sentence in section 556.26(a), stating that, in the case of a 
supplemental sale, the Director's recommendation will be replaced with 
his findings made under this section.
    Final rule section 556.302(d) states that the Director may, upon 
request, provide relative indications of interest in areas received in 
response to a Call. Paragraph (d) also addresses the potentially 
confidential nature of such indications of interest and indicates that 
BOEM will release this information in such a way so as not to 
compromise the competitive interest of any of the respondents to the 
Call. The language of this final rule paragraph was found in the prior 
regulations at section 556.10(d). The substance of this final rule 
paragraph 556.302(d) was found in the proposed rule at section 
256.100(b)(1) and (2), but BOEM believes it is more appropriately 
placed in this final rule section, which addresses the treatment of 
information received in response to a Call.
    Section 556.303. What does BOEM do if an area proposed for leasing 
is within three nautical miles of the seaward boundary of a coastal 
State? Final rule section 556.303 sets forth the information that BOEM 
will provide to a State when an area proposed for leasing lies within 
three nautical miles of the seaward boundary of that State. Section 
556.303 is the same as proposed rule section 256.302, except that the 
final rule corrects the language of the provision to be consistent with 
OCSLA section 8(g) (43 U.S.C. 1337(g)) in its use of the term 
``nautical miles'' instead of the proposed rule's ``geographical 
miles.''
    Section 556.304. How is a proposed notice of sale prepared? This 
section describes the process utilized to prepare a proposed notice of 
sale. Final rule section 556.304 retains all the substance of proposed 
rule section 256.303, but for clarity divides the proposed rule 
provision's one paragraph into multiple paragraphs. The final rule 
provision also has a new title because the proposed rule provision's 
text and its title--``What happens with an approved proposed notice of 
sale?''--appears to have addressed an already-approved notice of sale 
without explaining how the agency arrives at the approved notice. The 
final rule provision helps clarify this by retaining some of the 
paragraphs from the analogous section in the prior regulations, 556.29, 
which were left out of proposed rule provision 256.303, but which help 
to explain BOEM's procedures. The Preamble to the proposed rule stated 
that proposed rule provision 256.303 represented a 
``[s]implifi[cation]'' of section 256.29 (now 556.29), but some steps 
were left out in the simplifying process, creating gaps in the 
regulations. These gaps have been eliminated with the retention of 
certain concepts from the prior regulations in final rule section 
556.305.
    Final rule section 556.305(a) states that the Director of BOEM may, 
in consultation with other Federal agencies, develop lease stipulations 
and conditions, which will appear or be referenced in the proposed 
notice of sale. Both the prior regulation section 556.29 and proposed 
rule section 256.303 contained similar language, but the proposed rule 
provision went further and stated that the proposed notice of sale also 
includes ``the Director's findings, and all comments and 
recommendations received on the proposal.'' While reviewing the 
proposed rule, BOEM realized that these last three items are not in the 
proposed notice of sale, but accompany it when it is presented to the 
Secretary for approval. This concept that certain items will accompany 
the proposed notice of sale to the Secretary is correctly expressed in 
prior section 556.29(b), therefore this language has been used in final 
rule section 556.304(b).
    BOEM received a comment requesting that the lease form be attached 
to or referenced in the proposed notice of lease sale because ``the 
terms of an oil and gas lease sale are integral to the lessee/lessor 
relationship and lessees . . . should have the right to know the lease 
terms in advance of submitting bids.'' BOEM agrees with this comment 
insofar as potential bidders should be aware of the lease terms and 
conditions, to the extent possible, in advance of the lease sale. To 
that end, final rule provision 556.304(c) makes clear that the proposed 
notice of sale references the lease form.
    Section 556.305. How does BOEM coordinate and consult with States 
regarding a proposed notice of sale? This section outlines the process 
by which BOEM coordinates with affected States following the proposed 
notice of sale. Final rule section 556.305 is substantively the same as 
proposed rule section 256.304. One change was made to the language of 
the section in the final rule as a result of a comment. The comment 
requested that the section ``actually reference'' the Coastal Zone 
Management Act (CZMA) (16 U.S.C. 1451-1466) ``so that if the CZMA is 
modified or amended or repealed, [BOEM] can continue to follow the 
process outlined in the act, rather than risking conflict or 
inconsistency.'' BOEM agrees with this suggestion, and has included a 
reference to the CZMA in final rule section 556.305(b).
    Section 556.306. What if a potentially oil-or gas-bearing area 
underlies both the OCS and lands subject to State jurisdiction? This 
section provides a process for resolving issues or disputes that may 
arise between a State and the Federal government when a hydrocarbon-
bearing area underlies both the Federal OCS and State submerged lands. 
This final rule section did not appear in the proposed rule. The 
substance of the final rule section is, however, found at prior BOEM 
regulation section 556.25(b)-(d). The Preamble to the proposed rule 
stated that this section of the prior regulations had been left out in 
an attempt to simplify the regulations. Upon reconsideration, however, 
BOEM believes that the proposed rule may have over-simplified the 
regulations, resulting in a gap. The proposed rule, at section 256.302, 
addressed potentially leasable areas ``within 3 miles of the seaward 
boundary of a coastal State.'' The proposed rule did not, however, 
address potentially leasable areas that underlie the Federal/State 
boundary, resulting in potentially leasable resources on both sides of 
this boundary. The two situations are treated differently in OCSLA, at 
sections 8(g)(2) and 8(g)(3), respectively (43 U.S.C. 1337(g)(2) and 
1337(g)(3)). Therefore, BOEM believes that they should be treated 
separately in the regulations and BOEM has decided to retain the prior 
regulations' provisions in the final rule, at section 556.306.
    Section 556.307. What does BOEM do with comments and 
recommendations received on the proposed notice of sale? Final rule 
section 556.307 addresses BOEM's treatment of comments received on the 
proposed notice of sale, particularly those received from governors and 
local governments. This section provides a description of the process 
that BOEM will use to evaluate recommendations of governors and local 
governments. Section 556.307 is substantively the same as proposed rule 
section 256.305, but the final rule section has been divided into 
paragraphs for ease of reading and reference. The final rule section, 
at paragraph (b), contains one sentence that does not appear in the 
proposed rule, but did appear in the analogous prior section, 
556.31(b). That sentence merely states that the determination of

[[Page 18126]]

the ``national interest'' as meant in this section, will be based on 
the findings, purposes, and policies of OCSLA.
    Section 556.308. How does BOEM conduct a lease sale? Final rule 
section 556.308 explains that BOEM will publish a final notice of sale 
at least 30 days before the scheduled date of a lease sale. This final 
notice of sale will contain all the information needed to place a bid, 
as well as the terms and conditions of the lease, including any 
stipulations necessary to mitigate potential adverse impacts on the 
environment.
    Final rule section 556.308, paragraphs (a)-(c), are substantively 
the same as proposed rule section 256.306. The final rule section 
includes a new paragraph (d), which was added at the request of a 
commenter. The commenter requested that ``the Notices of Lease Sale 
should include the lease form that will be used to grant successful 
bids.'' Therefore, final rule section 556.308 (d) states: ``[t]he final 
notice of lease sale references, or provides a link to, the OCS lease 
form which will be issued to successful bidders.''
    Section 556.309. Does BOEM offer blocks in a sale that is not on 
the Five Year program schedule (called a Supplemental Sale)? Under 
certain circumstances, detailed in proposed rule section 256.206 and 
final rule section 556.309, BOEM is authorized to offer blocks in an 
otherwise unscheduled sale, referred to as a supplemental sale. The 
proposed and final rule sections are the same.
5. Subpart D--Qualifications
    Final rule Subpart D--Qualifications, was a sub-subpart in the 
proposed rule, under proposed rule Subpart D--Issuance of a Lease. The 
substance of the provisions in Subpart D of the final rule is the same 
as that found in sections 256.400 through 256.404 of the proposed rule. 
BOEM decided, however, that the provisions covering the qualifications 
necessary to hold leases on the OCS were significant enough to merit a 
separate subchapter in the final rule. BOEM believes it is logical to 
place ``Qualifications'' into its own subpart and to remove it from 
under the heading ``Issuance of a Lease,'' where it was found in the 
proposed rule as one must qualify before a lease can be issued.
    There are six sections within final rule Subpart D--Qualifications, 
which generally correspond with the five sections under the subheading 
``qualifications'' in the proposed rule. There are, however, a few 
minor differences between the sections in the proposed rule and the 
sections in the final rule, including the lack of a table in the final 
rule to set out the type of evidence required by BOEM to demonstrate 
proof of qualification to hold leases on the OCS. The proposed rule 
laid out the evidence requirements in a table format, but on 
reconsideration BOEM found this format too limiting, and opted to 
remove the table and instead use regulatory text to set forth the 
evidence requirements for qualification. The substance of the 
regulations remains the same in the final rule.
    Generally, there were some logical gaps in the scheme laid out by 
the proposed rule sections regarding ``Qualification'' to hold leases 
on the OCS, which BOEM has rectified in the final rule. For example, 
BOEM has been issuing ``qualification numbers'' to qualified potential 
lessees for many years, but the fact that such a number must be 
obtained by a potential lessee as a first step in the leasing process 
has not been clearly spelled out in the regulations. The lay-out of the 
proposed rule sections on qualification appeared to assume that the 
reader knew that he or she must obtain a qualification number from BOEM 
in order to be ``qualified'' to hold leases on the OCS, without ever 
saying how that number would be obtained.
    The other minor differences between the proposed and final rule 
provisions dealing with ``Qualifications'' are set forth, section-by-
section, below.
    Section 556.400. When must I demonstrate that I am qualified to 
hold a lease on the OCS? This section provides that, in order to bid 
on, own, hold, or operate a lease on the OCS, bidders, record title 
holders, and operating rights owners must first obtain a qualification 
number from BOEM. The title of this section was reworded to more 
clearly describe this purpose.
    Final rule section 556.400 is an outgrowth of proposed rule section 
256.401(a). Proposed rule section 256.401(a) stated that, a person, in 
order to show that he or she was qualified to be a lessee, must 
``provide [his] MMS qualification number.'' The proposed rule failed to 
explain, however, that a potential lessee first had to obtain a 
qualification number from BOEM. Final rule section 556.400 explains 
that, ``in order to bid, own, hold, or operate a lease on the OCS,'' 
one must obtain a qualification number from BOEM. Final rule section 
556.400 also makes clear that a bidder must be qualified in order to 
bid on OCS leases, as was required by prior section 556.46.
    Section 556.401. What do I need to show to become qualified to hold 
a lease on the OCS and obtain a qualification number? This section 
outlines BOEM's requirements for a prospective lessee to become a 
qualified bidder. Final rule section 556.401 is essentially proposed 
rule section 256.400, with a few minor additions, which flow from the 
language of the proposed rule. Like the proposed rule provision, the 
final rule provision lists those who may become qualified to hold 
leases on the OCS, but better describes the entities previously 
identified only as ``associations.'' Proposed rule section 256.400(c) 
listed ``[a] private, public or municipal corporation organized under 
the laws of any State of the U.S., the District of Columbia, or any 
territory or insular possession subject to U.S. jurisdiction.'' A 
Limited Liability Company (LLC) was not listed in proposed rule section 
256.400(c), but LLC was listed in the table in proposed rule section 
256.401 as one of the entities that may become qualified to hold leases 
on the OCS. Therefore, the final rule provision adds to the list in 
section 556.401 a ``Limited Liability Company or Limited Liability 
Corporation organized under the laws of any State of the United States, 
the District of Columbia, or any territory or insular possession 
subject to United States jurisdiction.''
    Proposed rule section 556.400(e) listed a ``State'' as one entity 
potentially qualified to hold leases on the OCS. The final rule, at 
section 556.401(a)(5), using language from proposed rule section 
256.400(c), instead says: ``[a] State, the District of Columbia, or any 
territory or insular possession subject to United States 
jurisdiction.'' Similarly, proposed rule section 256.400(f) listed a 
``political subdivision of States'' as also potentially qualified to 
hold leases on the OCS. The final rule, at section 556.401(a)(6) 
instead says: ``[a] political subdivision of a State, the District of 
Columbia, or any territory or insular possession subject to United 
States jurisdiction.''
    Final rule section 556.401, at paragraph (a)(7) adds ``Trust'' to 
the types of entities that are potentially qualified to hold leases on 
the OCS. A trust is one of the entities listed in the table in proposed 
rule section 256.401, but it is not among those potentially qualified 
entities that were listed in proposed rule section 256.400. In order to 
rectify this oversight, the final rule section adds ``Trust'' to the 
list of those potentially qualified set forth in final rule section 
556.401, and adds that any such Trust must also be ``organized under 
the laws of any State of the United States, the District of Columbia, 
or any territory or insular possession subject to United States 
jurisdiction.''
    Final rule section 556.401(c) affirmatively states that BOEM may

[[Page 18127]]

issue a qualification number to one who has provided acceptable 
evidence of qualification. This is a clarification of proposed rule 
section 256.401(a), which stated: ``[p]rovide your . . . qualification 
number if you have qualified with us.'' The final rule merely 
affirmatively states that BOEM will issue that number, if appropriate.
    Section 556.402. How do I make the necessary showing to qualify and 
obtain a qualification number? This section describes the types of 
evidence that BOEM will require in order to qualify a person to hold 
leases on the OCS. Section 556.402 replaces proposed rule section 
256.401, including the table in the latter. There are certain minor 
differences between the proposed and final rule sections, including the 
following:
    Both proposed rule section 256.401 and final rule section 556.402 
list the evidence needed to show that one is qualified to hold leases 
on the OCS. In the final rule, we added that such evidence must be 
``acceptable to BOEM.'' This requirement was implicit in the proposed 
rule. There would be no point in requiring evidence of qualification if 
BOEM were obligated to accept evidence that is not sufficient as to 
form or content to enable BOEM to be certain of the status of the 
submitter. In order to be certain of this status, it is reasonable to 
expect that only evidence ``acceptable to BOEM'' will be accepted.
    Final rule section 556.402, subparagraph (c)(3), adds the 
requirement that an entity seeking to qualify to hold leases on the OCS 
provide BOEM with a list of persons authorized to bind the entity, and 
that such list be kept current. This subparagraph reminds the entity 
that it is up to the entity, (and therefore, not up to BOEM) to 
determine who in its organization is authorized to bind it. BOEM 
believes that the requirement to provide a list of persons authorized 
to bind an organizational entity is a logical extension of the 
requirement to provide the various documents listed in the proposed 
rule table at proposed rule section 256.401. BOEM also believes that 
providing and updating this list of persons, along with the other 
evidence required by final rule section 556.402, is a simpler and more 
manageable way to approach the question of who is authorized to bind a 
specific entity than the prior regulations or the language used in the 
proposed rule.
    Final rule section 556.402 contains several paragraphs that did not 
appear in the analogous section of the proposed rule (section 256.401). 
Both proposed rule section 256.401 and final rule section 556.402 
address traditional business entities, such as corporations and 
partnerships. There are, however, other types of business organizations 
that are eligible to qualify to hold leases on the OCS, but that would 
not have been covered by the qualifications provision in the proposed 
rule.
    Paragraph (e) of final rule section 556.402 therefore addresses 
business entities with non-traditional business forms. Some of these 
non-traditional business forms do not have standard positions, such as 
``president'' or ``secretary.'' Accordingly, paragraph (e) of final 
rule section 556.402 does not name a particular position but states 
that an individual from the highest level of management of an entity 
with a non-traditional business form, who is authorized by the entity's 
operating agreement or governance documents to submit evidence of 
eligibility to hold OCS leases, must submit such evidence. Paragraph 
(e) is a clarification of proposed rule sections 256.401(c)(4) and 
256.401(d), both of which sought to ensure that BOEM does business with 
the person within a qualified organization who has the authority to 
bind that organization. Paragraph (e) is a general catch-all meant to 
ensure that there are no gaps in BOEM's regulations when it comes to 
the evidence necessary to demonstrate qualification to hold leases on 
the OCS.
    Final rule section 556.402(f) states the entity that obtains a 
qualification number is responsible for ensuring that the number is 
used only for the purposes that the entity's governance documents 
allow. This was implicit in the proposed rule, but the new final 
subsection makes it clear that it is not BOEM's responsibility to 
ensure that entities are not going beyond their allowed powers in their 
dealings on the OCS.
    Lastly, final rule section 556.402(h) makes it clear that one may 
not hold leases on the OCS until BOEM has issued a qualification 
number. This concept was also implicit in the proposed rule and in 
BOEM's prior regulations in the requirement to obtain the qualification 
number.
    Section 556.403. Under what circumstances may I be disqualified 
from holding a lease on the OCS? This section describes the 
circumstances under which a person may be excluded or disqualified from 
holding a lease on the OCS. Final rule section 556.403 substantively 
replicates proposed rule section 256.402, with some minor language 
changes. The language at final rule section 556.403, paragraph (b), 
tracks the language of OCSLA more closely than did the language of the 
corresponding section in the proposed rule. This was done at the 
request of a commenter and ensures that paragraph (b) (``You may not 
hold an OCS lease if . . . The Secretary finds, after notice and 
hearing, that you or your principals fail to meet due diligence 
requirements or to exercise due diligence under section 8(d) of OCSLA . 
. . on any OCS lease'') could not be interpreted to conflict with 
section 8(d) of OCSLA (``No bid for a lease may be submitted if the 
Secretary finds, after notice and hearing, that the bidder is not 
meeting due diligence requirements on other leases.'' 43 U.S.C. 
1337(d)).
    Also, the language at final rule section 556.403, paragraph (c), 
was revised to make it clear that either BOEM or BSEE could offer 
notice and opportunity for a hearing to determine whether operating 
performance is unacceptable, pursuant to either appropriate BOEM 
regulations or appropriate BSEE regulations. This clarification is 
necessary because of the division of BOEMRE into two agencies, and the 
fact that both BOEM and BSEE have a role in determining whether 
operating performance is unacceptable.
    Section 556.404. What do the non-procurement debarment rules 
require that I do? Final rule section 556.404 details how to comply 
with the Department's non-procurement debarment rules, specifically 
those that relate to entering covered transactions and notifying BOEM 
if you know that you or your principals are excluded or disqualified, 
or have been indicted or convicted of a crime .It is substantively the 
same as proposed rule section 256.403, with minor conforming language 
changes.
    Section 556.405. When must I notify BOEM of mergers, name changes, 
or changes of business form? This section provides that lessees must 
notify BOEM of any merger, name change, or change of business form as 
soon as practicable, but in no case later than one year after the 
change or action. Final rule section 556.405 is the same as the 
proposed rule section, 256.404, with one exception. The proposed 
section stated ``[y]ou must immediately notify BOEM of a name change,'' 
but then allowed up to one year within which to do so. A commenter 
pointed out the inconsistency between the word ``immediately'' and the 
one-year period, and BOEM has therefore dropped the word 
``immediately'' from final rule section 556.405 and replaced it with 
``as soon as practicable.''
    This same commenter opined that providing BOEM with name changes or 
changes of business form would be too burdensome and that BOEM has 
``multiple ways to learn of a merger or name change.'' BOEM does not 
agree

[[Page 18128]]

with these opinions. BOEM has run into difficulties in the past brought 
about by name changes and/or mergers about which BOEM had not been 
timely informed. It is not practicable for BOEM to monitor filings of 
name changes and merger information in each State. BOEM does not see 
that it is a burden for entities doing business on the OCS to keep BOEM 
apprised of changes of name or corporate form, such as may occur with a 
merger.
6. Subpart E--Issuance of a Lease
    Subpart E--Issuance of a Lease, is divided into four subdivisions 
in the final rule: ``How to Bid,'' ``Restrictions on Joint Bidding,'' 
``How Does BOEM Act on Bids?'' and ``Awarding the Lease.'' The 
regulations in the first subdivision delineate the process of 
submitting a bid to BOEM and the information that must be submitted 
with the bid. The next subdivision, ``Restrictions on Joint Bidding,'' 
explains the effect of being placed on BOEM's Restricted Joint Bidders 
List and the reporting requirements for those placed on the List. ``How 
Does BOEM Act on Bids?'' presents information as to BOEM's acceptance 
or rejection of bids, the treatment of a tied bid, and the options 
available to a high bidder whose bid was rejected. The last subdivision 
of Subpart E, ``Awarding the Lease'' explains the procedures the bidder 
must follow after BOEM accepts its bid.
    Following is a section-by-section analysis of the sections within 
Subpart E.
How To Bid
    Section 556.500. Once qualified, how do I submit a bid? Final rule 
section 556.500 states generally that each bidder must submit a 
separate sealed bid for each tract or bidding unit, along with a bid 
deposit. The final rule section specifies that information regarding 
the timing of bid submission, and the amount and payment method of bid 
deposits, will be set forth in the final notice of sale. Final rule 
section 556.500 appeared at proposed rule section 256.410.
    Paragraph (c) of final rule section 556.500 reaffirms the practice 
from the prior regulations (section 556.46(b)) and the proposed rule 
(section 256.410(b)) that the final notice of sale will specify the 
amount of the bid deposit. Paragraph (c) adds, however, that if not so 
specified, the ``default'' deposit amount will be twenty percent of the 
bid, the deposit amount that has been required for many years. As 
pointed out by a commenter, a bid deposit of twenty percent is the 
``status quo.'' Another commenter noted that the bid deposit is 
``typically set at one-fifth of the bonus bid amount.'' BOEM finds it 
unnecessary to seek comments on this ``default'' language, which merely 
reflects the ``status quo.''
    Section 556.501. What information do I need to submit with my bid? 
Final rule section 556.501 reiterates requirements, found in section 
26(a)(1)(A) of OCSLA (43 U.S.C. 1352(a)(1)(A)), to provide geological 
and geophysical (G&G) data to BOEM upon request. Current BOEM 
regulations in part 551 of Title 30 of the CFR, ``Geological and 
Geophysical (G&G) Explorations of the Outer Continental Shelf,'' 
already address this requirement, as applied to G&G activities 
permitted ``on unleased lands or on lands leased to a third party,'' 30 
CFR 551.12(a). Therefore, current part 551 already applies to lands 
being bid upon, but BOEM has included section 556.501 in this final 
rule, because part 556 sets forth bidding and leasing procedures/
requirements, and the requirement to provide G&G information with a bid 
logically falls within this comprehensive whole. Including final rule 
section 556.501 ensures that bidders are aware that they may need to 
submit requested G&G information at the time of bidding.
Restrictions on Joint Bidding
    In the prior regulations, there are a series of definitions and 
other provisions that apply only in the context of restricted joint 
bidding, which were not in the proposed rule. Prior regulation section 
556.40 lists 13 definitions, which help explicate the joint bidding 
restrictions. The proposed rule Preamble stated that section 256.40 
(now 556.40) was ``[e]liminated as redundant,'' but, upon reviewing the 
proposed rule and the comments, BOEM decided that these definitions and 
provisions are not ``redundant,'' but instructive and helpful to 
explain the concepts underlying restrictions on joint bidding. The 
definitions have been retained in the final rule, some in the final 
rule definitions section, 556.106, and some in the provisions under 
this subheading of ``Restrictions on Joint Bidding,'' made up of final 
rule sections 556.511 to 556.515.
    Further, there are several provisions previously found at 556.43(d) 
and (e), which explain how to measure oil, natural gas liquids, and 
natural gas, for purposes of determining whether a person's production 
has exceeded 1.6 million barrels in the prior period, and thus whether 
he or she will be on the Restricted Joint Bidders List (sometimes 
referred to below as the ``List''). For example, prior section 
556.43(d) stated that: ``[a]ll measurements of crude oil . . . under 
this section shall be at 60 degrees Fahrenheit.'' These important 
provisions were left out of the proposed rule with no explanation other 
than that section 256.43 (previously 556.43) was ``simplified and 
reorganized.'' BOEM has reconsidered this ``simplification and 
reorganization'' and has determined that these measurement-describing 
provisions should be retained. They appear in final rule section 
556.513(d).
    Section 556.511. Are there restrictions on bidding with others and 
do those restrictions affect my ability to bid? This section prohibits 
joint bidding by major oil and gas producers under certain 
circumstances. Final rule section 556.511 is substantively the same as 
proposed rule section 256.411, but the final rule section has one 
additional paragraph. This additional paragraph, 556.611(d), makes 
clear that a person on the Restricted Joint Bidders List may not enter 
into a pre-bidding agreement for the conveyance of any lease interest 
to another person on the List. The prohibition on pre-bid agreements 
between persons on the List was addressed in prior section 556.44 (c), 
but was not addressed in the proposed rule. BOEM has decided to retain 
this provision because of its continued relevance and applicability.
    Section 556.512. What bids may be disqualified? This section 
provides the circumstances under which a bid for any oil and gas lease 
will be disqualified and/or rejected. Final rule section 556.512 does 
not have a counterpart in the proposed rule, but it was found in the 
prior regulations at section 556.44. The Preamble to the proposed rule 
stated that section 256.44 (now 556.44) was ``simplified,'' and the 
reader was directed to proposed rule section 256.402 in its stead, but 
this ``simplification'' would create a discrepancy. Current section 
556.44 addresses disqualification of certain types of bids involving 
persons on the List of Restricted Joint Bidders. Proposed rule section 
256.402 has nothing to do with joint bidding, but sets forth three 
discrete situations where any person may be disqualified from holding a 
lease (exclusion due to the non-procurement debarment and suspension 
system, failure to exercise due diligence, or unacceptable operating 
performance). The substance of prior section 556.44 did not appear 
anywhere in the proposed rule, but BOEM has decided that it is 
necessary for a full understanding of the effects and ramifications of 
being placed on the Restricted Joint Bidders List. Therefore, the text 
of prior section 556.44 has been retained, verbatim, with only 
necessary

[[Page 18129]]

conforming changes, in final rule section 556.512.
    Section 556.513. When must I file a statement of production? This 
section explains the circumstances under which a lessee must prepare 
and send to BOEM a statement describing its oil and gas production and 
what the statement is to contain. Final rule section 556.513 contains 
the substance of proposed rule section 256.412, as well as three 
subparagraphs previously found at prior section 556.40(l) and omitted 
from the proposed rule. Proposed rule section 256.412 explained that a 
person on the List of Restricted Joint Bidders would have to file a 
statement of production when its production exceeded 1.6 million 
barrels of oil, natural gas liquids, and natural gas during the prior 
production period. The prior regulations had the same provision, but 
the prior regulations, at section 556.40(l), also defined what 
``Production'' meant with respect to each of these resources. 
Appropriate portions of the 556.40(l) definitions have been retained in 
final rule section 556.513 to make clear what is to be included in the 
measurement of crude oil, natural gas liquids, and natural gas when 
determining production chargeable to the prior production period.
    Section 556.514. How do I determine my production for purposes of 
the Restricted Joint Bidders List? This section details what production 
must be counted when determining whether a company should be considered 
a ``restricted bidder.'' Final rule section 556.514 replicates proposed 
rule section 256.413, with some concepts included from prior sections 
556.40 and 556.43. Section 556.43(d) states that ``[a]ll measurements 
of crude oil and liquefied petroleum products [referred to as natural 
gas liquids in the final rule] . . . shall be at 60 degrees 
Fahrenheit.'' The proposed rule did not include the 60 degree 
Fahrenheit measurement parameter, but BOEM has decided to retain it as 
a necessary instruction for those persons who need to determine their 
production for purposes of the Restricted Joint Bidders List. The 
measurement parameter is in final rule section 556.514(a)(1).
    Also in final rule section 556.514(a)(1) is a reference to the 
equivalency factors set forth in 42 U.S.C. 6213(b)(2) and (3), which 
state, respectively: ``[o]ne barrel of natural gas equivalent equals 
5,626 cubic feet of natural gas measured at 14.73 pounds per square 
inch [(PSI) relative to the mean sea level, or] (MSL) and 60 degrees 
Fahrenheit'' and ``[o]ne barrel of natural gas liquids equivalent 
equals 1.454 barrels of natural gas liquids at 60 degrees Fahrenheit.'' 
These two equivalencies were found in the prior regulations at section 
556.43(e), but were omitted from the proposed rule. BOEM believes that 
these equivalencies are also necessary instructions for persons 
attempting to determine whether their production would place them on 
the Restricted Joint Bidders List.
    The final rule, at section 556.514(d), also retains the definition 
of ``subsidiary'' found in prior section 556.43(a)(3), but not 
contained in the proposed rule. Final rule section 556.514(f), which 
further explains how measurements of resources must be made, was not in 
the proposed rule, but was found at prior section 556.40(l)(1) and (2).
    Final rule section 556.514(e) is a logical extension of the 
interplay among prior section 556.40's definitions of ``economic 
interest'' and ``owned'' and prior section 556.43(b). The definitions 
in prior section 556.40 applied to joint bidding and restrictions 
thereon. The definition of ``economic interest'' defines certain types 
of passive interests, such as a royalty interest or a net profits 
interest. The definition of ``owned'' in prior 556.40 included ``having 
. . . an economic interest in'' the production of crude oil, natural 
gas, or natural gas liquids. And 556.43(b) stated that a person is 
chargeable, for purposes of joint bidding restrictions, with production 
that it ``owns.'' Therefore, reading these provisions logically 
together, a person's economic interest in production must be counted in 
that production chargeable to him or her for purposes of determining 
whether he or she is on the Restricted Joint Bidders List. This concept 
from the prior regulations is retained in the final rule in section 
556.514(e) and the text was not changed from how it was originally 
proposed.
    Section 556.515. May a person be exempted from joint bidding 
restrictions? This section provides the circumstances under which a 
person may be exempted from joint bidding restrictions. Final rule 
section 556.515 is based on proposed rule section 256.414. Proposed 
section 256.414, however, did not state the specific regulatory 
sections from which exemption from the joint bidding restrictions or 
reporting requirements may be granted. These specific designations were 
found in the prior regulations, at section 556.41(d), and have been 
retained in final rule section 556.515.
How Does BOEM Act on Bids?
    Section 556.516. What does BOEM do with my bid? This section 
outlines the procedures BOEM will follow when reviewing bids received 
for leases on the OCS and when handling tie bids. Section 556.516 of 
the final rule is based on proposed rule section 256.416. Proposed 
section 256.416(b) stated that BOEM would accept or reject all bids 
within 90 days, or a longer time if BOEM extended the 90-day period. 
Section 556.516(b) of the final rule adds that BOEM will timely notify 
bidders in writing of a decision to extend the 90-day period. Proposed 
section 256.416(d) states that the Attorney General may review the 
results of a sale before BOEM accepts any bid. This requirement is 
repeated in final rule section 556.516(d), with additional language 
explaining that the Attorney General must act within 30 days and may 
consult with the Federal Trade Commission. Both of these strictures are 
found in section 8(c)(1) of OCSLA (43 U.S.C. 1344(c)(1)).
    BOEM received the following comment: ``There is no policy reason 
not to allow co-ownership by agreement of bidders with a tie bid, when 
the tie bidders are on the restricted joint bidder list. Those parties 
cannot have communicated or agreed with respect to the bid, but going 
forward could agree to an assignment creating co-ownership after the 
lease is awarded.'' Neither the prior regulations (see 30 CFR 
556.47(c)), nor the proposed rule, (see section 256.416(c)), permit tie 
high bidders who are both (or all) on the Restricted Joint Bidders List 
to accept a lease jointly. BOEM considered the comment above but 
concluded that there is no way to know whether tie bidders 
``communicated or agreed with respect to the bid.'' Therefore, BOEM has 
decided that the current policy is a sound one and will not be changed.
    There is one significant difference between proposed rule section 
256.416 and final rule section 556.516. Proposed rule section 
256.416(c) addressed tie bids and stated that if there was no agreement 
among the bidders as to who would receive the lease, BOEM would ``award 
the lease to the high bidder selected by lot.'' The prior regulation, 
at section 556.47(e)(2), did not allow a bid to be awarded by lot, but 
stated that if an agreement from the tie bidders was not submitted to 
BOEM within 15 days, ``all bids shall be rejected.''
    BOEM has reconsidered the ``award by lot'' policy enunciated in the 
proposed rule, and has decided not to adopt that policy. The policy is 
inherently unfair to one of the bidders and is inconsistent with BOEM's 
long-standing policy that if no bids are accepted, the lease will be 
withheld by BOEM and offered in the next lease sale. This policy 
affords BOEM the

[[Page 18130]]

opportunity to obtain a greater return, furthering OCSLA's goal that 
BOEM obtain fair market value for OCS leases. See, section 18(a)(4) of 
OCSLA (43 U.S.C. 1344(a)(4)). BOEM will therefore retain the policy in 
the existing regulation that all tie bids, for which a timely agreement 
delineating who will receive the lease has not been submitted to BOEM, 
will be deemed rejected. This policy is stated in final rule section 
556.516(c)(3).
    Section 556.517. What may I do if my high bid is rejected? This 
section describes the reconsideration procedures that apply in the 
event that a high bid is rejected by BOEM. Proposed rule section 
256.417 would have allowed a bidder whose bid was rejected to request 
reconsideration of that rejection within 15 days, and stated that the 
bidder would receive a written response. The previous regulations at 
section 556.47(e), and the proposed rule at section 256.410, stated 
that the request for reconsideration is to be made to the Secretary. 
The proposed rule section did not address whether such a request could 
be appealed, but the previous regulations at 556.47 stated that 
decisions on high bids are not subject to review by the Department's 
Office of Hearings and Appeals.
    BOEM received a comment on proposed section 256.417 that requested 
more detail regarding reconsideration of rejection of a high bid, 
specifically as to the review process for a reconsideration request. In 
response to the comment, BOEM has added detail to the final rule 
section to clarify the procedures to be followed by the bidder 
requesting reconsideration, and those that will be followed by BOEM 
when it receives such a request. Therefore, final rule section 556.517 
states that the decision of the authorized officer on bids is the final 
action of the Department, and that the request for reconsideration of 
such a decision must be made to the Director, as the Secretary's 
delegate, and must include evidence as to why the decision should be 
reconsidered. The final rule section retains the section 556.47 
statement that the decision on the reconsideration is not subject to 
review by the Department's Office of Hearings and Appeals.
Awarding the Lease
    Section 556.520. What happens if I am the successful high bidder 
and BOEM accepts my bid? This section describes the steps involved in 
the lease award process. BOEM received several comments on proposed 
section 256.420, which appears at final rule section 556.520, 
particularly on proposed section 256.420(c). That paragraph stated that 
if a successful bidder did not return the executed lease in the 
prescribed time or if it otherwise failed to comply with the 
regulations, its deposit would be forfeited ``and [BOEM] may take 
appropriate action to collect the full amount bid.'' Three commenters 
pointed out that, traditionally, in the scenario posited above, the 
bidder's deposit was forfeited, but BOEM had never attempted to collect 
the full amount bid. One of these commenters stated that ``[p]ayment of 
the one-fifth amount is sufficient penalty,'' and payment of amounts 
beyond that ``is not warranted.'' Another of the commenters pointed out 
that forfeiting the ``significant penalty'' of the one-fifth deposit 
``allows lessees to make an informed decision on leasing if information 
relating to the area becomes available after the bids are made.'' The 
third commenter ``objected'' to the forfeiture of the full bid amount, 
but also suggested some alternatives for BOEM's implementation of this 
provision, such as offering the second-highest qualified bidder the 
lease if the high bidder forfeits.
    BOEM generally agrees with the comments. Accordingly, final rule 
section 556.520 does not include the language that, in a forfeiture 
situation, BOEM may take action to collect the full amount bid. Nor 
will BOEM offer the lease to the second-highest bidder, as that could 
violate BOEM's mandate to obtain fair market value for all leases. 
Instead, BOEM will retain the current policy, now expressed in the 
regulations at section 556.47(g), that in the case of forfeiture, the 
forfeiting bidder will lose its deposit.
    BOEM also received a comment on another aspect of proposed section 
256.420(c). The comment noted that the proposed section states that a 
high bidder must ``execute and return the lease within 11 business days 
after receipt'' and contrasted that with the prior regulation, which 
stated that ``the bidder shall, not later than the 11th business day 
after receipt of the lease, execute the lease.'' See, section 
556.47(f). The comment pointed out that while the current language does 
not specify that the executed lease must be returned to BOEM by the 
11th day, the proposed rule section does so specify. The comment asked 
if this ``signif[ies] a change in how the process is administered?'' 
The rule does not signify a change in the interpretation of the 
regulation or in the administration of the process. The prior 
regulation was interpreted to mean that the lease must be executed and 
returned by the 11th business day after it is received, and the 
proposed and final rules continue this policy, but make the language 
more precise.
    Section 556.521. When is my lease effective? Final rule section 
556.521 and proposed rule section 256.421 are the same. They both state 
BOEM's long-standing policy that a lease is effective on the first day 
of the month following the month in which BOEM executes the lease, but 
that a lessee may request that its lease be made effective as of the 
first day of the month in which BOEM executes it. The final rule also 
adds a provision that, if BOEM agrees to make it effective as of the 
earlier date, it will so indicate when it executes the lease.
    Section 556.522. What are the terms and conditions of the lease and 
when are they published? This section provides that the terms and 
conditions of the lease will be stated in the final notice of sale, as 
well as in the lease instrument itself. Final rule section 556.522 is 
based on prior section 556.49. The prior section stated that oil and 
gas and sulfur lease forms will be approved by the BOEM Director. The 
prior section also mentioned forms for other minerals. The section was 
not included in the proposed rule, the Preamble of which stated that 
the ``[d]iscussion of form[s] for other minerals [was] eliminated as 
redundant.'' However, the proposed rule eliminated all of prior section 
556.49 and BOEM has decided to retain, in final rule section 556.522, 
the statement as to forms for oil and gas and sulfur leases. Final rule 
section 556.522 also echoes final rule section 556.308(a)(2), which 
states that the terms and conditions of the lease will be found in the 
final notice of sale.
7. Subpart F--Lease Term and Obligations
Length of Lease
    Section 556.600. What is the primary term of my oil and gas lease? 
Final rule section 556.600 (a) and (b) closely follows OCSLA and makes 
clear that the initial period/primary term of a lease will be five 
years, unless BOEM determines that a longer initial period/primary 
term, up to 10 years, is necessary due to unusually deep water or 
unusually adverse conditions. Proposed section 256.600 stated that an 
initial period of an oil and gas lease ``may range from five to ten 
years,'' but provided no clarification as to why there could be such a 
range. Section 8(b) of OCSLA (43 U.S.C. 1337(b)) states that the 
initial period of a lease must be for five years, or for up to 10 
years, if extension of the lease term is necessary due to unusually 
deep water or other unusually adverse conditions.

[[Page 18131]]

    Final rule section 556.600 (a) and (b) follows OCSLA's example, 
with one slight difference. OCSLA most commonly refers to the initial 
term of a lease as the ``initial period,'' but also refers to the 
initial term as the ``primary term.'' See, e.g., section 8(a)(7)(C) of 
OCSLA (43 U.S.C. 1337(a)(7)(C)). BOEM uses the phrase ``primary term'' 
in the final rule.
    Proposed rule section 256.600 used the term ``initial period'' to 
refer to the originally granted length of a lease. The terms ``primary 
term'' and ``initial period'' were used interchangeably throughout 
BOEM's prior regulations to mean the same thing (for example, 556.37(a) 
and (b) refer to ``initial period,'' while 556.68(b) and (c), and 
556.70 refer to ``primary term'') and BOEM has elected to use the 
phrase ``primary term'' rather than ``initial period'' in this final 
rule in order to better reflect the lease term description that is most 
commonly used in the U.S. oil and gas industry.
    The final rule removes the provision found in BOEM's previous 
regulations at section 556.37 and proposed rule section 256.600, which 
stated that, for leases in water depths between 400 and 800 meters, the 
primary term will be eight years, subject to administrative 
cancellation if no exploratory well is begun during the first five 
years after lease issuance. No further notice and comment are required 
for this change, as BOEM notified the public of the change in 2009 and 
provided an opportunity to comment, and all lease sales since 2009 have 
been consistent with this new practice. Specifically, BOEM stopped 
issuing leases with eight-year primary terms beginning with Central 
Gulf of Mexico Lease Sale 213, held on March 17, 2010. On November 16, 
2009, eight months after the publication of the proposed rule, the MMS 
published the Proposed Notice of Sale for Lease Sale 213 (PNOS) (74 FR 
58975). The PNOS notified the public that BOEM was considering dropping 
the eight-year primary term, and replacing it with a five-year primary 
term, which could be extended another three years if certain conditions 
were met. The PNOS also detailed that this five-year primary term, with 
a possible three-year extension, would apply in water depths between 0 
and 800 meters, whereas a seven-year primary term, with a possible 
three-year extension, would apply in water depths between 800 and 1600 
meters. In more than 1600 meters of water, the PNOS stated that the 
primary term would be 10 years.
    The PNOS also stated that, if a five- or seven-year primary term 
were not extended, the lease would expire, removing the need for 
administrative cancellation. The MMS received comments on the change 
from an eight-year primary term to a five- or seven-year primary term, 
as well as on the change from cancellation to expiration. The MMS 
carefully considered these comments and responded to them in the Final 
Notice of Sale for Lease Sale 213 (FNOS). In the FNOS, the MMS stated 
that it had decided to no longer offer leases with eight-year primary 
terms and to proceed with offering leases in Sale 213 with five- and 
seven-year primary terms, which would be subject to extension or 
expiration.
    BOEM has offered five- and/or seven-year primary terms in all eight 
lease sales held since Sale 213 and intends to continue doing so. To 
avoid any confusion about whether BOEM intends to revert to the pre-
2010 practice of issuing leases for eight year terms contingent on 
drilling in the first five years, however, final rule section 556.600 
tracks OCSLA closely in stating that the primary term of all leases 
will be five years, unless BOEM specifies otherwise. Unlike the prior 
regulations and the proposed rule, section 556.600 in the final rule 
does not attempt to ``specify otherwise'' in the regulation itself. 
Instead, it states, at subsection 556.600(c), that BOEM will specify 
the primary term in the final notice of sale and in the lease 
instrument, giving BOEM flexibility for the future.
    The new language will not preclude BOEM from offering eight year 
leases, nor does the existing regulation mandate eight year leases. 
Thus, the rule does not change BOEM's current practice. Accordingly, 
pursuant to 5 U.S.C. 553(b)(3)(B), BOEM, for good cause, finds that 
notice and public comment are unnecessary. In any event, as noted 
above, the public had an opportunity to express its views on the 
underlying policy in response to the PNOS published in the Federal 
Register in 2009.
    Section 556.601. How may I maintain my oil and gas lease beyond the 
primary term? This section lists the ways in which a lessee may 
maintain its lease for a period of time after the end of the primary 
term. Final rule section 556.601 is substantively the same as proposed 
rule section 256.601, with some minor language changes for clarity. 
Proposed rule section 256.601(a) included, among the ways of 
maintaining a lease beyond its primary term, the granting of a 
suspension, but final rule section 556.601(f) retains the more specific 
language from prior sections 556.37(b) and 556.73 that maintenance of a 
lease beyond the primary term will not result from a suspension imposed 
due to gross negligence or willful violation of a lease provision or 
regulation.
    Section 556.602. What is the primary term of my sulfur lease? As 
described in proposed rule section 256.602, final rule section 556.602 
states that the primary term of a sulfur lease will be not more than 10 
years, as mandated by section 8(j) of OCSLA. (43 U.S.C. 1337(j)). 
Proposed section 256.602 stated that a sulfur lease is subject to 
administrative cancellation if an exploratory well was not begun in the 
first five years. BOEM is no longer following the practice of 
cancelling leases in these circumstances, and this provision has been 
dropped from the final rule. Instead, final rule 556.602 states that 
the sulfur lease will expire at the end of the primary term if not 
maintained in accordance with the regulations.
    Section 556.603. How may I maintain my sulfur lease beyond the 
primary term? This section lists the ways in which a lessee may 
maintain its sulfur lease after the end of the primary term. Final rule 
section 556.603 is substantively the same as proposed rule section 
256.603, with some minor language changes for clarity. Proposed rule 
section 256.603 included, among ways of maintaining a lease beyond its 
primary term, the granting of a suspension, but final rule section 
556.603 elaborates that such an extension cannot result from a 
suspension imposed due to gross negligence or willful violation of a 
lease provision or regulation, as was stated at prior section 556.73.
Lease Obligations
    Section 556.604. What are my rights and obligations as a record 
title owner? This section outlines the rights and obligations of a 
record title holder of an OCS lease. Final rule section 556.604 
includes, with different subsections and some additional language, 
proposed rule sections 256.605 and 256.612. Proposed rule section 
256.605 was entitled, ``What are my obligations as a record title 
owner?'' and proposed rule section 256.612 was entitled, ``May I assign 
operating rights?'' In the final rule, BOEM has combined these 
sections, as they both address the rights and obligations of a record 
title owner.
    Proposed rule section 256.612 stated that a record title owner may 
assign (sever) operating rights, and refers to these assignments as 
``subleases,'' which they are. The term ``assignment of operating 
rights'' has been used in the past, but is inaccurate when referring to 
an initial severance of operating rights. Operating rights are a part 
of the whole of a record title interest. When they are initially 
severed, they are actually

[[Page 18132]]

carved out of the record title and subleased to another party, while 
the record title owner retains the rest of the record title interest, 
i.e., that part of the record title from which the operating rights 
were severed. This is different from a true assignment of a record 
title interest, wherein the assignor does not retain the corresponding 
part of the record title interest. And it is also different from a true 
assignment of an operating rights interest, which would occur when one 
who owns operating rights transfers his operating rights interest to 
another. Final rule section 556.604(b) retains the proposed rule's use 
of the term ``sublease'' and specifically states that a record title 
owner may sublease its operating rights to someone else, who is thereby 
the sublessee, referred to in the regulations as the operating rights 
owner.
    Both proposed rule section 256.612 and final rule sections 
556.604(b) and (c) explain that operating rights must be described by 
officially designated aliquot parts, and that, within any aliquot part, 
a record title owner may create a maximum of two subleases by depth. 
The one, or two, subleases may include the entire depth of the lease, 
but if they do not, any depth intervals not subleased are retained by 
the lessee/sublessor. Final rule section 556.604(c) elaborates that if 
two subleases are created by depth level, the two subleases must abut 
each other, with no gap in between. The ``no gap'' concept did not 
appear in the proposed rule, but it is, and has been, BOEM's long-
established policy, and imposes no new duty on lessees. Therefore 
notice and comment is unnecessary.
    Both proposed rule section 256.605(a) and final rule section 
556.604(d) explain that a record title interest owner is jointly and 
severally liable, with all other record title owners and all operating 
rights owners, for all non-monetary obligations of a lease that accrue 
while it holds record title. Final rule section 556.604(f) also 
contains the concept that a record title owner who obtained its record 
title through assignment is responsible for remedying all existing 
environmental or operational problems on a lease, with subrogation 
rights against prior lessees. This concept was found in both the prior 
regulations and in the proposed rule in sections addressing transfers 
of lease interests, (556.62(e) and 256.618, respectively), as it is in 
the final rule (556.713 and 556.807), but it is also appropriately 
included here, as the requirement that an assignee remedy all existing 
environmental and operational lease problems is an ``obligation'' of 
the assignee-record title owner.
    Proposed rule section 256.605(b) and final rule section 556.604(f) 
both also address the responsibility of record title owners for 
monetary obligations, pursuant to the Federal Oil and Gas Royalty 
Simplification and Fairness Act. Both sections make clear that, with 
respect to operating rights retained by a record title owner, the 
record title owner is primarily liable for monetary obligations, but 
with respect to those operating rights that have been subleased to 
others, the record title owner becomes secondarily liable, while the 
sublessee/operating rights owner is primarily liable.
    Section 556.605. What are my rights and obligations as an operating 
rights owner? Proposed rule section 256.606 and final rule section 
556.605 both address the rights and obligations of an operating rights 
owner, as opposed to a record title owner.
    Final rule section 556.605(d) was added as the result of two 
comments on the proposed rule. The comments pointed out that the 
proposed rule was inconsistent in that proposed section 256.605(a) 
stated that operating rights owners were jointly and severally liable 
with record title owners for all non-monetary obligations, but proposed 
section 256.606(c) stated that operating rights owners were so liable 
only with respect to that portion of the lease subject to their 
operating rights. To make clear that the latter concept is correct, 
BOEM added final rule section 556.605(d), which states: ``[a]n 
operating rights owner is only liable for obligations arising from that 
portion of the lease to which its operating rights appertain and that 
accrue during the period in which the operating rights owner owned the 
operating rights.''
    Proposed rule sections 256.606(c) and (d) are essentially repeated 
in final rule sections 556.605 (e) and (g). In both cases, the former 
section states that an operating rights owner is jointly and severally 
liable, with all other operating rights owners and record title owners, 
for non-monetary obligations. Also in both cases, the latter section 
states that an operating rights owner is liable for monetary 
obligations in proportion to its share of operating rights. Final rule 
section 556.605(g) goes on to point out that operating rights owners 
are primarily liable for these monetary obligations, while (as stated 
in final rule section 556.604(f) and pointed out above) record title 
owners are secondarily liable.
    Final rule section 556.605(f) also makes clear that operating 
rights owners that obtained rights through assignment are responsible 
for remedying all existing environmental or operational problems on a 
lease, with subrogation rights against prior operating rights owners. 
As mentioned above, this concept was found in both the prior BOEM 
regulations and in the proposed rule in sections addressing transfers 
of lease interests, (556.62(e) and 256.618, respectively), as well as 
in other sections of the final rule (556.712 and 556.807), but it is 
also appropriately included here, as the requirement that an assignee 
remedy all existing environmental and operational lease problems is an 
``obligation'' of an assignee of operating rights.
Helium
    Section 556.606. What must a lessee do if BOEM elects to extract 
helium from a lease? This section provides that BOEM reserves the 
ownership of, and the right to extract, helium from all gas produced 
from an OCS lease, and describes what BOEM will do if it requests you 
to deliver helium from operations associated with a lease. Final rule 
section 556.606 repeats proposed rule section 256.630. The final rule 
makes no changes to the proposed rule, other than conforming changes, 
such as changing ``MMS'' to ``BOEM.''
8. Commentary on Subparts G & H--Transferring Interests in a Lease
    The proposed rule followed the general format of the prior 
regulations in addressing together, in one regulatory subpart, both 
transfers of record title interests and transfers of operating rights 
interests. These two types of transfers are not the same, however, and 
they may have different consequences. Addressing them in the same 
regulatory sections has sometimes led to confusion and ambiguity. 
Therefore, in the final rule, BOEM divided the provisions dealing with 
assignment of different types of lease interests into two different 
subparts. Subpart G includes those provisions detailing the effects of 
an assignment of a record title interest, while subpart H includes 
those provisions detailing the effects of a sublease or subsequent 
assignment of an operating rights interest. None of the provisions in 
these subparts contains anything substantively new relative to the 
prior regulations, but the final rule more clearly separates out and 
explains the effects of an assignment of each type of lease interest on 
both the assignor and assignee. Subpart G consists of sections 556.700 
through 556.716, and subpart H consists of sections 556.800 through 
556.810. A section-by-section analysis of the sections in Subpart G is 
presented below, followed by a section-by-section analysis of the 
sections in Subpart H.

[[Page 18133]]

9. Subpart G--Transferring All or Part of a Record Title Interest in a 
Lease
    Section 556.700. May I assign or sublease all or any part of the 
record title interest in my lease? This section describes how a company 
may apply for approval to assign its whole or partial record title 
interest in its lease, or in any aliquot(s) thereof or to sublease 
operating rights. Proposed rule sections 256.610, 256.611, and 256.612 
were collapsed and subsumed into final rule section 556.700, insofar as 
they apply to transfers of record title interests. Proposed rule 
section 256.610 stated that all transfers of lease interests require 
BOEM approval. Proposed rule section 256.611 and proposed rule section 
256.612 repeated this requirement, with respect to transfers of ``lease 
interests,'' and operating rights, respectively. The requirement that 
BOEM approve transfers of record title interests and severances of 
operating rights interests appears in final rule sections 556.700(a), 
(b), and (c). Proposed rule sections 256.611 and 256.612 also specified 
that transfers must be properly described by aliquot parts and/or 
depth. This requirement of proper description is retained in final rule 
section 556.700(c).
    Proposed rule section 256.611 referred to both ``subdivisions'' and 
``aliquot parts'' when describing transfers of lease interests, but in 
final rule section 556.700, we removed the reference to subdivisions, 
retaining only the reference to aliquot parts, in order to reduce the 
potential for confusion. We also removed the definition of ``aliquot 
part'' from this section and moved it into the definitions section of 
the rule, section 556.106.
    The last sentence of proposed rule section 256.611, stating that 
BOEM may disapprove a transfer when the assignor or assignee has 
unsatisfied obligations under this chapter, has been moved to final 
rule section 556.704, entitled, ``When would BOEM disapprove an 
assignment or sublease of an interest in my lease?'' Placement in that 
final rule section is more appropriate.
    Section 556.701. How do I seek approval of an assignment of the 
record title interest in my lease, or a severance of operating rights 
from that record title interest? This section describes the process for 
obtaining BOEM approval of an assignment of a record title or operating 
rights interest in an OCS lease. Final rule section 556.701(a) was 
found at proposed rule section 256.613(a). The proposed rule section, 
at 256.613(a)(1), set out the official form numbers and names that one 
would use to effectuate and request approval of a transfer of lease 
interest. The final rule, however, merely states that the BOEM Regional 
Director will provide the form to be used to request and record such a 
transfer. BOEM made this change to retain flexibility as to form name 
and number in case these identifiers change in the future.
    Proposed rule section 256.613(b), which provided that BOEM must 
consult with and consider the views of the Attorney General before 
approving a transfer of a lease interest, appears at final rule section 
556.701(b). Finally, final rule paragraph 556.701(b) retains from prior 
section 556.65 the statement that the Secretary may act on a transfer 
if the Attorney General does not respond to a consultation request 
within 30 days of that request.
    Section 556.702. When will my assignment result in a segregated 
lease? Final rule section 556.702(a) and proposed rule section 
256.613(a)(2) both make clear that a transfer of 100% of the record 
title interest in one or more aliquots of a lease results in 
segregating the lease into two leases, both of which are referred to as 
``segregated leases'' and are subject to all the terms and conditions 
of the original lease. (Although it would be uncommon, it is also 
possible that a lease could be segregated into more than two leases.)
    Final rule section 556.702 also contains a subsection that was not 
found in the proposed rule and was not in the prior regulations--
556.702(b). This provision in the final rule clarifies the principles 
governing lease segregation. It is an outgrowth and corollary of the 
lease segregation concept expressed in proposed rule section 
256.613(a)(2). Specifically, final rule section 556.702(b) sets forth 
the direct corollary to section 556.702(a) by making clear that 
transfer of anything less than 100% of the record title interest in a 
certain aliquot does not create a new lease, but creates a joint 
ownership situation between the assignee(s) and assignor(s) in the 
portion of the lease in which part of the ownership was transferred.
    The last sentence of final rule section 556.702(b) states that a 
transfer of less than 100% of the record title to an aliquot(s) is 
subject to BOEM approval. This sentence reiterates the principle that 
all transfers of lease interests are subject to approval by BOEM, 
pursuant to section 8(e) of OCSLA (43 U.S.C. 1337(e)), the lease terms 
(see section 20 of the current lease form, Form BOEM-2005), and prior 
regulations. This sentence was added in the final rule to ensure that 
there is no doubt as to whether a transfer that creates a joint 
ownership in a portion of a lease would constitute a lease transfer 
necessitating BOEM approval.
    Section 556.703. What is the effect of the approval of the 
assignment of 100 percent of the record title in a particular 
aliquot(s) of my lease and of the resulting lease segregation? Final 
rule section 556.703 addresses the effects of a lease segregation 
(i.e., a transfer of 100% of a record title interest in a particular 
aliquot of a lease, which creates a new lease to be in effect on the 
segregated aliquot). It combines part of proposed rule section 
256.613(a)(2) with retained parts of BOEM's prior regulations from 
section 556.68. Proposed rule section 256.613(a)(2) stated that, in the 
case of a lease segregation, the requirement to post the requisite 
financial assurance applies to each new lease. This concept has been 
carried through into final rule section 556.703(a).
    An important clarification is made in final rule section 
556.703(c). The proposed rule at section 256.613(a)(2) stated that upon 
lease segregation, ``the newly segregated lease . . . is subject to all 
the terms and conditions of your original lease.'' The ambiguity of 
this language could give rise to an improper inference in certain 
circumstances that the terms of the original lease pertaining to any 
applicable royalty suspension volume (RSV) would apply in full and 
equally to each of the segregated leases.
    BOEM's prior regulations in section 556.68(a) were more specific 
than those from the proposed rule's section 256.613(a)(2), but are 
still ambiguous on this point. The prior regulation stated that 
``[r]oyalty, minimum royalty and rental provisions of the original 
lease shall apply separately to each segregated portion.'' The prior 
regulation mentioned royalty provisions specifically, and stated that 
such provisions will apply ``separately'' to each lease, but its 
relationship to any unused RSV was not clear.
    The ambiguity in the prior regulation may have led some to 
incorrectly infer that when a lease is segregated, each new lease would 
be allowed the entire amount of remaining available RSV that applied to 
the original lease. Such an interpretation would not have been 
justified. In the case of segregation of a deep water lease with an RSV 
into two leases, for example, that interpretation would have the 
substantive effect of doubling the remaining volume of royalty-free 
production. That is not the intent of offering particular leases with 
specified royalty suspension volumes under the authority of 43 U.S.C. 
1337(a)(1)(H) or 1337(a)(3)(C) (the royalty relief provisions of the 
OCSLA enacted in the Deep Water Royalty

[[Page 18134]]

Relief Act of 1995) or 42 U.S.C. 19504 or 19505 (the deep gas and deep 
water royalty relief provisions in the Energy Policy Act of 2005). The 
correct interpretation is that if an offshore lease is divided through 
segregation, any remaining unused RSV must be shared by the segregated 
leases in a manner not to exceed the total amount of the remaining 
unused RSV.
    Final rule section 556.703(c) clarifies that in a lease 
segregation, each segregated lease is not individually entitled to the 
whole remaining RSV allowed to the original lease. Each lease 
segregation is unique and presents different circumstances that might 
affect the allocation of RSV. Therefore, paragraph (c) makes clear that 
BOEM will allocate the RSV among segregated leases on an equitable 
basis, considering all of the circumstances. Circumstances that may 
affect that allocation include the reasons for the segregation, whether 
the lease is producing, the relative production of the leases after 
segregation, future development plans, etc. The allocation of any 
remaining RSV will be stated in BOEM's approval of the assignment and 
segregation.
    Final rule section 556.703(c) grows out of the proposed rule's 
statement at section 256.613(a)(2) that a newly segregated lease ``is 
subject to all the terms and conditions of [the] original lease.'' The 
final rule section carries forward the concept that the newly 
segregated lease is ``subject to'' any RSV provision that applied to 
the original lease, but clarifies in what manner that RSV provision 
will be applied to the two now-segregated leases. The language of final 
rule section 556.703(c) also clarifies the prior regulation's statement 
that royalty provisions apply ``separately'' to each lease. The final 
rule's language continues to apply the RSV provision ``separately'' to 
each segregated lease, but clarifies that ``separately'' does not mean 
``equally.''
    Final rule section 556.703(d) retains from prior section 556.68(b) 
the principle that each segregated lease continues in effect for the 
primary term specified in the original lease, unless maintained 
thereafter pursuant to the regulations. Paragraph (d) makes express the 
principle that with respect to continuation beyond the primary term, 
each segregated lease stands on its own. To remain in force after the 
primary term, each segregated lease must, on its own, meet the 
requirements of section 556.601, regardless of whether other segregated 
leases, which were part of the original lease, meet such requirements. 
Production from one segregated lease will not keep any other lease that 
was part of the original lease in effect beyond its primary term 
(unless, of course, the leases are included within the same unit). BOEM 
believes that the regulations are more clear with both principles 
expressly stated in the final rule.
    Section 556.704. When would BOEM disapprove an assignment or 
sublease of an interest in my lease? Final rule section 556.704 sets 
forth when a transfer of a lease interest may be void or disapproved by 
BOEM. The final rule section combines parts of proposed rule section 
256.611 and section 556.62 from BOEM's prior regulations. The last 
sentence of proposed rule section 256.611 stated that an assignment 
could be disapproved if the assignor or assignee had outstanding 
obligations under this chapter of the regulations. This provision 
appears at final rule section 556.704(a)(1). Prior section 556.62 
voided assignments made pursuant to certain prelease agreements. This 
provision is found at final rule section 556.704(b).
    Final rule section 556.704 also contains two provisions, at 
paragraphs (a)(2) and (a)(3), which make clear that BOEM may disapprove 
an assignment that is incorrect as to form or that does not comport 
with the regulations. Provision 556.704(a)(2) more clearly expresses 
the intent of proposed rule section 256.613, which listed the names and 
numbers of the forms that BOEM requires to be used to effectuate a 
transfer of record title or operating rights interests. Pursuant to the 
proposed rule, BOEM would accept only transfers submitted on these 
forms. Implicit in the requirement to use these forms is the 
requirement to complete them correctly. Transfers attempted to be 
submitted on other forms, on incorrectly completed forms, or using 
other documentation would not be accepted.
    In order to allow more flexibility and avoid restricting BOEM to a 
particular form name or number stated in the regulations, the final 
rule states that the Regional Director will provide a form for use in 
transfers of record title or operating rights. As in the proposed rule, 
however, only the form provided by the Regional Director will be 
accepted by BOEM, and only when completed correctly. Therefore, final 
rule section 556.704(a)(2) makes clear that a transfer request 
submitted to BOEM may be rejected if not ``acceptable as to form or 
content.'' The latter provision, 556.704(a)(3), provides that an 
attempted transfer that does not comport with the regulations or other 
applicable law will be disapproved.
    Section 556.705. How do I transfer the interest of a deceased 
natural person who was a lessee? This section outlines the procedures 
to follow to transfer an interest in an OCS lease from a deceased 
natural person. Final rule section 556.705 repeats proposed rule 
section 256.614, with minor wording changes.
    Section 556.706. What if I want to transfer record title interests 
in more than one lease at the same time, but to different parties? 
Final rule section 556.706 repeats proposed rule section 256.615 with 
some minor language changes. Both the proposed and final rule sections 
address a lessee or other interest holder who desires to transfer 
interests it owns in different leases to different parties. Both 
sections note that in this situation, each transfer requires its own 
instrument, which must be originally executed and filed in duplicate 
with BOEM.
    Section 556.707. What if I want to transfer different types of 
lease interests (not only record title interests) in the same lease to 
different parties? This section outlines the process for transferring 
different types of interests in a lease to different parties. Final 
rule section 556.707 derives from proposed rule section 256.615. That 
proposed rule section addressed the situation where interests in 
different leases are being transferred to different parties. The 
proposed rule said nothing, however, about the corollary situation: 
Where the interest holder desires to transfer different types of lease 
interests in the same lease to different parties. Final rule section 
556.707 was added to cover this corollary situation. It states that 
even if an interest holder is transferring interests in the same lease, 
if they are different types of interests and being transferred to 
different parties, each transfer requires its own separate instrument, 
which must be duly executed and filed in duplicate with BOEM.
    Section 556.708. What if I want to transfer my record title 
interests in more than one lease to the same party? This final rule 
section addresses lessees who desire to transfer interests in more than 
one lease to the same party. Final rule section 556.708 derives from 
the first sentence of proposed rule section 256.615. As noted by both 
proposed rule section 256.615 and final rule section 556.708, a lessee 
may not transfer record title interest in more than one lease using the 
same instrument. If a lessee wishes to transfer record title interest 
in more than one lease at the same time, the lessee must submit 
separate, originally executed forms for each transfer. Final rule 
section 556.708 also retains the statement from prior section 
556.64(a)(8) that a separate fee applies to each individual transfer of 
interest.

[[Page 18135]]

    Section 556.709. What if I want to transfer my record title 
interest in one lease to multiple parties? This section describes the 
requirements associated with transferring the record title interest in 
a lease to multiple parties. There is no analogous section in the 
proposed rule to final rule section 556.709, but the final rule section 
is a clarification of proposed rule section 256.615. That proposed rule 
section addressed the situations where interests in different leases 
are being transferred to different parties, or to the same party. The 
proposed rule did not address, however, the corollary situation, where 
the interest holder desires to transfer different portions of its 
record title interest in the same lease to multiple parties. Final rule 
section 556.709 was added to cover this corollary situation. It states 
that if a record title owner is transferring its record title interests 
in a single lease to multiple parties, it may use a single instrument. 
This differs from the circumstance addressed in section 556.707 where 
transfers of more than one type of interest in the single lease require 
use of more than one instrument. Final rule section 556.709 also 
retains the statement from prior section 556.64(a)(8) that where 
multiple transfers of interest are accomplished, a separate fee applies 
to each individual transfer of interest.
    Section 556.710. What is the effect of an assignment of a lease on 
an assignor's liability under the lease? Final rule section 556.710 was 
found at proposed rule section 256.616. Both the proposed and final 
rule sections state the long-established regulatory concept that after 
an assignment an assignor remains liable for all monetary and non-
monetary obligations that accrued before approval of the assignment. 
Proposed rule section 256.616 applied to assignments in general, but 
final rule section 556.710 applies only to transfers of record title 
interests, and an analogous final rule section, 556.805, applies only 
to transfers of operating rights interests.
    Section 556.711. What is the effect of a record title holder's 
sublease of operating rights on the record title holder's liability? 
This section provides that a record title holder who subleases 
operating rights remains liable for later accruing obligations of the 
lease, but is only secondarily liable for monetary obligations accruing 
thereafter. Parts of proposed rule section 256.616 appear at final rule 
section 556.711, specifically in 556.711(a) and (b). These two 
paragraphs, along with final rule section 556.709, retain all of 
proposed rule section 256.616 and make clear the extent of the 
liability retained by a party who assigns its record title interest. 
BOEM received a comment on proposed rule section 256.616 requesting 
that the final sentence be deleted because it was ambiguous. BOEM 
agrees with the comment and has deleted that sentence. The scenario it 
addressed in the proposed rule has been addressed without ambiguity in 
final rule section 556.711(a).
    Final rule section 556.711(c) arises from FOGRMA, and states that a 
sublessee of operating rights is primarily liable for monetary 
obligations, but the record title holder, even after the sublease, 
remains secondarily liable for monetary obligations.
    Section 556.712. What is the effective date of a transfer? This 
section describes the effective date of the transfer of a record title 
interest in a lease. Final rule section 556.712 is a combination of 
proposed rule section 256.617 and section 556.62(c) of BOEM's prior 
regulations. In the proposed rule, section 256.617 stated that an 
assignment is effective on the first day of the month following the 
request to assign, not following the date that BOEM approved the 
assignment. This left open the possibility, for example, that if you 
made a request to assign in April, it would become effective on the 
first of May, even if BOEM did not approve it until the fifteenth of 
May or later. The final rule section clarifies that, unless requested 
otherwise (see below), the effective date of a transfer of a lease 
interest is the first day of the next month after BOEM approves the 
transfer.
    Final rule section 556.712, like proposed rule section 256.617, 
allows the parties to a transfer to specify a date on which their 
transfer will become effective. The proposed rule stated that BOEM 
would record the assignment as effective as of the date specified by 
the parties. The prior regulation, at section 556.62(c), did not 
affirmatively state that BOEM would accept the date specified by the 
parties. The prior regulation used the word ``request'' to refer to the 
parties' choice of a different effective date, and stated that the 
effective date would be specified in BOEM's approval. After further 
consideration of this issue, BOEM has decided to retain the idea in the 
prior regulation, and to clarify any ambiguity by stating that BOEM 
must approve a request for a specified effective date for a transfer of 
record title interest.
    Both proposed rule section 256.617 and final rule section 556.712 
also make clear that the transferor's obligations continue to accrue 
until BOEM approves the transfer, no matter when the effective date is 
specified to be. In other words, the proposed and final rules clarify 
that if the parties to a transfer specify an effective date that falls 
before BOEM's approval of the transfer, this date is ``effective'' 
between the parties, but it does not have any effect on the obligations 
of the transferor to BOEM. The accrual of those obligations is ended 
only by BOEM's approval of the transfer.
    Section 556.713. What is the effect of an assignment of a lease on 
an assignee's liability under the lease? With respect to an assignee of 
a record title interest, final rule section 556.713 repeats proposed 
rule section 256.618. Both sections recite the obligations of an 
assignee, which include complying with the lease terms and regulations, 
remedying existing environmental and operational problems, and 
performing decommissioning.
    Section 556.714. As a restricted joint bidder, may I transfer an 
interest to another restricted joint bidder? Final rule section 556.714 
requires a person on the Restricted Joint Bidders List, when 
transferring less than 100% of its interest in a lease to another 
person on the same list, to file with BOEM all agreements applicable to 
the acquisition of the interest transferred. Final rule paragraph 
556.714(a) retains the language to this effect found in prior section 
556.64(i). This same requirement was also found in proposed rule 
section 256.619, and it engendered a comment that objected to proposed 
rule section 256.619 on several grounds. The comment stated that the 
documents requested by proposed section 256.619 may be ``sensitive,'' 
i.e., confidential, and that the section is too broad and vague with an 
``unascertainable'' intent. The comment also stated that because BOEM 
approves assignments, BOEM will be aware of the chain of title through 
which the assignor received its interest, rendering unnecessary the 
filing of agreements relating to the assignor's acquisition of that 
interest. The commenter suggested that BOEM ``should only be interested 
in the timing and nature of the agreement whereby one restricted joint 
bidder acquired from another restricted joint bidder.''
    For the most part, BOEM disagrees with this comment. Proposed rule 
section 256.619 did not introduce a new concept, but restated what was 
originally in prior section 556.64(i). Nor does BOEM find the section 
overly vague. The filing of the requested agreements or the provision 
of the description of the transaction (see below) is necessary to allow 
the Department of Justice to properly review the antitrust implications 
of assignments between restricted joint

[[Page 18136]]

bidders, as is required for all assignments by section 8(e) of OCSLA 
(43 U.S.C. 1337(e)). Also, the final rule section does, as one comment 
noted, demonstrate BOEM's interest in ``the timing and nature of the 
agreement whereby one restricted joint bidder acquired [a lease 
interest] from another restricted joint bidder.'' The final rule, by 
retaining the language from prior section 556.64(i), makes clear that 
BOEM is seeking information about acquisitions only from a transferor 
that was on the Restricted Joint Bidders List at the time of its 
acquisition of the interest, and that is now transferring less than its 
entire interest to an entity that was on the same list.
    In response to the comment, however, BOEM has noted in section 
556.714(d) that a person submitting the requested agreements may 
request they be treated confidentially and BOEM will do so to the 
extent authorized by its regulations and applicable Departmental 
regulations. Further, as suggested by the commenter, section 556.714(a) 
allows the assignor/submitter to choose whether to submit the requested 
agreements or instead to provide BOEM with a description of the timing 
and nature of the transfer agreement, together with a statement 
certifying the truth of this description.
    Section 556.715. Are there any interests I may transfer or record 
without BOEM approval? This section provides that a lessee may create, 
transfer, or assign an economic interest in a lease without BOEM 
approval, but that such transferor must send BOEM a copy of each 
instrument creating or transferring such a lease interest within 90 
days after the last party executes the transfer instrument. Final rule 
section 556.715 (along with final rule section 556.808) is the 
successor to proposed rule section 256.620. Final rule section 556.715 
and proposed section 256.620 are substantively similar, but the 
language of the proposed section was changed somewhat in the final 
rule. The proposed rule section stated that a lessee could create or 
transfer ``carried working interests, overriding royalty interests, or 
payments out of production'' without BOEM approval. In the final rule, 
instead of listing these three types of interests, section 556.715(a) 
states that a lessee may create, transfer, or assign ``economic 
interests'' without BOEM approval. The term ``economic interest'' is 
defined in final rule section 556.106 to encompass ``any right to, or 
any right dependent upon, production of crude oil, natural gas, or 
liquefied petroleum products,'' and includes, among others, the three 
types of interests listed in the proposed section.
    Final rule section 556.714 also makes clear that the 90-day 
deadline set forth in prior section 556.64(a)(2) applies to filings 
memorializing transfers of economic interests. Prior section 
556.64(a)(2) did not explicitly state that the 90-day deadline applies 
to such filings. The 90-day filing deadline appears in final rule 
section 556.701 with respect to the filings of transfers of record 
title interests and the severance of operating rights interests, and 
the final rule makes clear that the deadline also applies to filings of 
transfers of economic interests by so stating in final rule section 
556.714.
    BOEM received one comment on proposed section 256.620, which 
expressed concerns about confidentiality of documents and asked whether 
the section intended to require the submission of joint operating 
agreements to BOEM. The comment notes this provision, i.e., section 
256.620, and its requirements are ``not [] new,'' and that is correct--
this provision is currently found at section 556.64(a)(7). The final 
rule section does not impose any new requirements and does not require 
the filing of joint operating agreements as they do not necessarily 
create economic interests, only rights to such interests. Once those 
interests are created, however, documents respecting them must be filed 
with BOEM. As to confidentiality, documents will be treated in 
accordance with BOEM's regulation at section 556.104 and any applicable 
Departmental regulations.
    Section 556.716. What must I do with respect to the designation of 
operator on a lease when a transfer of record title is submitted? This 
section provides the circumstances under which the transfer of a record 
title interest triggers the need to file a new designation of operator 
form with BOEM. Final rule section 556.716 is based on several prior 
and proposed rule sections. Proposed rule section 256.611 and prior 
section 556.62 explained how a record title, or other lease interest, 
may be transferred, but did not mention the need, which often arises 
upon such a transfer, to file a new designation of operator form. Prior 
regulation section 550.143 stated that, when there is a change of 
designated operator, you must file a new designation of operator form 
with BOEM. Prior section 550.143 was, however, in a part of the 
regulations that does not address transfers of lease interests. 
Because, as stated above, the need to file a new designation of 
operator form often arises when lease interests are transferred, BOEM 
added section 556.716 here in part 556, to augment section 550.143 and 
ensure that parties to a transfer are aware of their duties with 
respect to designation of an operator.
10. Subpart H--Transferring All or Part of the Operating Rights in a 
Lease
    Section 556.800. As an operating rights owner, may I assign all or 
part of my operating rights interest? This section provides that an 
operating rights owner may assign all or part of its operating rights 
interests, subject to BOEM approval. Final rule section 556.800 repeats 
proposed rule section 256.612 with minor language changes.
    Section 556.801. How do I seek approval of an assignment of my 
operating rights? This section describes the process by which an 
assignor of operating rights must obtain approval of such an 
assignment. Final rule section 556.801 is based on proposed rule 
section 256.613. The proposed rule section applied to all transfers of 
lease interests, but final rule section 556.801 applies only to 
assignments of operating rights from one operating rights owner to 
another, in accordance with the approach in the final rule to separate 
regulatory sections concerning transfers of operating rights and those 
concerning transfers of record title interests.
    Both proposed rule section 256.613 and final rule section 556.801 
require that BOEM approve transfers of operating rights. Documents 
memorializing such transfers must be filed within 90 days of the 
transfer. Both sections also note BOEM may consult with the Attorney 
General. The final rule section states the Regional Director will 
provide the form on which to record the transfer of operating rights, 
instead of citing particular forms as was done in the proposed rule. 
For the same reasons laid out above in the discussion of final rule 
section 556.716, final rule section 556.801 reiterates the requirement 
found at prior regulation section 550.143 that a new operating rights 
owner must file a designation of operator form.
    One paragraph of final rule section 556.801 did not appear in the 
proposed rule: 556.801(c) states that if an operating rights owner 
transfers an undivided interest in its operating rights, that transfer 
creates a joint ownership of the operating rights in the transferor and 
the transferee. This provision did not appear in the proposed rule, but 
it is merely a description of the well-accepted legal consequences of 
such a transfer. As with a record title interest, an operating rights 
owner can transfer less than 100% of a certain part of its operating

[[Page 18137]]

rights interest, retaining some percentage of interest in that part. 
This is referred to as the transfer of an ``undivided interest'' and 
creates co-ownership.
    Section 556.802. When would BOEM disapprove the assignment of all 
or part of my operating rights interest? Final rule section 556.802 
sets forth the circumstances under which BOEM would disapprove an 
assignment of an operating rights interest. The final rule section is 
based on proposed rule section 256.611. The last sentence of proposed 
rule section 256.611 stated an assignment could be disapproved if the 
assignor or assignee had outstanding obligations under this chapter of 
the regulations. This provision appears at final rule section 
556.802(a).
    Final rule section 556.802 also contains two provisions, at 
paragraphs (b) and (c), which make clear that BOEM may disapprove an 
assignment of operating rights interests that is incorrect as to form 
or does not comport with the regulations. The former provision, 
556.802(b), derives from proposed rule section 256.613, which listed 
the names and numbers of the forms that BOEM requires to be used to 
effectuate a transfer of record title or operating rights interests. 
Pursuant to the proposed rule, BOEM would accept only transfers 
submitted on--and consistent with--these forms.
    In order to allow more flexibility and avoid restricting BOEM to a 
particular form name or number stated in the regulations, the final 
rule states the Regional Director will provide a form for use in 
transfers of record title or operating rights. As in the proposed rule, 
only the form provided by the Regional Director will be accepted by 
BOEM and only when completed correctly. Therefore, final rule section 
556.802(b) makes clear that a transfer request submitted to BOEM may be 
rejected if not ``acceptable as to form or content.'' The latter 
provision, 556.802(c), provides that an attempted transfer that does 
not comport with the regulations and/or applicable law will be 
disapproved.
    Section 556.803. What if I want to assign operating rights 
interests in more than one lease at the same time, but to different 
parties? This section addresses the assignment of operating rights 
interests in more than one lease to different parties. Final rule 
section 556.803 is based on proposed rule section 256.615. Both the 
first sentence of the proposed rule section and the final rule section 
address the situation where a lessee or other interest holder desires 
to transfer interests it owns in different leases to different parties. 
Final rule section 556.803, however, applies only to an operating 
rights owner who desires to simultaneously assign its operating rights 
in multiple leases. The limited application of final rule section 
556.803 is in keeping with the final rule's separation of regulatory 
sections concerning transfers of record title by record title holders 
and those concerning transfers of operating rights by operating rights 
owners.
    Section 556.804. What if I want to assign my operating rights in a 
lease to multiple parties? This section addresses the assignment of 
operating rights interests in one lease to more than one party. There 
was no analogous section in the proposed rule to final rule section 
556.804, but the final rule section developed out of proposed rule 
section 256.615. That proposed rule section, also discussed immediately 
above, addressed the transfer of interests in different leases to 
different parties, or to the same party. The proposed rule did not 
address, however, the corollary situation, where the interest holder 
desires to transfer different portions of its operating rights 
interests in the same lease to multiple parties. Final rule section 
556.804 was added to cover this corollary situation. It states that if 
an operating rights owner is transferring its operating rights in a 
single lease to multiple parties, it may use a single instrument. Final 
rule section 556.804 also retains the statement from prior section 
556.64(a)(8), which states that where multiple transfers of interest 
are accomplished using one instrument, a separate fee applies to each 
individual transfer of interest.
    Section 556.805. What is the effect of an operating rights owner's 
assignment of operating rights on the assignor's liability? This final 
rule section states the long-established regulatory concept that after 
an assignment, the assignor remains liable for all monetary and non-
monetary obligations that accrued before approval of the assignment. 
Final rule section 556.805 was found at proposed rule section 256.616. 
That proposed rule section applied to assignments in general, but final 
rule section 556.805 applies only to assignments of operating rights 
interests.
    Section 556.806. What is the effective date of an assignment of 
operating rights? This section describes the effective date of the 
transfer of an operating rights interest in a lease. Final rule section 
556.806 is a combination of proposed rule section 256.617 and prior 
section 556.62(c). In the proposed rule, analogous provision 256.617 
stated an assignment is effective on the first day of the month 
following the request to assign, not following the date that BOEM 
approved the assignment. As explained above, in the discussion of final 
rule section 556.712, this left open the possibility that an assignment 
could ostensibly become ``effective' before it was approved. Final rule 
section 556.806 clarifies that (unless requested otherwise, see below) 
the effective date of an assignment of an operating rights interest is 
the first day of the month after the month in which BOEM approves the 
transfer.
    Final rule section 556.806, like proposed rule section 256.617, 
allows the parties to a transfer to specify a date on which their 
transfer will become effective. The proposed rule stated that BOEM 
would record the assignment as effective as of the date specified by 
the parties. The prior regulation, at section 556.62(c), did not 
affirmatively state that BOEM would accept the date specified by the 
parties. The prior regulation used the word ``request'' to refer to the 
parties' choice of a different effective date, and stated that the 
effective date would be specified in BOEM's approval. After further 
consideration of this issue, BOEM has decided, in the final rule, to 
retain the idea in the prior regulation, and to clarify any ambiguity 
by stating that BOEM must approve a request for a specified effective 
date for a transfer of an operating rights interest.
    Both proposed rule section 256.617 and final rule section 556.806 
also make clear that the transferor's obligations do not end until BOEM 
approves the transfer, no matter when the effective date is specified 
to be. In other words, the proposed and final rules clarify that if the 
parties to a transfer specify an effective date that falls before 
BOEM's approval of the transfer, this date is ``effective'' between the 
parties, but it does not have any effect on the obligations of the 
transferor to BOEM. The accrual of those obligations is ended only by 
BOEM's approval of the transfer.
    Section 556.807. What is the effect of an assignment of operating 
rights on an assignee's liability? This section recites the obligations 
of an assignee, which include complying with the lease terms and 
regulations, remedying existing environmental and operational problems 
on the leasehold, and performing decommissioning obligations. Final 
rule section 556.807 repeats proposed rule section 256.618, but only 
with respect to an assignee of an operating rights interest. Proposed 
rule section 256.618 addressed both assignees of record title interests 
and operating rights interests, but consistent with the final rule's 
separate treatment

[[Page 18138]]

of these two types of interests, this final rule section addresses only 
the effect of an assignment of operating rights on an assignee's 
liability.
    Section 556.808. As an operating rights owner, are there any 
interests I may assign without BOEM approval? This section provides 
that an operating rights owner may create, transfer, or assign economic 
interests without BOEM approval, but that for record keeping purposes, 
the operating rights owner must send BOEM a copy of each instrument 
creating or transferring such interests within 90 days after the last 
party executes the transfer instrument. Final rule section 556.808 
(along with final rule section 556.715) is the successor to proposed 
rule section 256.620. Final rule section 556.808 is substantively 
similar to proposed section 256.620, but the final rule section applies 
to operating rights owners and contains somewhat different language 
from the proposed section. The proposed rule section stated that you 
could create or transfer ``carried working interests, overriding 
royalty interests, or payments out of production'' without BOEM 
approval. In the final rule, instead of listing these three types of 
interests, section 556.808(a) states that you may create, transfer, or 
assign ``economic interests'' without BOEM approval. The term 
``economic interest'' is defined in final rule section 556.106 to 
encompass ``any right to, or any right dependent upon, production of 
crude oil, natural gas, or natural gas liquids,'' and includes, among 
others, the three types of interests listed in the proposed section.
    Final rule section 556.808 also makes clear that the 90-day 
deadline set forth in prior regulation section 556.64(a)(2) also 
applies to filings memorializing transfers of economic interests. Prior 
section 556.64(a)(2) did not explicitly state that the 90-day deadline 
applies to such filings. The 90-day filing deadline appears in final 
rule section 556.801 with respect to the filings of assignments of 
operating rights interests, and the final rule makes clear that the 
deadline also applies to filings of transfers of economic interests by 
so stating in final rule section 556.808.
    BOEM received one comment on proposed section 256.620, which 
expressed concerns about confidentiality of documents and asked whether 
the section intended to require the submission of joint operating 
agreements to BOEM. The comment notes that this provision, i.e., 
256.620, and its requirements are ``not [ ] new'' and that is correct--
this provision is currently found at 556.64(a)(7). The final rule 
section does not impose any new requirements and does not require the 
filing of joint operating agreements as they do not necessarily create 
economic interests, only rights to such interests. Once those interests 
are created, however, documents respecting them must be filed with 
BOEM. As to confidentiality, documents will be treated in accordance 
with final rule section 556.104 and any applicable Departmental 
regulations.
    Section 556.810. What must I do with respect to the designation of 
operator on a lease when a transfer of operating rights ownership is 
submitted? This section provides the circumstances under which the 
transfer of an operating rights interest triggers the need to file a 
new designation of operator form with BOEM. Final rule section 556.810 
is a clarification and extension of several prior and proposed rule 
sections. Proposed rule section 256.611 and section 556.62 from BOEM's 
previous regulations explained how a record title or operating rights 
interest may be transferred, but did not mention the need, which often 
arises upon such a transfer, to file a new designation of operator 
form. Current section 550.143 states that, when there is a change of 
designated operator, you must file a new designation of operator form 
with BOEM. Current section 550.143 is, however, in a part of the 
regulations that does not address transfers of lease interests. Because 
the need to file a new designation of operator form often arises when 
lease interests are transferred, such as operating rights interests, 
BOEM added section 556.810 here in part 556 to augment prior BOEM 
regulation section 550.143, and to ensure that parties to an operating 
rights transfer are aware of their duties with respect to designation 
of an operator.
11. Subpart I--Bonding or Other Financial Assurance
    Part 560, section 560.500(b) in the final rule, addresses the 
electronic filing of documents concerning bonding or other financial 
assurance. The substance of final rule section 560.500(b) was in 
proposed rule section 256.503(c), which established the circumstances 
under which BOEM may require, rather than request, electronic document 
submission. The proposed and final rule sections provide that BOEM 
reserves the right to mandate the submission of financial assurance 
information electronically after publishing a 90 day-notice to that 
effect in the Federal Register. Submission of financial assurance data 
electronically would contribute significantly to streamlining the 
bonding process and facilitate a more efficient transfer of data and 
information between BOEM and the regulated community. BOEM received no 
comments on proposed rule section 256.503(c). Accordingly, although no 
other substantive changes related to bonding are made in the final 
rule, this provision was retained from the proposed rule at section 
560.500(b).
    Other than the electronic filing change that appears in final rule 
section 560.500(b) and minor administrative changes made to subpart I, 
as noted below, the regulatory sections in the subpart remain the same 
as in the prior regulations, where they are located at 30 CFR subpart 
I, consisting of prior sections 556.52 through 556.59.
    Sections 556.900-556.907. These sections establish bonding 
requirements for the lessee of an OCS oil and gas or sulfur lease. BOEM 
is not making any substantive changes to Subpart I--Bonding or Other 
Financial Assurance--relative to the prior regulations. The only 
changes made to this subpart in the final rule are administrative or 
conforming changes necessary to avoid inconsistency with the rest of 
BOEM's regulations. These changes are: (1) Editorial improvement; (2) 
correction of the inadvertent deletion of cross-references to former 
MMS regulations now administered by BSEE and ONRR; (3) changes in the 
section numbers and conforming changes needed in the text due to the 
section number changes; (4) changing references to ``Associate 
Director'' to ``Director,'' as there are no ``Associate Directors'' 
within BOEM; and (5) consistently referring to decommissioning 
obligations as ``decommissioning obligations,'' rather than by listing 
some or all of the constituent parts of decommissioning.
12. Subpart J--Bonus or Royalty Credits for Exchange of Certain Leases
    Section 556.1000. Leases formerly eligible for a bonus or royalty 
credit. This section provides that bonus or royalty credits issued by 
BOEM pursuant to the Gulf of Mexico Energy Security Act of 2006 
(GOMESA) (43 U.S.C. 1331 note) are no longer available. The deadline 
for applying for such a bonus or royalty credit was October 14, 2010; 
therefore, lessees may no longer apply for such credits. The proposed 
rule contained several sections addressing these credits because it was 
published in May 2009, before the October 2010 deadline. The final rule 
has only one section addressing these credits--section 556.1000.
    Although the GOMESA lease exchange/credit program is no longer 
active, section 556.1000 has been included in the final rule because

[[Page 18139]]

GOMESA did not specify a deadline to apply for lease credits. The 
October 14, 2010, deadline was set by BOEM in its regulations, and must 
be retained to forestall future requests for lease credits under 
GOMESA.
13. Subpart K--Ending a Lease
    Section 556.1100. How does a lease expire? This section provides 
the circumstances under which a lease will expire at the end of its 
primary term. Final section 556.1100 is substantively the same as 
proposed rule section 256.700, with minor wording changes. The final 
rule section is also divided into two paragraphs, one addressing oil 
and gas leases, and one addressing sulfur leases.
    BOEM received one comment noting that proposed section 256.700 
listed the ways to maintain a lease beyond the primary term, but failed 
to list production from unitized leases as one of those ways. The 
comment suggested that BOEM add in section 256.700 a reference to 
production from unitized leases as one of the ways to maintain a lease. 
Final rule section 556.1100 refers back to final rule section 556.601 
for the ways in which to maintain a lease beyond the primary term, 
which includes, at 556.601(e), production from unitized leases.
    Section 556.1101. May I relinquish my lease or an aliquot part 
thereof? Final rule section 556.1101 repeats the substance of proposed 
rule section 256.701. Both sections name the form that must be filed in 
triplicate by all lessees to effect a lease relinquishment and both 
note that the relinquishment is effective on the date of filing. Both 
sections also make clear that a relinquishment does not relieve the 
relinquisher(s) of any accrued obligations, but to express this concept 
the final rule section has retained the language in prior section 
556.76, rather than using the proposed language.
    Prior section 556.76 also stated that no filing fee is required for 
a relinquishment. The proposed rule, however, said nothing on this 
subject. It did not contain the statement in the prior regulations that 
no filing fee is required, but neither did it say that a filing fee was 
required for a relinquishment. The final rule retains the ``no filing 
fee'' statement from prior regulations at section 556.76.
    Section 556.1102. Under what circumstances will BOEM cancel my 
lease? This section provides the circumstances under which BOEM may 
cancel a producing or a non-producing OCS lease. Final rule section 
556.1102 contains the substance of proposed rule section 256.702, with 
some minor wording changes for clarity. Both sections state that 
failure to comply with a provision of a lease or of the regulations may 
result in lease cancellation, but the final rule section also makes 
clear that failure to provide requested financial assurance may result 
in lease cancellation or assessment of civil penalties. (See final rule 
section 556.1102(f).) Final rule section 556.1102(f) is a clarification 
of proposed rule subsections 256.702(b) and (c). Both these subsections 
state that failure to comply with any provision of the regulations may 
result in lease cancellation, and this includes failure to comply with 
those regulations requiring the maintenance of financial assurance.
    Proposed rule section 256.702 generally referred to section 5(a) of 
OCSLA (43 U.S.C. 1334(a)), whereas final rule section 556.1102 was 
written to more closely follow sections 5(a)(2)(A) and (B) of OCSLA (43 
U.S.C. 1334(a)(2)(A) and 1334(a)(2)(B)). Both the final and proposed 
rule sections repeat section 5(a)'s directive that a lease may be 
cancelled any time BOEM finds that continued activity will probably 
cause harm or damage to inter alia, life or property, that such threat 
of harm or damage will not disappear or acceptably decrease in a 
reasonable time, and that the advantages of lease cancellation outweigh 
the advantages of continuing the lease. But final rule section 556.1102 
paragraphs (d) and (e) also include section 5(a)'s requirements that 
cancellation pursuant to the terms above must be subsequent to a 
hearing and may not occur unless and until operations under the lease 
have been suspended or prohibited by the Department continuously for a 
period of five years.
14. Subpart L--Leases Maintained Under Section 6 of OCSLA
    Subpart L consists of two final rule sections, 556.1200 and 
556.1201, which have been retained from prior sections 556.79 and 
556.80, respectively. These two sections were not in the proposed rule. 
The Preamble to the proposed rule stated that prior section 256.79 (now 
556.79) was ``[e]liminated as unnecessary repetition'' of OCSLA section 
6(b) (43 U.S.C. 1335(b)) and prior section 256.80 (now 556.80) was 
``covered in 30 CFR part 281'' (now part 581).
    BOEM has reconsidered its decision to eliminate subpart L from its 
regulations, and, for the reasons outlined below, has decided to retain 
it in this final rule.
    Section 556.1200. Effect of regulations on lease. Final rule 
section 556.1200 makes clear the relationship between BOEM's 
regulations and the lease provisions of those leases maintained under 
section 6 of OCSLA (43 U.S.C. 1335). Section 6 of OCSLA applies to a 
specific group of leases--State-issued OCS leases issued before 
December 21, 1948.
    BOEM has retained this provision, derived from prior section 
556.79, even though it includes some repetition of Section 6 of OCSLA. 
Retaining this in final rule section 556.112 is helpful to BOEM's 
stakeholders because it clarifies the interplay between BOEM's 
regulations and Section 6 leases.
    Section 556.1201. Section 6(a) leases and leases other than those 
for oil, gas, or sulfur. BOEM has determined that the proposed rule was 
incorrect in asserting that prior part 556, subpart L, which consisted 
of prior sections 556.79 and 556.80, was an unnecessary duplication of 
provisions in another part of the regulations. BOEM has therefore 
decided to retain, in final rule section 556.1201, the substance of 
prior section 556.80. Final rule section 556.1201 states that the 
existence of a Section 6 oil and gas lease does not preclude the 
issuance, in the same area, of other types of leases under OCSLA. BOEM 
has determined that this section should be retained to clarify the 
circumstances surrounding Section 6 leases.
15. Subpart M--Environmental Studies
    Section 556.1300. Environmental studies. Subpart M--Environmental 
Studies consists of section 556.1300 in the final rule and provides 
that BOEM will conduct studies of any area or region included in any 
oil and gas lease sale as needed to assess and manage impacts on the 
human, marine and coastal environments, which may be affected by OCS 
oil and gas or other mineral activities in such area or region. Subpart 
M in the previous regulations consisted of section 556.82. The proposed 
rule deleted subpart M as an ``unnecessary recitation of internal 
procedures,'' but section 20(c) of OCSLA specifically states that the 
``Secretary shall, by regulation, establish procedures for carrying out 
his duties [to conduct environmental studies] under this section.'' (43 
U.S.C. 1346(c)). BOEM has determined to retain subpart M to comply with 
section 20 of OCSLA and to set forth in the regulations, procedures for 
the conduct of environmental studies with minor revisions to clarify 
text.

C. Part 559--Mineral Leasing: Definitions

    Prior part 559 was moved into final rule part 560, as explained 
below, in the discussion of final rule part 560.

[[Page 18140]]

D. Part 560--Outer Continental Shelf Oil and Gas Leasing

    The final rule updates the authority citation for part 560 and 
amends the Table of Contents for part 560 by removing prior subpart D, 
reserving the subpart, and adding new subparts C and E.
    Also, in this final rule, BOEM has moved the definitions from prior 
part 559 into final rule part 560 and deleted part 559. Prior part 559 
consisted of only two sections. The first section, 559.001, stated that 
``[t]he purpose of this part 559 is to define various terms appearing 
in part 560.'' The second section, 559.002, listed these definitions. 
This relocation did not appear in the proposed rule, but it is merely 
an administrative change, which streamlines the regulations and does 
not trigger the need for notice and comment.
    The wording of the definition of ``person'' in part 560 has been 
made consistent with that in part 556, but no change is being made to 
the other definitions except their re-location within the regulations.
1. Subpart A--General Provisions
    Section 560.100. Authority. This section provides a listing of the 
statutes that provide the legal basis for the regulations promulgated 
under this part. The authority provisions of part 560 have been revised 
in this new section, and the titles of the public laws corresponding to 
the relevant statutes have been added. FOGRMA (30 U.S.C. 1701-1759) has 
been updated to include the amendments made to it by the Federal Oil 
and Gas Royalty Simplification and Fairness Act of 1996, (FOGRSFA, 30 
U.S.C. 1701 note).
    Section 560.101. What is the purpose of this part? This final rule 
section retains the language of section 560.1 in the prior regulations, 
with no changes, but redesignated.
    Section 560.102. What definitions apply to this part? This section 
consolidates and updates the definitions previously located in part 559 
with the definitions previously located in section 560.2.
    Section 560.103. What is BOEM's authority to collect information? 
This section provides that BOEM may not conduct or sponsor a collection 
of information unless the information collection displays a currently 
valid OMB control number, and specifies the circumstances under which 
comments regarding any aspect of the collection of information under 
this part may be submitted to BOEM. This section is unchanged from 
section 560.3 but has been redesignated.
2. Subpart B--Bidding Systems
    Sections 560.200-560.230. These provisions establish the bidding 
systems that BOEM may use to offer and sell Federal leases for the 
exploration, development, and production of oil and gas resources 
located on the OCS. No changes were made to this subpart, except that 
all section numbers have been changed to conform to the numbering 
convention used throughout the final rule.
3. Subpart C--Operating Allowances
    Section 560.300. Operating allowances. The final rule includes a 
new subpart C, which consists of one section--556.300--that 
reestablishes a provision concerning operating allowances in the BOEM 
regulations. Operating allowance provisions were originally added into 
MMS (later BOEMRE) regulations by RIN 1010-AB93, 61 FR 3800, Bidding 
Systems for Leases in the Outer Continental Shelf. When the MMS was 
reorganized into ONRR, BOEM, and BSEE, the operating allowance sections 
of the regulations were moved from the BOEMRE regulations to the ONRR 
regulations, but the corresponding sections were not included in the 
BOEM regulations. Under the current organizational structure of the 
Department, ONRR will collect royalty as calculated using the operating 
allowance, but BOEM must first issue leases that contain the operating 
allowance. In order to effectuate the ONRR regulations related to 
operating allowances, therefore, counterpart provisions must also be 
re-established within the BOEM regulations.
    Subpart C re-establishes the operating allowance provisions in 
BOEM's regulations. It does not make any change to the regulatory 
provisions with respect to what sort of operating allowance would be 
available or when one might be granted.
4. Subpart D--Joint Bidding
    Both the proposed and final rules amend part 560 by removing 
subpart D, which concerned joint bidding. All the provisions in the 
prior subpart D have been moved to part 556 in the final rule (see 
sections 556.511-556.515, and 556.106, definitions of ``average daily 
production,'' ``barrel,'' ``crude oil,'' ``economic interest,'' ``joint 
bid,'' ``natural gas,'' ``natural gas liquids,'' ``owned,'' ``single 
bid,'' ``six-month bidding period,'' and ``statement of production''). 
The regulation sections that were in part 560, subpart D, more 
appropriately belong in part 556, subpart E, under the subheading, 
``Restrictions on Joint Bidding,'' because subpart E contains the full 
panoply of regulations relating to the restrictions on joint bidding. 
There is no clear rationale supporting retention of these sections in 
part 560 as well, and including these provisions twice in the 
regulations may cause confusion. Therefore, part 560, subpart D is 
being removed.
5. Subpart E--Electronic Filings
    In part 560, the final rule includes a new subpart E, ``Electronic 
Filings,'' which provides that BOEM may notify lessees and other 
parties that it will allow or request the submission of information 
electronically through BOEM's secure electronic filing system, through 
an alternate secure electronic filing system supported and maintained 
by the Department, or through some other electronic filing system that 
BOEM has approved for this purpose. This subpart did not appear in the 
proposed rule, nor did it appear in the prior regulations, but notice 
and an opportunity to comment on these new provisions are unnecessary 
because the subpart does not impose any requirements. Rather, it 
provides that anyone submitting documents to BOEM may do so 
electronically. The electronic-submittal option will likely reduce the 
burden on those making the submissions. Moreover, the option furthers 
the Federal government's move toward all-electronic document 
production, submission, and filing, a goal evidenced by the Government 
Paperwork Elimination Act (GPEA), Public Law 105-277, 112 Stat. 2681 
(1998), and the U.S. Office of Management and Budget's guidance for 
implementing that Act (Memorandum 00-10 OMB Procedures and Guidance on 
Implementing the Government Implementation of the Government Paperwork 
Elimination Act, April 25, 2000). Because subpart E imposes no 
requirements on the public, it constitutes a procedural rule that does 
not require notice and comment.
    Subpart E consists of three sections, which are individually 
addressed below.
    Section 560.500. Electronic documents and data transmission. Final 
rule section 560.500 lists the types of information that may be filed 
electronically. The section also makes clear that if BOEM sends a 
document in an electronic format, return of the document using the same 
format or in print is acceptable (560.500(c)), and that BOEM may 
electronically approve or execute documents referenced in this section 
(560.500(d)).
    Final rule section 560.500(b) repeats proposed rule section 
256.503(c), which

[[Page 18141]]

established the circumstances under which BOEM may require, rather than 
request, electronic document submission. The proposed and final rule 
sections provide that BOEM reserves the right to mandate the submission 
of financial assurance information electronically after publishing a 90 
day-notice to that effect in the Federal Register. Submission of 
financial assurance data electronically would contribute significantly 
to streamlining the bonding process and facilitate a more efficient 
transfer of data and information between BOEM and the regulated 
community. BOEM received no comments on proposed rule section 
256.503(c). Accordingly, although most other changes related to bonding 
were removed from the final rule, this provision was retained at 
section 560.500(b).
    Section 560.501. How long will the confidentiality of electronic 
document and data transmissions be maintained? Final rule section 
560.501 states that electronically-submitted confidential information 
will be maintained as confidential for the same amount of time that 
corresponding non-electronic information would be so maintained.
    Section 560.502. Are electronically filed document transmissions 
legally binding? Final rule section 560.502 has been included to ensure 
that electronic submission will not be a bar to legal viability. 
Pursuant to section 560.502, documents that are properly submitted 
through an approved electronic format will be considered legally 
binding (assuming they are properly prepared, executed, or whatever 
else may be necessary in each individual case), without the need to 
also submit a paper copy of such document. In other words, if all else 
has been done properly with regard to a document submission, the fact 
that it has been submitted electronically will not bar it from being 
legally binding.
    Final rule section 560.502 was not in the proposed rule and is 
being included in the final rule without a period of notice and 
comment. The Government Paperwork Elimination Act, found within the 
Omnibus Consolidated and Emergency Supplemental Appropriations Act of 
1999 (Public Law 105-277, 112 Stat. 2681 (1999)), at sections 1701 et 
seq., authorizes agencies to consider properly submitted electronic 
submissions as legally binding. The Government Paperwork Elimination 
Act, at section 1707, specifically addresses the question of whether, 
and how, electronically filed documents are legally binding. It states: 
``Electronic records submitted or maintained in accordance with 
procedures developed under this title, or electronic signatures or 
other forms of electronic authentication used in accordance with such 
procedures, shall not be denied legal effect, validity, or 
enforceability because such records are in electronic form.'' Pub. L. 
105-277, 112 Stat. 2681-751 (1999).
    Further, section 7001(a) of the Electronic Signatures in Global and 
National Commerce Act (ESIGN) (15 U.S.C. 7001-7031) states: 
``Notwithstanding any statute, regulation, or other rule of law (other 
than this subchapter and subchapter II of this chapter), with respect 
to any transaction in or affecting interstate or foreign commerce--(1) 
a signature, contract, or other record relating to such transaction may 
not be denied legal effect, validity, or enforceability solely because 
it is in electronic form; and (2) a contract relating to such 
transaction may not be denied legal effect, validity, or enforceability 
solely because an electronic signature or electronic record was used in 
its formation.''
    Final rule section 560.502 is administrative and serves to reduce 
the burden on those submitting filings to BOEM, but more importantly it 
is necessary to effectuate BOEM's electronic filing system and to 
ensure electronic submissions are considered legally valid documents.

IV. Table of Comments and Responses

    We do not provide responses to comments on subpart I because no 
substantive changes were made to that subpart as part of this final 
rule.

A. General Comment

    Comment: In an effort to streamline the regulations, the proposed 
rule eliminated several sections that repeat provisions of OCSLA. But 
in other instances, the proposed rule added language that is found in 
relevant statutes. BOEM should carefully review the proposed rule and 
eliminate instances in which the substance of statutes is simply 
repeated. Specifically, BOEM should consider proposed sections 556.101, 
556.200 (second sentence), 556.304(b), 556.402(b) in this regard.
    Response: We kept added statutory language when it was considered 
necessary for clarity.

B. Section-Specific Comments

------------------------------------------------------------------------
 Proposed rule section  (30
            CFR)                Comments received       BOEM Response
------------------------------------------------------------------------
                              The American
                               Petroleum Institute
                               (API) submitted
                               comments on many
                               sections of the
                               proposed rule,
                               which are discussed
                               throughout the
                               following Table.
256.101.....................  Section 256.101       BOEM agrees with the
                               references 18         comment and has
                               U.S.C. 1001, which    removed the
                               is unnecessary and    provision
                               potentially creates   referencing 18
                               confusion. In the     U.S.C. 1001 from
                               event 18 U.S.C.       the final rule.
                               1001 were revised,
                               amended or
                               repealed, MMS would
                               need to do the same
                               here. It's
                               redundant and
                               unnecessary.
256.103.....................  The definition for    We revised the
                               ``authorized          definition for
                               officer'' should be   ``Secretary'' to
                               retained in           include both the
                               proposed section      terms ``official''
                               256.103, as it is     and ``designated
                               still used in the     employee'' who are
                               regulations. The      ``authorized to act
                               proposal includes     on behalf of the
                               definitions for the   Secretary.'' We
                               ``Central Planning    have added the
                               Area'' and the        definition for the
                               ``Eastern Planning    ``Western Planning
                               Area,'' but not for   Area.''
                               the ``Western
                               Planning Area.''
                               For completeness,
                               MMS should consider
                               including a
                               definition for the
                               ``Western Planning
                               Area.''
256.200.....................  Section 256.200--The  The second sentence
                               second sentence       is short and
                               appears to be         explicit and
                               repeated from OCSLA   therefore has been
                               and its repetition    retained.
                               is not necessary.
                               See, 43 U.S.C.
                               1344(a)(3).
                               Repeating language
                               from the statute is
                               inconsistent with
                               the streamlining
                               approach that MMS
                               has taken with the
                               proposed
                               regulations.

[[Page 18142]]

 
256.301.....................  Section 256.301       We have not deleted
                               eliminates the        this provision. See
                               requirement that      final rule section
                               MMS inform the        556.302(c), which
                               public as soon as     states: ``BOEM will
                               possible, when        seek to inform the
                               areas are deleted     public, as soon as
                               from leasing. This    possible, of
                               requirement should    changes from the
                               be retained. It       area(s) proposed
                               should be             for leasing that
                               recognized that       occur after the
                               deleting areas from   Call process.''
                               leasing is of great
                               importance to
                               lessees who are
                               spending resources
                               in preparing for
                               lease sales, and
                               this information
                               should be published
                               as soon as
                               possible.
256.304(b)..................  Section 256.304(b)--  We cite the CZMA at
                               The Coastal Zone      section 556.305(b),
                               Management Act        where we refer to
                               (CZMA) (16 U.S.C.     the consistency
                               1451 et seq.) sets    determination.
                               out the process for
                               consistency
                               determinations by
                               the affected
                               States. While MMS
                               may be merely
                               setting out the
                               process it uses in
                               order to ensure
                               consistency with
                               the States, the
                               regulation should
                               actually reference
                               the CZMA so that if
                               the CZMA is
                               modified or amended
                               or repealed, MMS
                               can continue to
                               follow the process
                               outlined in that
                               act, rather than
                               risking conflict or
                               inconsistency.
256.303.....................  Shell Exploration     We agree with this
                               and Production        suggestion and have
                               Company (Shell)       incorporated this
                               Comments.             requirement into
                              Section 256.303--The   sections 556.304(c)
                               terms of an oil and   and 556.308.
                               gas lease are        The final notice of
                               integral to the       sale will replicate
                               lessee/lessor         the terms and
                               relationship and      conditions in the
                               lessees who are       lease form. The
                               bidding millions of   following is a
                               dollars on leases     sample statement
                               should have the       from a recent
                               right to know the     notice of sale:
                               lease terms in        ``BOEM will use the
                               advance of            recently revised
                               submitting bids.      Form BOEM-2005
                               Accordingly, Shell    (October 2011) to
                               requests that the     convey leases; it
                               form of lease on      can be viewed at:
                               which successful     http://www.boem.gov/
                               lease bids will be    About-BOEM/
                               granted be attached   Procurement-
                               to or referenced in   Business-
                               the notice of lease   Opportunities/BOEM-
                               sale..                OCS-Operation-Forms/
                                                     BOEM-OCS-Operation-
                                                     Forms.aspx.
                                                    The lease form will
                                                     be amended with the
                                                     specific terms,
                                                     conditions and
                                                     stipulations
                                                     applicable to the
                                                     individual lease.''
256.402(b)..................  Section 256.402(b)    We agree with this
                               should clarify that   comment and changed
                               this section does     the language, which
                               not impact the        is now found at
                               statutory             final rule section
                               requirements under    556.403(b), to more
                               OCSLA that provide    closely track the
                               for a finding by      language of section
                               the Secretary that    8(d) of OCSLA (43
                               the bidder is not     U.S.C. 1337(d)).
                               meeting due
                               diligence
                               requirements and
                               that provide for
                               notice and hearing.
                              Section 256.402(c)    Section 8(a)(1) of
                               should cite to the    OCSLA (43 U.S.C.
                               statutory             1337(a)(1)) states:
                               provisions            ``The Secretary is
                               authorizing the       authorized to grant
                               prohibition based     to the highest
                               upon unacceptable     responsible
                               operating             qualified bidder or
                               performance.          bidders by
                                                     competitive
                                                     bidding, under
                                                     regulations
                                                     promulgated in
                                                     advance, any oil
                                                     and gas lease on
                                                     submerged lands of
                                                     the outer
                                                     Continental Shelf .
                                                     . .'' The Secretary
                                                     has determined
                                                     through promulgated
                                                     regulations that
                                                     acceptable
                                                     operating
                                                     performance under
                                                     30 CFR parts 250
                                                     and 550 on any
                                                     other OCS lease is
                                                     necessary to be
                                                     considered a
                                                     ``responsible''
                                                     bidder. This
                                                     provision is not
                                                     new. The prior
                                                     regulations, at 30
                                                     CFR 556.35(c),
                                                     provided that,
                                                     ``BOEM may
                                                     disqualify you from
                                                     acquiring any new
                                                     lease holdings or
                                                     lease assignments
                                                     if your operating
                                                     performance is
                                                     unacceptable
                                                     according to 30 CFR
                                                     550.135.'' We
                                                     disagree that the
                                                     citation to the
                                                     statutory
                                                     provisions codified
                                                     from section
                                                     8(a)(1) of the
                                                     OCSLA is necessary
                                                     as the regulation
                                                     is clear and the
                                                     concept is
                                                     longstanding in the
                                                     prior regulations.
256.404.....................  Section 256.404--     We disagree with
                               This new provision    this comment, but
                               will create           in final rule
                               unnecessary           section 556.405, we
                               additional            replaced
                               administrative        ``immediately''
                               burdens. MMS has      with ``as soon as
                               multiple ways to      practicable.'' The
                               learn of a merger     new provision is
                               or name change,       needed to address
                               including, without    the problems that
                               limitation, the       the Bureau has had
                               filing of merger      in the past with
                               and name change       name changes and/or
                               documents with the    mergers about which
                               Secretary of State    BOEM is not
                               in most States and    informed in a
                               the submission of     timely fashion. It
                               new designation of    is not practical
                               operator and other    for BOEM to monitor
                               MMS forms. This       all filings with
                               additional            all Secretaries of
                               obligation need not   State in the United
                               be imposed on         States.
                               lessees. In
                               addition, MMS
                               should delete
                               ``immediately'' as
                               it is inconsistent
                               with the one year
                               limit. The API
                               suggested using
                               ``as soon as
                               practicable,'' but
                               not
                               ``immediately.''

[[Page 18143]]

 
256.416(b)..................  Section 256.416(b)--  We disagree with the
                               There is no policy    recommended policy
                               reason not to allow   change proffered in
                               co-ownership by       this comment. The
                               agreement of          presumption that an
                               bidders with a tie    agreement (whether
                               bid, when the tie     written or oral,
                               bidders are on the    formal or informal)
                               restricted joint      could not have been
                               bidders list. Those   made prior to, or
                               parties cannot have   simultaneously
                               communicated or       with, the
                               agreed with respect   submission of bids
                               to the bid, but       by two or more
                               going forward could   bidders on the
                               agree to an           restricted joint
                               assignment creating   bidders list is
                               co-ownership after    flawed. Collusive
                               the lease is          bidding practices
                               awarded.              are a possibility
                                                     that is addressed
                                                     explicitly in
                                                     existing
                                                     regulation, for
                                                     example, section
                                                     556.44 specifically
                                                     disqualifies bids
                                                     where collusive
                                                     bidding is evident.
                                                     We clarified the
                                                     language of
                                                     paragraph (c) of
                                                     final rule section
                                                     556.516 to address
                                                     the treatment of
                                                     tie high bids
                                                     submitted by two
                                                     bidders on the
                                                     Restricted Joint
                                                     Bidders List.
                                                     Paragraph (c)
                                                     states that only
                                                     those tied bidders,
                                                     ``not otherwise
                                                     prohibited from
                                                     bidding together''
                                                     may accept a lease
                                                     jointly. Because
                                                     two bidders on the
                                                     restricted joint
                                                     bidders list would
                                                     ``otherwise [be]
                                                     prohibited from
                                                     bidding together,''
                                                     this provision
                                                     retains the current
                                                     policy of not
                                                     allowing tied
                                                     restricted joint
                                                     bidders to accept a
                                                     lease jointly. The
                                                     use of the plural
                                                     lessee(s) at
                                                     section
                                                     556.516(c)(2)
                                                     implies that there
                                                     could be more than
                                                     two tied bidders
                                                     and that they could
                                                     agree to allow more
                                                     than one of the
                                                     tied bidders to
                                                     become lessees. We
                                                     deleted the words
                                                     ``or they may
                                                     decide'' as the
                                                     language did not
                                                     clearly state how
                                                     to notify us of
                                                     their decision.
256.417.....................  Section 256.417--The  A procedure to
                               protest procedure     request
                               has been eliminated   reconsideration of
                               entirely. MMS         a rejected bid has
                               should specify or     been retained in
                               refer to an appeal    the rule, but the
                               process: to whom      difference in the
                               appeals are made,     proposed and prior
                               how long the agency   regulations is that
                               has to make a         ``Secretary'' has
                               decision, who will    been replaced by
                               make the decision,    ``BOEM Director.''
                               and to whom that
                               decision will be
                               appealed.
256.420.....................  Section 256.420--MMS  BOEM agrees with
                               should retain the     this comment and
                               status quo that the   has decided to
                               failure to pay the    limit the penalty
                               remaining 4/5ths      for failure to pay
                               lease bonus results   the remainder to
                               in a forfeiture of    the amount of the
                               the 1/5th payment.    bid deposit. Prior
                               Payment of the 1/     section 556.47(f)
                               5th amount is         stated that ``If a
                               sufficient penalty    bid is accepted,
                               and MMS may still     such notice shall
                               offer and lease the   transmit three
                               tract at the next     copies of the lease
                               lease sale. Payment   to the successful
                               of amounts beyond     bidder.'' As
                               the 1/5th is not      provided in the
                               warranted. As a       prior 30 CFR
                               result, MMS should    1218.155, the
                               strike the words      bidder shall, not
                               ``and MMS may take    later than the 11th
                               appropriate action    business day after
                               to collect the full   receipt of the
                               amount bid.'' In      lease, execute the
                               addition, the         lease, pay the
                               existing rule, Sec.   first-year's
                                 256.47(g), states   rental, and unless
                               that the successful   deferred, pay the
                               bidder has 11         balance of the
                               business days to      bonus bid.'' 30 CFR
                               execute the lease     1218.155(c) made it
                               and otherwise         clear that the
                               comply with the       payment must be ``
                               applicable            . . . received by
                               regulations. This     the Federal Reserve
                               proposed rule         Bank of New York no
                               required that a       later than noon,
                               lessee ``execute      eastern standard
                               and return'' a        time, on the 11th
                               lease within 11-      business day after
                               business days after   receipt of the
                               receipt (emphasis     lease forms by the
                               added.) Can MMS       successful
                               confirm whether the   bidder.'' The new
                               addition of the       regulation makes it
                               words ``and           clear that the
                               return'' signify a    leases must be
                               change in how the     signed and returned
                               process is            to BOEM within 11-
                               administered? If      business days after
                               this does             the receipt. This
                               constitute a          has always been the
                               change, then can      rule and is not a
                               MMS explain the       change of BOEM
                               rationale behind      processes.
                               this change?
                              As discussed above,   Prior BOEM
                               API objects to        regulation section
                               forfeiture of the     556.47(g) said that
                               full bid amount,      if a bidder fails
                               because forfeiture    to execute the
                               of the 1/5th          lease as required
                               payment is            by the regulations,
                               sufficient.           BOEM will collect
                               However, in the       or retain only the
                               event that this       deposit. The final
                               option is retained,   rulemaking, at
                               MMS should consider   section 556.520(c),
                               providing some        says the same.
                               flexibility within    Granting the second
                               this provision in     highest bidder the
                               the event that the    opportunity to
                               full bid amount is    receive the lease
                               collected. The        in the event that
                               bidder should not     the high bidder
                               suffer forfeiture     forfeits the lease
                               of the lease if the   under this
                               full bid amount has   provision may not
                               been paid. MMS        result in BOEM
                               should also           receiving fair
                               consider giving the   market value for
                               second highest        the lease (see
                               qualified bidder      section 18(A)(4) of
                               the opportunity to    OCSLA) and is
                               receive the lease     contrary to the
                               in the event that     present BOEM policy
                               the high bidder       of offering all
                               forfeits the lease    blocks that are not
                               under these           awarded in a
                               provisions.           particular lease
                                                     sale in the next
                                                     lease sale for that
                                                     planning area.
256.420(c)..................  Chevron comments:     Same response as
                              Chevron does not       above.
                               view section
                               256.420(c) as a
                               clarification but a
                               significant change..
                              Delete the phrase
                               from section
                               256.420(c) ``and
                               MMS may take
                               appropriate action
                               to collect the full
                               amount bid, if so
                               provided for in the
                               notice of sale.''.

[[Page 18144]]

 
                              Shell comment:        Same response as
                              MMS should             above.
                               reconsider allowing
                               MMS to collect the
                               full amount bid in
                               the event a
                               successful bidder
                               does not pay the
                               remaining 4/5th of
                               the bid. Currently,
                               lessees are
                               permitted to suffer
                               the significant
                               penalty of
                               forfeiting the 1/
                               5th advance payment
                               and this process
                               allows lessees to
                               make an informed
                               decision on leasing
                               if information
                               relating to the
                               area becomes
                               available after the
                               bids are made..
256.605(a) and 256.606(c)...  API Comment:          We separated into
                              Section 256.605(a)     two sections those
                               is inconsistent       provisions that
                               with proposed         concern the rights
                               section 256.606(c).   and obligations of
                               In the former,        record title owners
                               operating rights      (section 556.604)
                               and record title      and those that
                               owners are jointly    concern the rights
                               and severally         and obligations of
                               liable for all non-   operating rights
                               monetary              owners (section
                               obligations, but in   556.605).
                               the latter,
                               operating rights
                               owners are only
                               responsible for
                               liabilities insofar
                               as their interest
                               in the lease..
256.616.....................  Section 256.616--The  We renumbered this
                               last sentence is      item 556.710 and
                               ambiguous. The        clarified it as
                               liabilities for an    follows:
                               assignor are         ``Until there is a
                               covered in section    BOEM-approved
                               256.605. The last     assignment of
                               sentence should be    interest, you, as
                               deleted.              the assignor,
                                                     remain liable for
                                                     the performance of
                                                     all lease
                                                     obligations that
                                                     accrued while you
                                                     held record title
                                                     interest, until all
                                                     such obligations
                                                     are fulfilled.''
                              Shell Comment:        See above.
                              MMS should remove
                               the last sentence
                               of Proposed Section
                               256.616, which is
                               ambiguous and which
                               concept is
                               addressed in
                               Section 256.605.
                               Also, proposed
                               Section 256.605(a)
                               is inconsistent
                               with Section
                               256.606(c)..
256.619.....................  API Comment:          We disagree with the
                              Section 256.619--The   comment. The
                               new rule poses the    requirement to
                               question, ``As a      provide the
                               restricted bidder,    agreements between
                               may I assign          two parties on the
                               interest to another   restricted joint
                               restricted joint      bidders list is not
                               bidder?'' The new     new, but simply
                               rule answers in the   represents a
                               affirmative but       restatement of the
                               also states that      prior 30 CFR
                               ``you must submit     556.64(i), which
                               to MMS a copy of      required that ``the
                               any agreements        assignor or
                               relating to the       transferor shall
                               acquisition of the    file a copy, prior
                               lease or              to approval of the
                               interest,'' API is    assignment, of all
                               concerned about the   agreements
                               submission of         applicable to the
                               commercial            acquisition of that
                               agreements under      lease or a
                               this provision. The   fractional
                               types of agreements   interest.'' The
                               requested are         agreements are
                               potentially highly    necessary for the
                               sensitive. MMS        Department of
                               should only be        Justice to properly
                               interested in the     review the
                               timing and nature     antitrust
                               of the agreement      implications of
                               whereby one           these types of
                               restricted joint      assignments. The
                               bidder acquired       new provision, now
                               from another          at final rule
                               restricted joint      section 556.714,
                               bidder. Agreements    adds the option of
                               whereby a             both parties
                               restricted joint      providing BOEM with
                               bidder acquired the   ``a description of
                               interest assigned     the timing and
                               are irrelevant        nature of the
                               (unless they came     agreement(s) by
                               from another          which the assignor
                               restricted joint      or transferor
                               bidder). Further,     acquired the
                               because assignments   interest it now
                               are approved, MMS     wishes to
                               will already know     transfer.'' Thus,
                               the chain of title    the company on the
                               by which the          restricted joint
                               assigning party       bidders list has a
                               received the          choice of
                               interest. Further,    submitting what has
                               this provision is     previously been
                               so broad as to be     required under
                               unascertainable as    prior section 30
                               to the intent,        CFR 556.64(i), or
                               raising further       may submit a
                               questions about       description of the
                               implementation and    timing and nature
                               what documents are    of the agreement,
                               sufficient to meet    subject to the
                               the requirement..     applicability of 18
                                                     U.S.C. 1001. The
                                                     implementation of
                                                     this provision will
                                                     not raise any
                                                     questions as to
                                                     which documents are
                                                     needed as that
                                                     portion of the
                                                     provision at issue
                                                     is not a new
                                                     requirement of the
                                                     regulations.
256.620(a)..................  Section 256.620(a)--  This language is
                               This is not a new     essentially
                               provision, but API    identical to the
                               questions the         language of the
                               effectiveness or      prior section
                               the need for filing   556.64(a)(7), but
                               with MMS              it is found at
                               contractually         section 556.715 in
                               created interests     the final rule.
                               that typically are    BOEM is not
                               not placed on         changing any legal
                               record in any other   requirement except
                               public record.        that we may require
                               Theoretically, any    filing of these
                               time a co-owner       interests
                               stands out or goes    electronically.
                               ``non-consent''       Joint Operating
                               under a joint         Agreements are not
                               operating             required to be
                               agreement; it         filed with BOEM as
                               assigns its           they do not
                               interests in the      necessarily create
                               well until payout.    economic interests,
                               Does MMS intend       only rights to such
                               those joint           interests. However,
                               operating             once those
                               agreements to be      interests are
                               filed? We also have   created,
                               concerns about        instruments
                               confidentiality of    creating these
                               agreements;           interests must be
                               therefore, this       filed with BOEM,
                               rule should only      just as instruments
                               apply to recorded     creating these
                               documents.            interests were
                                                     required to be
                                                     filed under prior
                                                     section
                                                     556.64(a)(8).
256.700.....................  Section 256.700--     We added the
                               This provision        reference at final
                               should reference      rule section
                               section 256.601(d),   556.601(e) to
                               relating to the       clarify the effect
                               effect of             of production from
                               production from       a BSEE approved
                               unitized leases, as   unit on individual
                               an additional         lease terms.
                               circumstance that
                               maintains a lease.

[[Page 18145]]

 
N/A.........................  Anglo Suisse          We have noted the
                               Offshore Partners     comment. BOEM
                               comment:              disagrees and has
                              NTL (Notice to         decided not to make
                               Lessees) No. 2008-    any changes at this
                               N07 grossly           time to the NTL.
                               overestimates the     There is nothing in
                               amount of             the rule that
                               supplemental          prevents BOEM from
                               bonding required..    taking SEC reserve
                              NTL No. 2008-N07       reports into
                               also requires MMS     account, but BOEM
                               staff to              is not obligated to
                               recalculate a         use those numbers
                               lessee's PDP          if it believes that
                               reserve values        they are inaccurate
                               rather than using     or insufficiently
                               third party           substantiated.
                               Securities and
                               Exchange Commission
                               (SEC) reserve
                               reports..
N/A.........................  Additional Issues:    These issues are
                               Waiver        beyond the scope of
                               criteria on           the final rule and
                               supplemental bonds.   may be addressed in
                               Amount of     future rulemaking.
                               bond vs. net worth.
                               Credit for
                               net worth in
                               calculating bonding
                               amounts.
                               New surety
                               rules for issuance
                               of bonds.
                              Should MMS attempt
                               to value a company,
                               rather than rely on
                               the SEC to do so?.
------------------------------------------------------------------------

V. Legal and Regulatory Analyses

A. Statutes and Executive Orders

1. Improving Regulation and Regulatory Review (Executive Order (E.O. 
13563)
    E.O. 13563, Improving Regulation and Regulatory Review (January 18, 
2011), together with follow-up memoranda EO Guidance Memorandum, M-11-
10 (February 2, 2011) and Retrospective Analysis Guidance Memorandum, 
M-11-19 (April 25, 2011), require that the regulatory system protect 
public health, welfare, safety, and the environment while promoting 
economic growth, innovation, competitiveness, and job creation. The 
regulatory system must be based on the best available science, while 
allowing public participation and an open exchange of ideas, thus 
promoting predictability and reducing uncertainty. The regulatory 
system must identify and use the best, most innovative and least 
burdensome tools for achieving regulatory ends and it must take into 
account benefits and costs, both quantitative and qualitative. It must 
ensure that regulations are accessible, consistent, written in plain 
language, and easy to understand. It must also measure, and seek to 
improve, the actual results of regulatory requirements.
    E.O. 13563 supplements and reaffirms the principles, structures, 
and definitions governing contemporary regulatory review that were 
established in E.O. 12866 of September 30, 1993. As stated in that 
E.O., and to the extent permitted by law, each agency must, among other 
things: (1) Propose or adopt a regulation only upon a reasoned 
determination that its benefits justify its costs (recognizing that 
some benefits and costs are difficult to quantify); (2) tailor its 
regulations to impose the least burden on society, consistent with 
obtaining regulatory objectives, taking into account, among other 
things, and to the extent practicable, the costs of cumulative 
regulations; (3) select, in choosing among alternative regulatory 
approaches, those approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages, distributive impacts, and equity); (4) to the extent 
feasible, specify performance objectives, rather than specifying the 
behavior or manner of compliance that regulated entities must adopt; 
and (5) identify and assess available alternatives to direct 
regulation, including providing information upon which the public can 
base choices, or providing economic incentives to encourage the desired 
behavior, such as user fees or marketable permits.
2. Regulatory Planning and Review (E.O. 12866)
    This final rule is not a significant rule, as determined by the 
Office of Management and Budget (OMB), and is not subject to review 
under E.O. 12866, Regulatory Planning and Review (September 30, 1993). 
This rule primarily updates existing regulations that govern the 
Federal leasing process for offshore sulfur and oil and gas subject to 
the exclusive jurisdiction of the United States. The rule is rewritten 
in simple, clear language, and reorganized to reflect the steps in the 
leasing process as they have evolved over time. Minor changes will make 
certain practices uniform among the OCS regional offices.
    (1) This final rule does not have an annual 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. The rule rewrites 30 CFR part 556 in plain language, as 
well as portions of 30 CFR parts 550 and 560, and contains similar 
reporting and recordkeeping requirements and attendant costs as the 
prior regulations. A cost-benefit analysis was not performed because 
this is a rule of administrative procedure for which such an analysis 
is not required. However, an overall economic analysis was performed 
pursuant to the Regulatory Flexibility Act.
    (2) This rule does not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency.
    (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. Nominal user fees imposed by the rule are not 
material in size or nature. The final rule includes a new fee for 
recording certain secondary lease interests, $29, and continues 
existing fees for submitting non-required documents, $29, and 
requesting approval of the assignment or transfer of certain lease 
interests, $198.
    (4) This rule does not raise novel legal or policy issues arising 
out of legal mandates, the President's priorities, or the principles 
set forth in E.O. 12866. The final rule supersedes the existing 
regulations.
3. Regulatory Flexibility Act
    The Department certifies that this final rule does not have a 
significant economic effect on a substantial number of small entities 
under the Regulatory Flexibility Act (5 U.S.C. 601-612).
    The changes in this final rule affect lessees and potential 
lessees, of which there are approximately 130 different companies. 
These companies are generally classified under the North American 
Industry Classification System (NAICS) Code 211111, which includes 
companies that extract crude petroleum and natural gas. For this NAICS 
code classification, a small

[[Page 18146]]

company is one with fewer than 500 employees. BOEM estimates that of 
the 130 lessees and operators that explore for and produce oil and gas 
on the OCS, approximately 90 are small businesses (70 percent).
    The costs associated with the information collection (IC) 
activities related to this rulemaking should not have any significant 
economic effect on small businesses. This rule contains most of the 
same burden hour requirements and non-hour cost burdens as were in 
effect with BOEM's prior regulations. The changes in reporting 
requirements that are implemented with this rule do not significantly 
increase the IC burden on respondents--large or small. BOEM estimates 
an annual cumulative increase of 2,441 hours in the paperwork burden 
for all lessees over that imposed by the prior regulations. There is 
also a new $29 non-hour cost burden for recording certain secondary 
lease interests resulting in an annual increase of $20,300 ($29 x an 
estimated 700 filings). A regulatory flexibility analysis is not 
required. Accordingly, a small entity compliance guide is also not 
required.
4. Small Business Regulatory Enforcement Fairness Act (SBREFA)
    This final rule is not a major rule under 5 U.S.C. 801-808), the 
Small Business Regulatory Enforcement Fairness Act. This rule:
    (a) Will not have an annual effect on the economy of $100 million 
or more;
    (b) Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions; and
    (c) Will not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
United States-based enterprises to compete with foreign-based 
enterprises.
5. Comments From Small Businesses
    The Small Business and Agriculture Regulatory Enforcement Ombudsman 
and 10 Regional Fairness Boards were established to receive comments 
from small businesses about Federal agency enforcement actions. The 
Ombudsman will annually evaluate the enforcement activities and rate 
each agency's responsiveness to small business. If you wish to comment 
on the actions of BOEM, call 1-888-734-3247. You may comment to the 
Small Business Administration (SBA) without fear of retaliation. 
Allegations of discrimination/retaliation filed with the Small Business 
Administration will be investigated for appropriate action.
6. Unfunded Mandates Reform Act
    This final rule does not impose an unfunded mandate on State, 
local, or tribal governments or the private sector of more than $100 
million per year. The final rule does not have a significant or unique 
effect on State, local, or tribal governments or the private sector. A 
statement containing the information required by the Unfunded Mandates 
Reform Act (2 U.S.C. 1531-1538) is not required.
7. Takings Implication Assessment (E.O. 12630)
    Under the criteria in E.O. 12630, Governmental Action and 
Interference with Constitutionally-Protected Property Rights (March 15, 
1988), this final rule does not have significant takings implications. 
The rule is not a governmental action capable of interference with 
constitutionally-protected property rights. A takings implication 
assessment is not required.
8. Federalism (E.O. 13132)
    Under the criteria in E.O. 13132, Federalism (August 4, 1999), this 
final rule does not have sufficient federalism implications to require 
a Federalism Assessment. This final rule does not substantially and 
directly affect the relationship between the Federal and State 
governments. To the extent that State and local governments play a role 
in OCS activities, this rule does not affect that role.
9. Civil Justice Reform (E.O. 12988)
    This rule complies with the requirements of E.O. 12988, Civil 
Justice Reform (February 7, 1996). Specifically, this rule:
    (a) Meets the criteria of section 3(a) requiring that all 
regulations be reviewed to eliminate errors and ambiguity and be 
written to minimize litigation; and
    (b) Meets the criteria of section 3(b)(2) requiring that all 
regulations be written in clear language and contain clear legal 
standards.
10. Consultation With Indian Tribal Governments (E.O. 13175)
    Under the criteria in E.O. 13175, Consultation and Coordination 
with Indian Tribal Governments (November 9, 2000), we have evaluated 
this final rule and determined it has no substantial effect on 
Federally-recognized Indian tribes.
11. Paperwork Reduction Act (PRA)
    This rule contains new IC requirements; therefore, a submission to 
OMB under the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-
3521) was required. The OMB has approved the IC for the final 
rulemaking and assigned OMB Control Number 1010-0006 for a total of 
19,454 burden hours and $766,053 non-hour cost burdens.
    The title of the IC is ``Leasing of Sulfur or Oil and Gas in the 
Outer Continental Shelf (30 CFR part 550, part 556, and part 560)''. 
Respondents are Federal sulfur or oil and gas lessees and/or operators. 
Some responses to this IC are required to obtain or retain a benefit, 
and some are mandatory. The frequency of response varies but is 
primarily on occasion. The IC does not include questions of a sensitive 
nature. BOEM will protect proprietary information according to section 
26 of OCSLA; the Freedom of Information Act (5 U.S.C. 552), its 
implementing regulations at 43 CFR part 2; and the regulations at 30 
CFR 556.104(b) and 550.197, addressing proprietary data and data and 
information to be made available to the public or for limited 
inspection.
    This rulemaking is a partial rewrite of 30 CFR part 556, Leasing of 
Sulfur or Oil and Gas and Bonding Requirements in the Outer Continental 
Shelf and of 30 CFR part 560, OCS Oil and Gas Leasing. It also refers 
to, but does not change current requirements and burdens already 
approved by OMB under 30 CFR part 550, subpart A (1010-0114). BOEM uses 
the information collected in the rulemaking to help determine specific 
areas of leasing interest, to determine if applicants are qualified to 
hold leases in the OCS, to identify parties ineligible to bid jointly, 
and to track owners of, and operators on, leaseholds.
    In response to the proposed rule (74 FR 25177, May 27, 2009), BOEM 
received comments from the American Petroleum Institute, Shell 
Exploration and Production Company, Chevron North America Exploration 
and Production, Anglo Suisse Offshore Partners, LLC. (and Anglo Suisse 
Texas Offshore Partners, LLC.), Dynamic Offshore Resources, RLI 
Insurance Company, and two private citizens. Comments that addressed 
aspects of the information collection for this rulemaking are 
summarized below. All comments are addressed in detail in the preamble 
of this final rule.
    Commenting on proposed rule section 256.404, one company indicated 
that it is burdensome to submit merger or name change information and 
that BOEM can obtain the information from the Secretary of State in 
most States. In the final rule, BOEM is retaining the requirement to 
submit such information in order to address the problems that the 
Bureau has had in the past with name/

[[Page 18147]]

merger changes of which BOEM was not timely informed. It is not 
practical for BOEM to monitor all filings with the Secretaries of State 
in each State. In final rule section 556.405, however, BOEM replaced 
the immediate filing with a requirement that the filing be accomplished 
as soon as practicable. No change in the burden resulted.
    Concerning proposed rule sections 256.619 and 256.620, one company 
questioned submitting commercial agreements relating to certain 
transfers between restricted joint bidders because of the information's 
sensitivity. In final rule section 556.714, BOEM provided an option for 
the submission of a description of the timing and nature of the 
agreement(s) by which the assignor or transferor acquired the interest 
it now wishes to transfer. No change in the hour burden resulted. 
However, partially in response to the comment, BOEM added a general 
provision to the part (section 556.104(b)) to protect proprietary 
information (+ 125 hours).
    In addition, between the proposed and final rules, several actions 
occurred that affected the information collection.
     The MMS was reorganized, per Secretarial Orders 3302 and 
3299, resulting in a realignment of the regulations, with the leasing 
regulations going to BOEM, under 30 CFR chapter 5 (e.g., 30 CFR part 
256 is now 30 CFR part 556).
     The IC burden for 30 CFR part 550, subpart J, bonding 
requirements for pipelines and pipeline rights-of-way, was consolidated 
into the collection being revised for this rulemaking for 30 CFR part 
556 (1010-0006) due to the regulations realignment. The consolidation 
was approved by OMB on 11/14/2011.
     The proposed rule included a total rewrite of 30 CFR part 
556; however, the final rule does not make substantive revisions to the 
regulations for general and supplemental bonding in prior part 556 
(subpart I). After the proposed rule was published, questions arose 
about possible inconsistencies between the revised bonding regulations 
and p regulations for oil-spill financial responsibility under 30 CFR 
part 553. Also, since the publication of the proposed rule, BOEM has 
decided to engage in an overhaul of its financial assurance processes, 
and subpart I will be revised in a separate rulemaking. Therefore, the 
regulations and the associated IC burden for 30 CFR part 550, subpart 
I, will remain in effect, but the sections in subpart I have been 
renumbered to fit within the numbering scheme of this rule (e.g., prior 
section 556.52 is now section 556.900).
     In the final rule, BOEM rearranged discussions to make the 
regulations easier to read and follow. Thus, all rule sections and 
citations have been renumbered from the proposed rule, as explained in 
the preamble of the final rule.
     The information collection for prior 30 CFR part 556 
regulations (1010-0006) was renewed by OMB, thereby updating burden 
hours based on public outreach. BOEM has therefore used those updated 
estimates where relevant instead of those used in the proposed 
rulemaking.
12. Other Changes in the Information Collection (IC) Between the 
Proposed and Final Rules
     The proposed rule included regulatory text concerning the 
reporting of decommissioning costs in 30 CFR part 250, subpart Q, and 
text concerning reports on lease-term pipelines in section 256.621. Due 
to the realignment of regulations and bureau responsibilities, BOEM 
removed these requirements from the final rule as they were addressed 
in the Bureau of Safety and Environmental Enforcement (BSEE) 
regulations (-820 hours for removing Subpart Q and -1,500 hours for 
removing section 256.621 in the final rule).
     The final rule also removed the provisions under proposed 
rule sections 256.902(a) and 256.905 for requesting/transferring a 
bonus or royalty credit, because the program has officially ended (-2 
hours from current collection).
     BOEM also divided the IC requirements for commenting on 
the 5-Year Program and responding to Calls for Information, etc. 
(sections 556.201-204 and sections 556.301-302) into general (not 
considered IC per the PRA) and specific, in accordance with the 
currently approved collection for part 556 (+ 596 hours). Where 
applicable, all estimates were updated according to the recent Office 
of Management and Budget (OMB) approved renewal of the 30 CFR part 556 
information collection.
     BOEM also included a burden that was overlooked in the 
proposed rule (section 256.100, now section 556.302(d)) for requesting 
a summary of interest on Calls for Information (+ 5 hours).
     The proposed rule (section 256.620) introduced a new cost 
recovery fee ($27) for filing required documents for record purposes. 
In the final rule (section 556.715(a)), the fee has been increased to 
$29 in accordance with changes BOEM made, due to inflation, to other 
such fees on January 28, 2013 (78 FR 5837).
     To make the regulations easier to follow, in the final 
rule BOEM split the discussion (requirements and associated fee) of 
assignment/transfer of record title and that of operating rights 
interests (30 CFR part 256, subpart G, in the proposed rule) into two 
subparts (30 CFR part 556, subparts G and H). With this reorganization, 
BOEM discovered that it had not properly counted the number of 
submissions for transfers of operating rights; therefore, in the final 
rule, BOEM is reporting an adjustment increase for such transfers of 
record title/operating rights (+ 421 hours; + $83,358 non-hour costs).
    In addition, to streamline activities, reduce the burden in the 
future, and assist respondents, the final rule includes:
     A clarification of the proposed rule (section 256.611) and 
BOEM's prior regulations (section 556.62), which both explained how a 
record title, or other lease interest may be transferred, but did not 
mention the need to file a new Designation of Operator form (BOEM-1123, 
30 CFR part 550, subpart A), which often arises when a lease interest 
is transferred. This clarification in part 556 (sections 701(c); 
715(b); 801(b); 810(b)) will result in a one-time increase in the 
number of submissions after the rule becomes effective (+ 80 hours); 
otherwise the requirement is covered under OMB Control No. 1010-0114.
     A clarification that geophysical statements and maps are 
included with bid submissions (sections 556.500-501). This requirement 
and its hour burden have always been part of the bid process but not 
specifically stated (no change in hour burden).
     A provision (section 556.107) to allow a company's one-
time submission of documentation, with a corporate seal, to establish 
the legal status of future submissions without such seals, where such 
seals would otherwise be required (+ 67 hours as a one-time burden but 
expected to reduce the net burden for companies in the future).
     An expansion of a provision from the proposed rule 
(section 256.503(c)) to allow implementation of electronic submission 
systems (e.g., for bonding information) (sections 556.107; 560.500) (+ 
800 hours as a one-time increase to allow companies to adjust their 
processes; however, we expect this provision to reduce the hour burden 
of each affected requirement in the future).
    The following table shows the breakdown of the hour and non-hour 
cost burdens for this final rulemaking.
13. Burden Breakdown Table
    [Italics show expansion of existing requirements; bold indicates 
new

[[Page 18148]]

requirements; regular font shows current requirements. Where 
applicable, updated estimates from the existing collection are being 
used instead of those in the proposed rulemaking.]

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Non-hour cost burdens
                                                             -------------------------------------------------------------------------------------------
     30 CFR part 556 and NTLs       Reporting requirement *                                     Average number of annual
                                                                       Hour burden                     responses                 Annual burden hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Subpart A
--------------------------------------------------------------------------------------------------------------------------------------------------------
104(b) New.......................  Submit confidentiality     0.25.........................  500..........................  125
                                    agreement.
--------------------------------------------------------------------------------------------------------------------------------------------------------
106..............................  Cost recovery/service      Cost recovery/service fees and associated documentation are   0
                                    fees; confirmation         covered under individual requirements throughout the part.
                                    receipt.
--------------------------------------------------------------------------------------------------------------------------------------------------------
107 New..........................  Submit required            Burden covered in Sec.   560.500.                             0
                                    documentation
                                    electronically through
                                    BOEM-approved system;
                                    comply with filing
                                    specifications, as
                                    directed by notice in
                                    the Federal Register in
                                    accordance with Sec.
                                    560.500.
--------------------------------------------------------------------------------------------------------------------------------------------------------
107 New..........................  File seals, documents,     10 min.......................  400..........................  67
                                    statements, signatures,
                                    etc., to establish legal
                                    status of all future
                                    submissions (paper and/
                                    or electronic).
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  900..........................  192
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Subpart B
--------------------------------------------------------------------------------------------------------------------------------------------------------
201-204..........................  Submit nominations,        Not considered IC as defined in 5 CFR 1320.3(h)(4).           0
                                    suggestions, and general
                                    comments in response to
                                    Request for Information/
                                    Comments, proposed 5-
                                    year leasing program,
                                    etc., including
                                    information from States/
                                    local governments,
                                    Federal agencies,
                                    industry, and others.
--------------------------------------------------------------------------------------------------------------------------------------------------------
201-204..........................  Submit nominations &       4............................  69...........................  276
                                    specific information
                                    requested in response to
                                    Request for Information/
                                    Comments, proposed 5-
                                    year leasing program,
                                    etc., including from
                                    States/local
                                    governments, Federal
                                    agencies, industry, and
                                    others.
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  69...........................  276
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Subpart C
--------------------------------------------------------------------------------------------------------------------------------------------------------
301; 302.........................  Submit response &          4............................  20 responses/sale x 2 sales/   320
                                    specific information                                      call x 2 calls/year = 80.
                                    requested in Requests
                                    for Industry Interest
                                    and Calls for
                                    Information and
                                    Nominations, etc., on
                                    areas proposed for
                                    leasing; including
                                    information from States/
                                    local governments.
--------------------------------------------------------------------------------------------------------------------------------------------------------
302(d) New.......................  Request summary of         1............................  5............................  5
                                    interest (nonproprietary
                                    information) for Calls
                                    for Information/Requests
                                    for Interest, etc.
--------------------------------------------------------------------------------------------------------------------------------------------------------
305; 306.........................  States or local            4............................  25...........................  100
                                    governments submit
                                    comments,
                                    recommendations, and
                                    other responses on size,
                                    timing, or location of
                                    proposed lease sale.
                                    Request extension; enter
                                    agreement.
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  110..........................  425
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Subpart D
--------------------------------------------------------------------------------------------------------------------------------------------------------
400-402; 405.....................  Establish file for         2............................  107..........................  214
                                    qualification; submit
                                    evidence/certification
                                    for lessee/bidder
                                    qualifications. Provide
                                    updates; obtain BOEM
                                    approval & qualification
                                    number.
--------------------------------------------------------------------------------------------------------------------------------------------------------
403(c)...........................  Request hearing on         Requirement not considered IC under 5 CFR 1320.3(h)(9).       0
                                    disqualification.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 18149]]

 
403; 404 New.....................  Notify BOEM if you or      1.5..........................  50...........................  75
                                    your principals are
                                    excluded, disqualified,
                                    or convicted of a crime--
                                    Federal non-procurement
                                    debarment and suspension
                                    requirements; request
                                    exception; enter
                                    transaction.
--------------------------------------------------------------------------------------------------------------------------------------------------------
405..............................  Notify BOEM of all         Requirement not considered IC under 5 CFR 1320.3(h)(1).       0
                                    mergers, name changes,
                                    or changes of business.
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  157..........................  289
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Subpart E
--------------------------------------------------------------------------------------------------------------------------------------------------------
500; 501.........................  Submit bids, deposits,     5............................  2,000........................  10,000
                                    and required
                                    information, including
                                    GDIS & maps; in manner
                                    specified. Make data
                                    available to BOEM.
--------------------------------------------------------------------------------------------------------------------------------------------------------
500(e); 517......................  Request reconsideration    Requirement not considered IC under 5 CFR 1320.3(h)(9).       0
                                    of bid decision.
--------------------------------------------------------------------------------------------------------------------------------------------------------
501(e) New.......................  Apply for reimbursement..  Burden covered in 1010-0048, 30 CFR part 551.                 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
511(b); 517......................  Submit appeal due to       Requirement not considered IC under 5 CFR 1320.3(h)(9).       0
                                    restricted joint bidders
                                    list; appeal bid
                                    decision.
--------------------------------------------------------------------------------------------------------------------------------------------------------
513; 514.........................  File statement and         2............................  100..........................  200
                                    detailed report of
                                    production. Make
                                    documents available to
                                    BOEM.
--------------------------------------------------------------------------------------------------------------------------------------------------------
515..............................  Request exemption from     Requirement not considered IC under 5 CFR 1320.3(h)(9).       0
                                    bidding restrictions;
                                    submit appropriate
                                    information.
--------------------------------------------------------------------------------------------------------------------------------------------------------
516..............................  Notify BOEM of tie bid     3.5..........................  2............................  7
                                    decision; file agreement
                                    on determination of
                                    lessee.
--------------------------------------------------------------------------------------------------------------------------------------------------------
520; 521; 600(c).................  Execute lease (includes    1............................  852..........................  852
                                    submission of evidence
                                    of authorized agent/
                                    completion and request
                                    effective date of
                                    lease); submit required
                                    data and rental.
--------------------------------------------------------------------------------------------------------------------------------------------------------
520(b) New.......................  Provide acceptable bond    0.25.........................  1............................  1
                                    for payment of a
                                    deferred bonus. (We do
                                    not expect this to
                                    occur, hence minimum
                                    burden).
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  2,955........................  11,060
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Subparts F, G, H
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart F, G, H..................  References to requests of approval for various operations or submit plans or             0
                                    applications. Burden included with other approved collections for BOEM 30 CFR part 550
                                    (Subpart A 1010-0114; Subpart B 1010-0151) and for BSEE 30 CFR part 250 (Subpart A
                                    1014-0022; Subpart D 1014-0018).
--------------------------------------------------------------------------------------------------------------------------------------------------------
701(c); 716(b); 801(b); 810(b)     Submit new designation of  0.5..........................  160..........................  80
 New.                               operator (BOEM-1123).
                                    One-time increase to
                                    existing requirements
                                    and burdens already
                                    covered in 1010-0114.
                                    Extra burden will be
                                    deleted in next renewal.
                                    No fee.
--------------------------------------------------------------------------------------------------------------------------------------------------------
700-715..........................  File application and       1............................  1,414........................  1,414
                                    required information for
                                    assignment/transfer of
                                    record title/lease
                                    interest (form BOEM-
                                    0150; form is 30 min.)
                                    (includes sell,
                                    sublease, sever,
                                    exchange, transfer);
                                    request effective date/
                                    confidentiality; provide
                                    notifications.
                                                             -------------------------------------------------------------------------------------------
                                                              $198 fee x 1,414 forms = $279,972
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 18150]]

 
800-810..........................  File application and       1............................  421..........................  421
                                    required information for
                                    assignment/transfer of
                                    operating rights
                                    interest (form BOEM-
                                    0151; form is 30 min.)
                                    (includes sell,
                                    sublease, sever,
                                    exchange, transfer);
                                    request effective date;
                                    provide notifications.
                                                             -------------------------------------------------------------------------------------------
                                                                                            $198 fee x 421 forms = $83,358
--------------------------------------------------------------------------------------------------------------------------------------------------------
715(a); 808(a)...................  File required instruments  1............................  2,369........................  2,369
                                    creating or transferring
                                    working interests, etc.,
                                    for record purposes.
                                                             -------------------------------------------------------------------------------------------
New Fee..........................                                                          $29 fee x 2,369 filings = $68,701
--------------------------------------------------------------------------------------------------------------------------------------------------------
715(b); 808(b)...................  Submit ``non-required''    Accepted as a service........  11,518.......................  0
                                    documents, for record
                                    purposes that
                                    respondents want BOEM to
                                    file with the lease
                                    document.
                                                             -------------------------------------------------------------------------------------------
                                   (Accepted on behalf of                                 $29 fee x 11,518 filings = $334,022
                                    lessees as a service;
                                    BOEM does not require or
                                    need them.).
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  15,882.......................  4,284
                                                                                            ------------------------------------------------------------
                                                                                                                       $766,053
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Subpart I
--------------------------------------------------------------------------------------------------------------------------------------------------------
900(a)-(e); 901; 902; 903(a).....  Submit OCS Mineral         0.33.........................  135..........................  45
                                    Lessee's and Operator's
                                    Bond (Form BOEM-2028);
                                    execute bond.
900(c), (d), (f), (g); 901(c),     Demonstrate financial      3.5..........................  166..........................  581
 (d), (f); 902(e).                  worth/ability to carry
                                    out present and future
                                    financial obligations,
                                    request approval of
                                    another form of
                                    security, or request
                                    reduction in amount of
                                    supplemental bond
                                    required on BOEM-
                                    approved forms. Monitor
                                    and submit required
                                    information.
--------------------------------------------------------------------------------------------------------------------------------------------------------
900(e); 901; 902; 903(a).........  Submit OCS Mineral         0.25.........................  141..........................  35
                                    Lessee's and Operator's
                                    Supplemental Plugging &
                                    Abandonment Bond (Form
                                    BOEM-2028A); execute
                                    bond.
--------------------------------------------------------------------------------------------------------------------------------------------------------
900(f), (g)......................  Submit authority for       2............................  12...........................  24
                                    Regional Director to
                                    sell Treasury or
                                    alternate type of
                                    securities.
--------------------------------------------------------------------------------------------------------------------------------------------------------
901..............................  Submit EP, DPP, and DOCDs  IC burden covered in 1010-0151, 30 CFR part 550, subpart B.   0
--------------------------------------------------------------------------------------------------------------------------------------------------------
901(f)...........................  Submit oral/written        Requirement not considered IC under 5 CFR 1320.3(h)(9).       0
                                    comment on adjusted bond
                                    amount and information.
--------------------------------------------------------------------------------------------------------------------------------------------------------
903(b)...........................  Notify BOEM of any lapse   1............................  4............................  4
                                    in previous bond/action
                                    filed alleging lessee,
                                    surety, or guarantor is
                                    insolvent or bankrupt.
--------------------------------------------------------------------------------------------------------------------------------------------------------
904..............................  Provide plan/instructions  12...........................  2............................  24
                                    to fund lease-specific
                                    abandonment account and
                                    related information;
                                    request approval to
                                    withdraw funds.
--------------------------------------------------------------------------------------------------------------------------------------------------------
905..............................  Provide third-party        19...........................  46...........................  874
                                    guarantee, indemnity
                                    agreement, financial and
                                    required information,
                                    related notices,
                                    reports, and annual
                                    update; notify BOEM if
                                    guarantor becomes
                                    unqualified.
--------------------------------------------------------------------------------------------------------------------------------------------------------
905(d)(3); 906...................  Provide notice of and      0.5..........................  378..........................  189
                                    request approval to
                                    terminate period of
                                    liability, cancel bond,
                                    or other security;
                                    provide required
                                    information.
--------------------------------------------------------------------------------------------------------------------------------------------------------
907(c)(2)........................  Provide information to     16...........................  5............................  80
                                    demonstrate lease will
                                    be brought into
                                    compliance.
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  889..........................  1,856
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 18151]]

 
                                                                        Subpart K
--------------------------------------------------------------------------------------------------------------------------------------------------------
1101.............................  Request relinquishment     1............................  247..........................  247
                                    (form BOEM-0152) of
                                    lease; submit required
                                    information.
1102.............................  Request additional time    1............................  1............................  1
                                    to bring lease into
                                    compliance.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1102(c)..........................  Comment on cancellation..  Requirement not considered IC under 5 CFR 1320.3(h)(9).       0
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal.....................  .........................  .............................  248..........................  248
--------------------------------------------------------------------------------------------------------------------------------------------------------
    30 CFR Part 556 Total........  .........................  .............................  21,210.......................  18,630
                                                                                            ------------------------------------------------------------
                                                                                                            $766,053 Non-Hour Cost Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
    30 CFR Part 550 Subpart J       Reporting requirement *            Hour burden                 Average number of             Annual burden hours
                                                                                             annual responses.............
--------------------------------------------------------------------------------------------------------------------------------------------------------
550.1011(a)......................  Provide surety bond (form  GOM 0.25.....................  52...........................  13
                                    BOEM-2030) and required
                                    information.
                                                             -------------------------------------------------------------------------------------------
                                                              Pacific 3.5..................  3............................  11
--------------------------------------------------------------------------------------------------------------------------------------------------------
    30 CFR Part 550, Subpart J,    .........................  .............................  55...........................  24
     Total.
--------------------------------------------------------------------------------------------------------------------------------------------------------
         30 CFR Part 560            Reporting requirement *            Hour burden                 Average number of             Annual burden hours
                                                                                             annual responses.............
--------------------------------------------------------------------------------------------------------------------------------------------------------
560.224(a).......................  Request BOEM to            Requirement not considered IC under 5 CFR 1320.3(h)(9).       0
                                    reconsider field
                                    assignment of a lease.
--------------------------------------------------------------------------------------------------------------------------------------------------------
560.500 New......................  Submit required            1............................  800..........................  800
                                    documentation
                                    electronically through
                                    BOEM-approved system;
                                    comply with filing
                                    specifications, as
                                    directed by notice in
                                    the Federal Register
                                    (e.g., bonding info.).
--------------------------------------------------------------------------------------------------------------------------------------------------------
    30 CFR Part 560 Total........  .........................  .............................  800..........................  800
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Reporting For            .........................  .............................  22,065.......................  19,454
     Collection.
                                                                                            ------------------------------------------------------------
                                                                                                            $766,053 Non-Hour Cost Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
* In the future, BOEM may require electronic filing of certain submissions.

    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. The public may comment, at any time, on the 
accuracy of the IC burden estimate in this rule and may submit any 
comments to the Information Collection Clearance Officer, Office of 
Policy, Regulations, and Analysis; Bureau of Ocean Energy Management; 
U.S. Department of the Interior; VAM-BOEM DIR; 45600 Woodland Rd, 
Sterling, Virginia 20166.
14. National Environmental Policy Act of 1969
    This rule does not constitute a major Federal action significantly 
affecting the quality of the human environment. BOEM has considered the 
rule under the criteria of the National Environmental Policy Act (NEPA) 
(42 U.S.C. 4321-4370h) and 516 Departmental Manual 15. This rule meets 
the criteria set forth in 43 CFR 46.210(5) for a Departmental 
``categorical exclusion'' in that this final rule is ``. . . of an 
administrative, financial, legal, technical, or procedural nature or 
whose environmental effects are too broad, speculative, or conjectural 
to lend themselves to meaningful analysis. . . .'' This rule also meets 
the criteria set forth in 516 Departmental Manual 15.4(C)(1) for a BOEM 
``categorical exclusion'' in that its impacts are limited to 
administrative, economic or technological effects. Further, BOEM has 
analyzed this rule to determine if it meets any of the extraordinary 
circumstances that require an environmental assessment or an 
environmental impact statement as set forth in 43 CFR 46.215 and has 
concluded that it does not.
15. Data Quality Act
    In developing this rule, we did not conduct or use a study, 
experiment, or survey requiring peer review under the Data Quality Act 
(44 U.S.C. 3516-3521), Public Law 106-554, app. C section 515, 114 
Stat. 2763, 2763A-153-154).
16. Effects on the Energy Supply (E.O. 13211)
    This rule is not a significant energy action under the definition 
in E.O. 13211, Actions Concerning Regulations

[[Page 18152]]

That Significantly Affect Energy Supply, Distribution, or Use (May 18, 
2001). A statement of energy effects is not required.

List of Subjects

30 CFR Part 550

    Administrative practice and procedure, Continental shelf, 
Environmental impact statements, Environmental protection, Federal 
lands, Government contracts, Investigations, Mineral resources, Oil and 
gas exploration, Outer continental shelf, Penalties, Pipelines, 
Reporting and recordkeeping requirements, Rights-of-way, Sulfur.

30 CFR Part 556

    Administrative practice and procedure, Continental shelf, 
Environmental protection, Federal lands, Government contracts, 
Intergovernmental relations, Oil and gas exploration, Outer continental 
shelf, Mineral resources, Rights-of-way, Reporting and recordkeeping 
requirements.

30 CFR Part 559

    Continental shelf, Federal lands, Federal lease, Gas, Government 
contracts, Mineral resources, Mineral royalties, Oil and gas 
exploration, Outer continental shelf, Reporting and recordkeeping 
requirements.

30 CFR Part 560

    Continental shelf, Federal lands, Government contracts, Mineral 
resources, Mineral royalties, Oil and gas exploration, Outer 
continental shelf, Reporting and recordkeeping requirements.

    Dated: March 10, 2016.
Amanda C. Leiter,
Acting Assistant Secretary--Land and Minerals Management.

    For the reasons stated in the preamble, the Bureau of Ocean Energy 
Management, (BOEM) amends 30 CFR parts 550, 556, 559 and 560 as 
follows:

PART 550--OIL AND GAS AND SULFUR OPERATIONS IN THE OUTER 
CONTINENTAL SHELF

0
1. Revise the authority citation for 30 CFR part 550 to read as 
follows:

    Authority:  31 U.S.C. 9701, 43 U.S.C. 1334.

Subpart A--General Provisions


0
2. Add Sec.  550.120 to read as follows:


Sec.  550.120  What standards will BOEM use to regulate leases, rights-
of-use and easement, and rights-of-way?

    BOEM will regulate all activities under a lease, a right-of-use and 
easement, or a right-of-way to:
    (a) Promote the orderly exploration, development, and production of 
mineral resources;
    (b) Prevent injury or loss of life;
    (c) Prevent damage to or waste of any natural resource, property, 
or the environment; and
    (d) Ensure cooperation and consultation with affected States, local 
governments, other interested parties, and relevant Federal agencies.


0
3. Add Sec.  550.121 to read as follows:


Sec.  550.121  What must I do to protect health, safety, property, and 
the environment?

    The Director may require additional measures to ensure the use of 
Best Available and Safest Technology (BAST) as identified by BSEE:
    (a) To avoid the failure of equipment that would have a significant 
effect on safety, health, or the environment;
    (b) If it is economically feasible; and
    (c) If the incremental benefits justify the incremental costs.


Sec. Sec.  550.145 and 550.146   [Redesignated as Sec. Sec.  550.146 
and 550.147]


0
4. Redesignate Sec. Sec.  550.145 and 550.146 as Sec. Sec.  550.146 and 
550.147, respectively.
0
5. Amend Sec.  550.197 as follows:
0
a. Revise the first sentence of the introductory text.
0
b. Revise paragraph (b)(5).
0
c. Revise paragraph (c).
0
d. Add paragraph (d).
    The revisions and addition read as follows:


Sec.  550.197  Data and information to be made available to the public 
or for limited inspection.

    BOEM will protect data and information that you submit under this 
chapter, as described in this section. * * *
* * * * *
    (b) * * *

----------------------------------------------------------------------------------------------------------------
                  If                      BOEM will release           At this time          Special provisions
----------------------------------------------------------------------------------------------------------------
(5) Your lease is still in effect and  Geological data,         Two years after the      These release times
 within the primary term specified in   analyzed geological      required submittal       apply only if the
 the lease.                             information.             date or 60 days after    provisions in this
                                                                 a lease sale if any      table governing high-
                                                                 portion of an offered    resolution systems and
                                                                 lease is within 50       the provisions in Sec.
                                                                 miles of a well,           552.7 do not apply.
                                                                 whichever is later.      If the primary term
                                                                                          specified in the lease
                                                                                          is extended, this
                                                                                          provision applies to
                                                                                          the extension.
----------------------------------------------------------------------------------------------------------------

* * * * *
    (c) BOEM may allow limited data and information inspection, but 
only by a person with a direct interest in related BOEM decisions and 
issues in a specific geographic area, and who agrees in writing to 
maintain the confidentiality of geological and geophysical (G&G) data 
and information submitted under this part that BOEM uses to:
    (1) Promote operational safety;
    (2) Protect the environment; or
    (3) Make field determinations.
    (d) No proprietary information received by BOEM under 43 U.S.C. 
1352 will be transmitted to any affected State unless the lessee, or 
the permittee and all persons to whom such permittee has sold such 
information under promise of confidentiality, agree to such 
transmittal.


0
6. Add subpart D to part 550 to read as follows:

Subpart D--Leasing Maps and Diagrams


Sec.  550.400  Leasing maps and diagrams.

    (a) Any area of the OCS, which has been appropriately platted as 
provided in paragraph (b) of this section, may be leased for any 
mineral not included in an existing lease issued under the Act or 
meeting the requirements of subsection (a) of section 6 of the Act. 
Before any lease is offered or issued an area may be:
    (1) Withdrawn from disposition pursuant to section 12(a) of the 
Act; or
    (2) Designated as an area or part of an area restricted from 
operation under section 12(d) of the Act.
    (b) BOEM will prepare leasing maps and official protraction 
diagrams of areas of the OCS. The areas included in each mineral lease 
will be in accordance with the appropriate leasing map or official 
protraction diagram.

0
7. Revise part 556 to read as follows:

[[Page 18153]]

PART 556--LEASING OF SULFUR OR OIL AND GAS AND BONDING REQUIREMENTS 
IN THE OUTER CONTINENTAL SHELF

Subpart A-General Provisions
Sec.
556.100 Statement of policy.
556.101 Purpose.
556.102 Authority.
556.103 Cross references.
556.104 Information collection and proprietary information.
556.105 Acronyms and definitions.
556.106 Service fees.
556.107 Corporate seal requirements.
Subpart B-Oil and Gas Five Year Leasing Program
556.200 What is the Five Year leasing program?
556.201 Does BOEM consider multiple uses of the OCS?
556.202 How does BOEM start the Five Year program preparation 
process?
556.203 What does BOEM do before publishing a proposed Five Year 
program?
556.204 How do Governments and citizens comment on a proposed Five 
Year program?
556.205 What does BOEM do before approving a proposed final Five 
Year program or a significant revision of a previously-approved Five 
Year program?
Subpart C--Planning and Holding a Lease Sale
556.300 What reports may BOEM and other Federal agencies prepare 
before a lease sale?
556.301 What is a Call for Information and Nominations?
556.302 What does BOEM do with the information from the Call?
556.303 What does BOEM do if an area proposed for leasing is within 
three nautical miles of the seaward boundary of a coastal State?
556.304 How is a proposed notice of sale prepared?
556.305 How does BOEM coordinate and consult with States regarding a 
proposed notice of sale?
556.306 What if a potentially oil or gas bearing area underlies both 
the OCS and lands subject to State jurisdiction?
556.307 What does BOEM do with comments and recommendations received 
on the proposed notice of sale?
556.308 How does BOEM conduct a lease sale?
556.309 Does BOEM offer blocks in a sale that is not on the Five 
Year program schedule (called a Supplemental Sale)?
Subpart D--Qualifications
556.400 When must I demonstrate that I am qualified to hold a lease 
on the OCS?
556.401 What do I need to show to become qualified to hold a lease 
on the OCS and obtain a qualification number?
556.402 How do I make the necessary showing to qualify and obtain a 
qualification number?
556.403 Under what circumstances may I be disqualified from holding 
a lease on the OCS?
556.404 What do the non-procurement debarment rules require that I 
do?
556.405 When must I notify BOEM of mergers, name changes, or changes 
of business form?
Subpart E--Issuance of a Lease

How To Bid

556.500 Once qualified, how do I submit a bid?
556.501 What information do I need to submit with my bid?

Restrictions on Joint Bidding

556.511 Are there restrictions on bidding with others and do those 
restrictions affect my ability to bid?
556.512 What bids may be disqualified?
556.513 When must I file a statement of production?
556.514 How do I determine my production for purposes of the 
restricted joint bidders list?
556.515 May a person be exempted from joint bidding restrictions?

How does BOEM act on bids?

556.516 What does BOEM do with my bid?
556.517 What may I do if my bid is rejected?

Awarding the Lease

556.520 What happens if I am the successful high bidder and BOEM 
accepts my bid?
556.521 When is my lease effective?
556.522 What are the terms and conditions of the lease and when are 
they published?
Subpart F--Lease Terms and Obligations

Length of Lease

556.600 What is the primary term of my oil and gas lease?
556.601 How may I maintain my oil and gas lease beyond the primary 
term?
556.602 What is the primary term of my sulfur lease?
556.603 How may I maintain my sulfur lease beyond the primary term?

Lease Obligations

56.604 What are my rights and obligations as a record title owner?
556.605 What are my rights and obligations as an operating rights 
owner?

Helium

556.606 What must a lessee do if BOEM elects to extract helium from 
a lease?
Subpart G--Transferring All or Part of the Record Title Interest in a 
Lease
556.700 May I assign or sublease all or any part of the record title 
interest in my lease?
556.701 How do I seek approval of an assignment of the record title 
interest in my lease, or a severance of operating rights from that 
record title interest?
556.702 When will my assignment result in a segregated lease?
556.703 What is the effect of the approval of the assignment of 100 
percent of the record title in a particular aliquot(s) of my lease 
and the resulting lease segregation?
556.704 When would BOEM disapprove an assignment or sublease of an 
interest in my lease?
556.705 How do I transfer the interest of a deceased natural person 
who was a lessee?
556.706 What if I want to transfer record title interests in more 
than one lease at the same time, but to different parties?
556.707 What if I want to transfer different types of lease 
interests (not only record title interests) in the same lease to 
different parties?
556.708 What if I want to transfer my record title interests in more 
than one lease to the same party?
556.709 What if I want to transfer my record title interest in one 
lease to multiple parties?
556.710 What is the effect of an assignment of a lease on an 
assignor's liability under the lease?
556.711 What is the effect of a record title holder's sublease of 
operating rights on the record title holder's liability?
556.712 What is the effective date of a transfer?
556.713 What is the effect of an assignment of a lease on an 
assignee's liability under the lease?
556.714 As a restricted joint bidder, may I transfer an interest to 
another restricted joint bidder?
556.715 Are there any interests I may transfer or record without 
BOEM approval?
556.716 What must I do with respect to the designation of operator 
on a lease when a transfer of record title is submitted?
Subpart H--Transferring Operating Rights in All or Part of a Lease
556.800 As an operating rights owner, may I assign all or part of my 
operating rights interest?
556.801 How do I seek approval of an assignment of my operating 
rights?
556.802 When would BOEM disapprove the assignment of all or part of 
my operating rights interest?
556.803 What if I want to assign operating rights interests in more 
than one lease at the same time, but to different parties?
556.804 What if I want to assign my operating rights interest in a 
lease to multiple parties?
556.805 What is the effect of an operating rights owner's assignment 
of operating rights on the assignor's liability?
556.806 What is the effective date of an assignment of operating 
rights?
556.807 What is the effect of an assignment of operating rights on 
an assignee's liability?
556.808 As an operating rights owner, are there any interests I may 
assign without BOEM approval?
556.809 [Reserved]
556.810 What must I do with respect to the designation of operator 
on a lease when a transfer of operating rights ownership is 
submitted?

[[Page 18154]]

Subpart I--Bonding or Other Financial Assurance
556.900 Bond requirements for an oil and gas or sulfur lease.
556.901 Additional bonds.
556.902 General requirements for bonds.
556.903 Lapse of bond.
556.904 Lease-specific abandonment accounts.
556.905 Using a third-party guarantee instead of a bond.
556.906 Termination of the period of liability and cancellation of a 
bond.
556.907 Forfeiture of bonds and/or other securities.
Subpart J--Bonus or Royalty Credits for Exchange of Certain Leases
556.1000 Leases formerly eligible for a bonus or royalty credit.
Subpart K--Ending a Lease
556.1100 How does a lease expire?
556.1101 May I relinquish my lease or an aliquot part thereof?
556.1102 Under what circumstances will BOEM cancel my lease?
Subpart L--Leases Maintained Under Section 6 of OCSLA
556.1200 Effect of regulations on lease.
556.1201 Section 6(a) leases and leases other than those for oil, 
gas, or sulfur.
Subpart M--Environmental Studies
556.1300 Environmental studies.

    Authority:  30 U.S.C. 1701 note, 30 U.S.C. 1711, 31 U.S.C. 9701, 
42 U.S.C. 6213, 43 U.S.C. 1331 note, 43 U.S.C. 1334, 43 U.SC. 1801-
1802.

Subpart A--General Provisions


Sec.  556.100  Statement of policy.

    The management of Outer Continental Shelf (OCS) resources is to be 
conducted in accordance with the findings, purposes, and policy 
directions provided by the Outer Continental Shelf Lands Act Amendments 
of 1978 (OCSLA or the Act) (43 U.S.C. 1332, 1801, 1802), and other 
executive, legislative, judicial and departmental guidance. The 
Secretary of the Interior (the Secretary) will consider available 
environmental information in making decisions affecting OCS resources.


Sec.  556.101  Purpose.

    The purpose of the regulations in this part is to establish the 
procedures under which the Secretary will exercise the authority to 
administer a leasing program for oil and gas, and sulfur. The 
regulations pertaining to the procedures under which the Secretary will 
exercise the authority to administer a program to grant rights-of-use 
and easements are found in part 550 of this chapter.


Sec.  556.102  Authority.

    (a) The Outer Continental Shelf Lands Act (OCSLA) (43 U.S.C. 1334) 
authorizes the Secretary of the Interior to issue, on a competitive 
basis, leases for oil and gas, and sulfur, in submerged lands of the 
OCS. The Act authorizes the Secretary to grant rights-of-way and 
easements through the submerged lands of the OCS.
    (b) The Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA) 
(30 U.S.C. 1711) governs oil and gas royalty management and requires 
the development of enforcement practices to ensure the prompt and 
proper collection of oil and gas revenues owed to the U.S.
    (c) The Independent Offices Appropriations Act of 1952 (IOAA) (31 
U.S.C. 9701) authorizes fees and charges for Federal government 
services.
    (d) The Energy Policy and Conservation Act of 1975 (42 U.S.C. 6213) 
prohibits joint bidding by major oil and gas producers.
    (e) The Gulf of Mexico Energy Security Act of 2006 (GOMESA) (Pub. 
L. 109-432, 43 U.S.C. 1331 note):
    (1) Shares leasing revenues with Gulf producing states and the Land 
& Water Conservation Fund for coastal restoration projects; and
    (2) Allows companies to exchange certain existing leases in 
moratorium areas for bonus and royalty credits to be used on other Gulf 
of Mexico leases.


Sec.  556.103  Cross references.

    The following includes some of the major regulations relevant to 
offshore oil and gas development:
    (a) For other applicable Bureau of Ocean Energy Management (BOEM) 
oil and gas regulations, see 30 CFR parts 550 through 560.
    (b) For Bureau of Safety and Environmental Enforcement (BSEE) 
regulations governing exploration, development and production, and oil 
spill response, see 30 CFR chapter II.
    (c) For Office of Natural Resources Revenue (ONRR) regulations 
related to rentals, royalties, and fees, see 30 CFR chapter XII.
    (d) For BOEM regulations governing the appeal of an order or 
decision issued under the regulations in this part, see 30 CFR part 
590.
    (e) For regulations on the National Environmental Policy Act 
(NEPA), see 40 CFR 1500-1508 and 43 CFR part 46.
    (f) For ocean dumping sites, see the U.S. Environmental Protection 
Agency (USEPA) listing--40 CFR part 228.
    (g) For air quality, see USEPA regulations at 40 CFR part 55 and 
BOEM regulations at 30 CFR part 550 subparts B and C.
    (h) For related National Oceanic and Atmospheric Administration 
(NOAA) programs, see:
    (1) Marine Sanctuary regulations, 15 CFR part 922;
    (2) Fishermen's Contingency Fund, 50 CFR part 296;
    (3) Coastal Zone Management Act (CZMA), 15 CFR part 930;
    (4) Essential Fish Habitat, 50 CFR 600.90.
    (i) For U.S. Coast Guard (USCG) regulations on the oil spill 
liability of vessels and operators, see 33 CFR parts 132, 135, and 136.
    (j) For USCG regulations on port access routes, see 33 CFR part 
164.
    (k) For Department of Transportation regulations on offshore 
pipeline facilities, see 49 CFR part 195.
    (1) For Department of Defense regulations on military activities on 
offshore areas, see 32 CFR part 252.


Sec.  556.104  Information collection and proprietary information.

    (a) Information collection. (1) The Office of Management and Budget 
(OMB) approved the collection of information under 44 U.S.C. 3501-
3521), and assigned OMB Control Number 1010-0006. The title of this 
collection of information is ``Leasing of Sulfur or Oil and Gas in the 
Outer Continental Shelf (30 CFR part 550, part 556, and part 560).''
    (2) BOEM collects this information to determine if an applicant 
seeking to obtain a lease or right-of-use and easement (RUE) on the OCS 
is qualified to hold such a lease or RUE and to determine whether any 
such applicant can meet the monetary and non-monetary requirements 
associated with a lease or RUE. Responses to this information 
collection are either required to obtain or retain a benefit or are 
mandatory under OCSLA (43 U.S.C. 1331-1356a). BOEM will protect 
proprietary information collected according to section 26 of OCSLA (43 
U.S.C. 1352), and this section.
    (3) The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) 
requires us to inform the public that an agency may not conduct or 
sponsor, and that no one is required to respond to, a collection of 
information unless it displays a current and valid OMB control number.
    (4) Send comments regarding any aspect of the collection of 
information under this part, including suggestions for reducing the 
burden, to the Information Collection Clearance Officer, Bureau of 
Ocean Energy Management, by mail at 45600 Woodland Road, Sterling, VA 
20166 or by email to [email protected], or by phone at (703) 787-
1025.
    (b) Proprietary information. (1) Any proprietary information 
maintained by BOEM will be subject to the requirements of 43 CFR part 
2.

[[Page 18155]]

    (2) No proprietary information received by BOEM under 43 U.S.C. 
1352(c) will be transmitted to any affected State unless the lessee, to 
whom such information applies, or the permittee and all persons, to 
whom such permittee has sold such information under promise of 
confidentiality, agree to such transmittal.
    (c) Proprietary information in response to a Call for Information 
and Nominations (Call).
    (1) A specific indication of interest in an area received in 
response to a Call issued by the Secretary is proprietary information.
    (2) Notwithstanding paragraph (c)(1) of this section, BOEM may 
provide a summary of indications of interest in areas received in 
response to a Call for a proposed sale.


Sec.  556.105  Acronyms and definitions.

    (a) Acronyms and terms used in this part have the following 
meanings:

ASTM American Society for Testing and Materials
BAST Best Available and Safest Technology
BOEM Bureau of Ocean Energy Management
BSEE Bureau of Safety and Environmental Enforcement
CFR Code of Federal Regulations
CPA Central Planning Area of the GOM
CZMA Coastal Zone Management Act
DOI Department of the Interior
DOCD Development Operations Coordination Document
DOO Designation of Operator
DPP Development and Production Plan
EIA Environmental Impact Analysis
EP Exploration Plan
EPA Eastern Planning Area of the GOM
EPAct Energy Policy Act of 2005
FNOS Final Notice of Sale
FOGRMA Federal Oil and Gas Royalty Management Act of 1982
G&G Geological and Geophysical
GDIS Geophysical Data and Information Statement
GOM Gulf of Mexico
GOMESA Gulf of Mexico Energy Security Act of 2006
IOAA Independent Offices Appropriations Act of 1952
LLC Limited Liability Company
MBB Mapping and Boundary Branch
NAD North American Datum
NEPA National Environmental Policy Act of 1969
NGPA Natural Gas Processors Association
NOAA National Oceanic and Atmospheric Administration
NTL Notice to Lessees
OCS Outer Continental Shelf
OCSLA Outer Continental Shelf Lands Act
OMB Office of Management and Budget
ONRR Office of Natural Resources Revenue
OPD Official Protraction Diagram
PNOS Proposed Notice of Sale
PRA Paperwork Reduction Act
ROW Right of way
RSV Royalty Suspension Volume
RUE Right of Use and Easement
SLA Submerged Lands Act of 1953
U.S. United States
U.S.C. United States Code
USCG U.S. Coast Guard
USEPA U.S. Environmental Protection Agency
UTM Universal Transverse Mercator coordinate system
WPA Western Planning Area of the GOM

    (b) As used in this part, each of the terms and phrases listed 
below has the meaning given in the Act or as defined in this section.
    Act means the Outer Continental Shelf Lands Act, as amended (OCSLA) 
(43 U.S.C. 1331-1356a).
    Affected State means, with respect to any program, plan, lease 
sale, or other activity proposed, conducted, or approved pursuant to 
the provisions of OCSLA, any State:
    (i) The laws of which are declared, pursuant to section 4(a)(2) of 
OCSLA (43 U.S.C. 1333(a)(2)), to be the law of the United States for 
the portion of the OCS on which such activity is, or is proposed to be, 
conducted;
    (ii) Which is, or is proposed to be, directly connected by 
transportation facilities to any artificial island or structure 
referred to in section 4(a)(1) of OCSLA (43 U.S.C. 1333(a)(1));
    (iii) Which is receiving, or in accordance with the proposed 
activity will receive, oil for processing, refining, or transshipment 
that was extracted from the OCS and transported directly to that State 
by means of one or more vessels or by a combination of means, including 
a vessel;
    (iv) Which is designated by the Secretary as a State in which there 
is a substantial probability of significant impact on or damage to the 
coastal, marine, or human environment; or a State in which there will 
be significant changes in the social, governmental, or economic 
infrastructure resulting from the exploration, development, and 
production of oil and gas anywhere on the OCS; or
    (v) In which the Secretary finds that because of such activity, 
there is, or will be, a significant risk of serious damage, due to 
factors such as prevailing winds and currents, to the marine or coastal 
environment in the event of any oil spill, blowout, or release of oil 
or gas from one or more vessels, pipelines, or other transshipment 
facilities.
    Aliquot or Aliquot part means an officially designated subdivision 
of a lease's area, which can be a half of a lease (\1/2\), a quarter of 
a lease (\1/4\), a quarter of a quarter of a lease (\1/4\ \1/4\), or a 
quarter of a quarter of a quarter of a lease (\1/4\ \1/4\ \1/4\).
    Authorized officer means any person authorized by law or by 
delegation of authority to or within BOEM to perform the duties 
described in this part.
    Average daily production means the total of all production in an 
applicable production period that is chargeable under Sec.  556.514 
divided by the exact number of calendar days in the applicable 
production period.
    Barrel means 42 U.S. gallons. All measurements of crude oil and 
natural gas liquids under this section must be at 60[emsp14][deg]F.
    (i) For purposes of computing production and reporting of natural 
gas, 5,626 cubic feet of natural gas at 14.73 pounds per square inch 
equals one barrel.
    (ii) For purposes of computing production and reporting of natural 
gas liquids, 1.454 barrels of natural gas liquids at 60[emsp14][deg]F 
equals one barrel of crude oil.
    Bidding unit means one or more OCS blocks, or any portion thereof, 
that may be bid upon as a single administrative unit and will become a 
single lease. The term `tract,'' as defined in this section, may be 
used interchangeably with the term ``bidding unit.''
    BOEM means Bureau of Ocean Energy Management of the U.S. Department 
of the Interior.
    Bonus or royalty credit means a legal instrument or other written 
documentation approved by BOEM, or an entry in an account managed by 
the Secretary, that a bidder or lessee may use in lieu of any other 
monetary payment for a bonus or a royalty due on oil or gas production 
from certain leases, as specified in, and permitted by, the Gulf of 
Mexico Energy Security Act of 2006, Pub. L. 109-432 (Div. C, Title 1), 
120 Stat. 3000 (2006), codified at 43 U.S.C. 1331, note.
    BSEE means Bureau of Safety and Environmental Enforcement of the 
U.S. Department of the Interior.
    Central Planning Area (CPA) means that portion of the Gulf of 
Mexico that lies southerly of Louisiana, Mississippi, and Alabama. 
Precise boundary information is available from the BOEM Leasing 
Division, Mapping and Boundary Branch (MBB).
    Coastal environment means the physical, atmospheric, and biological 
components, conditions, and factors that interactively determine the 
productivity, state, condition, and quality of the terrestrial 
ecosystem from the shoreline inland to the boundaries of the coastal 
zone.
    Coastal zone means the coastal waters (including the lands therein 
and thereunder) and the adjacent shorelands (including the water 
therein and

[[Page 18156]]

thereunder), strongly influenced by each other and in proximity to the 
shorelines of one or more of the several coastal States, and includes 
islands, transition and intertidal areas, salt marshes, wetlands, and 
beaches, whose zone extends seaward to the outer limit of the United 
States territorial sea and extends inland from the shore lines to the 
extent necessary to control shorelands, the uses of which have a direct 
and significant impact on the coastal waters, and the inland boundaries 
of which may be identified by the several coastal States, under section 
305(b)(1) of the Coastal Zone Management Act (CZMA) of 1972, 16 U.S.C. 
1454(b)(1).
    Coastline means the line of mean ordinary low water along that 
portion of the coast in direct contact with the open sea and the line 
marking the seaward limit of inland waters.
    Crude oil means a mixture of liquid hydrocarbons, including 
condensate that exists in natural underground reservoirs and remains 
liquid at atmospheric pressure after passing through surface separating 
facilities, but does not include liquid hydrocarbons produced from tar 
sand, gilsonite, oil shale, or coal.
    Designated operator means a person authorized to act on your behalf 
and fulfill your obligations under the Act, the lease, and the 
regulations, who has been designated as an operator by all record title 
holders and all operating rights owners that own an operating rights 
interest in the aliquot/depths in which the designated operator, to 
which the Designation of Operator form applies, will be operating, and 
who has been approved by BOEM to act as designated operator.
    Desoto Canyon OPD means the Official Protraction Diagram (OPD) 
designated as Desoto Canyon that has a western edge located at the 
universal transverse mercator (UTM) X coordinate 1,346,400 in the North 
American Datum of 1927 (NAD27).
    Destin Dome OPD means the Official Protraction Diagram (OPD) 
designated as Destin Dome that has a western edge located at the 
Universal Transverse Mercator (UTM) X coordinate 1,393,920 in the 
NAD27.
    Development block means a block, including a block susceptible to 
drainage, which is located on the same general geologic structure as an 
existing lease having a well with indicated hydrocarbons; a reservoir 
may or may not be interpreted to extend on to the block.
    Director means the Director of the BOEM of the U.S. Department of 
the Interior, or an official authorized to act on the Director's 
behalf.
    Eastern Planning Area (EPA) means that portion of the Gulf of 
Mexico that lies southerly and westerly of Florida. Precise boundary 
information is available from the BOEM Leasing Division, Mapping and 
Boundary Branch.
    Economic interest means any right to, or any right dependent upon, 
production of crude oil, natural gas, or natural gas liquids and 
includes, but is not limited to: a royalty interest; an overriding 
royalty interest, whether payable in cash or kind; a working interest 
that does not include a record title interest or an operating rights 
interest; a carried working interest; a net profits interest; or a 
production payment.
    Human environment means the physical, social, and economic 
components, conditions, and factors that interactively determine the 
state, condition, and quality of living conditions, employment, and 
health of those affected, directly or indirectly, by activities 
occurring on the OCS.
    Initial period or primary term means the initial period referred to 
in 43 U.S.C. 1337(b)(2).
    Joint bid means a bid submitted by two or more persons for an oil 
and gas lease under section 8(a) of the Act.
    Lease means an agreement that is issued under section 8 or 
maintained under section 6 of the Act and that authorizes exploration 
for, and development and production of, minerals on the OCS. The term 
also means the area covered by that agreement, whichever the context 
requires.
    Lease interest means one or more of the following ownership 
interests in an OCS oil and gas or sulfur lease: a record title 
interest, an operating rights interest, or an economic interest.
    Lessee means a person who has entered into a lease with the United 
States to explore for, develop, and produce the leased minerals and is 
therefore a record title owner of the lease, or the BOEM-approved 
assignee-owner of a record title interest. The term lessee also 
includes the BOEM-approved sublessee- or assignee-owner of an operating 
rights interest in a lease.
    Marine environment means the physical, atmospheric, and biological 
components, conditions, and factors that interactively determine the 
productivity, state, conditions, and quality of the marine ecosystem, 
including the waters of the high seas, the contiguous zone, 
transitional and intertidal areas, salt marshes, and wetlands within 
the coastal zone and on the OCS.
    Mineral means oil, gas, and sulfur; it also includes sand, gravel, 
and salt used to facilitate the development and production of oil, gas, 
and sulfur.
    Natural gas means a mixture of hydrocarbons and varying quantities 
of non-hydrocarbons that exist in the gaseous phase.
    Natural gas liquids means liquefied petroleum products produced 
from reservoir gas and liquefied at surface separators, field 
facilities, or gas processing plants worldwide, including any of the 
following:
    (i) Condensate--natural gas liquids recovered from gas well gas 
(associated and non-associated) in separators or field facilities; or
    (ii) Gas plant products--natural gas liquids recovered from natural 
gas in gas processing plants and from field facilities. Gas plant 
products include the following, as classified according to the 
standards of the Natural Gas Processors Association (NGPA) or the 
American Society for Testing and Materials (ASTM):
    (A) Ethane--C2H6
    (B) Propane--C3H8
    (C) Butane--C4H10, including all products 
covered by NGPA specifications for commercial butane, including 
isobutane, normal butane, and other butanes--all butanes not included 
as isobutane or normal butane;
    (D) Butane-Propane Mixtures--All products covered by NGPA 
specifications for butane-propane mixtures;
    (E) Natural Gasoline--A mixture of hydrocarbons extracted from 
natural gas, that meets vapor pressure, end point, and other 
specifications for natural gasoline set by NGPA;
    (F) Plant Condensate--A natural gas plant product recovered and 
separated as a liquid at gas inlet separators or scrubbers in 
processing plants or field facilities; and
    (G) Other Natural Gas plant products meeting refined product 
standards (i.e., gasoline, kerosene, distillate, etc.).
    Operating rights means an interest created by sublease out of the 
record title interest in an oil and gas lease, authorizing the owner to 
explore for, develop, and/or produce the oil and gas contained within a 
specified area and depth of the lease (i.e., operating rights tract).
    Operating rights owner means the holder of operating rights.
    Operating rights tract means the area within the lease from which 
the operating rights have been severed on an aliquot basis from the 
record title interest, defined by a beginning and ending depth.

[[Page 18157]]

    Operator means the person designated as having control or 
management of operations on the leased area or a portion thereof. An 
operator may be a lessee, the operating rights owner, or a designated 
agent of the lessee or the operating rights owner.
    Outer Continental Shelf (OCS) means all submerged lands lying 
seaward and outside of the area of lands beneath navigable waters as 
defined in the Submerged Lands Act (43 U.S.C. 1301-1315) and of which 
the subsoil and seabed appertain to the United States and are subject 
to its jurisdiction and control.
    Outer Continental Shelf Lands Act (OCSLA) means the Outer 
Continental Shelf Lands Act (43 U.S.C. 1331-1356a), as amended.
    Owned, as used in the context of restricted joint bidding or a 
statement of production, means:
    (i) With respect to crude oil--having either an economic interest 
in or a power of disposition over the production of crude oil;
    (ii) With respect to natural gas--having either an economic 
interest in or a power of disposition over the production of natural 
gas; and
    (iii) With respect to natural gas liquids--having either an 
economic interest in or a power of disposition over any natural gas 
liquids at the time of completion of the liquefaction process.
    Pensacola OPD means the Official Protraction Diagram (OPD) 
designated as Pensacola that has a western edge located at the UTM X 
coordinate 1,393,920 in the NAD27.
    Person means a natural person, where so designated, or an entity, 
such as a partnership, association, State, political subdivision of a 
State or territory, or a private, public, or municipal corporation.
    Planning area means a large portion of the OCS, consisting of 
contiguous OCS blocks, defined for administrative planning purposes.
    Primary term or initial period means the initial period referred to 
in 43 U.S.C. 1337(b)(2).
    Regional Director means the BOEM officer with responsibility and 
authority for a Region within BOEM.
    Regional Supervisor means the BOEM officer with responsibility and 
authority for leasing or other designated program functions within a 
BOEM Region.
    Right-of-Use and Easement (RUE) means a right to use a portion of 
the seabed at an OCS site other than on a lease you own, for the 
construction and/or use of artificial islands, facilities, 
installations, and other devices, established to support the 
exploration, development or production of oil and gas, mineral, or 
energy resources from an OCS or State submerged lands lease.
    Right-of-Way (ROW) means an authorization issued by BSEE under the 
authority of section 5(e) of the OCSLA (43 U.S.C. 1334(e)) for the use 
of submerged lands of the Outer Continental Shelf for pipeline 
purposes.
    Secretary means the Secretary of the Interior or an official or a 
designated employee authorized to act on the Secretary's behalf.
    Security or securities means any note, stock, treasury stock, bond, 
debenture, evidence of indebtedness, certificate of interest or 
participation in any profit-sharing agreement; collateral-trust 
certificate; pre-organization certificate or subscription; transferable 
share; investment contract; voting-trust certificate; certificate of 
deposit for a security; fractional undivided interest in oil, gas, or 
other mineral rights; or, in general, any interest or instrument 
commonly known as a ``security'' or any certificate of interest or 
participation in, temporary or interim certificate for, receipt for, 
guarantee of, or warrant or right to subscribe to or purchase any of 
the foregoing.
    Single bid means a bid submitted by one person for an oil and gas 
lease under section 8(a) of the Act.
    Six-month bidding period means the 6-month period of time:
    (i) From May 1 through October 31; or
    (ii) from November 1 through April 30.
    Statement of production means, in the context of joint restricted 
bidders, the following production during the applicable prior 
production period:
    (i) The average daily production in barrels of crude oil, natural 
gas, and natural gas liquids which it owned worldwide;
    (ii) The average daily production in barrels of crude oil, natural 
gas, and natural gas liquids owned worldwide by every subsidiary of the 
reporting person;
    (iii) The average daily production in barrels of crude oil, natural 
gas, and natural gas liquids owned worldwide by any person or persons 
of which the reporting person is a subsidiary; and
    (iv) The average daily production in barrels of crude oil, natural 
gas, and natural gas liquids owned worldwide by any subsidiary, other 
than the reporting person, of any person or persons of which the 
reporting person is a subsidiary.
    Tract means one or more OCS blocks, or any leasable portion 
thereof, that will be part of a single oil and gas lease. The term 
tract may be used interchangeably with the term ``bidding unit.''
    We, us, and our mean BOEM or the Department of the Interior, 
depending on the context in which the word is used.
    Western Planning Area (WPA) means that portion of the Gulf of 
Mexico that lies south and east of Texas. Precise boundary information 
is available from the Leasing Division, Mapping and Boundary Branch.
    You means any party that has, or may have, legal obligations to the 
Federal government with respect to any operations on the OCS in which 
it is or may become involved. Depending on the context of the 
regulation, the term ``you'' may include a lessee (record title owner), 
an operating rights owner, a designated operator or agent of the 
lessee, a predecessor lessee, a holder of a State or Federal RUE, or a 
pipeline ROW holder.


Sec.  556.106  Service fees.

    (a) The table in this paragraph shows the fees you must pay to BOEM 
for the services listed. BOEM will adjust the fees periodically 
according to the Implicit Price Deflator for Gross Domestic Product and 
publish a document showing the adjustment in the Federal Register. If a 
significant adjustment is needed to arrive at a new fee for any reason 
other than inflation, then a proposed rule containing the new fees will 
be published in the Federal Register for comment.

                            Service Fee Table
------------------------------------------------------------------------
    Service--processing of the
            following:                  Fee amount      30 CFR Citation
------------------------------------------------------------------------
(1) Assignment of record title                   $198  Sec.   556.701(a)
 interest in Federal oil and gas
 lease(s) for BOEM approval.......
(2) Sublease or Assignment of                     198  Sec.   556.801(a)
 operating rights interest in
 Federal oil and gas lease(s) for
 BOEM approval....................
(3) Required document filing for                   29  Sec.   556.715(a)
 record purpose, but not for BOEM                      Sec.   556.808(a)
 approval.........................

[[Page 18158]]

 
(4) Non-required document filing                   29  Sec.   556.715(b)
 for record purposes..............                     Sec.   556.808(b)
------------------------------------------------------------------------

    (b) Evidence of payment via pay.gov of the fees listed in paragraph 
(a) of this section must accompany the submission of a document for 
approval or filing, or be sent to an office identified by the Regional 
Director.
    (c) Once a fee is paid, it is nonrefundable, even if your service 
request is withdrawn.
    (d) If your request is returned to you as incomplete, you are not 
required to submit a new fee with the amended submission.
    (e) The pay.gov Web site is accessible at https://www.pay.gov/paygov/ or through the BOEM Web site at http://www.boem.gov/Fees-for-Services.
    (f) The fees listed in the table above apply equally to any 
document or information submitted electronically pursuant to part 560, 
subpart E, of this chapter.


Sec.  556.107  Corporate seal requirements.

    (a) If you electronically submit to BOEM any document or 
information referenced in Sec.  560.500 of this chapter, any 
requirement to use a corporate seal under this chapter will be 
satisfied, and you will not need to affix your corporate seal to such 
document or information, if:
    (1) You properly file with BOEM a paper, with a corporate seal and 
the signature of the authorized person(s), stating that electronic 
submissions made by you will be legally binding, as set forth in Sec.  
560.502 of this chapter; and
    (2) You make electronic submissions to BOEM through a secure 
electronic filing system that conforms to the requirements of Sec.  
560.500; or,
    (b) You may file with BOEM a non-electronic document, containing a 
corporate seal and the signature of an authorized person(s), attesting 
that future documents and information filed by you by electronic or 
non-electronic means will be legally binding without an affixed 
corporate seal. If you file such a non-electronic attestation document 
with BOEM, any requirement for use of a corporate seal under the 
regulations of this chapter will be satisfied, and you will not need to 
affix your corporate seal to submissions where they would have been 
otherwise required.
    (c) If the State or territory in which you are incorporated does 
not issue or require corporate seals, the document referred to in 
paragraphs (a) and (b) of this section need not contain a corporate 
seal, but must still contain the signature of the authorized person(s), 
a statement that the State in which you are incorporated does not issue 
or require corporate seals, and a statement that submissions made by 
you will be legally binding.
    (d) Any document, or information submitted without corporate seal 
must still contain the signature of an individual qualified to sign who 
has the requisite authority to act on your behalf.
    (e) Any document or information submitted pursuant to this section 
is submitted subject to the penalties of 18 U.S.C. 1001, as amended by 
the False Statements Accountability Act of 1996.

Subpart B--Oil and Gas Five Year Leasing Program


Sec.  556.200  What is the Five Year leasing program?

    Section 18(a) of OCSLA (43 U.S.C. 1344(a)), requires the Secretary 
to prepare an oil and gas leasing program that consists of a five-year 
schedule of proposed lease sales to best meet national energy needs, 
showing the size, timing, and location of leasing activity as precisely 
as possible. BOEM prepares the five year schedule of proposed lease 
sales consistent with the principles set out in section 18(a)(1) and 
(2)(A)-(H) of OCSLA (43 U.S.C. 1344(a)(1) and (2)(A)-(H)) to obtain a 
proper balance among the potential for environmental damage, the 
potential for the discovery of oil and gas, and the potential for 
adverse impact on the coastal zone, as required by OCSLA section 
18(a)(3) (43 U.S.C. 1344(a)(3)).


Sec.  556.201  Does BOEM consider multiple uses of the OCS?

    BOEM gathers information about multiple uses of the OCS in order to 
assist the Secretary in making decisions on the 5-year program pursuant 
to provisions of 43 U.S.C. 1344. For this purpose, BOEM invites and 
considers suggestions from States and local governments, industry, and 
any other interested parties, primarily through public notice and 
comment procedures. BOEM also invites and considers suggestions from 
Federal agencies.


Sec.  556.202  How does BOEM start the Five Year program preparation 
process?

    To begin preparation of the Five Year program, BOEM invites and 
considers nominations for any areas to be included or excluded from 
leasing, by doing the following:
    (a) BOEM prepares and makes public official protraction diagrams 
and leasing maps of OCS areas. In any area properly included in the 
official Five Year diagrams and maps, any area not already leased for 
oil and gas may be offered for lease.
    (b) BOEM invites and considers suggestions and relevant information 
from governors of States, local governments, industry, Federal 
agencies, and other interested parties, through a publication of a 
request for information in the Federal Register. Any local government 
must first submit its comments on the request for information to its 
State governor before sending the comments to BOEM.
    (c) BOEM sends a letter to the governor of each affected State 
asking the governor to identify specific laws, goals, and policies that 
should be considered. Each State governor, as well as the Department of 
Commerce, is requested to identify the relationship between any oil and 
gas activity and the State under sections 305 and 306 of the CZMA, 16 
U.S.C. 1454 and 1455.
    (d) BOEM asks the Department of Energy for information on regional 
and national energy markets and transportation networks.


Sec.  556.203  What does BOEM do before publishing a proposed Five Year 
program?

    After considering the comments and information described in Sec.  
556.202, BOEM will prepare a draft proposed Five Year program.
    (a) At least 60 days before publication of a proposed program, BOEM 
will send a letter, together with the draft proposed program, to the 
governor of each affected State, inviting the governor to comment on 
the draft proposed program.
    (b) A governor, whether for purposes of preparing that State's 
comments or otherwise, may solicit comments from local governments that 
he determines may be affected by an oil and gas leasing program.
    (c) If a governor's comments on the draft proposed program are 
received by

[[Page 18159]]

BOEM at least 15 days before submission of the proposed program to 
Congress and its publication for comment in the Federal Register, BOEM 
will reply to the governor in writing.


Sec.  556.204  How do governments and citizens comment on a proposed 
Five Year program?

    BOEM publishes the proposed program in the Federal Register for 
comment by the public. At the same time, BOEM sends the proposed 
program to the governors of the affected States and to Congress and the 
Attorney General of the United States for review and comment.
    (a) Governors are responsible for providing a copy of the proposed 
program to affected local governments in their States. Local 
governments may comment directly to BOEM, but must also send their 
comments to the governor of their State.
    (b) All comments from any party are due within 90 days after 
publication of the request for comments in the Federal Register.


Sec.  556.205  What does BOEM do before approving a proposed final Five 
Year program or a significant revision of a previously-approved Five 
Year program?

    At least 60 days before the Secretary may approve a proposed final 
Five Year program or a significant revision to a previously approved 
final Five Year program, BOEM will submit a proposed final program or 
proposed significant revision to the President and Congress. BOEM will 
also submit comments received and indicate the reasons why BOEM did or 
did not accept any specific recommendation of the Attorney General of 
the United States, the governor of a State, or the executive of a local 
government.

Subpart C--Planning and Holding a Lease Sale


Sec.  556.300  What reports may BOEM and other Federal agencies prepare 
before a lease sale?

    For an oil and gas lease sale in a Five Year program, and as the 
need arises for other mineral leasing pursuant to part 581 of this 
chapter, BOEM will prepare a report describing the general geology and 
potential mineral resources of the area under consideration. The 
Director may request other interested Federal agencies to prepare 
reports describing, to the extent known, any other valuable resources 
contained within the general area and the potential effect of mineral 
operations upon the resources or upon the total environment or other 
uses of the area.


Sec.  556.301  What is a Call for Information and Nominations?

    BOEM issues a Call for Information and Nominations (``Call'') on an 
area proposed for leasing in the Five Year program through publication 
in the Federal Register and other publications. A Call may include more 
than one proposed sale. Comments are requested from industry and the 
public on:
    (a) Industry interest in the area proposed for leasing, including 
nominations or indications of interest in specific blocks within the 
area;
    (b) Geological conditions, including bottom hazards;
    (c) Archaeological sites on the seabed or near shore;
    (d) Potential multiple uses of the proposed leasing area, including 
navigation, recreation, and fisheries;
    (e) Areas that should receive special concern and analysis; and
    (f) Other socioeconomic, biological, and environmental information.


Sec.  556.302  What does BOEM do with the information from the Call?

    (a) Based upon information and nominations received in response to 
the Call, and in consultation with appropriate Federal agencies, the 
Director will develop a recommendation of areas proposed for leasing 
for the Secretary for further consideration for leasing and/or 
environmental analysis.
    (1) In developing the recommendation, the Director will consider 
available information concerning the environment, conflicts with other 
uses, resource potential, industry interest, and other relevant 
information, including comments received from State and local 
governments and other interested parties in response to the Call.
    (2) The Director, on his/her own motion, may include in the 
recommendation areas in which interest has not been indicated in 
response to a Call. In making a recommendation, the Director will 
consider all available environmental information.
    (3) Upon approval by the Secretary, the Director will announce the 
area identified in the Federal Register.
    (b) BOEM will evaluate the area(s) identified for further 
consideration for the potential effects of leasing on the human, 
marine, and coastal environments, and may develop measures to mitigate 
adverse impacts, including lease stipulations, for the options to be 
analyzed. The Director may hold public hearings on the environmental 
analysis after an appropriate notice.
    (c) BOEM will seek to inform the public, as soon as possible, of 
changes from the area(s) proposed for leasing that occur after the Call 
process.
    (d) Upon request, the Director will provide relative indications of 
interest in areas, as well as any comments filed in response to a Call 
for a proposed sale. However, no information transmitted will identify 
any particular area with the name of any particular party so as not to 
compromise the competitive position of any participants in the process 
of indicating interest.
    (e) For supplemental sales provided for by Sec.  556.308, the 
Director's recommendation will be replaced by a statement describing 
the results of the Director's consideration of the factors specified 
above in this section.


Sec.  556.303  What does BOEM do if an area proposed for leasing is 
within three nautical miles of the seaward boundary of a coastal State?

    For an area proposed for leasing that is within three nautical 
miles of the seaward boundary of a coastal State, as governed by 
section 8(g)(1) of OCSLA (43 U.S.C. 1337(g)(1)):
    (a) BOEM provides the governor of the coastal State, subject to the 
confidentiality requirements in this chapter:
    (1) A schedule for leasing; and
    (2) An estimate of the potential oil and gas resources.
    (b) At the request of the governor of a coastal State, BOEM will 
provide to that governor, subject to the confidentiality requirements 
in this chapter:
    (1) Information concerning geographical, geological, and ecological 
characteristics; and
    (2) An identification of any field, geological structure, or trap, 
or portion thereof, that lies within three nautical miles of the 
State's boundary.


Sec.  556.304  How is a proposed notice of sale prepared?

    (a) The Director will, in consultation with appropriate Federal 
agencies, develop measures, including lease stipulations and 
conditions, to mitigate adverse impacts on the environment, which will 
be contained, or referenced, in the proposed notice of sale.
    (b) A proposed notice of sale will be submitted to the Secretary 
for approval. All comments and recommendations received and the 
Director's findings or actions thereon, will also be forwarded to the 
Secretary.
    (c) Upon approval by the Secretary, BOEM will send a proposed 
notice of sale to the governors of affected States and publish the 
notice of its availability in the Federal Register. The proposed notice 
of sale references or provides a

[[Page 18160]]

link to the lease form, and contains a description of the area proposed 
for leasing, the proposed lease terms and conditions of sale, and 
proposed stipulations to mitigate potential adverse impacts on the 
environment.


Sec.  556.305  How does BOEM coordinate and consult with States 
regarding a proposed notice of sale?

    (a) Within 60 days after receiving the proposed notice of sale, 
governors of affected States may submit comments and recommendations to 
BOEM regarding the size, timing, and location of the proposed sale. 
Local governments may comment to BOEM directly, but must also send 
their comments to the governor of their State.
    (b) BOEM will provide a consistency determination under the Coastal 
Zone Management Act (CZMA) (16 U.S.C. 1456) to each State with an 
approved coastal zone management program that will determine whether 
the proposed sale is consistent, to the maximum extent practicable, 
with the enforceable policies of the State's approved coastal zone 
management program.


Sec.  556.306  What if a potentially oil- or gas-bearing area underlies 
both the OCS and lands subject to State jurisdiction?

    (a) Whenever the Director or the governor of a coastal State 
determines that a common potentially hydrocarbon-bearing area may 
underlie the Federal OCS and State submerged lands, the Director or the 
governor will notify the other party in writing of the determination.
    (b) Thereafter the Director will provide to the governor of the 
coastal State, subject to the confidentiality requirements in this 
chapter:
    (1) An identification of the areas proposed for leasing and a 
schedule for, leasing; and
    (2) An estimate of the oil and gas resources.
    (c) At the request of the governor of the coastal State, the 
Director will provide to such governor, subject to the confidentiality 
requirements in this chapter:
    (1) All geographical, geological, and ecological characteristics of 
the areas proposed for leasing; and
    (2) An identification of any field, geological structure, or trap 
that lies within 3 miles of the State's seaward boundary.
    (d) If BOEM intends to lease such blocks or tracts, the Director 
and the governor of the coastal State may enter into an agreement for 
the equitable disposition of the revenues from production of any common 
potentially hydrocarbon-bearing area, pursuant to OCSLA section 8(g)(3) 
(43 U.S.C. 1337(g)(3)). Any revenues received by the United States 
under such an agreement are subject to the requirements of OSCLA 
section 8(g)(2) (43 U.S.C. 1337(g)(2)).
    (e) If the Director and the governor do not enter into an agreement 
under paragraph (d) of this section within 90 days, BOEM may 
nevertheless proceed with the leasing of the tracts, in which case all 
revenues will be deposited in a separate account in the Treasury of the 
United States, pending disposition of 27% (twenty-seven percent) of the 
revenues to the relevant coastal state(s), pursuant to the requirements 
of OCSLA section 8(g)(2). (43 U.S.C. 1337(g)(2)).


Sec.  556.307  What does BOEM do with comments and recommendations 
received on the proposed notice of sale?

    (a) BOEM will consider all comments and recommendations received in 
response to the proposed notice of sale.
    (b) If the Secretary determines, after providing opportunity for 
consultation, that a governor's comments, and those of any affected 
local government, provide a reasonable balance between the national 
interest and the well-being of the citizens of the State, the Secretary 
will accept the recommendations of a State and/or local government(s). 
Any such determination of the national interest will be based on the 
findings, purposes and policies of the Act set forth in 43 U.S.C. 1332 
and 43 U.S.C. 1801.
    (c) BOEM will send to each governor written reasons for its 
determination to accept or reject each governor's recommendation, and/
or to implement any alternative means to provide for a reasonable 
balance between the national interest and the interests of the citizens 
of the State.


Sec.  556.308  How does BOEM conduct a lease sale?

    (a) BOEM publishes a final notice of sale in the Federal Register 
and in other publications, as appropriate, at least 30 days before the 
date of the sale. The final notice:
    (1) States the place, time, and method for filing bids and the 
place, date, and hour for opening bids; and
    (2) Contains or references a description of the areas offered for 
lease, the lease terms and conditions of sale, and stipulations to 
mitigate potential adverse impacts on the environment.
    (b) Oil and gas tracts are offered for lease by competitive sealed 
bid in accordance with the terms and conditions in the final notice of 
sale and applicable laws and regulations.
    (c) Unless BOEM finds that a larger area is necessary for 
reasonable economic production, no individual tract for oil and gas 
leasing will exceed 5,760 acres in area. If BOEM finds that an area 
larger than 5,760 acres is necessary in any particular area, the size 
of any such tract will be specified in the final notice of sale.
    (d) The final notice of sale references, or provides a link to, the 
OCS lease form which will be issued to successful bidders.


Sec.  556.309  Does BOEM offer blocks in a sale that is not on the Five 
Year program schedule (called a Supplemental Sale)?

    (a) Except as provided in paragraph (c) of this section, BOEM may 
offer a block within a planning area included in the Five Year program 
in an otherwise unscheduled sale, if the block:
    (1) Received a bid that was rejected in an earlier sale;
    (2) Had a high bid that was forfeited in a scheduled sale; or
    (3) Is a development block subject to drainage.
    (b) For an unscheduled sale, BOEM may disclose the classification 
of the block as a development block.
    (c) Blocks in the Central or Western Gulf of Mexico Planning Areas 
cannot be offered in a sale that is not on the schedule.

Subpart D--Qualifications


Sec.  556.400  When must I demonstrate that I am qualified to hold a 
lease on the OCS?

    In order to bid on, own, hold, or operate a lease on the OCS, 
bidders, record title holders, and operating rights owners must first 
obtain a qualification number from BOEM.


Sec.  556.401  What do I need to show to become qualified to hold a 
lease on the OCS and obtain a qualification number?

    (a) You may become qualified to hold a lease on the OCS and obtain 
a qualification number in accordance with Sec.  556.402, if you submit 
evidence demonstrating that you are:
    (1) A natural person who is a citizen or national of the United 
States;
    (2) A natural person who is an alien lawfully admitted for 
permanent residence in the United States, as defined in 8 U.S.C. 
1101(a)(20);
    (3) A private, public, or municipal corporation or Limited 
Liability Company or Limited Liability Corporation (either/both 
sometimes herein referred to as ``LLC'') organized under the laws of 
any State of the United States, the District of Columbia, or any 
territory or insular possession subject to United States jurisdiction;
    (4) An association of such citizens, nationals, resident aliens, or 
corporations;

[[Page 18161]]

    (5) A State, the District of Columbia, or any territory or insular 
possession subject to United States jurisdiction;
    (6) A political subdivision of a State, the District of Columbia, 
or any territory or insular possession subject to United States 
jurisdiction; or
    (7) A Trust organized under the laws of any State of the United 
States, the District of Columbia, or any territory or insular 
possession subject to United States jurisdiction;
    (b) Statements and evidence submitted to demonstrate qualification 
under paragraphs (a)(1) through (6) of this section are subject to the 
penalties of 18 U.S.C. 1001.
    (b) BOEM may issue you a qualification number after you have 
provided evidence acceptable to BOEM.


Sec.  556.402  How do I make the necessary showing to qualify and 
obtain a qualification number?

    (a) If BOEM has already issued you a qualification number, you may 
present that number to BOEM. If not, in order to become qualified, you 
must provide the information in paragraph (b) or (c) of this section 
before BOEM will issue you a BOEM qualification number.
    (b) A natural person must be a citizen or national of the United 
States, or a resident alien, to qualify. A United States citizen or 
national must submit written evidence acceptable to BOEM attesting to 
United States citizenship or national status. A resident alien must 
submit an original or a photocopy of the United States Citizenship and 
Immigration Services form evidencing legal status as a resident alien.
    (c) A person who is not a natural person must submit evidence 
(refer to paragraph (d) of this section) acceptable to BOEM that:
    (1) It is authorized to conduct business under the laws of a State, 
the District of Columbia, or any territory or insular possession 
subject to United States jurisdiction under which it is organized;
    (2) Under the operating rules of its business, it is authorized to 
hold OCS leases; and
    (3) Includes an up-to-date list of persons, and their titles, who 
are authorized to bind the corporation, association or other entity 
when conducting business on the OCS. It is up to you, in accordance 
with your organizational structure or rules, to identify the 
individual, or group of individuals, who has actual authority to bind 
your organization, and the title(s) they will use when they sign 
documents to bind the organization. You must maintain and regularly 
update the information as to who has the authority to bind the 
organization whenever that information changes.
    (d) Acceptable evidence under paragraph (c) of this section 
includes, but is not limited to:
    (1) For a corporation,
    (i) A statement by the Secretary of the corporation, over corporate 
seal, certifying that the corporation is authorized to hold OCS leases; 
and
    (ii) Evidence of authority of holders of positions entitled to bind 
the corporation, certified by Secretary of the corporation, over 
corporate seal, such as:
    (A) Certified copy of resolution of the board of directors with 
titles of officers authorized to bind corporation;
    (B) Certified copy of resolutions granting corporate officer 
authority to issue a power of attorney; or
    (C) Certified copy of power of attorney or certified copy of 
resolution granting power of attorney.
    (2) For a Limited or General Partnership,
    (i) A statement by an authorized party certifying that the 
partnership is authorized to hold OCS leases;
    (ii) A copy of your signed partnership formation documents, 
including a partnership agreement;
    (iii) A statement from each partner indicating, as appropriate, 
U.S. citizenship or incorporation or organization under the laws of a 
State, the District of Columbia, or any territory or insular possession 
subject to U.S. jurisdiction; and
    (iv) Documentation evidencing the existence of the partnership and 
that it was properly created, either from the Secretary of State of the 
State in which the partnership is registered or by an equivalent State 
or governmental office.
    (3) For a Limited Liability Company or Limited Liability 
Corporation,
    (i) A certificate of formation of the LLC;
    (ii) A statement by an individual authorized to bind the LLC, as 
listed under (c)(4) above, certifying that the LLC is authorized to 
hold OCS leases;
    (iii) A statement from each member indicating, as appropriate, U.S. 
citizenship, or incorporation or organization under the laws of a 
State, the District of Columbia, or any territory or insular possession 
subject to U.S. jurisdiction; and
    (iv) Evidence of authority of holders of positions entitled to bind 
the LLC, certified by an individual authorized to bind the LLC.
    (4) For a Trust,
    (i) A copy of the trust agreement or document establishing the 
trust and all amendments, properly certified by the trustee; and
    (ii) A statement indicating the law under which the trust is 
established and that the trust is authorized to hold OCS leases.
    (e) In the event that a person may be eligible to hold OCS leases, 
but that type of person is not listed in paragraphs (c) or (d) of this 
section, evidence of such eligibility will be submitted and certified 
by the highest level of management of the person authorized to do so 
pursuant to its operating agreement or governance documents.
    (f) Any person who obtains a qualification number from BOEM is 
responsible to ensure that it is not using the qualification number 
approved by BOEM for any purpose that its operating rules do not allow.
    (g) Any evidence submitted in response to paragraphs (c), (d), or 
(e) of this section is submitted subject to 18 U.S.C. 1001.
    (h) A person may not hold leases on the OCS until the evidence 
requested in this section has been accepted and approved by BOEM and 
BOEM has issued a qualification number to that person.
    (i) If use of a corporate seal is required by this section, you may 
meet the requirement as specified in Sec.  556.107.


Sec.  556.403  Under what circumstances may I be disqualified from 
holding a lease on the OCS?

    You may not hold an OCS lease if:
    (a) You or your principals are excluded or disqualified from 
participating in a transaction covered by Federal non-procurement 
debarment and suspension (2 CFR parts 180 and 1400), unless the 
Department explicitly approves an exception for a transaction pursuant 
to the regulations in those parts;
    (b) The Secretary finds, after notice and hearing, that you or your 
principals (including in the meaning of ``you,'' for purposes of this 
subparagraph, a bidder or prospective bidder) fail to meet due 
diligence requirements or to exercise due diligence under section 8(d) 
of OCSLA (43 U.S.C. 1337(d)) on any OCS lease; or
    (c) BOEM disqualifies you from holding a lease on the OCS based on 
your unacceptable operating performance. BOEM will give you adequate 
notice and opportunity for a hearing before imposing a 
disqualification, unless BSEE has already provided such notice and 
opportunity for a hearing.


Sec.  556.404  What do the non-procurement debarment rules require that 
I do?

    You must comply with the Department's non-procurement

[[Page 18162]]

debarment regulations at 2 CFR parts 180 and 1400.
    (a) You must notify BOEM if you know that you or your principals 
are excluded, disqualified, have been convicted or are indicted of a 
crime as described in 2 CFR part 180, subpart C. You must make this 
notification before you sign a lease, sublease, or an assignment of 
record title interest or operating rights interest, or become a lease 
or unit operator. This paragraph does not apply if you have previously 
provided a statement disclosing this information, and you have received 
an exception from the Department, as described in 2 CFR 180.135 and 2 
CFR 1400.137.
    (b) If you wish to enter into a covered transaction with another 
person at a lower tier, as described in 2 CFR 180.200, you must first:
    (1) Verify that the person is not excluded or disqualified under 2 
CFR part 180; and
    (2) Require the person to:
    (i) Comply with 2 CFR part 180, subpart C; and
    (ii) Include the obligation to comply with 2 CFR part 180, subpart 
C in its contracts and other transactions.
    (c) After you enter into a covered transaction, you must 
immediately notify BOEM in writing if you learn that:
    (1) You failed to disclose pertinent information earlier; or
    (2) Due to changed circumstances, you or your principals now meet 
any of the criteria in 2 CFR 180.800.


Sec.  556.405  When must I notify BOEM of mergers, name changes, or 
changes of business form?

    You must notify BOEM of any merger, name change, or change of 
business form as soon as practicable, but in no case later than one 
year after the earlier of the effective date or the date of filing the 
change or action with the Secretary of State or other authorized 
official in the State of original registry.

Subpart E--Issuance of a Lease

How To Bid


Sec.  556.500  Once qualified, how do I submit a bid?

    (a) You must submit a separate sealed bid for each tract or bidding 
unit to the address provided and by the time specified in the final 
notice of sale. You may not bid on less than an entire tract or bidding 
unit.
    (b) BOEM requires a deposit for each bid. The final notice of sale 
will specify the amount and method of payment.
    (c) Unless otherwise specified in the final notice of sale, the bid 
deposit amount will be 20 percent of the amount of the bid for any 
given tract or bidding unit.
    (d) You may not submit a bid on an OCS tract if, after notice and 
hearing under section 8(d) of OCSLA (43 U.S.C. 1337(d)), the Secretary 
finds that you are not meeting the diligence requirements on any OCS 
lease.
    (e) If the authorized officer within BOEM rejects your high bid, 
the decision is final for the Department, subject only to 
reconsideration upon your written request as set out in Sec.  556.517.


Sec.  556.501  What information do I need to submit with my bid?

    In accordance with OCSLA section 18(a)(4) (43 U.S.C. 1344(a)(4)), 
BOEM must evaluate every bid to ensure that the federal government 
receives fair market value for every lease. Section 26(a)(1)(A) of 
OCSLA (43 U.S.C. 1352(a)(1)(A)) provides that, in accordance with 
regulations prescribed by the Secretary, any lessee or permittee 
conducting any exploration for, or development or production of, oil or 
gas must provide the Secretary access to all data and information 
(including processed, analyzed, and interpreted information) obtained 
from that activity and must provide copies of that data and information 
as the Secretary may request.
    (a) As part of the lease sale process, every bidder submitting a 
bid on a tract, or participating as a joint bidder in such a bid, may 
at the time of bid be required to submit various information, including 
a Geophysical Data and Information Statement (GDIS) corresponding to 
that tract, as well as the bidder's exclusive/proprietary geophysical 
data in order for BOEM to properly evaluate the bid. If a GDIS 
required, each GDIS must include, as required by Sec.  551.12(b) and 
(c) of this chapter:
    (1) A list of geophysical surveys or other information used as part 
of the decision to bid or participate in a bid on the block.
    (2) An accurate and complete record of each geophysical survey 
conducted, including digital navigational data and final location maps. 
The bidder and any joint bidder must include a map for each survey 
identified in the GDIS that illustrates the actual areal extent of the 
proprietary geophysical data.
    (b) If a bidder is required to submit a GDIS, the GDIS must be 
submitted even if the bidder did not rely on proprietary geophysical 
data and information in deciding to bid or participate as a joint 
bidder in the bid for any particular block, and must include entries 
for all such blocks.
    (c) The bidder must submit each GDIS in a separate and sealed 
envelope, or in an electronically readable spreadsheet format, with 
proprietary seismic data maps also available in an electronic format. 
Each bidder must submit the GDIS even if its joint bidder or bidders on 
a specific block also have submitted a GDIS.
    (d) If BOEM requires additional information related to bidding, it 
will describe the additional information requirements in the final 
notice of sale.
    (e) BOEM will reimburse bidders for the costs of complying with the 
requirements of this section, in accordance with Sec.  550.196 (on 
lease) and/or Sec.  551.13 (off lease) of this chapter.
    (f) Bids that are not made in compliance with this section will be 
considered incomplete and invalid.

Restrictions on Joint Bidding


Sec.  556.511  Are there restrictions on bidding with others and do 
those restrictions affect my ability to bid?

    The Energy Policy and Conservation Act of 1975, 42 U.S.C. 6213, 
prohibits joint bidding by major oil and gas producers under certain 
circumstances. BOEM implements 42 U.S.C. 6213 as follows:
    (a) BOEM publishes twice yearly in the Federal Register a 
restricted joint bidders list. A person appearing on this list is 
limited in its ability to submit a joint bid. The list:
    (1) Consists of the persons chargeable with an average worldwide 
daily production in excess of 1.6 million barrels of crude oil and/or 
its equivalent in natural gas liquids and natural gas for the prior 
production period; and
    (2) Is based upon the statement of production that filed as 
required by Sec.  556.513.
    (b) If BOEM places you on the restricted joint bidders list, BOEM 
will send you a copy of the order placing you on the list. You may 
appeal this order to the Interior Board of Land Appeals under 30 CFR 
part 590, subpart A.
    (c) If you are listed in the Federal Register in any group of 
restricted bidders, you may not bid:
    (1) Jointly with another person in any other group of restricted 
bidders for the applicable 6-month bidding period; or
    (2) Separately during the 6-month bidding period if you have an 
agreement with another restricted bidder that will result in joint 
ownership in an OCS lease.
    (d) If you are listed in the Federal Register in any group of 
restricted

[[Page 18163]]

bidders, you may not make any pre-bidding agreement for the conveyance 
of any potential lease interest, whether by assignment, sale, transfer, 
or other means, to any person on the list of restricted joint bidders.
    (e) Even if you are not listed in the Federal Register in any group 
of restricted bidders, you are prohibited from making any pre-bidding 
agreement for the assignment, sale, transfer, or other conveyance of 
any potential lease interest to two or more persons in different groups 
on the list of restricted joint bidders.
    (f) As a bidder, you are prohibited from unlawful combination with, 
or intimidation of, bidders under 18 U.S.C. 1860.


Sec.  556.512  What bids may be disqualified?

    The following bids for any oil and gas lease will be disqualified 
and rejected in their entirety:
    (a) A joint bid submitted by two or more persons who are on the 
effective List of Restricted Joint Bidders; or
    (b) A joint bid submitted by two or more persons when:
    (1) One or more of those persons is chargeable for the prior 
production period with an average daily production in excess of 1.6 
million barrels of crude oil, natural gas and natural gas liquids and 
has not filed a Statement of Production, as required by Sec.  556.513 
of this part for the applicable 6-month bidding period, or
    (2) Any of those persons have failed or refused to file a detailed 
report of production when required to do so under Sec.  556.513, or
    (c) A single or joint bid submitted pursuant to an agreement 
(whether written or oral, formal or informal, entered into or arranged 
prior to or simultaneously with the submission of such single or joint 
bid, or prior to or simultaneously with the award of the bid upon the 
tract) that provides:
    (1) For the assignment, transfer, sale, or other conveyance of less 
than a 100 percent interest in the entire tract on which the bid is 
submitted, by a person or persons on the List of Restricted Joint 
Bidders, effective on the date of submission of the bid, to another 
person or persons on the same List of Restricted Joint Bidders; or
    (2) For the assignment, sale, transfer or other conveyance of less 
than a 100 percent interest in any fractional interest in the entire 
tract (which fractional interest was originally acquired by the person 
making the assignment, sale, transfer or other conveyance, under the 
provisions of the act) by a person or persons on the List of Restricted 
Joint Bidders, effective on the date of submission of the bid, to 
another person or persons on the same List of Restricted Joint Bidders; 
or
    (3) For the assignment, sale, transfer, or other conveyance of any 
interest in a tract by a person or persons not on the List of 
Restricted Joint Bidders, effective on the date of submission of the 
bid, to two or more persons on the same List of Restricted Joint 
Bidders; or
    (4) For any of the types of conveyances described in paragraphs 
(c)(1), (2), or (3) of this section where any party to the conveyance 
is chargeable for the prior production period with an average daily 
production in excess of 1.6 million barrels of crude oil, natural gas 
and natural gas liquids and has not filed a Statement of Production 
pursuant to Sec.  556.513 for the applicable six-month bidding period. 
Assignments expressly required by law, regulation, lease or lease 
stipulation will not disqualify an otherwise qualified bid; or
    (d) A bid submitted by or in conjunction with a person who has 
filed a false, fraudulent or otherwise intentionally false or 
misleading detailed Report of Production.


Sec.  556.513  When must I file a statement of production?

    (a) You must file a statement of production if your average 
worldwide daily production exceeded 1.6 million barrels for the prior 
production period, as determined using the method set forth in Sec.  
556.514. Your statement of production must specify that you were 
chargeable with an average daily production in excess of 1.6 million 
barrels for the prior production period.
    (b) The prior production periods are as follows:

------------------------------------------------------------------------
                                             The prior production period
         For the bidding period of                is the  preceding
------------------------------------------------------------------------
(1) May through October...................  July through December.
(2) November through April................  January through June.
------------------------------------------------------------------------

    (c) You must file the statement of production by the following 
deadlines:

------------------------------------------------------------------------
                                             You must file the statement
         For the bidding period of                       by
------------------------------------------------------------------------
(1) May through October...................  March 17.
(2) November through April................  September 17.
------------------------------------------------------------------------

    (d) If you are required to file a statement of production, BOEM may 
require you to submit a detailed report of production.
    (1) The detailed report of production must list crude oil, natural 
gas liquids, and natural gas produced worldwide from reservoirs during 
the prior production period, and therefore chargeable to the prior 
production period.
    (i) The amount of crude oil chargeable to the prior production 
period will be established by measurement of volumes delivered at the 
point of custody transfer (e.g., from storage tanks to pipelines, 
trucks, tankers, or other media for transport to refineries or 
terminals), with adjustments for net differences between opening and 
closing inventories, and basic sediment and water.
    (ii) The amount of natural gas liquids chargeable to the prior 
production period must include gas liquefied at surface separators, 
field facilities, or gas processing plants.
    (iii) The amount of natural gas chargeable to the prior production 
period must include adjustments, where applicable, to reflect the 
volume of gas returned to natural reservoirs, and the reduction of 
volume resulting from the removal of natural gas liquids and non-
hydrocarbon gases.
    (2) You must submit the detailed report of production within 30 
days after receiving BOEM's request.
    (3) BOEM may inspect and copy any document, record of production, 
analysis, and other material to verify the accuracy of any earlier 
statement of production.
    (e) If you submit a statement of production that misrepresents your 
chargeable production, the Department may cancel any lease awarded in 
reliance upon the statement.


Sec.  556.514  How do I determine my production for purposes of the 
restricted joint bidders list?

    (a) To determine the amount of production chargeable to you, add 
together:
    (1) Your average daily production in barrels of crude oil, natural 
gas liquids, and natural gas worldwide, all measured at 60 [deg]F, 
using the equivalency or conversion factors for natural gas liquids and 
natural gas set out in 42 U.S.C. 6213(b)(2) and (3); and
    (2) Your proportionate share of the average daily production owned 
by any person that has an interest in you and/or in which you have an 
interest.
    (b) For the purpose of paragraph (a)(1) of this section, your 
production includes 100 percent of production owned by:
    (1) You;
    (2) Every subsidiary of yours;
    (3) Every person of which you are a subsidiary; and

[[Page 18164]]

    (4) Every subsidiary of any person of which you are a subsidiary.
    (c) For purposes of paragraph (a)(2) of this section, interest 
means at least a five percent ownership or control of you or the 
reporting person and includes any interest:
    (1) From ownership of securities or other evidence of ownership; 
or,
    (2) By participation in any contract, agreement, or understanding 
regarding control of the person or their production of crude oil, 
natural gas liquids, or natural gas.
    (d) For purposes of this section, subsidiary means a person, 50 
percent or more of whose stock or other interest having power to vote 
for the election of a controlling body, such as directors or trustees, 
is directly or indirectly owned or controlled by another person.
    (e) For purposes of this section, production chargeable to you 
includes, but is not limited to, production obtained as a result of a 
production payment or a working, net profit, royalty, overriding 
royalty, or carried interest.
    (f) For purposes of this section, production must be measured with 
appropriate adjustments for:
    (1) Basic sediment and water;
    (2) Removal of natural gas liquids and non-hydrocarbon gases; and
    (3) Volume of gas returned to natural reservoirs.


Sec.  556.515  May a person be exempted from joint bidding 
restrictions?

    BOEM may exempt you from some or all of the reporting requirements 
listed in Sec.  556.513, and/or some or all of the joint bidding 
restrictions listed in Sec. Sec.  556.511 and/or 556.512(a), (b), and/
or (c), if, after opportunity for a hearing, BOEM determines that the 
extremely high costs in an area will preclude exploration and 
development without an exemption.

How Does BOEM Act on Bids?


Sec.  556.516  What does BOEM do with my bid?

    (a) BOEM opens the sealed bids at the place, date, and hour 
specified in the final notice of sale for the sole purpose of publicly 
announcing and recording the bids. BOEM does not accept or reject any 
bids at that time.
    (b) BOEM reserves the right to reject any and all bids received, 
regardless of the amount offered. BOEM accepts or rejects all bids 
within 90 days of opening. BOEM reserves the right to extend that time 
if necessary, and in that event, BOEM will notify bidder(s) in writing 
prior to the expiration of the initial 90-day period, or of any 
extension. Any bid not accepted within the prescribed 90-day period, or 
any extension thereof, will be deemed rejected. If your bid is 
rejected, BOEM will refund any money deposited with your bid, plus any 
interest accrued.
    (c) If the highest bids are a tie, BOEM will notify the bidders who 
submitted the tie bids. Within 15 days after notification, those 
bidders, if qualified, and not otherwise prohibited from bidding 
together, may:
    (1) Agree to accept the lease jointly. The bidders must notify BOEM 
of their decision and submit a copy of their agreement to accept the 
lease jointly.
    (2) Agree between/among themselves which bidder will accept the 
lease. The bidders must notify BOEM of their decision.
    (d) If no agreement is submitted pursuant to paragraph (c) of this 
section, BOEM will reject all the tie bids.
    (e) The Attorney General, in consultation with the Federal Trade 
Commission, has 30 days to review the results of the lease sale before 
BOEM may accept the bid(s) and issue the lease(s).


Sec.  556.517  What may I do if my high bid is rejected?

    (a) The decision of the authorized officer on bids is the final 
action of the Department, subject only to reconsideration of the 
rejection of the high bid by the Director, in accordance with paragraph 
(b) of this section.
    (b) Within 15 days of bid rejection, you may file a written request 
for reconsideration with the Director, with a copy to the authorized 
officer. Such request must provide evidence as to why the Director 
should reconsider your bid. You will receive a written response either 
affirming or reversing the rejection of your bid.
    (c) The Director's decision on the request for reconsideration is 
not subject to appeal to the Interior Board of Land Appeals in the 
Department's Office of Hearings and Appeals.

Awarding the Lease


Sec.  556.520  What happens if I am the successful high bidder and BOEM 
accepts my bid?

    (a) If BOEM accepts your bid, BOEM will provide you with the 
appropriate number of copies of the lease for you to execute and return 
to BOEM. Within 11 business days after you receive the lease copies, 
you must:
    (1) Execute all copies of the lease;
    (2) Pay the first year's rental;
    (3) Pay the balance of the bonus bid, unless deferred under 
paragraph (b) below;
    (4) Comply with subpart I of this part; and,
    (5) Return all copies of the executed lease, including any required 
bond or other form of security approved by the Regional Director, to 
BOEM.
    (b) If provided for in the final notice of sale, BOEM may defer any 
part of the bonus and bid payment for up to five years after the sale 
according to a schedule included in the final notice of sale. You must 
provide a bond acceptable to BOEM to guarantee payment of a deferred 
bonus bid.
    (c) If you do not make the required payments and execute and return 
all copies of the lease and any required bond within 11 business days 
after receipt, or if you otherwise fail to comply with applicable 
regulations, your deposit will be forfeited. However, BOEM will return 
any deposit with interest if the tract is withdrawn from leasing before 
you execute the lease.
    (d) If you use an agent to execute the lease, you must include 
evidence with the executed copies of the lease that a person who is on 
the list of persons referenced in Sec.  556.402(c)(3) authorized the 
agent to act for you.
    (e) After you comply with all requirements in this section, and 
after BOEM has executed the lease, BOEM will send you a fully executed 
lease.


Sec.  556.521  When is my lease effective?

    Your lease is effective on the first day of the month following the 
date that BOEM executes the lease. You may request in writing, before 
BOEM executes the lease, that your lease be effective as of the first 
day of the month in which BOEM executes the lease. If BOEM agrees to 
make the lease effective as of the earlier date, BOEM will so indicate 
when it executes the lease.


Sec.  556.522  What are the terms and conditions of the lease and when 
are they published?

    The terms and conditions of the lease will be stated in the final 
notice of sale and contained in the lease instrument itself. Oil and 
gas leases and leases for sulfur will be issued on forms approved by 
the Director.

Subpart F--Lease Term and Obligations

Length of Lease


Sec.  556.600  What is the primary term of my oil and gas lease?

    (a) The primary term of an oil and gas lease will be five years, 
unless BOEM determines that:
    (1) The lease is located in unusually deep water or involves other 
unusually adverse conditions; and,
    (2) A lease term longer than five years is necessary to explore and 
develop the lease.

[[Page 18165]]

    (b) If BOEM determines that the criteria in paragraphs (a)(1) and 
(2) of this section are met, it may specify a longer primary term, not 
to exceed 10 years.
    (c) BOEM will specify the primary term in the final notice of sale 
and in the lease instrument.
    (d) The lease will expire at the end of the primary term, unless 
maintained beyond that term in accordance with the provisions of Sec.  
556.601.


Sec.  556.601  How may I maintain my oil and gas lease beyond the 
primary term?

    You may maintain your oil and gas lease beyond the expiration of 
the primary term as long as:
    (a) You are producing oil or gas in paying quantities;
    (b) You are conducting approved drilling or well reworking 
operations with the objective of establishing production in paying 
quantities, in accordance with 30 CFR 250.180;
    (c) You are producing from, or drilling or reworking, an approved 
well adjacent to or adjoining your lease that extends directionally 
into your lease in accordance with 30 CFR 256.71;
    (d) You make compensatory payments on your lease in accordance with 
30 CFR 256.72;
    (e) Your lease is included in a BSEE-approved unit, in accordance 
with 30 CFR part 250, subpart M; or
    (f) Your lease is subject to a suspension of production or a 
suspension of operations, in accordance with 30 CFR 250.168 through 
250.180, for reasons other than gross negligence or a willful violation 
of a provision of your lease or any governing regulations.


Sec.  556.602  What is the primary term of my sulfur lease?

    (a) Your sulfur lease will have a primary term of not more than 10 
years, as specified in the lease.
    (b) BOEM will announce the primary term prior to the lease sale.
    (c) The lease will expire at the end of the primary term unless 
maintained beyond that term in accordance with the provisions of Sec.  
556.603.


Sec.  556.603  How may I maintain my sulfur lease beyond the primary 
term?

    You may maintain your sulfur lease after the primary term as long 
as you are producing sulfur in paying quantities, conducting drilling, 
well reworking or plant construction, or other operations for the 
production of sulfur or you are granted a suspension by BSEE; or your 
lease is subject to a suspension directed by BSEE for reasons other 
than gross negligence or a willful violation of a provision of your 
lease or governing regulations.

Lease Obligations


Sec.  556.604  What are my rights and obligations as a record title 
owner?

    (a) As a record title owner, you are responsible for all 
administrative and operating performance on the lease, including paying 
any rent and royalty due.
    (b)(1) A record title owner owns operating rights to the lease, 
unless and until he or she severs the operating rights by subleasing 
them to someone else.
    (2) A sublease of operating rights from record title may be for a 
whole or undivided fractional interest in the entire lease or a 
described aliquot portion of the lease and/or a depth interval. The 
sublease creates an operating rights interest in the sublessee, herein 
referred to as the operating rights owner.
    (c) Within any given aliquot, the record title owner may sublease 
operating rights for up to a maximum of two depth divisions, which may 
result in a maximum of three different depth intervals. But, if the 
one, or two, depth divisions to which operating rights are subleased do 
not include the entire depth of the lease, whatever depth division(s) 
has not been subleased, remains part of the lessee/sublessor's record 
title interest. The depth intervals for which operating rights are 
subleased must be defined by a beginning and ending depth and the 
ending of one depth level must abut the beginning of the next depth 
level, with no gap in between.
    (d) Every current and prior record title owner is jointly and 
severally liable, along with all other record title owners and all 
prior and current operating rights owners, for compliance with all non-
monetary terms and conditions of the lease and all regulations issued 
under OCSLA, as well as for fulfilling all non-monetary obligations, 
including decommissioning obligations, which accrue while it holds 
record title interest.
    (e) Record title owners that acquired their record title interests 
through assignment from a prior record title owner are also responsible 
for remedying all existing environmental or operational problems on any 
lease in which they own record title interests, with subrogation rights 
against prior lessees.
    (f) For monetary obligations, your obligation depends on the source 
of the monetary obligation and whether you have retained or severed 
your operating rights.
    (1) With respect to those operating rights that you have retained, 
you are primarily liable under 30 U.S.C. 1712(a) for your pro-rata 
share of all other monetary obligations pertaining to that portion of 
the lease subject to the operating rights you have retained, based on 
your share of operating rights in that portion of the lease.
    (2) With respect to all monetary obligations arising from or in 
connection with those operating rights that have been severed from your 
record title interest, your obligation is secondary to that of the 
sublessee(s) or later assignee(s) of the operating rights that were 
severed from your record title interest, as prescribed in 30 U.S.C. 
1712(a).


Sec.  556.605  What are my rights and obligations as an operating 
rights owner?

    (a) As an operating rights owner, you have the right to enter the 
leased area to explore for, develop, and produce oil and gas resources, 
except helium gas, contained within the aliquot(s) and depths within 
which you own operating rights, according to the lease terms, 
applicable regulations, and BOEM's approval of the sublease or 
subsequent assignment of the operating rights.
    (b) Unless otherwise prohibited, you have the right to authorize 
another party to conduct operations on the part of the lease to which 
your operating rights appertain.
    (c) An owner of operating rights who is designating a new 
designated operator must file a designation of operator under Sec.  
550.143 of this chapter.
    (d) An operating rights owner is only liable for obligations 
arising from that portion of the lease to which its operating rights 
appertain and that accrue during the period in which the operating 
rights owner owned the operating rights.
    (e) You are jointly and severally liable with other operating 
rights owners and the record title owners for all non-monetary lease 
obligations pertaining to that portion of the lease subject to your 
operating rights, which accrued during the time you held your operating 
rights interest.
    (f) An operating rights owner that acquires its operating rights 
interests through assignment from a prior operating rights owner is 
also responsible, with subrogation rights against prior operating 
rights owners, for remedying existing environmental or operational 
problems, to the extent that such problems arise from that portion of 
the lease to which its operating rights appertain, on any lease in 
which it owns operating rights.
    (g) You are primarily liable for monetary obligations pertaining to 
that portion of the lease subject to your

[[Page 18166]]

operating rights, and the record title owners are secondarily liable. 
If there is more than one operating rights owner in a lease, each 
operating rights owner is primarily liable for its pro-rata share of 
the monetary obligations that pertain to the portion of the lease that 
is subject to its operating rights.

Helium


Sec.  556.606  What must a lessee do if BOEM elects to extract helium 
from a lease?

    (a) BOEM reserves the ownership of, and the right to extract, 
helium from all gas produced from your OCS lease. Under section 12(f) 
of OCSLA (43 U.S.C. 1341(f)), upon our request, you must deliver all or 
a specified portion of the gas containing helium to BOEM at a point on 
the leased area or at an onshore processing facility that BOEM 
designates.
    (b) BOEM will determine reasonable compensation and pay you for any 
loss caused by the extraction of helium, except for the value of the 
helium itself. BOEM may erect, maintain, and operate on your lease any 
reduction work and other equipment necessary for helium extraction. Our 
extraction of helium will be conducted in a manner to not cause 
substantial delays in the delivery of gas to your purchaser.

Subpart G--Transferring All or Part of the Record Title Interest in 
a Lease


Sec.  556.700  May I assign or sublease all or any part of the record 
title interest in my lease?

    (a) With BOEM approval, you may assign your whole, or a partial 
record title interest in your entire lease, or in any aliquot(s) 
thereof.
    (b) With BOEM approval, you may sever all, or a portion of, your 
operating rights.
    (c) You must request approval of each assignment of a record title 
interest and each sublease of an operating rights interest. Each 
instrument that transfers a record title interest must describe, by 
aliquot parts, the interest you propose to transfer. Each instrument 
that severs an operating rights interest must describe, by officially 
designated aliquot parts and depth levels, the interest proposed to be 
transferred.


Sec.  556.701  How do I seek approval of an assignment of the record 
title interest in my lease, or a severance of operating rights from 
that record title interest?

    (a) The Regional Director will provide the form to record an 
assignment of record title interest in a Federal OCS oil and gas or 
sulfur lease, or a severance of operating rights from that record title 
interest. You must submit to BOEM two originals of each instrument that 
transfers ownership of record title within 90 days after the last party 
executes the transfer instrument. You must pay the service fee listed 
in Sec.  556.106 with your request and your submission must include 
evidence of payment via pay.gov.
    (b) Before BOEM approves an assignment or transfer, it must consult 
with, and consider the views of, the Attorney General. The Secretary 
may act on an assignment or transfer if the Attorney General has not 
responded to a request for consultation within 30 days of said request.
    (c) A new record title owner or sublessee must file a designation 
of operator, in accordance with Sec.  550.143 of this chapter, along 
with the request for the approval of the assignment.


Sec.  556.702  When will my assignment result in a segregated lease?

    (a) When there is an assignment by all record title owners of 100 
percent of the record title to one or more aliquots in a lease, the 
assigned and retained portions become segregated into separate and 
distinct leases. In such case, both the new lease and the remaining 
portion of the original lease are referred to as ``segregated leases'' 
and the assignee(s) becomes the record title owner(s) of the new lease, 
which is subject to all the terms and conditions of the original lease.
    (b) If a record title holder transfers an undivided interest, i.e., 
less than 100 percent of the record title interest in any given 
aliquot(s), that transfer will not segregate the portions of the 
aliquots, or the whole aliquots, in which part of the record title was 
transferred, into separate leases from the portion(s) in which no 
interest was transferred. Instead, that transfer will create a joint 
ownership between the assignee(s) and assignor(s) in the portions of 
the lease in which part of the record title interest was transferred. 
Any transfer of an undivided interest is subject to approval by BOEM.


Sec.  556.703  What is the effect of the approval of the assignment of 
100 percent of the record title in a particular aliquot(s) of my lease 
and of the resulting lease segregation?

    (a) The bonding/financial assurance requirements of subpart I of 
this part apply separately to each segregated lease.
    (b) The royalty, minimum royalty, and rental provisions of the 
original lease will apply separately to each segregated lease.
    (c) BOEM will allocate among the segregated leases, on a basis that 
is equitable under the circumstances, any remaining unused royalty 
suspension volume or other form of royalty suspension or royalty relief 
that had been granted to the original lease, not to exceed in aggregate 
the total remaining amount.
    (d) Each segregated lease will continue in full force and effect 
for the primary term of the original lease and so long thereafter as 
each segregated lease meets the requirements outlined in Sec.  556.601. 
A segregated lease that does not meet the requirements of Sec.  556.601 
does not continue in force even if another segregated lease, which was 
part of the original lease, continues to meet those requirements.


Sec.  556.704  When would BOEM disapprove an assignment or sublease of 
an interest in my lease?

    (a) BOEM may disapprove an assignment or sublease of all or part of 
your lease interest(s):
    (1) When the transferor or transferee has unsatisfied obligations 
under this chapter or 30 CFR chapters II or XII;
    (2) When a transferor attempts a transfer that is not acceptable as 
to form or content (e.g., not on standard form, containing incorrect 
legal description, not executed by a person authorized to bind the 
corporation, transferee does not meet the requirements of Sec.  
556.401, etc.); or,
    (3) When the transfer does not conform to these regulations, or any 
other applicable laws or regulations (e.g., departmental debarment 
rules).
    (b) A transfer will be void if it is made pursuant to any prelease 
agreement that would cause a bid to be disqualified, such as those 
described in Sec.  556.511(c), (d), or (e).


Sec.  556.705  How do I transfer the interest of a deceased natural 
person who was a lessee?

    (a) An heir or devisee must submit evidence by means of a certified 
copy of an appropriate court order or decree that the person is 
deceased; or, if no court action is necessary, a certified copy of the 
will and death certificate or notarized affidavits of two disinterested 
parties with knowledge of the facts.
    (b) The heir or devisee, if the lawful successor in interest, must 
submit evidence that he/she is the person named in the will or evidence 
from an appropriate judgment of a court or decree that he/she is the 
lawful successor in interest, along with the required evidence of his/
her qualifications to hold a lease under subpart D of this part.
    (c) If the heir or devisee does not qualify to hold a lease under 
subpart D of this part, he/she will be recognized as the successor in 
interest, but he/she

[[Page 18167]]

must divest him/herself of this interest in the lease, to a person 
qualified to be a hold a lease, within two years.


Sec.  556.706  What if I want to transfer record title interests in 
more than one lease at the same time, but to different parties?

    You may not transfer interests in more than one lease to different 
parties using the same instrument. If you want to transfer the interest 
in more than one lease at the same time, you must submit duplicate, 
originally executed forms for each transfer. The forms used for each 
transfer must be accompanied by a cover letter executed by one of the 
parties to the transfer (or an authorized agent thereof) and evidence 
of payment via pay.gov.


Sec.  556.707  What if I want to transfer different types of lease 
interests (not only record title interests) in the same lease to 
different parties?

    You may not transfer different types of lease interests in a lease 
to different parties using the same instrument. You must submit 
duplicate, originally executed forms for each transfer, to a different 
party, of a different type of lease interest. The form used to transfer 
each type of lease interest must be accompanied by a cover letter 
executed by one of the parties to the transfer (or an authorized agent 
thereof) and evidence of payment via pay.gov.


Sec.  556.708  What if I want to transfer my record title interests in 
more than one lease to the same party?

    You may not transfer your record title interests in more than one 
lease to the same party using the same instrument. If you want to 
transfer record title interests in more than one lease at the same 
time, you must submit separate, originally executed forms for each 
transfer. The forms used for each transfer must be accompanied by a 
cover letter executed by one of the parties to the transfer (or an 
authorized agent thereof), and evidence of payment via pay.gov. A 
separate fee applies to each individual transfer of interest.


Sec.  556.709  What if I want to transfer my record title interest in 
one lease to multiple parties?

    You may transfer your record title interest in one lease to 
multiple parties using the same instrument. That instrument must be 
submitted in duplicate originals, accompanied by a cover letter 
executed by one of the parties to the transfer (or an authorized agent 
thereof). In such a multiple transfer of interests using a single 
instrument, a separate fee applies to each individual transfer of 
interest, and evidence of payment via pay.gov must accompany the 
instrument.


Sec.  556.710  What is the effect of an assignment of a lease on an 
assignor's liability under the lease?

    If you assign your record title interest, as an assignor you remain 
liable for all obligations, monetary and non-monetary, that accrued in 
connection with your lease during the period in which you owned the 
record title interest, up to the date BOEM approves your assignment. 
BOEM's approval of the assignment does not relieve you of these accrued 
obligations. Even after assignment, BOEM or BSEE may require you to 
bring the lease into compliance if your assignee or any subsequent 
assignee fails to perform any obligation under the lease, to the extent 
the obligation accrued before approval of your assignment. Until there 
is a BOEM-approved assignment of interest, you, as the assignor, remain 
liable for the performance of all lease obligations that accrued while 
you held record title interest, until all such obligations are 
fulfilled.


Sec.  556.711  What is the effect of a record title holder's sublease 
of operating rights on the record title holder's liability?

    (a) A record title holder who subleases operating rights remains 
liable for all obligations of the lease, including those obligations 
accruing after BOEM's approval of the sublease, subject to Sec.  
556.604(e) and (f).
    (b) Neither the sublease of operating rights, nor subsequent 
assignment of those rights by the original sublessee, nor by any 
subsequent assignee of the operating rights, alters in any manner the 
liability of the record title holder for nonmonetary obligations.
    (c) Upon approval of the sublease of the operating rights, the 
sublessee and subsequent assignees of the operating rights become 
primarily liable for monetary obligations, but the record title holder 
remains secondarily liable for them, as prescribed in 30 U.S.C. 1712(a) 
and Sec.  556.604(f)(2).


Sec.  556.712  What is the effective date of a transfer?

    Any transfer is effective at 12:01 a.m. on the first day of the 
month following the date on which BOEM approves your request, unless 
you request an earlier effective date and BOEM approves that earlier 
date, but such earlier effective date, if prior to the date of BOEM's 
approval, does not relieve you of obligations accrued between that 
earlier effective date and the date of approval.


Sec.  556.713  What is the effect of an assignment of a lease on an 
assignee's liability under the lease?

    As assignee, you and any subsequent assignees are liable for all 
obligations that accrue after the effective date of your assignment. As 
assignee, you must comply with all the terms and conditions of the 
lease and regulations issued under OCSLA, and in addition, you must 
remedy all existing environmental and operational problems on the 
lease, properly abandon all wells, and reclaim the site, as required 
under 30 CFR part 250.


Sec.  556.714  As a restricted joint bidder, may I transfer an interest 
to another restricted joint bidder?

    (a) Where the proposed assignment or transfer is by a person who, 
at the time of acquisition of an interest in the lease, was on the List 
of Restricted Joint Bidders, and that assignment or transfer is of less 
than the entire interest held by the assignor or transferor and to a 
person or persons on the same List of Restricted Joint Bidders, the 
assignor or transferor must file, prior to the approval of the 
assignment, a copy of all agreements applicable to the acquisition of 
that lease or fractional interest, or a description of the timing and 
nature of the agreement(s) by which the assignor or transferor acquired 
the interest it now wishes to transfer.
    (b) Such description of the timing and nature of the transfer 
agreement must be submitted together with a certified statement that 
attests to the truth and accuracy of any information reported 
concerning that agreement, subject to the penalties of 18 U.S.C. 1001.
    (c) If you wish to transfer less than your entire interest to 
another restricted joint bidder, BOEM may request the opinion of the 
Attorney General before acting on your request.
    (d) You may request that any submission to BOEM made pursuant to 
this part be treated confidentially. Please note such a request on your 
submission. BOEM will treat this request for confidentiality in 
accordance with the regulations at Sec.  556.104 and the regulations at 
43 CFR part 2.


Sec.  556.715  Are there any interests I may transfer or record without 
BOEM approval?

    (a) You may create, transfer, or assign economic interests without 
BOEM approval. However, for record purposes, you must send BOEM a copy 
of each instrument creating or transferring such interests within 90 
days after the last party executes the transfer instrument. For each 
lease affected, you must pay the service fee listed in Sec.  556.106 
with your documents submitted for record

[[Page 18168]]

purposes and your submission must include evidence of payment via 
pay.gov.
    (b) For recordkeeping purposes, you may also submit other legal 
documents to BOEM for transactions that do not require BOEM approval. 
If you submit such documents for record purposes not required by this 
part, you must pay the service fee listed in Sec.  556.106 with your 
document submissions for each lease affected. Your submission must 
include evidence of payment via pay.gov.


Sec.  556.716  What must I do with respect to the designation of 
operator on a lease when a transfer of record title is submitted?

    (a) If a transfer of ownership of the record title interest only 
changes the percentage ownership of the record title, no new parties or 
new aliquots are involved in the transaction, and no change of 
designated operator is made, you will not need to submit a new 
designation of operator form.
    (b) In all cases other than that in paragraph (a) of this section, 
you must submit new designation of operator forms in accordance with 
Sec.  550.143 of this chapter. In the event that you are transferring 
multiple record title interests, you must comply with this requirement 
for each interest that does not fall within paragraph (a) of this 
section.

Subpart H--Transferring All or Part of the Operating Rights in a 
Lease


Sec.  556.800  As an operating rights owner, may I assign all or part 
of my operating rights interest?

    An operating rights owner may assign all or part of its operating 
rights interests, subject to BOEM approval. Each instrument that 
transfers an interest must describe, by officially designated aliquot 
parts and depth levels, the interest proposed to be transferred.


Sec.  556.801  How do I seek approval of an assignment of my operating 
rights?

    (a) The Regional Director will provide the form to document the 
assignment of an operating rights interest. You must request approval 
of each assignment of operating rights and submit to BOEM two originals 
of each instrument that transfers ownership of operating rights within 
90 days after the last party executes the transfer instrument. You must 
pay the service fee listed in Sec.  556.106 with your request and your 
submission must include evidence of payment via pay.gov.
    (b) A new operating rights owner must file a designation of 
operator, in accordance with Sec.  550.143, along with the request for 
the approval of the assignment.
    (c) If an operating rights owner assigns an undivided ownership 
interest in its operating rights, that assignment creates a joint 
ownership in the operating rights.
    (d) Before BOEM approves a sublease or re-assignment of operating 
rights, BOEM may consult with and consider the views of the Attorney 
General.


Sec.  556.802  When would BOEM disapprove the assignment of all or part 
of my operating rights interest?

    BOEM may disapprove an assignment of all or part of your operating 
rights interest:
    (a) When the transferor or transferee has outstanding or 
unsatisfied obligations under this chapter or 30 CFR chapter II or XII;
    (b) When a transferor attempts a transfer that is not acceptable as 
to form or content (e.g., not on standard form, containing incorrect 
legal description, not executed in accordance with corporate 
governance, transferee does not meet the requirements of Sec.  556.401, 
etc.); or
    (c) When the transfer does not conform to these regulations, or any 
other applicable laws or regulations (e.g., departmental debarment 
rules).


Sec.  556.803  What if I want to assign operating rights interests in 
more than one lease at the same time, but to different parties?

    You may not assign operating rights interests in more than one 
lease to different parties using the same instrument. If you want to 
transfer operating rights interests in more than one lease at the same 
time, you must submit two originally executed forms for each transfer. 
Each request for a transfer of operating rights interest must be 
accompanied by a cover letter executed by one of the parties to the 
transfer (or an authorized agent thereof) and evidence of payment via 
pay.gov.


Sec.  556.804  What if I want to assign my operating rights interest in 
a lease to multiple parties?

    You may assign your operating rights interest in one lease to 
multiple parties using the same instrument. That instrument must be 
submitted in duplicate originals, accompanied by a cover letter 
executed by one of the parties to the transfer (or an authorized agent 
thereof). In such a multiple transfer of interests using a single 
instrument, a separate fee applies to each individual transfer of 
interest and evidence of payment via pay.gov must accompany the 
instrument.


Sec.  556.805  What is the effect of an operating rights owner's 
assignment of operating rights on the assignor's liability?

    An operating rights owner (who does not hold record title) who 
assigns the operating rights remains liable for all obligations of the 
lease that accrued during the period in which the assignor owned the 
operating rights, up to the effective date of the assignment, including 
decommissioning obligations that accrued during that period. BOEM's 
approval of the assignment does not alter that liability. Even after 
assignment, BOEM or BSEE may require the assignor to bring the lease 
into compliance if the assignee or any subsequent assignee fails to 
perform any obligation under the lease, to the extent the obligation 
accrued before approval of the assignment.


Sec.  556.806  What is the effective date of an assignment of operating 
rights?

    An assignment is effective at 12:01 a.m. on the first day of the 
month following the date on which BOEM approves your request, unless 
you request an earlier effective date and BOEM approves that earlier 
date. Such an earlier effective date, if prior to the date of BOEM's 
approval, does not relieve you of obligations accrued between that 
earlier effective date and the date of approval.


Sec.  556.807  What is the effect of an assignment of operating rights 
on an assignee's liability?

    As assignee, you and any subsequent assignees are liable for all 
obligations that accrue after the effective date of your assignment. As 
assignee, you must comply with all the terms and conditions of the 
lease and regulations issued under OCSLA. In addition, you must remedy 
all existing environmental and operational problems on the lease, 
properly abandon all wells, and reclaim the site, as required under 30 
CFR part 250.


Sec.  556.808  As an operating rights owner, are there any interests I 
may assign without BOEM approval?

    (a) You may create, transfer, or assign economic interests without 
BOEM approval. However, for record purposes, you must send BOEM a copy 
of each instrument creating or transferring such interests within 90 
days after the last party executes the transfer instrument. For each 
lease affected, you must pay the service fee listed in Sec.  556.106 
with your documents submitted for record purposes, and your submission 
must include evidence of payment via pay.gov.
    (b) For record keeping purposes, you may also submit other legal 
documents

[[Page 18169]]

to BOEM for transactions that do not require BOEM approval. If you 
submit such documents for record purposes that are not required by 
these regulations, for each lease affected, you must pay the service 
fee listed in Sec.  556.106 with your document submissions, and your 
submission must include evidence of payment via pay.gov.


Sec.  556.809  [Reserved]


Sec.  556.810  What must I do with respect to the designation of 
operator on a lease when a transfer of operating rights ownership is 
submitted?

    (a) If a transfer of ownership of operating rights only changes the 
percentage ownership; no new parties, new aliquots, or new depths are 
involved in the transaction; and no change of designated operator is 
made, you will not need to submit a new designation of operator form.
    (b) In all cases other than that in paragraph (a) of this section, 
you must submit new designation of operator forms, in accordance with 
Sec.  550.143 of this chapter. In the event that you are transferring 
multiple operating rights interests, you must comply with this 
requirement for each interest that does not fall within paragraph (a) 
of this section.

Subpart I--Bonding or Other Financial Assurance


Sec.  556.900  Bond requirements for an oil and gas or sulfur lease.

    This section establishes bond requirements for the lessee of an OCS 
oil and gas or sulfur lease.
    (a) Before BOEM will issue a new lease or approve the assignment of 
an existing lease to you as lessee, you or another record title owner 
for the lease must:
    (1) Maintain with the Regional Director a $50,000 lease bond that 
guarantees compliance with all the terms and conditions of the lease; 
or
    (2) Maintain a $300,000 area-wide bond that guarantees compliance 
with all the terms and conditions of all your oil and gas and sulfur 
leases in the area where the lease is located; or
    (3) Maintain a lease or area-wide bond in the amount required in 
Sec.  556.901(a) or (b).
    (b) For the purpose of this section, there are three areas. The 
three areas are:
    (1) The Gulf of Mexico and the area offshore the Atlantic Coast;
    (2) The area offshore the Pacific Coast States of California, 
Oregon, Washington, and Hawaii; and
    (3) The area offshore the Coast of Alaska.
    (c) The requirement to maintain a lease bond (or substitute 
security instrument) under paragraph (a)(1) of this section and Sec.  
556.901(a) and (b) may be satisfied if your operator or an operating 
rights owner provides a lease bond in the required amount that 
guarantees compliance with all the terms and conditions of the lease. 
Your operator or an operating rights owner may use an areawide bond 
under this paragraph to satisfy your bond obligation.
    (d) If a surety makes payment to the United States under a bond or 
alternative form of security maintained under this section, the 
surety's remaining liability under the bond or alternative form of 
security is reduced by the amount of that payment. See paragraph (e) of 
this section for the requirement to replace the reduced bond coverage.
    (e) If the value of your surety bond or alternative security is 
reduced because of a default or for any other reason, you must provide 
additional bond coverage sufficient to meet the security required under 
this subpart within 6 months, or such shorter period of time as the 
Regional Director may direct.
    (f) You may pledge United States Department of the Treasury 
(Treasury) securities instead of a bond. The Treasury securities you 
pledge must be negotiable for an amount of cash equal to the value of 
the bond they replace.
    (1) If you pledge Treasury securities under this paragraph (f), you 
must monitor their value. If their market value falls below the level 
of bond coverage required under this subpart, you must pledge 
additional Treasury securities to raise the value of the securities 
pledged to the required amount.
    (2) If you pledge Treasury securities, you must include authority 
for the Regional Director to sell them and use the proceeds in the 
event that the Regional Director determines that you fail to satisfy 
any lease obligation.
    (g) You may pledge alternative types of security instruments 
instead of providing a bond if the Regional Director determines that 
the alternative security protects the interests of the United States to 
the same extent as the required bond.
    (1) If you pledge an alternative type of security under this 
paragraph, you must monitor the security's value. If its market value 
falls below the level of bond coverage required under this subpart, you 
must pledge additional securities to raise the value of the securities 
pledged to the required amount.
    (2) If you pledge an alternative type of security, you must include 
authority for the Regional Director to sell the security and use the 
proceeds when the Regional Director determines that you failed to 
satisfy any lease obligation.
    (h) If you fail to replace a deficient bond or to provide 
additional bond coverage upon demand, the Regional Director may:
    (1) Assess penalties under part 550, subpart N of this chapter;
    (2) Suspend production and other operations on your leases in 
accordance with 30 CFR 250.173; and
    (3) Initiate action to cancel your lease.


Sec.  556.901  Additional bonds.

    (a) This paragraph explains what bonds you must provide before 
lease exploration activities commence.
    (1)(i) You must furnish the Regional Director a $200,000 bond that 
guarantees compliance with all the terms and conditions of the lease by 
the earliest of:
    (A) The date you submit a proposed exploration plan (EP) for 
approval; or
    (B) The date you submit a request for approval of the assignment of 
a lease on which an EP has been approved.
    (ii) The Regional Director may authorize you to submit the $200,000 
lease exploration bond after you submit an EP, but before approval of 
drilling activities under the EP.
    (iii) You may satisfy the bond requirement of this paragraph (a) by 
providing a new bond or by increasing the amount of your existing bond.
    (2) A $200,000 lease exploration bond pursuant to paragraph (a)(1) 
of this section need not be submitted and maintained if the lessee 
either:
    (i) Furnishes and maintains an areawide bond in the sum of $1 
million issued by a qualified surety and conditioned on compliance with 
all the terms and conditions of oil and gas and sulfur leases held by 
the lessee on the OCS for the area in which the lease is situated; or
    (ii) Furnishes and maintains a bond pursuant to paragraph (b)(2) of 
this section.
    (b) This paragraph explains what bonds you (the lessee) must 
provide before lease development and production activities commence.
    (1)(i) You must furnish the Regional Director a $500,000 bond that 
guarantees compliance with all the terms and conditions of the lease by 
the earliest of:
    (A) The date you submit a proposed development and production plan 
(DPP) or development operations coordination document (DOCD) for 
approval; or
    (B) The date you submit a request for approval of the assignment of 
a lease on

[[Page 18170]]

which a DPP or DOCD has been approved.
    (ii) The Regional Director may authorize you to submit the $500,000 
lease development bond after you submit a DPP or DOCD, but before he/
she approves the installation of a platform or the commencement of 
drilling activities under the DPP or DOCD.
    (iii) You may satisfy the bond requirement of this paragraph by 
providing a new bond or by increasing the amount of your existing bond.
    (2) You need not submit and maintain a $500,000 lease development 
bond pursuant to paragraph (b)(1) of this section if you furnish and 
maintain an areawide bond in the sum of $3 million issued by a 
qualified surety and conditioned on compliance with all the terms and 
conditions of oil and gas and sulfur leases you hold on the OCS for the 
area in which the lease is located.
    (c) If you can demonstrate to the satisfaction of the authorized 
officer that you can satisfy your decommissioning obligations for less 
than the amount of lease bond coverage required under paragraph (b)(1) 
of this section, the authorized officer may accept a lease surety bond 
in an amount less than the prescribed amount, but not less than the 
amount of the cost for decommissioning.
    (d) The Regional Director may determine that additional security 
(i.e., security above the amounts prescribed in Sec.  556.900(a) and 
paragraphs (a) and (b) of this section) is necessary to ensure 
compliance with the obligations under your lease, the regulations in 
this chapter, and the regulations in 30 CFR chapters II and XII.
    (1) The Regional Director's determination will be based on his/her 
evaluation of your ability to carry out present and future financial 
obligations demonstrated by:
    (i) Financial capacity substantially in excess of existing and 
anticipated lease and other obligations, as evidenced by audited 
financial statements (including auditor's certificate, balance sheet, 
and profit and loss sheet);
    (ii) Projected financial strength significantly in excess of 
existing and future lease obligations based on the estimated value of 
your existing OCS lease production and proven reserves for future 
production;
    (iii) Business stability based on five years of continuous 
operation and production of oil and gas or sulfur in the OCS or in the 
onshore oil and gas industry;
    (iv) Reliability in meeting obligations based on:
    (A) Credit rating; or
    (B) Trade references, including names and addresses of other 
lessees, drilling contractors, and suppliers with whom you have dealt; 
and
    (v) Record of compliance with laws, regulations, and lease terms.
    (2) You may satisfy the Regional Director's demand for additional 
security by increasing the amount of your existing bond or by providing 
additional bond or bonds.
    (e) The Regional Director will determine the amount of additional 
bond required to guarantee compliance. The Regional Director will 
consider potential underpayment of royalty and cumulative 
decommissioning obligations.
    (f) If your cumulative potential obligations and liabilities either 
increase or decrease, the Regional Director may adjust the amount of 
additional bond required.
    (1) If the Regional Director proposes an adjustment, the Regional 
Director will:
    (i) Notify you and the surety of any proposed adjustment to the 
amount of bond required; and
    (ii) Give you an opportunity to submit written or oral comment on 
the adjustment.
    (2) If you request a reduction of the amount of additional bond 
required, you must submit evidence to the Regional Director 
demonstrating that the projected amount of royalties due the Government 
and the estimated costs of decommissioning are less than the required 
bond amount. If the Regional Director finds that the evidence you 
submit is convincing, the Regional Director may reduce the amount of 
additional bond required.


Sec.  556.902  General requirements for bonds.

    (a) Any bond or other security that you, as lessee, operating 
rights owner or operator, provide under this part must:
    (1) Be payable upon demand to the Regional Director;
    (2) Guarantee compliance with all of your obligations under the 
lease, regulations in this chapter, and regulations under 30 CFR 
chapters II and XII; and
    (3) Guarantee compliance with the obligations of all lessees, 
operating rights owners and operators on the lease.
    (b) All bonds and pledges you furnish under this part must be on a 
form or in a form approved by the Director. Surety bonds must be issued 
by a surety that the Treasury certifies as an acceptable surety on 
Federal bonds and that is listed in the current Treasury Circular No. 
570. You may obtain a copy of the current Treasury Circular No. 570 
from the Surety Bond Branch, Financial Management Service, Department 
of the Treasury, East-West Highway, Hyattsville, MD 20782.
    (c) You and a qualified surety must execute your bond. When either 
party is a corporation, an authorized official for the party must sign 
the bond and attest to it by an imprint of the corporate seal.
    (d) Bonds must be non-cancellable, except as provided in Sec.  
556.906 of this part. Bonds must continue in full force and effect even 
though an event occurs that could diminish, terminate, or cancel a 
surety obligation under State surety law.
    (e) Lease bonds must be:
    (1) A surety bond;
    (2) Treasury securities as provided in Sec.  556.900(f);
    (3) Another form of security approved by the Regional Director; or
    (4) A combination of these security methods.
    (f) You may submit a bond to the Regional Director executed on a 
form approved under paragraph (b) of this section that you have 
reproduced or generated by use of a computer. If you do, and if the 
document omits terms or conditions contained on the form approved by 
the Director, the bond you submit will be deemed to contain the omitted 
terms and conditions.


Sec.  556.903  Lapse of bond.

    (a) If your surety becomes bankrupt, insolvent, or has its charter 
or license suspended or revoked, any bond coverage from that surety 
terminates immediately. In that event, you must promptly provide a new 
bond in the amount required under Sec. Sec.  556.900 and 556.901 to the 
Regional Director and advise the Regional Director of the lapse in your 
previous bond.
    (b) You must notify the Regional Director of any action filed 
alleging that you, your surety, or your guarantor are insolvent or 
bankrupt. You must notify the Regional Director within 72 hours of 
learning of such an action. All bonds must require the surety to 
provide this information to you and directly to BOEM.


Sec.  556.904  Lease-specific abandonment accounts.

    (a) The Regional Director may authorize you to establish a lease-
specific abandonment account in a federally insured institution in lieu 
of the bond required under Sec.  556.901(d). The account must provide 
that, except as provided in paragraph (a)(3) of this section, funds may 
not be withdrawn without the written approval of the Regional Director.
    (1) Funds in a lease-specific abandonment account must be payable

[[Page 18171]]

upon demand to BOEM and pledged to meet your decommissioning 
obligations.
    (2) You must fully fund the lease-specific abandonment account to 
cover all decommissioning costs as estimated by BOEM within the 
timeframe the Regional Director prescribes.
    (3) You must provide binding instructions under which the 
institution managing the account is to purchase Treasury securities 
pledged to BOEM under paragraph (d) of this section.
    (b) Any interest paid on funds in a lease-specific abandonment 
account will be treated as other funds in the account unless the 
Regional Director authorizes in writing the payment of interest to the 
party who deposits the funds.
    (c) The Regional Director may allow you to pledge Treasury 
securities that are made payable upon demand to the Regional Director 
to satisfy your obligation to make payments into a lease-specific 
abandonment account.
    (d) Before the amount of funds in a lease-specific abandonment 
account equals the maximum insurable amount as determined by the 
Federal Deposit Insurance Corporation or the Federal Savings and Loan 
Insurance Corporation, the institution managing the account must use 
the funds in the account to purchase Treasury securities pledged to 
BOEM under paragraph (c) of this section. The institution managing the 
lease specific-abandonment account will join with the Regional Director 
to establish a Federal Reserve Circular 154 account to hold these 
Treasury securities, unless the Regional Director authorizes the 
managing institution to retain the pledged Treasury securities in a 
separate trust account. You may obtain a copy of the current Treasury 
Circular No. 154 from the Surety Bond Branch, Financial Management 
Service, Department of the Treasury, East-West Highway, Hyattsville, MD 
20782.
    (e) The Regional Director may require you to create an overriding 
royalty or production payment obligation for the benefit of a lease-
specific account pledged for the decommissioning of a lease. The 
required obligation may be associated with oil and gas or sulfur 
production from a lease other than the lease bonded through the lease-
specific abandonment account.


Sec.  556.905  Using a third-party guarantee instead of a bond.

    (a) When the Regional Director may accept a third-party guarantee. 
The Regional Director may accept a third-party guarantee instead of an 
additional bond under Sec.  556.901(d) if:
    (1) The guarantee meets the criteria in paragraph (c) of this 
section;
    (2) The guarantee includes the terms specified in paragraph (d) of 
this section;
    (3) The guarantor's total outstanding and proposed guarantees do 
not exceed 25 percent of its unencumbered net worth in the United 
States; and
    (4) The guarantor submits an indemnity agreement meeting the 
criteria in paragraph (e) of this section.
    (b) What to do if your guarantor becomes unqualified. If, during 
the life of your third-party guarantee, your guarantor no longer meets 
the criteria of paragraphs (a)(3) and (c)(3) of this section, you must:
    (1) Notify the Regional Director immediately; and
    (2) Cease production until you comply with the bond coverage 
requirements of this subpart.
    (c) Criteria for acceptable guarantees. If you propose to furnish a 
third party's guarantee, that guarantee must ensure compliance with all 
lessees' lease obligations, the obligations of all operating rights 
owners, and the obligations of all operators on the lease. The Regional 
Director will base acceptance of your third-party guarantee on the 
following criteria:
    (1) The period of time that your third-party guarantor (guarantor) 
has been in continuous operation as a business entity where:
    (i) Continuous operation is the time that your guarantor conducts 
business immediately before you post the guarantee; and
    (ii) Continuous operation excludes periods of interruption in 
operations that are beyond your guarantor's control and that do not 
affect your guarantor's likelihood of remaining in business during 
exploration, development, production, and decommissioning.
    (2) Financial information available in the public record or 
submitted by your guarantor, on your guarantor's own initiative, in 
sufficient detail to show to the Regional Director's satisfaction that 
your guarantor is qualified based on:
    (i) Your guarantor's current rating for its most recent bond 
issuance by either Moody's Investor Service or Standard and Poor's 
Corporation;
    (ii) Your guarantor's net worth, taking into account liabilities 
under its guarantee of compliance with all the terms and conditions of 
your lease, the regulations in this chapter and 30 CFR chapters II and 
XII, and your guarantor's other guarantees;
    (iii) Your guarantor's ratio of current assets to current 
liabilities, taking into account liabilities under its guarantee of 
compliance with all the terms and conditions of your lease, the 
regulations in this chapter and 30 CFR chapters II and XII, and your 
guarantor's other guarantees; and
    (iv) Your guarantor's unencumbered fixed assets in the United 
States.
    (3) When the information required by paragraph (c) of this section 
is not publicly available, your guarantor may submit the information in 
the following table. Your guarantor must update the information 
annually within 90 days of the end of the fiscal year or by the date 
prescribed by the Regional Director.

------------------------------------------------------------------------
     The guarantor should submit                      That
------------------------------------------------------------------------
(i) Financial statements for the most  Include a report by an
 recently completed fiscal year,        independent certified public
                                        accountant containing the
                                        accountant's audit opinion or
                                        review opinion of the
                                        statements. The report must be
                                        prepared in conformance with
                                        generally accepted accounting
                                        principles and contain no
                                        adverse opinion.
(ii) Financial statements for          Your guarantor's financial
 completed quarters in the current      officer certifies to be correct.
 fiscal year, and
(iii) Additional information as        Your guarantor's financial
 requested by the Regional Director.    officer certifies to be correct.
------------------------------------------------------------------------

    (d) Provisions required in all third-party guarantees. Your third-
party guarantee must contain each of the following provisions.
    (1) If you, your operator, or an operating rights owner fails to 
comply with any lease term or regulation, your guarantor must either:
    (i) Take corrective action; or,
    (ii) Be liable under the indemnity agreement to provide, within 7 
calendar days, sufficient funds for the Regional Director to complete 
corrective action.
    (2) If your guarantor complies with paragraph (d)(1) of this 
section, this compliance will not reduce its liability.

[[Page 18172]]

    (3) If your guarantor wishes to terminate the period of liability 
under its guarantee, it must:
    (i) Notify you and the Regional Director at least 90 days before 
the proposed termination date;
    (ii) Obtain the Regional Director's approval for the termination of 
the period of liability for all or a specified portion of your 
guarantor's guarantee; and
    (iii) Remain liable for all work and workmanship performed during 
the period that your guarantor's guarantee is in effect.
    (4) You must provide a suitable replacement security instrument 
before the termination of the period of liability under your third-
party guarantee.
    (e) Required criteria for indemnity agreements. If the Regional 
Director approves your third-party guarantee, the guarantor must submit 
an indemnity agreement.
    (1) The indemnity agreement must be executed by your guarantor and 
all persons and parties bound by the agreement.
    (2) The indemnity agreement must bind each person and party 
executing the agreement jointly and severally.
    (3) When a person or party bound by the indemnity agreement is a 
corporate entity, two corporate officers who are authorized to bind the 
corporation must sign the indemnity agreement.
    (4) Your guarantor and the other corporate entities bound by the 
indemnity agreement must provide the Regional Director copies of:
    (i) The authorization of the signatory corporate officials to bind 
their respective corporations;
    (ii) An affidavit certifying that the agreement is valid under all 
applicable laws; and
    (iii) Each corporation's corporate authorization to execute the 
indemnity agreement.
    (5) If your third-party guarantor or another party bound by the 
indemnity agreement is a partnership, joint venture, or syndicate, the 
indemnity agreement must:
    (i) Bind each partner or party who has a beneficial interest in 
your guarantor; and
    (ii) Provide that, upon demand by the Regional Director under your 
third-party guarantee, each partner is jointly and severally liable for 
compliance with all terms and conditions of your lease.
    (6) When forfeiture is called for under Sec.  556.907, the 
indemnity agreement must provide that your guarantor will either:
    (i) Bring your lease into compliance; or
    (ii) Provide, within 7 calendar days, sufficient funds to permit 
the Regional Director to complete corrective action.
    (7) The indemnity agreement must contain a confession of judgment. 
It must provide that, if the Regional Director determines that you, 
your operator, or an operating rights owner is in default of the lease, 
the guarantor:
    (i) Will not challenge the determination; and
    (ii) Will remedy the default.
    (8) Each indemnity agreement is deemed to contain all terms and 
conditions contained in this paragraph (e), even if the guarantor has 
omitted them.


Sec.  556.906  Termination of the period of liability and cancellation 
of a bond.

    This section defines the terms and conditions under which BOEM will 
terminate the period of liability of a bond or cancel a bond. 
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. Canceling a bond relieves the surety of all liability. The 
liabilities that accrue during a period of liability include 
obligations that started to accrue prior to the beginning of the period 
of liability and had not been met, and obligations that begin accruing 
during the period of liability.
    (a) When you or the surety under your bond requests termination:
    (1) The Regional Director will terminate the period of liability 
under your bond within 90 days after BOEM receives the request; and
    (2) If you intend to continue operations, or have not met all 
decommissioning obligations, you must provide a replacement bond of an 
equivalent amount.
    (b) If you provide a replacement bond, the Regional Director will 
cancel your previous bond and the surety that provided your previous 
bond will not retain any liability, provided that:
    (1) The new bond is equal to or greater than the bond that was 
terminated, or you provide an alternative form of security, and the 
Regional Director determines that the alternative form of security 
provides a level of security equal to or greater than that provided for 
by the bond that was terminated;
    (2) For a base bond submitted under Sec.  556.900(a) or under Sec.  
556.901(a) or (b), the surety issuing the new bond agrees to assume all 
outstanding liabilities that accrued during the period of liability 
that was terminated; and
    (3) For additional bonds submitted under Sec.  556.901(d), the 
surety issuing the new additional bond agrees to assume that portion of 
the outstanding liabilities that accrued during the period of liability 
that was terminated and that the Regional Director determines may 
exceed the coverage of the base bond, and of which the Regional 
Director notifies the provider of the bond.
    (c) This paragraph applies if the period of liability is terminated 
for a bond, but the bond is not replaced by a bond of an equivalent 
amount. The surety that provided your terminated bond will continue to 
be responsible for accrued obligations:
    (1) Until the obligations are satisfied; and
    (2) For additional periods of time in accordance with paragraph (d) 
of this section.
    (d) When your lease expires or is terminated, the surety that 
issued a bond will continue to be responsible, and the Regional 
Director will retain other forms of security as shown in the following 
table:

------------------------------------------------------------------------
                                  The period of
For the following type of bond    liability will     Your bond will be
                                       end               cancelled
------------------------------------------------------------------------
(1) Base bonds submitted under  When the Regional  Seven years after the
 Sec.   556.900(a), Sec.         Director           termination of the
 556.901(a), or (b).             determines that    lease, 6 years after
                                 you have met all   completion of all
                                 of your            bonded obligations,
                                 obligations        or at the conclusion
                                 under the lease,   of any appeals or
                                                    litigation related
                                                    to your bonded
                                                    obligation,
                                                    whichever is the
                                                    latest. The Regional
                                                    Director will reduce
                                                    the amount of your
                                                    bond or return a
                                                    portion of your
                                                    security if the
                                                    Regional Director
                                                    determines that you
                                                    need less than the
                                                    full amount of the
                                                    base bond to meet
                                                    any possible future
                                                    problems.

[[Page 18173]]

 
(2) Additional bonds submitted  When the Regional  When you meet your
 under Sec.   556.901(d).        Director           bonded obligations,
                                 determines that    unless the Regional
                                 you have met all   Director: (i)
                                 your obligations   Determines that the
                                 covered by the     future potential
                                 additional bond,   liability resulting
                                                    from any undetected
                                                    problem is greater
                                                    than the amount of
                                                    the base bond; and
                                                   (ii) Notifies the
                                                    provider of the bond
                                                    that the Regional
                                                    Director will wait 7
                                                    years before
                                                    cancelling all or a
                                                    part of the bond (or
                                                    longer period as
                                                    necessary to
                                                    complete any appeals
                                                    or judicial
                                                    litigation related
                                                    to your bonding
                                                    obligation).
------------------------------------------------------------------------

    (e) For all bonds, the Regional Director may reinstate your bond as 
if no cancellation or release had occurred if:
    (1) A person makes a payment under the lease and the payment is 
rescinded or must be repaid by the recipient because the person making 
the payment is insolvent, bankrupt, subject to reorganization, or 
placed in receivership; or
    (2) The responsible party represents to BOEM that it has discharged 
its obligations under the lease, and the representation was materially 
false when the bond was canceled or released.


Sec.  556.907  Forfeiture of bonds and/or other securities.

    This section explains how a bond or other security may be 
forfeited.
    (a) The Regional Director will call for forfeiture of all or part 
of the bond, other form of security, or guarantee you provide under 
this part if:
    (1) You (the party who provided the bond) refuse, or the Regional 
Director determines that you are unable to comply with any term or 
condition of your lease; or
    (2) You default on one of the conditions under which the Regional 
Director accepts your bond, third-party guarantee, and/or other form of 
security.
    (b) The Regional Director may pursue forfeiture of your bond 
without first making demands for performance against any lessee, 
operating rights owner, or other person authorized to perform lease 
obligations.
    (c) The Regional Director will:
    (1) Notify you, the surety on your bond or other form of security, 
and any third-party guarantor of a determination to call for forfeiture 
of the bond, security, or guarantee under this section.
    (i) This notice will be in writing, and will provide the reason for 
the forfeiture and the amount to be forfeited.
    (ii) The Regional Director must base the amount he/she determines 
is forfeited upon his/her estimate of the total cost of corrective 
action to bring your lease into compliance.
    (2) Advise you, your third-party guarantor, and any surety that 
you, your guarantor, and any surety may avoid forfeiture if, within 
five working days:
    (i) You agree to, and demonstrate that you will bring your lease 
into compliance within the timeframe that the Regional Director 
prescribes;
    (ii) Your third-party guarantor agrees to and demonstrates that it 
will complete the corrective action to bring your lease into compliance 
within the timeframe that the Regional Director prescribes; or
    (iii) Your surety agrees to and demonstrates that it will bring 
your lease into compliance within the timeframe that the Regional 
Director prescribes, even if the cost of compliance exceeds the face 
amount of the bond or other surety instrument.
    (d) If the Regional Director finds you are in default, he/she may 
cause the forfeiture of any bonds and other security deposited as your 
guarantee of compliance with the terms and conditions of your lease and 
the regulations in this chapter and 30 CFR chapters II and XII.
    (e) If the Regional Director determines that your bond and/or other 
security is forfeited, the Regional Director will:
    (1) Collect the forfeited amount; and
    (2) Use the funds collected to bring your leases into compliance 
and to correct any default.
    (f) If the amount the Regional Director collects under your bond 
and other security is insufficient to pay the full cost of corrective 
actions he/she may:
    (1) Take or direct action to obtain full compliance with your lease 
and the regulations in this chapter; and
    (2) Recover from you, any co-lessee, operating rights owner, and/or 
any third-party guarantor responsible under this subpart all costs in 
excess of the amount he/she collects under your forfeited bond and 
other security.
    (g) The amount that the Regional Director collects under your 
forfeited bond and other security may exceed the costs of taking the 
corrective actions required to obtain full compliance with the terms 
and conditions of your lease and the regulations in this chapter and 30 
CFR chapters II and XII. In this case, the Regional Director will 
return the excess funds to the party from whom they were collected.

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


Sec.  556.1000  Leases formerly eligible for a bonus or royalty credit.

    Bonus or royalty credits were available to lessees with leases:
    (a) In effect on December 20, 2006, and located in:
    (1) The Eastern Planning Area and within 125 miles of the coastline 
of the State of Florida; or,
    (2) The Central Planning Area and within the Desoto Canyon OPD, the 
Destin Dome OPD, or the Pensacola OPD and within 100 miles of the 
coastline of the State of Florida.
    (b) The deadline for applying for such a bonus or royalty credit 
was October 14, 2010; therefore, lessees may no longer apply for such 
credits.

Subpart K--Ending a Lease


Sec.  556.1100  How does a lease expire?

    (a) Your oil and gas lease will automatically expire at the end of 
its primary term unless you have taken action, as set forth in Sec.  
556.601, to maintain the lease beyond the primary term.
    (b) Your sulfur lease will automatically expire at the end of its 
primary term unless you have taken action, as set forth in Sec.  
556.603, to maintain the lease beyond the primary term.


Sec.  556.1101  May I relinquish my lease or an aliquot part thereof?

    (a) A record title owner may relinquish a lease or an aliquot part 
of a lease if all record title owners of a lease or any aliquot part(s) 
of the lease file three original copies of a request to relinquish with 
BOEM on Form BOEM-0152, entitled, ``Relinquishment of Federal Oil and 
Gas Lease.'' No filing fee is required.
    (b) A relinquishment will be subject to the continued obligation of 
the record title owner and the surety to make all payments due, 
including any accrued rentals, royalties and deferred bonuses, and to 
abandon all wells and condition or remove all platforms and other 
facilities on the land to be relinquished to the satisfaction of the 
Director.

[[Page 18174]]

    (c) The effective date of the relinquishment is the date on which 
the relinquishment is filed with the proper BOEM regional office.


Sec.  556.1102  Under what circumstances will BOEM cancel my lease?

    (a) BOEM may cancel your non-producing lease if you fail to comply 
with any provision of OCSLA, the lease, or applicable regulations if 
the failure continues for 30 days after mailing of notice to your post 
office address of record by registered mail and you have not requested 
and been granted any additional time within which to correct the 
failure. Such cancellation is subject to judicial review under section 
23 of OCSLA (43 U.S.C. 1349).
    (b) Your producing lease may be cancelled if you fail to comply 
with any provision of OCSLA, the lease, or applicable regulations. The 
Secretary will cancel a producing lease after the judicial proceedings 
required under section 5(d) of OCSLA (43 U.S.C. 1334(d)).
    (c) BOEM may cancel your lease if it determines that the lease was 
obtained by fraud or misrepresentation. You will have notice and an 
opportunity to be heard before BOEM cancels your lease.
    (d) BOEM may cancel your lease at any time if it determines, after 
a hearing, that continued activity will probably cause serious harm or 
damage to life (including fish and other aquatic life), property, any 
mineral, national security or defense, or the marine, coastal, or human 
environment; that the threat of harm or damage will not disappear or 
decrease to an acceptable level within a reasonable period of time; and 
the advantages of cancellation outweigh the advantages of continuing 
the lease.
    (e) BOEM may cancel your lease at any time after operations under 
the lease have been suspended or temporarily prohibited by the 
Department continuously for a period of five years pursuant to 
paragraph (d) of this section, absent your request for a shorter 
period.
    (f) If, upon demand, you fail to provide a bond, or alternative 
type of security instrument acceptable to BOEM, the Regional Director 
may assess penalties or cancel your lease in accordance with part 550, 
subpart N of this chapter;
    (g) Title 30, part 550, subpart A of the CFR provides the 
procedures for lease cancellation and compensation, if applicable.

Subpart L--Leases Maintained Under Section 6 of OCSLA


Sec.  556.1200  Effect of regulations on lease.

    (a) All regulations in this part, insofar as they are applicable, 
will supersede the provisions of any lease that is maintained under 
section 6(a) of the Act. However, the provisions of a lease relating to 
area, minerals, rentals, royalties (subject to sections 6(a)(8) and (9) 
of the Act), and term (subject to section 6(a)(10) of the Act and, as 
to sulfur, subject to section 6(b)(2) of the Act) will continue in 
effect, and, in the event of any conflict or inconsistency, will take 
precedence over these regulations.
    (b) A lease maintained under section 6(a) of the Act is also 
subject to all operating and conservation regulations applicable to the 
OCS. In addition, the regulations relating to geophysical and 
geological exploratory operations and to pipeline ROW(s) are 
applicable, to the extent that those regulations are not contrary to or 
inconsistent with the lease provisions relating to area, minerals, 
rentals, royalties and term. The lessee must comply with any provision 
of the lease as validated, the subject matter of which is not covered 
in the regulations in this part.


Sec.  556.1201  Section 6(a) leases and leases other than those for 
oil, gas, or sulfur.

    The existence of an oil and gas lease maintained under section 6(a) 
of the Act precludes only the issuance in the same area of an oil and 
gas lease under OCSLA, but does not preclude the issuance of other 
types of leases under OCSLA. However, no other lease may authorize or 
permit the lessee thereunder unreasonably to interfere with or endanger 
operations under the existing lease. The United States will not grant 
any sulfur leases on any area that is included in a lease covering 
sulfur under section 6(b) of the Act.

Subpart M--Environmental Studies


Sec.  556.1300  Environmental studies.

    (a) The Director will conduct a study or studies of any area or 
region included in any oil and gas lease sale or other lease in order 
to establish information needed for assessment and management of 
impacts on the human, marine and coastal environments which may be 
affected by OCS oil and gas or other mineral activities in such area or 
region. The purposes of such studies will include, to the extent 
practicable, analyses of the impacts of pollutants introduced into the 
environments and impacts of offshore activities on the seabed and 
affected coastal areas.
    (b) Studies will be planned and carried out in cooperation with the 
affected States and interested parties and, to the extent possible, 
will not duplicate studies done under other laws. Where appropriate, 
the Director will, to the maximum extent practicable, coordinate with 
the National Oceanic and Atmospheric Administration (NOAA) in executing 
its environmental studies responsibilities. The Director may also make 
agreements for the coordination with, or the use of the services or 
resources of, any other Federal, State or local government agency in 
the conduct of such studies.
    (c) Any study of an area or region required by paragraph (a) of 
this section for a lease sale will be commenced not later than six 
months prior to holding a lease sale for that area. The Director may 
use information collected in any prior study. The Director may initiate 
studies for an area or region not identified in the leasing program.
    (d) After the leasing and developing of any area or region, the 
Director will conduct such studies as are deemed necessary to establish 
additional information and will monitor the human, marine and coastal 
environments of such area or region in a manner designed to provide 
information, which can be compared with the results of studies 
conducted prior to OCS oil and gas development. This will be done to 
identify any significant changes in the quality and productivity of 
such environments, to establish trends in the area studies, and to 
design experiments identifying the causes of such changes. Findings 
from such studies will be used to recommend modifications in practices 
that are employed to mitigate the effects of OCS activities and to 
enhance the data/information base for predicting impacts which might 
result from a single lease sale or cumulative OCS activities.
    (e) Information available or collected by the studies program will, 
to the extent practicable, be provided in a form and in a timeframe 
that can be used in the decision-making process associated with a 
specific leasing action or with longer term OCS minerals management 
responsibilities.

PART 559--[REMOVED]

0
8. Under the authority of section 5(a) of OCSLA (43 U.S.C. 1334(a)), 
remove part 559.

PART 560--OUTER CONTINENTAL SHELF OIL AND GAS LEASING

0
9. The authority citation for part 560 continues to read as follows:


[[Page 18175]]


    Authority:  Section 104, Public Law 97-451, 96 Stat. 2451 (30 
U.S.C. 1714), Public Law 109-432, Div C, Title I, 120 Stat. 3000; 30 
U.S.C. 1751; 31 U.S.C. 9701; 43 U.S.C. 1334; 33 U.S.C. 2704, 2716; 
E.O. 12777, as amended; 43 U.S.C. 1331 et seq., 43 U.S.C. 1337.


0
10. Revise the Table of Contents for 30 CFR part 560 to read as 
follows:
Subpart A--General Provisions
560.100 Authority
560.100 What is the purpose of this part?
560.102 What definitions apply to this part?
560.103 What is BOEM's authority to collect information?
Subpart B--Bidding Systems

General Provisions

560.200 What is the purpose of this subpart?
560.201 What definitions apply to this subpart?
560.202 What bidding systems may BOEM use?
560.203 What conditions apply to the bidding systems that BOEM uses?

Eligible Leases

560.210 How do royalty suspension volumes apply to eligible leases?
560.211 When does an eligible lease qualify for a royalty suspension 
volume?
560.212 How does BOEM assign and monitor royalty suspension volumes 
for eligible leases?
560.213 How long will a royalty suspension volume for an eligible 
lease be effective?
550.214 How do I measure natural gas production on my eligible 
lease?

Royalty Suspensions (RS) Leases

560.220 How does royalty suspension apply to leases issued in a sale 
held after November 2000?
560.221 When does a lease issued in a sale held after November 2000 
get a royalty suspension?
560.222 How long will a royalty suspension volume be effective for a 
lease issued in a sale held after November 2000?
560.223 How do I measure natural gas production for a lease issued 
in a sale held after November 2000?
560.224 How will royalty suspension apply if BOEM assigns a lease 
issued in a sale held after November 2000 to a field that has a pre-
Act lease?

Bidding System Selection Criteria

560.230 What criteria does BOEM use for selecting bidding systems 
and bidding system components?
Subpart C--Operating Allowances
560.300 Operating allowances.
Subpart D--[Reserved]
Subpart E--Electronic Filings
560.500 Electronic document and data transmissions.
560.501 How long will the confidentiality of electronic document and 
data transmissions be maintained?
560.502 Are electronically filed document transmissions legally 
binding?

Subpart B--Bidding Systems

0
11. Redesignate Sec. Sec.  560.101, 560.102, 560.110 and 560.111 as 
Sec. Sec.  560.200, 560.201, 560.202 and 560.203, respectively.

0
12. Redesignate Sec. Sec.  560.112, 560.113, 560.114, 560.115 and 
560.116 as Sec. Sec.  560.210, 560.211, 560.212, 560.213 and 560.214, 
respectively.

0
13. Redesignate Sec. Sec.  560.120, 560.121, 560.122, 560.123 and 
560.124 as Sec. Sec.  560.220, 560.221, 560.222, 560.223 and 560.224, 
respectively.

0
14. Redesignate Sec.  560.130 as Sec.  560.230.

Subpart A--General Provisions

0
15. Add Sec.  560.100 as follows:


Sec.  560.100  Authority.

    (a) The Outer Continental Shelf Lands Act (OCSLA) (43 U.S.C. 1334) 
(``Outer Continental Shelf Lands Act Amendments of 1978'').
    (b) The Federal Oil and Gas Royalty Management Act, as amended 
(FOGRMA) (30 U.S.C. 1711), including the Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1996, (30 U.S.C. 1701 note).
    (c) The Independent Offices Appropriations Act of 1952 (31 U.S.C. 
9701).
    (d) Public Law 89-554, 1966 (5 U.S.C. 301).


Sec.  560.1  [Redesignated as Sec.  560.101]

0
16. Redesignate Sec.  560.1 as Sec.  560.101.

0
17. Redesignate Sec.  560.2 as Sec.  560.102, and revise redesignated 
Sec.  560.2 to read as follows:


Sec.  560.102  What definitions apply to this part?

    (a) Terms used in this part have the meaning given in the Act and 
as defined in this part.
    (b) The following definitions apply to this part:
    Area or region means the geographic area or region over which the 
BOEM authorized officer has jurisdiction, unless the context in which 
those words are used indicates that a different meaning is intended.
    BOEM means Bureau of Ocean Energy Management.
    Designated official means a representative of DOI subject to the 
direction and supervisory authority of the Directors, BOEM, and the 
appropriate Regional Manager of the BOEM authorized and empowered to 
supervise and direct all oil and gas operations and to perform other 
duties prescribed in this chapter.
    Director means Director, BOEM, DOI.
    DOI means the Department of the Interior, including the Secretary 
of the Interior, or his or her delegate.
    Federal lease means an agreement which, for consideration, 
including, but not limited to, bonuses, rents or royalties conferred, 
and covenants to be observed, authorizes a person to explore for, or 
develop, or produce (or to do any or all of these) oil and gas, coal, 
oil shale, tar sands, and geothermal resources on lands or interests in 
lands under Federal jurisdiction.
    Gas or Natural Gas means a mixture of hydrocarbons and varying 
quantities of non-hydrocarbons that exist in the gaseous phase.
    Oil means a mixture of hydrocarbons that exists in a liquid or 
gaseous phase in an underground reservoir and which remains or becomes 
liquid at atmospheric pressure after passing through surface separating 
facilities, including condensate recovered by means other than a 
manufacturing process.
    Outer Continental Shelf (OCS) means all submerged lands lying 
seaward and outside of the area of lands beneath navigable waters as 
defined in the Submerged Lands Act (43 U.S.C. 1301-1315) and of which 
the subsoil and seabed appertain to the United States and are subject 
to its jurisdiction and control.
    OCSLA means the Outer Continental Shelf Lands Act, as amended (Act 
of August 7, 1953, Ch. 345, 67 Stat. 462, 43 U.S.C. 1331-1356a, as 
amended by Pub. L. 95-372, 92 Stat. 629).
    Person means a natural person, where so designated, or an entity, 
such as a partnership, association, State, political subdivision of a 
State or territory, or a private, public, or municipal corporation.
    We means the Bureau of Ocean Energy Management (BOEM).
    You means the lessee or operating rights owner.


Sec.  560.3  [Redesignated as Sec.  560.103]

0
18. Redesignate Sec.  560.3 as Sec.  560.103.

0
19. Add a new subpart C to read as follows:

Subpart C--Operating Allowances


Sec.  560.300  Operating allowances.

    Notwithstanding any other provision in the regulations in this 
part, BOEM may issue a lease containing an operating allowance when so 
specified in the final notice of sale and the lease. The allowance 
amount or formula will be specified in the final notice of sale and in 
the lease.

[[Page 18176]]

Subpart D--[Removed and Reserved]

0
20. Remove and reserve subpart D.

0
21. Add a new subpart E to read as follows:
Subpart E--Electronic Filings
560.500 Electronic document and data transmissions.
560.501 How long will the confidentiality of electronic document and 
data transmissions be maintained?
560.502 Are electronically filed document transmissions legally 
binding?

Subpart E--Electronic Filings


Sec.  560.500  Electronic document and data transmissions.

    (a) BOEM may notify you that it will allow or request you to submit 
the following information electronically through BOEM's secure 
electronic filing system, through an alternate secure electronic filing 
system supported and maintained by the Department, or through some 
other electronic filing system that BOEM has approved for this purpose:
    (1) Any document(s) or information described in the Qualifications 
section of part 556 of this chapter, as specified in subpart E. Such 
information would include, but not be limited to, the official name of 
the qualifying person, its legal and business address or addresses, its 
legal form and status, and the names and contact information of a 
person or organization authorized to act on the person's behalf.
    (2) Any document(s) or information required to obtain BOEM's 
approval of an assignment or sublease, including any form or instrument 
that creates or transfers ownership of a lease interest.
    (3) Any document(s) or information required to obtain BOEM's 
approval of your relinquishment of all, or any aliquot part of your 
lease, as specified in Sec.  556.1101 of this chapter.
    (4) Any document(s) creating, transferring or assigning economic 
interests, as specified in Sec. Sec.  556.715 and 556.808 of this 
chapter.
    (5) Any document(s) related to a bond, U.S. Treasury note or other 
security provided to BOEM, which is required to guarantee your 
compliance with terms and conditions of a lease.
    (6) Any document(s) or information necessary to bid for an OCS 
lease.
    (7) Any forms, document(s) or information necessary to determine 
worst case oil-spill discharge volume(s), or to provide evidence 
demonstrating oil spill financial responsibility, or to guarantee such 
financial responsibility or to comply with any other requirements of 
the Oil Spill Financial Responsibility Program, as described in part 
553 of this chapter.
    (b) BOEM reserves the right to require the electronic filing of any 
document(s) or information addressed in paragraph (a)(5) of this 
section upon a 90-day notice published in the Federal Register; if BOEM 
mandates that you transmit such document(s) or information 
electronically, the Federal Register notice will specify the filing 
details necessary to comply with this regulation.
    (c) In the event BOEM sends documents to you in a secure electronic 
format, you may either return the document(s) in an electronic format 
utilizing the same secure transmission mechanism or print the 
document(s) and return them.
    (d) BOEM may electronically acknowledge, approve, sign, or execute 
any document(s) referenced in this section.


Sec.  560.501  How long will the confidentiality of electronic document 
and data transmissions be maintained?

    The confidentiality of any electronically submitted information 
will be maintained for the same proprietary term that would apply to 
the corresponding non-electronic confidential submission, pursuant to 
Sec.  556.104(b) of this chapter.


Sec.  560.502  Are electronically filed document transmissions legally 
binding?

    Any document or information referenced in Sec.  560.500 which is 
submitted to BOEM through a secure electronic filing system that is 
approved by BOEM will be legally binding, without the need for a paper 
copy thereof.
[FR Doc. 2016-06513 Filed 3-29-16; 8:45 am]
BILLING CODE 4310-MR-P