07-6226. Outer Continental Shelf (OCS) Chukchi Sea Alaska, Oil and Gas Lease Sale 193

AGENCY:

Minerals Management Service, Interior.

ACTION:

Final Notice of Sale (FNOS), OCS Oil and Gas Lease Sale 193, Chukchi Sea.

SUMMARY:

The MMS will hold OCS Oil and Gas Lease Sale 193 on February 6, 2008, in accordance with provisions of the OCS Lands Act (43 U.S.C. 1331-1356, as amended), the implementing regulations (30 CFR 256), and the OCS Oil and Gas Leasing Program 2007-2012.

DATES:

Lease Sale 193 is scheduled to be held on February 6, 2008, at the Wilda Marston Theatre, Z. J. Loussac Public Library, 3600 Denali Street, Anchorage, Alaska. Public reading will begin at 9 a.m. All times referenced in this document are local Anchorage, Alaska, times, unless otherwise specified.

ADDRESSES:

A package containing the FNOS and several supporting and essential documents referenced herein is available from: Alaska OCS Region, Minerals Management Service, 3801 Centerpoint Drive, Suite 500, Anchorage, Alaska 99503-5823, Telephone: [phone] or 1-800-764-2627.

These documents are also available on the MMS Alaska OCS Region's Web page at http://www.mms.gov/​alaska.

Bid Submission Deadline: Bidders will be required to submit sealed bids to MMS at the Alaska OCS Region Office, 3801 Centerpoint Drive, Suite 500, Anchorage, Alaska 99503, by 10 a.m. on the day before the sale, Tuesday, February 5, 2008. If bids are mailed, the envelope containing all of the sealed bids must be marked as follows:

Attention: Mr. Fred King, Contains Sealed Bids for Sale 193.

If bids are received later than the time and date specified above, they will be returned unopened to the bidders. Bidders may not modify or withdraw their bids unless the Regional Director, Alaska OCS Region, receives a written modification or written withdrawal request prior to 10 a.m., Tuesday, February 5, 2008. Should an unexpected event such as an earthquake or travel restrictions be significantly disruptive to bid submission, the Alaska OCS Region may extend the Bid Submission Deadline. Bidders may call [phone] for information about the possible extension of the Bid Submission Deadline due to such an event.

Area Offered for Lease: The MMS is offering for lease all whole and partial blocks listed in the document “Blocks Available for Leasing in OCS Oil and Gas Lease Sale 193” included in the FNOS 193 package. All of these blocks are shown on OCS Official Protraction Diagrams, and in some cases on Supplemental Official OCS Block Diagrams. The following OCS Official Protraction Diagrams pertain to the Sale 193 area and are available at http://www.mms.gov/​ld/​alaska.htm.

• NS 02-08, Unnamed, revised December 31, 1994
• NS 03-07, Unnamed, revised December 31, 1994
• NS 03-08, Unnamed, revised December 31, 1994
• NS 04-07, Unnamed, revised December 31, 1994
• NS 04-08, Unnamed, revised December 31, 1994
• NR 02-02, Tison, revised December 31, 1994
• NR 03-01, Karo, revised December 31, 1994
• NR 03-02, Posey, revised December 31, 1994
• NR 04-01, Hanna Shoal, revised September 30, 1997
• NR 04-02, Barrow, revised September 30, 1997
• NR 02-04, Studds, revised December 31, 1994
• NR 03-03, Colbert, revised December 31, 1994
• NR 03-04, Solivik Island, revised September 30, 1997
• NR 04-03, Wainwright, revised September 30, 1997
• NR 02-06, Chukchi Sea, revised December 31, 1994
• NR 03-05, Point Lay West, revised September 30, 1997

A listing of blocks included in the sale is available at the MMS office listed above. The locator map (available at http://www.mms.gov/​alaska) may assist you in locating a particular block, but it should not be used for the official description of blocks available for lease. The OCS Official Protraction Diagrams constitute the official descriptions of the areas offered.

Note that block numbers may repeat between OCS Official Protraction Diagrams (OPD's). To uniquely describe a lease tract, you must reference both the OPD number and name and the block number.

Statutes and Regulations: Each lease issued in the lease sale is subject to the OCS Lands Act of August 7, 1953, 67 Stat. 462; 43 U.S.C. 1331, et seq., as amended (92 Stat. 629), hereinafter called “the Act”; all regulations issued pursuant to the Act and in existence upon the effective date of the lease; all regulations issued pursuant to the statute in the future which provide for the prevention of waste and conservation of the natural resources of the OCS and the protection of correlative rights therein; and all other applicable statutes and regulations.

Lease Terms and Conditions: The following lease terms and condition apply:

Initial Period: 10 years.

Minimum Bonus Bid Amounts: $25.00 per hectare, or a fraction thereof, for all blocks. Refer to the Final Notice of Sale, Chukchi Sea Sale 193 map, and the Summary Table of Minimum Bids, Minimum Royalty Rates, and Rental Rates shown below.

Rental Rates: The Lessee shall pay the Lessor, on or before the first day of each lease year which commences prior to a discovery in paying quantities of oil or gas on the leased area, a rental at the rate shown below in the Summary Table of Minimum Bids, Minimum Royalty Rates, and Rental Rates. During the time period in which a lease is classified as producible, i.e., following a discovery in paying quantities, but before royalty-bearing production begins, a rental of $13 per hectare or fraction thereof, applies and is paid at the end of each lease year until the start of royalty-bearing production.

Minimum Royalty Rates: After the start of royalty-bearing production and notwithstanding any royalty suspension which may apply, the Lessee shall pay the Lessor a minimum royalty of $13 per hectare, or fraction thereof, to be paid at the expiration of each lease year with credit applied for actual royalty paid during the lease year. If actual royalty paid exceeds the minimum royalty requirement, then no minimum royalty payment is due.

Royalty Rates: A 121/2 percent royalty rate will apply for all blocks. [?USGPO Galley End:?]

Summary Table of Minimum Bids, Minimum Royalty Rates, and Rental Rates

Terms (values per hectare or fraction thereof)
Royalty Rate	121/2% fixed
Minimum Bonus Bid	$25.00
Minimum Royalty Rate	13.00
Rental Rates:
Year 1	2.50
Year 2	3.75
Year 3	5.00
Year 4	6.25
Year 5	7.50
Year 6	10.00
Year 7	12.00
Year 8	15.00
Year 9	17.00
Year 10	20.00

Royalty Suspension: Royalty suspension, prorated by lease acreage and subject to price thresholds, will apply to all blocks. In accordance with applicable regulations at 30 CFR 260, the following royalty suspension provisions will apply to leases issued as a result of Chukchi Sea Oil and Gas Lease Sale 193. In addition to these Royalty Suspension Provisions, please refer to 30 CFR 218.151 and applicable parts of 260.120-260.124 for regulations on royalty suspensions and rental obligations that will apply to your lease.

1. A lease in the Chukchi Sea, depending on surface area, will receive a royalty suspension volume (RSV) as follows:

Lease size (hectares)	RSV (million barrels of oil equivalent)
Less than 771	10
771 to less than 1,541	20
1,541 or more	30

2. Natural gas must be measured in accordance with 30 CFR 203.73.

3. Each lessee must pay royalty on production that might otherwise receive royalty relief (in 30 CFR 260) for any calendar year during which the actual New York Mercantile Exchange (NYMEX) annual price for the light sweet crude oil or natural gas exceeds the threshold price ($39 per barrel of oil or $6.50 per million British thermal units (Btu) of gas, adjusted for inflation) in that year. Such production will be deducted from the remaining RSV. The actual NYMEX annual price for the commodity is defined as the arithmetic average of the daily closing prices for the “nearby delivery month” on the NYMEX in a calendar year. The actual NYMEX annual price for the commodity is calculated by averaging the commodity daily closing prices for each month in the year, and then averaging the 12 monthly averages.

(a) The threshold price in any year, say year t, is determined by inflating the base year 2004 price of $39 per barrel of oil or $6.50 per million Btu of gas. This base year price is modified by the percentage change in the implicit price deflator as reported by the U.S. Department of Commerce, Bureau of Economic Analysis, for the interval between 2004 and year t, resulting in the adjusted threshold price for year t. For example, if the deflator indicates that inflation is 1.6 percent in 2005, 2.1 percent in 2006, 2.5 percent in 2007, and 2.5 percent for 2008, then the threshold price in calendar year 2008 would become $42.50 per barrel of oil and $7.08 per million Btu of gas. Therefore, royalty on oil production in calendar year 2008 would be due if the 2008 actual NYMEX oil price, as calculated above, exceeds $42.50 per barrel. The royalty on gas production in calendar year 2008 would be due if the 2008 actual NYMEX gas price, as calculated above, exceeds $7.08 per million Btu.

(b) Royalties on production, when the actual NYMEX annual price of the commodity exceeds the threshold price in any calendar year, must be paid no later than 90 days after the end of that calendar year. (See 30 CFR 260.122(b)). Also, when the actual NYMEX annual price of the commodity exceeds the threshold price in any calendar year, royalties on production must be provisionally paid in the following calendar year. (See 30 CFR 260.122(c)).

4. In the case of a Sale 193 lease that is part of an approved unit agreement, allocated production from the unit can only apply against the lease's RSV if that lease is included in an approved participating area. The RSV will be applied to each lease consistent with the production allocation schedule approved by the MMS for the participating area. Participating area means all or parts of unit tracts described and designated as a Participating Area under the unit agreement for the purposes of allocating one or more unitized substances produced from a reservoir.

5. A lessee must resume paying full royalties on the first day of the month following the month in which the RSV is exhausted. Lessees do not owe royalties for the remainder of the month in which the RSV is exhausted, unless the actual NYMEX annual price of the commodity exceeds the threshold price for that year.

6. The MMS will provide notice when the actual NYMEX annual price of the commodity is above the threshold price. Information on actual and threshold prices can be found at the MMS Web site (www.mms.gov/​econ).

Stipulations and Information to Lessees: The documents entitled “Final Lease Stipulations” and “Final Information to Lessees” for Oil and Gas Lease Sale 193 contain the text of the Final Stipulations and the Information to Lessees clauses. These documents are included in the FNOS 193 package.

As required by the MMS, each company that has been awarded a lease must execute all copies of the lease (Form MMS-2005 (March 1986) as amended), pay by electronic funds transfer (EFT) the balance of the bonus bid amount and the first year's rental for each lease issued in accordance with the requirements of 30 CFR 218.155, and satisfy the bonding requirements of 30 CFR 256, subpart I, as amended.

Debarment and Suspension (Nonprocurement): In accordance with regulations pursuant to 2 CFR, part 180, and 2 CFR, part 1400, the lessee shall comply with the U.S. Department of the Interior's nonprocurement debarment and suspension requirements and agree to communicate this requirement to comply with these regulations to persons with whom the lessee does business as it relates to this lease by including this term as a condition to enter into their contracts and other transactions. Execution of the lease, which includes an Addendum specific to debarment, by each lessee constitutes notification to the MMS that each lessee is not excluded, disqualified, or convicted of a crime as described in 2 CFR 180.335, unless the lessee has provided a statement disclosing information as described in 2 CFR 180.335, and the MMS receives an exception from the U.S. Department of the Interior as described in 2 CFR 180.135 and 180.400.

Method of Bidding: For each block bid upon, a bidder must submit a separate signed bid in a sealed envelope labeled “Sealed Bid for Oil and Gas Lease Sale 193, not to be opened until 9 a.m., Wednesday, February 6, 2008.” The total amount of the bid must be in whole dollars; any cent amount above the whole dollar will be ignored by MMS. Details of the information required on the bid(s) and the bid envelope(s) are specified in the document “Bid Form and Envelope” contained in the FNOS 193 package. [?USGPO Galley End:?]

Restricted Joint Bidders: The MMS published a list of restricted joint bidders, which applies to this sale, in the Federal Register at 72 FR 64088 on November 14, 2007. Bidders submitting joint bids must state on the bid form the proportionate interest of each participating bidder, in percent to a maximum of five decimal places, i.e. 33.33333 percent. The MMS may require bidders to submit additional documents in accordance with 30 CFR 256.46. The MMS warns bidders against violation of 18 U.S.C. 1860 prohibiting unlawful combination or intimidation of bidders. Bidders must execute all documents in conformance with signatory authorizations on file in the Alaska OCS Region. Partnerships also must submit or have on file a list of signatories authorized to bind the partnership. Bidders are advised that MMS considers the signed bid to be a legally binding obligation on the part of the bidder(s) to comply with all applicable regulations, including paying the one-fifth bonus bid amount on all high bids. A statement to this effect must be included on each bid (see the document “Bid Form and Envelope” contained in the FNOS 193 package).

Bonus Bid Deposit: Each bidder submitting an apparent high bid must submit a bonus bid deposit to the MMS equal to one-fifth of the bonus bid amount for each such bid. Under the authority granted by 30 CFR 256.46(b), MMS will require bidders to use EFT procedures for payment of the one-fifth bonus bid deposits for Sale 193. Payment of the deposit will be due by 1:00 p.m. Eastern Time the day following bid reading. Detailed bid deposit procedures for Sale 193 will be found within the “Instructions for Making EFT Bonus Payments” document on the MMS Web site.

Note:

Certain bid submitters [i.e., those that are not currently an OCS mineral lease record title holder or designated operator or those that have ever defaulted on a one-fifth bonus payment (EFT or otherwise)] are required to guarantee (secure) their one-fifth bonus payment prior to the submission of bids. For those who must secure the EFT one-fifth bonus payment, one of the following options may be used: (1) Provide a third-party guarantee; (2) Amend bond coverage; (3) Provide a letter of credit; or (4) Provide a lump sum payment in advance via EFT. The EFT instructions specify the requirements for each option.

Payment of the deposit does not constitute and shall not be construed as acceptance of any bid on behalf of the United States. If a lease is awarded, MMS requests that only one transaction be used for payment of the four-fifths bonus bid amount and the first year's rental.

Withdrawal of Blocks: The United States reserves the right to withdraw any block from this sale prior to issuance of a written acceptance of a bid for the block.

Acceptance, Rejection, or Return of Bids: The United States reserves the right to reject any and all bids. In any case, no bid will be accepted, and no lease for any block will be awarded to any bidder, unless the bidder has complied with all requirements of this Notice, including the documents contained in the associated FNOS package for Sale 193 and applicable regulations; the bid is the highest valid bid; and the amount of the bid has been determined to be adequate by the authorized officer. The Attorney General of the United States may also review the results of the lease sale prior to the acceptance of bids and issuance of leases. Any bid submitted that does not conform to the requirements of this Notice; the OCS Lands Act, as amended; or applicable regulations may be returned to the person submitting that bid by the Regional Director and not considered for acceptance. To ensure that the Government receives a fair return for the conveyance of lease rights for this sale, high bids will be evaluated in accordance with MMS bid adequacy procedures.

Successful Bidders: As required by MMS, each company that has been awarded a lease must execute all 3 copies of the lease (Form MMS-2005 (March 1986) as amended), pay by EFT the balance of the bonus bid amount and the first year's rental for each lease issued in accordance with the requirements of 30 CFR 218.155, and satisfy the bonding requirements of 30 CFR 256, Subpart I.

Affirmative Action: MMS requests that, prior to bidding, Equal Opportunity Affirmative Action Representation Form MMS 2032 (June 1985) and Equal Opportunity Compliance Report Certification Form MMS 2033 (June 1985) be on file in the Alaska OCS Region. This certification is required by 41 CFR 60 and Executive Order No. 11246 of September 24, 1965, as amended by Executive Order Nos. 11375 (October 13, 1967), 12086 (October 5, 1978), and 13279 (December 12, 2002). In any event, prior to the execution of any lease contract, both forms are required to be on file in the Alaska OCS Region.

Notice of Bidding Systems: Section 8(a)(8) (43 U.S.C. 1337(a)(8)) of the OCS Lands Act requires that, at least 30 days before any lease sale, a Notice be submitted to Congress and published in the Federal Register. This Notice of Bidding Systems is for OCS Lease Sale 193, Chukchi Sea, scheduled to be held on February 6, 2008. In Sale 193, all blocks are being offered under a bidding system that uses a cash bonus and a fixed royalty of 121/2 percent with a royalty suspension of up to 30 million barrels of oil equivalent per lease. The amount of royalty suspension available on each lease is dependent on the area of the lease and specified in the Sale Notice. This bidding system is authorized under 30 CFR 260.110(g), which allows use of a cash bonus bid with a royalty rate of not less than 12 1/2 percent and with suspension of royalties for a period, volume, or value of production, and an annual rental. Analysis performed by MMS indicates that use of this system provides an incentive for development of this area while ensuring that a fair sharing of revenues will result if major discoveries are made and produced.

Geophysical Data and Information Statement: Pursuant to 30 CFR 251.12, MMS has a right to access geophysical data and information, as well as reprocessed versions of the data, collected under a permit in the OCS. Every bidder submitting a bid on a block in Sale 193, or participating as a joint bidder in such a bid, must submit a Geophysical Data and Information Statement (GDIS) identifying any processed or reprocessed pre- and post-stack geophysical data and information used as part of the decision to bid or participate in a bid on the block. The GDIS should clearly identify the survey type (2-D or 3-D), survey extent (i.e., number of line miles for 2D or number of blocks for 3D), and imaging type (pre-stack, post-stack and migration (time and/or depth) algorithm) of the data and information. The statement must also include the name and phone number of a contact person and an alternate, who are both knowledgeable about the data listed, the owner or controller of the reprocessed data or information, the survey from which the data were reprocessed and the owner/controller of the original data set, the date of reprocessing and whether the data were processed in-house or by a contractor. In the event such data and information include multiple data sets processed from the same survey using different velocity models or different processing parameters, you should identify only the highest quality data set used for bid preparation. The MMS reserves the right to query about alternate data sets and to quality check and compare the listed and alternative data sets to determine which data set most closely meets the needs of the fair-market-value determination process.

The statement must also identify each block upon which a bidder participated in a bid but for which it does not possess or control such data and information.

In the event your company supplies any type of data to the MMS, in order to get reimbursed, your company must be registered with the Central Contractor Registration (CCR) at http://www.ccr.gov. This is a requirement that was implemented on October 1, 2003, and requires all entities doing business with the Government to complete a business profile in the CCR and update it annually. Payments are made electronically based on the information contained in the CCR. Therefore, if your company is not actively registered in the CCR, MMS will not be able to reimburse or pay your company for any data supplied.

Protecting and disclosing data and information listed on the GDIS to the public is governed by 30 CFR 251.14. Except as specified in that section or in 30 CFR 250 and 252, if the Regional Director determines any data or information are exempt from public disclosure under 30 CFR 251.14(a), MMS will not provide the data and information to any State or to the executive of any local government or to the public unless the bidder and all third parties agree to the disclosure. For this reason, the bidder is instructed to submit the GDIS in a separate, sealed envelope at the time of bid submission. An example of the GDIS and a sample of the Geophysical Information envelope are available at the MMS Alaska OCS Region's Web page at http://www.mms.gov/​alaska.

Dated: December 20, 2007.

Randall B. Luthi,

Director, Minerals Management Service.