2011-2103. Notice of Intent To Establish an Indian Oil Valuation Negotiated Rulemaking Committee

AGENCY:

Office of Natural Resources Revenue (ONRR), Interior.

ACTION:

Notice of intent; request for nominees and comments.

SUMMARY:

The Office of Natural Resources Revenue (ONRR) is announcing its intent to establish an Indian Oil Valuation Negotiated Rulemaking Committee (Committee). The Committee will develop specific recommendations regarding proposed revisions to the existing regulations for oil production from Indian leases, especially the major portion valuation requirement. The Committee will include representatives of parties who would be affected by a final rule. The ONRR solicits comments on this initiative and requests interested parties to nominate representatives for membership on the Committee.

DATES:

Submit nominations to the Committee or written comments on this notice on or before March 2, 2011

ADDRESSES:

You may submit nominations to the Committee or comments on this notice by any of the following methods.

• Electronically go to http://www.regulations.gov. In the entry titled “Enter Keyword or ID,” enter BOEM-2010-0062, and then click search. Follow the instructions to submit public comments or nominations. The ONRR will post all comments.
• Mail comments or nominations to Hyla Hurst, Regulatory Specialist, Office of Natural Resources Revenue, P.O. Box 25165, MS 61013B, Denver, Colorado 80225. Please reference the Docket No. BOEM-2010-0062 in your comments.
• Hand-carry comments or use an overnight courier service. Our courier address is Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling St., Denver, Colorado 80225. Please reference the Docket No. BOEM-2010-0062 in your comments.

FOR FURTHER INFORMATION CONTACT:

John Barder, Western Audit and Compliance Management, ONRR; telephone [phone]; fax [phone]; e-mail to [e-mail]. Mailing address: Office of Natural Resources Revenue, Western Audit and Compliance Management, Denver B, P.O. Box 25165, MS 62220B, Denver, Colorado 80225-0165.

SUPPLEMENTARY INFORMATION:

I. Background

The existing rule for valuation of oil produced from Indian leases, codified at 30 CFR part 1206, subpart B, was published on January 15, 1988 (53 FR 1184), effective March 1, 1988. Since then, many changes have occurred in the oil market. Also, concerns have arisen about the need for revised valuation methodologies to address paragraph 3(c) of standard Indian oil and gas leases, such as the major portion analysis requirement for valuation of oil production from Indian leases.

The Minerals Revenue Management (MRM) division of the Minerals Management Service (MMS), now ONRR, published proposed rules for Indian oil valuation in February 1998 (63 FR 7089) and in January 2000 (65 FR 403). Each of these proposed rules was subsequently withdrawn because of market changes and the passage of time. In addition, eight public meetings were held during 2005 to consult with Indian tribes and individual Indian mineral owners and to obtain information from interested parties. Then a third proposed rule was published in February 2006 (71 FR 7453). Tribal and industry commenters on the 2006 proposed rule did not agree on most issues regarding oil valuation, and none of the commenters supported the major portion provisions.

The Royalty Policy Committee's Indian Oil Valuation Subcommittee evaluated the 2006 proposed rule but was unable to reach consensus about how the Department should proceed. Thus, MRM (now ONRR) decided to make only technical amendments to the existing Indian oil valuation regulations and to convene a negotiated rulemaking committee to make specific recommendations regarding the major portion provision. A final rule was published on December 17, 2007 (72 FR 71231), addressing the technical amendments. After publication of the final rule, MRM (now ONRR) started the process of forming the Indian Oil Valuation Negotiated Rulemaking Committee. However, the process was delayed because of the change in Administration. On June 8, 2010, the Secretary of the Interior signed a decision memorandum giving approval to go forward with establishing the Indian Oil Valuation Negotiated Rulemaking Committee.

II. Statutory Provisions

The Negotiated Rulemaking Act of 1996 (NRA) (5 U.S.C 561 et seq.); the Federal Advisory Committee Act (FACA) (5 U.S.C. Appendix 2, section 1 et seq.); the Indian Mineral Development Act of 1982 (25 U.S.C. 2101-2108); the Indian Mineral Leasing Act of 1938 (25 U.S.C. 396a-g); the Act of March 3, 1909 (25 U.S.C. 396); 25 CFR parts 211, 212; and 225; 30 CFR part 1206; and Indian oil and gas lease and agreement terms.

III. The Committee and Its Process

In a negotiated rulemaking, the provisions for a proposed rule are developed by a committee composed of representatives of government and the interests that will be significantly affected by the rule. Decisions are made by “consensus.”

“[C]onsensus” means unanimous concurrence among the interests represented on a negotiated rulemaking committee established under this subchapter, unless such committee (A) agrees to define such term to mean a general but not unanimous concurrence; or (B) agrees upon another specified definition.

5 U.S.C. 562(2) (A) and (B).

The negotiated rulemaking process is initiated by the agency's identification of interests potentially affected by the rulemaking under consideration. By this notice, ONRR is soliciting comments on this action.

Following receipt of nominations or comments, ONRR will establish the Negotiated Rulemaking Committee representing the identified interests to develop the provisions of a proposed rule. The ONRR will be a member of the Committee to represent the Federal Government's statutory mission. The Committee will be chaired by a facilitator. After the Committee reaches consensus on the provisions of a proposed rule, as discussed in more detail below, ONRR will develop a proposed rule to be published in the Federal Register.

Under 30 U.S.C. 563, the head of the agency is required to determine that the use of the negotiated rulemaking procedure is in the public interest. In making such a determination, the agency head must consider certain factors. Taking these factors into account, ONRR has determined that a negotiated rulemaking is in the public interest because:

1. A rule is needed. Royalty payors have considerable difficulty in complying with the current regulations.

2. A limited number of identifiable interests will be significantly affected by the rule. Such interests are oil and gas companies who produce oil and pay royalties on Indian leases, and Indian tribes and individual Indian mineral owners who receive royalties from oil produced from Indian leases located on their lands.

3. There is a reasonable likelihood that the Committee can be convened with a balanced representation of persons who can adequately represent the interests discussed in item 2 above and who are willing to negotiate in good faith to attempt to reach a consensus on provisions of a proposed rule.

4. There is a reasonable likelihood that the Committee will reach consensus on a proposed rule within a fixed period of time. This objective was accomplished with the current Indian gas valuation regulations, which added certainty and simplicity through the negotiated rulemaking process.

5. The use of negotiated rulemaking will not unreasonably delay the development of a proposed rule because time limits will be placed on the negotiation. We anticipate that negotiation will expedite a proposed rule and ultimately the acceptance of a final rule.

6. The ONRR is making a commitment to ensure that the Committee has sufficient resources to complete its work in a timely fashion.

7. The ONRR, to the maximum extent possible and consistent with the legal obligations of the agency, will use consensus of the Committee as the basis for a proposed rule for public notice and comment.

IV. Negotiated Rulemaking Procedures

In compliance with FACA and NRA, ONRR will use the following procedures and guidelines for this negotiated rulemaking. The ONRR may modify them in response to comments received on this notice or during the negotiation process.

A. Committee Formation

The Committee will be formed and operated in full compliance with the requirements of FACA and NRA and specifically under the guidelines of its charter.

B. Interests Involved

The ONRR intends to ensure full and adequate representation of those interests that are expected to be significantly affected by the proposed rule. Under 30 U.S.C. 562(5), “`interest' means with respect to an issue or matter, multiple parties which have a similar point of view or which are likely to be affected in a similar manner.” As discussed above, ONRR believes the interests significantly affected are oil and gas companies who produce oil and pay royalties on Indian leases, and Indian tribes and individual Indian mineral owners who receive royalties from oil produced from Indian leases located on their lands.

C. Members

The Committee should not exceed 25 members, and ONRR prefers 15. The ONRR will provide at least two members plus a facilitator. The facilitator will not count against the membership and will not be a voting member.

Responsibility for expenses is stated under 30 U.S.C. 568(c) as follows:

Members of a negotiated rulemaking committee shall be responsible for their own expenses of participation in such committee, except that an agency may, in accordance with section 7(d) of the Federal Advisory Committee Act, pay for a member's reasonable travel and per diem expenses, expenses to obtain technical assistance, and a reasonable rate of compensation, if—

(1) such member certifies a lack of adequate financial resources to participate in the committee; and

(2) the agency determines that such member's participation in the committee is necessary to assure an adequate representation of the member's interest.

Therefore, ONRR commits to pay the travel and per diem expenses of Committee members if appropriate under the NRA and Federal travel regulations.

D. Request for Nominations

The ONRR solicits nominations for appointment to membership on the Committee. Members can be individuals or representatives of organizations. An organization should identify the individual who will be its representative.

Committee members need to have authorization to negotiate on behalf of their interests and be willing to negotiate in good faith. The ONRR interprets good faith to include a willingness to (1) bring all issues to the table; and (2) not to discuss the issues in other forums. Good faith also includes a willingness to move away from taking adversarial positions and instead to explore openly all relevant and productive ideas that may emerge from the discussion of the Committee.

Authorization for each application or nomination must include:

1. The name of the applicant or nominee and a description of the interests such person will represent;

2. A description of the person's qualifications and expertise regarding those interests;

3. A statement whether the participant will be seeking agency resources to participate on the Committee; and

4. A written commitment of the applicant or nominee to actively participate in good faith in the negotiated rulemaking and keep all issues at the table.

E. Tentative Schedule

If ONRR publishes a notice establishing the Committee, after considering comments and applications submitted in response to this notice, it will publish a list of proposed members as a result of the nominations received from this notice, a solicitation for comments on the proposed membership of the Committee, and an explanation of how a person may apply or nominate another person for membership. The notice establishing the Committee will also include a proposed agenda and schedule for completing the work of the Committee, including a target date for publication by the agency of a proposed rule for notice and comment. Further, the notice establishing the Committee will include a description of administrative support for the committee to be provided by ONRR, including technical assistance. The Committee will agree on dates, times, and locations of meetings. The ONRR plans to terminate the Committee if it does not reach consensus on the provisions of a proposed rule within 24 months of the first meeting. The Committee may end earlier upon the promulgation of the final rule under consideration, or if the ONRR, after consulting with the Committee, or the Committee itself specifies an earlier termination date.

V. Request for Nominations and Comments

To comply with negotiated rulemaking procedures, ONRR invites written comments on this initiative and nominations for the negotiated rulemaking Committee. Written comments are specifically requested on the suitability of using the negotiated rulemaking procedure to develop a proposed valuation rule for oil production from Indian leases. Nominations are for all interests that could be affected by an Indian oil valuation rulemaking and must comply with paragraph IV. D., Request for Nominations, of this notice. All nominations and written comments must be sent to an appropriate address as listed in the ADDRESSES section of this notice.

Certification

For the above reasons, I hereby certify that the Indian Oil Valuation Negotiated Rulemaking Committee is in the public interest.

Dated: January 25, 2011.

Ken Salazar,

Secretary, Department of the Interior.