E7-20970. Oil and Gas Leasing: Onshore Oil and Gas Operations-Fees, Rentals, and Royalty

AGENCY:

Bureau of Land Management, Interior.

ACTION:

Notification to terminate the heavy oil royalty reductions program.

SUMMARY:

The Bureau of Land Management (BLM) is providing the six-month notification to terminate all royalty reductions for the production of heavy oil and to terminate the availability of further heavy oil relief under regulations at 43 CFR 3103.4-3.

DATES:

The termination of the heavy oil royalty reductions program is effective on May 1, 2008.

FOR FURTHER INFORMATION CONTACT:

Rudy Baier, Division of Fluid Minerals, BLM, [phone]. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service at 1-800-877-8339, 24 hours a day, 7 days a week, except holidays, for assistance in reaching Mr. Baier.

SUPPLEMENTARY INFORMATION:

Under 43 CFR 3103.4-3(b)(6)(i), the BLM may suspend or terminate all heavy oil royalty reductions and terminate the availability of further heavy royalty relief “upon 6 month's notice in the Federal Register when BLM determines that the average oil price has remained above $24 per barrel over a period of 6 consecutive months [based on the West Texas Intermediate (WTI) Crude average posted prices and adjusted for inflation using the implicit price deflator for gross national product with 1991 as the base year).” The adjusted threshold for the third quarter of calendar year 2004 was $30.83 and for the fourth quarter $31.00.

By Federal Register notice (70 FR 21810) dated April 27, 2005, this royalty reduction program was suspended effective November 1, 2005. In that notice, the BLM requested comments on the conditions under which the suspension should be removed. The BLM received three comments.

The WTI crude average posted oil prices have continued to exceed the adjusted threshold at all times since the April 27, 2005 notice. Therefore, considering the price of crude oil since the April 27, 2005 notice and current price projections for the near future, the BLM decided that this royalty reduction program should be terminated. As authorized by 43 CFR 3103.4-3(b)(6)(i), this serves as notice that the BLM will terminate the heavy oil royalty reductions program effective on May 1, 2008.

Should conditions change so as to warrant relief, the BLM has authority to grant royalty rate reductions on a case-by-case basis (see 43 CFR 3103.4-1).

James Abbott,

Assistant Director, Minerals, Realty, and Resource Protection.