[Federal Register Volume 61, Number 211 (Wednesday, October 30, 1996)]
[Rules and Regulations]
[Pages 55887-55889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27782]
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DEPARTMENT OF THE INTERIOR
30 CFR Part 256
RIN 1010-AC15
Outer Continental Shelf Lease Terms
AGENCY: Minerals Management Service, Interior.
ACTION: Final rule.
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SUMMARY: This rule amends the regulations governing the term for
certain leases on the Outer Continental Shelf (OCS) based on water
depth. This rule changes the current depth margins for 8-year leases
from 400 to 900 meters to 400 to 800 meters while retaining the
mandatory 5-year drilling requirement for all 8-year leases. The
amendment allows the Minerals Management Service (MMS) to set lease
terms of 8 to 10 years in water depths ranging from 800 to 900 meters.
The intended effect of this rule is to simplify administration of OCS
leases for the MMS and the lessees.
[[Page 55888]]
EFFECTIVE DATE: This final rule is effective on November 29, 1996.
FOR FURTHER INFORMATION CONTACT:
Judith M. Wilson, Engineering and Standards Branch, telephone (703)
787-1600.
SUPPLEMENTARY INFORMATION: Currently, MMS offers 10-year terms for
leases in water depths of 900 meters or more. In water depths of 400 to
900 meters, MMS offers 8-year lease terms subject to a requirement that
the lessee begin an exploratory well within the first 5 years, 30 CFR
256.37. On June 5, 1996, MMS published a notice of proposed rulemaking
in the Federal Register (61 FR 28528). MMS proposed to amend its
regulation at 30 CFR 256.37 to remove the requirement that the lessee
must begin exploratory drilling within 5 years on 8-year leases. The
proposed amendment also changed the 400 to 900 meter depth requirement
for 8-year leases to 400 to 800 meters. MMS proposed this rule because,
among other reasons, we considered the financial incentive established
by the OCS Deep Water Royalty Relief Act (DWRRA) to be more effective
than the drilling requirement as a means of achieving earlier drilling.
Comments
During the 60-day comment period, MMS received ten comments. Two-
thirds of the comments came from the ``major'' oil companies. The
remaining one-third of the comments came from ``independents'' and
drilling contractors. Generally, the majors support the proposed rule
and urged MMS to adopt the change before the September 25, 1996, Gulf
of Mexico OCS lease sale. They agree that the recently enacted DWRRA
serves as a more effective incentive to encourage earlier or expedited
development and were confident operators will continue to be diligent
in conducting exploratory drilling. They supported the change in water
depth range for 8-year leases.
The independents and drilling contractors, however, strongly oppose
the proposed rule maintaining that the drilling requirement is
necessary to ensure diligence. While the DWRRA should provide a
financial incentive to develop leases in water depths greater than 400
meters, MMS should use the 5-year drilling requirement as a safeguard
to ensure that the Nation's resources are produced in a timely manner.
Finally, they claim that the myriad of smaller entities supporting the
oil and gas industry have the greatest stake in the results of this
rule which ought to be significant under E.O. 12866.
Response to Comments
MMS based the proposed rule on the observation that the 5-year
drilling requirement has not resulted in meaningful, if any, increases
in exploratory drilling. The data to support this observation comes
from 8-year leases issued from 1985 to 1990. Leases issued at later
dates were not analyzed because, at the time MMS initiated the proposed
rule, it was too early to tell whether these leases would be drilled
before the 5-year drilling window expired. In light of the
independents' strong opposition to the proposed rule, MMS will review
the 5-year drilling requirement after we have more data from 8-year
leases issued for several years subsequent to 1990. The analysis will
allow MMS to view the statistics for time periods of declining and
increasing exploratory drilling.
Thus, under the final rule, if your lease is in 400 to 800 meters
of water, it will have an initial lease term of 8 years. You must begin
an exploratory well within 5 years or the leases will be canceled. The
final rule also gives MMS the flexibility to set an initial lease term
between 8 and 10 years in water depths ranging from 800 to 900 meters.
If MMS issues leases for more than 8 years in the 800 to 900 meter
depth margin, the current mandatory drilling requirement for that depth
margin would be eliminated. MMS does not believe that the longer lease
and the lack of the drilling requirement will have a significant impact
on smaller entities.
Leases in water depths less than 400 meters or more than 900 meters
are not addressed in this rule. See 30 CFR 256.37(a)(1).
Author: This document was prepared by Judy Wilson, Engineering and
Standards Branch, MMS.
Executive Order (E.O.) 12866
This rule is not a significant rule requiring Office of Management
and Budget review under E.O. 12866.
Regulatory Flexibility Act
The Department of the Interior (DOI) has determined that this rule
will not have a significant effect on a substantial number of small
entities. Most entities that engage in offshore activities as operators
are not small because of the technical and financial resources and
experience necessary to conduct offshore activities. Small entities are
more likely to operate onshore or in State waters--areas not covered by
this rule. When small entities work in the OCS, they are more likely to
be contractors rather than operators. For example, a company that
collects geologic and geophysical data might be a small entity. While
these contractors must follow rules governing OCS operations, we are
not changing the rules that govern the actual operations of a lease. We
are only modifying the provision setting the water depths at which
particular primary terms apply. This modification will have no effect
on small entities.
Paperwork Reduction Act
The final rule does not contain new information collection
requirements that require approval by the Office of Management and
Budget (OMB). The information collection requirements in 30 CFR part
256 are approved by OMB under approval No. 1010-0006. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid OMB
control number.
MMS estimates the public reporting burden for this information will
average 3.5 hours per response, including the time for reviewing
instructions, searching existing data sources, gathering and
maintaining data needed, and completing and reviewing the information
collection.
Takings Implication Assessment
The DOI certifies that this rule does not represent a governmental
action capable of interference with constitutionally protected property
rights. A Takings Implication Assessment prepared pursuant to E.O.
12630, Government Action and Interference with Constitutionally
Protected Property Rights, is not required.
Unfunded Mandate Reform Act of 1995
The DOI has determined and certifies according to the Unfunded
Mandates Reform Act, 2 U.S.C. 1502 et seq., that this rule will not
impose a cost of $100 million or more in any given year on local,
tribal, State governments, or the private sector.
E.O. 12988
The DOI has certified to OMB that the rule meets the applicable
civil justice reform standards provided in Sections 3(a) and 3(b)(2) of
E.O. 12988.
National Environmental Policy Act
MMS has examined the rule and has determined that it does not
constitute a major Federal action significantly affecting the quality
of the human environment pursuant to Section 102(2)(c) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(c)).
[[Page 55889]]
List of Subjects in 30 CFR Part 256
Administrative practice and procedures, Continental shelf,
Environmental Protection, Government contracts, Mineral royalties, Oil
and gas exploration, Pipelines, Public lands--mineral resources, Public
lands--rights-of-way, Reporting and recordkeeping requirements, Surety
bonds.
Dated: October 21, 1996.
Sylvia V. Baca,
Deputy Assistant Secretary, Land and Minerals Management.
For the reasons set forth in the preamble, the Minerals Management
Service amends 30 CFR part 256 as follows:
PART 256--LEASING OF SULPHUR OR OIL OR GAS IN THE OUTER CONTINENTAL
SHELF
1. The authority citation for part 256 continues to read as
follows:
Authority: 43 U.S.C. 1331 et seq.
2. In Sec. 256.37, the concluding text of paragraph (a) is removed,
paragraph (a)(2) is revised, and paragraph (a)(3) is added to read as
follows:
Sec. 256.37 Lease Term.
(a) (1) * * *
(2) If your oil and gas lease is in water depths between 400 and
800 meters, it will have an initial lease term of 8 years unless MMS
establishes a different lease term under paragraph (a)(1) of this
section.
(3) For leases issued with an initial term of 8 years, you must
begin an exploratory well within the first 5 years of the term to avoid
lease cancellation.
* * * * *
[FR Doc. 96-27782 Filed 10-29-96; 8:45 am]
BILLING CODE 4310-MR-M
