E8-29523. Agency Information Collection Activities: Proposed Collection, Comment Request

AGENCY:

Minerals Management Service (MMS), Interior.

ACTION:

Notice of an extension of a currently approved information collection (OMB Control Number 1010-0119).

SUMMARY:

To comply with the Paperwork Reduction Act of 1995 (PRA), we are notifying the public that we have submitted an information collection request (ICR) to the Office of Management and Budget (OMB) for renewal approval of the paperwork requirements in the regulations under 30 CFR part 208. This notice also provides the public a second opportunity to comment on the paperwork burden of these regulatory requirements. The previous title of this information collection request (ICR) was “30 CFR Part 208—Sale of Federal Royalty Oil; Sale of Federal Royalty Gas; and Commercial Contracts (Forms MMS-4070, Application for the Purchase of Royalty Oil; MMS-4071, Letter of Credit; and MMS-4072, Royalty-in-Kind Contract Surety Bond).” The new title of this ICR is “30 CFR Part 208, RIK Oil and Gas.”

DATES:

Submit written comments on or before January 14, 2009.

ADDRESSES:

Submit written comments by either FAX [phone] or e-mail ([e-mail]) directly to the Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for the Department of the Interior (OMB Control Number 1010-0119).

Please submit copies of your comments to MMS by the following methods:

• Electronically go to http://www.regulations.gov. In the “Comment or Submission” column, enter “MMS-2008-MRM-0010” to view supporting and related materials for this ICR. Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available through the site's “User Tips” link. All comments submitted will be posted to the docket.
• Mail comments to Armand Southall, Regulatory Specialist, Minerals Management Service, Minerals Revenue Management, P.O. Box 25165, MS 302B2, Denver, Colorado 80225. Please reference ICR 1010-0119 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 ICR 1010-0119 in your comments.

FOR FURTHER INFORMATION CONTACT:

Armand Southall, telephone [phone], or e-mail [e-mail]. You may also contact Armand Southall to obtain copies, at no cost, of (1) the ICR, (2) any associated forms, and (3) the regulations that require the subject collection of information.

SUPPLEMENTARY INFORMATION:

Title: 30 CFR Part 208, RIK Oil and Gas.

OMB Control Number: 1010-0119.

Bureau Form Number: Forms MMS-4070, MMS-4071, and MMS-4072.

Abstract: The Secretary of the U.S. Department of the Interior is responsible for mineral resource development on Federal and Indian lands and the Outer Continental Shelf (OCS). Under the Mineral Leasing Act of 1920 (30 U.S.C. 1923), the Indian Mineral Development Act of 1982 (25 U.S.C. 2103), and the Outer Continental Shelf Lands Act (OCS Lands Act, 43 U.S.C. 1353), the Secretary is responsible for managing the production of minerals from Federal and Indian lands and the OCS, collecting royalties and other mineral revenues from lessees who produce minerals, and distributing the funds collected in accordance with applicable laws.

The Secretary also has a trust responsibility to manage Indian lands and seek advice and information from Indian beneficiaries. The MMS performs the minerals revenue management functions and assists the Secretary in carrying out the Department's trust responsibility for Indian lands.

Public laws pertaining to mineral revenues are on our Web site at http://www.mrm.mms.gov/​Laws_​R_​D/​PublicLawsAMR.htm. These public laws and 30 CFR part 208, as well as specific language in the actual lease documents, authorize the Secretary to sell royalty oil and gas accruing to the United States. The standard lease terms state that royalties are due in amount or in value. The MMS directs communications between MMS operators and royalty-in-kind (RIK) purchasers through commercial contracts, situation-specific “Dear Operator” letters, or, in the case of eligible refiners, through regulations at part 208.

General Information. The MMS is responsible for ensuring that all revenues from Federal and Indian mineral leases are accurately collected and accounted for and appropriately disbursed to recipients. The Federal Government's RIK program became a permanent operational program after several years of pilot project testing. The RIK program takes payment from mineral lessees “in kind” in the form of produced crude oil and natural gas volumes, rather than in cash payments. The lessee transfers the title of the crude oil or natural gas to the Federal Government, and MMS sells the received product (crude oil or natural gas) in the marketplace and disburses revenues as prescribed by law.

The MMS sells Federal oil and gas competitively in the unrestricted marketplace. The MMS also sells some crude oil competitively to eligible refiners (a small and independent refiner, as defined under 30 CFR 208.2). Additionally, when directed, MMS delivers oil or gas to other Federal agencies, as was the case during the most recent fill of the Strategic Petroleum Reserve (SPR), directed by the President in 2007.

The crude oil or natural gas purchasers and eligible refiners report data on three forms—Forms MMS-4070, Application for the Purchase of Royalty Oil; MMS-4071, Letter of Credit; and MMS-4072, Royalty-in-Kind Contract Surety Bond. These forms are located at http://www.mrm.mms.gov/​rikweb/​RIKForms.htm.

Eligible Refiner Information—Determination of Need. The regulations, at 30 CFR part 208—Sale of Federal Royalty Oil, govern the eligible refiner sale. Under § 208.4(a) and (b) on behalf of the Secretary, MMS performs a Determination of Need prior to the sale of royalty oil. The MMS uses the feedback from the Determination of Need respondents to assess the availability of crude oil supply for eligible refiners and to assess current marketplace conditions. The MMS published the most recent Determination of Need, requesting specific information from interested parties, in the Federal Register on January 16, 2008 (73 FR 2938).

(1) Eligible Refiner Prequalification. In order to qualify for RIK sales, eligible refiners must prequalify by (a) signing the MMS base contract, “RIK Crude Oil General Terms and Conditions,” which is located at http://www.mrm.mms.gov/​rikweb/​PDFDocs/​gtcexh.pdf;​; and (b) providing detailed financial information. Upon prequalification, MMS will issue an amount of unsecured credit, based on the creditability of the offeror.

(2) Notice of Availability of Royalty Oil. Under § 208.5, if MMS finds from the Determination of Need process that the program should continue, MMS will then advise industry of a forthcoming RIK crude oil sale for eligible refiners and include administrative details concerning the application, allocation, and contract award processes for the royalty oil. The MMS will also advise industry of specific information about the crude oil types offered for sale and the location of delivery points. As a result of the most recent determination, MMS held an eligible refiner sale August 5-6, 2008, which was announced on July 30, 2008 (73 FR 44279).

Under § 208.10(e), eligible refiners who purchase royalty oil cannot transfer, assign, or sell their rights or interest in a royalty oil contract without written approval of the MMS Director. This provision is intended to ensure that only qualified eligible refiners benefit from these sales of royalty oil.

(3) Form MMS-4070—Application for the Purchase of Royalty Oil. Under § 208.6, eligible refiners interested in purchasing royalty oil must submit Form MMS-4070, which is located at http://www.mrm.mms.gov/​ReportingServices/​PDFDocs/​4070.pdf. This form serves as certification that the company qualifies as a small and independent refiner, as defined under § 208.2. The MMS uses the information collected on Form MMS-4070 to determine the eligibility of refiners wanting to enter into contracts to purchase royalty oil under 30 CFR 208.2 and to provide a basis for the allocation of available royalty oil among eligible refiners.

Directed Communications to Operators of Federal Oil and Gas Leases. Collection of RIK crude oil and natural gas for eligible refiners and other RIK purchasers requires communication between MMS and the operators of leases to ensure accurate and timely delivery of MMS' royalty share of production volumes. Information collected through MMS' directed communication is essential for MMS to ensure the delivery and acceptance of verifiable quantities and qualities of crude oil and natural gas.

The types of directed communication and the supporting data, that MMS requires from operators, are standard business practices in the oil and gas industry. Sample “Dear Operator” letters are posted on RIK's Web site at http://www.mrm.mms.gov/​rikweb/​RIKOperLts.htm.

Third-Party Agreements. Section 208.9 requires that eligible refiners who purchase royalty oil must submit to MMS two copies of any written third-party agreements (or two copies of a complete written explanation of any oral third-party agreements) and quality differential agreements. However, in practice, MMS does not currently require eligible refiners to submit these written third-party and quality differential agreements. The MMS reserves the right to request these agreements from eligible refiners, if needed.

Offers, Financial Statements, and Surety Instruments for Sales of Royalty Oil and Gas. (1) Offers. The MMS requires eligible refiners and/or other RIK purchasers to report (a) Actual pricing offers for submission when MMS offers production for competitive sale; (b) statements of financial qualification (audited financial statements or 10K report/statement); and (c) surety instruments, such as a Letter of Credit (LOC), bond, prepayment, or parent guaranty when financial qualification is not sufficient. All LOCs are irrevocable.

The MMS typically offers royalty oil and gas production for sale by Invitation for Offers (IFOs) to those offerors who have previously established their qualifications. The MMS evaluates all offers to determine which combination of price and other terms comprises the best return to the U.S. Department of the Treasury and to any affected state.

(2) Financial Statements. The MMS may request that a bidder submit publicly available statements of its financial condition (updated, if needed) or other related qualification information. The MMS evaluates the bidder's financial and/or qualification information to determine the risk of financial default to the Federal Government.

(3) Surety Instruments. Under MMS current practice, eligible refiners are subject to the same requirements as other RIK purchasers regarding MMS-acceptable surety instruments and qualification information. Reporting requirements in § 208.11 discuss surety instruments for eligible refiners. Surety instruments include the broad field of financial instruments that MMS may require, e.g., bonds, prepayments, or parent guaranties. When required, eligible refiners and other RIK purchasers must provide surety documents, i.e., Form MMS-4071, Letter of Credit; Form MMS-4072, Royalty-In-Kind Contract Surety Bond; or other acceptable commercial surety, within 5 business days prior to the first delivery under the contract. For bonds, MMS requires a specific MMS-approved format. All parent guaranties must specify a dollar amount of the guaranty and the effective term. The surety instruments provide the Federal Government with a means to collect money if purchasers do not report and pay the Federal royalties.

Summary: This collection of information is necessary to support MMS' (1) Requirement of operators to deliver RIK crude oil or natural gas volumes to the purchasers who competitively buy these volumes in the unrestricted market; (2) determination of which refiners qualify as small and independent eligible refiners to purchase royalty oil; and (3) requirement of purchasers and eligible refiners to file actual pricing offers, respective financial statements, and MMS-specified surety instruments.

The MMS requests OMB approval to continue to collect this information. Not collecting this information would limit the Secretary's ability to discharge his/her duties and may also result in loss of revenues. The MMS protects proprietary information submitted under this collection, and there are no questions of a sensitive nature included in this information collection.

Frequency of Response: On occasion, weekly, monthly, annually, frequency varies within monthly reporting cycle, or as necessary.

Estimated Number and Description of Respondents: 227 Federal lessees and/or operators; and 80 commercial oil and gas purchasers and/or refiners.

Estimated Annual Reporting and Recordkeeping “Hour” Burden: 1,969 hours.

We have not included in our estimates certain requirements performed in the normal course of business, which are considered usual and customary. The following chart shows the estimated annual burden hours by CFR section and paragraph:

Respondents' Estimated Annual Burden Hours

Citation 30 CFR	Reporting and recordkeeping requirement	Hour burden	Average number of annual responses	Annual burden hours
PART 208—SALE OF FEDERAL ROYALTY OIL, Subpart A—General Provisions
§ 208.4 Royalty oil sales to eligible refiners.
208.4(a)	(a) Determination to take royalty oil in kind. The Secretary may evaluate crude oil market conditions from time to time. * * * The Secretary will review these items and will determine whether eligible refiners have access to adequate supplies of crude oil and whether such oil is available to eligible refiners at equitable prices. * * *	4	4	16
208.4(b)	(b) Sale to eligible refiners. (1) * * * The Secretary may authorize MMS to offer royalty oil for sale to eligible refiners only for use in their refineries * * *	Hour burden covered under § 208.4(a).
208.4(c)	(c) Upon a determination by the Secretary * * * that eligible refiners do have access to adequate supplies of crude oil at equitable prices, MMS will not take royalties in kind from oil and gas leases for exclusive sale to such refiners. * * *	Hour burden covered under § 208.4(a).
208.4(d)	(d) Interim sales. * * * The potentially eligible refiners, individually or collectively, must submit documentation demonstrating that adequate supplies of crude oil at equitable prices are not available for purchase. * * *	Hour burden covered under § 208.4(a).
§ 208.6 General application procedures.
208.6(a) and (b)	(a) To apply for the purchase of royalty oil, an applicant must file a Form MMS-4070 with MMS in accordance with instructions provided in the “Notice of Availability of Royalty Oil” and in accordance with any instructions issued by MMS for completion of Form MMS-4070. The applicant will be required to submit a letter of intent from a qualified financial institution stating that it would be granted surety coverage for the royalty oil for which it is applying, or other such proof of surety coverage, as deemed acceptable by MMS. The letter of intent must be submitted with a completed Form MMS-4070. (b) In addition to any other application requirements specified in the Notice, the following information is required on Form MMS-4070 at the time of application: * * *	1.25	4	5
§ 208.7 Determination of eligibility.
208.7(a)	(a) The MMS will examine each application and may request additional information if the information in the application is inadequate. * * *	0.25	1	* 1
§ 208.8 Transportation and delivery.
208.8(a)	(a) * * * The purchaser must have physical access to the oil at the alternate delivery point and such point must be approved by MMS	1	1	1
208.8(b)	(b) * * * If the delivery point is on or immediately adjacent to the lease, the royalty oil will be delivered without cost to the Federal Government as an undivided portion of production in marketable condition at pipeline connections or other facilities provided by the lessee, unless other arrangements are approved by MMS. If the delivery point is not on or immediately adjacent to the lease, MMS will reimburse the lessee for the reasonable cost of transportation to such point in an amount not to exceed the transportation allowance determined pursuant to 30 CFR part 206. * * *	Hour burden covered by OMB Control Number 1010-0140. This provision is no different than the transportation allowances allowed in 30 CFR part 206 for royalties paid in value. The lessee enters allowance amount on Form MMS-2014.
§ 208.9 Agreements.
208.9(a)	(a) A purchaser must submit to MMS two copies of any written third-party agreements, or two copies of a full written explanation of any oral third-party agreements, relating to the method and costs of delivery of royalty oil, or crude oil exchanged for the royalty oil, from the point of delivery under the contract to the purchaser's refinery. In addition, the purchaser must submit copies of agreements pertaining to quality differentials which may occur between leases and delivery points	1	1	1
§ 208.10 Notices.
208.10(d)	(d) After MMS notification that royalty oil will be taken in kind, the operator shall be responsible for notifying each working interest on the Federal lease. * * *	2	20	40
208.10(e)	(e) A purchaser cannot transfer, assign, or sell its rights or interest in a royalty oil contract without written approval of the Director, MMS. * * * Without express written consent from MMS for a change in ownership, the royalty oil contract shall be terminated. * * *	1	1	1
§ 208.11 Surety requirements. [For eligible refiners]
208.11(a), (b), (d), and (e)	(a) The eligible purchaser, prior to execution of the contract, shall furnish an “MMS-specified surety instrument,” in an amount equal to the estimated value of royalty oil that could be taken by the purchaser in a 99-day period, plus related administrative charges. * * *	Hour burden covered under “Offers, Financial Statements, and Surety Instruments for Sales of Royalty Oil and Gas” section.
	(b) * * * The purchaser or its surety company may elect not to renew the letter of credit at any monthly anniversary date, but must notify MMS of its intent not to renew at least 30 days prior to the anniversary date. * * *	(Forms MMS-4071, Letter of Credit, and MMS-4072, Royalty-In-Kind Contract Surety Bond).
	(d) The “MMS-specified surety instrument” shall be in the form specified by MMS instructions or approved by MMS. * * *
	(e) All surety instruments must be in a form acceptable to MMS and must include such other specific requirements as MMS may require adequately to protect the Government's interests
§ 208.15 Audits.
208.15	Audits of the accounts and books of lessees, operators, payors, and/or purchasers of royalty oil taken in kind may be made annually or at other such times as may be directed by MMS. * * *	Audit process. See note.
Directed Communications to Operators of Federal Oil and Gas Leases
Contract-Directed	Wyoming Gas	3	3	9
	Natural Gas [Texas 8G and Gulf of Mexico (GOM)]	3	108	324
	GOM Oil	3	64	192
	SPR Fill Initiative: In January 2008, 70,000 barrels of oil per day were directed toward the SPR. (Oil volumes directed towards the SPR have been halted as of July 1, 2008. This will continue to be the case for the remainder of the year unless the price of oil drops below $75 bbl. Volumes which were being directed to the SPR have been redirected back to commercial GOM RIK oil sales. Thus, information collection responses will continue at the same level during and after the SPR initiative—the only difference will be under which program they fall.)	3	17	51
	Eligible refiners	3	35	105
Offers, Financial Statements, and Surety Instruments for Sales of Royalty Oil and Gas
Contract-Directed	Offers	1	903	903
	Financial Statements	1	20	20
	Surety Instruments	10	30	300
Total Burden			1,212	1,969
Note: The ORA determined that the audit process is not covered by the PRA because MMS staff asks non-standard questions to resolve exceptions.
* Rounded up from 0.25.

Estimated Annual Reporting and Recordkeeping “Non-hour” Cost Burden: We have identified no “non-hour” cost burdens.

Public Disclosure Statement: The PRA (44 U.S.C. 3501 et seq.) provides that 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.

Comments: Section 3506(c)(2)(A) of the PRA requires each agency to “* * * provide 60-day notice in the Federal Register * * * and otherwise consult with members of the public and affected agencies concerning each proposed collection of information * * *.” Agencies must specifically solicit comments to: (a) Evaluate whether the proposed collection of information is necessary for the agency to perform its duties, including whether the information is useful; (b) evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) enhance the quality, usefulness, and clarity of the information to be collected; and (d) minimize the burden on the respondents, including the use of automated collection techniques or other forms of information technology.

To comply with the public consultation process, we published a notice in the Federal Register on April 9, 2008 (73 FR 19241), announcing that we would submit this ICR to OMB for approval. The notice provided the required 60-day comment period. We received no comments in response to the notice.

If you wish to comment in response to this notice, you may send your comments to the offices listed under the ADDRESSES section of this notice. The OMB has up to 60 days to approve or disapprove the information collection but may respond after 30 days. Therefore, to ensure maximum consideration, OMB should receive public comments by January 14, 2009.

Public Comment Policy: We will post all comments in response to this notice on our Web site at http://www.mrm.mms.gov/​Laws_​R_​D/​FRNotices/​FRInfColl.htm. We will also make copies of the comments available for public review, including names and addresses of respondents, during regular business hours at our offices in Lakewood, Colorado. Before including your address, phone number, e-mail address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public view, we cannot guarantee that we will be able to do so.

MMS Information Collection Clearance Officer: Arlene Bajusz [phone].

Dated: October 21, 2008.

Gregory J. Gould,

Associate Director for Minerals Revenue Management.