[Federal Register Volume 62, Number 24 (Wednesday, February 5, 1997)]
[Rules and Regulations]
[Pages 5329-5332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2822]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Part 250
RIN 1010-AC19
Unitization
AGENCY: Minerals Management Service (MMS), Interior.
ACTION: Final rule.
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SUMMARY: This rule amends the unitization regulations by removing the
two model unit agreements--one for exploration, development, and
production units and the other for development and production units.
The model agreements will be available from the Regional Supervisor.
The rule is written in ``plain English.'' We take this action to
support the President's initiative to reform Government regulations.
Our objective is to shorten the regulation and clarify the wording.
EFFECTIVE DATE: This rule is effective on March 7, 1997.
FOR FURTHER INFORMATION CONTACT: Judith M. Wilson, Engineering and
Standards Branch, telephone (703) 787-1600.
SUPPLEMENTARY INFORMATION: The rules on unitization in 30 CFR part 250,
implementing section 5(a)7 of the Outer Continental Shelf (OCS) Lands
Act Amendments of 1978, are intended to prevent waste (defined in
Sec. 250.2), conserve natural resources (protection of marine life was
incorporated into conservation in 1971; also refers to deterring
unnecessary facilities), and/or protect correlative rights. The rules
include provisions to:
Explain the authority and requirements for unitization;
Provide for compulsory or voluntary unitization;
Explain requirements for competitive reservoir operations;
Explain how a lessee may request a determination of
whether a reservoir is competitive;
Explain how to submit a joint development and production
plan;
Explain the process for voluntary unitization;
Explain the process for compulsory unitization; and
Explain the role of a model agreement.
This final rule does not intend any substantive changes to the
regulations. It shortens existing regulations by removing the model
unit agreements. The ``plain English'' clarifies the existing rule.
There are two model unit agreements--one for exploration,
development, and production units and the other for development and
production units. The model agreements will be available from the
Regional Supervisor. The Regional Supervisor
[[Page 5330]]
can still approve variations from the model agreements for good cause.
If MMS changes the model unit agreements, MMS will publish the revised
model unit agreements in the Federal Register.
Comments
The Federal Register published the proposed rule on June 5, 1996
(61 FR 28525). During the 74-day comment period, MMS received 10 sets
of comments on the proposed rule. Six commenters did not agree with
using ``plain English'' and removing the model unit agreements from the
Code of Federal Regulations. Overall, those who opposed ``plain
English'' are comfortable with the existing language and understand it.
One specific comment on the proposed rule language included that it did
not clarify that ``Pugh'' concepts (State law authorizes unitized
leases to be segregated) do not apply to the OCS, and it omitted
potential hydrocarbon accumulations from the definition of a unit area.
Commenters concerned about removal of the model unit agreements
expressed a need to operate in a climate of greater certainty. The four
remaining comments support the proposed rule change.
Response to Comments
We appreciate the comments we received on the proposed rule. While
there was some opposition to using ``plain English,'' MMS supports the
President's initiative, and we will continue to improve our regulations
with ``plain English.'' ``Plain English'' allows us to express legal
requirements clearly and accurately and communicate information to a
wide audience.
We incorporated many of the specific editorial comments in an
effort to further clarify the rule. Regarding the ``Pugh'' concept, the
1982 Department of the Interior (DOI) Solicitor's Opinion M-36927,
concludes that the Secretary of the Interior does not have the legal
authority to require segregation of unitized portions of leases from
the remainder of leases. We clarified the language in the final rule to
maintain that portions of leases, as well as whole leases, may be
included in units.
It continues to be our policy that we may approve exploratory units
before a successful exploratory well is completed when geophysical data
reasonably support including a lease in the unit. The unit area is
limited to the leases that encompass the productive area of a
reservoir, for reservoir units, or to the leases containing all or part
of a geologic structure, i.e., a potential hydrocarbon accumulation.
In Sec. 250.191(2)(c), we retain the word ``minimum'' for the
number of leases, or portions of leases, in a unit area. Industry
suggested we use the word ``appropriate.'' Our policy is designed to
minimize the number of unitized leases necessary for efficient
exploration, development, and production.
The model unit agreements will be withdrawn. MMS will publish any
``permanent'' changes made to those agreements in the Federal Register
for public notice and comment.
In this rulemaking, MMS is also correcting a typographical error in
30 CFR part 250. The error occurs in Sec. 250.124(a)(3)(i). This
technical amendment amends the sentence in paragraph (i) from ``All PSH
or PSL'' to ``All PSH and PSL.'' This has always been the intent of the
requirement.
Executive Order (E.O.) 12866
This rule is not a significant rule requiring the Office of
Management and Budget (OMB) review under E.O. 12866.
Regulatory Flexibility Act
Since this amendment has no economic effects, DOI has determined
that this rule will have no effect on a substantial number of small
entities.
Paperwork Reduction Act
The information collection requirements in 30 CFR Part 250, Subpart
M, Unitization, are approved by OMB as required by the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The OMB control number
is 1010-0068. The Paperwork Reduction Act of 1995 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.
MMS collects the information under regulations implementing the OCS
Lands Act. MMS uses the information to determine if unitized operations
will conserve natural resources, prevent waste, and protect correlative
rights and Government interests. The information is required to obtain
or retain a benefit as specified in the OCS Lands Act. MMS will protect
information considered confidential or proprietary under applicable law
and under regulations at 30 CFR 250.18 (Data and information to be made
available to the public) and 30 CFR part 252 (OCS Oil and Gas
Information Program).
MMS estimates the annual reporting burden to be approximately 2,424
hours, an average of 45.7 hours per response. This includes the time
for reviewing instructions, searching existing data sources, gathering
and maintaining the data needed, and completing and reviewing the
information collection. MMS received no comments on the information
collection aspects of the proposed rule during the public comment
period.
You may direct comments on the burden estimate or any other aspect
of this collection to the Information Collection Clearance Officer,
Mail Stop 2053, Minerals Management Service, 381 Elden Street, Herndon,
VA 20170-4817; and to the Office of Information and Regulatory Affairs,
Office of Management and Budget, Desk Officer for the Department of the
Interior (OMB No. 1010-0068), Room 10102, 725 17th Street NW.,
Washington, D.C. 20503.
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, Governmental Actions and Interference with Constitutionally
Protected Property Rights, is not required.
Unfunded Mandates 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 State,
local, and tribal governments, or the private sector.
E.O. 12988
DOI has certified to OMB that this rule meets the applicable civil
justice reform standards provided in sections 3(b)(2) of E.O. 12988.
National Environmental Policy Act
MMS has examined the rulemaking and has determined that this rule
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)).
List of Subjects in 30 CFR Part 250
Continental shelf, Environmental impact statements, Environmental
protection, Government contracts, Incorporation by reference,
Investigations, Mineral royalties, Oil and gas development and
production, Oil and gas exploration, Oil and gas reserves, Penalties,
Pipelines, Public lands--mineral resources, Public lands--rights-of-
way, Reporting and recordkeeping requirements, Sulphur development and
production, Sulphur exploration, Surety bonds.
[[Page 5331]]
Dated: January 27, 1997.
Sylvia V. Baca,
Assistant Secretary, Land and Minerals Management.
For the reasons stated in the preamble, the Minerals Management
Service amends 30 CFR part 250 as follows:
PART 250--OIL AND GAS AND SULFUR OPERATIONS IN THE OUTER
CONTINENTAL SHELF
1. The authority citation for part 250 continues to read as
follows:
Authority: 43 U.S.C. 1334.
Subpart H--Oil and Gas Production Safety Systems
2. In Sec. 250.124, paragraph (a)(3)(i) is revised as follows:
Sec. 250.124 Production safety-system testing and records.
(a) * * *
(3) * * *
(i) All PSH and PSL,
* * * * *
Subpart M--Unitization
3. Subpart M is revised to read as follows:
Subpart M--Unitization
Sec.
250.190 What is the purpose of this subpart?
250.191 What are the requirements for unitization?
250.192 What if I have a competitive reservoir on a lease?
250.193 How do I apply for voluntary unitization?
250.194 How will MMS require unitization?
Subpart M--Unitization
Sec. 250.190 What is the purpose of this subpart?
This subpart explains how Outer Continental Shelf (OCS) leases are
unitized. If you are an OCS lessee, use the regulations in this subpart
for both competitive reservoir and unitization situations. The purpose
of joint development and unitization is to:
(a) Conserve natural resources;
(b) Prevent waste; and/or
(c) Protect correlative rights, including Federal royalty
interests.
Sec. 250.191 What are the requirements for unitization?
(a) Voluntary unitization. You and other OCS lessees may ask the
Regional Supervisor to approve a request for voluntary unitization. The
Regional Supervisor may approve the request for voluntary unitization
if unitized operations:
(1) Promote and expedite exploration and development; or
(2) Prevent waste, conserve natural resources, or protect
correlative rights, including Federal royalty interests, of a
reasonably delineated and productive reservoir.
(b) Compulsory unitization. The Regional Supervisor may require you
and other lessees to unitize operations if unitized operations are
necessary to:
(1) Prevent waste;
(2) Conserve natural resources; or
(3) Protect correlative rights, including Federal royalty
interests, of a reasonably delineated and productive reservoir.
(c) Unit area. The area that a unit includes is the minimum number
of leases that will allow the lessees to minimize the number of
platforms, facility installations, and wells necessary for efficient
exploration, development, and production of mineral deposits, oil and
gas reservoirs, or potential hydrocarbon accumulations. A unit may
include whole leases or portions of leases.
(d) Unit agreement. You, the other lessees, and the unit operator
must enter into a unit agreement. The unit agreement must: allocate
benefits to unitized leases, designate a unit operator, and specify the
effective date of the unit agreement. The unit agreement must terminate
when: the unit no longer produces unitized substances, and the unit
operator no longer conducts drilling or well-workover operations
(Sec. 250.13) under the unit agreement, unless the Regional Supervisor
orders or approves a suspension of production under Sec. 250.10.
(e) Unit operating agreement. The unit operator and the owners of
working interests in the unitized leases must enter into a unit
operating agreement. The unit operating agreement must describe how all
the unit participants will apportion all costs and liabilities incurred
maintaining or conducting operations. When a unit involves one or more
net-profit-share leases, the unit operating agreement must describe how
to attribute costs and credits to the net-profit-share lease(s), and
this part of the agreement must be approved by the Regional Supervisor.
Otherwise, you must provide a copy of the unit operating agreement to
the Regional Supervisor, but the Regional Supervisor does not need to
approve the unit operating agreement.
(f) Extension of a lease covered by unit operations. If your unit
agreement expires or terminates, or the unit area adjusts so that no
part of your lease remains within the unit boundaries, your lease
expires unless:
(1) Its initial term has not expired;
(2) You conduct drilling, production, or well-reworking operations
on your lease consistent with applicable regulations; or
(3) MMS orders or approves a suspension of production or operations
for your lease.
(g) Unit operations. If your lease, or any part of your lease, is
subject to a unit agreement, the entire lease continues for the term
provided in the lease, and as long thereafter as any portion of your
lease remains part of the unit area, and as long as operations continue
the unit in effect.
(1) If you drill, produce or perform well-workover operations on a
lease within a unit, each lease, or part of a lease, in the unit will
remain active in accordance with the unit agreement. Following a
discovery, if your unit ceases drilling activities for a reasonable
time period between the delineation of one or more reservoirs and the
initiation of actual development drilling or production operations and
that time period would extend beyond your lease's primary term or any
extension under Sec. 250.13, the unit operator must request and obtain
MMS approval of a suspension of production under Sec. 250.10 in order
to keep the unit from terminating.
(2) When a lease in a unit agreement is beyond the primary term and
the lease or unit is not producing, the lease will expire unless:
(i) You conduct a continuous drilling or well reworking program
designed to develop or restore the lease or unit production; or
(ii) MMS orders or approves a suspension of operations under
Sec. 250.10.
Sec. 250.192 What if I have a competitive reservoir on a lease?
(a) The Regional Supervisor may require you to conduct development
and production operations in a competitive reservoir under either a
joint Development and Production Plan or a unitization agreement. A
competitive reservoir has one or more producing or producible well
completions on each of two or more leases, or portions of leases, with
different lease operating interests. For purposes of this paragraph, a
producible well completion is a well which is capable of production and
which is shut in at the well head or at the surface but not necessarily
connected to production facilities and from which the operator plans
future production.
[[Page 5332]]
(b) You may request that the Regional Supervisor make a preliminary
determination whether a reservoir is competitive. When you receive the
preliminary determination, you have 30 days (or longer if the Regional
Supervisor allows additional time) to concur or to submit an objection
with supporting evidence if you do not concur. The Regional Supervisor
will make a final determination and notify you and the other lessees.
(c) If you conduct drilling or production operations in a reservoir
determined competitive by the Regional Supervisor, you and the other
affected lessees must submit for approval a joint plan of operations.
You must submit the joint plan within 90 days after the Regional
Supervisor makes a final determination that the reservoir is
competitive. The joint plan must provide for the development and/or
production of the reservoir. You may submit supplemental plans for the
Regional Supervisor's approval.
(d) If you and the other affected lessees cannot reach an agreement
on a joint Development and Production Plan within the approved period
of time, each lessee must submit a separate plan to the Regional
Supervisor. The Regional Supervisor will hold a hearing to resolve
differences in the separate plans. If the differences in the separate
plans are not resolved at the hearing and the Regional Supervisor
determines that unitization is necessary under Sec. 250.191(b), MMS
will initiate unitization under Sec. 250.194.
Sec. 250.193 How do I apply for voluntary unitization?
(a) You must file a request for a voluntary unit with the Regional
Supervisor. Your request must include:
(1) A draft of the proposed unit agreement;
(2) A proposed initial plan of operation;
(3) Supporting geological, geophysical, and engineering data; and
(4) Other information that may be necessary to show that the
unitization proposal meets the criteria of Sec. 250.190.
(b) The unit agreement must comply with the requirements of this
part. MMS will maintain and provide a model unit agreement for you to
follow. If MMS revises the model, MMS will publish the revised model in
the Federal Register. If you vary your unit agreement from the model
agreement, you must obtain the approval of the Regional Supervisor.
(c) After the Regional Supervisor accepts your unitization
proposal, you, the other lessees, and the unit operator must sign and
file copies of the unit agreement, the unit operating agreement, and
the initial plan of operation with the Regional Supervisor for
approval.
Sec. 250.194 How will MMS require unitization?
(a) If the Regional Supervisor determines that unitization of
operations within a proposed unit area is necessary to prevent waste,
conserve natural resources of the OCS, or protect correlative rights,
including Federal royalty interests, the Regional Supervisor may
require unitization.
(b) If you ask MMS to require unitization, you must file a request
with the Regional Supervisor. You must include a proposed unit
agreement as described in Secs. 250.191(d) and 250.193(b); a proposed
unit operating agreement; a proposed initial plan of operation;
supporting geological, geophysical, and engineering data; and any other
information that may be necessary to show that unitization meets the
criteria of Sec. 250.190. The proposed unit agreement must include a
counterpart executed by each lessee seeking compulsory unitization.
Lessees who seek compulsory unitization must simultaneously serve on
the nonconsenting lessees copies of:
(1) The request;
(2) The proposed unit agreement with executed counterparts;
(3) The proposed unit operating agreement; and
(4) The proposed initial plan of operation.
(c) If the Regional Supervisor initiates compulsory unitization,
MMS will serve all lessees of the proposed unit area with a proposed
unitization plan and a statement of reasons for the proposed
unitization.
(d) The Regional Supervisor will not require unitization until MMS
provides all lessees of the proposed unit area written notice and an
opportunity for a hearing. If you want MMS to hold a hearing, you must
request it within 30 days after you receive written notice from the
Regional Supervisor or after you are served with a request for
compulsory unitization from another lessee.
(e) MMS will not hold a hearing under this paragraph until at least
30 days after MMS provides written notice of the hearing date to all
parties owning interests that would be made subject to the unit
agreement. The Regional Supervisor must give all lessees of the
proposed unit area an opportunity to submit views orally and in writing
and to question both those seeking and those opposing compulsory
unitization. Adjudicatory procedures are not required. The Regional
Supervisor will make a decision based upon a record of the hearing,
including any written information made a part of the record. The
Regional Supervisor will arrange for a court reporter to make a
verbatim transcript. The party seeking compulsory unitization must pay
for the court reporter and pay for and provide to the Regional
Supervisor within 10 days after the hearing three copies of the
verbatim transcript.
(f) The Regional Supervisor will issue an order that requires or
rejects compulsory unitization. That order must include a statement of
reasons for the action taken and identify those parts of the record
which form the basis of the decision. Any adversely affected party may
appeal the final order of the Regional Supervisor under 30 CFR part
290.
[FR Doc. 97-2822 Filed 2-4-97; 8:45 am]
BILLING CODE 4310-MR-P
