[Federal Register Volume 60, Number 59 (Tuesday, March 28, 1995)]
[Proposed Rules]
[Pages 15888-15891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7534]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Chapter II
Review of Existing Regulations
AGENCY: Minerals Management Service, Interior.
ACTION: Review of regulations; request for comment.
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SUMMARY: In a March 1, 1994, document (59 FR 9718), the Minerals
Management Service (MMS) announced its intent to establish periodic
reviews of its significant regulations and asked the public to
participate in the reviews. The purpose of the reviews is to identify
and eliminate regulations that are obsolete, ineffective, or
burdensome. In addition, the reviews are meant to identify essential
regulations that should be revised either because they are unclear,
inefficient, or interfere with normal market conditions. Comments were
received from the March 1 document (the Notice) and acknowledged by MMS
in a July 15, 1994, document (59 FR 36108).
The purpose of this document is to: Provide a status update of the
MMS action taken on the regulations identified in the March 1 review;
and provide the public a second opportunity to identify MMS regulations
that should be eliminated or revised. A list of regulations identified
for elimination will be sent to the President by June 1, 1995.
DATES: Written comments must be received by April 27, 1995.
ADDRESSES: Mail written comments to Department of the Interior;
Minerals Management Service; Mail Stop 4013; 1849 C Street NW.;
Washington, DC 20240; Attention: Bettine Montgomery, MMS Regulatory
Coordinator, Policy and Management Improvement.
FOR FURTHER INFORMATION CONTACT:
Bettine Montgomery, Policy and Management Improvement, telephone (202)
208-3976; Fax (202) 208-4891.
SUPPLEMENTARY INFORMATION: MMS began a review of its regulations in
early 1994 pursuant to the directives contained in the President's
Executive Order 12866. The Executive Order calls for periodic
regulatory reviews to ensure that all significant regulations are
efficient and effective, impose the least possible burden upon the
public, and are tailored no broader than necessary to meet the agency's
objectives and presidential priorities.
MMS invited the public to participate in the regulatory review. The
invitation was sent out via different media, namely a notice dated
March 1, 1994 (59 FR 9718), MMS and independent publications, and
public speeches by MMS officials during that time.
MMS received approximately 40 public comments which were almost
equally divided between its Royalty Management and Offshore Minerals
Management Programs. MMS acknowledged the comments in a July 15, 1994,
notice (59 FR 36108) and set forth its planned actions to address the
comments, along with an estimated timetable for the actions.
This notice updates the MMS planned actions and related timetables.
This notice also requests additional comments form the public
identifying regulations that should be either eliminated or revised.
In recent years, MMS has made an effort to work more closely with
its regulated customers and will increase [[Page 15889]] this effort in
the future. During the past year, MMS has worked with representatives
from organizations affected by its regulations and brought them into
the early development of two major rulemakings. The representatives
formed committees or work groups under the negotiated rulemaking
process. They either have been or will be working together to form a
consensus on some very difficult and sometimes contentious issues. The
representatives function as the spokesperson on behalf of either
industry, States, Tribes, or local governments.
MMS is committed to working more closely with its regulated
customers in the future; moving from a process of regulation to one of
partnership, with common objectives. In a speech on February 21, 1995,
the President asked all Federal agencies to pursue a similar course. He
asked them to change their regulatory culture by consulting more
frequently with the people affected by their (the agency) regulations,
in particular by convening groups consisting of front-line regulators
and the regulated public, in order to find ways to achieve the public
interest while avoiding costly litigation. The President also asked all
agencies to identify (by June 1, 1995) regulations that can be
eliminated and to change the way they measure performance (focusing on
achieving regulatory objectives rather than on increasing compliance
orders). MMS is interested in comments from the public on how we can
best respond to the President's guidance.
MMS regulations are found at Title 30 in the Code of Federal
Regulations. Parts 201 through 243 contain regulations applicable to
MMS' Royalty Management Program; Parts 250 through 282 are applicable
to MMS' Offshore Minerals Management; and Part 290 is applicable to
Administrative Appeals.
Status Report
The following is a discussion showing the progress MMS has made in
reviewing its regulations in response to the comments received to the
Notice.
A. Offshore Minerals Management (OMM) Program
In response to the public comments on the Notice, OMM is currently
reviewing the following eight sections of OMM regulations.
1. Regulations Applicable to Production in Deepwater (30 CFR Part 250,
Subpart H, Production)
Comments Received--(a) ``Revise current regulations to provide for
approval of extended flaring periods under certain situations (e.g.,
deepwater prospects, well tests, etc.) and clarify criteria for flaring
or venting small amounts of gas'',
(b) ``Revise requirements associated with subsea installations * *
*, etc.
Action Planned--An MMS workgroup is finalizing a report that
recommends revising various policies and regulations associated with
deepwater development. The workgroup will submit the final report to
MMS management in March 1995. The report will include the following
recommendations:
For (a) above, current regulations provide sufficient flexibility
to meet industry needs while all parties gain greater experience with
deepwater operations. MMS will continue approving requests for extended
gas flaring and well testing on a case-by-case basis. Regions will
establish regional guidelines for approval of extended testing and
flaring.
For (b) above, revise the leakage rates and extend the testing
frequency and closure time requirements for underwater safety valves
and subsurface safety valves for subsea wells. MMS will consider an
alternate arrangement of underwater safety valves for subsea wells on a
case-by-case basis. MMS will not revise the leakage rate requirements
for surface safety valves at this time. This recommendation also
addresses emergency shutdown system requirements for subsea wells.
Timetable--Based on the recommendations of the workgroup, MMS will
formulate a policy on deepwater activities. MMS will continue to work
with operators under existing regulations when appropriate.
2. Regulations Applicable to Blowout Preventer (BOP) Testing and
Maintenance Requirements (30 CFR 250.56 and 57)
Comments Received--``Revise BOP testing regulations to allow for
less frequent and shorter tests. Allow 14 day BOP test interval vs.
current 7 day * * *.''
Action Planned--MMS recently completed a study to assess the
performance of BOP systems during testing. The results of this study
did not support industry claims about the high reliability of BOP
equipment or provide justification for less frequent testing.
Timetable--MMS will continue its review of BOP testing and
maintenance requirements, with a focus on stricter maintenance
requirements. With improved performance, MMS would consider if further
flexibility on BOP testing frequency can be provided to industry. At
this time, MMS does not plan on revising its regulations.
3. Regulations Governing Safety and Pollution Prevention Equipment (30
CFR 250.126)
Comments Received--``Reduce associated administrative burden on
lessees and operators by eliminating unnecessary record keeping
requirements (i.e., inventory lists, paperwork notifications, etc.).''
Action Planned--MMS considered the use of a negotiated rulemaking
as part of this review.
Timetable--MMS has initiated the ``convening'' stage of the
negotiated rulemaking. This stage is nearing completion and the
``convener's'' recommendation on whether to proceed with the negotiated
rulemaking will be made by April 1995. If the ``convener'' recommends
against a negotiated rulemaking, MMS will use other means to address
this issue.
4. Regulations Governing Conservation of Resources and Diligence (30
CFR 250, Subpart A, General and Subpart K, Oil and Gas Production
Rates)
Comments Received--(a) ``Revise Suspension of Production approval/
lease holding criteria * * *'', (b) ``Revise Determination of Well
Producibility to make wireline testing and/or mud logging analysis
optional * * *'', (c) ``revise current regulations to provide for
approval of extended flaring periods * * *'', (d) ``Relax restrictions
on commingling reservoirs in a common wellbore * * *'', (e) ``Allow
flexibility in the methods of testing subsea wells. * * *'', etc.
Action Planned--(a), (b), and, (d) above have been reviewed by MMS.
MMS is considering options to revise the regulations. For (c) above,
MMS will review current regulations when air quality studies currently
underway are completed. For (e) above, MMS will not change the
regulations. Current regulations allow operators to request that
different testing methods be allowed when conventional testing is
impractical.
Timetable--For (a), (b), and, (d) above, the course of action
should be determined by the summer of 1995. Rulemaking will be
initiated if appropriate.
5. Regulations Regarding Construction and Removal of Platforms and
Structures (30 CFR 250, Subpart I, Platforms and Structures)
Comments Received--(a) ``Modify platform design wave return period
calculation by placing a cap of 100 years on the field life calculation
* * *'', (b) [[Page 15890]] ``Adopt API RP2A (20th edition) Section 14,
Surveys, in its entirety * * *'', (c) ``Revise site clearance
requirements * * *'', (d) ``Revise requirements for placing protective
domes over well stubs * * *'', etc.
Action Planned--For (a) above, MMS has reviewed this request. MMS
is reviewing options to revise its regulations. For (b) above, MMS will
not modify the regulations. Current rules allow operators to petition
for longer inspection intervals. For (c) and (d) above, MMS published a
notice on February 1, 1995 (60 FR 6281), asking for comments on these
issues. Based on the responses, MMS will formulate a policy.
Timetable--For (a) above, the course of action should be determined
by the summer of 1995. Appropriate action will follow. For (c) and (d)
above, comments were due on March 3, 1995. MMS will consider regulatory
options following analysis of the comments. A course of action should
be established by the fall of 1995.
6. Regulations Applicable to Directional Surveys (30 CFR 250.51)
Comments Received--``Revise directional survey requirements to
allow a composite measurement-while-drilling directional survey to be
acceptable * * *''
Action Planned--MMS has completed a review of this issue and is
planning to update the regulations to keep up with current technology.
Timetable--Proposed changes to the regulations are being circulated
internally. Proposed rule should be prepared by summer of 1995.
7. Regulations Applicable to Daily Pollution Inspection Requirements
(30 CFR 250.41)
Comments Received--``Revise current requirements for daily
pollution inspection of unmanned production facilities * * *.''
Action Planned--MMS is currently studying this issue to see if
changes to the regulations are warranted.
Timetable--By summer of 1995, MMS will make a decision on whether
changes to the regulations are needed.
8. Regulations Applicable to Production Safety System Training (30 CFR
250.214)
Comments Received--``Revise training regulations to reduce the
associated burden on operators by modifying requirements (e.g.,
frequency, refresher requirements, structure, etc.) and allow expanded
training delivery modes.''
Action Planned--MMS has issued an Advance Notice of Proposed
Rulemaking and received comments. A Notice of Proposed Rulemaking (NPR)
which would provide greater flexibility to Industry is being prepared
at this time.
Timetable--The NPR should be published by late 1995.
B. Royalty Management Program (RMP)
RMP is reviewing regulations in the following six areas.
1. Regulations Applicable to Valuation of Gas Produced From Unitized/
Communitized Properties (Takes vs. Entitlements). Also, Regulations
Applicable to Non-Arm's-Length Sales (30 CFR 202), and Payment/
Reporting Systems
To resolve the complex issues dealing with the valuation of gas for
royalty purposes, MMS is using the negotiated rulemaking process. This
process enables MMS to arrive at a consensus with industry, the States,
and Indian tribes. All Committee meetings are announced in the Federal
Register.
Comments Received--``Regulations concerning Takes vs. Entitlements
are confusing and make compliance difficult * * * valuing gas under a
non-arm's-length transaction is burdensome * * *.''
Action Planned on Federal Leases--Formed the Federal Gas Valuation
Negotiated Rulemaking Committee with representation from MMS, industry,
and the States. The Committee addressed valuation of gas produced from
agreements (Takes vs. Entitlements), the benchmark valuation system for
valuing gas sold under non-arm's-length contracts, and reporting
simplicity and administrative cost savings. MMS is now preparing a
proposed rule based on the consensus arrived at by the Committee in
early February.
Timetable--MMS plans to publish a proposed rule by mid-1995.
Action Planned on Indian Leases--MMS has obtained approval for a
negotiated rulemaking for revising Indian gas valuation regulations. An
informal MMS group had been studying the issues, but MMS has now
superseded this group with the Indian Gas Valuation Negotiated
Rulemaking Committee. This Committee consists of representatives from
MMS, various Indian tribes, the Council of Energy Resources Tribes, the
Bureau of Indian Affairs, and industry. The Committee will discuss
major portion analysis, dual accounting, and percentage of proceeds
contracts.
Timetable--The first meeting of the Committee was held on February
22 and 23, 1995.
2. Regulations Clarifying the Responsibilities of Payors and Lessees
(30 CFR 218 and 211)
Comments Received--``Existing regulations are unclear as to the
obligations and liabilities of payors and lessees.''
Action Planned--A workgroup was assembled to review the options
associated with this issue. The workgroup reached agreement and
developed a proposed rule. The rule will establish liability for
royalty due on Federal and Indian leases, and will clarify the
responsibility to pay and report royalty and other payments.
Timetable--MMS plans to publish the proposed rule by mid-1995.
3. Refunds Due to Industry Which Are Controlled by Section 10 of the
Outer Continental Shelf Lands Act
Comments Received--Industry has difficulty complying with the 2-
year limitation on refunds. There is an inequity between the 2-year
refund requirement and the no-year limitation for MMS to collect
royalty underpayments.
Action Taken--On July 28, 1994, MMS published a final rule titled
``Offsets, Recoupments and Refunds of Excess Payments of Royalties,
Rentals, Bonuses, or Other Amounts Under Federal Offshore Minerals
Leases'' (59 FR 38359). This rule established procedures for obtaining
refunds and credits of excess payments and clarifies what payments are
not subject to Section 10's requirements. The rule also provides for a
de minimus exception to the MMS approval process.
4. Penalties and Assessments
Comments Received--Recent regulations and pending legislation tend
toward ever increasing penalties and assessments. Sufficient incentives
already exist to ensure correct and timely payments. Many reporting
errors by payors are due to unavoidable circumstances. Severe penalties
are unjustified.
Action Taken--MMS has used penalties and assessments not so much to
punish but to ensure compliance with the Federal Oil and Gas Royalty
Management Act (FOGRMA). FOGRMA requires MMS to distribute money to
shareholders in the same month it is collected from payors on Federal
and Indian leases. Without an effective strategy to encourage timely
and accurate reporting, the collection and distribution system could
quickly fall [[Page 15891]] out of compliance with the demands of the
legislation. MMS, however, is looking at situations where it can ease
some of the reporting requirements and minimize assessments. For
example, MMS has taken action to adjust its billing thresholds to
minimize ``nuisance'' bills for trivial assessments.
In a related area, MMS is addressing the financial impacts incurred
by payors that fail to timely file certain forms. MMS formed a study
group to evaluate the existing regulatory requirements for oil and gas
allowances including the assessments and sanctions for untimely filed
forms. The Study Group was comprised of representatives from MMS,
industry, and the State and Tribal Royalty Audit Committee. It
addressed the need for and equity of allowance payback and late payment
interest charges for untimely filed forms. The Study Group found that
the penalties were not consistent with the crime and proposed
alternatives to the payback penalty. MMS has prepared two proposed
rules to implement the Study Group's recommendations--one dealing with
oil and gas, and one dealing with coal.
Timetable--MMS plans to publish the proposed rules by mid-1995.
5. The Appeals Process
Comments Received--Current appeals process is too long.
Action Taken--MMS has undertaken a streamlining review of its
administrative appeals process. MMS has transferred decisionmaking on
routine appeals from the Appeals Division to the Royalty Management
Program. This has reduced the Appeals Division's workload by 20 percent
and freed up staff to work on more complex appeals cases.
MMS also initiated three pilot programs in its streamlining
efforts. One pilot program aims to decrease the time and expense
incurred by MMS in its preparation of an appellant's administrative
record. A second pilot program involves reformatting the decisionmaking
process to speed the issuance of shorter, more timely decisions. The
third pilot program will test the use of alternative dispute resolution
mechanisms to resolve many of the administrative appeals.
Timetable--The first two pilots were put in place the latter half
of 1994, and the third pilot began the end of February 1995.
6. Other
Comments Received--MMS received unfavorable comments on proposed
rules concerning administrative offset and credit adjustments. Comments
were also received about closing audit periods and receiving orders to
perform self-audits. Finally, there were comments received about the
estimated royalty payment system and that guidance given to payors over
the phone was overruled by RMP auditors.
Action Taken--The administrative offset and credit adjustment rules
have been consolidated as a final rule. MMS recognizes that many
companies oppose these rules but considers the rules to be important
enough that they should proceed to the final rulemaking stage.
Some of the issues regarding closing audit periods and orders to
perform recalculations of royalties are being addressed in a manual MMS
is preparing on audit procedures. With respect to the other comments
received, MMS will address them in order ways, such as ongoing customer
service initiatives.
Timetable--Publication of the administrative offset-credit
adjustment final rule is scheduled for mid-1995. The audit manual will
be available later this year.
Dated: March 22, 1995.
Cynthia Quarterman,
Acting Director, Minerals Management Service.
[FR Doc. 95-7534 Filed 3-27-95; 8:45 am]
BILLING CODE 4310-MR-M
