[Federal Register Volume 61, Number 109 (Wednesday, June 5, 1996)]
[Proposed Rules]
[Pages 28525-28528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13990]
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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: Notice of proposed rulemaking.
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SUMMARY: MMS proposes to amend its unitization regulations by removing
the model unit agreements for exploration, development, and production
units and development and production units. The model agreements would
be available from the Regional Supervisor. The rule would also be
written in ``plain English.'' We take this action to support the
President's initiative to reform Government regulations. Our interest
is to shorten the regulation and clarify the wording.
DATES: MMS will consider all comments received by August 5, 1996. We
will begin reviewing comments at that time and may not fully consider
comments we receive after August 5, 1996.
ADDRESSES: Mail or hand-carry written comments to the Department of the
Interior, Minerals Management Service, 381 Elden Street, Mail Stop
4700, Herndon, Virginia 22070-4817, Attention: Chief, Engineering and
Standards Branch.
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, were published on May 2, 1980. The rules were
amended on February 16, 1982. The amended rulemaking removed the
provisions that required segregation of the portion of the OCS oil and
gas lease not included in the unit agreement. That amendment was based
on the Department of the Interior (DOI) Solicitor's Opinion M-36927.
The rules were amended again in April 1988, when MMS restructured and
consolidated into one document the rules governing oil, gas, and
sulphur exploration, development, and production operations on the OCS.
The model unit agreements were incorporated at this time. The last
revision was in July 1991, to include sulphur operations in
unitization.
This subpart, 30 CFR part 250, Subpart M, Unitization, is intended
to
[[Page 28526]]
prevent waste, conserve natural resources (protection of marine life
was incorporated into conservation in 1971), 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 proposed rule does not intend any substantive changes to this
regulation. It would shorten existing regulations by removing the model
unit agreements. The ``plain English'' would clarify the rule.
There are two model unit agreements, one for exploration,
development, and production units, the other for development and
production units. The model agreements would continue to be available
from the Regional Supervisor. The Regional Supervisor could approve
variations from the model agreements for good cause.
Author: This document was prepared by Judy Wilson, Engineering and
Standards Branch, Offshore Resource Evaluation Division, MMS.
Executive Order (E.O.) 12866
This rule does not meet the criteria for a significant rule
requiring review by the Office of Management and Budget under E.O.
12866.
Regulatory Flexibility Act
Since this proposed amendment has no economic effects, DOI has
determined that this proposed rule will not have a significant effect
on a substantial number of small entities.
Paperwork Reduction Act
This proposed rule contains a collection of information which has
been submitted to the Office of Management and Budget (OMB) for review
and approval under section 3507(d) of the Paperwork Reduction Act of
1995. As part of our continuing effort to reduce paperwork and
respondent burden, MMS invites the public and other Federal agencies to
comment on any aspect of the reporting burden. Submit your comments to
the Office of Information and Regulatory Affairs, OMB, Attention Desk
Officer for the Department of the Interior (OMB control number 1010-
0068), Washington, DC 20503. Send a copy of your comments to the Chief,
Engineering and Standards Branch; Mail Stop 4700; Minerals Management
Service; 381 Elden Street; Herndon, Virginia 22070-4817. You may obtain
a copy of the proposed collection of information by contacting the
Bureau's Information Collection Clearance Officer at (703) 787-1242.
The title of this collection of information is ``30 CFR 250,
Subpart M, Unitization.'' OMB previously approved it under OMB control
number 1010-0068.
The collection of information consists of a proposed unit
agreement; a proposed initial plan of operation; supporting geological,
geophysical, and engineering data; and any other information necessary
to show that the unitization proposal meets the criteria in
Sec. 250.190. If approved, respondents will submit to MMS a unit
agreement, unit operation agreement, and the initial plan of operation
as the Regional Supervisor may require.
MMS uses the information to ensure that operations under the
proposed unit agreement will prevent waste, conserve natural resources,
and protect correlative rights including the Government's interests.
Respondnets are Federal OCS oil, gas, and sulphur lessees. MMS
receives approximately 53 responses each year. The frequency of
submission varies.
MMS estimates the annual reporting burden to be approximately 2,424
hours, an average of 45.7 hours per response. Based on $35 per hour,
the burden hour cost to respondents is estimated to be $84,840. The
estimate of other annual costs to respondents is unknown.
MMS will summarize written responses to this notice and address
them in the final rule. All comments will become a matter of public
record.
1. MMS specifically solicits comments on the following questions:
(a) Is the proposed collection of information necessary for the
proper performance of MMS's functions, and will it be useful?
(b) Are the estimates of the burden hours of the proposed
collection reasonable?
(c) Do you have any suggestions that would enhance the quality,
clarity, or usefulness of the information to be collected?
(d) Is there a way to minimize the information collection burden on
those who are to respond, including through the use of appropriate
automated electronic, mechanical, or other forms of information
technology?
2. In addition, the Paperwork Reduction Act of 1995 requires
agencies to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. MMS needs
your comments on this item. Your response should split the cost
estimate into two components:
(a) Total capital and startup cost component and
(b) Annual operation, maintenance, and purchase of services
component.
Your estimates should consider the costs to generate, maintain, and
disclose or provide the information. You should describe the methods
you use to estimate major cost factors, including system and technology
acquisition, expected useful life of capital equipment, discount
rate(s), and the period over which you incur costs. Capital and startup
costs include, among other items, computers and software you purchase
to prepare for collecting information; monitoring, sampling, drilling,
and testing equipment; and record storage facilities. Generally, your
estimates should not include equipment or services purchased: before
October 1, 1995; to comply with requirements not associated with the
information collection; for reasons other than to provide information
or keep records for the Government; or as part of customary and usual
business or private practice.
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.
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
This rule does not contain any unfunded mandates to State, local,
or tribal governments or the private sector.
E.O. 12988
DOI has certified to OMB that this proposed rule meets the
applicable civil justice reform standards provided in Sections 3(b)(2)
of E.O. 12988.
[[Page 28527]]
National Environmental Policy Act
MMS has examined the proposed 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.
Bob Armstrong,
Assistant Secretary, Land and Minerals Management.
For the reasons set forth in the preamble, the Minerals Management
Service proposes to amend 30 CFR part 250 as follows:
PART 250--SUBPART M--UNITIZATION
1. The authority citation for part 250 continues to read as
follows:
Authority: 43 U.S.C. 1334.
2. 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 my lease?
250.193 How do I get approval 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 voluntary and required unitization situations. The purpose of
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) Will promote and expedite lease exploration and development; or
(2) Are necessary to prevent waste, conserve natural resources, or
protect correlative rights, including Federal royalty interests, of a
reasonably delineated and productive reservoir.
(b) Compuslory unitization. The Regional Supervisor may require you
and other lessees to unitize operations if unitized operations are
necessary to prevent waste, conserve natural resources, or protect
correlative rights 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. A unit may include whole
leases of portions of leases.
(d) Unit agreement. You and the other lessees of the leases in the
unit must enter into a unit agreement that allocates benefits to
unitized leases. The unit agreement must designate a unit operator and
specify the effective date of the unit agreement. A unit agreement of
terminates when the unit no longer produces unitized substances and the
unit operator no longer conducts drilling or well-workover operations
under the unit agreement, unless the Director 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 agreements 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).
(f) Termination or adjustment of a unit agreement. If your unit
agreement expires or terminates, or if MMS adjusts the unit area to
exclude your lease from the unit, 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 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) Drilling, production, and well-reworking operations performed
on any lease in accordance with the unit agreement benefit all leases
in the unit. If your unit ceases drilling activities for a period
between the discovery and delineation of one or more reservoirs and the
initiation of actual development and production operations and that
time period would extend beyond your lease's primary term, you must
request and obtain MMS approval of a suspension of production under
Sec. 250.10.
(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 my lease?
(a) The Regional Supervisor may require you to conduct development
and production operations in a competitive reservoir under either a
voluntary 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,
with different owners. For purposes of this paragraph, a producible
well completion is a well which is capable of production and which is
shut in but not necessarily connected to production facilities, and
from which the operator plans future production.
(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.
[[Page 28528]]
(c) If you conduct drilling or production operations in a
competitive reservoir, 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 may 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 get approval for voluntary unitization?
(a) You must file a request with the Regional Supervisor for
approval of a unit. 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 provide a model unit agreement for you to follow. If you
make changes to the model agreement, you must obtain the approval of
the Regional Supervisor.
(c) After the Regional Supervisor approves your unitization
proposal, you and the unit operator must sign it and file copies of the
unit agreement, the unit operating agreement, and the plan of operation
with the Regional Supervisor.
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 order
unitization according to a plan for unitization. This plan will conform
to the model unit agreement available from the Regional Supervisor
unless the Regional Supervisor approves a variation.
(b) If you ask MMS to compel unitization, you must file a request
with the Regional Supervisor. Include a proposed unit agreement as
described in Sec. 250.192(b), a proposed unit operating agreement, and
a proposed initial plan of operation together with 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 seeking compulsory unitization must simultaneously serve, on
the non-consenting 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 copy of the
plan for unitization and a statement of reasons for the proposed
unitization.
(d) The Regional Supervisor will not compel 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 anther 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 which 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 or 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, made by a court reporter.
(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 including identification of those parts of
the record which form the basis of the decision. Any party may appeal
the final order of the Regional Supervisor under 30 CFR part 290.
[FR Doc. 96-13990 Filed 6-4-96; 8:45 am]
BILLING CODE 4310-MR-M
