[Federal Register Volume 64, Number 108 (Monday, June 7, 1999)]
[Proposed Rules]
[Pages 30267-30273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14346]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Chapter II
Review of Existing Regulations
AGENCY: Minerals Management Service (MMS), Interior.
ACTION: Review of regulations; request for comment.
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SUMMARY: MMS has been performing annual reviews of its significant
regulations and asking the public to participate in these reviews since
1994. 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 because they are either unclear, inefficient, or interfere with
normal market conditions. As MMS moves towards performance based
regulations, we are looking at ways to offer regulatory relief to
industry for exceptional performance. We request your comments and
suggestions with respect to which regulations could be more performance
based and less prescriptive.
The purpose of this document is twofold. First, we want to provide
the public an opportunity to comment on MMS regulations that should be
eliminated or revised, or could be more performance based. Second, we
are providing a status update of the actions MMS has taken on comments
previously received from the public in response to documents published
March 1, 1994, March 28, 1995, May 20, 1996, April 24, 1997, and June
12, 1998. We will only include in this document status updates on
comments which have not been closed or implemented in the five previous
status update documents listed above.
DATES: Written comments must be received by August 6, 1999.
ADDRESSES: Mail written comments to Department of the Interior;
Minerals Management Service; Mail Stop 4230; 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;
and E-Mail: Elizabeth.Montgomery@mms.gov.
SUPPLEMENTARY INFORMATION: MMS began a review of its regulations in
early 1994 under 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.
We invited the public to participate in the regulatory review. The
invitation was sent out via different media, namely a Federal Register
document 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. We acknowledged the comments in a July 15, 1994
(59 FR 36108), document and set forth our planned actions to address
the comments, along with an estimated timetable for these actions.
In the Federal Register notices published March 28, 1995 (60 FR
15888); May 20, 1996 (61 FR 25160); April 24, 1997 (62 FR 19961); and
June 12, 1998 (63 FR 32166), MMS: (a) asked for further public comments
on its regulations, and (b) provided a status update of actions it had
taken on the major public comments received to date. We received 10
responses from the 1995 document, 5 responses from the 1996 document, 2
responses from the 1997 document, and 3 responses from the 1998
document. A number of the commentators expressed appreciation for our
streamlining efforts and responsiveness to suggestions from our
regulated customers.
This document updates our planned actions and related timetables on
the major comments received to date. It also solicits additional
comments from the public concerning regulations that should be either
eliminated or revised, or could be more performance based. Since some
of the public responses received in response to prior documents
contained comments on very specific and detailed parts of the
regulations, this document does not address every one received. For
information on any comment submitted which is not addressed in this
document, please contact Mrs. Montgomery at the number and location
stated in the forward sections of this document.
MMS regulations are found at Title 30 in the Code of Federal
Regulations. Parts 201 through 243 contain regulations applicable to
MMS's Royalty Management Program; Parts 250 through 282 are applicable
to MMS's Offshore Minerals Management; and Part 290 is applicable to
Administrative Appeals.
Status Report
The following is a status report by program area on the comments
MMS has received, to date, on its regulations.
A. Offshore Minerals Management (OMM) Program
OMM is currently reviewing the following 10 sections of OMM
regulations:
1. Regulations Governing Conservation of Resources and Diligence (30
CFR 250, Subpart A)
Comments Received--(a) ``Revise Determination of Well Producibility
to make wireline testing and/or mud logging analysis optional * * *.''
(b) ``* * * consider comments from the 11/30/95 MMS sponsored workshop
to formulate policy for granting SOP (suspension of production)
approvals based on host capacity delays, non-contiguous unitization,
and market conditions/economic viability.''
Action Taken or Planned--For (a) above, a proposed rule,
``Postlease Operations,'' revising Subpart A was published on February
13, 1998 (63 FR 7335). This revision addressed the determination of
well producibility, and the public was invited to comment on this and
all areas of the proposed rule. The comment period closed on July 17,
1998. For (b) above, MMS did consider the comments from the November
30, 1995, workshop on granting suspensions of production when preparing
the proposed rule. A final rule is being prepared for publication.
Timetable--We plan to publish the final rule by mid-summer of 1999.
2. Regulations Applicable to Directional Surveys (30 CFR 250.401,
Subpart D)
Comments Received--``Revise directional survey requirements to
allow a composite measurement-while-drilling
[[Page 30268]]
directional survey to be acceptable * * *.''
Action Taken or Planned--We are rewriting the regulations governing
Oil and Gas Drilling Operations, found in 30 CFR Part 250, Subpart D,
in plain English. During this rewrite, we are making appropriate
revisions to the regulations. Updating the requirements for directional
survey requirements is one of the revisions planned for this rewrite.
Timetable--We plan to publish a Notice of Proposed Rulemaking in
the fall of 1999.
3. Approval and Reporting Processes for Well-Completion Operations (30
CFR 250.513)
Comments Received--``* * * a recompletion operation requires that a
Well Summary Report MMS-125 be filed within 30 days. Much of this data
is repetitious of data previously submitted on the Sundry Notice MMS-
124. The process could be changed to provide only data that has
changed.''
Action Taken or Planned--We don't plan to change these reporting
requirements at this time. We're working on plans to implement
electronic reporting, which will streamline the process and increase
reporting efficiency.
Timetable--No plans to change reporting requirements.
4. Safety System Design and Installation (30 CFR 250.122)
Comments Received--``We believe that the (Safety and Environmental
Management Program) SEMP/RP 75 Performance Measure process of
alternative compliance for operators who voluntarily implement RP 75
and have ``good'' performance should allow those operators to
periodically update drawings and other documents of production safety
system installations and routine modifications instead of receiving
required MMS approval of these documents before any modifications are
performed (Comment #14 of our July 17, 1996 letter). This is one
example of the alternative compliance process that we suggest.''
Action Taken or Planned--This comment expresses an interest for
regulatory relief in exchange for ``compliance'' with API RP75. This
industry standard captures the essence of SEMP. On August 13, 1997, MMS
published a Federal Register notice on SEMP (62 FR 43345). This notice
publicly relayed our intent to continue collaborative efforts with the
U.S. offshore oil and gas industry to promote the non-regulatory (i.e.,
voluntary) adoption of SEMP; it simultaneously relayed our intent to
increasingly focus on operator performance in the field. We made this
decision after extensive review of the industry's actions to adopt
RP75. We have seen important strides made in the development of SEMP
programs by the majority of OCS operators. We have, however, still not
seen widespread implementation of these programs on offshore
installations. In the most recent SEMP notice, we asked senior company
officers to notify MMS when they had ``fully'' implemented SEMP at the
field level. In our view, ``fully'' means that an operator has
developed their SEMP plan and has implemented it at enough of their
offshore installations to commence continuous improvement efforts
(e.g., SEMP audits). At the end of April 1999, we had received such
notifications from only eight OCS operators. This fact leads us to
conclude that SEMP is not yet broadly implemented at the field level.
Therefore, any requests for regulatory relief in exchange for SEMP
implementation will need to be made to MMS on an ad hoc basis by
operators who are prepared to demonstrate, and have us verify, both the
extent of their SEMP implementation and their field-level performance.
We have begun the process of revising 30 CFR Part 250, Subpart H.
The process changes suggested will be considered internally during
preparation of the Notice of Proposed Rulemaking.
Timetable--We expect to publish for comment the Notice of Proposed
Rulemaking for a revised 30 CFR Part 250, Subpart H, at the end of
1999.
5. Regulations Applicable to Production on the Outer Continental Shelf
(30 CFR Part 250, Subpart H)
Comments Received--Production Safety System Testing and Records (30
CFR 250.124)--``OOC (Offshore Operators Committee) is very much
interested in working with MMS on a research project beginning in 1997
to consider appropriate leak rate tolerances for critical safety
devices (Comment #11 of our July 17, 1996 letter) as well as testing
frequencies of accurate and reliable new generation safety devices
(Comment #13 of our July 17, 1996 letter).''
Action Taken or Planned--MMS initiated a research project in
September 1997 with Southwest Research Institute which investigated the
question of leak rate tolerances for critical safety devices. Final
results from the study should become available to the public in June
1999. We have also initiated the rulemaking process to revise all of
Subpart H. As part of this process, we will discuss internally testing
frequencies for safety devices. Any proposed changes to testing
frequencies will appear in the Notice of Proposed Rulemaking for
Subpart H.
Timetable--We expect the Notice of Proposed Rulemaking for a
revised Subpart H to appear in the Federal Register for comment at the
end of 1999.
6. Regulations Governing Safety and Pollution Prevention Equipment
(SPPE) (30 CFR Part 250.126, Subpart H)
Comments Received--``Revise regulations governing Safety Valves to
increase time between test and allowable leakage rates.''
Action Taken or Planned--As discussed under Item No. 5, MMS
contracted with Southwest Research Institute in September 1997 to study
leakage rates for surface and subsurface safety valves.
Timetable--As noted previously, the final results of the Southwest
Research Institute Study will be made available this June. Any changes
to our regulations as a result of this study will be incorporated into
the Notice of Proposed Rulemaking for 30 CFR 250, Subpart H, projected
to be published for comment by the end of 1999.
7. Regulations Regarding Construction and Removal of Platforms and
Structures (30 CFR 250, Subpart I)
Comments Received--(a) ``Modify platform design wave return period
calculation by placing a cap of 100 years on the field life calculation
* * *.'' (b) ``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 Taken or Planned--For (a), (c), and (d) above, the
proceedings for the International Workshop on Offshore Lease
Abandonment and Platform Disposal held in April 1996 were published in
1997. We will be considering the comments we received from the
proceedings in drafting a proposed rule on decommissioning. For (b)
above, Notice to Lessees (NTL 98-4N) was issued on March 4, 1998. It
contains interim guidance for applying ``Simplified Fatigue Analysis''
Procedure from American Petroleum Institute (API) Recommended Practice
2A (RP2A), Planning, Designing, and Constructing Fixed Offshore
Platforms, Nineteenth Edition (August 1, 1991), and Twentieth Edition
(July 1, 1993), and its supplement 1 (February 1, 1997). When the
Twenty-First Edition is published, we will be reviewing it to decide
whether or not MMS will adopt it.
[[Page 30269]]
Timetable--For (a), (c), and (d) above, we plan to publish for
comment a Notice of Proposed Rulemaking on decommissioning by December
1999. For (b) above, COMPLETED.
8. Regulations Applicable to Pipelines and Pipeline Rights-of-Way (30
CFR 250, Subpart J)
Comments Received--Revise regulations to avoid duplication of
requirements between the Department of the Interior (DOI) and the
Department of Transportation (DOT). The following comments were
submitted on the proposed rule on regulating pipelines which was
published October 2, 1997 (62 FR 51614): Commentators raised concerns
about the Notice of Proposed Rulemaking involving technical issues
affecting the applicability of the rule to producer-operated pipelines.
The pipelines were either previously subject to DOT regulation under
terms of the former 1976 Memorandum of Understanding between DOI and
DOT, or cross into State waters without first connecting to a
transporting operator's pipeline on the Outer Continental Shelf as
described in the 1996 Memorandum of Understanding.
Action Taken or Planned--As stated in our previous Notice,
``Reviewing Existing Regulations'' (June 12, 1998), a Memorandum of
Understanding on the pipeline issue between DOI and DOT became
effective December 10, 1996, and was published in the Federal Register
on February 14, 1997 (62 FR 7037). Since then, we have published a
final rule on August 17, 1998 (63 FR 43876) clarifying regulatory
jurisdiction of producer-operated pipelines that connect to
transportation pipelines on the Outer Continental Shelf. We are now
proceeding with a proposed rule that will clarify and resolve the
technical issues concerning producer-operated pipelines that cross into
State waters without first connecting to transportation pipelines on
the Outer Continental Shelf.
Timetable--We plan to publish the Notice of Proposed Rulemaking
incorporating comments on the earlier proposed rule by mid-summer 1999.
9. Shallow Hazards Requirements (NTL No. 83-3)
Comments Received--`` * * * revise (Notice to Lessees) NTL No. 83-3
which relates to shallow hazards requirements. Industry has requested
that MMS allow use of navigational positioning equipment in lieu of
buoying pipelines.''
Action Taken or Planned--Notice to Lessees (NTL) No. 83-3 has been
superseded by NTL No. 98-20. In NTL No. 98-20, however, we did not
address this comment on navigational positioning equipment. We are
planning to revise NTL No. 98-20, and are in the process of developing
guidance for navigational positioning equipment technology. In the
planned revision of NTL No. 98-20, industry may still use buoying, but
if they choose not to use buoying, the NTL will require the use of
state-of-the-art navigational systems. This will assure the accuracy
and safety of anchoring operations in the vicinity of pipelines.
Timetable--Ongoing.
10. Regulations Applicable to Production Safety System Training (30 CFR
250.214, Subpart O)
Comments Received--In response to a June 10, 1997, workshop on the
development of a performance based training rule, MMS received a
variety of comments from the oil and gas industry and MMS accredited
training schools. These comments include: (a) ``Continue to implement
the current Subpart O training system.'' (b) ``Develop a dual training
system incorporating elements from both a performance based program and
MMS's current system.'' (c) ``Companies may neglect training under a
performance based system.'' (d) ``MMS should use caution when changing
from the current prescriptive training system * * *.'' (e) ``* * * use
of a written MMS test may cause employees stress that would lead to
poor performance on the exams.'' (f) ``* * * hands-on simulator testing
is an excellent and realistic means of gauging performance. * * * MMS
may not have the expertise or equipment to properly conduct simulator
tests.'' (g) ``Hands-on testing should only be conducted onshore, not
offshore.'' (h) ``How will MMS react to a company that does not train
its employees but has a good safety record * * *.'' (I) ``This may not
be the right time to move towards a performance system because of the
increase in OCS activity and the shortage of trained and experienced
workers.''
Activity Taken or Planned--On April 20, 1999, we published for
comment a proposed rule on a performance based training program which
relies on industry to design its training programs (64 FR 19318). In
this proposed rule, ``Training of Lessee and Contractor Employees
Engaged in Oil and Gas and Sulphur Operations in the Outer Continental
Shelf,'' we propose to monitor the program through tests and audits.
The comment period ends July 17, 1999. We have scheduled a public
workshop on this proposed rule in Houston on June 10, 1999 (64 FR
23029).
Timetable--We plan to publish the final rule in the spring of the
year 2000.
Overview of MMS/Offshore Minerals Management Regulatory Actions
The Offshore Minerals Management Program has scheduled an ambitious
program in the coming year for rewriting current rules into Plain
English and updating them to reflect changing conditions in the energy
industry. We want to summarize some of the highlights of this rule
rewriting effort.
Postlease Operations Safety (30 CFR 250, Subpart A)--Final
rule to be published by mid-summer of 1999. The rule includes various
interrelated topics all dealing with postlease operations.
Coastal Zone Consistency Review of Exploration Plans and
Development and Production Plans (30 CFR Parts 250 and 204)--Final rule
to be published by the end of 1999.
Leasing of Sulphur or Oil and Gas in the Outer Continental
Shelf--Bonus Payments with Bids (30 CFR Part 256)--Final rule to be
published by the fall of 1999. This rule allows MMS to require a
specific payment method for 1/5 of the bonus payment due when we hold a
sale to lease Federal offshore Outer Continental Shelf lands.
Producer-Operated Outer Continental Shelf Pipelines that
Cross Directly into State Waters (30 CFR 250)--Proposed rule to be
published by summer of 1999. This rule proposes to implement a
provision of the December 10, 1996, Memorandum of Understanding between
the Departments of the Interior and Transportation regarding Outer
Continental Shelf Pipelines.
Prospecting for Minerals Other Than Oil, Gas, and Sulphur
in the Outer Continental Shelf (30 CFR Part 280)--Proposed rule to be
published in the summer of 1999. This rule proposes to specify how to
conduct Geological and Geophysical prospecting and research for
minerals other than oil, gas, and sulphur in the Outer Continental
Shelf under a permit.
End of Life Royalty Relief for Oil and Gas Leases on the
Outer Continental Shelf (30 CFR Part 203)--Proposed rule to be
published by the end of 1999. This rule avoids continuance of royalty
relief in the presence of noticeable improvement in lease economics and
market conditions. The rule applies only to new applications and
approvals, not to existing arrangements.
Exploration and Development and Production Plans (30 CFR
Part 250 Subpart B)--Proposed rule to be published by the end of 1999.
The
[[Page 30270]]
rewrite for this proposed rule will include other plans such as Deep
Water Operations Plan, Development Operations Coordination Document,
and Conservation Information Documents.
Oil and Gas and Drilling Operations (30 CFR Part 250
Subpart D)--Proposed rule to be published by the end of 1999. This rule
proposes to restructure the requirements for oil and gas drilling
operations on the Outer Continental Shelf, remove overly prescriptive
requirements, and update requirements to reflect changes in drilling
technology.
Abandonment of Wells (30 CFR Part 250 Subpart G)--Proposed
rule to be published by the end of 1999. This proposed rule on
decommissioning platforms will consider the comments received on the
proceedings from the International Workshop on Offshore Lease
Abandonment and Platform disposal held in April 1996.
Oil and Gas Production Safety Systems (30 CFR Part 250
Subpart H)--Proposed rule to be published by the spring of the year
2000. We will write this proposed rule in Plain English and update the
requirements to reflect current practice in the offshore energy
industry.
B. Royalty Management Program (RMP)
RMP is reviewing regulations in the following 14 subject areas:
1. Statute of Limitations and Record Retention
Comments Received--(a) ``Statute of limitations is unclear.'' (b)
``Establish a reciprocal 5-year statute of limitations from the date an
obligation becomes due.'' (c) ``Absence of a record retention program
creates some confusion. Regulations should require record retention to
coincide with the 5-year statute of limitations.'' (d) ``the MMS is
changing processes, developing implementation plans, and preparing
regulatory changes,'' in doing so, the congressional intent of FOGRSFA
should be followed to provide certainty and simplicity to lessees.
Action Taken or Planned--The Federal Oil and Gas Royalty
Simplification and Fairness Act (FOGRSFA) was signed into law on August
13, 1996. FOGRSFA contains language to implement a 7-year statute of
limitations for MMS processes. We are changing processes, developing
implementation plans, and preparing regulatory changes to comply with
the requirements of FOGRSFA.
Timetable--Ongoing.
2. Interest on Overpayments
Comment received--(a) ``Interest accrual should be equitable
between the agency and industry.'' (b) ``the MMS should be mindful of
the congressional intent of simplicity and certainty in promulgating
any regulations to implement these provisions of FOGRSFA.''
Action Taken or Planned--FOGRSFA provides for the payment of
interest on overpayments for oil and gas leases on Federal lands. On
March 31, 1997, we issued a Dear Payor letter about FOGRSFA's
provisions involving interest issues. We issued another Dear Payor
letter on October 1, 1997, explaining interest calculations and
interest reporting requirements. MMS is designing system changes to
implement the requirements of FOGRSFA and preparing regulations to be
published.
Timetable--We will publish for comment in late 1999, or early next
year, a Notice of Proposed Rulemaking providing for interest on
overpayments and underpayments.
3. Interest Assessments
Comments Received--(a) ``A de minimis provision should be
established for the assessment of interest.'' (b) ``* * * MMS should
enhance their existing interest assessment system to allow for the
offsetting of prior period adjustments made on the MMS Form 2014 before
calculating applicable interest.''
Action Taken or Planned--FOGRSFA not only provides for the payment
of interest on overpayments for oil and gas leases on Federal lands,
but allows industry to calculate the correct interest assessment. Also,
FOGRSFA allows interest that has accrued on overpayments to be applied
to reduce underpayments. We have included billing thresholds in our
interest system to prevent bills for de minimis amounts. In May 1997,
we started sending interest statements instead of interest bills, and
the statements contain totals for interest that MMS owes and for
interest owed to MMS. MMS is implementing system changes to conform
with the requirements of FOGRSFA and preparing regulations.
Timetable--As noted under Item 2, Timetable, we plan to publish a
Notice of Proposed Rulemaking for comment on payment of interest late
in 1999 or early next year.
4. Gas Valuation
Comments received--(a) ``Define gross proceeds more equitably and
clearly in this ever changing gas marketing environment.'' (b) ``It is
important that the Federal Gas Valuation Rule final rule not
discriminate against producers which are affiliated with marketing
companies and are party to non-arms-length contracts.'' (c) ``* * *
commends the MMS on their use of negotiated rulemaking process to
address the valuation of gas. Rule should result in administrative cost
savings for all parties.'' (d) ``If the Takes vs. Entitlements policy
stays in effect, MMS should strictly enforce reporting on actual
quantities taken for all industry participants.'' (e) ``Eliminate
Transportation and Processing Allowance Forms for Indians.'' (f) ``MMS,
States, and industry * * * devoted considerable time and expense during
the REGNEG process and * * * is disappointed that the strong commitment
of all the respective parties did not result in a valuation methodology
that MMS can endorse.''
Action Taken or Planned--For (a) above, on December 16, 1997, MMS
published a final rule clarifying what deductions may be taken from
gross proceeds for the costs of transportation under Federal Energy
Regulatory Commission (FERC) Order No. 636. The rule was effective
February 1, 1998 (63 FR 65753). For (a), (b), (c) and (f) above, the
Federal Gas Valuation proposed rule was published in the Federal
Register on November 6, 1995 (60 FR 56007), and the comment period
closed on February 5, 1996. In light of the comments received from 44
entities, on May 21, 1996, MMS reopened the public comment period and
asked for public comment on five options for proceeding with further
rulemaking (61 FR 25241). The reopened public comment period closed
August 19, 1996. MMS reconvened the Federal Gas Valuation Negotiated
Rulemaking Committee on June 12-14, 1996, and asked the Committee to
provide input into the five options.
MMS performed a cost benefit analysis on three viable options for
proceeding with gas valuation regulations. Given the results of the
cost benefit analysis ($20 million annual loss in royalties) and
changes occurring in the gas market, MMS withdrew the proposed
rulemaking on April 22, 1997 (62 FR 19536).
For (d) above, FOGRSFA contains language requiring ``takes''
reporting for stand alone leases and agreements containing 100 percent
Federal leases. FOGRSFA also requires ``entitlements'' reporting for
so-called mixed agreements (agreements containing Federal, State,
Indian, and/or fee leases) with an exception to use ``takes'' reporting
for marginal properties. We are changing processes, developing
implementation plans, and preparing regulatory changes to comply with
the requirements of FOGRSFA.
[[Page 30271]]
For (e) above, a proposed rule developed by the Indian Gas
Valuation Negotiated Rulemaking Committee was published on September
23, 1996 (61 FR 49894). The Indian Valuation Negotiated Rulemaking
Committee was reconvened on March 26, 1997. This rule addressed the
valuation for royalty purposes of natural gas produced from Indian
leases. The rule proposes to reduce substantially the transportation
and allowance reporting forms for gas from Indian leases. The proposed
rule would add a methodology to calculate the major portion value and
an alternative methodology for dual accounting as required by Indian
lease terms. The proposed rulemaking would simplify and add certainty
to the valuation of production from Indian leases.
Timetable--We plan to publish for comment a Notice of Proposed
Rulemaking on takes vs. entitlements in 1999. Also in 1999, we plan to
publish a final rule on Valuation of Gas From Indian Leases.
5. Reporting Procedures and Threshold
Comments Received--(a) ``Eliminate or streamline MMS Form 2014
reporting.''
(b) ``Report prior period adjustments on a ``net'' basis.''
(c) ``Change estimated payment from lease level to payor level.''
(d) ``Assess interest at the payor level--for the Indian leases on
the basis of each Indian Tribe.''
(e) ``Eliminate Payor Information Form (PIF) Filings. This is an
unnecessary and costly reporting requirement.''
(f) ``MMS should modify the regulations and system tolerances/
thresholds so that only those exceptions that are cost beneficial for
MMS to pursue are generated.''
(g) ``Set thresholds or tolerances for regulations to save costs to
both MMS and industry. (Example: Invoices are sent for less than
$1.00.)''
(h) ``MMS should not implement regulations until its systems are
programmed to handle the new regulations.''
(i) ``* * * the prompt implementation of the recommendations of the
Royalty Policy Committee Audit and Royalty Reporting and Production
Accounting Subcommittees will achieve those simplification and
streamlining goals * * *.''
(j) The RMP Reengineering Team has recommended 32 reporting changes
to reduce and simplify reporting and reduce administrative costs for
both MMS and lessees. MMS should proceed diligently to implement these
changes.
(k) We recommend that MMS immediately implement at least a one
dollar threshold or higher thresholds which would alleviate tremendous
burden and cost to the government and lessees.
Action Taken or Planned--Building upon the Royalty Policy
Committee's earlier study, the RMP Reengineering Team (Team) analyzed
current information reporting requirements to determine the data
necessary for future RMP processes. The Team identified opportunities
for easing reporting burden, avoiding data duplication, decreasing
error rates, and increasing processing efficiency. The Team developed
32 reporting changes that are in their report titled ``Preliminary
Design Concepts of the RMP Reengineering Team.'' If these changes are
implemented, they will significantly reduce the volume of lines
reported and processed, minimize errors and related error correction
workload, simplify reporting, and lower costs for both reporters and
RMP. The Team's changes generally incorporate or exceed the Royalty
Policy Committee's recommendations.
On February 23, 1999 (64 FR 8844), we published a notice of
information collection solicitation and public meetings for changes to
the royalty and production accounting reports. At the public meetings,
which were held in March, we consulted with industry representatives on
the proposed reporting changes.
In addition to our reengineering work, we continue to pursue
shorter range reporting improvements not requiring significant system
changes. For example, the Payor Information Form MMS-4025 is being
streamlined to eliminate numerous data fields. Also, many production
reporting changes are being implemented where redundant or unnecessary
data collection is identified. We have revised our billing thresholds
to $100 for bills due on Federal leases and $25 for bills due on Indian
leases.
On April 14, 1998 (63 FR 17133), we published a proposed rule
requesting that all reports be submitted electronically by December 31,
1998. Electronic submission significantly reduces the amount of time
necessary for a company to complete the monthly reports and MMS
processing time, since no manual entry is required.
Timetable--Ongoing.
6. Refunds Due to Industry Which Are Controlled by Section 10 of the
Outer Continental Shelf Lands Act
Comments Received--(a) ``Section 10 refund requirements should be
eliminated. The refund process used for onshore properties should be
established for offshore properties.'' (b) * * * we would urge the MMS
to facilitate elimination of the Section 10 recoupment procedures in
its entirety. The current practice is administratively burdensome and
not cost effective for the industry or MMS.'' (c) ``Eliminate
documentation requirements for refund requests over $250M (million);
and/or increase this threshold to $500M; raise the refund request limit
to $5M. Exempt pure accounting adjustments for items such as production
date adjustments and incorrect AID (Accounting Identification) numbers;
exempt unit revisions because these revisions are often made more than
2 years after the date of production; establish a time limit on MMS for
review of a refund request to expedite the process; and overpayments on
OCS properties should be allowed to be offset against any OCS
underpayment.''
Action Taken or Planned--FOGRSFA repeals the Section 10 refund
procedures of the OCS Lands Act. On November 25, 1996, we mailed a Dear
Payor letter with guidelines on refund procedures. We are presently
developing a proposed rule implementing the new refund procedures.
Timetable--Ongoing.
7. Electronic Data Exchange
Comments Received--(a) ``* * * MMS (should) continue their ongoing
effort to exchange data by electronic means rather than hard copy
thereby enabling the industry to adjust the data elements to integrate
with each company's systems.'' (b) ``* * * is looking forward to
working with MMS to develop an electronic reporting and funds transfer
system that is both cost effective and efficient for all parties.''
Action Taken or Planned--We continue to encourage the exchange of
data electronically. Our Reporter and Payor Training sessions stress
the benefits of electronic reporting and provide reporters and payors
with options for reporting by electronic data interchange, diskette, or
magnetic tape. On April 22, 1997 (62 FR 19497), we published a final
rule specifying how payments are made for mineral royalties, rentals,
and bonuses that requires all payments to be made electronically to the
extent it is cost effective and practical. We also published on April
8, 1998 (63 FR 17133), a proposed rule to require reporters to submit
royalty and production reports electronically. Another way we publicize
electronic
[[Page 30272]]
reporting is on the MMS/Royalty Management Program Internet website.
Timetable--Reporter and Payor Training sessions are planned for the
summer of 1999. We plan to publish a final rule on Electronic Reporting
in 1999.
8. Parameters for Identifying Improper MMS Form 2014 Adjustments
Comments Received--``The MMS currently inquires as to any variances
between any Form 2014 adjustments and its original Form 2014 entry that
exceed $1.00, which is an insignificant amount. It is suggested that
the MMS's review should be relevant to the amount of the adjustment
such as a given percentage.''
Action Taken or Planned--At this time, MMS does not plan to make
changes in this procedure. We need to ensure accuracy and integrity in
the accounting systems, and retain precise records for the auditors. In
our reengineering effort, we are looking at streamlined reporting for
short- and long-term benefits for MMS and industry.
Timetable--Ongoing.
9. Publish Final Rules Expeditiously
Comments Received--``* * * primary recommendation is the
expeditious completion and publication of pending final rules, for
example, the proposed rules on administrative offset and limitations on
credit adjustments, and the proposed rule on payor liability. * * *
Certainly, publication of the final federal (and Indian) gas valuation
rule should be facilitated to the maximum extent possible.''
Action Taken or Planned--We are in the process of finalizing the
Indian gas valuation rule. As for the final Federal gas valuation rule,
on April 22, 1997, we published a Notice in the Federal Register (62 FR
19536) that withdrew the proposed rule because of changes occurring in
the gas market.
New language in FOGRSFA will cause a number of changes in the Payor
Liability rule and the Administrative Offset and Limitations on Credit
Adjustments rule. We are working to incorporate the effects of FOGRSFA
in these rules.
Timetable--Ongoing.
10. The Appeals Process
Comments Received--``Current appeals process is too long.''
Action Taken or Planned--FOGRSFA imposed a 33-month time frame for
the Department of the Interior to decide appeals involving royalties on
Federal oil and gas leases. This deadline does not apply to appeals on
royalties involving Indian leases and Federal leases for minerals other
than oil and gas.
On October 28, 1996 (61 FR 55607), MMS published a proposed rule
establishing a 16-month deadline for MMS to decide all appeals to the
Director, including Indian leases and appeals for royalties on minerals
other than oil and gas. After MMS' decision, the appellants can further
appeal to the Interior Board of Land Appeals. The comment period for
this proposed rule ended on March 27, 1997.
The Royalty Policy Committee, a Federal Advisory Committee
reporting to the Secretary, established a subcommittee of State,
Indian, and industry representatives to study the appeals process. The
Royalty Policy Committee reported its recommendations to the Secretary
in March 1997, and the Secretary accepted the recommendations, with
minor changes, in September 1997. The Department published a proposed
rule on January 12, 1999 (64 FR 1930), to implement these
recommendations.
Timetable--We published a final rule on May 13, 1999 (64 FR 26240),
to implement the provisions of FOGRSFA related to the 33-month time
limit to decide oil and gas appeals on Federal leases. We are currently
reviewing comments on other parts of the proposed rule.
11. Valuation of Coal From Federal Leases
Comments Received--(a) ``* * * amending this section to allow the
use of the lessee's arm's length contracts to support the value for a
nonarm's-length contract would make this section more effective and
also eliminate the need to use third-party proprietary information in
many instances.'' (b) ``* * * the use of the lessee's arm's-length
contracts is the best evidence of the comparable value of any nonarm's-
length sales by the lessee.''
Action Taken or Planned--The Royalty Policy Committee's Coal
Subcommittee is reviewing issues related to coal valuation, and we will
use the Royalty Policy Committee's recommendations to make improvements
to the coal royalty valuation and reporting procedures and associated
regulations.
Timetable--Ongoing.
12. Royalty-in-Kind Alternative
Comments Received--``urges the MMS to pursue implementation of a
RIK program as a cost effective alternative.''
Action Taken or Planned--In 1997 MMS conducted a Feasibility Study
which examined a series of Royalty-in-Kind (RIK) options, both offshore
and onshore. Under RIK, the government accepts its royalty share in the
form of production rather than in value (cash). Based on the Study's
recommendations, we are presently conducting three pilot projects to
study the concept.
Two of the pilot projects are underway. Pilot I is in the State of
Wyoming where Federal and State crude oil is being taken in kind and
sold on the open market. Pilot II uses Federal leases in the Gulf of
Mexico, Texas 8(g) zone (Federal offshore leases adjacent to State
waters), where natural gas is being taken in kind and part of it sold
to the General Services Administration (GSA) under an interagency
agreement for use by Federal agencies. The rest of the gas is being
marketed in partnership with the Texas General Land office through a
Cooperative Agreement with the State of Texas. Both these pilots will
last a minimum of 2 years. Pilot III is scheduled to begin this fall
and will take RIK gas from offshore Federal leases in the Gulf of
Mexico. This Pilot will involve the largest volume of the three pilots.
We expect to sell up to 800 million cubic feet of gas per day, or one
third of the Federal royalty share of production in the Gulf. As in
Pilot II, a portion of this gas will be transferred to GSA, and the
rest sold competitively on the open market.
We will analyze the results of these three pilots to determine if,
and under what circumstances, the RIK option can reduce administrative
costs for government and industry while producing at least as much
revenue as our current method of collecting royalties in value.
Timetable--Ongoing.
13. Lessee/Designee
Comments Received--MMS published an interim final rule on August 5,
1997 (62 FR 42062), to implement the designation of royalty payment
responsibility provision of FOGRSFA. Generally, we support the need for
lessees to submit designations pursuant to FOGRSFA, however they take
issue with MMS's overall approach to implementing these very important
provisions of FOGRSFA. Specifically, they object to the need for MMS to
collect some of the information sought, the level of detailed
information required by this rule, the burdensomeness of information
required, and the ability of MMS and the Bureau of Land Management
(BLM) to utilize information that these bureaus already have and
maintain. Also, they take issue with MMS's authority to collect the
information required under the rule from designees (payors).
[[Page 30273]]
Action Taken or Planned--When the payor remits royalties on behalf
of the lessee, FOGRSFA requires that the lessee designate the paying
party as their designee for each lease. The interim final rule
published on August 5, 1997, implements the requirements of FOGRSFA. We
have worked with BLM to set up a process to identify operating rights
owners and changes to operating rights ownership.
Timetable--Ongoing.
14. Other MMS/Royalty Management Program Regulatory Actions
Comments Received--(a) ``In order to craft a reasonable, fair, and
proper (oil valuation) rule, it is imperative that MMS publicly address
all critical issues prior to the issuance of any final rule so that
affected persons can participate meaningfully in the rulemaking
process.''
(b) ``Congress pushed for delegation of royalty management
functions to states as a means of streamlining and simplifying the
process of collection and payment of federal royalties. Despite
Congress' clear intent however, the final regulations published on
August 12, 1997 and the standards for delegation published on September
8, 1997 in no way attempt to achieve that purpose.''
Action Taken or Planned--The regulations for the Delegation of
Royalty Management Functions to States were developed in consultation
with State government representatives and industry. The final rule was
published on August 12, 1997 (62 FR 43076), and included responses to
comments we received on the proposed rule. On February 10, 1999 (64 FR
6586), we published a proposed rule that would allow States which
choose to assume duties to do so for less than all of the Federal
mineral leases within the State or leases offshore of the State,
subject to section 8(g), of the Outer Continental Shelf Lands Act. We
plan to issue a final rule in 1999.
On January 24, 1997, we published a proposed rule on Valuation of
Oil From Federal Leases (62 FR 3742), and on February 12, 1998, we
published a proposed rule on Valuation of Oil From Indian Leases (63 FR
7089). We've held numerous public meetings regarding the proposed oil
valuation rules, and in response to the many comments received in the
meetings and through the mail, we published the following in the
Federal Register on the proposed rule, Valuation of Oil on Federal
Leases:
Supplementary Proposed Rule (July 3, 1997-62 FR 36030);
Reopened Public Comment Period and Offered Alternatives
(September 22, 1997-62 FR 49460);
Supplementary Proposed Rule (February 6, 1998-63 FR 6113);
Supplementary Proposed Rule (July 16, 1998-63 FR 38355);
and
Reopened Comment Period and Offered Three Workshops in
Houston, TX; Albuquerque, NM; and Washington, DC (March 12, 1999-64 FR
12267).
We are also preparing a Supplementary Proposed Rule for the
Valuation of Oil From Indian Leases, and plan to publish it in 1999.
Conclusion
We invite you to comment on our existing regulations and also the
actions we have taken in response to comments and enacted legislation.
And, we invite you to stay further informed on many of the topics
discussed in this status report by visiting the MMS Internet Website at
www.mms.gov.
Dated: May 28, 1999.
Lucy Querques Denett,
Director, Minerals Management Service.
[FR Doc. 99-14346 Filed 6-4-99; 8:45 am]
BILLING CODE 4310-MR-P
