94-16900. Outer Continental Shelf, Western Gulf of Mexico; Notice of Leasing Systems, Sale 150

[Federal Register Volume 59, Number 133 (Wednesday, July 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16900]


[[Page Unknown]]

[Federal Register: July 13, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Minerals Management Service

 

Outer Continental Shelf, Western Gulf of Mexico; Notice of 
Leasing Systems, Sale 150

    Section 8(a)(8) (43 U.S.C. 1337(a)(8)) of the Outer Continental 
Shelf Lands Act (OCSLA) requires that, at least 30 days before any 
lease sale, a Notice be submitted to the Congress and published in the 
Federal Register:
    1. identifying the bidding systems to be used and the reasons for 
such use; and
    2. designating the tracts to be offered under each bidding system 
and the reasons for such designation.
    This Notice is published pursuant to these requirements.
    1. Bidding systems to be used. In the Outer Continental Shelf (OCS) 
Sale 150, blocks will be offered under the following two bidding 
systems as authorized by section 8(a)(1) (43 U.S.C. 1337(a)(1)): (a) 
bonus bidding with a fixed 16\2/3\-percent royalty on all unleased 
blocks in less than 400 meters of water; and (b) bonus bidding with a 
fixed 12\1/2\-percent royalty on all remaining unleased blocks.
    a. Bonus Bidding with a 16\2/3\-Percent Royalty. This system is 
authorized by section (8)(a)(1)(A) of the OCSLA. This system has been 
used extensively since the passage of the OCSLA in 1953 and imposes 
greater risks on the lessee than systems with higher contingency 
payments but may yield more rewards if a commercial field is 
discovered. The relatively high front-end bonus payments may encourage 
rapid exploration.
    b. Bonus Bidding with a 12\1/2\-Percent Royalty. This system is 
authorized by section (8)(a)(1)(A) of the OCSLA. It has been chosen for 
certain deeper water blocks proposed for the Western Gulf of Mexico 
(Sale 150) because these blocks are expected to require substantially 
higher exploration, development, and production costs, as well as 
longer times before initial production, in comparison to shallow-water 
blocks. Department of the Interior analyses indicate that the minimum 
economically developable discovery on a block in such high-cost areas 
under a 12\1/2\-percent royalty system would be less than for the same 
blocks under a 16\2/3\-percent royalty system. As a result, more blocks 
may be explored and developed. In addition, the lower royalty rate 
system is expected to encourage more rapid production and higher 
economic profits. It is not anticipated, however, that the larger cash 
bonus bid associated with a lower royalty rate will significantly 
reduce competition, since the higher costs for exploration and 
development are the primary constraints to competition.
    2. Designation of Blocks. The selection of blocks to be offered 
under the two systems was based on the following factors:
    a. Lease terms on adjacent, previously leased blocks were 
considered to enhance orderly development of each field.
    b. Blocks in deep water were selected for the 12\1/2\-percent 
royalty system based on the favorable performance of this system in 
these high-cost areas as evidenced in our analyses.
    The specific blocks to be offered under each system are shown on 
Map 2 entitled ``Western Gulf of Mexico Lease Sale 150--Final Bidding 
Systems and Bidding Units.'' This map is available from the Minerals 
Management Service, Gulf of Mexico Region, 1201 Elmwood Park Boulevard, 
New Orleans, Louisiana 70123-2394.

    Dated: June 27, 1994.
Tom Fry,
Director, Minerals Management Service.
    Approved:
Bob Armstrong,
Assistant Secretary, Land and Minerals Management.
[FR Doc. 94-16900 Filed 7-12-94; 8:45 am]
BILLING CODE 4310-MR-P