05-17618. Oil and Gas Leasing: Onshore Oil and Gas Operations-Fees, Rentals and Royalty Stripper Well Royalty Reductions Retention of Records

AGENCY:

Bureau of Land Management, Interior.

ACTION:

Final rule.

SUMMARY:

The Bureau of Land Management (BLM) is revising the regulations to require that records supporting a stripper well royalty reduction be retained for seven years from the last date that an operator claims the reduction.

DATES:

This rule is effective on September 7, 2005.

FOR FURTHER INFORMATION CONTACT:

Rudy Baier, Fluid Minerals Group, Bureau of Land Management, [phone] (Commercial or FTS). Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339, 24 hours a day, seven days a week, except holidays, for assistance in reaching Mr. Baier.

SUPPLEMENTARY INFORMATION:

I. Background

II. Final Rule as adopted

III. Procedural Matters

I. Background

The existing regulation at 43 CFR 3103.4-2 authorizes the operator of a stripper well property to pay a reduced royalty tied to the lowest average production of oil per eligible well per well-day for any 12-month period since the initial qualifying period of August 1, 1990 through July 31, 1991. The regulations permit the operator to use the reduced royalty rate upon certifying that the royalty rate was calculated under the instructions and procedures in the regulations using reports of oil production and well-days for the qualifying period. However, current regulations do not require a submission of supporting evidence or specify the retention of records supporting the reduced royalty.

The Inspector General of the Department, as well as several States, have expressed concern about the inability of auditors to confirm the validity of the claimed production per eligible well per well day during the qualifying period, if it were more than seven years after the qualifying period. Although August 1990 through July 1991 production may be the basis for the royalty rate claimed after September 1992, some operators have inferred from the absence of specific regulatory requirements that they need not retain those records more than seven years from July 1991.

The Secretary is authorized under 30 U.S.C. 1713 and 1724(f) to require the retention of records for seven years from the date of the transactions for which they are required for “determining compliance with rules or orders” or “for the purpose of determining obligations due.” Since the royalty rate for stripper well properties depends on the lowest level of production per well since the “qualifying period,” BLM is revising the regulations to require that records of production (on which the claimed royalty rate is based) be retained for seven years after the benefit of the reduced royalty is last claimed.

II. Final Rule as Adopted

This rulemaking establishes a requirement that records supporting the reduced royalty rate claimed under 43 CFR 3103.4-2 be retained for seven years from the last date on which the operator is relying upon it to support its royalty rate.

III. Procedural Matters

Waiver of Notice of Proposed Rulemaking

Waiver of 30-Day Delay of Effective Date

In accordance with 5 U.S.C. 553, BLM finds that notice and public comment on this rule is contrary to the public interest, as that concept is defined in 5 U.S.C. 553(b)(3)(B), because to provide advance notice of the requirement prior to its effectiveness would frustrate the public interest, by allowing operators with questionable claims to royalty relief to destroy, without penalty, records in their possession that might document their ineligibility for the royalty relief claimed. The risk of destruction of records is also good cause to waive the 30-day delay of the effective date.

Executive Order 12866, Regulatory Planning and Review

This rulemaking is not a significant regulatory action and is not subject to review by the Office of Management and Budget (OMB) under Executive Order 12866. This rulemaking will not have an effect of $100 million or more on the economy. They will not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. This rulemaking will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. This rulemaking does not alter the budgetary effects of entitlements, grants, user fees, or loan programs or the right or obligations of their recipients; nor does it raise novel legal or policy issues. This rule will have little or no impact on operators who are currently eligible for royalty reductions under the stripper well program. The rule merely requires operators to retain records which they currently have in their possession.

Regulatory Flexibility Act

Congress enacted the Regulatory Flexibility Act (RFA) of 1980, as amended, 5 U.S.C. 601-612, to ensure that Government regulations do not unnecessarily or disproportionately burden small entities. The RFA requires a regulatory flexibility analysis if a rule would have significant economic impact, either detrimental or beneficial, on a substantial number of small entities. Because this rule would merely require operators receiving a royalty reduction under the program to retain records they currently have, BLM has determined under the RFA that this rule would not have a significant economic impact on a substantial number of small entities.

Small Business Regulatory Enforcement Fairness Act

This rulemaking is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rulemaking does not have an annual effect on the economy of $100 million or more. It will not cause an increase in costs or prices for consumers, individual industries, Federal, State, or local governments agencies, or geographic regions. The rulemaking does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. As stated above, this rule only requires operators to retain records they currently have.

Unfunded Mandates Reform Act

This rulemaking does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year; nor does this rule have a significant or unique effect on State, local, or tribal governments or the private sector. The rule does not impose any unfunded mandate on State, local, or tribal governments or the private sector. The rule merely requires operators to retain records which they currently have. Therefore, BLM is not required to prepare a statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq.).

Executive Order 12630, Governmental Actions and Interference With Constitutionally Protected Property Rights

The rulemaking does not represent a government action capable of interfering with constitutionally protected property rights. It merely requires operators to retain records they currently have. Therefore, the DOI has determined that the rule would not cause a taking of private property or require further discussion of takings implications under this Executive Order.

Executive Order 13132, Federalism

The rulemaking will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. This records retention rule has no effect on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. The BLM has determined that this rulemaking does not have sufficient Federalism implications to warrant preparation of a Federalism Assessment.

Executive Order 12988, Civil Justice Reform

Under Executive Order 12988, the Office of the Solicitor has determined that this rule would not unduly burden the judicial system and that it meets the requirements of paragraph 3(a) and 3(b)(2) of the Order.

Paperwork Reduction Act of 1995

BLM has determined this rulemaking does not contain any new information collection requirements that the Office of Management and Budget must approve under the Paperwork Reduction Act of 1995.

National Environmental Policy Act

BLM has determined that this rule is administrative and involves only procedural changes addressing the retention of records for the stripper well property royalty rate reduction program. Therefore, it is categorically excluded from environmental review under paragraph 102(2)(C) of the National Environmental Policy Act of 1969 pursuant to 516 Departmental Manual (DM) 2.3A and 516 DM 2, Appendix 1, Item 1.10. BLM has further determined that none of the exceptions at 516 DM Appendix 2 apply.

Pursuant to Council on Environmental Quality regulations (40 CFR 1508.4) and the environmental policies and procedures of the DOI, the term “categorical exclusions” means categories of actions which do not individually or cumulatively have a significant effect on the human environment and which have no such effect in procedures adopted by a Federal agency and therefore require neither an environmental assessment nor an environmental impact statement.

Executive Order 13175, Consultation and Coordination With Indian Tribal Governments

Under Executive Order 13175, we have found that this rulemaking does not include policies that have tribal implications. This rule does not apply to leases of Indian minerals.

Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use

Under Executive Order 13211, BLM has determined that the rulemaking will not have substantial direct effects on the energy supply, distribution or use, including a shortfall in supply or price increase. The rule merely requires operators to retain records which they currently have. This rule will not have a significant impact on the national energy supply.

Author

The principal author of this rule is Rudy Baier, Fluid Minerals Group, assisted by Shirlean Beshir of the Regulatory Affairs Group.

List of Subjects in 43 CFR Part 3100

• Government contracts
• Mineral royalties
• Oil and gas exploration
• Public lands-mineral resources
• Reporting and recordkeeping requirements, and Surety bonds

Dated: August 24, 2005.

Chad Calvert,

Acting Assistant Secretary, Land and Minerals Management.

Accordingly, for the reasons stated in the preamble and exercising the authorities stated, we amend part 3100 of Title 43 of the Code of Federal Regulations as set forth below:

PART 3100—OIL AND GAS LEASING

1. Revise the authority citation for part 3100 to read as follows:

Authority: 30 U.S.C. 189 and 359; 30 U.S.C. 1713 and 1751; and 43 U.S.C. 1732(b), 1733, and 1740.

Subpart 3103—Fees, Rentals and Royalty

2. Amend § 3103.4-2 by redesignating paragraph (b)(3)(vi) as paragraph (b)(3)(vii) and adding a new paragraph (b)(3)(vi) to read as follows:

§ 3103.4-2

Stripper well royalty reductions.

* * * * *

(b) * * *

(3) * * *

(vi) Record retention. For seven years after production on which the operator claims a royalty rate reduction for stripper well properties, the operator must retain and make available to BLM for inspection all documents on which the calculation of the applicable royalty rate under this section relies.