03-10173. Oil and Gas and Sulphur Operations in the Outer Continental Shelf-Revision of Requirements Governing Outer Continental Shelf Rights-of-Use and Easement and Pipeline Rights-of-Way

AGENCY:

Minerals Management Service (MMS), Interior.

ACTION:

Proposed rule.

SUMMARY:

MMS is proposing to modify requirements governing rights-of-use and easements and pipeline rights-of-way on the Outer Continental Shelf (OCS). These changes will increase rental rates for pipeline rights-of-way and establish rentals for rights-of-use and easements. This change is needed because of requests by lessees and pipeline right-of-way holders to use large areas outside of the area covered by their lease and pipeline right-of-way for accessory structures. This rule will require holders of rights-of-use and easements and holders of large areas as part of a pipeline right-of-way to pay rentals on a per acre basis.

DATES:

We will consider all comments we receive by May 27, 2003. We will begin reviewing comments then and may not fully consider comments we receive after May 27, 2003.

ADDRESSES:

If you wish to comment, you may submit your comments by any one of several methods. You may mail or hand-carry comments (three copies) to the Department of the Interior; Minerals Management Service; Mail Stop 4024; 381 Elden Street; Herndon, Virginia 20170-4817; Attention: Rules Processing Team. You may also send your comments by e-mail or e-mail attachment. The e-mail address is: [e-mail]. Reference “1010-AC91, Rights-of-Use and Easement” in your subject line. Include your name and return address in your e-mail message and mark your message for return receipt.

FOR FURTHER INFORMATION CONTACT:

John Mirabella, Engineering and Operations Division, [phone].

SUPPLEMENTARY INFORMATION:

This proposed rule provides a 30-day comment period. We believe that the issues involved in this proposed rule are not complex and 30 days will provide sufficient time for interested parties to prepare and submit comments.

Areas of the Gulf of Mexico (GOM) once thought beyond reach, located in water depths greater than 5,000 feet, are now being explored for development. A new generation of drillships and the development of new techniques allow drilling in waters as deep as 10,000 feet. Lease operators and pipeline right-of-way holders are developing more sophisticated and cost-efficient technology that will lower the cost of safely finding, extracting, and delivering deepwater oil and natural gas.

In the next decade, as the offshore industry moves into ultra-deepwater frontiers, the number of floating production vessels will increase substantially. Structures such as tension-leg platforms and floating production and offloading systems will become widely used to produce oil and gas in the GOM. These systems must be stabilized above the seafloor in water depths of 1,000 to 10,000 feet and, therefore, require a mooring system which may have a “footprint” radius greater than 8,500 feet. In some cases, we expect that the mooring system will cover the majority of the OCS block on which the facility is positioned.

Additionally, lease operators will produce smaller hydrocarbon discoveries in deep water by means of wells with production trees, i.e., the assemblage of valves, etc., used to control the flow from the well, that are located on the ocean floor. These subsea systems must be tied back to a host facility by means of pipelines that deliver the production for processing and/or measurement, and cable-like control umbilicals that contain electrical conductors and small diameter steel tubing. Umbilicals allow control of the valves in the production tree and the measurement of pressure and temperature within the well to be accomplished remotely from the host facility.

A right-of-use and easement or pipeline right-of-way grant allows OCS operators and pipeline right-of-way holders the freedom to optimize the placement of their facilities on unleased blocks or on blocks leased by other operators. OCS blocks on which facilities such as floating structures with large mooring footprints, convergent pipelines, export pipelines, and control umbilicals are installed may present safety concerns. The safety concerns could occur if drilling facilities, work boats, or other vessel traffic associated with a new lease were located too close to floating structures, convergent pipelines, export pipelines, or control umbilicals associated with a right-of-way or right-of-use and easement previously granted. For this reason, MMS might decide to set aside adequate space around some pipeline rights-of-way or rights-of-use and easements. By removing blocks from the inventory or by otherwise restricting surface occupancy, potential safety and environmental concerns will be eliminated. In reviewing and approving applications for rights-of-use and easements and rights-of-way, MMS will ensure that safety and environmental problems do not occur. However, since issuance of these rights-of-use and easements and rights-of-way could have some adverse affects on other projects, MMS believes that the government should be compensated when the right-of-use and easement or right-of-way is issued.

The proposed modifications of 30 CFR 250.160, in subpart A, and 30 CFR 250.1009, in subpart J, would allow MMS to charge an annual rental to compensate the United States for the use of the unleased area being provided to the lessee or pipeline right-of-way holder. This proposed rule applies to applicants of pipeline rights-of-way who request a site for accessories for the pipeline right-of-way and for operators who request use of an area which is not part of their lease, i.e., a right-of-use and easement. The proposed rule would cover applications granted after the effective date of a final rule for new areas or applications to modify an existing area. The proposed rule includes a rental of $5 per acre affected in water depths less than 200 meters and $7.50 per acre affected in water depths of 200 meters or greater. These rental rates correspond to the rental rates charged for leases in those water depths. The total proposed annual rental depends on the size of the area requested except that a minimum annual rental will be charged based on 90 acres. The proposed minimum rental is $450 per year in water depths of less than 200 meters and $675 per year in water depths of 200 meters or greater. Establishing the minimum charge based on 90 acres will ensure that the government receives sufficient payment to cover administrative costs.

Existing regulations for payment of pipeline right-of-way rentals allows for payment on an annual basis, for a 5-year period, or for multiples of 5 years. This proposed regulation retains that option for pipeline rights-of-way and establishes the same option for rights-of-use and easements.

Section 160 was rewritten to add a table. Section 1009 was separated and redesignated as sections 1009 through 1014. Current sections 1010 through 1014 were redesignated as sections 1015 through 1019. Redesignated section 1012 was rewritten to add a table. The use of tables and the use of shorter sections with titles are intended to improve the clarity and readability of the regulation.

Procedural Matters

Public Comment Procedure

Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home address from the rulemaking record, and there may be circumstances in which we would withhold from the rulemaking record a respondent's identity, to the extent allowable by law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. However, we will not consider anonymous comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety.

Regulatory Planning and Review (Executive Order 12866)

This document was determined by the Office of Management and Budget to be significant and has been reviewed by OMB under Executive Order 12866.

Over the next 5 years, in water depths 200 meters or greater, MMS anticipates that it will receive an average of two requests per year for a new or modified right-of-use and easement and an average of two requests per year for a new or modified pipeline right-of-way that includes an area for an accessory. These requests would be affected by this rule. Based on historical data, we estimate that the affected area per request in water depths 200 meters or greater will average 5,760 acres, which is the typical size of one OCS lease block. In these water depths, the new rule proposes a rental of $7.50 per acre affected. This equates to a total cost of $86,400 (5,760 × $7.50 × 2) for pipeline right-of-way applicants and $86,400 (5,760 × $7.50 × 2) for right-of-use and easement applicants.

Over the next 5 years, in water depths less than 200 meters, MMS anticipates, based on requests in recent years, that it will receive an average of 10 requests per year for a new right-of-use and easement and an average of two requests per year for a new or modified pipeline right-of-way that includes an area for an accessory. These requests would be affected by this rule. We estimate that the affected area per request in water depths less than 200 meters will average 90 acres, which is the proposed minimum size of an affected area. In these water depths, the new rule proposes a rental of $5 per acre affected. This equates to a total annual cost of $4,500 (90 × $5 × 10) for right-of-use and easement applicants and $900 (90 × $5 × 2) for pipeline right-of-way applicants.

The annual cost to industry for rentals would be $178,200 ($86,400 + $86,400 + $4,500 + $900).

Since the current regulations provide for an annual rental of $75 per site included in an application for pipeline rights-of-way accessories and no cost for right-of-use and easement applications, the total cost under current rules for these same activities is $300 per year for pipeline right-of-way applicants ($75 × 2 + $75 × 2) and no cost for right-of-use and easement applicants.

(1) This rule would not have an effect of $100 million or more on the economy. It 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.

(2) This rule would not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. Issuance of a pipeline right-of way or right-of-use and easement does not interfere with the ability of other agencies to exercise their authority.

(3) This rule would not alter the budgetary effects of entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients. This rule will have no effect on the rights of the recipients of entitlements, grants, user fees, or loan programs.

(4) This rule may raise novel legal or policy issues.

Regulatory Flexibility (RF) Act

The Department certifies that this rule would not have a significant economic effect on a substantial number of small entities under the RF Act (5 U.S.C. 601 et seq.).

This rule would affect lessees and operators of leases and holders of pipeline rights-of-way in the OCS. This includes about 130 different companies. These companies are generally classified under the North American Industry Classification System (NAICS) code 211111, which includes companies that extract crude petroleum and natural gas. For this NAICS code classification, a small company is one with fewer than 500 employees. Based on these criteria, we estimate that about 70 percent of these companies are considered small. This rule, therefore, affects a substantial number of small entities.

The companies that are considered small have an average of about 15 offshore facilities. We estimate that the small companies have annual sales between $10 million and $40 million. As discussed earlier, the total annual cost to industry is estimated to be $178,800. No large or small company will bear a significant cost.

Your comments are important. The Small Business and Agriculture Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were established to receive comments from small business about Federal agency enforcement actions. The Ombudsman will annually evaluate the enforcement activities and rate each agency's responsiveness to small business. If you wish to comment on the actions of MMS, call 1-888-734-3247. You may comment to the Small Business Administration without fear of retaliation. Disciplinary action for retaliation by an MMS employee may include suspension or termination from employment with the Department of the Interior.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

This rule is not a major rule under the SBREFA (5 U.S.C. 804(2)). This rule:

(a) Would not have an annual effect on the economy of $100 million or more.

(b) Would not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.

(c) Would 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.

We do not expect this rule to have a significant effect because, as discussed under procedural matters, Regulatory Planning and Review (Executive Order 12866), this rule would have a total industry effect of $178,200 annually. This amount is not a significant effect for companies that do business on the OCS.

Paperwork Reduction Act (PRA) of 1995

The PRA provides that an agency may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number. Until OMB approves a collection of information and assigns a control number, you are not required to respond. The proposed revisions to 30 CFR part 250, subparts A and J, refer to, but do not change, information collection requirements in current regulations. OMB has approved the referenced information collection requirements under OMB control numbers 1010-0114 for subpart A, current expiration date of July 31, 2005; and 1010-0051 for subpart J, current expiration date of August 31, 2003. The rule proposes no new paperwork requirements, and an OMB form 83-I submission to OMB under the PRA is not required.

Federalism (Executive Order 13132)

With respect to Executive Order 13132, the rule would not have Federalism implications. This rule would not substantially and directly affect the relationship between the Federal and State governments. To the extent that State and local governments have a role in OCS activities, this rule would not affect that role.

Takings (Executive Order 12630)

With respect to Executive Order 12630, the proposed rule would not have significant Takings implications. A Takings Implication Assessment is not required. The proposed rulemaking is not a governmental action capable of interfering with constitutionally protected property rights.

Energy Supply, Distribution, or Use (Executive Order 13211)

This rule is not a significant rule and is not subject to review by the Office of Management and Budget under Executive Order 13211. The rule would not have a significant effect on energy supply, distribution, or use because proposed payments to compensate the government for making resources unavailable for leasing will occur on the average less than one time a year. The costs due to increases in rental costs will be very small compared to the costs of operating in the OCS. Thus, a Statement of Energy Effects is not required.

Civil Justice Reform (Executive Order 12988)

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

National Environmental Policy Act (NEPA) of 1969

This rule would not constitute a major Federal action significantly affecting the quality of the human environment. This rule would not affect the environmental regulations that a right-of-use and easement holder or a pipeline right-of-way holder will need to follow. A detailed statement under the NEPA is not required.

Unfunded Mandate Reform Act (UMRA) of 1995 (Executive Order 12866)

This rule would not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The rule would not have a significant or unique effect on State, local, or tribal governments or the private sector. A statement containing the information required by the UMRA (2 U.S.C. 1531 et seq.) is not required. This is because the rule would not affect State, local, or tribal governments, and the effect on the private sector is small.

List of Subjects in 30 CFR Part 250

• Continental shelf
• Environmental impact statements
• Environmental protection
• Government contracts
• 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-right-of-way
• Reporting and recordkeeping requirements
• Sulphur development and production
• Sulphur exploration
• Surety bonds

Dated: January 29, 2003.

Rebecca W. Watson,

Assistant Secretary, Land and Minerals Management.

For the reasons stated in the preamble, the Minerals Management Service (MMS) proposes to amend 30 CFR part 250 as follows:

PART 250—OIL AND GAS AND SULPHUR OPERATIONS IN THE OUTER CONTINENTAL SHELF

Subpart A—General

1. The authority citation for part 250 continues to read as follows:

Authority: 43 U.S.C. 1331, et seq.

2. In § 250.160, new paragraphs (f) through (h) are added to read as follows:

§ 250.160

When will MMS grant me a right-of-use and easement, and what requirements must I meet?

* * * * *

(f) You must pay a fee as required by paragraph (g) of this section if:

(1) You obtain a right-of-use and easement after the effective date of this rule; or

(2) You ask MMS to modify your right-of-use and easement to change the footprint of the associated platform, artificial island, or installation or device.

(g) If you meet either of the conditions in paragraph (f) of this section, you must pay a fee to MMS as shown in the following table:

If . . .	Then . . .
(1) Your right-of-use and easement site is located in water depths of less than 200 meters	You must pay a rental of $5 per acre per year with a minimum of $450 per year. The area subject to annual rental includes the areal extent of anchor chains, pipeline risers, and other equipment associated with the platform, artificial island, or installation or device.
(2) Your right-of-use and easement site is located in water depths of 200 meters or greater	You must pay a rental of $7.50 per acre per year with a minimum of $675 per year. The area subject to annual rental includes the areal extent of anchor chains, pipeline risers, and other equipment associated with the platform, artificial island, or installation or device.

(h) You must make the rental payments required by paragraph (g)(1) and (g)(2) of this section on an annual basis, for a 5-year period, or for multiples of 5 years. You must make the first payment at the time you submit the right-of-use and easement application. You must make all subsequent payments before the respective time periods begin.

3. In subpart J, §§ 250.1009 through 250.1014 are redesignated as shown in the following table:

Current section and paragraph	Redesignated section and paragraph
250.1009(a)(1)	250.1009(a).
250.1009(a)(2)	250.1009(b).
250.1009(b)(1)	250.1011(a).
250.1009(b)(1)(i)	250.1011(a)(1).
250.1009(b)(1)(ii)	250.1011(a)(2).
250.1009(b)(2)	250.1011(b).
250.1009(b)(2)(i)	250.1011(b)(1).
250.1009(b)(2)(ii)	250.1011(b)(2).
250.1009(b)(2)(iii)	250.1011(b)(3).
250.1009(b)(3)	250.1011(c).
250.1009(b)(4)	250.1011(d).
250.1009(c) introductory text	250.1010 introductory text
250.1009(c)(1)	250.1010(a).
250.1009(c)(2)	250.1012.
250.1009(c)(3)	250.1010(b).
250.1009(c)(4)	250.1010(c).
250.1009(c)(5)	250.1010(d).
250.1009(c)(6)	250.1010(e).
250.1009(c)(7)(i)	250.1010(f)(1).
250.1009(c)(7)(ii)	250.1010(f)(2).
250.1009(c)(7)(ii)(A)	250.1010(f)(2)(i).
250.1009(c)(7)(ii)(B)	250.1010(f)(2)(ii).
250.1009(c)(8)	250.1010(g).
250.1009(c)(9)	250.1010(h).
250.1009(d)	250.1013.
250.1009(e)	250.1014.
250.1010	250.1015.
250.1011	250.1016.
250.1012	250.1017.
250.1013	250.1018.
250.1014	250.1019.

4. The headings for newly redesignated §§ 250.1010 through 250.1014 are revised, and headings for newly redesignated §§ 250.1015 through 250.1019 are added to read as follows:

§ 250.1009

Requirements to obtain pipeline right-of-way grants.

* * * * *

§ 250.1010

General requirements for pipeline right-of-way holders.

* * * * *

§ 250.1011

Bond requirements for pipeline right-of-way holders.

* * * * *

§ 250.1012

Required payments for right-of-way holders.

* * * * *

§ 250.1013

Grounds for forfeiture of pipeline right-of-way grants.

* * * * *

§ 250.1014

When pipeline right-of-way grants expire.

* * * * *

§ 250.1015

Applications for pipeline right-of-way grants.

* * * * *

§ 250.1016

Granting pipeline rights-of-way.

* * * * *

§ 250.1017

Requirements for construction under pipeline right-of-way grants.

* * * * *

§ 250.1018

Assignment of pipeline right-of-way grants.

* * * * *

§ 250.1019

Relinquishment of pipeline right-of-way grants.

* * * * *

5. Redesignated § 250.1012 is revised to read as follows:

§ 250.1012

Required payments for pipeline right-of-way holders.

(a) You must pay MMS an annual rental of $15 for each statute mile, or part of a statute mile, of the OCS that your pipeline right-of-way crosses.

(b) This paragraph applies to you if you obtain a pipeline right-of-way that includes a site for an accessory to the pipeline, including fixed and floating platforms, subsea manifolds, and other similar structures. If either MMS grants the pipeline right-of-way after the effective date of this rule or you apply to modify the grant to change the site footprint, then you must make additional payment to MMS as shown in the following table.

If . . .	Then . . .
(1) Your accessory site is located in water depths of less than 200 meters	You must pay a rental of $5 per acre per year with a minimum of $450 per year. The area subject to annual rental includes the areal extent of anchor chains, pipeline risers, and other facilities and devices associated with the accessory.
(2) Your accessory site is located in water depths of 200 meters or greater	You must pay a rental of $7.50 per acre per year with a minimum of $675 per year. The area subject to annual rental includes the areal extent of anchor chains, pipeline risers, and other facilities and devices associated with the accessory.

(c) If you hold a pipeline right-of-way that includes a site for an accessory to your pipeline and you are not covered by paragraph (b) of this section, then you must pay MMS an annual rental of $75 for use of the affected area.

(d) You must make the rental payments required by paragraphs (a), (b)(1), (b)(2), and (c) of this section on an annual basis, for a 5-year period, or for multiples of 5 years. You must make the first payment at the time you submit the pipeline right-of-way application. You must make all subsequent payments before the respective time periods begin.