[Federal Register Volume 64, Number 135 (Thursday, July 15, 1999)]
[Rules and Regulations]
[Pages 38116-38124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18005]
[[Page 38116]]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Parts 210 and 216
RIN 1010-AC40
Electronic Reporting
AGENCY: Minerals Management Service, Interior.
ACTION: Final rule.
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SUMMARY: The Minerals Management Service (MMS) is amending its
regulations to require reporters to submit selected royalty and
production reports electronically, to extend the due date for
production reports filed electronically, and to eliminate the reporting
of most wells that are in drilling status. This rulemaking provides
electronic reporting exceptions for reporters who meet certain
criteria. These amendments will reduce administrative costs and
increase operating efficiencies for industry and MMS.
EFFECTIVE DATES: This final rule will be effective on November 1, 1999.
FOR FURTHER INFORMATION CONTACT: David S. Guzy, Chief, Rules and
Publications Staff, Royalty Management Program, MMS; telephone (303)
231-3432; fax (303) 231-3385; e-mail David.Guzy@mms.gov.
SUPPLEMENTARY INFORMATION: The principal authors of this rule are Mary
Williams, Ralph Spencer, Barbara Lambert, Tim Allard, and Gail Solaas
of the Royalty Management Program (RMP), MMS.
I. Background
MMS published a proposed rulemaking entitled ``Electronic
Reporting'' on April 8, 1998 (63 FR 17133). The proposed rulemaking
provided a 60-day public comment period which ended on June 8, 1998. We
have analyzed the comments we received and amended our proposed rule to
meet public concerns when prudent and necessary.
II. Comments on Proposed Rule
General Comments
Comment--One industry trade association commented that it does not
believe MMS has a legal basis for requiring electronic reporting. The
commenter stated that the proposed rule has only a vague reference to
various mandates to use new technologies to improve programs. The
commenter recommended MMS withdraw the proposed rule.
Response--Our authorities for issuing this rule are cited at the
beginning of each part. One of the primary purposes of this rule is to
comply with 44 U.S.C. 3506 which requires Federal agencies to carry out
information management activities efficiently, effectively, and
economically. The Secretary of the Interior can also prescribe
necessary and proper rules and regulations to administer mineral leases
in accordance with 30 U.S.C. 189 and 1701. We believe we have the legal
authority to require electronic reporting; therefore, we have no reason
to withdraw the rule.
Comment--One industry association commented that because the
majority of lines are already reported to MMS electronically and MMS
will be revising reporting formats in the near future, MMS should not
mandate electronic reporting at this time. The commenter suggested that
MMS use other methods to encourage electronic reporting.
Response--We agree with the commenter that a majority of our
lines--80 percent of our royalty lines and 60 percent of our production
lines--are reported electronically. However, the electronic lines are
submitted primarily by very large companies and are a small number of
our total reports. We continue to receive over 20,000 paper reports
monthly, generally from small reporters. These paper reports must be
manually keyed, filed, boxed, and stored until they can be destroyed in
accordance with Federal record disposal requirements. These manual
tasks are costly for the Government and taxpayers.
We also agree with the commenter that our royalty and production
reports may be revised as a result of reengineering efforts that are
currently ongoing. One of the most important reengineering proposals is
to eliminate the Form MMS-3160, Report of Monthly Operations, within 2
years. Because we are proposing to eliminate the Form MMS-3160 in 2
years, we have decided to remove the requirement contained in
Sec. 210.20 of our proposed rule to report the Form MMS-3160
electronically. We are also eliminating all other references to
mandatory electronic reporting of Form MMS-3160 in this final
rulemaking.
The proposal to eliminate the Form MMS-3160 was published in the
Federal Register, along with other production reporting changes, on
February 23, 1999 (64 FR 8844). Most operators of onshore properties
report production on Form MMS-3160, although they have the option of
reporting on Form MMS-4054, Oil and Gas Operations Report. All offshore
operators, however, must report their production on Form MMS-4054.
Consequently, MMS and those operators having both onshore and offshore
production must maintain and support two separate reporting systems--
one for the Form MMS-3160 and one for the Form MMS-4054. We are
proposing that operators use one form, a revised Form MMS-4054, to
report both onshore and offshore production because we believe it is
more efficient for MMS and industry.
With respect to the commenter's suggestion that MMS use other means
to encourage electronic reporting, we have promoted electronic
reporting for many years by offering various options other than this
rule. However, we have numerous indicators--such as cost savings from
less data to key manually, fewer reporting errors to correct, and less
paper records to file and store--that show electronic reporting is more
accurate, efficient, and economical than paper reporting. Companies
reporting electronically also experience cost and time savings over
paper reporting. Moreover, technology is currently available to easily
expand the use of electronic reporting and reduce or eliminate paper
reporting. This rulemaking enables us to take greater advantage of
electronic reporting and storage technologies that will save time and
money for both MMS and industry.
For all the reasons discussed above, we believe there is no
justification for delaying the requirement for electronic reporting of
Forms MMS-2014 and MMS-4054.
Comment--Two companies commented on the need to file paper reports
for adjustments or adding lines after an electronic report is ready to
send. One company stated they would have to build an elaborate
reporting system costing tens of thousands of dollars. One company
wanted a ``grandfather'' clause for adjustments prior to the
implementation date.
Response--We currently receive manual adjusting reports from many
companies who report most or all of their initial data electronically.
Typically, these manual reports are facsimiles generated from a
computer. Facsimile reporting indicates that the company is entering
the data into a computer but is unable to convert these adjustments
into an electronic format. In these cases, we suggest the company use
one of our other electronic reporting options to convert these
adjusting entries so they can be filed electronically. For example,
many companies use a Microsoft Excel spreadsheet which can be easily
converted to a Comma Separated Values format and sent via e-mail or
diskette. We recognize that the electronic format for adjustments under
this scenario
[[Page 38117]]
would be different from the format for the current month's report.
However, MMS systems have the flexibility to accept different
electronic formats for the same time period. We do not believe that
this simple conversion would cost tens of thousands of dollars because
the data is already compiled in a company's computer. For these
reasons, we did not modify the final rule to ``grandfather''
adjustments for periods prior to the effective date.
Comment--One commenter was concerned with the statement in the
background section that ``Reporters who use electronic reports
experience few problems with converting or submitting their monthly
reports.'' The company stated that they have experienced problems with
generating the Electronic Data Interchange (EDI) transmission, with MMS
receiving the transmission, and with sending large volumes of data.
When these problems occurred, MMS required submission by tape. The
company had also experienced an increase in the costs of reporting via
EDI versus magnetic or cartridge tape.
Response--MMS was not aware of the problems this company
encountered when generating a ``live'' EDI transmission. We usually
discover and correct EDI transmission problems during sample testing
and subsequent EDI files are generated without difficulties.
Regarding large volume transmissions, the Value Added Network (VAN)
service provider MMS currently uses is unable to receive EDI
transmissions containing file sizes larger than 10 megabytes. Although
it is unusual to exceed this file size, the following solutions to this
problem are available to reporters:
1. The reporter can ask MMS to assist in the creation of smaller
reports for multiple EDI transmissions, which do not increase the
reporter's cost;
2. The reporter can ask the VAN service provider to suggest unique
solutions on an individual basis; and
3. Reporters can submit data in a magnetic tape format.
Regarding MMS's request that the reporter submit data by tape, we
do not mandate a specific primary method of transmission. However, we
strongly recommend that a reporter have a backup method available in
case its primary method fails as apparently happened in this instance.
MMS technical staff can assist reporters in resolving implementation
problems with any method they choose.
We agree with the commenter that reporting via EDI has higher
initial costs. In an effort to reduce VAN charges, we eliminated some
reference data elements when we initially established the EDI format.
However, both Government and industry benefit from standardized
reporting inputs, improved data integrity, proven VAN reliability, and
the enhanced confidentiality and security.
Specific Comments
Section 210.20(b)(2)(i)--now Sec. 210.21(a)(2)(i)--One commenter
requested additional information to determine if electronic reporting
would be helpful. The commenter's questions are: Has the MMS improved
the Monthly Report of Operations, Form MMS-3160, software? Does it now
print single-page versions of the report? What do the printed Form MMS-
2014 reports look like? Are the Form MMS-3160 and Form MMS-2014 reports
integrated in any way? Can the templates be incorporated into our Lotus
1-2-3 worksheets?
Response--As noted earlier, we have removed the requirement that
reporters submit the Form MMS-3160 electronically from this final rule.
However, if reporters should voluntarily choose to submit the Form MMS-
3160 electronically, we offer the following information.
MMS has not changed the Form MMS-3160 template software. This
software prints the Form MMS-3160 on two pages as it always has. The
printed Form MMS-2014 reports generated by our new 2014 template
software mirrors the paper Form MMS-2014. The Forms MMS-2014 and MMS-
3160 are not integrated in any way. Neither of these templates can be
incorporated into any spreadsheet or database software applications.
However, if reporters have stored their report data electronically, it
is a relatively easy process to download the required information into
either a Comma Separated Values (CSV) or ASCII format once you have the
appropriate MMS-approved record layouts in your possession. You may
find these record layouts on our Internet site at http://
www.rmp.mms.gov, Customer Services, Publication Services, Forms.
Section 210.20(d)--now Sec. 210.21(c)--One industry commenter
wanted to know about the electronic reporting guidelines, getting
samples approved, electronic commerce agreements and security measures.
What are they? How cumbersome will they be to implement? How will we
prove that our reports have been electronically filed on time? When the
MMS sends out error notices with their accompanying bills for
penalties, how do you prove what was submitted?
Response--To answer most of these questions, we have published our
EDI Handbook, Template User Guide, and Floppy Diskette and Magnetic
Tape Reporting instructions on our Internet site at http://
www.rmp.mms.gov under Customer Services, Publication Services,
Handbooks. We can also mail a paper copy of these guides to any company
interested in converting to electronic reporting. The user guides
provide detailed instructions on how to use the two template reporting
options currently available to reporters. Additional reporting
information can be found at http://www.rmp.mms.gov, see Customer
Services, Publication Services, Forms, Electronic Commerce Information.
Reporters may be particularly interested in the Electronic Commerce
Brochure found at this last site. This 2-page document details all the
electronic reporting options currently available at MMS.
MMS will approve a sample electronic report in 3 to 5 working days,
depending upon the date during the month the sample is received. This
process is a simple one in which MMS will notify a reporter that either
the sample report is acceptable and approved for live processing, or
that the sample report must be changed in one or more fields and re-
submitted. Thereafter, each reporter submitting an electronic report
will receive an electronic acknowledgment from MMS stating the date and
time a report was received. Reporters can use this acknowledgment as
proof that they submitted the report timely.
We maintain a record of each company's original report to support
any bills for erroneous reporting. We will continue to contact any
company whose lines are rejected and corrected within our Auditing and
Financial System. Our error correction process will not change simply
because we receive reports electronically.
With respect to security measures, we believe security is an
integral part of electronic reporting. For example, reporters selecting
the EDI reporting option must utilize a VAN to process their
transmissions to MMS. VANs are private networks that provide
confidentiality and security through user authentication, non-
repudiation, and data encryption. For e-mail transmissions over the
Internet, all users must register with RMP to establish themselves as
an authorized reporter. MMS will not process data files submitted by
reporters who have not registered. Additionally, e-mail files are
compressed using PKZip software with a password for added security.
This compression measure prevents others from seeing actual report
data. Both the reporter and MMS must use the correct
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PKZip password before actual data becomes available for processing.
With respect to the Electronic Commerce Agreement (ECA), the
information about electronic reporting contained in an ECA is now
contained in this rule. Also, as discussed above, the passwords used in
electronic reporting will ensure the confidentiality of information
formerly contained in the ECA. Thus, we decided to eliminate the ECA
which was required under proposed Sec. 210.20(d)(2). We want to make
reporting electronically to MMS as simple and easy as possible.
Section 210.20(f)--now Sec. 210.22(a)--One commenter is unclear on
how much time payors will be given to make the appropriate system
changes, have reports approved, sign electronic commerce agreements,
etc. The 90 days allowed for a new reporter, as noted in this section,
would appear inadequate for initial development and implementation.
Response--The 90-day timeframe (equivalent to 3 months) for new
reporters assumes that most new reporters will be using an automated
system to account for their production and sales or, at the very least,
have a computer. We have two templates available upon request. One
requires a 386 computer using Microsoft Windows 3.1 or better, while
the other requires a 486 computer and Microsoft Windows 95. We have
several other electronic reporting options available and are developing
an Internet application for the near future.
The approval process is not time-consuming. For example, we try to
use the sample electronic report as the actual report for the month
submitted unless we encounter problems that we cannot resolve over the
telephone. On average, a company can select one of the templates or any
of our other electronic reporting options and receive approval within
30 days. As noted earlier, we have eliminated the requirement to file
an ECA in an effort to simplify and speed the process.
Given the various reporting options that are available and the
quick approval process, we believe 3 months are sufficient for a new
reporter to begin electronic reporting. Current reporters submitting 6
lines or more will have until November 1, 1999--the effective date of
this rule--to convert to electronic reporting. See Sec. 210.20 and
210.22 for electronic reporting conversion dates and exceptions,
respectively.
Section 210.20(g)--now eliminated--One commenter was concerned with
occasional equipment/electrical failure and what MMS thinks is
``reasonable'' in terms of a fixed fee per report line for
noncompliance. The commenter suggested MMS include a clause to cover
exceptions for occasional equipment/electrical failure. Another
commenter stated that the proposed rule is unclear about whether the
provision for the fee applies only to new reporters or to current
reporters who fail to comply. The commenter also questioned the need to
assess a fee for noncompliance. Because MMS is already processing paper
reports and this proposal will encourage reporters to switch to
electronic reporting, the Government cost to process paper reports will
decrease, rather than increase. Also, under RMP's reengineering
initiative, the data entry burden should be further reduced.
Response--We have eliminated proposed Sec. 210.20(g) which stated
that we would assess a fee if a reporter did not convert to electronic
reporting. We remind reporters, however, that they are subject to civil
penalty procedures under 30 CFR part 241 if they fail to comply with
any MMS regulation. These penalty procedures would pertain to reporters
who do not comply with the scheduled conversion dates provided in
Sec. 210.20(a). In addition, we have extended the effective date of
this rule from December 31, 1998 to November 1, 1999, to allow
reporters sufficient time to convert to electronic reporting. Over the
next few months, we will be working very hard to help reporters convert
to electronic reporting as soon as possible.
Section 210.52--One commenter wanted clarification on the statement
``You must submit a completed Report of Sales and Royalty Remittance
(Form MMS-2014) with all payments * * *.'' The commenter wants to know
if reporters can submit the Form MMS-2014 electronically independent of
the electronic payments.
Response--Yes, the Form MMS-2014 can be submitted electronically
independent of the electronic payment. The payor assigned document
number is used to link reports and payments. Many companies currently
send electronic and paper reports and a single electronic payment. We
allow reporters to send their electronic payment on the due date and
their electronic reports a few days before the payment. These
independent submissions provide flexibility to meet individual company
needs.
Section 216.50(c)--One company commented that extending the due
date for production reports by 10 days to the 25th of the second month
following production will place them in jeopardy of meeting the Form
MMS-2014 due date of the last day of the second month for making
estimated royalty payments to MMS. The company reports and pays
royalties for 12 clients. They recommend that we change the due date to
a 5-day extension for production reports or extend the due date for the
Form MMS-2014 by 5 days.
Response--The extended due date assists in reducing the number of
amended production reports without impacting the timeliness of data we
must process and send to States, tribes, and other Federal agencies.
Because automated reports are entered into our computer system the same
day they are received, they take less time to process than paper
documents. We piloted the 10-day extension for 1 year and received no
information indicating that companies were dependent upon the
production report to complete the Form MMS-2014. Royalty is typically
calculated using run tickets for liquids, meter readings for gas, and
other documents that are provided by lease operators. We believe you
should use the information on these documents to prepare the Form MMS-
2014, not the production report. We cannot change the due date of the
Form MMS-2014 and the associated royalty payment because of lease terms
and requirements in the Federal Oil and Gas Royalty Management Act of
1982, 30 U.S.C. 1711 et seq. We must have the Form MMS-2014 in order to
distribute royalty payments timely to the proper Federal, State, and
Indian recipients. MMS will continue the 10-day extension of the
production reporting due date not only as an incentive for electronic
reporting but also to reduce the number of amended reports.
III. Section-by-Section Analysis
The following paragraphs summarize the most significant changes we
made to our proposed rule that was published on April 8, 1998 (63 FR
17133):
Section 210.20
We eliminated the requirement to file the Form MMS-3160
electronically.
Section 210.20(a)
We added a timetable to Sec. 210.20(a) which phases small reporters
into electronic reporting over the next 2\1/4\ years. We added the
timetable in order to: (1) Minimize the impacts, if any, on small
businesses; and (2) give small businesses time to make any operational
changes necessary to comply with our electronic reporting requirements.
In addition to the table, we added a new paragraph (b) to clarify what
we mean by ``line'' and a new paragraph (c) to clarify what we mean by
``form''
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because both terms are referred to in the timetable in paragraph (a).
For purposes of this part, multiple submissions of the same form in one
month equals one form. For example, if you submitted 10 Form MMS-4054's
containing 3 lines each, MMS would consider that to be one form with 30
lines.
Section 210.20(b)
We moved proposed Sec. 210.20(b) to new Sec. 210.21(a) for clarity
purposes.
Section 210.20(c)
We moved proposed Sec. 210.20(c) to new Sec. 210.21(b) and added
the phrase ``or by accessing our Internet site at www.rmp.mms.gov'' to
provide reporters with an additional source for our electronic commerce
brochure.
Section 210.20(d)
We moved proposed Sec. 210.20(d) to new Sec. 210.21(c) and deleted
Sec. 210.20(d)(2) which required reporters to submit an Electronic
Commerce Agreement.
Section 210.20(e)
We combined the provisions in this proposed Sec. 210.20(e) with new
Sec. 210.21(c) for further clarification.
Section 210.20(f)
We removed proposed Sec. 210.20(f) and included the 3-month grace
period for new reporters in new Sec. 210.22(a).
Section 210.20(g)
We deleted this proposed Sec. 210.20(g) which stated that we would
assess a fee if a reporter did not convert to electronic reporting. For
further information, see our response to public comments under
Sec. 210.20(g).
New Sec. 210.22
We added new Sec. 210.22 which provides two grace periods and two
exclusions to our electronic reporting requirements.
The first grace period MMS will allow is if you become a
new MMS reporter after any of the required conversion dates. In such
cases, MMS will allow you 3 months from the day your first report is
due to begin reporting electronically (this grace period was originally
contained in proposed Sec. 210.20(f) and defined as 90 days). For
example, if you become an MMS reporter by leasing 6 new producing
properties (equivalent to 6 lines) on April 16, 2000, your first Form
MMS-2014 for April 2000 sales will be due May 31, 2000. You will have 3
months--or until August 31, 2000--to begin submitting the Form MMS-2014
electronically. MMS will continue to accept paper forms during the
grace period.
The second grace period is for when you exceed the maximum
number of lines you are allowed to report on paper under
Sec. 210.20(a). In that case, you have 3 months from the last day of
the month in which you exceeded the line limit to begin reporting
electronically. For example, assume that you currently report 5 lines
per month on your Form MMS-2014. On June 8, 2000 (7 months after the 6-
line conversion date of November 1, 1999), you lease two new producing
properties (equivalent to 2 new lines per month). You will have 3
months from the last day of the month in which you exceeded the 6-line
limit--or until September 30, 2000--to begin submitting the Form MMS-
2014 electronically. MMS will continue to accept paper forms during the
grace period.
The two exceptions to our electronic reporting requirements
provided in Sec. 210.22 are as follows:
You do not have to report electronically if you report
only rent, minimum royalty, or other annual obligations on the Form
MMS-2014; and
You do not have to report electronically if you are a
small business as defined by the U.S. Small Business Administration,
and you have no computer, no resources to purchase a computer or
contract with an electronic reporting service, nor access to a computer
at a local library or other public facility.
The two exceptions to our electronic reporting requirements which
we added to this final rule are directed primarily at small reporters
who might suffer financial hardship if forced to comply with this rule.
For a detailed explanation of these exceptions, see our discussion of
small business issues under the Regulatory Flexibility Act section of
the preamble in caption IV. Procedural Matters.
Section 216.50(a)
We added a sentence to this paragraph to clarify that you may
submit the Form MMS-3160 electronically.
Section 216.50(c)(1) and (2)
We clarified that you will have a 10-day extension from the 15th to
the 25th day of the second month following the month for which you are
reporting if you voluntarily choose to submit the Form MMS-3160,
Monthly Report of Operations, electronically.
Section 216.53(c)(1) and (2)
We clarified that you will have a 10-day extension from the 15th to
the 25th day of the second month following the month for which you are
reporting if you submit the Form MMS-4054, Oil and Gas Operations
Report, electronically.
Section 216.55(c)(1) and (2)
We clarified that you will have a 10-day extension from the 15th to
the 25th day of the second month following the month for which you are
reporting to submit your Form MMS-4056, Gas Plant Operations Report, on
paper if you submit the Form MMS-4054, Oil and Gas Operations Report,
electronically.
Section 216.56(c)(1) and (2)
We clarified that you will have a 10-day extension from the 15th to
the 25th day of the second month following the month for which you are
reporting to submit your Form MMS-4058, Production Allocation Schedule
Report, on paper if you submit the Form MMS-4054, Oil and Gas
Operations Report, electronically.
IV. Procedural Matters
Regulatory Planning and Review (Executive Order 12866)
This document is not a significant rule and is not subject to
review by the Office of Management and Budget under E.O. 12866.
Generally, this rule will require many Federal and Indian mineral
revenue and production reporters to convert from paper to electronic
reporting by November 1, 2001. MMS uses the reports to account for and
distribute Federal and Indian mineral revenues. This rule will not
affect the timeliness of revenue distribution to recipients or
information dissemination to other Federal agencies. Based on this and
other information detailed below, we conclude:
(1) This rule will not have an effect of $100 million or more on
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities.
Governments
This rule will have no effect on tribal governments but will have
positive effects on the amount of revenues shared with States and
possibly local governments. We expect net receipts sharing costs to
States--that is, the MMS operating costs deducted from States' shares
of royalty revenue--to decrease as MMS realizes savings from electronic
reporting. We estimate the total annual savings to States to be
[[Page 38120]]
$33,000 in the first year and $134,000 each year thereafter.
Private Sector
(1) This rule establishes the type of media that reporters in the
oil and gas industry must use to report mineral revenues and production
to MMS. We estimate that electronic reporting will generate net savings
to industry of $1.2 million in the first year and $1.8 million each
year thereafter;
(2) This rule will not create a serious inconsistency or otherwise
interfere with an action taken or planned by another agency;
(3) This rule does not alter the budgetary effects or entitlements,
grants, user fees, or loan programs or the rights or obligations of
their recipients; and
(4) This rule does not raise novel legal or policy issues.
Regulatory Flexibility Act
In our April 8, 1998, proposed rule (63 FR 17133), we concluded
that the rule would not have a significant economic impact on small
businesses primarily because of the various low-cost electronic
reporting options available to reporters. We received several public
comments that disagreed with our conclusion. In response to those
comments, we modified the rule substantially to minimize the negative
impact on the largest number of small businesses and still increase the
number of reports received electronically.
Comments Received on Small Business Impact
One industry trade group and three companies disagreed with our
conclusion that the impact of requiring electronic reporting for small
reporters would not be significant. They were concerned that: (1) MMS
was shifting data entry costs to the small reporters; (2) many
companies do not have a computer and cannot afford to buy one or pay
someone else to report electronically for them; and (3) this rule would
require a significant change in the way their business is conducted.
Additionally, the industry trade group disputed our conclusion that
reporting electronically will reduce the reporting burden for companies
who report only a few lines each month. The trade group believes it
will be a costly, time-consuming burden to convert to electronic
reporting. The industry trade group is concerned that MMS permits no
exception to the proposed rule, especially for small lessees who are
trying to produce from marginal wells in a time of extremely low
prices.
The industry trade group and one company recommended that we
establish a reasonable threshold by number of lines or royalties paid
per year. The industry trade group also recommended that MMS establish
a means by which reporters could request an exemption to the rule based
on various circumstances or hardships. One company also recommended
that, for the few non-electronic reporters remaining, MMS reduce the
reporting burden for both MMS and the reporter by developing an
abbreviated paper report.
MMS Response to Comments
It is not our intent to cause economic hardship for any small
business by requiring electronic reporting. We devoted substantial time
and effort to identify the possible negative economic impacts of this
rule on small businesses and to take steps to eliminate or lessen
adverse impacts whenever possible. The following are examples of the
many actions we took to mitigate negative economic impacts and still
increase the number of reports submitted electronically:
Free software. We developed template software (see
response to Sec. 210.20(b)(2)(i) under specific comments) primarily for
those small companies that report only a few lines each month. We
provide this software at no charge to reporters. If a company should
choose to purchase a computer to use the software, the minimum software
requirements permit the company to purchase a very inexpensive model.
The template software is easy to install, requires no programming
or computer expertise, and provides companies with the static or
reference data that must be reported each month. This software also
permits companies to save the report to a file which they can use to
amend their report later, if necessary.
This software has significant benefits for both MMS and industry.
It could ultimately allow us to cease printing and mailing over 4,000
model paper reports each month. The model contains the static or
reference data contained in our system for each reporter. This process
is very costly to MMS and, in many cases, companies are not using the
model to report but only as a reference. The model report is also
cumbersome to industry because each company must wait for the model to
be received, complete the model with the current month's data, make
copies, and mail the report back to MMS. With electronic reporting,
companies can complete the report anytime during the month and easily
amend prior reports if necessary;
Internet filing. We are also developing an Internet
application that will permit small companies that do not have computers
to submit reports from remote locations, such as public libraries,
without purchasing a computer. We anticipate this alternative to be
available before the effective date of this rule. This alternative will
eliminate the need to purchase a computer;
Advice and assistance. We offer advice and assistance to
the hundreds of small companies that currently use a computer-generated
paper facsimile to report each month to help them transition to
electronic reporting. Our goal is to eliminate as much data entry as
possible for both the companies and MMS. For example, a company may
enter data in its automated system and possibly again on its facsimile
reports. Subsequently, MMS must manually enter the data from the paper
copy into our system. Electronic reporting will eliminate these two
stages of manual data entry without shifting costs. One of the
commenting companies uses Lotus 1-2-3 for its accounting functions. The
Lotus spreadsheet can be converted to an ASCII format (based upon an
ASCII record layout we provide) and sent to MMS via e-mail or diskette.
While Lotus does not offer a direct file conversion to a Comma
Separated Values (CSV) format, a user can compose a macro that saves
Lotus files in a CSV format. We will provide any reporter with a CSV
and/or ASCII record layout for both production and royalty reports upon
request;
Elimination of the requirement to file the Form MMS-3160,
Monthly Report of Operations, electronically. As part of our
reengineering efforts, MMS is proposing to eliminate the Form MMS-3160
and replace it with a revised Form MMS-4054. Consequently, we
determined that it would not be cost effective to require reporters to
convert to electronic reporting of the Form MMS-3160 at this time;
Phased compliance over 2\1/4\ years. In Sec. 210.20(a), we
established a timetable that phases the smallest reporters into
electronic reporting over 2\1/4\ years. These extended compliance dates
will allow additional time for small businesses to obtain computer
equipment or contract with an electronic reporting service to comply
with our electronic reporting requirements; and
Exceptions to electronic reporting. In response to public
comments, MMS will allow some exceptions to the electronic reporting
requirements in this final rule. The exceptions at Sec. 210.22 are
directed primarily at small reporters
[[Page 38121]]
who might suffer financial hardship if forced to comply with this rule.
The two exceptions to electronic reporting are as follows:
(1) You do not have to report electronically if you report only
rent, minimum royalty, or other annual obligations on the Form MMS-
2014. This category covers reporters who submit one line per lease per
year for any number of leases. We determined that it would not be
economically feasible for a reporter to develop an electronic reporting
method for this very limited reporting situation; and
(2) You do not have to report electronically if you are a small
business as defined by the U.S. Small Business Administration, and you
have no computer, no resources to purchase a computer or contract with
an electronic reporting service, nor access to a computer at a local
library or other public facility. This exception will allow any small
business facing severe financial hardship to continue submitting paper
reports rather than convert to electronic reporting. Excluding these
small payors and reporters from electronic reporting requirements will
avoid causing undue financial hardship for the smallest companies.
We did not choose to develop an abbreviated paper report in
addition to the current forms as one commenter suggested because this
action would not further our goal to eliminate paper reporting. One of
the significant advantages of electronic reporting is that a company
can store and submit only those data elements that are required for its
operation. Maintaining two different reporting forms or data collection
instruments is duplicative and confusing for MMS and reporters. In
addition, MMS is in the process of reengineering our systems and
attempting to reduce or modify the data elements currently required.
However, we probably will not complete this effort for several years.
Conclusion. Based on the numerous mitigating actions we have taken
in response to public comments, the Department of the Interior
certifies that this rule will not have a significant economic effect on
a substantial number of small entities under the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.). This rule will have no effect on tribal
governments or other small governmental jurisdictions.
Your comments are important. The Small Business and Agriculture
Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were
established to receive comments from small businesses 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 enforcement actions in this
rule, call 1-888-734-3247.
Small Business Regulatory Enforcement Fairness Act (SBREFA)
This rule is not a major rule under 5 U.S.C. 804(2), the Small
Business Regulatory Enforcement Fairness Act. This rule:
a. Does not have an annual effect on the economy of $100 million or
more. Net revenues distributed to States may increase $33,000 in the
first year and $134,000 each year thereafter due to cost savings
realized by MMS through increased electronic reporting. Net savings to
industry from converting to electronic reporting is estimated to be
$1.2 million in the first year and $1.8 million each year thereafter.
b. Will not cause a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies, or geographic regions. See discussion under Regulatory
Flexibility Act.
c. 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. See
discussion under Regulatory Flexibility Act.
Unfunded Mandates Reform Act of 1995
This rule does not impose an unfunded mandate on State, local, or
tribal governments or the private sector of more than $100 million per
year. This rule does 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 Unfunded Mandates Reform Act
(2 U.S.C. 1531 et seq.) is not required.
Governments. This rule does not affect local or tribal governments.
States that request to perform the delegable function of processing
royalty and production reports under 30 CFR part 227 are required to
accept multiple forms of electronic media from reporters as specified
by MMS. States are compensated for the costs of performing delegable
functions up to the amount it would reasonably cost MMS to perform the
same function. We conclude that this rule would not impose an unfunded
mandate on States.
Private sector. This rule establishes the type of media that
reporters in the oil and gas industry must use to report mineral
revenues and production to MMS. We estimate net savings to industry
from converting to electronic reporting to be $1.2 million in the first
year and $1.8 million each year thereafter.
Takings (E.O. 12630)
In accordance with E.O. 12630, this rule does not have significant
takings implications. This rule does not impose conditions or
limitations on the use of any private property; consequently, a takings
implication assessment is not required.
Federalism (E.O. 12612)
In accordance with Executive Order 12612, this rule does not have
sufficient federalism implications to warrant the preparation of a
Federalism Assessment. This rule does not impose any requirements on
oil and gas reports submitted to States or limit State policymaking
discretion in any way; consequently, a Federalism Assessment is not
required.
Civil Justice Reform (E.O. 12988)
In accordance with Executive Order 12988, the Office of the
Solicitor has determined that this rule does not unduly burden the
judicial system and meets the requirements of sections 3(a) and 3(b)(2)
of the Order.
Paperwork Reduction Act
In our April 8, 1998, proposed rule (63 FR 17133), we stated that
this rule will reduce burden hours associated with two existing
information collections approved by the Office of Management and Budget
(OMB):
(1) OMB Control Number 1010-0022, Report of Sales and Royalty
Remittance (Form MMS-2014); and
(2) OMB Control Number 1010-0040, Production Accounting and
Auditing System (PAAS) Reports (Facility and Measurement Information
Form (FMIF), Form MMS-4051; Oil and Gas Operations Report (OGOR), Form
MMS-4054; Gas Analysis Report (GAR), Form MMS-4055; Gas Plant
Operations Report (GPOR), Form MMS-4056; Monthly Report of Operations
(MRO), Form MMS-3160; and Production Allocation Schedule Report (PASR),
Form MMS-4058)].
One industry commenter believes that if a free-form layout is
allowed using existing spreadsheet software (for example, Microsoft
Excel), it would take closer to the 7 minutes per line to complete the
Form MMS-2014 (similar to the paper submission) versus 2 minutes for
electronic reporting. The commenter believes the 2 minutes per line,
the burden estimate we used in our OMB submission, could only be
realized
[[Page 38122]]
if such data were systematically loaded on the spreadsheet. The
commenter is currently submitting his adjustments on paper.
Our estimate of 2 minutes per line is based on the assumption that
a company is already using spreadsheet software or other automated
options to submit its Form MMS-2014 or similar State reports. We also
offer electronic alternatives to facilitate compatibility with a
company's system, including submission of ASCII files on diskette or
submission of regular reports on magnetic tape with adjustments on a
diskette. We will work with any company to determine the simplest, most
efficient alternative for reporting electronically.
On May 30, 1998, OMB approved the reduction in burden which we
estimated in the proposed rule for both of the above-referenced
information collections (OMB Control Numbers 1010-0022 and 1010-0040).
Both collections have an expiration date of August 31, 2001.
As part of our continuing effort to reduce paperwork and respondent
burden, we invite the public and other Federal agencies to comment on
any aspect of the reporting burdens associated with these information
collections. Submit your comments to the Office of Information and
Regulatory Affairs, OMB, Attention Desk Officer for the Department of
the Interior, Washington, D.C. 20503. Send copies of your comments to
Minerals Management Service, Royalty Management Program, Rules and
Publications Staff, P.O. Box 25165, MS 3021, Denver, Colorado 80225-
0165; courier address is Building 85, Denver Federal Center, Denver,
Colorado 80225; e-mail address is RMP.comments@mms.gov.
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.
National Environmental Policy Act of 1969
This rule does not constitute a major Federal Action significantly
affecting the quality of the human environment. A detailed statement
under the National Environmental Policy Act of 1969 is not required.
List of Subjects
30 CFR part 210
Coal, Continental shelf, Geothermal energy, Government contracts,
Indian lands, Mineral royalties, Natural gas, Petroleum, Public lands--
mineral resources, Reporting and recordkeeping requirements.
30 CFR part 216
Coal, Continental shelf, Geothermal energy, Government contracts,
Indian lands, Mineral royalties, Natural gas, Penalties, Petroleum,
Public lands--mineral resources, Reporting and recordkeeping
requirements.
Dated: June 30, 1999.
Sylvia V. Baca,
Acting Assistant Secretary--Land and Minerals Management.
For the reasons stated in the preamble, MMS amends 30 CFR parts 210
and 216 as follows:
PART 210--FORMS AND REPORTS
1. The authority citation for part 210 is revised to read as
follows:
Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396, 2107; 30 U.S.C.
189, 190, 359, 1023, 1751(a); 31 U.S.C. 3716, 9701; 43 U.S.C. 1334,
1801 et seq.; and 44 U.S.C. 3506(a).
2. Section 210.10 paragraphs (c)(1), (c)(2), (c)(7), and (d) are
revised to read as follows:
Sec. 210.10 Information collection.
* * * * *
(c) * * *
(1) MMS-2014--Used monthly to report lease-related transactions
essential for royalty management to determine the correct royalty
amount due, reconcile or audit data, and distribute payments to
appropriate accounts. Public reporting burden for paper submission is
estimated to average 7 minutes to complete each line item on the form,
including the time necessary to assemble data, calculate value and
royalty, and enter data on the form. Companies reporting electronically
may average 2 minutes to complete each line item on the form. Comments
submitted relative to this information collection should reference the
information collection titled Report of Sales and Royalty Remittance,
OMB Control Number 1010-0022.
(2) MMS-3160--Used by onshore oil and gas lease operators to report
monthly oil and gas production to MMS. Public reporting burden for
paper submission is estimated to average 15 minutes per form, including
the time necessary to assemble data, ensure that production and
disposition numbers are accurate, and enter data on the form. Companies
reporting electronically may average 7.5 minutes per month to complete
the form. Comments submitted relative to this information collection
should reference the information collection titled PAAS Oil and Gas
Reports, OMB Control Number 1010-0040.
* * * * *
(7) MMS-4054--This three-part form identifies all oil and gas lease
production from Federal and Indian lands. MMS uses information from
this form to track oil and gas from the point of production to the
point of first sale or other disposition. Respondents will generally
not use all three parts of the form. Public reporting burden for paper
submission is estimated to average 30 minutes per month, including the
time necessary to assemble data, ensure that production and disposition
numbers are accurate, and enter data on the form. Companies reporting
electronically may average 15 minutes per month to complete the form.
Comments submitted relative to this information collection should
reference the information collection titled PAAS Oil and Gas Reports,
OMB Control Number 1010-0040.
* * * * *
(d) Comments on burden estimates. Send comments on the accuracy of
this burden estimate or suggestions on reducing this burden to the
Information Collection Clearance Officer, MS 4230, MMS, 1849 C Street,
NW, Washington, DC 20240 and to the Office of Management and Budget,
Office of Information and Regulatory Affairs, Attention: Desk Officer
for the U.S. Department of the Interior, OMB Control Number 1010-
________ (insert appropriate OMB Control Number), Washington, DC 20503.
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.
3. Sections 210.20-210.22 are added to subpart A to read as
follows:
Sec. 210.20 When is electronic reporting required?
(a) You must submit Forms MMS-2014 and MMS-4054 to MMS
electronically. You must begin reporting electronically according to
the following timetable unless you qualify for the exceptions to
electronic reporting listed in Sec. 210.22:
------------------------------------------------------------------------
Then, you must submit that
If you report the following number of form electronically
lines each month on a required form . . . beginning . . .
------------------------------------------------------------------------
(1) 6 or more............................. November 1, 1999.
(2) 4-5................................... November 1, 2000.
(3) 1-3................................... November 1, 2001.
------------------------------------------------------------------------
(b) See Sec. 218.40(c) for the definition of a royalty report line
on Form MMS-2014 and Sec. 216.40(c) for the definition
[[Page 38123]]
of a production report line on Form MMS-4054; and
(c) For purposes of this part, multiple submissions of the same
form in one month equals one form.
Sec. 210.21 How do you report electronically?
(a) You may use any of the following electronic media types, unless
MMS instructs you differently:
(1) Electronic Data Interchange (EDI) 1--The inter-
organizational, computer-to-computer exchange of structured information
in a standard, machine-processable format;
---------------------------------------------------------------------------
\1\ MMS has developed security measures, authentication
procedures, and automated acknowledgments for this electronic media
type.
---------------------------------------------------------------------------
(2) Electronic Mail (e-mail) 1--Any communication
service used to electronically transmit and store messages and attach
files. MMS has three electronic file options:
(i) Template--MMS-provided software that generates blank forms on a
personal computer to assist companies in preparing MMS regulatory
reports (this option is not available for Form MMS-4054);
(ii) Comma Separated Values (CSV)--A file format where attribute
fields are separated by commas; and
(iii) American Standard Code for Information Interchange (ASCII)--A
file format of fixed-length records with fixed-length attribute fields;
(3) Reporter-Prepared Diskette (3\1/2\ inch)--A data storage medium
used to transmit report data using one of the following file formats:
(i) Template;
(ii) CSV; and
(iii) ASCII;
(4) Magnetic or Cartridge Tape--A data storage medium used to
transmit report data in an ASCII file format.
(b) MMS prefers that you use the media types in the order presented
in paragraph (a) of this section to the extent it is cost effective and
practical. As technology changes, MMS will consider other media types
and the order of MMS preference may change. Refer to our electronic
commerce brochure for the most current reporting options. You can
receive a copy of our brochure by calling your MMS representative or by
accessing our Internet site at www.rmp.mms.gov.
(c) Before you may begin reporting electronically:
(1) You must submit an electronic sample of your report for MMS
approval using the MMS-supplied electronic reporting guidelines;
(2) MMS must notify you that your sample report has been approved;
(3) MMS must assign you a sender identification number and security
code for any EDI transmissions; and
(4) MMS must assign you an originating address and compression
software password for any e-mail transmissions.
Sec. 210.22 What are the exceptions to the electronic reporting
requirements?
MMS will allow the following grace periods and exceptions to the
electronic reporting requirements in Sec. 210.20:
(a) If you become a new MMS reporter after any of the dates you are
required to submit electronic reports under Sec. 210.20(a), you have 3
months from the day your first report is due to begin reporting
electronically;
(b) If you exceed the maximum number of lines you are allowed to
report on paper under Sec. 210.20(a), you have 3 months from the last
day of the month in which you exceeded the line limit to begin
reporting electronically;
(c) You are not required to report electronically if you report
only rent, minimum royalty, or other annual obligations on the Form
MMS-2014; and
(d) You are not required to report electronically if you are a
small business as defined by the U.S. Small Business Administration,
and you have no computer, no resources to purchase a computer or
contract with an electronic reporting service, nor access to a computer
at a local library or other public facility.
4. Section 210.52 is revised to read as follows:
Sec. 210.52 Report of sales and royalty remittance.
(a) You must submit a completed Form MMS-2014 (Report of Sales and
Royalty Remittance) to MMS with:
(1) All royalty payments; and,
(2) Rents on nonproducing leases, where specified.
(b) When you submit Form MMS-2014 data electronically, you must not
submit the form itself.
(c) Completed Forms MMS-2014 for royalty payments are due by the
end of the month following the production month.
(d) Where applicable, completed Forms MMS-2014 for rental payments
are due no later than the anniversary date of the lease.
(e) This section does not prohibit you from making early payments
voluntarily.
PART 216--PRODUCTION ACCOUNTING
5. The authority citation for part 216 is revised to read as
follows:
Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396, 2107; 30 U.S.C.
189, 190, 359, 1023, 1751(a); 31 U.S.C. 3716, 9701; 43 U.S.C. 1334,
1801 et seq.; and 44 U.S.C. 3506(a).
Subpart A--General Provisions
6. Add Sec. 216.11 to subpart A to read as follows:
Sec. 216.11 Electronic reporting.
You must submit your Oil and Gas Operations Report, Form MMS-4054,
in accordance with electronic reporting requirements in 30 CFR part
210.
Subpart B--Oil and Gas, General
7. Section 216.50 is added by redesignating paragraphs (b) through
(d) as paragraphs (f) through (h), revising paragraph (a), and adding
new paragraphs (b) through (e) to read as follows:
Sec. 216.50 Monthly report of operations.
(a) You must submit a Monthly Report of Operations, Form MMS-3160,
if you operate either an onshore Federal or Indian lease or an onshore
federally-approved agreement that contains one or more wells that are
not permanently plugged and abandoned. You may submit Form MMS-3160
electronically.
(b) You must submit a Form MMS-3160 for each well for each calendar
month, beginning with the month in which you complete drilling, unless
you have only test production from a drilling well or MMS tells you in
writing to do otherwise.
(c) MMS must receive your completed Form MMS-3160 according to the
following table:
------------------------------------------------------------------------
If you submit your form . . . We must receive it by . . .
------------------------------------------------------------------------
(1) Electronically........................ The 25th day of the second
month following the month
for which you are
reporting.
(2) Other than electronically............. The 15th day of the second
month following the month
for which you are
reporting.
------------------------------------------------------------------------
(d) You must continue reporting until either:
(1) BLM approves all wells as permanently plugged or abandoned and
you dispose of all inventory; or
(2) The lease or agreement is terminated.
(e) You are not required to submit Form MMS-3160 if:
(1) You are authorized to submit an Oil and Gas Operations Report,
Form MMS-4054, instead of a Form MMS-3160; or
[[Page 38124]]
(2) You operate a gas storage agreement. You must report gas
storage agreements to the appropriate BLM office.
* * * * *
8. Section 216.53 is revised to read as follows:
Sec. 216.53 Oil and gas operations report.
(a) You must file an Oil and Gas Operations Report, Form MMS-4054,
if you operate one of the following that contains one or more wells
that are not permanently plugged or abandoned:
(1) An OCS lease or federally-approved agreement; or
(2) An onshore Federal or Indian lease or federally-approved
agreement for which you elected to report on a Form MMS-4054 instead of
a Form MMS-3160.
(b) You must submit a Form MMS-4054 for each well for each calendar
month, beginning with the month in which you complete drilling, unless
you have only test production from a drilling well or MMS tells you in
writing to do otherwise.
(c) MMS must receive your completed Form MMS-4054 according to the
following table:
------------------------------------------------------------------------
If you submit your form . . . We must receive it by . . .
------------------------------------------------------------------------
(1) Electronically........................ The 25th day of the second
month following the month
for which you are
reporting.
(2) Other than electronically............. The 15th day of the second
month following the month
for which you are
reporting.
------------------------------------------------------------------------
(d) You must continue reporting until either:
(1) BLM or MMS approves all wells as permanently plugged or
abandoned and you dispose of all inventory; or
(2) The lease or agreement is terminated.
9. Section 216.55 is revised to read as follows:
Sec. 216.55 Gas plant operations report.
(a) You must submit a Gas Plant Operations Report, Form MMS-4056,
if you operate either:
(1) A gas plant that processes gas originating from an OCS lease or
federally-approved agreement before the point of final royalty
determination; or
(2) A gas plant that processes gas from an onshore Federal or
Indian lease or federally-approved agreement before the point of final
royalty determination, and MMS has asked you to submit a Form MMS-4056.
(b) You must submit a Form MMS-4056 for each calendar month
beginning with the month gas processing is initiated.
(c) MMS must receive your completed Form MMS-4056 according to the
following table:
------------------------------------------------------------------------
We must receive your Form
If you submit your Form MMS-4054 . . . MMS-4056 by . . .
------------------------------------------------------------------------
(1) Electronically........................ The 25th day of the second
month following the month
for which you are
reporting.
(2) Other than electronically............. The 15th day of the second
month following the month
for which you are
reporting.
------------------------------------------------------------------------
(d) Your report must show 100 percent of the gas.
(e) You are not required to file a Form MMS-4056 if:
(1) Your plant has not processed gas that originated from a Federal
onshore, OCS, or Indian lease, or federally-approved agreement before
the point of final royalty determination for 6 months; and
(2) You notified MMS in writing within 30 days after the end of the
6-month period.
(f) You must file a Form MMS-4056 when your plant resumes
processing gas that originated from a Federal onshore, OCS, or Indian
lease, or federally-approved agreement before the point of final
royalty determination.
10. Section 216.56 is amended by revising paragraph (b) and adding
paragraph (c) to read as follows:
Sec. 216.56 Production allocation schedule report.
* * * * *
(b) You must submit a Production Allocation Schedule Report, Form
MMS-4058, for each calendar month beginning with the month in which you
first handle production covered by this section.
(c) MMS must receive your Form MMS-4058 according to the following
table:
------------------------------------------------------------------------
We must receive your Form
If you submit your Form MMS-4054 . . . MMS-4058 by . . .
------------------------------------------------------------------------
(1) Electronically........................ The 25th day of the second
month following the month
for which you are
reporting.
(2) Other than electronically............. The 15th day of the second
month following the month
for which you are
reporting.
------------------------------------------------------------------------
[FR Doc. 99-18005 Filed 7-14-99; 8:45 am]
BILLING CODE 4310-MR-P
