# Leasing of Sulfur or Oil and Gas in the Outer Continental Shelf > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2016-06513 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** March 30, 2016 - **Citation:** 81 FR 18112 ## Text DEPARTMENT OF THE INTERIOR Bureau of Ocean Energy Management 30 CFR Parts 550, 556, 559 and 560 RIN 1010-AD06 [Docket ID: MMS-2007-OMM-0069] Leasing of Sulfur or Oil and Gas in the Outer Continental Shelf AGENCY: Bureau of Ocean Energy Management (BOEM), Interior. ACTION: Final rule. SUMMARY: This final rule updates and streamlines the existing Outer Continental Shelf (OCS) leasing regulations and clarifies implementation of the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996, which amended the Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA). The final rule reorganizes leasing requirements to more effectively communicate the leasing process as it has evolved over the years. The final rule makes changes to regulations which relate to the oil, gas, and sulfur leasing requirements. The final rule does not, however, include substantive changes to regulations which relate to bonding, which will be the subject of a separate new proposed rulemaking. DATES: This final rule will become effective May 31, 2016. FOR FURTHER INFORMATION CONTACT: Peter Meffert, Senior Regulatory Specialist, Office of Policy, Regulations and Analysis, Bureau of Ocean Energy Management, at regulation1@boem.gov , at 703-787-1610, or Jaron Ming, Regional Supervisor, Office of Leasing and Plans, Gulf of Mexico Region, Bureau of Ocean Energy Management, at jaron.ming@boem.gov , at 504-736-2761, or David Diamond, Chief, Leasing Division, Bureau of Ocean Energy Management, at david.diamond@boem.gov , at (703) 787-1251. SUPPLEMENTARY INFORMATION: Table of Contents I. Executive Summary A. Background 1. Why We Need to Publish a Rule 2. What is covered by the rule? B. Abbreviations of Terms and Acronyms C. Final Rule as Adopted and Response to Comments 1. Availability of Public Comments 2. Effects of the Reorganization of MMS Into Three Distinct Agencies 3. Definitions 4. Delayed Provisions 5. Other Editorial Improvements II. Derivation Tables A. Derivation Table for 30 CFR part 550 (“Oil and Gas and Sulfur Operations in the Outer Continental Shelf”) B. Derivation Table for 30 CFR part 556 (“Leasing of Sulfur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf”) C. Derivation Table for 30 CFR part 560 (“Outer Continental Shelf Oil and Gas Leasing”) III. Section-by-Section Analysis of the Final Rulemaking A. Part 550—Oil and Gas and Sulfur Operations in the Outer Continental Shelf 1. Subpart A—General Provisions 2. Subpart D—Leasing Maps and Diagrams B. Part 556—Leasing of Sulfur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf 1. The Table of Contents for Part 556 2. Subpart A—General Provisions 3. Subpart B—Oil and Gas Five Year Leasing Program 4. Subpart C—Planning and Holding a Lease Sale 5. Subpart D—Qualifications 6. Subpart E—Issuance of a Lease 7. Subpart F—Lease Term and Obligations 8. Commentary on Subparts G & H—Transferring Interests in a Lease 9. Subpart G—Transferring All or Part of a Record Title Interest in a Lease 10. Subpart H—Transferring All or Part of the Operating Rights in a Lease 11. Subpart I—Bonding or Other Financial Assurance 12. Subpart J—Bonus or Royalty Credits for Exchange of Certain Leases 13. Subpart K—Ending a Lease 14. Subpart L—Leases Maintained Under Section 6 of OCSLA 15. Subpart M—Environmental Studies C. Part 559—Mineral Leasing: Definitions D. Part 560—Outer Continental Shelf Oil and Gas Leasing 1. Subpart A—General Provisions 2. Subpart B—Bidding Systems 3. Subpart C—Operating Allowances 4. Subpart D—Joint Bidding 5. Subpart E—Electronic Filings IV. Table of Comments and Responses A. General Comments B. Section-Specific Comments V. Legal and Regulatory Analyses A. Statutes and Executive Orders 1. Improving Regulation and Regulatory Review (Executive Order (E.O. 13563) 2. Regulatory Planning and Review (E.O. 12866) 3. Regulatory Flexibility Act 4. Small Business Regulatory Enforcement Fairness Act (SBREFA) 5. Comments from Small Businesses 6. Unfunded Mandates Reform Act 7. Takings Implication Assessment (E.O. 12630) 8. Federalism (E.O. 13132) 9. Civil Justice Reform (E.O. 12988) 10. Consultation with Indian Tribal Governments (E.O. 13175) 11. Paperwork Reduction Act (PRA) 12. Other Changes in the Information Collection (IC) Between the Proposed and Final Rules 13. Burden Breakdown Table 14. National Environmental Policy Act of 1969 15. Data Quality Act 16. Effects on the Energy Supply (E.O. 13211) List of Subjects I. Executive Summary A. Background On May 27, 2009, the Minerals Management Service (MMS) published a proposed rule (Notice of Proposed Rulemaking or NPRM) in the Federal Register entitled, “Leasing of Sulphur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf” (74 FR 25177, May 27, 2009). Since that time, the MMS was renamed the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) and then was reorganized and divided into three separate bureaus—the Bureau of Ocean Energy Management (BOEM), the Bureau of Safety and Environmental Enforcement (BSEE) and the Office of Natural Resources Revenue (ONRR). The leasing program is under the authority of BOEM, whose regulations reside in 30 CFR Chapter V. 1. Why We Need to Publish a Rule This final rule reorganizes and reorders the parts of the BOEM regulations concerning leasing, adds new sections to standardize or clarify practices in all three BOEM OCS regional offices, and eliminates redundant or otherwise unnecessary text. The final rule also includes regulatory provisions which, during the division of BOEMRE, were inadvertently assigned to an agency other than BOEM, but have proven necessary for BOEM's use and are therefore added back into these regulations. (In this Preamble, the BOEMRE regulations, as they existed before BOEMRE was divided into BOEM, BSEE, and ONRR, are sometimes referred to as the “pre-split regulations.”) Additionally, this final rule also updates and clarifies processes required by legislation enacted since BOEM's regulations were last amended, such as those required by the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996, which amended FOGRMA, or by more recently promulgated regulations, such as the Department of the Interior's (Department or DOI) non-procurement debarment rules. The final rule also includes changes that will assist BOEM in meeting its stewardship responsibilities and performing its role as a responsible regulator. 2. What is covered by the rule? This final rule revises sections of the regulations at 30 CFR parts 550, “Oil and Gas and Sulfur Operations in the Outer Continental Shelf,” 556, “Leasing of Sulfur or Oil and Gas in the Outer Continental Shelf,” 559, “Mineral Leasing: Definitions,” and 560, “Outer Continental Shelf Oil and Gas Leasing.” The changes made in part 550, “Oil and Gas and Sulfur Operations in the Outer Continental Shelf” and those made in part 560, “Outer Continental Shelf Oil and Gas Leasing,” relate primarily to simplifying and clarifying the regulatory language, as well as creating new, and re-establishing pre-split, regulations that had been inadvertently deleted when the former BOEMRE was divided into three new agencies. For example, in October 2010 (as part of the direct final rule RIN 1010-AD70, Reorganization of Title 30, Code of Federal Regulations (75 FR 61051, October 4, 2010)), during the first split of the BOEMRE regulations, a regulation related to operating allowances was inadvertently deleted from the BOEM regulations and included only in the ONRR regulations. In order for ONRR's operating allowance regulations to be effective, however, they must have counterpart provisions in the BOEM regulations. The operating allowance regulation is re-established in BOEM's regulations by this final rule. Most of the final rule consists of revisions to part 556. Part 556 includes regulations pertaining to: (1) The oil and gas leasing program; (2) preparing for a lease sale; (3) issuing, maintaining, transferring, and terminating a lease; and (4) bonding requirements. As explained in greater detail below, the final rule addresses the first three components, but the fourth component, bonding, is not addressed in this final rule, except to make minor editorial and conforming changes. Bonding and financial assurance will be further addressed in future rulemakings. B. Abbreviations of Terms and Acronyms The following are abbreviations of terms used in the preamble: API American Petroleum Institute ASTM  American Society for Testing and Materials BAST  Best Available and Safest Technology BOEM  Bureau of Ocean Energy Management BOEMRE  Bureau of Ocean Energy Management, Regulation, and Enforcement BSEE  Bureau of Safety and Environmental Enforcement CFR Code of Federal Regulations CID Conservation Information Document CPA Central Planning Area of the GOM CZMA Coastal Zone Management Act DOI Department of the Interior DOCD Development Operations Coordination Document DOO Designation of Operator DPP Development and Production Plan EIA Environmental Impact Analysis EO Executive Order EP Exploration Plan EPA Eastern Planning Area of the GOM EPAct Energy Policy Act of 2005 ESIGN Electronic Signatures in Global and National Commerce Act of 2000 FNOS Final Notice of Sale FOGRMA Federal Oil and Gas Royalty Management Act of 1982 FOGRSFA Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 FR Federal Register G&G Geological and Geophysical GDIS Geophysical Data and Information Statement GOM Gulf of Mexico GOMESA Gulf of Mexico Energy Security Act of 2006 GPEA Government Paperwork Elimination Act of 1998 H 2 S Hydrogen sulfide IC Information Collection IOAA Independent Offices Appropriations Act of 1952 LLC Limited Liability Company MBB Mapping and Boundary Branch MMS Minerals Management Service MSL Mean Sea Level NAD North American Datum NAICS North American Industry Classification System NEPA National Environmental Policy Act of 1969 NGPA Natural Gas Processors Association NOAA National Oceanic and Atmospheric Administration NPR Notice of Proposed Rulemaking NTL Notice to Lessees OCS Outer Continental Shelf OCSLA Outer Continental Shelf Lands Act OMB Office of Management and Budget ONRR Office of Natural Resources Revenue OPD Official Protraction Diagram PDP Proved Developed Producing (reserves) PNOS Proposed Notice of Sale PRA Paperwork Reduction Act PSI Pounds Per Square inch RFA Regulatory Flexibility Act of 1980 ROW Right of Way RSV Royalty Suspension Volume RUE Right of Use and Easement SBA Small Business Administration SBREFA Small Business Regulatory Enforcement Fairness Act of 1996 SEC Securities and Exchange Commission SLA Submerged Lands Act of 1953 US United States U.S.C. United States Code USCG U.S. Coast Guard USEPA U.S. Environmental Protection Agency UTM Universal Transverse Mercator Coordinate System WPA Western Planning Area of the GOM C. Final Rule as Adopted and Response to Comments On May 27, 2009, BOEM published a proposed rule entitled, “Leasing of Sulphur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf” (74 FR 25177). In the six years since the proposed regulation was published, several developments have brought about the need for the final rule to appear different from the proposed rulemaking. The organization of the final rule is structured differently from that of the proposed rule to make the regulations easier for the public to read and follow. The major reasons for the other differences between the proposed rule and the final rule are explained below: 1. Availability of Public Comments BOEM received a total of eight comments from the American Petroleum Institute (API), Shell Oil Company, Chevron Oil Company, Anglo Suisse, Dynamic Offshore Resources, RLI Insurance Company, and two citizens, who commented to show their support of OCS leasing and the oil and gas program. Each comment was considered and some resulted in changes to the proposed rule. BOEM's responses are addressed in this Preamble. All comments can be viewed at www.BOEM.gov under the Regulations section and at www.regulations.gov . 2. Effects of the Reorganization of MMS Into Three Distinct Agencies Background On May 19, 2010, the Secretary signed Secretarial Order 3299 directing the split of MMS into three new bureaus, BOEM, BSEE, and ONRR. This split was accomplished in two phases. In 2010 MMS was split into two agencies, ONRR and BOEMRE. In 2011 BOEMRE was itself split into two agencies, BOEM and BSEE. Prior to October 4, 2010, the regulations of BOEM, BSEE, and ONRR were contained in one set of regulations (“pre-split” regulations), which were issued by the MMS. On October 4, 2010, MMS published a final rule in the Federal Register (75 FR 61051), moving its regulations related to its royalty and revenue functions from MMS to ONRR and creating a new chapter XII. The name of the remaining organization was changed from the MMS to BOEMRE. On October 18, 2011, DOI published a final rule (76 FR 64432) splitting BOEMRE regulations into separate BOEM and BSEE chapters. Pursuant to that split, BOEM is responsible for the resource evaluation, planning, and leasing functions for offshore oil and gas. BSEE is primarily responsible for the safety and environmental enforcement of offshore oil and gas development activities. BOEM's regulations were recodifed into 30 CFR Chapter V. BSEE's regulations remained in 30 CFR Chapter II. Assignment and Retention of Regulations As time has passed, it has come to light that some regulations were incorrectly assigned during the split. For example, some of the regulatory provisions assigned to BSEE or ONRR have proven necessary for BOEM. Regulatory provisions that fall into this category have been included in the final rulemaking, as explained in this Preamble. Because of the reorganization of the former MMS, some provisions of the proposed rule are now outside the scope of BOEM's responsibilities and are not included in this final rule. In addition, there are some regulatory provisions that appear in this final rulemaking that did not appear in the proposed rule. These regulatory provisions are not “substantively new,” however. They appeared in the former MMS regulations. The Final Rule also differs from the Proposed Rule in that the Final Rule retains certain provisions that the Proposed Rule suggested deleting. Instances of retention of prior sections of the regulations are also discussed in this Preamble. Administrative Changes There are some wholly administrative changes from the proposed rule that appear in the final rule. These changes were also primarily necessitated by the division of MMS into three separate agencies. For example, the BOEM regulations are now found in a different chapter of Title 30 of the Code of Federal Regulations (CFR) than the chapter in which the BOEMRE regulations were found. Before the BOEMRE regulations were divided into two sets of independent agency regulations, they were all contained in Chapter II of Title 30 of the CFR, within parts 203 through 291. This means that the first digit in the section number of each individual provision was a “2.” After the division of the regulations, all BSEE regulations remained in Chapter II, and thus retained the first digit “2.” And, because the proposed rule was published before the agency split, its provisions also begin with a “2.” After the division, however, the BOEM regulations were moved into Chapter V. Thus, although the proposed rule provisions each began with a “2,” all final BOEM rule provisions begin with a “5.” Also, in the final rule, internal citations to section numbers were changed to maintain correct and consistent cross-references, and sections were re-numbered to maintain internal numerical order. Whenever appropriate, references to “MMS” from the proposed rule have been changed to “BOEM” in the final rule. These administrative changes have no effect on the substance of the regulations, and therefore do not require notice and comment, but they do make the regulations clearer, more consistent, and easier to use. Removed Provisions The proposed rule would have added a new “expenses . . . with supporting documentation” reporting requirement to the then-BOEMRE, now-BSEE regulatory sections 250.1717, 250.1729, and 250.1743. Section 250.1717 addresses the information that must be submitted after well plugging and abandonment. Section 250.1729 addresses the information that must be submitted after removal of a platform or other facility, and section 250.1743 addresses the information that must be submitted after site clearance. The proposed rule added new requirements concerning the submittal of information on the costs of decommissioning. When BOEMRE was divided into two agencies, the operational aspects of decommissioning were placed within BSEE's rather than BOEM's purview. In the final rulemaking, therefore, BOEM decided to remove the three provisions proposing revisions to sections 250.1717, 250.1729, and 250.1743, as BSEE finalized the rule addressing the submittal of information on the costs of decommissioning in their rule entitled “Oil and Gas and Sulphur Operations in the Outer Continental Shelf; Decommissioning Costs,” RIN 1014-AA24, published in the Federal Register on December 4, 2015. The other proposed provision that was removed from the final rule was proposed rule section 256.621, concerning the submission of reports about lease term pipelines when requesting BOEM's approval of a lease assignment. As with decommissioning, BSEE has been tasked with the administration of the operational aspects of pipelines on the OCS; therefore, the submission of reports on lease term pipelines is within BSEE's jurisdiction. BSEE has proposed to address the submission of reports concerning lease term pipelines in a rule entitled “Pipelines and Pipeline Right-of-Way Safety,” RIN 1014-AA27. 3. Definitions Several definitions have been added in the final rulemaking that did not appear in the proposed rulemaking to clarify the meaning of terms used in the regulations. In each case, the term either was defined in the BOEMRE regulations or its definition is apparent from the context of the prior regulatory language. 4. Delayed Provisions The proposed rule included a subpart E, “Financial Accountability and Risk Management,” which contained provisions addressing requirements for general and additional bonding, surety, and third-party indemnity. After the proposed rule was published, BOEM identified possible conflicts between the proposed rule's use/definitions of certain terms and their use/definitions within BOEM's oil spill financial responsibility regulations (30 CFR part 553). Also, after publication of the proposed rule, BOEM began a process of reassessing its bonding and financial assurance policies, leading to a decision to publish this final rule with the text of existing subpart I (Bonding), with only limited conforming changes. This decision will enable BOEM and the regulated public to continue to rely on the existing financial assurance regulations until BOEM is ready to make necessary changes to its policies and to propose and seek comment on separate new regulations specific to bonding and financial assurance to implement these new policies. 5. Other Editorial Improvements A consistent change that was made in the final rule was to add, where appropriate, the word “final” before the phrase “notice of sale.” Another change is eliminating any references to “Associate Director,” since there are no longer any Associate Directors in BOEM. The word “sulphur” has been replaced with a more contemporary spelling of “sulfur.” All cross-references and section numbers within this final rule have been updated. II. Derivation Tables The following derivation tables describe the source(s) of the regulations in the final rule relative to those in the prior regulations and/or those in the proposed rule. These tables are intended only to provide cross-references to the other materials. The section-by-section analysis that follows these derivation tables provides a detailed explanation of the changes made with this final rule. Most sections of the final rule reflect content from the proposed rule, however, in some cases, the organization of the regulations and the final section numbers have changed since the rule was proposed. The derivation tables compare the location of the various rule sections in the final rule to the prior section numbers in the prior regulations that have been modified and the corresponding section numbers from the proposed rule, if appropriate. A. Derivation Table for 30 CFR part 550—Oil and Gas and Sulfur Operations in the Outer Continental Shelf Final rule section Prior regulation that the final rule would modify for replace Corresponding section number from the proposal (if any) Subpart A—General Provisions PERFORMANCE STANDARDS: 550.120—This section provides that BOEM will regulate activities under a lease, right-of-use and easement, or right-of-way, to promote the orderly exploration, development, and production of mineral resources, while preventing waste, protecting the environment and ensuring cooperation with other government agencies None This section was in the regulations before the split of MMS into three different agencies and has been reinserted for consistency. 550.121—This section provides that BOEM may require additional measures to ensure the use of Best Available and Safest Technology (BAST) as identified by BSEE to avoid the failure of equipment that would have a significant effect on health, safety, property or the environment when economically feasible None This section was in the regulations before the split of MMS into three different agencies and has been reinserted for consistency. INFORMATION AND REPORTING REQUIREMENTS: 550.197(b)—This subsection provides that BOEM will generally release geological data and analyzed geological information two years after the required submittal date for such information or 60 days after a lease sale 550.197(b) Section 256.100(b). 550.197(c)—This subsection provides that BOEM will generally release geological data and analyzed geological information to individuals with a need to know that agree to maintain the confidentiality of the relevant information 550.197(c) Section 256.100(b). 550.197(d)—This section provides, in accordance with section 26 of OCSLA, that no proprietary information received by BOEM will be transmitted to any affected State unless the lessee, or the permittee and all persons to whom such permittee has sold such information under promise of confidentiality, agree to such transmittal None New provision required to conform the regulations to the Outer Continental Shelf Lands Act (OCSLA) (43 U.S.C. 1352(c)). Subpart D—Leasing Maps and Diagrams New subpart. 550.400—This section provides that any area of the OCS, which has been appropriately platted, may be leased for any mineral not included in an existing lease issued under the Act or meeting the requirements of subsection (a) of section 6 of the Act 556.8 Section 256.202(a). B. Derivation Table for 30 CFR Part 556—Leasing of Sulfur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf Final rule section Prior regulation that the final rule would modify or replace Corresponding section number from the proposal (if any) Subpart A—General Provisions 556.100—This section states that management of Outer Continental Shelf (OCS) resources is to be conducted in accordance with the findings, purposes, and policy directions provided by the Outer Continental Shelf Lands Act 556.2 None. 556.101—This section sets forth the purpose of the regulations in this part 556.1 Section 256.102. 556.102—This section lists the statutory authorities for this part 556.4 Undesignated authority section. 556.103—This section lists related regulations 556.7 None. 556.104—This section provides the legal basis for BOEM's collection of information in connection with the administration of its OCS oil, gas and sulfur leasing program and describes how BOEM will handle and maintain proprietary information 556.0, 556.10 Section 256.100. 556.104(c)—This subsection describes BOEM's treatment of proprietary information received in response to a Call for Information and Nominations 556.10(a) Section 256.100(b). 556.105—This section provides definitions for key terms used throughout this part of the regulations 556.5, 556.40 Section 256.103. 556.106—This section identifies administrative fees that BOEM requires for various services 556.63 Section 256.104. 556.107—This section sets forth an alternative procedure, to avoid the use of a corporate seal, for those electronic document submissions for which a corporate seal is otherwise required by these regulations 556.46, 556.54, 556.95 None. Subpart B—Oil and Gas Five-Year Leasing Program 556.200—This section reiterates those key provisions of OCSLA that require the Secretary to prepare an oil and gas leasing program that consists of a five-year schedule of proposed lease sales None Section 256.200. 556.201—This section reiterates the OCSLA requirement that BOEM consider multiple uses of the OCS in its development of the Five-Year oil and gas leasing program None New provision based on 43 U.S.C. 1344(a)(2)(D). 556.202—This section sets forth the steps BOEM takes in initiating the Five-Year program 556.16 Section 256.202. 556.203—This section provides that BOEM will invite comments from governors on a draft proposed program at least 60-days before it publishes a proposed Five-Year program 556.17(a) Section 256.203. 556.204—This section states the procedures to be followed to obtain inter-governmental and citizens' comments on the proposed Five-Year program 556.17(b) Section 256.204. 556.205—This section provides that the Secretary must provide a copy of the proposed Five-Year Program, or any significant revision thereto, to Congress and the President at least 60-days before approving it 556.17(c) Section 256.205. Subpart C—Planning and Holding a Lease Sale 556.300—This section provides that BOEM will prepare a report describing the general geology and potential mineral resources of the area under consideration for a sale 556.22 None. 556.301—This section outlines the process BOEM uses to collect information to inform its determination as to which areas should be made available for leasing 556.23 Section 256.300. 556.302—This section explains the process used to arrive at the Area ID 556.26, 556.10 Section 256.301. 556.303—This section sets forth the information that BOEM will provide to a State when an area proposed for leasing lies within three nautical miles of the seaward boundary of that State 556.10, 556.25 Section 256.302. 556.304—This section describes the process utilized to prepare a proposed notice of sale 556.29 Section 256.303. 556.305—This section outlines the process by which BOEM coordinates with affected States following the proposed notice of sale 556.29, 556.31 Section 256.304. 556.306—This section provides a process for resolving issues or disputes that may arise between a State and the Federal government when a hydrocarbon-bearing area underlies both the Federal OCS and State submerged lands 556.25(b)-(d) None. Added for consistency with OCSLA section 8(g)(3), as amended in 1986 (43 U.S.C. 1337 (8)(g)(3)). 556.307—This section provides a description of the process that BOEM will use to evaluate comments and recommendations of governors and local governments 556.31 Section 256.305. 556.308—This section sets forth BOEM's procedures for conducting a lease sale 556.28, 556.32 Section 256.306. 556.309—This section sets forth BOEM's procedures for conducting a Supplemental Sale 556.12 Section 256.206. Subpart D—Qualifications QUALIFICATONS: 556.400—This section provides that, in order to bid on, own, hold, or operate a lease on the OCS, bidders, record title holders, and operating rights owners must first obtain a qualification number from BOEM 556.35 Section 256.400. 556.401—This section outlines BOEM's requirements for a prospective lessee to become a qualified bidder 556.35, 556.46 Section 256.400. 556.402—This section describes the types of evidence that BOEM will require in order to qualify a person to hold leases on the OCS 556.35 Section 256.401. 556.403—This section describes the circumstances under which a person may be excluded or disqualified from holding a lease on the OCS 556.35(c), 556.46(h) Section 256.402. 556.404—This section details how to comply with the Department's non-procurement debarment rules None Section 256.403. 556.405—This section provides that lessees must notify BOEM of any merger, name change, or change of business form as soon as practicable, but in no case later than one year after the change or action 585.109 Section 256.404. Subpart E—Issuance of a Lease HOW TO BID: 556.500—This section sets forth the procedures for submitting a bid at a lease sale 556.46(a)-(b) Section 256.410. 556.501—This section explains what geological and geophysical information must be submitted with a bid at a lease sale 551.11, 551.12, 580.51 None. RESTRICTIONS ON JOINT BIDDING: 556.511—This section prohibits joint bidding by major oil and gas producers under certain circumstances 556.41 Section 256.411. 556.512—This section provides the circumstances under which a bid for an oil and gas lease will be disqualified and/or rejected 556.44 Section 256.402. 556.513—This section explains the circumstances under which a lessee must prepare and send to BOEM a statement describing its oil and gas production and what the statement is to contain 556.40 Section 256.412. 556.514—This section details what production must be counted when determining whether a company should be considered a “restricted bidder” 556.40, 556.43 Section 256.413. 556.515—This section provides the circumstances under which a person may be exempted from joint bidding restrictions 556.41(d) Section 256.414. HOW DOES BOEM ACT ON BIDS: 556.516—This section outlines the procedures BOEM will follow when reviewing bids received for leases on the OCS and when handling tie bids 556.47 Section 256.416. 556.517—This section describes the reconsideration procedures that apply in the event that BOEM rejects a high bid 556.47(e)(1)-(e)(3) Section 256.417. AWARDING THE LEASE: 556.520—This section describes the steps involved in the lease award process 556.47 Section 256.420. 556.521—This section explains when a lease becomes effective 556.50 Section 256.421. 556.522—This section provides that the terms and conditions of the lease will be stated in the final notice of sale, as well as in the lease instrument itself 556.49 Section 256.306(a)(2). Subpart F—Lease Term and Obligations LENGTH OF LEASE: 556.600—This section sets forth the primary term of an oil and gas lease 556.37(a)-(b) Section 256.600. 556.601—This section sets forth the methods by which a lessee many maintain its oil and gas lease beyond the primary term 556.37(a)-(b), 556.70, 556.71, 556.72 Section 256.601. 556.602—This section sets forth the primary term of a sulfur lease 556.37(c) Section 256.602. 556.603—This section sets forth the methods by which a lessee many maintain its sulfur lease beyond the primary term 556.37(c) Section 256.603. LEASE OBLIGATIONS: 556.604—This section outlines the rights and obligations of a record title holder of an OCS lease 550.146, 556.62, 556.64 Sections 256.605 and 256.612. 556.605—This section outlines the rights and obligations of an operating rights owner of an OCS lease 550.146, 556.62, 556.64 Sections 256.606 and 256.612. HELIUM: 556.606—This section provides that BOEM reserves the ownership of, and the right to extract, helium from all gas produced from an OCS lease, and describes what BOEM will do if it requests you to deliver helium from operations associated with a lease 556.11 Section 256.630. Subpart G—Transferring All or Part of the Record Title Interest in a Lease 556.700—This section describes how a company may apply for approval to assign its whole, or a partial, record title interest in its lease, or in any aliquot(s) thereof, or to sublease operating rights 556.62, 556.64 Sections 256.610, 256.611, and 256.612. 556.701—This section describes the process for obtaining BOEM approval of an assignment of a record title or operating rights interest in an OCS lease 556.62(a), 556.65 Section 256.611. 556.702—This section describes when an assignment will result in a segregated (i.e., new) lease 556.68 Section 256.613(a)(2). 556.703—This section addresses the effects of a lease segregation 556.68 Section 256.613(a)(2). 556.704—This section sets forth the circumstances under which BOEM would disapprove an assignment or sublease 556.62, 556.64 Section 256.611. 556.705—This section outlines the procedures to follow to transfer an interest in an OCS lease from a deceased natural person 556.64(e)-(g) Section 256.614. 556.706—This section outlines the process for transferring record title interests in more than one lease to different parties None Section 256.615. 556.707—This section outlines the process for transferring different types of interests in a lease to different parties 556.67 Section 256.615. 556.708—This section outlines the process for transferring record title interests in more than one lease to the same party 556.64(a)(8), 556.67 Section 256.615. 556.709—This section outlines the process for transferring the record title interest in one lease to more than one party 556.64 Section 256.616. 556.710 -This section sets forth the effect of an assignment of record title on an assignor's liability under the lease 556.64 Section 256.616. 556.711—This section provides that a record title holder who subleases operating rights remains liable for later accruing obligations of the lease, but is only secondarily liable for monetary obligations accruing thereafter 556.64 Section 256.616. 556.712—This section describes the effective legal date of the transfer of a record title interest in a lease 556.62(c) Section 256.617. 556.713—This section sets forth the effect of an assignment of record title on an assignee's liability under the lease 556.62(e) Section 256.618. 556.714—This section describes procedures to be used in assignments between those on the restricted joint bidders list 556.64(i) Section 256.619. 556.715—This section provides that a lessee may create, transfer, or assign an economic interest in a lease without BOEM approval, but that such transferor must send BOEM a copy of each instrument creating or transferring such a lease interest within 90 days after the last party executes the transfer instrument 556.64(a)(7) Section 256.620. 556.716—This section provides the circumstances under which the transfer of a record title interest triggers the need to file a new designation of operator form with BOEM 550.143 Section 256.611. Subpart H—Transferring All or Part of the Operating Rights in a Lease 556.800—This section provides that an operating rights owner may assign all or part of its operating rights interests, subject to BOEM approval 556.62, 556.64 Section 256.612. 556.801—This section describes the process by which an assignor of operating rights must obtain approval of such an assignment 550.143, 556.64 Section 256.613. 556.802—This section sets forth the circumstances under which BOEM may disapprove an assignment of operating rights 556.62 Section 256.611. 556.803—This section addresses the assignment of operating rights interests in more than one lease to different parties 556.67 Section 256.615. 556.804—This section addresses the assignment of operating rights interests in one lease to more than one party 556.64(a)(8) Section 256.615. 556.805—This section sets forth the effect of an assignment of operating rights on an assignor's liability under the lease 556.62(d) Section 256.616. 556.806—This section describes the effective legal date of the transfer of an operating rights interest in a lease 556.62(c) Section 256.617. 556.807—This section sets forth the effect of an assignment of operating rights on an assignee's liability under the lease 556.62, 556.64 Section 256.618. 556.808—This section provides that an operating rights owner may create, transfer, or assign economic interests without BOEM approval, but that for record keeping purposes, the operating rights owner must send BOEM a copy of each instrument creating or transferring such interests within 90 days after the last party executes the transfer instrument 556.64(a)(7) Section 256.620. 556.809 Reserved None. 556.810—This section provides the circumstances under which the transfer of an operating rights interest triggers the need to file a new designation of operator form with BOEM 550.143, 556.62 Section 256.611. Subpart I—Bonding or Other Financial Assurance 556.900—This section sets forth general bonding/financial assurance requirements for OCS leases 556.52 Sections 256.500, 256.502, 256.510, and 256.521. 556.901—This section sets forth additional bonding/financial assurance requirements for OCS leases 556.53 Sections 256. 501 and 256.510. 556.902—This section sets forth the requirements which a bond or other security must meet 556.54 Sections 256.502 and 256.503. 556.903—This section sets forth what must be done if a bond lapses 556.55 Section 256.520. 556.904—This section sets forth the procedures for establishing lease abandonment accounts as a method of financial assurance 556.56 Section 256.512. 556.905—This section sets forth the procedures for using a third-party guarantee as a method of financial assurance 556.57 Section 256.511. 556.906—This section sets forth the procedures for terminating the period of liability of, and cancelling, a bond 556.58 Section 256.522 and 256.523. 556.907—This section sets forth the procedures for forfeiting a bond or other security 556.59 Sections 256.524, 256.525, and 256.526. Subpart J—Bonus or Royalty Credits for Exchange of Certain Leases 556.1000—This section sets forth the deadline for applying for certain bonus or royalty credits which had been available under the Gulf of Mexico Energy Security Act of 2006 (GOMESA) (43 U.S.C. 1331 note) 556.90-556.95 Sections 256.900-256.905. Subpart K—Ending a Lease 556.1100—This section provides the circumstances under which a lease will expire at the end of its primary term 556.37(b)-(c) Section 256.700. 556.1101—This section sets forth the procedures to follow for relinquishment of a lease 556.76 Section 256.701. 556.1102—This section provides the circumstances under which BOEM may cancel or void a producing or a non-producing OCS lease 556.77 Section 256.702. Subpart L—Leases Maintained Under Section 6 of OCSLA 556.1200—This section explains the relationship between BOEM's regulations and leases maintained under section 6 of OCSLA 556.79 None. 556.1201—This section states that the existence of a lease for other minerals under section 6 of OCSLA in an area does not preclude the issuance of other leases in the same area 556.80 None. Subpart M—Environmental Studies 556.1300—This section provides that BOEM will conduct studies of any area or region included in any oil and gas lease sale, as needed, to assess and manage impacts on the human, marine and coastal environments which may be affected by OCS oil and gas or other mineral activities in such area or region 556.82 None. Derivation Table for 30 CFR Part 560—Outer Continental Shelf Oil and Gas Leasing Final rule section Prior regulation that the final rule would modify or replace Corresponding section number from the proposal (if any) Subpart A—General Provisions 560.100—This section describes the authorities applicable to this part Undesignated authority section Undesignated authority section. 560.101—This section describes the purpose of this part 560.1 None. 560.102—This section sets forth the definitions applicable to this part 559.001—559.002,560.2 None. 560.103—This section describes BOEM's information collection authority 560.3 None. Subpart B—Bidding Systems GENERAL PROVISIONS: 560.200—This section describes the purpose of this subpart 560.101 None. 560.201—This section sets forth the definitions applicable to this subpart 560.102 None. 560.202—This section describes the bidding systems that BOEM may utilize 560.110 None. 560.203—This section describes the terms and conditions that would apply, depending on the bidding systems that BOEM utilizes 560.111 None. ELIGIBLE LEASES: 560.210—This section describes how royalty suspension volumes could apply to a lease 560.112 None. 560.211—This section describes when a lease may qualify for royalty suspensions 560.113 None. 560.212—This section describes how BOEM would assign royalty suspension volumes for eligible leases 560.114 None. 560.213—This section specifies how long royalty suspension volumes may be effective to eligible leases 560.115 None. 560.214—This section describes how a lessee should measure the natural gas production on an eligible lease, subject to the royalty suspension volume 560.116 None. ROYALTY SUSPENSION LEASES: 560.220—This section describes how royalty suspensions apply to leases issued in a sale held after November 2000 560.120 None. 560.221—This section describes when a lease issued in a sale held after November 2000 is entitled to a royalty suspension 560.121 None. 560.222—This section describes how long a royalty suspension volume would be effective for a lease issued in a sale held after November 2000 560.122 None. 560.223—This section describes how to measure natural gas production for a lease subject to royalty suspension volumes issued in a sale held after November 2000 560.123 None. 560.224—This section describes how a royalty suspension would apply if BOEM assigns a lease issued in a sale held after November 2000 to a field that has a lease issued before the enactment of the OCS Deep Water Royalty Relief Act. (43 U.S.C. 1337(3)) 560.124 None. BIDDING SYSTEM SELECTION CRITERIA: 560.230—This section describes what criteria BOEM uses for selecting bidding systems and bidding system components 560.130 None. Subpart C—Operating Allowances 560.300—This section explains that Operating Allowances can be specified in an oil and gas leases 206.120 This section was originally part of MMS regulations at section 206.120 and was inadvertently omitted from BOEM regulations during the split of the MMS rules into those of three different agencies. 75 FR 65051. Subpart D—Joint Bidding Reserved 560.301—560.303 The proposed rule amended 30 CFR part 260 by removing subpart D, which consisted of prior regulations sections 560.301—560.303. Subpart E—Electronic Filings 560.500—This section describes BOEM's electronic document and data transmissions procedures None This section is derived in part from proposed rule section 256.503(c). 560.501—This section describes how BOEM will maintain the confidentiality of electronic documents and data None None. 560.502—This section describes under what circumstances electronic document filings will be considered legally binding None None. III. Section-by-Section Analysis of the Final Rulemaking A. Part 550—Oil and Gas and Sulfur Operations in the Outer Continental Shelf 1. Subpart A—General Provisions Section 550.120. What standards will BOEM use to regulate leases, rights-of-use and easement, and rights-of-way? This section provides that BOEM will regulate activities under a lease, right-of-use and easement, or right-of-way, to promote the orderly exploration, development, and production of mineral resources, while preventing waste, protecting the environment and ensuring cooperation with other government agencies. Final rule section 550.120 did not appear in the proposed rule, but it was in the pre-split regulations, at 30 CFR 250.106. When BOEMRE was split into two agencies, this regulation was assigned to BSEE, and it therefore still appears at 30 CFR 250.106. As time has passed, however, BOEM has found itself hampered in properly evaluating and approving certain types of plans (such as exploration plans (EPs), development and production plans (DPPs), or development operations coordination documents (DOCDs)) without this provision in its regulations. This section has therefore been put into the final rule with minor word changes. Section 550.121. What must I do to protect health, safety, property, and the environment? This section provides that, when economically feasible, BOEM may require additional measures to ensure the use of Best Available and Safest Technology (BAST) as identified by BSEE, to avoid the failure of equipment that would have a significant effect on safety, health, or the environment. Final rule section 550.121 did not appear in the proposed rule, but it was in the pre-split regulations, at 30 CFR 250.107 and tracks section 21(b) of OCSLA. When BOEMRE was split into two agencies, this regulation was assigned to BSEE, and it therefore still appears at 30 CFR 250.107. As time has passed, however, BOEM has found itself hampered in properly evaluating and approving certain types of plans ( e.g., EPs) without this provision in the BOEM regulations. It has therefore been put into the final rule with some changes necessary to conform the provision to the scope of BOEM's enforcement authority. Section 550.197(b)(5). Data and information to be made available to the public or for limited inspection. This section provides that BOEM will generally release geological data and analyzed geological information two years after the required submittal date for such information or 60 days after a lease sale. This final rule provision did not appear in the proposed rule, but did appear in the pre-split regulations at section 250.197(b)(5) (now BOEM regulation 550.197(b)(5)). However, the prior section, 550.197(b)(5), states “[i]f the primary term specified in the lease is extended under the heading of `Suspensions' under this subpart, the extension applies to this provision.” Since the agency split, the determination whether to grant a suspension is made by BSEE. Because BOEM does not make these determinations, “suspensions” are no longer addressed in this subpart. Accordingly, the text in this final rulemaking changes the statement to say: “[i]f the primary term specified in the lease is extended, the extension applies to this provision,” removing the reference to “suspensions” and to “this subpart” while retaining the meaning of the earlier provision. Section 550.197(c). Data and information to be made available to the public or for limited inspection. This section provides that BOEM may allow limited data and information inspection, but only by a person with a direct interest in related BOEM decisions and issues in a specific geographic area, and who agrees in writing to maintain the confidentiality of geological and geophysical (G&G) data and information submitted under this part. Similar to the last-discussed provision, this section did not appear in the proposed rulemaking, but it did appear in the pre-split regulations, at 250.197(c) (now BOEM regulation 550.197(c)). The provision in the final rulemaking changes “MMS” to “BOEM” and deletes a reference to “part 203,” which no longer exists in the regulations at Title 30. The pre-split regulation listed several activities done by MMS. Only the part of that list that is pertinent to BOEM is retained in this final rule section. Section 550.197(d). Data and information to be made available to the public or for limited inspection. This section provides, in accordance with section 26 of OCSLA, that no proprietary information received by BOEM will be transmitted to any affected State unless the lessee, or the permittee and all persons to whom such permittee has sold such information under promise of confidentiality, agree to such transmittal. The final rule includes this provision, which did not appear in the proposed rule, because section 26(c) of OCSLA requires a regulation providing for maintenance of the confidentiality of privileged or proprietary information received by BOEM. (43 U.S.C. 1352(c)). 2. Subpart D—Leasing Maps and Diagrams This is a new subpart, which is being created as part of this rule. Section 550.400. Leasing maps and diagrams. This section provides that any area of the OCS, that has been appropriately platted, may be leased for any mineral not included in an existing lease issued under the Act or meeting the requirements of subsection (a) of section 6 of the Act. This section was in the pre-split regulations at section 256.8 (now BOEM regulation 556.8), but was omitted in part from the proposed rule. The Derivation Table in the Preamble to the proposed rule said the language of 256.8 was “simplified” and placed in proposed rule section 256.202. Proposed rule section 256.202, however, is not sufficient to ensure that the substance of former 256.8 is retained in the regulations. After reviewing these provisions, BOEM has determined that the text of former section 256.8 (now 556.8) should be retained. Hence, it has been included in this final rulemaking as section 550.400, which retains the text from prior section 556.8 without any changes. B. Part 556—Leasing of Sulfur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf 1. The Table of Contents for Part 556 The Table of Contents for part 556 in the final rulemaking reflects a changed organization and structure from the proposed rule. After publication of the proposed rule, and after BOEMRE was divided into two agencies, BOEM analyzed the organization of part 556 and the way in which information was presented within the sections in the part, and decided to modify the organization of the part. The first three subparts in the final rule (subpart A—General Provisions, subpart B—Oil and Gas Five Year Leasing Program, and subpart C—Planning and Holding a Lease Sale), contain the same information as the first three subparts in the proposed rule; the fourth subpart, Subpart D, however, includes more significant organizational changes. In the proposed rule, Subpart D—Issuance of a Lease, contained five subtitles within it: Qualifications, How to Bid, Restrictions on Joint Bidding, How Does MMS Act on Bids?, and Awarding the Lease. In the final rule, Subpart D includes only one subtitle: Qualifications. BOEM made this change in order to separate out the qualifications provisions and set them out in a clearer, more sequential manner. Subpart E in the final rule picks up the other four subtitles from the proposed rule's Subpart D. In the proposed rule, Subpart E covered bonding and financial assurance. These topics are found in Subpart I in the final rule, but as previously noted, no substantive changes have been made to the provisions in this subpart in the final rule. Instead of adopting the proposed rule sections on these topics, BOEM will retain the prior bonding and financial assurance provisions—which, with minor editorial and conforming revisions, are found at final rule sections 556.900 through 556.907—until such time as a new rulemaking is proposed for these topics. In the proposed rule, Subpart F was entitled, “Maintaining a Lease,” and it contained four subtitles: Initial Period of a Lease, Lease Obligations, Transferring Interest in All or Part of a Lease, and Helium. In the final rule, Subpart F contains three subtitles: Length of Lease, Lease Obligations, and Helium. These subtitles cover the same regulatory issues as Subpart F in the proposed rule, with the exception of the proposed rule's subtitle concerning transfers of interest. In the final rule, regulatory provisions concerning the transfer of a record title interest and those provisions concerning transfers of an operating rights interest have been split into two different Subparts—Subpart G and Subpart H, respectively. The final rule's Subpart H was “Reserved” in the proposed rule. In the final rule, Subpart H includes provisions addressing the transfer of operating rights interests. As noted above, final rule Subpart I addresses BOEM's bonding and financial assurance requirements, which are substantively unchanged from the prior BOEM regulations. Provisions dealing with bonus or royalty credits in exchange for certain leases, found in final rule Subpart J, were found in proposed rule Subpart I. The final rule's Subpart K—Ending a Lease, was the proposed rule's Subpart G. Finally, final rule Subpart L—Leases Maintained under Section 6 of OCSLA (43 U.S.C. 1335), and Subpart M—Environmental Studies, did not appear in the proposed rule. The Derivation Table in the Preamble to the proposed rule proposed to eliminate both subparts as unnecessary, but BOEM has re-thought this elimination, and has decided to retain them. We do so because, in the case of Subpart L, there are extant “Section 6 Leases,” and with respect to Subpart M, OCSLA section 20 requires that the Secretary perform environmental studies. (43 U.S.C. 1346). 2. Subpart A—General Provisions Section 556.100. Statement of Policy. This section states that management of Outer Continental Shelf (OCS) resources is to be conducted in accordance with the findings, purposes, and policy directions provided by OCSLA. The corollary to final rule section 556.100 is prior BOEM regulation 556.2. Both sections set forth a general policy statement. The proposed rule did not contain a section setting forth a statement of policy. Although this section is new in the final rule, it is explanatory in nature and does not impose any new requirements on the public. Therefore, BOEM is including it in this final rule without prior public notice and comment. Section 556.101. Purpose. The proposed rule contained a statement of purpose at section 256.102, “What does this part cover?” In the final rule, however, BOEM decided to retain the statement of purpose section from the prior regulations, which was found at 556.1. Section 556.102. Authority. In the final rule, BOEM decided to include a regulatory section setting forth the authority(ies) for the issuance of these regulations, which has been updated to reflect the amendments made to FOGRMA by the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996, (30 U.S.C. 1701 note). The proposed rule did not contain a regulatory section with a list of authorities, but did contain such a list at the end of the proposed rule's Table of Contents. The list needed to be updated since the publication of the proposed rule. Section 556.103. Cross references. The proposed rule did not contain a section setting out cross-references. Current BOEM regulations section 556.7 lists pertinent cross-references, and BOEM decided to include a cross-reference section in the final rule. We did so because cross-references enable the reading public to more quickly find related regulations. Cross-references do not impose any new substantive requirements that require prior public notice and comment. Section 556.104. Information collection and proprietary information. This section has two major provisions. The first provides the legal basis for BOEM's collection of information in connection with the administration of its OCS oil, gas and sulfur leasing program. The second provision describes how BOEM will handle and maintain proprietary information. Final rule section 556.104 contains the same information as the corresponding proposed rule section, section 256.100. Subsection (b) of the proposed rule provision addressed “proprietary information,” but it was unclear whether the subsection extended to all proprietary information, or only to such information received in response to a Call for Information and Nominations (“Call”). To rectify this situation, we drafted the final rule provision to address proprietary information generally, (section 556.104(b)), and separately, proprietary information received in response to a Call (section 556.104(c)). Section 556.105. Definitions. This section provides definitions for key terms used throughout this part of the regulations. As explained further below, some of these definitions are retained from the preexisting regulations; others are identical to definitions included in the proposed rule; and finally, a few definitions are new to this final rule, but they define terms already used in the regulations. The terms and phrases listed in the next paragraph have been retained from the regulations as they existed before BOEMRE was divided into two agencies, and therefore, as the regulations were constituted at the time of publication of the proposed rule. The list of terms that have been retained from the pre-split regulations is as follows: Aliquot or Aliquot Part, Authorized officer, Average daily production, Barrel, Crude oil, Development block, Economic interest, Initial period, Lease term pipeline, Lessee, Natural gas, Operating rights, Operator, Outer Continental Shelf (OCS), Outer Continental Shelf Lands Act (OCSLA), Owned, Planning area, Regional Director, Regional Supervisor, Security, Single bid, Six-month bidding period, and Statement of production. In the following cases, we moved definitions of terms from a substantive regulation to this definitions section, with no change to the meaning expressed. Aliquot part. The definition of the term “aliquot part” from proposed rule section 256.611, which addresses transfers of lease interests, was moved into this definitions section (556.105). BOEM. The term “BOEM” was retained, from the prior regulations, in final rule section 556.105. Development block. The definition of the term “development block” was moved from section 556.12(c)(3) to this definitions section. Economic interest. The definition of the term “economic interest” was moved from section 556.40 to this definitions section. Western Planning Area. Pursuant to a commenter's recommendation, a definition of “Western Planning Area” was added, in final rule section 556.105. The following terms were retained unchanged from the prior BOEM regulations, or remain as described in the proposed rule: Act, Affected State, Authorized Officer, Coastal Environment, Coastal Zone, Coastline, Desoto Canyon OPD, Destin Dome OPD, Human Environment, Marine Environment, Pensacola OPD. The term “person” was added to the regulations, utilizing the definition from the proposed rule. The following definitions have been added in final rule section 556.105 to define terms or concepts already used in the regulations, the definitions of which were apparent from the context of the prior regulatory language: BSEE, crude oil, designated operator, economic interest, initial period, primary term, joint bid, lease, lease interest, lessee, natural gas, natural gas liquids, operating rights, operating rights owner, operating rights tract, operator, owned, planning area, primary term, regional director, regional supervisor, RUE, ROW, security, single bid, six month bid period, and statement of production. A few of these terms were updated, as follows: • Designated operator. The requirement to designate an operator is set out in prior BOEM regulations at section 550.143. Consistent with the “designated operator” requirements in that section, BOEM is including a definition of the term “designated operator” in the definitions section of the final rule. Prior section 550.143(a) states that “each lessee must submit a Designation of Operator (DOO) form” to designate an operator. As implemented, this requirement applies to all record title owners and to those operating rights owners that own operating rights in the aliquots/depths in which the designated operator, to which the DOO form applies, will be operating. This interpretation is reflected in the definition of “[d]esignated operator” in the final rule. • Lease interest. The term “lease interest” appears, as “interests in . . . leases,” in the first sentence of prior BOEM regulations at section 556.62. The final rule definition lists interests already recognized in the prior regulations. • Minerals. The term has been redefined to better correspond to its meaning in OCSLA. • Natural gas liquids. The definition of “Natural gas liquids” is taken from the prior term “Liquefied petroleum products.” 42 U.S.C. 6213 restricts joint bidding on leases for those producing more than an average worldwide daily production of 1.6 million barrels of crude oil and/or its equivalent in natural gas liquids and natural gas during a 6-month period preceding a lease sale. Previously, regulations implementing 42 U.S.C. 6213 referred to “liquefied petroleum products” rather than “natural gas liquids,” but then defined “liquefied petroleum products” as natural gas liquids. We dropped references to “liquefied petroleum products,” but there is no change in the concept; only the term has been changed. • Operating rights owner. The definition of the term “Operating rights owner” has been added into this definitions section. It is based on the definition of “Operating rights” in prior BOEM regulations at section 550.105. • Right-of-use and easement. The prior BOEM regulations, at 30 CFR 550.105, defined the terms “Easement” and “Right-of-use” separately. But the term that is actually used throughout the prior regulations is “right-of-use and easement.” ( See, e.g., 30 CFR 550.16—550.166). The term “right-of-use and easement” is also used in the proposed rule (s ee, e.g., proposed rule sections 256.502(c), 256.410(a), and 256.511(a)). The term is defined in the final rule because it appears in final rule section 556.104, concerning BOEM's information collections and its handling of proprietary information. • Right-of-way. The definition of “Right-of-way” in the final rule is based on the definition of “Right-of-way pipelines” in the prior BOEM regulations at section 550.105, but the definition has been updated to make clear that a right-of-way authorization is issued by BSEE. • You. The term “You” was defined in proposed rule provision 256.103 by providing a list of individuals to whom it would apply. This list has been retained in the final rule, but an introductory sentence has been added to the definition that defines the word, rather than merely listing the individuals to whom the term applies. Section 556.106. Service fees. This section identifies various administrative fees that BOEM requires for various services. The language in the Service Fees section, 256.104(b), of the proposed rulemaking, “payment . . . must accompany . . . submission,” engendered comments as to whether the proposed rule would have required operators to send in checks with their submission(s). BOEM therefore changed the language of this provision in the final rule to reflect that evidence of payment of the required fee(s) via pay.gov must accompany document submission(s) or must be sent to the office identified by BOEM. The fees in this rule are being adjusted to reflect the Implicit Price Deflator change of 3.31 percent (inflation from 2011 through 2013). The fees were last adjusted for inflation through calendar year 2011 (78 FR 5836). Section 556.107. Corporate Seal requirements. This section sets forth an alternative procedure, to avoid the use of a corporate seal, for those electronic document submissions for which a corporate seal is otherwise required by these regulations. BOEM's rules require the use of a corporate seal in several instances. The Federal Government is, however, moving rapidly toward an all-electronic filing and records retention system. Because of this, BOEM has added section 556.107 to the final rule, which permits document submitters to electronically file documents with BOEM using a secure electronic filing system without the use of corporate seals. The filer may choose to file a document electronically; electronic document submission is not required by the final rule. In order to maintain the legal validity of documents filed electronically without corporate seals, BOEM is requiring that those entities who choose to so file provide BOEM with a one-time filing of a document containing the entity's corporate seal, signed by an authorized party, and stating that the entity's filings made through a secure electronic filing system will be legally binding. Final rule section 556.107 also enables those who choose not to file documents electronically to forego repeated use of the corporate seal by filing a document similar to the document discussed in the last paragraph, which states that future non-electronic filings will be legally binding without the use of a corporate seal. BOEM further recognizes that not all States issue corporate seals. Therefore, final rule section 556.107 contains a paragraph (c), which states that an entity from a non-corporate seal State may file a document with BOEM stating that its state of incorporation does not use corporate seals. This document must be signed by an authorized party and must state that submissions made by this corporation will be legally binding. Final rule section 556.107 does not have a counterpart in the proposed rule, but notice and comment on this provision is unnecessary because the provision does not require that any member of the public do anything differently than was already required by the prior regulations. Section 556.107 will, however, reduce the burden on those who choose to use the options it provides by streamlining the document submission process for them. The provision is also in accord with the Federal-Government-wide effort to digitize government services. See, e.g., the Government Paperwork Elimination Act, Public Law 105-277, 112 Stat. 2681 (1998). 3. Subpart B—Oil and Gas Five Year Leasing Program Sections under this subpart detail the steps BOEM takes to develop the Five-Year Oil and Gas Leasing Program. The final rule provisions set forth, sequentially, the stages in the development of the Five Year program, and closely mirror those in the proposed rule. Proposed rule section 256.206, “Does MMS offer blocks in a sale that is not on the 5-year program schedule?” appeared under this Subpart B in the proposed rule. In the final rule, this section was moved to the next subpart, Subpart C—Planning and Holding a Lease Sale, because the section is substantively concerned with holding a certain type of lease sale, not with the development of the Five Year program. BOEM believes this section is more appropriately placed within Subpart C. Section 556.200. What is the Five Year leasing program? This section reiterates those key provisions of OCSLA that require the Secretary to prepare an oil and gas leasing program that consists of a five-year schedule of proposed lease sales. Final rule section 556.200(a) substantially repeats proposed rule section 256.200. BOEM received two comments on proposed rule section 256.200 (section 556.200 in the final rule) that part of the section repeated language from OCSLA, and was therefore “inconsistent with the streamlining that MMS has taken with the proposed regulations.” BOEM considered these comments, but decided to retain the statutory language as it is important to explain the goals of the Five Year program. BOEM received no other comments on this subpart. Section 556.201. Does BOEM consider multiple uses of the OCS? Final rule section 556.201 reiterates the OCSLA requirement that BOEM consider multiple uses of the OCS in its development of the Five Year oil and gas leasing program. This approach derives from a requirement in Section 18 of OCSLA (43 U.S.C. 1344(a)(2)(D)) that the leasing program shall be prepared and maintained in a manner consistent with, among other things, “other uses of the sea and seabed, including fisheries, navigation, existing or proposed sea lanes, potential sites of deepwater ports, and other anticipated uses of the resources and space of the outer Continental Shelf.” Final rule section 556.201 emphasizes that BOEM gathers information about multiple uses of the OCS to assist the Secretary in making decisions on the Five Year program, pursuant to the provisions of 43 U.S.C. 1344. For this purpose, BOEM invites and considers suggestions from States and local governments, industry, and any other interested parties, primarily through public notice and comment procedures. BOEM also invites and considers suggestions from Federal agencies. Section 256.201 from the proposed rule has been modified in the final rule. As originally worded, proposed rule section 256.201 might have been considered confusing because it used the word “consult” in the context of the Five Year Program. The term “consult” is a term of art usually associated with consultation under the Endangered Species Act (16 U.S.C. 1531-1544) and government-to-government consultation with Indian tribes. The Endangered Species Act does not require consultation during the preparation of the Five Year program. OCSLA requires that BOEM invite and consider comments and suggestions from other agencies and from States during its Five Year program preparation process, 43 U.S.C. 1344(c), and so the final rule addresses that in sections 556.201 through 556.203. Section 556.202. How does BOEM start the Five Year preparation process? This section sets forth the steps BOEM takes in initiating the Five Year program. Final rule section 556.202 substantively repeats proposed rule section 256.202, but the final rule changes the statement in the proposed rule that “[a]ny area properly included on the official 5-year diagrams and maps may be offered for lease for any mineral not already leased” by substituting the explanation that any “area not already leased for oil and gas may be offered for lease.” The statement in the proposed rule was inaccurate because the Five Year program applies only to the leasing of oil and gas. Section 556.203. What does BOEM do before publishing a proposed Five Year program? This section provides that BOEM will invite comments from governors on a draft proposed program at least sixty days before it publishes a proposed Five Year program. Final rule section 556.203 repeats proposed rule section 256.203, with some minor wording changes. Section 556.204. How do governments and citizens comment on a proposed Five Year program? This section states the procedures to be followed to obtain inter-governmental and citizens' comments on the proposed Five Year program. Final rule section 556.204 repeats proposed rule section 256.204. Section 556.205. What does BOEM do before approving a proposed final Five Year program or a significant revision of a previously-approved Five Year program? This section provides that the Secretary must provide a copy of the proposed Five Year Program, or any significant revision thereto, to Congress and the President at least sixty days before approving it. Final rule section 556.205 is substantively the same as proposed rule section 256.205. 4. Subpart C—Planning and Holding a Lease Sale Sections in this subpart address the process leading up to a lease sale, the conduct of a lease sale, and the circumstances under which a lease sale that is not on the Five Year Program schedule may be held. Subpart C in the final rule generally tracks Subpart C in the proposed rule, with certain differences, described in the following paragraphs, which discuss final rule sections 556.300 through 556.309. Section 556.300. What reports may BOEM and other Federal agencies prepare before a lease sale? This section provides that BOEM will prepare a report describing the general geology and potential mineral resources of the area under consideration. Although this final rule section did not appear in the proposed rule, it did appear in the prior BOEM regulations, at prior Subpart C—Reports from Federal Agencies, which consists of one section, 556.22, “General.” The Preamble to the proposed rule stated that the precursor to prior regulations section 556.22 ( i.e., 256.22) was “[e]liminated as repetitive with [OCSLA].” BOEM has decided to retain the section in the final rule because the regulated public will be looking to the regulations, and not to OCSLA, for guidance on BOEM's processes and requirements. Final rule section 556.300 is substantively identical to the prior BOEM regulation 556.22. Section 556.301. What is a Call for Information and Nominations? The formal lease sale process usually begins with BOEM's publication of a Call for Information and Nominations, sometimes referred to as the “Call.” The Call requests indications of interest from industry in the leasing of specific blocks, and requests comments on other relevant information that BOEM can use in developing a recommendation of leasing areas for the Secretary. This section outlines the process BOEM uses to collect information to inform its determination as to which areas should be made available for leasing. Final rule section 556.301 is substantively identical to proposed rule section 256.300, except for the addition of an additional topic on which the Call will request comments. The prior regulations, at section 556.23(b), state that the Call “shall also request comments on areas which should receive special concern and analysis.” The proposed rule did not include “areas of special concern and analysis” as one of the topics on which the Call will request comments, but the Preamble to the proposed rule shed no light on why this topic was omitted, stating only that section 256.23 (now 556.23) was “[r]eorganized.” BOEM sees no reason to omit “areas of special concern and analysis” from the list of topics on which the Call will request comments, and so has retained it in the list of such topics stated in final rule section 556.301. Section 556.302. What does BOEM do with the information from the Call? Using the information received in response to the Call and further analysis of environmental issues, resource potential, stated interest, potential use conflicts, and other relevant information, the Director will develop a recommendation of the area to be included in a lease sale. This recommendation is often termed the “Area Identification,” or “Area ID.” This section explains the process used to arrive at the Area ID. BOEM received one comment on proposed rule section 256.301, on which final rule section 556.302 is based. The comment noted that the phrase “as soon as possible,” which appeared in the analogous prior regulation (section 556.26(c)), had been deleted by the proposed rule, resulting in the following statement in section 256.301(b) of the proposed rule: “[w]e inform the public of any additions or deletions from the area proposed for leasing in the 5-year program that result from the call process.” The commenter requested that the phrase be retained in the final rule because whether or not areas have been deleted from a sale area is of great importance to potential bidders that are preparing for lease sales. BOEM agrees with this comment and has re-inserted this phrase in final rule section 556.302(c). Section 256.301 of the proposed rule addressed the Area ID stage of BOEM's lease sale preparation, but omitted several aspects that appeared in the prior BOEM regulations at section 556.26. There is no reason given in the proposed rule as to why certain aspects of this stage of the lease sale process were left out, except the statement that prior section 256.26 was “[r]eorganized.” Final rule section 556.302 contains the substance of proposed rule section 256.301, as well as several paragraphs from the prior section 556.26. Specifically, three aspects of prior section 556.26 were not in the proposed rule, but have been retained in section 556.302 of the final rule. First, subparagraph (a)(2) of final rule section 556.302 states that the Director may, on his or her own motion, include in his or her recommendation areas that were not indicated in response to a Call. ( See section 556.26(a)). Second, the last sentence of final rule section 556.302(b) states that the Director may hold public hearings on the environmental analysis done on the areas identified for leasing. ( See section 556.26(b)). Third, subparagraph 556.302(e) of the final rule repeats the last sentence in section 556.26(a), stating that, in the case of a supplemental sale, the Director's recommendation will be replaced with his findings made under this section. Final rule section 556.302(d) states that the Director may, upon request, provide relative indications of interest in areas received in response to a Call. Paragraph (d) also addresses the potentially confidential nature of such indications of interest and indicates that BOEM will release this information in such a way so as not to compromise the competitive interest of any of the respondents to the Call. The language of this final rule paragraph was found in the prior regulations at section 556.10(d). The substance of this final rule paragraph 556.302(d) was found in the proposed rule at section 256.100(b)(1) and (2), but BOEM believes it is more appropriately placed in this final rule section, which addresses the treatment of information received in response to a Call. Section 556.303. What does BOEM do if an area proposed for leasing is within three nautical miles of the seaward boundary of a coastal State? Final rule section 556.303 sets forth the information that BOEM will provide to a State when an area proposed for leasing lies within three nautical miles of the seaward boundary of that State. Section 556.303 is the same as proposed rule section 256.302, except that the final rule corrects the language of the provision to be consistent with OCSLA section 8(g) (43 U.S.C. 1337(g)) in its use of the term “nautical miles” instead of the proposed rule's “geographical miles.” Section 556.304. How is a proposed notice of sale prepared? This section describes the process utilized to prepare a proposed notice of sale. Final rule section 556.304 retains all the substance of proposed rule section 256.303, but for clarity divides the proposed rule provision's one paragraph into multiple paragraphs. The final rule provision also has a new title because the proposed rule provision's text and its title—“What happens with an approved proposed notice of sale?”—appears to have addressed an already-approved notice of sale without explaining how the agency arrives at the approved notice. The final rule provision helps clarify this by retaining some of the paragraphs from the analogous section in the prior regulations, 556.29, which were left out of proposed rule provision 256.303, but which help to explain BOEM's procedures. The Preamble to the proposed rule stated that proposed rule provision 256.303 represented a “[s]implifi[cation]” of section 256.29 (now 556.29), but some steps were left out in the simplifying process, creating gaps in the regulations. These gaps have been eliminated with the retention of certain concepts from the prior regulations in final rule section 556.305. Final rule section 556.305(a) states that the Director of BOEM may, in consultation with other Federal agencies, develop lease stipulations and conditions, which will appear or be referenced in the proposed notice of sale. Both the prior regulation section 556.29 and proposed rule section 256.303 contained similar language, but the proposed rule provision went further and stated that the proposed notice of sale also includes “the Director's findings, and all comments and recommendations received on the proposal.” While reviewing the proposed rule, BOEM realized that these last three items are not in the proposed notice of sale, but accompany it when it is presented to the Secretary for approval. This concept that certain items will accompany the proposed notice of sale to the Secretary is correctly expressed in prior section 556.29(b), therefore this language has been used in final rule section 556.304(b). BOEM received a comment requesting that the lease form be attached to or referenced in the proposed notice of lease sale because “the terms of an oil and gas lease sale are integral to the lessee/lessor relationship and lessees . . . should have the right to know the lease terms in advance of submitting bids.” BOEM agrees with this comment insofar as potential bidders should be aware of the lease terms and conditions, to the extent possible, in advance of the lease sale. To that end, final rule provision 556.304(c) makes clear that the proposed notice of sale references the lease form. Section 556.305. How does BOEM coordinate and consult with States regarding a proposed notice of sale? This section outlines the process by which BOEM coordinates with affected States following the proposed notice of sale. Final rule section 556.305 is substantively the same as proposed rule section 256.304. One change was made to the language of the section in the final rule as a result of a comment. The comment requested that the section “actually reference” the Coastal Zone Management Act (CZMA) (16 U.S.C. 1451-1466) “so that if the CZMA is modified or amended or repealed, [BOEM] can continue to follow the process outlined in the act, rather than risking conflict or inconsistency.” BOEM agrees with this suggestion, and has included a reference to the CZMA in final rule section 556.305(b). Section 556.306. What if a potentially oil-or gas-bearing area underlies both the OCS and lands subject to State jurisdiction? This section provides a process for resolving issues or disputes that may arise between a State and the Federal government when a hydrocarbon-bearing area underlies both the Federal OCS and State submerged lands. This final rule section did not appear in the proposed rule. The substance of the final rule section is, however, found at prior BOEM regulation section 556.25(b)-(d). The Preamble to the proposed rule stated that this section of the prior regulations had been left out in an attempt to simplify the regulations. Upon reconsideration, however, BOEM believes that the proposed rule may have over-simplified the regulations, resulting in a gap. The proposed rule, at section 256.302, addressed potentially leasable areas “within 3 miles of the seaward boundary of a coastal State.” The proposed rule did not, however, address potentially leasable areas that underlie the Federal/State boundary, resulting in potentially leasable resources on both sides of this boundary. The two situations are treated differently in OCSLA, at sections 8(g)(2) and 8(g)(3), respectively (43 U.S.C. 1337(g)(2) and 1337(g)(3)). Therefore, BOEM believes that they should be treated separately in the regulations and BOEM has decided to retain the prior regulations' provisions in the final rule, at section 556.306. Section 556.307. What does BOEM do with comments and recommendations received on the proposed notice of sale? Final rule section 556.307 addresses BOEM's treatment of comments received on the proposed notice of sale, particularly those received from governors and local governments. This section provides a description of the process that BOEM will use to evaluate recommendations of governors and local governments. Section 556.307 is substantively the same as proposed rule section 256.305, but the final rule section has been divided into paragraphs for ease of reading and reference. The final rule section, at paragraph (b), contains one sentence that does not appear in the proposed rule, but did appear in the analogous prior section, 556.31(b). That sentence merely states that the determination of the “national interest” as meant in this section, will be based on the findings, purposes, and policies of OCSLA. Section 556.308. How does BOEM conduct a lease sale? Final rule section 556.308 explains that BOEM will publish a final notice of sale at least 30 days before the scheduled date of a lease sale. This final notice of sale will contain all the information needed to place a bid, as well as the terms and conditions of the lease, including any stipulations necessary to mitigate potential adverse impacts on the environment. Final rule section 556.308, paragraphs (a)-(c), are substantively the same as proposed rule section 256.306. The final rule section includes a new paragraph (d), which was added at the request of a commenter. The commenter requested that “the Notices of Lease Sale should include the lease form that will be used to grant successful bids.” Therefore, final rule section 556.308 (d) states: “[t]he final notice of lease sale references, or provides a link to, the OCS lease form which will be issued to successful bidders.” Section 556.309. Does BOEM offer blocks in a sale that is not on the Five Year program schedule (called a Supplemental Sale)? Under certain circumstances, detailed in proposed rule section 256.206 and final rule section 556.309, BOEM is authorized to offer blocks in an otherwise unscheduled sale, referred to as a supplemental sale. The proposed and final rule sections are the same. 5. Subpart D—Qualifications Final rule Subpart D—Qualifications, was a sub-subpart in the proposed rule, under proposed rule Subpart D—Issuance of a Lease. The substance of the provisions in Subpart D of the final rule is the same as that found in sections 256.400 through 256.404 of the proposed rule. BOEM decided, however, that the provisions covering the qualifications necessary to hold leases on the OCS were significant enough to merit a separate subchapter in the final rule. BOEM believes it is logical to place “Qualifications” into its own subpart and to remove it from under the heading “Issuance of a Lease,” where it was found in the proposed rule as one must qualify before a lease can be issued. There are six sections within final rule Subpart D—Qualifications, which generally correspond with the five sections under the subheading “qualifications” in the proposed rule. There are, however, a few minor differences between the sections in the proposed rule and the sections in the final rule, including the lack of a table in the final rule to set out the type of evidence required by BOEM to demonstrate proof of qualification to hold leases on the OCS. The proposed rule laid out the evidence requirements in a table format, but on reconsideration BOEM found this format too limiting, and opted to remove the table and instead use regulatory text to set forth the evidence requirements for qualification. The substance of the regulations remains the same in the final rule. Generally, there were some logical gaps in the scheme laid out by the proposed rule sections regarding “Qualification” to hold leases on the OCS, which BOEM has rectified in the final rule. For example, BOEM has been issuing “qualification numbers” to qualified potential lessees for many years, but the fact that such a number must be obtained by a potential lessee as a first step in the leasing process has not been clearly spelled out in the regulations. The lay-out of the proposed rule sections on qualification appeared to assume that the reader knew that he or she must obtain a qualification number from BOEM in order to be “qualified” to hold leases on the OCS, without ever saying how that number would be obtained. The other minor differences between the proposed and final rule provisions dealing with “Qualifications” are set forth, section-by-section, below. Section 556.400. When must I demonstrate that I am qualified to hold a lease on the OCS? This section provides that, in order to bid on, own, hold, or operate a lease on the OCS, bidders, record title holders, and operating rights owners must first obtain a qualification number from BOEM. The title of this section was reworded to more clearly describe this purpose. Final rule section 556.400 is an outgrowth of proposed rule section 256.401(a). Proposed rule section 256.401(a) stated that, a person, in order to show that he or she was qualified to be a lessee, must “provide [his] MMS qualification number.” The proposed rule failed to explain, however, that a potential lessee first had to obtain a qualification number from BOEM. Final rule section 556.400 explains that, “in order to bid, own, hold, or operate a lease on the OCS,” one must obtain a qualification number from BOEM. Final rule section 556.400 also makes clear that a bidder must be qualified in order to bid on OCS leases, as was required by prior section 556.46. Section 556.401. What do I need to show to become qualified to hold a lease on the OCS and obtain a qualification number? This section outlines BOEM's requirements for a prospective lessee to become a qualified bidder. Final rule section 556.401 is essentially proposed rule section 256.400, with a few minor additions, which flow from the language of the proposed rule. Like the proposed rule provision, the final rule provision lists those who may become qualified to hold leases on the OCS, but better describes the entities previously identified only as “associations.” Proposed rule section 256.400(c) listed “[a] private, public or municipal corporation organized under the laws of any State of the U.S., the District of Columbia, or any territory or insular possession subject to U.S. jurisdiction.” A Limited Liability Company (LLC) was not listed in proposed rule section 256.400(c), but LLC was listed in the table in proposed rule section 256.401 as one of the entities that may become qualified to hold leases on the OCS. Therefore, the final rule provision adds to the list in section 556.401 a “Limited Liability Company or Limited Liability Corporation organized under the laws of any State of the United States, the District of Columbia, or any territory or insular possession subject to United States jurisdiction.” Proposed rule section 556.400(e) listed a “State” as one entity potentially qualified to hold leases on the OCS. The final rule, at section 556.401(a)(5), using language from proposed rule section 256.400(c), instead says: “[a] State, the District of Columbia, or any territory or insular possession subject to United States jurisdiction.” Similarly, proposed rule section 256.400(f) listed a “political subdivision of States” as also potentially qualified to hold leases on the OCS. The final rule, at section 556.401(a)(6) instead says: “[a] political subdivision of a State, the District of Columbia, or any territory or insular possession subject to United States jurisdiction.” Final rule section 556.401, at paragraph (a)(7) adds “Trust” to the types of entities that are potentially qualified to hold leases on the OCS. A trust is one of the entities listed in the table in proposed rule section 256.401, but it is not among those potentially qualified entities that were listed in proposed rule section 256.400. In order to rectify this oversight, the final rule section adds “Trust” to the list of those potentially qualified set forth in final rule section 556.401, and adds that any such Trust must also be “organized under the laws of any State of the United States, the District of Columbia, or any territory or insular possession subject to United States jurisdiction.” Final rule section 556.401(c) affirmatively states that BOEM may issue a qualification number to one who has provided acceptable evidence of qualification. This is a clarification of proposed rule section 256.401(a), which stated: “[p]rovide your . . . qualification number if you have qualified with us.” The final rule merely affirmatively states that BOEM will issue that number, if appropriate. Section 556.402. How do I make the necessary showing to qualify and obtain a qualification number? This section describes the types of evidence that BOEM will require in order to qualify a person to hold leases on the OCS. Section 556.402 replaces proposed rule section 256.401, including the table in the latter. There are certain minor differences between the proposed and final rule sections, including the following: Both proposed rule section 256.401 and final rule section 556.402 list the evidence needed to show that one is qualified to hold leases on the OCS. In the final rule, we added that such evidence must be “acceptable to BOEM.” This requirement was implicit in the proposed rule. There would be no point in requiring evidence of qualification if BOEM were obligated to accept evidence that is not sufficient as to form or content to enable BOEM to be certain of the status of the submitter. In order to be certain of this status, it is reasonable to expect that only evidence “acceptable to BOEM” will be accepted. Final rule section 556.402, subparagraph (c)(3), adds the requirement that an entity seeking to qualify to hold leases on the OCS provide BOEM with a list of persons authorized to bind the entity, and that such list be kept current. This subparagraph reminds the entity that it is up to the entity, (and therefore, not up to BOEM) to determine who in its organization is authorized to bind it. BOEM believes that the requirement to provide a list of persons authorized to bind an organizational entity is a logical extension of the requirement to provide the various documents listed in the proposed rule table at proposed rule section 256.401. BOEM also believes that providing and updating this list of persons, along with the other evidence required by final rule section 556.402, is a simpler and more manageable way to approach the question of who is authorized to bind a specific entity than the prior regulations or the language used in the proposed rule. Final rule section 556.402 contains several paragraphs that did not appear in the analogous section of the proposed rule (section 256.401). Both proposed rule section 256.401 and final rule section 556.402 address traditional business entities, such as corporations and partnerships. There are, however, other types of business organizations that are eligible to qualify to hold leases on the OCS, but that would not have been covered by the qualifications provision in the proposed rule. Paragraph (e) of final rule section 556.402 therefore addresses business entities with non-traditional business forms. Some of these non-traditional business forms do not have standard positions, such as “president” or “secretary.” Accordingly, paragraph (e) of final rule section 556.402 does not name a particular position but states that an individual from the highest level of management of an entity with a non-traditional business form, who is authorized by the entity's operating agreement or governance documents to submit evidence of eligibility to hold OCS leases, must submit such evidence. Paragraph (e) is a clarification of proposed rule sections 256.401(c)(4) and 256.401(d), both of which sought to ensure that BOEM does business with the person within a qualified organization who has the authority to bind that organization. Paragraph (e) is a general catch-all meant to ensure that there are no gaps in BOEM's regulations when it comes to the evidence necessary to demonstrate qualification to hold leases on the OCS. Final rule section 556.402(f) states the entity that obtains a qualification number is responsible for ensuring that the number is used only for the purposes that the entity's governance documents allow. This was implicit in the proposed rule, but the new final subsection makes it clear that it is not BOEM's responsibility to ensure that entities are not going beyond their allowed powers in their dealings on the OCS. Lastly, final rule section 556.402(h) makes it clear that one may not hold leases on the OCS until BOEM has issued a qualification number. This concept was also implicit in the proposed rule and in BOEM's prior regulations in the requirement to obtain the qualification number. Section 556.403. Under what circumstances may I be disqualified from holding a lease on the OCS? This section describes the circumstances under which a person may be excluded or disqualified from holding a lease on the OCS. Final rule section 556.403 substantively replicates proposed rule section 256.402, with some minor language changes. The language at final rule section 556.403, paragraph (b), tracks the language of OCSLA more closely than did the language of the corresponding section in the proposed rule. This was done at the request of a commenter and ensures that paragraph (b) (“You may not hold an OCS lease if . . . The Secretary finds, after notice and hearing, that you or your principals fail to meet due diligence requirements or to exercise due diligence under section 8(d) of OCSLA . . . on any OCS lease”) could not be interpreted to conflict with section 8(d) of OCSLA (“No bid for a lease may be submitted if the Secretary finds, after notice and hearing, that the bidder is not meeting due diligence requirements on other leases.” 43 U.S.C. 1337(d)). Also, the language at final rule section 556.403, paragraph (c), was revised to make it clear that either BOEM or BSEE could offer notice and opportunity for a hearing to determine whether operating performance is unacceptable, pursuant to either appropriate BOEM regulations or appropriate BSEE regulations. This clarification is necessary because of the division of BOEMRE into two agencies, and the fact that both BOEM and BSEE have a role in determining whether operating performance is unacceptable. Section 556.404. What do the non-procurement debarment rules require that I do? Final rule section 556.404 details how to comply with the Department's non-procurement debarment rules, specifically those that relate to entering covered transactions and notifying BOEM if you know that you or your principals are excluded or disqualified, or have been indicted or convicted of a crime .It is substantively the same as proposed rule section 256.403, with minor conforming language changes. Section 556.405. When must I notify BOEM of mergers, name changes, or changes of business form? This section provides that lessees must notify BOEM of any merger, name change, or change of business form as soon as practicable, but in no case later than one year after the change or action. Final rule section 556.405 is the same as the proposed rule section, 256.404, with one exception. The proposed section stated “[y]ou must immediately notify BOEM of a name change,” but then allowed up to one year within which to do so. A commenter pointed out the inconsistency between the word “immediately” and the one-year period, and BOEM has therefore dropped the word “immediately” from final rule section 556.405 and replaced it with “as soon as practicable.” This same commenter opined that providing BOEM with name changes or changes of business form would be too burdensome and that BOEM has “multiple ways to learn of a merger or name change.” BOEM does not agree with these opinions. BOEM has run into difficulties in the past brought about by name changes and/or mergers about which BOEM had not been timely informed. It is not practicable for BOEM to monitor filings of name changes and merger information in each State. BOEM does not see that it is a burden for entities doing business on the OCS to keep BOEM apprised of changes of name or corporate form, such as may occur with a merger. 6. Subpart E—Issuance of a Lease Subpart E—Issuance of a Lease, is divided into four subdivisions in the final rule: “How to Bid,” “Restrictions on Joint Bidding,” “How Does BOEM Act on Bids?” and “Awarding the Lease.” The regulations in the first subdivision delineate the process of submitting a bid to BOEM and the information that must be submitted with the bid. The next subdivision, “Restrictions on Joint Bidding,” explains the effect of being placed on BOEM's Restricted Joint Bidders List and the reporting requirements for those placed on the List. “How Does BOEM Act on Bids?” presents information as to BOEM's acceptance or rejection of bids, the treatment of a tied bid, and the options available to a high bidder whose bid was rejected. The last subdivision of Subpart E, “Awarding the Lease” explains the procedures the bidder must follow after BOEM accepts its bid. Following is a section-by-section analysis of the sections within Subpart E. How To Bid Section 556.500. Once qualified, how do I submit a bid? Final rule section 556.500 states generally that each bidder must submit a separate sealed bid for each tract or bidding unit, along with a bid deposit. The final rule section specifies that information regarding the timing of bid submission, and the amount and payment method of bid deposits, will be set forth in the final notice of sale. Final rule section 556.500 appeared at proposed rule section 256.410. Paragraph (c) of final rule section 556.500 reaffirms the practice from the prior regulations (section 556.46(b)) and the proposed rule (section 256.410(b)) that the final notice of sale will specify the amount of the bid deposit. Paragraph (c) adds, however, that if not so specified, the “default” deposit amount will be twenty percent of the bid, the deposit amount that has been required for many years. As pointed out by a commenter, a bid deposit of twenty percent is the “status quo.” Another commenter noted that the bid deposit is “typically set at one-fifth of the bonus bid amount.” BOEM finds it unnecessary to seek comments on this “default” language, which merely reflects the “status quo.” Section 556.501. What information do I need to submit with my bid? Final rule section 556.501 reiterates requirements, found in section 26(a)(1)(A) of OCSLA (43 U.S.C. 1352(a)(1)(A)), to provide geological and geophysical (G&G) data to BOEM upon request. Current BOEM regulations in part 551 of Title 30 of the CFR, “Geological and Geophysical (G&G) Explorations of the Outer Continental Shelf,” already address this requirement, as applied to G&G activities permitted “on unleased lands or on lands leased to a third party,” 30 CFR 551.12(a). Therefore, current part 551 already applies to lands being bid upon, but BOEM has included section 556.501 in this final rule, because part 556 sets forth bidding and leasing procedures/requirements, and the requirement to provide G&G information with a bid logically falls within this comprehensive whole. Including final rule section 556.501 ensures that bidders are aware that they may need to submit requested G&G information at the time of bidding. Restrictions on Joint Bidding In the prior regulations, there are a series of definitions and other provisions that apply only in the context of restricted joint bidding, which were not in the proposed rule. Prior regulation section 556.40 lists 13 definitions, which help explicate the joint bidding restrictions. The proposed rule Preamble stated that section 256.40 (now 556.40) was “[e]liminated as redundant,” but, upon reviewing the proposed rule and the comments, BOEM decided that these definitions and provisions are not “redundant,” but instructive and helpful to explain the concepts underlying restrictions on joint bidding. The definitions have been retained in the final rule, some in the final rule definitions section, 556.106, and some in the provisions under this subheading of “Restrictions on Joint Bidding,” made up of final rule sections 556.511 to 556.515. Further, there are several provisions previously found at 556.43(d) and (e), which explain how to measure oil, natural gas liquids, and natural gas, for purposes of determining whether a person's production has exceeded 1.6 million barrels in the prior period, and thus whether he or she will be on the Restricted Joint Bidders List (sometimes referred to below as the “List”). For example, prior section 556.43(d) stated that: “[a]ll measurements of crude oil . . . under this section shall be at 60 degrees Fahrenheit.” These important provisions were left out of the proposed rule with no explanation other than that section 256.43 (previously 556.43) was “simplified and reorganized.” BOEM has reconsidered this “simplification and reorganization” and has determined that these measurement-describing provisions should be retained. They appear in final rule section 556.513(d). Section 556.511. Are there restrictions on bidding with others and do those restrictions affect my ability to bid? This section prohibits joint bidding by major oil and gas producers under certain circumstances. Final rule section 556.511 is substantively the same as proposed rule section 256.411, but the final rule section has one additional paragraph. This additional paragraph, 556.611(d), makes clear that a person on the Restricted Joint Bidders List may not enter into a pre-bidding agreement for the conveyance of any lease interest to another person on the List. The prohibition on pre-bid agreements between persons on the List was addressed in prior section 556.44 (c), but was not addressed in the proposed rule. BOEM has decided to retain this provision because of its continued relevance and applicability. Section 556.512. What bids may be disqualified? This section provides the circumstances under which a bid for any oil and gas lease will be disqualified and/or rejected. Final rule section 556.512 does not have a counterpart in the proposed rule, but it was found in the prior regulations at section 556.44. The Preamble to the proposed rule stated that section 256.44 (now 556.44) was “simplified,” and the reader was directed to proposed rule section 256.402 in its stead, but this “simplification” would create a discrepancy. Current section 556.44 addresses disqualification of certain types of bids involving persons on the List of Restricted Joint Bidders. Proposed rule section 256.402 has nothing to do with joint bidding, but sets forth three discrete situations where any person may be disqualified from holding a lease (exclusion due to the non-procurement debarment and suspension system, failure to exercise due diligence, or unacceptable operating performance). The substance of prior section 556.44 did not appear anywhere in the proposed rule, but BOEM has decided that it is necessary for a full understanding of the effects and ramifications of being placed on the Restricted Joint Bidders List. Therefore, the text of prior section 556.44 has been retained, verbatim, with only necessary conforming changes, in final rule section 556.512. Section 556.513. When must I file a statement of production? This section explains the circumstances under which a lessee must prepare and send to BOEM a statement describing its oil and gas production and what the statement is to contain. Final rule section 556.513 contains the substance of proposed rule section 256.412, as well as three subparagraphs previously found at prior section 556.40(l) and omitted from the proposed rule. Proposed rule section 256.412 explained that a person on the List of Restricted Joint Bidders would have to file a statement of production when its production exceeded 1.6 million barrels of oil, natural gas liquids, and natural gas during the prior production period. The prior regulations had the same provision, but the prior regulations, at section 556.40(l), also defined what “Production” meant with respect to each of these resources. Appropriate portions of the 556.40(l) definitions have been retained in final rule section 556.513 to make clear what is to be included in the measurement of crude oil, natural gas liquids, and natural gas when determining production chargeable to the prior production period. Section 556.514. How do I determine my production for purposes of the Restricted Joint Bidders List? This section details what production must be counted when determining whether a company should be considered a “restricted bidder.” Final rule section 556.514 replicates proposed rule section 256.413, with some concepts included from prior sections 556.40 and 556.43. Section 556.43(d) states that “[a]ll measurements of crude oil and liquefied petroleum products [referred to as natural gas liquids in the final rule] . . . shall be at 60 degrees Fahrenheit.” The proposed rule did not include the 60 degree Fahrenheit measurement parameter, but BOEM has decided to retain it as a necessary instruction for those persons who need to determine their production for purposes of the Restricted Joint Bidders List. The measurement parameter is in final rule section 556.514(a)(1). Also in final rule section 556.514(a)(1) is a reference to the equivalency factors set forth in 42 U.S.C. 6213(b)(2) and (3), which state, respectively: “[o]ne barrel of natural gas equivalent equals 5,626 cubic feet of natural gas measured at 14.73 pounds per square inch [(PSI) relative to the mean sea level, or] (MSL) and 60 degrees Fahrenheit” and “[o]ne barrel of natural gas liquids equivalent equals 1.454 barrels of natural gas liquids at 60 degrees Fahrenheit.” These two equivalencies were found in the prior regulations at section 556.43(e), but were omitted from the proposed rule. BOEM believes that these equivalencies are also necessary instructions for persons attempting to determine whether their production would place them on the Restricted Joint Bidders List. The final rule, at section 556.514(d), also retains the definition of “subsidiary” found in prior section 556.43(a)(3), but not contained in the proposed rule. Final rule section 556.514(f), which further explains how measurements of resources must be made, was not in the proposed rule, but was found at prior section 556.40(l)(1) and (2). Final rule section 556.514(e) is a logical extension of the interplay among prior section 556.40's definitions of “economic interest” and “owned” and prior section 556.43(b). The definitions in prior section 556.40 applied to joint bidding and restrictions thereon. The definition of “economic interest” defines certain types of passive interests, such as a royalty interest or a net profits interest. The definition of “owned” in prior 556.40 included “having . . . an economic interest in” the production of crude oil, natural gas, or natural gas liquids. And 556.43(b) stated that a person is chargeable, for purposes of joint bidding restrictions, with production that it “owns.” Therefore, reading these provisions logically together, a person's economic interest in production must be counted in that production chargeable to him or her for purposes of determining whether he or she is on the Restricted Joint Bidders List. This concept from the prior regulations is retained in the final rule in section 556.514(e) and the text was not changed from how it was originally proposed. Section 556.515. May a person be exempted from joint bidding restrictions? This section provides the circumstances under which a person may be exempted from joint bidding restrictions. Final rule section 556.515 is based on proposed rule section 256.414. Proposed section 256.414, however, did not state the specific regulatory sections from which exemption from the joint bidding restrictions or reporting requirements may be granted. These specific designations were found in the prior regulations, at section 556.41(d), and have been retained in final rule section 556.515. How Does BOEM Act on Bids? Section 556.516. What does BOEM do with my bid? This section outlines the procedures BOEM will follow when reviewing bids received for leases on the OCS and when handling tie bids. Section 556.516 of the final rule is based on proposed rule section 256.416. Proposed section 256.416(b) stated that BOEM would accept or reject all bids within 90 days, or a longer time if BOEM extended the 90-day period. Section 556.516(b) of the final rule adds that BOEM will timely notify bidders in writing of a decision to extend the 90-day period. Proposed section 256.416(d) states that the Attorney General may review the results of a sale before BOEM accepts any bid. This requirement is repeated in final rule section 556.516(d), with additional language explaining that the Attorney General must act within 30 days and may consult with the Federal Trade Commission. Both of these strictures are found in section 8(c)(1) of OCSLA (43 U.S.C. 1344(c)(1)). BOEM received the following comment: “There is no policy reason not to allow co-ownership by agreement of bidders with a tie bid, when the tie bidders are on the restricted joint bidder list. Those parties cannot have communicated or agreed with respect to the bid, but going forward could agree to an assignment creating co-ownership after the lease is awarded.” Neither the prior regulations (see 30 CFR 556.47(c)), nor the proposed rule, (see section 256.416(c)), permit tie high bidders who are both (or all) on the Restricted Joint Bidders List to accept a lease jointly. BOEM considered the comment above but concluded that there is no way to know whether tie bidders “communicated or agreed with respect to the bid.” Therefore, BOEM has decided that the current policy is a sound one and will not be changed. There is one significant difference between proposed rule section 256.416 and final rule section 556.516. Proposed rule section 256.416(c) addressed tie bids and stated that if there was no agreement among the bidders as to who would receive the lease, BOEM would “award the lease to the high bidder selected by lot.” The prior regulation, at section 556.47(e)(2), did not allow a bid to be awarded by lot, but stated that if an agreement from the tie bidders was not submitted to BOEM within 15 days, “all bids shall be rejected.” BOEM has reconsidered the “award by lot” policy enunciated in the proposed rule, and has decided not to adopt that policy. The policy is inherently unfair to one of the bidders and is inconsistent with BOEM's long-standing policy that if no bids are accepted, the lease will be withheld by BOEM and offered in the next lease sale. This policy affords BOEM the opportunity to obtain a greater return, furthering OCSLA's goal that BOEM obtain fair market value for OCS leases. See, section 18(a)(4) of OCSLA (43 U.S.C. 1344(a)(4)). BOEM will therefore retain the policy in the existing regulation that all tie bids, for which a timely agreement delineating who will receive the lease has not been submitted to BOEM, will be deemed rejected. This policy is stated in final rule section 556.516(c)(3). Section 556.517. What may I do if my high bid is rejected? This section describes the reconsideration procedures that apply in the event that a high bid is rejected by BOEM. Proposed rule section 256.417 would have allowed a bidder whose bid was rejected to request reconsideration of that rejection within 15 days, and stated that the bidder would receive a written response. The previous regulations at section 556.47(e), and the proposed rule at section 256.410, stated that the request for reconsideration is to be made to the Secretary. The proposed rule section did not address whether such a request could be appealed, but the previous regulations at 556.47 stated that decisions on high bids are not subject to review by the Department's Office of Hearings and Appeals. BOEM received a comment on proposed section 256.417 that requested more detail regarding reconsideration of rejection of a high bid, specifically as to the review process for a reconsideration request. In response to the comment, BOEM has added detail to the final rule section to clarify the procedures to be followed by the bidder requesting reconsideration, and those that will be followed by BOEM when it receives such a request. Therefore, final rule section 556.517 states that the decision of the authorized officer on bids is the final action of the Department, and that the request for reconsideration of such a decision must be made to the Director, as the Secretary's delegate, and must include evidence as to why the decision should be reconsidered. The final rule section retains the section 556.47 statement that the decision on the reconsideration is not subject to review by the Department's Office of Hearings and Appeals. Awarding the Lease Section 556.520. What happens if I am the successful high bidder and BOEM accepts my bid? This section describes the steps involved in the lease award process. BOEM received several comments on proposed section 256.420, which appears at final rule section 556.520, particularly on proposed section 256.420(c). That paragraph stated that if a successful bidder did not return the executed lease in the prescribed time or if it otherwise failed to comply with the regulations, its deposit would be forfeited “and [BOEM] may take appropriate action to collect the full amount bid.” Three commenters pointed out that, traditionally, in the scenario posited above, the bidder's deposit was forfeited, but BOEM had never attempted to collect the full amount bid. One of these commenters stated that “[p]ayment of the one-fifth amount is sufficient penalty,” and payment of amounts beyond that “is not warranted.” Another of the commenters pointed out that forfeiting the “significant penalty” of the one-fifth deposit “allows lessees to make an informed decision on leasing if information relating to the area becomes available after the bids are made.” The third commenter “objected” to the forfeiture of the full bid amount, but also suggested some alternatives for BOEM's implementation of this provision, such as offering the second-highest qualified bidder the lease if the high bidder forfeits. BOEM generally agrees with the comments. Accordingly, final rule section 556.520 does not include the language that, in a forfeiture situation, BOEM may take action to collect the full amount bid. Nor will BOEM offer the lease to the second-highest bidder, as that could violate BOEM's mandate to obtain fair market value for all leases. Instead, BOEM will retain the current policy, now expressed in the regulations at section 556.47(g), that in the case of forfeiture, the forfeiting bidder will lose its deposit. BOEM also received a comment on another aspect of proposed section 256.420(c). The comment noted that the proposed section states that a high bidder must “execute and return the lease within 11 business days after receipt” and contrasted that with the prior regulation, which stated that “the bidder shall, not later than the 11th business day after receipt of the lease, execute the lease.” See, section 556.47(f). The comment pointed out that while the current language does not specify that the executed lease must be returned to BOEM by the 11th day, the proposed rule section does so specify. The comment asked if this “signif[ies] a change in how the process is administered?” The rule does not signify a change in the interpretation of the regulation or in the administration of the process. The prior regulation was interpreted to mean that the lease must be executed and returned by the 11th business day after it is received, and the proposed and final rules continue this policy, but make the language more precise. Section 556.521. When is my lease effective? Final rule section 556.521 and proposed rule section 256.421 are the same. They both state BOEM's long-standing policy that a lease is effective on the first day of the month following the month in which BOEM executes the lease, but that a lessee may request that its lease be made effective as of the first day of the month in which BOEM executes it. The final rule also adds a provision that, if BOEM agrees to make it effective as of the earlier date, it will so indicate when it executes the lease. Section 556.522. What are the terms and conditions of the lease and when are they published? This section provides that the terms and conditions of the lease wil [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2016-06513. Public record. Not legal advice.