Logical Mining Units (LMU's) in General; LMU Application Procedures; LMU Approval Criteria; LMU Diligence; and Administration of LMU Operations

DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Parts 3400, 3470, and 3480

[WO-600-4120-02-24 1A]

RIN 1004-AC15

Logical Mining Units (LMU's) in General; LMU Application

Procedures; LMU Approval Criteria; LMU Diligence; and Administration of

LMU Operations

AGENCY: Bureau of Land Management, Interior.

ACTION: Proposed regulation.

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SUMMARY: This proposed rule has three purposes. First, it would amend

the regulations relating to logical mining units (LMU's) for coal

mining operations. The proposed amendments would ensure that,

consistent with the goals of the Federal Coal Leasing Amendments Act

(FCLAA) and the Mineral Leasing Act, as amended (MLA), LMU's are

approved only for the purpose of developing Federal coal resources in

an ``efficient, economical and orderly manner,'' and not solely for the

purpose of extending diligent development periods. The amendments would

also make several minor clarifications.

Second, the proposed rule would clarify the definition of

``producing,'' which governs how lessees holding current Federal coal

leases are qualified to obtain new MLA leases under the law.

Finally, the proposed rule would remove the provision that allows

extension of the 3-year deadline for submission of resource recovery

and protection plans.

DATES: Comments should be submitted by February 27, 1995. Comments

received or postmarked after this date may not be considered in the

decisionmaking process on the issuance of the final regulation.

ADDRESSES: Comments should be submitted to: Director (140), Bureau of

Land Management, Room 5555 MIB, 1849 C Street NW, Washington, DC 20240.

Comments will be available for public review in room 5555 of the above

address during regular business hours (7:45 a.m. to 4:15 p.m.), Monday

through Friday.

FOR FURTHER INFORMATION CONTACT: Harold W. Moritz, (202) 452-0350.

SUPPLEMENTARY INFORMATION:

Background:

The concept of LMU's was created when FCLAA was enacted on August

4, 1976. Section 5(b) of FCLAA amended Section 2(d) of the MLA (30

U.S.C. 202a(1)) so that it provides that the Secretary of the Interior,

upon determining that maximum economic recovery of the coal deposit or

deposits is served thereby, may approve the consolidation of coal

leases into a logical mining unit. Such consolidation may only take

place after a public hearing, if requested by any person whose interest

is or may be adversely affected. A logical mining unit is an area of

land in which the coal resources can be developed in an efficient,

economical, and orderly manner as a unit with due regard to

conservation of coal reserves and other resources. A logical mining

unit may consist of one or more Federal leaseholds, and may include

intervening or adjacent lands in which the United States does not own

the coal resources, but all the lands in a logical mining unit must be

under the effective control of a single operator, be able to be

developed and operated as a single operation and be contiguous.

An LMU is a production allocation mechanism, which allows a

straightforward approach to the logical sequencing of mining operations

on contiguous lands. The purpose of an LMU is to permit coal to be

mined in a sequence that makes sense. In the western United States,

where checkerboard land-ownership patterns are common, an operator may

develop several contiguous coal leases on lands that are owned by

different entities and were leased at different times. In some cases,

requiring the operator to mine the oldest Federal leases first in order

to meet diligent development requirements would be inefficient and

would not ensure maximum economic recovery of coal reserves. Similarly,

requiring an operator to maintain production on multiple contiguous

leases in order to meet lessee-qualification requirements under Section

2(a)(2)(A) or continued operation requirements under Section 7 of MLA

would be inefficient.

An LMU consolidates two or more Federal leases (or Federal and non-

Federal tracts) and allows the Secretary to credit production from

anywhere in the LMU to all Federal leases contained in the LMU, for

purposes of diligent development, continued operation and lessee

qualification. Thus, formation of an LMU can permit more efficient mine

sequencing, allowing an operator to progress logically from one lease

to the next, while also allowing the lessee to meet applicable

production requirements.

LMU's are an important part of the Federal Coal Management Program.

The BLM has approved 39 LMU's to date. These LMU's include 155 of the

remaining 431 Federal coal leases. For fiscal year 1993, these approved

LMU's comprised more than 32 percent of the Federal lease acres and 51

percent of Federal production.

While LMU's are a legitimate means of managing Federal coal

resources, BLM has determined that, in some circumstances, the existing

regulations could be used as a device to circumvent FCLAA-mandated

lease-specific production requirements. The current LMU regulations

provide that: (1) An LMU's 10-year diligent development period starts

on the effective date of the ``most recent Federal lease'' and (2) LMU

diligence supersedes lease-specific diligence for the duration of the

LMU. This presents the possibility that an operator holding a lease

that is about to be terminated for failure to meet diligent development

could extend the diligent development period for the lease by applying

for an LMU that combines that old lease with newer leases. The term

``most recent Federal lease'' is defined at 43 CFR 3480.0-

5(a)(13)(ii)(B) to mean the Federal coal lease that is first made

subject to the 1982 regulatory diligence system closest to, but

preceding, the effective date of the approved LMU.

The BLM believes that the regulations governing the commencement of

an LMU's diligent development period should be continued without

change. The BLM believes, however, that a lease that has not met its

diligent development requirements 8 years after its effective date

should be included in a new LMU only where the operator is actively

pursuing development on some portion of the proposed LMU. This

requirement will help ensure that new LMU's are formed only for the

purposes intended under FCLAA, and not for the purpose of speculation.

For further information regarding this proposal see the discussion of

43 CFR 3487.1(f) below.

BLM has also concluded that the regulations should provide more

detailed criteria to guide BLM's review of LMU applications. While the

factors proposed are ones that LMU applicants have often addressed in

their applications in the past, BLM has concluded that publication of

these specific criteria would better ensure that LMU's are approved

only where appropriate.

Advance Notice of Proposed Rulemaking

On December 10, 1993, BLM published an Advance Notice of Proposed

Rulemaking (ANPRM) (58 FR 64919). The ANPRM gave notice to the public

that BLM was considering revision of the regulations at 43 CFR Group

3400 relating to LMU's for coal operations, in order to improve

procedures for review of LMU applications and to improve administration

of LMU operations.

The ANPRM stated that the purpose of any proposed amendment would

be to place a greater emphasis on the stewardship of the Federal coal

resources and to ensure that Federal coal resources are developed in an

efficient, economical, and orderly manner with due regard to the

conservation of coal reserves and other resources, as required by the

MLA. The ANPRM presented only a general description of the actions

being considered, and included no specific regulatory text. The ANPRM

requested information and public comments related to 8 general

questions related to LMU's.

The ANPRM solicited public comments to assist in the preparation of

a proposed rule. The public comment period closed on February 8, 1994.

Seventeen comments were received. Nine comments came from the coal

industry, all of them from current Federal coal lessees. Three comments

came from State government offices in the State of Wyoming. Three

comments came from interest groups; two of these were from industry-

oriented groups and one from an environmental group. Two comments came

from individuals.

In general, most of the comments said that there was no

demonstrated need to change the LMU regulations. Some comments said

that changing the LMU regulations could place newly approved LMU's at a

competitive disadvantage compared with LMU's approved under the

existing regulations. Some comments said that, if BLM does change the

regulations, the changes should have a prospective effect only.

The ANPRM requested information and public comments on the

following 8 questions concerning LMU's. While not every comment

responded to all of the questions, the summaries below address the

comments responding to each one.

1. Is any change in the current regulations related to LMU diligent

development required or necessary?

All of the comments answering this question said that no changes

from the current LMU diligent development regulations were either

required or necessary. However, BLM believes that some changes relating

to LMU diligent development are warranted. For example, see the

detailed discussion relating to the timing of the start of the LMU

recoverable coal reserves exhaustion period at 43 CFR 3487.1(e)(6).

2. Is it appropriate for the approval of an LMU to allow for LMU

diligent development requirements to supersede lease-specific

diligence?

All of the comments responding to this question stated that it is

appropriate for the approval of an LMU to allow for LMU diligent

development requirements to supersede lease-specific diligence. BLM has

determined that the current regulations, which allow LMU diligent

development requirements to supersede lease-specific diligence,

implement the intent of Congress in enacting the LMU provisions of

FCLAA. In debates on the bill, one of the co-sponsors of FCLAA

described LMU's as ``providing an enormous exemption to the

requirements of due diligence and continuous operation by permitting

old leases to be consolidated and treated as one . . . .'' 122 Cong.

Rec. 507 (January 21, 1976) (remarks of Chairwoman Mink).

3. Is it appropriate to tie LMU diligent development to the date of

the most recent Federal lease included in the LMU?

4. What methods should be used to establish LMU diligent

development requirements?

5. How should LMU diligent development requirements be related to

the lease-specific diligent development requirements of those leases

included in the LMU?

These questions address essentially the same issue: whether BLM

should continue the current practice of tying LMU diligent development

to the date of the most recent Federal lease included in the LMU. All

of the comments responding to these three questions supported the

current regulatory approach. BLM has determined that tying the diligent

development period's start date to the most recent Federal lease

remains appropriate. The most recent Federal lease in an LMU may be the

one that should logically be mined first. It is appropriate to provide

the same lead time for diligent development for a recently issued lease

when it is part of an LMU as would be required for the lease standing

alone.

6. Should the regulations continue to allow an LMU to be effective

as early as the date that a complete LMU application was submitted?

All of the comments addressing this question said that the

regulations should continue to provide BLM the option to allow an LMU

to be effective as early as the date that a complete LMU application

was submitted. There are several, often time-consuming, steps involved

in approving an LMU once an application is received. Having a Federal

coal lease included in an approved and producing LMU can provide

protection to a lessee from the disqualification (due to the lessee's

holding of nonproducing Federal coal leases) that would otherwise occur

pursuant to Section 2(a)(2)(A). In order to provide this protection in

a timely manner, it is not appropriate for BLM to delay the effective

date of an LMU during its processing of an LMU application. Therefore,

the current procedure of allowing an LMU to be effective as early as

the date that a complete LMU application was submitted will be

continued.

7. Should the regulations require that at least one Federal lease

be either producing or included in an approved Surface Mining Control

and Reclamation Act (SMCRA) permit in order to be included in an LMU

application?

All of the comments responsive to this question stated that the

regulations should not be amended to require that at least one Federal

lease be either producing or included in an approved SMCRA permit in

order to be included in an LMU application. Based on the public

comments received, BLM has determined that the regulations should not

be amended to require that at least one Federal lease be producing.

However, BLM has determined that, where the proposed LMU would include

a lease that has not met diligent development requirements within 8

years after its issuance, it is appropriate to require that at least

some part of the proposed LMU be covered by a pending or an approved

application for a SMCRA permit in order for the LMU to be approved. See

the discussion of 43 CFR 3487.1(f)(7), below.

8. What would be a viable, working definition of the term

``producing'' or ``production'' under the Federal Coal Leasing

Amendments Act and MLA as the term relates to LMU's? Should separate

definitions of ``producing'' and ``production'' be developed

specifically for LMU's? If so, what should the definition be?

All of the comments answering this question said that the

regulations already contain viable working definitions for the terms

``producing'' or ``production'' under FCLAA and MLA as the terms relate

to LMU's. All of these comments further stated that the regulations

should not contain separate definitions of ``producing'' and

``production'' specifically for LMU's. None of the comments suggested

any alternative definitions. Nevertheless, BLM believes that the

definition of ``producing'' at 43 CFR 3400.0-5(rr)(6) needs some

clarification. The BLM proposes to clarify the existing provisions of

and add two new provisions to 43 CFR 3400.0-5(rr)(6). These changes

would: (1) remove the term ``standard industry operation practices;''

(2) address the ``producing'' status of leases that are mined out and

being held solely for reclamation; and (3) make it clear that market

conditions do not provide a basis for extended ``temporary''

suspensions of severance. See also the discussion on 43 CFR 3400.0-

5(rr)(6), below.

Finally, the public was invited to raise any additional concerns

relating to diligent-development requirements for LMU's and to submit

suggested solutions. None of the comments provided any additional

insight into diligent development requirements for LMU's. Experience in

implementing the LMU program over the past 12 years has led BLM to

consider several additional small changes. See the more detailed

discussions below.

Study by the General Accounting Office (GAO)

Since 1992, GAO has been examining BLM's coal leasing program. In

the course of its investigation, GAO has raised several issues,

including two related to LMU's. First, GAO suggested that BLM should

prepare regulations to provide clear criteria that BLM can use to

determine whether an LMU will further the efficient, economical and

orderly development of coal deposits. Second, GAO suggested that the

definition of producing, as it relates to an approved LMU's ability to

provide protection from the lessee-qualification sanctions of Section

2(a)(2)(A) of MLA, could be improved to reduce the possibility of

speculation. This proposed rule addresses both of these areas.

Section 3400.0-5 Definitions

The prefatory clause to the list of definitions at 43 CFR 3400.0-5

presently states ``As used in this part:''. This could be interpreted

to mean that the definitions are applicable only to the general coal

management provisions of part 3400, and not to the remainder of group

3400. This has never been the intention of the regulation, as all of

the terms defined at section 3400.0-5 appear throughout group 3400. To

eliminate any possible confusion, the prefatory wording of section

3400.0-5 would be amended to make it clear that the definitions apply

to all of the Federal coal management regulations in group 3400.

The proposed rule would also amend the definition of ``producing''

at section 3400.0-5(rr)(6), which defines one of the lessee

qualifications under MLA. Section 2(a)(2)(A) of the MLA provides that

no lease may be issued under MLA to any entity that holds, and has held

for 10 years, a Federal coal lease that is not ``producing'' in

commercial quantities.

The BLM has concluded that the present regulation, which defines

``producing'' to include ``operating an ongoing mining operation in

accordance with standard industry operation practices,'' has potential

for abuse. The present language could allow a lessee to claim that it

is ``producing'' in accordance with standard industry practices even

though, for reasons that are within its control, coal has not been

produced for many years. This practice does not well serve a major goal

of FCLAA: to prevent speculative holding of leases.

BLM recognizes, however, that operator/lessees may have legitimate

reasons that are beyond their control for temporarily suspending

severance of coal. Congress recognized this possibility in Section

2(a)(2)(A) of MLA, which provides that lessees that are not producing

are not disqualified from obtaining new leases if the leases meet the

exception-to-producing requirements in Section 7(b) of MLA (30 U.S.C.

207(b)). Section 7(b) exempts lessees from diligent development and

continued operation requirements where operations are interrupted by

strikes, the elements, or casualties not attributable to the lessee or

where the operator/lessee is paying advance royalty in lieu of

continued operation.

Consequently, the proposed rule would remove the ``standard

industry operation practices'' language, but would preserve the

exception permitting temporary suspension of operations for reasons

beyond the reasonable control of the operator/lessee. BLM believes that

the examples of reasons for suspending operations that are listed in

the present regulation account for most ``standard industry operation

practices'' that might require a temporary suspension. There may be

other reasons for temporarily suspending operations, but any such

reasons must also be beyond the reasonable control of the operator/

lessee. BLM solicits public comment on other reasons that may be

included in this listing.

The present regulation does not define ``temporary.'' It is

appropriate to place a definite limit on the duration of temporary

suspensions of severance for purposes of the meaning of ``producing''

under Section 2(a)(2)(A). The BLM would establish 3 months as the

maximum period of time that would be considered temporary under section

3400.0-5(rr)(6). Should forces beyond the operator/lessee's control

require a longer period of suspension, the operator/lessee could apply

for a force majeure suspension under Section 7(b) of the MLA (30 U.S.C.

207(b)), as imple-mented by 43 CFR 3483.3. In accordance with the

exceptions stated in Section 2(a)(2)(A) of the MLA and 43 CFR 3472.1-

2(e)(1)(i), any operator/lessee who has, under 43 CFR 3483.3 an

approved suspension of the requirement for continued operations found

in Section 7(b) of the MLA is not barred by Section 2(a)(2)(A) from

acquiring new leases on account of that suspension.

The listed examples of reasons for temporary suspension of

severance remain appropriate, but they require minor clarifications.

The proposed rule adds to ``sale of stockpiles of coal'' the phrase

``that was severed from the lease or LMU in question,'' in order to

make it clear that an operator/lessee's sale of coal from any source

other than the lease or LMU in question would not be grounds for

suspending the production requirement for purposes of Section

2(a)(2)(A).

Additionally, the phrase ``limited duration of time'' found at the

end of existing section 3400.0-5(rr)(6)(i) would be removed and

replaced with a cross-reference to this same temporary period of time

(i.e., that could not exceed 3 months). This will make it clear that,

when the coal buyer's operation of its power plants requires the coal

buyer to stop taking coal shipments for temporary periods of up to 3

months, the lease or LMU supplying that coal can be viewed as producing

under these regulations.

A new paragraph (rr)(6)(ii)(B) would be added to provide that

market conditions are not considered by BLM to fall within the scope of

the term ``reasons beyond the reasonable control of the operator/

lessee.'' The Department of the Interior (DOI) takes the position that

lack of a market or the loss of a contract constitutes a normal

business risk, and that neither event is a justifiable reason for

granting a suspension. These situations are distinguishable from

circumstances where the operator/lessee has temporarily suspended

further severance of coal for short periods while selling stockpiled

coal severed from the lease or LMU in question or while the coal

buyer's operations require it to stop taking coal.

Section 2(a)(2)(A) of MLA was added principally as an anti-

speculation device for leases in existence at the time of FCLAA's

enactment. Maintaining a lease in a nonproducing status while waiting

for a market to develop, or for a contract to be negotiated or

renegotiated, is the kind of speculation that Congress intended to

discourage when it enacted FCLAA.

Because proposed Sec. 3400.0-5(rr)(6)(ii)(A) would limit to 3

months or less those temporary suspensions not affecting lessee

eligibility, paragraph (rr)(6)(iii) would be added in order to avoid

disqualification of lessees whose production is suspended for longer

periods by orders of governmental authorities and through no fault of

the operator/lessee. The effect of the rule would be to move the

exception from the requirement of actual severance, on account of

suspensions due to the orders of governmental authorities, from the

existing paragraph (rr)(6)(i) to the proposed paragraph (rr)(6)(iii).

Paragraph (rr)(6)(iv) would be added to clarify that the term

operator/lessee as used in paragraphs (rr)(6), (ii) and (iii) would

have the same meaning as stated in Sec. 3480.0-5(a)(28).

As presently drafted, the proposed changes in the definition of

``producing'' would, if adopted in the final rule, take effect 30 days

after the date when the final rule is published. The BLM solicits

public comment on whether a longer phase-in period, such as 6 months,

is necessary and appropriate to allow operators/lessees to come into

compliance with these changes.

Section 3472.1-2 Special leasing qualifications

Section 3472.1-2 sets forth special qualifications that applicants

must meet in order to obtain leases. The BLM proposes to make several

clarifying changes in the section. Paragraph (e)(1)(i) parallels MLA

Section 2(a)(2)(A), which prohibits issuance of new leases to those who

have held a Federal coal lease for 10 years that is not producing in

commercial quantities. The current regulation sets forth exceptions to

that prohibition, including those provided in ``paragraph (e)(4) or (5)

of this section.''

Proposed paragraph (e)(1)(i) would make several minor grammatical

corrections, and would add a reference to paragraph (e)(6) as another

exception to the lessee qualification provisions. As the present

language of the regulation suggests, BLM has always considered

paragraph (e)(1)(i) to be subject to the exceptions set forth in

paragraph (e)(6). The proposed change simply clarifies that fact.

The proposed rule also includes several clarifying changes in

paragraph 3472.1-2(e)(6)(ii). Paragraphs (A) through (C), which apply

to pre-FCLAA leases, clearly require that a lease actually be

``producing'' at the time qualification for new leases is determined.

Paragraph (D) requires leases subject to diligent development

requirements to be ``producing in compliance with diligent development

and continued operation provisions of part 3480.'' Paragraph (E)

requires that, for a lease contained in a logical mining unit, the LMU

be producing ``in accordance with the logical mining unit stipulations

of approval.''

Under the present wording of paragraph (D), a lessee who has held a

non-producing lease for more than 10 years could argue that the lease

is ``producing in compliance with diligent development and continued

operation provisions of part 3480.'' This could occur where the lessee

holds a pre-FCLAA lease that did not become subject to diligent

development until it was readjusted in, for example, 1988. In 1994, the

lease would be in compliance with diligent development and continued

operation requirements, because production of commercial quantities

would not be due until 1998, and continued operation requirements would

apply only after meeting diligent development. Similarly, under the

present wording of paragraph (E), a lessee holding non-producing leases

in a non-producing LMU could argue that the lessee meets the

``producing'' requirement for purposes of MLA Section 2(a)(2)(A) if the

LMU is merely in compliance with the diligence provisions of its

stipulations of approval.

The BLM believes that a policy under which mere compliance with the

diligent development requirements of amended Section 7(b) of the MLA is

adequate to satisfy the ``producing'' requirement of Section

2(a)(2)(A), where the lease has not yet produced commercial quantities,

undermines the anti-speculation goal of FCLAA. The two sections have

separate purposes and their requirements should be implemented

separately. This interpretation of the relationship between Section

2(a)(2)(A) and Section 7(b) better serves the anti-speculation goal of

FCLAA.

The BLM does believe, however, that once a lessee has actually

satisfied diligent development and continued operation requirements, a

lease should be considered to be ``producing'' under Section

2(a)(2)(A). Accordingly, proposed paragraph (D) would be amended to

provide that, in order to protect a lessee from disqualification under

Section 2(a)(2)(A), a lease must be producing or, for a lease that has

met its diligent development requirements, must have met its continued

operation requirements for the year. Similarly, proposed paragraph (E)

would be amended to make it clear that, in order to protect a lessee

from disqualification, an LMU must be producing, or have satisfied its

continued operation requirements for the year, in addition to complying

with the LMU approval stipulations.

Section 3480.0-5 Definitions

A new paragraph (a)(21) would be added to define the new term

``logical mining unit (LMU) recoverable coal reserves exhaustion

period.'' This term would better reflect the requirement in the MLA

that the maximum mine-out period allowed for each LMU is 40 years. 30

U.S.C. 202a(2) (1988). Also, see discussions below regarding sections

3487.1(d)(1), 3487.1(e)(6), and 3487.1(g)(4), where this new term would

be used in the regulations.

To allow for the new definition at section 3480.0-5(a)(21),

existing paragraphs (21) through (36) of section 3480.0-5(a) would be

renumbered as (22) through (37), respectively.

Section 3483.3 Extension or suspension of continued operation, 3-year

resource recovery and protection plan submission requirement, and

operations and production

In Natural Resources Defense Council v. Jamison, 815 F. Supp. 454,

470-71 (D.D.C. 1992), the court held that the present provision at 43

CFR 3483.3(a) that allows extension of the 3-year deadline for

submission of resource recovery and protection plans is inconsistent

with the requirements of FCLAA. The court ruled that FCLAA's

requirement that the operation and reclamation plan must be submitted

within 3 years of issuance of a lease is mandatory and contains no

force majeure exception. See 30 U.S.C. 207(c)(1988). Consequently, the

proposed regulation removes from section 3483.3(a) all references to

resource recovery and protection plans. Section 3483.3(a) has also been

edited for clarity of expression.

Section 3487.1 Logical mining units

The proposed rule would make several changes in the regulations

governing logical mining units. Once they are effective, BLM intends to

apply the new regulations to its review of all LMU applications that

are currently pending, and those that are filed after December 28,

1994.

Minor revisions would be made at paragraphs 3487.1(d)(1) and (e)(6)

to make the regulation consistent with the new definition of ``logical

mining unit (LMU) recoverable coal reserves exhaustion period'' at

paragraph 3480.0-5(a)(21).

Additionally, the proposed rule would amend paragraph 3487.1(e)(6)

to provide that the LMU recoverable coal reserves exhaustion period

begins upon approval of the resource recovery and protection plan, in

accordance with sections 3482.1(b) and 3482.2(a)(2), and to require

that all recoverable reserves be mined within that period. The current

regulation establishes the start date as the date on which coal is

first produced from the LMU on or after the LMU's effective date. The

MLA does not state expressly when the mine-out period should start.

Rather, the MLA states that the period that the Secretary establishes

must be part of the approved ``mining plan'' and cannot exceed 40

years. See 30 U.S.C. 202a(2). The BLM interprets ``mining plan'' to

mean the ``operation and reclamation plan'' required under 30 U.S.C.

207(c), which the implementing regulations, at 43 CFR subpart 3482,

call the ``resource recovery and protection plan''. This plan, which

the lessee must submit within 3 years after a lease is issued, provides

detailed descriptions of how the operator/lessee will mine the coal and

reclaim the land. Because this plan is approved concurrently with the

SMCRA permit, the operator/lessee is free to start operations after the

date of approval. The BLM believes that it best serves the purposes of

FCLAA to begin the 40-year LMU mine-out period on this date, in order

to encourage diligent development of Federal coal reserves.

Paragraph 3487.1(f) would be revised to insert the word ``may'' in

lieu of the phrase ``shall, except for good cause stated in a decision

disapproving the application.'' The MLA provides that the Secretary

``may'' approve an LMU, upon determining that maximum economic recovery

of coal would be served thereby. See 30 U.S.C. 202a(1). The statute

gives the Secretary broad discretion to determine whether the public

interest would be served by approval of an LMU. The present regulation

unnecessarily limits this discretion by requiring that the authorized

officer ``shall,'' except for good cause, approve an LMU application

that meets certain standards. The legislative history of FCLAA

indicates that Congress never intended that there should be a

presumption in favor of approving LMU's. See 122 Cong. Rec. 507-08

(Jan. 21, 1976) (remark of Chairwoman Mink that ``we have agreed to

permit this limited use of the LMU device''). The proposed new wording

better reflects the discretion granted by Congress.

Several additions are proposed to paragraph 3487.1(f)(2) to provide

authorized officers with more detailed guidance for determining whether

a proposed LMU would promote efficient, economical, and orderly

development of coal resources. First, the proposed rule would make it

clear that the applicant bears the burden of showing that the proposed

LMU meets the statutory criteria. Second, the proposed rule would list

the key geologic and engineering factors that the authorized officer

will use to determine whether an LMU will meet those criteria. The

proposed rule would not include an exhaustive list of such factors; the

authorized officer would retain the discretion to consider other

relevant factors.

A new subparagraph (f)(7) would be added to limit the circumstances

under which leases that are nearing the end of their diligent

development periods may be included in LMU's. The regulation would

provide that an LMU will not be approved if it includes a lease that

has not produced commercial quantities by the end of the eighth year of

its diligent development period, unless some part of the proposed LMU

is covered by an approved SMCRA permit or an administratively complete

application for such a permit. (The term ``administratively complete

application'' is defined at 30 CFR 701.5.) This requirement will help

ensure that LMU's are formed only for the purposes intended by Congress

when it enacted FCLAA.

Under FCLAA, any lease that is not producing coal in commercial

quantities after 10 years must be terminated. The regulations define

``commercial quantities'' to mean one percent of the recoverable coal

reserves. The current regulations also provide that an LMU's 10-year

diligent development period starts either on the effective date of the

LMU or the effective date of the most recent Federal lease, depending

on the age and status of the leases to be included in the LMU. See 43

CFR 3480.0-5(a)(13)(ii). This presents the possibility that an operator

holding an older lease that is about to be terminated for failure to

produce in commercial quantities could seek to postpone the lease

termination date by applying for an LMU that combines the older lease

with a more recently issued one. This would not well serve FCLAA's goal

of preventing speculation in Federal coal reserves.

The BLM believes that the existing regulatory provisions for the

commencement of an LMU's diligent development period should not be

changed. The BLM has concluded, however, that a lease that has not met

diligent development requirements after 8 years should not be included

in a new LMU unless the operator is actively pursuing development of

some portion of the proposed LMU. The BLM believes that, as a lease

nears the end of its diligent development period without having

produced in commercial quantities, the likelihood increases that the

operator/lessee has included it in an LMU application merely for the

purpose of delaying the lease's termination, and not for achieving

efficient, economical, and orderly development of coal. Preparation of

a new SMCRA permit application, however, requires a significant

expenditure of time and money, indicating that the operator/lessee

intends in good faith to pursue development.

A new paragraph 3487.1(g) would require BLM's authorized officer to

make a written record of the basis of his or her decision on the LMU

application.

As a result of the addition of new paragraph 3487.1(g), existing

paragraphs 3487.1(g)-(h) would be redesignated as 3487.1(h)-(i),

respectively. A minor revision would be made at redesignated

3487.1(h)(4) to ensure consistent usage with the term: ``Logical mining

unit (LMU) recoverable coal reserves exhaustion period,'' newly defined

at section 3480.0-5(a)(21).

The principal author of this proposed rule is Harold W. Moritz,

Senior Technical Specialist, Division of Solid Minerals, Bureau of Land

Management (BLM); assisted by Allen B. Agnew, Senior Mining Engineer of

the BLM's Division of Solid Minerals located in the Oregon State

Office, and staff of the Division of Legislation and Regulatory

Management, BLM.

It is hereby determined that this proposed rule does not constitute

a major Federal action significantly affecting the quality of the human

environment, and that no detailed statement pursuant to Section

102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C.

4332(2)(C)) is required. BLM has determined that this regulation is

categorically excluded from further environmental review pursuant to

516 Departmental Manual, Chapter 2, Appendix 1, Item 1.10, and that the

regulation will not significantly affect the 10 criteria for exceptions

listed in 516 DM 2, Appendix 2. Pursuant to the Council on

Environmental Quality regulations (40 CFR 1508.4) and environmental

policies and procedures of DOI, ``categorical exclusions'' means a

category of actions that do not individually or cumulatively have a

significant effect on the human environment and that have been found to

have no such effect in procedures adopted by a Federal Agency and for

which neither an environmental assessment nor an environmental impact

statement is required.''

This regulation has been reviewed under Executive Order 12866.

DOI also certifies that this document will not have a significant

economic effect on a substantial number of small entities under the

Regulatory Flexibility Act (5 U.S.C. 601 et seq.). LMU's have

historically not been within the purview of small entities. There are

currently no small entities that hold either an approved LMU or pending

LMU application.

As required by Executive Order 12630, DOI has determined that the

regulation would not cause a taking of private property.

DOI has certified to the Office of Management and Budget that these

regulations meet the applicable standards provided in sections 2(a) and

2(b)(2) of Executive Order 12778.

The provisions for collection of information contained at 43 CFR

Group 3400, Parts 3400, 3470, and 3480 have previously been approved by

the Office of Management and Budget and assigned clearance number 1004-

0073. This rule does not contain information collection requirements

that require approval by the Office of Management and Budget under 44

U.S.C. 3501 et seq.

List of Subjects

43 CFR Part 3400

Administrative practice and procedure, Coal, Government contracts,

Public lands-mineral resources, Reporting and recordkeeping

requirements.

43 CFR Part 3470

Coal, Government contracts, Lease and LMU diligence requirements

Leases, Lessee qualification, Logical mining units, Mineral royalties,

Mines, Producing requirements, Public lands-mineral resources,

Reporting and recordkeeping requirements.

43 CFR Part 3480

Coal, Government contracts, Intergovernmental relations, Logical

mining units, Mineral royalties, Mines, Public lands-mineral resources,

Reporting and recordkeeping requirements, Suspensions.

For the reasons stated in the preamble, and under the authorities

cited below, parts 3400, 3470, 3480, Group 3400, Subchapter C, Chapter

II of Title 43 of the Code of Federal Regulations are proposed to be

amended as follows:

PART 3400--COAL MANAGEMENT: GENERAL

1. The authority citation for part 3400 is revised to read as

follows:

Authority: 30 U.S.C. 181 et seq.

2. Section 3400.0-5 is amended by revising the introductory text

and paragraph (rr)(6) to read as follows:

Sec. 3400.0-5 Definitions.

As used in this group:

* * * * *

(rr) * * *

(6) Producing means actually severing coal. A lease is also

considered to be producing when:

(i) The operator/lessee is processing or loading severed coal, or

transporting it from the point of severance to the point of sale; or

(ii)(A) The operator/lessee temporarily suspends severance of coal,

for a period not to exceed 3 months, for reasons beyond the reasonable

control of the operator/lessee. Circumstances allowing such suspension

include but are not limited to: dragline or other equipment movement,

breakdown, or repair; overburden removal; sale from stockpiles of coal

that was severed from the lease or LMU in question; vacations and

holidays; coal buyer's operations of its power plants that require the

coal buyer to stop taking coal shipments for a similar temporary period

(not to exceed 3 months);

(B) Provided, however, that neither a lack or loss of market nor a

lack or loss of a contract shall be considered ``reasons beyond the

reasonable control of the operator/lessee'' for purposes of paragraph

(rr)(6)(ii)(A) of this section; or

(iii) Governmental authorities order a suspension of the severance

of coal by the operator/lessee for reasons beyond the reasonable

control and not the fault of the operator/lessee.

(iv) For the purposes of this paragraph (rr)(6), the term

``operator/lessee'' has the meaning set forth in Sec. 3480.0-5(a)(28)

of this title.

* * * * *

Part 3470--Coal Management Provisions and Limitations

3. The authority citation for part 3470 is revised to read as

follows:

Authority: 30 U.S.C. 181 et seq., and 30 U.S.C. 351-359.

4. Section 3472.1-2 is amended by revising paragraphs (e)(1)(i) and

(e)(6)(ii)(D) and (E) to read as follows:

Sec. 3472.1-2 Special leasing qualifications.

* * * * *

(e)(1)(i) On or after December 31, 1986, no lease shall be issued

and no existing lease shall be transferred to any entity that holds and

has held for 10 years any lease from which the entity is not producing

coal in commercial quantities, except as authorized under the advance

royalty or suspension provisions of part 3480 of this title, or

paragraph (e)(4), (5), or (6) of this section.

* * * * *

(6) * * *

(ii) * * *

(D) Producing, or has produced in satisfaction of the continued

operation requirements of part 3480 of this title, for leases that

began their first production of coal--

(1) On or after August 4, 1976; and

(2) After becoming subject to the diligence provisions of part 3480

of this title;

(E) Contained in an approved logical mining unit that is--

(1) Producing, or has produced in satisfaction of the continued

operation requirements of part 3480 of this title; and

(2) In compliance with the logical mining unit stipulations of

approval under Sec. 3487.1(e) and (f) of this title; or

* * * * *

PART 3480--COAL EXPLORATION AND MINING OPERATIONS RULES

5. The authority citation for part 3480 is revised to read as

follows:

Authority: 30 U.S.C. 181 et seq.

Subpart 3480--Coal Exploration and Mining Operations Rules: General

6. Section 3480.0-5 is amended by redesignating paragraphs (a)(21)

through (a)(36) as paragraphs (a)(22) through (a)(37), respectively,

and adding paragraph (a)(21) to read as follows:

Sec. 3480.0-5 Definitions.

(a) * * *

(21) Logical mining unit (LMU) recoverable coal reserves exhaustion

period means the period of time that begins upon the approval of the

LMU resource recovery and protection plan and ends when all the LMU

recoverable coal reserves have been mined out. This period must not be

more than 40 years.

* * * * *

SUBPART 3483--DILIGENCE REQUIREMENTS

7. Section 3483.3 is amended by revising the heading and paragraphs

(a) and (a)(1) to read as follows:

Sec. 3483.3 Suspension of continued operation or operations and

production.

(a) Applications for suspensions of continued operation must be

filed in triplicate in the office of the authorized officer. The

authorized officer, if he determines an application to be in the public

interest, may approve the application and terminate suspensions that

have been or may be granted.

(1) The authorized officer must suspend the requirement for

continued operation by the period of time he or she determines that

strikes, the elements, or casualties not attributable to the operator/

lessee have interrupted operations under the Federal coal lease or LMU.

* * * * *

SUBPART 3487--LOGICAL MINING UNIT

8. Section 3487.1 is amended by redesignating paragraphs (f)(2)

through (f)(5) as paragraphs (f)(3) through (f)(6), respectively, by

redesignating paragraphs (g) and (h) as paragraphs (h) and (i),

respectively, by revising paragraph (e)(6), by adding new paragraphs

(f)(2), (f)(7), and (g), and by revising newly designated paragraph

(h)(4) to read as follows:

Sec. 3487.1 Logical mining units.

* * * * *

(e) * * *

(6) Beginning the LMU recoverable coal reserves exhaustion period

on the date the LMU resource recovery and protection plan is approved,

and requiring that the operator/lessee mine all LMU recoverable coal

reserves within 40 years of that date.

* * * * *

(f) Criteria for approving the establishment of an LMU. The

authorized officer may approve an LMU if it meets the following

criteria:

* * * * *

(2) The application demonstrates that mining operations on the LMU

will achieve maximum economic recovery of Federal recoverable coal

reserves within the LMU in an efficient, economical, and orderly manner

with due regard to conservation of coal reserves and other resources. A

single operation may include a series of excavations. In determining

whether the proposed LMU meets these requirements, the authorized

officer will consider the following factors:

(i) The amount of coal reserves recoverable from the LMU, compared

with the amount recoverable if each lease were developed individually;

(ii) The mining sequence;

(iii) The potential for independent development of each lease

proposed to be included in the LMU;

(iv) The advantages of developing and operating the LMU as a unit;

(v) The potential for inclusion of the leases in question into

another LMU;

(vi) The availability of transportation and access facilities; and

(vii) Other factors that the authorized officer finds relevant to

achievement of maximum economic recovery in an efficient, economical,

and orderly manner.

* * * * *

(7) The LMU does not include a lease that has not produced coal in

commercial quantities by the end of the eighth year of its diligent

development period, unless a portion of the LMU is covered by a SMCRA

permit approved under 30 U.S.C. 1256 or by an administratively complete

application for such a permit.

(g) The authorized officer will state in writing the reasons for

the decision on the LMU application.

* * * * *

(h) * * *

(4) The authorized officer will not extend the LMU recoverable coal

reserves exhaustion period because of the enlargement of an LMU or

because of the modification of a resource recovery and protection plan.

Dated: October 14, 1994.

Bob Armstrong,

Assistant Secretary of the Interior.

[FR Doc. 94-31925 Filed 12-27-94; 8:45 am]

BILLING CODE 4310-84-P