Review of Existing Regulations

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Chapter II

Review of Existing Regulations

AGENCY: Minerals Management Service, Interior.

ACTION: Review of regulations; request for comment.

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SUMMARY: In a March 1, 1994, document (59 FR 9718), the Minerals

Management Service (MMS) announced its intent to establish periodic

reviews of its significant regulations and asked the public to

participate in the reviews. The purpose of the reviews is to identify

and eliminate regulations that are obsolete, ineffective, or

burdensome. In addition, the reviews are meant to identify essential

regulations that should be revised either because they are unclear,

inefficient, or interfere with normal market conditions. Comments were

received from the March 1 document (the Notice) and acknowledged by MMS

in a July 15, 1994, document (59 FR 36108).

The purpose of this document is to: Provide a status update of the

MMS action taken on the regulations identified in the March 1 review;

and provide the public a second opportunity to identify MMS regulations

that should be eliminated or revised. A list of regulations identified

for elimination will be sent to the President by June 1, 1995.

DATES: Written comments must be received by April 27, 1995.

ADDRESSES: Mail written comments to Department of the Interior;

Minerals Management Service; Mail Stop 4013; 1849 C Street NW.;

Washington, DC 20240; Attention: Bettine Montgomery, MMS Regulatory

Coordinator, Policy and Management Improvement.

FOR FURTHER INFORMATION CONTACT:

Bettine Montgomery, Policy and Management Improvement, telephone (202)

208-3976; Fax (202) 208-4891.

SUPPLEMENTARY INFORMATION: MMS began a review of its regulations in

early 1994 pursuant to the directives contained in the President's

Executive Order 12866. The Executive Order calls for periodic

regulatory reviews to ensure that all significant regulations are

efficient and effective, impose the least possible burden upon the

public, and are tailored no broader than necessary to meet the agency's

objectives and presidential priorities.

MMS invited the public to participate in the regulatory review. The

invitation was sent out via different media, namely a notice dated

March 1, 1994 (59 FR 9718), MMS and independent publications, and

public speeches by MMS officials during that time.

MMS received approximately 40 public comments which were almost

equally divided between its Royalty Management and Offshore Minerals

Management Programs. MMS acknowledged the comments in a July 15, 1994,

notice (59 FR 36108) and set forth its planned actions to address the

comments, along with an estimated timetable for the actions.

This notice updates the MMS planned actions and related timetables.

This notice also requests additional comments form the public

identifying regulations that should be either eliminated or revised.

In recent years, MMS has made an effort to work more closely with

its regulated customers and will increase [[Page 15889]] this effort in

the future. During the past year, MMS has worked with representatives

from organizations affected by its regulations and brought them into

the early development of two major rulemakings. The representatives

formed committees or work groups under the negotiated rulemaking

process. They either have been or will be working together to form a

consensus on some very difficult and sometimes contentious issues. The

representatives function as the spokesperson on behalf of either

industry, States, Tribes, or local governments.

MMS is committed to working more closely with its regulated

customers in the future; moving from a process of regulation to one of

partnership, with common objectives. In a speech on February 21, 1995,

the President asked all Federal agencies to pursue a similar course. He

asked them to change their regulatory culture by consulting more

frequently with the people affected by their (the agency) regulations,

in particular by convening groups consisting of front-line regulators

and the regulated public, in order to find ways to achieve the public

interest while avoiding costly litigation. The President also asked all

agencies to identify (by June 1, 1995) regulations that can be

eliminated and to change the way they measure performance (focusing on

achieving regulatory objectives rather than on increasing compliance

orders). MMS is interested in comments from the public on how we can

best respond to the President's guidance.

MMS regulations are found at Title 30 in the Code of Federal

Regulations. Parts 201 through 243 contain regulations applicable to

MMS' Royalty Management Program; Parts 250 through 282 are applicable

to MMS' Offshore Minerals Management; and Part 290 is applicable to

Administrative Appeals.

Status Report

The following is a discussion showing the progress MMS has made in

reviewing its regulations in response to the comments received to the

Notice.

A. Offshore Minerals Management (OMM) Program

In response to the public comments on the Notice, OMM is currently

reviewing the following eight sections of OMM regulations.

1. Regulations Applicable to Production in Deepwater (30 CFR Part 250,

Subpart H, Production)

Comments Received--(a) ``Revise current regulations to provide for

approval of extended flaring periods under certain situations (e.g.,

deepwater prospects, well tests, etc.) and clarify criteria for flaring

or venting small amounts of gas'',

(b) ``Revise requirements associated with subsea installations * *

*, etc.

Action Planned--An MMS workgroup is finalizing a report that

recommends revising various policies and regulations associated with

deepwater development. The workgroup will submit the final report to

MMS management in March 1995. The report will include the following

recommendations:

For (a) above, current regulations provide sufficient flexibility

to meet industry needs while all parties gain greater experience with

deepwater operations. MMS will continue approving requests for extended

gas flaring and well testing on a case-by-case basis. Regions will

establish regional guidelines for approval of extended testing and

flaring.

For (b) above, revise the leakage rates and extend the testing

frequency and closure time requirements for underwater safety valves

and subsurface safety valves for subsea wells. MMS will consider an

alternate arrangement of underwater safety valves for subsea wells on a

case-by-case basis. MMS will not revise the leakage rate requirements

for surface safety valves at this time. This recommendation also

addresses emergency shutdown system requirements for subsea wells.

Timetable--Based on the recommendations of the workgroup, MMS will

formulate a policy on deepwater activities. MMS will continue to work

with operators under existing regulations when appropriate.

2. Regulations Applicable to Blowout Preventer (BOP) Testing and

Maintenance Requirements (30 CFR 250.56 and 57)

Comments Received--``Revise BOP testing regulations to allow for

less frequent and shorter tests. Allow 14 day BOP test interval vs.

current 7 day * * *.''

Action Planned--MMS recently completed a study to assess the

performance of BOP systems during testing. The results of this study

did not support industry claims about the high reliability of BOP

equipment or provide justification for less frequent testing.

Timetable--MMS will continue its review of BOP testing and

maintenance requirements, with a focus on stricter maintenance

requirements. With improved performance, MMS would consider if further

flexibility on BOP testing frequency can be provided to industry. At

this time, MMS does not plan on revising its regulations.

3. Regulations Governing Safety and Pollution Prevention Equipment (30

CFR 250.126)

Comments Received--``Reduce associated administrative burden on

lessees and operators by eliminating unnecessary record keeping

requirements (i.e., inventory lists, paperwork notifications, etc.).''

Action Planned--MMS considered the use of a negotiated rulemaking

as part of this review.

Timetable--MMS has initiated the ``convening'' stage of the

negotiated rulemaking. This stage is nearing completion and the

``convener's'' recommendation on whether to proceed with the negotiated

rulemaking will be made by April 1995. If the ``convener'' recommends

against a negotiated rulemaking, MMS will use other means to address

this issue.

4. Regulations Governing Conservation of Resources and Diligence (30

CFR 250, Subpart A, General and Subpart K, Oil and Gas Production

Rates)

Comments Received--(a) ``Revise Suspension of Production approval/

lease holding criteria * * *'', (b) ``Revise Determination of Well

Producibility to make wireline testing and/or mud logging analysis

optional * * *'', (c) ``revise current regulations to provide for

approval of extended flaring periods * * *'', (d) ``Relax restrictions

on commingling reservoirs in a common wellbore * * *'', (e) ``Allow

flexibility in the methods of testing subsea wells. * * *'', etc.

Action Planned--(a), (b), and, (d) above have been reviewed by MMS.

MMS is considering options to revise the regulations. For (c) above,

MMS will review current regulations when air quality studies currently

underway are completed. For (e) above, MMS will not change the

regulations. Current regulations allow operators to request that

different testing methods be allowed when conventional testing is

impractical.

Timetable--For (a), (b), and, (d) above, the course of action

should be determined by the summer of 1995. Rulemaking will be

initiated if appropriate.

5. Regulations Regarding Construction and Removal of Platforms and

Structures (30 CFR 250, Subpart I, Platforms and Structures)

Comments Received--(a) ``Modify platform design wave return period

calculation by placing a cap of 100 years on the field life calculation

* * *'', (b) [[Page 15890]] ``Adopt API RP2A (20th edition) Section 14,

Surveys, in its entirety * * *'', (c) ``Revise site clearance

requirements * * *'', (d) ``Revise requirements for placing protective

domes over well stubs * * *'', etc.

Action Planned--For (a) above, MMS has reviewed this request. MMS

is reviewing options to revise its regulations. For (b) above, MMS will

not modify the regulations. Current rules allow operators to petition

for longer inspection intervals. For (c) and (d) above, MMS published a

notice on February 1, 1995 (60 FR 6281), asking for comments on these

issues. Based on the responses, MMS will formulate a policy.

Timetable--For (a) above, the course of action should be determined

by the summer of 1995. Appropriate action will follow. For (c) and (d)

above, comments were due on March 3, 1995. MMS will consider regulatory

options following analysis of the comments. A course of action should

be established by the fall of 1995.

6. Regulations Applicable to Directional Surveys (30 CFR 250.51)

Comments Received--``Revise directional survey requirements to

allow a composite measurement-while-drilling directional survey to be

acceptable * * *''

Action Planned--MMS has completed a review of this issue and is

planning to update the regulations to keep up with current technology.

Timetable--Proposed changes to the regulations are being circulated

internally. Proposed rule should be prepared by summer of 1995.

7. Regulations Applicable to Daily Pollution Inspection Requirements

(30 CFR 250.41)

Comments Received--``Revise current requirements for daily

pollution inspection of unmanned production facilities * * *.''

Action Planned--MMS is currently studying this issue to see if

changes to the regulations are warranted.

Timetable--By summer of 1995, MMS will make a decision on whether

changes to the regulations are needed.

8. Regulations Applicable to Production Safety System Training (30 CFR

250.214)

Comments Received--``Revise training regulations to reduce the

associated burden on operators by modifying requirements (e.g.,

frequency, refresher requirements, structure, etc.) and allow expanded

training delivery modes.''

Action Planned--MMS has issued an Advance Notice of Proposed

Rulemaking and received comments. A Notice of Proposed Rulemaking (NPR)

which would provide greater flexibility to Industry is being prepared

at this time.

Timetable--The NPR should be published by late 1995.

B. Royalty Management Program (RMP)

RMP is reviewing regulations in the following six areas.

1. Regulations Applicable to Valuation of Gas Produced From Unitized/

Communitized Properties (Takes vs. Entitlements). Also, Regulations

Applicable to Non-Arm's-Length Sales (30 CFR 202), and Payment/

Reporting Systems

To resolve the complex issues dealing with the valuation of gas for

royalty purposes, MMS is using the negotiated rulemaking process. This

process enables MMS to arrive at a consensus with industry, the States,

and Indian tribes. All Committee meetings are announced in the Federal

Register.

Comments Received--``Regulations concerning Takes vs. Entitlements

are confusing and make compliance difficult * * * valuing gas under a

non-arm's-length transaction is burdensome * * *.''

Action Planned on Federal Leases--Formed the Federal Gas Valuation

Negotiated Rulemaking Committee with representation from MMS, industry,

and the States. The Committee addressed valuation of gas produced from

agreements (Takes vs. Entitlements), the benchmark valuation system for

valuing gas sold under non-arm's-length contracts, and reporting

simplicity and administrative cost savings. MMS is now preparing a

proposed rule based on the consensus arrived at by the Committee in

early February.

Timetable--MMS plans to publish a proposed rule by mid-1995.

Action Planned on Indian Leases--MMS has obtained approval for a

negotiated rulemaking for revising Indian gas valuation regulations. An

informal MMS group had been studying the issues, but MMS has now

superseded this group with the Indian Gas Valuation Negotiated

Rulemaking Committee. This Committee consists of representatives from

MMS, various Indian tribes, the Council of Energy Resources Tribes, the

Bureau of Indian Affairs, and industry. The Committee will discuss

major portion analysis, dual accounting, and percentage of proceeds

contracts.

Timetable--The first meeting of the Committee was held on February

22 and 23, 1995.

2. Regulations Clarifying the Responsibilities of Payors and Lessees

(30 CFR 218 and 211)

Comments Received--``Existing regulations are unclear as to the

obligations and liabilities of payors and lessees.''

Action Planned--A workgroup was assembled to review the options

associated with this issue. The workgroup reached agreement and

developed a proposed rule. The rule will establish liability for

royalty due on Federal and Indian leases, and will clarify the

responsibility to pay and report royalty and other payments.

Timetable--MMS plans to publish the proposed rule by mid-1995.

3. Refunds Due to Industry Which Are Controlled by Section 10 of the

Outer Continental Shelf Lands Act

Comments Received--Industry has difficulty complying with the 2-

year limitation on refunds. There is an inequity between the 2-year

refund requirement and the no-year limitation for MMS to collect

royalty underpayments.

Action Taken--On July 28, 1994, MMS published a final rule titled

``Offsets, Recoupments and Refunds of Excess Payments of Royalties,

Rentals, Bonuses, or Other Amounts Under Federal Offshore Minerals

Leases'' (59 FR 38359). This rule established procedures for obtaining

refunds and credits of excess payments and clarifies what payments are

not subject to Section 10's requirements. The rule also provides for a

de minimus exception to the MMS approval process.

4. Penalties and Assessments

Comments Received--Recent regulations and pending legislation tend

toward ever increasing penalties and assessments. Sufficient incentives

already exist to ensure correct and timely payments. Many reporting

errors by payors are due to unavoidable circumstances. Severe penalties

are unjustified.

Action Taken--MMS has used penalties and assessments not so much to

punish but to ensure compliance with the Federal Oil and Gas Royalty

Management Act (FOGRMA). FOGRMA requires MMS to distribute money to

shareholders in the same month it is collected from payors on Federal

and Indian leases. Without an effective strategy to encourage timely

and accurate reporting, the collection and distribution system could

quickly fall [[Page 15891]] out of compliance with the demands of the

legislation. MMS, however, is looking at situations where it can ease

some of the reporting requirements and minimize assessments. For

example, MMS has taken action to adjust its billing thresholds to

minimize ``nuisance'' bills for trivial assessments.

In a related area, MMS is addressing the financial impacts incurred

by payors that fail to timely file certain forms. MMS formed a study

group to evaluate the existing regulatory requirements for oil and gas

allowances including the assessments and sanctions for untimely filed

forms. The Study Group was comprised of representatives from MMS,

industry, and the State and Tribal Royalty Audit Committee. It

addressed the need for and equity of allowance payback and late payment

interest charges for untimely filed forms. The Study Group found that

the penalties were not consistent with the crime and proposed

alternatives to the payback penalty. MMS has prepared two proposed

rules to implement the Study Group's recommendations--one dealing with

oil and gas, and one dealing with coal.

Timetable--MMS plans to publish the proposed rules by mid-1995.

5. The Appeals Process

Comments Received--Current appeals process is too long.

Action Taken--MMS has undertaken a streamlining review of its

administrative appeals process. MMS has transferred decisionmaking on

routine appeals from the Appeals Division to the Royalty Management

Program. This has reduced the Appeals Division's workload by 20 percent

and freed up staff to work on more complex appeals cases.

MMS also initiated three pilot programs in its streamlining

efforts. One pilot program aims to decrease the time and expense

incurred by MMS in its preparation of an appellant's administrative

record. A second pilot program involves reformatting the decisionmaking

process to speed the issuance of shorter, more timely decisions. The

third pilot program will test the use of alternative dispute resolution

mechanisms to resolve many of the administrative appeals.

Timetable--The first two pilots were put in place the latter half

of 1994, and the third pilot began the end of February 1995.

6. Other

Comments Received--MMS received unfavorable comments on proposed

rules concerning administrative offset and credit adjustments. Comments

were also received about closing audit periods and receiving orders to

perform self-audits. Finally, there were comments received about the

estimated royalty payment system and that guidance given to payors over

the phone was overruled by RMP auditors.

Action Taken--The administrative offset and credit adjustment rules

have been consolidated as a final rule. MMS recognizes that many

companies oppose these rules but considers the rules to be important

enough that they should proceed to the final rulemaking stage.

Some of the issues regarding closing audit periods and orders to

perform recalculations of royalties are being addressed in a manual MMS

is preparing on audit procedures. With respect to the other comments

received, MMS will address them in order ways, such as ongoing customer

service initiatives.

Timetable--Publication of the administrative offset-credit

adjustment final rule is scheduled for mid-1995. The audit manual will

be available later this year.

Dated: March 22, 1995.

Cynthia Quarterman,

Acting Director, Minerals Management Service.

[FR Doc. 95-7534 Filed 3-27-95; 8:45 am]

BILLING CODE 4310-MR-M