Call for Comment on Proposed Policy Options and Announcement of Related Workshop for Outer Continental Shelf (OCS) Natural Gas and Oil Resource Management

DEPARTMENT OF THE INTERIOR

Call for Comment on Proposed Policy Options and Announcement of

Related Workshop for Outer Continental Shelf (OCS) Natural Gas and Oil

Resource Management

AGENCY: Minerals Management Service (MMS), Department of the Interior.

ACTION: Call for Comment on proposed policy options and announcement of

workshop.

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SUMMARY: On December 7, 1993, the MMS published a Call for Public

Comment on General Leasing Policies in the Central and Western Gulf of

Mexico Planning Areas. The MMS has reviewed the comments it received

and conducted additional analyses. In this Call for Comment, the MMS

describes specific policy options being considered.

The primary objectives to be met are to slow expected declines in

infrastructure and production in producing areas, to promote

development of infrastructure in certain non-producing areas, and to

assure continued receipt of fair market value for OCS leases.

Implementation of one new policy, expanding the tract-specific data

made available to all prospective bidders prior to a sale, has just

begun. Other options under consideration are to publish specific

guidelines for the treatment of applications for royalty relief, to

offer more flexible royalty terms on some new leases, to increase

flexibility to respond to requests for extensions in lease terms, to

modify rental and minimum bid policies, to revise bid adequacy

procedures, and to propose coastal impact assistance.

A 2-day workshop to discuss current policy options will be held in

the Gulf of Mexico region in mid-June 1995. The first day will be

devoted to an overall discussion of the various options. The second day

will be spent on the guidelines being developed by the MMS for royalty

relief on active leases. Details will be published in a second Federal

Register Notice later this month.

DATES: Written responses should be received by July 19, 1995. Comments

also may be presented in person at the workshop announced in this

notice.

ADDRESSES: Written responses should be mailed to the Acting Deputy

Associate Director, Resources and Environmental Management, Minerals

Management Service (MS-4430), 381 Elden Street, Herndon, VA 22070. Hand

deliveries may be made at 381 Elden Street, Room 3408, Herndon,

Virginia (dial 1178 from lobby telephone). Envelopes or packages should

be marked ``Comments on Proposed Policy Options for the Gulf of

Mexico.'' If any privileged or proprietary information is submitted

that the respondent wishes to be treated as confidential, both the

envelope and the contents should be marked ``Confidential

Information.''

FOR FURTHER INFORMATION CONTACT: For information pertaining to this

Call for Comment on Proposed Policy Options and Announcement of

Workshop, telephone Marshall Rose or Mary Vavrina, Economic Evaluation

Branch, at (703) 787-1536.

SUPPLEMENTARY INFORMATION: In the December 7, 1993, Call for Public

Comment on General Leasing Policies in the Central and Western Gulf of

Mexico Planning Areas, suggestions and comments were requested from

States, local governments, Federal agencies, the oil and gas industry,

environmental groups, and other interested individuals and groups to

assist the MMS and the Department of the Interior in planning for the

Central and Western GOM sales remaining under the Comprehensive OCS

Natural Gas and Oil Resource Management Program for 1992-1997. After

considering the comments received and conducting additional internal

analyses, the MMS and the Department decided that, overall, the

regulations and policies already in place were appropriate. However,

the MMS did identify several areas where improvement was possible and

has developed a number of options for further consideration.

The MMS has decided that the current approach of offering annual,

area-wide sales in the Central and Western GOM is the most appropriate

leasing system for those planning areas at this time. In other planning

areas, the MMS may hold narrowly targeted sales, more typical tract

selection sales, or tract nomination sales (where all tracts

specifically nominated are offered, absent environmental or other

concerns).

The MMS also has decided that an extension of the period used to

evaluate bids from a lease sale is no longer needed. Its Resource

Evaluation staff now has sufficient training in the use of new computer

systems and interpretation of technical data to complete the evaluation

of bids within the existing 90-day requirement.

Several commenters supported impact assistance. The Administration

recognizes that coastal states and localities can incur impacts

disproportionate to their share of the national benefits. The

Administration supports impact assistance as a means to more equitably

share the benefits and burdens of OCS production, protect coastal and

marine resources, and strengthen the Federal-State partnership. The

critical issue in designing an impact assistance program, however, is

the budget offsets required so that there is no net impact on the

Federal Treasury. The Administration is currently reviewing impact

assistance but does not have a proposal at this time.

Primary Objectives

In considering the main purpose of the OCS oil and gas program (to

contribute to the Nation's energy supply) and the range of

opportunities currently available to make beneficial changes within its

existing authority, the MMS decided to focus on three objectives:

--Slow expected declines in infrastructure and production in the

producing portions of the Central and Western GOM

--Promote development of infrastructure in promising deep-water

portions of the Central and Western GOM (and possibly in frontier

planning areas) to encourage the domestic market to replenish reserves

and to increase its ability to [[Page 19768]] respond to sudden

decreases in the availability of moderately priced supplies of oil and

gas from foreign sources

--Assure receipt of fair market value for OCS leases.

Policy Options for Comment

I. New Policy: Information on Tracts with Indicated Hydrocarbons

The MMS believes that early identification of available tracts with

low geologic risk (those with indicated hydrocarbons) would be a

service to potential bidders and would result in greater competition

for some tracts. Scarce resources may make it difficult for some

potential bidders to identify the tracts on their own. Fifty percent of

the tracts with high bids rejected between 1990-92 had well bores with

confirmed resources. In subsequent sales, both the number of bids per

tract and high bids, on average, increased significantly. These

findings suggest that wider dissemination of relevant geologic data on

discovered resources would increase the bidding competition and high

bid amounts in future sales.

An initial Indicated Hydrocarbon List has been prepared and

distributed that identifies relevant unleased tracts by class in the

Central GOM. The three classes are those that were fields or portions

of fields that produced; those with well bores that qualified under 30

CFR 250.11 but did not produce; and those with well bores that the MMS

believes would qualify under 30 CFR 250.11 but were never classified

and never produced. Basic information relating to production, well

bores, and pay range for every tract in each class also is included in

the list. The data are available in hard copy and digital format. An

updated list will be available to the public approximately 3 months

before each GOM sale.

Specific Information Requested

The MMS would like two kinds of information on this new policy:

evaluations of the usefulness of the information provided for the May

1995 Central GOM sale and suggestions for improvement or expansion. If

the information has not been useful, why not? Are there ways to make it

more useful? Are there other kinds of useful, non-proprietary data that

could be provided by the MMS that are not readily available on the

private market?

II. Royalty Policies for Active Leases

The MMS is authorized by the OCS Lands Act to reduce or eliminate

royalties on oil-, gas-, and sulphur-producing leases in order to

increase production from those leases. The MMS is considering

guidelines for such royalty relief that would distinguish between two

categories of requests. One is relief for expense type projects, which

is designed to promote continued production from a lease by lowering

lease royalty rates for a relatively short duration. The other is

relief for capital investment projects, which focuses on encouraging

incremental production from specific projects on the lease by lowering

reservoir or lease royalty rates for extended periods. Royalty relief

would be granted only for leases already in production.

For expense type projects, MMS would try to set royalty rates so

that operators would more than cover their cost of continuing

operations. For capital investment projects, to the extent possible

through adjusting royalties, MMS will seek to ensure a targeted rate of

return on the new capital invested before all but a nominal royalty

becomes due.

Qualification for relief under expense type projects typically

would require that the lease has a negative operating cash flow that is

expected to persist for subsequent periods. Depending upon the

anticipated stability of future prices and costs, MMS may use either a

fixed or variable adjustment in the royalty rate for qualifying

projects.

Under either approach for expense type projects, the MMS would

calculate the minimal amount of relief needed to stimulate continuing

operations, e.g., a royalty rate at which the lessee retains 25 percent

of the difference between revenues and operating costs (excluding

royalties). At about the point where the lease revenues would cover

operating costs with the full royalty (the break-even operating level),

the original lease royalty rate would apply.

When prices and/or costs are expected to be highly variable, or the

interval between review periods is extended, then a variable royalty

rate system would be considered. In this approach, the royalty rate

that applies in any period could vary as product prices and production

levels change. As with the case of the fixed royalty modification, the

functional form of the royalty rate would reflect only that amount of

relief needed to induce continued production, e.g., the lessee retains

25 percent of the difference between revenues and operating costs

(excluding royalties), up to about the break-even operating level.

Qualification for relief under capital investment projects would

require the lessee to demonstrate that the eligible project is not

expected to generate an adequate rate of return to justify the needed

expenditures which would promote increased production. In those cases

where MMS is convinced that the additional production directly

attributable to the proposed project is not economical under existing

royalty terms, it would first determine whether royalty relief would

make the proposed project worth pursuing.

If this appears to be the case, then the project may qualify for

relief. Following documented payments for the development activities,

incremental production would be charged a royalty at a predetermined

lower rate, e.g., one-twenty fourth of the wellhead value of

production. This rate would remain in effect until the project earned a

specified rate of return, e.g., equal to the BBB bond rate, allowing

for realized receipts, actual investment and transportation costs, and

predetermined allowances for operating and overhead costs.

Production value in excess of the break-even operating level at the

reduced royalty rate subsequently would be charged at the original

royalty rate. Further, the lessee incurs a repayment obligation if the

project proves, in retrospect, not to have needed the full amount of

relief. Over the production interval between the investment break-even

point at the reduced royalty rate and the break-even point at the

original royalty rate, the lessee will incur an obligation to repay an

increasing proportion of the difference in royalties owing to approval

of the original application for relief. The required repayment will be

the amount needed to provide the lessee with the specified return on

investment up to that point. No additional obligation beyond the

original royalty rate is incurred thereafter.

The repayment obligation would need to be paid either at the time

the project ceases producing commercial amounts of production in excess

of the investment break-even operating level at the modified royalty

rate, or at the time the project generates sufficient revenues to break

even on the original investment at the original royalty rate, whichever

occurs first. The lessee could further manage the size and timing of

the repayment obligation by requesting that the terms of the royalty

modification cease earlier than planned and possibly forwarding payment

at that time for any incurred or anticipated repayment obligations.

In addition, studies are underway to estimate the extent to which a

particular category of reserves known as ``behind-the-pipe,'' tend to

be left in the ground when the producing reserves are abandoned.

``Behind-the-pipe'' reserves [[Page 19769]] are those through which an

operator has drilled--but is not producing--to get to another reservoir

that is producing. If it is not economic to produce these reservoirs

through an existing wellbore, it is highly unlikely that in the future

they would justify the cost of drilling a new well, plus the attendant

costs of completion and production. The following additional options

may be considered for behind-the-pipe reserves:

A. Develop general (across-the-board or interpretive) guidelines

for royalty relief for this category of reserves.

B. Develop procedures for case-by-case review of royalty rate

requests for ``behind-the-pipe'' and related reserves that involve

reductions in royalties and periodic reviews.

C. Initiate administrative reviews of development and conservation

issues that could substitute for or supplement royalty relief in

inducing lessees to produce socially beneficial reserves. Specifically,

a lessee's plan to abandon a well or move to a new horizon would be

reviewed in more depth to ensure that economically recoverable reserves

are not left behind.

Specific Information Requested

The MMS is seeking comments on several questions pertaining to the

proposed more specific interpretive guidelines for granting royalty

relief on active leases.

1. Is the demarcation by the two types of projects the best

approach? Are there other types of projects not adequately addressed by

the proposed guidelines?

2. Are there particular categories of tracts that should be

considered?

3. Would the establishment of more specific, interpretive

guidelines encourage more lessees to apply for such relief? If so, how

much additional production of oil, gas, and sulphur might result from

expense-type projects? From capital investment projects? Would this

appreciably affect the kind and level of infrastructure in the GOM?

4. Are there aspects of the proposal that would be burdensome or

that would otherwise discourage lessees from applying? For example,

would the documentation or payback requirements be problems?

5. A fee might be charged to cover the costs of processing

applications. How high could this fee be without discouraging

applicants?

III. Royalty Policies for New Leases

During the past 10 years, about 240 tracts have been relinquished

despite the discovery of potentially economical reserves. An estimated

2 billion barrels of oil equivalent have been discovered but not

produced on 30 deep-water leases. The Government holds in its inventory

over 700 tracts in water depths of at least 200 meters each of which

has, at least once, received a bonus bid of more than one million

dollars. Thus, more flexible royalty policies might encourage

production of discovered reserves when the price of the oil and gas

exceeds the cost, excluding royalties, of bringing those resources to

market.

The following options are being considered:

A. Offer reduced or deferred royalties on tracts that have a

history of prior discoveries without production.

B. In deep-water areas, offer tracts with suspensions of royalties

on substantial volumes or market values of production.

C. Offer suspension of royalties on tracts that have never received

a bid or have not received a bid for over 10 years.

The MMS intends to seek the flexibility to offer royalty

suspensions or lower fixed royalty rates for new leases. The OCS Lands

Act requires for specified bidding systems that leases stipulate an

initial royalty rate of at least 12\1/2\ percent. However, alternative

bidding systems can be implemented under Section 8 of the OCS Lands Act

[43 U.S.C. 1337(a)(1)(H)], as long as they are consistent with the duty

to assure receipt of fair market value and help accomplish the purposes

and policies of the Act. The new bidding systems could provide for

leases containing royalty suspensions or lower fixed royalty rates for

all tracts in deep water or for selected tracts, such as previously

relinquished tracts with qualifying wells or marginal tracts in shallow

waters.

By offering the same favorable royalty terms to all bidders, the

MMS should be able to obtain correspondingly higher bonus bids for such

leases. (Bid adequacy procedures would remain in effect.) At the same

time, those who are successful in both bidding and exploration would

face lower royalty costs, allowing them to develop and produce

discoveries that would otherwise be uneconomic.

The MMS may want to provide additional or stronger incentives for

exploration and production in some frontier areas, where the value to

the Nation as a whole--but not the potential revenues for the lessee--

would exceed the private costs of developing and producing certain

discoveries. Additional exploration provides important information

about the geology and prospective nature of the area. Each discovery

that goes into production provides transportation and other

infrastructure that generates an increase in the value of blocks in the

vicinity of the development. Getting one or more leases in frontier

areas into production could reduce the perceived risk of subsequent

exploratory drilling and significantly improve the economics for future

production on other leases. Because the incentives are meant to help

compensate for the risks and costs that must be borne by those

undertaking early investment in exploration and infrastructure

development, they might be eliminated or offered in reduced amounts for

leases offered after the initial discoveries and development in a

targeted area.

For high-cost areas (such as the deep-water GOM) or frontier areas,

the MMS also is considering the possibility of offering tracts that are

larger than the standard size, in addition to favorable royalty terms

or other incentives.

Possible Rulemaking

The MMS is likely to publish a Notice of Proposed Rulemaking before

the end of the fiscal year that would propose changing the bidding

systems for newly offered tracts under the OCS Lands Act to permit the

MMS to (1) lower the prescribed minimum initial royalty rate below

12\1/2\ percent; (2) allow operating allowances in determining receipts

subject to royalty; (3) suspend or defer royalty for periods, volumes,

or values of production; and (4) extend the forms for calculating

royalty rates under variable rate systems to include product prices, as

well as value and amount of production. Ideally, the MMS would like to

have any regulatory changes in place in time to accommodate proposed

sale design options for the 1996 Central and Western GOM sales.

However, given the obstacles inherent in the current regulatory

process, an implementation target of 1997 sales may be more realistic.

Specific Information Requested

The MMS would like respondents to provide comments and suggestions

both on the additional authority it seeks and on the new policy options

it is considering.

First, which of the policy options above are most likely to help

achieve the stated objectives or other relevant objectives? To what

extent are they likely to make a difference? Are there ways to make

them more effective or more efficient? Are there other policy options

the MMS should be considering?

Second, if the MMS should be considering other alternative bidding

systems or related policy options for which it has general rulemaking

[[Page 19770]] authority, what regulatory changes would be most

appropriate?

IV. Increased Flexibility in Length of Lease Terms, With Possible

Changes in Rental Rates and Minimum Bids

Several industry respondents to the December 1993 Federal Register

Call for Public Comment requested increased flexibility involving

Suspensions of Operations (SOOs), Suspensions of Production (SOPs), and

similar provisions, particularly for leases on deep-water tracts. Some

lessees also have asked for more flexibility where sub-salt prospects

exist. Lessees have complained that technical data and information

developed for a prospect cannot always be evaluated in time to identify

optimal drill sites and commence drilling to better develop exploratory

targets within the primary lease term. There may be some benefit to

providing industry more time for analysis or other tasks leading to

exploration or development where adverse or unusual conditions exist.

However, there is an inventory of 3,000 undrilled tracts in

industry hands. Most leases in the GOM are either explored early in

their primary lease term or held undrilled until the end of their term.

Less than 1 percent of the deep-water leases that were issued for $50

per acre or less since 1982 have been drilled. The MMS would like to

grant additional flexibility where it is needed but also, where

possible, to encourage earlier drilling or relinquishment so that

tracts are not kept off the market by lessees who are unlikely to

undertake exploration activity. Changes in minimum bid and rental

policies, in combination with other new policies, may be an effective

way to achieve this.

Currently, leases are issued with 5-year, 8-year, and 10-year terms

for water depths of 400 meters or less, 400-900 meters, and greater

than 900 meters, respectively. The 8-year leases require that an

exploratory well be drilled within the first 5 years. With a few

exceptions, the lessee must demonstrate a qualifying discovery to hold

a lease beyond the primary term. Undrilled leases will be continued in

effect if the lease is part of a unit agreement with other leases with

a discovery, where there is continuous drilling, or as long as the

leases in the unit are under a SOO or an SOP. No regulation

specifically allows suspensions for the purpose of conducting analysis.

At present, the MMS is considering several options to increase

flexibility and/or to encourage diligence:

A. Offer 7- or 8-year leases on some tracts in less than 400 meters

of water based on pre-sale identification or post-sale evidence of

``adverse conditions,'' such as sub-salt prospects. Higher rental rates

(e.g., $25-$50 per acre, per year) could be charged in years 6-8.

B. Amend 30 CFR 250.13(b), by deleting the words ``where

environmental conditions warrant,'' to authorize MMS Regional Directors

to approve a period of time greater than 180 days between termination

of production, drilling, or well-reworking operations and the

commencement of production, new drilling, or well-reworking operations

in cases that are in the national interest. Escalating rental rates

could be imposed for the additional years.

C. Develop general guidelines for escalating rentals that would

apply to broad categories of tracts (e.g., 5-year lease term, 8-year

lease term, etc.) in combination with a reduced minimum bid level

(e.g., $10 per acre) so that the net present value of the reduced

minimum bid and escalating rentals would be about equal to the present

value of a $25 per acre minimum bid and $5 per-acre, per-year rental

during the first 2-3 years of the lease. In addition, the escalating

rental provision could substitute for the rigid requirement to initiate

exploration drilling by the fifth year of leases with an 8-year term.

If escalating rental rates are imposed, another option would be to

allow the additional rental payments to be applied to future royalty

obligations from the same lease.

Possible Rulemaking

The MMS may issue a Notice of Proposed Rulemaking to delete the

words ``where environmental conditions warrant'' from 30 CFR 250.13(b)

and insert language specifically granting the Regional Director

authority to require higher rental (or minimum royalty) rates during

the additional time requested by, and granted to, the lessee under this

regulation. Other appropriate changes to 30 CFR 250.13 and to 30 CFR

250.10 may be considered as well.

Specific Information Requested

Respondents may wish to consider the following questions.

1. What flexibility not now available to lessees would help

increase production and develop or maintain infrastructure? In what

cases should the flexibility be available? In what cases should it not

be available (e.g., where it merely allows delays that deprive other

companies the opportunity to lease and expeditiously develop the

resources)?

2. Are there cases where this need might be temporary? For example,

will new technology and additional experience make it possible to

evaluate sub-salt prospects in less time?

3. What can the MMS do to provide flexibility where needed without

ignoring its responsibility to enforce statutory diligence

requirements? Should the MMS be considering other changes in its

regulations?

4. When combined with additional flexibility, would rentals of $25-

$50 per acre for additional years be appropriate? Would they provide

incentives for diligence or would they be too low to influence timing

decisions? Would they defeat the purpose of providing the flexibility?

5. Would a lower minimum bid, combined with an increasing rental

rate help increase production without imposing undesirable timing

constraints? If so, what levels of minimum bid and rentals would be

effective and appropriate?

V. Bid Adequacy Procedures

The Bid Adequacy decision procedures have essentially remained the

same since the advent of the area-wide leasing program in 1983. In

recent years, it has been shown that rejected tracts, on average,

receive much higher bids in subsequent sales. (This finding takes into

account the foregone original bids for those few rejected tracts not

receiving bids in subsequent sales.) Use of the 3-Bid Rule and the Bid

Averaging Rule occasionally has resulted in the acceptance of some

tracts that were highly valued by the MMS but received relatively low

bids. The Office of the Inspector General has expressed concern that

the Bid Averaging Rule places too much emphasis on losing bids in

determining whether to accept the high bid on tracts about which the

MMS has relatively good information.

In Phase 1 of the two-phased bid adequacy procedures, a high bid on

a wildcat or confirmed tract can be accepted without further MMS

evaluation if the tract receives three or more bids. The 3-Bid Rule was

originally adopted to place reliance on the market to ensure receipt of

fair market value when there was a sufficient number of competitive

bids. Also, the rule was adopted to devote scarce tract evaluation

resources on those cases where competition was weakest (i.e., tracts

receiving one or two bids) or where MMS data were considered most

reliable and some bidders might have an informational advantage over

the rest of the market (i.e., drainage and development tracts).

Possible changes in Phase 1 procedures that are being considered

include eliminating the 3-Bid Rule and [[Page 19771]] applying the 3-

Bid Rule to wildcat tracts only.

In Phase 2 of the two-phased bid adequacy procedures, the MMS

estimate of tract value is averaged (geometrically) with the bids

submitted. If the high bid exceeds the ``average'' bid, it is accepted.

This averaging rule is applied to wildcat and confirmed tracts

receiving two bids and to drainage and development tracts receiving

three or more bids.

The three options currently being considered for Phase 2 procedures

include replacing the geometric average with the median of the MMS

tract value estimate and a lower percentile parameter as the number of

bids on the tract increases, replacing the geometric average with an

arithmetic average in the GOM Region and with the median elsewhere, and

eliminating the geometric average with no replacement.

Whether or not changes are made in its bid adequacy procedures, the

MMS is likely to adopt or retain at least one criterion incorporating

market information provided by bids. In the past, changes in bid

adequacy procedures have applied uniformly to all OCS lease sales,

regardless of the planning area.

Should a decision be made to change the status quo, a notice to

prospective bidders would be published in the Federal Register, and a

discussion of the changes would be included in the appropriate Notice

of Sale.

Specific Information Requested

The MMS would like any information that would help it, in the face

of changing conditions, to continue to fulfill its obligation under the

OCS Lands Act to assure the receipt of fair market value for oil and

gas leases. Given the high return on rejected bids, what changes if any

might be appropriate in current bid adequacy procedures? Are there

options not identified above that MMS should consider?

Request for Comments

Specific kinds of comments are requested at the end of each of the

five groups of policy options identified immediately above. In general,

it would be helpful to the MMS for respondents to focus on the extent

to which the options would help to achieve the objectives stated in

this Call for Comment.

The MMS also requests any information indicating that certain

options may have the potential for important negative consequences or

would be less effective or less efficient than other actions under MMS

control.

In addition to comments on the workability and possible

effectiveness of individual options, the MMS would appreciate any

suggestions for combinations of policies that might be superior to any

individual options in achieving the stated objectives.

Respondents should not limit themselves to addressing the questions

in this Call for Comment and should feel free to respond through the

workshop, through written comments, or both. None of the policies

discussed in this Call for Comment, with the exception of publishing

the Indicated Hydrocarbon List, will receive final approval until after

the comment period has closed and all comments--whether made at the

workshop or submitted in writing--have been considered fully.

Workshop on Proposed Policy Options

A 2-day workshop to discuss the options presented in this Call for

Comment will be held in the Gulf of Mexico region in mid-June 1995. The

most likely site is Houston, with Metairie, Louisiana, as an alternate,

and the tentative dates are June 14-15. The dates, exact location, and

agenda will be announced in a Federal Register Notice later this month.

The first day of the workshop will be devoted to an overall

discussion of the full set of options in this Call for Comment. This

will include a limited discussion of the proposed guidelines for

royalty relief on active leases and the purposes they are designed to

achieve. The second day will be reserved for a more detailed discussion

of how the proposed guidelines for royalty relief on active leases

would work. All interested parties are invited to both sessions, but it

would be especially valuable for those who might write the applications

for royalty relief under the new guidelines to attend on the second

day.

While the workshop is open, free of charge, to anyone who wishes to

attend, the MMS requests that those wishing to attend any part of the

two-day session register in advance. Registration information will be

provided in the upcoming Notice announcing details of the workshop.

Assuming that a decision is made to issue specific royalty relief

guidelines after comments have been analyzed, a training session will

be held to explain the plan for implementation of the final guidelines.

Timing and Means of Implementation

As mentioned above, the MMS may issue two Notices of Proposed

Rulemaking to gain more flexibility in the implementation of existing

statutory authority for royalty rates and the effective length of lease

terms. The decision to seek additional regulatory flexibility should

not be interpreted as a decision to implement any particular policy

option.

Most of the other options being considered could be implemented

under existing authority. If, after considering the responses to this

Call for Comment and any information gained from the workshop, a

decision is made to change existing policies, the MMS hopes to announce

in the Federal Register a package of proposals in time for

implementation in the mid-1996 Western GOM sale (Sale 161) and

subsequent GOM sales. Ideally, any decisions to change policies toward

active leases would be made at the same time.

However, the MMS is not committed to adopting any specific options

or to meeting a specific schedule for implementation. Regardless of any

preferred timing, the MMS will assure that it has had adequate

opportunity to hear and consider comments from industry, States, and

other affected parties prior to any final decisions. In addition, the

MMS will provide affected parties sufficient time to adjust to the

decisions that eventually come out of this process.

Cynthia Quarterman,

Director, Minerals Management Service.

[FR Doc. 95-9704 Filed 4-19-95; 8:45 am]

BILLING CODE 4310-MR-P