Flexibility in Keeping Leases in Force Beyond Their Primary Term

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010-AC07

Flexibility in Keeping Leases in Force Beyond Their Primary Term

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Proposed rule.

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SUMMARY: MMS proposes to amend regulations that specify how Outer

Continental Shelf (OCS) lessees can continue their leases beyond their

primary term. Changes in industry exploration practices have increased

the time necessary to collect and analyze data associated with drilling

operations. The proposed changes would increase from 90 to 180 days the

time allowed between operations for a lease continued beyond its

primary term.

DATES: MMS will consider all comments we receive by June 24, 1996. We

will begin reviewing comments at that time and may not fully consider

comments we receive after June 24, 1996.

ADDRESSES: Mail or hand-carry comments to the Department of the

Interior; Minerals Management Service; Mail Stop 4700; 381 Elden

Street; Herndon, Virginia 22070-4817; Attention: Chief, Engineering and

Standards Branch.

FOR FURTHER INFORMATION CONTACT:

Lawrence H. Ake or John Mirabella, Engineering and Standards Branch,

telephone (703) 787-1600.

Author: The principal author of this rule is Lawrence H. Ake,

Engineering and Standards Branch, MMS, Herndon, Virginia.

SUPPLEMENTARY INFORMATION:

I. Background

On March 1, 1994, the Department of the Interior (DOI) published a

notice in the Federal Register (59 FR 9718-9719), requesting comments

and suggestions on DOI agency regulations. In its notice, DOI announced

its intention to periodically review its regulations and asked the

public to participate in the review. Over 40 responses were received

concerning MMS regulations from the public, industry, and Government.

Several comments suggested that MMS make changes to Subpart A of 30

CFR Part 250. These comments suggested allowing 180 days between

drilling, well-reworking, or other operations in order to keep a lease

in effect beyond its primary term.

MMS held a public meeting in New Orleans on June 12, 1995, to

discuss this and other issues. Based on the comments heard at that

meeting, as well as those previously received, this notice of proposed

rulemaking has been prepared for public comment.

II. Discussion of the Proposed Rule

Under current statute (43 U.S.C. 1337(b)(2)) and MMS regulations

(30 CFR 250.13 and 256.37(b)), if no production, drilling, or well-

reworking activities occur on the lease during the last 90 days prior

to lease expiration and no suspension of operations or production is in

effect on the lease, the lease expires by operation of law and lease

terms.

Current Sec. 250.13 gives lessees several methods to keep leases in

effect beyond their primary term. The most common method is through

production of resources and payment of a royalty. Continuous drilling

or well-reworking activities without a break of more than 90 days will

also keep a lease in effect beyond its primary term. Other methods for

extending a lease include receiving a suspension of production (30 CFR

250.10); a suspension of operations (30 CFR 250.10); or participation

in a unit which has another lease that is being held beyond its primary

term by one of these operations (30 CFR 250.190 (e) and (f)).

Commentors told MMS that although many OCS operations can be ended

and recommenced within the present 90-day time allowance, many require

considerably more time. The search for oil and gas resources in the OCS

has reached a mature phase. Most of the easily found resources have

been produced. Industry is now focusing its efforts in deeper waters,

subsalt projects, and other areas of extremely complex geology. The

proposed changes will allow more time for efficient and expedient

production, drilling, and well-reworking operations.

With this rulemaking MMS proposes to increase from 90 to 180 days

the time allowed between production, drilling, or well-reworking

operations for leases continued beyond their primary term. For example,

under the current rule if a lessee ceases production, drilling or well-

reworking operations on a lease 60 days before the lease expiration

date, he must resume operations within 90 days (i.e., within 30 days

after the original lease expiration date). Under this proposed rule,

the lessee would have 180 days (i.e., 120 days after the original lease

expiration date) within which to resume operations.

Leases that have been continued past their primary term, will

remain in force as long as the break in operations is no longer than

180 days. This contrasts with 90 days provided by the current rule.

The proposed changes will allow MMS regulations to more accurately

reflect the realities of exploration and production of minerals on the

OCS. The proposed changes will also allow the Regional Supervisor to

give more flexibility to lessees who are diligently exploring their

leases.

Executive Order (E.O.) 12866

This is a significant rule under E.O. 12866 and has been reviewed

by the Office of Management and Budget.

Regulatory Flexibility Act

The DOI determined that this proposed rule will not have a

significant effect on a substantial number of small entities. Most

entities that engage in offshore activities as operators are not small

because of the technical and financial resources and experience needed

to conduct offshore activities. Small entities are more likely to

operate onshore or in State Waters--areas not covered by the proposed

regulation. When small entities work in the OCS, they are more likely

to be contractors rather than operators. For example, a company that

collects geologic and geophysical data might be a small entity. While

these contractors must follow the rules governing OCS operations, we

are not changing the rules that govern the actual operations on a

lease. We are only proposing to modify the rules governing the extent

of a lease beyond the primary term. The rule could have a secondary

affect. By extending the time available to the lessee, more leases may

be active and this could result in an increase in

[[Page 18310]]

opportunities for small entities to collect data or perform other

services. The added time could also work to benefit smaller companies

who may have slower computers and could benefit from a longer time

period for review of data.

Paperwork Reduction Act

This proposed rule does not contain any information collection

requirements.

Takings Implication Assessment

The DOI determined that this proposed rule does not represent a

governmental action capable of interference with constitutionally

protected property rights. Thus, DOI does not need to prepare a Takings

Implication Assessment pursuant to E.O. 12630, Government Action and

interference with constitutionally Protected Property Rights.

Unfunded Mandate Reform Act of 1995

This rule does not contain any unfunded mandates to State, local,

or tribal governments or the private sector.

E.O. 12778

The DOI certified to OMB that this proposed rule meets the

applicable civil justice reform standards provided in Sections 2(a) and

2(b)(2) of E.O. 12778.

National Environmental Policy Act

The DOI determined that this action does not constitute a major

Federal action significantly affecting the quality of the human

environment; therefore, an Environmental Impact Statement is not

required.

List of Subjects in 30 CFR Part 250

Continental shelf, Environmental impact statements, Environmental

protection, Government contracts, Incorporation by reference,

Investigations, Mineral royalties, Oil and gas development and

production, Oil and gas exploration, Oil and gas reserves, Penalties,

pipelines, Public lands--mineral resources, Public lands--rights-of-

way, Reporting and recordkeeping requirements, Sulphur development and

production, Sulphur exploration, Surety bonds.

Dated: April 3, 1996.

Bob Armstrong,

Assistant Secretary, Land and Minerals Management.

For the reasons set forth in the preamble, Minerals Management

Service (MMS) proposes to amend 30 CFR Part 250 as follows:

PART 250--OIL AND GAS AND SULPHUR OPERATIONS IN THE OUTER

CONTINENTAL SHELF

1. The authority citation for part 250 continues to read as

follows:

Authority: 43 U.S.C. 1334.

2. Section 250.13 is revised to read as follows:

Sec. 250.13 How Does Production, Drilling, or Well-reworking Affect

Your Lease Term?

Continuous production or drilling or well-reworking operations on

the lease will allow you to keep a lease past its primary term. The

drilling or well-reworking programs must be part of a plan that has as

its objective continuous production on the lease. Throughout the

remainder of this section (250.13), the term ``operations'' will refer

to continuous production, drilling, or well-reworking.

(a) How can I keep my lease in effect if I stop conducting

continuous operations during the last 180 days of the primary lease

term? If you stop conducting operations during the last 180 days of the

primary lease term, you must:

(1) Resume operations on the lease no later than 180 days after the

operations ended; or

(2) Ask us for a suspension of operations or production under 30

CFR 250.10, before the 180th day after you stop operations. The

Regional Supervisor must approve this request; or

(3) Receive a directed suspension of operations or production from

the Regional Supervisor under 30 CFR 250.10 before the 180th day after

you stop operations.

(b) How can I keep my lease in effect if I stop conducting

operations on a lease that has been continued beyond its primary term?

If you stop conducting operations on the lease, you must comply with

either paragraph (a) (1), (2), or (3) of this section.

(c) Can I have more than 180 days to resume operations? You may ask

the Regional Supervisor in writing to allow you more time to resume

operations on a lease continued beyond its primary term, when warranted

by operating conditions. In allowing additional time, the Regional

Supervisor must determine that the longer period is in the national

interest and that it conserves resources, prevents waste, or protects

correlative rights.

[FR Doc. 96-10059 Filed 4-24-96; 8:45 am]

BILLING CODE 4310-MR-M