Review of Existing Regulations

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Chapter II

Review of Existing Regulations

agency: Minerals Management Service (MMS), Interior.

action: Review of regulations; request for comment.

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summary: MMS performs annual periodic reviews of its significant

regulations and asks the public to participate in these 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 because

they are either unclear, inefficient or interfere with normal market

conditions.

The purpose of this document is to: Provide the public an

opportunity to comment on MMS regulations that should be eliminated or

revised; and provide a status update of the actions MMS has taken on

comments previously received from the public in response to documents

published March 1, 1994 and March 28, 1995.

dates: Written comments must be received by July 19, 1996.

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

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Management Improvement, telephone (202) 208-3976; Fax (202) 208-3118.

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 Federal Register

document 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

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

comments, along with an estimated timetable for the actions.

In the March 28, 1995, document (60 FR 15888), MMS: (a) asked for

further public comments on its regulations, and (b) provided a status

update of actions it had taken on the 40 public comments received the

prior year. MMS received 10 responses from the March 28 document. We

believe MMS has been very responsive to most of the comments received,

to date.

This document updates the MMS planned actions and related

timetables on the major comments received to date. It also solicits

additional comments from the public concerning regulations that should

be either eliminated or revised. Since some of the public responses

received in response to prior documents contained comments on very

specific and detailed parts of the regulations, this document does not

address every one received. For information on any comment submitted

which is not addressed in this document, please contact Mrs. Montgomery

at the number and location stated in the forward sections of this

document.

These annual reviews of regulations have resulted in the

elimination of approximately 18 pages of regulations from the Code of

Federal Regulations and the improvement, by rewriting, of over 200

pages. We are fully committed to improving our regulations and working

more closely with our customers and constituents. This is part of our

effort to improve government by making it more efficient and

responsive.

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 (note: part 213 applies to Offshore

royalty rate reductions); 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 status report by program area on the comments

MMS has received, to date, on its regulations.

A. Offshore Minerals Management (OMM) Program

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 Taken or Planned--An MMS workgroup finalized its report on

deepwater regulatory issues. The major recommendation from the report

was that MMS should evaluate and regulate deepwater production

activities through a ``total systems'' approach. Under this

recommendation, MMS would require a lessee to submit a Deepwater

Operations Plan for each deepwater or subsea development project.

Individual projects could then be evaluated within the context of the

master plan. The Associate Director for Offshore Minerals Management

approved the report in May 1995, and we are finalizing guidelines and

procedures for the preparation and approval of the Deepwater Operations

Plan.

Timetable--We are preparing a Letter to Lessees explaining the

Deepwater Operations Plan and will issue it in June 1996.

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 Taken or Planned--MMS recently announced (March 1996) the

selection of an engineering consulting firm to assess the performance

of blowout preventer equipment and the frequency it should be tested.

Selection of the firm was a joint effort of MMS and industry. MMS will

use this cooperative study in determining if increased blowout

preventer testing intervals will afford an equal or better degree of

protection, safety, or performance. This study requires the systematic

review and analysis of blowout preventer test results from wells

drilled on the OCS.

Timetable--The contractor will provide us with a report on the

study in November 1966. MMS will use the study's results to revise our

regulations as appropriate.

3. Regulations governing safety and pollution prevention equipment

(SPPE) (30 CFR Subpart H).

Comments Received--(a) ``Reduce associated administrative burden on

lessees and operators by eliminating unnecessary record keeping

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

(b) ``Revise regulations governing Safety Valves to increase time

between test and allowable leakage rates.''

Action Taken or Planned--(a) MMS is drafting a proposed rule to

revise the regulations governing SPPE. This proposed rule will address

the concerns raised regarding recordkeeping. (b) MMS is reviewing

Subpart H, Production Safety Systems, and plans to rewrite the subpart

in plain English and update requirements where warranted. We expect to

work with industry in areas where we need further data. The cooperative

effort with the blowout preventer study can serve as a model.

Timetable.--(a) MMS should publish this proposed rule in the

Federal Register by September 1996. (b) MMS will begin rewriting

subpart H by this summer. We will work with industry to initiate needed

safety value studies early in 1997, following the joint blowout

preventer study.

4. Regulations governing conservation of resources and diligence

(30 CFR 250. Subpart A, General and Subpart K, Oil and Gas Production

Rates).

Comment Received--(a) ``Revised 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 extending flaring periods * * *'', (d) ``Relax restrictions

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

flexibility in the methods of

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testing subsea wells. * * *'', (f) ``MMS [should] determine and specify

allowable volumes of liquid hydrocarbons that lessees could burn

without requesting approval.''

Action Taken or Planned--For (a) above, MMS published a proposed

rule on April 25, 1996, to extend the period for holding a lease beyond

its primary term from 90 to 180 days. For (b) above, MMS is currently

rewriting Subpart A in plain English. This effort will also include any

changes needed to the regulations. We will obtain more ideas from

industry concerning what changes are needed. For (c) above, MMS will

not relax current regulations at this time. We are reviewing the

results of air quality studies and will not make any changes to the

regulations until this review is complete. For (d) above, MMS issued a

Letter to Lessees that allowed for greater flexibility in dealing with

commingling issues. 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. For (f)

above, MMS, is addressing the burning of liquid hydrocarbons in a rule

that we published as proposed on February 17, 1995. MMS agrees with the

benefits of using a specific value for the term ``minimal.'' However,

in approving a request to burn liquid hydocarbons, we need to deal with

many economic, technical, safety, and environmental factors.

Conservation is a key factor in determining how much liquid

hydrocarbons a lessee can burn. Making volume determinations on a case

by case basis allows us to properly consider technical, safety, and

environmental factors.

Timetable.--A final rule addressing (f) above, (burning small

quantities of liquid hydrocarbons) is scheduled for publication in May

1996. Proposed rules covering the other matters mentioned above will be

published during 1996 and early 1997.

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) ``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 studs

* * *'', etc.

Action Taken or Planned--For (a) above, MMS is reviewing this

request and considering some options. For (b) above, MMS will not

modify the regulations. Current rules allow operators to petition for

longer inspection intervals. On April 15-17, 1996, MMS held a workshop

in New Orleans and discussed lease abandonment and platform removal

issues with interested parties from other government agencies and

private industry. We will continue to work with these parties to

identify needed research and potential changes to the regulations.

Timetable--In the coming months, MMS will identify specific action

items and timetables for both further regulatory changes and research.

6. Regulations applicable to directional surveys, (30 CFR 250.51).

Comments Received--``Revise directional survey requirements to

allow composite measurement-while-drilling directional survey to be

acceptable * * *.''

Action Taken or Planned--MMS is planning to rewrite the regulations

governing Oil and Gas Drilling Operations, found in Subpart D, in plain

English. We plan to update the regulations to keep pace with current

technology as part of the plain English initiative.

Timetable--MMS plans to begin drafting a proposed rule shortly,

Publication in the Federal Register would be sometime in 1997.

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 Taken or Planned--On February 15, 1996, MMS issued a Notice

to Lessees regarding the pollution inspection frequency for unmanned

facilities. The current regulations allow operators to request a waiver

from the daily inspection of unmanned facilities. The Notice to Lessees

reviewed the criteria MMS uses in determining whether or not to grant

the waiver.

Timetable--MMS has no plans to change the regulations in this area.

8. Regulations applicable to production safety system training (30

CFR 250.214).

Comments Received--(a) ``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.'' (b) ``* * * training regulations (well-

control) are not clearly stated and often not relevant * * *.''

Action Taken or Planned--MMS rewrote the entire section (subpart O)

of training regulations in a plain English format and published a

proposed rule in the Federal Register on November 2, 1995 (60 FR

55683), MMS received comments and is preparing the final rule.

Timetable--MMS should publish the final rule by the end of 1996.

9. Regulations applicable to Pipelines and Pipeline Rights-of-Way

(Subpart J).

Comments Received--Revise regulations to avoid duplication of

requirements between DOI and the Department of Transportation (DOT).

Action Taken or Planned--MMS continues to work with DOT and with

other interested parties to develop a new memorandum of understanding

(MOU) between DOI and DOT. After we have a new MOU, MMS will revise

regulations to clarify rules and remove redundant requirements, and

promote compatible regulations.

Timetable--We expect that DOI and DOT will approve a new MOU by

fall of 1996.

B. Royalty Management Program (RMP)

RMP is reviewing regulations in the following subject areas.

1. Statute of Limitations and Record Retention

Comments Received--``Statute of limitations is unclear.''

--``Establish a reciprocal 5-year statute of limitations from the date

an obligation becomes due.''

--``Absence of a record retention program creates some confusion.

Regulations should require record retention to coincide with the 5-year

statute of limitations.''

Action Taken or Planned--The extent of the time periods covered by

audits of royalty payments has been a matter of considerable

controversy between MMS and the minerals industry for several years.

MMS's goal, more recently, as reflected in the Contemporaneous Audit

Initiative, has been to conduct all audits on a contemporaneous basis

consistent with the most effective and efficient use of audit

resources, to provide industry with earlier closure, to streamline the

royalty collection process, and to be more responsive to the public we

serve.

Timetable--Accordingly, MMS issued a policy memorandum on July 14,

1995, that affirms MMS's policy to complete reviews and audits of

royalty payments made on Federal and Indian leased land, including

issuance of enforcement documents for underpayments (orders to pay or

to recompute and pay). Within the 30 U.S.C. 1713 principal documents

retention period, that is within six years of the royalty payment due

date. Some exceptions to this requirement may occur in RMP compliance

activities.

[[Page 25163]]

2. Interests on Overpayments

Comment received--``Interest accrual should be equitable between

the Agency and industry.''

Action Taken or Planned--MMS does not have statutory authority to

remit interest to companies for overpayments. We are pursuing

strategies to improve electronic royalty reporting and paying options

to our customers. This along with the option for companies to post

surety in lieu of paying disputed amounts should decrease lost interest

on overpayments to MMS.

Timetable--Ongoing.

3. Gas Valuation

Comments received--``Define gross proceeds more equitably and

clearly in this ever changing gas marketing environment.''

--``It is important that the Federal Gas Valuation Rule final rule not

discriminate against producers which are affiliated with marketing

companies and are party to non-arms-length contracts.''

--``Extend the elimination of processing and transportation allowance

forms to oil.''

--``* * * commends the MMS on their use of negotiated rulemaking

process to address the valuation of gas. Rule should result in

administrative cost savings for all parties.''

--``If the Takes vs. Entitlements policy stays in effect, MMS should

strictly enforce reporting on actual quantities taken for all industry

participants.''

Action Taken or Planned--Revisions of the Valuation Regulations

Governing Allowances were published in the Federal Register as a final

rule on February 12, 1996. This rule eliminated most allowance forms

filing requirements for oil, gas, and coal produced from Federal

leases.

The Federal Gas Valuation proposed rule was published in the

Federal Register on November 6, 1995, and the comment period closed on

February 5, 1996. The proposed rule represented the consensus of the

Federal Gas Valuation Negotiated Rulemaking Committee with

representation from MMS, industry and the states.

MMS is preparing a Federal Register document to announce the

reconvening of the committee in June 1966 and another Federal Register

document to reopen the public comment period. The proposed rule would

provide alternatives to using gross proceeds as a basis for gas

valuation, such as published natural gas index prices.

The Indian Gas Valuation Negotiated Rulemaking Committee is

developing a proposed rule governing the valuation for royalty purposes

of natural gas produced from Indian leases. The proposed rule would add

a methodology to calculate the major portion value and an alternative

methodology for dual accounting as required by Indian lease terms. The

proposed rulemaking would simplify and add certainty to the valuation

of production from Indian leases.

MMS is developing a proposed rule clarifying what deductions may be

taken from gross proceeds for the costs of transportation under Federal

Energy Regulatory Commission (FERC) Order No. 636.

Timetable--MMS will reconvene the Federal Gas Valuation Negotiated

Rulemaking Committee in June 1996, and has reopened the comment period

to discuss options for proceeding further with a rulemaking. MMS

anticipates publishing a proposed rulemaking for Indian gas valuation

in July 1996. MMS also expects to publish a proposed rule on FERC Order

No. 636 early this summer.

4. Reporting Procedures and Threshold

Comments Received--``Eliminate or streamline MMS Form 2014

reporting.''

--``Report prior period adjustments on a `net' basis.''

--``Change estimated payment from lease level to payor level.''

--``Assess interest at the payor level--for the Indian leases on the

basis of each Indian Tribe.''

--``Eliminate Payor Information (PIF) Filings. This is an unnecessary

and costly reporting requirement.''

--``MMS should modify the regulations and system tolerances/thresholds

so that only those exceptions that are cost beneficial for MMS to

pursue are generated.''

--``Set thresholds or tolerances for regulations to save costs to both

MMS and industry. (Example: Invoices are sent for less than $1.00.)''

--``MMS should not implement regulations until its systems are

programmed to handle the new regulations.''

Action Taken or Planned--MMS has revised its billing thresholds and

assessments policy to reduce administrative costs, and we continue to

review these issues through the Royalty Policy Committee which was

formed in September 1995. The Committee's membership includes

representatives from states, tribes, allottee associations, industry

trade groups and other agencies. At their initial meeting, a Royalty

Reporting and Production Accounting Subcommittee was established.

The Subcommittee had its first meeting in November 1995 and agreed

to review all royalty and production reporting forms and policies. To

assure all areas were addressed, four workgroups were formed to review

the Payor Information Form, royalty reporting, oil and gas production

reporting, and solids production reporting.

The preliminary recommendations from the workgroups cover

streamlining of all reporting forms; reducing or eliminating redundant

data collection; changing estimates; and reviewing thresholds for

allowance and interest billings.

Timetable--The Subcommittee recommendations are to be finalized and

forwarded to the full committee for their review and approval in June

1996. The recommendations will then be reviewed for possible

implementation by MMS. In particular, recommendations that can be

implemented in the short term without significant cost will be pursued

by MMS.

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

Outer Continental Shelf Lands Act

Comments Received--``Section 10 refund requirements should be

eliminated. The refund process used for onshore properties should be

established for offshore properties.''

--``Eliminate documentation requirements for refund requests over $250

M, and/or increase this threshold to $500 M; raise the refund request

limit to $5 M. Exempt pure accounting adjustments for items such as

production date adjustments and incorrect AID numbers; exempt unit

revisions because these revisions are often made more than two years

after the date of production; establish a time limit on MMS for review

of a refund request to expedite the process; and overpayments on OCS

properties should be allowed to be offset against any OCS

underpayment.''

Action Taken or Planned--A legislative change would be required to

eliminate the Section 10 refund requirements of 43 U.S.C. 1339.

Section 10(b) of 43 U.S.C. 1339(b) requires MMS to report refunds

or credits to both Houses of Congress and can increase the time to

process refunds and recoupments. The final rule published on July 28,

1994 (59 FR 38359), Titled ``Offsets Recoupments and Refunds of Excess

Payments of Royalties, Rentals; Bonuses, or other amounts under Federal

Offshore

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Minerals Leases'' established procedures for obtaining refunds and

credits of excess payments and clarified what payments are not subject

to Section 10's requirements. Unit agreement revisions are covered in

this rule under ``Transactions not subject to section 10''.

This rule also provides for a de minimis exception to the MMS

approval process. On February 23, 1996 (61 FR 7016), MMS published a

document raising the de minimis reporting requirements from $250 to

$2,500. By raising the de minimis level, companies may now recover

overpayments below the de minimis amount from future royalty payments.

This change will reduce administrative costs for MMS and companies.

6. The Appeals Process

Comments Received--``Current appeals process is too long.''

Action Taken or Planned--MMS has made several administrative

processing changes to streamline the appeal process. One change was

transferring 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 cases.

Other efforts included the initiation of several pilot programs to

look at additional streamlining possibilities. One pilot program was

aimed at decreasing the time and expense incurred by MMS in its

preparation of an appellant's administrative record. A second pilot

program involved 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.

Spinoff projects from these pilot efforts are still ongoing and

will result in further changes to the appeals process in the future. We

are engaged in a concentrated effort, during the spring and summer of

1996, to resolve all of the older, active appeals on the docket. Also,

the Royalty Policy Committee has established an Appeals/Settlement/ADR

subcommittee which should provide MMS with additional advice on ways to

improve the process of resolving disputes involving royalty

collections.

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

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

Further administrative streamlining changes and possibly regulatory

changes by MMS are anticipated for calendar year 1996.

7. Other MMS Regulatory Actions

--MMS is evaluating comments received on the proposed rule to establish

liability for royalty due on Federal and Indian leases, and to

establish responsibility to pay and report royalty and other payments.

--MMS published an advance notice of proposed rulemaking on valuation

of oil from Federal and Indian leases and is evaluating the comments

received from industry, States, and Indian tribes on this notice.

Dated: May 13, 1996.

Cynthia Quarterman,

Director, Minerals Management Service.

[FR Doc. 96-12545 Filed 5-17-96; 8:45 am]

BILLING CODE 4310-MR-M