Leasing of Tribal Lands for Mineral Development and Leasing of Allotted Lands for Mineral Development

DEPARTMENT OF THE INTERIOR

Bureau of Indian Affairs

25 CFR Parts 211 and 212

RIN 1076-AA82

Leasing of Tribal Lands for Mineral Development and Leasing of

Allotted Lands for Mineral Development

AGENCY: Bureau of Indian Affairs, Interior.

ACTION: Final rule.

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SUMMARY: The Bureau of Indian Affairs (BIA) of the Department of the

Interior (Department) is promulgating regulations revising and updating

regulations in 25 CFR Parts 211 and 212 that govern mineral leasing on

tribal and allotted Indian lands respectively. The intent of these

regulations is to ensure that Indian mineral owners, both tribes and

individual owners, desiring to have their resources developed are

assured that they will be developed in a manner that maximizes their

best economic interests and minimizes any adverse environmental or

cultural impact resulting from such development. Further, these

regulations recognize Federal government reorganization, enacted

legislation, and prevailing administrative practice in the 58 years

since these regulations were first promulgated.

EFFECTIVE DATE: August 7, 1996.

FOR FURTHER INFORMATION CONTACT: Richard N. Wilson (303) 231-5070 or

Pete C. Aguilar (303) 231-5070.

SUPPLEMENTARY INFORMATION: These final rules are published in the

exercise of the authority delegated by the Secretary of the Interior

(Secretary) to the Assistant Secretary for Indian Affairs by 209 DM 8.

The principal authors of these rules are Richard N. Wilson and Pete C.

Aguilar, both in the Division of Energy and Mineral Resources, Golden,

Colorado.

This final rulemaking revises and updates the mineral leasing of

tribally-owned minerals governed by the Act of May 11, 1938 (25 U.S.C.

396a), and the mineral leasing of allotted lands governed by the Act of

March 3, 1909, as amended, (25 U.S.C. 396). The 1938 Act permits Indian

tribes to elect whether they wish to offer their mineral resources for

lease by competitive bidding, or enter into negotiations with

prospective lessees if bids are not satisfactory. The Act of 1909

permits individual Indian mineral owners to offer their mineral

resources for lease by competitive bidding under the aegis of the

Secretary.

This is the first comprehensive revision of general BIA regulations

governing mineral leasing of Indian lands since 1938. In the

intervening period Congress has enacted many laws applicable to Indian

mineral leases, including the National Environmental Policy Act of 1969

and the Federal Oil and Gas Royalty Management Act of 1982. There have

also been major changes in Federal Indian policy, as reflected in the

Indian Self-Determination Act of 1975 and recent amendments thereto.

This revision is the product of many years of consultation with Indian

tribal leaders. It is intended to update, streamline and clarify the

procedures for Indian mineral leasing and administration, consistent

with the Federal government's role as trustee for these mineral

resources and with the modern Federal policy of self-determination.

Indeed, they largely reflect current BIA practice and procedure, and

are intended in part to eliminate the confusion often fostered by the

existing,

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outmoded regulations. Although these revised regulations include new

requirements imposed by modern statutes and intervening judicial

interpretations of the BIA's legal responsibilities, they are no

lengthier than the existing regulations, most of which have been in

place for 58 years.

Pursuant to section 8 of the Indian Mineral Development Act (IMDA)

of 1982, the BIA published a notice of proposed rulemaking in the

Federal Register on July 12, 1983 (48 FR 31978) to revise and

reorganize the regulations governing solid mineral, oil and gas, and

geothermal leasing adopted pursuant to the Acts of 1909 and 1938, last

revised in their entirety on December 24, 1957 (22 FR 10588); as well

as to promulgate regulations implementing the IMDA. On August 24, 1987,

the BIA published final regulations (52 FR 31916) that were scheduled

to become effective on October 24, 1987. Then, in response to concerns

expressed by the public, the regulations were amended and republished

as proposed on October 21, 1987 (52 FR 39332), and the public was

notified that the regulations published on August 24, 1987 would not

become effective.

Public responses to these publications contained compelling

arguments for restructuring the format of the proposed regulations.

Several commenters stated that the October 21, 1987 proposed

regulations were confusing and ambiguous. The format of the proposed

regulations, implementing the Acts of March 3, 1909 and May 11, 1938,

and the IMDA; combined the regulations into two separate parts: (1)

Part 211, contracts for prospecting and mining on Indian lands (except

oil and gas and geothermal) and (2) Part 225, oil and gas and

geothermal contracts. The most common major concern was whether

provisions of the IMDA would supplant lease and regulatory conditions

contained in lease contracts entered into under the authority of the

1909 and 1938 Acts. The regulatory format created confusion about

contract approval procedures for leasing tribal versus allotted lands.

In addition, the format created confusion between regulatory

requirements for solid mineral versus fluid mineral contracts. The

uncertainty expressed by Indian interests and industry on numerous

issues convinced the Department that the regulations needed to be

entirely reformatted and revised.

The proposed regulations were then organized under a system that

would be more familiar to both Indian mineral owners and industry. The

proposed regulations were organized in three parts: (1) 25 CFR Part 211

provided the procedures for obtaining and operating standard mineral

leases, for both solid and fluid minerals, on tribal lands under the

Act of May 11, 1938, as amended; (2) 25 CFR Part 212 provided the

procedures for obtaining and operating standard mineral leases, for

both solid and fluid minerals, on allotted lands under the Act of March

3, 1909, as amended; and (3) 25 CFR Part 225 provided a new and

separate part governing minerals agreements for development of Indian

minerals under the IMDA.

Along with the reformatting, many changes were made to the

individual parts of the regulation. Those changes reflected the

Department's efforts to be responsive to the comments received in 1987,

and to include the additional business and administrative experience

that had been gained on several issues during the intervening years.

In order to provide Indian mineral owners and Indian-mineral

operators full opportunity to review and comment on the reformatted and

rewritten regulations, the Department determined that those regulations

should be published as proposed rather than as final rules, and that

the public should be given 90 days to review the regulations and

provide written comments. The proposed rulemaking was published in the

Federal Register (56 FR 58734) on November 21, 1991. The closing date

for submission of review comments on the proposed rulemaking was

February 19, 1992.

Comments received from Indian mineral owners, industry, and the

public were directed mostly to 25 CFR Parts 211 and 212. Tribes were

especially concerned that the proposed regulations did not adequately

recognize tribal rules and regulations and did not provide for adequate

notification and communication with tribes prior to implementation of

Departmental decision and authority with respect to mineral leasing and

mineral management activities. Industry expressed concern about acreage

limitations in the leasing of solid minerals and oil and gas, the role

of the regulatory structure of the Department and its effects on the

reclamation of Indian lands mined for coal, and were still concerned

about the possible effects of the proposed rules on existing mineral

leases on Indian lands.

Because there were: (1) regulations formerly in place governing the

mineral leasing of Indian lands (25 CFR Parts 211 and 212 as well as

the regulations of other Federal agencies); (2) no regulations

governing the disposition of mineral resources pursuant to the IMDA;

and (3) because the IMDA is and has been utilized by tribes to

participate in minerals agreements, since 1982, without benefit of

formal regulations designed specifically to implement the IMDA; the

Department published separately (25 CFR Part 225, 59 FR 14960, March

30, 1994) as final rulemaking the regulations implementing the IMDA. In

response to the wishes and numerous comments of Indian tribes and the

public and to ensure that Indian mineral owners and lessees and the

general public had adequate and full opportunity for review and

comment, the Department determined that the regulations revising and

updating 25 CFR Parts 211 and 212 should be published as final

rulemaking only after an additional opportunity for review and comment

had been provided.

Accordingly, the public comment period was reopened, public

meetings scheduled, and additional opportunity provided for concerned

and involved parties to further discuss and provide comments, prior to

final rulemaking, on 25 CFR Parts 211 and 212 published on November 21,

1991. The comment period was reopened for 60 days by Federal Register

notice (57 FR 40298) on September 2, 1992. Public hearings were held at

Denver, Colorado on September 25, 1992 and at Albuquerque, New Mexico

on September 28, 1992 to receive public comments on 25 CFR Parts 211

and 212 as proposed and published on November 21, 1991. The closing

date for submission of comments on proposed rulemaking was November 2,

1992.

In reviewing all of the issues raised in the 1987, 1991 and 1992

comments and in redrafting the regulations, the goal of the BIA is to

ensure that the Department is able to fulfill its trust responsibility

by providing adequate provisions to ensure the protection of the trust

resources and at the same time benefit the Indian mineral owners by

removing unnecessary regulatory barriers and complications that could

make their minerals less attractive to industry and thus frustrate

development. In addition, consistent with the policy on self-

determination, the Department has attempted to provide the tribes as

much freedom as possible to make their own determination on issues

affecting the development of their minerals.

The regulations are rewritten and restructured in response to the

comments received during the comment periods of 1991 and 1992. Because

of previous extensive reformatting and restructuring in response to

comments received in 1987 (56 FR 58735), as well as to comments

received in 1991 and

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1992, the Department is of the opinion that a detailed review of

comments received during a time interval of more than five years would

be more confusing than helpful. Accordingly, the Department decided to

provide in the preamble a listing by section of the salient changes

made in the proposed regulations.

I. Changes Made to Proposed Rules

Set forth in the following list of changes are most of the

clarifying changes, but not each and every minor change, made to the

regulations since they were last published as proposed in the Federal

Register on November 21, 1991. The proposed rules are modified: (1) in

response to comments received; (2) to reflect the fact that 25 CFR

Parts 211 and 212 now stand alone after separation and subsequent

publication of 25 CFR Part 225 (59 FR 14960) as a final rule; and (3)

in recognition of prevailing and customary business and administrative

practices developed in the last 58 years (since regulations were first

promulgated in 1938) under the Acts of 1909 and 1938. The salient

modifications to the proposed rules are here summarized by section.

Many of the changes and modifications made in 25 CFR Part 212 are the

same as those made in 25 CFR Part 211 or the sections are included from

25 CFR Part 211 by reference. The changes and modifications in sections

so referenced are the same in both parts. These changes and

modifications as well as changes and modifications in common in the

text of both parts of regulation are set forth only in the section

summaries of Part 211 below, but are easily found because the numbering

and designation of sections in Part 212 parallel those of Part 211.

Where significant differences exist the sections of Part 212 are

discussed separately (below). The section headings refer to this final

rule.

Section 211.1. Purpose and Scope

Several changes are made to this section to more clearly state the

general guidance of this section and to assure the Alaska native

corporations that 25 CFR Parts 211 and 212 are applicable only to

Indian mineral interests held in trust by the United States. In

addition, a change is made to clarify that 25 CFR Parts 211 and 212 do

not affect certain key provisions of existing mineral leases and

permits.

Section 211.3. Definitions

The definitions section of Part 211 is modified somewhat, partly in

response to comments, because permits are now specifically recognized

in regulation, and for other reasons. The necessary changes made are:

Applicant is an addition to clarify that no one is a lessee or

permittee does not exist until after the issuance of a lease or permit;

Bureau is deleted from definitions because this word is no longer

used specifically without qualification in the regulations;

Cooperative Agreement is added because the term is used in many

places in the discussion of agreements that allocate costs and benefits

among the operator(s) and the mineral owner(s).

Director's representative is added to bring the Office of Surface

Mining Reclamation and Enforcement representative formally into Part

211;

In the best interest of the Indian mineral owner is modified to

clarify that the Secretary shall consider any relevant factor in making

a best interest determination;

Indian Surface Owner is defined in both Part 211 and Part 212 in

response to comments and because this phrase is brought into Part 212

by reference to the appropriate sections of Part 211.

Minerals is modified to better define the scope and description of

minerals that may be included in a mineral lease or permit on Indian

lands;

Permit is added to recognize that permits, as well as leases, may

be issued in the course of exploration and development of mineral

resources on Indian lands;

Permittee is added to recognize one who holds a permit as compared

to one who holds a lease on Indian land;

Tar sand is deleted, but tar sand is now defined as a mineral and

included as a result of the modification of the definition of

``minerals.''

Section 211.4. Authority and Responsibility of the Bureau of Land

Management (BLM)

References are added to cite the BLM regulations concerning onshore

oil and gas and geothermal unitization and communitization.

Section 211.6. Authority and Responsibility of the Minerals Management

Service (MMS)

This section is expanded to clarify that the Secretary may consider

alternative provisions in a lease or permit with respect to the

requirements found in 30 CFR Chapter II, Subchapters A and C, if they

are reasonable and adequately address the royalty functions governed by

MMS regulations.

Section 211.7. Environmental Studies

A change is made in this section to clarify that although

compliance with all environmental, archeological and historic

preservation statutes is required, the exhaustive, site-specific

analyses and surveys demanded when operations begin at a specific site

are not invariably required prior to approval of a lease or permit.

Rather, the degree and timing of environmental compliance activity

demanded at a specific site or area is dependent upon the findings of

the environmental analysis or environmental assessment.

Section 211.9. Existing Permits and Leases for Minerals Issued Pursuant

to 43 CFR and Acquired for Indian Tribes

This section is modified to clarify that permits and leases issued

under 43 CFR on certain Federal lands which later became Indian lands,

shall be administered in accordance with the regulations set forth in

30 CFR and 43 CFR, as applicable. This section also provides guidance

in the making of payments and the submittal of reports for mineral

permits and leases.

Section 211.20. Leasing Procedures

Changes are made in this section to emphasize that the Secretary

undertakes mineral leasing on Indian lands at the request of, and in

consultation with, the Indian mineral owner. Except for oil and gas,

and with the approval of the Secretary, the Indian mineral owner and/or

the Secretary may engage in private negotiations in pursuit of mineral

leasing. After oil and gas lands have been considered for lease by

competitive bid, the oil and gas lands may be leased by private

negotiation between the Indian mineral owner and the mineral industry,

subject to approval of the Secretary.

Section 211.24. Bonds

Changes in this section emphasize that bonds are payable to the

Secretary or the Secretary's designee and provide minimum (nationwide

and/or statewide bonds) requirements for the bonding of lessees and

permittees. Current financial and business practices are now recognized

in the regulations by providing for a variety of financial instruments

to accompany a personal bond so that a wide variety of assets can be

used to satisfy the bonding requirements.

Section 211.25. Acreage Limitation

As a result of comments, Section 211.25 is rewritten to more nearly

reflect current administrative practice. In the previous proposed

rulemaking, coal leases were restricted to 640 acres (56 FR 58740). In

the final rule the limit is raised to 2,560 acres and may, with the

consent of the Indian mineral

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owner, be approved in larger acreage. This is similar to the existing

regulation. For other minerals each lease may not exceed 640 acres, or

the nearest aliquot portion thereof, although multiple leases of 640

acres each may be obtained by lessees. Indian mineral owners and

applicants who find the acreage limitations in Sec. 211.25 unduly

restrictive may avail themselves of procedures under the IMDA (25 CFR

Part 225).

Section 211.27. Duration of Leases

Rewording in this section clarifies the conditions under which a

lease may be extended beyond its primary term of lease duration by

drilling (oil and gas and geothermal leases) or actual production

(solid minerals leases). A provision is added, in the interest of

diligent development of oil and gas and geothermal leases, that

provides a lease cannot be extended more than 120 days beyond its

primary term by drilling activity in the absence of production or an

approval of a cooperative agreement.

Section 211.28. Unitization and Communitization Agreements, and Well

Spacing

Additions to this section include (1) the requirement that the

Secretary consult with the Indian mineral owner prior to making a

determination concerning a cooperative agreement or a well-spacing plan

and (2) a clarification at Sec. 211.28(e) that requests for approval of

cooperative agreements, which must be appropriately filed ninety (90)

days prior to the expiration date of the first Indian lease to be

included in the proposed agreement, apply to all mineral commodities

amenable to approval of a cooperative agreement.

Section 211.29. Exemption of Leases and Permits Made by Organized

Tribes

At the suggestion of tribal commenters, the regulation currently

found in 25 CFR Sec. 211.29, acknowledging that tribal laws may

supersede these regulations, has been retained in this final rule.

However, for clarification purposes, a proviso has been added, stating

that tribal law may not supersede the requirements of Federal statutes

governing Indian mineral leasing, for example, the requirement in 25

U.S.C. Sec. 396a that a tribal lease must be approved by the Secretary

of the Interior.

Section 211.40. Manner of Payments

The change to this section clarifies the manner of payments and

specifically identifies the Secretary's designees to receive payments

prior to the establishment of production.

Section 211.41. Rentals and Production Royalty on Oil and Gas Leases

The change to this section: (1) raises the minimum annual rental

for Indian land to $2.00 per acre in keeping with current practices and

rentals for mineral leases on Federal land; (2) clarifies at

Sec. 211.41(c) that the Secretary may consider alternative lease or

permit provisions to the requirements of 30 CFR Chapter II, Subchapters

A and C, if the alternatives are reasonable and adequately address the

royalty functions governed by regulations of the Minerals Management

Service; and (3) restores the language in regulations formerly in place

at Sec. 211.13(b) thus removing the requirement in the proposed

regulations (56 FR 58734) that lessor use of gas in excess of lessee's

requirements must be provided for in lease provisions.

Section 211.42. Annual Rentals and Expenditures for Development on

Leases Other Than Oil and Gas

The changes to this section increase the minimum annual development

expenditure to $20.00 per acre and increase the minimum rental to $2.00

per acre in keeping with current rates and rentals for mineral leases

on Federal land and to reflect the effects of inflation over the years.

Section 211.43. Royalty Rates for Minerals Other Than Oil and Gas

Minor changes are made to clarify that the royalty rates specified

are only minimums, and that higher rates are allowed without any

special approvals.

Section 211.53. Assignments, Overriding Royalties, and Operating

Agreements

Changes are made in this section to clarify that: (1) the Indian

mineral owner must consent to assignment or transfer of approved leases

or any interest therein if such approval of the Indian mineral owner is

required in the lease; (2) even if such consent is not required the

Secretary shall notify the Indian mineral owner of a proposed

assignment; (3) agreements creating overriding royalties or payments

out of production or agreements designating operators, although not

requiring the approval of the Secretary, are required to be filed with

the superintendent and do not relieve the lessee from obligations

imposed by the MMS for reporting, accounting, and auditing; and (4) in

response to comments, the proposed restrictions concerning assignment

of partial interests and assignment of stratigraphic intervals are

removed from the regulations.

Section 211.54. Lease or Permit Cancellation; Bureau of Indian Affairs

Notice of Noncompliance

Changes to this section include: (1) reorganization of the section

in the interests of clarity of procedure in the serving of notices of

noncompliance, orders of cessation, notices of cancellation, and orders

of cancellation; (2) allowing a permittee or lessee thirty (30) days,

rather than twenty (20) days, in which to respond to notices; and (3)

clarification, by reorganization and addition of paragraphs, of BIA

procedures to be followed in the event of noncompliance and necessary

enforcement associated with the cancellation process which includes the

option of BIA to issue a notice of non-compliance rather than to

immediately start cancellation proceedings.

Section 211.55. Penalties

This section is rewritten with minor changes, including a change in

section title, to clarify procedures in the event penalties are imposed

on a permittee or lessee. A change is made to formally recognize the

authority of the director's representative of the Office of Surface

Mining Reclamation and Enforcement to impose penalties and paragraph

(f) is rewritten to guard against the imposition of multiple penalties

by different Federal agencies for the same violation. A penalties

section in the Bureau of Indian Affairs minerals regulations continues

to be necessary because the only other remedies available to the

Secretary for noncompliance with permit requirements or breach of the

lease are cessation of operations or cancellation of the lease, either

of which may be seen as extreme measures and may cause harm to the

interests of the Indian mineral owner. Also, there are no penalty

provisions under any other Federal agency's regulations to provide for

enforcement of provisions of a permit or lease which includes solid

minerals or other mineral commodities not covered by the Federal Oil

and Gas Royalty Management Act of 1982 (FOGRMA) or the Surface Mining

Control and Reclamation Act of 1977 (SMCRA). The new rule also provides

more detail on the due process and appeal procedures available to a

lessee or operator subject to a penalty assessment, than is found in

the existing rule in 25 CFR Sec. 211.22.

Section 211.56. Geological and Geophysical Permits

Change is made in Sec. 211.56(a)(3) to provide for the release of

data after six (6) years after receipt by the Federal

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Government, if no time limit for the release of data is prescribed in

the permit; and to provide that data release is subject to the consent

of the Indian mineral owner.

Section 212.20. Leasing Procedures

Changes made in this section emphasize that the Secretary

undertakes mineral leasing on Indian lands at the request of the Indian

mineral owner and that the lease or permit shall not be approved

without the consent of the Indian mineral owner. After the lands have

been considered for lease by competitive bid, the Secretary may engage

in negotiations, at the request of, and on behalf of the Indian mineral

owner, in pursuit of mineral leasing.

Section 212.21. Execution of Leases

Minor changes are made in the wording to clarify under what

circumstances the Secretary may execute leases on behalf of the Indian

mineral owners. A change has been made to subsection (b), in part to

reflect the existence of modern tribal courts, by adding a proviso that

the Secretary may exercise this authority only if there is no parent,

guardian, conservator, or other person who has lawful authority to

execute a lease on behalf of the minor or person with mental

incapacity.

Section 212.28. Unitization and Communitization Agreements, and Well

Spacing

This section, included in Part 212 by reference to Part 211 in

proposed rules, is now specifically included in Part 212 in final rules

because of necessary minor differences in the unitization and

communitization of allotted versus unallotted lands. Clarification is

made at Sec. 212.28(e) that requests for approval of a cooperative

agreement, that must be appropriately filed ninety (90) days prior to

the expiration date of the first Indian lease to be included in the

proposed agreement, apply to all mineral commodities amenable to

approval of a cooperative agreement.

Section 212.33. Terms Applying After Relinquishment

This section is rewritten with the provision that the lessee may,

after lease relinquishment by the Secretary and the revesting of the

lessor's title, withhold payment of rental and royalty until all

parties agree upon and designate a trustee in writing and in a

recordable instrument to receive all payments due thereunder on behalf

of said parties and their respective successors in title. The provision

that there must be four or more parties entitled to royalties and

rentals before withholding is permitted is removed.

Section 212.41. Rentals and Production Royalty on Oil and Gas Leases

Changes in this section (1) raise the minimum annual rental for

Indian land to $2.00 per acre in keeping with current practices and

rentals for mineral leases on Federal land and (2) clarify at

Sec. 212.41(c) that if valuation provisions in the lease are

inconsistent with the regulations in 30 CFR Chapter II, Subchapters A

and C, the lease provisions shall govern.

Section 212.56. Geological and Geophysical Permits

This section is reorganized in the interests of clarity of

presentation and a change is made to proposed Sec. 212.56(a)(3) to

provide for the release of data after six (6) years after receipt by

the Federal Government, if no time limit for the release of data is

prescribed in the permit, and to provide that data release is subject

to the discretion of the Secretary.

II. Comments Received on Proposed Rules

The notice of Proposed Rulemaking was published in the Federal

Register on November 21, 1991 (56 FR 58734). The proposed rules

provided for a 90-day comment period ending on February 19, 1992. The

comment period was subsequently reopened (57 FR 40298) on September 2,

1992. Public hearings were held at Denver, Colorado on September 25,

1992 and at Albuquerque, New Mexico on September 28, 1992. The closing

date for the submission of comments on proposed rulemaking and the

reopened comment period was November 2, 1992. During the two comment

periods, 27 commenters submitted written comments and/or oral

statements and comments at public hearings. All comments were accepted

for consideration in preparation of the final rules and are addressed

in this portion of the preamble (Section II). All substantive comments

applicable to sections of 25 CFR Parts 211 and 212 were considered with

respect to both Parts whether or not the comments were directed to Part

212 specifically.

(1) One commenter states that the title of Part 211 creates some

unnecessary confusion by referring to ``Leasing'' of tribal lands; that

Part 225 also applies to certain ``leases'' of tribal lands, when

negotiated under the IMDA; and that the title to Part 211 would be more

accurate if it referred to ``Competitive Bid Leasing'' rather than just

``Leasing.''

Response: References to leasing are mostly removed from 25 CFR Part

225 (published separately in final rulemaking, 59 FR 14960) and efforts

made to refer, where at all possible, to the disposition of mineral

resources under Part 225 as disposition by minerals agreement. Also, at

the request of the Indian mineral owner or in the event of waiver,

rejection, or failure of the bidding process, negotiated leases may be

issued under Parts 211 and 212. Thus, the present titling of Part 211

is retained without change.

(2) Several commenters stated that sufficient time for review of

the proposed regulations was not initially provided and ask for

extended review time as well as public hearings at locations convenient

to the Indian tribes; and stated that the proposed rules should be

subject to a negotiated rule-making process among interested tribes,

industry, and the Bureau of Indian Affairs.

Response: As set forth in the introductory remarks (above), the

Secretary reopened the period for comment for an additional 60 days and

public hearings were held at Denver, Colorado and Albuquerque, New

Mexico. Thus, the regulations have been subject to written oral

comments twice and all interested parties have been afforded an

opportunity to influence the content. Additionally, the regulations are

not subject to negotiated rulemaking processes because enacted and

codified legislation is not subject to subsequent unilateral

negotiation to the exclusion of any concerned party.

(3) One commenter indicates that the purpose of the proposed

rulemaking is to make regulations consistent with the regulations

governing mineral leasing and development of Federal lands. The

commenter states that mineral leasing and development on Indian lands

are not sufficiently similar to mineral leasing on Federal lands to

justify uniformity.

Response: One of the Department's purposes in the reformatting and

changing of proposed rules is to make, when appropriate, these

regulations consistent with the regulations governing mineral leasing

and development of Federal lands (56 FR 58734). Appropriate consistency

is desirable because many of the operating and reclamation regulations

of other offices and bureaus of the Department of the Interior are also

applicable in the day-to-day management of the mineral estate on Tribal

and allotted Indian lands subject to mineral leasing and development

under 25 CFR 211 and 212. The commenter is correct that in a number of

important respects mineral

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leasing and development on Indian lands differ from such activities on

Federal lands; in such instances different treatment is required, and

the regulations so provide. To the extent that Indian tribes find the

Department's leasing regulations generally unuseful, they may wish to

enter into minerals agreements under the IMDA (see 25 CFR Part 225).

(4) One commenter states that the rules must provide that fixed

dollar amounts (in lease provisions), whether in relation to annual

rental, bonds, or other fees be indexed for inflation.

Response: Although many fixed costs and charges in these

regulations have been increased to offset the inflationary effects

since the rules were last revised, no provision is made for indexing

costs and charges to reflect the expected decrease in the purchasing

power of money in future years. It is doubtful if an index (standard)

or method of calculation acceptable to all parties to Indian mineral

leasing can be found. Further, the IMDA provides the means by which

indexing for inflation can be done for individual mineral properties

and minerals agreements.

(5) One commenter states that the Department attempting to ``remove

unnecessary regulatory barriers and complications which could make

[Indian] minerals less attractive to industry and thus frustrate

development'' (56 FR 59735) should be principally addressed by tribes

because many of the regulatory barriers and complications exist to

protect tribes.

Response: Tribes may address how best to protect their interests in

minerals agreements under the IMDA (25 CFR Part 225). Also, provision

is made at Sec. 211.29 in final rules for supersedence of Federal

regulations by the provisions of any properly issued tribal

constitution, bylaw, or charter.

(6) One commenter states that the proposed regulations should be

reproposed with coal mining leases and operations addressed by separate

regulations specific to coal operations because, as proposed, the

regulations would impose an unnecessary and duplicate regulatory burden

on coal operations on Indian lands; and further states that coal-

specific regulations must avoid creating overlapping and duplicative

regulatory requirements and that the mining of minerals other than coal

also warrants separate treatment.

Response: The authorization for the leasing of allotted and

unallotted Indian lands for mining (including oil and gas) is set forth

at 25 U.S.C. Sec. 396 and Secs. 396a-396g, in which no provision is

made for the promulgation of separate regulations for individual

mineral commodities. Although not prohibited, the Secretary is of the

opinion that the devising of regulations for the administration of

individual mineral commodities occurring in each individual land

category would create a costly and unmanageable administrative

situation for those engaged in the management of minerals operations

and reclamation of disturbed lands. Sections 211.7, 211.24, 211.47,

211.48, 211.51, 211.54, and 211.58 have all been changed to remove the

concerns of regulatory overlap and duplication.

(7) Several Alaska Native Regional Corporations ask that language

be made in the rules to clarify that the Part 211 Tribal leasing

regulations do not apply to lands conveyed pursuant to the Alaska

Native Claims Settlement Act of 1971.

Response: Language is added in 25 CFR 211.1(a) to clarify that the

rules apply only to lands which the United States holds in trust for

the benefit of an Indian tribe, or which are subject to a restriction

against alienation imposed by the United States.

(8) Several tribal commenters are in favor of a broader retroactive

effect for the proposed regulations. One commenter stated that only the

royalty rate should not be subject to retroactive change by the

regulations. One industry commenter stated that the regulations should

not have any retroactive effect unless agreed to by all parties.

Response: The current regulations in Sec. 211.28 provide for an

effective date and state that the current regulations supersede all

former regulations. The current regulations then include a proviso,

``That no regulations made after the approval of any lease shall

operate to affect the term of the lease, rate of royalty, rental or

acreage unless agreed to by both parties to the lease.'' This provision

has been carried essentially unchanged. No attempt has been made to

change this provision that has been in effect for many years and has

not led to any problems in interpretation or application. Therefore, no

changes were made pursuant to the comments.

(9) Several commenters state that the placement of the provisions

of Sec. 211.29, from regulations formerly in place, at proposed

Sec. 211.1(c) does not: (1) adequately recognize the regulatory

authority of tribes; (2) specifically provide that the proposed

regulations may be superseded by the provisions of any tribal

constitution, bylaw, or ordinance; nor (3) provide the proper platform

for the adoption of tribal bylaws, ordinances, and other measures

governing assignments, taxation, and other matters of regulation of the

Indian mineral estate.

Response: In response to this and other comments the regulation in

25 CFR Sec. 211.29 has been reinstated in the same place, with minor

revisions for clarification purposes. In addition to the tribal

regulatory authority recognized in the new Section 211.1(d) (211.1(c)

in the proposed rules), Section 211.29 recognizes that tribes may enact

laws which supersede these regulations, but not Federal statutes.

(10) One commenter states that many tribes have adopted their own

mineral leasing act, which should be noted in the new regulations.

Response: See the response to comment (9).

(11) One commenter is concerned that each part of proposed 25 CFR

Parts 211, 212, and 225 have separate sets of definitions and states

that only one set of definitions should be used.

Response: The commenter is correct in stating that uniformity of

definition is desirable. However, with the decision to separate 25 CFR

Parts 211 and 212 from Part 225 (59 FR 14960), more than one set of

definitions is required for publication in the Federal Register. Also,

the three parts of regulation respond to at least three different sets

of empowering legislation over about an 80-year, time span such that

differences of definition are unavoidable. Wherever possible terms in

the three sets of regulations have the same meaning.

(12) One commenter points out that ``Bureau'' is specified in

definition, but not used consistently in the proposed regulations and

suggests usage consistent with definition.

Response: We agree. The word ``Bureau'' is removed from definitions

and the regulations in favor of usage of the ``Secretary'' or the

title(s) of the Secretary's designee.

(13) One commenter states that ``coal'' ought to be defined because

it is a referenced mineral in the proposed regulations.

Response: The definition of ``minerals'' includes coal specifically

in definition and also by virtue of including metalliferous, non-

metalliferous, energy, and non-energy minerals. A definition of

``coal'' is not added in final rulemaking.

(14) One commenter suggests that coal be specifically included in

the definition of ``solid minerals.''

Response: Coal is specifically included in the definition of

``minerals'', and by virtue of being a solid is included in the

definition of ``solid minerals.'' The definition is unchanged in final

rulemaking.

(15) Several commenters are concerned that the definition of

``gas'': (1) may or may not include coal-bed

[[Page 35640]]

methane and suggest that methane gas and other ``non-traditional

hydrocarbons'' be exempted from definitions of minerals acquired under

a traditional mineral lease; and (2) should exclude those substances

found in other minerals as a constituent part of other minerals.

Response: The issues raised by commenters are currently being

litigated. The definition of ``gas'' in these regulations is consistent

with the position that the Department of the Interior has taken in

litigation. If necessary, distinction among gases of various origin or

association may be made by the use of suitable modifiers in lease

provisions (e.g., coal-bed methane, natural gas, or carbon-dioxide gas)

at the time of advertisement of properties for lease and/or subsequent

lease negotiation by principals. Further, the IMDA is available to

tribes (and allottees if participating in a minerals agreement under

the IMDA) to specifically address in minerals agreements these issues

on an individual basis.

(16) One commenter states that the definition of a ``gas'' should

make clear the meaning of ``ordinary temperatures and pressure

conditions'' because of perceived differences in ordinary temperature

and pressure in subsurface contrasted with ordinary temperature and

pressure at land surface.

Response: Ordinary temperature and pressure generally means near

room temperature and about one atmosphere pressure as commonly used in

the calculation and handling of gases and in specified standards for

the determination of quantities of materials. The specification of

temperature and pressure standards for produced gas(es) are found in

the operating regulations of the BLM and the production and valuation

regulations of MMS. The specification of a standard, if required,

should appear in lease provisions or be specified at the time of lease

negotiation.

(17) One commenter suggests that the definition in proposed rules

of ``in the best interest of the Indian mineral owner'' be dropped

because an adequate and concise definition of this phrase is difficult

to compose, although the concept is generally understood.

Response: The final definition includes a partial list of factors

to be considered by the Secretary and is consistent with Kenai Oil and

Gas, Inc. v. Department of Interior, 671, F.2d 383.

(18) One commenter suggests that the proposed definition of ``in

the best interest of the Indian mineral owner'' be changed to require

the Secretary to consider any relevant factor in the best interest

determination.

Response: We agree. The definition is changed in final rulemaking.

(19) One commenter is concerned that the definition of ``Indian

lands'' was included in proposed rulemaking with no explanation in

preamble and is different than the definition used by OSM.

Response: The proposed rules state (56 FR 58735) that the

definitions section of the regulations is expanded significantly to

eliminate ambiguities and questions concerning the meaning of

frequently used terms. The definition of ``Indian lands'' used by OSM

is found in SMCRA, and is applicable only to the provisions of SMCRA.

Indeed, that statutory definition has been the subject of varying

interpretations and litigation over its meaning. The definition used in

these regulations simply recognizes that Indian-owned lands held in

trust or subject to Federal restrictions against alienation are within

the purview of the Indian mineral leasing statutes and the Secretary's

trust responsibilities.

(20) One commenter suggests that the proposed definition of

``Indian lands'' specifically exclude Alaska Native Regional

Corporations which own land or interest in minerals.

Response: Language is added to 25 CFR 211.1(a) to specify those

lands to which 25 CFR Part 211 applies, language which excludes lands

or mineral interest owned by Alaska Native Regional Corporations.

(21) One commenter objects to confusing syntax in the proposed

definition of ``Indian lands'' and suggests that such lands be defined

(in part) in terms of ownership by group(s) recognized by the United

States as eligible for services from the Bureau of Indian Affairs.

Another commenter suggests that in use in regulation the words ``trust

or restricted lands'' be changed to ``Indian lands.''

Response: See the response to comment (19).

(22) One commenter questions the need for including lands owned by

any individual Indian in the definition of ``Indian lands'' because

Part 211 deals exclusively with leasing of tribal lands.

Response: Use of the term ``Indian lands'' in Part 211 is very

limited. See Sections 211.9 and 211.22. There the context includes

allotted as well as tribal lands.

(23) Several commenters state that ``Indian surface owner'' needs

to be defined in rulemaking.

Response: We agree. The phrase ``Indian surface owner'' is defined

in both Part 211 and Part 212 because sections of Part 211 are

referenced in Part 212.

(24) One commenter suggests that the definition of ``lessee''

imposes diligent development and other operating obligations (as well

as the obligation of paying royalty and rental) on a designated royalty

payor rather than an operator and suggests the definition be deleted

whereas another commenter states that the definition should be

broadened to include anyone who has been assigned any rights associated

with the lease.

Response: The definition of ``lessee'' in Parts 211 and 212

parallels and supports similar definitions in the operating regulations

of both the BLM and the MMS. The MMS definition includes those who have

been assigned an obligation to make royalty or other payments as

required by the lease. The definition is retained unchanged in final

rulemaking.

(25) Several commenters point out that the definition of ``lessee''

should not include those prior to the time a lease is granted.

Response: We agree. The definition is rewritten to reflect that

those who have made application for or who are negotiating for a lease

are not lessees.

(26) One commenter states that the common mineral varieties should

be excluded from the definition of ``minerals'' at Sec. 211.3.

Response: The authority in the Act of May 11, 1938, for the leasing

of tribal lands for mining purposes has been interpreted broadly since

its enactment. Nothing in the Act suggests that common varieties of

minerals should not be included.

(27) Two commenters object to the exclusion of materials from the

definition of mining based on the type and volume of material

considered for extraction and one questions if the extraction of 5,000

cubic yards of gold and silver bearing material is a non-mining

venture.

Response: Common varieties of mineral resources extracted in small

amounts are excluded from the definition of mining, especially because

the purpose of such extraction is often for local and/or tribal use.

However, permits for these small operations are still reviewed and

approved at the superintendent's office. Gold and silver are not

included in the extraction of small amounts of materials because gold

and silver are precious metals and not common mineral varieties. The

Indian mineral owner still retains the option of disposing of the

common mineral varieties in whatever types and quantities specified by

a minerals agreement under the provisions of the IMDA, if desired.

[[Page 35641]]

(28) One commenter points out that in proposed rulemaking the

definitions of ``oil'' and ``gas'' are at odds with the definitions

used by the Minerals Management Service and suggests that the

definitions of the two Federal agencies should be more compatible.

Response: The definitions of the two Federal agencies are

unavoidably different because those at 25 CFR Sec. 211.3 are similar to

those used by the Bureau of Land Management in the management of

mineral leasing and production whereas the Minerals Management Service

definitions are more closely tied to measurement and royalty management

concerns.

(29) Three commenters suggest that a definition of ``in paying

quantities'' be included in proposed definitions at Sec. 211.3.

Response: The paying quantities determination is made by the Bureau

of Land Management after operations commence and production begins. The

definition of paying quantities is contained in 43 CFR Part 3160. The

definitions of commercial quantities for geothermal resources is in 43

CFR Part 3260 and for coal is in 43 CFR Part 3480. A definition is not

needed here, because this responsibility falls to the BLM to determine

whether production meets the ``pay quantities'' criteria. Therefore no

definition is included.

(30) One commenter suggests that additional definitions be added to

Sec. 211.3 including ``primary term'' and ``maximum term'' as used in

Sec. 211.27.

Response: The primary term is defined in context when used to

describe the duration of a lease. No reference is made to a maximum

term of lease duration in final regulation. These definitions are not

added in final rulemaking.

(31) One commenter states that the definition of ``tar sands'' is

restrictive because it is limited in definition to production by mining

or quarrying.

Response: We agree. The definition is not used in regulation and is

removed from Sec. 211.3 (and Sec. 212.3) in final rulemaking.

(32) Two commenters feel that in proposed Secs. 211.4, 211.5, and

211.6 the authority and responsibility of tribal governments over

operations on reservation lands should be explicitly recognized and one

believes that with respect to the authority and responsibilities of the

various agencies of the U.S. Government, explicit mention of the

Government's trust responsibility to Indians should be included in the

regulations.

Response: The authority and responsibility of tribal governments is

recognized and in these rules at Sec. 211.1(d), at Sec. 211.29, and

discussed above (see comment number 9 and in the summary remarks of

this preamble). Insofar as the mention of the Secretary's trust

responsibility is concerned all Federal agencies must recognize the

trust responsibility of the United States when implementing programs

for Indians.

(33) One commenter is especially concerned about Sec. 211.5 and

states that the regulations should make it clear that coal mining

reclamation requirements and procedures have no application to open-

pit, hard-rock operations.

Response: Section 211.5 is changed to specifically cite the Code of

Federal Regulations governing coal mining and reclamation requirements

and procedures.

(34) One commenter states that the regulations of the MMS recognize

that Indian lessees must ``dual account'' for gas produced from tribal

lands and states that the proposed regulations are silent on this

methodology which could be viewed as a retreat from the valuation

system that greatly enhances tribal income. Another commenter states

that these regulations must expressly state that the trust

responsibility requires the Secretary to maximize valuation on Indian

lands.

Response: Under FOGRMA and the Department of the Interior Manual,

the valuation of production for royalty purposes is a function of the

MMS. Thus, the requirements and methodology of valuation are properly

set forth in appropriate case law and Title 30 of the CFR in Chapter

II, Subchapters A and C, of the MMS rules and regulations. Section

211.6 is rewritten to provide that if parties to a lease or permit are

able to provide reasonable provisions satisfactorily addressing the

functions governed by MMS regulations, the Secretary may approve such

alternate provisions.

(35) Several tribal commenters and many industry commenters raise

questions concerning the application of environmental, historic

preservation and archaeological protection laws to Indian lands. One

tribal commenter states that the National Historic Preservation Act

does not apply to Indian lands. Another opposes the application of the

National Environmental Protection Act (NEPA) to Indian lands. Industry

commenters state that compliance with environmental, archaeological and

historic preservation survey requirements is an extremely burdensome,

expensive, and unnecessary requirement. Several industry commenters

recommend that archaeological surveys be performed after approval of a

lease, but prior to approval of any surface disturbing operations.

Response: The National Environmental Protection Act and the other

historic preservation and archaeological protection statutes cited in

this section apply to Indian lands when activities on those lands are

subject to approval by the Federal Government. Therefore, the

Department has no discretion to determine whether or not to comply with

those laws as they affect mineral leasing on Indian lands. It is also

clear that the provisions of NEPA must be complied with at the time of

lease approval. It is not possible to defer NEPA compliance until the

surface disturbance phase of lease development. However, the prior

proposed regulations stated that all historic preservation and

archaeological surveys would be performed prior to approval of a lease.

It has been determined that this statement may impose a greater burden

than is actually required by applicable regulations. Therefore

Sec. 211.7 is modified to state that ``the Secretary shall ensure that

all clearances and surveys are performed in compliance with these laws

* * *.''

(36) One commenter states that the second sentence of Sec. 211.9

should be revised to read that ``Existing mineral prospecting permits,

exploration and mining leases on these lands issued prior to these

properties being placed in trust status or becoming Indian lands

pursuant to 43 CFR * * *.''

Response: We agree. Section 211.9 is rewritten to clarify that such

lands, once taken into trust or becoming Indian lands, are no longer

treated as public or Federal lands (recognizing pre-existing rights).

(37) Several commenters state that the leasing procedures of

proposed Sec. 211.20 are not clear and suggest that the procedures are

in need of clarification.

Response: We agree. Section 211.20 is rewritten and recast to

clarify procedures and to emphasize the involvement of the Indian

mineral owner in the leasing process.

(38) One commenter states that Sec. 211.20 is unclear as to

amendments to existing leases and suggests that amendments to 1938 Act

leases be negotiated under the 1982 Act (IMDA).

Response: Neither rules formerly in place nor final rules provide a

formal regulatory scheme for amendment to existing leases because the

amendments are either at the convenience of the parties to the lease or

result from lease provisions to open and renegotiate a lease after a

specified event occurs. Regardless of the approach to amendment, the

resulting terms must be approved by the Secretary, an action

[[Page 35642]]

resulting in the issuance of a minerals agreement (25 CFR Part 225), a

new lease, or ancillary terms appended to an existing lease; all of

which are new leases that must be approved by the Secretary. Provision

is made for the amendment of minerals agreements (25 CFR Part 225, 59

FR 14975). Minerals agreements are expected to be the preferred

procedure for the amendment of all existing leases and agreements.

(39) One commenter states that potential lessees should be

instructed to submit lease applications directly to the Indian mineral

owner as well as the superintendent at the time of application.

Response: Submittal of applications to lease to multiple offices is

not required in final rules. Rather, the Indian mineral owner shall be

promptly notified of the lease application and the leasing

alternatives. The course of action to be followed after this

notification is then contingent upon the decisions of the Indian

mineral owner.

(40) Several tribes comment that the royalty rate and rental as

well as bonus should be included as variables in the advertisement of

leases for sealed or oral bid, and that the Secretary should not

unilaterally set a royalty rate and rental amount in the advertisement.

Response: Comments concerning the need for tribal input are well

taken and Sec. 211.20 is modified to require consultation with the

Indian mineral owner prior to advertisement. However, the comments

requesting that royalty rate and rental be variables in the sealed and

oral bid process is not accepted because the procedures can be managed

only with great difficulty. Past experience has shown that it is

extremely difficult to compare the values of bids that are contingent

upon three different variables bid separately. In addition, if an

Indian mineral owner desires to receive offers to lease a land parcel

or tract, the value of which is determined by the total value of a

variety of considerations each of which may be dependent on another,

the procedures under the IMDA or, in certain circumstances, negotiation

offer flexibility to a Tribe.

(41) One commenter states that there ought to be included in

Sec. 211.20 a provision that requires BIA to issue a comprehensive

analysis of the potential value of the property being considered for

oil and gas development and its potential effect upon reservoir

production; otherwise, tribes that do not have independent assessment

capabilities will have no way of knowing what the value of properties

are before they are submitted for bid.

Response: Mineral inventories and appraisals are conducted by the

BLM and BIA, depending upon the resources available. Limited resources

make it impossible to appraise every mineral tract prior to leasing.

The best readily available measure of mineral worth of an oil and gas

tract is likely the fair market value of the tract as revealed by past

and present bonus bids for the tract or (if available) nearby similar

tracts.

(42) One commenter states that the language of Sec. 211.20(b)(5)

indicating the high bidder ``may'' forfeit the required 25 percent of

bonus bid should be changed to ``shall'' and that there is no standard

to establish when the forfeiture occurs.

Response: We agree. In final rules a standard is specified and the

forfeiture is made certain by the use of the word ``shall'' in final

rules.

(43) One commenter states that the successful oral bidder should be

required to immediately pay 25 percent bonus [bid as] deposit at the

time of the auction.

Response: The final rules continue to permit five (5) working days

in which the successful oral auction high bidder will be allowed to

remit the required 25 percent deposit of the bonus bid. In the event of

a spirited auction, the successful high bidder may not have at the

place and time of auction the requisite 25 percent of the bonus bid for

the deposit.

(44) One commenter states that the required publication of a notice

of sale at least thirty (30) days prior to the sale date should be

sixty (60) days to give an interested party adequate time to prepare

for the sale.

Response: The publication of the advertisement of lease sale thirty

(30) days in advance of the sale date is a minimum time interval. The

publication of the advertisement of date of lease sale and ancillary

information may take place more than thirty (30) days before the sale.

This minimum time has for many years proved to be a workable minimum.

(45) Two commenters are of the opinion that the proposed rules

allow for competitive bonus bid and negotiated leases at the same time

and object to negotiations after the potential lessor has the advantage

of evaluating bids received. Further, one commenter states that the

results of competitive bidding should be final and the winning bid

should be awarded the lease.

Response: As owner of the property to be leased, the Indian mineral

owner has wide latitude in the determination of methods of auction and

conditions of lease sale. Under the trust responsibility, the Secretary

must reserve sufficient latitude to properly discharge that

responsibility. Accordingly, there is no provision in final rules for

lease sales and lease negotiations to be conducted at the same time for

the same land tracts. In the event that the results of a lease sale are

not to the liking or not in the best interest of an Indian mineral

owner, action must be taken to satisfy the needs and wishes of the

potential lessor. Section 211.20 therefore balances concerns of

potential lessees and lessors.

(46) One commenter is uncertain why the storage option is granted

at 25 CFR Sec. 211.22 and is unsure of what benefit is derived by a

lessor when a lessee produces oil and gas, but stores it for future

use; and whether or not hydrocarbons not previously produced includes

hydrocarbons produced, but stored; and if a lessee may store previously

produced minerals indefinitely and thereby hold the lease without

payments to the lessor.

Response: The storage option is included at 25 CFR Sec. 211.22 to

provide the Indian mineral owner with a mechanism to profitably

participate in the demand for surge storage capacity for oil and gas

(usually hydrocarbons) by underground storage. Participation is

achieved by means of leasing or adjusting existing lease provisions to

accommodate produced oil and gas, in existing natural or near natural

underground structures (oil and gas traps comprising an oil and gas

field) at or near the end of productive life; or those older, produced

fields having capacity that can be used to store oil and gas. Payments

to Indian mineral owners can be based on metered transfer of oil and

gas in and out of the field (structure) that may provide rental in lieu

of, or in addition to, royalties deriving from field production. Oil

and gas stored may be from the same field or other sources (including

pipelines). Usually, provision must be made in royalty, fees, and/or

rentals to ensure proper accounting and payment for all oil and gas

recovered from storage including quantities in excess of stored amounts

and those fluid phases, produced as a result of introduction of stored

hydrocarbons (say, residue gas) or other gases, that would not have

been produced otherwise. Also, provision must be made in royalty, fees,

and/or rentals to pay the Indian mineral owner for the use of the field

(trap) for storage purposes. Section 211.22 is unchanged in final

rulemaking.

(47) Two commenters representing industry interests recommend the

deletion of proposed Sec. 211.23(b) that requires: (1) the filing of a

statement

[[Page 35643]]

showing a corporate applicant's State of incorporation; (2) that the

corporation is authorized to hold interests in property in the State in

which the lands are operated; and (3) a notarized statement that the

corporation has the power to conduct all business and operations as

described in the lease.

Response: The requirements are retained because the information

required has been found to be useful to the Department, is not

burdensome to industry, and is a standard requirement of long standing

for all significant transactions with corporations. Therefore no

changes were made in final rules.

(48) Several commenters are concerned that the dollar amounts

stated in Sec. 211.24 for bond requirements are inadequate and

recommend that bonds be required in amounts sufficient to protect the

interests of the Indian mineral owner and the United States.

Response: The final rule balances the high cost of bonds against

potential damage to the Indian mineral owner and the United States.

Section 211.24 is rewritten to permit the use of personal bonds as

surety as well as the customary Statewide and Nationwide bonds and

Sec. 211.24(e) provides for increasing bond amounts in any particular

case at the discretion of the Secretary. The goal in regulation remains

that lessees furnish bond sufficient to ensure compliance with all

lease provisions and applicable rules and statutes.

(49) One commenter states that Sec. 211.24 should make provision

for bonding to include Federal, State, or fee mineral leases, the

surface of which is owned by a tribe or individual Indian, for purposes

of surface reclamation as proposed in an approved plan of operation.

Response: The rules in 25 CFR Parts 211 and 212 are concerned with

the leasing of minerals on Indian lands. Therefore, the requirements

for leasing of Federal, State, and fee minerals must be addressed under

other authority, and published elsewhere.

(50) One commenter states that proposed paragraphs 211.24(c) and

211.24(c)(3) are inconsistent in naming the payee.

Response: Although Sec. 211.24 is rewritten the language included

in these proposed paragraphs is essentially the same; the payee is the

Secretary with the stipulation that the letter of credit is payable to

the Bureau of Indian Affairs (the Secretary's designee) upon receipt

from the Secretary of a notice of attachment stating the basis thereof.

(51) One commenter states that the Indian mineral owner should be

allowed to be named as the payee on a bond.

Response: An Indian mineral owner cannot be named as payee on

Statewide or Nationwide bonds which affect more than one Indian mineral

owner. In final rulemaking the Secretary remains the payee because, in

the discharge of the trust responsibility, the bond must be continually

and easily available to defray the cost of abandonment, reclamation

and/or provide for payment of royalties, other charges, and fees in the

event of default.

(52) One commenter states that the proposed Sec. 211.24(d) should

be changed to state explicitly that bonding shall be in an amount

satisfactory to the Secretary and the Indian mineral owner or the

Indian surface owner, in amounts sufficient to ensure compliance with

the requirements of the authorized officer and the Indian mineral owner

or the Indian surface owner and shall be available, in the Secretary's

discretion, with concurrence by the Indian mineral or surface owner, to

satisfy any unpaid debt of the lessee or assignee to the lessor or

surface owner.

Response: In situations requiring complex and detailed bonding in

response to many and varied interests, the prospective lessor should

consider using a minerals agreement under the IMDA (25 CFR Part 225)

rather than 25 CFR Part 211.

(53) One commenter points out that no definition is provided for

the term ``assignee'' which is used in Sec. 211.24.

Response: The paragraph (a) in Sec. 211.24 is rewritten to clarify

the use in context of the word ``assignee.''

(54) Two commenters recommend that proposed paragraph

Sec. 211.24(d) be revised to allow the posting of an individual lease

bond is some amount not to exceed $5,000 to encourage independent

operators to invest and work on Indian land.

Response: The rule at Sec. 211.24 is rewritten in response to

comments to provide in final rulemaking the minimal requirements for

the bonding (or equivalent surety) of lessees conducting mineral

operations on Indian lands such that the Secretary may adequately and

timely fulfill the trust responsibility.

(55) Several commenters object to the single section of land (640

acre), lease-size limitation. It is stated that smaller leases would be

less attractive to industry because they would be less economic. Other

commenters request that the lease-size limitation be subject to

variations on a case-by-case basis to allow for irregularities in land

sections.

Response: Except for coal, the lease-size limitations remain the

same as in the proposed rules. Coal leases have historically been

limited to 2,560 acres with due allowances for exceptions to provide

for the dedication of sufficient reserves to specific projects

(powerplants) to ensure that ventures will not fail for lack of fuel.

Additional language is added to Sec. 211.25 to restore the 2,560-acre

limitation (with provision for exception) for coal and to provide that

the rule of approximation shall apply in the event irregular land

sections are included in the leased land blocks as well as provision

for lands not surveyed under the United States Governmental survey.

Changes to Sec. 211.25 are also made to emphasize that the acquisition

and holding of multiple leases (both adjoining and not adjoining) of

640 acres each are not affected by the acreage limitation. In the past,

large tracts of Indian land have been held by production from a small

portion of a lease and in response to this concern the Department has

for three decades restricted the size of offered leases (especially for

oil and gas) not to exceed 640 acres or one section, with provision for

irregular sections. In addition, the problems raised by commenters may

easily be mitigated in several ways: (1) acquisition of multiple leases

because there is no limitation on the number of leases a party may

enter into; (2) inclusion of multiple leases in a unitization or

communitization agreement to allow mineral development on one lease to

hold more than one lease; and (3) a party desiring a larger lease may

enter into negotiations with an Indian mineral owner to secure a

minerals agreement in accordance with the IMDA, under which there is no

provision limiting lease acreage. Finally, acreage limitations will

have no retroactive effect, and so will not reduce the acreage of any

current lease.

(56) One industry commenter states that the 10-year limitation on

the term of any minerals lease is insufficient to permit development

into production, especially for a surface coal mining operation. The

commenter recommends that the 20-year time period provided in the

Mineral Leasing Act of 1920, for Federal lands, be used instead. The

commenter further recommends that the regulations should prevent tribes

from entering into leases for periods of less than 10 years.

Response: The Indian Mineral Leasing Act of 1938, that governs

leasing of tribal lands, provides a statutory 10-year limit (25 U.S.C.

Sec. 396a) with exceptions for the primary term of lease duration. This

limitation is statutory and may not be waived by the parties to a

lease, or altered by the Department by regulations. As an alternative,

the IMDA

[[Page 35644]]

does not limit the time period for development and therefore, may be

for any time period negotiated by the parties.

(57) One commenter believes that a primary lease term should be

determined by the commodity leased, together with a term maximum, say

oil and gas leases not to exceed 3 years, solid minerals other than

coal not to exceed 5 years, coal not to exceed 10 years, and no lease

to exceed a 20-year maximum unless agreed to between the Indian mineral

owner and the lessee.

Response: Although permitted by statute, the primary term of lease

duration is not specified in final rules as a result of commodity

considerations. If the specific mineral commodity is regarded as a

critical factor in the determination of lease duration, then this

factor may be set forth at the time of advertisement of lease sale,

negotiated, or the lease provisions may be determined in minerals

agreements, under the IMDA (25 CFR Part 225), by the Indian mineral

owner and a prospective lessee.

(58) One tribal commenter points out that some leases impose a

maximum ultimate term [of lease duration] of twenty (20) to thirty (30)

years. Therefore, the commenter recommends that the regulations include

a provision that would defer to specific lease terms on this point.

Response: In any instance where specific lease provisions do not

conflict with statutory authorities, or do not prevent the Department

from exercising its trust responsibilities, the Indian mineral owners

are free to negotiate specific lease provisions of their choosing. In

this particular instance the limitation of lease duration by the

provisions of lease is entirely appropriate. Therefore, the comment is

accepted and a change was made to clarify this point.

(59) One commenter states that commencement clauses (beyond the

primary lease term) should not be permitted because such clauses permit

oil companies to do nothing until the last day of the primary term, and

then begin drilling. Another commenter believes the proposed

regulations governing the primary-term commencement clauses works

contrary to the actual intent of a primary term and believes

Sec. 211.27(b) should be changed. Two commenters recommend the

inclusion of the commencement clause at Sec. 211.27 and state that a

duration of extension should be included in this section and one states

that a continuous drilling clause should be included.

Response: A review of comments indicate that the possibility that

this provision would allow lessees to extend leases for an inordinate

time period is highly unlikely. Most current leases limit the primary

term of lease duration to 3 to 5 years. An extension of this term

(duration) while active drilling takes place is an appropriate

extension of the lease and accords with standard business practice.

However, to ensure that lessees do not abuse this provision, a 120-day

limitation has been added in response to concerns of Indian mineral

owners. A drilling clause without limitation could extend, by mere

drilling that fails to result in production, the primary term of lease

duration.

(60) One commenter states that when read literally, the first

sentence of Sec. 211.27(a) is inconsistent with the provision for the

suspension of operations at Sec. 211.44.

Response: Section 211.44 makes provision for the suspension of

operations on a lease after the primary term. The paragraph at

Sec. 211.27(a) speaks to the primary term of lease duration.

(61) Several commenters state that the regulations should require

tribal consent to any communitization or unitization agreement whether

or not such consent is required in the lease. One commenter states that

the consent of the mineral owner is seldom required for the

communitization of an Indian lease, and in the commenter's view, is

unnecessary.

Response: Every tribal lease executed under the Indian Mineral

Leasing Act of 1938 contains the following provision or a similar

provision:

Unit Operation--The parties hereto agree to subscribe to and

abide by any agreement for the cooperative or unit development of

the field or area, affecting the leased lands, or any pool thereof,

if and when collectively adopted by a majority operating interest

therein and approved by the Secretary of the Interior, during the

period of supervision.

This provision grants the consent of the tribe to cooperative

agreements provided they are reviewed and approved by the Secretary.

The Department does not intend to attempt to amend this lease provision

through these regulations. Instead, the Department affirms that Indian

mineral owners may require consent in any future leases or lease

amendments. The Department believes that this remains the most

equitable method of handling this issue. However, in response to tribal

concerns, a provision has been added at Sec. 211.28 requiring the

Department to consult with the Indian mineral owner prior to making a

determination concerning an operating, unitization, or communitization

agreement or well spacing plan. This will ensure that the Indian

mineral owner has an opportunity to bring any relevant information

concerning the proposal to the Secretary's attention prior to any

cooperative action or well spacing plan being undertaken.

(62) Two commenters state that an affidavit from the lessee stating

that a notice was mailed to each mineral owner of record for whom the

superintendent and/or area director has an address should satisfy the

requirement that all Indian mineral owners will be notified by the

lessee at the time a cooperative agreement is submitted to the

superintendent and/or area director.

Response: We agree. Section 211.28(d) is changed in response to

this comment.

(63) One commenter states that the Secretary shall approve well

spacing programs, in the context of unit agreements and that it is not

clear why the regulations single out well spacing in this context for

Secretarial approval. Another commenter states that the well spacing

program should be approved by the Secretary and the Indian mineral

owner.

Response: The paragraph in Sec. 211.28(h) is rewritten to provide

that the well spacing program is subject to the approval of the

authorized officer under the operating rules of the Bureau of Land

Management. Provision is made at Sec. 211.28(b) for consultation with

the Indian mineral owner before approval of a well spacing plan.

(64) One commenter states that provision for lease segregation at

Sec. 211.28(g) should be included at Sec. 211.28(f) as a specific

``Pugh Clause.'' Such a clause provides that the effect of production

constructively obtained through communitization is restricted to lands

that are communitized and does not extend to other leases or to any

other leased lands outside the communitized area. Another commenter

states that Sec. 211.28(g) should be deleted entirely because it

provides a pugh clause in leases that are already reduced in size when

issued and that segregation should only occur when the lands are

partially included in Federal field-wide units. Another commenter

states that provision for segregation will clearly discourage leasing

and exploration activity on tribal lands.

Response: The segregation clause contained in Sec. 211.28(g) is

intended to ensure diligent development of Indian lands. If portions of

a lease are not included in a communitization agreement, or within a

producing or exploratory cooperative unit then there is no reason why

the excluded lease

[[Page 35645]]

portion should be held by the unit agreement to the disadvantage of the

Indian mineral owner and perhaps of no particular advantage to the

lessee, regardless of whether partially within an entire field or

mining district or only a portion of an entire field or just within a

mining unit. Further, the segregation provision must be applicable to

the lease portions both within and excluded from an exploratory or

productive unit for any mineral commodity and not satisfy only the pugh

clause requirements with respect to an area communitized for gas and

oil.

(65) One commenter states that well spacing is governed by state

oil and gas regulations and that there is no reason for the Secretary

to become involved in well spacing issues.

Response: Each State issues well spacing orders that are commonly,

but not necessarily, accepted as a spacing standard within the State or

area in question. However, States have no authority to regulate well

spacing on Indian land. The Secretary, in consultation with the Indian

mineral owner, has exclusive authority with respect to the spacing of

wells, as reflected in Sec. 211.28(h).

(66) One commenter states that Sec. 211.28 should be expanded to

permit unitization or communitization of hard rock mineral leases and

expresses concern about efficiency of operation in exploiting an ore

body in two or more sections of land.

Response: We agree. Although Sec. 211.28 is not greatly changed

from proposed rules, provision is made for the commenter's concern by

stating in final rules that a cooperative unit or other development

plan means an agreement to develop a specifically designated area

without regard to ownership of the land included in the agreement.

(67) Several commenters ask that various time deadlines be imposed

on the superintendent or area director to review and approve or reject

cooperative agreements. One commenter requests that agreements

submitted after the 90 day deadline be reviewed in the discretion of

the superintendent or area director.

Response: Review of these requests for a time limitation for

Departmental review of proposed cooperative agreements, indicates that

the issues raised in individual agreements and the problems posed in

individual cases vary so widely that it was not advisable to specify a

set time frame for review. However, the 90 day time period specified in

the regulations in effect imposes such a limitation. Cooperative

agreements submitted after the 90 day deadline will be considered by

the Department, but the lessee bears the risk that leases may expire

prior to the Department being able to take action to approve the

agreement.

(68) One commenter states that the existing lock-box arrangement

for receipt of monies is working well and another suggests that it be

stated in Sec. 211.40 that current lock-box arrangements are not to be

affected.

Response: Present lock-box arrangements for the receipt of monies

are not affected by Sec. 211.40. The final regulations merely provide

for the continuation of existing and standard procedures for the

receipt and handling of bonus, rent, and royalty payments.

(69) One commenter suggests that proposed Sec. 211.40 be modified

to allow lease provisions and Federal regulations to be superseded by

tribal regulation and another states that the regulation should

expressly authorize the Secretary to designate the tribe or the tribe's

fiscal agent as the payee.

Response: Section 211.40 is rewritten to clarify that unless

otherwise specifically provided for in a lease all payments after

production has been established shall be made to the MMS or such other

party as may be designated, and that prior to production all bonus and

rental payments shall be made to the superintendent or area director.

Present payment arrangements may be modified by tribal notification to

the Minerals Management Service prior to the modification. All payments

after production has been established are regulated in 30 CFR Chapter

II, Subchapters A and C. Supersedence of Federal regulations is

addressed in final rules at Sec. 211.29.

(70) One commenter points out that proposed Sec. 211.40 is

inconsistent in identifying where payments should be made and states

that payments should be made to the BIA and MMS unless otherwise

provided for in lease terms.

Response: We agree. Section 211.40 is rewritten to clarify where

and when all payments are to be made. Also, after production has been

established the payee may modify the manner of payment in accordance

with 30 CFR Chapter II, Subchapters A and C.

(71) One tribal commenter requests that the minimum rental be

increased from $1.25 per acre to $10.00 per acre with a consumer price

index adjustment clause. Two industry commenters object that in the

proposed regulations rentals are not credited against production

royalties.

Response: The minimum rental specified in final regulations is

$2.00 per acre, an increase of $0.75 per acre from the current rate.

This increases the rental to that presently being imposed for Federal

lands leased for oil and gas, which is a standard rate throughout the

industry. It is clearly stated in final regulations that the rental

will be controlled by the provisions negotiated in a lease. Any Indian

mineral owner who wishes to make provision for higher rental and/or

adjustments as a hedge against inflation in a lease is free to do so

for leases or lease provisions which are negotiated. In such cases,

whether or not the rentals are credited against production royalty is

entirely up to the parties. Where a lease is silent on this issue, the

rentals must be paid in addition to royalties. Therefore, further

changes are not made in Sec. 211.41(a).

(72) One tribal commenter states that the minimum royalty be set at

20 percent and others do not object to the 16\2/3\ percent minimum

royalty. Several industry commenters state that the proposed 16\2/3\

percent minimum royalty is too high and may place Indian minerals at a

competitive disadvantage.

Response: The 16\2/3\ percent royalty proposed in the regulations

is a minimum royalty that may be raised upon agreement of the parties

to a lease, or which may be reduced upon agreement of the parties and

the findings of the Department that a lower rate is in the best

interest of the Indian mineral owner. Although industry has objected to

the increased rates this change merely brings the rates in line with

general practice on Indian lands. For over twenty years the standard

royalty rate for all leases on Indian lands has been 16\2/3\ percent or

higher. The change in the regulations will not cause any significant

change in leasing procedures on Indian lands. It will not retroactively

affect any current leases, and will not require applicants for Indian

leases to agree to this royalty rate against their will. The minimum

royalty simply requires the parties to submit a good reason why a lower

royalty rate is necessary before it may be approved by the Department.

This helps to ensure that the Secretary exercises his responsibility to

protect trust resources.

(73) Several tribes comment that the regulations should contain

provisions concerning valuation of production and other accounting

issues. They are concerned that reference to the MMS regulations in 30

CFR Chapter II, Subchapters A and C, will not be sufficient to clarify

that the lease provisions concerning valuation issues shall govern in

the event that lease provisions are inconsistent with MMS's

regulations.

Response: The valuation provisions contained in current 25 CFR

Sec. 211.13 were included in the regulations prior to

[[Page 35646]]

the creation of the MMS. It is appropriate, now that authority for

valuation issues has been given to the MMS, that the BIA leasing

regulations defer to the much more detailed treatment of this subject

in the MMS regulations. However, in response to tribal concerns a

sentence is added to final Sec. 211.41(c) to clarify that the specific

provisions of a lease on this issue shall govern where those provisions

are inconsistent with the MMS regulations.

(74) One tribe comments that Indian mineral owners should be

allowed to use gas which is in excess of the lessees needs for any

purpose rather than be limited to use of excess gas for schools or

other tribal buildings. Two industry commenters object to this

provision and ask that it be removed entirely or that the use of excess

gas for tribal buildings be treated as a taking of royalty-in-kind.

Response: The provision in the current 25 CFR Sec. 211.13(b), which

is carried over to final rules at 25 CFR Sec. 211.41(d), provides for a

reasonable and limited use of excess gas by the lessor. This provision

has been included in the regulations for at least 30 years. In

addition, many current leases contain a specific provision allowing

such use, and all current leases contain a provision adopting

regulations in effect at the time of the lease. This means that

virtually all current tribal leases are subject to this provision.

Also, in the many years that this provision has been either included in

the leases specifically or by reference to the regulations, we know of

no instance where the right to use excess gas has been abused.

Therefore this section is amended to incorporate the language in

Sec. 211.13(b) of the current regulations as being clearer than the

proposed language. Thus, no change is effected in final rules.

(75) One commenter states that both the annual rental and the

expenditure for development on leases other than oil and gas, and

geothermal resources should be not less than $10.00 per acre and should

be escalated annually based on the CPI [Consumer Price Index] for all

urban consumers.

Response: In Sec. 211.14 formerly in place the minimum annual

rental is fixed at $1.00 per acre and the minimum annual expenditure at

$10.00 per acre unless otherwise authorized by the Secretary. These

minimum payments and expenditures have not been changed in many years

and thus do not reflect the effects of inflation. In final rules at

Sec. 211.42 the minimum annual rental is fixed at $2.00 per acre and

the minimum annual expenditure at $20.00 per acre, but with no

provision for the expected future decline in purchasing power of money.

It is not likely that a satisfactory index or method can be identified.

In those situations where escalation of payments and expenditures is an

issue, the prospective lessors may, however include indexing in

minerals agreements under the IMDA (25 CFR Part 225).

(76) One tribal commenter states that the value of production

removed and sold from the lease should be established FOB at the mine

rather than at the nearest shipping point as proposed at Sec. 211.43.

Another commenter states that the proposed rule would affect their

sales (but did not elaborate) and urged deletion of specific

commodities from this section.

Response: The wording of 25 CFR Sec. 211.43(a) stating the 10

percent minimum royalty ``at the nearest shipping point'' is the same

as that in regulations formerly in place at Sec. 211.15. In those

instances where the point of valuation is an issue or that Sec. 211.43

is not appropriate, as written, to a specific mineral commodity the

Indian mineral owner may wish to negotiate the royalty provisions or

conclude a minerals agreement under the IMDA (25 CFR Part 225). Section

211.43(a) is essentially unchanged in the final rules.

(77) Two commenters indicate that certain royalty rates and royalty

provisions at Sec. 211.43 for minerals other than oil and gas are not

sufficient and state that: (1) the royalty rate for byproducts from

geothermal resources should not be less than 10 percent of the value of

the byproducts; (2) a lower royalty rate should only be granted with

the consent of the Indian mineral owner; (3) a lower royalty rate may

be allowed, but not to exceed 5 years, after which the royalty rate

should be adjusted upward; and (4) that this section should be revised

to take into account potential unconventional means for developing coal

resources, e.g., where a processed product is made out of coal, the

royalty rate should be 12\1/2\ percent of the processed product, not

12\1/2\ percent of the value of what is removed.

Response: Special lease conditions and provisions for certain

mineral commodities, and special and/or new technologies are best

negotiated under the IMDA (25 CFR Part 225). Under Parts 211 and 212 a

lower royalty rate may be approved only if it is in the best interest

of the Indian mineral owner. This determination will require a higher

level of analysis to assure that the tribe is receiving adequate

consideration. Thus, a minimum royalty rate should provide no barrier

to mineral development. Tribes and industry are required to justify

proposed lower royalty rates for leases on a case-by-case basis.

(78) One commenter states that as noted in the proposed rules (56

FR 58736) the BIA for the first time is proposing minimum royalty rates

for minerals other than oil and gas with no explanation of the reasons

for imposing these minimum royalty rates and urges the BIA to withdraw

the minimum royalty provisions.

Response: In current regulations at Sec. 211.15 minimum royalty

rates for minerals other than oil and gas are set forth, and have been

contained in regulations since 1957. The preamble of the proposed

regulations (56 FR 58736), stating that a new section would provide,

for the first time, minimum royalty rates for minerals other than oil

and gas, was in error.

(79) One commenter states that the proposed rules (Sec. 211.43(b))

allow a lower royalty rate if it is determined to be in the best

interest of the Indian mineral owner but that no valid criteria are

established for implementing this term [in the best interest of the

Indian mineral owner]. The commenter states further that the lessee has

no assurance that a lower rate can be obtained in the event that he

proves that a minable deposit exists that cannot profitably be mined at

the rate set by regulation and that this could have a negative effect

on mineral development under Indian leases.

Response: The criteria implementing the best interest determination

are set forth at proposed Sec. 211.3 (56 FR 58738). Minor change in

Sec. 211.3 is made in the final rules to require the Secretary to

consider any relevant factor in the best interest determination.

Special assurances that lower royalty rates can be obtained by a lessor

or lessee, cast in a scenario of expected or possible future events,

are best sought by negotiation of a minerals agreement under the IMDA

(25 CFR Part 225).

(80) Some industry commenters object to the minimum royalty rates

in proposed Sec. 211.43 as being too high and one commenter states that

5 percent or less of net smelter returns has long been the royalty

standard for base and precious metals under leases of fee simple

mineral land and suggests that the regulations should allow minimum

royalties more in line with market rates or should establish a royalty

formula which will accommodate variances in mineral quality and

quantity, mining costs, recovery rates, and the like.

Response: In the event that minimum royalty rates, as set forth in

the

[[Page 35647]]

proposed and/or final Sec. 211.43, are judged to be too high by the

prospective parties to a minerals lease, the parties should consider

negotiating an IMDA minerals agreement. Similarly, if risk sharing or

royalty adjustment provisions in lease or minerals agreement

instruments are contemplated, then the parties should consider

negotiation rather than competitive bidding. In the final regulations,

the minimum royalties for the competitive acquisition of leases from

Indian mineral owners are brought into line with those prevailing on

Federal lands (not fee lands). In view of the negotiation alternatives,

available under both the Indian Mineral Leasing Act of 1938 and the

IMDA, no further changes to Sec. 211.43 are made.

(81) One commenter is of the opinion that proposed Sec. 211.44

requires tribal consent to suspension of operations whereas several

other commenters are concerned that suspension of operations for

remedial purposes by the Secretary (Sec. 211.44(a)) does not require

the consent of the Indian mineral owner; and another commenter states

that the proposed rule would allow an operator to suspend operations

without the consent of the Indian mineral owner and should not be

permitted.

Response: The suspension of operations provision at Sec. 211.44 is

applicable only to leases after expiration of the primary term of lease

duration and in no way affects the prerogatives of the Indian mineral

owner during the primary term. Section 211.44(a) provides the Secretary

the necessary latitude to act, under such provisions and conditions as

may be required, in the discharge of the trust responsibility in those

instances where all else has failed and remedial measures are required,

usually at once, for continued production, protection of the resource,

or protection of the environment. Provision is made at Sec. 211.44(b),

for mineral properties capable of production after expiration of the

primary term of lease duration, such that suspension of operations

requires the consent of the Indian mineral owner.

(82) One commenter states that suspension of operations should: (1)

never exceed the maximum lease term; (2) require the consent of the

Indian mineral owner if the suspension is longer than 90 days; and (3)

result in lease cancellation if an application for suspension of

operations is denied and the operator [be held] responsible for all

abandonment requirements. Another commenter states that: (1) a time

period for accomplishment of remedial operations is absolutely

necessary; (2) the regulations should expressly define the conditions

under which suspension of operations is necessary; and (3) if

suspension of operations is necessary, then the Department's current

policy requiring reinstatement of production within 30 days should

apply.

Response: Numerous provisions and conditions could be added to

Sec. 211.44, but are best dealt with on a case-by-case basis by the

Secretary.

(83) One commenter states that Sec. 211.44(b) has to do with

suspension of operations for non-physical reasons whereas with respect

to non-economic or non-marketing reasons, no tribal consent is required

for suspension of operations after expiration of the primary term and

there is no statutory distinction that justifies requiring tribal

consent in one case but not the other.

Response: We see no way of readily or reasonably separating the

subtle cause and effect of physical versus non-physical reasons for

situations leading to a suspension of operations or production. In the

event remedial measures are required in the proper and timely discharge

of the trust responsibility and in the best interest of the Indian

mineral owner, the Secretary has no choice but to take requisite

remedial measures. Provision is made at Sec. 211.44(b) for the parties

to the lease to make application for permission to suspend operations

on a lease capable of production after expiration of the primary term

of lease duration.

(84) One commenter recommends that the extended term be referred to

as either ``after expiration of the primary term of the lease'' or as

``in the extended term of the lease'' and not both.

Response: We agree. Although both phrases mean the same thing,

meaning that portion of the duration of the lease, when the lease is

held by production beyond the primary term of the lease. The primary

lease term cannot exceed 10 years. Section 211.44 is changed so that

only one phrase is used.

(85) Two commenters state that they do not understand why in

proposed rules that the suspension of operations necessary for remedial

operations must be approved by the Assistant Secretary and that this

matter is best left to the authority of the agency office.

Response: The final regulations are changed to clarify that the

suspension of operations is at the discretion of the Secretary,

although the suspension action will likely be issued by the authorized

officer for Sec. 211.44(a) and for Sec. 211.44(b) by the area director

or superintendent, under authority delegated by the Secretary.

(86) One commenter states that proposed Sec. 211.44(a) makes

reference to minimum royalty requirements but finds no minimum royalty

requirement in the proposed regulations.

Response: The final regulations are clarified to provide that

suspension of operations or production after expiration of the primary

term of lease duration shall not relieve the lessee from liability for

the payment of rental and other payments as required by lease

provisions.

(87) One commenter states that proposed Sec. 211.46 should make

clear to whom the books and records will be made available.

Response: Section 211.46 is modified to provide that lessees shall

allow the Indian mineral owner's representatives, or any authorized

representative of the Secretary to enter all parts of the leased

premises for the purposes of inspection and audit, that lessees shall

keep a full and correct account of all operations as required by the

lease and applicable regulations, and that books and records shall be

made available during regular business hours.

(88) One commenter states that clarification should be added under

Sec. 211.46 to indicate that under the FOGRMA of 1982 a lessee is

required only to maintain records of this type for 6 years after the

records are generated unless the Secretary notifies the record holder

that he has initiated an audit or investigation involving such records

and that such records must be maintained for a longer period.

Response: Record keeping requirements are set forth in the

operating regulations of BLM, MMS, and OSM which are included by

reference at Secs. 211.4, 211.5, and 211.6.

(89) One tribal commenter signifies that proposed Sec. 211.47 be

expanded to include protection of all Indian lands from drainage,

whether leased or not. Another tribal commenter states that the burden

falls on the Tribe to prove that additional development of leased lands

is required by the prudent operator standard. One industry commenter

states that no compensatory royalties should be assessed if ``the

superintendent has denied approval of a cooperative agreement for any

reason.''

Response: These regulations only concern the leasing of tribal

lands, and the requirements which are properly placed on lessees. These

regulations do not properly include provisions for dealing with

drainage from unleased lands. However, the standard that will be

applied to lessees as concerns the leased land is clear. Lessees are

required, among other requirements to exercise diligence in mining,

drilling and operating wells, protect the lease from drainage. This

standard imposes an affirmative duty on the lessee. No

[[Page 35648]]

changes in response to these tribal comments were made. Also, no

changes were made in response to the industry comment seeking relief

from the compensatory royalty provision in Sec. 211.47(b). A proposed

cooperative agreement may properly be rejected by the Department when

such proposed agreement fails to protect the lease. If an inappropriate

cooperative agreement has been rejected by the Department, the

rejection should not serve to relieve the lessee from the lessee's

obligations under the lease.

(90) One tribal commenter requests that the 200 feet setback

requirement for well pads and operations be increased to a minimum of

500 feet.

Response: The proposed section merely carries forward the

limitation contained in current Sec. 211.19. Because the current

regulation provides a minimum setback requirement, a tribe may

negotiate for a greater setback whenever it deems this to be necessary.

Also a greater setback may be requested by the authorized officer prior

to issuance of permission to drill. For these reasons no change is made

at Sec. 211.47(f) in final regulations.

(91) One commenter advises that proposed Sec. 211.47(j) be revised

to provide that the lessee pay the surface owner or tenant all damages,

including damages to crops, buildings, other improvements of the

surface owner occasioned by the lessee's operations as determined by

the Secretary with the consent of the Indian mineral owner.

Response: No change is made in Sec. 211.47 in the final regulations

because the suggested change would create rights that would not be

authorized in law.

(92) One industry commenter states that proposed Sec. 211.47(i)

gives the superintendent sole authority to establish the payment due

the Indian tribe or allottee for surface damages and expresses the

opinion that this should be a matter of negotiation, or based on an

independent appraisal with at most, approval of the superintendent.

Response: Authority for the determination of payment of damages to

the surface owner is retained by the Secretary, who may employ a BIA

appraiser in the decision making process, in this instance the

superintendent, for those situations in which the mineral and surface

estates have been separated and/or surface damages are at issue.

(93) One industry commenter objects to the provision that written

permission must be secured from the Secretary before any operations are

started on the leased premises.

Response: The applicable operating and reclamation regulations

administered by the Bureau of Land Management and the Office of Surface

Mining Reclamation and Enforcement require prior approval for drilling

or mining operations. Therefore, the only change made in this paragraph

is to the authorities cited to include the Office of Surface Mining

Reclamation and Enforcement. The intent of this paragraph is to alert

the mineral industry that a mineral lease issued by an Indian mineral

owner, still requires the approval of the Secretary. After the lease is

approved, lessees are still required to secure written permission

(written approval) from the appropriate agency or agencies before

beginning any operations on the lease.

(94) A tribal commenter feels that Sec. 211.48 should be amended to

include the need for written permission of the Indian mineral owner

before operations are started and that after permission is secured,

operation must also be in accordance with all operating rules and

regulations promulgated by the Secretary or the Indian mineral owner.

Response: Indian mineral owners are always consulted prior to final

approval of any activity involving Indian mineral lands, if it is an

action or activity that requires approval or consultation with the

Indian mineral owner.

(95) Two industry commenters object to Sec. 211.49 stating that the

broad and vague language could be used to restrict or preclude a lessee

from developing a lease. Both commenters suggest that any necessary

restrictions be spelled out in the lease.

Response: This section carries into final rules Sec. 211.21(a) of

regulations currently in place. This provision has been contained in

the Department's regulations for many years. The authority stated in

this section has rarely been used, and to our knowledge, has never been

used to preclude development of a lease. The section is necessary to

ensure that the Secretary has the ability to fulfill the fiduciary duty

to protect the trust resource.

(96) One commenter objects that proposed Sec. 211.51 does not

explicitly address the option of surrender of an operating oil and gas

property to the tribe, but rather appears to be confined to lease

surrenders after which all production ceases.

Response: There is no barrier in either proposed or final

regulations to a request to surrender an operating property to an

Indian mineral owner, subject to approval of the Secretary. There is a

requirement in proposed and final regulations that the lessee discharge

all lease obligations upon surrender, as required.

(97) Several commenters state that the requirement in proposed

Sec. 211.51(d) that the original lease documents be delivered to the

Department with the request to surrender is not supported by any reason

and imposes an additional administrative burden without providing any

benefit.

Response: The requirement that the original lease documents be

surrendered is intended, to the extent possible, to prevent any

confusion as to the extent and location of lands that are leased.

Additionally, surrender will prevent fraudulent assignments. This

requirement has been in the Department's regulations for several

decades (see Sec. 211.27(b)(6)). Also, it is standard industry practice

to require surrender of the documents. Because it is standard industry

practice the requirement does not impose an additional burden on

lessees.

(98) One tribal commenter questions whether this section is

sufficient to ensure that all reclamation be performed in an

environmentally sound manner.

Response: Section 211.51 requires that the leased land be left in

an environmentally sound condition and that all environmental work,

such as reclamation, be done. Changes are made in final regulations to

paragraph (h) to avoid any possible conflict with this requirement.

(99) Two industry commenters seek qualification to the paragraph in

this section requiring the lessee to pay for all drainage which occurs

prior to acceptance of surrender of the lease. One commenter states

that it is unreasonable to permit liability for compensatory royalty to

continue to accrue after filing an application to surrender. One

commenter asks that a provision be added to excuse the lessee from

payment of compensatory royalties for drainage if a cooperative

agreement has been denied ``for any reason'' by the Department.

Response: The provisions contained in proposed Sec. 211.51(g) are

an updated version of the current requirement found in

Sec. 211.27(b)(10). An addition to the proposed regulations is an

explicit reference to compensatory royalties for drainage. Neither of

the proposed changes are included in final regulations because they

could permit unacceptable actions on the part of the lessee. First, it

may be necessary and reasonable for the Department to assess

compensatory royalties for waste or drainage, if lack of diligence or

poor workmanship on the lease continues to cause the lessor damage

after the date of surrender. For instance, if a lessee has

[[Page 35649]]

missed the opportunity to enter into a cooperative agreement, and then

seeks immediately to surrender the lease, the lessor may not be able to

prevent drainage immediately. The lessee may not avoid liability for

the drainage by attempting to surrender the lease. Similarly, the fact

that a lessee at one time submitted a cooperative agreement for

approval will not relieve the lessee from responsibilities under the

regulations and lease provisions. The authority reserved to the

Secretary in final regulations is to ``impose reasonable and equitable

terms and conditions to protect the interests of the Indian mineral

owner.'' If however, the lessee believes that provisions imposed are

arbitrary or capricious, then the lessee may appeal under 25 CFR Part

2. We feel that these procedures provide adequate protection to

lessees.

(100) Three industry commenters object to the increase in filing

fees in proposed Sec. 211.52, by stating that the increase is

unjustified and imposes an additional burden on a struggling industry.

Response: For over four decades the BIA did not raise filing fees.

The increase from $10.00 to $75.00 reflects inflation that has occurred

during four decades and is in keeping with the current filing fees of

the Bureau of Land Management, which increased the filing fees to

$75.00 on December 22, 1987. However, surrender of leases no longer

must be accompanied by a filing fee, because most standard mineral

leases specify a surrender fee.

(101) Both tribes and industry comment that assignments of

stratigraphic horizons or intervals should be permitted. Tribes and

industry indicate that this practice is common within the industry and

would provide economic benefits to the Indian mineral owner.

Response: In final regulations the provisions in proposed rules at

Sec. 211.53(a) that prohibit such assignments are removed. Assignment

of stratigraphic thicknesses or intervals is permitted.

(102) One commenter states that Sec. 211.53 should be revised so

that the broad definition of ``assignment'' that is implied in the

Sec. 211.26(b), formerly in place, is retained.

Response: Proposed Sec. 211.53 is rewritten to be more nearly

compatible with Sec. 211.26 formerly in place and retain the existing

and widely understood concept of an assignment in current use with

respect to Indian mineral leases.

(103) Three commenters state that overrides and production payments

may render prudent economic development, or otherwise economic

operations and proposals uneconomic or prematurely uneconomic. One

commenter recommends that both the Secretary and the Indian mineral

owner approve overrides, production payments, and operating agreements;

one commenter recommends that overrides, production payments, and

operating agreements require approval; one commenter states that at a

minimum overriding royalties and operating agreements should be

forwarded to the Secretary for review.

Response: The creation of overrides, production payments, and use

of operating agreements have been standard business practices in the

minerals industry for many years and often serve as the necessary

economic incentive for the development of, and subsequent production

from, mineral properties, especially for oil and gas. Commenters

concerns are valid that under some conditions (e.g. a sudden decline in

value of the mineral product) mineral properties can be burdened by

overrides and production payments. In response to the concerns of

commenters, provision is made in final regulation that the Indian

mineral owner shall be notified of proposed assignments and agreements

creating overriding royalties or payments out of production, or

agreements designating operators shall be filed with the

superintendent. In those instances where the overrides, production

payments, and operating agreements are of concern to the Indian mineral

owner during the leasing process, the prospective lessors and lessees

may wish to arrive at a minerals agreement under the IMDA (25 CFR Part

225).

(104) Four tribal commenters state that the approval or consent of

the Indian mineral owner should be required for all assignments; one,

if required by lease or by tribal law; another, if any instrument or

agreement either makes a present conveyance of an interest in the

minerals or obligates one party to convey an interest in the minerals

to another party upon performance of some condition; a third,

regardless of whether the right of approval is retained in the lease

document; and a fourth, would require approval of the Indian mineral

owner for all actions regardless of whether the lease requires such

approval. One industry commenter states that the language of proposed

Sec. 211.53 is appropriate but not consistent with the various tribal

ordinances applicable to oil and gas leases; another perceives that

proposed Sec. 211.53 is a restatement of current regulatory practice

and that new regulations should place no greater restriction on the

lessee than currently exists.

Response: Section 211.53 is rewritten in language more nearly

resembling 25 CFR Part 211 and 212 formerly in place and is therefore

more familiar to both Indian mineral owners and prospective lessees.

There is no consensus or general agreement among Indian mineral owners

and/or industry upon the conditions of approval of assignments and

related agreements. Therefore, final regulations provide for a broad

right of assignment of an approved lease for Indian owned minerals, so

long as there is no change in the material provisions of the lease.

Final regulations are applicable to existing and future leases issued

under the Act of May 11, 1938 (25 U.S.C. 396a) and the Act of March 3,

1909 (25 U.S.C. 396). Indian mineral owners that wish to require

consent may, under the IMDA, or by negotiated, individual (not

necessarily standard) lease provisions under the Act of May 11, 1938;

either of which allow the Indian mineral owner to specify the

provisions under which owner consent and/or approval would be required

for lease assignments, overriding royalties, and operating agreements.

(105) One industry commenter objects to proposed lease cancellation

and notice of non-compliance provisions (Sec. 211.54) on the grounds

these provisions would allow the Bureau of Indian Affairs (BIA), to

``assume responsibility for enforcement not only of the provisions of

the IMDA, but of other laws and regulations as well.'' The commenter

objects to the idea that the BIA might interfere with the authorities

which SMCRA vests with the Secretary, who acts through the Office of

Surface Mining Reclamation and Enforcement (OSM).

Response: Nothing in this section is intended to interfere with the

authority of OSM to administer SMCRA. Section 211.54 is a continuation

of the cancellation provision in current 25 CFR Sec. 211.27(a) but

includes more due process procedures to protect lessees, and provides

the Department with the new option of issuing a notice of non-

compliance rather than threatening lease cancellation for any and all

offenses, no matter how minor. This section applies to leases issued

under the Act of May 11, 1938 (25 U.S.C. 396a). These regulations

neither govern IMDA agreements nor purport to govern the type of

activities governed by SMCRA. However, it should be clearly understood

that violations of SMCRA can also be violations of the lease which, in

turn, could lead to cancellation of the lease. Only the BIA,

[[Page 35650]]

pursuant to these regulations, has authority to cancel the lease

itself. Therefore, Sec. 211.54 does not provide the BIA with authority

that overlaps over the authority of OSM.

(106) One tribal commenter asks that a procedure be added for

tribes to report any non-compliance which they may observe.

Response: Because of the close working relationship between the

tribes and the BIA agency and area offices, it has been determined that

a formal regulatory procedure for tribes to share lease compliance

information with the BIA is not necessary. Information of any type and

in any format from tribes concerning lease compliance by lessees is

always welcomed by the Department.

(107) One tribal commenter asks that tribes be granted a larger

independent right to cancel a lease for non-compliance.

Response: The request for tribal authority to cancel leases is not

included in final regulations. The mineral lease approved by the

Secretary concerns lands which the Department has a statutory

obligation to protect. The Secretary will review any and all

information an Indian mineral owner may have concerning whether or not

a lease should be cancelled but the final decision to cancel must

remain with the Secretary: See Yavapai-Prescott Indian Tribe v. Watt,

707 F.2d 1072 (9th Cir. 1983), cert. denied 464 U.S. 1017.

(108) One tribal commenter asks that a time limit be imposed on the

Secretary to issue a decision with regard to a lease cancellation.

Response: The request for a time limit for issuance of a decision

on cancellation of a lease is not included in final regulations. The

factors to be considered and the unique nature of most lease

cancellation actions makes a time deadline for action by the Secretary

inappropriate.

(109) One tribal commenter suggests that proposed Sec. 211.54(a) be

expanded to include the enabling of the noncompliance and cancellation

processes in the event the Secretary determines that a lessee or

permittee has failed to comply with applicable tribal laws and

regulations, and mining or reclamation plans.

Response: Section 211.54(a) is rewritten in the interest of

simplification and to clarify that Sec. 211.54 is enabled in the event

of noncompliance with lease provisions, these regulations, or other

applicable rules and regulations. Although BLM and OSM are primarily

responsible under those agencies' regulations for enforcement of mining

and reclamation plans, under some circumstances it may be appropriate

for BIA officials to issue notices of non-compliance for violations of

such plans. Tribal administrative and judicial remedies will often be

the appropriate means for redressing violations of tribal laws and

regulations. But the revised language of this regulation leaves open

the possibility of enforcement under this Part when an alleged

violation raises mixed issues of Federal and tribal law.

(110) One commenter suggests that service by certified mail should

be deemed to occur seven (7) rather than five (5) days after the date

of mailing (in both Secs. 211.54 and 211.55) to be consistent with MMS

regulations regarding constructive service of official correspondence.

Response: In the interest of consistency the date of service is

deemed to be five (5) working days after the date of mailing in final

regulations.

(111) One commenter states that in proposed Sec. 211.54 there is no

provision for a hearing before the Secretary prior to lease

cancellation and that denial of the right to a hearing is the denial of

the right to due process that exists in present regulations and that

this right should be restored.

Response: Section 211.54 is rewritten in final regulations to

clarify noncompliance and cancellation procedures. Final regulations

provide lessees and permittees adequate time for response to notices of

noncompliance, orders of cessation, and notices of proposed

cancellation or of cancellation. Hearings may be requested in the

responses of lessees and permittees to notices and orders and the

rights of lessees and permittees under 25 CFR Part 2 (Sec. 211.58) are

not abridged. The suggested provisions are not included at Sec. 211.54.

(112) One commenter states that in proposed Sec. 211.54 reference

is made to an ``order of cessation'' and it is not clear what an order

of cessation is or how it differs from a notice of noncompliance.

Another commenter states that BIA does not define a ``cessation

order.''

Response: Section 211.54 is rewritten in final regulations to

clarify noncompliance and cancellation procedures.

(113) Several industry commenters object to proposed Sec. 211.55

and request that it be removed for a number of reasons. First, several

commenters challenge the authority of the Department to impose civil

penalties. Second, the $1,000.00 per day limit is challenged as unduly

high. Finally, even though the commenters maintain that the Secretary

lacks authority to impose civil penalties, the commenters object to the

civil penalties as duplicative of other civil penalties which the

Secretary has authority to impose.

Response: The proposed civil penalties provision is not new. The

current regulations contain Sec. 211.22 that provides for a $500.00 per

day civil penalty for violations of terms of the lease, regulations or

orders. Section 211.22 has been contained in the leasing regulations

for unallotted lands for many years. The proposed revisions to this

section do two things. First, the dollar limit for a violation is

updated to accord with current penalty limits contained in other

Departmental regulations (see 43 CFR Sec. 3162 and Sec. 3163.2). In

fact this dollar figure is conservative when compared to the $5,000.00

per violation per day limit contained in the Bureau of Land

Management's regulations. The second change provides lessees and

permittees with additional due process procedures to ensure that no

penalty is unfairly imposed. The Department believes that the broad

authority granted to the President by Congress to regulate Indian

affairs (see 25 U.S.C. Secs. 2 and 9), the longstanding administrative

interpretation of these statutes as granting authority to assess

penalties, and the unique responsibilities imposed on the Secretary to

protect Indian trust resources support this section. However, in

response to industry comments a provision has been added to this

section in final rules to clarify that no penalty may be assessed under

this section for a violation over which the BLM, OSM, or MMS have

either statutory or regulatory authority to assess a penalty. This will

ensure that this section does not duplicate any other penalty provision

and that no duplicative penalties will be issued.

(114) Five industry commenters express concern that the language in

proposed Sec. 211.56 is not adequate to protect the rights of the data

owner and more specifically that there are no requirements on the part

of the Indian mineral owner to protect the confidentiality of the data

provided to them. Three Indian commenters felt that the proposed

regulation is too weak, because it does not provide specifically for

submittal of collected data to the Indian mineral owner.

Response: The concern regarding the lack of confidentiality

requirements on the part of the Indian mineral owner is best considered

at the time of negotiation between the Indian mineral owner and the

proponent of the permit. Therefore, no specific change is made in final

regulation with respect to this item. Section 211.56 is rewritten to

[[Page 35651]]

reflect the major concerns of the commenters and provides that copies

of collected data shall be forwarded to the Indian mineral owner,

unless otherwise provided in the permit.

(115) One industry commenter expresses concern that seismic option

agreements are not covered in proposed regulation.

Response: The comment regarding seismic option agreements is not

considered because it is deemed that such agreements are best concluded

as minerals agreements under the provisions of the IMDA (25 CFR Part

225).

(116) One of the Indian commenters requests that the regulations

provide for the issuance of geological and geophysical permits by the

Indian mineral owner to university students. The same commenter

proposes that all collected data be submitted to the Indian mineral

owner, who in turn will provide it to the Secretary and also recommends

that the phrase that allows a permittee to take samples for assay and

experimental purposes be deleted.

Response: The recommendation that issuance of geological and

geophysical permits to universities be addressed in final regulations

is not included in final regulations because such requests should be

considered on a case-by-case basis by the Indian mineral owner, who has

the option of requesting assistance from the Secretary if consideration

of such permits pose problems in approval. The related recommendation

for deletion from Sec. 211.56(b) of the provision for the taking of

assay samples for experimental purposes is also not included because,

at times, the taking of experimental assay samples can be of benefit to

the Indian mineral owner.

(117) One industry commenter recommends that ``Indian owner'' in

Sec. 211.56(a) be changed to ``Indian mineral owner'' in order to

distinguish between the Indian surface owner and the Indian mineral

owner. The same commenter recommends that the word ``shall'' rather

than ``may'' (Sec. 211.56(c)) be used in regard to the Secretary's

responsibility to maintain for a reasonable period of time the

confidentiality of data submitted.

Response: The words ``Indian owner'' are changed to ``Indian

mineral owner'' to aid in distinction between the Indian mineral owner

and the Indian surface owner. Language in this section is unchanged in

that the Secretary ``may'' release information after six (6) years,

with the consent of the Indian mineral owner if no time period for

release is prescribed in the permit. The word ``may'' is retained in

the final regulations because the six years is a minimum time period

for information retention. It may not be in the best interest of the

Indian mineral owner to release information after the prescribed

retention period.

(118) One commenter states that the definition of Indian lands in

Sec. 212.3 should be limited to lands owned by any individual Indian or

Alaska native. Otherwise there is no substantive provision in the

regulations in Part 212 which limits their applicability to allotted

lands.

Response: The Secretary does not lease Indian lands without the

consent of the individual Indian mineral owner(s), and thus does not

unilaterally execute a lease for the individual Indian mineral owner,

except as provided in Sec. 212.21. Successors in title to approved and

issued mineral leases follow without respect to these regulations. No

change is made in the final rules.

(119) One commenter states that the definition of a lessor should

be changed to read that a lessor is an Indian mineral owner who has

accepted or consented to a lease or for whom the Secretary has executed

a lease, and any successor in title to an original lessor.

Response: The Secretary does not lease Indian mineral lands without

the consent of the individual Indian mineral owner(s), and thus does

not unilaterally execute a lease for the individual Indian mineral

owner, except as provided by specific statutory exceptions which allow

the Secretary to lease allotted lands when the allottee has died and

his heirs are undetermined or when the owner cannot be located.

Successors in title to approved and issued mineral leases follow

without respect to these regulations. No change is made in the final

rules.

(120) One commenter states that to receive optimal benefit for the

Indian landowner, royalty rates should be considered in the bidding

process.

Response: Royalty rates are considered in the bidding process in

the announcement of lease sale. Royalty bidding is not customarily

included in either written or oral bidding because of the difficulty in

determining the total value of bid based on multiple variables of say,

total value of bonus bid, plus rental bid, plus royalty bid, or any

combination thereof. Royalty rates may be considered or reconsidered

separately if the lease is subsequently negotiated on behalf of the

Indian mineral owner.

(121) One tribal commenter recommends an addition to proposed

Sec. 212.20 to provide that prior to negotiation for lease, a mineral

property must be listed but not successfully won in the most recent

lease sale of no later than the preceding 12-month period.

Response: Section 212.20 is rewritten to provide that the option in

leasing procedures be decided by the Indian mineral owner. In the event

that the leasing option cannot be determined by the Indian mineral

owner(s) the Secretary will act on their behalf, and in the best

interest of the Indian mineral owner(s).

(122) One tribal commenter suggests that proposed Sec. 212.20 be

modified to provide that if an offer to lease a mineral property is

made, and no tribal property exists within the same section or spacing

order, and given the approval of the Indian mineral owner, or the

majority of owners; the BIA or the Indian mineral owners themselves be

able to negotiate a lease agreement, subject to approval of the

Secretary.

Response: The suggested modifications to Sec. 212.20 place a great

many restrictions on the leasing procedures. The required consent of

all Indian mineral owners to the leasing of mineral lands composed of

both tribal and individual mineral ownership could adversely affect all

owners if difficulty is experienced in reaching a consensus. Thus, the

suggested modifications are not made in final regulations. However,

provision is made in final regulations at Sec. 212.20 that the Indian

mineral owner be advised of the results of bidding and that the lease

shall not be approved until the consent of the Indian mineral owner has

been obtained.

(123) One commenter suggests that a sentence be added to proposed

Sec. 212.20(b)(5) to provide that the Secretary shall not disperse any

bonus money to the Indian mineral owner(s) until such time as the lease

has been signed by the Indian mineral owner(s) unless otherwise agreed

to by the successful bidder.

Response: Bonus monies are not dispensed until the lease is issued.

Money received is placed in a special account at the BIA area or agency

where it is retained until a lease number can be assigned; whereupon

money is distributed after the lease is signed and a number assigned to

the lease instrument.

(124) One commenter states that the language of proposed

Sec. 212.20(a) should be the same as that in proposed Sec. 211.20(a)

providing the same superintendent is meant at both places, otherwise,

guidance as to the appropriate superintendent should be given.

Response: We agree. Change is made in the final regulations such

that both paragraphs now include a reference to

[[Page 35652]]

the superintendent having jurisdiction over the lands, because the same

superintendent is the same in both instances.

(125) One commenter suggests changes in Sec. 212.30 (a) and (b) to

restrict references to lessors and lessees to the mineral interest only

and that there does not appear to be any good reason for relieving

[from the supervision of the Secretary] the unrestricted land of an

existing lease.

Response: Changes are not made in response to this comment because

the references in these paragraphs are to the unrestricted owners and

not to the owners under restriction. Protection for the lessee existing

prior to the removal of restriction are contained in Sec. 212.30(b)

which provides that the Supervision of the Secretary shall continue

until adequate arrangements have been made to account for the mineral

resources of the restricted land separately from those of the

unrestricted. The unrestricted lands must be relieved from the

Supervision of the Secretary because the removal of restriction also

removes the authority of the Secretary.

(126) One commenter states that the 30-day notice to lessee and

lessor in proposed Sec. 212.33(a) is not adequate for the lessee to

prepare title opinions in order to timely and properly pay rentals and

royalties and suggests that a 120-day notice is appropriate unless a

shorter period is agreed to by the parties [to the lease instrument].

Response: The 30-day notice to principals in the event the

Secretary relinquishes supervision during the life of a mineral lease

instrument is standard and has been in the present regulations

(Sec. 212.29) for many years without causing difficulty. No change is

made in the final regulations.

(127) One commenter points out that the word ``fee'' is used in a

dual sense in Sec. 212.33 and suggests that distinction be made between

monetary fees and fee simple title and also suggests other changes in

this section in the interest of clarity.

Response: We agree. Sec. 212.33(b) is rewritten in final regulation

to clarify and simplify the provisions of this section.

(128) One commenter states that Sec. 212.56(c) should be amended to

state specifically that the subject section is applicable to allotted

lands only.

Response: The title of 25 CFR Part 212 states that these

regulations are applicable to the leasing of allotted lands for mineral

development and full explanation of the purpose and scope of Parts 211

and 212 are contained in Secs. 211.1 and 212.1 and to considerable

extent in preamble. This paragraph, although redesignated, remains

unchanged.

(129) One commenter states that the use of the words ``surface

occupant'' in proposed Sec. 212.56(c) be changed to ``surface owner.''

Otherwise the lessee may be in the position of not knowing who to

negotiate with, the surface occupant or the surface owner.

Response: The lessee may have to negotiate with both the surface

occupant and the surface owner depending upon land use (e.g., row crops

during the growing season on leased surface) and provisions of the

surface lease between the surface lessor and surface lessee. The

surface occupant is oftentimes the individual easiest to find. This

section is unchanged in final rules.

(130) One commenter states that proposed Sec. 212.56 should be

revised to make clear that the consent of the Indian surface owner is

not required by these regulations and that the consent referred to in

proposed paragraph (c) is required only if made ``necessary'' by some

other applicable law.

Response: Section 212.56 in final regulations provides that where

the Indian mineral owner is not the surface owner, the lessee must

obtain any additional necessary permits or rights of ingress or egress

from the surface occupant. This information is provided to lessees so

that the lessee will know that under some conditions a mineral lease

does not automatically authorize surface ingress and egress.

III. Conclusion

The scope and purpose of these final rules are to revise,

streamline and update implementation of the Act of May 11, 1938, as

amended, and the Act of March 3, 1909, as amended, that provide for the

leasing of Indian tribal and allotted lands, respectively, for mineral

development. By means of these final rules, the Department provides,

within statutory limitations, increased communication between the

Indian mineral owner and the Secretary and provides the Indian mineral

owner greater recognition and authority in the mineral leasing of

Indian lands within the framework of the Secretary's trust

responsibility and the determination of the best interest of the Indian

mineral owner. The Department understands the concerns and importance

to tribes of the recognition of tribal authority and responsibility in

matters of the management generally of their own mineral resources.

This authority and responsibility are recognized at Secs. 211.1 and

211.29 in final rules. Section 211.29 specifically permits the

supersedence of Federal regulations by the provisions of ordinance,

resolution, or other action authorized under any properly issued tribal

constitution, bylaw, or charter. Superseding provisions that: (1)

nullify the provisions of enacted legislation or judicial decision that

preclude the exercise of tribal authority; (2) modify the provisions of

an existing lease or permit which constitute substantially the

consideration of the lease or permit, or without which the lease or

permit would not have been made; or (3) provide for a regulatory taking

cannot be approved by the Secretary. Also, the rules formerly in place

have not been revised in entirety since 1938 and therefore the action

of the Department, in this revision, reflects in final regulation the

enactment of legislation, court decisions, evolution of usual and

common business and administrative practices, and changes and

reorganizations within the Federal government that has taken place

during the last 58 years.

Executive Order No. 12866 and Regulatory Flexibility Act

These rules have been reviewed under Executive Order 12866. In

addition, the Department of the Interior has determined that these

rules 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.).

This final rulemaking will have equal impact on anyone desiring to

engage in prospecting for or developing Indian-owned minerals,

including oil and gas and geothermal resources. The promulgation of

final rulemaking reduces the regulatory burden imposed on such persons

in several instances. This rulemaking will increase the filing fee

(from $10.00 to $75.00) that must accompany each application for lease,

permit, or assignment thereof and is no different from the filing fees

presently required when filing on Federal lands. This increase is

necessary to partially compensate the United States for its costs of

processing those documents, but experience shows that this increase is

not an amount that will discourage or prevent any small business from

contracting to engage in mineral development on Indian lands. The

minimum rental for mineral leases on Indian land will be increased from

$1.25 to $2.00 per acre which is no different from the minimum rentals

imposed on lessees of Federal minerals. The minimum annual development

expenditure on leases other than oil and gas and geothermal resources

will increase from $10.00 to $20.00 per acre. The increases in minimum

rental and annual development expenditure reflect

[[Page 35653]]

the effects of inflation during the last several years on the cost of

doing business, helps ensure diligent development of the Indian mineral

estate, and helps to protect the Indian mineral owner against the

decline through time in purchasing power of dollars received from the

Indian mineral leases. These rules promote economic growth by providing

tribes and individual Indian mineral owners greater opportunity to

negotiate or participate in the negotiation of leases and permits that

maximize their best economic interest and minimize any adverse

environmental and cultural impact and at the same time enhance economic

growth by allowing wise use of a portion of the National mineral

reserve base that might not be otherwise available.

Executive Order No. 12612

The Department has determined that these rules do not have

significant federalism effects. These rules support the goals of E.O.

No. 12612 by enhancing self determination among the Indian communities

by encouraging tribes to responsibly and independently achieve their

personal, cultural, and economic objectives through their own efforts.

Executive Order No. 12630

In accordance with E.O. 12630, the Department has determined that

these rules do not have significant takings implications.

Executive Order No. 12988

The Department has determined that these regulations meet the

applicable standards provided in Sections 3(a) and 3(b) (2) of

Executive Order No. 12988.

National Environmental Policy Act of 1969

The changes made in this final rulemaking are for the purpose of

streamlining and updating the regulations implementing the Act of May

11, 1938, as amended, and the Act of March 3, 1909, as amended. These

rules constitute an administrative action and do not impact on the

physical environment. The approval of mineral leases, permits, and

assignments will require compliance with the provisions of the National

Environmental Policy Act of 1969, including public participation in

compliance with the regulations of the Council on Environmental

Quality. In analyzing the alternatives to the changes in previously

proposed rulemaking that were made, the Bureau of Indian Affairs

considered the changes to be of such minor variation and degree that

the impacts were deemed equal to or less than the changes made by the

previously proposed rulemaking. The Department of the Interior has

determined therefore, that there will be no significant impact to the

human environment.

Paperwork Reduction Act of 1980

This rule is exempt from the information collections requirement

under the Paperwork Reduction Act, Pub. L. 95-511 (44 U.S.C. 3501 et

seq.).

List of Subjects in 25 CFR Parts 211 and 212

Geothermal energy, Indians--lands, Mineral resources, Mines, Oil

and gas exploration, Reporting and recordkeeping requirements.

Words of Issuance

For the reasons set out in the preamble, Parts 211 and 212 of Title

25, Chapter I of the Code of Federal Regulations are revised as set

forth below.

PART 211--LEASING OF TRIBAL LANDS FOR MINERAL DEVELOPMENT

Subpart A--General

Sec.

211.1 Purpose and scope.

211.2 Information collection.

211.3 Definitions.

211.4 Authority and responsibility of the Bureau of Land Management

(BLM).

211.5 Authority and responsibility of the Office of Surface Mining

Reclamation and Enforcement (OSM).

211.6 Authority and responsibility of the Minerals Management

Service (MMS).

211.7 Environmental studies.

211.8 Government employees cannot acquire leases.

211.9 Existing permits or leases for minerals issued pursuant to 43

CFR chapter II and acquired for Indian tribes.

Subpart B--How To Acquire Leases

211.20 Leasing procedures.

211.21 [Reserved]

211.22 Leases for subsurface storage of oil or gas.

211.23 Corporate qualifications and requests for information.

211.24 Bonds.

211.25 Acreage limitation.

211.26 [Reserved]

211.27 Duration of leases.

211.28 Unitization and communitization agreements, and well

spacing.

211.29 Exemption of leases and permits made by organized tribes.

Subpart C--Rents, Royalties, Cancellations and Appeals

211.40 Manner of payments.

211.41 Rentals and production royalty on oil and gas leases.

211.42 Annual rentals and expenditures for development on leases

other than oil and gas, and geothermal resources.

211.43 Royalty rates for minerals other than oil and gas.

211.44 Suspension of operations.

211.45 [Reserved]

211.46 Inspection of premises, books and accounts.

211.47 Diligence, drainage and prevention of waste.

211.48 Permission to start operations.

211.49 Restrictions on operations.

211.50 [Reserved]

211.51 Surrender of leases.

211.52 Fees.

211.53 Assignments, overriding royalties, and operating agreements.

211.54 Lease or permit cancellation; Bureau of Indian Affairs

notice of noncompliance.

211.55 Penalties.

211.56 Geological and geophysical permits.

211.57 Forms.

211.58 Appeals.

Authority: Sec. 4, Act of May 11, 1938, (52 Stat. 347): Act of

August 1, 1956 (70 Stat. 774): 25 U.S.C. 396a-g; and 25 U.S.C. 2 and

9.

Subpart A--General

Sec. 211.1 Purpose and scope.

(a) The regulations in this part govern leases and permits for the

development of Indian tribal oil and gas, geothermal, and solid mineral

resources except as provided under paragraph (e) of this section. These

regulations are applicable to lands or interests in lands the title to

which is held in trust by the United States or is subject to a

restriction against alienation imposed by the United States. These

regulations are intended to ensure that Indian mineral owners desiring

to have their resources developed are assured that they will be

developed in a manner that maximizes their best economic interests and

minimizes any adverse environmental impacts or cultural impacts

resulting from such development.

(b) The regulations in this part shall be subject to amendment at

any time by the Secretary of the Interior. No regulation that becomes

effective after the date of approval of any lease or permit shall

operate to affect the duration of the lease or permit, rate of royalty,

rental, or acreage unless agreed to by all parties to the lease or

permit.

(c) The regulations of the Bureau of Land Management, the Office of

Surface Mining Reclamation and Enforcement, and the Minerals Management

Service that are referenced in Secs. 211.4, 211.5, and 211.6 are

supplemental to the regulations in this part, and apply to parties

holding leases or permits for development of Indian mineral resources

unless specifically stated otherwise in this part or in such other

Federal regulations.

(d) Nothing in the regulations in this part is intended to prevent

Indian tribes

[[Page 35654]]

from exercising their lawful governmental authority to regulate the

conduct of persons, businesses, operations or mining within their

territorial jurisdiction.

(e) The regulations in this part do not apply to leasing and

development governed by regulations in 25 CFR Parts 213 (Members of the

Five Civilized Tribes of Oklahoma), 226 (Osage), or 227 (Wind River

Reservation).

Sec. 211.2 Information collection.

The information collection requirements contained in this part do

not require a review by the Office of Management and Budget under the

Paperwork Reduction Act (44 U.S.C. 3501; et seq.).

Sec. 211.3 Definitions.

As used in this part, the following words and phrases have the

specified meaning except where otherwise indicated:

Applicant means any person seeking a permit, lease, or an

assignment from the superintendent or area director.

Approving official means the Bureau of Indians Affairs official

with delegated authority to approve a lease or permit.

Area director means the Bureau of Indian Affairs official in charge

of an area office.

Authorized officer means any employee of the Bureau of Land

Management authorized by law or by lawful delegation of authority to

perform the duties described in this part and in 43 CFR Parts 3160,

3180, 3260, 3280, 3480 and 3590.

Cooperative agreement means a binding arrangement between two or

more parties purporting to the act of agreeing or of coming to a mutual

arrangement that is accepted by all parties to a transaction (e.g.,

communitization and unitization).

Director's representative means the Office of Surface Mining

Reclamation and Enforcement director's representative authorized by law

or lawful delegation of authority to perform the duties described in 30

CFR part 750.

Gas means any fluid, either combustible or non-combustible, that is

produced in a natural state from the earth and that maintains a gaseous

or rarefied state at ordinary temperature and pressure conditions.

Geological and geophysical permit means a written authorization to

conduct on-site surveys to locate potential deposits of oil and gas,

geothermal or solid mineral resources on the lands.

Geothermal resources means:

(1) All products of geothermal processes, including indigenous

steam, hot water and hot brines;

(2) Steam and other gases, hot water, and hot brines, resulting

from water, gas or other fluids artificially introduced into geothermal

formations;

(3) Heat or other associated energy found in geothermal formations;

and

(4) Any by-product derived therefrom.

In the best interest of the Indian mineral owner refers to the

standards to be applied by the Secretary in considering whether to take

an administrative action affecting the interests of an Indian mineral

owner. In considering whether it is ``in the best interest of the

Indian mineral owner'' to take a certain action (such as approval of a

lease, permit, unitization or communitization agreement), the Secretary

shall consider any relevant factor, including, but not limited to:

economic considerations, such as date of lease expiration; probable

financial effect on the Indian mineral owner; leasability of land

concerned; need for change in the terms of the existing lease;

marketability; and potential environmental, social, and cultural

effects.

Indian lands means any lands owned by any individual Indian or

Alaska Native, Indian tribe, band, nation, pueblo, community,

rancheria, colony, or other tribal group which owns land or interests

in the land, the title to which is held in trust by the United States

or is subject to a restriction against alienation imposed by the United

States.

Indian mineral owner means an Indian tribe, band, nation, pueblo

community, rancheria, colony, or other tribal group which owns mineral

interests in oil and gas, geothermal or solid mineral resources, title

to which is held in trust by the United States, or is subject to a

restriction against alienation imposed by the United States.

Indian surface owner means any individual Indian or Indian tribe

whose surface estate is held in trust by the United States, or is

subject to restriction against alienation imposed by the United States.

Lease means any contract approved by the United States under the

Act of May 11, 1938 (52 Stat. 347) (25 U.S.C. 396a-396g), as amended,

that authorizes exploration for, extraction of, or removal of any

minerals.

Lessee means a natural person, proprietorship, partnership,

corporation, or other entity that has entered into a lease with an

Indian mineral owner, or who has been assigned an obligation to make

royalty or other payments required by the lease.

Lessor means an Indian mineral owner who is a party to a lease.

Minerals includes both metalliferous and non-metalliferous

minerals; all hydrocarbons, including oil and gas, coal and lignite of

all ranks; geothermal resources; and includes but is not limited to,

sand, gravel, pumice, cinders, granite, building stone, limestone,

clay, silt, or any other energy or non-energy mineral.

Minerals Management Service official means any employee of the

Minerals Management Service (MMS) authorized by law or by lawful

delegation of authority to perform the duties described in 30 CFR

chapter II, subchapters A and C.

Mining means the science, technique, and business of mineral

development including, but not limited to: opencast work, underground

work, and in-situ leaching directed to severance and treatment of

minerals; Provided, when sand, gravel, pumice, cinders, granite,

building stone, limestone, clay or silt is the subject mineral, an

enterprise is considered ``mining'' only if the extraction of such a

mineral exceeds 5,000 cubic yards in any given year.

Oil means all nongaseous hydrocarbon substances other than those

substances leasable as coal, oil shale, or gilsonite (including all

vein-type solid hydrocarbons). Oil includes liquefiable hydrocarbon

substances such as drip gasoline and other natural condensates

recovered or recoverable in a liquid state from produced gas without

resorting to a manufacturing process.

Permit means any contract issued by the superintendent and/or area

director to conduct exploration on; or removal of less than 5,000 cubic

yards per year of common varieties of minerals from Indian lands.

Permittee means a person holding or required by this part to hold a

permit to conduct exploration operations on; or remove less than 5,000

cubic yards per year of common varieties of minerals from Indian lands.

Secretary means the Secretary of the Interior or an authorized

representative.

Solid minerals means all minerals excluding oil, gas and geothermal

resources.

Superintendent means the Bureau of Indian Affairs official in

charge of the agency office having jurisdiction over the minerals

subject to leasing under this part.

Sec. 211.4 Authority and responsibility of the Bureau of Land

Management (BLM).

The functions of the Bureau of Land Management are found in 43 CFR

part 3160--Onshore Oil and Gas Operations, 43 CFR part 3180--Onshore

Oil and Gas

[[Page 35655]]

Unit Agreements: Unproven Area, 43 CFR part 3260--Geothermal Resources

Operations, 43 CFR part 3280--Geothermal Resources Unit Agreements:

Unproven Areas, 43 CFR part 3480--Coal Exploration and Mining

Operations, and 43 CFR part 3590--Solid Minerals (other than coal)

Exploration and Mining Operations; and currently include, but are not

limited to, resource evaluation, approval of drilling permits, mining

and reclamation, production plans, mineral appraisals, inspection and

enforcement, and production verification. These regulations, apply to

leases and permits approved under this part.

Sec. 211.5 Authority and responsibility of the Office of Surface

Mining Reclamation and Enforcement (OSM).

The OSM is the regulatory authority for surface coal mining and

reclamation operations on Indian lands pursuant to the Surface Mining

Control and Reclamation Act of 1977 (30 U.S.C. 1201 et seq.). The

relevant regulations for surface coal mining and reclamation operations

are found in 30 CFR part 750. Those regulations apply to mining and

reclamation on leases approved under this part.

Sec. 211.6 Authority and responsibility of the Minerals Management

Service (MMS).

The functions of the MMS for reporting, accounting, and auditing

are found in 30 CFR chapter II, subchapters A and C, which, apply to

leases approved under this part. To the extent the parties to a lease

or permit are able to provide reasonable provisions satisfactorily

addressing the functions governed by MMS regulations, the Secretary may

approve alternate provisions in a lease or permit.

Sec. 211.7 Environmental studies.

(a) The Secretary shall ensure that all environmental studies are

prepared as required by the National Environmental Policy Act of 1969

(NEPA) and the regulations promulgated by the Council on Environmental

Quality (CEQ), found in 40 CFR parts 1500 through 1508.

(b) The Secretary shall ensure that all necessary surveys are

performed and clearances obtained in accordance with 36 CFR parts 60,

63, and 800 and with the requirements of the Archaeological and

Historic Preservation Act (16 U.S.C. 469 et seq.), the National

Historic Preservation Act (16 U.S.C. 470 et seq.), The American Indian

Religious Freedom Act (42 U.S.C. 1996), and Executive Order 11593,

Protection and Enhancement of the Cultural Environment (3 CFR, 1971

through 1975 Comp., p. 559). If these surveys indicate that a mineral

development will have an adverse effect on a property listed on or

eligible for listing on the National Register of Historic Places, the

Secretary shall:

(1) Seek the comments of the Advisory Council on Historic

Preservation, in accordance with 36 CFR part 800;

(2) Ensure that the property is avoided, that the adverse effect is

mitigated, or;

(3) Ensure that appropriate excavations or other related research

is conducted and ensure that complete data describing the historic

property is preserved.

Sec. 211.8 Government employees cannot acquire leases.

U.S. Government employees are prevented from acquiring leases or

interests in leases by the provisions of 25 CFR part 140 and 43 CFR

part 20 pertaining to conflicts of interest and ownership of an

interest in trust land.

Sec. 211.9 Existing permits or leases for minerals issued pursuant to

43 CFR chapter II and acquired for Indian tribes.

(a) Title to the minerals underlying certain Federal lands, which

were previously subject to general leasing and mining laws, is now held

in trust by the United States for Indian tribes. Existing mineral

prospecting permits, exploration and mining leases on these lands,

issued prior to these lands being placed in trust status or becoming

Indian lands, pursuant to 43 CFR chapter II (and its predecessor

regulations), and all actions on the permits and leases shall be

administered by the Secretary in accordance with the regulations set

forth in 30 CFR chapters II and VII and 43 CFR chapter II, as

applicable, provided, that all payment or reports required by a non-

producing lease or permit, issued pursuant to 43 CFR chapter II, shall

be made to the superintendent having administrative jurisdiction over

the land involved, instead of the officer of the Bureau of Land

Management designated in 43 CFR unless specifically stated otherwise in

the statutes authorizing the United States to hold the land in trust

for an Indian tribe. Producing lease payments and reports will be

submitted to the Minerals Management Service in accordance with 30 CFR

chapter II, subchapters A and C.

(b) Administrative actions regarding an existing lease or permit

under this section, may be appealed pursuant to 25 CFR part 2.

Subpart B--How to Acquire Leases

Sec. 211.20 Leasing procedures.

(a) Indian mineral owners may, with the approval of the

superintendent or area director, lease their land for mining purposes.

No oil and gas lease shall be approved unless it has first been offered

for bidding at an advertised lease sale in accordance with this

section. Leases for minerals other than oil and gas shall be advertised

for bids as prescribed in this section unless the Secretary grants the

Indian mineral owners written permission to negotiate for lease.

Application for leases shall be made to the superintendent having

jurisdiction over the lands.

(b) Indian mineral owners may request that the Secretary prepare

and advertise or negotiate (if the requirements of this section have

been met) mineral leases on their behalf. If requested by an applicant

interested in acquiring rights to Indian-owned minerals, the Secretary

shall promptly notify the Indian mineral owner, and advise the owner in

writing of the alternatives available, including the right to decline

to lease. If the Indian mineral owner decides to have the leases

advertised, the Secretary shall consult with the Indian mineral owner

concerning the appropriate royalty rate and rental. The Secretary may

then undertake the responsibility to advertise and lease in accordance

with the following procedures:

(1) Leases shall be advertised to receive optimum competition for

bonus consideration, under sealed bid, oral auction, or a combination

of both. Notice of such advertisement shall be published in at least

one local newspaper and in one trade publication at least thirty (30)

days in advance of sale. If applicable, such notice must identify the

reservation within which the tracts to be leased are found. No specific

description of the tracts to be leased need be published. Specific

description of such tracts shall be available at the office of the

superintendent and/or area director upon request. The complete text of

the advertisement, including a specific description, shall be mailed to

each person listed on the appropriate agency or area mailing list.

Individuals and companies interested in receiving advertisements of

lease sales should send their mailing information to the appropriate

superintendent or area director for future reference.

(2) The advertisement shall offer the tracts to the responsible

bidder offering the highest bonus. The Secretary, after consultation

with the Indian mineral owner, shall establish the rental and

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royalty rates which shall be stated in the advertisement and shall not

be subject to negotiation. The advertisement shall provide that the

Secretary reserves the right to reject any or all bids, and that

acceptance of the lease bid by the Indian mineral owner is required.

(3) Each sealed bid must be accompanied by a cashier's check,

certified check or postal money order, or any combination thereof,

payable to the payee designated in the advertisement, in an amount not

less than 25 percent of the bonus bid, which shall be returned if that

bid is not accepted.

(4) A successful oral auction bidder will be allowed five (5)

working days to remit the required 25 percent deposit of the bonus bid.

(5) A successful bidder shall, within thirty (30) days after

notification of the bid award, remit to the Secretary the balance of

the bon

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