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

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## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** July 8, 1996
- **Citation:** 61 FR 35634

## Text

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,

[[Page 35635]]

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

[[Page 35636]]

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

[[Page 35637]]

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

[[Page 35638]]

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

[[Page 35639]]

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A96-16036. Public record. Not legal advice.