Oil and Gas and Sulphur Operations in the Outer Continental Shelf

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010-AC39

Oil and Gas and Sulphur Operations in the Outer Continental Shelf

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a provision of the December

10, 1996, Memorandum of Understanding (MOU) between the Department of

the Interior (DOI) and the Department of Transportation (DOT) Regarding

Outer Continental Shelf (OCS) Pipelines. Under this MOU, the two

departments jointly regulate OCS pipelines. As specified in the MOU,

MMS regulations would pertain to all OCS oil or gas pipelines located

upstream of the points at which operating responsibility for the

pipelines transfer from a producing operator to a transporting

operator.

DATES: MMS will consider all comments we receive by December 1, 1997.

We will begin reviewing comments then and may not fully consider

comments we receive after December 1, 1997.

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

Interior; Minerals Management Service; Mail Stop 4020; 381 Elden

Street; Herndon, Virginia 20170-4817; Attention: Rules Processing Team.

FOR FURTHER INFORMATION CONTACT: Carl W. Anderson, Operations Analysis

Branch, at (703) 787-1608; e-mail Carl__A[email protected].

[[Page 51615]]

SUPPLEMENTARY INFORMATION:

Background

MMS, through delegations from the Secretary of the Interior, has

authority to promulgate and enforce regulations for the promotion of

safe operations, protection of the environment, and conservation of the

natural resources of the OCS, as that area is defined in the OCS Lands

Act (43 U.S.C. 1331 et seq.). The scope of this authority includes the

pipeline transportation of mineral production and the approval and

granting of rights-of-way for the construction of pipelines and

associated facilities on the OCS. MMS also administers the following

laws as they relate to OCS pipelines: (1) the Federal Oil and Gas

Royalty Management Act of 1982 (FOGRMA) for oil and gas production

measurement, and (2) the Federal Water Pollution Control Act, as

amended by the Oil Pollution Act of 1990 (OPA) and implemented under

Executive Order 12777. (Under a February 3, 1994, MOU to implement OPA,

DOI, DOT, and the U.S. Environmental Protection Agency divided their

respective responsibilities for oil spill prevention and response

according to the definition of ``coast line'' contained in the

Submerged Lands Act, 43 U.S.C. 1301(c) (59 FR 9494-9495).) Nothing in

this proposed regulation will affect MMS' authority under either FOGRMA

or OPA.

Under an MOU between DOI and DOT dated May 6, 1976, MMS regulated

oil and gas pipelines located upstream of the outlet flange of each

facility where hydrocarbons were first produced or where produced

hydrocarbons were first separated, dehydrated or otherwise processed,

whichever facility was farther upstream. The Departments agreed to

change this regulatory boundary with the signing of the December 10,

1996, MOU. The 1996 MOU was the result of negotiations that began in

the summer of 1993 and included a high degree of participation from the

regulated industry. MMS and DOT's Research and Special Programs

Administration (RSPA) solicited public comments on a draft MOU through

a joint MMS and DOT Federal Register Notice of May 24, 1995 (60 FR

27546-27549). The Notice announced a public meeting at the MMS Gulf of

Mexico OCS regional office in New Orleans, Louisiana, on August 1,

1995, to discuss the proposal. Over 70 people attended the meeting

which generated over 100 pages of transcribed comments from natural gas

and petroleum trade organizations, natural gas and oil exploration and

production companies, transmission companies, offshore construction

companies, and industry consultants. A transcript of this meeting is

available through the agency representative listed in the For Further

Information section of this notice. Twenty-three individuals and

organizations submitted written comments on the Federal Register

notice.

In May 1996, MMS and RSPA met with a joint industry workgroup

representing OCS oil and natural gas producers and transmission

pipeline operators led by the American Petroleum Institute. (The

Interstate Natural Gas Association of America also participated on the

workgroup.) The industry workgroup proposed that the agencies rely upon

individual operators of production and transportation facilities to

identify the boundaries of their respective facilities, since producers

and transporters can best make such decisions based on the operating

characteristics peculiar to each facility. The two agencies agreed with

the industry proposal. Under the proposal, MMS would have primary

regulatory responsibility for producer-operated facilities and

pipelines on the OCS, while RSPA would have primary regulatory

responsibility for transporter-operated pipelines and associated

pumping or compressor facilities. Producing operators are companies

which are engaged in the extraction and processing of hydrocarbons on

the OCS. Transporting operators are companies which are engaged in the

transportation of those hydrocarbons.

The Purpose of This Proposed Rule

The purpose of this proposed rule is to require OCS producing and

transporting operators to designate the specific points on their

pipelines where operating responsibility transfers from a producing

operator to an adjoining transporting operator. The rule would amend 30

CFR Part 250, Subpart J--Pipelines and Pipeline Rights-of-Way, section

250.150, ``General Requirements,'' Sec. 250.151, ``Definitions,'' and

Sec. 250.157, ``Applications.'' Operators would have until 60 days

after the date the rule becomes final to identify the specific points

at which operating responsibility transfers. In most cases, the

specific transfer points would be easily identifiable either because of

specific valves or flanges where the adjoining operations connect, or

because of differences in paint colors that adjoining operators use to

protect and maintain pipeline coatings or surfaces. For those instances

in which the transfer points would not be identifiable by a durable

marking, each operator would have until 180 days after the final rule

becomes effective to mark the transfer points. (The 180-day period

would give operators time to mark the transfer points during customary

maintenance routines.) The operator would be required to durably mark

each transfer point directly on the pipeline (usually at a valve or

flange). If it were not practicable to durably mark a transfer point,

and the transfer point were located above water, then the operator

would be required to depict the transfer point on a schematic located

on the facility. Some transfer points could be located subsea. In such

cases, the operators also would be required to identify the transfer

points on schematics which would be provided to MMS upon request.

For those instances in which adjoining operators could not agree on

a transfer point, MMS and RSPA's Office of Pipeline Safety (OPS) would

make a joint determination of the boundary.

MMS and OPS could, through their enforcement agencies and in

consultation with the affected parties, agree to exceptions to the

general boundary description (operations transfer point) on a facility-

by-facility or area-by-area basis. Operators also could petition, by

letter, MMS and OPS for exceptions to the general boundary description.

For existing lease term pipelines, the current designated operator

of the associated lease(s) would have the operating responsibility for

the pipeline(s). For right-of-way pipelines, MMS would assume that the

current right-of-way grant holder had the operating responsibility,

unless the right-of-way grant holder informed MMS otherwise within 60

days after the effective date of this rule. (There are up to 160

designated operators of leases and 70 operators of transportation

pipelines on the OCS.)

Applications for new right-of-way pipelines would be required to

include an identification of the operator and a boundary demarcation

point on the flow schematic submitted in accordance with 30 CFR

250.157(a)(2).

A pipeline segment originally operated under DOT regulations but

later transferred under MMS regulatory responsibility as a result of

this proposed rulemaking could continue to be operated under DOT

requirements, unless the MMS Regional Supervisor determined, based on

an MMS safety assessment, that a pipeline segment or component is

unsafe. The Regional Supervisor would then notify the operator that MMS

regulations apply to that segment or component.

[[Page 51616]]

Under 30 CFR 250.3, the MMS Supervisor for Field Operations may

approve alternative techniques, procedures, equipment, or activities an

operator proposed if such techniques, procedures, equipment, or

activities afford a degree of protection, safety, or performance equal

to or better than that intended to be achieved by MMS regulations.

Various laws enacted since 1976 have contributed to ambiguity

concerning MMS' and OPS' respective responsibilities concerning the

approximately 20,000 miles of active OCS oil and gas pipelines and

production facilities that were regulated under the May 6, 1976, MOU.

The most notable legislative changes included the 1978 OCS Lands Act

Amendments; the Hazardous Liquid Pipeline Safety Act of 1979; the OPA

of 1990; and the Pipeline Safety Act amendments of 1990, 1992, 1995,

and 1996.

The December 1996 MOU would re-define MMS-OPS regulatory boundary

from the OCS facility where hydrocarbons are first produced, separated,

dehydrated, or otherwise processed to the point at which operating

responsibility for the pipeline transfers from a producing operator to

a transporting operator. The MOU would place, to the greatest extent

practicable, producer-operated pipelines under DOI regulation and

transporter-operated pipelines under DOT regulation.

In its 1994 report ``Improving the Safety of Marine Pipelines,''

the National Academy of Sciences Marine Board recommended: ``To make

better use of inspection resources and help integrate enforcement of

MMS and OPS marine pipeline safety regulations, the committee

recommends that enforcement of OPS regulations offshore be performed by

MMS, through an interagency agreement or redefinition of the memorandum

of understanding that defines the jurisdictional division between OPS

and MMS * * *.'' In response to this recommendation, the 1996 MOU

provides for DOI to act as an agent for the DOT in identifying and

reporting potential violations of DOT regulations at platforms on the

OCS. As an agent, DOI may inspect all DOT-regulated pipeline facilities

on production platforms during DOI inspections. DOI may also perform

coordinated DOI/DOT inspections of pipeline facilities on DOT-regulated

platforms. The inspections may include reviewing any operating or

maintenance records or reports that are located at the inspected OCS

platform facility.

Executive Order (E.O.) 12866

This is not a significant rule under E.O. 12866 and does not

require review by the Office of Management and Budget (OMB). An

analysis of the proposed rule indicates that the direct costs to

industry for the entire proposed rule total approximately $360,000 for

the first year, and that in succeeding years, the cost of the rule to

industry would not likely exceed $255,000.

Regulatory Flexibility Act

DOI has determined that this rule will not have a significant

economic effect on a substantial number of small entities. While this

rule would affect a substantial number of ``small entities,'' the

economic effects of the rule would not be significant. There are many

companies on the OCS that are ``small businesses'' as defined by the

Small Business Administration. However, the technology necessary for

conducting offshore oil and gas exploration and development activities

is very complex and costly, and most entities that engage in offshore

activities have considerable financial resources disproportionate to

their numbers of employees and well beyond what would normally be

considered ``small business.''

DOI's analysis of the economic impacts indicates that direct costs

to industry for the entire proposed rule total approximately $360,000

for the first year, and in succeeding years, the cost of the rule to

industry would not likely exceed $255,000 annually. These annual costs

would not persist for long, because all pipelines converted to MMS

regulation eventually would come into compliance with MMS safety valve

requirements. There are up to 160 designated operators of leases and 70

operators of transportation pipelines on the OCS (both large and small

operators), and the economic impacts on the oil and gas production and

transportation companies directly affected would be minor. Not all

operators affected would be small businesses, but much of their

modification costs may be paid to offshore service contractors who may

be classified as small businesses. Operators having to install new

automatic shutdown valves as a result of transferring under MMS

regulations would sustain the greatest economic impact from this rule.

It is impractical, however, to determine in advance which operators

would be affected, because the operators themselves will determine the

transfer points between producers and transporters.

To the extent that this rule might eventually cause some of the

relatively larger OCS operators to make modifications to their

pipelines, it may have a minor beneficial effect of increasing demand

for the services and equipment of smaller service companies and

manufacturers. This rule would not impose any new restrictions on small

pipeline service companies or manufacturers, nor will it cause their

business practices to change.

Paperwork Reduction Act

This proposed rule contains a collection of information which we

have submitted to the OMB for review and approval under section 3507(d)

of the Paperwork Reduction Act of 1995. As part of our continuing

effort to reduce paperwork and respondent burdens, MMS invites the

public and other Federal agencies to comment on any aspect of the

reporting burden imposed by this proposed rule. Submit your comments to

the Office of Information and Regulatory Affairs, OMB; Attention: Desk

Officer for the Department of the Interior (OMB control number 1010-

XXXX); Washington, DC 20503. Send a copy of your comments to the Rules

Processing Team; Mail Stop 4020; 381 Elden Street; Herndon, Virginia

20170-4817. You may obtain a copy of the supporting statement for the

collection of information by contacting the Bureau's Information

Collection Clearance Officer at (202) 208-7744.

The Paperwork Reduction Act of 1995 provides that an agency may not

conduct or sponsor, and a person is not required to respond to, a

collection of information unless it displays a currently valid OMB

control number. OMB has up to 60 days to approve or disapprove this

collection of information but may respond after 30 days from receipt of

our request. Therefore, your comments are best assured of being

considered by OMB if OMB receives them within 30 days of publication of

this notice. However, MMS will consider all comments received during

the comment period for this notice of proposed rulemaking.

The title of this collection of information is ``Implementation of

Memorandum of Understanding Between the Departments of the Interior and

Transportation.''

The collection of information in the proposed rule consists of (1)

reviewing existing pipeline maps, conferring and agreeing with

operators of adjoining transportation pipeline segments concerning the

locations of specific transfer points, and either marking directly on

each pipeline or depicting on a schematic the specific point on each

pipeline where operating responsibility transfers from the

[[Page 51617]]

producing operator to a transporting operator; (2) identifying the

operator of right-of-way pipelines if different from the grant holder;

and (3) allowing for petitions for exceptions to general operations

transfer points. As stated above under the ``Intent of the Proposed

Rule'' section, specific transfer points will be easily identifiable in

most cases, either because of specific valves or flanges where the

adjoining operations connect, or because of differences in paint that

adjoining operators use to protect and maintain pipeline coatings or

surfaces.

The requirement to respond is mandatory. MMS uses the information

to determine the demarcation where pipelines are subject to MMS design,

construction, operation, and maintenance requirements, as distinguished

from similar OPS requirements.

The regulated community consists of up to 160 Federal OCS oil and

gas lease designated operators and 70 transportation pipeline

operators. There are approximately 3,000 points where operating

responsibility for pipelines transfers from a producer to a

transporter. MMS assumes that about 2,400 (representing 80 percent) of

these transfer points are already marked. Therefore, this rulemaking

would require a one-time identification and marking of about 600 points

where operating responsibility for pipelines transfers from a producer

to a transporter. For the 2,400 transfer points that are clearly

marked, there would be no information burden. The 600 unmarked transfer

points, on the other hand, would require widely-varying times for

marking depending on whether a painted line or a schematic was used to

mark the transfer point.

The public reporting burden for this proposed information

collection requirement is estimated to average 5 hours per response.

This includes the time for reviewing instructions, searching existing

data sources, gathering and maintaining the data needed, and completing

the required marking. The average annualized burden over a 3-year

period would be 1,051 hours.

MMS will summarize written responses to this notice and address

them in the final rule. All comments will become a matter of public

record.

1. MMS specifically solicits comments on the following questions:

(a) Is the proposed collection of information necessary for the

proper performance of MMS's functions, and will it be useful?

(b) Are the estimates of the burden hours of the proposed

collection reasonable?

(c) Do you have any suggestions that would enhance the quality,

clarity, or usefulness of the information to be collected?

(d) Is there a way to minimize the information collection burden on

those who are to respond, including through the use of appropriate

automated electronic, mechanical, or other forms of information

technology?

2. In addition, the Paperwork Reduction Act of 1995 requires

agencies to estimate the total annual cost burden to respondents or

record keepers resulting from the collection of information. MMS needs

your comments on this item. Your response should split the cost

estimate into two components: (a) Total capital and startup cost, and

(b) annual operation, maintenance, and purchase of services. Your

estimates should consider the costs to generate, maintain, and disclose

or provide the information. You should describe the methods you use to

estimate major cost factors, including system and technology

acquisition, expected useful life of capital equipment, discount

rate(s), and the period over which you incur costs. Capital and startup

costs include, among other items, computers and software you purchase

to prepare for collecting information; monitoring, sampling, drilling,

and testing equipment; and record storage facilities. Generally, your

estimates should not include equipment or services purchased: before

October 1, 1995; to comply with requirements not associated with the

information collection; for reasons other than to provide information

or keep records for the Government; or as part of customary and usual

business or private practices.

Takings Implication Assessment

DOI certifies that the proposed rule does not represent a

governmental action capable of interference with constitutionally

protected property rights. Thus, a Takings Implication Assessment need

not be prepared pursuant to E.O. 12630, Governmental Actions and

Interference with Constitutionally Protected Property Rights.

Unfunded Mandates Reform Act of 1995

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

or tribal governments, nor would it impose significant regulatory costs

on the private sector. Anticipated costs to the private sector will be

far below the $100 million threshold for any year that was established

by the Unfunded Mandates Reform Act.

E.O. 12988

DOI has certified to OMB that this proposed regulation meets the

applicable civil justice reform standards provided in sections 3(a) and

3(b)(2) of E.O. 12988.

National Environmental Policy Act

Under 516 DM 6, Appendix 10.4, ``issuance and/or modification of

regulations'' is considered a categorically excluded action causing no

significant effects on the environment and, therefore, does not require

preparation of an environmental assessment or impact statement. DOI

completed a Categorical Exclusion Review for this action on April 22,

1997, and concluded: ``The proposed rulemaking does not represent an

exception to the established criteria for categorical exclusion.''

List of Subjects in 30 CFR Part 250

Continental shelf, Environmental impact statements, Environmental

protection, Government contracts, Incorporation by reference,

Investigations, Mineral royalties, Oil and gas development and

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

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

way, Reporting and recordkeeping requirements, Sulphur development and

production, Sulphur exploration, Surety bonds.

Dated: September 22, 1997.

Sylvia V. Baca,

Assistant Secretary, Land and Minerals Management.

For the reasons stated in the preamble, Minerals Management Service

proposes to amend 30 CFR part 250 as follows:

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

CONTINENTAL SHELF

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

follows:

Authority: 43 U.S.C. 1331, et seq.

2. In Sec. 250.150, paragraph (c) is revised to read as follows:

Sec. 250.150 General requirements.

* * * * *

(c)(1) Department of the Interior (DOI) pipelines, as defined in

Sec. 250.151 of this subpart, must meet the requirements for design,

construction, operation, maintenance, and abandonment contained in

Secs. 250.150 through 250.158 of this subpart.

[[Page 51618]]

(2) A pipeline right-of-way grant holder must identify in writing

to the Regional Supervisor the operator of any pipeline located on its

right-of-way if the operator is different from the right-of-way grant

holder.

(3) A producing operator must identify on all existing pipelines

located on its lease or right-of-way the specific points at which

operating responsibility transfers to a transporting operator.

(i) If the transfer points are not identifiable by a durable

marking, each producing operator must mark all above-water transfer

points by (insert date 180 days after the final rule is published). The

operators of new pipelines also must durably mark all above-water

transfer points directly on each pipeline.

(ii) If it is not practical to durably mark a transfer point, and

the transfer point is located above water, then the operator must

depict the transfer point on a schematic located on the facility.

(iii) If a transfer point is located subsea, then the operator also

must identify the transfer point on a schematic. The operator must

provide the schematic to MMS upon request.

(iv) If a producing and an adjoining transporting operator cannot

agree on a transfer point by the date specified in paragraph (c)(3)(i)

of this section, the MMS Regional Supervisor and the Department of

Transportation (DOT) Office of Pipeline Safety (OPS) Regional Director

may jointly determine the transfer point.

(4) Operators may petition, by letter, the MMS Regional Supervisor

for exceptions to the general operations transfer point description on

a facility-by-facility or an area-by-area basis. The Regional

Supervisor, in consultation with the OPS Regional Director and affected

parties, may grant such exceptions.

(5) Pipeline segments designed and constructed under DOT

regulations before (INSERT THE EFFECTIVE DATE OF THE FINAL RULE), may

continue to operate under DOT design and construction requirements

until significant modifications or repairs are made to those segments.

After (INSERT THE EFFECTIVE DATE OF THE FINAL RULE), MMS operational

and maintenance requirements will apply to those segments.

* * * * *

3. In Sec. 250.151, a definition for the term ``DOI pipelines'' is

added in alphabetical order as follows:

Sec. 250.151 Definitions.

* * * * *

DOI pipelines are those pipelines extending upstream from each

point on the OCS at which operating responsibility transfers from a

producing operator to a transporting operator.

* * * * *

4. Section 250.157 is amended by revising the title, revising

paragraph (a) introductory text, and adding a new sentence at the end

of paragraph (a)(2) to read as follows:

Sec. 250.157 What to include in applications.

(a) Applications to install a lease term pipeline or for a pipeline

right-of-way grant must be submitted in quadruplicate to the Regional

Supervisor. Right-of-way grant applications must include an

identification of the operator of the pipeline. Each application must

include the following:

* * * * *

(2) * * * The schematic must indicate the point on the OCS at which

operating responsibility transfers from a producing operator to a

transporting operator.

* * * * *

[FR Doc. 97-26073 Filed 10-1-97; 8:45 am]

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