Review of Existing Regulations

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Chapter II

Review of Existing Regulations

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Review of regulations; request for comment.

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SUMMARY: MMS has been performing annual reviews of its significant

regulations and asking the public to participate in these reviews since

1994. The purpose of the reviews is to identify and eliminate

regulations that are obsolete, ineffective, or burdensome. In addition,

the reviews are meant to identify essential regulations that should be

revised because they are either unclear, inefficient, or interfere with

normal market conditions. As MMS moves towards performance based

regulations, we are looking at ways to offer regulatory relief to

industry for exceptional performance. We request your comments and

suggestions with respect to which regulations could be more performance

based and less prescriptive.

The purpose of this document is twofold. First, we want to provide

the public an opportunity to comment on MMS regulations that should be

eliminated or revised, or could be more performance based. Second, we

are providing a status update of the actions MMS has taken on comments

previously received from the public in response to documents published

March 1, 1994, March 28, 1995, May 20, 1996, and April 24, 1997. We

will only include in this document status updates on comments which

have not been closed/implemented in the four previous status update

documents listed above.

DATES: Written comments must be received by August 11, 1998.

ADDRESSES: Mail written comments to Department of the Interior;

Minerals Management Service; Mail Stop 4230; 1849 C Street NW;

Washington, DC 20240; Attention: Bettine Montgomery, MMS Regulatory

Coordinator, Policy and Management Improvement.

FOR FURTHER INFORMATION CONTACT: Bettine Montgomery, Policy and

Management Improvement, telephone: (202) 208-3976; Fax: (202) 208-4891;

and E-Mail: Elizabeth.M[email protected].

SUPPLEMENTARY INFORMATION: MMS began a review of its regulations in

early 1994 under the directives contained in the President's Executive

Order 12866. The Executive Order calls for periodic regulatory reviews

to ensure that all significant regulations are efficient and effective,

impose the least possible burden upon the public, and are tailored no

broader than necessary to meet the agency's objectives and Presidential

priorities.

We invited the public to participate in the regulatory review. The

invitation was sent out via different media, namely a Federal Register

document dated March 1, 1994 (59 FR 9718); MMS and independent

publications; and public speeches by MMS officials during that time.

MMS received approximately 40 public comments which were almost

equally divided between its Royalty Management and Offshore Minerals

Management Programs. We acknowledged the comments in a July 15, 1994

(59 FR 36108), document and set forth our planned actions to address

the comments, along with an estimated timetable for these actions.

In the Federal Register notices published March 28, 1995 (60 FR

15888); May 20, 1996 (61 FR 25160); and April 24, 1997 (62 FR 19961),

MMS: (a) asked for further public comments on its regulations, and (b)

provided a status update of actions it had taken on the major public

comments received to date. We received 10 responses from the 1995

document; 5 responses from the 1996 document; and 2 responses from the

1997 document. A number of the commentators expressed appreciation for

our streamlining efforts and responsiveness to suggestions from our

regulated customers.

This document updates the MMS planned actions and related

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

additional comments from the public concerning regulations that should

be either eliminated or revised, or could be more performance based.

Since some of the public responses received in response to prior

documents contained comments on very specific and detailed parts of the

regulations, this document does not address every one received. For

information on any comment submitted which is not addressed in this

document, please contact Mrs. Montgomery at the number and location

stated in the forward sections of this document.

MMS regulations are found at Title 30 in the Code of Federal

Regulations. Parts 201 through 243 contain regulations applicable to

MMS's Royalty Management Program; Parts 250 through 282 are applicable

to MMS's Offshore Minerals Management; and Part 290 is applicable to

Administrative Appeals.

Status Report

The following is a status report by program area on the comments

MMS has received, to date, on its regulations.

A. Offshore Minerals Management (OMM) Program

OMM is currently reviewing the following 14 sections of OMM

regulations:

1. Regulations Governing Conservation of Resources and Diligence (30

CFR 250, Subpart A.)

Comments Received--(a) ``Revise Determination of Well Producibility

to make wireline testing and/or mud logging analysis optional * * *.''

(b) ``* * * consider comments from the 11/30/95 MMS sponsored workshop

to formulate policy for granting SOP (suspension of production)

approvals based on host capacity delays, non-contiguous unitization,

and market conditions/economic viability.''

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

``Postlease Operations,'' revising Subpart A was published on February

13, 1998 (63 FR 7335). This revision addresses the determination of

well producibility process, and the public is invited to comment on

this and all areas of the proposed rule. The comment period closes on

July 17, 1998. For (b) above, MMS did consider the comments from the

11/30/95 workshop on granting suspensions of production when preparing

the proposed rule.

Timetable--The projected publication date for a final rule is April

1999.

2. Revision of the Process for Incorporating Codes and Standards by

Reference (30 CFR 250.1, Subpart A)

Comments Received--``* * * review individual documents when changed

and recommend adoption or rejection to reduce confusion as to the

standard that should be used.''

Action Taken or Planned--On November 26, 1996 (61 FR 60019), MMS

published a final rule that updated over 50 documents incorporated by

reference. In the preamble of the rule, MMS discussed its new policy

for incorporating documents into the regulations. This will result in a

much quicker and more efficient process for incorporating documents. If

MMS determines that the changes to documents are minor, result in

safety improvements or represent new industry standard technology, and

do not impose undue costs on the affected parties, MMS will incorporate

the new edition with a final rule published in the Federal Register.

This will keep the number of out-of-date documents incorporated by

reference to a minimum. This also means that a new edition becomes

effective without public comment.

Timetable--Completed.

3. Regulations Applicable to Directional Surveys (30 CFR 250.51,

Subpart D)

Comments Received--``Revise directional survey requirements to

allow

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a composite measurement-while-drilling directional survey to be

acceptable * * *.''

Action Taken or Planned--MMS is rewriting the regulations governing

Oil and Gas Drilling Operations, found in 30 CFR Part 250, Subpart D,

in plain English. During this rewrite, MMS is making appropriate

revisions to the regulations. Updating the requirements for directional

survey requirements is one of the revisions planned for this rewrite.

Timetable--We plan to publish a Notice of Proposed Rulemaking this

fall.

4. Regulations Applicable to Blowout Preventer (BOP) Testing and

Maintenance Requirements (30 CFR 250.56 and 250.57, Subpart D)

Comments Received--``Revise BOP testing regulations to allow for

less frequent and shorter tests. Allow 14 day BOP test interval vs.

current 7-day interval.''

Action Taken or Planned--MMS published a proposed rule to amend the

regulations governing the testing requirements for BOP systems used in

drilling and completion operations in the Federal Register on July 15,

1997 (62 FR 37819). The rule proposed to allow a lessee up to 14 days

between BOP pressure tests. We made the decision to allow the extended

testing time frame based on a completed study of BOP performance by an

engineering consulting firm. The study concluded that no statistical

difference in failure rates existed between BOP's tested as required,

every 7 days, and those tested between an 8 to 14-day interval. The new

testing time frame applies to drilling, sidetrack, and completion

activities, but not to workover activities since they were not examined

in the performance study. MMS has made minor revisions to the rule

based on the five sets of comments on the proposed rule, and we

published the final rule on June 1, 1998 (63 FR 29604).

Timetable--Completed.

5. Approval and Reporting Processes for Well-Completion Operations (30

CFR 250.83)

Comments Received--``* * * a recompletion operation requires that a

Well Summary Report MMS-125 be filed within 30 days. Much of this data

is repetitious of data previously submitted on the Sundry Notice MMS-

124. The process could be changed to provide only data that has

changed.''

Action Taken or Planned--We will study this process to decide

whether or not to change reporting requirements through rulemaking.

Timetable--Ongoing.

6. Safety System Design and Installation (30 CFR 250.122)

Comments Received--Safety System Design and Installation (30 CFR

250.122)--``We believe that the (Safety and Environmental Management

Program) SEMP/RP 75 Performance Measure process of alternative

compliance for operators who voluntarily implement RP 75 and have

``good'' performance should allow those operators to periodically

update drawings and other documents of production safety system

installations and routine modifications instead of receiving required

MMS approval of these documents before any modifications are performed

(Comment #14 of our July 17, 1996 letter). This is one example of the

alternative compliance process that we suggest.''

Action Taken or Planned--This comment expresses an interest for

regulatory relief in exchange for ``compliance'' with API RP75. This

industry standard captures the essence of SEMP. On August 13, 1997, the

MMS published a Federal Register notice on SEMP (62 FR 43345). This

notice publicly relayed our intent to continue collaborative efforts

with the U.S. offshore oil and gas industry to promote the non-

regulatory (i.e., voluntary) adoption of SEMP; it simultaneously

relayed our intent to increasingly focus on operator performance in the

field. This decision was made after extensive review of the industry's

actions to adopt RP75. We have seen important strides made in the

development of SEMP programs by the majority of OCS operators. We have,

however, still not seen widespread implementation of these programs on

offshore installations. In the most recent SEMP notice, we asked senior

company officers to notify MMS when they had ``fully'' implemented SEMP

at the field level. In our view, ``fully'' means that an operator has

developed their SEMP plan and has implemented it at enough of their

offshore installations to commence continuous improvement efforts

(e.g., SEMP audits). At the end of April 1998, we had received such

notifications from only five OCS operators. This fact leads us to

conclude that SEMP is not yet broadly implemented at the field level.

Therefore, any requests for regulatory relief in exchange for SEMP

implementation will need to be made to MMS on an ad hoc basis by

operators who are prepared to demonstrate, and have the MMS verify,

both the extent of their SEMP implementation and their field-level

performance.

MMS has begun the process of revising 30 CFR Part 250, Subpart H.

The process changes suggested above will be considered internally

during preparation of the Notice of Proposed Rulemaking.

Timetable--MMS expects the Notice of Proposed Rulemaking for a

revised 30 CFR Part 250, Subpart H, to be published for comment in the

fall of 1998.

7. Regulations Applicable to Production on the Outer Continental Shelf

(OCS) (30 CFR Part 250, Subpart H)

Comments Received--Production Safety System Testing and Records (30

CFR 250.124)--``OOC (Offshore Operators Committee) is very much

interested in working with MMS on a research project beginning in 1997

to consider appropriate leak rate tolerances for critical safety

devices (Comment #11 of our July 17, 1996 letter) as well as testing

frequencies of accurate and reliable new generation safety devices

(Comment #13 of our July 17, 1996 letter).''

Action Taken or Planned--MMS has initiated a research project with

Southwest Research Institute which will investigate the question of

leak rate tolerances for critical safety devices. First results from

the study should become available in the fall of 1998. MMS has also

initiated the rulemaking process to revise all of subpart H. As part of

this process, testing frequencies for safety devices will be discussed

internally. Any proposed changes to testing frequencies will appear in

the Notice of Proposed Rulemaking for subpart H.

Timetable--MMS expects the Notice of Proposed Rulemaking for a

revised subpart H to appear in the Federal Register this fall.

8. Regulations Governing Safety and Pollution Prevention Equipment

(SPPE) (30 CFR Part 250.126, Subpart H)

Comments Received--(a) Quality Assurance (30 CFR 250.126)--``We

encourage MMS to eliminate unnecessary record keeping requirements

(Comment #16 of our July l7, 1996 letter) as proposed in the December

18, 1996, Federal Register notice 61 FR 66639. However, we strongly

object to eliminating functional noncertified SPPE that is currently in

service for any reason other than hot work or remanufacture as

explained in our February 14, 1997, comments on the proposal at 61 FR

66639.'' (b) ``Revise regulations governing Safety Valves to increase

time between test and allowable leakage rates.''

Action Taken or Planned--For (a) above, revised quality assurance

requirements were published as a

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Notice of Final Rulemaking in the Federal Register on August 8, 1997

(62 FR 42669). To reduce paperwork, the new rule eliminated the need

for companies to update their list of noncertified SPPE. It also

eliminated the detailed reporting requirements regarding the

installation and failure of certified equipment. The final rule

requires replacement of noncertified SPPE only when the noncertified

SPPE requires offsite repair, remanufacturing, or hot work, such as

welding. This allows operators to continue using noncertified SPPE

provided the equipment works properly, and when necessary, requires

only minor repairs. Once noncertified SPPE requires offsite repair,

manufacturing, or hot work, it may not be used on the OCS.

For (b) above, as discussed under Item No. 7, MMS contracted with

Southwest Research Institute in September 1997 to study leakage rates

for surface and subsurface safety valves.

Timetable--The Southwest Research Institute will complete the study

in the fall of 1998.

9. Regulations Regarding Construction and Removal of Platforms and

Structures (30 CFR 250, Subpart I)

Comments Received--(a) ``Modify platform design wave return period

calculation by placing a cap of 100 years on the field life calculation

* * *.'' (b) ``Adopt API RP2A (20th edition) Section 14, Surveys, in

its entirety * * *.'' (c) ``Revise site clearance requirements * * *.''

(d) ``Revise requirements for placing protective domes over well stubs

* * *,'' etc.

Action Taken or Planned--For (a), (c), and (d) above, the

proceedings for the International Workshop on Offshore Lease

Abandonment and Platform Disposal held in April 1996 were published in

1997. We will be considering the comments we received from the

proceedings in drafting a proposed rule on decommissioning. For (b)

above, NTL98-4N was issued on March 4, 1998. It contains interim

guidance for applying ``Simplified Fatigue Analysis'' Procedure from

American Petroleum Institute (API) Recommended Practice 2A (RP2A),

Planning, Designing, and Constructing Fixed Offshore Platforms,

Nineteenth Edition (August 1, 1991), and Twentieth Edition (July 1,

1993), and its supplement 1 (February 1, 1997).

Timetable--For (a), (c), and (d) above, MMS plans to draft a rule

on decommissioning by December 1998. For (b) above, ongoing.

10. Regulations Applicable to Pipelines and Pipeline Rights-of-Way (30

CFR 250, Subpart J)

Comments Received--Revise regulations to avoid duplication of

requirements between the Department of the Interior (DOI) and the

Department of Transportation (DOT). The following comments were

submitted on the proposed rule on regulating pipelines which was

published October 2, 1997 (62 FR 51614):--Commentators raised concerns

about the Notice of Proposed Rulemaking involving technical issues

affecting the applicability of the rule to producer-operated pipelines.

The pipelines were either previously subject to DOT regulation under

terms of the former 1976 Memorandum of Understanding between DOI and

DOT, or cross into State waters without first connecting to a

transporting operator's pipeline on the OCS as described in the 1996

Memorandum of Understanding.

Action Taken or Planned--As stated in our previous Notice,

``Reviewing Existing Regulations'' (April 24, 1997), a Memorandum of

Understanding on the pipeline issue between DOI and DOT became

effective December 10, 1996, and was published in the Federal Register

on February 14, 1997 (62 FR 7037). Since then, we have published a

proposed rule on October 2, 1997 (62 FR 51614) clarifying regulatory

jurisdiction of the pipelines. MMS is now proceeding with a final rule

that will clarify and resolve the technical issues raised during the

comment period on the proposed rule.

Timetable--We plan to publish the Notice of Final Rulemaking

incorporating comments on the proposed rule by mid-summer.

11. Allocation Meter Facility Requirements (30 CFR 250.180(e))

Comments Received--``We suggest that the regulations be revised to

recognize the use of liquid turbine meters and the inability to

physically make adjustments to these types of meters, and to clarify

that samples should be taken proportional to flow to reflect present

industry practice.''

Action Taken or Planned--MMS published a proposed rule, ``Oil and

Gas Production Measurement, Surface Commingling, and Security,'' on

February 26, 1997 (62 FR 8665), that addressed this comment. The final

rule was published May 12, 1998 (63 FR 26361), and will be effective

June 29, 1998.

Timetable--Completed.

12. Model Unit Agreement (30 CFR 250.194)

Comments Received--``In several instances within the Model Unit

Agreement language, the defined terms are not used when it seems

appropriate. We recommend that the defined terms be used to avoid

confusion when reviewing the agreements.''

Action Taken or Planned--On July 3, 1996 (61 FR 28525), MMS

published a final rule which removed the Model Unit Agreement from the

Code of Federal Regulations. We have no plans to revise the Agreement

at this time. A final rule on Unitization was published on February 5,

1997 (62 FR 5329), and was effective March 7, 1997.

Timetable--Completed.

13. Shallow Hazards Requirements (NTL No. 83-3)

Comments Received--``* * * revise (Notice to Lessees) NTL No. 83-3

which relates to shallow hazards requirements. Industry has requested

that MMS allow use of navigational positioning equipment in lieu of

buoying pipelines.''

Action Taken or Planned--We are revising NTL No. 83-3 and are in

the process of developing guidance for navigational positioning

equipment technology. In the revised NTL, industry may still use

buoying, but if they choose not to use buoying, the NTL will require

the use of state-of-the-art navigational systems. This will assure the

accuracy and safety of anchoring operations in the vicinity of

pipelines.

Timetable--Ongoing.

14. Regulations Applicable to Production Safety System Training (30 CFR

250.214, Subpart O)

Comments Received--In response to a June 10, 1997, workshop on the

development of a performance based training rule, MMS received a

variety of comments from the oil and gas industry and MMS accredited

training schools. These comments include: (a) ``Continue to implement

the current Subpart O training system.'' (b) ``Develop a dual training

system incorporating elements from both a performance based program and

MMS's current system.'' (c) ``Companies may neglect training under a

performance based system.'' (d) ``MMS should use caution when changing

from the current prescriptive training system * * *'' (e) ``* * * use

of a written MMS test may cause employees stress that would lead to

poor performance on the exams.'' (f) ``* * * hands-on simulator testing

is an excellent and realistic means of gauging performance. * * * MMS

may not have the expertise or

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equipment to properly conduct simulator tests.'' (g) ``Hands-on testing

should only be conducted onshore, not offshore.'' (h) ``How will MMS

react to a company that does not train its employees but has a good

safety record * * *.'' (i) ``This may not be the right time to move

towards a performance system because of the increase in OCS activity

and the shortage of trained and experienced workers.''

Activity Taken or Planned--MMS has prepared a proposed rule on a

performance based training program which relies on industry to design

its training needs. We would monitor the program through tests and

audits. In developing the rule, we took into consideration the comments

received in the June 10, 1997, workshop.

Timetable--We plan to publish the Notice of Proposed Rulemaking for

comment by late summer.

B. Royalty Management Program (RMP)

RMP is reviewing regulations in the following 12 subject areas:

1. Statute of Limitations and Record Retention

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

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

obligation becomes due.''--``Absence of a record retention program

creates some confusion. Regulations should require record retention to

coincide with the 5-year statute of limitations.''

Action Taken or Planned--The Federal Oil and Gas Royalty

Simplification and Fairness Act (Act) was signed into law on August 13,

1996. The Act contains language to implement a 7-year statute of

limitations for MMS processes. We are changing processes, developing

implementation plans, and preparing regulatory changes to comply with

the requirements of the Act.

Timetable--Ongoing.

2. Interest on Overpayments

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

the agency and industry.''

Action Taken or Planned--The Act provides for the payment of

interest on overpayments for oil and gas leases on Federal lands. On

March 31, 1997, we issued a Dear Payor letter about the Act's

provisions involving interest issues. We issued another Dear Payor

letter on October 1, 1997, explaining interest calculations and

interest reporting requirements. MMS is designing system changes to

implement the requirements of the Act and preparing regulations to be

published.

Timetable--A Notice of Rulemaking providing for interest on

overpayments and underpayments will be published for comment in 1998.

3. Interest Assessments

Comments Received--``A de minimis provision should be established

for the assessment of interest.''--``* * * MMS should enhance their

existing interest assessment system to allow for the offsetting of

prior period adjustments made on the MMS Form 2014 before calculating

applicable interest.''

Action Taken or Planned--The Act not only provides for the payment

of interest on overpayments for oil and gas leases on Federal lands,

but allows industry to calculate the correct interest assessment. Also,

the Act allows interest that has accrued on overpayments to be applied

to reduce underpayments. We have included billing thresholds in our

interest system to prevent bills for de minimis amounts. In May 1997,

we started sending interest statements instead of interest bills, and

the statements contain totals for interest that MMS owes and for

interest owed to MMS. MMS is implementing system changes to conform

with the requirements of the Act and preparing regulations.

Timetable--As noted under Item 2, Timetable, a Notice of Rulemaking

for comment on payment of interest will be published in 1998.

4. Gas Valuation

Comments Received--(a) ``Define gross proceeds more equitably and

clearly in this ever changing gas marketing environment.'' (b) ``It is

important that the Federal Gas Valuation Rule final rule not

discriminate against producers which are affiliated with marketing

companies and are party to non-arms-length contracts.'' (c) ``Extend

the elimination of processing and transportation allowance forms to

oil.'' (d) ``* * *commends the MMS on their use of negotiated

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

in administrative cost savings for all parties.'' (e) ``If the Takes

vs. Entitlements policy stays in effect, MMS should strictly enforce

reporting on actual quantities taken for all industry participants.''

(f) ``Eliminate Transportation and Processing Allowance Forms for

Indians.''

Action Taken or Planned--For (c) above, a final rule revising the

valuation regulations governing allowances was published in the Federal

Register on February 12, 1996 (61 FR 5448). This rule eliminated most

allowance forms filing requirements for oil, gas, and coal produced

from Federal leases.

For (a) above, on December 16, 1997, MMS published a final rule

clarifying what deductions may be taken from gross proceeds for the

costs of transportation under Federal Energy Regulatory Commission

(FERC) Order No. 636. The rule was effective February 1, 1998 (63 FR

65753). For (a), (b), and (d) above, the Federal Gas Valuation proposed

rule was published in the Federal Register on November 6, 1995 (60 FR

56007), and the comment period closed on February 5, 1996. In light of

the comments received from 44 entities, on May 21, 1996, MMS reopened

the public comment period and asked for public comment on five options

for proceeding with further rulemaking (61 FR 25421). The reopened

public comment period closed August 19, 1996. MMS reconvened the

Federal Gas Valuation Negotiated Rulemaking Committee on June 12-14,

1996, and asked the Committee to provide input into the five options.

MMS performed a cost benefit analysis on three viable options for

proceeding with gas valuation regulations. Given the results of the

cost benefit analysis ($20 million annual loss in royalties) and

changes occurring in the gas market, MMS withdrew the proposed

rulemaking on April 22, 1997 (62 FR 19536). MMS is developing a

framework for offshore gas valuation and will conduct workshops to

obtain constituent input. We will work with the States to develop an

onshore perspective.

For (e) above, the Act contains language requiring ``takes''

reporting for stand alone leases and agreements containing 100 percent

Federal leases. The Act also requires ``entitlements'' reporting for

so-called mixed agreements (agreements containing Federal, State,

Indian, and/or fee leases) with an exception to use ``takes'' reporting

for marginal properties. We are changing processes, developing

implementation plans, and preparing regulatory changes to comply with

the requirements of the Act.

For (f) above, a proposed rule developed by the Indian Gas

Valuation Negotiated Rulemaking Committee was published on September

23, 1996 (61 FR 49894). The Indian Valuation Negotiated Rulemaking

Committee was reconvened on March 26, 1997. This rule addressed the

valuation for royalty purposes of natural gas produced from Indian

leases. The rule proposes to reduce substantially the transportation

and allowance reporting forms for gas from Indian leases. The proposed

rule would add a methodology to calculate

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the major portion value and an alternative methodology for dual

accounting as required by Indian lease terms. The proposed rulemaking

would simplify and add certainty to the valuation of production from

Indian leases.

Timetable--We plan to publish a Notice of Proposed Rulemaking for

comment on takes vs. entitlements early in 1999. We plan to publish a

Notice of Final Rulemaking on Valuation of Gas From Indian Leases in

1998.

5. Reporting Procedures and Threshold

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

reporting.''

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

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

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

basis of each Indian Tribe.''

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

unnecessary and costly reporting requirement.''

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

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

pursue are generated.''

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

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

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

programmed to handle the new regulations.''

--``* * *the prompt implementation of the recommendations of the

Royalty Policy Committee Audit and Royalty Reporting and Production

Accounting Subcommittees will achieve those simplification and

streamlining goals * * *.''

Action Taken or Planned--Building upon the Royalty Policy

Committee's earlier study, the RMP Reengineering Team (Team) analyzed

current information reporting requirements to determine the data

necessary for future RMP processes. The Team identified opportunities

for easing reporting burden, avoiding data duplication, decreasing

error rates, and increasing processing efficiency. The Team developed

32 reporting changes that are in their report titled ``Preliminary

Design Concepts of the RMP Reengineering Team.'' If these changes are

implemented, they will significantly reduce the volume of lines

reported and processed, minimize errors and related error correction

workload, simplify reporting, and lower costs for both reporters and

RMP. The Team's changes generally incorporate or exceed the Royalty

Policy Committee's recommendations.

In addition to our reengineering work, we continue to pursue

shorter range reporting improvements not requiring significant system

changes. For example, the Payor Information Form MMS-4025 is being

streamlined to eliminate numerous data fields. Also, many production

reporting changes are being implemented where redundant or unnecessary

data collection is identified. We will continue to review and revise

our billing thresholds and assessment policies to reduce administrative

costs.

On April 14, 1998 (63 FR 17133), we published a proposed rule

requesting that all reports be submitted electronically by December 31,

1998. Electronic submission significantly reduces the amount of time

necessary for a company to complete the monthly reports and MMS

processing time, since no manual entry is required.

Timetable--Ongoing.

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

OCS Lands Act

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

eliminated. The refund process used for onshore properties should be

established for offshore properties.''

--``* * * we would urge the MMS to facilitate elimination of the

Section 10 recoupment procedures in its entirety. The current practice

is administratively burdensome and not cost effective for the industry

or MMS.''

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

(million); and/or increase this threshold to $500M; raise the refund

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

as production date adjustments and incorrect AID (Accounting

Identification) numbers; exempt unit revisions because these revisions

are often made more than 2 years after the date of production;

establish a time limit on MMS for review of a refund request to

expedite the process; and overpayments on OCS properties should be

allowed to be offset against any OCS underpayment.''

Action Taken or Planned--The Act repeals the Section 10 refund

procedures of the OCS Lands Act. On November 25, 1996, we mailed a Dear

Payor letter with guidelines on refund procedures. We are presently

developing a proposed rule implementing the new refund procedures.

Timetable--Ongoing.

7. Electronic Data Exchange

Comments Received--``* * * MMS (should) continue their ongoing

effort to exchange data by electronic means rather than hard copy

thereby enabling the industry to adjust the data elements to integrate

with each company's systems.''

Action Taken or Planned--We continue to encourage the exchange of

data electronically. Our Reporter and Payor Training sessions stress

the benefits of electronic reporting and provide reporters and payers

with options for reporting by electronic data interchange, diskette, or

magnetic tape. On April 22, 1997 (62 FR 19497), we published a final

rule specifying how payments are made for mineral royalties, rentals,

and bonuses that requires all payments to be made electronically to the

extent it is cost effective and practical. We also published on April

8, 1998 (63 FR 17133), a proposed rule to require reporters to submit

royalty and production reports electronically. Another way we publicize

electronic reporting is on the MMS/Royalty Management Program Internet

website.

Timetable--Reporter and Payor Training sessions are planned for the

summer of 1998. We will work towards publishing a Notice of Final

Rulemaking on Electronic Reporting in 1999.

8. Parameters for Identifying Improper MMS Form 2014 Adjustments

Comments Received--``The MMS currently inquires as to any variances

between any Form 2014 adjustments and its original Form 2014 entry that

exceed $1.00, which is an insignificant amount. It is suggested that

the MMS's review should be relevant to the amount of the adjustment

such as a given percentage.''

Action Taken or Planned--At this time, MMS does not plan to make

changes in this procedure. We need to ensure accuracy and integrity in

the accounting systems, and retain precise records for the auditors. In

our reengineering effort, we are looking at streamlined reporting for

short- and long-term benefits for MMS and industry.

Timetable--Ongoing.

9. Publish Final Rules Expeditiously

Comments Received--(a) ``* * * primary recommendation is the

expeditious completion and publication of pending final rules, for

example, the proposed rules on administrative offset and limitations on

credit adjustments, and the proposed rule on payor liability.

[[Page 32172]]

* * * Certainly, publication of the final federal (and Indian) gas

valuation rule should be facilitated to the maximum extent possible.''

(b) `` * * * it would be extremely beneficial for MMS to publish its

proposed rule implementing the Federal Energy Regulatory Commission's

(FERC) Order 636 as soon as possible because of its impact on and

relationship to the federal gas valuation rule.''

Action Taken or Planned--For (a) above, we are in the process of

finalizing the Indian gas valuation rule. As for the final Federal

Register (62 FR 19536) that withdrew the proposed rule because of

changes occurring in the gas market. MMS is developing a framework for

offshore gas valuation and will conduct workshops to obtain constituent

input. We will work with the States to develop an onshore perspective.

New language in the Act will cause a number of changes in the Payor

Liability rule and the Administrative Offset and Limitations on Credit

Adjustments rule. We are working to incorporate the effects of the Act

in these rules.

For (b) above, the final rule implementing FERC Order 636 was

published on December 16, 1997 (62 FR 65753).

Timetable--Ongoing.

10. The Appeals Process

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

Action Taken or Planned--The Act imposed a 33-month time frame for

the Department of the Interior to decide appeals involving royalties on

Federal oil and gas leases. This deadline does not apply to appeals on

royalties involving Indian leases and Federal leases for minerals other

than oil and gas.

On October 28, 1996 (61 FR 55607), MMS published a proposed rule

establishing a 16-month deadline for MMS to decide all appeals to the

Director, including Indian leases and appeals for royalties on minerals

other than oil and gas. After MMS's decision, the appellants can

further appeal to the Interior Board of Land Appeals. The comment

period for this proposed rule ended on March 27, 1997.

The Royalty Policy Committee, a Federal Advisory Committee

reporting to the Secretary, established a subcommittee of State,

Indian, and industry representatives to study the appeals process. The

Royalty Policy Committee reported its recommendations to the Secretary

in March 1997, and the Secretary accepted the recommendations, with

minor changes, in September 1997. The Department now is preparing a

revised proposed rule to implement these recommendations.

Timetable--We plan to issue a revised Notice of Proposed Rulemaking

on the Administrative Appeals Process by late 1998, and a Notice of

Final Rulemaking in 1999.

11. Valuation of Coal From Federal Leases

Comments Received--``* * * [A]mending this section to allow the use

of the lessee's arm's length contracts to support the value for a

nonarm's-length contract would make this section more effective and

also eliminate the need to use third-party proprietary information in

many instances.'' ``* * * [T]he use of the lessee's arm's-length

contracts is the best evidence of the comparable value of any nonarm's-

length sales by the lessee.''

Action Taken or Planned--The Royalty Policy Committee's Coal

Subcommittee is reviewing issues related to coal valuation, and we will

use the Royalty Policy Committee's recommendations to make improvements

to the coal royalty valuation and reporting procedures and associated

regulations.

Timetable--Ongoing.

12. Other MMS/Royalty Management Program Regulatory Actions

This past year we published proposed rules that would amend the

valuation of oil produced from Federal and Indian leases and held a

number of public meetings to receive input on the proposals. After

analyzing the comments received, we plan to issue final rules in late

1998.

The Act expanded the authorities and responsibilities that the

Secretary of the Interior may delegate to the States. To implement

this, we published a final rule on August 12, 1997 (62 FR 43076), for

Delegation of Royalty Management Functions to the States.

We invite you to comment on our existing regulations and also the

actions we have taken in response to comments and enacted legislation.

And, we invite you to stay further informed on many of the topics

discussed in this status report by visiting the MMS Internet Website at

www.mms.gov.

Cynthia Quarterman,

Director, Minerals Management Service

[FR Doc. 98-15626 Filed 6-11-98; 8:45 am]

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