Notice of Revision of Form MMS-2005, Oil and Gas Lease of Submerged Lands Under the Outer Continental Shelf Lands Act

DEPARTMENT OF THE INTERIOR

Minerals Management Service

Notice of Revision of Form MMS-2005, Oil and Gas Lease of

Submerged Lands Under the Outer Continental Shelf Lands Act

AGENCY: Minerals Management Service, Interior.

ACTION: Notice.

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SUMMARY: MMS has determined that Form MMS-2005, the lease document,

needs revision due to changes in regulations since it was last reviewed

in 1986. MMS has revised the form to reflect plain language and has

rewritten it for clarity and organization. To reduce the need for

future revisions to the document due to changes in regulations, MMS

refers the Lessee to applicable laws, and rules and regulations of the

Department. Much of the wording of existing Form MMS 2005 that

specifically cites, incorporates by reference, or restates statutory

and regulatory requirements is therefore deleted from the proposed

revision.

DATES: MMS will accept comments on this document on or before December

24, 1998, and will schedule a workshop during the comment period.

ADDRESSES: Comments may be sent to Terry Holman, Minerals Management

[[Page 60381]]

Service, Mail Stop 4230, 1849 C Street, NW, Washington, D.C. 20240.

SUPPLEMENTARY INFORMATION: The Lease Sale Document form MMS-2005, is

the written contract between the U.S. Government and those wishing to

lease the submerged lands of the Outer Continental Shelf for

exploration, development and production of oil and natural gas

resources. Section 1 explicitly states that the lease is subject to the

Notice of Lease Sale, the Outer Continental Shelf Lands Act, and all

applicable rules and regulations of the Secretary of the Interior and

Executive Orders issued by the President. Provisions that restate

regulations have been deleted from the document. A section-by-section

description of the proposed changes is presented below.

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Old form New form

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Top of the form above the double line.. The statement concerning

information collection has

been revised to indicate that

the form contains information

collection requirements that

have been approved by the

Office of Management and

Budget. Headings in the upper

right are revised for clarity.

The Net Profit Share heading

is replaced with Other to

accommodate the recording of a

broader range of special terms

that might pertain to a lease.

Section 1: Statutes and Regulations.... This section was rewritten to

clarify that the lease is

subject to the OCS Lands Act,

the Lease Sale Notice, and all

applicable laws, rules,

regulations, and Executive

Orders issued by the President

as of the date of the lease

and in the future. The revised

section contains a specific

reference to the Notice of

Sale which was not included in

the previous version of the

document. Since many sections

have been removed from the

lease document because the

requirements exist in various

regulations, this statement

affirms that the lessee

remains responsible for

elements not expressly stated

in the lease.

Section 2: Rights of Lessee............ Retitled Rights Granted to the

Lessee. Rewritten in plain

language.

Section 3: Term........................ Rewritten in plain language.

Section 4: Rental...................... Four sections combined in one

renumbered and retitled

Section 7 Payment of Rent and

Royalty. Provisions deleted

because they are redundant of

43 USC 1337; 30 CFR part 206,

subpart C, 30 CFR 202.100; and

30 CFR part 218, subparts B

and D. Rewritten in plain

language.

Section 5: Minimun Royalty............. See note on section 4 above.

Section 6: Royalty on Production....... See note on section 4 above.

Section 7: Payments.................... See note on section 4 above.

Clarifies when payments are

due and how value of

production is calculated. We

added additional language to

make express the existing

implied covenant to market

production for the mutual

benefit of the Lessee and the

Lessor. We also added that

delivery of resources taken in

kind shall be made to a point

designated by the Lessor.

Section 8: Bonds....................... Provision deleted because it is

redundant of 30 CFR part 256,

subpart I.

Section 9: Plans....................... Provision deleted because it is

redundant of 30 CFR part 250,

subpart B.

Section 10: Performance................ Renumbered and retitled Section

8 Diligent Operations.

Rewritten in plain language.

Section 11: Directional Drilling....... Provision deleted because it is

redundant of 30 CFR 256.71.

Section 12: Safety Requirements........ Provision deleted because it is

redundant of 30 CFR 250.120-

122 22 and 43 U.S.C. 1347 and

1348.

Sectioni 13: Suspension and Provision deleted because it is

Cancellation. redundant of 30 CFR 250.110,

250.112 and 43 U.S.C. 1334.

Section 14: Indemnification............ Renumbered section 4. Rewritten

in plain language. Clarifies

that only successful appeal of

an MMS order, not mere pursuit

of an appeal, could exempt the

lessee from liability for loss

or damage to property or

injury to persons resulting

from compliance with the

order.

Section 15: Disposition of Production.. Provision deleted because it is

redundant of 43 U.S.C. 1353

and 43 U.S.C. 1337.

Section 16: Unitization, Pooling, and Provision deleted because it is

Drilling Agreements. redundant of 30 CFR part 250,

subpart M.

Section 17: Equal Opportunity Clause... Provision deleted because it is

redundant of 41 CFR 6-1.4(a)

and Executive Order 11246.

Section 18: Certification of Effective September 18, 1997,

Nonsegregated Facilities. the Labor Department amended

its regulations and 41 CFR 60-

1.8(b) has been deleted. (See

rulemaking at 62 FR 44174

(Aug. 19, 1997). The amended

60-1.8 requires the contractor

maintain a non-segregated

workplace, but no longer

relies on certification of the

contractor.

Section 19: Reservations to Lessor..... Renumbered section 6. Rewritten

in plain language.

Section 20: Transfer of Lease.......... Provision deleted because it is

redundant of 30 CFR part 256,

subpart J and 43 U.S.C. 1334.

Section 21: Surrender of Lease......... Provision deleted because it is

redundant of 30 CFR part

256.76 and 43 U.S.C. 1334.

[[Page 60382]]

Section 22: Removal of Property on Renumbered section 9. Rewritten

Termination of Lease. to specify time for submission

of a plan for well abandonment

and platform removal (within 3

months of lease termination).

Also would authorize lessor to

take title to property not

removed within the prescribed

time.

Section 23: Remedies in Case of Default Renumbered section 10 and

retitled Remedies for Lessee

Non-Compliance. Rewritten in

plain language.

Section 24: Unlawful Interest.......... Provision deleted because it is

redundant of 41 U.S.C. 22 and

18 U.S.C. 431-433.

Section 5 Access to Records is

a new section. It implements

and clarifies the requirements

of 30 CFR 207.5, 212.51 and

250.121 and implements section

103 of the Federal Oil and Gas

Royalty Management Act. In

particular, it would require

disclosure to authorize

representatives of the lessor

of documents in the possession

of ``affiliates,'' which have

been found to be covered

``other persons'' under 30 CFR

212.51 in Shell Oil Co. v.

Babbitt, 125 F.3d 172 (3rd

Cir. 1997), affirming 945

F.Supp. 792, and Santa Fe

Mineral v. McCutcheon, 90 F.3d

409 (10th Cir. 1996).

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The revised form is included below:

Form MMS-2005 ( 1998)

(Supersedes MMS-2005 March 1986)

United States Department of the Interior Minerals Management Service

Oil and Gas Lease of Submerged Lands Under the Outer Continental Shelf

Lands Act

This form contains information collection requirements that have

been approved by the Office of Management and Budget. These

approvals are found at 30 CFR 210.10, and 30 CFR 250.100.

Office

Serial Number

Cash Bonus

Rent per acre of fraction thereof________

Rent per hectare or fraction thereof________

$

Minimum royalty rate per acre or fraction thereof________

Minimum royalty rate per hectare or fraction thereof________

Royalty Rate

Other

This lease contains approximately acres hectares (the

``leased area''), described as follows:

It is effective as of (the ``Effective Date'') and will

continue for an initial period of years (the ``Initial Period'')

by and between the United States of America (the ``Lessor''), by the

Minerals Management Service (``MMS''), its authorized officer, and

(the ``Lessee''). In consideration of any payment made by the Lessee

to the Lessor and in consideration of the promises, terms,

conditions, and covenants contained herein, including the attached

Stipulation(s) numbered , the Lessee and Lessor agree as

follows:

Sec. 1. Statutes and Regulations. This lease is issued under the

Outer Continental Shelf Lands Act 43 U.S.C. 1331 et seq., as amended

(the ``Act''), and the Notice of Sale ________dated ________.

This lease is subject to the terms of that Notice, the Act, all

applicable laws, and the rules and regulations of the Secretary of

the Interior now or hereafter in effect, when not inconsistent with

any express provision of this lease. This lease is also subject to

all applicable Executive Orders issued by the President now or

hereafter in effect.

Sec. 2. Rights Granted to the Lessee. The Lessor grants to the

Lessee the exclusive right to explore for, develop, and produce oil

and gas resources, except helium gas, in the submerged lands of the

Outer Continental Shelf. This right is subject to the Lessor's

approval of plans and permits required under the Act and

regulations.

The Lessee also has the following rights:

(a) the nonexclusive right to conduct geological and geophysical

explorations according to applicable regulations;

(b) the nonexclusive right to drill water wells, except wells in

geopressured-geothermal and other geothermal reservoirs, and to use

the water produced for operations under the Act free of cost.

Drilling must be conducted according to procedures approved by the

Lessor.

(c) the right to construct and maintain devices and structures

necessary to the full exercise of rights under the lease, subject to

compliance with applicable laws and regulations.

Sec. 3. Term. This lease will continue from the Effective Date

of the lease for the Initial Period and as long as oil or gas is

produced from the leased area in paying quantities, or drilling or

well reworking operations (as approved by the Lessor) are conducted,

or as otherwise extended under regulation.

Sec. 4. Indemnification. The Lessee must indemnify the Lessor

for any claim, including claims for loss or damage to property or

injury to persons resulting from any operation on the leased area

conducted by or on behalf of the Lessee. However, the Lessee is not

responsible to the Lessor under this section for any loss, damage,

or injury caused by or resulting from:

(a) the Lessor's negligence, other than the commission or

omission of a discretionary function or duty, or

(b) the Lessee's compliance with an order of the Lessor against

which the Lessee filed an administrative appeal if the appeal is

filed before the cause of action for the claim arose and if the

Lessee prevails in the administrative appeal or subsequent action

for judicial review.

Sec. 5. Access to Records. In accordance with regulations, if

requested by the Lessor, the Lessee agrees to provide within a

reasonable time to any authorized representative of the Department

of the Interior all books, accounts, maps and any other records in

the possession or under the control of the Lessee, its affiliates,

or agents, that are relevant to operations, payments, disposition of

the production, or any other activity occurring under this lease.

The Lessee also agrees to keep these records open for inspection by

any authorized representative at all reasonable times. This clause

applies regardless of whether the records were prepared by or are

under the control of the Lessee, or its affiliates, or agents.

Information regarding disposition of the production includes, but is

not limited to, all records regarding the sale or other disposition

of oil or gas produced from the leased area by the Lessee or any of

its affiliated or related entities.

Sec. 6. Reservations to Lessor. All rights in the leased area

not expressly granted to the Lessee by the Act, the regulations, or

this lease are reserved to the Lessor. Reserved rights include, but

are not limited to:

(a) authorizing geological and geophysical exploration in the

leased area which does not unreasonably interfere with or endanger

actual operations under this lease;

(b) granting easements or rights-of-way;

(c) granting leases for any minerals other than oil and gas,

provided that operations under such leases do not unreasonably

interfere with or endanger operations under this lease; and

(d) suspending operations under this lease during war or

national emergency as provided in section 12(c) or 12(d) of the Act.

If the Lessor suspends operations or restricts activities under

those sections of the Act, rent and royalty payments will be

suspended and the term of this lease will be extended by adding the

suspension period. The Lessor will pay the Lessee just compensation

for such suspension as provided by the Act.

Section. 7. Payment of Rent and Royalty. The Lessee must pay the

rent, minimum royalty, or royalty on the value of production saved,

removed or sold at the rate specified on the face of this lease. The

Lessor may require payment of the royalty in kind.

[[Page 60383]]

Payment must comply with applicable regulations and the following

provisions:

(a) The Lessee must pay rent for each lease year which begins

before determination of oil or gas in paying quantities in the

leased area. Rent for the first year is due by the eleventh business

day after receipt of this lease, and for subsequent years on or

before the anniversary date of this lease.

(b) The Lessee must pay minimum royalty for each year which

begins after a determination of oil or gas in paying quantities on

the lease area is made by the Lessor. Minimum royalty is due by the

day before the next anniversary of the lease. If production occurs,

the Lessee must pay the greater of minimum royalty or royalty.

(c) The Lessor reserves authority to establish reasonable value

of all production for royalty purposes. To establish the value of

production, the Lessor may use dispositions by the Lessee, its

affiliates, and others related to the Lessee, or the Lessor may use

other considerations specified under applicable regulations.

(d) The Lessee must place production in marketable condition and

market the production at no cost to the Lessor.

(e) The Lessee shall deliver royalty oil and gas resources taken

in kind to a delivery point designated by the Lessor.

Sec. 8. Diligent Operations. The Lessee must properly and timely

develop and produce this lease. Under normal conditions, the Lessee

will explore and commence development within the primary term of

this lease. After due notice in writing from the Lessor, the Lessee

must drill such wells and produce at such rates consistent with

sound operating principles as the Lessor may require.

Sec. 9. Removal of Property on Termination of Lease. In

accordance with regulations, the Lessee must submit for approval a

plan for well abandonment and platform decommissioning within three

months after termination in whole or in part unless the Lessor

approves a longer period. The Lessee must provide for the removal of

all devices, works, and structures from the premises no longer

subject to the lease, according to applicable regulations and orders

of the Lessor. All abandonment and removal operations must be

completed within one year after termination of this lease unless

otherwise approved by the Lessor. Failure to comply will result in

penalties under the regulations. The Lessor may take title to any

property not removed within such time. With the written approval of

the Lessor under a right of use and easement, the Lessee may

continue to maintain devices, works, and structures on the leased

area for drilling or producing on other leases or for other

purposes.

Sec. 10. Remedies for Less Non-Compliance.

(a) Whenever the Lessee fails to comply with any provisions of

the Act, the regulations issued under the Act, or the terms of this

lease, the Lessor's remedies include, but are not limited to:

(1) Penalties under section 24 of the Act;

(2) Suspension or cancellation under Section 5 of the Act;

(3) Demands for payment or forfeiture of bond; or

(4) Other remedies for nonperformance of a contract available

under common law or statutes.

(b) The Lessor's nonenforcement of a remedy for any violation

does not prevent the Lessor from exercising any other remedies for

any other violation or from exercising any other remedies for the

same violation occurring at any other time.

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(Lessee)

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(Signature of Authorized Officer)

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(Name of Signatory)

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(Title)

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(Date)

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(Address of Lessee)

The United States of America, Lessor

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(Signature of Authorized Officer)

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(Name of Signatory)

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(Title)

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(Date)

If this lease is executed by a corporation, it must bear the

corporate seal.

Dated: November 2, 1998.

Cynthia Quarterman,

Director.

[FR Doc. 98-29914 Filed 11-6-98; 8:45 am]

BILLING CODE 4310-MR-M