Electronic Reporting

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Parts 210 and 216

RIN 1010-AC40

Electronic Reporting

AGENCY: Minerals Management Service, Interior.

ACTION: Final rule.

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SUMMARY: The Minerals Management Service (MMS) is amending its

regulations to require reporters to submit selected royalty and

production reports electronically, to extend the due date for

production reports filed electronically, and to eliminate the reporting

of most wells that are in drilling status. This rulemaking provides

electronic reporting exceptions for reporters who meet certain

criteria. These amendments will reduce administrative costs and

increase operating efficiencies for industry and MMS.

EFFECTIVE DATES: This final rule will be effective on November 1, 1999.

FOR FURTHER INFORMATION CONTACT: David S. Guzy, Chief, Rules and

Publications Staff, Royalty Management Program, MMS; telephone (303)

231-3432; fax (303) 231-3385; e-mail David.G[email protected].

SUPPLEMENTARY INFORMATION: The principal authors of this rule are Mary

Williams, Ralph Spencer, Barbara Lambert, Tim Allard, and Gail Solaas

of the Royalty Management Program (RMP), MMS.

I. Background

MMS published a proposed rulemaking entitled ``Electronic

Reporting'' on April 8, 1998 (63 FR 17133). The proposed rulemaking

provided a 60-day public comment period which ended on June 8, 1998. We

have analyzed the comments we received and amended our proposed rule to

meet public concerns when prudent and necessary.

II. Comments on Proposed Rule

General Comments

Comment--One industry trade association commented that it does not

believe MMS has a legal basis for requiring electronic reporting. The

commenter stated that the proposed rule has only a vague reference to

various mandates to use new technologies to improve programs. The

commenter recommended MMS withdraw the proposed rule.

Response--Our authorities for issuing this rule are cited at the

beginning of each part. One of the primary purposes of this rule is to

comply with 44 U.S.C. 3506 which requires Federal agencies to carry out

information management activities efficiently, effectively, and

economically. The Secretary of the Interior can also prescribe

necessary and proper rules and regulations to administer mineral leases

in accordance with 30 U.S.C. 189 and 1701. We believe we have the legal

authority to require electronic reporting; therefore, we have no reason

to withdraw the rule.

Comment--One industry association commented that because the

majority of lines are already reported to MMS electronically and MMS

will be revising reporting formats in the near future, MMS should not

mandate electronic reporting at this time. The commenter suggested that

MMS use other methods to encourage electronic reporting.

Response--We agree with the commenter that a majority of our

lines--80 percent of our royalty lines and 60 percent of our production

lines--are reported electronically. However, the electronic lines are

submitted primarily by very large companies and are a small number of

our total reports. We continue to receive over 20,000 paper reports

monthly, generally from small reporters. These paper reports must be

manually keyed, filed, boxed, and stored until they can be destroyed in

accordance with Federal record disposal requirements. These manual

tasks are costly for the Government and taxpayers.

We also agree with the commenter that our royalty and production

reports may be revised as a result of reengineering efforts that are

currently ongoing. One of the most important reengineering proposals is

to eliminate the Form MMS-3160, Report of Monthly Operations, within 2

years. Because we are proposing to eliminate the Form MMS-3160 in 2

years, we have decided to remove the requirement contained in

Sec. 210.20 of our proposed rule to report the Form MMS-3160

electronically. We are also eliminating all other references to

mandatory electronic reporting of Form MMS-3160 in this final

rulemaking.

The proposal to eliminate the Form MMS-3160 was published in the

Federal Register, along with other production reporting changes, on

February 23, 1999 (64 FR 8844). Most operators of onshore properties

report production on Form MMS-3160, although they have the option of

reporting on Form MMS-4054, Oil and Gas Operations Report. All offshore

operators, however, must report their production on Form MMS-4054.

Consequently, MMS and those operators having both onshore and offshore

production must maintain and support two separate reporting systems--

one for the Form MMS-3160 and one for the Form MMS-4054. We are

proposing that operators use one form, a revised Form MMS-4054, to

report both onshore and offshore production because we believe it is

more efficient for MMS and industry.

With respect to the commenter's suggestion that MMS use other means

to encourage electronic reporting, we have promoted electronic

reporting for many years by offering various options other than this

rule. However, we have numerous indicators--such as cost savings from

less data to key manually, fewer reporting errors to correct, and less

paper records to file and store--that show electronic reporting is more

accurate, efficient, and economical than paper reporting. Companies

reporting electronically also experience cost and time savings over

paper reporting. Moreover, technology is currently available to easily

expand the use of electronic reporting and reduce or eliminate paper

reporting. This rulemaking enables us to take greater advantage of

electronic reporting and storage technologies that will save time and

money for both MMS and industry.

For all the reasons discussed above, we believe there is no

justification for delaying the requirement for electronic reporting of

Forms MMS-2014 and MMS-4054.

Comment--Two companies commented on the need to file paper reports

for adjustments or adding lines after an electronic report is ready to

send. One company stated they would have to build an elaborate

reporting system costing tens of thousands of dollars. One company

wanted a ``grandfather'' clause for adjustments prior to the

implementation date.

Response--We currently receive manual adjusting reports from many

companies who report most or all of their initial data electronically.

Typically, these manual reports are facsimiles generated from a

computer. Facsimile reporting indicates that the company is entering

the data into a computer but is unable to convert these adjustments

into an electronic format. In these cases, we suggest the company use

one of our other electronic reporting options to convert these

adjusting entries so they can be filed electronically. For example,

many companies use a Microsoft Excel spreadsheet which can be easily

converted to a Comma Separated Values format and sent via e-mail or

diskette. We recognize that the electronic format for adjustments under

this scenario

[[Page 38117]]

would be different from the format for the current month's report.

However, MMS systems have the flexibility to accept different

electronic formats for the same time period. We do not believe that

this simple conversion would cost tens of thousands of dollars because

the data is already compiled in a company's computer. For these

reasons, we did not modify the final rule to ``grandfather''

adjustments for periods prior to the effective date.

Comment--One commenter was concerned with the statement in the

background section that ``Reporters who use electronic reports

experience few problems with converting or submitting their monthly

reports.'' The company stated that they have experienced problems with

generating the Electronic Data Interchange (EDI) transmission, with MMS

receiving the transmission, and with sending large volumes of data.

When these problems occurred, MMS required submission by tape. The

company had also experienced an increase in the costs of reporting via

EDI versus magnetic or cartridge tape.

Response--MMS was not aware of the problems this company

encountered when generating a ``live'' EDI transmission. We usually

discover and correct EDI transmission problems during sample testing

and subsequent EDI files are generated without difficulties.

Regarding large volume transmissions, the Value Added Network (VAN)

service provider MMS currently uses is unable to receive EDI

transmissions containing file sizes larger than 10 megabytes. Although

it is unusual to exceed this file size, the following solutions to this

problem are available to reporters:

1. The reporter can ask MMS to assist in the creation of smaller

reports for multiple EDI transmissions, which do not increase the

reporter's cost;

2. The reporter can ask the VAN service provider to suggest unique

solutions on an individual basis; and

3. Reporters can submit data in a magnetic tape format.

Regarding MMS's request that the reporter submit data by tape, we

do not mandate a specific primary method of transmission. However, we

strongly recommend that a reporter have a backup method available in

case its primary method fails as apparently happened in this instance.

MMS technical staff can assist reporters in resolving implementation

problems with any method they choose.

We agree with the commenter that reporting via EDI has higher

initial costs. In an effort to reduce VAN charges, we eliminated some

reference data elements when we initially established the EDI format.

However, both Government and industry benefit from standardized

reporting inputs, improved data integrity, proven VAN reliability, and

the enhanced confidentiality and security.

Specific Comments

Section 210.20(b)(2)(i)--now Sec. 210.21(a)(2)(i)--One commenter

requested additional information to determine if electronic reporting

would be helpful. The commenter's questions are: Has the MMS improved

the Monthly Report of Operations, Form MMS-3160, software? Does it now

print single-page versions of the report? What do the printed Form MMS-

2014 reports look like? Are the Form MMS-3160 and Form MMS-2014 reports

integrated in any way? Can the templates be incorporated into our Lotus

1-2-3 worksheets?

Response--As noted earlier, we have removed the requirement that

reporters submit the Form MMS-3160 electronically from this final rule.

However, if reporters should voluntarily choose to submit the Form MMS-

3160 electronically, we offer the following information.

MMS has not changed the Form MMS-3160 template software. This

software prints the Form MMS-3160 on two pages as it always has. The

printed Form MMS-2014 reports generated by our new 2014 template

software mirrors the paper Form MMS-2014. The Forms MMS-2014 and MMS-

3160 are not integrated in any way. Neither of these templates can be

incorporated into any spreadsheet or database software applications.

However, if reporters have stored their report data electronically, it

is a relatively easy process to download the required information into

either a Comma Separated Values (CSV) or ASCII format once you have the

appropriate MMS-approved record layouts in your possession. You may

find these record layouts on our Internet site at http://

www.rmp.mms.gov, Customer Services, Publication Services, Forms.

Section 210.20(d)--now Sec. 210.21(c)--One industry commenter

wanted to know about the electronic reporting guidelines, getting

samples approved, electronic commerce agreements and security measures.

What are they? How cumbersome will they be to implement? How will we

prove that our reports have been electronically filed on time? When the

MMS sends out error notices with their accompanying bills for

penalties, how do you prove what was submitted?

Response--To answer most of these questions, we have published our

EDI Handbook, Template User Guide, and Floppy Diskette and Magnetic

Tape Reporting instructions on our Internet site at http://

www.rmp.mms.gov under Customer Services, Publication Services,

Handbooks. We can also mail a paper copy of these guides to any company

interested in converting to electronic reporting. The user guides

provide detailed instructions on how to use the two template reporting

options currently available to reporters. Additional reporting

information can be found at http://www.rmp.mms.gov, see Customer

Services, Publication Services, Forms, Electronic Commerce Information.

Reporters may be particularly interested in the Electronic Commerce

Brochure found at this last site. This 2-page document details all the

electronic reporting options currently available at MMS.

MMS will approve a sample electronic report in 3 to 5 working days,

depending upon the date during the month the sample is received. This

process is a simple one in which MMS will notify a reporter that either

the sample report is acceptable and approved for live processing, or

that the sample report must be changed in one or more fields and re-

submitted. Thereafter, each reporter submitting an electronic report

will receive an electronic acknowledgment from MMS stating the date and

time a report was received. Reporters can use this acknowledgment as

proof that they submitted the report timely.

We maintain a record of each company's original report to support

any bills for erroneous reporting. We will continue to contact any

company whose lines are rejected and corrected within our Auditing and

Financial System. Our error correction process will not change simply

because we receive reports electronically.

With respect to security measures, we believe security is an

integral part of electronic reporting. For example, reporters selecting

the EDI reporting option must utilize a VAN to process their

transmissions to MMS. VANs are private networks that provide

confidentiality and security through user authentication, non-

repudiation, and data encryption. For e-mail transmissions over the

Internet, all users must register with RMP to establish themselves as

an authorized reporter. MMS will not process data files submitted by

reporters who have not registered. Additionally, e-mail files are

compressed using PKZip software with a password for added security.

This compression measure prevents others from seeing actual report

data. Both the reporter and MMS must use the correct

[[Page 38118]]

PKZip password before actual data becomes available for processing.

With respect to the Electronic Commerce Agreement (ECA), the

information about electronic reporting contained in an ECA is now

contained in this rule. Also, as discussed above, the passwords used in

electronic reporting will ensure the confidentiality of information

formerly contained in the ECA. Thus, we decided to eliminate the ECA

which was required under proposed Sec. 210.20(d)(2). We want to make

reporting electronically to MMS as simple and easy as possible.

Section 210.20(f)--now Sec. 210.22(a)--One commenter is unclear on

how much time payors will be given to make the appropriate system

changes, have reports approved, sign electronic commerce agreements,

etc. The 90 days allowed for a new reporter, as noted in this section,

would appear inadequate for initial development and implementation.

Response--The 90-day timeframe (equivalent to 3 months) for new

reporters assumes that most new reporters will be using an automated

system to account for their production and sales or, at the very least,

have a computer. We have two templates available upon request. One

requires a 386 computer using Microsoft Windows 3.1 or better, while

the other requires a 486 computer and Microsoft Windows 95. We have

several other electronic reporting options available and are developing

an Internet application for the near future.

The approval process is not time-consuming. For example, we try to

use the sample electronic report as the actual report for the month

submitted unless we encounter problems that we cannot resolve over the

telephone. On average, a company can select one of the templates or any

of our other electronic reporting options and receive approval within

30 days. As noted earlier, we have eliminated the requirement to file

an ECA in an effort to simplify and speed the process.

Given the various reporting options that are available and the

quick approval process, we believe 3 months are sufficient for a new

reporter to begin electronic reporting. Current reporters submitting 6

lines or more will have until November 1, 1999--the effective date of

this rule--to convert to electronic reporting. See Sec. 210.20 and

210.22 for electronic reporting conversion dates and exceptions,

respectively.

Section 210.20(g)--now eliminated--One commenter was concerned with

occasional equipment/electrical failure and what MMS thinks is

``reasonable'' in terms of a fixed fee per report line for

noncompliance. The commenter suggested MMS include a clause to cover

exceptions for occasional equipment/electrical failure. Another

commenter stated that the proposed rule is unclear about whether the

provision for the fee applies only to new reporters or to current

reporters who fail to comply. The commenter also questioned the need to

assess a fee for noncompliance. Because MMS is already processing paper

reports and this proposal will encourage reporters to switch to

electronic reporting, the Government cost to process paper reports will

decrease, rather than increase. Also, under RMP's reengineering

initiative, the data entry burden should be further reduced.

Response--We have eliminated proposed Sec. 210.20(g) which stated

that we would assess a fee if a reporter did not convert to electronic

reporting. We remind reporters, however, that they are subject to civil

penalty procedures under 30 CFR part 241 if they fail to comply with

any MMS regulation. These penalty procedures would pertain to reporters

who do not comply with the scheduled conversion dates provided in

Sec. 210.20(a). In addition, we have extended the effective date of

this rule from December 31, 1998 to November 1, 1999, to allow

reporters sufficient time to convert to electronic reporting. Over the

next few months, we will be working very hard to help reporters convert

to electronic reporting as soon as possible.

Section 210.52--One commenter wanted clarification on the statement

``You must submit a completed Report of Sales and Royalty Remittance

(Form MMS-2014) with all payments * * *.'' The commenter wants to know

if reporters can submit the Form MMS-2014 electronically independent of

the electronic payments.

Response--Yes, the Form MMS-2014 can be submitted electronically

independent of the electronic payment. The payor assigned document

number is used to link reports and payments. Many companies currently

send electronic and paper reports and a single electronic payment. We

allow reporters to send their electronic payment on the due date and

their electronic reports a few days before the payment. These

independent submissions provide flexibility to meet individual company

needs.

Section 216.50(c)--One company commented that extending the due

date for production reports by 10 days to the 25th of the second month

following production will place them in jeopardy of meeting the Form

MMS-2014 due date of the last day of the second month for making

estimated royalty payments to MMS. The company reports and pays

royalties for 12 clients. They recommend that we change the due date to

a 5-day extension for production reports or extend the due date for the

Form MMS-2014 by 5 days.

Response--The extended due date assists in reducing the number of

amended production reports without impacting the timeliness of data we

must process and send to States, tribes, and other Federal agencies.

Because automated reports are entered into our computer system the same

day they are received, they take less time to process than paper

documents. We piloted the 10-day extension for 1 year and received no

information indicating that companies were dependent upon the

production report to complete the Form MMS-2014. Royalty is typically

calculated using run tickets for liquids, meter readings for gas, and

other documents that are provided by lease operators. We believe you

should use the information on these documents to prepare the Form MMS-

2014, not the production report. We cannot change the due date of the

Form MMS-2014 and the associated royalty payment because of lease terms

and requirements in the Federal Oil and Gas Royalty Management Act of

1982, 30 U.S.C. 1711 et seq. We must have the Form MMS-2014 in order to

distribute royalty payments timely to the proper Federal, State, and

Indian recipients. MMS will continue the 10-day extension of the

production reporting due date not only as an incentive for electronic

reporting but also to reduce the number of amended reports.

III. Section-by-Section Analysis

The following paragraphs summarize the most significant changes we

made to our proposed rule that was published on April 8, 1998 (63 FR

17133):

Section 210.20

We eliminated the requirement to file the Form MMS-3160

electronically.

Section 210.20(a)

We added a timetable to Sec. 210.20(a) which phases small reporters

into electronic reporting over the next 2\1/4\ years. We added the

timetable in order to: (1) Minimize the impacts, if any, on small

businesses; and (2) give small businesses time to make any operational

changes necessary to comply with our electronic reporting requirements.

In addition to the table, we added a new paragraph (b) to clarify what

we mean by ``line'' and a new paragraph (c) to clarify what we mean by

``form''

[[Page 38119]]

because both terms are referred to in the timetable in paragraph (a).

For purposes of this part, multiple submissions of the same form in one

month equals one form. For example, if you submitted 10 Form MMS-4054's

containing 3 lines each, MMS would consider that to be one form with 30

lines.

Section 210.20(b)

We moved proposed Sec. 210.20(b) to new Sec. 210.21(a) for clarity

purposes.

Section 210.20(c)

We moved proposed Sec. 210.20(c) to new Sec. 210.21(b) and added

the phrase ``or by accessing our Internet site at www.rmp.mms.gov'' to

provide reporters with an additional source for our electronic commerce

brochure.

Section 210.20(d)

We moved proposed Sec. 210.20(d) to new Sec. 210.21(c) and deleted

Sec. 210.20(d)(2) which required reporters to submit an Electronic

Commerce Agreement.

Section 210.20(e)

We combined the provisions in this proposed Sec. 210.20(e) with new

Sec. 210.21(c) for further clarification.

Section 210.20(f)

We removed proposed Sec. 210.20(f) and included the 3-month grace

period for new reporters in new Sec. 210.22(a).

Section 210.20(g)

We deleted this proposed Sec. 210.20(g) which stated that we would

assess a fee if a reporter did not convert to electronic reporting. For

further information, see our response to public comments under

Sec. 210.20(g).

New Sec. 210.22

We added new Sec. 210.22 which provides two grace periods and two

exclusions to our electronic reporting requirements.

The first grace period MMS will allow is if you become a

new MMS reporter after any of the required conversion dates. In such

cases, MMS will allow you 3 months from the day your first report is

due to begin reporting electronically (this grace period was originally

contained in proposed Sec. 210.20(f) and defined as 90 days). For

example, if you become an MMS reporter by leasing 6 new producing

properties (equivalent to 6 lines) on April 16, 2000, your first Form

MMS-2014 for April 2000 sales will be due May 31, 2000. You will have 3

months--or until August 31, 2000--to begin submitting the Form MMS-2014

electronically. MMS will continue to accept paper forms during the

grace period.

The second grace period is for when you exceed the maximum

number of lines you are allowed to report on paper under

Sec. 210.20(a). In that case, you have 3 months from the last day of

the month in which you exceeded the line limit to begin reporting

electronically. For example, assume that you currently report 5 lines

per month on your Form MMS-2014. On June 8, 2000 (7 months after the 6-

line conversion date of November 1, 1999), you lease two new producing

properties (equivalent to 2 new lines per month). You will have 3

months from the last day of the month in which you exceeded the 6-line

limit--or until September 30, 2000--to begin submitting the Form MMS-

2014 electronically. MMS will continue to accept paper forms during the

grace period.

The two exceptions to our electronic reporting requirements

provided in Sec. 210.22 are as follows:

You do not have to report electronically if you report

only rent, minimum royalty, or other annual obligations on the Form

MMS-2014; and

You do not have to report electronically if you are a

small business as defined by the U.S. Small Business Administration,

and you have no computer, no resources to purchase a computer or

contract with an electronic reporting service, nor access to a computer

at a local library or other public facility.

The two exceptions to our electronic reporting requirements which

we added to this final rule are directed primarily at small reporters

who might suffer financial hardship if forced to comply with this rule.

For a detailed explanation of these exceptions, see our discussion of

small business issues under the Regulatory Flexibility Act section of

the preamble in caption IV. Procedural Matters.

Section 216.50(a)

We added a sentence to this paragraph to clarify that you may

submit the Form MMS-3160 electronically.

Section 216.50(c)(1) and (2)

We clarified that you will have a 10-day extension from the 15th to

the 25th day of the second month following the month for which you are

reporting if you voluntarily choose to submit the Form MMS-3160,

Monthly Report of Operations, electronically.

Section 216.53(c)(1) and (2)

We clarified that you will have a 10-day extension from the 15th to

the 25th day of the second month following the month for which you are

reporting if you submit the Form MMS-4054, Oil and Gas Operations

Report, electronically.

Section 216.55(c)(1) and (2)

We clarified that you will have a 10-day extension from the 15th to

the 25th day of the second month following the month for which you are

reporting to submit your Form MMS-4056, Gas Plant Operations Report, on

paper if you submit the Form MMS-4054, Oil and Gas Operations Report,

electronically.

Section 216.56(c)(1) and (2)

We clarified that you will have a 10-day extension from the 15th to

the 25th day of the second month following the month for which you are

reporting to submit your Form MMS-4058, Production Allocation Schedule

Report, on paper if you submit the Form MMS-4054, Oil and Gas

Operations Report, electronically.

IV. Procedural Matters

Regulatory Planning and Review (Executive Order 12866)

This document is not a significant rule and is not subject to

review by the Office of Management and Budget under E.O. 12866.

Generally, this rule will require many Federal and Indian mineral

revenue and production reporters to convert from paper to electronic

reporting by November 1, 2001. MMS uses the reports to account for and

distribute Federal and Indian mineral revenues. This rule will not

affect the timeliness of revenue distribution to recipients or

information dissemination to other Federal agencies. Based on this and

other information detailed below, we conclude:

(1) This rule will not have an effect of $100 million or more on

the economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities.

Governments

This rule will have no effect on tribal governments but will have

positive effects on the amount of revenues shared with States and

possibly local governments. We expect net receipts sharing costs to

States--that is, the MMS operating costs deducted from States' shares

of royalty revenue--to decrease as MMS realizes savings from electronic

reporting. We estimate the total annual savings to States to be

[[Page 38120]]

$33,000 in the first year and $134,000 each year thereafter.

Private Sector

(1) This rule establishes the type of media that reporters in the

oil and gas industry must use to report mineral revenues and production

to MMS. We estimate that electronic reporting will generate net savings

to industry of $1.2 million in the first year and $1.8 million each

year thereafter;

(2) This rule will not create a serious inconsistency or otherwise

interfere with an action taken or planned by another agency;

(3) This rule does not alter the budgetary effects or entitlements,

grants, user fees, or loan programs or the rights or obligations of

their recipients; and

(4) This rule does not raise novel legal or policy issues.

Regulatory Flexibility Act

In our April 8, 1998, proposed rule (63 FR 17133), we concluded

that the rule would not have a significant economic impact on small

businesses primarily because of the various low-cost electronic

reporting options available to reporters. We received several public

comments that disagreed with our conclusion. In response to those

comments, we modified the rule substantially to minimize the negative

impact on the largest number of small businesses and still increase the

number of reports received electronically.

Comments Received on Small Business Impact

One industry trade group and three companies disagreed with our

conclusion that the impact of requiring electronic reporting for small

reporters would not be significant. They were concerned that: (1) MMS

was shifting data entry costs to the small reporters; (2) many

companies do not have a computer and cannot afford to buy one or pay

someone else to report electronically for them; and (3) this rule would

require a significant change in the way their business is conducted.

Additionally, the industry trade group disputed our conclusion that

reporting electronically will reduce the reporting burden for companies

who report only a few lines each month. The trade group believes it

will be a costly, time-consuming burden to convert to electronic

reporting. The industry trade group is concerned that MMS permits no

exception to the proposed rule, especially for small lessees who are

trying to produce from marginal wells in a time of extremely low

prices.

The industry trade group and one company recommended that we

establish a reasonable threshold by number of lines or royalties paid

per year. The industry trade group also recommended that MMS establish

a means by which reporters could request an exemption to the rule based

on various circumstances or hardships. One company also recommended

that, for the few non-electronic reporters remaining, MMS reduce the

reporting burden for both MMS and the reporter by developing an

abbreviated paper report.

MMS Response to Comments

It is not our intent to cause economic hardship for any small

business by requiring electronic reporting. We devoted substantial time

and effort to identify the possible negative economic impacts of this

rule on small businesses and to take steps to eliminate or lessen

adverse impacts whenever possible. The following are examples of the

many actions we took to mitigate negative economic impacts and still

increase the number of reports submitted electronically:

Free software. We developed template software (see

response to Sec. 210.20(b)(2)(i) under specific comments) primarily for

those small companies that report only a few lines each month. We

provide this software at no charge to reporters. If a company should

choose to purchase a computer to use the software, the minimum software

requirements permit the company to purchase a very inexpensive model.

The template software is easy to install, requires no programming

or computer expertise, and provides companies with the static or

reference data that must be reported each month. This software also

permits companies to save the report to a file which they can use to

amend their report later, if necessary.

This software has significant benefits for both MMS and industry.

It could ultimately allow us to cease printing and mailing over 4,000

model paper reports each month. The model contains the static or

reference data contained in our system for each reporter. This process

is very costly to MMS and, in many cases, companies are not using the

model to report but only as a reference. The model report is also

cumbersome to industry because each company must wait for the model to

be received, complete the model with the current month's data, make

copies, and mail the report back to MMS. With electronic reporting,

companies can complete the report anytime during the month and easily

amend prior reports if necessary;

Internet filing. We are also developing an Internet

application that will permit small companies that do not have computers

to submit reports from remote locations, such as public libraries,

without purchasing a computer. We anticipate this alternative to be

available before the effective date of this rule. This alternative will

eliminate the need to purchase a computer;

Advice and assistance. We offer advice and assistance to

the hundreds of small companies that currently use a computer-generated

paper facsimile to report each month to help them transition to

electronic reporting. Our goal is to eliminate as much data entry as

possible for both the companies and MMS. For example, a company may

enter data in its automated system and possibly again on its facsimile

reports. Subsequently, MMS must manually enter the data from the paper

copy into our system. Electronic reporting will eliminate these two

stages of manual data entry without shifting costs. One of the

commenting companies uses Lotus 1-2-3 for its accounting functions. The

Lotus spreadsheet can be converted to an ASCII format (based upon an

ASCII record layout we provide) and sent to MMS via e-mail or diskette.

While Lotus does not offer a direct file conversion to a Comma

Separated Values (CSV) format, a user can compose a macro that saves

Lotus files in a CSV format. We will provide any reporter with a CSV

and/or ASCII record layout for both production and royalty reports upon

request;

Elimination of the requirement to file the Form MMS-3160,

Monthly Report of Operations, electronically. As part of our

reengineering efforts, MMS is proposing to eliminate the Form MMS-3160

and replace it with a revised Form MMS-4054. Consequently, we

determined that it would not be cost effective to require reporters to

convert to electronic reporting of the Form MMS-3160 at this time;

Phased compliance over 2\1/4\ years. In Sec. 210.20(a), we

established a timetable that phases the smallest reporters into

electronic reporting over 2\1/4\ years. These extended compliance dates

will allow additional time for small businesses to obtain computer

equipment or contract with an electronic reporting service to comply

with our electronic reporting requirements; and

Exceptions to electronic reporting. In response to public

comments, MMS will allow some exceptions to the electronic reporting

requirements in this final rule. The exceptions at Sec. 210.22 are

directed primarily at small reporters

[[Page 38121]]

who might suffer financial hardship if forced to comply with this rule.

The two exceptions to electronic reporting are as follows:

(1) You do not have to report electronically if you report only

rent, minimum royalty, or other annual obligations on the Form MMS-

2014. This category covers reporters who submit one line per lease per

year for any number of leases. We determined that it would not be

economically feasible for a reporter to develop an electronic reporting

method for this very limited reporting situation; and

(2) You do not have to report electronically if you are a small

business as defined by the U.S. Small Business Administration, and you

have no computer, no resources to purchase a computer or contract with

an electronic reporting service, nor access to a computer at a local

library or other public facility. This exception will allow any small

business facing severe financial hardship to continue submitting paper

reports rather than convert to electronic reporting. Excluding these

small payors and reporters from electronic reporting requirements will

avoid causing undue financial hardship for the smallest companies.

We did not choose to develop an abbreviated paper report in

addition to the current forms as one commenter suggested because this

action would not further our goal to eliminate paper reporting. One of

the significant advantages of electronic reporting is that a company

can store and submit only those data elements that are required for its

operation. Maintaining two different reporting forms or data collection

instruments is duplicative and confusing for MMS and reporters. In

addition, MMS is in the process of reengineering our systems and

attempting to reduce or modify the data elements currently required.

However, we probably will not complete this effort for several years.

Conclusion. Based on the numerous mitigating actions we have taken

in response to public comments, the Department of the Interior

certifies that this rule will not have a significant economic effect on

a substantial number of small entities under the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.). This rule will have no effect on tribal

governments or other small governmental jurisdictions.

Your comments are important. The Small Business and Agriculture

Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were

established to receive comments from small businesses about Federal

agency enforcement actions. The Ombudsman will annually evaluate the

enforcement activities and rate each agency's responsiveness to small

business. If you wish to comment on the enforcement actions in this

rule, call 1-888-734-3247.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

This rule is not a major rule under 5 U.S.C. 804(2), the Small

Business Regulatory Enforcement Fairness Act. This rule:

a. Does not have an annual effect on the economy of $100 million or

more. Net revenues distributed to States may increase $33,000 in the

first year and $134,000 each year thereafter due to cost savings

realized by MMS through increased electronic reporting. Net savings to

industry from converting to electronic reporting is estimated to be

$1.2 million in the first year and $1.8 million each year thereafter.

b. Will not cause a major increase in costs or prices for

consumers, individual industries, Federal, State, or local government

agencies, or geographic regions. See discussion under Regulatory

Flexibility Act.

c. Does not have significant adverse effects on competition,

employment, investment, productivity, innovation, or the ability of

U.S.-based enterprises to compete with foreign-based enterprises. See

discussion under Regulatory Flexibility Act.

Unfunded Mandates Reform Act of 1995

This rule does not impose an unfunded mandate on State, local, or

tribal governments or the private sector of more than $100 million per

year. This rule does not have a significant or unique effect on State,

local, or tribal governments or the private sector. A statement

containing the information required by the Unfunded Mandates Reform Act

(2 U.S.C. 1531 et seq.) is not required.

Governments. This rule does not affect local or tribal governments.

States that request to perform the delegable function of processing

royalty and production reports under 30 CFR part 227 are required to

accept multiple forms of electronic media from reporters as specified

by MMS. States are compensated for the costs of performing delegable

functions up to the amount it would reasonably cost MMS to perform the

same function. We conclude that this rule would not impose an unfunded

mandate on States.

Private sector. This rule establishes the type of media that

reporters in the oil and gas industry must use to report mineral

revenues and production to MMS. We estimate net savings to industry

from converting to electronic reporting to be $1.2 million in the first

year and $1.8 million each year thereafter.

Takings (E.O. 12630)

In accordance with E.O. 12630, this rule does not have significant

takings implications. This rule does not impose conditions or

limitations on the use of any private property; consequently, a takings

implication assessment is not required.

Federalism (E.O. 12612)

In accordance with Executive Order 12612, this rule does not have

sufficient federalism implications to warrant the preparation of a

Federalism Assessment. This rule does not impose any requirements on

oil and gas reports submitted to States or limit State policymaking

discretion in any way; consequently, a Federalism Assessment is not

required.

Civil Justice Reform (E.O. 12988)

In accordance with Executive Order 12988, the Office of the

Solicitor has determined that this rule does not unduly burden the

judicial system and meets the requirements of sections 3(a) and 3(b)(2)

of the Order.

Paperwork Reduction Act

In our April 8, 1998, proposed rule (63 FR 17133), we stated that

this rule will reduce burden hours associated with two existing

information collections approved by the Office of Management and Budget

(OMB):

(1) OMB Control Number 1010-0022, Report of Sales and Royalty

Remittance (Form MMS-2014); and

(2) OMB Control Number 1010-0040, Production Accounting and

Auditing System (PAAS) Reports (Facility and Measurement Information

Form (FMIF), Form MMS-4051; Oil and Gas Operations Report (OGOR), Form

MMS-4054; Gas Analysis Report (GAR), Form MMS-4055; Gas Plant

Operations Report (GPOR), Form MMS-4056; Monthly Report of Operations

(MRO), Form MMS-3160; and Production Allocation Schedule Report (PASR),

Form MMS-4058)].

One industry commenter believes that if a free-form layout is

allowed using existing spreadsheet software (for example, Microsoft

Excel), it would take closer to the 7 minutes per line to complete the

Form MMS-2014 (similar to the paper submission) versus 2 minutes for

electronic reporting. The commenter believes the 2 minutes per line,

the burden estimate we used in our OMB submission, could only be

realized

[[Page 38122]]

if such data were systematically loaded on the spreadsheet. The

commenter is currently submitting his adjustments on paper.

Our estimate of 2 minutes per line is based on the assumption that

a company is already using spreadsheet software or other automated

options to submit its Form MMS-2014 or similar State reports. We also

offer electronic alternatives to facilitate compatibility with a

company's system, including submission of ASCII files on diskette or

submission of regular reports on magnetic tape with adjustments on a

diskette. We will work with any company to determine the simplest, most

efficient alternative for reporting electronically.

On May 30, 1998, OMB approved the reduction in burden which we

estimated in the proposed rule for both of the above-referenced

information collections (OMB Control Numbers 1010-0022 and 1010-0040).

Both collections have an expiration date of August 31, 2001.

As part of our continuing effort to reduce paperwork and respondent

burden, we invite the public and other Federal agencies to comment on

any aspect of the reporting burdens associated with these information

collections. Submit your comments to the Office of Information and

Regulatory Affairs, OMB, Attention Desk Officer for the Department of

the Interior, Washington, D.C. 20503. Send copies of your comments to

Minerals Management Service, Royalty Management Program, Rules and

Publications Staff, P.O. Box 25165, MS 3021, Denver, Colorado 80225-

0165; courier address is Building 85, Denver Federal Center, Denver,

Colorado 80225; e-mail address is RMP.[email protected].

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.

National Environmental Policy Act of 1969

This rule does not constitute a major Federal Action significantly

affecting the quality of the human environment. A detailed statement

under the National Environmental Policy Act of 1969 is not required.

List of Subjects

30 CFR part 210

Coal, Continental shelf, Geothermal energy, Government contracts,

Indian lands, Mineral royalties, Natural gas, Petroleum, Public lands--

mineral resources, Reporting and recordkeeping requirements.

30 CFR part 216

Coal, Continental shelf, Geothermal energy, Government contracts,

Indian lands, Mineral royalties, Natural gas, Penalties, Petroleum,

Public lands--mineral resources, Reporting and recordkeeping

requirements.

Dated: June 30, 1999.

Sylvia V. Baca,

Acting Assistant Secretary--Land and Minerals Management.

For the reasons stated in the preamble, MMS amends 30 CFR parts 210

and 216 as follows:

PART 210--FORMS AND REPORTS

1. The authority citation for part 210 is revised to read as

follows:

Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396, 2107; 30 U.S.C.

189, 190, 359, 1023, 1751(a); 31 U.S.C. 3716, 9701; 43 U.S.C. 1334,

1801 et seq.; and 44 U.S.C. 3506(a).

2. Section 210.10 paragraphs (c)(1), (c)(2), (c)(7), and (d) are

revised to read as follows:

Sec. 210.10 Information collection.

* * * * *

(c) * * *

(1) MMS-2014--Used monthly to report lease-related transactions

essential for royalty management to determine the correct royalty

amount due, reconcile or audit data, and distribute payments to

appropriate accounts. Public reporting burden for paper submission is

estimated to average 7 minutes to complete each line item on the form,

including the time necessary to assemble data, calculate value and

royalty, and enter data on the form. Companies reporting electronically

may average 2 minutes to complete each line item on the form. Comments

submitted relative to this information collection should reference the

information collection titled Report of Sales and Royalty Remittance,

OMB Control Number 1010-0022.

(2) MMS-3160--Used by onshore oil and gas lease operators to report

monthly oil and gas production to MMS. Public reporting burden for

paper submission is estimated to average 15 minutes per form, including

the time necessary to assemble data, ensure that production and

disposition numbers are accurate, and enter data on the form. Companies

reporting electronically may average 7.5 minutes per month to complete

the form. Comments submitted relative to this information collection

should reference the information collection titled PAAS Oil and Gas

Reports, OMB Control Number 1010-0040.

* * * * *

(7) MMS-4054--This three-part form identifies all oil and gas lease

production from Federal and Indian lands. MMS uses information from

this form to track oil and gas from the point of production to the

point of first sale or other disposition. Respondents will generally

not use all three parts of the form. Public reporting burden for paper

submission is estimated to average 30 minutes per month, including the

time necessary to assemble data, ensure that production and disposition

numbers are accurate, and enter data on the form. Companies reporting

electronically may average 15 minutes per month to complete the form.

Comments submitted relative to this information collection should

reference the information collection titled PAAS Oil and Gas Reports,

OMB Control Number 1010-0040.

* * * * *

(d) Comments on burden estimates. Send comments on the accuracy of

this burden estimate or suggestions on reducing this burden to the

Information Collection Clearance Officer, MS 4230, MMS, 1849 C Street,

NW, Washington, DC 20240 and to the Office of Management and Budget,

Office of Information and Regulatory Affairs, Attention: Desk Officer

for the U.S. Department of the Interior, OMB Control Number 1010-

________ (insert appropriate OMB Control Number), Washington, DC 20503.

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.

3. Sections 210.20-210.22 are added to subpart A to read as

follows:

Sec. 210.20 When is electronic reporting required?

(a) You must submit Forms MMS-2014 and MMS-4054 to MMS

electronically. You must begin reporting electronically according to

the following timetable unless you qualify for the exceptions to

electronic reporting listed in Sec. 210.22:

------------------------------------------------------------------------

Then, you must submit that

If you report the following number of form electronically

lines each month on a required form . . . beginning . . .

------------------------------------------------------------------------

(1) 6 or more............................. November 1, 1999.

(2) 4-5................................... November 1, 2000.

(3) 1-3................................... November 1, 2001.

------------------------------------------------------------------------

(b) See Sec. 218.40(c) for the definition of a royalty report line

on Form MMS-2014 and Sec. 216.40(c) for the definition

[[Page 38123]]

of a production report line on Form MMS-4054; and

(c) For purposes of this part, multiple submissions of the same

form in one month equals one form.

Sec. 210.21 How do you report electronically?

(a) You may use any of the following electronic media types, unless

MMS instructs you differently:

(1) Electronic Data Interchange (EDI) 1--The inter-

organizational, computer-to-computer exchange of structured information

in a standard, machine-processable format;

---------------------------------------------------------------------------

\1\ MMS has developed security measures, authentication

procedures, and automated acknowledgments for this electronic media

type.

---------------------------------------------------------------------------

(2) Electronic Mail (e-mail) 1--Any communication

service used to electronically transmit and store messages and attach

files. MMS has three electronic file options:

(i) Template--MMS-provided software that generates blank forms on a

personal computer to assist companies in preparing MMS regulatory

reports (this option is not available for Form MMS-4054);

(ii) Comma Separated Values (CSV)--A file format where attribute

fields are separated by commas; and

(iii) American Standard Code for Information Interchange (ASCII)--A

file format of fixed-length records with fixed-length attribute fields;

(3) Reporter-Prepared Diskette (3\1/2\ inch)--A data storage medium

used to transmit report data using one of the following file formats:

(i) Template;

(ii) CSV; and

(iii) ASCII;

(4) Magnetic or Cartridge Tape--A data storage medium used to

transmit report data in an ASCII file format.

(b) MMS prefers that you use the media types in the order presented

in paragraph (a) of this section to the extent it is cost effective and

practical. As technology changes, MMS will consider other media types

and the order of MMS preference may change. Refer to our electronic

commerce brochure for the most current reporting options. You can

receive a copy of our brochure by calling your MMS representative or by

accessing our Internet site at www.rmp.mms.gov.

(c) Before you may begin reporting electronically:

(1) You must submit an electronic sample of your report for MMS

approval using the MMS-supplied electronic reporting guidelines;

(2) MMS must notify you that your sample report has been approved;

(3) MMS must assign you a sender identification number and security

code for any EDI transmissions; and

(4) MMS must assign you an originating address and compression

software password for any e-mail transmissions.

Sec. 210.22 What are the exceptions to the electronic reporting

requirements?

MMS will allow the following grace periods and exceptions to the

electronic reporting requirements in Sec. 210.20:

(a) If you become a new MMS reporter after any of the dates you are

required to submit electronic reports under Sec. 210.20(a), you have 3

months from the day your first report is due to begin reporting

electronically;

(b) If you exceed the maximum number of lines you are allowed to

report on paper under Sec. 210.20(a), you have 3 months from the last

day of the month in which you exceeded the line limit to begin

reporting electronically;

(c) You are not required to report electronically if you report

only rent, minimum royalty, or other annual obligations on the Form

MMS-2014; and

(d) You are not required to report electronically if you are a

small business as defined by the U.S. Small Business Administration,

and you have no computer, no resources to purchase a computer or

contract with an electronic reporting service, nor access to a computer

at a local library or other public facility.

4. Section 210.52 is revised to read as follows:

Sec. 210.52 Report of sales and royalty remittance.

(a) You must submit a completed Form MMS-2014 (Report of Sales and

Royalty Remittance) to MMS with:

(1) All royalty payments; and,

(2) Rents on nonproducing leases, where specified.

(b) When you submit Form MMS-2014 data electronically, you must not

submit the form itself.

(c) Completed Forms MMS-2014 for royalty payments are due by the

end of the month following the production month.

(d) Where applicable, completed Forms MMS-2014 for rental payments

are due no later than the anniversary date of the lease.

(e) This section does not prohibit you from making early payments

voluntarily.

PART 216--PRODUCTION ACCOUNTING

5. The authority citation for part 216 is revised to read as

follows:

Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396, 2107; 30 U.S.C.

189, 190, 359, 1023, 1751(a); 31 U.S.C. 3716, 9701; 43 U.S.C. 1334,

1801 et seq.; and 44 U.S.C. 3506(a).

Subpart A--General Provisions

6. Add Sec. 216.11 to subpart A to read as follows:

Sec. 216.11 Electronic reporting.

You must submit your Oil and Gas Operations Report, Form MMS-4054,

in accordance with electronic reporting requirements in 30 CFR part

210.

Subpart B--Oil and Gas, General

7. Section 216.50 is added by redesignating paragraphs (b) through

(d) as paragraphs (f) through (h), revising paragraph (a), and adding

new paragraphs (b) through (e) to read as follows:

Sec. 216.50 Monthly report of operations.

(a) You must submit a Monthly Report of Operations, Form MMS-3160,

if you operate either an onshore Federal or Indian lease or an onshore

federally-approved agreement that contains one or more wells that are

not permanently plugged and abandoned. You may submit Form MMS-3160

electronically.

(b) You must submit a Form MMS-3160 for each well for each calendar

month, beginning with the month in which you complete drilling, unless

you have only test production from a drilling well or MMS tells you in

writing to do otherwise.

(c) MMS must receive your completed Form MMS-3160 according to the

following table:

------------------------------------------------------------------------

If you submit your form . . . We must receive it by . . .

------------------------------------------------------------------------

(1) Electronically........................ The 25th day of the second

month following the month

for which you are

reporting.

(2) Other than electronically............. The 15th day of the second

month following the month

for which you are

reporting.

------------------------------------------------------------------------

(d) You must continue reporting until either:

(1) BLM approves all wells as permanently plugged or abandoned and

you dispose of all inventory; or

(2) The lease or agreement is terminated.

(e) You are not required to submit Form MMS-3160 if:

(1) You are authorized to submit an Oil and Gas Operations Report,

Form MMS-4054, instead of a Form MMS-3160; or

[[Page 38124]]

(2) You operate a gas storage agreement. You must report gas

storage agreements to the appropriate BLM office.

* * * * *

8. Section 216.53 is revised to read as follows:

Sec. 216.53 Oil and gas operations report.

(a) You must file an Oil and Gas Operations Report, Form MMS-4054,

if you operate one of the following that contains one or more wells

that are not permanently plugged or abandoned:

(1) An OCS lease or federally-approved agreement; or

(2) An onshore Federal or Indian lease or federally-approved

agreement for which you elected to report on a Form MMS-4054 instead of

a Form MMS-3160.

(b) You must submit a Form MMS-4054 for each well for each calendar

month, beginning with the month in which you complete drilling, unless

you have only test production from a drilling well or MMS tells you in

writing to do otherwise.

(c) MMS must receive your completed Form MMS-4054 according to the

following table:

------------------------------------------------------------------------

If you submit your form . . . We must receive it by . . .

------------------------------------------------------------------------

(1) Electronically........................ The 25th day of the second

month following the month

for which you are

reporting.

(2) Other than electronically............. The 15th day of the second

month following the month

for which you are

reporting.

------------------------------------------------------------------------

(d) You must continue reporting until either:

(1) BLM or MMS approves all wells as permanently plugged or

abandoned and you dispose of all inventory; or

(2) The lease or agreement is terminated.

9. Section 216.55 is revised to read as follows:

Sec. 216.55 Gas plant operations report.

(a) You must submit a Gas Plant Operations Report, Form MMS-4056,

if you operate either:

(1) A gas plant that processes gas originating from an OCS lease or

federally-approved agreement before the point of final royalty

determination; or

(2) A gas plant that processes gas from an onshore Federal or

Indian lease or federally-approved agreement before the point of final

royalty determination, and MMS has asked you to submit a Form MMS-4056.

(b) You must submit a Form MMS-4056 for each calendar month

beginning with the month gas processing is initiated.

(c) MMS must receive your completed Form MMS-4056 according to the

following table:

------------------------------------------------------------------------

We must receive your Form

If you submit your Form MMS-4054 . . . MMS-4056 by . . .

------------------------------------------------------------------------

(1) Electronically........................ The 25th day of the second

month following the month

for which you are

reporting.

(2) Other than electronically............. The 15th day of the second

month following the month

for which you are

reporting.

------------------------------------------------------------------------

(d) Your report must show 100 percent of the gas.

(e) You are not required to file a Form MMS-4056 if:

(1) Your plant has not processed gas that originated from a Federal

onshore, OCS, or Indian lease, or federally-approved agreement before

the point of final royalty determination for 6 months; and

(2) You notified MMS in writing within 30 days after the end of the

6-month period.

(f) You must file a Form MMS-4056 when your plant resumes

processing gas that originated from a Federal onshore, OCS, or Indian

lease, or federally-approved agreement before the point of final

royalty determination.

10. Section 216.56 is amended by revising paragraph (b) and adding

paragraph (c) to read as follows:

Sec. 216.56 Production allocation schedule report.

* * * * *

(b) You must submit a Production Allocation Schedule Report, Form

MMS-4058, for each calendar month beginning with the month in which you

first handle production covered by this section.

(c) MMS must receive your Form MMS-4058 according to the following

table:

------------------------------------------------------------------------

We must receive your Form

If you submit your Form MMS-4054 . . . MMS-4058 by . . .

------------------------------------------------------------------------

(1) Electronically........................ The 25th day of the second

month following the month

for which you are

reporting.

(2) Other than electronically............. The 15th day of the second

month following the month

for which you are

reporting.

------------------------------------------------------------------------

[FR Doc. 99-18005 Filed 7-14-99; 8:45 am]

BILLING CODE 4310-MR-P