# Appeals of MMS Orders

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A99-37

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** January 12, 1999
- **Citation:** 64 FR 1930

## Text

SUMMARY: The Office of Hearings and Appeals and the Minerals Management
Service propose to amend their rules governing the appeal of orders
from both the MMS's Royalty Management Program and MMS's Offshore
Minerals Management Program. Also included in this proposed rulemaking
are new regulations governing the issuance of royalty orders and the
ability of appellants in royalty appeals to demonstrate financial
solvency in lieu of posting a surety in accordance with the Federal Oil
and Gas Royalty Simplification and Fairness Act of 1996, and new
regulations to collect processing fees.

DATES: Comments must be submitted on or before March 15, 1999. MMS will
publish a separate document notice in the Federal Register indicating
date and location of a workshop regarding this proposed rulemaking.

ADDRESSES: Written comments regarding this proposed rule should be sent
to David S. Guzy, Chief, Rules and Publications Staff, at the following
addresses.
For comments sent via the U.S. Postal Service use: Minerals
Management Service, Royalty Management Program, Rules and Publications
Staff, P.O. Box 25165 MS 3021, Denver, CO 80225-0165. Courier or
overnight delivery address is: Building 85, Room A-613, Denver Federal
Center, Denver, CO 80225; or e-mail RMP.[email protected].

FOR FURTHER INFORMATION CONTACT: David S. Guzy, Chief, Rules and
Publications Staff, telephone (303) 231-3432, FAX (303) 231-3385, e-
Mail David.G[email protected].

SUPPLEMENTARY INFORMATION: We will post public comments after the
comment period closes on the Internet at http://www.rmp.mms.gov or
contact David S. Guzy, Chief, Rules and Publications Staff, telephone
(303) 231-3432, FAX (303) 231-3385.

I. General Background

In May 1994, MMS began a comprehensive review of its administrative
appeals process, particularly as it relates to appeals involving orders
or decisions issued by the Royalty Management Program (RMP). As part of
that review, MMS held several informal meetings with State, tribal, and
industry representatives to discuss the problems and possible solutions
within the appeals process. The principal problems identified included
the length of the appeals process, sometimes taking several years to
resolve a case, and the excessive costs of the process to both MMS and
appellants.
On August 13, 1996, the President signed the Federal Oil and Gas
Royalty Simplification and Fairness Act, Pub. L. 104-185, as corrected
by Pub. L. 104-200 (RSFA). Section 4 of RSFA amended the Federal Oil
and Gas Royalty Management Act of 1982 (FOGRMA), 30 U.S.C. 1701 et
seq., and added a new FOGRMA Sec. 115(h), 30 U.S.C. 1724(h), governing
the Department's process for resolving appeals of MMS orders or
decisions involving royalties and other payments due on Federal oil and
gas leases. For appeals involving Federal oil and gas leases covered by
this new provision, the Department has 33 months from the date a
proceeding is commenced to complete all levels of administrative
review. If the Department does not decide the appeal within 33 months,
the appeal is deemed decided either for or against the Department,
depending on the type of order and the monetary amount at issue in the
appeal. The 33-month deadline does not apply to appeals involving
Indian leases or Federal leases for minerals other than oil and gas. As
a result of this MMS review and the new legislation, MMS announced a
proposed rule in the Federal Register on October 28, 1996. The proposed
regulation provided for amendments to 30 CFR part 290. On December 31,
1997, MMS announced that it intended to withdraw the October 28, 1996,
proposed rule when it published a revised notice of proposed rule
responding to the Royalty Policy Committee (RPC) report. 62 FR 68244.
Accordingly we hereby withdraw the October 28, 1996, proposed rule.
In 1995, the Department of the Interior (DOI) established a RPC
under the Minerals Management Advisory Board. The RPC's purpose is to
provide advice to the Secretary on the Department's management of
Federal and Indian mineral leases, revenues, and other minerals-related
policies. The RPC includes representatives from States, Indian tribes
and allottee organizations, minerals industry associations, Federal
agencies and the public. At the RPC's first meeting in September 1995,
it established eight Subcommittees, including the Appeals and
Alternative Dispute Resolution (ADR) Subcommittee (Subcommittee). The
Subcommittee was created to make recommendations to the RPC to improve
the processes involving appeals and alternative dispute resolution.
Membership in the Subcommittee included eleven representatives from
industry, five representatives from States, and two representatives
from Indian tribes. In addition to the voting members, the Subcommittee
benefitted from the participation of several other persons as non-
voting members and of two employees of MMS as staff to the
Subcommittee. The Subcommittee agreed that the principal purpose of the
MMS administrative appeals process should be the expeditious and
independent review of appeals.
The Subcommittee recognized that the MMS appeals process had been
under criticism and serious review since 1994 and believed that
substantial reform was needed. Some of the problems the Subcommittee
identified in the existing appeals process were:
1. Lack of timely resolution;
2. Lack of clarity in some orders;
3. Perceived lack of independence and unfairness of MMS Director-
level appeals decisions due to the internal clearance process and
communication within the Department between those involved in making
the initial decision and those involved in making the decision on
appeal;
4. Policy uncertainty--some orders issued without MMS having
clearly decided and explained policy issues;
5. Inability of the appellant to determine what the administrative
record for the order contains;
6. Allegedly conflicting roles of the Solicitor's Office in
satisfying institutional needs (assisting in setting policy and overall
litigation strategy) and acting as a legal advocate for MMS; and
7. Duplication of effort between the MMS Director and Interior
Board of Land Appeals (IBLA) levels of review.
Throughout its review of the appeals process, the Subcommittee
insisted that its recommendations needed to meet certain principles.
Any changes in the process:
1. Could not substantially harm the position of MMS;
2. Would need to ensure that the process would be completed within
33 months;

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3. Should encourage the parties to develop the facts, clarify the
issues, and resolve disputes at the earliest possible opportunity;
4. Would have to reduce the costs of the process to the
participants;
5. Would clarify the role of Indian lessors as parties; and
6. Would clarify delegated State participation.
The RPC unanimously adopted and approved the recommendation of the
RPC Appeals and ADR Subcommittee and submitted a report (RPC Report) to
the Secretary of the Interior on March 27, 1997. The RPC Report
recommended a number of specific steps involving both appeals and ADR
processes. The RPC recommended changing the current two-stage appeals
process into a one-stage IBLA administrative appeal process designed to
solve the problems and meet the principles identified above. The
Subcommittee recommended that:
1. MMS resolve all fundamental policy questions before it or a
delegated State issues an order;
2. DOI encourage the resolution of disputes without completing the
formal administrative appeals process;
3. DOI clarify the standing of Indian lessors and ``States
concerned'' with respect to the administrative appeals process;
4. DOI change the structure of the administrative appeals process,
so that appeals of MMS, State, or tribal orders are taken to the IBLA,
under a special set of rules applicable to royalty appeals; and
5. DOI specify the differences in appeals involving Indian leases
and Federal leases for minerals other than oil and gas because the
provisions of RSFA do not apply to those leases.
On September 22, 1997, the Secretary accepted the RPC Report for
implementation with some changes and clarifications. This proposed rule
is based primarily on the RPC Report and the changes and clarifications
identified in the Secretary's letter dated September 22, 1997.
To implement the RPC recommendations, as modified by the
Secretary's letter, MMS formed a regulation writing team comprised of
representatives from MMS, the IBLA, the Office of the Solicitor, and
State audit offices. That team drafted the proposed rule with the goal
of developing an appeals process implementing the RPC's recommendations
in accordance with the Secretary's changes and clarifications.
During the drafting process, the team members heard concerns about
whether the result of the recommendations of the RPC will actually
advance the RPC's primary goal: namely, timely and efficient resolution
of appeals. The pre-briefing procedures in the proposed rule are
complex in order to meet the following goals:
(1) Implement RSFA provisions setting time limits on appeals and
requiring at least one settlement conference for each appeal;
(2) Respond to other RSFA provisions regarding orders and the roles
of lessees when their designees receive orders;
(3) Coordinate RSFA time limits with other provisions of the rule;
and
(4) Respond to recommendations of the RPC involving enhanced
participation of Indian lessors and delegated States in the appeals
process; continued ability of the MMS Director to recommend whether to
concur with, modify or rescind orders; and continued ability of
Assistant Secretaries to decide appeals.
An example of a scenario illustrating the complexity of the
proposed rule would be when the MMS Director modifies an order and the
delegated State disagrees with the modification and intervenes. Assume
in the example that both the appellant and MMS wish to file documents
not contained in the record they certified under Sec. 4.919 or to add
issues not contained in the ``Joint Statement of Facts and Issues''
(this is often the case under the current process and is possible under
the proposed appeals process). As a result of the expedited briefing
process under the proposed rule, in the example, MMS and the delegated
State would each file up to seven substantive documents (i.e. briefs,
replies, responses, requests, surreplies), and the appellant would file
up to six substantive documents, all in less than four months. The IBLA
may have to issue two orders regarding the record prior to its final
decision, and to consider up to twenty substantive pleadings in order
to arrive at its final decision. (The current process usually involves
three or four substantive pleadings and a single decision by the IBLA.)
While this example does not reflect the proposed process in its
simplest form, even more complicated processes are possible. Therefore,
in cases such as this example, the pre-briefing procedures and more
formal IBLA processes described in this proposed rulemaking will add
expense to the appeal process for both appellants and MMS.
In recent years under the existing process the MMS Director has
been deciding an average of approximately 213 appeals per year.
Approximately 75 of these (35%) are appealed to IBLA. Thus, under the
current process, a minority of MMS Director's decisions are appealed to
IBLA.
Also, in recent years, we estimate that it has taken the IBLA, on
average, about 18 months to issue a decision (counting from the date an
MMS royalty appeal is fully briefed and ripe for decision). This number
is based on data from the IBLA's docketing system.
The proposed rule is likely to increase the IBLA's workload, on
average, for individual royalty appeals. Under the proposed rule, the
IBLA would have to issue a decision in every appeal that is not
resolved or settled by MMS and the appellant or decided by an Assistant
Secretary. Even assuming that the IBLA's docket load does not increase
under the proposed rule, the IBLA will have to issue a decision in a
royalty appeal every 6 days in order to meet the 33-month deadline.
This figure is based on 75 royalty appeals per year to the IBLA and 430
days to decide those appeals (20 months less weekends and holidays). It
does not include the 130 royalty appeals currently pending before the
IBLA, of which 81 are subject to RSFA's 33-month deadline.
Any additional workload also could affect IBLA's ability to timely
decide appeals affecting Bureau of Land Management (BLM) and Office of
Surface Mining programs, as well as appeals of royalty issues which are
not subject to RSFA's 33-month deadline. The Department's Office of the
Inspector General (OIG) is currently conducting an audit that is
expected to address the timeliness of IBLA's disposition of MMS royalty
appeals. OIG is expected to issue a draft audit report before this rule
becomes final, and its report may provide information that would be
useful in evaluating the implications of this proposed rule as well as
any possible alternative proposals.
We recognize that there are deficiencies in the current process. We
encourage comments on whether and how the procedures recommended in the
RPC Report might serve to, or be modified to, make the appeal process
more efficient and effective. We invite comment on whether alternatives
to the proposed rule might reach the goal of the Royalty Policy
Committee by a simpler route than the processes set forth in the
proposed rulemaking.
We specifically request comment on whether, as an alternative to
the procedures described in this proposed rulemaking, the current two-
level administrative appeal process should be retained, with
amendments. These amendments would:
(a) Implement the RSFA requirements for settlement conferences and
default

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decisions if appeals are not resolved within 33 months of their
commencement (similar to those contained in this rulemaking under
Secs. 4.906, 4.907, 4.911-4.913, 4.924-4.926, 4.950, 4.951, 4.954,
4.956, 4.957, and 4.970-4.972);
(b) Establish procedures for lessees to appeal notices sent to
designees; and
(c) Incorporate internal time constraints for appeals pending
before the MMS Director to ensure that the Department decides appeals
within the RSFA 33-month deadline, such as those previously proposed,
see 61 FR 33607 (1996).

However, retaining the current process, with amendments, might not
address other goals of the RPC.
Several portions of this proposed rule would implement the RPC
recommendations. First, the new proposed 43 CFR part 4, subpart J would
establish a new procedure for appeals of royalty orders. The current
regulations at 30 CFR part 290 and 43 CFR part 4, subpart E would no
longer apply to appeals of royalty orders. Under the new proposed
process, MMS's role would be limited to record development and
settlement discussions at an early stage of the process and to deciding
whether to modify or rescind orders prior to argument at the IBLA or to
an Assistant Secretary. The IBLA (or an Assistant Secretary) would
decide cases under a new, modified IBLA appeals process, and RSFA time
limits would be imposed on appeals that are subject to that Act.
Second, the new proposed 30 CFR part 242 would establish procedures
for orders that MMS and delegated States issue. The new part 242 would
respond to the RPC recommendations on how MMS and delegated States
should communicate their preliminary audit findings and issue orders.
See RPC Recommendations at paragraphs 5-7. The general principle behind
this part is that MMS and delegated States should clearly communicate
specific information about the basis for orders. This part also would
establish procedures for Indian lessors to request formally that MMS
take actions with respect to their leases. That would help to implement
the RPC recommendation that the new regulations clarify the standing
and role of Indian lessors in the appeals process. See RPC Report at
page 10. In addition, this part would incorporate certain RSFA
provisions regarding orders and orders to perform restructured
accounting and regarding notifying lessees when orders are sent to the
persons designated by the lessees to pay their royalties. Finally, this
part would incorporate appeals and service requirements that currently
are found at 30 CFR part 243.
Third, the proposed revision of 30 CFR part 243 would implement
changes that RSFA made to requirements for staying orders pending
appeal. RSFA Sec. 4(a) amended FOGRMA to add a new Sec. 115(l), 30
U.S.C. 1724(l), ``Stay of Payment Obligation Pending Review.'' Section
115(l) allows any person (as that term is defined by FOGRMA Sec. 102
(12)), who MMS or a delegated State orders to pay any obligation (other
than an ``assessment'') subject to RSFA, to demonstrate that the person
is ``financially solvent.'' Under the proposed rule, if MMS determines
that the person is financially solvent, the person is entitled to a
stay of an order (other than one to pay an assessment) without posting
a bond or other surety instrument pending an administrative or judicial
proceeding. If the person is unable to demonstrate financial solvency,
the Secretary will require a bond or other surety instrument
satisfactory to cover the obligation. The proposed regulations would
explain the process and standards for demonstrating financial solvency.
As part of those proposed regulations, MMS also is rewriting 30 CFR
part 243 in ``plain language'' and revising it to eliminate references
to 30 CFR part 290.
Because MMS is eliminating appeals to the MMS Director under 30 CFR
part 290 for RMP orders, MMS rewrote that part to only refer to appeals
of the MMS Offshore Minerals Management Program (OMM). MMS determined
that it would be advantageous to amend its process for appeals from
decisions by officials of OMM at the same time it proposes the
revisions to the RMP appeals process. The proposed OMM appeals process
is patterned after the process the BLM uses for appeals of BLM
officials' decisions because they have similar responsibilities with
respect to onshore Federal and Indian trust lands. We request comments
on whether we should adopt this process for offshore appeals or whether
we should retain the current process.
The Departmental team that drafted the proposed appeals rule
received public input initially from the Royalty Policy Committee, as
described above, and also conducted two public workshops and five
outreach sessions with Indian tribes and individual Indian mineral
owners. The two public workshops were held in Denver, Colorado on
January 27, 1998, and March 30, 1998. These workshops were announced in
the Federal Register (62 FR 68244, December 31, 1997, and 63 FR 11634,
March 10, 1998) and were attended primarily by representatives of
natural gas, oil, and coal producers, including representatives both of
large integrated producers and of smaller independent producers. The
team distributed to workshop participants copies of preliminary drafts
of the proposed rule prior to the sessions, thereby providing
participants an opportunity to prepare specific questions, suggestions,
and comments.
The five outreach sessions with Indian lessors were as follows:
April 29, 1998, Canadian, Oklahoma, Muskogee Area Office.
This outreach meeting was attended by representatives of the Cherokee
Nation, Choctaw Nation, and Creek Nation, as well as many individual
Indian mineral owners and heirs. BIA Area Office and Agency staff also
attended;
May 19, 1998, Bismarck, North Dakota, Aberdeen and
Billings Area Offices. BIA Agency representatives from Cheyenne River,
Fort Berthold and Standing Rock attended this meeting. In addition,
tribal members from the Three Affiliated Tribes (Mandan, Arikara, and
Hidatsa) from Fort Berthold attended;
May 20, 1998, El Reno, Oklahoma, Concho Agency. This
outreach meeting was attended by individual Indian mineral owners from
the Concho and Anadarko areas. BIA Area Office and Agency staff also
attended;
June 12, 1998, Scottsdale, Arizona, tribal members of the
State and Tribal Audit Committee. This outreach meeting was attended by
representatives of the Blackfeet Nation, Navajo Nation, Shoshone and
Arapaho Tribe, Southern Ute Indian Tribe, and Ute Mountain Ute Tribe;
and
July 7, 1998, Denver, Colorado, Indian Energy and Minerals
Conference. Attendees included representatives from various BIA Area
Offices and Agencies, as well as representatives of the following
Tribes: Alabama and Coushatta Tribes, Assiniboine and Sioux Tribes,
Burns Paiute Reservation Tribe, Choctaw Nation of Oklahoma, Eastern
Shoshone Tribe, Jicarilla Apache Tribe, Navajo Nation, Osage Tribe,
Shoshone Nation, Southern Ute Tribe, Three Affiliated Tribes, and Ute
Mountain Ute Tribe.
At these sessions, the team members described the rule and its
anticipated effects on Indian lessors and received comments from
individual Indian mineral owners, tribal representatives, and MMS and
BIA representatives about how best to structure the rule to protect
Indian trust resources.
As discussed below in the applicable Section-by-Section analysis,
this rulemaking also would propose to

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charge reasonable processing fees where appropriate.

II. Section-by-Section Analysis, 43 CFR Part 4, Subpart J

Section 4.901 What is the Purpose of This Subpart?

This section would state that the purpose of this subpart is to
explain the procedures for appeals of MMS or delegated State orders,
and MMS decisions not to issue orders under 30 CFR part 242, concerning
reporting to the MMS RMP and the payment of royalties and other
payments due under leases subject to this subpart. This subpart would
replace 30 CFR part 290 with respect to appeals of RMP and delegated
State actions regarding royalties and other payments. The regulation at
30 CFR part 290 would only apply to appeals of MMS OMM actions
regarding offshore lease operational obligations, not to actions
regarding royalties and other payments.

Section 4.902 What Leases are Subject to This Subpart?

This section would explain that this subpart applies to all Federal
mineral leases onshore and on the Outer Continental Shelf (OCS), and to
all federally-administered mineral leases on Indian tribal and
individual Indian mineral owners' lands regardless of the statutory
authority under which the lease was issued or maintained. See Section-
by-Section analysis for Sec. 4.903 for an explanation of the definition
of ``lease.'' However, some procedures under this rule would apply only
to Federal oil and gas leases because the RSFA requirement for deciding
appeals within 33 months, 30 U.S.C. 1724(h), applies only to such
leases. Accordingly, those procedures would specifically state that
they do not apply to Federal solid mineral and geothermal leases, or
Indian leases.

Section 4.903 What Definitions Apply to This Subpart?

This section would explain the definitions that you will need to
know for this subpart. However, other definitions in this part, or 30
CFR Chapter II, which are not specifically defined in this proposed
rule, and do not conflict with definitions in this proposed rule, also
would apply.
Affected would mean, with respect to delegated States and States
concerned, that the appeal concerns an order regarding a Federal
onshore or Outer Continental Shelf lease, within a State's borders or
offshore of the State, from which the State, or a political subdivision
of the State, receives a statutorily-prescribed portion of the
royalties; and, with respect to Indian lessors, that the appeal
concerns an order regarding the Indian lessor's federally-administered
mineral lease. This definition is intended to distinguish between
States concerned, delegated States, and Indian lessors that are
directly affected by the action (or inaction) under appeal, and those
that are either only indirectly affected or that are merely interested
in the appeal's outcome.
Assessment would mean any fee or charge levied or imposed by the
Secretary or a delegated State other than: (1) the principal amount of
any royalty, minimum royalty, rental, bonus, net profit share or
proceed of sale; (2) any interest; or (3) any civil or criminal
penalty.
Delegated State would mean a State to which MMS has delegated
authority to perform royalty management functions pursuant to an
agreement or agreements under regulations at 30 CFR part 227. This
definition is essentially the same as that under RSFA Sec. 2(1), adding
FOGRMA Sec. 3, 30 U.S.C. 1702(22).
Designee would mean the person designated by a lessee under 30 CFR
218.52 to make all or part of the royalty or other payments due on a
lease on the lessee's behalf. This definition is essentially the same
as that under RSFA Sec. 2(1), adding FOGRMA Sec. 3(24), 30 U.S.C.
1702(24). Accordingly, the definition would cite the rule implementing
the requirements of RSFA Sec. 6(g), amending FOGRMA Sec. 102(a), 30
U.S.C. 1712(a), which allows lessees to designate another person to pay
royalties on their behalf by written notice filed with MMS. Thus, this
definition would apply only to appeals involving royalties and other
payments due on production from Federal oil and gas leases after
September 1, 1996, because RSFA applies only to such payments.
IBLA would mean the Interior Board of Land Appeals.
Indian lessor would mean an Indian tribe or individual Indian
mineral owner with a beneficial or restricted interest in a property
that is subject to a lease issued or administered by the Secretary on
behalf of the tribe or individual Indian mineral owner.
Lease would mean any contract, net profit share arrangement, joint
venture, or other agreement authorizing exploration for or extraction
of any mineral, regardless of whether the instrument is expressly
denominated as a ``lease.'' This would include all agreements the
Secretary approves under the Indian Mineral Development Act, 25 U.S.C.
2101 et seq.
Lessee would mean any person to whom the United States, or the
United States on behalf of an Indian tribe or individual Indian mineral
owner, issues a lease subject to this subpart, or any person to whom
all or part of the lessee's interest or operating rights in a lease
subject to this subpart has been assigned. This definition is
essentially the same as that under RSFA Sec. 2(1), amending FOGRMA
Sec. 3(7), 30 U.S.C. 1702(7), and would include owners of operating
rights. RSFA defines ``lessees'' to include holders of operating
rights. However, RSFA does not apply to Federal oil and gas leases for
production prior to September 1, 1996, other Federal solid mineral and
geothermal leases, and Indian leases. Therefore, we did not separately
define operating rights owners or operators because recipients of
orders not subject to RSFA may appeal under this rule regardless of
whether they are a ``lessee'' under RSFA.
Monetary obligation would mean any requirement to pay or to compute
and pay any obligation in any order. We included this definition
because Congress did not define ``monetary obligation'' in RSFA for
purposes of the default decision rule in 30 U.S.C. 1724(h), which
Secs. 4.956 and 4.972 would implement. Under this definition,
``monetary obligation'' would include amounts that MMS or delegated
States assert that lessees, designees, and payors owe, as well as
amounts that lessees, designees, and payors assert are owed to them
(for example refunds of alleged overpayments). The definition of
``monetary obligation'' would include amounts due as a result of orders
to compute and pay because there is no indication that Congress
intended to restrict its meaning to only an ``order to pay'' a
specifically stated amount. Moreover, orders to compute and pay usually
contain an ``order to pay'' additional royalty amounts due based on the
test leases and months.
This definition also would clarify what constitutes a single
monetary obligation as opposed to separate monetary obligations when an
order covers multiple issues. Paragraph (1) would state that if an
order asserts a monetary obligation arising from one issue or type of
underpayment that covers multiple leases or production months, the
total obligation for all leases or production months involved
constitutes a single monetary obligation. For example, assume MMS
issued an order to you determining that you underpaid royalties on
Lease Nos. A, B, and C, for production months January 1, 1996, through
December 31, 1996, because you failed to pay royalties on

[[Page 1934]]

tax reimbursements that are part of your gross proceeds. The amount
owed under that order would constitute one monetary obligation, not
three (one for each lease), or twelve (one for each production month),
or thirty-six (one for each production month for each lease).
Paragraph (2) would state that if an order asserts monetary
obligations arising from different issues or types of underpayments for
one or more leases, the obligations arising from each separate issue,
subject to paragraph (1), constitute separate monetary obligations. For
example, assume the same facts as described under paragraph (1).
However, also assume that the order determines that you underpaid
royalties on the same leases for the same production months because you
improperly calculated a gas processing allowance. In that situation,
the gross proceeds issue described in paragraph (1) would constitute
one monetary obligation, and the processing allowance issue would
constitute another monetary obligation.
Subparagraph (3) would state that if an order asserts a monetary
obligation with a stated amount of additional royalties due, plus an
order to perform a restructured accounting arising from the same issue
or cause as the specifically stated underpayment, the stated amount of
royalties due plus the estimated amount due under the restructured
accounting, subject to paragraphs (1) and (2), together constitute a
single monetary obligation. For example, assume the same facts as
described under paragraph (1). Also assume that the order requires you
to perform a restructured accounting on all of your leases to determine
whether you underpaid royalties on those leases because you failed to
pay royalties on tax reimbursements. That order would constitute one
monetary obligation. However, assuming the same facts as described
under paragraphs (1) and (2), if the order also required you to perform
a restructured accounting on all of your leases to determine whether
you calculated the proper processing allowance, then the gross proceeds
issue described in paragraph (1), together with the requirements to
perform a restructured accounting on tax reimbursements, would
constitute one monetary obligation, and the processing allowance issue,
together with the order to perform a restructured accounting on the
processing allowance issue, would constitute another monetary
obligation.
Nonmonetary obligation would mean only any duty of a lessee or its
designee to deliver oil and gas in kind, or any duty of the Secretary
to take oil and gas royalty in kind. This definition is consistent with
the definition of ``obligation'' under RSFA Sec. 2(1), adding FOGRMA
Sec. 3(25), 30 U.S.C. 1702(25), because these obligations are the only
two under the statutory definition that are ``nonmonetary.'' Thus, for
example, orders to report or produce information and denials of
requests for exceptions from various reporting requirements would not
be ``nonmonetary obligations'' because they are not defined as
``obligations'' under RSFA.
Notice of order would mean the notice under 30 CFR part 242 that
MMS or a delegated State would provide to a lessee stating that MMS or
the delegated State has issued an order to the lessee's designee. As
stated above, RSFA allows lessees to designate another person to pay
royalties on their behalf by written notice filed to MMS. 30 U.S.C.
1712(a). However, only lessees, not their ``designees,'' are liable for
any payment obligations. Id. Thus, if MMS issues a written order to pay
to a designee, RSFA's definition of ``order to pay'' requires MMS to
serve a notice of that order on that designee's lessee. 30 U.S.C.
1702(26), as added by RSFA Sec. 2(1).
Obligation would mean:
(1) A lessee's, designee's or payor's duty to:
(i) Deliver royalty-in-kind; or
(ii) Make a lease-related payment, including royalty, minimum
royalty, rental, bonus, net profit share, proceeds of sale, interest,
penalty, civil penalty, or assessment; and
(2) The Secretary's duty to:
(i) Take oil or gas royalty in kind; or
(ii) Make a lease-related payment, refund, offset, or credit,
including royalty, minimum royalty, rental, bonus, net profit share,
proceeds of sale, or interest. This definition is essentially the same
as that under RSFA Sec. 2(1), adding FOGRMA Sec. 3(25), 30 U.S.C.
1702(25).
Order would mean any document issued by the MMS Director, officials
of the MMS RMP, or a delegated State that contains mandatory or
ordering language that requires the recipient of an order to do any of
the following for any lease subject to this subpart: report, compute or
pay royalties or other obligations, report production, or provide other
information. The proposed rule would refer to 30 CFR part 242, which is
being proposed in this same Federal Register Notice, to refer
appellants to the standards for issuing orders contained in that part.
The purpose of this definition is to establish the types of orders
that are appealable under this subpart. This section would define what
actions are appealable orders and what actions are not appealable
orders. Only certain written orders, instructions or other actions by
the MMS Director, RMP officials, or a delegated State concerning the
reporting and payment of royalties and other payments due under leases
subject to this proposed subpart would be appealable ``orders'' under
this proposed rule.
Orders would have to include mandatory or ordering language. For
example, if you received a written instruction or other action by the
MMS Director, RMP, or a delegated State that contained language such as
``you must pay,'' ``you must recalculate and pay,'' ``you are ordered
to pay,'' ``you are ordered to recalculate and pay,'' ``you may not
take this credit,'' or ``you may not use this exception,'' that would
be considered mandatory or ordering language and the order would be
appealable under this proposed rule.
Under paragraph (1), orders would include but not be limited to:
(i) An order to pay. Order to pay would be defined under 30 CFR
part 242, proposed in this same rulemaking, and that definition would
essentially be the same as that under RSFA Sec. 2(1), adding FOGRMA
Sec. 3(26), 30 U.S.C. 1702(26);
(ii) An MMS or delegated State decision to deny a lessee's,
designee's, or payor's written request that MMS make a payment, refund,
offset, or credit of money to the lessee or designee related to the
principal amount of any royalty, minimum royalty, rental, bonus, net
profit share, proceeds of sale, or any interest or assessment related
to a lease obligation. These are MMS's ``obligations'' as defined under
RSFA, Sec. 2(1), adding FOGRMA Sec. 3(25)(A), 30 U.S.C. 1702(25)(A).
Thus, for example, if a lessee or designee believes MMS has improperly
denied a refund of a claimed overpayment, the lessee or designee may
appeal that denial. However, although a lessee would have standing to
file an administrative appeal concerning an MMS decision not to take
royalty-in-kind, we do not believe that the lessee would have any
substantive basis for the appeal because the decision whether to take
royalty-in-kind is committed to the Secretary's discretion by law. 30
U.S.C. 192;
(iii) A denial of a request for an exception from any valuation and
reporting requirement;
(iv) An order to perform restructured accounting. Orders to perform
restructured accounting would be defined under 30 CFR part 242,
proposed in this same rulemaking, and that definition would be
consistent with the description in RSFA Sec. 4(a), adding FOGRMA
Sec. 115(d)(4)(B)(i), 30 U.S.C.

[[Page 1935]]

1724(d)(4)(B)(i). However, an order to perform a restructured
accounting that requires the recipient to provide schedules of
recalculations would not be considered an order to provide documents or
information under this proposed rulemaking. See RSFA, Sec. 4(a), adding
FOGRMA Sec. 115(d)(4)(C), 30 U.S.C. 1724(d)(4)(C), which provides that
``[a]n order to perform a restructured accounting shall not mean or be
construed to include any other action by or on behalf of the Secretary
or a delegated State;''
(v) An order to file a report related to any royalty or other lease
obligation under 30 CFR part 210 or 216; and
(vi) An order to provide documents or information. This section
also would make clear that orders to perform a restructured accounting
are not ``orders to provide documents or information.'' As discussed
below, under proposed Sec. 4.905, an order to provide documents or
information is not appealable under this subpart if it is issued by the
Associate Director for Royalty Management or by someone to whom that
Associate Director has delegated the authority to issue orders to
provide documents or information that are final for the Department.
This section also would state what MMS or delegated State actions
would not constitute ``orders.'' As a threshold matter, actions that
the MMS OMM takes regarding offshore lease operational obligations
would not be appealable ``orders'' under this proposed rule. For
example, OMM actions that allocate production or otherwise affect
production volume would not be appealable ``orders'' under this subpart
even if they could affect royalty calculations. Those orders would be
appealable under 30 CFR part 290.
Under paragraph (2)(i), orders would not include non-binding
requests, information, and guidance such as:
(A) A Preliminary Determination Letter issued under proposed 30 CFR
242.102. These are commonly called ``issue letters'' and do not contain
mandatory or ordering language. Rather, they inform the recipient that
MMS has made a preliminary determination, and invite responses to that
determination prior to issuance of an appealable ``order'';
(B) Advice or guidance on how to report or pay, including a
valuation determination, unless it contains mandatory or ordering
language. For example, assume that you have asked MMS whether it
believes that you are properly valuing your production under a
particular regulation. Also assume that MMS responds that under its
interpretation of the regulations, it does not believe that you are
properly valuing your production. That guidance would not be
appealable. However, if you ignored MMS's guidance, and continued
valuing your production using your valuation method, MMS could later
issue an order stating that you must pay additional royalty because MMS
has determined that you improperly valued that production. In such
instances, you could appeal that order; and
(C) A policy determination. For example, a general letter to
royalty payors advising them of RMP's interpretation regarding a
particular issue--such as the RMP May 3, 1993, ``Dear Payor Letter'' on
the royalty consequences of gas contract settlements--would not be
appealable.
The Department does not consider such documents ``orders'' because
they do not require anyone to take any specific action. However, if a
valuation determination or a letter to payors includes mandatory
language requiring a person to take a specific action with respect to a
mineral lease administered by the Secretary, then it is an order. In
addition, a person's failure to follow guidance or policy
determinations would not preclude that person from later appealing an
``order'' with mandatory language requiring the person to follow such
guidance.
Paragraph (ii) would state that subpoenas also would not be
considered ``orders.'' Subpoenas are enforceable directly by the United
States Government in federal district court under 30 U.S.C. 1717(b),
and are not subject to administrative appeal. Therefore, they are not
appealable ``orders.''
Under paragraph (2)(iii), orders to pay that MMS issues to refiners
or other persons involved in disposition of royalty taken in kind would
not be classified as ``orders'' under this subpart, because those
orders arise out of contracts for sale of royalty-in-kind (RIK)
production and not out of obligations under leases subject to this
subpart. See related changes to 30 CFR part 208 in this same notice.
Party would mean MMS, any person who files a Notice of Appeal, and
any person who files a Notice of Joinder or Intervention Brief in an
appeal under this subpart. This definition is necessary because
``parties'' have certain rights and obligations under this proposed
rulemaking that other participants in the appeals process do not.
Payor would mean any person responsible for reporting and paying
royalties for:
(1) Federal oil and gas leases for production before September 1,
1996;
(2) Federal mineral leases other than oil and gas leases; and
(3) Leases on Indian lands subject to this Subpart. This definition
is necessary because the term ``designee'' is used for Federal oil and
gas leases subject to RSFA, and ``payor'' is used for leases not
subject to RSFA. In addition, designees have certain requirements under
this proposed rulemaking, such as serving their Notice of Appeal on
their lessee(s) under Sec. 4.907(d).
Reporter would mean a person who submits reports for leases subject
to this subpart regardless of whether that person has payment
responsibility.
State concerned would mean the State that receives a statutorily-
prescribed portion of the royalties from a Federal onshore or Outer
Continental Shelf lease. This definition is modeled after the
corresponding definition under RSFA, Sec. 2(1), adding FOGRMA
Sec. 3(31), 30 U.S.C. 1702(31).

Section 4.904 Who May File an Appeal?

Under paragraph (a), if you receive an order, as defined under this
subpart, you could appeal that order if the order adversely affects
you, except as provided under Sec. 4.905.
Under paragraph (b), if you are a lessee and you receive a Notice
of Order, you would have three options under this proposed rule
regarding appealing the order issued to your designee. First, you could
appeal the order yourself. If you chose to appeal the order yourself,
you could make your own arguments in the appeal as an appellant,
regardless of whether your designee also appeals the order or makes
those arguments.
Second, you could join in your designee's appeal under Sec. 4.908.
We added the joinder provision to protect lessees should the designee
decide during some part of the appeals process that it no longer wishes
to pursue the appeal. If you chose to join your designee's appeal under
Sec. 4.908, you would be deemed to appeal the order jointly with the
designee, but the designee would have to fulfill all requirements
imposed on appellants under this subpart. Thus, you could not file any
submissions or pleadings separately from the designee. The purpose of
limiting pleadings to designees is to prevent numerous duplicative
submissions by multiple lessees of a single designee.
Third, you could neither appeal nor join, but instead rely on your
designee's appeal. However, if you chose this option, your designee's
actions with

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respect to the appeal, and any decisions in the appeal, would bind you.
In other words, if your designee lost the appeal, you could not
reappeal the same order. Likewise, if your designee discontinued its
appeal, you could not reappeal the same order or continue the appeal
for the designee.
Under paragraph (c), if you are an Indian lessor, you could file an
appeal of any MMS decision not to issue an order under 30 CFR part 242
that adversely affects you. Part 242, also proposed in this Federal
Register Notice, would explain the process for Indian lessors to
request that MMS issue an order. This paragraph would implement the RPC
Report's recommendation that we clarify the appeal rights of Indian
lessors. RPC Report, page 10. Note, however, that States could not
appeal orders or decisions not to issue orders. Delegated States could
intervene under Sec. 4.934 in an appeal of an order. We decided not to
allow States to appeal orders or decisions not to issue orders because,
unlike Indian lessors, States do not have a property interest in
leases. In addition, States can request authority to issue orders
pursuant to an agreement or agreements under MMS's regulations at 30
CFR part 227.

Section 4.905 What May I Not Appeal Under This Subpart?

This section would state that you could not appeal:
(a) An action that is not an order, as defined in this subpart;
(b) An order to provide documents or information issued under 30
CFR 242.104(b)(4) by the Associate Director for Royalty Management, or
any person to whom that Associate Director has delegated the authority
to issue such orders that are final for the Department. We propose to
make these orders final for the Department because: (1) courts have
consistently upheld MMS's authority to issue orders to produce
documents and information, see Shell Oil Co. (On Reconsideration, 132
IBLA 354 (overruling Shell Oil Co., 130 IBLA 93), aff'd, Shell Oil Co.
v. Babbitt, 945 F. Supp 792 (D. Del. 1996), aff'd, 125 F.3d 172 (3d
Cir. 1997); Santa Fe Energy Products Co., 127 IBLA 265 (1993), aff'd
Santa Fe Energy Products Co. v. McCutcheon, No. 94-C-535, slip op., (D.
Colo. Mar. 30, 1995), aff'd, 90 F.3d 409 (10th Cir. 1996); and (2) it
would avoid the delay caused by administrative appeals of such orders.
Delays associated with these types of orders are particularly
detrimental because they interfere with MMS's and delegated States'
ability to determine whether additional royalties or other payments may
be due. Accordingly, we propose to make such orders subject to judicial
review directly. However, if the order is issued by a person other than
the Associate Director for Royalty Management, or a person delegated
the authority to issue such final orders, then it would be appealable
under this subpart.
(c) A determination of the surety amount or financial solvency
under 30 CFR part 243, subparts B or C. These determinations are final
for the Department and are not subject to administrative appeal.

Section 4.906 When Must I File an Appeal?

You would have to file your appeal with MMS as required under
Sec. 4.960 within 60 days after MMS or a delegated State serves the
order or Notice of Order, or MMS serves a decision not to issue an
order under 30 CFR part 242. An order, Notice of Order, or decision not
to issue an order would be considered served as provided under 30 CFR
242.305.
Formerly, appeals of MMS RMP orders had to be filed within 30 days
of the person's receipt of the order. This rule extends the time in
which to appeal to 60 days from receipt, as the RPC Report recommended.
The 60 day time frame also implements the requirement under RSFA,
Sec. 4(a), adding FOGRMA Sec. 115(d)(4)(B)(ii)(V), 30 U.S.C.
1724(d)(4)(B)(ii)(V), that orders to perform a restructured accounting
``provide the lessee or its designee 60 days within which to file an
administrative appeal of the order. * * *.''
Unlike other appeals to IBLA, which are filed with the office that
issued the decision being appealed (see 43 CFR 4.411), these appeals
would be filed with a centralized office in MMS called the MMS Dispute
Resolution Division (DRD). We chose this centralized approach to ensure
accurate documentation of receipt, to facilitate collection of
processing fees, and to minimize delays in initiating record
development and settlement efforts. In effect, the DRD would receive
the appeals on behalf of the MMS or delegated State office that issued
the order being appealed.
We would eliminate the grace period for filing formerly included
under 30 CFR 290.5(b) (mailed within the 30 day appeal period and
received within 10 days of the 30th day). Instead, we would extend the
time period within which to file to 60 days, with no exceptions or
grace periods. However, to make filing easier, we would allow filing by
telefax, and we plan to centralize the docketing function to ensure
that employees are present during business hours to receive appeals. We
specifically request comments on what methods of filing we should
accept and ways we could provide appellants with documentation of the
receipt date other than a return receipt card.

Section 4.907 How Must I File an Appeal?

Under paragraph (a) of this proposed section, for an appeal to be
considered filed, the MMS DRD would have to receive the appellant's
Notice of Appeal, Preliminary Statement of Issues, and Processing Fee
within the time required under Sec. 4.906.
The written Notice of Appeal would have to include a copy of the
order, or MMS decision not to issue an order, that the appellant is
appealing. Appellants would not be allowed to extend the 60-day period
for MMS to receive their Notice of Appeal.
The written Preliminary Statement of Issues would have to state the
issues the appellant will raise on appeal. The RPC Report recommended
requiring a Preliminary Statement of Issues. The Secretary, in his
September 22, 1997, letter to the RPC, modified that RPC Report
recommendation to state that appellants must ``specifically identify
their legal and factual disagreements with the MMS action.'' However,
he stated that it need not be a legal brief or include the level of
detail appellants currently provide in a Statement of Reasons to the
MMS Director. The Secretary stated that the purpose of the Preliminary
Statement of Issues is to ``ensure productive, well-informed record
development and settlement efforts.'' Moreover, MMS or the delegated
State will have stated the facts and law or regulations relied upon in
issuing the order. Thus, it is imperative that the appellant
specifically identify the factual and legal disagreements the appellant
has with an order so that MMS can properly evaluate the appellant's
position. For example, a blanket statement that the appellant disagrees
with the order, without stating the legal or factual basis for the
disagreement, would not be sufficient information for MMS to determine
whether the appellant's position has merit, or to respond to the
appellant. Nor would a list of issues, without some explanation of how
the facts of the appeal raise those issues, be sufficient. Therefore,
the proposed rule would require appellants to specifically identify the
legal and factual disagreements they have with the order, or MMS
decision not to issue an order, they are appealing. See Appendix A for

[[Page 1937]]

an example of a Preliminary Statement of Issues.
In addition to helping MMS and the appellant prepare for the record
development and settlement conferences, this requirement would would
help highlight those appeals in which it would be appropriate for the
MMS Director to take action to rescind or modify the order. This is
particularly important because appellants would not be required to
provide a Statement of Reasons which comprehensively briefs their legal
position until after the MMS Director has the opportunity to rescind,
modify, or concur with the order. Accordingly, it is in the appellant's
best interest to set out the issues and disagreements specifically,
because it will help to save litigation time and expense before the
IBLA.
The nonrefundable processing fee would be $150. You would have to
pay the processing fee as required under Sec. 4.965 or seek a fee
waiver or reduction under Sec. 4.966. Our analysis leading to the
choice of $150 as the processing fee at this stage of the appeal is in
the Section-by-Section analysis for Sec. 4.965 of this proposed rule.
Indian lessors would not have to pay the processing fee.
Unlike the Notice of Appeal, you would be allowed to request an
automatic extension of time of up to 60 days to file the Preliminary
Statement of Issues and to pay the processing fee. Any such request
would have to be in writing and be received by MMS within the time
allowed for filing the appeal. After the automatic extension, you could
request additional extensions subject to agreement by MMS.
Under paragraph (b), you would have to serve your Notice of Appeal,
Preliminary Statement of Issues, and any attached documents as required
under Sec. 4.962.
Under paragraph (d), if you are a designee, when you file your
appeal under paragraph (a), you would have to serve your Notice of
Appeal on the lessees who MMS identifies under proposed 30 CFR
242.105(a)(5)(i) in the order you appealed. We included this
requirement because lessees would have to join an appeal under
Sec. 4.908(a) within 30 days after they receive the designee's Notice
of Appeal. Thus, it is imperative that designees timely serve lessees
with the Notice of Appeal.

Section 4.908 If I am a Lessee, Can I Join a Designee's Appeal?

Under this section, if you are a lessee, and your designee files an
appeal under Sec. 4.904, you could join in that appeal within 30 days
after you received your designee's Notice of Appeal. You could join
that appeal by filing a Notice of Joinder with the MMS DRD as required
under Sec. 4.960. We added the joinder provision to protect lessees by
giving them the ability to continue the appeal if the designee decides
during some part of the appeals process that it no longer wishes to
pursue the appeal. As stated above, we included a requirement under
Sec. 4.907(c) that designees timely serve lessees with the Notice of
Appeal to facilitate the joinder process. Lessees also would be
required to serve their Notice of Joinder on all parties to the appeal
and other persons as required under Sec. 4.962.
Finally, lessees that neither appeal nor join in their designee's
appeal would be bound by their designee's actions with respect to the
appeal and any decisions in the appeal. In other words, if a lessee
neither appealed nor joined its designee's appeal, and the designee did
not pursue the appeal, or lost the appeal, the lessee could not
continue that appeal either in the Department or in district court.

Section 4.909 What is the Effect of Joining an Appeal?

Under this section, if you joined in an appeal under Sec. 4.908,
you would be deemed to appeal the order jointly with the designee.
However, as discussed in the Section-by-Section analysis for
Sec. 4.904, the designee would have to fulfill all requirements imposed
on appellants under this subpart. Thus, if you joined in your
designee's appeal, you could not file submissions or pleadings
separately from the designee. As discussed above, we limited the
submission of pleadings to designees to prevent numerous duplicative
submissions by multiple lessees of a single designee.
Finally, a lessee who has joined an appeal under Sec. 4.908 could
continue an appeal as an appellant if the designee notified the lessee
under Sec. 4.910(a) that it no longer wanted to pursue the appeal. If
the lessee wanted to continue the appeal, then it would become the
``appellant'' and would have to meet all requirements of this subpart.

Section 4.910 What Must a Designee do if it Decides to Discontinue an
Appeal?

Under this section, if you are a designee and you decide to
discontinue participation in the appeal at any time, you would have to
serve written notice on all lessees who have joined in the appeal under
Sec. 4.908, and on the office or officer with whom any subsequent
submissions or pleadings must be filed, no later than 30 days before
the next submission or pleading is due. The purpose of serving your
lessee if you wish to discontinue the appeal is to give the lessee
notice to allow the lessee to continue the appeal in your place under
Sec. 4.909(d). You also would have to serve the office where the next
pleading is due to allow that office to close the appeal if a lessee
does not continue the appeal under Sec. 4.909(d). Additionally, you
would have to serve your notice on all parties to the appeal and other
persons as required under Sec. 4.962.

Section 4.911 When Does My Appeal Commence?

This section would explain when your appeal commences for purposes
of the period in which the Department must issue a final decision in
your appeal under 30 U.S.C. 1724(h)(1) and Sec. 4.956 of this proposed
rule, or which the Department uses as guidance to track your appeal
under Sec. 4.948.
As explained above, under Sec. 4.907(a), the date your appeal would
be considered filed would be the date the MMS DRD receives all three
items you must file under Sec. 4.907(a)--the Notice of Appeal,
Preliminary Statement of Issues, and processing fee. Thus, paragraph
(a) of this section would provide that your appeal commences on the
date the MMS DRD receives the last of all the items you must file under
Sec. 4.907(a).
RSFA did not define ``commencement'' for purposes of the required
time for the Department to issue a final decision under RSFA Sec. 4(a),
adding FOGRMA Sec. 115(h), 30 U.S.C. 1724(h). RSFA states that:

The Secretary shall issue a final decision in any administrative
proceeding, including any administrative proceeding pending on the
date of enactment of this section, within 33 months from the date
such proceeding was commenced or 33 months from the date of such
enactment, whichever is later.

RSFA Sec. 4(a), 30 U.S.C. 1724(h)(1). An ``administrative proceeding''
is defined under RSFA as ``any Department of the Interior agency
process in which a demand, decision or order issued by the Secretary or
a delegated State is subject to appeal or has been appealed.'' RSFA
Sec. 2, adding FOGRMA Sec. 3(18), 30 U.S.C. 1702(18). RSFA did define
``commence'' ``with respect to a judicial proceeding'' and ``with
respect to a demand.'' 30 U.S.C. 1702(20). However, the definition of
``commence'' under 1702(20) clearly does not encompass ``administrative
proceedings'' under 30 U.S.C. 1724(h)(1) or 1702(18). Rather,
``commence'' under Sec. 1702(20) deals with the ``commencement'' of
judicial proceedings or demands for purposes of the RSFA seven-year
limitations period under RSFA Sec. 4(a), adding FOGRMA

[[Page 1938]]

Sec. 115(b), 30 U.S.C. 1724(b). Accordingly, it is necessary for us to
define ``commencement'' in this proposed rule for purposes of
Sec. 1724(h).
We believe it is more efficient to define ``commencement'' as the
date all three items are filed, rather than defining ``commencement''
as the date when the appellant files the Notice of Appeal and then
requiring the appellant to seek extensions for all other items required
to actually commence the appeal. In addition, we cannot begin to
process an appeal until the appellant tells us what issues the
appellant is raising on appeal in its Preliminary Statement of Issues.
Thus, if you requested an automatic extension of time of 60 days within
which to file your Preliminary Statement of Issues, even though you
filed your Notice of Appeal and paid your processing fee, your appeal
would not ``commence'' until we received your Preliminary Statement of
Issues. The same would be true for processing fees so that if you
requested an automatic extension of time of 60 days within which to pay
your fee, your appeal would not commence until the date we received
your processing fee.
Paragraph (c) would tell you when your appeal commences if you
requested a fee waiver or reduction under Sec. 4.966. In such
instances, your appeal would not commence (assuming you already filed
your Preliminary Statement of Issues) until the date the MMS DRD
either: (1) grants your request for a waiver; (2) receives the reduced
fee if the MMS DRD grants your request for a reduction in the fee; or
(3) receives the entire fee if the MMS DRD denies your request for a
reduction in the fee.

Section 4.912 When Does My Appeal End?

This section would explain that your appeal ends on the same day of
the month of the 33rd calendar month after your appeal commenced under
Sec. 4.911, plus the number of days of any applicable time extensions.
Thus, if your appeal commenced on January 1, 1998, and you requested an
extension of time under Sec. 4.958 of 60 days within which to file your
Statement of Reasons, your appeal would ``end'' on November 30, 2000
(January 1, 1998 to October 1, 2000 (33 months), plus 60 days).
If the 33rd calendar month after your appeal commenced does not
have the same day of the month as the day of the month your appeal
commenced, then the initial 33-month period ends on the last day of the
33rd calendar month. For example, if your appeal commenced on the 31st
of a month, but would end 33 months later in a month with only 30 days,
your appeal would end on the 30th day of the 33rd month, not on the
first day of the 34th month.

Section 4.913 What if a Due Date Falls on a Day the Department or
Relevant Office is Not Open for Business?

This section would explain that if a due date required under this
subpart falls on a day the relevant office is not open for business
(such as a weekend, Federal holiday, or shutdown), then due date would
be the next day the relevant office is open for business. Thus, if your
Statement of Reasons was due on December 25, 1998, a Federal holiday
falling on a Friday, you would be required to file it at the latest on
Monday, December 28, 1998. Likewise, if the IBLA is required to issue a
decision on December 25, 1998, the IBLA would be required to issue the
decision on Monday, December 28, 1998.

Section 4.914 What Will MMS Do After It Receives My Appeal?

This section would explain what the MMS DRD will do with your
appeal after it is received.
Paragraph (a) would explain that when MMS receives your appeal, it
will date stamp each document received (e.g., your Notice of Appeal and
Preliminary Statement of Issues, or request(s) for extension of time to
file your Preliminary Statement of Issues and/or processing fee). Date
stamping would document whether the appeal is timely filed and be used
to calculate the commencement and ending of the appeal. The MMS DRD
also would document receipt of your processing fee using any method it
deems appropriate for the method of payment. Payments by check would be
date stamped on the day received unless received after normal business
hours, in which case the date received would be the next business day.
For payments by Electronic Funds Transfer, MMS could rely on reports,
statements, or online inquiries through an Automated Clearing House or
Federal Reserve Wire network.
Paragraph (b) would state that the MMS DRD will decide whether your
appeal is filed on time. If the MMS DRD did not receive your Notice of
Appeal, Preliminary Statement of Issues, and processing fee, or your
request for extension of time to file your Preliminary Statement of
Issues or processing fee, or your request for a waiver or fee
reduction, by 5:00 p.m. (local time of the MMS DRD) on the 60th day
after you received the order, Notice of Order, or MMS decision not to
issue an order, your appeal would not be timely filed and would not be
considered. In such instances, MMS would notify you under paragraph (c)
that your appeal was not timely filed.
The RPC Report recommended that we notify appellants whether their
appeal is timely filed within 10 days of the Department's receipt of an
appeal. However, we decided not to impose a time requirement in this
proposed rulemaking because, although we expect we would usually meet
such a 10-day time frame, problems could arise which need further
investigation to determine whether the appeal was timely filed. To
avoid disputes over the consequences of any such delay, and because
there is no significant consequence to any party, we decided to omit
the 10-day requirement.
Although appeals would not be under the jurisdiction of MMS, the
designated office in MMS would determine whether the appeal was timely
filed. This is consistent with other IBLA regulations where appeals are
initially filed with the office that issued the decision or order under
appeal, and those offices determine whether the appeals are timely
filed. See e.g., 43 CFR 4.470.
If your appeal was timely filed, MMS would provide you with a
docket number for you to use in future correspondence related to your
appeal. The docket number would not be an MMS docket number but,
instead, would be a Departmental number. Thus, unlike the past appeals
process wherein MMS assigned your appeal an MMS docket number, and the
IBLA assigned it an IBLA docket number, you would use the Departmental
docket number MMS assigns your appeal through the entire appeal
process. This is because it is administratively simpler for both MMS
and IBLA to track an appeal through a coordinated docketing system.
With its notification of your docket number, MMS would also include
instructions regarding scheduling a record development conference and
settlement conference.

Section 4.915 How Will MMS Schedule Record Development Conferences?

Paragraph (a) would provide that if you file an appeal under this
subpart, MMS will schedule you to attend at least one record
development conference within 60 days of the commencement of your
appeal under Sec. 4.911. You would be allowed to extend this 60-day
period under Sec. 4.958.
Paragraph (b) would provide that you may request that record
development conferences take place via telephone, video conference, or
in person.
Paragraph (c) would provide that MMS will determine the time and

[[Page 1939]]

location of record development conferences and whether record
development conferences will take place via telephone, video
conference, or in person. MMS would not require you to travel without
your agreement.

Section 4.916 Who Must and Who May Participate in Record Development
Conferences?

This section would explain who must and who may participate in
record development conferences. Our goal is to allow interested
affected persons that have an ability to provide useful information,
views, or insights to participate in record and issue development.
Paragraph (a) would state that appellants and relevant MMS offices
must participate in record development conferences. We believe that
those persons must participate because they are the ones with the facts
and documentation necessary to develop the record.
Because other interested persons may wish to participate in record
development conferences, paragraph (b) would state that an affected
delegated State or affected State concerned, an affected Indian lessor,
and a lessee, designee, payor, or reporter, if not an appellant, could
participate in the record development conferences.
Paragraph (c) would state that any person who refuses to
participate in any record development conference as required under
paragraph (a) could not file any documents and materials for the
record. Under paragraph (d), any person who may participate as allowed
under paragraph (b) but doesn't participate in any record development
conferences may not file any documents or materials for the record.
This means that those parties could not file any documents, at any
time, including under Sec. 4.923. The purpose of paragraphs (c) and (d)
is to ensure that the record is as complete as possible by the end of
the record development process, rather than to allow persons who could
or should have participated in that process to add to the record at a
later date.

Section 4.917 How Will I Receive Notification of Record Development
Conferences?

The purpose of this section would be to identify who in the
Department has responsibility for notifying the various participants of
the record development conferences. Because MMS would have such
information, it would have the primary notification responsibility.
Thus, paragraph (a) would explain that after MMS schedules any record
development conference under Sec. 4.915, MMS will notify the appellant,
lessees that joined under Sec. 4.908, the office that issued the order,
affected delegated States, the persons that affected States concerned
identify under Sec. 4.961, and affected Indian tribes or appropriate
BIA offices of any record development conference.
MMS would not be responsible for notifying individual Indian
mineral owners that they may attend record development conferences
because it does not have the information necessary to contact those
persons. However, BIA does have that information. Thus, paragraph (b)
would provide that the appropriate BIA office that MMS notifies under
paragraph (a) would make available whatever notice to individual Indian
mineral owners it deems appropriate by any method it deems appropriate.
This proposal was based on the assumption that area BIA offices are in
the best position to know what type of notice would be useful. For
example, such notice could be in the form of notice in a local paper,
or posting notice on the internet that individual Indian mineral owners
could access at their local BIA office. We request comments on the most
appropriate way to provide useful notice to individual Indian mineral
owners about matters that may affect their revenues.

Section 4.918 How Will the Parties to the Appeal Develop the Record
During the Record Development Conferences?

The goals of the record development conference would be to (1)
identify and narrow the facts and issues that are in dispute in the
appeal, (2) agree to the extent possible on the facts and issues, and
(3) provide both sides the opportunity to put into the record documents
and other evidence that are relevant to the disputed facts and issues.
Although the proposed rule requires a minimum of one record development
conference, MMS envisions a record development ``process,'' the goal of
which is to have a complete record that all parties can agree upon.
Accordingly, we used the plural ``conferences'' because we believe that
there may be several record development conferences in the more
factually complex cases as part of the entire record development
process.
At the record development conferences, the parties would have to
identify all documents and evidence that are relevant to disputed legal
or factual issues involved in the appeal or that demonstrate material
facts. The purpose of this provision is to make it clear that the
parties must bring forward relevant information at this stage of the
appeal, rather than waiting until later in the process.
Relevant information would include information adverse to the
party's position on appeal that the party is aware of, and that was
considered in determining the party's position, that is not privileged
or prohibited by law. However, this would not create an affirmative
duty to seek out information adverse to the party's position that was
not considered as part of determining its position.
The requirement to provide information would not, however, preclude
a party from adding to the record at a later date in circumstances
where the party reasonably would not have known about the information
or its relevance to the case. In such instances, the party could
request that the IBLA allow it to supplement the record later under
Sec. 4.923.

Section 4.919 What Will the Parties Do If They Agree on the Record
Contents?

This section would require the parties to compile for the record
all material information relevant to the appeal and to file a Joint
Statement of Facts and Issues and a certification that the record is
complete. We believe this section is largely consistent with the RPC
Report recommendations because: (1) parties would file a Joint
Statement of Facts and Issues (see RPC Report paragraph 19.d); (2) the
record would have to include ``evidence in the work papers or otherwise
in the control of either party that bears upon the disputed facts or
issues'' (see RPC Report at paragraph 19.e); and (3) parties would
attempt to agree on evidence to be provided as part of the record (see
RPC Report paragraph 19.f).
Although MMS would usually be responsible for assembling the record
and drafting a Joint Statement of Facts and Issues, all parties would
be expected to be actively involved in the process, and the parties
could agree to allocate the responsibility differently. Thus, the
appellant or a delegated State could assemble the record or draft the
Joint Statement of Facts and Issues. Accordingly, under paragraph (a),
if the parties to the appeal agree on the contents of the record and
the facts and issues on appeal, MMS would be responsible for (1)
compiling all documents and materials to be included in the record, (2)
drafting a Joint Statement of Facts and Issues, and (3) filing the
record, Joint Statement of Facts and Issues, and certification that the
record is complete, with the MMS DRD within 30 days after the end of
the record development conferences. The parties could file the
certification jointly

[[Page 1940]]

or individually, but the MMS DRD would have to receive all parties'
certifications before it will deem the record complete. When MMS deems
the record complete it would send notice to all parties that the record
is complete. Thus, under the proposed rule, parties would only be able
to add to the record at later stages of the process if they submit a
request to the IBLA under Sec. 4.923 to add to the record with an
explanation of why they did not add the information during the record
development process. The RPC recommended both certification, RPC Report
paragraph 19.d., and admission to the record of additional information
after certification only upon a showing of ``good cause'' to the IBLA.
RPC Report paragraph 25.
We believe that requiring certification of the record will increase
the incentive for appellants and MMS to take the record development
process seriously and to bring forward all evidence and issues during
record development. Having a complete record early in the process will
provide several benefits. First, we believe that this can help to
filter out many cases at an early stage before the process of briefing
to the IBLA begins. Facts and issues brought up early in the process
can help either or both sides to see any errors in their positions,
which can facilitate early resolution of the case. Second, identifying
facts and issues at the record development stage will facilitate
settlement discussions, which also can obviate the need for more costly
briefing to and decision by the IBLA. Third, for cases that proceed to
briefing before the IBLA, we think that the briefing will be faster and
more efficient if the parties are aware of the facts and issues on
appeal before briefing begins. Front-loading the record-development
process as proposed here is intended to support efforts to decide
appeals faster and to meet the time frames set out elsewhere in this
rule. However, we understand that there may be cases where parties
identify new issues or facts that are relevant to the case after they
have certified the record. In such cases, the parties could petition
IBLA under Sec. 4.923 to allow them to add the facts or issues to the
record. We believe that Sec. 4.923 will insure an opportunity to
supplement the record in cases where the party can show a good reason
for not identifying the facts or issues at an earlier stage.
We recognize that the proposed process for certifying the record at
the record development stage could slow down the appeals process
because the requirement to ask the IBLA for permission to make
additional submissions, and explain to the IBLA the reason for the
request, requires additional time and cost for the requesting party to
prepare the request, and for the IBLA to act on that request.
Additionally, the appeals process may become quite complicated and get
bogged down in collateral disputes if the IBLA denies a party's request
to add to the record, or if another party objects to the request. We
further recognize that there may be practical difficulties in being
able to assemble all the pertinent facts or materials in the time frame
envisioned for the record development conferences, and we request
comments on this question.
Moreover, one of the primary goals of the record development
process is to develop a complete administrative record for any
subsequent judicial review of the Department's ultimate decision.
Accordingly, certifying that the record is complete at this early
stage, and then requiring parties to ``request'' to add to the record,
may be too onerous and ultimately contrary to the goal of
administrative record development. Therefore, we specifically request
comments on whether we should require parties to ``certify'' the record
at this early stage, and then require the parties to separately request
to add to the record at later stages of the appeals process. We also
specifically request comments on other alternatives, including not
requiring any certification and permitting documentary submissions at
later stages of the appeals process.

Section 4.920 What Will the Parties Do If They Do Not Agree on the
Record Contents?

This section would establish procedures for completing the record
in the event the parties cannot agree on the record contents. If the
parties to the appeal cannot agree on the contents of the record and
the facts and issues on appeal, then under this section, in addition to
submitting the material required under Sec. 4.919, each party would
have to prepare an Additional Statement of Facts and Issues and
supporting documents for the record and file them with the MMS DRD
within 30 days after the end of the record development conferences. In
addition, each party would have to certify that the Additional
Statement of Facts and Issues and supporting documentation it filed
comprises the complete record, except as provided in Sec. 4.923 of this
subpart. The MMS DRD would have to receive all parties' certifications
before it would deem the record complete. When the MMS DRD deemed the
record complete it would send notice to all parties that the record is
complete.
The RPC Report did not address the process for record development
when parties cannot agree on the record and facts and issues in
dispute. However, we wanted the record development process to be
inclusive, rather than exclusive. We have included the process in this
section in the proposed rule because, although it would not accomplish
the goal of agreement on the record and issues, it would still
accomplish the objective of producing as complete a record as possible
as early as possible in the appeals process. This process also would
avoid lengthy disputes in which the parties to the appeal would be
arguing over what the appeal is about or what should be in the record.

Section 4.921 What Must MMS or I Do If the Record Contains Proprietary
or Confidential Information?

This section would explain that if a party considers any of the
documents or materials compiled under this subpart to contain
proprietary or confidential information, that party would have to
follow the procedures under 43 CFR 4.31 to have that information
treated as such. On August 4, 1997, MMS proposed a separate rule on
this subject (62 FR 16116), but MMS withdrew that proposal on December
31, 1997 (62 FR 68244). We decided to rely on existing procedures under
43 CFR 4.31 rather than create new procedures.

Section 4.922 What if MMS or I Need More time to Develop the Record?

As proposed, the time to complete the record development process
would be 120 days, unless a party requested to extend the process.
Thus, under this proposed section, if an appellant requires additional
record development conferences (or additional time for any other part
of the record development process, such as for filing a Joint or
Additional Statement of Facts and issues or for certifying that the
record is complete) after that time period, then the appellant would
have to follow the procedures set out in Sec. 4.958 to request an
extension. The purpose of this paragraph is to ensure that the record
development process is flexible enough to allow the parties to develop
as complete a record as possible at this stage of the appeals process.
We did not want to cut off the record development process but needed to
make sure that the 33-month period in which to decide Federal oil and
gas appeals did not continue to run if the appellant needed more time
to complete the process.

[[Page 1941]]

Section 4.923 May Parties Supplement the Record or Statement of Facts
and Issues After the Record is Deemed Complete?

As discussed above in the Section-by-Section analysis for
Sec. 4.919, although parties would have to certify that the record is
complete at the end of the record development process, they could
request to later add to the record under this section. The RPC Report
stated that ``[a]bsent good cause, [appellants could] not raise new
issues or facts that were not raised when the administrative record was
developed'' in their Statement of Reasons. RPC Report at paragraph
22.d. The proposed rule would make that provision applicable to all
parties with the objective of encouraging early record development.
We recognize that there will be situations where additional
information or issues are identified after the record development
conference. Thus, this section would allow parties to supplement the
record at a later stage, provided that they can demonstrate adequate
reasons to the IBLA. Accordingly, under paragraph (a), if you are a
party, and you want to supplement the record or the Joint or Additional
Statement of Facts and Issues at any time after MMS deems the record
complete under Secs. 4.919 or 4.920 through the time additional
responsive pleadings are filed under Sec. 4.944, you would have to file
any additional material together with a written request for permission
with the IBLA (or an Assistant Secretary who is deciding the appeal
under Sec. 4.937) to supplement the record or the Joint or Additional
Statement of Facts and Issues. Paragraph (b) would state that a party's
request would have to explain why the additional documents, evidence,
facts or issues were not available or provided in the certified record
or in the Joint or Additional Statement of Facts and Issues and why
they are material to a decision on the appeal.
As previously discussed in connection with the proposed Sec. 4.919,
we recognize that this approach's practical result may be inefficient
or counterproductive to the goal of administrative record development.
We specifically request comments on whether we should require parties
to request to add to the record, and explain that request, after the
record development conferences are complete.
Paragraph (c) would provide that if you are an appellant, you would
have to agree in writing to extend the period for the Department to
issue a final decision in your appeal under 30 U.S.C. 1724(h)(1) by 45
days, and include that agreement with your request. The purpose of this
paragraph is to ensure that the record development process is flexible
enough to allow the parties to develop as complete a record as possible
but make sure that the 33-month period in which to decide federal oil
and gas appeals does not continue to run if the appellant needs
additional time to add to the record.
We propose 45 days for the extension of time under paragraph (c)
because that time frame would allow the IBLA to act on the request and
other parties to respond to the additional submissions. Thus, paragraph
(d) would provide that you must serve your request on all parties to
the appeal. Paragraph (e) would provide that the IBLA would issue an
order either granting or denying your request to supplement the record
or Joint or Additional Statement of Facts and Issues under this section
within 30 days of its receipt of your request. If the IBLA did not
issue an order either granting or denying your request within 30 days
of its receipt of your request, your request would be deemed granted.
Then, under paragraph (f), if the IBLA granted a request or a request
was deemed granted under paragraph (e), any party to the appeal could
respond to a party's additional documents, evidence, facts or issues
within 15 days of its receipt of the IBLA's order, or, if the IBLA did
not issue an order, within 45 days of the party's receipt of the
request.

Section 4.924 How Will MMS Schedule a Settlement Conference?

RSFA Sec. 4(a), adding FOGRMA Sec. 115(i), 30 U.S.C. 1724(i),
requires that parties to disputed obligations under orders subject to
RSFA ``hold not less than one settlement consultation.'' However, the
RPC recommended we propose to make at least one settlement conference
mandatory for all appeals, not just appeals involving Federal oil and
gas production subject to RSFA. Our reason is that participation in a
settlement conference imposes little additional burden on any party but
may yield substantial benefits in terms of the time and expense of
resolving the dispute. We seek comments on whether we should extend
this RSFA requirement to all appeals. In particular we specifically
request comments on whether this requirement should be mandatory for
Indian appeals.
Accordingly, paragraph (a) would state that if you file an appeal
under this subpart, MMS will schedule you to attend a settlement
conference within 120 days of the commencement of your appeal under
Sec. 4.911. You would be allowed to extend this 120-day period under
Sec. 4.958. Thus, attendance at one settlement conference would be
mandatory for all appeals. However, we would encourage as many
settlement conferences as necessary to facilitate early resolution of
disputes. We included the provision requiring an extension of the 33-
month period because we did not want to cut off the settlement process,
but needed to make sure that the 33-month period in which to decide
federal oil and gas appeals did not continue to run if the appellant
needed more time to complete the process.
Under paragraph (b), you could request that the settlement
conference take place via telephone, video conference, or in person.
However, under paragraph (c), MMS ultimately would determine the time
and location of the settlement conference and whether the settlement
conference will take place via telephone, video conference, or in
person. MMS would not compel you to travel (i.e., MMS might suggest
that the conference be in person at a location remote from the
appellant, but if the appellant chose not to travel, MMS would
accommodate that choice).
To increase the flexibility and efficiency of the settlement and
appeals process, MMS added paragraph (d) to provide that the settlement
conference could be held as part of the record development conference
scheduled under Sec. 4.915 if you and MMS agree to do so. MMS believes
that, in many instances, the record development conference and
settlement conference would be concurrent because all necessary parties
would be present to discuss the issues, facts, and possible early
resolution of the dispute.

Section 4.925 Who Must and Who May Participate in the Settlement
Conference?

This section would explain who must and who may participate in
settlement conferences. Our goal is to allow interested affected
persons that have an ability to provide useful information, views, or
insights to participate in settlement conferences.
Paragraph (a) would state that appellants and relevant MMS offices
must participate in settlement conferences, as required under RSFA
Sec. 4(a), adding FOGRMA Sec. 115(i), 30 U.S.C. 1724(i).
Because States concerned and other interested persons may wish to
participate in settlement conferences, paragraph (b) would state that
affected delegated States or affected States concerned, affected Indian
lessors, and a lessee, designee, payor, or reporter (if

[[Page 1942]]

not an appellant) may participate in the settlement conferences.
RSFA Sec. 4(a), FOGRMA Sec. 115(i), provides that for royalties due
on production after September 1, 1996, ``the parties shall hold not
less than one settlement consultation and the Secretary and the State
concerned may take such action as is appropriate to compromise and
settle a disputed obligation * * *.'' However, that language does not
grant States authority to settle a dispute or give the State a ``veto''
over the Secretary settling a dispute. Rather, the Secretary must
determine what is the appropriate action and has determined that it is
not mandatory for States concerned to participate in settlement
conferences. Thus, if States concerned want to participate, they could
do so under paragraph (b).

Section 4.926 How will I Receive Notification of Settlement
Conferences?

The purpose of this section is to identify who in the Department
has responsibility for notifying the various persons of the settlement
conferences. Because MMS would have such information, it would have the
primary notification responsibility. Thus, paragraph (a) would explain
that after MMS schedules a settlement conference under Sec. 4.924, MMS
will notify the appellant, lessees that joined under Sec. 4.908, the
office that issued the order, affected delegated States, the persons
that affected States concerned identify under Sec. 4.961, and affected
Indian tribes or appropriate BIA offices of the settlement conference.
MMS would not be responsible for notifying individual Indian
mineral owners that they may attend settlement conferences because it
does not have the information necessary to contact those persons.
However, BIA does have that information. Thus, paragraph (b) would
provide that the appropriate BIA office that MMS notifies under
paragraph (a) would make available whatever notice to individual Indian
mineral owners it deems appropriate by any method it deems appropriate.
This proposal was based on the assumption that area BIA offices are in
the best position to know what type of notice would be useful. For
example, such notice could be in the form of notice in a local paper,
or posting notice on the Internet that individual Indian mineral owners
could access at their local BIA office. We request comments on the most
appropriate way to provide useful notice to individual Indian mineral
owners about matters that may affect their revenues.

Section 4.927 May Parties Resolve an Appeal by Settlement or Using
Third Party Neutrals After the Settlement Conference?

Although RSFA Sec. 4(a), adding FOGRMA Sec. 115(i), 30 U.S.C.
1724(i) requires at least ``one settlement consultation,'' MMS wants to
make clear that it will engage in settlement negotiations whenever
appropriate throughout the appeals process. Thus, paragraph (a) would
provide that parties may resolve any appeal by settlement at any time
before the Department has issued a final decision.
Under paragraph (b), any party could participate in settlement
negotiations at any stage of the appeal. Also, MMS could use any
personnel or officials it deems appropriate for settlement
negotiations, including representatives of tribes and delegated States.
Like the mandatory settlement conference, the Secretary has determined
under this proposed rulemaking that it is not mandatory for States
concerned to participate in settlement negotiations. However, MMS would
consult with States concerned regarding any settlement negotiations and
could invite States concerned to participate under this paragraph.
We are proposing paragraph (c) to provide for alternative dispute
resolution options other than settlement negotiations. Accordingly, in
addition to negotiated settlements, at any stage of the appeal, MMS
could use third party neutrals under the Administrative Dispute
Resolution Act, 5 U.S.C. 571 et seq., if both MMS and the other parties
to the appeal agreed to do so. Thus, parties would not be forced to
refer disputes to an arbitrator or mediator. If MMS used third party
neutrals, MMS could use the Alternative Dispute Resolution Official
from the OHA, or persons named on the roster of third party neutrals
that OHA maintains.

Section 4.928 What if I Need More Time to Consider Settlement?

This section would explain how to postpone any filing requirements
and the deadline for the Department to issue a final decision in your
appeal while settlement efforts are ongoing. To do this, you would have
to obtain an extension under Sec. 4.958. We included this provision
because we did not want to cut off the settlement process but needed to
make sure that the 33-month period in which to decide Federal oil and
gas appeals did not continue to run if the appellant needed more time
to complete the process.

Section 4.929 May the MMS Director Concur With, Rescind, or Modify an
Order or Decision Not to Issue an Order that I Appealed?

One of the goals of the RPC was elimination of the current two-step
royalty appeals process wherein an appellant must appeal to the MMS
Director, brief that appeal, and receive a decision that is then
appealable to the IBLA. Once at the IBLA, appellants must then brief
the appeal to the IBLA.
To eliminate the two-step briefing process, yet allow MMS the
opportunity to rescind or modify an order after record development, the
RPC Report recommended that MMS prepare an internal recommendation on
whether an order should be upheld, modified, or rescinded. RPC Report
paragraph 21. The RPC Report then recommended that after appropriate
consultation with States and tribes, the MMS Appeals Division could
rescind or modify an order. Id. However, this process would have
involved asking the IBLA to remand the appeal, which would be
burdensome and time consuming. Also, the internal memorandum would not
be shared with the appellant. In his letter of September 22, 1997, the
Secretary stated that rather than writing an internal memorandum MMS
would issue a letter decision to appellants with copies to appropriate
Indian lessors and delegated States stating whether the MMS Director
had modified or rescinded the order or decision not to issue an order.
Thus, under paragraph (a), although appeals are not to the MMS
Director, this rule is proposing that the MMS Director, within 60 days
of the date that the MMS DRD has received the record under Secs. 4.919
or 4.920, may concur with, rescind, or modify the order or decision not
to issue an order that you have appealed. We felt that MMS should have
up to this point to unilaterally act on an order without leave of the
IBLA. We also believe that the short 60-day time period within which
the MMS Director would have to act was necessary because of the RSFA
33-month period within which to decide Federal oil and gas appeals and
the Department's and RPC's desire to decide appeals more quickly than
the current process. Although neither the RPC report nor the Secretary
addressed the process for the MMS Director to concur with orders, we
believe that in addition to issuing letters modifying or rescinding
orders, as part of MMS's review practice, MMS should be authorized to
issue letters concurring with orders.

[[Page 1943]]

The purpose of allowing the MMS Director to rescind or modify the
order or decision not to issue an order would be to: (1) formally
communicate our reasons for rescission or modification to appellants;
(2) eliminate the need to request remand from the IBLA; (3) allow MMS
an opportunity to review orders for accuracy and conformity with MMS
policy prior to formal briefing to the IBLA; and (4) help resolve
appeals or issues prior to formal briefing to the IBLA. The early
resolution of appeals is particularly important given RSFA's 33-month
time constraint.
Moreover, under the current appeals process, MMS appeals decisions
and settlement agreements have resolved more than three-fourths of the
complex appeals filed with MMS prior to appeal to the IBLA. MMS hopes
that its ability to review and rescind or modify orders in this
proposed rule, together with the settlement conferences, will yield a
similar result.
The purpose of having the MMS Director affirmatively concur with
orders is to speed up the appeals process and give appellants clear
documentation of the concurrence (compared to ``deemed'' concurrences
under paragraph (e), described below).
Paragraph (b) would provide that MMS will consult informally with
the MMS office that issued the order or decision not to issue the
order, and with affected tribes or affected delegated States that
participated in the record development conference or the settlement
conference before the MMS Director rescinds or modifies an order or
decision not to issue an order under paragraph (a). This is
substantially what the RPC Report recommended, RPC Report paragraph
21.a, except that MMS would not have to consult with affected tribes or
affected delegated States that show no interest in the proceedings by
failing to participate in the early part of the appeals process. MMS
also would not be required to consult with States concerned. This would
conserve MMS resources by eliminating the need to inform persons that
did not issue the order, participate in the audit that resulted in the
order, or participate in the appeals process. This would also encourage
interested affected tribes and affected delegated States to participate
early in the process and thereby produce more meaningful record
development and settlement conferences. However, paragraph (c) would
give MMS discretion to consult informally with other relevant MMS
offices, States concerned, and affected Indian lessors before the MMS
Director rescinds or modifies an order or decision not to issue an
order.
Under the current appeals process, for appeals involving Indian
leases, MMS prepares the decision, and the Deputy Commissioner of
Indian Affairs signs the decision, after the Solicitor, Division of
Indian Affairs, reviews the decision. In this proposed rule, the MMS
Director would concur with, rescind or modify appeals involving Indian
leases. We specifically request comment on what the extent of BIA
involvement regarding such appeals should be. For example, should MMS
be required to ``consult informally'' with appropriate BIA officials
prior to acting on an order under paragraph (b), or should such
consultation be at MMS's discretion under paragraph (c)?
Under paragraph (d), MMS would notify appellants in writing that
the MMS Director has concurred with, rescinded or modified the order or
decision not to issue an order they appealed. A notice of rescission or
modification would state the reasons for the rescission or
modification. However, we anticipate that these letters would be
shorter and would include less written legal analysis than current MMS
appeals decisions.
We included paragraph (e) to explain what happens if the MMS
Director does not concur with, rescind or modify the order or decision
not to issue an order within the 60-day time frame provided in
paragraph (a). In such instances, the MMS Director would be deemed to
have concurred with the order or decision not to issue an order that
you have appealed.

Section 4.930 What Other Persons Will MMS Notify When the MMS Director
Concurs With, Rescinds, or Modifies an Order or Decision Not to Issue
an Order?

The purpose of this section is to identify the persons, other than
the appellant that the Department will notify when the MMS Director
concurs with, rescinds, or modifies an order or decision not to issue
an order. This would include persons who would not otherwise be aware
of such action because they did not receive an order, Notice of Order,
or Notice of Appeal. Because MMS would have such information, it would
have the primary notification responsibility.
Paragraph (a) would provide that, for appeals filed under
Sec. 4.904(a) or (b) (i.e., by parties other than Indian lessors), MMS
will send a copy of the notice that it issues under Sec. 4.929(d) to
the following persons: (1) the office that issued the order; (2) any
affected delegated State; (3) any affected Tribe; and (4) the
appropriate BIA office, if the order involves leases on individual
Indian lands. The BIA office may make available to individual Indian
mineral owners whatever notice it deems appropriate by any method it
deems appropriate. MMS would not be responsible for notifying
individual Indian mineral owners because it does not have the
information necessary to contact those persons. However, BIA does have
that information. This proposal was based on the assumption that BIA
area offices are in the best position to know what type of notice would
be useful. For example, such notice could be in the form of notice in a
local paper, or posting notice on the Internet that individual Indian
mineral owners could access at their local BIA office. We request
comments on the most appropriate way to provide useful notice to
individual Indian mineral owners about matters that may affect their
revenues.
Paragraph (b) would provide that for appeals filed by Indian
lessors under Sec. 4.904(c), MMS will send a copy of the notice it
issues under Sec. 4.929(d) to the office that decided not to issue the
order and to the lessee or its designee.

Section 4.931 If the MMS Director Rescinds or Modifies an Order, How
Does it Affect the Statutory Limitations Period?

RSFA Sec. 4(a), adding the new FOGRMA Sec. 115(b)(1), 30 U.S.C.
1724(b)(1), provides that MMS must commence a demand for an obligation
within seven years from the date the obligation becomes due. Thus,
orders subject to RSFA must be issued within seven years of the date
that additional royalties became due. For purposes of this rulemaking,
we needed to clarify the effect of the MMS Director's rescission or
modification of orders subject to the seven-year limitations period
under RSFA.
Accordingly, for purposes of determining whether an order is timely
under the limitations period prescribed in 30 U.S.C. 1724(b)-(d),
paragraph (a) of the proposed section would state that if the MMS
Director modifies an order under Sec. 4.929, the timeliness of the
order is not affected and the modified order is timely if the original
order was timely. For example, assume that MMS issued an order to pay
additional royalty of $10,000 on January 1, 1998, for royalties that
were due on January 1, 1991 from lease X.
Also assume that the designee appealed the order, and that the MMS
Director modified the order to find that the lessee underpaid royalties
on lease X for the same production by $15,000, not the $10,000 under
the order as issued, and to require the lessee to pay the higher
amount. In that instance,

[[Page 1944]]

because the original order was timely, the modification would be
timely, even though it increased the amount of royalties due. However,
the MMS Director's modification would not address production not
included in the original order. Thus, using the above example, the MMS
Director could not modify the order to include additional royalties on
production from lease Y, because that production was not included in
the original order. Similarly, the Director could not modify the order
to include production from lease X for a time period different than the
time period in the original order.
Paragraph (b) would provide that for purposes of determining
whether an order is timely under the limitations period prescribed in
30 U.S.C. 1724(b)-((d), if the MMS Director rescinded all or part of an
order under Sec. 4.929, and the IBLA, an Assistant Secretary, the
Director of OHA, the Secretary, or a court reinstates that order, in
whole or in part, the reinstated order relates back to the date the
order was originally issued, and the reinstated order would be timely
if the original order was timely. Thus, as long as an appeal (or
intervention) of the rescission was pending within the Department or in
federal court, an order would stay ``alive'' for purposes of the 7-year
limitations period even though the MMS Director rescinded that order.

Section 4.932 When Will MMS Send the Record to IBLA?

Under this section, the MMS DRD would transmit the record to the
IBLA within 45 days of the date MMS notifies the appellant under
Sec. 4.929(d). If the MMS Director is deemed to have concurred with an
order under Sec. 4.929(e), this section would require that the MMS
Dispute Resolution Division transmit the record to the IBLA within 105
days after MMS has received the record under Sec. 4.919 or 4.920. The
45-day deadline under this paragraph would merely be guidance for MMS
and would create no substantive rights in parties to the appeal or any
other persons.

Section 4.933 What Must I Do, or What May I Do, After the MMS Director
Concurs With, Rescinds or Modifies an Order or Decision Not To Issue an
Order That I Have Appealed?

This section would explain what an appellant could do regarding the
appeal of its order after the MMS Director concurs with, modifies or
rescinds an order under Sec. 4.929. Depending on the MMS Director's
action, and whether the appellant desires to continue the appeal, there
are several options for the appellant. First, under paragraph (a), if
the MMS Director concurred with the order or decision not to issue an
order that you appealed, and you wanted to continue your appeal, you
would have to file your Statement of Reasons under Sec. 4.939 with the
IBLA within 60 days after you received the MMS Director's concurrence
under Sec. 4.929. The 60-day time period is intended to provide
sufficient time for you to determine what action you intend to take and
to prepare your Statement of Reasons.
Second, under paragraph (b), if the MMS Director rescinded the
order that you appealed, and if an Indian lessor or delegated State
intervened under Sec. 4.934, because you would be bound by the
Department's final decision in the intervention in your appeal, you
could file an Answer to the Intervention Brief under Sec. 4.942 within
60 days after you receive the MMS Director's rescission under
Sec. 4.929(d). We assume that appellants would not appeal a recission
to IBLA. However, we realize that the substantive rights of appellants
may be affected if an Indian lessor or delegated State intervenes under
Sec. 4.934. Thus, we wanted to ensure that appellants have the
opportunity to address any arguments for reinstatement of a rescinded
order an Intervenor makes to IBLA in its Intervention Brief. But we
also wanted to make clear that if an appellant chooses not to answer an
Intervention Brief, it would still be bound by any IBLA decision
regarding the rescission.
Third, under paragraph (c), if the MMS Director modified the order
that you appealed, and if you still wanted to contest the order as
modified, you would have to file your Statement of Reasons under
Sec. 4.939, and any Answer to an Intervention Brief under Sec. 4.942,
within 60 days after you receive the MMS Director's modification under
Sec. 4.929. The 60-day time period is intended to provide sufficient
time for you to determine what action you intend to take and to prepare
your Statement of Reasons and any Answer to an Intervention Brief.
Finally, under paragraph (d), if the MMS Director was deemed under
Sec. 4.929(e) to have concurred with the order or decision not to issue
an order that you appealed, you would have to file your Statement of
Reasons under Sec. 4.939 within 120 days after the date the MMS DRD
receives the record forwarded under Secs. 4.919 or 4.920. Thus, if MMS
did not notify you of its concurrence, modification, or rescission of
the order within the time required under Sec. 4.929, then you would
have 60 days from the date that the notification should have been sent
to file a Statement of Reasons with the IBLA. This would give an
appellant sufficient time to determine whether the appeal was deemed
concurred with under Sec. 4.929(e), determine what action it intends to
take, and prepare its Statement of Reasons.

Section 4.934 Who May Intervene in an Appeal?

The purpose of this section is to provide a means for Indian
lessors and affected delegated States to object to an MMS Director's
rescission or modification of an order without having to make the
Indian lessor or State file a separate appeal of some kind. We felt it
would be too confusing and administratively difficult to track dual
appeals regarding the same order for purposes of the 33-month period
within which to decide appeals of orders concerning federal oil and gas
leases. The RPC Report, paragraph 21.e, recommended that delegated
States be allowed to ``continue'' an appeal. However, we believe that
Indian lessors and affected delegated States are not ``appellants''
when they disagree with an MMS rescission or modification because there
already is an ``appellant.'' Rather, they should be regarded as
intervenors because they did not appeal the order but challenge MMS's
action with respect to an order. See e.g., 43 CFR 4.471 and 4.1110.
This achieves the same effect as the RPC Report recommendation,
but, under the proposed rule, appellants have different substantive
rights and procedures than intervenors. For example, under various
sections of the proposed rule, if an appellant wants additional time to
comply with a filing deadline, hold additional record development or
settlement conferences, etc., then, under Sec. 4.958, the appellant
must request an extension of the period in which the Department must
issue a final decision in its appeal under Sec. 4.956, or which the
Department uses as guidance to track its appeal under Sec. 4.948. There
is no such requirement for Intervenors because they cannot extend the
33-month period. Thus, the Departmental office considering an extension
request from an Intervenor would have discretion whether to grant the
request considering, among other factors, whether the Intervenor
obtained a written agreement from the appellant to extend the 33-month
period. Accordingly, under paragraph (a), Indian lessors could
intervene in any appeal involving their leases by filing an
Intervention Brief under Sec. 4.939 within 30 days after receiving
notification of the MMS Director's concurrence, rescission or
modification of an order

[[Page 1945]]

under Sec. 4.930 that adversely affects them. Likewise, paragraph (b)
would provide that affected delegated States could intervene in an
appeal if the MMS Director modified or rescinded an order under
Sec. 4.929 that the recipient of the order or Notice of Order appealed,
by filing an Intervention Brief under Sec. 4.939 within 30 days after
the delegated State received MMS's notification of any rescission or
modification under Sec. 4.930, if MMS's rescission or modification of
the order adversely affected that State.
We believe that only Indian lessors and delegated States that are
adversely affected by the MMS Director's actions regarding an order
should be allowed to intervene. Thus, an Indian lessor whose leases are
not at issue in the appeal, or a delegated State that does not receive
revenues from the leases at issue in the appeal, could not intervene.
However, if an unaffected Indian lessor or delegated State wished to
express views about the merits of MMS's actions, it could file an
amicus brief under Sec. 4.943.

Section 4.935 What is the Record for an Appeal if a State or Indian
Lessor Intervenes?

Because a record already exists for an appeal when an Indian lessor
or a delegated State intervenes, this section would provide that if an
Indian lessor or delegated State intervenes under Sec. 4.934, the
record for the appeal that the IBLA must consider is the record
established under Secs. 4.919 or 4.920 before the MMS Director's
rescission or modification under Sec. 4.929, plus any additional
correspondence to the MMS Director and the MMS Director's notice of
modification or rescission under Sec. 4.929(d).

Section 4.936 If an Indian Lessor or Delegated State Intervenes, How
Does it Affect the Time Frame for Deciding an Appeal?

As explained above, we believe that Indian lessors and affected
delegated States are not ``appellants'' when they disagree with an MMS
rescission or modification because there already is an ``appellant.''
Thus, this section would provide that when an Indian lessor or
delegated State intervenes, the appeal commences on the appellant's
commencement date under Sec. 4.911, not on the date an intervening
party files its Intervention Brief. Thus, intervention would not
``recommence'' an appeal.

Section 4.937 May an Assistant Secretary Decide an Appeal?

Under the current two-step appeals process, an Assistant Secretary
may take jurisdiction of an appeal and issue a decision at any time
prior to an appeal to the IBLA. Marathon Oil Co., 108 IBLA 177 (1989),
Blue Star, Inc., 41 IBLA 333, 335-36 (1979). The RPC recommended that
if an Assistant Secretary wanted to decide an appeal, the Assistant
Secretary would have to petition the IBLA to relinquish jurisdiction of
the appeal. RPC Report, paragraph 30. However, in his letter of
September 22, 1997, the Secretary stated that the Department would
allow an Assistant Secretary to choose to decide an appeal without
leave from the IBLA, at any time prior to the Appellant's filing of its
Statement of Reasons or an Intervenor's filing of its Intervention
Brief with the IBLA. We believe that if policy-level officials in the
Department choose to make a decision in a case, there should be no need
for them to be granted permission. This also is similar to the
procedures for certain other Departmental appeals. See 43 CFR 4.332(b).
Accordingly, paragraph (a) of this section would provide that the
Assistant Secretary for Land and Minerals Management (or, the Assistant
Secretary for Indian Affairs for appeals involving an Indian lease)
could choose to decide an appeal by notifying the appellant, the MMS
Dispute Resolution Division, and the IBLA in writing that the Assistant
Secretary will decide the appeal, at any time up to 30 days before the
date the appellant must file its Statement of Reasons or an Intervenor
must file its Intervention Brief under Sec. 4.939. The 30-day
notification would give appellants and Intervenors time to prepare
their Statement of Reasons or Intervention Brief for filing with the
Assistant Secretary, rather than with the IBLA. The proposed rule does
not specify how an Assistant Secretary would determine to decide an
appeal, but we believe any party, including the appellant, could
request that an Assistant Secretary decide the appeal.
We believe that the appellant should argue its case to the
Assistant Secretary in much the same way as it would argue the matter
to the IBLA. Thus, paragraph (b) of this section would provide that,
after the Assistant Secretary notifies you of his or her decision to
decide your appeal, you must file all subsequent documents required
under this subpart with the Assistant Secretary under Sec. 4.960.
In a public meeting we held on earlier drafts of this proposed
rule, industry representatives expressed concern over the extent of ex
parte communications from the MMS and the Solicitor's office to the
Assistant Secretary when an Assistant Secretary decides an appeal.
Under the proposed procedure, appellants would be able to submit the
same arguments to the Assistant Secretary as they would submit to the
IBLA. While the procedures would differ from those before the IBLA
because there would be no bar on agency or Solicitor's office personnel
working with the Assistant Secretary on a decision, any Assistant
Secretary's decision would have the benefit of being subject to
immediate judicial review. Moreover, it is critical to the Assistant
Secretary's decision making process that he or she have available the
expertise of both the agency personnel and his or her attorneys. We
specifically request comments about any procedures that the Department
should consider regarding how it can maintain an efficient and fair
process, while providing adequate staff support to the Assistant
Secretary, and preserving the Assistant Secretary's prerogative to
consult with whomever he or she chooses within the Department.

Section 4.938 Who Will Notify Other Persons That an Assistant
Secretary Will Decide an Appeal or Has Decided an Appeal?

The purpose of this section is to identify who in the Department
has responsibility for notifying affected persons other than the
appellant that an Assistant Secretary will decide an appeal or has
decided an appeal, who would not otherwise be aware of such action.
Because MMS would be notified of such action, it would have the primary
notification responsibility.
Thus, paragraph (a) would explain that MMS will transmit a copy of
the Assistant Secretary's notice required under Sec. 4.937 to:
(1) Affected tribes;
(2) Affected delegated States;
(3) Lessees who join under Sec. 4.908;
(4) Intervenors; and
(5) Affected lessees or their designees if an Indian lessor files
an appeal under Sec. 4.904 of any MMS decision not to issue an order.
Paragraph (b) would provide that for appeals involving individual
Indian mineral owners' leases, in addition to notifying the persons
under paragraph (a), MMS would transmit a copy of the Assistant
Secretary's notice required under Sec. 4.937 to the appropriate BIA
office. That BIA office could make available to individual Indian
mineral owners whatever notice it deems appropriate by any method it
deems appropriate. MMS would not be responsible for notifying
individual Indian mineral owners because it does not have the
information necessary to contact those persons. However, BIA does have
that information. Thus, this

[[Page 1946]]

proposal was based on the assumption that area BIA offices are in the
best position to know what type of notice would be useful. For example,
such notice could be in the form of notice in a local paper, or posting
notice on the Internet that individual Indian mineral owners could
access at their local BIA office. We request comments on the most
appropriate way to provide useful notice to individual Indian mineral
owners about matters that may affect their revenues.

Section 4.939 How Do I File My Statement of Reasons or Intervention
Brief?

This section would explain how an appellant would file its
Statement of Reasons, and an Intervenor would file its Intervention
Brief, with the IBLA or an Assistant Secretary.
Under paragraph (a), you would have to file your Statement of
Reasons or Intervention Brief with the IBLA under Sec. 4.960 within the
times required under Secs. 4.933 and 4.934.
Under paragraph (b), if an Assistant Secretary will decide your
appeal under Sec. 4.937, you would have to file your Statement of
Reasons or Intervention Brief with that Assistant Secretary under
Sec. 4.960 within 60 days after the MMS DRD has received the record
under Secs. 4.919 or 4.920.
Under paragraph (c), appellants would have to pay a nonrefundable
processing fee of $150 with their Statement of Reasons as required
under Sec. 4.965 or seek a fee waiver or reduction under Sec. 4.966.
Our analysis leading to the choice of $150 as the processing fee at
this stage of the appeal is in the Section-by-Section analysis for
Sec. 4.965 of this proposed rule. Indian lessors and delegated States
would not have to pay the processing fee.
Under paragraph (d) you also would have to serve your Statement of
Reasons or Intervention Brief on all parties to the appeal, and on
other persons as required under Sec. 4.962. Section 4.962 requires
appellants to serve their Statement of Reasons on the office that
issued the order, affected tribes, and affected delegated States. The
current rules do not require appellants to serve the Statement of
Reasons on these entities. However, we added this requirement to ensure
that the office that issued the order, affected tribes, and affected
delegated States would be informed about the progress of the appeal and
to provide them with an opportunity to give the Solicitor's office
information they believe is responsive to the Statement of Reasons or
file an amicus brief under Sec. 4.943.

Section 4.940 What if I Do Not Timely File My Statement of Reasons,
Intervention Brief or Request for an Extension of Time to File Those
Documents?

This section would explain that if you do not file your Statement
of Reasons, Intervention Brief, or request for extension of time to
file either of those documents within the times prescribed in
Secs. 4.933, 4.934, or 4.939, or within any extensio

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-37. Public record. Not legal advice.