24542 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Parts 3130 and 3160

[WO–310–1310–00 24 1A]

RIN 1004–AD13

National Petroleum Reserve, Alaska—

Unitization

AGENCY: Bureau of Land Management,

Interior.

ACTION: Proposed rule.

SUMMARY: This proposed rule would add

a new subpart to the Bureau of Land

Management’s oil and gas regulations

implementing new statutory authority

allowing operators to form units in the

National Petroleum Reserve, Alaska

(NPRA). Units allow for the sharing of

costs and spreading of revenues among

several leases, and allow for production

from unit leases to occur without regard

to lease or property boundaries. The

rule would also allow for waiver,

suspension, or reduction of rental or

royalty for NPRA leases; allow for

suspension of operations and

production for NPRA leases; amend

existing regulatory language to set the

primary lease term for an NPRA lease at

10 years. Current regulations allow 10

years, or a shorter term if it is in the

notice of sale; and add a new subpart to

the NPRA regulations on subsurface

storage agreements. Subsurface storage

agreements allow operators to store gas

in existing geologic structures on

Federal lands.

This proposal would also make it

clear that existing suspension

regulations would not apply to the

NPRA.

DATES: You must submit your comments

to BLM at the appropriate address below

on or before June 26, 2000. BLM will not

necessarily consider any comments

received after the above date in making

its decisions on the final rule.

ADDRESSES: Mail: Director (630), Bureau

of Land Management, Administrative

Record, Room 401 LS, 1849 C Street,

NW, Washington, D.C. 20240.

Personal or messenger delivery: Room

401, 1620 L Street, NW, Washington,

D.C. 20036.

Internet e-mail:

WOComment@blm.gov. (Include ‘‘Attn:

AD13’’)

FOR FURTHER INFORMATION CONTACT:

Erick Kaarlela at (202) 452–0340, or Ian

Senio at (202) 452–5049, or write to

Director (630), Bureau of Land

Management, Room 401 LS, 1849 C

Street, NW, Washington, D.C. 20240.

Persons who use a telecommunications

device for the deaf may contact these

persons through the Federal Information

Relay Service at 1–800–877–8339, 24

hours a day, 7 days a week.

SUPPLEMENTARY INFORMATION:

I. Public Comment Procedures

II. Background

III. The Rule as Proposed

IV. Section-by-Section Analysis

V. Procedural Matters

I. Public Comment Procedures

A. How Do I Comment on the Proposed

Rule?

If you wish to comment, you may

submit your comments by any one of

several methods.

You may mail comments to Director

(630), Bureau of Land Management,

Room 401 LS, 1849 C Street, NW,

Washington, D.C. 20240.

You may deliver comments to Room

401, 1620 L Street, NW, Washington,

D.C. 20036.

You may also comment via the

Internet to WOComment@blm.gov.

Please submit Internet comments as an

ASCII file avoiding the use of special

characters and any form of encryption.

Please also include ‘‘Attn: AD13’’ and

your name and return address in your

Internet message. If you do not receive

a confirmation that we have received

your Internet message, contact us

directly at (202) 452–5030.

Please make your written comments

on the proposed rule as specific as

possible, confine them to issues

pertinent to the proposed rule, and

explain the reason for any changes you

recommend. Where possible, your

comments should reference the specific

section or paragraph of the proposal that

you are addressing.

BLM may not necessarily consider or

include in the Administrative Record

for the final rule comments that BLM

receives after the close of the comment

period (see DATES) or comments

delivered to an address other than those

listed above (see ADDRESSES).

B. May I Review Comments Submitted

by Others?

Comments, including names, street

addresses, and other contact

information of respondents, will be

available for public review at 1620 L

Street, NW, Room 401, Washington,

D.C., during regular business hours

(7:45 a.m. to 4:15 p.m.), Monday

through Friday, except Federal holidays.

Individual respondents may request

confidentiality. If you wish to request

that BLM consider withholding your

name, street address, and other contact

information (such as: Internet address,

FAX or phone number) from public

review or from disclosure under the

Freedom of Information Act, you must

state this prominently at the beginning

of your comment. BLM will honor

requests for confidentiality on a case-bycase basis to the extent allowed by law.

BLM will make available for public

inspection in their entirety all

submissions from organizations or

businesses, and from individuals

identifying themselves as

representatives or officials of

organizations or businesses.

II. Background

Why is BLM Proposing This Rule?

Part 3130 of 43 Code of Federal

Regulations (CFR) contains the

regulations that apply to oil and gas

leasing in the National Petroleum

Reserve, Alaska (NPRA) authorized

under the Naval Petroleum Reserves

Production Act of 1976, as amended

(the ‘‘Act’’), (42 U.S.C. 6501 et seq.). Part

3130 does not contain regulations on

unitization, suspensions, or waivers of

royalty or rental, suspensions of

operations and production or subsurface

storage of oil and gas. This proposed

rule would implement amendments to

the Act (see Pub. L. 105–83) authorizing

operational activities, including

unitization of leases, suspensions or

waivers of royalty or rental, the

suspension of operation and production

for leases in NPRA and subsurface

storage agreements.

Is this Rule Related to the

Environmental Impact Statement or the

Record of Decision to Lease Oil and Gas

in the NPRA?

No. BLM completed and made

publicly available an Environmental

Impact Statement/Integrated Activity

Plan (EIS/IAP) regarding oil and gas

leasing in the NPRA on August 7, 1998.

The Secretary issued a Record of

Decision (ROD) for that action on

October 7, 1998. This proposal does not

address the EIS/IAP or the ROD or any

action involved with the actual leasing

process, but would cover operational

activities carried out under leases issued

as a result of that process.

III. The Rule as Proposed

How Would This Rule Change BLM’s Oil

and Gas Regulations?

The proposed rule applies to

operations under Federal oil and gas

leases in NPRA and would add a new

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24543

subpart allowing the formation of oil

and gas units in the NPRA. The rule

would also—

(A) Allow for waiver, suspension or

reduction of rental or royalty for NPRA

leases;

(B) Allow for suspension of

operations and production for NPRA

leases;

(C) Amend existing regulatory

language to set the primary lease term

for an NPRA lease at 10 years. Current

regulations allow 10 years or a shorter

term if it is in the notice of sale;

(D) Add a new subpart to the NPRA

regulations on subsurface storage

agreements. Subsurface storage

agreements allow operators to store gas

in existing geologic structures on

Federal lands in return for fees; and

(E) Make it clear that existing

suspension regulations that preceded

the enactment of P.L. 105–83, would no

longer apply to the NPRA.

What is Unitization?

Unitization is a means for a group of

oil and gas lessees in a given area to

share in the risks and costs associated

with oil and gas exploration and

development and also to share in the

possible benefits. Unitization of leases

reduces the need for surface disturbing

activities by enhancing the likelihood

that fewer wells would need to be

authorized in order to produce the oil or

gas reservoir. The proposed regulations

implement statutory changes and are

intended to recognize the unique

climatic conditions of NPRA, the needs

and practices of the oil and gas industry

in light of those conditions, and the

need to protect natural resources in

NPRA.

The Secretary is obligated to protect

surface resources within NPRA (see 42

U.S.C. 6508). The protection of surface

resources includes the protection of

subsistence needs of rural residents.

This proposal does not directly address

subsistence because unitization will not

change the obligation to comply with

subsistence related stipulations in

leases. Please comment on whether

these proposed regulations will meet the

needs of the public and the industry

while protecting the NPRA environment

and whether these regulations should

specifically address subsistence.

Why is BLM Proposing a Rule on

Unitization of Oil and Gas Leases in

NPRA?

While there is already a detailed set

of regulations governing oil and gas

leasing in NPRA in Part 3130 of 43 CFR,

there are no regulations allowing for

unitization. The proposed rule

implements paragraph (8) of section

6508 of the Act that authorizes

unitization of NPRA leases.

Is This Proposal Similar to That

Proposed in BLM’s Earlier Oil and Gas

Rulemaking on Unitization?

This proposal closely follows the

proposed unit regulations in BLM’s

proposed comprehensive oil and gas

rule published on December 3, 1998, at

63 FR 66840. Those unit regulations

would apply on Federal lands in the

lower 48 States and Alaska, but not in

NPRA. This proposal differs from that

proposal where the statute requires

differences or where, because of

environmental, climatic, or geologic

concerns, we determined that rules in

NPRA should differ from those applying

to other Federal lands. This proposal is

also different in that it applies only to

exploratory units and would not apply

to enhanced or secondary recovery

units.

What Are the Major Differences Between

This Proposal and the Unit Regulations

That Currently Apply to Federal Lands

Outside of NPRA?

Increased Flexibility

Like the unit regulations proposed

earlier (63 FR 66911), these regulations

would increase the flexibility of the

unitization process by allowing

operators and BLM to negotiate

exploration and development terms

before entering into a unit agreement.

The focus of this process would be to

protect the public interest rather than to

rely on the model unit agreement

contained in existing regulations at 43

CFR subpart 3186, which is currently

applicable to Federal lands outside of

NPRA.

Up-Front Negotiation and Limited

Number of Unit Terms

The primary change to the unitization

process that you may be familiar with

would be an emphasis on up-front

negotiation among the various interest

owners and BLM. Operators would be

able to use any agreement format in

their unit agreement as long as it

addressed the following four basic

issues: (1) Unit area; (2) Initial and

continuing development obligations; (3)

Productivity criteria and participating

areas; and (4) BLM’s ability to set or

modify the quantity, rate, and location

of development and production.

BLM would accept only a limited

number of additional unit agreement

terms beyond the mandatory terms. If

the unit agreement does not specifically

address modifications, they would not

be permitted unless all of the parties to

the agreement agree. The unit agreement

would include all producing intervals

unless the unit agreement specifies

those producing interval(s) to which it

applies.

What Would be the Basis for the

Negotiations?

The unit operator and BLM would

base the negotiation of unit agreement

terms on many factors. These factors

may include the history of the area,

economics, the number and depth of

wells previously drilled in the area, the

size of the area, and the cost of the

proposed operations and the unique

environmental and climatic and

geologic conditions in the NPRA.

How Would the Unit Agreement Process

Work?

Under the proposed regulations,

generally, if you own or lease tracts you

could apply to BLM for review of your

proposed unit agreement. You and BLM

would negotiate the terms of the unit

agreement. BLM would review the

agreement and determine whether we

should approve it. After BLM approves

the unit agreement, tracts joining the

unit would be committed tracts. BLM

would designate a participating area if

it found that a well meets the negotiated

productivity criteria laid out in the unit

agreement. To meet the productivity

criteria, a well must have future

production potential sufficient to pay

for the costs of drilling, completing and

operating a unit well. Each participating

area would have at least one well

meeting the productivity criteria.

Participating areas are used to allocate

production to committed tracts within

the unit. A tract shares in production if

there is anywhere within the tract a

participating area containing a well that

meets the productivity criteria.

When a unit well in a participating

area stops producing, the participating

area terminates unless there is another

unit well that is producing in that

participating area. Normally, when the

last unit well in the last participating

area stops producing and there are no

approved drilling or reworking

operations on committed tracts, the unit

terminates. After unit termination, all

committed leases that were part of the

unit would return to their individual

lease status in effect at the time of

termination and would not receive any

further benefits of unitization. For

example, if a committed Federal lease’s

primary term expires before unit

termination, the Federal lease would

terminate when the unit terminates,

unless the lease qualifies for extension

under current regulations at 43 CFR

3135.1–5. There is no automatic

extension of the lease term provided for

24544 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

Federal leases which have been

previously committed to terminated

units. Federal leases that have not

completed their primary term would

continue under their terms.

What Are Participating Areas and How

Does This Proposal Treat Them?

Participating areas are used to allocate

production from wells in a unit to the

tracts committed to the unit and

unleased Federal land. A participating

area includes the land around a well

that meets certain criteria negotiated for

and laid out in the agreement. In

general, these criteria must show that

the production from the well can pay for

its operation. You and BLM would

negotiate the productivity criteria and

the participating area and revision size,

and would include these terms in the

unit agreement. To establish a

participating area, you must prove to

BLM that the production from the area

you propose to include in the

participating area can cover the costs of

operating the area.

This proposal would change the

current procedure involving the creation

and size of initial participating areas

and additions to existing participating

areas. This rule would provide that the

amount of land to be included in any

participating area or revision be

specified in the unit agreement. Under

current procedures that apply to Federal

lands outside of NPRA you are not

required to specify the amount of land

and BLM determines participating area

size after a detailed review of

production data. Under existing

procedure, participating areas include

only specific producing intervals. Under

this proposal we presume that a

participating area includes all

producing intervals unless the

agreement specifies that it doesn’t. An

addition to an existing participating area

would occur when a new well that

meets the productivity criteria defined

in the unit agreement is drilled outside

of that participating area.

Does This Proposal Require a Plan of

Operations?

The obligation in the model unit

agreement to drill an exploratory well

and subsequent wells under a plan of

operations would be replaced with

initial and continuing development

obligations. Under this proposal, you

and BLM would negotiate the initial and

continuing development obligations and

would include those terms in the unit

agreement. These terms would define

the number and frequency of wells you

plan to drill or operations that would

establish new unitized production. You

would be required to submit a plan of

operations to BLM after you completed

initial development obligations that

would detail how you plan to develop

the area. Under this proposal, the unit

would automatically contract (decrease

in size) to the existing participating

area(s) when you do not meet a

continuing development obligation.

Existing regulations that apply to

Federal lands outside of NPRA allow

five years for drilling and development

of the unitized area before automatic

elimination would occur for lands not

in a participating area. This proposal

would not contain the 5-year initial

drilling and development period of

current regulations applying to Federal

lands outside of NPRA. BLM believes

this new requirement would increase

the potential for oil and gas

development by encouraging operators

to follow a continuous development

program on a schedule appropriate for

the area, or risk contraction of the unit

area to the participating area(s).

What Are Paying Well Determinations

and How Does This Proposal Treat

Them?

Under current regulations that apply

to Federal lands outside of NPRA,

paying well determinations are the basis

to authorize the creation of a

participating area. Under this proposal,

paying well determinations would be

replaced with well productivity criteria

laid out in the unit agreement. This

would allow the unit operator to

negotiate criteria that are not tied

strictly to well economics. Currently,

production must cover the drilling and

operating costs attributed to that well.

Under this proposal, costs for that well

would be considered as part of unit

costs and not be required to be covered

by production from that well alone.

Productivity criteria must be adequate

to indicate a well has established future

production potential to pay for the cost

of drilling, completing, and operating.

Under This Proposal, Is There a Set

Time in Which I Must Develop the

Entire Unit?

Under existing procedures that apply

to Federal lands outside of NPRA,

operators are limited to a set time to

develop the entire unit. Under the

proposed regulations, the unit would

not contract as long as development

continued at the rate set out in the

agreement. Once you meet your initial

development obligations (set out in the

agreement), all tracts committed to a

unit would continue to receive the

benefits of unitization as long as the

unit is producing oil and gas.

Why is BLM Proposing Rules on Waiver,

Suspension, or Reduction of Rental or

Royalty?

Recent amendments to the Act made

by Public Law 105–83 authorize BLM to

approve waiver, suspension, or

reduction of rental or royalty for NPRA

leases (see paragraph (10) of section

6508 of the Act). In accordance with the

Act, BLM would approve these only if

they encouraged the greatest ultimate

recovery of oil and gas or it was in the

interest of conservation. Operators

would get the benefit only if they

proved to BLM that they could not

successfully operate the lease without

the benefit. These standards are high

because we should take these actions

only as a last resort, to save a lease

which ‘‘cannot be successfully operated

under the terms provided therein.’’ (42

U.S.C. 6508).

Why is BLM Proposing a Rule on

Suspensions of Operations and

Production?

Recent amendments to the Act made

by Public Law 105–83 authorize BLM to

approve suspensions of operations and

production for an NPRA lease. The rule

would implement paragraph (10) of

section 6508 of the Act that gives BLM

the authority to suspend operations and

production on NPRA leases. Because of

the extreme sensitivity of Alaska’s north

slope environment, any surface

disturbing activity requires a long

construction lead-time and careful

planning. The lapse of time between the

discovery of oil and gas and the

connection of that discovery well with

transportation facilities is much greater

in northern Alaska and is much more

expensive than in the lower 48 States.

A lease should not be lost, or the

opportunity to develop a new field

foregone, simply because a multi-year

planning and construction process may

be required. It is important that the

environment receive maximum

protection while providing the lessee,

the United States, and the State of

Alaska the opportunity to develop new

mineral resources. These regulations

would allow BLM to grant suspensions

of operations and production of unitized

leases to protect the surface resources,

to promote the greatest ultimate

recovery of resources to allow for the

careful planning and construction of a

transportation system to a new area of

discovery, or to mitigate reasonably

foreseeable and significant adverse

effects on the surface resources.

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24545

How Does a Suspension of Operations

and Production Affect a Lease?

During the period of the suspension,

operations and production would stop.

Operators would not be required to pay

any rental or royalty during the period

of suspension, but neither would they

have beneficial use of the lease.

Suspensions of operations and

production would also extend the term

of a suspended lease, and add the

period of the suspension to the lease

term.

Why is BLM Proposing a Rule on NPRA

Lease Extensions?

Recent amendments to the Act made

by Public Law 105–83 authorize BLM to

approve lease extensions. Paragraph (8)

of section 6508 of the Act provides that

extensions can only occur by

production or by reworking or drilling

as approved by the Secretary. However,

BLM is charged with administering this

statute and has the duty to interpret and

implement these provisions. If a very

narrow construction is given to the

words production, drilling or reworking,

the result would be the expenditure of

time and money without the

opportunity to start operations that

would otherwise extend the lease term.

Accordingly, the proposed regulations

would address the concepts of

‘‘constructive drilling’’ and

‘‘constructive reworking operations,’’

and recognize demonstrations of

diligence in operations as a basis for

extension.

What are Subsurface Storage

Agreements?

Subsurface storage agreements are

agreements between an operator and

BLM to store oil or gas on Federal lands

in existing geologic structures in return

for a fee. Tanks are not installed: The

gas is reinjected, and is stored in, a

geologic structure that exists naturally.

There is very little environmental

impact involved in storing oil or gas in

this manner. Most times oil or gas is

reinjected by existing surface and

subsurface operating equipment from

prior operations. Existing regulations

that apply to Federal lands outside of

NPRA allow subsurface storage

agreements (see 43 CFR 3105.5). There

is a similar need for subsurface storage

agreements within the NPRA.

Why is BLM Proposing a Rule on

Subsurface Storage Agreements?

Subsurface storage agreements are

important for NPRA because they would

allow operators to store oil or gas with

minimal environmental impact while

waiting for distribution. Climatic

conditions in NPRA are often severe,

making gas storage necessary until it can

be distributed.

Are There any Other Changes to

Existing Regulations That This Proposal

Would Make?

Yes. This rulemaking would make

two more minor changes to the NPRA

regulations.

1. Fixing the Lease Term at 10 Years

In recent amendments to the Act

made by Public Law 105–83, Congress

mandated that the initial NPRA lease

term be 10 years. These regulations

would implement that provision. Under

current regulations, the lease term could

be less. Longer lease terms in the NPRA

are preferable since there are harsh

geologic and climatic conditions in the

NPRA that make it difficult to operate

in that region. Longer lease terms would

allow operators additional time to deal

with the geologic and climatic

conditions in NPRA.

2. Administrative Provision

Existing provisions on suspensions

that apply to leases in the lower 48

States would no longer apply to NPRA

leases. This proposal would amend

existing language in subpart 3160 that

cross-references § 3104–3 and make it

clear that that provision does not apply

to NPRA leases. This amendment is

strictly administrative. As discussed

above, this proposal would implement

statutory authority by adding

suspension provisions that apply only

to NPRA leases.

IV. Section-by-Section Analysis

Subpart 3130—Oil and Gas Leasing,

National Petroleum Reserve, Alaska:

General

Section 3130.4–2 would set NPRA

lease terms at 10 years. Existing

regulations allow lease terms to be less

than 10 years if it is in the notice of

lease sale. This change was mandated

by Congress.

Subpart 3133—Rentals and Royalties

Section 3133.3 would provide for

waiver, suspension, or reduction of

rental, royalty, or minimum royalty for

NPRA leases if it encouraged the

greatest ultimate recovery of oil and gas

or it was in the interest of conservation.

Applicants would be required to prove

to BLM that they couldn’t operate under

their current lease terms without a

waiver, suspension, or reduction of

rental, royalty, or minimum royalty.

Section 3133.4 would require you to

submit to BLM an application and

describe in it the relief you are

requesting. BLM would also require you

to submit the items listed in this section

in your application so that BLM can

determine if you meet the standards of

the regulations.

Subpart 3135—Transfers, Extensions,

Consolidations and Suspensions

The suspension of operations and

production in this subpart should be

distinguished from the suspensions of

rental, royalty, or minimum royalty in

subpart 3133. Those suspensions relate

to payments only and do not relate to

suspensions of operations and

production contained in this subpart.

Section 3135.2 would describe the

circumstances under which BLM would

approve a request for a suspension of

operations and production on an NPRA

lease. BLM would approve suspensions

of operations and production if you are

prevented from operating your lease for

reasons beyond your control, and your

request:

(A) Is in the interest of conservation

of natural resources. This could include

conservation of oil and gas as well as

other NPRA resources;

(B) Encourages the greatest ultimate

recovery of oil and gas, including the

planning and construction of a

transportation system to a new area of

discovery; or

(C) Mitigates reasonably foreseeable

and significantly adverse effects on

surface resources.

The suspension stops the running of

the lease term and during the period of

the suspension you:

(A) Are not required to pay rental or

royalty; and

(B) Do not have beneficial use of and

may not operate on your lease.

Examples of reasons that BLM might

grant a suspension could be related to

protection of natural habitat and

wildlife, and protection of subsistence

needs of rural residents. Please

comment on whether the regulation

should include specific reasons to

support a grant of suspension, and

whether additional or different reasons

should be the basis supporting a grant

of suspension.

Section 3135.3 would provide the

suspension application requirements.

BLM would require the listed items to

determine whether you qualify for a

lease suspension.

Sections 3135.4 and 3135.5 would

describe the effective date of the

suspension and when you should stop

paying rental or royalty.

Sections 3135.6 and 3135.7 would

state when your suspension terminates

and how the termination of the

suspension would affect your lease.

BLM will terminate suspensions when

you begin any operations on your lease,

or when BLM determines that the

24546 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

reason for granting the suspension no

longer exists. You must notify BLM at

least 24 hours before starting operations

on a suspended lease. Once the lease

suspension terminates, your rental or

minimum royalty obligation resumes.

Your lease will be extended by adding

the period of the suspension to the term

of your lease.

Subpart 3137—Unitization Agreements,

National Petroleum Reserve, Alaska

Section 3137.5 would contain a

definitions section that includes the

terms you need to know to understand

this subpart.

This section introduces two terms,

constructive drilling and constructive

reworking operations, that would be

unique to the NPRA. These terms are

important for the extension provisions

of §§ 3137.111 through 3137.113 and

would allow you to get an extension of

a lease in a unit if you prove there are

ongoing constructive drilling or

reworking operations in the unit. Since

oil and gas operations are difficult and

expensive in the NPRA, we believe, as

we noted in the overview discussion

above, that it is reasonable for

constructive drilling or reworking

operations to extend your lease.

We would use of the term operating

rights instead of the use of the more

universal term ‘‘working interest’’ here

to be consistent with BLM’s proposed

Onshore Oil and Gas Leasing and

Operations regulations (63 FR 66879)

and current regulations that apply to

Federal lands outside of NPRA. (see

§§ 3100.0–5 and 3160.0–7). Please

specifically comment on this definition

and how it compares to standard

industry usage of this term.

General

Section 3137.10 would explain the

benefits to entering into a unitization

agreement in the NPRA. One of the

major benefits of unitization is that

operations or production from one part

of the unit meets the development

obligations for all leases committed to

the unit. You receive the benefits of

operations or production, even if the

operations are not on, or the production

does not occur from, your lease. We give

identical benefits to all the tracts in the

unit for extensions and wells that meet

the productivity requirements laid out

in the agreement. As long as one well in

the unit has met the productivity

criteria, all leases in the unit are

extended.

Another benefit of unitization is that

operations may occur in the unit

without regard to restrictions such as

spacing requirements and lease offsets.

For example, if there were a 200-foot

limit to drilling next to a lease

boundary, it would not apply among

unitized tracts and you would be able to

drill within the 200-foot limit. Finally,

since unit operator(s) would be

responsible for operations for all

unitized tracts, lessees benefit by being

able to consolidate operations and

reporting requirements.

Application

Sections 3137.20 would describe the

format of the unit agreement BLM will

accept. BLM would accept any format as

long as it protects the public interest,

including oil and gas resources and

environmental concerns, and includes

the mandatory terms required by these

regulations.

Section 3137.21 would introduce the

basic terms of a unit agreement. It

would also cross reference other

sections of the regulation whose subject

is referenced here. This section would

contain a provision that would allow

BLM to request additional supporting

documentation after reviewing your

initial application.

Section 3137.22 would lay out the

size and shape requirements for the unit

area. Units must be made up of tracts

that are contiguous so that unit

operations and production could be

conducted in an efficient and logical

manner. BLM considers this to be the

minimum qualification for a tract to be

included in a unit area. The unit area

must also include at least one NPRA

lease since these regulations would not

apply if an NPRA lease were not in the

unit.

This section would also make it clear

that BLM may limit the size and shape

of the unit, considering the type,

amount and rate of development and

production and the location of the oil

and gas. BLM would approve reasonable

sizes and shapes as long as they comply

with the other provisions of this section.

Section 3137.23 would describe what

you must submit to BLM in your

application. This would include a

statement that there are sufficient tracts

in the agreement to reasonably operate

and develop the unit area. This means

that BLM expects unit operators to be

able to operate the unit area efficiently

without the need for participation in

unit operations or production by noncommitted parties.

Your application would include a

discussion of the reasonably foreseeable

and significantly adverse effects on the

surface resources of the NPRA. This

standard is laid out in paragraph (1) of

42 U.S.C. 6508. This section would also

require you to explain how unit

operations may reduce impacts

compared to individual lease

operations. In other words, your unit

application must explain how:

(A) Operations under the unit will

comply with the environmental,

subsistence, archaeological, and

historical preservation requirements

under laws or regulations; and

(B) The unit operations’ impacts on

surface resources would be less than

those impacts of lease operations were

they to be performed individually.

Section 3137.24 would list the

reasons BLM would reject a unit

agreement application.

BLM would reject a unit application

that:

(A) Does not contain the mandatory

terms these regulations require, and any

additional terms BLM may require you

to include;

(B) Proposes a unit operator who has

an unsatisfactory record of complying

with applicable laws, regulations, the

terms of any lease or permit, or the

requirements of any notice or order.

BLM has determined that only

responsible, qualified operators should

be allowed to operate a unit in the

NPRA. Operators with satisfactory

records of compliance are more likely to

comply with the terms and conditions

of leases and these regulations than

those who have unsatisfactory records

of compliance. BLM would also reject

any unit application that proposes an

operator who is not qualified, under any

statute or regulation, to operate within

NPRA;

(C) Does not conserve natural

resources. BLM interprets paragraph

(10) of 42 U.S.C. 6508 as establishing

this standard. BLM has interpreted ‘‘in

the interest of conservation’’ from the

statute to mean that the unit agreement

must conserve natural resources,

including oil and gas and other

resources in the area of development;

(D) We determined was not in the

public interest. BLM would not approve

unit applications that do not protect the

resources in an oil and gas pool, field,

or similar area;

(E) Does not comply with any special

conditions in effect for any part of the

NPRA that would be affected by the unit

or any lease subject to the unit. BLM

often imposes special conditions, such

as stipulations and conditions of

approval, to protect surface and

subsurface resources; or

(F) Does not comply with the

requirements of this subpart.

Sections 3137.25 and 3137.26 would

explain how parties to the unit would

know if BLM approves or disapproves

the unit agreement and when the unit

agreement will become effective. BLM

would provide notice to unit operators.

The unit operator would be required to

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24547

notify in writing all parties to the unit

agreement within 30 calendar days of

receiving BLM notice. One important

reason for this is to notify lessees of

when the unit operator began acting on

their behalf. A unit agreement is

effective the date BLM approves it.

Sections 3137.27 and 3137.28 would

explain the effect of other agreements on

the unit agreement and whether a unit

agreement includes all oil and gas

committed to the unit.

This section would make it clear that

private agreements between operators,

among lessees, or between the

operator(s) and lessees do not affect or

modify the terms of the BLM approved

unit agreement. Likewise, agreements

entered into with any other parties,

including lease agreements, do not

modify unit terms or conditions.

However, the unit agreement does not

modify Federal lease stipulations.

The regulations would require a unit

agreement to include all oil and gas

resources of committed tracts unless

BLM approves agreement terms to the

contrary.

Development

Section 3137.40 and 3137.41 would

explain that you must define initial and

continuing development obligations in a

unit agreement. You and BLM would

negotiate the details of these terms

before you submit a final application.

Initial development obligations must

be such that when you complete them,

you will be able to estimate the size and

shape of the reservoir within the unit

area and understand the geologic

conditions existing within the reservoir

and unit area. You must complete initial

development obligations before

beginning continuing development

obligations.

Continuing development obligations

should promote development within

unit areas. BLM has determined that, as

a matter of policy, in exchange for the

benefits of unitization, operators must

commit to development exceeding that

of non-unit development in the area

surrounding the unit.

Optional Terms

Section 3137.50 would describe the

optional terms BLM may allow you to

include in your unit agreement if they

promote additional development or

enhanced production potential. These

include optional terms that:

(A) Limit the unit to certain

formations;

(B) Allow multiple unit operators; or

(C) Allow modifications to the

agreement by less than 100% of the

parties to the unit.

BLM would also allow other optional

terms not listed above if you prove to

BLM that they promote the greatest

economic recovery of oil and gas.

Section 3137.51 would establish the

requirements for multiple unit

operators. The unit agreement must

explain the conditions under which

additional unit operators would be

acceptable. For example, a justification

for multiple unit operators may be the

need for different sets of operations to

produce oil and gas with different and

distinct characteristics from the same

unit. Multiple unit operators may be

necessary to have distinct, but not

redundant, surface production facilities

to handle that production. The unit

agreement must also establish the

responsibilities of the different

operators so that lessees and BLM are

informed of who is responsible for what,

including bond coverage.

You must also define in the unit

agreement the consequences if one or

more of the unit operators defaults, such

as which operator(s) would be

responsible for particular operations in

case another operator defaults. Finally,

the unit agreement must define which

unit operator is responsible for unit

obligations not specifically assigned in

the unit agreement such as the division

of responsibilities for different types of

operations that might occur within the

same unit.

Section 3137.52 would set out the

requirements to allow you to modify the

unit agreement. You would be able to

modify the unit agreement if:

(A) All current parties (original

parties or their successors) agree to the

modification; or

(B) You meet the modification

provision in the unit agreement. In

order to permit you to modify the unit

agreement in this manner, the unit

agreement must identify which parties,

and what percentage of those parties,

must consent to each type of

modification named in the unit

agreement.

Before BLM approves a modification,

you must certify that all necessary

parties, as spelled out in the unit

agreement, have agreed to the

modification. Modifications would be

effective retroactive to the date you filed

a complete modification application.

Unit Agreement Operating

Requirements

Section 3137.60 would describe the

unit operator’s obligations. Operators

must:

(A) Comply with the terms and

conditions of the unit agreement,

Federal laws and regulations, lease

terms and stipulations, and BLM notices

and orders; and

(B) Provide evidence of acceptable

bonding. The proposal provides that the

amount of acceptable bonding would be

no less than the sum of the individual

Federal bonding requirements for each

of the Federal leases committed to the

unit.

Evidence of acceptable bonding could

include:

(A) A list of the bonds, their

identification numbers, and their

amounts; and

(B) Certification that the bond

amounts are sufficient to cover the

proposed unit operations.

Operators who do not comply with

this section are not eligible to operate an

NPRA unit.

This section would require bonds to

be payable to the Secretary of the

Interior. This is standard practice for

bonding on public lands.

Section 3137.61 would make clear

how you can change the unit operator.

If you are the new unit operator of an

existing unit, you must file statements

with BLM that you accept unit

obligations and that the required

percentage of interest owners according

to the unit terms consented to a change

of the unit operator. New operators must

also file evidence of acceptable bonding.

The effective date of the change in the

unit operator would be the date BLM

approves it.

Section 3137.62 would describe your

liabilities as a former unit operator.

Former unit operators would be liable

for any duties and obligations that

accrued before BLM approved a new

unit operator.

Section 3137.63 would describe your

liabilities as the new unit operator.

Liability would be joint and several

with the former unit operator. This

means that each person who holds an

undivided interest in the lease is

responsible for the full amount of

liability if the other holders of the lease

can’t satisfy the liability. The new unit

operator would have joint and several

liability with the record title and

operating rights owners for:

(A) Compliance with the terms and

conditions of the unit agreement,

Federal laws and regulations, lease

terms and stipulations and BLM notices

and orders;

(B) Plugging unplugged wells that

were drilled and reclaiming

unreclaimed facilities that were

installed or used before the effective

date of the change in unit operators; and

(C) Liabilities that accrue during the

time you are the unit operator. Under

the proposed regulation, the new unit

operator’s liability for obligations under

24548 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

the lease, such as royalties and other

payments, would be limited by Section

102(a) of the Federal Oil and Gas

Royalty Management Act of 1982

(FOGRMA), 30 U.S.C. 1712(a).

Section 102(a) of FOGRMA provides

that, while a lessee may designate some

other person, such as a unit operator, to

make payments due to the Government

on the lessee’s behalf, the designated

payer does not thereby become liable to

the Government for those payment

obligations. A designated payer, such as

a unit operator, only has liability to the

Government if he is also the owner of

the operating rights in a lease or is the

record title owner. The statute provides

that the operating rights owners are

primarily liable to the Government for

payment obligations and that owners of

record title are secondarily liable if they

do not own the operating rights.

Accordingly, the proposed regulation

would recognize that a new unit

operator’s potential liability for the

payments due the Government would

not be automatic, but would be

dependent upon whether he is an

operating rights owner or an owner of

record title, in accordance with the

limitations contained in Section 102(a)

of FOGRMA.

Section 3137.64 would set out the

requirements for preventing drainage or

compensating the Federal Government

for it. To prevent uncompensated

drainage of oil and gas from unit land

by wells on land not subject to the

agreement, you must take such

measures as BLM determines are

necessary. This would include:

(A) Drilling protective wells that are

economically feasible. A protective well

is considered economically feasible if it

is projected to have production in

quantities sufficient to pay for the cost

of drilling, completing and producing

operations;

(B) Paying the Federal Government

compensatory royalty for oil or gas lost

through drainage from a unit. BLM

would determine the amount of

compensatory royalty that would cover

oil and gas lost through drainage;

(C) Forming other agreements or

modifying existing agreements to allow

the tracts in the unit to share in

production. BLM would agree to this

provision only if we determine that the

Federal Government is being fairly

compensated for drainage; or

(D) Any additional measures that

BLM considers necessary to prevent

uncompensated drainage.

Development Requirements

Sections 3137.70 would explain:

(A) The requirements to meet initial

development obligations; and

(B) What you must submit to BLM

after you meet initial development

obligations. To meet initial development

obligations by the time you agreed to in

your unit agreement, you must have:

(1) Drilled the required test well(s) to

the primary target. This term would

have been negotiated with BLM before

you submitted to BLM your complete

unit application;

(2) Drilled at least one well that meets

the productivity criteria (see the

discussion of § 3137.82 for a discussion

of productivity criteria); or

(3) Established to BLM’s satisfaction

that further drilling to meet the

productivity criteria is unwarranted or

impracticable. BLM would require you

to submit information showing that the

primary target defined in the unit has

been adequately drilled and tested as

proof that further drilling is

unwarranted or impracticable. This

information could include well logs and

production test data. If you meet this

standard, and BLM agrees that further

drilling should not occur, the unit may

terminate. Alternatively, if you have a

modification provision in your unit

agreement, you could submit, for BLM

approval, a request to modify the initial

development obligations and/or

productivity criteria in your unit

agreement.

You would be required to submit to

BLM certification that you met initial

development obligations within 60

calendar days after having done so.

Section 3137.71 would explain the

requirements to meet continuing

development obligations and would list

what kinds of operations BLM would

consider to be continuing development.

(See the discussion of §§ 3137.40 and

3137.41.) Work you conducted before

meeting initial development

requirements would not be continuing

development. You would be required to

submit to BLM, no later than 90 days

after meeting initial development

obligations, a plan that describes how

you will meet continuing development

obligations. No later than 90 days after

BLM’s approval of your plan, you would

be required to certify to BLM in writing

that you started operations to fulfill

continuing development obligations.

Section 3137.72 would explain that

you may conduct additional

development within or outside a

participating area to fulfill continuing

development obligations.

Section 3137.73 would explain that a

unit contracts if you do not meet a

deadline for performing a continuing

development obligation. This section

would also explain contraction and

when it is effective. Contraction means

that all areas outside any participating

area will be eliminated from the unit

and only established participating areas

(producing or non-producing,

depending on unit terms) remain in the

unit. After contraction, any producing

wells no longer in the unit would

produce oil or gas under the terms of the

lease or other agreement (e.g.,

communitization agreement) under

which they are operating. If you do not

meet a continuing development

obligation before a participating area is

established, the unit terminates.

Participating Areas

Sections 3137.80 and 3137.81 would

define participating areas and describe

their function. Whether an area

surrounding a well becomes a

participating area depends on whether

the well within the unit area meets the

productivity criteria set out in the unit

agreement. The function of a

participating area is to allocate

production to each committed tract that

is within or partially within the

participating area according to that

tract’s surface acreage within the

participating area. Section 3137.80

would require you to delineate a

participating area at the time it meets

the productivity criteria defined in

§ 3137.82.

Section 3137.82 would define

productivity criteria as the

characteristics of a well that warrant

including an area (defined in the unit

agreement) surrounding the well in a

participating area. The criteria would be

required to be defined in the unit

agreement for each producible interval.

Well characteristics include things like

the:

(A) Depth of the well;

(B) Geology surrounding the well that

might affect drainage from the oil and

gas reservoir; and

(C) Area you estimate the well to be

draining.

You must be able to determine

whether you meet the criteria when the

well is drilled and you have completed

testing. This means that as soon as you

complete testing, it must be evident

whether or not the well meets the

productivity criteria.

To meet the productivity criteria, you

must be able to demonstrate to BLM that

the well has sufficient future production

potential to pay for the costs of drilling,

completing, and operating the well as a

unit well. This is different from a paying

lease well, since those wells need only

cover the operating costs on a lease

basis. A unit benefits from the

efficiencies and economics of operating

several leases jointly, whereas a nonunit lease must stand on its own.

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24549

Section 3137.83 would explain that

the first well you drill after unitization

that meets the productivity criteria

would establish the initial participating

area. If that initial participating area

contains wells that meet the

productivity criteria that existed before

BLM approved the unit agreement, the

wells will either:

(A) Be added to the participating area

if the well is in the same producible

interval; or

(B) Establish a separate participating

area if the well is in a different

producible interval. This would occur

unless the unit agreement defines the

productivity criteria to include separate

producible intervals in a single

participating area.

Section 3137.84 would describe what

you must submit to BLM to establish an

initial or new participating area or add

to an existing participating area. You

must submit to BLM:

(A) A statement that the well meets

the productivity criteria as defined in

the unit agreement. BLM may request

you to submit information verifying

your statement. This could include well

logs and production test data.

(B) A map showing the new or revised

participating area and acreage. This map

should be detailed enough for BLM to

determine the participating area

boundary and the exact acreage.

(C) An allocation schedule for each

participating area that establishes

production allocation for each tract and

for each record title and operating rights

owners in the participating area. This

information is necessary to determine

proper allocation of production and for

royalty purposes.

Section 3137.85 would set the

effective date of an initial, new, or

revised participating area as the first day

of the month in which you complete a

well that meets the productivity criteria.

However, this date can’t be earlier

than the effective date of the unit, even

if the well was drilled and met the

productivity criteria before BLM

approved the unit.

Section 3137.86 would lay out what

happens to a participating area when

you drill new wells that meet the

productivity criteria. The participating

area will remain the same, a new

participating area will be established, or

an existing participating area will be

expanded, depending on whether the

well is:

(A) Inside or outside the participating

area boundaries; and

(B) In the same or different producible

interval as an existing well.

Section 3137.87 would describe your

responsibilities if there are unleased

Federal tracts in a participating area.

You must include any unleased Federal

tracts in a participating area even

though BLM will not share in unit costs.

BLM cannot be a party to the unit

agreement. However, you must allocate

production to the unleased Federal

tracts for royalty purposes as if they

were committed to the agreement. The

Federal Government would receive

royalties based on the production

allocated to that land in the

participating area.

If there are unleased Federal tracts

that are leased after the effective date of

the unit, you must admit them as of the

effective date of the lease. Any time

there is a new Federal lease admitted to

the unit, you must submit to BLM:

(A) Revised maps;

(B) A new list of committed leases;

and

(C) New allocation schedules

reflecting introduction of the new lease

to the unit.

Section 3137.88 would explain that

wells on committed tracts outside any

existing participating area that do not

meet the productivity criteria would be

considered to be non-unit wells, and

operations on those wells are non-unit

operations. Not later than 60 calendar

days after a unit well does not meet the

productivity criteria, you must notify

BLM and treat the well as a non-unit

well. This means that you must conduct

operations under the terms of the lease

or any other federally approved

cooperative agreements such as

communitization agreements and

drainage compensation agreements but

not under the unit terms.

Section 3137.89 would explain how

production is allocated from wells that

do not meet the productivity criteria. If

a well that does not meet the

productivity criteria was drilled before

the unit was formed, or outside the

participating area but still within the

unit, production from that well must be

allocated on a lease or other agreement

basis. If a well was drilled after BLM

approved the unit and was completed

within an existing participating area, the

production from that well becomes part

of the participating area production.

This is true whether or not the well

meets the productivity criteria.

Section 3137.90 would explain that

wells on committed tracts outside an

existing participating area that do not

meet the productivity criteria may be

operated by someone other than the unit

operator. However, as the unit operator,

you must continue to operate wells you

drilled after unit formation that do not

meet the productivity criteria. You must

do this until BLM approves a new

operator for those wells.

Section 3137.91 would explain that a

well BLM previously determined was a

non-unit well (it did not meet the

productivity criteria) that now meets the

productivity criteria may establish or

revise a participating area. You must

notify BLM within 60 days of when this

occurs and demonstrate to us that the

well meets the productivity criteria

before you revise an existing

participating area or establish a new

one. Operators would be required to

submit engineering and geologic and

geophysical exploration information to

prove to BLM that a well meets the

productivity criteria.

Section 3137.92 would explain that

after contraction under § 3137.73 of this

subpart, a participating area terminates

60 calendar days after BLM notifies you

that there is insufficient production to

meet the operating costs of that

production, unless you show that

within 60 days after BLM’s

notification—

(A) Your operations to restore or

establish new production are in

progress; and

(B) You are diligently pursuing oil

and gas production.

Production Allocation

Section 3137.100 would explain how

to allocate production when a

participating area includes unleased

Federal lands as if the unleased Federal

lands were leased and committed to the

agreement. This protects the Federal

interest and ensures that the public is

fairly compensated for Federal oil and

gas produced.

The obligation to pay the United

States for production from unleased

Federal lands accrues from the later of

the date:

(A) The committed leases in the

participating area that includes

unleased Federal lands receive a

production allocation; or

(B) Federal lands become unleased,

whichever is later.

Federal lands that were committed to

the unit may become unleased for a

variety of reasons; such as BLM

determining that the lessee of record is

ineligible to hold a lease.

The royalty rate for production from

unleased Federal lands in the unit

would be the greater of 121/2% or the

highest royalty rate of any lease in the

unit. This provision would be consistent

with how royalty rates are determined

for unleased Federal lands in Federal

units outside of the NPRA.

Obligations and Extensions

Section 3137.110 would make it clear

that nothing in a unit agreement

modifies Federal lease stipulations

24550 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

including lease-specific environmental

stipulations.

Section 3137.111 would explain that

BLM will extend the primary term of a

unit if there is:

(A) Actual production from a well in

the unit that meets the productivity

criteria; or

(B) Actual or constructive drilling or

reworking operations.

These actions should demonstrate to

BLM that you expended sufficient effort

to explore for oil and gas that should be

rewarded with an extension of the unit.

Section 3137.112 would contain a

chart that explains that as long as the

unit exists:

(A) Production from any unit well

that meets the productivity criteria from

any tract committed to the unit will

extend all leases in the unit as long as

that production is occurring;

(B) BLM would approve an extension

of up to three years for all leases

committed to the unit if you perform

actual or constructive drilling or

reworking operations on any tract in the

unit; and

(C) After an extension for actual or

constructive drilling or reworking

operations, all leases in the unit would

be eligible for an extension of up to

three more years if you demonstrate

reasonable diligence and reasonable

monetary expenditures in performing

the approved drilling or reworking

operations during the initial extension.

If, after the second extension, you still

have not drilled a well within the unit

that meets the productivity criteria and

within the unit there is no producing

well that meets the productivity criteria,

the unit terminates.

Section 3137.113 would explain that

BLM will extend all committed leases if,

for reasons beyond your control, you

were prevented from starting actual or

constructive reworking or drilling

operations. You would be eligible for

two extensions for a total of six years.

You must resume actual or constructive

drilling or reworking operations as soon

as the reasons that prevented you from

starting operations no longer exist. If

you do not resume operations, BLM will

cancel the extension and the unit would

terminate.

Change in Ownership

Section 3137.120 would make it clear

that grantees, transferees, and

successors in interest of a unitized lease

are subject to the terms and conditions

of the unit agreement. This is standard

practice for BLM-approved units and in

the oil and gas industry in general.

Unit Termination

Section 3137.130 would describe the

circumstances under which BLM will

approve voluntary termination. BLM

will approve voluntary termination of

the unit any time before the unit

operator discovers production that

meets the productivity criteria, or the

unit operator certifies that at least 75%

of the operating rights (working interest)

owners on a surface acreage basis agree

to the termination. BLM chose 75% of

operating rights (working interest)

owners as the standard to discourage

voluntary unit termination against the

will of most of the lessees, and to

protect interest owners in the unit.

Section 3137.131 would explain that

if the unit terminated before the unit

operator met the initial development

obligations, BLM’s approval of the

agreement is revoked. The consequences

of this are that lessees forfeit any

benefits they may have received as a

result of unitization, such as lease

extensions and suspensions. Any lease

that BLM extended as a result of being

committed to the unit would expire

unless it qualified for an extension

under § 3135.1–5 of this part. Any lease

suspension BLM granted as a result of

a lease being committed to the unit

would be canceled.

Section 3137.132 would explain that

a unit automatically terminates if you

did not meet a continuing development

obligation before any participating area

is established. You would have

negotiated continuing development

obligations with BLM that would be

specified in the unit agreement, and as

such, BLM will strictly enforce the

obligations. The effective date of the

termination is the day after you did not

meet a continuing development

obligation.

Section 3137.133 would explain that

a unit terminates when the last

participating area of a unit terminates. If

there are no participating areas in the

unit, it means that there is no

production from any well that meets the

productivity criteria in the unit area.

Consequently, the reason for the unit no

longer exists.

Section 3137.134 would explain that

when the unit terminates, all committed

leases are subject to their original

provisions. Any lease that has

completed its primary term on or before

the unit expires, unless it qualifies for

an extension under current § 3135.1–5.

Section 3137.135 would explain that

the unit operator must submit to BLM

a plan and schedule for mitigating the

impact of unit operations within 3

months after unit termination. Operators

would be required to describe in detail

planned plugging and abandonment and

surface restoration operations.

Appeals

Section 3137.150 would explain that

any person who is adversely affected by

a BLM decision under this subpart may

appeal that decision. This section would

also cross-reference State Director

Review (SDR) regulations that BLM is

developing. Details of how the SDR

process would work will be in an

upcoming proposed rule. Under this

proposal, you would be able to request

an SDR of decisions BLM issues under

these regulations. This section would

not become final until the SDR

regulations are final.

In the event that these regulations

become final before the SDR regulations

are final, SDRs would be available for

decisions issued under these regulations

following the process in existing

regulations at § 3165.3(b).

Possible Alternative

Please specifically comment on

whether or not the existing regulations

in subparts 3180–3183 and the model

unit agreement form in subpart 3186

could apply to units in the NPRA in lieu

of the unit agreement process we are

proposing. We also invite comments on

how the model agreement form should

be modified to apply to NPRA units.

Due to statutory requirements and

policy considerations, such as the

difficulties of conducting operations in

the NPRA, we believe that if BLM were

to decide to use the existing unit

agreement regulations, instead of the

regulations in this proposal, several

sections of the proposal would need to

be incorporated into the regulatory

process. In addition to the existing

regulations on units and the model unit

agreement for unproven areas (43 CFR

3186.1), the following sections of the

proposal would apply to NPRA units:

• The definitions of constructive

drilling and constructive reworking

operations in proposed § 3137.5.

• Paragraphs (b) through (e) of

proposed § 3137.24, dealing with the

reasons BLM would reject a unit

application.

• Proposed § 3137.60, which lays out

the unit operator’s obligations.

• Proposed § 3137.63, describing

liabilities of a new unit operator after a

change in unit operators.

• Proposed § 3137.112, which

addresses lease extensions for actual or

constructive drilling operations. The

concept in the proposal of ‘‘productivity

criteria’’ would be replaced with

‘‘paying well’’ determinations contained

in the existing unit agreement

regulations.

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24551

• Proposed § 3137.113, which also

addresses lease extensions.

• Proposed § 3137.150, which has to

do with appeals of decisions under the

subpart.

Several provisions of the model form

in § 3186.1 would also be modified for

NPRA units as follows:

• Replacing the ‘‘Mineral Leasing Act

of February 25, 1920, as amended,’’ with

‘‘Naval Petroleum Reserves Production

Act of 1976, as amended,’’ wherever it

appears.

• Section 9 of the model form would

be modified by removing ‘‘6 months’’

from the first sentence of the section

and replacing it with a blank. BLM

would determine a reasonable time

frame in which particular operations

would be required to occur. BLM

realizes that, due to the more severe

climate in NPRA, operations there are

more difficult and more time consuming

than in the lower 48 and therefore

operators may require more than 6

months to establish drilling operations.

For the same reasons the same

modification would apply to optional

section 9a.

• Paragraph 18(g) would be

eliminated since that paragraph pertains

to and directly quotes from the Mineral

Leasing Act, which does not apply to

NPRA.

• Sections 7, 8, 9 and 10 of the

‘‘General Guidelines’’ would be

eliminated. Section 7 would be

eliminated since there are no NFS lands

in NPRA. Section 8 applies to the

Jackson Hole Area of Wyoming only.

There are no reclamation lands in NPRA

to which section 9 could apply. Finally,

there are no existing or planned power

sites in the NPRA , so section 10 would

be eliminated.

Subpart 3138—Subsurface Storage

Agreements

This proposal would add a new

subpart to BLM’s NPRA leasing

regulations dealing with subsurface

storage agreements.

Section 3138.10 would make it clear

that BLM will allow you to store oil or

gas in existing geologic structures on

either leased or unleased Federal lands,

if you prove to BLM that the storage is

necessary to avoid waste or to promote

conservation of natural resources,

including oil and gas. Under this

subpart you would be able to store gas

produced from Federal or non-Federal

lands.

Section 3138.11 would require you to

submit to BLM an application to receive

a subsurface storage agreement. In the

application you must:

(A) Provide the reason for forming a

subsurface storage agreement. This is in

addition to the proof required by

§ 3138.10. For example, your

justification could be that you require

subsurface storage while awaiting the

building of a distribution system or that

you require storage for economic

reasons, or to avoid waste;

(B) Describe the area you plan to

include in the agreement. This should

include a legal land description of all

Federal or non-Federal leases within the

area of the storage agreement;

(C) Describe the formation you plan to

use for storage. This should include the

standard geologic name or designation,

if any, of the reservoir, and the depths

at which the formation exists;

(D) Pay proposed storage or rental fees

based on the value of the storage,

injection, and withdrawal volumes and

rental or other income you might

generate for letting or subletting the

storage area. BLM could approve or

disapprove your proposed fee structure

or make a counter-proposal;

(E) Pay any royalty payment for oil

and gas that you may produce from the

formation;

(F) Describe how often and under

what circumstances you propose that

you and BLM renegotiate fees and

payments. For example, this could be

based on anticipated changes in the rate

of reservoir fill-up or withdrawal from

the reservoir;

(G) Propose an effective date and term

of the agreement. This should be tied to

your justification for the agreement (see

A above);

(H) Certify that all owners of mineral

rights and lease interests have

consented to the gas storage agreement

in writing. This is to protect mineral

owners’ and lessees’ mineral rights.

BLM will reject subsurface storage

agreement applications that do not

comply with this provision;

(I) Provide an ownership schedule

showing lease or land status. This

should include the status of leased and

unleased and Federal and non-Federal

properties;

(J) Provide a schedule of the

participation factor for all parties to the

agreement. The schedule should list the

parties to the agreement and the percent

or volume of oil or gas stored for each

of them; and

(K) Demonstrate the capability of the

reservoir to store oil or gas. This

demonstration could include geologic

maps showing the storage formation,

reservoir data demonstrating the volume

of area available for storage, and similar

data.

This section would also explain that

the terms of the storage agreement are

negotiated between you and BLM. The

agreement will include terms on

bonding and reservoir management.

BLM may request additional data we

find necessary to approve your

application.

Section 3138.12 would describe what

you must pay for storage. The fee could

be based on any combination of storage

fees, rentals, or royalties to which you

and BLM agree. When determining a fair

storage fee, typically, BLM would also

take into consideration what operators

in the same area are paying for similar

gas storage arrangements whether on

Federal or non-Federal land.

Part 3160—Onshore Oil and Gas

Operations

This proposal would amend the

existing purpose section of BLM’s

operating regulations. Subpart 3160

applies to NPRA lease operations and to

unit operations. This section would

revise subpart 3160 to make it clear that

the referenced suspension regulations

apply to operations on other Federal

lands but not to NPRA.

V. Procedural Matters

Regulatory Planning and Review

In accordance with the criteria in

Executive Order 12866, this rule is not

a significant regulatory action and is not

subject to review by the Office of

Management and Budget (OMB).

a. This rule will not have an annual

economic effect of $100 million or

adversely affect an economic sector,

productivity, jobs, the environment, or

other units of government since the

costs of operating and leasing in the

NPRA would not be substantially

affected (see the economic analysis).

b. This rule will not create

inconsistencies with other agencies’

actions. This rule does not change the

relationships of the oil and gas program

with other agencies’ actions. These

relationships are all encompassed in

agreements and memorandums of

understanding that will not change with

this proposed rule.

c. This rule will not materially affect

entitlements, grants, user fees, loan

programs, or the rights and obligations

of their recipients. The proposal does

not deal with entitlements, grants, loan

programs, or rights and obligations of

their recipients; BLM’s oil and gas

program does not typically have an

impact on these issues and neither

would this proposal. BLM does charge

user fees for certain activities on Federal

lands. However, this proposal would

not implement any new user fees. Any

fees, such as filing fees for leases,

already exist under other regulations.

d. This rule will not raise novel legal

or policy issues. NPRA leasing

24552 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

regulations already exist. However,

those regulations do not address

unitization, suspension of rental and

royalty, suspension of operations and

production or subsurface storage

agreements. This rule would make

operating practices in the NPRA more

consistent with those on Federal lands

outside of NPRA in that unitization

would be made available in NPRA.

Clarity of Regulations

Executive Order 12866 requires each

agency to write regulations that are

simple and easy to understand. We

invite your comments on how to make

these proposed regulations easier to

understand, including answers to

questions such as the following: (1) Are

the requirements in the proposed

regulations clearly stated? (2) Do the

proposed regulations contain technical

language or jargon that interferes with

their clarity? (3) Does the format of the

proposed regulations (grouping and

order of sections, use of headings,

paragraphing, etc.) aid or reduce their

clarity? (4) Would the regulations be

easier to understand if they were

divided into more (but shorter) sections?

(5) Is the description of the proposed

regulations in the SUPPLEMENTARY

INFORMATION section of this preamble

helpful in understanding the proposed

regulations? How could this description

be more helpful in making the proposed

regulations easier to understand?

Please send any comments you have

on the clarity of the regulations to the

address specified in the ADDRESSES

section.

Regulatory Flexibility Act

Congress enacted the Regulatory

Flexibility Act of 1980, as amended (5

U.S.C. 601–612) (RFA), to ensure that

government regulations do not

unnecessarily or disproportionately

burden small entities. The RFA requires

a regulatory flexibility analysis if a rule

would have a significant economic

impact, either detrimental or beneficial,

on a substantial number of small

entities.

This rule will not have a significant

economic effect on a substantial number

of small entities as defined under RFA.

A Regulatory Flexibility Analysis is not

required. Accordingly, a Small Entity

Compliance Guide is not required.

For the purposes of this section, a

‘‘small entity’’ is considered to be an

individual, limited partnership, or small

company with fewer than 500

employees. Many of the operators BLM

deals within the oil and gas program

would be considered to be small

entities.

Leasing decisions could potentially

impact small operators. However, this

rule is independent of leasing decisions.

The rule is neutral as to whether or not

leasing will occur in NPRA. Due to the

significant costs associated with oil and

gas operations in the NPRA, we do not

anticipate many small operators will

lease oil and gas in the NPRA. Having

an NPRA lease, as that is defined in the

proposal, is a condition precedent to

unit formation in NPRA. If small

operators did lease in NPRA, the

economic impacts associated with this

proposal are positive, but minimal, for

operators in general (see the economic

analysis) and would also be so for small

operators. Therefore, the proposed rule

would not have a significant economic

impact on a substantial number of small

entities under the Regulatory Flexibility

Act.

Small Business Regulatory Enforcement

Fairness Act

This rule is not a major rule under 5

U.S.C. 804(2), the Small Business

Regulatory Enforcement Fairness Act.

This rule:

a. Does not have an annual effect on

the economy of $100 million or more

(see the economic analysis).

b. Will not cause a major increase in

costs or prices for consumers,

individual industries, Federal, State, or

local government agencies, or

geographic regions. The proposal would

not effect costs or prices for consumers

since the actions associated with the

proposal would have minimal economic

impact on the industry (see the

economic analysis).

c. Does not have significant adverse

effects on competition, employment,

investment, productivity, innovation, or

the ability of U.S.-based enterprises to

compete with foreign-based enterprises,

but could positively effect them by

making it more attractive to lease oil

and gas in the NPRA.

Unfunded Mandates Reform Act

In accordance with the Unfunded

Mandates Reform Act (UMRA) (2 U.S.C.

1501, et seq.):

a. This rule will not ‘‘significantly or

uniquely’’ affect small governments. A

Small Government Agency Plan is not

required. The proposal would not

change the relationship between BLM’s

oil and gas program and small

governments.

b. This rule will not produce a

Federal mandate of $100 million or

greater in any year, i.e., it is not a

‘‘significant regulatory action’’ under

the Unfunded Mandates Reform Act (see

the economic analysis). These proposed

regulations do not impose an unfunded

mandate on State, local or Tribal

governments or the private sector of

more than $100 million per year; nor do

these proposed regulations have a

significant or unique effect on State,

local or Tribal governments or the

private sector.

Takings Implications

In accordance with Executive Order

12630, the proposed rule does not

represent a government action capable

of interfering with constitutionally

protected property rights. A takings

implication assessment is not required.

The proposed rule would not take

anyone’s property. The proposed rule

would not take away or restrict an

operator’s right to develop an NPRA oil

and gas lease under the lease terms.

Therefore, the Department of the

Interior has determined that the rule

would not cause a taking of private

property or require further discussion of

takings implications under this

Executive Order.

Federalism Implications

In accordance with Executive Order

13132, the rule does not have sufficient

federalism implications to warrant the

preparation of a federalism summary

impact statement. The rule does not

have substantial direct effects on the

States, on the relationship between the

national government and the States, or

on the distribution of power and

responsibilities among the various

levels of government. The rule does not

preempt State law. The proposed rule

would make operations in the NPRA

more consistent with practices on other

Federal lands.

Civil Justice Reform

In accordance with Executive Order

12988, the Office of the Solicitor has

determined that the rule does not

unduly burden the judicial system and

meets the requirements of sections 3(a)

and 3(b)(2) of the Order. BLM drafted

this rule in plain-language to provide

clear standards and to ensure that the

rule is clearly written. BLM consulted

with the Department of the Interior’s

Office of the Solicitor throughout the

rule drafting process for the same

reasons.

Paperwork Reduction Act

These regulations would contain

information collection requirements. As

required by the Paperwork Reduction

Act of 1995 (44 U.S.C. 3507(d)), BLM

has submitted a copy of the proposed

information collection requirements to

the Office of Management and Budget

(OMB) for review. BLM will not require

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24553

collection of this information until OMB

has given its approval.

The recordkeeping and information

collection items required under various

provisions of this proposal in subparts

3133, 3135, 3137, and 3138 pertain to

data that would be submitted by the

operator or operating rights owner. The

information would provide data so that

BLM may approve a proposed unit

agreement or storage agreements or

enable BLM to monitor compliance with

granted approvals. For unit agreements,

BLM would use the information to grant

approval to begin or modify unit

operations or to allow unit agreements

to continue.

The information required under the

3130 subparts would cover a range of

activities, and a specific operator would

not be required to obtain or provide

each item. Many of the requirements are

one-time filings BLM would use to

approve operations under a unit

agreement or to apply for reduction of

royalty, suspension or operations or

production, or a subsurface storage

agreement. BLM would use other

routine data submissions to monitor

drilling and production and ensure

compliance with the unit agreement,

lease terms, regulations, orders, notices

to lessees, lease stipulations, and

conditions of approval. All

recordkeeping burdens are associated

with the items requested in this

regulation.

The information burden in subparts

3133, 3135, 3137, and 3138 totals an

estimated 4101⁄4 hours. BLM

professional staff derived these

estimates by relying on personal

experiences in working with the oil and

gas industry and by consulting with

field office staff. This collection

comprises non-form items, and BLM

expects the public reporting burden to

be as follows:

Section 3133.4. An application for

waiver, suspension, or reduction of

rental, royalty, or minimum royalty on

a lease would include:

(1) A description of the requested

relief.

(2) The lease serial number.

(3) Number, locations, and status of

each well drilled.

(4) A statement that shows the

amount of oil or gas subject to royalty

for each month covering a period of at

least 6 months immediately before the

filing date of the application.

(5) The number of wells counted as

producing each month and the average

production per well per day.

(6) A detailed statement of expenses

and costs of operating the entire lease.

(7) All facts that demonstrate why the

wells cannot be successfully operated

under the terms of the lease.

(8) The amount of any outstanding

overriding royalty and payments out of

production or similar interests.

(9) Other information BLM may

require.

The information and data provide the

basis and evidence to BLM that the lease

cannot be operated under its terms

without the rental or royalty relief and

that the applicant meets the standards of

the regulations, the benefit would be

granted if it would encourage the

greatest ultimate recovery of oil and gas,

or the waiver, suspension, etc., is in the

interest of conservation of natural

resources.

We estimate it would take

approximately 16 hours to comply with

the information requirement for

application for waiver, suspension, or

reduction of rental or royalty. The

estimate includes time for gathering,

preparing, completing, and maintaining

the specified information, much of

which is already maintained by the

operator. We estimate that there will be

one application for royalty suspension

for a total information collection burden

of 16 hours.

Section 3135.3. An application for

suspension of lease operations and

production would include a description

of the circumstances that are beyond the

operator’s reasonable control that

prevent operation of, or production on,

the entire lease.

The information is required to

determine whether the applicant

qualifies for a lease suspension, the

suspension is in the interest of

conservation of oil and gas or other

natural resources, the lease cannot be

operated for reasons beyond the control

of the operator, and the lessee is

complying with the other requirements

of the regulations.

We estimate it would take

approximately four hours to comply

with the information requirement for

application for suspension. We estimate

that there will be one application for

suspension within a given year, for a

total information collection burden of

four hours.

Section 3135.6. After BLM terminates

a suspension of operations or

production, the operator would be

required to notify BLM before resuming

operations or production.

Notification ensures proper

monitoring by BLM of operations

activities. The information is required

so that BLM may approve the proposed

operations. It would also enable BLM to

monitor operations for compliance with

the regulations and lease terms.

We estimate it would take

approximately 1⁄4 of an hour to comply

with the notification requirement, and

we estimate one response for a total

information burden of 1⁄4 of an hour.

Section 3137.23. An application for

NPRA unitization would include:

(1) The proposed agreement.

The agreement would provide the

information requested in § 3137.21 as

follows:

(A) A description of the unit area and

the geologic and engineering factors on

which the area is based.

The information is required for BLM

to determine if the proposed unitization

of leases is technically feasible and to

adequately assess you proposed initial

and continuing development

obligations. The information would also

be necessary for BLM to ensure that

operations are conducted in a manner

that promotes the conservation of

natural resources.

(B) Initial and continuing

development obligations.

This information would allow BLM to

verify that the operator has planned a

program of exploration or development

that meets or exceeds the rate of well

operations in the vicinity of the unit

without unitization and represents an

investment proportionate to the size of

the area in the unit agreement.

(C) Proposed participating area size

and locations.

This requirement would be necessary

for BLM to determine whether the lands

within the unit area have been

reasonably proven to contain unitized

substances that can be produced in

paying quantities.

(D) Acknowledgment of BLM’s

authority to set or modify the quantity,

rate, and location of development and

production.

(E) Any optional terms authorized by

section 3137.50.

(2) A map showing the unit area and

committed leases and other tracts;

The map would show all tracts that

are to be included in the unit.

(3) A list of committed leases and

other tracts with legal descriptions,

record titles, working interests, and

acreage.

This would list owners of record title

and all working interest owners that

have agreed to abide by the terms and

conditions of the unit agreement.

(4) Written certification that: (a) All

owners of leased or unleased minerals

rights and record title and operating

rights lease interests were invited to join

the unit; (b) there is sufficient

commitment to the unit agreement for

reasonable control of the unit area; (c)

all of the interests are committed to the

unit; and (d) there is agreement to unit

obligations under 3170.60.

24554 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

The certification would provide BLM

information to determine whether there

is sufficient commitment of leases or

tracts in the unit area for reasonable

control of the unit area and that the

committed parties agree to abide by the

terms and conditions of the unit

agreement.

(5) Evidence of acceptable bonding.

BLM requires this information to

determine that operations under the

unit agreement are covered by a bond in

an amount sufficient to protect public

lands and resources.

(6) A discussion of the reasonably

foreseeable and significantly adverse

effects on the surface resources of the

NPRA. This standard is laid out in

paragraph (1) of 42 U.S.C. 6508. This

section would also require you to

explain how unit operations may reduce

impacts compared to individual lease

operations. BLM requires this

information to determine if:

(A) Unit operations will comply with

the environmental, subsistence,

archaeological, and historical

preservation requirements under laws or

regulations; and

(B) The unit operations’ impacts on

surface resources would be less than

those impacts of lease operations were

they to be performed individually. BLM

considers this to be an important factor

in determining whether or not to

approve the unit agreement.

We estimate it would take

approximately 80 hours to comply with

the information requirement for

application for unit designation. The

estimate includes time for gathering,

preparing, completing, and maintaining

the specified information, but not the

time normally required to obtain,

analyze, and interpret the information

normally expended as part of an

exploration program without

unitization. We estimate that there will

be no more than three unit applications

made within a given year, for a total

information collection burden of 240

hours.

Section 3137.25 would require the

operator to notify in writing all parties

to the unit agreement that BLM

approved the unit.

We estimate that it would take

approximately one hour to comply with

the notification requirement. The

estimate includes the time to draft the

notifications to the different parties to

the unit. We expect three respondents

for a total information collection burden

of three hours.

Section 3137.52. An application for

modification of a unit agreement would

include certification that:

(1) All parties to the agreement

consent to the modification; or

(2) The operator meets the

modification provision in the

agreement, which identifies which

parties and what percentage of those

parties consent to each type of

modification.

BLM requires this certification by the

operator to ensure that the terms of the

unit agreement previously approved are

met.

We estimate that application for

modification of a unit agreement will

take approximately four hours, and that

there will be one application for a total

burden of four hours.

Section 3137.60. The operator would

be required to provide BLM evidence of

acceptable bonding.

BLM would require evidence of such

bonding because bonding is required

under the regulations and the terms of

the lease.

We estimate the information would

take approximately 1⁄2 of an hour to

provide for each new occurrence, and

estimate three respondents, for a total

information burden of 11⁄2 hours.

Section 3137.61. To change unit

operators, and when there is a change of

unit operator, the new unit operator

must provide, for BLM’s approval:

(1) A statement that it accepts unit

obligations;

(2) A statement of the percentage of

interest owners required by the unit

agreement consenting to a change of

unit operator; and

(3) Evidence of acceptable bonding.

Statements of unit obligation

acceptance and percentage of interest

owners consenting to the change are

required so that unit requirements and

the terms of the previously-approved

unit agreement are continued to be met,

and that the unit may remain in effect.

Evidence of acceptable bonding is

necessary because bonding is required

under the regulations and the terms of

the lease and so that BLM can determine

that operations under the unit

agreement are continued to be covered

by a bond sufficient to protect public

lands and resources.

We estimate it will take

approximately 3⁄4 hour to provide the

statements and the evidence of

acceptable bonding. We estimate two

responses, for a total information

burden of 11⁄2 hours.

Section 3137.70. The operator would

be required to submit certification that

it met the initial unit obligation.

Certification is required to document

that the initial unit obligation, as

required in the unit agreement, was

timely met so that the unit may remain

in effect.

We estimate it will take

approximately two hours to comply

with the certification information. The

estimate includes time for gathering and

compiling data showing that unit

requirements such as drilling and

production are met, and for providing

certification. We estimate three

responses, for a total information

burden of six hours.

Section 3137.71. The operator would

be required to provide a plan describing

how it will meet continuing

development obligations. The plan

would include a description of the

activities needed for full development of

the oil and gas field and any further

actual or constructive drilling

operations that will be conducted.

BLM requires the information to

determine if the plan would actually

comply with the unit terms on

continuing development.

The operator would also be required

to submit certification, and supporting

documentation if requested, that it met

continuing development obligations.

This certification documents that

continuing development obligations, as

required in the unit agreement, were

met on time to ensure compliance with

unit terms.

We estimate it will take

approximately two hours to comply

with the certification requirement. The

estimate includes time for gathering and

compiling drilling, testing, completion,

and recompletion data and providing

certification. We estimate three

responses, for a total information

burden of six hours.

Section 3137.84. The respondent

would be required to submit a statement

that the well meets the productivity

criteria and economic, geologic, and

engineering data; a map; and a

production allocation schedule to

establish or revise a participating area

(PA).

The information is necessary for BLM

to determine whether the unit meets the

requirements to form a PA and to

determine that the unit is productive.

We estimate it will take

approximately 12 hours to comply with

the information required for an

operator’s request to establish or revise

a PA. The estimate includes time for

compiling and preparing the various

data requirements. We estimate two

responses, for a total information

burden of 24 hours.

Section 3137.87. If there are unleased

Federal tracts in a participating area, the

operator would be required to include

the unleased Federal tracts in the unit.

If the tract is later leased you must

provide revised maps, a list of

committed leases, and production

allocation schedules to BLM.

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24555

The information enables BLM to

monitor the terms of the participating

area and to ensure that royalty revenue

is properly allocated and reported.

The information would require

approximately three hours to prepare

and provide. We estimate one

respondent, for a total information

burden of three hours.

Section 3137.88. The respondent

would be required to provide

notification to BLM that a well does not

meet the productivity criteria.

This information is necessary for BLM

to determine whether to approve the

well for non-unit operations and to

ensure proper allocation of production.

We estimate it will take

approximately a 1⁄2 of an hour to comply

with the notification requirement, and

one response, for a total information

burden of 1⁄2 of an hour.

Section 3137.91. The respondent

would be required to notify BLM when

a non-unit well meets productivity

criteria, which is then used to revise or

establish a PA.

BLM would use the required

information to determine whether a

non-unit well meets the productivity

criteria and therefore will revise or

establish a PA.

We estimate it would take

approximately 1⁄2 of an hour to comply

with the notification requirement, and

estimate one response, for a total

information burden of 1⁄2 of an hour.

Section 3137.92. The respondent

would be required to provide

information that it restored or

established production and well

completion information so that a

participating area would not terminate

after BLM notification of insufficient

production.

BLM requires this information to

determine whether to keep a PA in

effect.

We estimate it will take

approximately one hour to comply with

the production information

requirement. The estimate includes time

to compile production data. We estimate

one response, for a total information

burden of one hour.

Section 3137.112. The operator would

be required to provide information that

shows actual well production meets the

productivity criteria or that there is

actual or constructive drilling or

reworking operations in order to request

an extension of the primary term of all

leases committed to a unit agreement.

BLM would require verification that

the operator met the requirements for

obtaining a lease extension.

We estimate there will be one

respondent and the information, which

is already maintained by the operator,

will take approximately three hours to

organize and compile. The total burden

would be three hours.

Section 3137.113. The operator would

be required to demonstrate to BLM that

it cannot start actual or constructive

drilling or reworking activities because

of reasons beyond the operator’s control.

BLM requires the information to

determine the validity of the operator’s

inability to conduct drilling or

reworking activities, as required under

the terms of the lease.

We estimate one respondent and that

two hours would be needed to fulfill the

information requirement for a total

information burden of two hours.

Section 3137.130. If a unit operator

requests approval for voluntary

termination of the unit, and production

is insufficient to establish a

participating area, the operator would

be required to certify that at least 75

percent of the interest owners in the

agreement agree to the voluntary

termination.

BLM requires the certification to

approve termination of the unit based

on production data and consent of the

interest owners under the terms of the

agreement.

This information would take

approximately one hour to compile. We

estimate one respondent, for a total

information burden of one hour.

Section 3137.135. The respondent

would be required to submit a plan for

mitigating the impacts from unit

operations after termination of the unit.

The information is necessary for BLM

approval of mitigation plans for timely,

proper, and efficient management of the

surface impacts resulting from unit

operations.

We estimate it would take

approximately four hours to comply

with the information requirement for

application for unit designation. The

estimate includes time for formulating

and preparing the specified information.

We estimate three responses, for a total

information burden of 12 hours. The

estimate includes the time for reviewing

the instructions, searching existing data

bases, gathering and maintaining the

data needed, and completing and

reviewing the collection of information.

Section 3138.11. An application for a

subsurface storage agreement would

include:

(1) The reason for forming the

agreement;

(2) Descriptions of both the area that

is to be included and the formation;

(3) The proposed storage fees or

rentals;

(4) Royalty for oil or gas present in the

formation before injection and produced

when stored oil or gas is withdrawn;

(5) A description of fees and

payments renegotiations;

(6) The proposed effective date and

term of the agreement;

(7) Certification that all owners of

leased or unleased minerals rights and

lease interests have committed or

consented to the commitment of their

interest in writing;

(8) An ownership schedule showing

lease or land status;

(9) A schedule showing the

participation factor for all parties to the

agreement;

(10) Geologic maps and other data

that demonstrate storage capability of

the reservoir.

The information is necessary so that

BLM can determine whether the

proposed agreement is technically

feasible and is necessary to avoid waste

and that operations will be conducted in

a manner that promotes conservation of

natural resources.

We estimate it would take

approximately 80 hours to comply with

the information requirement for

application for storage agreement. The

estimate includes time for compiling

and preparing the various specified

information and obtaining commitments

and providing certification. We estimate

that there will be one storage agreement

application, for a total information

collection burden of 80 hours.

Organizations and individuals

desiring to submit comments on the

information collection requirements

should direct them to the Office of

Information and Regulatory Affairs,

Office of Management and Budget,

Interior Desk Officer (1004–NEW) New

Executive Office Building, Washington,

D.C. 20503.

BLM considers comments by the

public on this proposed collection of

information in:

Evaluating whether the proposed

collection of information is necessary

for the proper performance of the

functions of BLM, including whether

the information will have practical use;

Evaluating the accuracy of BLM’s

estimate of the burden of the proposed

collection of information, including the

validity of the methodology and

assumptions used;

Enhancing the quality, usefulness,

and clarity of the information to be

collected; and

Minimizing the burden of the

collection of information on those who

are to respond, including through the

use of appropriate automated,

electronic, mechanical, or other

technological collection techniques or

other forms of information technology;

such as permitting electronic submittal

of responses.

24556 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

OMB is required to make a decision

concerning the collection of information

contained in these proposed regulations

between 30 and 60 days after

publication of this document in the

Federal Register. Therefore, a comment

to OMB is best assured of having its full

effect if OMB receives it within 30 days

of publication. This does not affect the

deadline for the public to comment to

BLM on the proposed regulations.

National Environmental Policy Act

We have analyzed this rule in

accordance with the criteria of the

National Environmental Policy Act and

516 DM. This rule does not constitute a

major Federal action significantly

affecting the quality of the human

environment.

BLM has prepared an environmental

assessment and has found that the

proposed rule would not constitute a

major Federal action significantly

affecting the quality of the human

environment under section 102(2)(C) of

the National Environmental Policy Act

of 1969 (NEPA), 42 U.S.C. 4332(2)(C). A

detailed statement under NEPA is not

required.

Environmental effects that could

occur would be the result of leasing, not

the result of these proposed regulations.

To the extent that there are any

environmental effects incident to the

proposed regulations, they would likely

be beneficial. Unitization combines the

development plans of several lessees

into a single consolidated plan of

development under one operator instead

of separate operators and separate plans

of development for each lease. The

advantage of having one operator and

one plan of development under one unit

agreement is that the effect on the

environment could be minimized in

contrast to having several plans of

development for each lease covering an

oil and/or gas field with a relatively

greater environmental effect.

For subsurface storage agreements, the

oil or gas is reinjected, and would be

stored in a geologic structure. There are

no tanks installed and the oil or gas

usually is reinjected using existing

surface and subsurface operating

equipment from prior operations. There

is very little environmental impact

involved in storing oil or gas in this

manner. The operator must demonstrate

that storage is necessary to avoid waste

or to promote the conservation of

natural resources which otherwise may

be vented or lost. Therefore, the

proposed regulations could encourage

better, more efficient development with

a smaller environmental ‘‘footprint’’ and

effects.

These regulations would not add to

the effects of other actions, but could

facilitate less of an environmental

footprint due to consolidating and

unifying the development of a given oil

or gas field under one operator. The

authorization of subsurface storage

agreement would promote the

conservation of oil or gas which

otherwise may be vented or lost. This

would conserve natural resources.

Government-to-Government

Relationship With Tribes

In accordance with the President’s

memorandum of April 29, 1994,

‘‘Government-to-Government Relations

with Native American Tribal

Governments’’ (59 FR 22951) and 512

DM 2, we have evaluated whether

formal government-to-government

consultation with Indian Tribes is

required with respect to the proposed

rules. In this case, we have concluded

that, within the context of this

rulemaking, formal consultation other

than opportunities provided to the

public for notice and comment is not

required.

Executive Order 13084 (‘‘E.O.

13084’’), ‘‘Consultation and

Coordination with Indian Tribal

Governments’’ (May 14, 1998), (63 FR

27655) supplements the President’s

memorandum of April 29, 1994. E.O.

13084 provides that Federal agencies

must consult with Indian Tribal

Governments before formal

promulgation of regulations that

‘‘significantly or uniquely affect’’ Tribal

communities. E.O. 13084 defines

‘‘Indian Tribes’’ for purposes of

government-to-government consultation

as those ‘‘that the Secretary of the

Interior acknowledges to exist as an

Indian tribe pursuant to the Federally

Recognized Indian Tribe List Act of

1994, 25 U.S.C. 479a.’’ E.O. 13084 at

Section 1(b). In accordance with this

mandate, the Bureau of Indian Affairs

recently published a list of recognized

Tribes, including a large number of

Native Alaskan entities including

Villages, Communities, and Tribes. See

63 FR 71941 (December 30, 1998). If

there is a duty of government-togovernment consultation, it would be

owed to those listed Tribal

governments.

The proposed regulations are

designed to permit consolidated

operation of oil and gas leases on

Federal lands and thereby promote

conservation. We are not aware that any

of the recognized Tribal governments

have significant oil and gas interests

within NPRA or within the vicinity of

NPRA. To the extent that any of those

Tribes acquire oil and gas interests and

choose to join a unit which includes

Federal NPRA leases, they would be

eligible to participate in those unit

agreements in the same manner as any

other participants. Accordingly, the

proposed regulations would not

‘‘significantly or uniquely affect’’ those

Tribes and there is no government-togovernment consultation obligation in

this case.

Additionally, we are aware that a

number of Alaska Native corporations

organized under the Alaska Native

Claims Settlement Act (43 U.S.C. 1601

et seq.) (ANCSA) may have oil and gas

interests. These corporations could

potentially become participants in units

which include Federal NPRA leases. If

so, they would be eligible to participate

in those unit agreements in the same

manner as any other participants.

However, no special consultation with

such corporations is required. The

Bureau of Indian Affairs has recently

declined to include such corporations

on the list of recognized Tribes eligible

for government-to-government

consultation. The Bureau of Indian

Affairs indicated that ANCSA

corporations ‘‘are formally statechartered corporations rather than tribes

in the conventional legal or political

sense’’ and that Alaskan Native Villages

were Indian Tribes. See ‘‘Indian Entities

Recognized and Eligible to Receive

Services From the United States Bureau

of Indian Affairs,’’ 60 FR 9250 (February

16, 1995).

Finally, while the proposal of these

regulations imposes no special

government-to-government consultation

obligation upon the Department, there

will be ample opportunity for the Tribal

governments, along with the public

generally, to comment in accordance

with the notice and comment

requirements of the Administrative

Procedure Act.

Economic Analysis

Unitization

The proposal implements the Naval

Petroleum Reserves Production Act of

1976 (42 U.S.C. 6501 et seq.), which was

amended by Public Law 105–83, and

allowed for the creation of units in the

Naval Petroleum Reserves, Alaska

(NPRA). Unitization could increase the

potential value of NPRA leases, which

could result in higher bonus bids at

lease sales. Operators could also obtain

some benefit due to some reduction in

operating and reporting costs. These

reduced costs are a benefit derived from

unitization since production may occur

from fewer areas and reporting

requirements could be consolidated.

However, the essential costs of

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24557

operating and leasing in NPRA would

not be substantially affected. As

previously noted, there are other noneconomic benefits to unitization (see

discussion of § 3137.10).

Once leasing occurs in NPRA, the

proposed unitization rules may increase

the probability of finding and producing

oil and gas there through more efficient

and economic exploration and

production, but the net effect should be

small enough that there would not be a

measurable net effect on oil and gas

prices. Any impacts on the economy,

productivity, competition, or jobs would

be positive. Development could only

occur if it did not endanger the

environment, public health, or safety.

To the extent that the proposed rules

may increase the bonus bids for leases

and the probability of production, the

potential increase in revenue and

economic activity could have a positive

effect on State, local, and tribal

governments and communities.

Subsurface Storage

The proposal would also allow for

subsurface storage agreements in the

NPRA. This would have little economic

effect. Most often, companies use

existing infrastructures to re-inject oil or

gas into existing geologic structures.

Companies would derive an economic

benefit since they could store oil or gas

while waiting for distribution of it or

while waiting for more favorable

economic conditions. The Federal

government would derive a benefit in

the form of storage fees. The benefits

derived by the companies operating in

NPRA or the Federal government would

not be significant. In 1998 BLM had in

effect 32 oil and gas storage agreements

in the lower 48 states which provided

$982,346 in revenues. That averages out

to about $30,698 in revenue payments to

the United States per agreement. We

anticipate far fewer agreements in NPRA

than in the lower 48 with about the

same average income stream being

generated per agreement. These could

impact State, local, and tribal

governments and communities

positively, but only minimally. Any

impacts on the economy, productivity,

competition, or jobs would be positive,

but minimal.

Waiver, Suspension, or Reduction of

Rental or Royalty

The proposal would also allow for the

waiver, suspension, or reduction of

rental or royalty on NPRA leases. This

provision would have minimal

economic impact. BLM would not allow

for any to take place unless it

encouraged the greatest ultimate

recovery of oil and gas or it was in the

interest of conservation. Operators

would only get the benefit if they

proved to BLM that they could not

successfully operate the lease without

the benefit. These standards are high

because BLM believes we should take

these actions only as a last resort, to

save a lease which ‘‘cannot be

successfully operated under the terms

provided therein.’’ (42 U.S.C. 6508).

Operators would benefit since they

would be able to continue to operate

their leases. BLM would benefit as well

since producible leases would not be

shut down and the Federal government

would continue to receive revenue,

albeit at a reduced rate. State, local, and

Tribal governments and communities

would be positively affected since leases

that would under other circumstances

be shut down, would continue to

produce, providing jobs and revenues to

local areas. Any impacts on the

economy, productivity, competition, or

jobs would be positive, but minimal.

Suspensions of Operations and

Production

This proposal would allow for

suspension of operations and

production for NPRA leases.

Suspensions of operations and

production give operators relief from

lease obligations when they are

prevented from complying with the

obligations for reasons that are beyond

their control. During the period of the

suspension, lessees are not required to

pay rental or royalty on their lease, but

they do not have beneficial use of their

lease during the period. The lease term

would be extended by the time period

of the suspension.

One example where lease suspensions

would be appropriate would be where

an operator has found oil and gas in

producible quantities, but there is no

transportation system available to get

the oil and gas to market. BLM would

suspend operations and production on

the lease until operations on the lease

resume or when BLM determines the

reason for the suspension no longer

exists.

Any economic impacts associated

with this provision would, in the long

run, be positive. The alternative to

suspension would be shutting down

lease operations. This alternative is not

beneficial to the government or

operators. Short-term loss in rentals and

royalties is preferable to shutting down

a lease completely. State and local

governments and native communities

could be positively impacted since

leases that would under other

circumstances be shut down, would, in

the long run, continue to produce,

providing jobs and revenues to local

areas. Any impacts on the economy,

productivity, competition, or jobs would

be positive, but minimal.

Lease Extensions

This proposal would allow for the

extension of unit leases if, from

anywhere in the unit there is—

(A) Actual production from a well in

the unit that meets the productivity

criteria set out in the unit agreement;

(B) Actual or constructive drilling

operations; or

(C) Actual or constructive reworking

operations.

This proposal would have little

economic impact on the industry as a

whole, but could make unitizing leases

in the NPRA more attractive to

individual operators. Operators would

get the benefit of diligently developing

their leases by way of lease extensions.

This is a benefit to industry, since leases

in units which otherwise would be

canceled would be extended if there

was constructive drilling or reworking

within the unit.

Any economic impacts associated

with this provision would, in the long

run, be positive. The alternative to

extending leases in the unit would be

canceling a lease and shutting down

operations. This alternative is not

beneficial to the government or

operators. State, local, and Tribal

governments and communities would

be positively affected since leases that

would under other circumstances be

shut down would continue to operate,

increasing the chances of discovering oil

and gas. If producible oil and gas is

discovered, the unit could provide jobs

and revenues to local areas. Any

impacts on the economy, productivity,

competition, or jobs would be positive,

but minimal.

Fixing Lease Term at 10 Years

Congress mandated that the initial

NPRA lease term be 10 years. The

provision setting the lease term at 10

years would have little, if any, economic

impact. It could benefit operators since

the term would be fixed at 10 years

consistent with the statute, whereas

under current regulations, the term

could be less. Longer lease terms in the

NPRA are preferable since there are

harsh geology and climate in the NPRA

make it difficult to operate in that

region. Longer lease terms would allow

operators additional time to deal with

the geologic and climatic conditions in

NPRA.

Administrative Provision

The provision that clarifies which

suspension regulations apply to NPRA

24558 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

is strictly administrative and would

have no economic impact.

Authors

The principal authors of this rule are

Erick Kaarlela (Washington Office),

Sherri Thompson (Colorado State

Office), Rick Wymer (Tulsa Field

Office), Duane Spencer (Colorado State

Office), and Chris Gibson (Alaska State

Office), assisted by Ian Senio of BLM’s

Regulatory Affairs Group (Washington

Office) and Harvey Blank (Office of the

Solicitor, Department of the Interior).

List of Subjects

43 CFR Part 3130

Alaska, Government contracts,

Mineral royalties, Oil and gas

exploration, Oil and gas reserves, Public

lands-mineral resources, Reporting and

recordkeeping requirements, Surety

bonds.

43 CFR Part 3160

Administrative practice and

procedure, Government contracts,

Indians’lands, Mineral royalties, Oil and

gas exploration, Penalties, Public

lands’mineral resources, Reporting and

recordkeeping requirements.

Accordingly, for the reasons stated in

the preamble, and under the authorities

cited below, amend Title 43, Subtitle B,

Chapter II, Subchapter C, Part 3130 as

follows:

PART 3130—OIL AND GAS LEASING:

NATIONAL PETROLEUM RESERVE,

ALASKA

1. Revise the authority citation for

part 3130 to read as follows:

Authority: 42 U.S.C. 6508, 43 U.S.C. 1733

and 1740.

2. Revise § 3130.4–2 to read as

follows:

§ 3130.4–2 Lease term.

The primary term of an NPRA lease is

10 years.

3. Add § 3133.3 and § 3133.4 to

subpart 3133 to read as follows:

§ 3133.3 Under what circumstances will

BLM waive, suspend, or reduce the rental,

royalty, or minimum royalty on my NPRA

lease?

BLM will waive, suspend, or reduce

the rental, royalty, or minimum royalty

of your lease if BLM finds that—

(a) It encourages the greatest ultimate

recovery of oil or gas or it is in the

interest of conservation; and

(b) You can’t successfully operate the

lease under its terms. This means that

your cost to operate the lease exceeds

income from the lease.

§ 3133.4 How do I apply for a waiver,

suspension or reduction of rental, royalty or

minimum royalty for my NPRA lease?

(a) Submit to BLM your application

and in it describe the relief you are

requesting and include—

(1) The lease serial number;

(2) The number, location and status of

each well drilled;

(3) A statement that shows the

aggregate amount of oil or gas subject to

royalty for each month covering a

period of at least six months

immediately before the date you filed

the application;

(4) The number of wells counted as

producing each month and the average

production per well per day;

(5) A detailed statement of expenses

and costs of operating the entire lease;

(6) All facts that demonstrate that you

can’t successfully operate the wells

under the terms of the lease;

(7) The amount of any overriding

royalty and payments out of production

or similar interests applicable to your

lease; and

(8) Any other information BLM

requires.

(b) Your application must be signed

by—

(1) All lessees of record; or

(2) By the operator on behalf of the

lessees of record.

4. Revise the subpart 3135 heading to

read as follows:

Subpart 3135—Transfers, extensions,

consolidations, and suspensions

5. Add §§ 3135.2 through 3135.7 as

follows:

§ 3135.2 Under what circumstances will

BLM approve my request for a suspension

of operations and production for my lease?

(a) BLM will approve your request for

a suspension of operations and

production for your lease(s) if BLM

determines that—

(1) It is in the interest of conservation

of natural resources;

(2) It encourages the greatest ultimate

recovery of oil and gas, including the

planning and construction of a

transportation system to a new area of

discovery; or

(3) It mitigates reasonably foreseeable

and significantly adverse effects on

surface resources.

(b) BLM will suspend lease

obligations if it determines that, despite

the exercise of due care and diligence,

you can’t comply with those obligations

for reasons beyond your control.

(c) If BLM approves your request for

a suspension of operations and

production, the suspension—

(1) Stops the running of your lease

term and prevents it from expiring for

as long as the suspension is in effect;

(2) Relieves you of your obligation to

pay rent, royalty, or minimum royalty

during the suspension; and

(3) Prohibits you from operating on,

producing from, or having any other

beneficial use of your lease during the

suspension.

§ 3135.3 How do I apply for a suspension

of operations and production?

(a) You must submit to BLM an

application stating the circumstances

that are beyond your reasonable control

that prevent you from operating or

producing your lease(s).

(b) Your suspension application must

be signed by—

(1) All record title owners of the lease;

or

(2) By the operator on behalf of the

record title owners of the leases

committed to an approved agreement.

(c) You must submit your application

to BLM before your lease expires.

(d) Your application must be for your

entire lease.

§ 3135.4 When is a suspension of

operations and production effective?

A suspension of operations and

production is effective—

(a) The first day of the month in

which you file the application for

suspension; or

(b) Any other date BLM specifies in

the approval document.

§ 3135.5 When should I stop paying rental

or royalty after my suspension of

operations and production is approved?

You should stop paying rental or

royalty on the first day of the month

following BLM’s approval of the

suspension.

§ 3135.6 When will my suspension

terminate?

(a) Your suspension terminates—

(1) On the first day of the month in

which you begin to operate or produce

on your lease; or

(2) The date BLM specifies in a

written notice to you.

(b) You must notify BLM at least 24

hours before you begin operations or

production under paragraph (a)(1) of

this section.

§ 3135.7 How will termination of the

suspension affect my lease?

(a) BLM extends your lease term by

adding the period of the suspension to

the term of the lease.

(b) Your rental and/or minimum

royalty obligation resumes on the date

the suspension terminates.

6. Add a new subpart 3137 to part

3130 to read as follows:

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24559

Subpart 3137—Unitization

Agreements—National Petroleum

Reserve, Alaska

Sec.

3137.5 What terms do I need to know to

understand this subpart?

General

3137.10 What benefits do I receive for

entering into a unit agreement?

Application

3137.20 Is there a standard unit agreement

form?

3137.21 What must I include in a NPRA

unit agreement?

3137.22 What are the size and shape

requirements for a unit area?

3137.23 What must I include in my NPRA

unitization application?

3137.24 Why would BLM reject a unit

agreement application?

3137.25 How will the parties to the unit

know if BLM approves the unit

agreement?

3137.26 When is a unit agreement effective?

3137.27 What effect do other agreements

have on the unit agreement?

3137.28 What oil and gas resources of

committed tracts does the unit agreement

include?

Development

3137.40 What initial development

obligations must I define in a unit

agreement?

3137.41 What continuing development

obligations must I define in a unit

agreement?

Optional Terms

3137.50 What optional terms may I include

in a unit agreement?

3137.51 Under what conditions does BLM

permit multiple unit operators?

3137.52 When may I modify the agreement?

Unit Agreement Operating Requirements

3137.60 As the unit operator, what are my

obligations?

3137.61 How do I change unit operators?

3137.62 What are my liabilities as a former

unit operator?

3137.63 What are my liabilities after BLM

approves me as the new unit operator?

3137.64 As a unit operator, what must I do

to prevent or compensate for drainage?

Development Requirements

3137.70 What must I do to meet initial

development obligations?

3137.71 What must I do to meet continuing

development obligations?

3137.72 May I perform additional

development outside established

participating areas to fulfill continuing

development obligations?

3137.73 What happens if I do not meet a

continuing development obligation?

Participating Areas

3137.80 What are participating areas and

how do they relate to the unit

agreement?

3137.81 What is the function of a

participating area?

3137.82 What are productivity criteria?

3137.83 What establishes a participating

area?

3137.84 What must I submit to BLM to

establish a new participating area, or add

to an existing participating area?

3137.85 What is the effective date of a

participating area?

3137.86 What happens to the participating

area when I drill new wells that meet the

productivity criteria?

3137.87 What must I do if there are

unleased Federal tracts in a participating

area?

3137.88 What happens when a well outside

a participating area does not meet the

productivity criteria?

3137.89 How does production allocation

occur from wells that do not meet the

productivity criteria?

3137.90 Who must operate wells that do not

meet the productivity criteria?

3137.91 When may a well BLM previously

determined to be a non-unit well

establish or revise a participating area?

3137.92 When does a participating area

terminate?

Production Allocation

3137.100 How must I allocate production to

the United States when a participating

area includes unleased Federal lands?

Obligations and Extensions

3137.110 Do the terms and conditions of a

unit agreement modify Federal lease

stipulations?

3137.111 When will BLM extend the

primary term of all leases committed to

a unit agreement?

3137.112 Under what circumstances will

BLM extend my NPRA lease?

3137.113 What happens if I am prevented

from performing actual or constructive

drilling or reworking operations?

Change in Ownership

3137.120 As a transferee of an interest in a

unitized NPRA lease, am I subject to the

terms and conditions of the unit

agreement?

Unit Termination

3137.130 Under what circumstances will

BLM approve a voluntary termination of

the unit?

3137.131 What happens if the unit

terminated before the unit operator met

the initial development obligations?

3137.132 What if I do not meet a continuing

development obligation before I establish

any participating area in the unit?

3137.133 After participating areas are

established, when does the unit

terminate?

3137.134 What happens to committed

leases if the unit terminates?

3137.135 What are the unit operator’s

obligations after unit termination?

Appeals

3137.150 Who may appeal a decision BLM

issues under this subpart?

Subpart 3137—Unitization Agreements—

National Petroleum Reserve, Alaska

§ 3137.5 What terms do I need to know to

understand this subpart?

As used in this subpart—

Actual drilling means operations you

conduct that are similar to those that a

person seriously looking for oil or gas

could be expected to conduct in that

particular area, given the existing

knowledge of geologic and other

pertinent facts about the area to be

drilled. The term includes the testing,

completing, or equipping of the drill

hole (casing, tubing, packers, pumps,

etc.) so that it is capable of producing

oil or gas. Actual drilling operations do

not include preparatory or preliminary

work such as grading roads and well

sites, or moving equipment onto the

lease.

Actual production means oil or gas

flowing from the wellbore into

treatment or sales facilities.

Actual reworking operations means

reasonably continuous well-bore

operations such as fracturing, acidizing,

and tubing repair.

Committed tract means—

(1) A Federal lease where all owners

of record title and all operating rights

owners have agreed to the terms and

conditions of a unit agreement and

agreed to accept responsibility for unit

operations; or

(2) A State lease or private parcel of

land where all owners and all operating

rights owners have agreed to the terms

and conditions of a unit agreement and

agreed to accept responsibility for unit

operations.

Constructive drilling means those

activities that are necessary to prepare

for actual drilling that occurs after BLM

approves an application to drill, but

before you actually drill the well. These

include, but are not limited to, activities

such as road and well pad construction,

and drilling rig and equipment set-up.

Constructive reworking operations

means activities that are necessary to

prepare for well-bore operations. These

may include rig and equipment set-up

and pit construction.

Continuing development obligations

means a program of development or

operations you conduct that, after you

complete initial obligations defined in a

unit agreement—

(1) Meets or exceeds the rate of nonunit operations in the vicinity of the

unit; and

(2) Represents an investment

proportionate to the size of the area

covered by the unit agreement.

NPRA lease means any oil and gas

lease within the boundaries of the

National Petroleum Reserve, Alaska

24560 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

(NPRA), issued by the United States

under the Naval Petroleum Reserves

Production Act of 1976, as amended (42

U.S.C. 6501–6508), that authorizes

exploration for and removal of oil and

gas.

Operating rights (working interest)

means any interest you hold that allows

you to explore for, develop, or produce

oil and gas.

Participating area means those

committed tracts or portions of those

committed tracts within the unit area

that contain a well meeting the

productivity criteria specified in the

unit agreement.

Primary target means the principal

geologic formation that you intend to

develop and produce.

Producible interval means the section

of any pool, deposit, zone, or portion

thereof capable of producing oil and gas.

Record title means legal ownership of

an oil and gas lease recorded in BLM’s

records.

Tract means land that may be

included in an NPRA oil and gas unit

agreement and that may or may not be

in a Federal lease.

Unit agreement means a BLMapproved agreement to cooperate in

exploring, developing, operating and

sharing in production of all or part of an

oil or gas pool, field or like area,

including at least one NPRA lease,

without regard to lease boundaries and

ownership.

Unit area means all tracts committed

to a BLM-approved unit. Tracts not

committed to the unit, even though they

may be within the external unit

boundary, are not part of the unit area.

Unit operations are all activities

associated with exploration,

development drilling, and production

operations conducted by the unit

operator(s) on committed tracts.

General

§ 3137.10 What benefits do I receive for

entering into a unit agreement?

(a) Each individual tract committed to

the agreement meets its full

performance obligation if one or more

tracts in the unit meets the development

or production requirements;

(b) Production from a well that meets

the productivity criteria (see § 3137.82

of this subpart) under the unit

agreement extends all NPRA leases

committed to the agreement as provided

in § 3137.112 of this subpart;

(c) You may drill within the unit

without regard to certain lease

restrictions, such as lease boundaries

within the unit and spacing offsets; and

(d) You may consolidate operations

and permitting and reporting

requirements.

Application

§ 3137.20 Is there a standard unit

agreement form?

There is no standard unit agreement

form. BLM will accept any unit

agreement format if it protects the

public interest and includes the

mandatory terms required in § 3137.21

of this subpart.

§ 3137.21 What must I include in an NPRA

unit agreement?

(a) Your NPRA unit agreement must

include—

(1) A description of the unit area and

any geologic and engineering factors

upon which the area may be based;

(2) Initial and continuing

development obligations (see §§ 3137.40

and 3137.41 of this subpart);

(3) The proposed participating area

size and locations (see § 3137.80(b) of

this subpart);

(4) A provision that acknowledges

BLM’s authority to set or modify the

quantity, rate, and location of

development and production; and

(5) Any optional terms authorized by

§ 3137.50 of this subpart.

(b) You must include in the unit

agreement any additional terms and

conditions that result from consultation

with BLM. After your initial

application, BLM may request

additional supporting documentation.

§ 3137.22 What are the size and shape

requirements for a unit area?

(a) The unit area must—

(1) Be composed of tracts, each of

which must be contiguous to at least

one other tract in the unit, that are

located so that you can perform

operations and production in an

efficient and logical manner; and

(2) Include at least one NPRA lease.

(b) BLM may limit the size and shape

of the unit considering the type, amount

and rate of the proposed development

and production and the location of the

oil and gas.

§ 3137.23 What must I include in my NPRA

unitization application?

Submit your unitization application

to BLM and include in it—

(a) The proposed agreement;

(b) A map showing the unit area;

(c) A list of committed tracts

including, for each tract, the—

(1) Legal land description and

acreage;

(2) Names of persons holding record

title interest;

(3) Names of persons holding

operating rights; and

(4) Name of the unit operator.

(d) You must certify—

(1) That you invited all owners of oil

and gas rights (leased or unleased) and

lease interests (record title and

operating rights) within the external

boundary of the unit area described in

the application to join the unit;

(2) That there are sufficient tracts

committed to the unit agreement to

reasonably operate and develop the unit

area;

(3) The commitment status of all

tracts within the area proposed for

unitization; and

(4) That you accept unit obligations

under § 3137.60 of this subpart.

(e) Evidence of acceptable bonding;

(f) A discussion of reasonably

foreseeable and significantly adverse

effects on the surface resources of NPRA

and how unit operations may reduce

impacts compared to individual lease

operations; and

(g) Other documentation BLM may

request. BLM may require additional

copies of maps, plats, and other similar

exhibits.

§ 3137.24 Why would BLM reject a unit

agreement application?

BLM will reject a unit agreement

application—

(a) That does not address all

mandatory terms, including those

required under § 3137.21(b) of this

subpart;

(b) If the unit operator—

(1) Has an unsatisfactory record of

complying with applicable laws,

regulations, the terms of any lease or

permit, or the requirements of any

notice or order; or

(2) Is not qualified to operate within

NPRA under applicable laws and

regulations;

(c) That does not conserve natural

resources;

(d) That is not in the public interest;

(e) That does not comply with any

special conditions in effect for any part

of the NPRA that would be affected by

the unit or any lease subject to the unit;

or

(f) That does not otherwise comply

with the requirements of this subpart.

§ 3137.25 How will the parties to the unit

know if BLM approves the unit agreement?

BLM will notify the unit operator in

writing when it approves or disapproves

the proposed unit agreement. The unit

operator must notify in writing all

parties to the agreement within 30

calendar days after receiving BLM’s

notice of approval or disapproval.

§ 3137.26 When is a unit agreement

effective?

The agreement is effective on the date

BLM approves it.

§ 3137.27 What effect do other agreements

have on the unit agreement?

No other agreement—

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24561

(a) Modifies the terms or conditions of

the unit agreement; or

(b) Relieves the unit operator of any

right or obligation under the unit

agreement.

§ 3137.28 What oil and gas resources of

committed tracts does the unit agreement

include?

A unit agreement includes all oil and

gas resources of committed tracts unless

BLM approves agreement terms to the

contrary.

Development

§ 3137.40 What initial development

obligations must I define in a unit

agreement?

You must define—

(a) The number of wells required to

assess the reservoir adequately;

(b) A primary target for each well;

(c) A schedule for starting and

completing drilling operations for each

well; and

(d) The time between starting

operations on a well to the start of

operations on the next well.

§ 3137.41 What continuing development

obligations must I define in a unit

agreement?

A unit agreement must obligate the

operator to a program of exploration and

development that, after completion of

the initial obligations—

(a) Meets or exceeds the rate of nonunit operations in the vicinity of the

unit; and

(b) Represents an investment

proportionate to the size of the area

covered by the unit agreement.

Optional Terms

§ 3137.50 What optional terms may I

include in a unit agreement?

BLM may approve the following

optional terms if they promote

additional development or enhanced

production potential—

(a) Limiting the agreement to certain

formations and their intervals (see

§ 3137.28 of this subpart);

(b) Multiple unit operators (see

§ 3137.51 of this subpart);

(c) Modifying the agreement terms by

less than 100 percent of the parties to

the agreement (see § 3137.52 of this

subpart); or

(d) Other terms that BLM determines

will promote the greatest economic

recovery of oil and gas consistent with

applicable law.

§ 3137.51 Under what conditions does

BLM permit multiple unit operators?

BLM permits multiple unit operators

only if the unit agreement defines—

(a) The conditions under which

additional unit operators are acceptable;

(b) The responsibilities of the

different operators, including obtaining

BLM approvals, reporting, paying

Federal royalties and conducting

operations;

(c) Which unit operators are obligated

to ensure bond coverage for each NPRA

lease in the unit;

(d) The consequences if one or more

unit operators defaults. For example, if

an operator defaults, the agreement

would list which unit operators would

conduct that operator’s operations and

ensure bonding of those operations; and

(e) Which unit operator is responsible

for unit obligations not specifically

assigned in the unit agreement.

§ 3137.52 When may I modify the

agreement?

(a) You may modify a unit agreement

if—

(1) All current parties to the

agreement agree to the modification; or

(2) You meet the requirements of the

modification provision in the unit

agreement. The modification provision

must identify which parties, and what

percentage of those parties, must

consent to each type of modification.

(b) You must submit to BLM an

application for modification.

(c) The operator must certify that the

necessary parties have agreed to the

modification.

(d) A modification is not effective

unless BLM approves it. After BLM

approves the modification, it is effective

retroactively to the date you filed a

complete application for modification.

However, BLM may approve a different

effective date if you request it and

provide acceptable justification.

(e) BLM will reject any modifications

that do not comply with BLM

regulations or applicable law.

Unit Agreement Operating

Requirements

§ 3137.60 As the unit operator, what are

my obligations?

(a) You must comply with the terms

and conditions of the unit agreement,

Federal laws and regulations, lease

terms and stipulations, and BLM notices

and orders.

(b) You must provide BLM evidence

of acceptable bonding. Acceptable

bonding means a bond in an amount

which is no less than the sum of the

individual Federal bonding

requirements for each of the NPRA

leases committed to the unit. This

requirement may also be met if the unit

operator is added as a principal to lease

bonds to reach the required amount.

(c) The bond must be payable to the

Secretary of the Interior.

§ 3137.61 How do I change unit operators?

(a) To change unit operators, the new

unit operator must submit to BLM—

(1) Statements that—

(i) It accepts unit obligations; and

(ii) The percentage of required interest

owners consented to a change of unit

operator; and

(2) Evidence of acceptable bonding

(see § 3137.60(b) of this subpart).

(b) The effective date of the change in

unit operator is the date BLM approves

the new unit operator.

§ 3137.62 What are my liabilities as a

former unit operator?

You are responsible for all duties and

obligations of the unit agreement that

accrued while you were unit operator

up to the date BLM approves a new unit

operator.

§ 3137.63 What are my liabilities after BLM

approves me as the new unit operator?

(a) After BLM approves the change in

unit operator, you, as the new unit

operator, assume full liability, jointly

and severally with the record title and

operating rights owners, except as

otherwise provided in paragraph (c) and

to the extent permitted by law, for—

(1) Compliance with the terms and

conditions of the unit agreement,

Federal laws and regulations, lease

terms and stipulations, and BLM notices

and orders;

(2) Plugging unplugged wells and

reclaiming unreclaimed facilities that

were installed or used before the

effective date of the change in unit

operator (this liability is joint and

several with the former unit operator);

and

(3) Those liabilities accruing during

the time you are unit operator.

(b) Your liability includes, but is not

limited to—

(1) Rental and royalty payments;

(2) Protecting the lease from loss due

to drainage as provided in § 3137.64 of

this subpart;

(3) Well plugging and abandonment;

(4) Surface reclamation;

(5) All environmental remediation or

restoration required by law, regulations,

lease terms, or conditions of approval;

and

(6) Other requirements related to

operations on the lease.

(c) Your liability for royalty and other

payments on the lease is limited by

section 102(a) of the Federal Oil and Gas

Royalty Management Act of 1982, as

amended (30 U.S.C. 1712(a)).

§ 3137.64 As a unit operator, what must I

do to prevent or compensate for drainage?

You must prevent uncompensated

drainage of oil and gas from unit land

24562 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

by wells on land not subject to the

agreement. This includes, but is not

limited to—

(a) Drilling a protective well if it is

economically feasible;

(b) Paying compensatory royalty;

(c) Forming other agreements, or

modifying existing agreements, that

allow the tracts committed to the

agreement to share in production; or

(d) Any additional measures BLM

considers necessary to prevent

uncompensated drainage.

Development Requirements

§ 3137.70 What must I do to meet initial

development obligations?

(a) To meet initial development

obligations by the time specified in your

unit agreement you must—

(1) Drill the required test well(s) to the

primary target;

(2) Drill at least one well that meets

the productivity criteria (see § 3137.82

of this subpart); or

(3) Establish, to BLM’s satisfaction,

that further drilling to meet the

productivity criteria is unwarranted or

impracticable.

(b) You must certify to BLM that you

met initial development obligations no

later than 60 calendar days after meeting

the obligations. BLM may require you to

supply documentation that supports

your certification.

§ 3137.71 What must I do to meet

continuing development obligations?

(a) Once you meet initial development

obligations, you must perform

additional development. Work you did

before meeting initial development

obligations is not continuing

development. Continuing development

includes the following operations—

(1) Drilling, testing, or completing

additional wells to the primary target or

other unit formations;

(2) Drilling or completing additional

wells that establish production of oil

and gas;

(3) Recompleting wells or other

operations that establish new unit

production; or

(4) Drilling existing wells to a deeper

target.

(b) No later than 90 calendar days

after meeting initial development

obligations, submit to BLM a plan that

describes how you will meet continuing

development obligations.

(1) If you have drilled a well that

meets the productivity criteria, your

plan must describe the activities to fully

develop the oil and gas field.

(2) If you fulfilled your initial

development obligations, but did not

establish a well that meets the

productivity criteria, your plan must

describe any further actual or

constructive drilling operations you will

conduct.

(c) No later than 90 calendar days

after BLM’s approval of your plan

submitted under paragraph (b) of this

section, you must certify to BLM that

you started operations to fulfill your

continuing development obligations.

BLM may require you to—

(1) Supply documentation to support

your certification; and

(2) Submit periodic reports that

demonstrate continuing development.

§ 3137.72 May I perform additional

development outside established

participating areas to fulfill continuing

development obligations?

You may perform additional

development either within or outside a

participating area, depending on the

terms of the unit agreement.

§ 3137.73 What happens if I do not meet a

continuing development obligation?

(a) After you establish a participating

area, if you do not meet a continuing

development obligation and BLM has

not granted you an extension of time to

meet the obligation, the unit contracts.

This means that—

(1) All areas within the unit that do

not have participating areas established

will be eliminated from the unit. Any

eliminated areas are subject to their

original lease terms; and

(2) Only established participating

areas, whether they are actually

producing or not, remain in the unit.

(b) Units contract effective the first

day of the month after the date on

which the unit agreement required the

continuing development obligations to

begin.

(c) If you do not meet a continuing

development obligation before you

establish a participating area, the unit

terminates (see § 3137.132 of this

subpart).

Participating Areas

§ 3137.80 What are participating areas and

how do they relate to the unit agreement?

(a) Participating areas are those

committed tracts or portions of those

committed tracts within the unit area

that contain a well meeting the

productivity criteria specified in the

unit agreement.

(b) You must include the proposed

participating area size in the unit

agreement for planning purposes and to

mitigate reasonably foreseeable and

significantly adverse effects on NPRA

surface resources. The unit agreement

must define the proposed participating

areas. Your proposed participating area

may be limited to separate producible

intervals or areas.

(c) At the time you meet the

productivity criteria discussed in

§ 3137.82 of this subpart, you must

delineate those participating areas.

§ 3137.81 What is the function of a

participating area?

The function of a participating area is

to allocate production to each

committed tract within a participating

area. Allocation to each committed tract

within the participating area is in the

same proportion as that tract’s surface

acreage in the participating area to the

total acreage in the participating area.

§ 3137.82 What are productivity criteria?

(a) Productivity criteria are

characteristics of a unit well that

warrant including a defined area

surrounding the well in a participating

area. The unit agreement must define

these criteria for each separate

producible interval. You must be able to

determine whether you meet the criteria

when the well is drilled and you

complete well testing.

(b) To meet the productivity criteria

the well must indicate future

production potential sufficient to pay

for the costs of drilling, completing, and

operating the well on a unit basis.

§ 3137.83 What establishes a participating

area?

The first well you drill after the unit

agreement is formed that meets the

productivity criteria establishes an

initial participating area. When you

establish an initial participating area,

lands that contain previously existing

wells in the unit that meet the

productivity criteria (see § 3137.82 of

this subpart), will—

(a) Be added to that initial

participating area as a revision, if it is

in the same producible interval; or

(b) Become a separate participating

area, if it is in a different producible

interval (see also § 3137.88 of this

subpart for wells that do not meet the

productivity criteria).

§ 3137.84 What must I submit to BLM to

establish a new participating area, or add to

an existing participating area?

To establish a new participating area

or add to an existing participating area,

you must submit to BLM a—

(a) Statement that the well meets the

productivity criteria (see § 3137.82 of

this subpart). BLM may require you to

submit information supporting your

statement;

(b) Map showing the new or revised

participating area and acreage; and

(c) Schedule that establishes the

production allocation for each NPRA

lease or tract, and each record title and

operating rights owner in the

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24563

participating area. You must submit a

separate allocation schedule for each

participating area.

§ 3137.85 What is the effective date of a

participating area?

The effective date of either an initial

or revised participating area is the first

day of the month in which you

complete a well that meets the

productivity criteria, but no earlier than

the effective date of the unit.

§ 3137.86 What happens to the

participating area when I drill new wells that

meet the productivity criteria?

If a new well that meets the

productivity criteria is—

(a) Inside a participating area

boundary and completed in the same

producible interval, the participating

area will remain the same;

(b) Outside a participating area

boundary and completed in the same

producible interval as the well in an

existing participating area, the

participating area expands to include

the new area; or

(c) In a different producible interval,

inside or outside the participating area,

a new participating area may be

established for the well.

§ 3137.87 What must I do if there are

unleased Federal tracts in a participating

area?

If there are unleased Federal tracts in

a participating area, you must—

(a) Include the unleased Federal tracts

in the participating area, even though

BLM will not share in unit costs;

(b) Allocate production for royalty

purposes as if the unleased Federal

tracts were leased and committed to the

agreement under § 3137.100 of this

subpart;

(c) Admit Federal tracts leased after

the effective date of the unit agreement

into the agreement on the date the lease

is effective; and

(d) Submit to BLM revised maps, a list

of committed leases, and allocation

schedules that reflect the commitment

of the newly leased Federal tracts to the

unit.

§ 3137.88 What happens when a well

outside a participating area does not meet

the productivity criteria?

If a well outside any of the established

participating area(s) does not meet the

productivity criteria, all operations on

that well are non-unit operations and

we do not revise the participating area.

No later than 60 calendar days after the

well did not meet the productivity

criteria, you must notify BLM that unit

operations are no longer occurring. You

must conduct non-unit operations under

the terms of the underlying lease or

other federally approved cooperative oil

and gas agreements.

§ 3137.89 How does production allocation

occur from wells that do not meet the

productivity criteria?

(a) If a well that does not meet the

productivity criteria was drilled before

the unit was formed, the production is

allocated on a lease or other federally

approved cooperative oil and gas

agreement basis. You must pay and

report the royalties from any such well

either as specified in the underlying

lease or other federally approved

cooperative oil and gas agreements.

(b) If you drilled a well after the unit

was formed and the well is completed

within an existing participating area, the

production becomes a part of that

participating area production. This

paragraph applies whether or not the

well meets the productivity criteria.

(c) If a well that does not meet the

productivity criteria is outside a

participating area, the production is

allocated the same as under paragraph

(a) of this section.

§ 3137.90 Who must operate wells that do

not meet the productivity criteria?

(a) If a well that does not meet the

productivity criteria was drilled before

the unit was formed, the operator of the

well at the time the unit was formed

may continue as operator.

(b) As unit operator, you must

continue to operate wells drilled after

unit formation that do not meet the

productivity criteria, until BLM

approves a change in the designation of

operator for those wells.

§ 3137.91 When may a well BLM

previously determined to be a non-unit well

establish or revise a participating area?

If you, as the unit operator, complete

sufficient work so that a well BLM

previously determined to be a non-unit

well now meets the productivity

criteria, you must demonstrate this to

BLM within 60 calendar days of when

this occurs. You must then revise an

existing participating area or establish a

new participating area (see § 3137.84 of

this subpart).

§ 3137.92 When does a participating area

terminate?

After contraction under § 3137.73 of

this subpart, a participating area

terminates 60 calendar days after BLM

notifies you that there is insufficient

production to meet the operating costs

of that production, unless you show that

within 60 days after BLM’s

notification—

(a) Your operations to restore or

establish new production are in

progress; and

(b) You are diligently pursuing oil or

gas production.

Production Allocation

§ 3137.100 How must I allocate production

to the United States when a participating

area includes unleased Federal lands?

(a) When a participating area includes

unleased Federal lands, you must

allocate production as if the unleased

Federal lands were leased and

committed to the agreement (see

§§ 3137.80 and 3137.81 of this subpart).

The obligation to pay royalty for

production attributable to unleased

Federal lands accrues from the later of

the date the—

(1) Committed leases in the

participating area that includes

unleased Federal lands receive a

production allocation; or

(2) Previously leased tracts within the

participating area become unleased.

(b) The royalty rate applicable to

production allocated to unleased

Federal lands is the greater of 121/2%

or the highest royalty rate for any lease

committed to the unit.

Obligations and Extensions

§ 3137.110 Do the terms and conditions of

a unit agreement modify Federal lease

stipulations?

A unit agreement does not modify

Federal lease stipulations.

§ 3137.111 When will BLM extend the

primary term of all leases committed to a

unit agreement?

If the unit operator requests it, BLM

will extend the primary term of an

NPRA lease committed to a unit

agreement if, from anywhere in the unit

area, there is—

(a) Actual production from a well that

meets the productivity criteria;

(b) Actual or constructive drilling

operations; or

(c) Actual or constructive reworking

operations.

§ 3137.112 Under what circumstances will

BLM extend my NPRA lease?

BLM will extend all NPRA leases

committed to the unit, for as long as the

unit exists, for the following types of

operations from any NPRA lease

committed to the unit—

24564 Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules

Type of operations Length of extension Additional extension

(a) Actual production .......................................... As long as there is production from a well in

the unit that meets the productivity criteria.

Does not apply.

(b) Actual or constructive drilling operations ..... Up to 3 years ................................................... Up to three more years if you demonstrate

reasonable diligence and reasonable monetary expenditures in carrying out the approved drilling or reworking operations during the initial extension.

(c) Actual or constructive reworking operations Up to 3ears ...................................................... Up to three more years if you demonstrate

reasonable diligence and reasonable monetary expenditures in carrying out the approved drilling or reworking operations during the initial extension.

§ 3137.113 What happens if I am prevented

from performing actual or constructive

drilling or reworking operations?

(a) If you demonstrate to BLM that

reasons beyond your control prevent

you, despite reasonable diligence, from

starting actual or constructive drilling,

reworking, or completing operations,

BLM will extend all committed leases as

if you were performing constructive or

actual drilling or reworking operations.

You are limited to two extensions under

this section.

(b) You must resume actual or

constructive drilling or reworking

operations when conditions permit. If

you do not resume operations—

(1) BLM will cancel the extension;

and

(2) The unit terminates (see

§ 3137.131 of this subpart).

Change in Ownership

§ 3137.120 As a transferee of an interest in

a unitized NPRA lease, am I subject to the

terms and conditions of the unit

agreement?

As a transferee of an interest in an

NPRA lease that is included in a unit

agreement, you are subject to the terms

and conditions of the unit agreement.

Unit Termination

§ 3137.130 Under what circumstances will

BLM approve a voluntary termination of the

unit?

BLM will approve the voluntary

termination of the unit at any time—

(a) Before the unit operator discovers

production sufficient to establish a

participating area; and

(b) The unit operator submits to BLM

certification that at least 75 percent of

the operating rights owners in the

agreement, on a surface acreage basis,

agree to the termination.

§ 3137.131 What happens if the unit

terminated before the unit operator met the

initial development obligations?

If the unit terminated before the unit

operator met the initial development

obligations, BLM’s approval of the

agreement is revoked. You, as lessee,

forfeit all further benefits, including

extensions and suspensions, granted

any NPRA lease as a result of having

been committed to the unit. Any lease

that BLM extended as a result of being

committed to the unit would expire

unless it qualified for an extension

under § 3135.1–5 of this part.

§ 3137.132 What if I do not meet a

continuing development obligation before I

establish any participating area in the unit?

If you do not meet a continuing

development obligation before any

participating area is established, the

unit terminates automatically.

Termination is effective the day after

you did not meet a continuing

development obligation.

§ 3137.133 After participating areas are

established, when does the unit terminate?

After participating areas are

established, the unit terminates when

the last participating area of the unit

terminates (see § 3137.92 of this

subpart).

§ 3137.134 What happens to committed

leases if the unit terminates?

(a) If the unit terminates, all

committed NPRA leases return to

individual lease status and are subject to

their original provisions.

(b) An NPRA lease that has completed

its primary term on or before the date

the unit terminates expires unless it

qualifies for extension under § 3135.1–

5 of this part.

§ 3137.135 What are the unit operator’s

obligations after unit termination?

Within 3 months after unit

termination, the unit operator must

submit to BLM for approval a plan and

schedule for mitigating the impacts

resulting from unit operations. The plan

must describe in detail planned

plugging and abandonment and surface

restoration operations. The unit operator

must then comply with the BLMapproved plan and schedule.

Appeals

§ 3137.150 Who may appeal a decision

BLM issues under this subpart?

(a) Any person adversely affected by

a BLM decision under this subpart may

appeal the decision under parts 4 and

1840 of this title.

(b) You may file for a State Director

Review (SDR) of decision BLM issues

under this subpart. Sections [to be

specified in the final rule] of this title

contain regulations on SDR.

7. Add a new subpart 3138 to part

3130 to read as follows:

Subpart 3138—Subsurface Storage

Agreements

Sec.

3138.10 When will BLM allow subsurface

storage agreements covering federallyowned lands?

3138.11 How do I apply for a subsurface

storage agreement?

3138.12 What must I pay for storage?

§ 3138.10 When will BLM allow subsurface

storage agreements covering federallyowned lands?

BLM will allow you to use either

leased or unleased federally-owned

lands for the subsurface storage of oil

and gas, whether or not the oil or gas

you intend to store is produced from

federally-owned lands, if you

demonstrate that storage is necessary

to—

(a) Avoid waste; or

(b) Promote conservation of natural

resources.

§ 3138.11 How do I apply for a subsurface

storage agreement?

(a) You must submit an application to

BLM for a subsurface storage agreement

that includes—

(1) The reason for forming a

subsurface storage agreement;

(2) A description of the area you plan

to include in the subsurface storage

agreement;

(3) A description of the formation you

plan to use for storage;

(4) The proposed storage fees or

rentals. The fees or rentals must be

Federal Register / Vol. 65, No. 81 / Wednesday, April 26, 2000 / Proposed Rules 24565

based on the value of the subsurface

storage, injection, and withdrawal

volumes, and rental income or other

income generated by the operator for

letting or subletting the storage

facilities;

(5) The payment of royalty for native

oil or gas (oil or gas that exists in the

formation before injection and that is

produced when the stored oil or gas is

withdrawn);

(6) A description of how often and

under what circumstances you and BLM

intend to renegotiate fees and payments;

(7) The proposed effective date and

term of the subsurface storage

agreement;

(8) Certification that all owners of

mineral rights (leased or unleased) and

lease interests have consented to the gas

storage agreement in writing;

(9) An ownership schedule showing

lease or land status;

(10) A schedule showing the

participation factor for all parties to the

subsurface storage agreement; and

(11) Supporting data (geologic maps

showing the storage formation, reservoir

data, etc.) demonstrating the capability

of the reservoir for storage.

(b) BLM will negotiate the terms of a

subsurface storage agreement with you,

including bonding, and reservoir

management.

(c) BLM may request documentation

in addition to that which you provide

under paragraph (a) above of this

section.

§ 3138.12 What must I pay for storage?

You must pay any combination of

storage fees, rentals, or royalties to

which you and BLM agree. The royalty

you pay on production of native oil and

gas from leased lands will be the royalty

required by the underlying lease(s). You

must not produce native oil and gas

from unleased lands in the storage

agreement area.

PART 3160—ONSHORE OIL AND GAS

OPERATIONS

8. Revise the authority citation for

part 3160 to read as follows:

Authority: 25 U.S.C. 396d and 2107; 30

U.S.C. 189, 306, 359, and 1751; and 43 U.S.C.

1732(b), 1733 and 1740.

9. Revise 3160.0–1 to read as follows:

§ 3160.0–1 Purpose.

The regulations in this part govern

operations associated with the

exploration, development and

production of oil and gas deposits

from—

(a) Leases issued or approved by the

United States;

(b) Restricted Indian land leases; and

(c) Those leases under the jurisdiction

of the Secretary of the Interior by law or

administrative arrangement including

the National Petroleum Reserve-Alaska

(NPR–A). However, § 3103.4–4 of this

chapter does not apply to the NPR–A.

Dated: April 11, 2000.

Kathy Karpan,

Acting Principal Deputy Assistant Secretary,

Land and Minerals Management.

[FR Doc. 00–10150 Filed 4–25–00; 8:45 am]

BILLING CODE 4310–84–P