61624 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Rules and Regulations 

DEPARTMENT OF THE INTERIOR 

Bureau of Land Management 

43 CFR Part 3100 

[LLWO310000.L13100000.PP0000–241A.00] 

RIN 1004–AE04 

Promotion of Development, Reduction 

of Royalty Rates for Stripper Well and 

Heavy Oil Properties 

AGENCY: Bureau of Land Management, 

Interior. 

ACTION: Final rule. 

SUMMARY: The Bureau of Land 

Management (BLM) is removing 

portions of two regulations in order to 

characterize accurately the current 

status of two programs that have been 

terminated. In the past, the programs 

reduced royalty rates for stripper well 

properties and for heavy oil properties, 

so that Federal lessees would have 

incentives to keep economically 

marginal oil wells in production. This 

rule provides for record retention and 

correction of errors in calculation of 

royalties requirements that enable the 

Office of Natural Resources Revenue 

(ONRR) to continue to verify that 

royalties associated with past 

production were correctly paid. 

DATES: Effective October 6, 2010. 

ADDRESSES: You may mail suggestions 

or inquiries to the Bureau of Land 

Management, Division of Fluid 

Minerals, WO–310, 1849 C Street, NW., 

Washington, DC 20240–0001. 

FOR FURTHER INFORMATION CONTACT: 

Rudy Baier, Bureau of Land 

Management, 202–912–7146. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Basics 

B. Termination 

C. Energy Policy Act 

II. Discussion of the Final Rule 

III. Procedural Matters 

I. Background 

A. Basics 

Section 39 of the Mineral Leasing Act 

authorizes the Secretary of the Interior 

to waive, suspend, or reduce the rental, 

or minimum royalty, or reduce the 

royalty on an entire leasehold, or on any 

tract or portion thereof segregated for 

royalty purposes, for the purpose of 

encouraging the greatest ultimate 

recovery of oil, gas, and other minerals, 

and in the interest of conservation of 

natural resources (1) whenever, in his 

judgment, it is necessary to do so in 

order to promote development; or (2) 

whenever, in his judgment, the leases 

cannot be successfully operated under 

the terms provided therein (30 U.S.C. 

209). 

The BLM’s regulations at 43 CFR 

3103.4 include a provision authorizing 

royalty relief on a case-by-case 

application basis (43 CFR 3103.4–1), as 

well as provisions establishing 

categorical royalty reductions for two 

categories of oil-producing properties: 

Stripper wells (43 CFR 3103.4–2) and 

heavy oil (43 CFR 3103.4–3). The BLM 

promulgated the latter two provisions in 

1992 and 1996, respectively (57 FR 

35973 (Aug. 11, 1992); 61 FR 4750 (Feb. 

8, 1996)). 

A stripper well property, within the 

meaning of section 3103.4–2, is any 

Federal lease or portion thereof 

segregated for royalty purposes, a 

communitization agreement, or a 

participating area of a unit agreement, 

operated by the same operator, that 

produces an average of less than 15 

barrels of oil per eligible well per wellday for the qualifying period (43 CFR 

3103.4–2(a)(1)). 

A heavy oil property, within the 

meaning of section 3103.4–3, is any 

Federal lease or portion thereof 

segregated for royalty purposes, a 

communitization area, or a unit 

participating area, operated by the same 

operator, that produces crude oil with a 

weighted average gravity of less than 20 

degrees as measured on the American 

Petroleum Institute scale (43 CFR 

3103.4–3(a)(1)). 

B. Termination 

Sections 3103.4–2 and 3103.4–3 

include a total of four provisions (two 

in each regulation) that authorize 

termination of the royalty reduction 

programs for stripper well properties 

and heavy oil properties. The provision 

for heavy oil properties (43 CFR 3103.4– 

3(b)(6)(ii)) and the analogous provision 

for stripper well properties (43 CFR 

3103.4–2(b)(5)) state that royalty 

reduction benefits may be terminated if 

the Secretary determines that royalty 

rate reductions have not been effective. 

In addition, both sections authorize 

termination if oil prices exceed specific 

thresholds. Section 3103.4–2(b)(4) 

(describing the royalty reduction 

program for stripper well properties) 

states that upon 6 months’ notice in the 

Federal Register, the BLM may 

terminate royalty rate reduction benefits 

after a determination that the oil price, 

adjusted for inflation by the BLM and 

the ONRR, using the implicit price 

deflator for gross national product with 

1991 as the base year, remains on 

average above $28 per barrel, based on 

West Texas Intermediate crude average 

posted price for a period of 6 

consecutive months. A generally 

analogous provision for heavy oil 

properties sets the threshold price for 

termination or suspension at $24 per 

barrel with 1991 as the base year (43 

CFR 3103.4–3(b)(6)(i)). 

Exercising its authority under the 

‘‘price-threshold’’ provisions described 

above, the BLM terminated the program 

for stripper well properties (70 FR 

42093 (July 21, 2005)). The BLM 

suspended and subsequently terminated 

the program for heavy oil properties (70 

FR 21810 (April 27, 2005); 72 FR 60691 

(Oct. 25, 2007)). The effective dates of 

the terminations were February 1, 2006, 

for stripper well properties and May 1, 

2008, for heavy oil properties. 

C. Energy Policy Act 

Section 343 of the Energy Policy Act 

is titled, ‘‘Marginal Property Production 

Incentives,’’ and generally defines 

‘‘marginal property’’ as an onshore, gasor oil-producing Federal property with 

an average daily production of less than 

15 barrels of oil per well, or less than 

90,000,000 British thermal units of 

natural gas per well. Average daily 

production is to be based only on wells 

that produce on more than half of the 

days during the 3 most recent 

production months (42 U.S.C. 15903(a)). 

Section 343 also states that, until such 

time as the Secretary issues regulations 

that prescribe different standards or 

requirements, the Secretary shall reduce 

the royalty rate on (1) oil production 

from marginal properties if the spot 

price of West Texas Intermediate crude 

oil at Cushing, Oklahoma, is, on 

average, less than $15 per barrel 

(adjusted in accordance with the 

Consumer Price Index for all-urban 

consumers, United States city average, 

as published by the Bureau of Labor 

Statistics) for 90 consecutive trading 

days; and (2) gas production from 

marginal properties if the spot price of 

natural gas delivered at Henry Hub, 

Louisiana, is, on average, less than $2.00 

per million British thermal units 

(adjusted in accordance with the 

Consumer Price Index for all-urban 

consumers, United States city average, 

as published by the Bureau of Labor 

Statistics) for 90 consecutive trading 

days (42 U.S.C. 15903(b)). 

The BLM has issued a notice 

explaining that Section 343 of the 

Energy Policy Act has taken the place of 

the royalty reduction program for 

stripper well properties until the 

Secretary of the Interior issues 

regulations prescribing different relief 

(71 FR 71187 (Dec. 8, 2006)). 

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Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Rules and Regulations 61625 

II. Discussion of the Final Rule 

The purpose of this rule is to avoid 

confusion regarding the continued 

availability of royalty relief under the 

BLM’s regulations. Categorical royalty 

relief pursuant to the existing codified 

regulations is no longer available for 

current production, since the BLM has 

terminated the regulatory programs that 

established royalty relief and Congress 

has enacted a superseding relief 

program for marginal wells. The current 

regulations provide for royalty relief on 

a case-by-case basis. 

However, it is inappropriate to 

rescind all of the provisions of the 

regulations that provide for royalty 

relief. While royalty relief is no longer 

available for current production, prior 

production continues to be subject to 

audits and, when appropriate, corrective 

actions. The Federal Oil and Gas 

Royalty Simplification and Fairness Act 

(30 U.S.C. 1701, et seq.) provides for a 

7-year statute of limitations for the 

ONRR to pursue a demand for royalty 

following the date the obligation became 

due, i.e., the month in which oil or gas 

is produced (30 U.S.C. 1724(b)(1)). As a 

result, the ONRR continues to verify 

that royalties associated with the 

stripper well and heavy oil royalty rate 

reduction programs were correctly paid, 

and the BLM may still terminate relief 

retroactively if such relief was based on 

manipulation of normal production or 

adulteration of oil sold. Since the ONRR 

and cooperating State auditors continue 

to perform audits, recalculate royalty 

rates improperly calculated, and, 

together with the BLM, take compliance 

actions for production manipulation, 

the substance of existing 43 CFR 

3103.4–2(b)(3)(v), (vi), and (vii) as well 

as 43 CFR 3103.4–3(b)(5)(vi) and (vii) is 

retained and redesignated. This will 

avoid any dispute over the continuing 

obligation to maintain records for BLM 

or ONRR inspection and to pay, upon 

demand, any underpaid royalties with 

interest or receive credits for overpaid 

royalties with interest. 

Besides removing provisions referring 

to royalty relief for stripper well 

properties and heavy oil properties, this 

rule updates 43 CFR 3100.0–9(b) to 

remove a reference to 43 CFR 3103.4– 

1(d), which was removed in a previous 

rulemaking. The remainder of 43 CFR 

3100.0–9(b) provides for information 

collection by the ONRR and is otherwise 

unchanged so that the ONRR will be 

able to verify that royalties associated 

with past production were correctly 

paid. In addition, this rule: (1) Corrects 

a typographical error in existing 43 CFR 

3103.4–2(b)(v) (redesignated as 43 CFR 

3103.4–2(a)), and (2) removes from 

existing 43 CFR 3103.4–3(b)(5)(vi) two 

references to existing paragraph (b) that 

will be confusing once that paragraph is 

redesignated as 43 CFR 3103.4–3(a). 

This rule may be issued without first 

publishing a proposed rule for public 

comment. Pursuant to 5 U.S.C. 

553(b)(3)(B), the BLM for good cause 

finds that notice and public procedure 

are unnecessary, since the royalty relief 

programs for stripper wells and heavy 

oil properties already are terminated, 

and the Energy Policy Act of 2005 took 

the place of the royalty reduction 

program for stripper well properties 

until regulations governing this area are 

promulgated. Additionally, the BLM for 

good cause finds under 5 U.S.C. 

553(d)(3) that this removal may properly 

take effect upon publication since it 

does not require any change in conduct 

by any regulated party. 

III. Procedural Matters 

Executive Order 12866, Regulatory 

Planning and Review 

The BLM has determined that this 

rule is not a ‘‘significant regulatory 

action’’ within the meaning of Executive 

Order 12866. 

• This rule will not have an annual 

effect on the economy of $100 million 

or more, and will not adversely affect in 

a material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, or tribal 

governments or communities. This rule 

will not have an impact on the economy 

because it is a ministerial action. 

• This rule will not create 

inconsistencies with other agencies’ 

actions. No other agency has 

jurisdiction over the rate of royalty for 

minerals produced on Federal lands. 

The BLM has coordinated this 

rulemaking with the ONRR, the agency 

that is responsible for enforcing royalty 

payment requirements. 

• This rule will not materially affect 

entitlements, grants, loan programs, or 

the rights and obligations of their 

recipients. 

• This rule will not raise novel legal 

or policy issues because it only removes 

from the regulations royalty rate 

reduction programs that are not in effect 

and will not be reinstated. 

Regulatory Flexibility Act 

This rule will not have a significant 

economic effect on a substantial number 

of small entities as defined in the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.) because the relief programs have 

been terminated and replaced by a new 

statute. Accordingly, a final Regulatory 

Flexibility Analysis is not required, and 

a Small Entity Compliance Guide is not 

required. 

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 will not have an annual 

effect on the economy of $100 million 

or more. 

• This rule will not materially alter 

current BLM policy. 

• This rule will not cause a major 

increase in costs or prices for 

consumers, individual industries, 

Federal, State, or local government 

agencies, or geographic regions. 

• This rule will not have significant 

adverse effects on competition, 

employment, investment, productivity, 

innovation, or the ability of U.S.-based 

enterprises to compete with foreignbased enterprises. 

Unfunded Mandates Reform Act 

In accordance with the criteria in the 

Unfunded Mandates Reform Act (2 

U.S.C. 1501 et seq.), the BLM has 

determined that this rule contains no 

regulatory requirements that might 

significantly or uniquely affect small 

governments. The BLM has also 

determined that this rule does not 

include a Federal mandate that may 

result in estimated annual costs of $100 

million or more to State, local, and 

tribal governments in the aggregate, or 

to the private sector. Accordingly, the 

BLM is not required to prepare a 

budgetary impact statement or a plan for 

providing notice to any small 

governments. 

Executive Order 12630, Takings 

The BLM has determined that this 

rule does not have takings implications. 

A takings implication assessment is not 

required. 

Executive Order 13132, Federalism 

The final rule will not have a 

substantial direct effect on the States, on 

the relationship between the National 

and State Governments, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, the 

BLM has determined that this final rule 

does not warrant preparation of a 

Federalism Assessment. 

Executive Order 12988, Civil Justice 

Reform 

The BLM has determined that this 

rule meets the requirements of sections 

3(a) and 3(b)(2) of Executive Order 

12988, and therefore does not unduly 

burden the judicial system. 

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61626 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Rules and Regulations 

Paperwork Reduction Act 

This rule does not initiate any new 

information collection requirements. 

This rule does not affect any existing 

information collection requirements 

which are assigned the clearance 

number 1010–0090 and are 

administered by the ONRR. 

Accordingly, no analysis or action is 

necessary under the Paperwork 

Reduction Act. 

National Environmental Policy Act 

The BLM has determined that this 

rule is not a major Federal action within 

the meaning of 40 U.S.C. 4332(2)(C). 

This rule removes regulations that 

established two programs that have been 

terminated. The removal of the 

regulations merely clarifies the 

programs’ current status, and is thus a 

ministerial act. No analysis is required 

under the National Environmental 

Policy Act. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

The BLM has determined that this 

rule does not have ‘‘tribal implications’’ 

within the meaning of Executive Order 

13174. 

Executive Order 13211, Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use 

Under Executive Order 13211, a 

‘‘significant energy action’’ is one that is 

‘‘significant’’ under Executive Order 

12866 and is likely to have a significant 

adverse energy effect. The BLM has 

determined that this rule is not 

‘‘significant’’ within the meaning of 

Executive Order 12866. Moreover, the 

BLM has determined that this rule is not 

likely to have a significant adverse 

energy effect, in view of the price data 

that led to the termination of royalty 

reduction benefits for stripper well 

properties and heavy oil properties. 

Accordingly, the BLM has determined 

that this rule is not a ‘‘significant energy 

action’’ requiring a ‘‘Statement of Energy 

Effects’’ within the meaning of Executive 

Order 13211. 

Author 

The principal author of this final rule 

is Rudy Baier, Minerals and Realty 

Management, with the assistance of Jean 

Sonneman of the Division of Regulatory 

Affairs, Bureau of Land Management, 

Washington, DC. 

List of Subjects in 43 CFR Part 3100 

Mineral royalties, Oil and gas 

exploration and production, Public 

lands—mineral resources, Reporting 

and recordkeeping requirements, and 

Surety bonds. 

■ For the reasons stated in the preamble, 

and under the authorities cited below, 

part 3100, Subchapter C, Chapter II of 

Title 43 of the Code of Federal 

Regulations, is amended as set forth 

below: 

Ned Farquhar, 

Deputy Assistant Secretary, Land and 

Minerals Management. 

PART 3100—OIL AND GAS LEASING 

■ 1. The authority citation for part 3100 

continues to read as follows: 

Authority: 30 U.S.C. 189 and 359; 43 

U.S.C. 1732(b), 1733, and 1740; and the 

Energy Policy Act of 2005 (Pub. L. 109–58). 

Subpart 3103—Fees, Rentals and 

Royalty 

§ 3103.4–1 [Amended] 

■ 2. Section 3103.4–1(b)(1) is amended 

by removing the phrase ‘‘on other than 

stripper oil well leases or heavy oil 

properties’’ and the sentence ‘‘(Royalty 

reductions specifically for stripper oil 

well leases or heavy oil properties are 

discussed in § 3103.4–2 and § 3103.4–3 

respectively.)’’. 

§ 3103.4–2 [Amended] 

■ 3. Section 3103.4–2 is amended as 

follows: 

■ a. Remove paragraph (a), the 

introductory text of paragraph (b), 

paragraphs (b)(1)and (b)(2), the 

introductory text of paragraph (b)(3), 

and paragraphs (b)(3)(i), (b)(3)(ii), 

(b)(3)(iii), (b)(3)(iv), (b)(4), (b)(5), (b)(6), 

(b)(7), (b)(8), (b)(9), and (b)(10). 

■ b. Redesignate paragraphs (b)(3)(v), 

(b)(3)(vi), and (b)(3)(vii) as paragraphs 

(a), (b), and (c). 

■ c. Amend redesignated paragraph (a) 

by removing the term ‘‘MSS’’ and adding 

in its place the term ‘‘ONRR’’. 

§ 3103.4–3 [Amended] 

■ 4. Section 3103.4–3 is amended as 

follows: 

■ a. Remove paragraph (a), the 

introductory text of paragraph (b), 

paragraphs (b)(1), (b)(2), (b)(3), and 

(b)(4), the introductory text of paragraph 

(b)(5), and paragraphs (b)(5)(i), (b)(5)(ii), 

(b)(5)(iii), (b)(5)(iv), (b)(5)(v), (b)(6), 

(b)(7), (b)(8), (b)(9), (b)(10), and (b)(11). 

■ b. Redesignate paragraphs (b)(5)(vi) 

and (b)(5)(vii) as paragraphs (a) and (b). 

■ c. Amend redesignated paragraph (a) 

by removing the phrases ‘‘authorized by 

this paragraph (b),’’ and ‘‘of this 

paragraph (b)’’. 

[FR Doc. 2010–25154 Filed 10–5–10; 8:45 am] 

BILLING CODE 4310–84–P 

DEPARTMENT OF TRANSPORTATION 

Federal Motor Carrier Safety 

Administration 

49 CFR Part 395 

[Docket No. FMCSA–2010–0230] 

Hours of Service; Limited Exemption 

for the Distribution of Anhydrous 

Ammonia in Agricultural Operations 

AGENCY: Federal Motor Carrier Safety 

Administration (FMCSA), Department 

of Transportation (DOT). 

ACTION: Notice of final disposition; 

granting of exemption. 

SUMMARY: FMCSA grants a 2-year, 

limited exemption from the Federal 

hours-of-service (HOS) regulations for 

the transportation of anhydrous 

ammonia from any distribution point to 

a local farm retailer or to the ultimate 

consumer, and from a local farm retailer 

to the ultimate consumer, as long as the 

transportation takes place within a 100 

air-mile radius of the retail or wholesale 

distribution point. This exemption 

extends the agricultural operations 

exemption established by section 345 of 

the National Highway System 

Designation Act of 1995, as amended by 

sections 4115 and 4130 of the Safe, 

Accountable, Flexible, Efficient 

Transportation Equity: A Legacy for 

Users (SAFETEA–LU), to certain drivers 

and motor carriers engaged in the 

distribution of anhydrous ammonia 

during the planting and harvesting 

seasons, as defined by the States in 

which the carriers and drivers operate. 

The Agency believes that the exemption 

will achieve a level of safety that is 

equivalent to, or greater than, the level 

that would be achieved absent such 

exemption, based on the terms and 

conditions imposed. The exemption 

preempts inconsistent State and local 

requirements applicable to interstate 

commerce. 

DATES: The exemption is effective 

October 6, 2010. The exemption will 

remain in effect until October 9, 2012 

unless revoked earlier by FMCSA. 

FOR FURTHER INFORMATION CONTACT: 

Thomas L. Yager, Chief, Driver and 

Carrier Operations Division, Office of 

Bus and Truck Standards and 

Operations, Federal Motor Carrier Safety 

Administration, 1200 New Jersey Ave., 

SE., Washington, DC 20590. 

E-mail: MCPSD@dot.gov. Phone (202) 

366–4325. 

SUPPLEMENTARY INFORMATION: 

Legal Basis 

Section 4007(a) of the Transportation 

Equity Act for the 21st Century (TEA– 

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