28636 Federal Register / Vol. 72, No. 98 / Tuesday, May 22, 2007 / Proposed Rules 

§ 100.35–T05–044, Mill Creek, Fort 

Monroe, Hampton, Virginia. 

(a) Regulated area. The regulated area 

is established for the waters of Mill 

Creek, adjacent to Fort Monroe, 

Hampton, Virginia, enclosed by the 

following boundaries: To the north, a 

line drawn along latitude 37°01′00′′ N, 

to the east a line drawn along longitude 

076°18′30′′ W, to the south a line 

parallel with the shoreline adjacent to 

Fort Monroe, and the west boundary is 

parallel with the Route 258—Mercury 

Boulevard Bridge. All coordinates 

reference Datum NAD 1983. 

(b) Definitions. (1) Coast Guard Patrol 

Commander means a commissioned, 

warrant, or petty officer of the Coast 

Guard who has been designated by the 

Commander, Coast Guard Sector 

Hampton Roads. 

(2) Official Patrol means any vessel 

assigned or approved by Commander, 

Coast Guard Sector Hampton Roads 

with a commissioned, warrant, or petty 

officer on board and displaying a Coast 

Guard ensign. 

(3) Participant includes all vessels 

participating in the ‘‘Hampton Cup 

Regatta’’ under the auspices of the 

Marine Event Permit issued to the event 

sponsor and approved by Commander, 

Coast Guard Sector Hampton Roads. 

(c) Special local regulations. (1) 

Except for event participants and 

persons or vessels authorized by the 

Coast Guard Patrol Commander, no 

person or vessel may enter or remain in 

the regulated area. 

(2) The operator of any vessel in the 

regulated area must: 

(i) Stop the vessel immediately when 

directed to do so by any Official Patrol 

and then proceed only as directed. 

(ii) All persons and vessels shall 

comply with the instructions of the 

Official Patrol. 

(iii) When authorized to transit the 

regulated area, all vessels shall proceed 

at the minimum speed necessary to 

maintain a safe course that minimizes 

wake near the race course. 

(d) Enforcement period. This section 

will be enforced from 7:30 a.m. to 6:30 

p.m. on August 10, 11, and 12, 2007. 

Dated: May 11, 2007. 

Larry L. Hereth, 

Rear Admiral, U.S. Coast Guard, Commander, 

Fifth Coast Guard District. 

[FR Doc. E7–9843 Filed 5–21–07; 8:45 am] 

BILLING CODE 4910–15–P 

DEPARTMENT OF THE INTERIOR 

Bureau of Land Management 

43 CFR Part 3130 

[WO–310–1310–PP–241A] 

RIN 1004–AD78 

Oil and Gas Leasing; National 

Petroleum Reserve—Alaska 

AGENCY: Bureau of Land Management, 

Interior. 

ACTION: Proposed rule. 

SUMMARY: The Bureau of Land 

Management (BLM), proposes to amend 

its regulations at 43 CFR part 3130 

pertaining to oil and gas resources in the 

National Petroleum Reserve-Alaska 

(NPR–A). The proposed rule would 

make oil and gas administrative 

procedures in NPR–A consistent with 

Section 347 of the Energy Policy Act of 

2005. The proposed rule would amend 

the administrative procedures for the 

efficient transfer, consolidation, 

segregation, suspension, and unitization 

of Federal leases in the NPR–A. The rule 

would also make changes to the way the 

BLM processes lease renewals, lease 

extensions, lease expirations, lease 

agreements, exploration incentives, 

lease consolidations, and termination of 

administration for conveyed lands in 

the NPR–A. Finally, the rule would 

make the NPR–A regulation on 

additional bonding consistent with the 

regulations that apply outside of the 

NPR–A. 

DATES: Send your comments on this 

proposed rule to the BLM on or before 

July 23, 2007. The BLM will not 

necessarily consider any comments 

received after the above date during its 

decision on the rule. 

ADDRESSES: Commenters may mail 

written comments to the Bureau of Land 

Management, Administrative Record, 

Room 401LS, 1849 C Street, NW., 

Washington, DC 20240; or hand-deliver 

written comments to the Bureau of Land 

Management, Administrative Record, 

Room 401, 1620 L Street, NW., 

Washington, DC 20036. Comments will 

be available for public review at the L 

Street address from 7:45 a.m. to 4:15 

p.m., Eastern Time, Monday through 

Friday, except Federal holidays. 

E-mail: 

comments_washington@blm.gov. 

Federal eRulemaking Portal: http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: Greg 

Noble, Chief, Energy Branch, the BLM’s 

Alaska State Office at (907) 267–1429 or 

Ian Senio at the BLM’s Division of 

Regulatory Affairs at (202) 452–5049. 

Persons who use a telecommunications 

device for the deaf (TDD) may contact 

these persons through the Federal 

Information Relay Service (FIRS) at 

1–800–877–8339, 24 hours a day, 7 days 

a week. 

SUPPLEMENTARY INFORMATION: 

I. Public Comment Procedures 

II. Background 

III. Discussion of Proposed Rule 

IV. Procedural Matters 

I. Public Comment Procedures 

You may submit your comments by 

any one of several methods: 

You may mail your comments to: 

Director (630), Bureau of Land 

Management, 1620 L Street, NW., Suite 

401, Washington, DC 20036, Attention: 

RIN 1004–AD78. 

You may deliver comments to: 1620 L 

Street, NW., Suite 401, Washington, DC 

20036. You may e-mail your comments 

to: comments_washington@blm.gov. 

(Include ‘‘Attention: AD78’’ in the 

subject line.) Please make your 

comments on the 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. 

Before including your address, phone 

number, e-mail address, or other 

personal identifying information in your 

comment, be advised that your entire 

comment, including your personal 

identifying information, may be made 

publicly available at any time. While 

you can ask us in your comment to 

withhold from public review your 

personal identifying information, we 

cannot guarantee that we will be able to 

do so. 

The Department of the Interior may 

not necessarily consider or include in 

the Administrative Record for the final 

rule comments that we receive after the 

close of the comment period (see DATES) 

or comments delivered to an address 

other than those listed above (see 

ADDRESSES). 

II. Background 

Part 3130 of 43 Code of Federal 

Regulations (CFR) contains the 

regulations that apply to oil and gas 

leasing in the NPR–A authorized under 

the Naval Petroleum Reserves 

Production Act of 1976, as amended 

(NPRPA), (42 U.S.C. 6501 et seq.). 

On April 11, 2002 (67 FR 17865), the 

BLM published a final rule that applies 

to operations under Federal oil and gas 

leases in NPR–A and added a new 


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subpart allowing the formation of oil 

and gas units in the NPR–A. 

On August 8, 2005, the President 

signed the Energy Policy Act of 2005 

(EPAct of 2005) (Pub. L. 109–58). 

Section 347 of the EPAct of 2005 

amends the NPRPA. These amendments 

require that the BLM revise our existing 

regulations on: 

(A) Lease extensions and renewals; 

(B) Participation in oil and gas units; 

(C) Production allocation; 

(D) Termination of administration of 

conveyed mineral estate; and 

(E) Waiver, suspension, and reduction 

of rental, minimum royalty, or royalty. 

This proposed rule would make the 

part 3130 regulations on these subjects 

consistent with the EPAct of 2005. The 

rule would also make other changes to 

NPR–A regulations affecting 

administration of NPR–A leases and 

units. 

III. Discussion of the Proposed Rule 

Section 3130.0–3 Authority 

This proposed rule would amend the 

authority section by adding a reference 

to the Energy Policy Act of 2005 (Pub. 

L. 109–58) in a new paragraph (d). 

Section 3130.0–5 Definitions 

The EPAct of 2005 uses three terms 

that we also use in this proposed rule. 

All three terms are used in the 

provisions having to do with the 

proposed methodology for allocating 

production among committed tracts in a 

unit in the NPR–A (see proposed section 

3137.23(g)). If the unit included nonFederal land, the methodology must 

take into account reservoir 

heterogeneity and area variation in 

reservoir producibility. This section of 

the rule would define the terms 

‘‘production allocation methodology,’’

‘‘reservoir heterogeneity,’’ and 

‘‘variation in reservoir producibility’’ in 

a manner consistent with normal usage 

in the field. 

Section 3133.3 Under what 

circumstances will BLM waive, suspend, 

or reduce the rental, royalty, or 

minimum royalty on my NPR–A lease? 

The EPAct of 2005 addresses the 

circumstances under which the BLM 

would consider waiving, suspending, or 

reducing the rental, royalty, or 

minimum royalty on an NPR–A lease. 

This section of existing regulations 

would be amended by this rule and 

under new paragraph (a)(2) the BLM 

could waive, suspend, or reduce the 

rental, royalty, or minimum royalty on 

an NPR–A lease if it was necessary to 

promote development or the BLM 

determined that the lease could not be 

successfully operated under the terms of 

the lease. 

Also, as a result of changes made to 

the NPRPA by the EPAct of 2005, this 

proposed rule would change existing 

paragraph (b) by requiring the BLM to 

consult with the State of Alaska and the 

North Slope Borough within 10 days of 

receiving an application for waiver, 

suspension, or reduction of rental, 

royalty, or minimum royalty. Under 

new paragraph (b), the BLM would not 

approve an application for these 

benefits (under § 3133.4) until at least 

30 days after the consultation is 

completed. 

This proposed rule would add a new 

paragraph (c) to this section. Under this 

new paragraph, if a lease included land 

that was made available for acquisition 

by a Regional Corporation (as defined in 

43 U.S.C. 1602) under Section 1431(o) 

of the Alaska National Interest Lands 

Conservation Act (16 U.S.C. 3101 et 

seq.), the BLM would only approve a 

waiver, suspension, or reduction of 

rental, royalty, or minimum royalty if 

the Regional Corporation concurred. 

This change is necessary because the 

statute requires concurrence from the 

Regional Corporation prior to approval 

of these actions. 

Section 3133.4 How do I apply for a 

waiver, suspension or reduction of 

rental, royalty or minimum royalty for 

my NPR–A lease? 

Under this proposed rule, existing 

paragraph (a)(6) would have a new 

requirement that an applicant who is 

applying for a waiver, suspension, or 

reduction of rental, royalty, or minimum 

royalty demonstrate that the waiver, 

suspension, reduction of the rental, 

royalty, or minimum royalty encourages 

the greatest ultimate recovery of oil or 

gas or it is in the interest of 

conservation, and all the facts 

demonstrate that it cannot successfully 

operate the lease under its terms. The 

new requirement is as a result of 

changes that the EPAct of 2005 made to 

NPRPA. 

This rule would also make a minor 

editorial change to existing paragraph 

(a)(7) by replacing ‘‘can’t’’ with 

‘‘cannot.’’

Section 3134.1–2 Additional Bonds 

Changes to the existing paragraph (a) 

on additional bonding would allow the 

BLM to require additional bonding for 

all NPR–A leases, not only special areas, 

using the criteria of section 3104.5(b) of 

the existing regulations. This rule would 

add a cross reference to existing section 

3104.5(b), which would allow the BLM 

to require an increase in the amount of 

any NPR–A lease bond if the BLM 

determined that the operator posed a 

risk due to factors, including, but not 

limited to: 

(A) A history of previous violations; 

(B) A notice from the Minerals 

Management Service (MMS) that there 

are uncollected royalties due; or 

(C) The total cost of plugging existing 

wells and reclaiming lands exceeds the 

present bond amount based on the 

estimates determined by the BLM. 

The existing regulations only allow 

BLM to increase the bonding amount in 

the Special Areas as defined in the 

NPRPA. This rule would allow BLM to 

increase the bonding amount on all 

NPR–A leases and would make the 

NPR–A oil and gas regulations 

consistent with the regulations that 

currently apply to Federal oil and gas 

leases outside of the NPR–A. 

Section 3135.1–4 Effect of Transfer of 

a Tract 

This proposed rule would revise 

paragraph (a) of this section to make the 

existing provisions clearer. This 

proposal would not change the meaning 

or intent of this paragraph. 

This proposed rule would revise the 

provisions on segregation in paragraph 

(b) of this section by changing the 

standard that the BLM applies when 

determining if a segregated lease should 

continue in full force and effect. The 

existing standard is that a segregated 

lease remains in full force and effect if 

the BLM determines that oil and gas is 

being produced in paying quantities 

from that segregated portion of the lease 

area or so long as drilling or well 

reworking operations, either actual or 

constructive, are being conducted. The 

new standard would be that a lease 

would continue in full force and effect 

as long as the activities on the 

segregated lease support lease extension 

under the regulations in section 3135.1–

5. That section would be revised by this 

rule as well and it is discussed further 

below. 

Section 3135.1–5 Extension of Lease 

Existing regulations on lease 

extensions require that the BLM extend 

the term of a lease beyond its primary 

term so long as: 

(A) Oil or gas is produced from the 

lease in paying quantities; or 

(B) Drilling or reworking operations, 

actual or constructive, as approved by 

the BLM, are being conducted on the 

lease. 

This proposed rule would add a new 

condition to paragraph (a) of this section 

under which the BLM would grant a 

lease extension in cases where the BLM 

has determined in writing that oil or gas 


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is capable of being produced in paying 

quantities from the lease. 

The proposed rule would amend 

existing paragraph (a) by breaking it into 

subparagraphs so that it is easier to read. 

The last sentence of paragraph (a) would 

be rewritten to make it clear that the 

BLM approves drilling or reworking 

operations, actual or constructive, rather 

than the Secretary. 

This rule would also add a new 

paragraph (b) to this section that 

explains that NPR–A leases expire on 

the 30th anniversary date of the original 

issuance date of the lease unless oil or 

gas is being produced in paying 

quantities from the lease. The new 

paragraph further explains that if a lease 

contains a well that is capable of 

production, but the lease does not 

produce the oil or gas due to 

circumstances beyond the lessee’s 

control, the lessee may apply for a 

suspension under section 3135.2. If the 

BLM approved the suspension, the lease 

would not expire on the 30th 

anniversary of the original issuance date 

of the lease. These proposed changes are 

in response to changes to NPRPA made 

by the EPAct of 2005. 

This rule would amend paragraph (c) 

of the existing regulation by making it 

clear that the directional wells 

discussed in that paragraph are the 

BLM-approved directional wells. This is 

a clarification of existing practice. 

Section 3135.1–6 Lease Renewal 

This proposed rule would add a new 

section on lease renewals to the existing 

NPR–A regulations that would be based 

on changes the EPAct of 2005 made to 

the NPRPA. The EPAct of 2005 

addresses, and this section would 

address, lease renewals in two parts: 

those leases that have a discovery of 

hydrocarbons and those leases that do 

not have a discovery. 

With a Discovery. Under this 

proposed section, at any time after the 

fifth year of the primary term of a lease, 

the BLM could approve a 10-year lease 

renewal for a lease on which there has 

been a well drilled and a discovery of 

hydrocarbons, even if the BLM had 

determined that the well is not capable 

of producing oil or gas in paying 

quantities. Under this section the BLM 

must receive the lessee’s application for 

lease renewal no later than 60 days prior 

to the expiration of the primary term of 

the lease. 

This section would require that the 

renewal application provide evidence, 

and a certification by the lessee, that the 

lessee has discovered oil or gas on the 

leased lands in such quantities that a 

prudent operator would hold the lease 

for potential future development. 

Under this proposed section, the BLM 

would approve the application if it 

determined that a discovery was made 

and that a prudent operator would hold 

the lease for future development. 

The lease renewal would be effective 

on the day following the end of the 

primary term of the lease. The BLM may 

approve the lease renewal on the 

condition that the lessee drills one or 

more additional wells or acquires and 

analyzes more well data, seismic data, 

or geochemical survey data prior to the 

end of the primary term of the lease. 

The BLM is interested in all 

comments that you may have on what 

constitutes a ‘‘discovery’’ for purposes 

of lease renewal. If today’s proposal 

were adopted, the BLM would use 

professional judgment, on a case-by-case 

basis, to make a determination on 

whether there is a discovery. However, 

we are especially interested in 

comments regarding whether any 

specific criteria should be used to make 

this determination or, if by the very 

nature of the determination, each case 

should be judged individually. 

Without a Discovery. Under this 

proposed section, at any time after the 

fifth year of the primary term of a lease, 

the BLM could approve an application 

for a 10-year lease renewal for a lease on 

which there has not been a discovery of 

oil or gas. The BLM must receive the 

lessee’s application no later than 60 

days prior to the expiration of the 

primary term of the lease. 

Under this proposed rule, the renewal 

application must: 

(A) Provide sufficient evidence that 

the lessee has diligently pursued 

exploration that warrants continuation 

of the lease with the intent of continued 

exploration or future potential 

development of the leased land. The 

application must show the lessee has 

drilled one or more wells or acquired 

seismic or geochemical data indicating 

a probability of future success, and the 

application must include a plan for 

future exploration; or 

(B) Show that all or part of the lease 

is part of a unit agreement covering a 

lease that qualifies for renewal without 

a discovery and that the lease has not 

been previously contracted out of the 

unit. 

The BLM would approve the renewal 

application if it determined that the 

application satisfied the requirements of 

paragraph (b)(2)(A) or (B) of this section. 

If the BLM approved the application for 

lease renewal, the applicant would be 

required to submit to the BLM a fee of 

$100 per acre within 5 business days of 

receiving notification of the renewal 

approval. 

The lease renewal would be effective 

on the day following the end of the 

primary term of the lease. The BLM may 

approve the lease renewal on the 

condition that the lessee drills one or 

more additional wells or acquires and 

analyzes more well data, seismic data, 

or geochemical survey data prior to the 

end of the primary term of the lease. 

The renewed lease would be subject 

to the terms and conditions applicable 

to new oil and gas leases issued under 

the Integrated Activity Plan in effect on 

the date that the BLM issues the 

decision to renew the lease. 

Section 3135.1–7 Consolidation of 

Leases 

This proposed rule would revise the 

consolidation provisions in existing 

regulations having to do with the term 

of a consolidated lease. Under the 

existing regulations, the term of a 

consolidated lease is extended beyond 

the primary term of the lease only as 

long as oil or gas is produced in paying 

quantities or approved constructive or 

actual drilling or reworking operations 

are conducted on the lease. Under 

paragraph (d) of this proposed rule, the 

term of a consolidated lease would be 

extended or renewed, as appropriate, 

under the extension or renewal 

provisions of the regulations. The 

change would recognize that the new 

standards in the extension and renewal 

provisions of this rule apply to 

consolidated leases. 

This rule would amend paragraph (e) 

of the existing regulation by making it 

clear that the highest of the royalty or 

rental rates of any original lease apply 

to the consolidated lease. This is 

consistent with existing policy and 

practice. 

Section 3135.1–8 Termination of 

Administration for Conveyed Lands and 

Segregation 

This rule would add a new section 

concerning the waiver of administration 

for conveyed lands in a lease. This new 

section is necessary because of changes 

that the EPAct of 2005 made to the 

NPRPA. Under this new section, the 

BLM would be required to terminate 

administration of any oil and gas lease 

if all of the mineral estate is conveyed 

to the Arctic Slope Regional Corporation 

(ASRC). The ASRC would then assume 

the lessor’s obligation to administer any 

oil and gas lease. 

This section would explain that if a 

conveyance of the mineral estate does 

not include all of the land covered by 

an oil and gas lease, the lease would be 

segregated into two leases, one of which 

will cover only the mineral estate 

conveyed. The ASRC would assume 


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Federal Register / Vol. 72, No. 98 / Tuesday, May 22, 2007 / Proposed Rules 28639 

administration of the lease within the 

conveyed mineral estate. 

Under this proposed rule, if the ASRC 

assumed administration of a lease under 

paragraphs (a) or (b) of this section, all 

lease terms, the BLM regulations, and 

the BLM orders in effect on the date of 

assumption would continue to apply to 

the lessee’s obligations under the lease. 

All such obligations would remain 

enforceable by the ASRC as the lessor 

until the lease terminated. 

In a case in which a conveyance of a 

mineral estate described in paragraph 

(b) of this section does not include all 

of the land covered by the oil and gas 

lease, a person who owns part of the 

mineral estate covered by the lease is 

entitled to the revenues associated with 

its mineral rights, including all royalties 

resulting from oil and gas produced 

from or allocated to that part of the 

mineral estate. 

Section 3137.5 What terms do I need 

to know to understand this subpart? 

This rule would make one change to 

the definition of ‘‘participating area’’ by 

replacing the word ‘‘contain’’ with the 

phrase ‘‘are proven to be productive.’’

Existing regulations imply that every 

committed tract within a participating 

area must contain a well that meets the 

productivity criteria specified in the 

unit agreement. The rule would clarify 

that the participating area consists of 

tracts that have been proven productive 

by a well meeting the productivity 

criteria, but that not every committed 

tract in the participating area would 

necessarily contain a well meeting the 

productivity criteria. 

Section 3137.11 What consultation 

must BLM perform if lands in the unit 

area are owned by the Arctic Slope 

Regional Corporation or the State of 

Alaska? 

This rule would add a new section on 

consultation if lands in a unit are owned 

by the ASRC or the State of Alaska. This 

section is based on changes that the 

EPAct of 2005 made to the NPRPA. The 

new section requires that if the BLM 

administers a unit containing tracts 

where the mineral estate is owned by 

the ASRC or the State of Alaska, or if a 

proposed unit contains tracts where the 

mineral estate is owned by the ASRC or 

the State of Alaska, the BLM would 

consult with and provide opportunities 

for participation with respect to the 

creation or expansion of the unit by: 

(A) The ASRC, if the unit acreage 

contains the ASRC’s mineral estate; or 

(B) The State of Alaska, if the unit 

acreage contains the state’s mineral 

estate. 

The EPAct of 2005 requires that the 

BLM provide opportunity for 

participation by the State of Alaska and 

the ASRC in the creation and expansion 

of units if those units include acreage in 

which the State of Alaska or the ASRC 

has an interest in the mineral estate. If 

a proposed oil and gas unit included 

lands where one or both of these entities 

owned an interest in the mineral estate, 

the BLM would require the unit 

proponent to allow the State of Alaska 

and/or the ASRC to participate in the 

negotiations of the unit agreement terms 

and the unit agreement area. This would 

allow the State of Alaska and the ASRC 

to protect their interests in the unit 

agreement before they committed their 

tracts to the unit. 

Similarly, if a unit expansion is 

proposed, and the existing unit or the 

acreage included in the expansion 

included lands in which the State of 

Alaska or the ASRC owned a mineral 

interest, both parties would participate 

in the negotiation of the terms of the 

expanded unit and in the determination 

of the expanded unit area. 

‘‘Participation’’ in this case does not 

mean sharing of revenues or production. 

Instead, the term means participation by 

the ASRC or the state, as applicable, in 

the process of government oversight, 

through consultation, of the unit’s 

creation or expansion. 

Section 3137.21 What must I include 

in an NPR–A unit agreement? 

The rule would make one minor 

change to section 3137.21(a)(3) by 

replacing the word ‘‘proposed’’ with the 

word ‘‘anticipated.’’ Existing regulations 

assume that in all cases the applicant 

would be in a position to propose the 

participating area size and well 

locations at the application stage. The 

wording change would recognize that at 

the early application stage in the 

process an applicant may not be able to 

propose the participating area size or 

well locations. Using the word 

‘‘anticipated’’ instead of ‘‘proposed’’

better reflects on-the-ground 

circumstances. 

This proposed rule would amend the 

existing paragraph (a)(5) of this section 

by requiring that unit agreements that 

contain the ASRC’s mineral estate or the 

state’s mineral estate must acknowledge 

that, with respect to those two entities, 

the BLM consulted with and provided 

opportunities for participation in the 

creation of the unit and that the BLM 

will consult with and provide 

opportunities for participation in the 

expansion of the unit, as appropriate. 

Existing regulations do not contain this 

consultation requirement, which is now 

necessary due to changes to NPRPA 

made by the EPAct of 2005. As in 

proposed section 3137.21, 

‘‘participation’’ by the ASRC or the state 

means participation in the oversight 

process through consultation with the 

BLM. 

This rule would also make a minor 

editorial change to existing paragraph 

(a)(5) (renumbered paragraph (a)(6)) by 

adding ‘‘that’’ between ‘‘subpart’’ and 

‘‘you.’’

Section 3137.23 What must I include 

in my NPR–A unitization application? 

This proposed rule would add to the 

existing regulation a provision requiring 

in the unit application a discussion of 

the proposed methodology for allocating 

production among the committed tracts. 

If the unit included non-Federal oil and 

gas mineral estate, new paragraph (g) 

would require that the application 

explain how the methodology would 

take into account reservoir 

heterogeneity and area variation in 

reservoir producibility. These changes 

are necessary because of changes that 

the EPAct of 2005 made to the NPRPA. 

Also, as discussed earlier, the terms 

‘‘reservoir heterogeneity’’ and ‘‘reservoir 

producibility’’ would be defined in 

section 3130.0–5 of this rule. 

Section 3137.41 What continuing 

development obligations must I define 

in a unit agreement? 

This proposed rule would amend the 

section on continuing development 

obligations by requiring that a unit 

agreement provide for the submission of 

supplemental or additional plans of 

development which obligate the 

operator to a program of exploration and 

development. The existing regulations 

require that the unit agreement actually 

obligate the operator to a program of 

exploration and development. The 

change recognizes that at the early 

stages of a unit agreement, an operator 

may not be able to identify the program 

of exploration and development and 

therefore it might not be possible for an 

operator to commit to one at that time. 

The proposal would allow an operator 

to submit plans of development later in 

the process, allowing the operator to 

collect additional data prior to requiring 

the operator to obligate itself to a 

program of exploration and 

development. 

Section 3137.80 What are 

participating areas and how do they 

relate to the unit agreement? 

This proposed rule would make two 

changes to this section. The first change 

would revise paragraph (a) of the 

section by replacing ‘‘that contain’’ with 

‘‘that are proven to be productive.’’ The 


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existing regulations imply that every 

committed tract within a participating 

area must contain a well that meets the 

productivity criteria specified in the 

unit agreement. The revision would 

make it clear that a participating area 

contains committed tracts in a unit area 

that are proven to be productive by a 

well meeting the productivity criteria 

specified in the unit agreement, but that 

not every committed tract in the 

participating area would necessarily 

contain a well meeting the productivity 

criteria. 

The second change this rule would 

make is to paragraph (b) of this section. 

Under the new rule, an applicant would 

be required to include ‘‘a description of 

the anticipated participating area(s) size 

in the unit agreement’’ rather than 

merely stating that the unit area 

‘‘contain’’ a well meeting the 

productivity criteria. This change makes 

it clear that the application must 

contain a description of the anticipated 

participating area size. 

Section 3137.81 What is the function 

of a participating area? 

The rule would revise paragraph (a) of 

this section by changing how the BLM 

allocates production, for royalty 

purposes, to each committed tract 

within the participating area. Under 

existing regulations, the BLM allocates 

to each committed tract within the 

participating area in the same 

proportion as that tract’s surface in the 

participating area to the total acreage in 

the participating area. Under this 

proposed rule, the BLM would allocate 

production for royalty purposes to each 

committed tract within the participating 

area using the allocation methodology 

agreed to in the unit agreement (see 

section 3137.23(g)). This change would 

allow for variations in the reservoir 

geology and producibility when 

calculating allocations for royalty 

purposes. 

Section 3137.85 What is the effective 

date of a participating area? 

This proposed rule would revise 

paragraph (b) of this section by changing 

how the BLM determines the effective 

date of a modified participating area or 

modified allocation schedule. Under 

existing regulations, the effective date of 

a modified participating area or 

modified allocation schedule is the 

earlier of the first day of the month in 

which you: (1) Complete a new well 

meeting the productivity criteria; or (2) 

Should have known you need to revise 

the allocation schedule. Under this 

proposed rule, the effective date of a 

modified participating area or allocation 

schedule would be the earlier of the first 

day of the month in which you file a 

proposal for modification or such other 

date as may be provided in the unit 

agreement. It has been common practice 

with oil and gas units administered by 

the State of Alaska to allow for an 

earlier effective date when participating 

areas or allocation schedules are 

modified. 

The proposed rule would allow the 

BLM to approve an earlier effective date 

of the participating area, if it is 

warranted, consistent with the approach 

that the State of Alaska takes. Under this 

proposed rule, rather than just 

determining a fair, current allocation of 

a revised participating area, the BLM 

would be able to approve an effective 

date back in time. This would allow 

corrections of past, errant allocations 

rather than just moving forward with a 

fair allocation from the time new 

information is acquired. This method of 

‘‘backward’’ looking reallocation creates 

a greater administrative workload for 

the BLM and the MMS, but it is the 

superior approach because it would 

allow for corrections of allocations that 

were incorrect and helps to ensure that 

parties to the unit are treated equitably. 

Section 3137.111 When will BLM 

extend the primary term of all leases 

committed to a unit agreement or renew 

all leases committed to the unit? 

This proposed rule would revise this 

section by adding lease renewals to this 

section and referencing the proposed 

rule governing extensions (43 CFR 

3135.1–5). The EPAct of 2005 addresses 

lease renewals and provides for a 

renewal fee of $100 per acre for each 

lease in the unit that is renewed without 

a discovery under 43 CFR 3135.1–6 of 

this proposed rule. Renewals are 

addressed under 43 CFR 3135.1–6 of 

this proposed rule. This section 

incorporates those changes to this 

section of the NPR–A unit regulations. 

As a result of these changes and because 

the EPAct of 2005 addresses extensions 

and lease renewals, existing section 

3137.111 is superseded by the statutory 

provisions that this rule would 

implement. 

Section 3137.131 What happens if the 

unit terminated before the unit operator 

met the initial development obligations? 

and 

Section 3137.134 What happens to 

committed leases if the unit terminates? 

These two sections address what 

happens to leases in a unit in the event 

a unit terminates. This proposed rule 

would revise these sections by adding 

the option of a lessee applying for a 

renewal upon unit termination and by 

adding a cross-reference to the proposed 

lease renewal provisions in these 

proposed regulations. 

IV. Procedural Matters 

Executive Order 12866, Regulatory 

Planning and Review 

In accordance with the criteria in 

Executive Order 12866, this rule is not 

a significant regulatory action. The 

Office of Management and Budget 

makes the final determination under 

Executive Order 12866. 

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 (see below). 

A cost-benefit and economic analysis is 

not required. 

b. This rule will not create 

inconsistencies with other agencies’

actions. These rule changes are 

administrative in nature and will not 

effect other agencies’ actions. There are 

provisions in the rule that require the 

BLM to consult with or request 

concurrence from the state, North Slope 

Borough, or the ASRC before approving 

certain actions. These provisions are to 

the benefit of these other agencies 

because they help ensure that their 

rights are protected. These provisions 

would more than likely help ensure that 

the actions taken under this rule would 

not create inconsistencies with those 

agencies’ actions. 

c. This rule will not materially affect 

entitlements, grants, user fees, loan 

programs, or the rights and obligations 

of their recipients. The one fee this rule 

would implement (lease renewals 

without a discovery) is a per-acre fee 

mandated by Congress. As stated below, 

when compared to the scope and cost of 

operations in NPR–A, this fee is not 

significant. 

d. This rule will not raise novel legal 

or policy issues. All of the NPR–A oil 

and gas regulations changes that this 

rule would implement are currently 

addressed similarly in other existing 

BLM regulations or policies. 

The following discusses the potential 

impacts of the proposed rule changes: 

Waiver, Suspension, or Reduction of the 

Rental, Royalty, or Minimum Royalty 

The rule would add a provision that 

would allow the BLM to waive, 

suspend, or reduce the rental, royalty, or 

minimum royalty on an NPR–A lease if 

it was necessary to promote 

development or the BLM determined 

that the lease could not be successfully 

operated under the terms of the lease. 

The BLM would not allow for any of 

these to take place unless it were 


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1According to the Alaska Department of Revenue, 

Tax Division, the per-barrel price for oil between 

January 2005 and April 2006 fluctuated between 

$41.12 and $67.74 per barrel. We cannot predict 

price fluctuations in the future; however, the $60 

represents an estimate of average prices expected. 

necessary to promote development or if 

we determined that the lease could not 

be successfully operated under the 

terms of the lease. 

Operators would benefit from this 

provision since they would be able to 

continue to operate their leases. The 

Federal Government would benefit 

since producible wells would not be 

shut in and the Federal Government 

would continue to receive revenue from 

wells that might otherwise be shut in, 

which may result in waste of Federal oil 

and gas. Furthermore, since this 

provision may reduce the risk of 

investment to lessees, it may result in 

higher bonus bids for new leases. State, 

local and tribal governments and 

communities would be positively 

affected since wells that would under 

other circumstances be shut in, would 

continue to produce, providing jobs and 

revenues to local areas. Any impacts on 

the economy, productivity, competition 

or jobs would be positive, but would be 

too speculative to predict. 

Also, as a result of changes made to 

the NPRPA by the EPAct of 2005, the 

proposed rule would change existing 

regulations by requiring the BLM to 

consult with the State of Alaska and the 

North Slope Borough within 10 days of 

receiving an application for waiver, 

suspension, or reduction of rental, 

royalty, or minimum royalty. This 

provision could increase costs slightly 

for the BLM, the State of Alaska, and the 

North Slope Borough because under this 

proposed rule these parties would be 

involved in consultation that is 

currently not required. However, 

consultation would help ensure that the 

rights of the state and the North Slope 

Borough are protected. 

The proposed rule would add a new 

provision to the regulations stating that 

if a lease included land that was made 

available for acquisition by a Regional 

Corporation under the Alaska National 

Interest Lands Conservation Act, the 

BLM would only approve a waiver, 

suspension, or reduction of rental, 

royalty, or minimum royalty if the 

Regional Corporation concurred. This 

change is necessary because the statute 

requires concurrence from the Regional 

Corporation prior to approval of these 

actions. Concurrence by the Regional 

Corporation is not currently required. 

Therefore, this provision could 

minimally increase administrative costs 

for the Federal Government and for the 

Regional Corporation; however, 

requiring concurrence would help 

ensure that the rights of the Regional 

Corporation are protected. 

Additional Bonding 

Changes to the bonding regulations 

would allow the BLM to require 

additional bonding under certain 

circumstances. The existing regulations 

only allow BLM to increase the bonding 

amount in the Special Areas as defined 

in the NPRPA. The rule would allow the 

BLM to require an increase in the 

amount of an NPR–A lease bond for any 

NPR–A lease if the BLM determined 

that the operator posed a risk due to 

factors, including, but not limited to: 

(A) A history of previous violations; 

(B) A notice from the MMS that there 

are uncollected royalties due; or 

(C) The total cost of plugging existing 

wells and reclaiming lands exceeds the 

present bond amount based on the 

estimates determined by the BLM. 

The rule change would make the 

existing regulations on bonding of NPR–

A leases consistent with the Mineral 

Leasing Act regulations that currently 

apply to Federal oil and gas leases 

outside of the NPR–A. The BLM has 

used this authority on lands leased 

under the Mineral Leasing Act. The 

increases have most often been based on 

the significant liabilities that an 

operator has under a single bond. Under 

these circumstances, the average bond 

increase has been about 200 percent. 

While it is not possible, at this time, to 

predict how much any specific bond 

amount might be increased were this 

provision to become effective, 

increasing an area-wide NPR–A bond 

($300,000) by 200 percent would make 

the increased bond amount $900,000. 

This is more consistent with bonding of 

other agencies on the North Slope than 

is the existing area-wide bond amount 

under existing regulations. For example, 

the State of Alaska requires bonding of 

$700,000 for multiple oil wells and the 

MMS requires bonding of $3,000,000 for 

offshore development. 

This provision would economically 

impact only those operators who have a 

history of previous violations, those that 

have uncollected royalties that are due, 

and those who have leases where the 

total cost of plugging existing wells and 

reclaiming lands exceeds the present 

bond amount based on the estimates 

determined by the BLM. The economic 

impact to these operators would be 

minimal when compared to the value of 

an oil and gas lease in the NPR–A, and 

when compared to the additional 

protection the Federal Government and 

Federal lands would receive. 

A typical development in NPR–A 

would produce approximately 20,000 

barrels per day or 7,300,000 barrels per 

year. With a market price of $60 per 

barrel 1 in the lower 48 states and 

approximately $8 in transportation costs 

per barrel to get the oil from NPR–A to 

the lower 48 states, the wellhead price 

would be approximately $52 per barrel. 

A typical bond amount for a lease in 

the NPR–A is approximately $300,000. 

If we raised the bonding requirement 

from $300,000 to $900,000, the annual 

bonding fee the operator would pay 

would go from approximately $3,000 

per year to $9,000 per year (the cost of 

a surety bond is approximately 1% per 

year), an increase of $6,000 per year. 

How does that compare to other costs 

the operator faces? The transportation 

cost to get the production to the lower 

48 states would be about $58,400,000 

per year. Receipts at the wellhead 

would be approximately $379,600,000 

per year. The lifting cost would be about 

$33,000,000. Royalties would be 

approximately $47,450,000 per year. A 

$6,000, or even $60,000, increase in 

costs per year would have minimal 

impact on the operator. 

Effect of Transfer of a Tract-Segregation 

The proposed rule would change the 

standard that the BLM applies when 

determining if a segregated lease should 

continue in full force and effect. The 

existing standard is that a segregated 

lease remains in full force and effect if 

the BLM determines that oil and gas is 

being produced in paying quantities 

from that segregated portion of the lease 

area or so long as drilling or well 

reworking operations, either actual or 

constructive, are being conducted. The 

new standard would be that a lease 

would continue in full force and effect 

as long as oil or gas is produced or is 

capable of being produced from the 

lease in paying quantities or drilling or 

reworking operations, actual or 

constructive, as approved by the 

Secretary, are being conducted on the 

lease. This would have the same 

economic impact as discussed under the 

‘‘Lease Extension’’ and ‘‘Lease Renewal’’

sections since the segregated lease 

would be able to be extended or 

renewed based on the same criteria used 

for all NPR–A leases. 

Lease Extension 

Existing regulations on lease 

extensions require that the BLM extend 

the term of a lease beyond its primary 

term so long as: 

(A) Oil or gas is produced from the 

lease in paying quantities; or 


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28642 Federal Register / Vol. 72, No. 98 / Tuesday, May 22, 2007 / Proposed Rules 

(B) Drilling or reworking operations, 

actual or constructive, as approved by 

the Secretary, are being conducted on 

the lease. 

The proposed rule would add a new 

condition under which the BLM would 

grant a lease extension in cases where 

the BLM has determined that oil or gas 

is capable of being produced in paying 

quantities from the lease. 

This rule would also add a new 

provision that explains that NPR–A 

leases expire on the 30th anniversary 

date of the original issuance date of the 

lease unless oil or gas is being produced 

from the lease. This provision is 

required by the EPAct of 2005. 

Prior to the EPAct of 2005, NPR–A 

lease terms were fixed at 10 years. 

Longer lease terms for NPR–A leases are 

preferable since there are harsh climatic 

conditions and a short ‘‘winter only’’

exploration window in the NPR–A that 

make it difficult to operate in that 

region. Longer lease terms allow 

operators additional time to deal with 

these conditions. Under the existing 

regulations, the long lead time between 

exploration and production on the 

North Slope (6–8 years) reduces 

incentive for operators to explore on 

leases with less than 6–8 years left in 

their primary term. The new rule would 

provide incentive for operators to 

continue exploration in the later years 

of the primary term of the lease. The 

timeframe for bringing a gas discovery 

to production is even longer. Without a 

gas pipeline to the North Slope, 

operators currently have little incentive 

to explore in gas-prone areas or to 

further delineate gas discoveries. The 

new rule may have the effect of 

increasing the value of the NPR–A 

leases, increasing the level of 

exploration activity, and increasing the 

likelihood of eventual production from 

NPR–A leases. The value of these 

benefits, if any, is too speculative to 

predict. These changes would also have 

minor administrative savings and 

economic benefit to operators and to the 

Federal Government since lessees 

would not be required to file for lease 

extensions as frequently and since the 

Federal Government would not be 

required to process those lease 

extensions. 

Lease Renewal 

The proposed rule would add a new 

section on lease renewals based on 

changes the EPAct of 2005 made to the 

NPRPA. The rule would address lease 

renewals in two parts: Those leases that 

have a discovery of hydrocarbons and 

those leases that do not have a 

discovery. 

With a Discovery. Under this 

proposed section, the BLM would 

approve a 10-year lease renewal for a 

lease on which there has been a well 

drilled and a discovery of hydrocarbons, 

even if the BLM had determined that the 

well is not capable of producing oil or 

gas in paying quantities. This section 

would require that the applicant 

provide evidence that oil or gas has 

been discovered on the leased lands in 

such quantities that a prudent operator 

would hold the lease for potential future 

development. This regulatory change is 

required by the EPAct of 2005. 

The economic impact of this 

provision would be positive. Existing 

regulations do not provide for lease 

renewals but do provide for lease 

extensions if there is actual production 

or as long as drilling and reworking 

operations are being conducted. This 

provision would allow for lease renewal 

for a 10-year term if a discovery was 

made and a prudent operator would 

hold the lease for future development. 

This provision provides an incentive for 

an operator to explore, even if there is 

not enough time to meet the current 

conditions for lease extensions. This 

change would allow the lessee another 

10 years to explore and develop the 

lease without having to compete for the 

lease again in a subsequent lease sale. 

Leases in the NPR–A typically are either 

5,760 or 11,520 acres and the average 

high bid is approximately $70 per acre. 

The Federal Government may be 

foregoing between $400,000 and 

$800,000 for each of these lease 

renewals, since lessees who were 

granted a lease renewal would not be 

required to compete for a new lease for 

the same lands. In exchange for this 

‘‘opportunity cost’’ the lease has a much 

greater likelihood of being developed 

and developed sooner. 

It is also possible that without the 

option of renewal, the lease which has 

been explored without a paying well 

discovery would have less value and not 

receive bids in the next sale. In this 

case, the United States would lose the 

value of lease rental ($60,000–$150,000 

per year). Lease bonuses and lease 

rentals are both lesser considerations in 

the United States realizing the value of 

leased lands, however. The value of 

potential production from an NPR–A 

lease far exceeds either of these revenue 

streams. A typical North Slope 

development produces about 20,000 

barrels of oil per day. At a $60 per barrel 

oil price, the United States would 

collect between $45 and $60 million 

dollars per year in royalties. If the 

renewals make the likelihood of 

development greater, the identified 

‘‘opportunity costs’’ are viewed as 

beneficial to the United States. 

Furthermore, this could reduce risk of 

investment to the lessee, which may 

increase bonus bids on future leases. 

Without a Discovery. Under this 

proposed section, the BLM could 

approve an application for a 10-year 

lease renewal for a lease on which there 

has not been a discovery of oil or gas. 

Under this proposed rule, the renewal 

application must: 

(A) Provide sufficient evidence that 

the lessee has diligently pursued 

exploration that warrants continuation 

of the lease with the intent of continued 

exploration or future potential 

development of the leased land; or 

(B) Show that all or part of the lease 

is part of a unit agreement covering a 

lease that qualifies for renewal without 

a discovery and that the lease has not 

been previously contracted out of the 

unit. 

If the BLM approved the application 

for lease renewal, the applicant would 

be required to submit to the BLM a fee 

of $100 per acre within 5 working days 

of receiving notification of the renewal 

approval. This fee is mandated by the 

EPAct of 2005. 

As discussed above, existing 

regulations do not allow for lease 

renewals, only lease extensions if there 

is actual production or as long as 

drilling and reworking operations are 

being conducted. This new provision 

would allow for lease renewal without 

a discovery under certain circumstances 

and would require that lessees pay a fee 

of $100 per acre for the renewal. The 

economic impact of this provision 

would be minimal. As with lease 

renewal with a discovery, this provision 

provides the lessee with incentive to 

explore, even if there is not sufficient 

time to take actions to qualify for a lease 

extension. As discussed above, the cost 

to obtain the lease in a subsequent sale 

would likely be around $70 per acre. 

The new rule would allow the lessee to 

retain the lease without competition, or 

the risk of loss of the lease, for a cost 

above what it might cost in a 

competitive lease sale, but it would 

allow the operator to seamlessly pursue 

exploration. This is likely to have the 

effect of accelerating the eventuality of 

bringing the lease into production. It is 

also possible, as discussed above, that 

without the option of renewal the lease 

which has been explored without a 

discovery would have less value and not 

receive bids in the next sale. In this case 

the United States would lose the value 

of lease rental ($60,000—$150,000 per 

year). Furthermore, nothing compels a 

lessee to apply for a lease renewal and 

pay the per acre fee. If the lessee 


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believes the lease may be valuable, but 

not worth $100 per acre, he can 

relinquish the lease and try to obtain it 

at a lower price in a subsequent 

competitive lease sale. Operators may 

still apply for lease extensions under the 

revised provisions of this rule. 

Operators may also apply for a renewal 

under other provisions of this rule and 

avoid paying the fee by a discovery and 

a showing that a prudent operator 

would hold the lease for future 

development. 

The new rule has the effect of 

allowing the government to be 

compensated for the lease without 

having the administrative costs of 

conducting a new lease sale. The new 

rule also increases the likelihood of 

production and royalty payments at an 

earlier date. The value of potential 

production from an NPR–A lease far 

exceeds the value of lease bonuses. A 

typical North Slope development 

produces about 20,000 barrels of oil per 

day. At a $60 per barrel oil price, the 

United States would collect between 

$45 and $60 million dollars per year in 

royalties. 

This provision could lower the risk of 

investment to the lessee and possibly 

result in higher bonus bids at future 

lease sales. Like other changes this rule 

would make, any benefits of this 

provision are too speculative to predict. 

Lease Consolidation 

The proposed rule would revise the 

consolidation provisions in existing 

regulations having to do with the term 

of a consolidated lease. Under existing 

regulations, the term of a consolidated 

lease is extended beyond the primary 

term of the lease only as long as oil or 

gas is produced in paying quantities or 

approved constructive or actual drilling 

or reworking operations are conducted 

on the lease. Under this proposed rule, 

the term of a consolidated lease would 

be extended or renewed, as appropriate, 

under the extension or renewal 

provisions of the regulations. The 

change would recognize that the new 

standards in the extension and renewal 

provisions of this rule apply to 

consolidated leases. This would have 

the same economic impacts discussed 

under ‘‘Lease Extension’’ and ‘‘Lease 

Renewal’’ sections above, i.e., it could 

have the effect of increasing the value of 

the NPR–A leases, increasing the level 

of exploration activity, increasing the 

likelihood of production from NPR–A 

leases, and increasing future bonus bids. 

Termination of Administration for 

Conveyed Lands and Segregation 

This rule would add a new section 

concerning the waiver of administration 

for conveyed lands in a lease. This new 

section is necessary because of changes 

that the EPAct of 2005 made to the 

NPRPA. Under this new section, the 

BLM would be required to terminate 

administration of any oil and gas lease 

if all of the mineral estate is conveyed 

to the ASRC. The ASRC would then 

assume the lessor’s obligation to 

administer any oil and gas lease. This 

provision does not provide the authority 

to convey the mineral estate to the 

Regional Corporation, only that once a 

conveyance is made, the BLM would no 

longer administer any oil and gas lease. 

This change would have a minor 

positive economic impact on the 

Federal Government because costs for 

administration of these types of leases 

would no longer be borne by the BLM. 

The Regional Corporation would be 

responsible for administration and 

likewise be responsible for 

administrative costs. 

This section would explain that if a 

conveyance of the mineral estate does 

not include all of the land covered by 

an oil and gas lease, the lease would be 

segregated into two leases, one of which 

will cover only the mineral estate 

conveyed. The ASRC would assume 

administration of the lease within the 

conveyed mineral estate. The 

segregation of a lease would not impair 

the mineral estate owners’ rights to 

royalties for oil and gas produced from, 

or allocated to, their portions of land 

covered by the lease. This provision is 

purely administrative in nature and 

would have a minimal economic 

impact. It would decrease 

administrative costs for the Federal 

Government and increase the 

administrative costs to the ASRC for 

leases that have been conveyed. 

Change to the Definition of Participating 

Area 

This rule would make one change to 

the definition of ‘‘participating area’’ by 

replacing the word ‘‘contain’’ with the 

phrase ‘‘are proven to be productive.’’

Existing regulations are not clear that a 

committed tract does not need to 

contain a well that meets the 

productivity criteria specified in the 

unit agreement. Instead, a unit well 

meeting the productivity criteria proves 

that the committed tract is productive. 

This change would have no economic 

impact since this change merely 

clarifies existing policy. 

Consultation if Lands in the Unit Area 

Are Owned by the Arctic Slope Regional 

Corporation or the State of Alaska 

This rule would add a new section on 

consultation if lands in a unit are owned 

by the ASRC or the State of Alaska. This 

section is based on changes that the 

EPAct of 2005 made to the NPRPA. The 

new section requires that if the BLM 

administers a unit containing tracts 

where the mineral estate is owned by 

the ASRC or the State of Alaska, or if a 

proposed unit contains tracts where the 

mineral estate is owned by the ASRC or 

the State of Alaska, the BLM would 

consult with and provide opportunities 

for participation with respect to the 

creation or expansion of the unit by: 

(A) The ASRC, if the unit acreage 

contains the ASRC’s mineral estate; or 

(B) The State of Alaska, if the unit 

acreage contains the state’s mineral 

estate. 

The rule would have minor economic 

impacts on the BLM, the State of Alaska, 

and the ASRC. All parties involved in 

the consultation could incur minor 

additional costs; however, consultation 

would help ensure that the rights of all 

parties to the unit are protected. 

NPR–A Unitization Application 

The proposed rule would require the 

unit application to explain the proposed 

methodology for allocating production 

among the committed tracts. If the unit 

included non-Federal mineral estate, the 

applicant would be required to explain 

how the methodology would take into 

account reservoir heterogeneity and area 

variation in reservoir producibility. 

These changes are necessary because of 

changes that the EPAct of 2005 made to 

the NPRPA. The economic impacts of 

this provision are expected to be minor, 

but not measurable, since the change 

would impact different unit agreements 

differently. However, the rule would 

help ensure fair allocation of production 

among unit participants and ensure that 

the Federal Government receives the 

correct royalty payment. 

Continuing Development Obligations in 

a Unit Agreement 

The proposed rule would amend the 

provisions on continuing development 

obligations in existing regulations by 

requiring that a unit agreement provide 

for the submission of supplemental or 

additional plans of development which 

obligate the operator to a program of 

exploration and development. The 

existing regulations require that the unit 

agreement actually obligate the operator 

to a program of exploration and 

development. 

The change recognizes that at the 

early stages of a unit agreement, an 

operator may not be able to identify the 

program of exploration and 

development and therefore it might not 

be possible for an operator to commit to 

one at that time. The proposal would 

allow an operator to submit plans of 


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development later in the process, 

allowing for the operator to collect 

additional data prior to requiring the 

operator to obligate itself to a program 

of exploration and development. Under 

the existing process, because the data 

may be incomplete, the operator may be 

required to submit information several 

times as the data becomes available. The 

new provision would have minor 

positive economic benefits for 

applicants and the BLM since it would 

allow commitment to a program of 

exploration and development at a more 

appropriate time when sufficient data is 

available. 

Participating Areas 

This proposed rule would make two 

changes to the provisions on 

participating areas. The first change 

would make it clear that a participating 

area contains committed tracts in a unit 

area that are proven to be productive by 

a well meeting the productivity criteria 

specified in the unit agreement. The 

second change is that this rule would 

make it clear that the application must 

contain a description of the anticipated 

participating area size. Neither of these 

changes would have an economic 

impact because they merely clarify 

existing policy. 

Function of a Participating Area 

The rule would revise the 

participating area provisions of existing 

rules by changing how the BLM 

allocates production, for royalty 

purposes, to each committed tract 

within the participating area. Under 

existing regulations, the BLM allocates 

to each committed tract within the 

participating area in the same 

proportion as that tract’s surface in the 

participating area to the total acreage in 

the participating area. Under this 

proposed rule, the BLM would allocate 

production for royalty purposes to each 

committed tract within the participating 

area using the allocation methodology 

agreed to in the unit agreement. This 

change would allow for variations in the 

reservoir geology and producibility 

when calculating allocations for royalty 

purposes. This change would 

implement changes mandated by 

Congress in the EPAct of 2005. This rule 

change would have little economic 

impact to industry or the Federal 

Government, but would help ensure 

proper production allocations on a caseby-case basis. 

Effective Date of a Participating Area 

This proposed rule would revise how 

the BLM determines the effective date of 

a modified participating area or 

modified allocation schedule. Under 

existing regulations, the effective date of 

a modified participating area or 

modified allocation schedule is the 

earlier of the first day of the month in 

which you: (1) Complete a new well 

meeting the productivity criteria; or (2) 

Should have known you need to revise 

the allocation schedule. Under this rule, 

the effective date of a modified 

participating area or allocation schedule 

would be the earlier of the first day of 

the month in which you file a proposal 

for modification or such other date as 

may be provided in the unit agreement. 

This change allows the BLM to approve 

an earlier effective date, if warranted. 

Rather than just determining a fair 

current allocation of a revised 

participating area, the BLM would be 

able to approve an effective date back in 

time. This would allow corrections of 

past, erroneous, allocations rather than 

just moving forward with a fair 

allocation from the time new 

information is acquired. This provides 

greater flexibility and certainty that 

allocations will be equitably determined 

for all parties and overall would have no 

economic impact except that it could 

affect individual allocations. 

Extension of the Primary Term of Leases 

Committed to a Unit Agreement or 

Renewal of Leases Committed to a Unit 

This proposed rule would revise the 

provisions on the term of leases 

committed to a unit by adding lease 

renewals as an option. The EPAct of 

2005 addresses lease renewals and 

provides for a renewal fee of $100 per 

acre for each lease in the unit that is 

renewed without a discovery. This 

section incorporates those changes to 

this section of the NPR–A unit 

regulations. As a result of these changes 

and because the EPAct of 2005 

addresses extensions and lease 

renewals, existing provisions on lease 

extensions for leases in a unit are 

superseded by the statutory provisions 

that this rule would implement. We 

anticipate that the economic impacts of 

this rule would be the same as described 

under the ‘‘Lease Extension’’ section 

above. 

Leases in Terminated Units and Lease 

Renewal 

The rule change addresses what 

happens to leases in a unit in the event 

a unit terminates. The proposed rule 

would allow a lessee to apply for a lease 

renewal upon unit termination and 

would conform the provisions 

addressing termination with Congress’

mandates regarding extension in the 

EPAct of 2005. Existing regulations 

allow lease extensions upon unit 

termination, but do not provide for lease 

renewals in these circumstances. These 

changes would have a minor positive 

economic impact by allowing lessees 

the option of applying for lease renewal 

upon unit termination. 

Clarity of the 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? (A 

‘‘section’’ appears in bold type and is 

preceded by the symbol ‘‘§ ’’ and a 

numbered heading, for example: 

§ 3135.1–4 Effect of transfer of a tract.). 

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. 

National Environmental Policy Act 

The BLM has prepared an 

environmental assessment (EA) 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 (NEPA), 42 U.S.C. 4332(2)(C). 

A detailed statement under NEPA is not 

required. The BLM has placed the EA 

and the Finding of No Significant 

Impact on file in the BLM 

Administrative Record at the address 

specified in the ADDRESSES section. 

The action of modifying the existing 

regulations would have very little 

impact on the environment. The new 

regulations would create more favorable 

lease terms for oil and gas companies 

(e.g., allowing lease extensions and 

renewals, potential for relief from 

royalty, rental and minimum royalty) 

and this may increase the likelihood of 

exploration and development in the 

NPR–A. The revised regulations would 

also allow the BLM greater flexibility in 


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granting relief from rentals and royalty 

which may also have the effect of 

encouraging development. But while the 

likelihood of exploration and 

development may be greater, the 

character or intensity of exploration and 

development remains unchanged. The 

potential impacts from exploration and 

development have been addressed in 

three environmental impact statements 

(EIS) written for the Integrated Activity 

Plans for the Northeast and Northwest 

NPR–A, seven EAs written for 

individual exploration proposals, and 

the Alpine Satellites Development EIS. 

To the extent that recent Court 

decisions may require further NEPA 

analysis with respect to the 

environmental impacts of proposed 

leasing in the NPR–A, the BLM would 

address such analysis within the context 

of its consideration of land use planning 

and any proposed leasing. However, 

these proposed regulations do not 

invoke any significant environmental 

impact requiring additional NEPA 

analysis beyond the environmental 

assessment. 

The revised regulations may also have 

the effect of allowing the oil and gas 

operators to pursue exploration and 

development at a more measured pace 

since terms of the lease can be extended 

beyond what was previously available. 

The change to bonding levels would 

provide the BLM more certainty that 

environmental obligations, such as 

reclamation and well plugging, are 

honored. This would lessen the 

likelihood of adverse environmental 

impacts to the NPR–A. 

Changes in the regulations that would 

require: (1) The BLM to allow 

participation from ASRC and the State 

of Alaska in the creation and expansion 

of oil and gas units; (2) Consultation 

with ASRC, State of Alaska, and the 

North Slope Borough when considering 

relief from royalty, rentals, or minimum 

royalty; (3) Allocation of production 

based on reservoir characteristics; and 

(4) The BLM to give ASRC 

administration of leases conveyed to the 

Native Corporation, are strictly 

administrative in nature and will have 

no effect on the environment. 

This view as to the minimal 

environmental effects of the proposed 

changes in the regulations is consistent 

with the Department’s previously 

expressed policies as indicated by 

provisions of the Departmental Manual 

(DM) which establish categorical 

exclusions under NEPA for actions by 

the BLM of the type addressed by the 

proposed regulations. These include 

‘‘(4) approval of unitization [sic] 

agreement[s] * * * (5) approval of 

suspensions of operations, force majeure 

suspensions, and suspensions of 

operations and production.’’ See 516 

DM Chapter 6, Appendix 5, 5.4B. 

Regulatory Flexibility Act 

Congress enacted the Regulatory 

Flexibility Act (RFA) of 1980, as 

amended, 5 U.S.C. 601–612, 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 the 

RFA. An initial or final Regulatory 

Flexibility Analysis is not required. 

Accordingly, a Small Entity Compliance 

Guide is not required. 

The BLM cannot determine how 

many lessees may qualify as small 

businesses or how many would be 

adversely affected by this proposed rule 

because the BLM does not track this 

type of information and it is not readily 

available. The BLM believes that several 

of the types of businesses identified in 

the North American Industrial 

Classification System (NAICS) (codified 

in the Small Business Administration 

regulations at 13 CFR 121.201) may do 

business in the NPR–A. These 

businesses, NAICS codes, and size 

standards in millions of dollars in 

receipts annually or number of 

employees are listed in the following 

table: 

NAICS code NAICS U.S. industry title 

Size standard 

in millions of 

dollars 

Size standard 

in number of 

employees 

211111 ........................................................ Crude Petroleum and Natural Gas Extraction ............................. .......................... 500 

211112 ........................................................ Natural Gas Liquid Extraction ...................................................... .......................... 500 

213111 ........................................................ Drilling Oil and Gas Wells ............................................................ .......................... 500 

213112 ........................................................ Support Activities for Oil and Gas Operations ............................. 6 .5 ........................

237120 ........................................................ Oil and Gas Pipeline and Related Structures Construction ......... 31 ........................

As stated above, the businesses in the 

table represent ones that may operate in 

NPR–A. However, we do not believe 

that businesses with the NAICS codes 

213111, 213112, or 237120 would be 

impacted by the changes this rule 

proposes to make to the current 

regulations. Of the businesses listed in 

the table, businesses with NAICS codes 

211111 and 211112 may be impacted by 

the proposed changes this rule would 

make because the regulatory changes 

would primarily affect lessees, and 

lessees may fall into one or both of these 

two categories. 

Due to the scale and cost of operations 

on the North Slope (see the discussion 

under Executive Order 12866 above), it 

is not likely that operators in NPR–A 

would be small businesses. 

Furthermore, the BLM is unaware of any 

small businesses operating on lands in 

NPR–A under existing regulations and 

because of the large scale and high cost 

of operations in NPR–A, we do not 

anticipate that small businesses will 

enter the market in the future. Even if 

a small business did begin doing 

business in NPR–A, when compared to 

the costs of operating in the NPR–A and 

the potential receipts involved if 

production were to take place (see the 

discussion under Executive Order 12866 

above), the impact of the proposed rule 

changes would be minimal. Therefore, 

the proposed changes would not have a 

significant economic effect on a 

substantial number of small entities. 

Small Business Regulatory Enforcement 

Fairness Act 

This proposed 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. 

Please see the discussion under 

Executive Order 12866 above. 

b. Will not cause a major increase in 

costs or prices for consumers, 

individual industries, Federal, state, or 

local government agencies, or 

geographic regions. Please see the 

discussion under Executive Order 12866 

above. 

c. Does not have significant adverse 

effects on competition, employment, 


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investment, productivity, innovation, or 

the ability of U.S.-based enterprises to 

compete with foreign-based enterprises. 

These proposed changes should have no 

adverse effects on competition, 

employment, investment, productivity, 

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

enterprises to compete with foreignbased enterprises because their impact, 

economic and otherwise, would be 

minimal. 

Unfunded Mandates Reform Act 

In accordance with the Unfunded 

Mandates Reform Act (2 U.S.C. 1501, et 

seq.): 

a. This proposed rule would not 

‘‘significantly or uniquely’’ affect small 

governments. A Small Government 

Agency Plan is not required. 

b. This proposed rule would 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. 

This proposed rule would not 

mandate additional expenditures by any 

state or local government, any Federal 

agency, or any other entity. The State of 

Alaska and the ASRC may incur minor 

additional expenses under the 

consultation provisions of this proposed 

rule, but the consultations are for the 

benefit of those parties. 

Executive Order 12630, Governmental 

Actions and Interference With 

Constitutionally Protected Property 

Rights (Takings) 

The proposed rule does not represent 

a government action capable of 

interfering with constitutionally 

protected property rights. The proposed 

rule primarily extends benefits to 

leaseholders. The cost of additional 

bonding is too minor to constitute a 

taking. Therefore, the Department of the 

Interior has determined that the 

proposed rule would not cause a taking 

of private property or require further 

discussion of takings implications under 

this Executive Order. 

Executive Order 13132, Federalism 

The proposed rule will not have a 

substantial direct effect 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. 

In accordance with Executive Order 

13132, the proposed rule does not have 

significant Federalism effects. A 

Federalism assessment is not required. 

The proposed rule would only have a 

minimal effect 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. There are certain 

consultation provisions in the proposed 

rule where the state would be invited to 

participate in the discussion of the 

creation or expansion of Federal unit 

agreements in NPR–A which contain 

state lands. The consultation burden is 

minimal and it would be in the interest 

of the state to participate to help ensure 

that allocations to the state were fair. 

Executive Order 12988, Civil Justice 

Reform 

Under Executive Order 12988, the 

Office of the Solicitor has determined 

that this proposed rule would not 

unduly burden the judicial system and 

that it meets the requirements of 

sections 3(a) and 3(b)(2) of the Order. 

The BLM has worked closely with the 

Office of the Solicitor to help ensure 

that the proposed rule is written clearly 

and to help eliminate drafting errors. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 (E.O. 13175) 

provides that Federal agencies must 

consult with Indian Tribal Governments 

before formal promulgation of 

regulations ‘‘that have Tribal 

implications.’’ E.O. 13175 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. 13175 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 70 

FR 71194 (November 25, 2005)). If there 

were a duty of government-togovernment consultation, prior to 

promulgation of these regulations, it 

would be owed to those listed tribal 

governments. 

None of the recognized tribal 

governments have significant oil and gas 

interests within NPR–A or within the 

vicinity of NPR–A. Therefore, nothing 

in these final regulations has 

‘‘substantial direct effects on one or 

more Indian tribes, on the relationship 

between the Federal government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes’’

(see section 1(a) of E.O. 13175). 

Accordingly, the final regulations do not 

have tribal implications and there is no 

government-to-government 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. The proposed rule would 

provide for consultation with the ASRC 

in accordance with the requirements of 

the EPAct of 2005 if lands in the unit 

area are owned by the ASRC. Also, the 

proposed rule would provide for 

concurrence by the ASRC before the 

BLM approves a waiver, suspension, or 

reduction of royalties under section 

3133.3 if the lease includes land that 

was made available for acquisition by 

the Regional Corporation under Section 

1431(o) of the Alaska National Interest 

Lands Conservation Act (ANILCA) (Pub. 

L. 96–487). Additionally, these 

corporations could potentially become 

participants in units that include 

Federal NPR–A 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 beyond that required by 

the EPAct of 2005 or by these proposed 

rules, if adopted, with such corporations 

would be required as a matter of law. 

The Bureau of Indian Affairs has 

recently declined to include such 

corporations on the list of recognized 

tribes eligible for government-togovernment consultation (see 70 FR 

71194 (November 25, 2005)). The 

Bureau of Indian Affairs previously 

indicated that ANCSA corporations are 

formally state-chartered 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)). 

Prior to the promulgation of these 

rules, the BLM will provide opportunity 

for the tribal governments, along with 

the public generally, to comment during 

the comment period, in accordance with 

the notice and comment requirements of 

the Administrative Procedure Act. 

Therefore, in accordance with E.O. 

13175, we have found that this 

proposed rule does not include policies 

that have tribal implications. 

Executive Order 13211, Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use 

In accordance with Executive Order 

13211, the BLM has determined that the 

proposed rule will not have substantial 

direct effects on the energy supply, 


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distribution or use, including a shortfall 

in supply or price increase. For the most 

part, this proposed rule does not 

represent the exercise of agency 

discretion inasmuch as a substantial 

portion of this rule is mandated by the 

EPAct of 2005. Congress’s mandate to 

amend the BLM’s existing NPR–A oil 

and gas regulations may result in an 

increase in oil and gas production of 

unknown amounts. 

Executive Order 13352, Facilitation of 

Cooperative Conservation 

In accordance with Executive Order 

13352, the BLM has determined that 

this proposed rule does not impede 

facilitating cooperative conservation; 

takes appropriate account of and 

considers the interests of persons with 

ownership or other legally recognized 

interests in land or other natural 

resources; properly accommodates local 

participation in the Federal decisionmaking process; and provides that the 

programs, projects, and activities are 

consistent with protecting public health 

and safety. The proposed rule may 

positively affect the facilitation of 

cooperative conservation because the 

proposed rule seeks to add provisions to 

the existing NPR–A oil and gas 

regulations requiring that the BLM 

consult with the ASRC and the state in 

certain circumstances where 

consultation is not currently required. 

Paperwork Reduction Act 

The BLM has determined that this 

rulemaking does not contain any new 

information collection requirements that 

the Office of Management and Budget 

must approve under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). 

Data Quality Act 

When the BLM developed this rule, it 

did not conduct or use a study, 

experiment, or survey requiring peer 

review under the Data Quality Act (Pub. 

L. 106–554). 

Authors 

The principal authors of this 

proposed rule are Greg Noble, Chief, 

Energy Branch, Bureau of Land 

Management, Alaska State Office, and 

Erick Kaarlela, Special Assistant to the 

Assistant Director, Minerals, Realty and 

Resource Protection, assisted by the 

Department of the Interior Office of the 

Solicitor and BLM’s Division of 

Regulatory Affairs, Washington, DC. 

List of Subjects in 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. 

Dated: May 11, 2007. 

C. Stephen Allred, 

Assistant Secretary, Land and Minerals 

Management. 

For the reasons stated in the 

preamble, the BLM proposes to amend 

43 CFR part 3130 as set forth below: 

PART 3130—OIL AND GAS LEASING: 

NATIONAL PETROLEUM RESERVE, 

ALASKA 

1. The authority citation for part 3130 

continues to read as follows: 

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

and 1740. 

2. Amend § 3130.0–3 by adding a new 

paragraph (d) to read as follows: 

§ 3130.0–3 Authority. 

* * * * * 

(d) The Energy Policy Act of 2005 

(Pub. L. 109–58). 

3. Amend § 3130.0–5 by adding three 

new paragraphs (g), (h), and (i) to read 

as follows: 

§ 3130.0–5 Definitions. 

* * * * * 

(g) Production allocation methodology 

means a way of attributing the 

production of oil and gas produced from 

a unit well to individual tracts 

committed to the unit. 

(h) Reservoir heterogeneity means 

spatial differences in the oil and gas 

reservoir properties. This can include, 

but is not limited to, the thickness of the 

reservoir, the amount of pore space in 

the reservoir rock that contains oil, gas, 

or water, and the amount of water 

contained in the reservoir rock. This 

information may be used to allocate 

production. 

(i) Variation in reservoir producibility 

means differences in the rates oil and 

gas wells produce from the reservoir. 

This can be dependent on where the 

well penetrates the reservoir. 

4. Amend § 3133.3 by revising 

paragraphs (a)(2) and (b) and by adding 

a new paragraph (c) to read as follows: 

§ 3133.3 Under what circumstances will 

BLM waive, suspend, or reduce the rental, 

royalty, or minimum royalty on my NPR–A 

lease? 

(a) * * * 

(2) It is necessary to promote 

development or the BLM determines the 

lease cannot be successfully operated 

under the terms of the lease. 

(b) The BLM will consult with the 

State of Alaska and the North Slope 

Borough within 10 days of receiving an 

application for waiver, suspension, or 

reduction of rental, royalty, or minimum 

royalty and will not approve an 

application under § 3133.4 of this 

subpart until at least 30 days after the 

consultation. 

(c) If your lease includes land that 

was made available for acquisition by a 

Regional Corporation (as defined in 43 

U.S.C. 1602) under the provision of 

Section 1431(o) of the Alaska National 

Interest Lands Conservation Act 

(ANILCA) (16 U.S.C. 3101 et seq.), the 

BLM will only approve a waiver, 

suspension, or reduction of rental, 

royalty, or minimum royalty if the 

Regional Corporation concurs. 

5. Amend § 3133.4 by revising 

paragraphs (a)(6) and (a)(7) to read as 

follows: 

§ 3133.4 How do I apply for a waiver, 

suspension or reduction of rental, royalty or 

minimum royalty for my NPR–A lease? 

(a) * * * 

(6) All facts that demonstrate that the 

waiver, suspension, reduction of the 

rental, royalty, or minimum royalty 

encourages the greatest ultimate 

recovery of oil or gas or it is in the 

interest of conservation; 

(7) All facts that demonstrate that you 

cannot successfully operate the lease 

under the terms of the lease; and 

* * * * * 

6. Amend § 3134.1–2 by revising 

paragraph (a) to read as follows: 

§ 3134.1–2 Additional bonds. 

(a) The authorized officer may require 

the bonded party to supply additional 

bonding in accordance with § 3104.5(b) 

of this chapter. 

* * * * * 

7. Revise § 3135.1–4 to read as 

follows: 

§ 3135.1–4 Effect of transfer of a tract. 

(a) When a transfer is made of all the 

record title to a portion of the acreage 

in a lease, the transferred and retained 

portions are divided into separate and 

distinct leases. The BLM will not 

approve transfers of a tract of land: 

(1) Of less than 640 acres that is not 

compact; or 

(2) That would leave a retained tract 

of less than 640 acres. 

(b) Each segregated lease shall 

continue in full force and effect for the 

primary term of the original lease and so 

long thereafter as the activities on the 

segregated lease support extension in 

accordance with § 3135.1–5. 

8. Revise § 3135.1–5 to read as 

follows: 

§ 3135.1–5 Extension of lease. 

(a) The term of a lease shall be 

extended beyond its primary term: 


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(1) So long as oil or gas is produced 

from the lease in paying quantities; 

(2) The BLM has determined in 

writing that oil or gas is capable of being 

produced in paying quantities from the 

lease; or 

(3) So long as drilling or reworking 

operations, actual or constructive, as 

approved by the BLM, are conducted 

thereon. 

(b) Your lease will expire on the 30th 

anniversary of the issuance date of the 

lease unless oil or gas is being produced 

in paying quantities. If your lease 

contains a well that is capable of 

production, but you fail to produce the 

oil or gas due to circumstances beyond 

your control, you may apply for a 

suspension under § 3135.2. If the BLM 

approves the suspension, the lease will 

not expire on the 30th anniversary of 

the original issuance date of the lease. 

(c) A lease may be maintained in force 

by the BLM-approved directional wells 

drilled under the leased area from 

surface locations on adjacent or 

adjoining lands not covered by the 

lease. In such circumstances, drilling 

shall be considered to have commenced 

on the lease area when drilling is 

commenced on the adjacent or adjoining 

lands for the purpose of directional 

drilling under the leased area through 

any directional well surfaced on 

adjacent or adjoining lands. Production, 

drilling or reworking of any such 

directional well shall be considered 

production or drilling or reworking 

operations on the lease area for all 

purposes of the lease. 

9. Redesignate § 3135.1–6 as § 3135.1–

7 and add a new § 3135.1–6 to read as 

follows: 

§ 3135.1–6 Lease Renewal. 

(a)(1) With a discovery—At any time 

after the fifth year of the primary term 

of a lease, the BLM may approve a 10- 

year lease renewal for a lease on which 

there has been a well drilled and a 

discovery of hydrocarbons even if the 

BLM has determined that the well is not 

capable of producing oil or gas in 

paying quantities. The BLM must 

receive the lessee’s application for lease 

renewal no later than 60 days prior to 

the expiration of the primary term of the 

lease. 

(2) The renewal application must 

provide evidence, and a certification by 

the lessee, that the lessee has drilled one 

or more wells and discovered 

producible hydrocarbons on the leased 

lands in such quantities that a prudent 

operator would hold the lease for 

potential future development. 

(3) The BLM will approve the 

application if it determines that a 

discovery was made and that a prudent 

operator would hold the lease for future 

development. 

(4) The date of the lease renewal will 

be effective on the day following the 

end of the primary term of the lease. 

(5) The lease renewal may be 

approved on the condition that the 

lessee drills one or more additional 

wells or acquires and analyzes more 

well data, seismic data, or geochemical 

survey data prior to the end of the 

primary term. 

(b)(1) Without a discovery—At any 

time after the fifth year of the primary 

term of a lease, the BLM may approve 

an application for a 10-year lease 

renewal for a lease on which there has 

not been a discovery of oil or gas. The 

BLM must receive the lessee’s 

application no later than 60 days prior 

to the expiration of the primary term of 

the lease. 

(2) The renewal application must: 

(i) Provide sufficient evidence that the 

lessee has diligently pursued 

exploration that warrants continuation 

of the lease with the intent of continued 

exploration or future potential 

development of the leased land. The 

application must show the: 

(A) Lessee has drilled one or more 

wells or has acquired and analyzed 

seismic data, or geochemical survey 

data on a significant portion of the 

leased land since the lease was issued; 

(B) Data collected indicates a 

reasonable probability of future success; 

and 

(C) Lessee’s plans for future 

exploration; or 

(ii) Show that all or part of the lease 

is part of a unit agreement covering a 

lease that qualifies for renewal without 

a discovery and that the lease has not 

been previously contracted out of the 

unit. 

(3) The BLM will approve the renewal 

application if it determines that the 

application satisfies the requirements of 

paragraph (b)(2)(i) or (ii) of this section. 

If the BLM approves the application for 

lease renewal, the applicant must 

submit to the BLM a fee of $100 per acre 

within 5 business days of receiving 

notification of approval. 

(4) The date of the lease renewal will 

be effective on the day following the 

end of the primary term of the lease. 

(5) The lease renewal may be 

approved on the condition that the 

lessee drills one or more additional 

wells or acquires and analyzes more 

well data, seismic data or geochemical 

survey data prior to the end of the 

primary term. 

(c) The renewed lease will be subject 

to the terms and conditions applicable 

to new oil and gas leases issued under 

the Integrated Activity Plan in effect on 

the date that the BLM issues the 

decision to renew the lease. 

10. Amend newly designated 

§ 3135.1–7 by revising paragraph (d) and 

by adding a new sentence to the end of 

paragraph (e) to read as follows: 

§ 3135.1–7 Consolidation of leases. 

* * * * * 

(d) The effective date, the anniversary 

date, and the primary term of the 

consolidated lease will be those of the 

oldest original lease involved in the 

consolidation. The term of a 

consolidated lease may be extended, or 

renewed, as appropriate, beyond the 

primary lease term under § 3135.1–5 or 

3135.1–6. 

(e) * * * The highest of the royalty or 

rental rates of any original lease shall 

apply to the consolidated lease. 

11. Add a new § 3135.1–8 to read as 

follows: 

§ 3135.1–8 Termination of administration 

for conveyed lands and segregation. 

(a) If all of the mineral estate is 

conveyed to the Arctic Slope Regional 

Corporation, the Regional Corporation 

will assume the lessor’s obligation to 

administer any oil and gas lease. 

(b) If a conveyance of the mineral 

estate does not include all of the land 

covered by an oil and gas lease, the 

lease will be segregated into two leases, 

one of which will cover only the 

mineral estate conveyed. The Arctic 

Slope Regional Corporation will assume 

administration of the lease within the 

conveyed mineral estate. 

(c) If the Arctic Slope Regional 

Corporation assumes administration of a 

lease under paragraph (a) or (b) of this 

section, all lease terms, BLM 

regulations, and BLM orders in effect on 

the date of assumption continue to 

apply to the lessee’s obligations under 

the lease. All such obligations remain 

enforceable by the Arctic Slope Regional 

Corporation as the lessor until the lease 

terminates. 

(d) In a case in which a conveyance 

of a mineral estate described in 

paragraph (b) of this section does not 

include all of the land covered by the oil 

and gas lease, the owner of the mineral 

estate in any particular portion of the 

land covered by the lease is entitled to 

all of the revenues reserved under the 

lease as to that portion including all of 

the royalty payable with respect to oil 

or gas produced from or allocated to that 

portion. 

12. Amend § 3137.5 by revising the 

definition of ‘‘Participating area’’ to read 

as follows: 

§ 3137.5 What terms do I need to know to 

understand this subpart? 

* * * * * 


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Federal Register / Vol. 72, No. 98 / Tuesday, May 22, 2007 / Proposed Rules 28649 

Participating area means those 

committed tracts or portions of those 

committed tracts within the unit area 

that are proven to be productive by a 

well meeting the productivity criteria 

specified in the unit agreement. 

* * * * * 

13. Add a new § 3137.11 to read as 

follows: 

§ 3137.11 What consultation must the BLM 

perform if lands in the unit area are owned 

by the Arctic Slope Regional Corporation or 

the State of Alaska? 

If the BLM administers a unit 

containing tracts where the mineral 

estate is owned by the Arctic Slope 

Regional Corporation or the State of 

Alaska, or if a proposed unit contains 

tracts where the mineral estate is owned 

by the Arctic Slope Regional 

Corporation or the State of Alaska, the 

BLM will consult with and provide 

opportunities for participation in 

negotiations with respect to the creation 

or expansion of the unit by—

(a) The Regional Corporation, if the 

unit acreage contains the Regional 

Corporation’s mineral estate; or 

(b) The State of Alaska, if the unit 

acreage contains the state’s mineral 

estate. 

14. Amend § 3137.21 by revising 

paragraph (a)(3), redesignating 

paragraph (a)(5) as paragraph (a)(6), 

adding a new paragraph (a)(5) and 

revising newly designated paragraph 

(a)(6) to read as follows: 

§ 3137.21 What must I include in an NPR–

A unit agreement? 

(a) * * * 

(3) The anticipated participating area 

size and proposed well locations (see 

§ 3137.80(b) of this subpart); 

* * * * * 

(5) A provision that acknowledges the 

BLM consulted with and provided 

opportunities for participation in the 

creation of the unit and a provision that 

acknowledges that the BLM will consult 

with and provide opportunities for 

participation in the expansion of the 

unit by—

(i) The Regional Corporation, if the 

unit acreage contains the Regional 

Corporation’s mineral estate; or 

(ii) The State of Alaska, if the unit 

acreage contains the state’s mineral 

estate. 

(6) Any optional terms which are 

authorized in § 3137.50 of this subpart 

that you choose to include in the unit 

agreement. 

* * * * * 

15. Amend § 3137.23 by removing 

‘‘and’’ from the end of the paragraph (f), 

redesignating paragraph (g) as paragraph 

(h), and adding a new paragraph (g) to 

read as follows: 

§ 3137.23 What must I include in my NPR–

A unitization application? 

* * * * * 

(g) A discussion of the proposed 

methodology for allocating production 

among the committed tracts. If the unit 

includes non-Federal oil and gas 

mineral estate, the methodology must 

take into account reservoir 

heterogeneity and area variation in 

reservoir producibility; and 

* * * * * 

16. Amend § 3137.41 by revising the 

introductory paragraph of the section to 

read as follows: 

§ 3137.41 What continuing development 

obligations must I define in a unit 

agreement? 

A unit agreement must provide for 

submission of supplemental or 

additional plans of development which 

obligate the operator to a program of 

exploration and development (see 

§ 3137.71 of this subpart) that, after 

completion of the initial obligations—

* * * * * 

17. Amend § 3137.80 by revising 

paragraph (a) and the first sentence of 

paragraph (b) to read as follows: 

§ 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 are proven to be productive by a 

well meeting the productivity criteria 

specified in the unit agreement. 

(b) You must include a description of 

the anticipated participating area(s) size 

in the unit agreement for planning 

purposes to aid in the mitigation of 

reasonably foreseeable and significantly 

adverse effects on NPR–A surface 

resources. * * * 

* * * * * 

18. Amend § 3137.81 by revising 

paragraph (a) to read as follows: 

§ 3137.81 What is the function of a 

participating area? 

(a) The function of a participating area 

is to allocate production to each 

committed tract within a participating 

area. The BLM will allocate production 

for royalty purposes to each committed 

tract within the participating area using 

the allocation methodology agreed to in 

the unit agreement (see § 3137.23(g) of 

this subpart). 

* * * * * 

19. Amend § 3137.85 by revising 

paragraph (b) to read as follows: 

§ 3137.85 What is the effective date of a 

participating area? 

* * * * * 

(b) The effective date of a modified 

participating area or modified allocation 

schedule is the earlier of the first day of 

the month in which you file the 

proposal for a modification or such 

other effective date as may be provided 

for in the unit agreement and approved 

by the BLM, but no earlier than the 

effective date of the unit. 

20. Revise § 3137.111 to read as 

follows: 

§ 3137.111 When will BLM extend the 

primary term of all leases committed to a 

unit agreement or renew all leases 

committed to a unit agreement? 

If the unit operator requests it, the 

BLM will extend the primary term of all 

NPR-A leases committed to a unit 

agreement or renew the leases 

committed to a unit agreement if any 

committed lease within the unit is 

extended or renewed under §§ 3135.1–

5 or 3135.1–6. If the BLM approves a 

lease renewal under § 3135.1–6(b), the 

BLM will require a renewal fee of $100 

per acre for each lease in the unit that 

is renewed. 

21. Amend § 3137.131 by revising the 

second and third sentences of the 

section to read as follows: 

§ 3137.131 What happens if the unit 

terminated before the unit operator met the 

initial development obligations? 

* * * You, as lessee, forfeit all further 

benefits, including extensions and 

suspensions, granted any NPR-A lease 

because of having been committed to 

the unit. Any lease that the BLM 

extended because of being committed to 

the unit would expire unless it qualified 

for an extension or renewal under 

§§ 3135.1–5 or 3135.1–6. 

22. Amend § 3137.134 by revising 

paragraph (b) to read as follows: 

§ 3137.134 What happens to committed 

leases if the unit terminates? 

* * * * * 

(b) An NPR–A lease that has 

completed its primary term on or before 

the date the unit terminates will expire 

unless it qualifies for extension or 

renewal under §§ 3135.1–5 or 3135.1–6. 

[FR Doc. E7–9696 Filed 5–21–07; 8:45 am] 

BILLING CODE 4310–84–P 


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