[Federal Register Volume 62, Number 44 (Thursday, March 6, 1997)]
[Proposed Rules]
[Pages 10247-10248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5493]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Parts 202 and 206

RIN 1010-AB57


Amendments to Gas Valuation Regulations for Indian Leases

AGENCY: Minerals Management Service, Interior.

ACTION: Notice of meeting and reopening of public comment period.

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SUMMARY: The Minerals Management Service (MMS) is reopening the public 
comment period for a proposed rule published in the Federal Register on 
September 23, 1996, 61 FR 49894, amending its regulations governing the 
valuation for royalty purposes of natural gas produced from Indian 
leases.

DATES: Comments must be submitted on or before April 4, 1997. The 
committee meeting will be on March 26, 1997.

ADDRESSES: MMS will hold a meeting of the Indian Gas Valuation 
Negotiated rulemaking committee on March 26, 1997, in the conference 
room at: Golden Hill Office Complex, 12600 West Colfax Avenue, Suite 
B200, Golden, Colorado.
    Written comments, suggestions, or objections regarding this 
proposed amendment should be sent to the following addresses. For 
comments sent via the U.S. Postal Service use: Minerals Management 
Service, Royalty Management Program, Rules and Publications Staff, P.O. 
Box 25165, MS 3101, Denver, Colorado 80225-0165.
    For comments via courier or overnight delivery service use: 
Minerals Management Service, Royalty Management Program, Rules and 
Publications Staff, MS 3101, Building 85, Denver Federal Center, Room 
A-212, Denver, Colorado 80225-0165.

FOR FURTHER INFORMATION CONTACT:
David S. Guzy, Chief, Rules and Publications Staff, phone (303) 231-
3432, FAX (303) 231-3194, e-Mail David__G<a href="/cdn-cgi/l/email-protection#b5c0cfccf5c6d8c1c59bd8d8c69bd2dac3"><span class="__cf_email__" data-cfemail="c6b3bcbf86b5abb2b6e8ababb5e8a1a9b0">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: David S. Guzy, Chief, Rules and 
Procedures Staff, at (303) 231-3432.

I. SUPPLEMENTARY INFORMATION:

Background

    On September 23, 1996, MMS published a notice of proposed 
rulemaking in the Federal Register (61 FR 49894) to amend the valuation 
regulations for gas production from Indian leases. The framework for 
the proposed rule was the product of an Indian Gas Valuation Negotiated 
Rulemaking Committee. The proposed rulemaking provided for a 60-day 
comment period, which ended November 22, 1996, and was extended to 
December 3, 1996, by a Federal Register Notice (61 FR 59849, November 
25, 1996). during the public comment period MMS received 13 written 
comments: 7 responses from industry, 4 from industry trade groups or 
associations, 1 from an Indian tribe, and 1 from an Indian agency. A 
public hearing was held in Oklahoma City, Oklahoma, on October 23, 
1996.

II. Comments on Proposed Rule

    MMS proposed to revise the current regulations regarding the 
valuation of gas production from Indian leases to accomplish the 
following:
    <bullet> To ensure that Indian mineral lessors receive the maximum 
revenues from mineral resources on their land consistent with the 
Secretary of the

[[Page 10248]]

Interior's (Secretary) trust responsibility and lease terms; and,
    <bullet> To improve the regulatory framework so that information is 
available which would permit lessees to comply with the regulatory 
requirements at the time that royalties were due.
    All commenters endorsed the concept of revising the existing 
regulations to provide simplicity and certainty, decrease 
administrative costs, and decrease litigation. Industry generally 
supports the use of independent published index prices for valuing gas 
produced from Indian leases. Industry also supports the concept of an 
alternative ``percentage increase'' to satisfy the dual accounting 
requirement contained in most Indian leases to the extent the use of 
this alternative methodology is voluntarily chosen by the lessee. 
Industry does not support the language in the proposed rule and objects 
to:
    <bullet> the safety net concept for nondedicated sales,
    <bullet> the separate dual accounting requirement on natural gas 
liquids, and
    <bullet> the gross proceeds requirement if gas production was 
subject to a previous contract which was the subject of a gas contract 
settlement. The Council of Petroleum Accountants Societies (COPAS) 
states ``The COPAS representative on the Committee voted in favor of 
the original index-based formula at the Committee's May, 1995 meeting 
based on the belief that the use of that formula would satisfy both the 
gross proceeds and major portion clauses contained in most Indian 
leases, with the exception of gas sold under certain high-priced 
contracts.''
    MMS agrees the gross proceeds requirement in the proposed rule 
dealing with the issue of gas contract settlements changed the 
Committee's agreement that the index formula was to replace both the 
gross proceeds requirement and the major portion requirement. The MMS 
would like to receive comments on a concept where contract settlement 
proceeds would be royalty bearing, but would not require a monthly 
gross proceeds comparison to the index formula. MMS will view contract 
settlement proceeds to be part of gross proceeds when value is 
determined by gross proceeds such as for production from a dedicated 
contract, or in nonindex areas where the initial value is determined 
under the gross proceeds context. For index areas, MMS will require the 
gross proceeds of gas sold under nondedicated contracts to be 
calculated only if the contract settlement proceeds per MMBTU when 
added to the 80 percent of the safety net price exceeds the formula 
value for the month including any increase for dual accounting. This 
computation would be made after the safety net prices were reported to 
the MMS by the lessee. Specifically, under this concept, MMS would 
revise Sec. 206.172(b)(2)(ii) to read as follows:
    This paragraph applies to gas not sold under a dedicated contract 
and that was subject to a previous contract which was part of a gas 
contract settlement. If the contract settlement proceeds per MMBTU 
added to the 80 percent of the safety net prices calculated at 
Sec. 206.172(e)(4)(i) exceeds the index-based value that applies to the 
gas under this section (including any adjustments required under 
Sec. 206.176), then the value of the gas is the higher of the value 
determined under this section (including any adjustments required under 
Sec. 206.176) or Sec. 206.174.
    MMS specifically requests comments on these revised paragraphs. You 
do not need to comment on the rest of the rule. MMS will respond to all 
comments in a final rule.

    February 28, 1997.
Lucy R. Querques,
Associate Director for Royalty Management.
[FR Doc. 97-5493 Filed 3-5-97; 8:45 am]
BILLING CODE 4310-MR-M


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