31520 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

DEPARTMENT OF THE INTERIOR

Minerals Management Service

Mid-term Assessment of the New

Leases Provision in the Outer

Continental Shelf (OCS) Deep Water

Royalty Relief Act

AGENCY: Office of the Assistant

Secretary, Land and Minerals

Management.

ACTION: Notice of Workshop to discuss

an assessment of the new leases

provision of the OCS Deep Water

Royalty Relief Act.

SUMMARY: Implementation of section

304 of the OCS Deep Water Royalty

Relief Act (DWRRA), the provision

related to OCS lease sales in the Gulf of

Mexico (GOM) held after the date of

enactment, is about at the half way

point in its 5 year authorized period.

The Assistant Secretary for Land and

Minerals Management (ASLM) is the

official responsible for administering

and overseeing the offshore oil and gas

program for the Secretary of the Interior

(Secretary). The ASLM is interested in

assessing the contribution that the new

lease provision has made to the levels

of bidding activity observed in the deep

water areas of the GOM. Taken in

conjunction with recent changes in

technological development, market

conditions, and a number of other

factors prevalent in current deep water

operations, the ASLM would like to

determine whether modifications in the

terms and conditions of deep water

leases issued in 1999 and 2000 may be

warranted. Additionally, the ASLM is

interested in assessing whether the new

lease provision should be continued

beyond the current 5-year period, and if

so, in what form. A public workshop

will be held to discuss these issues.

DATES: Assistant Secretary Robert

Armstrong will chair the workshop

which will be held on Monday, June 29,

1998, from 1:00 p.m. to 5:30 p.m.

Written comments received within 60

days after the workshop is held will be

considered and made part of the record.

ADDRESSES: The workshop will be held

at the Sheraton Crown Hotel &

Conference Center, 15700 John F.

Kennedy Blvd., Houston, Texas 77032.

The telephone number is (281) 442–

5100. Mail or hand carry comments to

the Department of the Interior; Minerals

Management Service; [Mail Stop 5114;

1201 Elmwood Park Blvd., New

Orleans, Louisiana 70123; Attention:

Thierry M. De Cort, Supervisor,

Resource and Economic Analysis Unit,

or send comments via e-mail to

thierry.decort@mms.gov or Fax to

(504)736–2905.]

FOR FURTHER INFORMATION CONTACT:

Thomas R. Kitsos, Staff Assistant, Office

of ASLM, at (202) 208–5220, e-mail to

thomas.kitsos@mms.gov, or Fax to (202)

208–3144 or (202) 208–6243.

Background

On November 28, 1995, President

Clinton signed Public Law 104–58,

which included the DWRRA. The new

law carries a number of discretionary

and mandatory provisions related to the

granting, by the Secretary, of royalty

relief on existing and new deep water

leases in the GOM, west of 87 degrees,

30 minutes west longitude. Section 304

of the DWRRA provides that all such

leases offered in water at least 200

meters deep within 5 years of the date

of enactment must be offered under a

new bidding system established in

section 303 (bonus bids with royalty

suspensions for a period, volume, or

value determined by the Secretary) and

with mandatory minimum suspension

royalty volumes of: 17.5 million barrels

of oil equivalent (MMBOE) for leases in

200–400 meters of water; 52.5 MMBOE

for leases in 400–800 meters; and 87.5

MMBOE for leases in more than 800

meters. The MMS issued an interim rule

for new lease sales on March 25, 1996,

and published a final rule on January

16, 1998.

As little as 5 years ago, technology for

developing deep water projects was still

in its infancy. At that time, there were

only two platforms producing in water

depths greater than 400 meters and

development costs were expected easily

to exceed $1 billion per project. The

facility design and construction phase

was expected to take two or three times

that needed in shallow water and the

hydrocarbon recovery period was

expected to be much longer in deeper

waters.

Since that time, and particularly in

the 21⁄2 years since enactment of the

DWRRA, there have been dramatic

changes in deep water exploration,

development, and production. Industry

has demonstrated that production rates

can be high, improved technologies can

reduce the costs of floating production

systems, projects can get on line

quickly, and geologic risk can be

reduced primarily because of improved

seismic imaging and processing tools.

Additionally, five extremely active

OCS sales in which a number of leasing

records were broken have been held

since enactment of the DWRRA, and the

experience and technological advances

by the oil and gas industry in deep

water operations in the GOM continue

to grow.

On the other hand, the robust activity

in the GOM which has led to many of

these unanticipated and very positive

developments also has resulted in some

added costs. It appears, for example,

that there has been a steep rise in the

day rates for drilling rigs, crew and

supply boats, and pipeline lay barges.

Also, there is an apparent shortage of

skilled, experienced personnel which is

driving up the costs in the deep water

and there is some recent indication that

certain technological approaches may

have run into costly problems. Finally,

the price of oil, about one third lower

than a year ago, adds to the

uncertainties in deep water

development.

The mandatory minimum royalty

relief provided to newly leased fields

under section 304 of the DWRRA can be

substantial. For example, ultra deep

water fields at 800 meters or deeper are

entitled to royalty free production of a

minimum of 87.5 million barrels.

Assuming a well-head price (gross price

minus transportation and processing

costs for some gas) of $16 per barrel of

oil ($2.15 per mcf of gas), the operators

of an oil field at that depth would be

able to produce about $1.4 billion in

gross value of energy ($1.1 billion for a

gas field) without paying royalty to the

Federal Government. The standard

1/8th royalty rate for development at

this depth would result in a royalty

payment of some $175 million for an oil

field ($138 million for a gas field),

which represents the amount of royalty

not paid under the terms of the DWRRA.

In view of these developments, deep

water production may be more

economic than first anticipated.

Consequently, deep water fields leased

since enactment of the DWRRA may be

benefitting from royalty relief beyond

simply the recoupment of capital costs,

which was the original intent of the Act.

The ASLM wants to assess this situation

as decisions are made on terms and

conditions for future lease sales and in

anticipation of the end of the 5-year

period of mandatory relief for new

leases.

Under the OCS Lands Act (OCSLA),

the Secretary is directed to carry out an

offshore energy development program

that, among many goals, assures

‘‘receipt of fair market value for the

lands leased and the rights conveyed by

the Federal Government.’’

A concern of the ASLM is whether

bidders, particularly those bidding at or

near the per acre minimum for deep

water tracts, are acquiring large amounts

of acreage to ‘‘bank’’ them as options

rather than for near term exploration

and development. Such a strategy, if

being practiced, may be at odds with the
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31521

Secretary’s responsibility to assure

receipt of fair market value, increases

the post sale tract evaluation workload

on MMS, precludes other companies

from acquiring and possibly exploring

the tract for many years, and fails to

result in expeditious development.

Given this mix of policy concerns

regarding deep water leasing issues, the

ASLM believes that a workshop held

with industry at the half-way point of

the new lease provision is desirable.

This workshop will review, among other

factors, the state of knowledge about

deep water exploration and production

profitability today in comparison with

what was anticipated at the time the

suspension volumes were developed. In

particular, industry and MMS will

participate in a series of presentations

addressing the following issues:

—General economic parameters (e.g.,

well rates, average finding and other

costs, production times, rates of

return) in the GOM; and

—Technological developments (e.g.,

seismic acquisition and processing,

production facility design, subsea

completions).

Moreover, through these

presentations, the ASLM is seeking

information that will allow him to

answer the following questions:

—To what extent has section 304 of the

DWRRA contributed to the increased

bidding activity observed for the last

five lease sales?

—What refinements, if any, should be

made in lease terms and conditions

for the remainder of the 5-year new

lease provision?

—At the end of the five year

authorization period for section 304,

should MMS continue to offer leases

with royalty suspensions and why—

or why not? If yes, should the terms

of the suspension (period, volume or

value) or other financial terms be

modified at that time?

—To what extent, if any, is option

bidding occurring on deep water

tracts?

—If some option bidding is occurring, is

it having a beneficial or adverse

impact on the Secretary’s ability to

assure a fair return to the public for

its resources, on energy markets, and

on the national economy?

—With respect to leasing in the deep

water of the GOM, to what extent, if

any, should MMS modify its lease

terms to assure a fair return to the

public for its resources and to lessen

any adverse impacts that option

bidding may be having on the

economy?

—How does the deep water of the GOM

currently compare in the global

market to other areas, both offshore

and onshore, with respect to its

attractiveness for investment?

Additional Information

1. An agenda of scheduled workshop

presentations and times will be

available through the Minerals

Management Service on the MMS

homepage approximately 1 week before

the workshop.

2. The next Western Gulf of Mexico

sale, Lease Sale 171, scheduled for

August 26, 1998, in New Orleans, will

not be affected in any way by the

workshop.

Dated: June 3, 1998.

Bob Armstrong,

Assistant Secretary, Land and Minerals

Management.

[FR Doc. 98–15283 Filed 6–8–98; 8:45 am]

BILLING CODE 4310–MR–P

DEPARTMENT OF THE INTERIOR

National Park Service

National Register of Historic Places;

Notification of Pending Nominations

Nominations for the following

properties being considered for listing

in the National Register were received

by the National Park Service before

MAY 30, 1998. Pursuant to section

60.13 of 36 CFR Part 60 written

comments concerning the significance

of these properties under the National

Register criteria for evaluation may be

forwarded to the National Register,

National Park Service, 1849 C St. NW,

NC400, Washington, DC 20240. Written

comments should be submitted by June

24, 1998.

Beth Savage,

Acting Keeper of the National Register.

ALABAMA

Jefferson County

Downtown Birmingham Retail and Theatre

Historic District (Boundary Increase), 1914,

1917, 1919, 1930 4th Ave., N.,

Birmingham, 98000709

Lawrence County

Courtland Historic District (Boundary

Increase), Roughly bounded by Clinton,

Madison, Van Buren, Jefferson, Ussery,

Tennessee, Monroe and Academy Sts.,

Courtland, 98000710

Wilcox County

Oak Hill Historic District, Area around Jct.

AL 10 and Al 21, Oak Hill, 98000711

CALIFORNIA

Los Angeles County

Golden State Mutual Life Insurance Building,

4261 S. Central Ave., Los Angeles,

98000712

Yolo County

Davis Subway, Richards Blvd. between Olive

Dr. and 1st St., Davis, 98000713

FLORIDA

Glades County

Moore Haven Residential Historic District,

Roughly bounded by Ave. J to Ave. M and

1st to 5th Sts., Moore Haven, 98000714

GEORGIA

Newton County

Starrsville Historic District, Jct. GA 213, Old

Starsville and Dixie Rds., Starrsville,

98000715

IOWA

Adair County

Adair Viaduct (Highway Bridges of Iowa

MPS) Business 80 over IAIS RR, Adair,

98000775

Adams County

Snider Bridge (Highway Bridges of Iowa

MPS) 220th St. over unnamed stream,

Corning vicinity, 98000774

Allamakee County

Monsrud Bridge (Highway Bridges of Iowa

MPS) Swebakken Rd. over Paint Cr.,

Waterville vicinity, 98000771

Red Bridge (Highway Bridges of Iowa MPS)

Fuel Hollow Rd. over Yellow R., Postville

vicinity, 98000773

Upper Iowa River Bridge (Highway Bridges of

Iowa MPS) Mays Prairie Rd. over Upper

Iowa R., Dorchester vicinity, 98000772

Benton County

Shellsburg Bridge (Highway Bridges of Iowa

MPS) Pearl St. over Bear Cr., Shellsburg,

98000770

Black Hawk County

Crane Creek Bridge (Highway Bridges of Iowa

MPS) Marquis Rd. over Crane Cr., Waterloo

vicinity, 98000769

Dunkerton Bridge (Highway Bridges of Iowa

MPS) Town street over Crane Cr.,

Dunkerton, 98000768

Boone County

Beaver Creek Bridge (Highway Bridges of

Iowa MPS) 210th St. over Beaver Cr.,

Ogden vicinity, 98000762

Big Creek Bridge (Highway Bridges of Iowa

MPS) 2110 300th St. over Big Cr., Madrid

vicinity, 98000766

Big Creek Bridge 2 (Highway Bridges of Iowa)

2130 320th St. over Big Cr., Madrid

vicinity, 98000767

Boone Bridge (Highway Bridges of Iowa

MPS) Old US 30 over Des Moines R.,

Boone vicinity, 98000761

Boone Bridge 2 (Highway Bridges of Iowa

MPS) 1000 200th St. over Des Moines R.,

Boone vicinity, 98000765

Squaw Creek Bridge (Highway Bridges of

Iowa MPS) 120th St. and V Ave. over

Squaw Cr., Ridgeport vicinity, 98000763

Squaw Creek Bridge 2 (Highway Bridges of

Iowa MPS) 110th St. and V Ave. over

Squaw Cr., Ridgeport vicinity, 98000764