32166 Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Proposed Rules

resident counterparties (i.e., foreign-toforeign payments) may be included in

such regulations. In addition, comments

are also solicited concerning the

appropriate treatment of swaps or other

derivative transactions on property

(other than stocks and securities) that

produce FDAP income, e.g., rents and

royalties.

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a

significant regulatory action as defined

in EO 12866. Therefore, a regulatory

impact analysis is not required. It also

has been determined that section 553(b)

of the Administrative Procedure Act (5

U.S.C. chapter 5) does not apply to these

regulations, and because the regulation

does not impose a collection of

information on small entities, the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) does not apply. Therefore, a

Regulatory Flexibility Analysis under

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

Chapter 6) is not required. Pursuant to

section 7805(f) of the Code, this notice

of proposed rulemaking will be

submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on their

impact on small business.

Comments and Public Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written comments that are submitted

timely to the IRS (a signed original and

eight (8) copies). All comments will be

available for public inspection and

copying.

A public hearing has been scheduled

for September 9, 1998, at 10:00 A.M., in

room 2615, Internal Revenue Building,

1111 Constitution Avenue NW,

Washington, DC. Because of access

restrictions, visitors will not be

admitted beyond the Internal Revenue

Building lobby more than 15 minutes

before the hearing starts.

The rules of 26 CFR 601.601(a)(3)

apply to the hearing. Persons that wish

to present oral comments at the hearing

must submit written comments by

September 10, 1998, and submit an

outline of the topics to be discussed and

the time to be devoted to each topic by

August 19, 1998.

A period of 10 minutes will be

allotted to each person for making

comments.

An agenda showing the scheduling of

the speakers will be prepared after the

deadline for receiving outlines has

passed. Copies of the agenda will be

available free of charge at the hearing.

Proposed Effective Date

These regulations are proposed to be

effective for taxable years beginning 30

days after the date final regulations are

published in the Federal Register.

Taxpayers may elect to apply the

provisions of the final regulations to

taxable years beginning before the date

which is 30 days after these regulations

are published as final in the Federal

Register. No inference is intended

regarding the treatment of derivative

transactions under sections

864(b)(2)(A)(ii) and (B)(ii) and the

current regulations. For periods prior to

the effective date, taxpayers engaged in

derivative transactions may take any

reasonable position with regard to the

section 864(b)(2)(A)(ii) and (B)(ii) safe

harbors. Positions consistent with these

proposed regulations will be considered

reasonable.

Drafting Information

The principal author of these

regulations is Milton Cahn of the Office

of Associate Chief Counsel

(International). However, other

personnel from the IRS and Treasury

Department participated in their

development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

Proposed Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 continues to read in part as

follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.864(b)–1 is added to

read as follows:

§ 1.864(b)–1 Trading in derivatives.

(a) Trading for taxpayer’s own

account. As used in part I (section 861

and following) and part II (section 871

and following), subchapter N, chapter 1

of the Internal Revenue Code (Code),

and chapter 3 (section 1441 and

following) of the Code, and the

regulations thereunder, if a taxpayer is

an eligible nondealer, the term engaged

in trade or business within the United

States does not include effecting

transactions in derivatives for the

taxpayer’s own account, including

hedging transactions within the

meaning of § 1.1221–2.

(b) Definitions—(1) Eligible nondealer.

For purposes of this section, an eligible

nondealer is a person that is not a

resident of the United States and is not,

at any place (domestic or foreign), nor

at any time during that person’s taxable

year, any of the following—

(i) A dealer in stocks or securities as

defined in § 1.864–2(c)(2)(iv)(a);

(ii) A dealer in commodities as that

term is used in § 1.864–2(d); or

(iii) A person that regularly offers to

enter into, assume, offset, assign or

otherwise terminate positions in

derivatives with customers in the

ordinary course of a trade or business,

including regularly holding oneself out,

in the ordinary course of one’s trade or

business, as being willing and able to

enter into either side of a derivative

transaction.

(2) Derivative. For purposes of this

section, the term derivative includes—

(i) An interest rate, currency (as

defined in paragraph (b)(3) of this

section), equity, or commodity (as the

term is used in section 864(b)(2)(B) and

§ 1.864–2(d)) notional principal contract

(as the term is used in section 475(c)(2));

or

(ii) An evidence of an interest, or a

derivative financial instrument

(including any option, forward contract,

short position and any similar financial

instrument), in any—

(A) Commodity (as the term is used in

section 864(b)(2)(B) and § 1.864–2(d));

(B) Currency (as defined in paragraph

(b)(3) of this section);

(C) Share of stock (as the term is used

in § 1.864–2(c)(2));

(D) Partnership or beneficial

ownership interest in a widely held or

publicly traded partnership or trust;

(E) Note, bond, debenture, or other

evidence of indebtedness; or

(F) Notional principal contract

described in paragraph (b)(2)(i) of this

section.

(3) Limitation. For purposes of this

section, the term currency is limited to

currencies of a kind customarily dealt in

on an organized commodity exchange.

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

[FR Doc. 98–15452 Filed 6–11–98; 8:45 am]

BILLING CODE 4830–01–P

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Chapter II

Review of Existing Regulations

AGENCY: Minerals Management Service

(MMS), Interior.

ACTION: Review of regulations; request

for comment.
Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Proposed Rules 32167

SUMMARY: MMS has been performing

annual reviews of its significant

regulations and asking the public to

participate in these reviews since 1994.

The purpose of the reviews is to identify

and eliminate regulations that are

obsolete, ineffective, or burdensome. In

addition, the reviews are meant to

identify essential regulations that

should be revised because they are

either unclear, inefficient, or interfere

with normal market conditions. As

MMS moves towards performance based

regulations, we are looking at ways to

offer regulatory relief to industry for

exceptional performance. We request

your comments and suggestions with

respect to which regulations could be

more performance based and less

prescriptive.

The purpose of this document is

twofold. First, we want to provide the

public an opportunity to comment on

MMS regulations that should be

eliminated or revised, or could be more

performance based. Second, we are

providing a status update of the actions

MMS has taken on comments

previously received from the public in

response to documents published March

1, 1994, March 28, 1995, May 20, 1996,

and April 24, 1997. We will only

include in this document status updates

on comments which have not been

closed/implemented in the four

previous status update documents listed

above.

DATES: Written comments must be

received by August 11, 1998.

ADDRESSES: Mail written comments to

Department of the Interior; Minerals

Management Service; Mail Stop 4230;

1849 C Street NW; Washington, DC

20240; Attention: Bettine Montgomery,

MMS Regulatory Coordinator, Policy

and Management Improvement.

FOR FURTHER INFORMATION CONTACT:

Bettine Montgomery, Policy and

Management Improvement, telephone:

(202) 208–3976; Fax: (202) 208–4891;

and E-Mail:

Elizabeth.Montgomery@mms.gov.

SUPPLEMENTARY INFORMATION: MMS

began a review of its regulations in early

1994 under the directives contained in

the President’s Executive Order 12866.

The Executive Order calls for periodic

regulatory reviews to ensure that all

significant regulations are efficient and

effective, impose the least possible

burden upon the public, and are tailored

no broader than necessary to meet the

agency’s objectives and Presidential

priorities.

We invited the public to participate in

the regulatory review. The invitation

was sent out via different media, namely

a Federal Register document dated

March 1, 1994 (59 FR 9718); MMS and

independent publications; and public

speeches by MMS officials during that

time.

MMS received approximately 40

public comments which were almost

equally divided between its Royalty

Management and Offshore Minerals

Management Programs. We

acknowledged the comments in a July

15, 1994 (59 FR 36108), document and

set forth our planned actions to address

the comments, along with an estimated

timetable for these actions.

In the Federal Register notices

published March 28, 1995 (60 FR

15888); May 20, 1996 (61 FR 25160);

and April 24, 1997 (62 FR 19961), MMS:

(a) asked for further public comments

on its regulations, and (b) provided a

status update of actions it had taken on

the major public comments received to

date. We received 10 responses from the

1995 document; 5 responses from the

1996 document; and 2 responses from

the 1997 document. A number of the

commentators expressed appreciation

for our streamlining efforts and

responsiveness to suggestions from our

regulated customers.

This document updates the MMS

planned actions and related timetables

on the major comments received to date.

It also solicits additional comments

from the public concerning regulations

that should be either eliminated or

revised, or could be more performance

based. Since some of the public

responses received in response to prior

documents contained comments on very

specific and detailed parts of the

regulations, this document does not

address every one received. For

information on any comment submitted

which is not addressed in this

document, please contact Mrs.

Montgomery at the number and location

stated in the forward sections of this

document.

MMS regulations are found at Title 30

in the Code of Federal Regulations. Parts

201 through 243 contain regulations

applicable to MMS’s Royalty

Management Program; Parts 250 through

282 are applicable to MMS’s Offshore

Minerals Management; and Part 290 is

applicable to Administrative Appeals.

Status Report

The following is a status report by

program area on the comments MMS

has received, to date, on its regulations.

A. Offshore Minerals Management

(OMM) Program

OMM is currently reviewing the

following 14 sections of OMM

regulations:

1. Regulations Governing Conservation

of Resources and Diligence (30 CFR 250,

Subpart A.)

Comments Received—(a) ‘‘Revise

Determination of Well Producibility to

make wireline testing and/or mud

logging analysis optional * * *.’’ (b)

‘‘* * * consider comments from the 11/

30/95 MMS sponsored workshop to

formulate policy for granting SOP

(suspension of production) approvals

based on host capacity delays, noncontiguous unitization, and market

conditions/economic viability.’’

Action Taken or Planned—For (a)

above, a proposed rule, ‘‘Postlease

Operations,’’ revising Subpart A was

published on February 13, 1998 (63 FR

7335). This revision addresses the

determination of well producibility

process, and the public is invited to

comment on this and all areas of the

proposed rule. The comment period

closes on July 17, 1998. For (b) above,

MMS did consider the comments from

the 11/30/95 workshop on granting

suspensions of production when

preparing the proposed rule.

Timetable—The projected publication

date for a final rule is April 1999.

2. Revision of the Process for

Incorporating Codes and Standards by

Reference (30 CFR 250.1, Subpart A)

Comments Received—‘‘* * * review

individual documents when changed

and recommend adoption or rejection to

reduce confusion as to the standard that

should be used.’’

Action Taken or Planned—On

November 26, 1996 (61 FR 60019), MMS

published a final rule that updated over

50 documents incorporated by

reference. In the preamble of the rule,

MMS discussed its new policy for

incorporating documents into the

regulations. This will result in a much

quicker and more efficient process for

incorporating documents. If MMS

determines that the changes to

documents are minor, result in safety

improvements or represent new

industry standard technology, and do

not impose undue costs on the affected

parties, MMS will incorporate the new

edition with a final rule published in

the Federal Register. This will keep the

number of out-of-date documents

incorporated by reference to a

minimum. This also means that a new

edition becomes effective without

public comment.

Timetable—Completed.

3. Regulations Applicable to Directional

Surveys (30 CFR 250.51, Subpart D)

Comments Received—‘‘Revise

directional survey requirements to allow
32168 Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Proposed Rules

a composite measurement-while-drilling

directional survey to be acceptable

* * *.’’

Action Taken or Planned—MMS is

rewriting the regulations governing Oil

and Gas Drilling Operations, found in

30 CFR Part 250, Subpart D, in plain

English. During this rewrite, MMS is

making appropriate revisions to the

regulations. Updating the requirements

for directional survey requirements is

one of the revisions planned for this

rewrite.

Timetable—We plan to publish a

Notice of Proposed Rulemaking this fall.

4. Regulations Applicable to Blowout

Preventer (BOP) Testing and

Maintenance Requirements (30 CFR

250.56 and 250.57, Subpart D)

Comments Received—‘‘Revise BOP

testing regulations to allow for less

frequent and shorter tests. Allow 14 day

BOP test interval vs. current 7-day

interval.’’

Action Taken or Planned—MMS

published a proposed rule to amend the

regulations governing the testing

requirements for BOP systems used in

drilling and completion operations in

the Federal Register on July 15, 1997

(62 FR 37819). The rule proposed to

allow a lessee up to 14 days between

BOP pressure tests. We made the

decision to allow the extended testing

time frame based on a completed study

of BOP performance by an engineering

consulting firm. The study concluded

that no statistical difference in failure

rates existed between BOP’s tested as

required, every 7 days, and those tested

between an 8 to 14-day interval. The

new testing time frame applies to

drilling, sidetrack, and completion

activities, but not to workover activities

since they were not examined in the

performance study. MMS has made

minor revisions to the rule based on the

five sets of comments on the proposed

rule, and we published the final rule on

June 1, 1998 (63 FR 29604).

Timetable—Completed.

5. Approval and Reporting Processes for

Well-Completion Operations (30 CFR

250.83)

Comments Received—‘‘* * * a

recompletion operation requires that a

Well Summary Report MMS–125 be

filed within 30 days. Much of this data

is repetitious of data previously

submitted on the Sundry Notice MMS–

124. The process could be changed to

provide only data that has changed.’’

Action Taken or Planned—We will

study this process to decide whether or

not to change reporting requirements

through rulemaking.

Timetable—Ongoing.

6. Safety System Design and Installation

(30 CFR 250.122)

Comments Received—Safety System

Design and Installation (30 CFR

250.122)—‘‘We believe that the (Safety

and Environmental Management

Program) SEMP/RP 75 Performance

Measure process of alternative

compliance for operators who

voluntarily implement RP 75 and have

‘‘good’’ performance should allow those

operators to periodically update

drawings and other documents of

production safety system installations

and routine modifications instead of

receiving required MMS approval of

these documents before any

modifications are performed (Comment

#14 of our July 17, 1996 letter). This is

one example of the alternative

compliance process that we suggest.’’

Action Taken or Planned—This

comment expresses an interest for

regulatory relief in exchange for

‘‘compliance’’ with API RP75. This

industry standard captures the essence

of SEMP. On August 13, 1997, the MMS

published a Federal Register notice on

SEMP (62 FR 43345). This notice

publicly relayed our intent to continue

collaborative efforts with the U.S.

offshore oil and gas industry to promote

the non-regulatory (i.e., voluntary)

adoption of SEMP; it simultaneously

relayed our intent to increasingly focus

on operator performance in the field.

This decision was made after extensive

review of the industry’s actions to adopt

RP75. We have seen important strides

made in the development of SEMP

programs by the majority of OCS

operators. We have, however, still not

seen widespread implementation of

these programs on offshore installations.

In the most recent SEMP notice, we

asked senior company officers to notify

MMS when they had ‘‘fully’’

implemented SEMP at the field level. In

our view, ‘‘fully’’ means that an operator

has developed their SEMP plan and has

implemented it at enough of their

offshore installations to commence

continuous improvement efforts (e.g.,

SEMP audits). At the end of April 1998,

we had received such notifications from

only five OCS operators. This fact leads

us to conclude that SEMP is not yet

broadly implemented at the field level.

Therefore, any requests for regulatory

relief in exchange for SEMP

implementation will need to be made to

MMS on an ad hoc basis by operators

who are prepared to demonstrate, and

have the MMS verify, both the extent of

their SEMP implementation and their

field-level performance.

MMS has begun the process of

revising 30 CFR Part 250, Subpart H.

The process changes suggested above

will be considered internally during

preparation of the Notice of Proposed

Rulemaking.

Timetable—MMS expects the Notice

of Proposed Rulemaking for a revised 30

CFR Part 250, Subpart H, to be

published for comment in the fall of

1998.

7. Regulations Applicable to Production

on the Outer Continental Shelf (OCS)

(30 CFR Part 250, Subpart H)

Comments Received—Production

Safety System Testing and Records (30

CFR 250.124)—‘‘OOC (Offshore

Operators Committee) is very much

interested in working with MMS on a

research project beginning in 1997 to

consider appropriate leak rate tolerances

for critical safety devices (Comment #11

of our July 17, 1996 letter) as well as

testing frequencies of accurate and

reliable new generation safety devices

(Comment #13 of our July 17, 1996

letter).’’

Action Taken or Planned—MMS has

initiated a research project with

Southwest Research Institute which will

investigate the question of leak rate

tolerances for critical safety devices.

First results from the study should

become available in the fall of 1998.

MMS has also initiated the rulemaking

process to revise all of subpart H. As

part of this process, testing frequencies

for safety devices will be discussed

internally. Any proposed changes to

testing frequencies will appear in the

Notice of Proposed Rulemaking for

subpart H.

Timetable—MMS expects the Notice

of Proposed Rulemaking for a revised

subpart H to appear in the Federal

Register this fall.

8. Regulations Governing Safety and

Pollution Prevention Equipment (SPPE)

(30 CFR Part 250.126, Subpart H)

Comments Received—(a) Quality

Assurance (30 CFR 250.126)—‘‘We

encourage MMS to eliminate

unnecessary record keeping

requirements (Comment #16 of our July

l7, 1996 letter) as proposed in the

December 18, 1996, Federal Register

notice 61 FR 66639. However, we

strongly object to eliminating functional

noncertified SPPE that is currently in

service for any reason other than hot

work or remanufacture as explained in

our February 14, 1997, comments on the

proposal at 61 FR 66639.’’ (b) ‘‘Revise

regulations governing Safety Valves to

increase time between test and

allowable leakage rates.’’

Action Taken or Planned—For (a)

above, revised quality assurance

requirements were published as a
Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Proposed Rules 32169

Notice of Final Rulemaking in the

Federal Register on August 8, 1997 (62

FR 42669). To reduce paperwork, the

new rule eliminated the need for

companies to update their list of

noncertified SPPE. It also eliminated the

detailed reporting requirements

regarding the installation and failure of

certified equipment. The final rule

requires replacement of noncertified

SPPE only when the noncertified SPPE

requires offsite repair, remanufacturing,

or hot work, such as welding. This

allows operators to continue using

noncertified SPPE provided the

equipment works properly, and when

necessary, requires only minor repairs.

Once noncertified SPPE requires offsite

repair, manufacturing, or hot work, it

may not be used on the OCS.

For (b) above, as discussed under Item

No. 7, MMS contracted with Southwest

Research Institute in September 1997 to

study leakage rates for surface and

subsurface safety valves.

Timetable—The Southwest Research

Institute will complete the study in the

fall of 1998.

9. Regulations Regarding Construction

and Removal of Platforms and

Structures (30 CFR 250, Subpart I)

Comments Received—(a) ‘‘Modify

platform design wave return period

calculation by placing a cap of 100 years

on the field life calculation * * *.’’ (b)

‘‘Adopt API RP2A (20th edition) Section

14, Surveys, in its entirety * * *.’’ (c)

‘‘Revise site clearance requirements

* * *.’’ (d) ‘‘Revise requirements for

placing protective domes over well

stubs * * *,’’ etc.

Action Taken or Planned—For (a), (c),

and (d) above, the proceedings for the

International Workshop on Offshore

Lease Abandonment and Platform

Disposal held in April 1996 were

published in 1997. We will be

considering the comments we received

from the proceedings in drafting a

proposed rule on decommissioning. For

(b) above, NTL98–4N was issued on

March 4, 1998. It contains interim

guidance for applying ‘‘Simplified

Fatigue Analysis’’ Procedure from

American Petroleum Institute (API)

Recommended Practice 2A (RP2A),

Planning, Designing, and Constructing

Fixed Offshore Platforms, Nineteenth

Edition (August 1, 1991), and Twentieth

Edition (July 1, 1993), and its

supplement 1 (February 1, 1997).

Timetable—For (a), (c), and (d) above,

MMS plans to draft a rule on

decommissioning by December 1998.

For (b) above, ongoing.

10. Regulations Applicable to Pipelines

and Pipeline Rights-of-Way (30 CFR

250, Subpart J)

Comments Received—Revise

regulations to avoid duplication of

requirements between the Department

of the Interior (DOI) and the Department

of Transportation (DOT). The following

comments were submitted on the

proposed rule on regulating pipelines

which was published October 2, 1997

(62 FR 51614):—Commentators raised

concerns about the Notice of Proposed

Rulemaking involving technical issues

affecting the applicability of the rule to

producer-operated pipelines. The

pipelines were either previously subject

to DOT regulation under terms of the

former 1976 Memorandum of

Understanding between DOI and DOT,

or cross into State waters without first

connecting to a transporting operator’s

pipeline on the OCS as described in the

1996 Memorandum of Understanding.

Action Taken or Planned—As stated

in our previous Notice, ‘‘Reviewing

Existing Regulations’’ (April 24, 1997), a

Memorandum of Understanding on the

pipeline issue between DOI and DOT

became effective December 10, 1996,

and was published in the Federal

Register on February 14, 1997 (62 FR

7037). Since then, we have published a

proposed rule on October 2, 1997 (62 FR

51614) clarifying regulatory jurisdiction

of the pipelines. MMS is now

proceeding with a final rule that will

clarify and resolve the technical issues

raised during the comment period on

the proposed rule.

Timetable—We plan to publish the

Notice of Final Rulemaking

incorporating comments on the

proposed rule by mid-summer.

11. Allocation Meter Facility

Requirements (30 CFR 250.180(e))

Comments Received—‘‘We suggest

that the regulations be revised to

recognize the use of liquid turbine

meters and the inability to physically

make adjustments to these types of

meters, and to clarify that samples

should be taken proportional to flow to

reflect present industry practice.’’

Action Taken or Planned—MMS

published a proposed rule, ‘‘Oil and Gas

Production Measurement, Surface

Commingling, and Security,’’ on

February 26, 1997 (62 FR 8665), that

addressed this comment. The final rule

was published May 12, 1998 (63 FR

26361), and will be effective June 29,

1998.

Timetable—Completed.

12. Model Unit Agreement (30 CFR

250.194)

Comments Received—‘‘In several

instances within the Model Unit

Agreement language, the defined terms

are not used when it seems appropriate.

We recommend that the defined terms

be used to avoid confusion when

reviewing the agreements.’’

Action Taken or Planned—On July 3,

1996 (61 FR 28525), MMS published a

final rule which removed the Model

Unit Agreement from the Code of

Federal Regulations. We have no plans

to revise the Agreement at this time. A

final rule on Unitization was published

on February 5, 1997 (62 FR 5329), and

was effective March 7, 1997.

Timetable—Completed.

13. Shallow Hazards Requirements

(NTL No. 83–3)

Comments Received—‘‘* * * revise

(Notice to Lessees) NTL No. 83–3 which

relates to shallow hazards requirements.

Industry has requested that MMS allow

use of navigational positioning

equipment in lieu of buoying

pipelines.’’

Action Taken or Planned—We are

revising NTL No. 83–3 and are in the

process of developing guidance for

navigational positioning equipment

technology. In the revised NTL, industry

may still use buoying, but if they choose

not to use buoying, the NTL will require

the use of state-of-the-art navigational

systems. This will assure the accuracy

and safety of anchoring operations in

the vicinity of pipelines.

Timetable—Ongoing.

14. Regulations Applicable to

Production Safety System Training (30

CFR 250.214, Subpart O)

Comments Received—In response to a

June 10, 1997, workshop on the

development of a performance based

training rule, MMS received a variety of

comments from the oil and gas industry

and MMS accredited training schools.

These comments include: (a) ‘‘Continue

to implement the current Subpart O

training system.’’ (b) ‘‘Develop a dual

training system incorporating elements

from both a performance based program

and MMS’s current system.’’ (c)

‘‘Companies may neglect training under

a performance based system.’’ (d) ‘‘MMS

should use caution when changing from

the current prescriptive training system

* * *’’ (e) ‘‘* * * use of a written MMS

test may cause employees stress that

would lead to poor performance on the

exams.’’ (f) ‘‘* * * hands-on simulator

testing is an excellent and realistic

means of gauging performance. * * *

MMS may not have the expertise or
32170 Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Proposed Rules

equipment to properly conduct

simulator tests.’’ (g) ‘‘Hands-on testing

should only be conducted onshore, not

offshore.’’ (h) ‘‘How will MMS react to

a company that does not train its

employees but has a good safety record

* * *.’’ (i) ‘‘This may not be the right

time to move towards a performance

system because of the increase in OCS

activity and the shortage of trained and

experienced workers.’’

Activity Taken or Planned—MMS has

prepared a proposed rule on a

performance based training program

which relies on industry to design its

training needs. We would monitor the

program through tests and audits. In

developing the rule, we took into

consideration the comments received in

the June 10, 1997, workshop.

Timetable—We plan to publish the

Notice of Proposed Rulemaking for

comment by late summer.

B. Royalty Management Program (RMP)

RMP is reviewing regulations in the

following 12 subject areas:

1. Statute of Limitations and Record

Retention

Comments Received—‘‘Statute of

limitations is unclear.’’—‘‘Establish a

reciprocal 5-year statute of limitations

from the date an obligation becomes

due.’’—‘‘Absence of a record retention

program creates some confusion.

Regulations should require record

retention to coincide with the 5-year

statute of limitations.’’

Action Taken or Planned—The

Federal Oil and Gas Royalty

Simplification and Fairness Act (Act)

was signed into law on August 13, 1996.

The Act contains language to implement

a 7-year statute of limitations for MMS

processes. We are changing processes,

developing implementation plans, and

preparing regulatory changes to comply

with the requirements of the Act.

Timetable—Ongoing.

2. Interest on Overpayments

Comment Received—‘‘Interest accrual

should be equitable between the agency

and industry.’’

Action Taken or Planned—The Act

provides for the payment of interest on

overpayments for oil and gas leases on

Federal lands. On March 31, 1997, we

issued a Dear Payor letter about the

Act’s provisions involving interest

issues. We issued another Dear Payor

letter on October 1, 1997, explaining

interest calculations and interest

reporting requirements. MMS is

designing system changes to implement

the requirements of the Act and

preparing regulations to be published.

Timetable—A Notice of Rulemaking

providing for interest on overpayments

and underpayments will be published

for comment in 1998.

3. Interest Assessments

Comments Received—‘‘A de minimis

provision should be established for the

assessment of interest.’’—‘‘* * * MMS

should enhance their existing interest

assessment system to allow for the

offsetting of prior period adjustments

made on the MMS Form 2014 before

calculating applicable interest.’’

Action Taken or Planned—The Act

not only provides for the payment of

interest on overpayments for oil and gas

leases on Federal lands, but allows

industry to calculate the correct interest

assessment. Also, the Act allows interest

that has accrued on overpayments to be

applied to reduce underpayments. We

have included billing thresholds in our

interest system to prevent bills for de

minimis amounts. In May 1997, we

started sending interest statements

instead of interest bills, and the

statements contain totals for interest

that MMS owes and for interest owed to

MMS. MMS is implementing system

changes to conform with the

requirements of the Act and preparing

regulations.

Timetable—As noted under Item 2,

Timetable, a Notice of Rulemaking for

comment on payment of interest will be

published in 1998.

4. Gas Valuation

Comments Received—(a) ‘‘Define

gross proceeds more equitably and

clearly in this ever changing gas

marketing environment.’’ (b) ‘‘It is

important that the Federal Gas

Valuation Rule final rule not

discriminate against producers which

are affiliated with marketing companies

and are party to non-arms-length

contracts.’’ (c) ‘‘Extend the elimination

of processing and transportation

allowance forms to oil.’’ (d) ‘‘* *

*commends the MMS on their use of

negotiated rulemaking process to

address the valuation of gas. Rule

should result in administrative cost

savings for all parties.’’ (e) ‘‘If the Takes

vs. Entitlements policy stays in effect,

MMS should strictly enforce reporting

on actual quantities taken for all

industry participants.’’ (f) ‘‘Eliminate

Transportation and Processing

Allowance Forms for Indians.’’

Action Taken or Planned—For (c)

above, a final rule revising the valuation

regulations governing allowances was

published in the Federal Register on

February 12, 1996 (61 FR 5448). This

rule eliminated most allowance forms

filing requirements for oil, gas, and coal

produced from Federal leases.

For (a) above, on December 16, 1997,

MMS published a final rule clarifying

what deductions may be taken from

gross proceeds for the costs of

transportation under Federal Energy

Regulatory Commission (FERC) Order

No. 636. The rule was effective February

1, 1998 (63 FR 65753). For (a), (b), and

(d) above, the Federal Gas Valuation

proposed rule was published in the

Federal Register on November 6, 1995

(60 FR 56007), and the comment period

closed on February 5, 1996. In light of

the comments received from 44 entities,

on May 21, 1996, MMS reopened the

public comment period and asked for

public comment on five options for

proceeding with further rulemaking (61

FR 25421). The reopened public

comment period closed August 19,

1996. MMS reconvened the Federal Gas

Valuation Negotiated Rulemaking

Committee on June 12–14, 1996, and

asked the Committee to provide input

into the five options.

MMS performed a cost benefit

analysis on three viable options for

proceeding with gas valuation

regulations. Given the results of the cost

benefit analysis ($20 million annual loss

in royalties) and changes occurring in

the gas market, MMS withdrew the

proposed rulemaking on April 22, 1997

(62 FR 19536). MMS is developing a

framework for offshore gas valuation

and will conduct workshops to obtain

constituent input. We will work with

the States to develop an onshore

perspective.

For (e) above, the Act contains

language requiring ‘‘takes’’ reporting for

stand alone leases and agreements

containing 100 percent Federal leases.

The Act also requires ‘‘entitlements’’

reporting for so-called mixed

agreements (agreements containing

Federal, State, Indian, and/or fee leases)

with an exception to use ‘‘takes’’

reporting for marginal properties. We

are changing processes, developing

implementation plans, and preparing

regulatory changes to comply with the

requirements of the Act.

For (f) above, a proposed rule

developed by the Indian Gas Valuation

Negotiated Rulemaking Committee was

published on September 23, 1996 (61 FR

49894). The Indian Valuation

Negotiated Rulemaking Committee was

reconvened on March 26, 1997. This

rule addressed the valuation for royalty

purposes of natural gas produced from

Indian leases. The rule proposes to

reduce substantially the transportation

and allowance reporting forms for gas

from Indian leases. The proposed rule

would add a methodology to calculate
Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Proposed Rules 32171

the major portion value and an

alternative methodology for dual

accounting as required by Indian lease

terms. The proposed rulemaking would

simplify and add certainty to the

valuation of production from Indian

leases.

Timetable—We plan to publish a

Notice of Proposed Rulemaking for

comment on takes vs. entitlements early

in 1999. We plan to publish a Notice of

Final Rulemaking on Valuation of Gas

From Indian Leases in 1998.

5. Reporting Procedures and Threshold

Comments Received—‘‘Eliminate or

streamline MMS Form 2014 reporting.’’

—‘‘Report prior period adjustments on a

‘‘net’’ basis.’’

—‘‘Change estimated payment from

lease level to payor level.’’

—‘‘Assess interest at the payor level—

for the Indian leases on the basis of

each Indian Tribe.’’

—‘‘Eliminate Payor Information Form

(PIF) Filings. This is an unnecessary

and costly reporting requirement.’’

—‘‘MMS should modify the regulations

and system tolerances/thresholds so

that only those exceptions that are

cost beneficial for MMS to pursue are

generated.’’

—‘‘Set thresholds or tolerances for

regulations to save costs to both MMS

and industry. (Example: Invoices are

sent for less than $1.00.)’’

—‘‘MMS should not implement

regulations until its systems are

programmed to handle the new

regulations.’’

—‘‘* * *the prompt implementation of

the recommendations of the Royalty

Policy Committee Audit and Royalty

Reporting and Production Accounting

Subcommittees will achieve those

simplification and streamlining goals

* * *.’’

Action Taken or Planned—Building

upon the Royalty Policy Committee’s

earlier study, the RMP Reengineering

Team (Team) analyzed current

information reporting requirements to

determine the data necessary for future

RMP processes. The Team identified

opportunities for easing reporting

burden, avoiding data duplication,

decreasing error rates, and increasing

processing efficiency. The Team

developed 32 reporting changes that are

in their report titled ‘‘Preliminary

Design Concepts of the RMP

Reengineering Team.’’ If these changes

are implemented, they will significantly

reduce the volume of lines reported and

processed, minimize errors and related

error correction workload, simplify

reporting, and lower costs for both

reporters and RMP. The Team’s changes

generally incorporate or exceed the

Royalty Policy Committee’s

recommendations.

In addition to our reengineering work,

we continue to pursue shorter range

reporting improvements not requiring

significant system changes. For

example, the Payor Information Form

MMS–4025 is being streamlined to

eliminate numerous data fields. Also,

many production reporting changes are

being implemented where redundant or

unnecessary data collection is

identified. We will continue to review

and revise our billing thresholds and

assessment policies to reduce

administrative costs.

On April 14, 1998 (63 FR 17133), we

published a proposed rule requesting

that all reports be submitted

electronically by December 31, 1998.

Electronic submission significantly

reduces the amount of time necessary

for a company to complete the monthly

reports and MMS processing time, since

no manual entry is required.

Timetable—Ongoing.

6. Refunds Due to Industry Which Are

Controlled by Section 10 of the OCS

Lands Act

Comments Received—‘‘Section 10

refund requirements should be

eliminated. The refund process used for

onshore properties should be

established for offshore properties.’’

—‘‘* * * we would urge the MMS to

facilitate elimination of the Section 10

recoupment procedures in its entirety.

The current practice is

administratively burdensome and not

cost effective for the industry or

MMS.’’

—‘‘Eliminate documentation

requirements for refund requests over

$250M (million); and/or increase this

threshold to $500M; raise the refund

request limit to $5M. Exempt pure

accounting adjustments for items such

as production date adjustments and

incorrect AID (Accounting

Identification) numbers; exempt unit

revisions because these revisions are

often made more than 2 years after the

date of production; establish a time

limit on MMS for review of a refund

request to expedite the process; and

overpayments on OCS properties

should be allowed to be offset against

any OCS underpayment.’’

Action Taken or Planned—The Act

repeals the Section 10 refund

procedures of the OCS Lands Act. On

November 25, 1996, we mailed a Dear

Payor letter with guidelines on refund

procedures. We are presently

developing a proposed rule

implementing the new refund

procedures.

Timetable—Ongoing.

7. Electronic Data Exchange

Comments Received—‘‘* * * MMS

(should) continue their ongoing effort to

exchange data by electronic means

rather than hard copy thereby enabling

the industry to adjust the data elements

to integrate with each company’s

systems.’’

Action Taken or Planned—We

continue to encourage the exchange of

data electronically. Our Reporter and

Payor Training sessions stress the

benefits of electronic reporting and

provide reporters and payers with

options for reporting by electronic data

interchange, diskette, or magnetic tape.

On April 22, 1997 (62 FR 19497), we

published a final rule specifying how

payments are made for mineral

royalties, rentals, and bonuses that

requires all payments to be made

electronically to the extent it is cost

effective and practical. We also

published on April 8, 1998 (63 FR

17133), a proposed rule to require

reporters to submit royalty and

production reports electronically.

Another way we publicize electronic

reporting is on the MMS/Royalty

Management Program Internet website.

Timetable—Reporter and Payor

Training sessions are planned for the

summer of 1998. We will work towards

publishing a Notice of Final Rulemaking

on Electronic Reporting in 1999.

8. Parameters for Identifying Improper

MMS Form 2014 Adjustments

Comments Received—‘‘The MMS

currently inquires as to any variances

between any Form 2014 adjustments

and its original Form 2014 entry that

exceed $1.00, which is an insignificant

amount. It is suggested that the MMS’s

review should be relevant to the amount

of the adjustment such as a given

percentage.’’

Action Taken or Planned—At this

time, MMS does not plan to make

changes in this procedure. We need to

ensure accuracy and integrity in the

accounting systems, and retain precise

records for the auditors. In our

reengineering effort, we are looking at

streamlined reporting for short- and

long-term benefits for MMS and

industry.

Timetable—Ongoing.

9. Publish Final Rules Expeditiously

Comments Received—(a) ‘‘* * *

primary recommendation is the

expeditious completion and publication

of pending final rules, for example, the

proposed rules on administrative offset

and limitations on credit adjustments,

and the proposed rule on payor liability.
32172 Federal Register / Vol. 63, No. 113 / Friday, June 12, 1998 / Proposed Rules

* * * Certainly, publication of the final

federal (and Indian) gas valuation rule

should be facilitated to the maximum

extent possible.’’ (b) ‘‘ * * * it would be

extremely beneficial for MMS to publish

its proposed rule implementing the

Federal Energy Regulatory

Commission’s (FERC) Order 636 as soon

as possible because of its impact on and

relationship to the federal gas valuation

rule.’’

Action Taken or Planned—For (a)

above, we are in the process of

finalizing the Indian gas valuation rule.

As for the final Federal Register (62 FR

19536) that withdrew the proposed rule

because of changes occurring in the gas

market. MMS is developing a framework

for offshore gas valuation and will

conduct workshops to obtain

constituent input. We will work with

the States to develop an onshore

perspective.

New language in the Act will cause a

number of changes in the Payor Liability

rule and the Administrative Offset and

Limitations on Credit Adjustments rule.

We are working to incorporate the

effects of the Act in these rules.

For (b) above, the final rule

implementing FERC Order 636 was

published on December 16, 1997 (62 FR

65753).

Timetable—Ongoing.

10. The Appeals Process

Comments Received—‘‘Current

appeals process is too long.’’

Action Taken or Planned—The Act

imposed a 33-month time frame for the

Department of the Interior to decide

appeals involving royalties on Federal

oil and gas leases. This deadline does

not apply to appeals on royalties

involving Indian leases and Federal

leases for minerals other than oil and

gas.

On October 28, 1996 (61 FR 55607),

MMS published a proposed rule

establishing a 16-month deadline for

MMS to decide all appeals to the

Director, including Indian leases and

appeals for royalties on minerals other

than oil and gas. After MMS’s decision,

the appellants can further appeal to the

Interior Board of Land Appeals. The

comment period for this proposed rule

ended on March 27, 1997.

The Royalty Policy Committee, a

Federal Advisory Committee reporting

to the Secretary, established a

subcommittee of State, Indian, and

industry representatives to study the

appeals process. The Royalty Policy

Committee reported its

recommendations to the Secretary in

March 1997, and the Secretary accepted

the recommendations, with minor

changes, in September 1997. The

Department now is preparing a revised

proposed rule to implement these

recommendations.

Timetable—We plan to issue a revised

Notice of Proposed Rulemaking on the

Administrative Appeals Process by late

1998, and a Notice of Final Rulemaking

in 1999.

11. Valuation of Coal From Federal

Leases

Comments Received—‘‘* * *

[A]mending this section to allow the use

of the lessee’s arm’s length contracts to

support the value for a nonarm’s-length

contract would make this section more

effective and also eliminate the need to

use third-party proprietary information

in many instances.’’ ‘‘* * * [T]he use of

the lessee’s arm’s-length contracts is the

best evidence of the comparable value of

any nonarm’s-length sales by the

lessee.’’

Action Taken or Planned—The

Royalty Policy Committee’s Coal

Subcommittee is reviewing issues

related to coal valuation, and we will

use the Royalty Policy Committee’s

recommendations to make

improvements to the coal royalty

valuation and reporting procedures and

associated regulations.

Timetable—Ongoing.

12. Other MMS/Royalty Management

Program Regulatory Actions

This past year we published proposed

rules that would amend the valuation of

oil produced from Federal and Indian

leases and held a number of public

meetings to receive input on the

proposals. After analyzing the

comments received, we plan to issue

final rules in late 1998.

The Act expanded the authorities and

responsibilities that the Secretary of the

Interior may delegate to the States. To

implement this, we published a final

rule on August 12, 1997 (62 FR 43076),

for Delegation of Royalty Management

Functions to the States.

We invite you to comment on our

existing regulations and also the actions

we have taken in response to comments

and enacted legislation. And, we invite

you to stay further informed on many of

the topics discussed in this status report

by visiting the MMS Internet Website at

www.mms.gov.

Cynthia Quarterman,

Director, Minerals Management Service

[FR Doc. 98–15626 Filed 6–11–98; 8:45 am]

BILLING CODE 4310–MR–P

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[SIPTRAX NO. PA108–4073b; FRL–6107–5]

Proposed Approval and Promulgation

of Air Quality Implementation Plans;

Pennsylvania; Source Specific Control

Measures and a Revised Episode Plan

for USX Clairton in the Liberty

Borough PM–10 Nonattainment Area

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: EPA proposes to approve the

State Implementation Plan (SIP)

revision submitted by the State of

Pennsylvania for the purpose of

establishing control measures at USX’s

Clairton Coke Works in Clairton,

Pennsylvania and enhancing the

Allegheny County Health Department’s

(ACHD) episode plan by requiring that

USX develop and maintain a sourcespecific episode plan subject to ACHD

approval. In the Final Rules section of

this Federal Register, EPA is approving

the State’s SIP revision as a direct final

rule without prior proposal because the

Agency views this as a noncontroversial

SIP revision and anticipates no adverse

comments. A detailed rationale for the

approval is set forth in the direct final

rule and the technical support

document for this rulemaking. If no

adverse comments are received in

response to this proposed rule, no

further activity is contemplated in

relation to this proposed rule. If EPA

receives adverse comments, it will

publish a document informing the

public that the direct final rule did not

take effect and EPA will address all

public comments received in a

subsequent final rule based on this

proposed rule. EPA will not institute a

second comment period on this action.

Any parties interested in commenting

on this action should do so at this time.

DATES: Comments must be received in

writing by July 13, 1998.

ADDRESSES: Comments may be mailed to

Makeba Morris, Chief, Technical

Assessment Branch, Mailcode 3AP22,

U.S. Environmental Protection Agency,

Region III, 841 Chestnut Building,

Philadelphia, Pennsylvania 19107.

Copies of the documents relevant to this

action are available for public

inspection during normal business

hours at the Air Protection Division,

U.S. Environmental Protection Agency,

Region III, 841 Chestnut Building,

Philadelphia, Pennsylvania 19107; the

Air and Radiation Docket and