Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules 9309

situations through the selection of a

particular location. This includes ROW

acquisitions within a potential highway

corridor under consideration where

necessary to preserve the corridor for

future highway purposes. Authorization

of work under this paragraph shall be in

accord with the provisions of 23 CFR

part 712.

(5) In special cases where the Federal

Highway Administrator determines it to

be in the best interest of the Federal-aid

highway program.

(d) The authorization to proceed with

a project under 23 CFR 630.106(c)(3)

through (c)(5) shall contain the

following statement: ‘‘Authorization to

proceed shall not constitute any

commitment of Federal funds, nor shall

it be construed as creating in any

manner any obligation on the part of the

Federal Government to provide Federal

funds for that portion of the undertaking

not fully funded herein.’’

(e) When a project has received an

authorization under 23 CFR 630.106

(c)(3) and (c)(4), subsequent

authorizations beyond the location stage

shall not be given until appropriate

available funds have been obligated to

cover eligible costs of the work covered

by the previous authorization.

(f)(1) The Federal-aid share of eligible

project costs shall be established at the

time of project authorization in one of

the following manners:

(i) Pro rata, with the authorization

stating the Federal share as a specified

percentage, or

(ii) Lump sum, with the authorization

stating that Federal funds are limited to

a specified dollar amount not to exceed

the legal pro rata.

(2) The pro-rata or lump sum share

may be adjusted to reflect any

substantive change in the bids received

as compared to the SHA’s estimated cost

of the project at the time of FHWA

authorization, provided that Federal

funds are available.

(g) Federal participation is limited to

the agreed Federal share of eligible costs

actually incurred by the State, not to

exceed the maximum permitted by

enabling legislation. Any private cash

contributions to the project must be

credited to, and thereby such

contributions reduce, the total project

cost and are not considered to be costs

incurred by the State. Private cash

contributions may be applied to

participating or nonparticipating work.

Cash contributions provided by a local

government are considered the same as

State funds.

(h) The sum of cash contributions

from all sources plus the Federal funds

may not exceed the total cost of the

project.

(i) The State may contribute more

than the normal non-Federal share of

title 23, U.S.C., projects. However,

proposals resulting in token Federal

financing of a Federal-aid project shall

not be approved.

[FR Doc. 95–4029 Filed 2–16–95; 8:45 am]

BILLING CODE 4910–22–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[CO–62–94]

RIN 1545–AT15

Continuity of Interest in Transfer of

Target Assets After Qualified Stock

Purchase of Target

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations relating to the

income tax treatment of the transfer of

target assets to the purchasing

corporation or another member of the

same affiliated group as the purchasing

corporation (the transferee) after a

qualified stock purchase (QSP) of target

stock, if a section 338 election is not

made. These regulations provide

guidance to parties to such transfers and

their shareholders. This document also

provides notice of a public hearing on

these proposed regulations.

DATES: Written comments and outlines

of topics to be discussed at the public

hearing scheduled for June 7, 1995,

must be received by May 19, 1995.

ADDRESSES: Send submissions to:

CC:CORP:T:R (CO–62–94), room 5228,

Internal Revenue Service, POB 7604,

Ben Franklin Station, Washington, DC

20044. In the alternative, submissions

may be hand delivered between the

hours of 8 a.m. and 5 p.m. to:

CC:CORP:T:R (CO–62–94), Courier’s

Desk, Internal Revenue Service, 1111

Constitution Avenue NW., Washington,

DC. The public hearing will be held in

room 3313, Internal Revenue Building,

1111 Constitution Avenue NW.,

Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations,

William Alexander, (202) 622–7780;

concerning the submissions and

requests for a hearing, Christina

Vasquez, (202) 622–7180 (not toll-free

numbers).

SUPPLEMENTARY INFORMATION:

Background

This document proposes guidance as

to the treatment of transfers of target

assets to another corporation after a

qualified stock purchase of target stock,

if a section 338 election is not made for

the target. It addresses the effect of

section 338 on the result in Yoc Heating

v. Commissioner and similar cases.

Under § 1.368–1(b), for a transfer of

assets to be pursuant to a reorganization

within the meaning of section 368, there

must be a continuity of interest in the

target’s business enterprise on the part

of those persons who, directly or

indirectly, were the owners of the

enterprise prior to the reorganization.

In Yoc Heating v. Commissioner, 61

T.C. 168 (1973), a corporation bought 85

percent of a target corporation’s stock

for cash and notes. As part of the same

plan, the target subsequently transferred

its assets to a newly formed subsidiary

of the purchaser and dissolved. The

purchaser received additional stock of

its subsidiary in exchange for the

purchaser’s target stock and the

minority shareholders received cash in

exchange for their target stock.

The Tax Court, viewing the stock

purchase and asset acquisition as an

integrated transaction in which the

purchaser acquired all of the target’s

assets for cash and notes, held there was

insufficient continuity of interest to

qualify the asset transfer as a

reorganization under section 368

because the shareholders of the target

before the stock purchase received no

stock in the acquiring entity. As a result,

the subsidiary received a cost basis in

the target’s assets.

In addition to Yoc Heating, there are

other cases in which courts have denied

reorganization treatment and have given

the transferee a stepped-up basis in the

target’s assets following the purchase of

the target’s stock and the merger of the

target into the purchaser or a related

corporation. See, e.g., Russell v.

Commissioner, 832 F.2d 349 (6th Cir.

1987), aff’g Cannonsburg Skiing Corp. v.

Commissioner, T.C. Memo 1986–150

(corporation purchased target stock and

then target merged into purchaser);

Security Industrial Insurance Co. v.

United States, 702 F.2d 1234 (5th Cir.

1983) (corporation purchased stock of

targets and then targets merged into

purchaser, which then transferred the

target assets to a subsidiary of the

purchaser); South Bay Corporation v.

Commissioner, 345 F.2d 698 (2d Cir.

1965) (individual purchased stock in

two targets and then targets merged into

a third corporation owned by the

individual); Superior Coach of Florida
9310 Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules

v. Commissioner, 80 T.C. 895 (1983)

(individual purchased target stock and

then target merged into another

corporation controlled by the

individual); Estate of McWhorter v.

Commissioner, 69 T.C. 650 (1978), aff’d,

590 F.2d 340 (8th Cir. 1978)

(corporation purchased target stock and

then target merged into purchaser); and

Kass v. Commissioner, 60 T.C. 218

(1973), aff’d, 491 F.2d 749 (3d Cir. 1974)

(corporation purchased target stock and

then target merged into purchaser).

The Yoc Heating court’s analysis of

the transaction as, in substance, a

taxable asset acquisition by the

subsidiary is consistent with generally

applied federal income tax principles.

For example, in Kimbell-Diamond

Milling Co. v. Commissioner, 14 T.C. 74

(1950), aff’d per curiam, 187 F.2d 718

(5th Cir.), cert. denied, 342 U.S. 827

(1951), an acquiring corporation’s

purchase of a target corporation’s stock

followed by the liquidation of the target

was treated for federal income tax

purposes as, in substance, a direct

purchase of the target’s assets by the

acquiring corporation. The Tax Court’s

characterization in Kimbell-Diamond

was based on a finding that the

acquiring corporation intended to obtain

the target’s assets rather than its stock.

As a result, the acquiring corporation’s

basis in the target’s assets was

determined by reference to the purchase

price of the target’s stock.

In 1954, Congress codified principles

derived from Kimbell-Diamond by

enacting former section 334(b)(2) of the

Internal Revenue Code of 1954, which

created an objective test that permitted

a stock purchase followed by

liquidation of the target to be treated as

an asset acquisition. S. Rep. No. 1622,

83d Cong., 2d Sess. 257 (1954).

In 1982, Congress repealed section

334(b)(2) and replaced it with section

338, which provides that, if a

corporation makes a qualified stock

purchase (QSP) of the stock of a target,

the purchasing corporation may elect to

have the target treated as having sold all

of its assets at the close of the

acquisition date in a single transaction

and as a new corporation that purchased

all such assets at the beginning of the

following day. Section 338 was

‘‘intended to replace any nonstatutory

treatment of a stock purchase as an asset

purchase under the Kimbell-Diamond

doctrine.’’ H.R. Conf. Rep. No. 760, 97th

Cong., 2d Sess. 467, 536 (1982), 1982–

2 C.B. 600, 632.

Under section 338(i), the IRS and

Treasury are authorized to prescribe

such regulations as may be necessary or

appropriate to carry out the purposes of

section 338. The IRS and Treasury

believe that the result in Yoc Heating is

inconsistent with the legislative intent

behind section 338. As a result of the

enactment of section 338, an intragroup

merger or similar transaction following

a QSP generally should not be treated as

part of an overall asset acquisition. The

qualified stock purchase must be

accorded its intended effect. Cf. Rev.

Rul. 90–95, 1990–2 C.B. 67 (applying

sections 332 and 334 to a merger of the

target into the purchasing corporation

following a QSP). If a section 338

election is not made, in a subsequent

intragroup merger or similar transaction,

the target assets generally should

preserve their historic basis maintained

in the qualified stock purchase. The IRS

and Treasury believe that applying the

reorganization rules to the target and

purchasing group in mergers and similar

transactions following a QSP is the

simplest and most effective means of

achieving the congressional intent in

repealing the Kimbell-Diamond

doctrine.

Explanation of Provisions

Proposed § 1.338–2(c)(3) applies to

the transfer of target assets to the

purchasing corporation or another

member of the same affiliated group as

the purchasing corporation (the

transferee) following a QSP of target

stock, if the purchasing corporation

does not make a section 338 election for

the target.

As noted above, for the transfer of

target assets to be pursuant to a

reorganization within the meaning of

section 368, there must be a continuity

of interest in the target’s business

enterprise on the part of those persons

who, directly or indirectly, were the

owners of the enterprise prior to the

reorganization. See § 1.368–1(b). The

proposed regulations generally provide

that, by virtue of the application of

section 338, the purchasing

corporation’s target stock acquired in

the QSP represents an interest on the

part of a person who was an owner of

the target’s business enterprise prior to

the transfer that can be continued in a

reorganization for the purpose of

determining whether the continuity of

interest requirement is satisfied. A

corollary provision enables the transfer

to satisfy the requirements for an

acquisitive reorganization under section

368(a)(1)(D).

Notwithstanding the general rule

above, the proposed regulations provide

that sections 354, 355, 356 and 358 do

not apply to any person other than the

purchasing corporation or another

member of the same affiliated group as

the purchasing corporation unless the

transfer of target assets is pursuant to a

reorganization under generally

applicable rules without regard to the

provisions of the proposed regulations.

The legislative history of section 338

does not indicate any intent to eliminate

the continuity of interest requirement

generally and allow reorganization

treatment to shareholders receiving

stock in acquisitions where the overall

consideration does not preserve

continuity of interest. The rules

provided in the proposed regulations

reconcile Congress’ concerns in enacting

section 338 with general reorganization

principles.

The IRS and Treasury request

comments on the proposed rules,

including, particularly, comments

regarding the collateral consequences of

treating the transaction as a

reorganization to the target and to the

purchasing corporation and its affiliates,

but not to persons unaffiliated with the

purchasing corporation. The IRS and

Treasury also solicit comments as to

whether guidance is needed as to the

proper treatment of post-QSP mergers

and similar transactions if a section 338

election is made for the target.

Proposed Effective Date

Section 1.338–2(c)(3) is proposed to

be effective for transfers of target assets

occurring on or after the date final

regulations are filed with the Office of

the Federal Register.

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

assessment is not required. It has also

been determined that section 553(b) of

the Administrative Procedure Act (5

U.S.C. chapter 5) and the Regulatory

Flexibility Act (5 U.S.C. chapter 6) do

not apply to these regulations, and,

therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, this notice of proposed

rulemaking will be submitted to the

Chief Counsel for Advocacy of the Small

Business Administration for comment

on its impact on small business.

Comments and Requests for a Public

Hearing

Before this proposed regulation is

adopted as a final regulation,

consideration will be given to any

written comments (a signed original and

eight (8) copies) that are submitted

timely to the IRS. All comments will be

available for public inspection and

copying.

A public hearing has been scheduled

for June 7, 1995, at 10 a.m. in room
Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules 9311

3313, 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 May 19, 1995, and

submit an outline of the topics to be

discussed and the time to be devoted to

each topic (signed original and eight (8)

copies) by May 19, 1995.

A period of 10 minutes will be

allocated 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.

Drafting Information

The principal author of these

regulations is William Galanis, Office of

Assistant Chief Counsel (Corporate),

Internal Revenue Service. 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 1.338–0 is amended by

adding entries for § 1.338–2(c)(3) to read

as follows:

§ 1.338–0 Outline of topics.

* * * * *

§ 1.338–2 Miscellaneous issues under

section 338.

* * * * *

(c)* * *

(3) Consequences of post-acquisition

elimination of target.

(i) Scope.

(ii) Continuity of interest.

(iii) Control requirement.

(iv) Example.

(v) Effective date.

* * * * *

Par. 3. Section 1.338–2 is amended by

adding paragraph (c)(3) to read as

follows:

§ 1.338–2 Miscellaneous issues under

section 338.

* * * * *

(c) * * *

(3) Consequences of post-acquisition

elimination of target—(i) Scope. The

rules of this paragraph (c)(3) apply to

the transfer of target assets to the

purchasing corporation (or another

member of the same affiliated group as

the purchasing corporation) (the

transferee) following a qualified stock

purchase of target stock, if the

purchasing corporation does not make a

section 338 election for target.

(ii) Continuity of interest. By virtue of

section 338, in determining whether the

continuity of interest requirement of

§ 1.368–1(b) is satisfied on the transfer

of assets from target to the transferee,

the purchasing corporation’s target stock

acquired in the qualified stock purchase

represents an interest on the part of a

person who was an owner of the target’s

business enterprise prior to the transfer

that can be continued in a

reorganization. Notwithstanding the

preceding sentence, sections 354, 355,

356 and 358 do not apply to any person

other than the purchasing corporation or

another member of the same affiliated

group as the purchasing corporation

unless the transfer is pursuant to a

reorganization under generally

applicable rules without regard to this

paragraph (c)(3)(ii).

(iii) Control requirement. By virtue of

section 338, the purchasing corporation

is treated as a shareholder of the target

transferor for the purpose of

determining whether, immediately after

the transfer of target assets, a

shareholder of the transferor is in

control of the corporation to which the

assets are transferred within the

meaning of section 368(a)(1)(D).

(iv) Example. This paragraph (c)(3) is

illustrated by the following example:

Example. (A) Facts. P, T, and X are

domestic corporations. T and X each operate

a trade or business. A and K, individuals

unrelated to P, own 85 and 15 percent,

respectively, of the stock of T. P owns all of

the stock of X. The total adjusted basis of T’s

property exceeds the sum of T’s liabilities

plus the amount of liabilities to which T’s

property is subject. P purchases all of A’s T

stock for cash in a qualified stock purchase.

P does not make an election under section

338(g) with respect to its acquisition of T

stock. Shortly after the acquisition date, and

as part of the same plan, T merges under

applicable state law into X in a transaction

that, but for the question of continuity of

interest, satisfies all the requirements of

section 368(a)(1)(A). In the merger, all of T’s

assets are transferred to X. P and K receive

X stock in exchange for their T stock. P

intends to retain the stock of X indefinitely.

(B) Status of transfer as a reorganization.

By virtue of section 338, for the purpose of

determining whether the continuity of

interest requirement of § 1.368–1(b) is

satisfied, P’s T stock acquired in the qualified

stock purchase represents an interest on the

part of a person who was an owner of T’s

business enterprise prior to the transfer that

can be continued in a reorganization through

P’s continuing ownership of X. Thus, the

continuity of interest requirement is satisfied

and the merger of T into X is a reorganization

within the meaning of section 368(a)(1)(A).

Moreover, by virtue of section 338, the

requirement of section 368(a)(1)(D) that a

target shareholder control the transferee

immediately after the transfer is satisfied

because P controls X immediately after the

transfer. In addition, all of T’s assets are

transferred to X in the merger and P and K

receive the X stock exchanged therefor in

pursuance of the plan of reorganization.

Thus, the merger of T into X is also a

reorganization within the meaning of section

368(a)(1)(D).

(C) Treatment of T and X. Under section

361(a), T recognizes no gain or loss in the

merger. Under section 362(b), X’s basis in the

assets received in the merger is the same as

the basis of the assets in T’s hands. X

succeeds to and takes into account the items

of T as provided in section 381.

(D) Treatment of P. By virtue of section

338, the transfer of T assets to X is a

reorganization. Pursuant to that

reorganization, P exchanges its T stock solely

for stock of X, a party to the reorganization.

Because P is the purchasing corporation,

section 354 applies to P’s exchange of T stock

for X stock in the merger of T into X. Thus,

P recognizes no gain or loss on the exchange.

Under section 358, P’s basis in the X stock

received in the exchange is the same as the

basis of P’s T stock exchanged therefor.

(E) Treatment of K. Because K is not the

purchasing corporation (or an affiliate

thereof), section 354 does not apply to K’s

exchange of T stock for X stock in the merger

of T into X unless the transfer is pursuant to

a reorganization under generally applicable

rules without regard to paragraph (c)(3)(ii) of

this section. Under general income tax

principles applicable to reorganizations, the

continuity of interest requirement is not

satisfied because P’s stock purchase and the

merger of T into X are pursuant to an

integrated transaction in which A, the owner

of 85 percent of the stock of T, received

solely cash in exchange for A’s T stock. See,

e.g., Yoc Heating v. Commissioner, 61 T.C.

168 (1973); Kass v. Commissioner, 60 T.C.

218 (1973), aff’d, 491 F.2d 749 (3d Cir. 1974).

Thus, the requisite continuity of interest

under § 1.368–1(b) is lacking and section 354

does not apply to K’s exchange of T stock for

X stock. K recognizes gain or loss, if any,

pursuant to section 1001(c) with respect to its

T stock.

(v) Effective date. The provisions of

this paragraph (c)(3) are effective for

transfers of target assets on or after the
9312 Federal Register / Vol. 60, No. 33 / Friday, February 17, 1995 / Proposed Rules

date final regulations are filed with the

Office of the Federal Register.

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 95–3771 Filed 2–16–95; 8:45 am]

BILLING CODE 4830–01–P

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010–AB96

Flaring or Venting Gas and Burning

Liquid Hydrocarbons

AGENCY: Minerals Management Service

(MMS), Interior.

ACTION: Proposed rule.

SUMMARY: This proposed rule would

amend regulations governing the

restrictions on flaring or venting gas to

include restrictions on burning liquid

hydrocarbons. The MMS is proposing to

amend these regulations because of the

increased interest in burning liquid

hydrocarbons and to clarify the

restrictions on burning this natural

resource. The amendment would

conserve liquid hydrocarbons and

protect the environment from the

possible effects of burning liquid

hydrocarbons.

DATES: Comments on this proposed rule

must be postmarked or received on or

before April 18, 1995 to be considered

for this rulemaking.

ADDRESSES: Mail or hand-carry

comments to the Department of the

Interior; Minerals Management Service;

Mail Stop 4700; 381 Elden Street;

Herndon, Virginia 22070–4817;

Attention: Chief, Engineering and

Standards Branch.

FOR FURTHER INFORMATION CONTACT:

Sharon Buffington, Engineering and

Standards Branch, telephone (703) 787–

1600.

SUPPLEMENTARY INFORMATION: Requests

for burning liquid hydrocarbons (crude

oil and condensate) have become more

frequent in the Outer Continental Shelf.

In the interest of conserving natural

resources, and because of the

environmental concerns associated with

this burning, MMS proposes to amend

the regulations at 30 CFR 250.175,

which currently include restrictions on

flaring and venting of gas, to include

restrictions on burning liquid

hydrocarbons.

Under proposed new paragraph (c) of

30 CFR 250.175, lessees will not be

permitted to burn liquid hydrocarbons

without the prior approval of the

Regional Supervisor. To obtain

approval, the lessee must demonstrate

that the amounts to be burned would be

minimal or that the alternatives, such as

transporting the liquids or storing and

re-injecting the liquids, are infeasible or

pose a significant risk to offshore

personnel or the environment. The term

‘‘lessee’’ also includes their agents and

designees.

Authors

Sharon Buffington and Jo Ann

Lauterbach, Engineering and

Technology Division, MMS, prepared

this document.

Executive Order (E.O.) 12866

The Department of the Interior (DOI)

reviewed this proposed rule under E.O

12866 and determined that it is not a

significant rule.

Regulatory Flexibility Act

The DOI determined that this

proposed rule will not have a significant

effect on a substantial number of small

entities. In general, the entities that

engage in offshore activities are not

considered small due to the technical

and financial resources and experience

necessary to safety conduct such

activities.

Paperwork Reduction Act

The proposed information collection

requirements contained in § 250.175

were submitted to the Office of

Management and Budget (OMB) for

approval as required by the Paperwork

Reduction Act (44 U.S.C. 3501 et seq.).

The DOI will not require the

collection on this information until

OMB has approved its collection.

The MMS estimates the public

reporting burden for this information to

average 1.5 hours per response,

including the time for reviewing

instructions, searching existing data

sources, gathering and maintaining the

data needed, and completing and

reviewing the information collection.

Send comments regarding this burden

estimate or any other aspects of this

collection of information, including

suggestions for reducing the burden, to

the Information Collection Clearance

Officer; Minerals Management Service;

Mail Stop 2053, 381 Elden Street;

Herndon, Virginia 22070–4817, and the

Office of Management and Budget,

Paperwork Reduction Project (1010–

0041), Washington, DC 20503.

Takings Implication Assessment

The DOI determined that this

proposed rule does not represent a

governmental action capable of

interference with constitutionally

protected property rights. Thus, a

Takings Implication Assessment does

not need to be prepared pursuant to E.O.

12630, Government Action and

Interference with Constitutionally

Protected Property Rights.

E.O. 12778

The DOI certified to OMB that this

proposed rule meets the applicable civil

justice reform standards provided in

Sections 2(a) and 2(b)(2) of E.O. 12778.

National Environmental Policy Act

The DOI determined that this action

does not constitute a major Federal

action significantly affecting the quality

of the human environment; therefore, an

Environmental Impact Statement is not

required.

List of Subjects in 30 CFR Part 250

Continental shelf, Environmental

impact statements, Environmental

protection, Government contracts,

Incorporation by reference,

Investigations, Mineral royalties, Oil

and gas development and production,

Oil and gas exploration, Oil and gas

reserves, Penalties, Pipelines, Pubic

lands—mineral resources, Public

lands—rights-of-way, Reporting and

recordkeeping requirements, Sulphur

development and production, Sulphur

exploration, Surety bonds.

Dated: December 23, 1994.

Bob Armstrong,

Assistant Secretary, Land and Minerals

Management.

For the reasons set forth above, MMS

proposes to amend 30 CFR part 250 to

read as follows:

PART 250—OIL AND GAS AND

SULPHUR OPERATIONS IN THE

OUTER CONTINENTAL SHELF

1. The authority citation for part 250

continues to read as follows:

Authority: 43 U.S.C. 1334.

2. Section 250.175 is revised to read

as follows:

§ 250.175 Flaring or venting gas and

burning liquid hydrocarbons.

(a) Lessees must not flare or vent oilwell gas or gas-well gas without the

prior approval of the Regional

Supervisor except in the following

situations:

(1) When gas vapors are flared or

vented in small volumes from storage

vessels or other low-pressure

production vessels and cannot be

economically recovered.

(2) During temporary situations such

as a compressor or other equipment