[Federal Register Volume 60, Number 59 (Tuesday, March 28, 1995)]
[Proposed Rules]
[Pages 15888-15891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7534]



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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Chapter II


Review of Existing Regulations

AGENCY: Minerals Management Service, Interior.

ACTION: Review of regulations; request for comment.

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SUMMARY: In a March 1, 1994, document (59 FR 9718), the Minerals 
Management Service (MMS) announced its intent to establish periodic 
reviews of its significant regulations and asked the public to 
participate in the reviews. 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 either because they are unclear, 
inefficient, or interfere with normal market conditions. Comments were 
received from the March 1 document (the Notice) and acknowledged by MMS 
in a July 15, 1994, document (59 FR 36108).
    The purpose of this document is to: Provide a status update of the 
MMS action taken on the regulations identified in the March 1 review; 
and provide the public a second opportunity to identify MMS regulations 
that should be eliminated or revised. A list of regulations identified 
for elimination will be sent to the President by June 1, 1995.

DATES: Written comments must be received by April 27, 1995.

ADDRESSES: Mail written comments to Department of the Interior; 
Minerals Management Service; Mail Stop 4013; 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.

SUPPLEMENTARY INFORMATION: MMS began a review of its regulations in 
early 1994 pursuant to 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.
    MMS invited the public to participate in the regulatory review. The 
invitation was sent out via different media, namely a notice 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. MMS acknowledged the comments in a July 15, 1994, 
notice (59 FR 36108) and set forth its planned actions to address the 
comments, along with an estimated timetable for the actions.
    This notice updates the MMS planned actions and related timetables. 
This notice also requests additional comments form the public 
identifying regulations that should be either eliminated or revised.
    In recent years, MMS has made an effort to work more closely with 
its regulated customers and will increase [[Page 15889]] this effort in 
the future. During the past year, MMS has worked with representatives 
from organizations affected by its regulations and brought them into 
the early development of two major rulemakings. The representatives 
formed committees or work groups under the negotiated rulemaking 
process. They either have been or will be working together to form a 
consensus on some very difficult and sometimes contentious issues. The 
representatives function as the spokesperson on behalf of either 
industry, States, Tribes, or local governments.
    MMS is committed to working more closely with its regulated 
customers in the future; moving from a process of regulation to one of 
partnership, with common objectives. In a speech on February 21, 1995, 
the President asked all Federal agencies to pursue a similar course. He 
asked them to change their regulatory culture by consulting more 
frequently with the people affected by their (the agency) regulations, 
in particular by convening groups consisting of front-line regulators 
and the regulated public, in order to find ways to achieve the public 
interest while avoiding costly litigation. The President also asked all 
agencies to identify (by June 1, 1995) regulations that can be 
eliminated and to change the way they measure performance (focusing on 
achieving regulatory objectives rather than on increasing compliance 
orders). MMS is interested in comments from the public on how we can 
best respond to the President's guidance.
    MMS regulations are found at Title 30 in the Code of Federal 
Regulations. Parts 201 through 243 contain regulations applicable to 
MMS' Royalty Management Program; Parts 250 through 282 are applicable 
to MMS' Offshore Minerals Management; and Part 290 is applicable to 
Administrative Appeals.

Status Report

    The following is a discussion showing the progress MMS has made in 
reviewing its regulations in response to the comments received to the 
Notice.

A. Offshore Minerals Management (OMM) Program

    In response to the public comments on the Notice, OMM is currently 
reviewing the following eight sections of OMM regulations.
1. Regulations Applicable to Production in Deepwater (30 CFR Part 250, 
Subpart H, Production)
    Comments Received--(a) ``Revise current regulations to provide for 
approval of extended flaring periods under certain situations (e.g., 
deepwater prospects, well tests, etc.) and clarify criteria for flaring 
or venting small amounts of gas'',
    (b) ``Revise requirements associated with subsea installations * * 
*, etc.
    Action Planned--An MMS workgroup is finalizing a report that 
recommends revising various policies and regulations associated with 
deepwater development. The workgroup will submit the final report to 
MMS management in March 1995. The report will include the following 
recommendations:
    For (a) above, current regulations provide sufficient flexibility 
to meet industry needs while all parties gain greater experience with 
deepwater operations. MMS will continue approving requests for extended 
gas flaring and well testing on a case-by-case basis. Regions will 
establish regional guidelines for approval of extended testing and 
flaring.
    For (b) above, revise the leakage rates and extend the testing 
frequency and closure time requirements for underwater safety valves 
and subsurface safety valves for subsea wells. MMS will consider an 
alternate arrangement of underwater safety valves for subsea wells on a 
case-by-case basis. MMS will not revise the leakage rate requirements 
for surface safety valves at this time. This recommendation also 
addresses emergency shutdown system requirements for subsea wells.
    Timetable--Based on the recommendations of the workgroup, MMS will 
formulate a policy on deepwater activities. MMS will continue to work 
with operators under existing regulations when appropriate.
2. Regulations Applicable to Blowout Preventer (BOP) Testing and 
Maintenance Requirements (30 CFR 250.56 and 57)
    Comments Received--``Revise BOP testing regulations to allow for 
less frequent and shorter tests. Allow 14 day BOP test interval vs. 
current 7 day * * *.''
    Action Planned--MMS recently completed a study to assess the 
performance of BOP systems during testing. The results of this study 
did not support industry claims about the high reliability of BOP 
equipment or provide justification for less frequent testing.
    Timetable--MMS will continue its review of BOP testing and 
maintenance requirements, with a focus on stricter maintenance 
requirements. With improved performance, MMS would consider if further 
flexibility on BOP testing frequency can be provided to industry. At 
this time, MMS does not plan on revising its regulations.
3. Regulations Governing Safety and Pollution Prevention Equipment (30 
CFR 250.126)
    Comments Received--``Reduce associated administrative burden on 
lessees and operators by eliminating unnecessary record keeping 
requirements (i.e., inventory lists, paperwork notifications, etc.).''
    Action Planned--MMS considered the use of a negotiated rulemaking 
as part of this review.
    Timetable--MMS has initiated the ``convening'' stage of the 
negotiated rulemaking. This stage is nearing completion and the 
``convener's'' recommendation on whether to proceed with the negotiated 
rulemaking will be made by April 1995. If the ``convener'' recommends 
against a negotiated rulemaking, MMS will use other means to address 
this issue.
4. Regulations Governing Conservation of Resources and Diligence (30 
CFR 250, Subpart A, General and Subpart K, Oil and Gas Production 
Rates)
    Comments Received--(a) ``Revise Suspension of Production approval/
lease holding criteria * * *'', (b) ``Revise Determination of Well 
Producibility to make wireline testing and/or mud logging analysis 
optional * * *'', (c) ``revise current regulations to provide for 
approval of extended flaring periods * * *'', (d) ``Relax restrictions 
on commingling reservoirs in a common wellbore * * *'', (e) ``Allow 
flexibility in the methods of testing subsea wells. * * *'', etc.
    Action Planned--(a), (b), and, (d) above have been reviewed by MMS. 
MMS is considering options to revise the regulations. For (c) above, 
MMS will review current regulations when air quality studies currently 
underway are completed. For (e) above, MMS will not change the 
regulations. Current regulations allow operators to request that 
different testing methods be allowed when conventional testing is 
impractical.
    Timetable--For (a), (b), and, (d) above, the course of action 
should be determined by the summer of 1995. Rulemaking will be 
initiated if appropriate.
5. Regulations Regarding Construction and Removal of Platforms and 
Structures (30 CFR 250, Subpart I, Platforms and Structures)
    Comments Received--(a) ``Modify platform design wave return period 
calculation by placing a cap of 100 years on the field life calculation 
* * *'', (b) [[Page 15890]] ``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 Planned--For (a) above, MMS has reviewed this request. MMS 
is reviewing options to revise its regulations. For (b) above, MMS will 
not modify the regulations. Current rules allow operators to petition 
for longer inspection intervals. For (c) and (d) above, MMS published a 
notice on February 1, 1995 (60 FR 6281), asking for comments on these 
issues. Based on the responses, MMS will formulate a policy.
    Timetable--For (a) above, the course of action should be determined 
by the summer of 1995. Appropriate action will follow. For (c) and (d) 
above, comments were due on March 3, 1995. MMS will consider regulatory 
options following analysis of the comments. A course of action should 
be established by the fall of 1995.
6. Regulations Applicable to Directional Surveys (30 CFR 250.51)
    Comments Received--``Revise directional survey requirements to 
allow a composite measurement-while-drilling directional survey to be 
acceptable * * *''
    Action Planned--MMS has completed a review of this issue and is 
planning to update the regulations to keep up with current technology.
    Timetable--Proposed changes to the regulations are being circulated 
internally. Proposed rule should be prepared by summer of 1995.
7. Regulations Applicable to Daily Pollution Inspection Requirements 
(30 CFR 250.41)
    Comments Received--``Revise current requirements for daily 
pollution inspection of unmanned production facilities * * *.''
    Action Planned--MMS is currently studying this issue to see if 
changes to the regulations are warranted.
    Timetable--By summer of 1995, MMS will make a decision on whether 
changes to the regulations are needed.
8. Regulations Applicable to Production Safety System Training (30 CFR 
250.214)
    Comments Received--``Revise training regulations to reduce the 
associated burden on operators by modifying requirements (e.g., 
frequency, refresher requirements, structure, etc.) and allow expanded 
training delivery modes.''
    Action Planned--MMS has issued an Advance Notice of Proposed 
Rulemaking and received comments. A Notice of Proposed Rulemaking (NPR) 
which would provide greater flexibility to Industry is being prepared 
at this time.
    Timetable--The NPR should be published by late 1995.

B. Royalty Management Program (RMP)

    RMP is reviewing regulations in the following six areas.
1. Regulations Applicable to Valuation of Gas Produced From Unitized/
Communitized Properties (Takes vs. Entitlements). Also, Regulations 
Applicable to Non-Arm's-Length Sales (30 CFR 202), and Payment/
Reporting Systems
    To resolve the complex issues dealing with the valuation of gas for 
royalty purposes, MMS is using the negotiated rulemaking process. This 
process enables MMS to arrive at a consensus with industry, the States, 
and Indian tribes. All Committee meetings are announced in the Federal 
Register.
    Comments Received--``Regulations concerning Takes vs. Entitlements 
are confusing and make compliance difficult * * * valuing gas under a 
non-arm's-length transaction is burdensome * * *.''
    Action Planned on Federal Leases--Formed the Federal Gas Valuation 
Negotiated Rulemaking Committee with representation from MMS, industry, 
and the States. The Committee addressed valuation of gas produced from 
agreements (Takes vs. Entitlements), the benchmark valuation system for 
valuing gas sold under non-arm's-length contracts, and reporting 
simplicity and administrative cost savings. MMS is now preparing a 
proposed rule based on the consensus arrived at by the Committee in 
early February.
    Timetable--MMS plans to publish a proposed rule by mid-1995.
    Action Planned on Indian Leases--MMS has obtained approval for a 
negotiated rulemaking for revising Indian gas valuation regulations. An 
informal MMS group had been studying the issues, but MMS has now 
superseded this group with the Indian Gas Valuation Negotiated 
Rulemaking Committee. This Committee consists of representatives from 
MMS, various Indian tribes, the Council of Energy Resources Tribes, the 
Bureau of Indian Affairs, and industry. The Committee will discuss 
major portion analysis, dual accounting, and percentage of proceeds 
contracts.
    Timetable--The first meeting of the Committee was held on February 
22 and 23, 1995.
2. Regulations Clarifying the Responsibilities of Payors and Lessees 
(30 CFR 218 and 211)
    Comments Received--``Existing regulations are unclear as to the 
obligations and liabilities of payors and lessees.''
    Action Planned--A workgroup was assembled to review the options 
associated with this issue. The workgroup reached agreement and 
developed a proposed rule. The rule will establish liability for 
royalty due on Federal and Indian leases, and will clarify the 
responsibility to pay and report royalty and other payments.
    Timetable--MMS plans to publish the proposed rule by mid-1995.
3. Refunds Due to Industry Which Are Controlled by Section 10 of the 
Outer Continental Shelf Lands Act
    Comments Received--Industry has difficulty complying with the 2-
year limitation on refunds. There is an inequity between the 2-year 
refund requirement and the no-year limitation for MMS to collect 
royalty underpayments.
    Action Taken--On July 28, 1994, MMS published a final rule titled 
``Offsets, Recoupments and Refunds of Excess Payments of Royalties, 
Rentals, Bonuses, or Other Amounts Under Federal Offshore Minerals 
Leases'' (59 FR 38359). This rule established procedures for obtaining 
refunds and credits of excess payments and clarifies what payments are 
not subject to Section 10's requirements. The rule also provides for a 
de minimus exception to the MMS approval process.
4. Penalties and Assessments
    Comments Received--Recent regulations and pending legislation tend 
toward ever increasing penalties and assessments. Sufficient incentives 
already exist to ensure correct and timely payments. Many reporting 
errors by payors are due to unavoidable circumstances. Severe penalties 
are unjustified.
    Action Taken--MMS has used penalties and assessments not so much to 
punish but to ensure compliance with the Federal Oil and Gas Royalty 
Management Act (FOGRMA). FOGRMA requires MMS to distribute money to 
shareholders in the same month it is collected from payors on Federal 
and Indian leases. Without an effective strategy to encourage timely 
and accurate reporting, the collection and distribution system could 
quickly fall [[Page 15891]] out of compliance with the demands of the 
legislation. MMS, however, is looking at situations where it can ease 
some of the reporting requirements and minimize assessments. For 
example, MMS has taken action to adjust its billing thresholds to 
minimize ``nuisance'' bills for trivial assessments.
    In a related area, MMS is addressing the financial impacts incurred 
by payors that fail to timely file certain forms. MMS formed a study 
group to evaluate the existing regulatory requirements for oil and gas 
allowances including the assessments and sanctions for untimely filed 
forms. The Study Group was comprised of representatives from MMS, 
industry, and the State and Tribal Royalty Audit Committee. It 
addressed the need for and equity of allowance payback and late payment 
interest charges for untimely filed forms. The Study Group found that 
the penalties were not consistent with the crime and proposed 
alternatives to the payback penalty. MMS has prepared two proposed 
rules to implement the Study Group's recommendations--one dealing with 
oil and gas, and one dealing with coal.
    Timetable--MMS plans to publish the proposed rules by mid-1995.
5. The Appeals Process
    Comments Received--Current appeals process is too long.
    Action Taken--MMS has undertaken a streamlining review of its 
administrative appeals process. MMS has transferred decisionmaking on 
routine appeals from the Appeals Division to the Royalty Management 
Program. This has reduced the Appeals Division's workload by 20 percent 
and freed up staff to work on more complex appeals cases.
    MMS also initiated three pilot programs in its streamlining 
efforts. One pilot program aims to decrease the time and expense 
incurred by MMS in its preparation of an appellant's administrative 
record. A second pilot program involves reformatting the decisionmaking 
process to speed the issuance of shorter, more timely decisions. The 
third pilot program will test the use of alternative dispute resolution 
mechanisms to resolve many of the administrative appeals.
    Timetable--The first two pilots were put in place the latter half 
of 1994, and the third pilot began the end of February 1995.
6. Other
    Comments Received--MMS received unfavorable comments on proposed 
rules concerning administrative offset and credit adjustments. Comments 
were also received about closing audit periods and receiving orders to 
perform self-audits. Finally, there were comments received about the 
estimated royalty payment system and that guidance given to payors over 
the phone was overruled by RMP auditors.
    Action Taken--The administrative offset and credit adjustment rules 
have been consolidated as a final rule. MMS recognizes that many 
companies oppose these rules but considers the rules to be important 
enough that they should proceed to the final rulemaking stage.
    Some of the issues regarding closing audit periods and orders to 
perform recalculations of royalties are being addressed in a manual MMS 
is preparing on audit procedures. With respect to the other comments 
received, MMS will address them in order ways, such as ongoing customer 
service initiatives.
    Timetable--Publication of the administrative offset-credit 
adjustment final rule is scheduled for mid-1995. The audit manual will 
be available later this year.

    Dated: March 22, 1995.
Cynthia Quarterman,
Acting Director, Minerals Management Service.
[FR Doc. 95-7534 Filed 3-27-95; 8:45 am]
BILLING CODE 4310-MR-M