[Federal Register Volume 61, Number 129 (Wednesday, July 3, 1996)]
[Rules and Regulations]
[Pages 34730-34732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17013]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 256

RIN 1010-AC18


Leasing of Sulphur or Oil and Gas in the Outer Continental Shelf

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule.

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SUMMARY: This rule amends the regulations of MMS to allow the 
authorized officer to extend the 90-day time period within which we 
must accept or reject the high bids received on Outer Continental Shelf 
(OCS) tracts offered for sale. Unforeseen circumstances including a 
flood, a furlough, and an extremely high bid response may create a need 
for more time to evaluate bids. The rule gives the authorized officer 
authority to extend the time period for 15 working days or longer, 
beyond 90 days after the date on which the bids are opened, when 
circumstances warrant.

EFFECTIVE DATE: This rule is effective July 18, 1996.

FOR FURTHER INFORMATION CONTACT:
Dr. Marshall Rose, Chief, Economic Evaluation Branch, telephone (703) 
787-1536.

SUPPLEMENTARY INFORMATION: The time to accept or reject bids is 
established under the regulations at 30 CFR 256.47. The authorized 
officer must accept or reject the high bids within 90 days after the 
bid opening, except for tracts or blocks identified by the Secretary of 
the Interior as subject to:
    (1) Another nations's claims of jurisdiction and control which 
conflict with the claims of the United States, or
    (2) Defense-related activities that may be incompatible with 
mineral exploration/development activities. Any bid not accepted within 
that period is deemed rejected.
    In the Central Gulf of Mexico Sale 157, held April 24, 1996, we 
received 1,381 bids on 924 tracts, 632 of which passed to Phase 2 for 
detailed reviews. This unprecedented response by industry in Sale 157 
resulted from the enactment of the Outer Continental Shelf Deep Water 
Royalty Relief Act (Pub. L. 104-58, DWRRA) and other factors, such as 
higher natural gas and oil prices. Consequently, MMS is unable to 
conduct and complete the entire bid review process within the 90 days, 
i.e., by July 22, 1996. If we do not modify the timing restriction 
before the 90 days expire for Sale 157, dozens of high bids received on 
tracts offered in that sale may be rejected because of our inability to 
complete the statutorily mandated review for fair market value. 
Therefore, in accordance with 5 U.S.C. 553(b)(3)(B), this rule is 
effective July 18, 1996. It is in the public interest to ensure that 
adequate time is available to give all high bids a full and appropriate 
review and to ensure the receipt of fair market value.
    The 90-day period was established in 1982 because of the change 
from nomination to areawide sales and from presale to postsale 
evaluations. Since then, MMS has held mainly areawide sales. The DWRRA 
amended the Outer Continental Shelf Lands Act and defined a new bidding 
system which provides for royalty suspensions. The deep water incentive 
law did not amend the requirement that we receive fair market value for 
tracts leased. Any lease sale held before November 28, 2000, must use 
the new bidding system for all tracts located in water depths of 200 
meters or more in the Gulf of Mexico west of 87 degrees, 30 minutes 
west longitude. The large number of bids received in response to the 
new statutory requirements resulted in an increased workload which we 
expect will exceed our ability to complete the bid review process 
within 90 days as required by 30 CFR 256.47(e)(2).
    This rule allows the authorized officer authority to extend the 
time period for 15 working days or longer when circumstances warrant. 
Recent examples include floods and furloughs; however, other 
circumstances such as an excessive unanticipated workload may arise 
which could warrant the need for a longer time for bid evaluation.
    This rule addresses a housekeeping issue and will enable us to 
adjust the bid acceptance/rejection time period to meet changing 
conditions. It recognizes that 90 days may not be enough time to 
complete the review process, which would result in the rejection of the 
high bids which we fail to evaluate within 90 days. This would result 
in fewer leases being issued because of failure to complete the bid 
review process within time and resource constraints. The Government may 
receive less bonus and rental monies.
    Today, without authority to extend the bid review period, the 1982 
90-day rule is arbitrarily too rigid and may not allow sufficient time 
given the current complexities inherent in evaluating certain tracts. 
It is in the public interest to ensure that adequate time is available 
to give all high bids a full and appropriate review, to ensure the 
receipt of fair market value, and ultimately to increase natural gas 
and oil supplies.
    This rulemaking finalizes the rule, with one substantive 
modification, as originally proposed and published in the Federal 
Register (61 FR 24466, May 15, 1996). Seven respondents--a trade 
organization and six companies--submitted comments on the proposed rule 
during the public comment period. The MMS reviewed and analyzed the 
comments. The following is a discussion of the comments received and 
our response.

Narrative Responses to Comments

    Comment: Although MMS now pays interest on the one-fifth bonus held 
during the evaluation period, industry must set aside the four-fifths 
of the bonus and first year rental to pay for the lease when and if 
awarded. Delays in rejecting a lease may cause a company to miss 
participating in a significant opportunity elsewhere. Delays in 
awarding leases can cause delays in planning further seismic 
evaluation, hazard surveys, rig commitment, and budgeting of wells. On 
the other hand, industry does not want the retention of the 90-day 
period to result in the rejection of the high bids because MMS does not 
have sufficient time to evaluate them.
    Response: We realize that any extension beyond the 90 days could 
result in some missed opportunities and impact exploration and 
development activities, but MMS must fulfill its duty to obtain fair 
market value for offshore leased tracts. Because we accept tracts 
sequentially during the bid review period, on only a small portion of 
tracts will MMS require more than 90 days to

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complete the evaluation. We plan to extend the bid review period only 
when circumstances beyond our control arise, such as weather 
conditions, furloughs, or an unusually large number of unanticipated 
tracts receiving bids causing disruptions in our workload. We would 
rather ensure that adequate time is available to give all high bids a 
full and appropriate review, than have to reject high bids for 
insufficient time to evaluate, which could be the case without this 
rule. To accommodate the concern to keep the review time extension as 
short as possible, MMS has reduced the minimum extension time from 30 
days as proposed to 15 working days in the final rule.
    Comment: The ``authorized officer'' should not be allowed authority 
to extend the time period for more than 30 days. This extension of time 
should only apply to the evaluation of Sale 157 bids and should not be 
for additional time caused by a change in the bid adequacy procedures, 
for example, elimination of the 3-bid rule.
    Response: Our recent experience with floods and furloughs, which 
resulted in extensions of the bid review period for 14 and 9 days each, 
would indicate that it is unlikely that the authorized officer will 
extend the time period for more than 15 working days. As a result, we 
have modified the proposed 30 days to 15 working days. However, in 
those rare circumstances that may arise which could warrant a longer 
time for bid evaluation, this rule gives the authorized officer the 
flexibility to respond appropriately and in the public interest. With 
respect to Sale 157, more than three times the normal number of tracts 
went to Phase 2 for further evaluation, only a small percentage of 
which was attributable to the elimination of the 3-bid rule. The 
excessive workload burden is a result primarily of industry competition 
and bidding in Sale 157 and not a change in the bid adequacy 
procedures.
    Comment: The fact that a tract is covered by the DWRRA should not 
be a factor in evaluating the high bid on that tract.
    Response: The MMS must fulfill its duty to obtain fair market value 
for offshore leased tracts. The fact that a tract may benefit from the 
DWRRA will normally cause the bidders to adjust their bids accordingly. 
Therefore, any bid review procedure should take this effect into 
consideration as well.
    Comment: The regulation and the notice granting the extension 
should make clear the event or circumstances which require the 
extension.
    Response: Based on past experience, the rule does not list all 
possible reasons, or combination of reasons, that could trigger an 
extension. Examples of circumstances that might apply are: Inclement 
weather that results in closing the office; damage to the building 
(e.g., explosion, fire, or water); lack of electrical power; etc. Any 
announcement of an extension beyond the 90-day period will include the 
reasons warranting the extension.
    Comment: An extension to accept or reject the high bids is 
acceptable provided the additional time is warranted, and the sale 
schedule in the Central and Western Gulf of Mexico is not seriously 
affected. The alternative of rejecting high bids not evaluated because 
of insufficient time does not serve the best interest of the companies 
or the Government.
    Response: We, like the companies, do not want to extend the bid 
review period any more than absolutely necessary because MMS wants to 
continue to meet our sales schedule. We also realize that companies 
might delay exploration and development decisions because considerable 
amounts of financial resources, which could be better employed 
elsewhere, are tied up during this period. Any extensions should be for 
the minimum time warranted and affect a small number of tracts.
    Comment: The 90-day period would be sufficient if MMS limited its 
evaluation efforts in Phase 2 to those tracts where there is current 
activity or new production offsetting a tract receiving bids.
    Response: Because we are required to receive fair value for all 
tracts leased, the existing bid adequacy procedures do not limit Phase 
2 evaluation efforts only to those tracts where there is current 
activity or new production offsetting a tract receiving bids. The rule 
recognizes that more than 90 days may be needed to complete the 
process. We will continue to review our procedures and, based on 
knowledge gained from experience in lease sales, may identify 
modifications which might reduce the length of the bid review period.
    Author: This document was prepared by Mary Vavrina, Offshore 
Resource Evaluation Division, MMS.

Executive Order (E.O.) 12866

    This rule does not meet the criteria for a significant rule 
requiring review by the Office of Management and Budget (OMB) under 
E.O. 12866.

Regulatory Flexibility Act

    The Department of the Interior (DOI) has determined that this rule 
will not have a significant economic effect on a substantial number of 
small entities. Any direct effects of this rulemaking will primarily 
affect the lessees and operators--entities that are not, by definition, 
small due to the technical complexities and financial resources 
necessary to conduct OCS activities. Small entities are more likely to 
operate onshore or in State waters--areas not covered by this rule. The 
indirect effect of this rulemaking on small entities that provide 
support for offshore activities has also been determined to be small. 
When small entities work on the OCS, they are more likely to be 
contractors rather than lessees. While these contractors must follow 
the rules governing OCS operations, we are not changing the rules that 
govern actual operations on a lease. We are only modifying the rules 
governing the actual acceptance or rejection of a high bid for a lease.

Paperwork Reduction Act

    The rule has been examined under the Paperwork Reduction Act of 
1995 and has been found to contain no new reporting and information 
collection requirements.

Takings Implication Assessment

    The DOI certifies that this rule does not represent a governmental 
action capable of interference with constitutionally protected property 
rights. A Takings Implication Assessment prepared under E.O. 12630, 
Government Action and Interference with Constitutionally Protected 
Property Rights, is not required.

E.O. 12988

    The DOI has certified to OMB that the rule meets the applicable 
reform standards provided in Section 3(b)(2) of E.O. 12988.

National Environmental Policy Act

    The DOI has determined that this rule does not constitute a major 
Federal action significantly affecting the quality of the human 
environment; therefore, an environmental impact statement is not 
required.

Unfunded Mandate Reform Act of 1995

    The DOI has determined and certifies according to the Unfunded 
Mandates Reform Act, 2 U.S.C. 1502 et seq., that this rule will not 
impose a cost of $100 million or more in any given year on local, 
tribal, or State governments or the private sector.

List of Subjects in 30 CFR Part 256

    Administrative practices and procedures, Continental shelf, 
Government contracts, Incorporation by reference, Oil and gas 
exploration,

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Public lands--mineral resources, Reporting and recordkeeping 
requirements, Surety bonds.

    Dated: June 27, 1996.
Sylvia V. Baca,
Assistant Secretary, Land and Minerals Management.

    For the reasons set forth in the preamble, we amend 30 CFR part 256 
as follows:

PART 256--LEASING OF SULPHUR OR OIL AND GAS IN THE OUTER 
CONTINENTAL SHELF

    1. The Authority citation for part 256 continues to read as 
follows:

    Authority: 43 U.S.C. 1331 et seq.

    2. Section 256.47(e)(2) is revised to read as follows:


Sec. 256.47  Award of leases.

* * * * *
    (e) * * *
    (2) The authorized officer must accept or reject the bid within 90 
days. The authorized officer may extend the time period for acceptance 
or rejection of a bid for 15 working days or longer, if circumstances 
warrant. Any bid not accepted within the prescribed time period, 
including any extension thereof, is deemed rejected.
* * * * *
[FR Doc. 96-17013 Filed 7-2-96; 8:45 am]
BILLING CODE 4310-MR-M