[Federal Register Volume 61, Number 131 (Monday, July 8, 1996)]
[Rules and Regulations]
[Pages 35634-35666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16036]


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DEPARTMENT OF THE INTERIOR

Bureau of Indian Affairs

25 CFR Parts 211 and 212

RIN 1076-AA82


Leasing of Tribal Lands for Mineral Development and Leasing of 
Allotted Lands for Mineral Development

AGENCY: Bureau of Indian Affairs, Interior.

ACTION: Final rule.

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SUMMARY: The Bureau of Indian Affairs (BIA) of the Department of the 
Interior (Department) is promulgating regulations revising and updating 
regulations in 25 CFR Parts 211 and 212 that govern mineral leasing on 
tribal and allotted Indian lands respectively. The intent of these 
regulations is to ensure that Indian mineral owners, both tribes and 
individual owners, desiring to have their resources developed are 
assured that they will be developed in a manner that maximizes their 
best economic interests and minimizes any adverse environmental or 
cultural impact resulting from such development. Further, these 
regulations recognize Federal government reorganization, enacted 
legislation, and prevailing administrative practice in the 58 years 
since these regulations were first promulgated.

EFFECTIVE DATE: August 7, 1996.

FOR FURTHER INFORMATION CONTACT: Richard N. Wilson (303) 231-5070 or 
Pete C. Aguilar (303) 231-5070.

SUPPLEMENTARY INFORMATION: These final rules are published in the 
exercise of the authority delegated by the Secretary of the Interior 
(Secretary) to the Assistant Secretary for Indian Affairs by 209 DM 8. 
The principal authors of these rules are Richard N. Wilson and Pete C. 
Aguilar, both in the Division of Energy and Mineral Resources, Golden, 
Colorado.
    This final rulemaking revises and updates the mineral leasing of 
tribally-owned minerals governed by the Act of May 11, 1938 (25 U.S.C. 
396a), and the mineral leasing of allotted lands governed by the Act of 
March 3, 1909, as amended, (25 U.S.C. 396). The 1938 Act permits Indian 
tribes to elect whether they wish to offer their mineral resources for 
lease by competitive bidding, or enter into negotiations with 
prospective lessees if bids are not satisfactory. The Act of 1909 
permits individual Indian mineral owners to offer their mineral 
resources for lease by competitive bidding under the aegis of the 
Secretary.
    This is the first comprehensive revision of general BIA regulations 
governing mineral leasing of Indian lands since 1938. In the 
intervening period Congress has enacted many laws applicable to Indian 
mineral leases, including the National Environmental Policy Act of 1969 
and the Federal Oil and Gas Royalty Management Act of 1982. There have 
also been major changes in Federal Indian policy, as reflected in the 
Indian Self-Determination Act of 1975 and recent amendments thereto. 
This revision is the product of many years of consultation with Indian 
tribal leaders. It is intended to update, streamline and clarify the 
procedures for Indian mineral leasing and administration, consistent 
with the Federal government's role as trustee for these mineral 
resources and with the modern Federal policy of self-determination. 
Indeed, they largely reflect current BIA practice and procedure, and 
are intended in part to eliminate the confusion often fostered by the 
existing,

[[Page 35635]]

outmoded regulations. Although these revised regulations include new 
requirements imposed by modern statutes and intervening judicial 
interpretations of the BIA's legal responsibilities, they are no 
lengthier than the existing regulations, most of which have been in 
place for 58 years.
    Pursuant to section 8 of the Indian Mineral Development Act (IMDA) 
of 1982, the BIA published a notice of proposed rulemaking in the 
Federal Register on July 12, 1983 (48 FR 31978) to revise and 
reorganize the regulations governing solid mineral, oil and gas, and 
geothermal leasing adopted pursuant to the Acts of 1909 and 1938, last 
revised in their entirety on December 24, 1957 (22 FR 10588); as well 
as to promulgate regulations implementing the IMDA. On August 24, 1987, 
the BIA published final regulations (52 FR 31916) that were scheduled 
to become effective on October 24, 1987. Then, in response to concerns 
expressed by the public, the regulations were amended and republished 
as proposed on October 21, 1987 (52 FR 39332), and the public was 
notified that the regulations published on August 24, 1987 would not 
become effective.
    Public responses to these publications contained compelling 
arguments for restructuring the format of the proposed regulations. 
Several commenters stated that the October 21, 1987 proposed 
regulations were confusing and ambiguous. The format of the proposed 
regulations, implementing the Acts of March 3, 1909 and May 11, 1938, 
and the IMDA; combined the regulations into two separate parts: (1) 
Part 211, contracts for prospecting and mining on Indian lands (except 
oil and gas and geothermal) and (2) Part 225, oil and gas and 
geothermal contracts. The most common major concern was whether 
provisions of the IMDA would supplant lease and regulatory conditions 
contained in lease contracts entered into under the authority of the 
1909 and 1938 Acts. The regulatory format created confusion about 
contract approval procedures for leasing tribal versus allotted lands. 
In addition, the format created confusion between regulatory 
requirements for solid mineral versus fluid mineral contracts. The 
uncertainty expressed by Indian interests and industry on numerous 
issues convinced the Department that the regulations needed to be 
entirely reformatted and revised.
    The proposed regulations were then organized under a system that 
would be more familiar to both Indian mineral owners and industry. The 
proposed regulations were organized in three parts: (1) 25 CFR Part 211 
provided the procedures for obtaining and operating standard mineral 
leases, for both solid and fluid minerals, on tribal lands under the 
Act of May 11, 1938, as amended; (2) 25 CFR Part 212 provided the 
procedures for obtaining and operating standard mineral leases, for 
both solid and fluid minerals, on allotted lands under the Act of March 
3, 1909, as amended; and (3) 25 CFR Part 225 provided a new and 
separate part governing minerals agreements for development of Indian 
minerals under the IMDA.
    Along with the reformatting, many changes were made to the 
individual parts of the regulation. Those changes reflected the 
Department's efforts to be responsive to the comments received in 1987, 
and to include the additional business and administrative experience 
that had been gained on several issues during the intervening years.
    In order to provide Indian mineral owners and Indian-mineral 
operators full opportunity to review and comment on the reformatted and 
rewritten regulations, the Department determined that those regulations 
should be published as proposed rather than as final rules, and that 
the public should be given 90 days to review the regulations and 
provide written comments. The proposed rulemaking was published in the 
Federal Register (56 FR 58734) on November 21, 1991. The closing date 
for submission of review comments on the proposed rulemaking was 
February 19, 1992.
    Comments received from Indian mineral owners, industry, and the 
public were directed mostly to 25 CFR Parts 211 and 212. Tribes were 
especially concerned that the proposed regulations did not adequately 
recognize tribal rules and regulations and did not provide for adequate 
notification and communication with tribes prior to implementation of 
Departmental decision and authority with respect to mineral leasing and 
mineral management activities. Industry expressed concern about acreage 
limitations in the leasing of solid minerals and oil and gas, the role 
of the regulatory structure of the Department and its effects on the 
reclamation of Indian lands mined for coal, and were still concerned 
about the possible effects of the proposed rules on existing mineral 
leases on Indian lands.
    Because there were: (1) regulations formerly in place governing the 
mineral leasing of Indian lands (25 CFR Parts 211 and 212 as well as 
the regulations of other Federal agencies); (2) no regulations 
governing the disposition of mineral resources pursuant to the IMDA; 
and (3) because the IMDA is and has been utilized by tribes to 
participate in minerals agreements, since 1982, without benefit of 
formal regulations designed specifically to implement the IMDA; the 
Department published separately (25 CFR Part 225, 59 FR 14960, March 
30, 1994) as final rulemaking the regulations implementing the IMDA. In 
response to the wishes and numerous comments of Indian tribes and the 
public and to ensure that Indian mineral owners and lessees and the 
general public had adequate and full opportunity for review and 
comment, the Department determined that the regulations revising and 
updating 25 CFR Parts 211 and 212 should be published as final 
rulemaking only after an additional opportunity for review and comment 
had been provided.
    Accordingly, the public comment period was reopened, public 
meetings scheduled, and additional opportunity provided for concerned 
and involved parties to further discuss and provide comments, prior to 
final rulemaking, on 25 CFR Parts 211 and 212 published on November 21, 
1991. The comment period was reopened for 60 days by Federal Register 
notice (57 FR 40298) on September 2, 1992. Public hearings were held at 
Denver, Colorado on September 25, 1992 and at Albuquerque, New Mexico 
on September 28, 1992 to receive public comments on 25 CFR Parts 211 
and 212 as proposed and published on November 21, 1991. The closing 
date for submission of comments on proposed rulemaking was November 2, 
1992.
    In reviewing all of the issues raised in the 1987, 1991 and 1992 
comments and in redrafting the regulations, the goal of the BIA is to 
ensure that the Department is able to fulfill its trust responsibility 
by providing adequate provisions to ensure the protection of the trust 
resources and at the same time benefit the Indian mineral owners by 
removing unnecessary regulatory barriers and complications that could 
make their minerals less attractive to industry and thus frustrate 
development. In addition, consistent with the policy on self-
determination, the Department has attempted to provide the tribes as 
much freedom as possible to make their own determination on issues 
affecting the development of their minerals.
    The regulations are rewritten and restructured in response to the 
comments received during the comment periods of 1991 and 1992. Because 
of previous extensive reformatting and restructuring in response to 
comments received in 1987 (56 FR 58735), as well as to comments 
received in 1991 and

[[Page 35636]]

1992, the Department is of the opinion that a detailed review of 
comments received during a time interval of more than five years would 
be more confusing than helpful. Accordingly, the Department decided to 
provide in the preamble a listing by section of the salient changes 
made in the proposed regulations.

I. Changes Made to Proposed Rules

    Set forth in the following list of changes are most of the 
clarifying changes, but not each and every minor change, made to the 
regulations since they were last published as proposed in the Federal 
Register on November 21, 1991. The proposed rules are modified: (1) in 
response to comments received; (2) to reflect the fact that 25 CFR 
Parts 211 and 212 now stand alone after separation and subsequent 
publication of 25 CFR Part 225 (59 FR 14960) as a final rule; and (3) 
in recognition of prevailing and customary business and administrative 
practices developed in the last 58 years (since regulations were first 
promulgated in 1938) under the Acts of 1909 and 1938. The salient 
modifications to the proposed rules are here summarized by section. 
Many of the changes and modifications made in 25 CFR Part 212 are the 
same as those made in 25 CFR Part 211 or the sections are included from 
25 CFR Part 211 by reference. The changes and modifications in sections 
so referenced are the same in both parts. These changes and 
modifications as well as changes and modifications in common in the 
text of both parts of regulation are set forth only in the section 
summaries of Part 211 below, but are easily found because the numbering 
and designation of sections in Part 212 parallel those of Part 211. 
Where significant differences exist the sections of Part 212 are 
discussed separately (below). The section headings refer to this final 
rule.

Section 211.1. Purpose and Scope

    Several changes are made to this section to more clearly state the 
general guidance of this section and to assure the Alaska native 
corporations that 25 CFR Parts 211 and 212 are applicable only to 
Indian mineral interests held in trust by the United States. In 
addition, a change is made to clarify that 25 CFR Parts 211 and 212 do 
not affect certain key provisions of existing mineral leases and 
permits.

Section 211.3. Definitions

    The definitions section of Part 211 is modified somewhat, partly in 
response to comments, because permits are now specifically recognized 
in regulation, and for other reasons. The necessary changes made are:
    Applicant is an addition to clarify that no one is a lessee or 
permittee does not exist until after the issuance of a lease or permit;
    Bureau is deleted from definitions because this word is no longer 
used specifically without qualification in the regulations;
    Cooperative Agreement is added because the term is used in many 
places in the discussion of agreements that allocate costs and benefits 
among the operator(s) and the mineral owner(s).
    Director's representative is added to bring the Office of Surface 
Mining Reclamation and Enforcement representative formally into Part 
211;
    In the best interest of the Indian mineral owner is modified to 
clarify that the Secretary shall consider any relevant factor in making 
a best interest determination;
    Indian Surface Owner is defined in both Part 211 and Part 212 in 
response to comments and because this phrase is brought into Part 212 
by reference to the appropriate sections of Part 211.
    Minerals is modified to better define the scope and description of 
minerals that may be included in a mineral lease or permit on Indian 
lands;
    Permit is added to recognize that permits, as well as leases, may 
be issued in the course of exploration and development of mineral 
resources on Indian lands;
    Permittee is added to recognize one who holds a permit as compared 
to one who holds a lease on Indian land;
    Tar sand is deleted, but tar sand is now defined as a mineral and 
included as a result of the modification of the definition of 
``minerals.''

Section 211.4. Authority and Responsibility of the Bureau of Land 
Management (BLM)

    References are added to cite the BLM regulations concerning onshore 
oil and gas and geothermal unitization and communitization.

Section 211.6. Authority and Responsibility of the Minerals Management 
Service (MMS)

    This section is expanded to clarify that the Secretary may consider 
alternative provisions in a lease or permit with respect to the 
requirements found in 30 CFR Chapter II, Subchapters A and C, if they 
are reasonable and adequately address the royalty functions governed by 
MMS regulations.

Section 211.7. Environmental Studies

    A change is made in this section to clarify that although 
compliance with all environmental, archeological and historic 
preservation statutes is required, the exhaustive, site-specific 
analyses and surveys demanded when operations begin at a specific site 
are not invariably required prior to approval of a lease or permit. 
Rather, the degree and timing of environmental compliance activity 
demanded at a specific site or area is dependent upon the findings of 
the environmental analysis or environmental assessment.

Section 211.9. Existing Permits and Leases for Minerals Issued Pursuant 
to 43 CFR and Acquired for Indian Tribes

    This section is modified to clarify that permits and leases issued 
under 43 CFR on certain Federal lands which later became Indian lands, 
shall be administered in accordance with the regulations set forth in 
30 CFR and 43 CFR, as applicable. This section also provides guidance 
in the making of payments and the submittal of reports for mineral 
permits and leases.

Section 211.20. Leasing Procedures

    Changes are made in this section to emphasize that the Secretary 
undertakes mineral leasing on Indian lands at the request of, and in 
consultation with, the Indian mineral owner. Except for oil and gas, 
and with the approval of the Secretary, the Indian mineral owner and/or 
the Secretary may engage in private negotiations in pursuit of mineral 
leasing. After oil and gas lands have been considered for lease by 
competitive bid, the oil and gas lands may be leased by private 
negotiation between the Indian mineral owner and the mineral industry, 
subject to approval of the Secretary.

Section 211.24. Bonds

    Changes in this section emphasize that bonds are payable to the 
Secretary or the Secretary's designee and provide minimum (nationwide 
and/or statewide bonds) requirements for the bonding of lessees and 
permittees. Current financial and business practices are now recognized 
in the regulations by providing for a variety of financial instruments 
to accompany a personal bond so that a wide variety of assets can be 
used to satisfy the bonding requirements.

Section 211.25. Acreage Limitation

    As a result of comments, Section 211.25 is rewritten to more nearly 
reflect current administrative practice. In the previous proposed 
rulemaking, coal leases were restricted to 640 acres (56 FR 58740). In 
the final rule the limit is raised to 2,560 acres and may, with the 
consent of the Indian mineral

[[Page 35637]]

owner, be approved in larger acreage. This is similar to the existing 
regulation. For other minerals each lease may not exceed 640 acres, or 
the nearest aliquot portion thereof, although multiple leases of 640 
acres each may be obtained by lessees. Indian mineral owners and 
applicants who find the acreage limitations in Sec. 211.25 unduly 
restrictive may avail themselves of procedures under the IMDA (25 CFR 
Part 225).

Section 211.27. Duration of Leases

    Rewording in this section clarifies the conditions under which a 
lease may be extended beyond its primary term of lease duration by 
drilling (oil and gas and geothermal leases) or actual production 
(solid minerals leases). A provision is added, in the interest of 
diligent development of oil and gas and geothermal leases, that 
provides a lease cannot be extended more than 120 days beyond its 
primary term by drilling activity in the absence of production or an 
approval of a cooperative agreement.

Section 211.28. Unitization and Communitization Agreements, and Well 
Spacing

    Additions to this section include (1) the requirement that the 
Secretary consult with the Indian mineral owner prior to making a 
determination concerning a cooperative agreement or a well-spacing plan 
and (2) a clarification at Sec. 211.28(e) that requests for approval of 
cooperative agreements, which must be appropriately filed ninety (90) 
days prior to the expiration date of the first Indian lease to be 
included in the proposed agreement, apply to all mineral commodities 
amenable to approval of a cooperative agreement.

Section 211.29. Exemption of Leases and Permits Made by Organized 
Tribes

    At the suggestion of tribal commenters, the regulation currently 
found in 25 CFR Sec. 211.29, acknowledging that tribal laws may 
supersede these regulations, has been retained in this final rule. 
However, for clarification purposes, a proviso has been added, stating 
that tribal law may not supersede the requirements of Federal statutes 
governing Indian mineral leasing, for example, the requirement in 25 
U.S.C. Sec. 396a that a tribal lease must be approved by the Secretary 
of the Interior.

Section 211.40. Manner of Payments

    The change to this section clarifies the manner of payments and 
specifically identifies the Secretary's designees to receive payments 
prior to the establishment of production.

Section 211.41. Rentals and Production Royalty on Oil and Gas Leases

    The change to this section: (1) raises the minimum annual rental 
for Indian land to $2.00 per acre in keeping with current practices and 
rentals for mineral leases on Federal land; (2) clarifies at 
Sec. 211.41(c) that the Secretary may consider alternative lease or 
permit provisions to the requirements of 30 CFR Chapter II, Subchapters 
A and C, if the alternatives are reasonable and adequately address the 
royalty functions governed by regulations of the Minerals Management 
Service; and (3) restores the language in regulations formerly in place 
at Sec. 211.13(b) thus removing the requirement in the proposed 
regulations (56 FR 58734) that lessor use of gas in excess of lessee's 
requirements must be provided for in lease provisions.

Section 211.42. Annual Rentals and Expenditures for Development on 
Leases Other Than Oil and Gas

    The changes to this section increase the minimum annual development 
expenditure to $20.00 per acre and increase the minimum rental to $2.00 
per acre in keeping with current rates and rentals for mineral leases 
on Federal land and to reflect the effects of inflation over the years.

Section 211.43. Royalty Rates for Minerals Other Than Oil and Gas

    Minor changes are made to clarify that the royalty rates specified 
are only minimums, and that higher rates are allowed without any 
special approvals.

Section 211.53. Assignments, Overriding Royalties, and Operating 
Agreements

    Changes are made in this section to clarify that: (1) the Indian 
mineral owner must consent to assignment or transfer of approved leases 
or any interest therein if such approval of the Indian mineral owner is 
required in the lease; (2) even if such consent is not required the 
Secretary shall notify the Indian mineral owner of a proposed 
assignment; (3) agreements creating overriding royalties or payments 
out of production or agreements designating operators, although not 
requiring the approval of the Secretary, are required to be filed with 
the superintendent and do not relieve the lessee from obligations 
imposed by the MMS for reporting, accounting, and auditing; and (4) in 
response to comments, the proposed restrictions concerning assignment 
of partial interests and assignment of stratigraphic intervals are 
removed from the regulations.

Section 211.54. Lease or Permit Cancellation; Bureau of Indian Affairs 
Notice of Noncompliance

    Changes to this section include: (1) reorganization of the section 
in the interests of clarity of procedure in the serving of notices of 
noncompliance, orders of cessation, notices of cancellation, and orders 
of cancellation; (2) allowing a permittee or lessee thirty (30) days, 
rather than twenty (20) days, in which to respond to notices; and (3) 
clarification, by reorganization and addition of paragraphs, of BIA 
procedures to be followed in the event of noncompliance and necessary 
enforcement associated with the cancellation process which includes the 
option of BIA to issue a notice of non-compliance rather than to 
immediately start cancellation proceedings.

Section 211.55. Penalties

    This section is rewritten with minor changes, including a change in 
section title, to clarify procedures in the event penalties are imposed 
on a permittee or lessee. A change is made to formally recognize the 
authority of the director's representative of the Office of Surface 
Mining Reclamation and Enforcement to impose penalties and paragraph 
(f) is rewritten to guard against the imposition of multiple penalties 
by different Federal agencies for the same violation. A penalties 
section in the Bureau of Indian Affairs minerals regulations continues 
to be necessary because the only other remedies available to the 
Secretary for noncompliance with permit requirements or breach of the 
lease are cessation of operations or cancellation of the lease, either 
of which may be seen as extreme measures and may cause harm to the 
interests of the Indian mineral owner. Also, there are no penalty 
provisions under any other Federal agency's regulations to provide for 
enforcement of provisions of a permit or lease which includes solid 
minerals or other mineral commodities not covered by the Federal Oil 
and Gas Royalty Management Act of 1982 (FOGRMA) or the Surface Mining 
Control and Reclamation Act of 1977 (SMCRA). The new rule also provides 
more detail on the due process and appeal procedures available to a 
lessee or operator subject to a penalty assessment, than is found in 
the existing rule in 25 CFR Sec. 211.22.

Section 211.56. Geological and Geophysical Permits

    Change is made in Sec. 211.56(a)(3) to provide for the release of 
data after six (6) years after receipt by the Federal

[[Page 35638]]

Government, if no time limit for the release of data is prescribed in 
the permit; and to provide that data release is subject to the consent 
of the Indian mineral owner.

Section 212.20. Leasing Procedures

    Changes made in this section emphasize that the Secretary 
undertakes mineral leasing on Indian lands at the request of the Indian 
mineral owner and that the lease or permit shall not be approved 
without the consent of the Indian mineral owner. After the lands have 
been considered for lease by competitive bid, the Secretary may engage 
in negotiations, at the request of, and on behalf of the Indian mineral 
owner, in pursuit of mineral leasing.

Section 212.21. Execution of Leases

    Minor changes are made in the wording to clarify under what 
circumstances the Secretary may execute leases on behalf of the Indian 
mineral owners. A change has been made to subsection (b), in part to 
reflect the existence of modern tribal courts, by adding a proviso that 
the Secretary may exercise this authority only if there is no parent, 
guardian, conservator, or other person who has lawful authority to 
execute a lease on behalf of the minor or person with mental 
incapacity.

Section 212.28. Unitization and Communitization Agreements, and Well 
Spacing

    This section, included in Part 212 by reference to Part 211 in 
proposed rules, is now specifically included in Part 212 in final rules 
because of necessary minor differences in the unitization and 
communitization of allotted versus unallotted lands. Clarification is 
made at Sec. 212.28(e) that requests for approval of a cooperative 
agreement, that must be appropriately filed ninety (90) days prior to 
the expiration date of the first Indian lease to be included in the 
proposed agreement, apply to all mineral commodities amenable to 
approval of a cooperative agreement.

Section 212.33. Terms Applying After Relinquishment

     This section is rewritten with the provision that the lessee may, 
after lease relinquishment by the Secretary and the revesting of the 
lessor's title, withhold payment of rental and royalty until all 
parties agree upon and designate a trustee in writing and in a 
recordable instrument to receive all payments due thereunder on behalf 
of said parties and their respective successors in title. The provision 
that there must be four or more parties entitled to royalties and 
rentals before withholding is permitted is removed.

Section 212.41. Rentals and Production Royalty on Oil and Gas Leases

    Changes in this section (1) raise the minimum annual rental for 
Indian land to $2.00 per acre in keeping with current practices and 
rentals for mineral leases on Federal land and (2) clarify at 
Sec. 212.41(c) that if valuation provisions in the lease are 
inconsistent with the regulations in 30 CFR Chapter II, Subchapters A 
and C, the lease provisions shall govern.

Section 212.56. Geological and Geophysical Permits

    This section is reorganized in the interests of clarity of 
presentation and a change is made to proposed Sec. 212.56(a)(3) to 
provide for the release of data after six (6) years after receipt by 
the Federal Government, if no time limit for the release of data is 
prescribed in the permit, and to provide that data release is subject 
to the discretion of the Secretary.

II. Comments Received on Proposed Rules

    The notice of Proposed Rulemaking was published in the Federal 
Register on November 21, 1991 (56 FR 58734). The proposed rules 
provided for a 90-day comment period ending on February 19, 1992. The 
comment period was subsequently reopened (57 FR 40298) on September 2, 
1992. Public hearings were held at Denver, Colorado on September 25, 
1992 and at Albuquerque, New Mexico on September 28, 1992. The closing 
date for the submission of comments on proposed rulemaking and the 
reopened comment period was November 2, 1992. During the two comment 
periods, 27 commenters submitted written comments and/or oral 
statements and comments at public hearings. All comments were accepted 
for consideration in preparation of the final rules and are addressed 
in this portion of the preamble (Section II). All substantive comments 
applicable to sections of 25 CFR Parts 211 and 212 were considered with 
respect to both Parts whether or not the comments were directed to Part 
212 specifically.
    (1) One commenter states that the title of Part 211 creates some 
unnecessary confusion by referring to ``Leasing'' of tribal lands; that 
Part 225 also applies to certain ``leases'' of tribal lands, when 
negotiated under the IMDA; and that the title to Part 211 would be more 
accurate if it referred to ``Competitive Bid Leasing'' rather than just 
``Leasing.''
    Response: References to leasing are mostly removed from 25 CFR Part 
225 (published separately in final rulemaking, 59 FR 14960) and efforts 
made to refer, where at all possible, to the disposition of mineral 
resources under Part 225 as disposition by minerals agreement. Also, at 
the request of the Indian mineral owner or in the event of waiver, 
rejection, or failure of the bidding process, negotiated leases may be 
issued under Parts 211 and 212. Thus, the present titling of Part 211 
is retained without change.
    (2) Several commenters stated that sufficient time for review of 
the proposed regulations was not initially provided and ask for 
extended review time as well as public hearings at locations convenient 
to the Indian tribes; and stated that the proposed rules should be 
subject to a negotiated rule-making process among interested tribes, 
industry, and the Bureau of Indian Affairs.
    Response: As set forth in the introductory remarks (above), the 
Secretary reopened the period for comment for an additional 60 days and 
public hearings were held at Denver, Colorado and Albuquerque, New 
Mexico. Thus, the regulations have been subject to written oral 
comments twice and all interested parties have been afforded an 
opportunity to influence the content. Additionally, the regulations are 
not subject to negotiated rulemaking processes because enacted and 
codified legislation is not subject to subsequent unilateral 
negotiation to the exclusion of any concerned party.
    (3) One commenter indicates that the purpose of the proposed 
rulemaking is to make regulations consistent with the regulations 
governing mineral leasing and development of Federal lands. The 
commenter states that mineral leasing and development on Indian lands 
are not sufficiently similar to mineral leasing on Federal lands to 
justify uniformity.
    Response: One of the Department's purposes in the reformatting and 
changing of proposed rules is to make, when appropriate, these 
regulations consistent with the regulations governing mineral leasing 
and development of Federal lands (56 FR 58734). Appropriate consistency 
is desirable because many of the operating and reclamation regulations 
of other offices and bureaus of the Department of the Interior are also 
applicable in the day-to-day management of the mineral estate on Tribal 
and allotted Indian lands subject to mineral leasing and development 
under 25 CFR 211 and 212. The commenter is correct that in a number of 
important respects mineral

[[Page 35639]]

leasing and development on Indian lands differ from such activities on 
Federal lands; in such instances different treatment is required, and 
the regulations so provide. To the extent that Indian tribes find the 
Department's leasing regulations generally unuseful, they may wish to 
enter into minerals agreements under the IMDA (see 25 CFR Part 225).
    (4) One commenter states that the rules must provide that fixed 
dollar amounts (in lease provisions), whether in relation to annual 
rental, bonds, or other fees be indexed for inflation.
    Response: Although many fixed costs and charges in these 
regulations have been increased to offset the inflationary effects 
since the rules were last revised, no provision is made for indexing 
costs and charges to reflect the expected decrease in the purchasing 
power of money in future years. It is doubtful if an index (standard) 
or method of calculation acceptable to all parties to Indian mineral 
leasing can be found. Further, the IMDA provides the means by which 
indexing for inflation can be done for individual mineral properties 
and minerals agreements.
    (5) One commenter states that the Department attempting to ``remove 
unnecessary regulatory barriers and complications which could make 
[Indian] minerals less attractive to industry and thus frustrate 
development'' (56 FR 59735) should be principally addressed by tribes 
because many of the regulatory barriers and complications exist to 
protect tribes.
    Response: Tribes may address how best to protect their interests in 
minerals agreements under the IMDA (25 CFR Part 225). Also, provision 
is made at Sec. 211.29 in final rules for supersedence of Federal 
regulations by the provisions of any properly issued tribal 
constitution, bylaw, or charter.
    (6) One commenter states that the proposed regulations should be 
reproposed with coal mining leases and operations addressed by separate 
regulations specific to coal operations because, as proposed, the 
regulations would impose an unnecessary and duplicate regulatory burden 
on coal operations on Indian lands; and further states that coal-
specific regulations must avoid creating overlapping and duplicative 
regulatory requirements and that the mining of minerals other than coal 
also warrants separate treatment.
    Response: The authorization for the leasing of allotted and 
unallotted Indian lands for mining (including oil and gas) is set forth 
at 25 U.S.C. Sec. 396 and Secs. 396a-396g, in which no provision is 
made for the promulgation of separate regulations for individual 
mineral commodities. Although not prohibited, the Secretary is of the 
opinion that the devising of regulations for the administration of 
individual mineral commodities occurring in each individual land 
category would create a costly and unmanageable administrative 
situation for those engaged in the management of minerals operations 
and reclamation of disturbed lands. Sections 211.7, 211.24, 211.47, 
211.48, 211.51, 211.54, and 211.58 have all been changed to remove the 
concerns of regulatory overlap and duplication.
    (7) Several Alaska Native Regional Corporations ask that language 
be made in the rules to clarify that the Part 211 Tribal leasing 
regulations do not apply to lands conveyed pursuant to the Alaska 
Native Claims Settlement Act of 1971.
    Response: Language is added in 25 CFR 211.1(a) to clarify that the 
rules apply only to lands which the United States holds in trust for 
the benefit of an Indian tribe, or which are subject to a restriction 
against alienation imposed by the United States.
    (8) Several tribal commenters are in favor of a broader retroactive 
effect for the proposed regulations. One commenter stated that only the 
royalty rate should not be subject to retroactive change by the 
regulations. One industry commenter stated that the regulations should 
not have any retroactive effect unless agreed to by all parties.
    Response: The current regulations in Sec. 211.28 provide for an 
effective date and state that the current regulations supersede all 
former regulations. The current regulations then include a proviso, 
``That no regulations made after the approval of any lease shall 
operate to affect the term of the lease, rate of royalty, rental or 
acreage unless agreed to by both parties to the lease.'' This provision 
has been carried essentially unchanged. No attempt has been made to 
change this provision that has been in effect for many years and has 
not led to any problems in interpretation or application. Therefore, no 
changes were made pursuant to the comments.
    (9) Several commenters state that the placement of the provisions 
of Sec. 211.29, from regulations formerly in place, at proposed 
Sec. 211.1(c) does not: (1) adequately recognize the regulatory 
authority of tribes; (2) specifically provide that the proposed 
regulations may be superseded by the provisions of any tribal 
constitution, bylaw, or ordinance; nor (3) provide the proper platform 
for the adoption of tribal bylaws, ordinances, and other measures 
governing assignments, taxation, and other matters of regulation of the 
Indian mineral estate.
    Response: In response to this and other comments the regulation in 
25 CFR Sec. 211.29 has been reinstated in the same place, with minor 
revisions for clarification purposes. In addition to the tribal 
regulatory authority recognized in the new Section 211.1(d) (211.1(c) 
in the proposed rules), Section 211.29 recognizes that tribes may enact 
laws which supersede these regulations, but not Federal statutes.
    (10) One commenter states that many tribes have adopted their own 
mineral leasing act, which should be noted in the new regulations.
    Response: See the response to comment (9).
    (11) One commenter is concerned that each part of proposed 25 CFR 
Parts 211, 212, and 225 have separate sets of definitions and states 
that only one set of definitions should be used.
    Response: The commenter is correct in stating that uniformity of 
definition is desirable. However, with the decision to separate 25 CFR 
Parts 211 and 212 from Part 225 (59 FR 14960), more than one set of 
definitions is required for publication in the Federal Register. Also, 
the three parts of regulation respond to at least three different sets 
of empowering legislation over about an 80-year, time span such that 
differences of definition are unavoidable. Wherever possible terms in 
the three sets of regulations have the same meaning.
    (12) One commenter points out that ``Bureau'' is specified in 
definition, but not used consistently in the proposed regulations and 
suggests usage consistent with definition.
    Response: We agree. The word ``Bureau'' is removed from definitions 
and the regulations in favor of usage of the ``Secretary'' or the 
title(s) of the Secretary's designee.
    (13) One commenter states that ``coal'' ought to be defined because 
it is a referenced mineral in the proposed regulations.
    Response: The definition of ``minerals'' includes coal specifically 
in definition and also by virtue of including metalliferous, non-
metalliferous, energy, and non-energy minerals. A definition of 
``coal'' is not added in final rulemaking.
    (14) One commenter suggests that coal be specifically included in 
the definition of ``solid minerals.''
    Response: Coal is specifically included in the definition of 
``minerals'', and by virtue of being a solid is included in the 
definition of ``solid minerals.'' The definition is unchanged in final 
rulemaking.
    (15) Several commenters are concerned that the definition of 
``gas'': (1) may or may not include coal-bed

[[Page 35640]]

methane and suggest that methane gas and other ``non-traditional 
hydrocarbons'' be exempted from definitions of minerals acquired under 
a traditional mineral lease; and (2) should exclude those substances 
found in other minerals as a constituent part of other minerals.
    Response: The issues raised by commenters are currently being 
litigated. The definition of ``gas'' in these regulations is consistent 
with the position that the Department of the Interior has taken in 
litigation. If necessary, distinction among gases of various origin or 
association may be made by the use of suitable modifiers in lease 
provisions (e.g., coal-bed methane, natural gas, or carbon-dioxide gas) 
at the time of advertisement of properties for lease and/or subsequent 
lease negotiation by principals. Further, the IMDA is available to 
tribes (and allottees if participating in a minerals agreement under 
the IMDA) to specifically address in minerals agreements these issues 
on an individual basis.
    (16) One commenter states that the definition of a ``gas'' should 
make clear the meaning of ``ordinary temperatures and pressure 
conditions'' because of perceived differences in ordinary temperature 
and pressure in subsurface contrasted with ordinary temperature and 
pressure at land surface.
    Response: Ordinary temperature and pressure generally means near 
room temperature and about one atmosphere pressure as commonly used in 
the calculation and handling of gases and in specified standards for 
the determination of quantities of materials. The specification of 
temperature and pressure standards for produced gas(es) are found in 
the operating regulations of the BLM and the production and valuation 
regulations of MMS. The specification of a standard, if required, 
should appear in lease provisions or be specified at the time of lease 
negotiation.
    (17) One commenter suggests that the definition in proposed rules 
of ``in the best interest of the Indian mineral owner'' be dropped 
because an adequate and concise definition of this phrase is difficult 
to compose, although the concept is generally understood.
    Response: The final definition includes a partial list of factors 
to be considered by the Secretary and is consistent with Kenai Oil and 
Gas, Inc. v. Department of Interior, 671, F.2d 383.
    (18) One commenter suggests that the proposed definition of ``in 
the best interest of the Indian mineral owner'' be changed to require 
the Secretary to consider any relevant factor in the best interest 
determination.
    Response: We agree. The definition is changed in final rulemaking.
    (19) One commenter is concerned that the definition of ``Indian 
lands'' was included in proposed rulemaking with no explanation in 
preamble and is different than the definition used by OSM.
    Response: The proposed rules state (56 FR 58735) that the 
definitions section of the regulations is expanded significantly to 
eliminate ambiguities and questions concerning the meaning of 
frequently used terms. The definition of ``Indian lands'' used by OSM 
is found in SMCRA, and is applicable only to the provisions of SMCRA. 
Indeed, that statutory definition has been the subject of varying 
interpretations and litigation over its meaning. The definition used in 
these regulations simply recognizes that Indian-owned lands held in 
trust or subject to Federal restrictions against alienation are within 
the purview of the Indian mineral leasing statutes and the Secretary's 
trust responsibilities.
    (20) One commenter suggests that the proposed definition of 
``Indian lands'' specifically exclude Alaska Native Regional 
Corporations which own land or interest in minerals.
    Response: Language is added to 25 CFR 211.1(a) to specify those 
lands to which 25 CFR Part 211 applies, language which excludes lands 
or mineral interest owned by Alaska Native Regional Corporations.
    (21) One commenter objects to confusing syntax in the proposed 
definition of ``Indian lands'' and suggests that such lands be defined 
(in part) in terms of ownership by group(s) recognized by the United 
States as eligible for services from the Bureau of Indian Affairs. 
Another commenter suggests that in use in regulation the words ``trust 
or restricted lands'' be changed to ``Indian lands.''
    Response: See the response to comment (19).
    (22) One commenter questions the need for including lands owned by 
any individual Indian in the definition of ``Indian lands'' because 
Part 211 deals exclusively with leasing of tribal lands.
    Response: Use of the term ``Indian lands'' in Part 211 is very 
limited. See Sections 211.9 and 211.22. There the context includes 
allotted as well as tribal lands.
    (23) Several commenters state that ``Indian surface owner'' needs 
to be defined in rulemaking.
    Response: We agree. The phrase ``Indian surface owner'' is defined 
in both Part 211 and Part 212 because sections of Part 211 are 
referenced in Part 212.
    (24) One commenter suggests that the definition of ``lessee'' 
imposes diligent development and other operating obligations (as well 
as the obligation of paying royalty and rental) on a designated royalty 
payor rather than an operator and suggests the definition be deleted 
whereas another commenter states that the definition should be 
broadened to include anyone who has been assigned any rights associated 
with the lease.
    Response: The definition of ``lessee'' in Parts 211 and 212 
parallels and supports similar definitions in the operating regulations 
of both the BLM and the MMS. The MMS definition includes those who have 
been assigned an obligation to make royalty or other payments as 
required by the lease. The definition is retained unchanged in final 
rulemaking.
    (25) Several commenters point out that the definition of ``lessee'' 
should not include those prior to the time a lease is granted.
    Response: We agree. The definition is rewritten to reflect that 
those who have made application for or who are negotiating for a lease 
are not lessees.
    (26) One commenter states that the common mineral varieties should 
be excluded from the definition of ``minerals'' at Sec. 211.3.
    Response: The authority in the Act of May 11, 1938, for the leasing 
of tribal lands for mining purposes has been interpreted broadly since 
its enactment. Nothing in the Act suggests that common varieties of 
minerals should not be included.
    (27) Two commenters object to the exclusion of materials from the 
definition of mining based on the type and volume of material 
considered for extraction and one questions if the extraction of 5,000 
cubic yards of gold and silver bearing material is a non-mining 
venture.
    Response: Common varieties of mineral resources extracted in small 
amounts are excluded from the definition of mining, especially because 
the purpose of such extraction is often for local and/or tribal use. 
However, permits for these small operations are still reviewed and 
approved at the superintendent's office. Gold and silver are not 
included in the extraction of small amounts of materials because gold 
and silver are precious metals and not common mineral varieties. The 
Indian mineral owner still retains the option of disposing of the 
common mineral varieties in whatever types and quantities specified by 
a minerals agreement under the provisions of the IMDA, if desired.

[[Page 35641]]

    (28) One commenter points out that in proposed rulemaking the 
definitions of ``oil'' and ``gas'' are at odds with the definitions 
used by the Minerals Management Service and suggests that the 
definitions of the two Federal agencies should be more compatible.
    Response: The definitions of the two Federal agencies are 
unavoidably different because those at 25 CFR Sec. 211.3 are similar to 
those used by the Bureau of Land Management in the management of 
mineral leasing and production whereas the Minerals Management Service 
definitions are more closely tied to measurement and royalty management 
concerns.
    (29) Three commenters suggest that a definition of ``in paying 
quantities'' be included in proposed definitions at Sec. 211.3.
    Response: The paying quantities determination is made by the Bureau 
of Land Management after operations commence and production begins. The 
definition of paying quantities is contained in 43 CFR Part 3160. The 
definitions of commercial quantities for geothermal resources is in 43 
CFR Part 3260 and for coal is in 43 CFR Part 3480. A definition is not 
needed here, because this responsibility falls to the BLM to determine 
whether production meets the ``pay quantities'' criteria. Therefore no 
definition is included.
    (30) One commenter suggests that additional definitions be added to 
Sec. 211.3 including ``primary term'' and ``maximum term'' as used in 
Sec. 211.27.
    Response: The primary term is defined in context when used to 
describe the duration of a lease. No reference is made to a maximum 
term of lease duration in final regulation. These definitions are not 
added in final rulemaking.
    (31) One commenter states that the definition of ``tar sands'' is 
restrictive because it is limited in definition to production by mining 
or quarrying.
    Response: We agree. The definition is not used in regulation and is 
removed from Sec. 211.3 (and Sec. 212.3) in final rulemaking.
    (32) Two commenters feel that in proposed Secs. 211.4, 211.5, and 
211.6 the authority and responsibility of tribal governments over 
operations on reservation lands should be explicitly recognized and one 
believes that with respect to the authority and responsibilities of the 
various agencies of the U.S. Government, explicit mention of the 
Government's trust responsibility to Indians should be included in the 
regulations.
    Response: The authority and responsibility of tribal governments is 
recognized and in these rules at Sec. 211.1(d), at Sec. 211.29, and 
discussed above (see comment number 9 and in the summary remarks of 
this preamble). Insofar as the mention of the Secretary's trust 
responsibility is concerned all Federal agencies must recognize the 
trust responsibility of the United States when implementing programs 
for Indians.
    (33) One commenter is especially concerned about Sec. 211.5 and 
states that the regulations should make it clear that coal mining 
reclamation requirements and procedures have no application to open-
pit, hard-rock operations.
    Response: Section 211.5 is changed to specifically cite the Code of 
Federal Regulations governing coal mining and reclamation requirements 
and procedures.
    (34) One commenter states that the regulations of the MMS recognize 
that Indian lessees must ``dual account'' for gas produced from tribal 
lands and states that the proposed regulations are silent on this 
methodology which could be viewed as a retreat from the valuation 
system that greatly enhances tribal income. Another commenter states 
that these regulations must expressly state that the trust 
responsibility requires the Secretary to maximize valuation on Indian 
lands.
    Response: Under FOGRMA and the Department of the Interior Manual, 
the valuation of production for royalty purposes is a function of the 
MMS. Thus, the requirements and methodology of valuation are properly 
set forth in appropriate case law and Title 30 of the CFR in Chapter 
II, Subchapters A and C, of the MMS rules and regulations. Section 
211.6 is rewritten to provide that if parties to a lease or permit are 
able to provide reasonable provisions satisfactorily addressing the 
functions governed by MMS regulations, the Secretary may approve such 
alternate provisions.
    (35) Several tribal commenters and many industry commenters raise 
questions concerning the application of environmental, historic 
preservation and archaeological protection laws to Indian lands. One 
tribal commenter states that the National Historic Preservation Act 
does not apply to Indian lands. Another opposes the application of the 
National Environmental Protection Act (NEPA) to Indian lands. Industry 
commenters state that compliance with environmental, archaeological and 
historic preservation survey requirements is an extremely burdensome, 
expensive, and unnecessary requirement. Several industry commenters 
recommend that archaeological surveys be performed after approval of a 
lease, but prior to approval of any surface disturbing operations.
    Response: The National Environmental Protection Act and the other 
historic preservation and archaeological protection statutes cited in 
this section apply to Indian lands when activities on those lands are 
subject to approval by the Federal Government. Therefore, the 
Department has no discretion to determine whether or not to comply with 
those laws as they affect mineral leasing on Indian lands. It is also 
clear that the provisions of NEPA must be complied with at the time of 
lease approval. It is not possible to defer NEPA compliance until the 
surface disturbance phase of lease development. However, the prior 
proposed regulations stated that all historic preservation and 
archaeological surveys would be performed prior to approval of a lease. 
It has been determined that this statement may impose a greater burden 
than is actually required by applicable regulations. Therefore 
Sec. 211.7 is modified to state that ``the Secretary shall ensure that 
all clearances and surveys are performed in compliance with these laws 
* * *.''
    (36) One commenter states that the second sentence of Sec. 211.9 
should be revised to read that ``Existing mineral prospecting permits, 
exploration and mining leases on these lands issued prior to these 
properties being placed in trust status or becoming Indian lands 
pursuant to 43 CFR * * *.''
    Response: We agree. Section 211.9 is rewritten to clarify that such 
lands, once taken into trust or becoming Indian lands, are no longer 
treated as public or Federal lands (recognizing pre-existing rights).
    (37) Several commenters state that the leasing procedures of 
proposed Sec. 211.20 are not clear and suggest that the procedures are 
in need of clarification.
    Response: We agree. Section 211.20 is rewritten and recast to 
clarify procedures and to emphasize the involvement of the Indian 
mineral owner in the leasing process.
    (38) One commenter states that Sec. 211.20 is unclear as to 
amendments to existing leases and suggests that amendments to 1938 Act 
leases be negotiated under the 1982 Act (IMDA).
    Response: Neither rules formerly in place nor final rules provide a 
formal regulatory scheme for amendment to existing leases because the 
amendments are either at the convenience of the parties to the lease or 
result from lease provisions to open and renegotiate a lease after a 
specified event occurs. Regardless of the approach to amendment, the 
resulting terms must be approved by the Secretary, an action

[[Page 35642]]

resulting in the issuance of a minerals agreement (25 CFR Part 225), a 
new lease, or ancillary terms appended to an existing lease; all of 
which are new leases that must be approved by the Secretary. Provision 
is made for the amendment of minerals agreements (25 CFR Part 225, 59 
FR 14975). Minerals agreements are expected to be the preferred 
procedure for the amendment of all existing leases and agreements.
    (39) One commenter states that potential lessees should be 
instructed to submit lease applications directly to the Indian mineral 
owner as well as the superintendent at the time of application.
    Response: Submittal of applications to lease to multiple offices is 
not required in final rules. Rather, the Indian mineral owner shall be 
promptly notified of the lease application and the leasing 
alternatives. The course of action to be followed after this 
notification is then contingent upon the decisions of the Indian 
mineral owner.
    (40) Several tribes comment that the royalty rate and rental as 
well as bonus should be included as variables in the advertisement of 
leases for sealed or oral bid, and that the Secretary should not 
unilaterally set a royalty rate and rental amount in the advertisement.
    Response: Comments concerning the need for tribal input are well 
taken and Sec. 211.20 is modified to require consultation with the 
Indian mineral owner prior to advertisement. However, the comments 
requesting that royalty rate and rental be variables in the sealed and 
oral bid process is not accepted because the procedures can be managed 
only with great difficulty. Past experience has shown that it is 
extremely difficult to compare the values of bids that are contingent 
upon three different variables bid separately. In addition, if an 
Indian mineral owner desires to receive offers to lease a land parcel 
or tract, the value of which is determined by the total value of a 
variety of considerations each of which may be dependent on another, 
the procedures under the IMDA or, in certain circumstances, negotiation 
offer flexibility to a Tribe.
    (41) One commenter states that there ought to be included in 
Sec. 211.20 a provision that requires BIA to issue a comprehensive 
analysis of the potential value of the property being considered for 
oil and gas development and its potential effect upon reservoir 
production; otherwise, tribes that do not have independent assessment 
capabilities will have no way of knowing what the value of properties 
are before they are submitted for bid.
    Response: Mineral inventories and appraisals are conducted by the 
BLM and BIA, depending upon the resources available. Limited resources 
make it impossible to appraise every mineral tract prior to leasing. 
The best readily available measure of mineral worth of an oil and gas 
tract is likely the fair market value of the tract as revealed by past 
and present bonus bids for the tract or (if available) nearby similar 
tracts.
    (42) One commenter states that the language of Sec. 211.20(b)(5) 
indicating the high bidder ``may'' forfeit the required 25 percent of 
bonus bid should be changed to ``shall'' and that there is no standard 
to establish when the forfeiture occurs.
    Response: We agree. In final rules a standard is specified and the 
forfeiture is made certain by the use of the word ``shall'' in final 
rules.
    (43) One commenter states that the successful oral bidder should be 
required to immediately pay 25 percent bonus [bid as] deposit at the 
time of the auction.
    Response: The final rules continue to permit five (5) working days 
in which the successful oral auction high bidder will be allowed to 
remit the required 25 percent deposit of the bonus bid. In the event of 
a spirited auction, the successful high bidder may not have at the 
place and time of auction the requisite 25 percent of the bonus bid for 
the deposit.
    (44) One commenter states that the required publication of a notice 
of sale at least thirty (30) days prior to the sale date should be 
sixty (60) days to give an interested party adequate time to prepare 
for the sale.
    Response: The publication of the advertisement of lease sale thirty 
(30) days in advance of the sale date is a minimum time interval. The 
publication of the advertisement of date of lease sale and ancillary 
information may take place more than thirty (30) days before the sale. 
This minimum time has for many years proved to be a workable minimum.
    (45) Two commenters are of the opinion that the proposed rules 
allow for competitive bonus bid and negotiated leases at the same time 
and object to negotiations after the potential lessor has the advantage 
of evaluating bids received. Further, one commenter states that the 
results of competitive bidding should be final and the winning bid 
should be awarded the lease.
    Response: As owner of the property to be leased, the Indian mineral 
owner has wide latitude in the determination of methods of auction and 
conditions of lease sale. Under the trust responsibility, the Secretary 
must reserve sufficient latitude to properly discharge that 
responsibility. Accordingly, there is no provision in final rules for 
lease sales and lease negotiations to be conducted at the same time for 
the same land tracts. In the event that the results of a lease sale are 
not to the liking or not in the best interest of an Indian mineral 
owner, action must be taken to satisfy the needs and wishes of the 
potential lessor. Section 211.20 therefore balances concerns of 
potential lessees and lessors.
    (46) One commenter is uncertain why the storage option is granted 
at 25 CFR Sec. 211.22 and is unsure of what benefit is derived by a 
lessor when a lessee produces oil and gas, but stores it for future 
use; and whether or not hydrocarbons not previously produced includes 
hydrocarbons produced, but stored; and if a lessee may store previously 
produced minerals indefinitely and thereby hold the lease without 
payments to the lessor.
    Response: The storage option is included at 25 CFR Sec. 211.22 to 
provide the Indian mineral owner with a mechanism to profitably 
participate in the demand for surge storage capacity for oil and gas 
(usually hydrocarbons) by underground storage. Participation is 
achieved by means of leasing or adjusting existing lease provisions to 
accommodate produced oil and gas, in existing natural or near natural 
underground structures (oil and gas traps comprising an oil and gas 
field) at or near the end of productive life; or those older, produced 
fields having capacity that can be used to store oil and gas. Payments 
to Indian mineral owners can be based on metered transfer of oil and 
gas in and out of the field (structure) that may provide rental in lieu 
of, or in addition to, royalties deriving from field production. Oil 
and gas stored may be from the same field or other sources (including 
pipelines). Usually, provision must be made in royalty, fees, and/or 
rentals to ensure proper accounting and payment for all oil and gas 
recovered from storage including quantities in excess of stored amounts 
and those fluid phases, produced as a result of introduction of stored 
hydrocarbons (say, residue gas) or other gases, that would not have 
been produced otherwise. Also, provision must be made in royalty, fees, 
and/or rentals to pay the Indian mineral owner for the use of the field 
(trap) for storage purposes. Section 211.22 is unchanged in final 
rulemaking.
    (47) Two commenters representing industry interests recommend the 
deletion of proposed Sec. 211.23(b) that requires: (1) the filing of a 
statement

[[Page 35643]]

showing a corporate applicant's State of incorporation; (2) that the 
corporation is authorized to hold interests in property in the State in 
which the lands are operated; and (3) a notarized statement that the 
corporation has the power to conduct all business and operations as 
described in the lease.
    Response: The requirements are retained because the information 
required has been found to be useful to the Department, is not 
burdensome to industry, and is a standard requirement of long standing 
for all significant transactions with corporations. Therefore no 
changes were made in final rules.
    (48) Several commenters are concerned that the dollar amounts 
stated in Sec. 211.24 for bond requirements are inadequate and 
recommend that bonds be required in amounts sufficient to protect the 
interests of the Indian mineral owner and the United States.
    Response: The final rule balances the high cost of bonds against 
potential damage to the Indian mineral owner and the United States. 
Section 211.24 is rewritten to permit the use of personal bonds as 
surety as well as the customary Statewide and Nationwide bonds and 
Sec. 211.24(e) provides for increasing bond amounts in any particular 
case at the discretion of the Secretary. The goal in regulation remains 
that lessees furnish bond sufficient to ensure compliance with all 
lease provisions and applicable rules and statutes.
    (49) One commenter states that Sec. 211.24 should make provision 
for bonding to include Federal, State, or fee mineral leases, the 
surface of which is owned by a tribe or individual Indian, for purposes 
of surface reclamation as proposed in an approved plan of operation.
    Response: The rules in 25 CFR Parts 211 and 212 are concerned with 
the leasing of minerals on Indian lands. Therefore, the requirements 
for leasing of Federal, State, and fee minerals must be addressed under 
other authority, and published elsewhere.
    (50) One commenter states that proposed paragraphs 211.24(c) and 
211.24(c)(3) are inconsistent in naming the payee.
    Response: Although Sec. 211.24 is rewritten the language included 
in these proposed paragraphs is essentially the same; the payee is the 
Secretary with the stipulation that the letter of credit is payable to 
the Bureau of Indian Affairs (the Secretary's designee) upon receipt 
from the Secretary of a notice of attachment stating the basis thereof.
    (51) One commenter states that the Indian mineral owner should be 
allowed to be named as the payee on a bond.
    Response: An Indian mineral owner cannot be named as payee on 
Statewide or Nationwide bonds which affect more than one Indian mineral 
owner. In final rulemaking the Secretary remains the payee because, in 
the discharge of the trust responsibility, the bond must be continually 
and easily available to defray the cost of abandonment, reclamation 
and/or provide for payment of royalties, other charges, and fees in the 
event of default.
    (52) One commenter states that the proposed Sec. 211.24(d) should 
be changed to state explicitly that bonding shall be in an amount 
satisfactory to the Secretary and the Indian mineral owner or the 
Indian surface owner, in amounts sufficient to ensure compliance with 
the requirements of the authorized officer and the Indian mineral owner 
or the Indian surface owner and shall be available, in the Secretary's 
discretion, with concurrence by the Indian mineral or surface owner, to 
satisfy any unpaid debt of the lessee or assignee to the lessor or 
surface owner.
    Response: In situations requiring complex and detailed bonding in 
response to many and varied interests, the prospective lessor should 
consider using a minerals agreement under the IMDA (25 CFR Part 225) 
rather than 25 CFR Part 211.
    (53) One commenter points out that no definition is provided for 
the term ``assignee'' which is used in Sec. 211.24.
    Response: The paragraph (a) in Sec. 211.24 is rewritten to clarify 
the use in context of the word ``assignee.''
    (54) Two commenters recommend that proposed paragraph 
Sec. 211.24(d) be revised to allow the posting of an individual lease 
bond is some amount not to exceed $5,000 to encourage independent 
operators to invest and work on Indian land.
    Response: The rule at Sec. 211.24 is rewritten in response to 
comments to provide in final rulemaking the minimal requirements for 
the bonding (or equivalent surety) of lessees conducting mineral 
operations on Indian lands such that the Secretary may adequately and 
timely fulfill the trust responsibility.
    (55) Several commenters object to the single section of land (640 
acre), lease-size limitation. It is stated that smaller leases would be 
less attractive to industry because they would be less economic. Other 
commenters request that the lease-size limitation be subject to 
variations on a case-by-case basis to allow for irregularities in land 
sections.
    Response: Except for coal, the lease-size limitations remain the 
same as in the proposed rules. Coal leases have historically been 
limited to 2,560 acres with due allowances for exceptions to provide 
for the dedication of sufficient reserves to specific projects 
(powerplants) to ensure that ventures will not fail for lack of fuel. 
Additional language is added to Sec. 211.25 to restore the 2,560-acre 
limitation (with provision for exception) for coal and to provide that 
the rule of approximation shall apply in the event irregular land 
sections are included in the leased land blocks as well as provision 
for lands not surveyed under the United States Governmental survey. 
Changes to Sec. 211.25 are also made to emphasize that the acquisition 
and holding of multiple leases (both adjoining and not adjoining) of 
640 acres each are not affected by the acreage limitation. In the past, 
large tracts of Indian land have been held by production from a small 
portion of a lease and in response to this concern the Department has 
for three decades restricted the size of offered leases (especially for 
oil and gas) not to exceed 640 acres or one section, with provision for 
irregular sections. In addition, the problems raised by commenters may 
easily be mitigated in several ways: (1) acquisition of multiple leases 
because there is no limitation on the number of leases a party may 
enter into; (2) inclusion of multiple leases in a unitization or 
communitization agreement to allow mineral development on one lease to 
hold more than one lease; and (3) a party desiring a larger lease may 
enter into negotiations with an Indian mineral owner to secure a 
minerals agreement in accordance with the IMDA, under which there is no 
provision limiting lease acreage. Finally, acreage limitations will 
have no retroactive effect, and so will not reduce the acreage of any 
current lease.
    (56) One industry commenter states that the 10-year limitation on 
the term of any minerals lease is insufficient to permit development 
into production, especially for a surface coal mining operation. The 
commenter recommends that the 20-year time period provided in the 
Mineral Leasing Act of 1920, for Federal lands, be used instead. The 
commenter further recommends that the regulations should prevent tribes 
from entering into leases for periods of less than 10 years.
    Response: The Indian Mineral Leasing Act of 1938, that governs 
leasing of tribal lands, provides a statutory 10-year limit (25 U.S.C. 
Sec. 396a) with exceptions for the primary term of lease duration. This 
limitation is statutory and may not be waived by the parties to a 
lease, or altered by the Department by regulations. As an alternative, 
the IMDA

[[Page 35644]]

does not limit the time period for development and therefore, may be 
for any time period negotiated by the parties.
    (57) One commenter believes that a primary lease term should be 
determined by the commodity leased, together with a term maximum, say 
oil and gas leases not to exceed 3 years, solid minerals other than 
coal not to exceed 5 years, coal not to exceed 10 years, and no lease 
to exceed a 20-year maximum unless agreed to between the Indian mineral 
owner and the lessee.
    Response: Although permitted by statute, the primary term of lease 
duration is not specified in final rules as a result of commodity 
considerations. If the specific mineral commodity is regarded as a 
critical factor in the determination of lease duration, then this 
factor may be set forth at the time of advertisement of lease sale, 
negotiated, or the lease provisions may be determined in minerals 
agreements, under the IMDA (25 CFR Part 225), by the Indian mineral 
owner and a prospective lessee.
    (58) One tribal commenter points out that some leases impose a 
maximum ultimate term [of lease duration] of twenty (20) to thirty (30) 
years. Therefore, the commenter recommends that the regulations include 
a provision that would defer to specific lease terms on this point.
    Response: In any instance where specific lease provisions do not 
conflict with statutory authorities, or do not prevent the Department 
from exercising its trust responsibilities, the Indian mineral owners 
are free to negotiate specific lease provisions of their choosing. In 
this particular instance the limitation of lease duration by the 
provisions of lease is entirely appropriate. Therefore, the comment is 
accepted and a change was made to clarify this point.
    (59) One commenter states that commencement clauses (beyond the 
primary lease term) should not be permitted because such clauses permit 
oil companies to do nothing until the last day of the primary term, and 
then begin drilling. Another commenter believes the proposed 
regulations governing the primary-term commencement clauses works 
contrary to the actual intent of a primary term and believes 
Sec. 211.27(b) should be changed. Two commenters recommend the 
inclusion of the commencement clause at Sec. 211.27 and state that a 
duration of extension should be included in this section and one states 
that a continuous drilling clause should be included.
    Response: A review of comments indicate that the possibility that 
this provision would allow lessees to extend leases for an inordinate 
time period is highly unlikely. Most current leases limit the primary 
term of lease duration to 3 to 5 years. An extension of this term 
(duration) while active drilling takes place is an appropriate 
extension of the lease and accords with standard business practice. 
However, to ensure that lessees do not abuse this provision, a 120-day 
limitation has been added in response to concerns of Indian mineral 
owners. A drilling clause without limitation could extend, by mere 
drilling that fails to result in production, the primary term of lease 
duration.
    (60) One commenter states that when read literally, the first 
sentence of Sec. 211.27(a) is inconsistent with the provision for the 
suspension of operations at Sec. 211.44.
    Response: Section 211.44 makes provision for the suspension of 
operations on a lease after the primary term. The paragraph at 
Sec. 211.27(a) speaks to the primary term of lease duration.
    (61) Several commenters state that the regulations should require 
tribal consent to any communitization or unitization agreement whether 
or not such consent is required in the lease. One commenter states that 
the consent of the mineral owner is seldom required for the 
communitization of an Indian lease, and in the commenter's view, is 
unnecessary.
    Response: Every tribal lease executed under the Indian Mineral 
Leasing Act of 1938 contains the following provision or a similar 
provision:

    Unit Operation--The parties hereto agree to subscribe to and 
abide by any agreement for the cooperative or unit development of 
the field or area, affecting the leased lands, or any pool thereof, 
if and when collectively adopted by a majority operating interest 
therein and approved by the Secretary of the Interior, during the 
period of supervision.

This provision grants the consent of the tribe to cooperative 
agreements provided they are reviewed and approved by the Secretary. 
The Department does not intend to attempt to amend this lease provision 
through these regulations. Instead, the Department affirms that Indian 
mineral owners may require consent in any future leases or lease 
amendments. The Department believes that this remains the most 
equitable method of handling this issue. However, in response to tribal 
concerns, a provision has been added at Sec. 211.28 requiring the 
Department to consult with the Indian mineral owner prior to making a 
determination concerning an operating, unitization, or communitization 
agreement or well spacing plan. This will ensure that the Indian 
mineral owner has an opportunity to bring any relevant information 
concerning the proposal to the Secretary's attention prior to any 
cooperative action or well spacing plan being undertaken.
    (62) Two commenters state that an affidavit from the lessee stating 
that a notice was mailed to each mineral owner of record for whom the 
superintendent and/or area director has an address should satisfy the 
requirement that all Indian mineral owners will be notified by the 
lessee at the time a cooperative agreement is submitted to the 
superintendent and/or area director.
    Response: We agree. Section 211.28(d) is changed in response to 
this comment.
    (63) One commenter states that the Secretary shall approve well 
spacing programs, in the context of unit agreements and that it is not 
clear why the regulations single out well spacing in this context for 
Secretarial approval. Another commenter states that the well spacing 
program should be approved by the Secretary and the Indian mineral 
owner.
    Response: The paragraph in Sec. 211.28(h) is rewritten to provide 
that the well spacing program is subject to the approval of the 
authorized officer under the operating rules of the Bureau of Land 
Management. Provision is made at Sec. 211.28(b) for consultation with 
the Indian mineral owner before approval of a well spacing plan.
    (64) One commenter states that provision for lease segregation at 
Sec. 211.28(g) should be included at Sec. 211.28(f) as a specific 
``Pugh Clause.'' Such a clause provides that the effect of production 
constructively obtained through communitization is restricted to lands 
that are communitized and does not extend to other leases or to any 
other leased lands outside the communitized area. Another commenter 
states that Sec. 211.28(g) should be deleted entirely because it 
provides a pugh clause in leases that are already reduced in size when 
issued and that segregation should only occur when the lands are 
partially included in Federal field-wide units. Another commenter 
states that provision for segregation will clearly discourage leasing 
and exploration activity on tribal lands.
    Response: The segregation clause contained in Sec. 211.28(g) is 
intended to ensure diligent development of Indian lands. If portions of 
a lease are not included in a communitization agreement, or within a 
producing or exploratory cooperative unit then there is no reason why 
the excluded lease

[[Page 35645]]

portion should be held by the unit agreement to the disadvantage of the 
Indian mineral owner and perhaps of no particular advantage to the 
lessee, regardless of whether partially within an entire field or 
mining district or only a portion of an entire field or just within a 
mining unit. Further, the segregation provision must be applicable to 
the lease portions both within and excluded from an exploratory or 
productive unit for any mineral commodity and not satisfy only the pugh 
clause requirements with respect to an area communitized for gas and 
oil.
    (65) One commenter states that well spacing is governed by state 
oil and gas regulations and that there is no reason for the Secretary 
to become involved in well spacing issues.
    Response: Each State issues well spacing orders that are commonly, 
but not necessarily, accepted as a spacing standard within the State or 
area in question. However, States have no authority to regulate well 
spacing on Indian land. The Secretary, in consultation with the Indian 
mineral owner, has exclusive authority with respect to the spacing of 
wells, as reflected in Sec. 211.28(h).
    (66) One commenter states that Sec. 211.28 should be expanded to 
permit unitization or communitization of hard rock mineral leases and 
expresses concern about efficiency of operation in exploiting an ore 
body in two or more sections of land.
    Response: We agree. Although Sec. 211.28 is not greatly changed 
from proposed rules, provision is made for the commenter's concern by 
stating in final rules that a cooperative unit or other development 
plan means an agreement to develop a specifically designated area 
without regard to ownership of the land included in the agreement.
    (67) Several commenters ask that various time deadlines be imposed 
on the superintendent or area director to review and approve or reject 
cooperative agreements. One commenter requests that agreements 
submitted after the 90 day deadline be reviewed in the discretion of 
the superintendent or area director.
    Response: Review of these requests for a time limitation for 
Departmental review of proposed cooperative agreements, indicates that 
the issues raised in individual agreements and the problems posed in 
individual cases vary so widely that it was not advisable to specify a 
set time frame for review. However, the 90 day time period specified in 
the regulations in effect imposes such a limitation. Cooperative 
agreements submitted after the 90 day deadline will be considered by 
the Department, but the lessee bears the risk that leases may expire 
prior to the Department being able to take action to approve the 
agreement.
    (68) One commenter states that the existing lock-box arrangement 
for receipt of monies is working well and another suggests that it be 
stated in Sec. 211.40 that current lock-box arrangements are not to be 
affected.
    Response: Present lock-box arrangements for the receipt of monies 
are not affected by Sec. 211.40. The final regulations merely provide 
for the continuation of existing and standard procedures for the 
receipt and handling of bonus, rent, and royalty payments.
    (69) One commenter suggests that proposed Sec. 211.40 be modified 
to allow lease provisions and Federal regulations to be superseded by 
tribal regulation and another states that the regulation should 
expressly authorize the Secretary to designate the tribe or the tribe's 
fiscal agent as the payee.
    Response: Section 211.40 is rewritten to clarify that unless 
otherwise specifically provided for in a lease all payments after 
production has been established shall be made to the MMS or such other 
party as may be designated, and that prior to production all bonus and 
rental payments shall be made to the superintendent or area director. 
Present payment arrangements may be modified by tribal notification to 
the Minerals Management Service prior to the modification. All payments 
after production has been established are regulated in 30 CFR Chapter 
II, Subchapters A and C. Supersedence of Federal regulations is 
addressed in final rules at Sec. 211.29.
    (70) One commenter points out that proposed Sec. 211.40 is 
inconsistent in identifying where payments should be made and states 
that payments should be made to the BIA and MMS unless otherwise 
provided for in lease terms.
    Response: We agree. Section 211.40 is rewritten to clarify where 
and when all payments are to be made. Also, after production has been 
established the payee may modify the manner of payment in accordance 
with 30 CFR Chapter II, Subchapters A and C.
    (71) One tribal commenter requests that the minimum rental be 
increased from $1.25 per acre to $10.00 per acre with a consumer price 
index adjustment clause. Two industry commenters object that in the 
proposed regulations rentals are not credited against production 
royalties.
    Response: The minimum rental specified in final regulations is 
$2.00 per acre, an increase of $0.75 per acre from the current rate. 
This increases the rental to that presently being imposed for Federal 
lands leased for oil and gas, which is a standard rate throughout the 
industry. It is clearly stated in final regulations that the rental 
will be controlled by the provisions negotiated in a lease. Any Indian 
mineral owner who wishes to make provision for higher rental and/or 
adjustments as a hedge against inflation in a lease is free to do so 
for leases or lease provisions which are negotiated. In such cases, 
whether or not the rentals are credited against production royalty is 
entirely up to the parties. Where a lease is silent on this issue, the 
rentals must be paid in addition to royalties. Therefore, further 
changes are not made in Sec. 211.41(a).
    (72) One tribal commenter states that the minimum royalty be set at 
20 percent and others do not object to the 16\2/3\ percent minimum 
royalty. Several industry commenters state that the proposed 16\2/3\ 
percent minimum royalty is too high and may place Indian minerals at a 
competitive disadvantage.
    Response: The 16\2/3\ percent royalty proposed in the regulations 
is a minimum royalty that may be raised upon agreement of the parties 
to a lease, or which may be reduced upon agreement of the parties and 
the findings of the Department that a lower rate is in the best 
interest of the Indian mineral owner. Although industry has objected to 
the increased rates this change merely brings the rates in line with 
general practice on Indian lands. For over twenty years the standard 
royalty rate for all leases on Indian lands has been 16\2/3\ percent or 
higher. The change in the regulations will not cause any significant 
change in leasing procedures on Indian lands. It will not retroactively 
affect any current leases, and will not require applicants for Indian 
leases to agree to this royalty rate against their will. The minimum 
royalty simply requires the parties to submit a good reason why a lower 
royalty rate is necessary before it may be approved by the Department. 
This helps to ensure that the Secretary exercises his responsibility to 
protect trust resources.
    (73) Several tribes comment that the regulations should contain 
provisions concerning valuation of production and other accounting 
issues. They are concerned that reference to the MMS regulations in 30 
CFR Chapter II, Subchapters A and C, will not be sufficient to clarify 
that the lease provisions concerning valuation issues shall govern in 
the event that lease provisions are inconsistent with MMS's 
regulations.
    Response: The valuation provisions contained in current 25 CFR 
Sec. 211.13 were included in the regulations prior to

[[Page 35646]]

the creation of the MMS. It is appropriate, now that authority for 
valuation issues has been given to the MMS, that the BIA leasing 
regulations defer to the much more detailed treatment of this subject 
in the MMS regulations. However, in response to tribal concerns a 
sentence is added to final Sec. 211.41(c) to clarify that the specific 
provisions of a lease on this issue shall govern where those provisions 
are inconsistent with the MMS regulations.
    (74) One tribe comments that Indian mineral owners should be 
allowed to use gas which is in excess of the lessees needs for any 
purpose rather than be limited to use of excess gas for schools or 
other tribal buildings. Two industry commenters object to this 
provision and ask that it be removed entirely or that the use of excess 
gas for tribal buildings be treated as a taking of royalty-in-kind.
    Response: The provision in the current 25 CFR Sec. 211.13(b), which 
is carried over to final rules at 25 CFR Sec. 211.41(d), provides for a 
reasonable and limited use of excess gas by the lessor. This provision 
has been included in the regulations for at least 30 years. In 
addition, many current leases contain a specific provision allowing 
such use, and all current leases contain a provision adopting 
regulations in effect at the time of the lease. This means that 
virtually all current tribal leases are subject to this provision. 
Also, in the many years that this provision has been either included in 
the leases specifically or by reference to the regulations, we know of 
no instance where the right to use excess gas has been abused. 
Therefore this section is amended to incorporate the language in 
Sec. 211.13(b) of the current regulations as being clearer than the 
proposed language. Thus, no change is effected in final rules.
    (75) One commenter states that both the annual rental and the 
expenditure for development on leases other than oil and gas, and 
geothermal resources should be not less than $10.00 per acre and should 
be escalated annually based on the CPI [Consumer Price Index] for all 
urban consumers.
    Response: In Sec. 211.14 formerly in place the minimum annual 
rental is fixed at $1.00 per acre and the minimum annual expenditure at 
$10.00 per acre unless otherwise authorized by the Secretary. These 
minimum payments and expenditures have not been changed in many years 
and thus do not reflect the effects of inflation. In final rules at 
Sec. 211.42 the minimum annual rental is fixed at $2.00 per acre and 
the minimum annual expenditure at $20.00 per acre, but with no 
provision for the expected future decline in purchasing power of money. 
It is not likely that a satisfactory index or method can be identified. 
In those situations where escalation of payments and expenditures is an 
issue, the prospective lessors may, however include indexing in 
minerals agreements under the IMDA (25 CFR Part 225).
    (76) One tribal commenter states that the value of production 
removed and sold from the lease should be established FOB at the mine 
rather than at the nearest shipping point as proposed at Sec. 211.43. 
Another commenter states that the proposed rule would affect their 
sales (but did not elaborate) and urged deletion of specific 
commodities from this section.
    Response: The wording of 25 CFR Sec. 211.43(a) stating the 10 
percent minimum royalty ``at the nearest shipping point'' is the same 
as that in regulations formerly in place at Sec. 211.15. In those 
instances where the point of valuation is an issue or that Sec. 211.43 
is not appropriate, as written, to a specific mineral commodity the 
Indian mineral owner may wish to negotiate the royalty provisions or 
conclude a minerals agreement under the IMDA (25 CFR Part 225). Section 
211.43(a) is essentially unchanged in the final rules.
    (77) Two commenters indicate that certain royalty rates and royalty 
provisions at Sec. 211.43 for minerals other than oil and gas are not 
sufficient and state that: (1) the royalty rate for byproducts from 
geothermal resources should not be less than 10 percent of the value of 
the byproducts; (2) a lower royalty rate should only be granted with 
the consent of the Indian mineral owner; (3) a lower royalty rate may 
be allowed, but not to exceed 5 years, after which the royalty rate 
should be adjusted upward; and (4) that this section should be revised 
to take into account potential unconventional means for developing coal 
resources, e.g., where a processed product is made out of coal, the 
royalty rate should be 12\1/2\ percent of the processed product, not 
12\1/2\ percent of the value of what is removed.
    Response: Special lease conditions and provisions for certain 
mineral commodities, and special and/or new technologies are best 
negotiated under the IMDA (25 CFR Part 225). Under Parts 211 and 212 a 
lower royalty rate may be approved only if it is in the best interest 
of the Indian mineral owner. This determination will require a higher 
level of analysis to assure that the tribe is receiving adequate 
consideration. Thus, a minimum royalty rate should provide no barrier 
to mineral development. Tribes and industry are required to justify 
proposed lower royalty rates for leases on a case-by-case basis.
    (78) One commenter states that as noted in the proposed rules (56 
FR 58736) the BIA for the first time is proposing minimum royalty rates 
for minerals other than oil and gas with no explanation of the reasons 
for imposing these minimum royalty rates and urges the BIA to withdraw 
the minimum royalty provisions.
    Response: In current regulations at Sec. 211.15 minimum royalty 
rates for minerals other than oil and gas are set forth, and have been 
contained in regulations since 1957. The preamble of the proposed 
regulations (56 FR 58736), stating that a new section would provide, 
for the first time, minimum royalty rates for minerals other than oil 
and gas, was in error.
    (79) One commenter states that the proposed rules (Sec. 211.43(b)) 
allow a lower royalty rate if it is determined to be in the best 
interest of the Indian mineral owner but that no valid criteria are 
established for implementing this term [in the best interest of the 
Indian mineral owner]. The commenter states further that the lessee has 
no assurance that a lower rate can be obtained in the event that he 
proves that a minable deposit exists that cannot profitably be mined at 
the rate set by regulation and that this could have a negative effect 
on mineral development under Indian leases.
    Response: The criteria implementing the best interest determination 
are set forth at proposed Sec. 211.3 (56 FR 58738). Minor change in 
Sec. 211.3 is made in the final rules to require the Secretary to 
consider any relevant factor in the best interest determination. 
Special assurances that lower royalty rates can be obtained by a lessor 
or lessee, cast in a scenario of expected or possible future events, 
are best sought by negotiation of a minerals agreement under the IMDA 
(25 CFR Part 225).
    (80) Some industry commenters object to the minimum royalty rates 
in proposed Sec. 211.43 as being too high and one commenter states that 
5 percent or less of net smelter returns has long been the royalty 
standard for base and precious metals under leases of fee simple 
mineral land and suggests that the regulations should allow minimum 
royalties more in line with market rates or should establish a royalty 
formula which will accommodate variances in mineral quality and 
quantity, mining costs, recovery rates, and the like.
    Response: In the event that minimum royalty rates, as set forth in 
the

[[Page 35647]]

proposed and/or final Sec. 211.43, are judged to be too high by the 
prospective parties to a minerals lease, the parties should consider 
negotiating an IMDA minerals agreement. Similarly, if risk sharing or 
royalty adjustment provisions in lease or minerals agreement 
instruments are contemplated, then the parties should consider 
negotiation rather than competitive bidding. In the final regulations, 
the minimum royalties for the competitive acquisition of leases from 
Indian mineral owners are brought into line with those prevailing on 
Federal lands (not fee lands). In view of the negotiation alternatives, 
available under both the Indian Mineral Leasing Act of 1938 and the 
IMDA, no further changes to Sec. 211.43 are made.
    (81) One commenter is of the opinion that proposed Sec. 211.44 
requires tribal consent to suspension of operations whereas several 
other commenters are concerned that suspension of operations for 
remedial purposes by the Secretary (Sec. 211.44(a)) does not require 
the consent of the Indian mineral owner; and another commenter states 
that the proposed rule would allow an operator to suspend operations 
without the consent of the Indian mineral owner and should not be 
permitted.
    Response: The suspension of operations provision at Sec. 211.44 is 
applicable only to leases after expiration of the primary term of lease 
duration and in no way affects the prerogatives of the Indian mineral 
owner during the primary term. Section 211.44(a) provides the Secretary 
the necessary latitude to act, under such provisions and conditions as 
may be required, in the discharge of the trust responsibility in those 
instances where all else has failed and remedial measures are required, 
usually at once, for continued production, protection of the resource, 
or protection of the environment. Provision is made at Sec. 211.44(b), 
for mineral properties capable of production after expiration of the 
primary term of lease duration, such that suspension of operations 
requires the consent of the Indian mineral owner.
    (82) One commenter states that suspension of operations should: (1) 
never exceed the maximum lease term; (2) require the consent of the 
Indian mineral owner if the suspension is longer than 90 days; and (3) 
result in lease cancellation if an application for suspension of 
operations is denied and the operator [be held] responsible for all 
abandonment requirements. Another commenter states that: (1) a time 
period for accomplishment of remedial operations is absolutely 
necessary; (2) the regulations should expressly define the conditions 
under which suspension of operations is necessary; and (3) if 
suspension of operations is necessary, then the Department's current 
policy requiring reinstatement of production within 30 days should 
apply.
    Response: Numerous provisions and conditions could be added to 
Sec. 211.44, but are best dealt with on a case-by-case basis by the 
Secretary.
    (83) One commenter states that Sec. 211.44(b) has to do with 
suspension of operations for non-physical reasons whereas with respect 
to non-economic or non-marketing reasons, no tribal consent is required 
for suspension of operations after expiration of the primary term and 
there is no statutory distinction that justifies requiring tribal 
consent in one case but not the other.
    Response: We see no way of readily or reasonably separating the 
subtle cause and effect of physical versus non-physical reasons for 
situations leading to a suspension of operations or production. In the 
event remedial measures are required in the proper and timely discharge 
of the trust responsibility and in the best interest of the Indian 
mineral owner, the Secretary has no choice but to take requisite 
remedial measures. Provision is made at Sec. 211.44(b) for the parties 
to the lease to make application for permission to suspend operations 
on a lease capable of production after expiration of the primary term 
of lease duration.
    (84) One commenter recommends that the extended term be referred to 
as either ``after expiration of the primary term of the lease'' or as 
``in the extended term of the lease'' and not both.
    Response: We agree. Although both phrases mean the same thing, 
meaning that portion of the duration of the lease, when the lease is 
held by production beyond the primary term of the lease. The primary 
lease term cannot exceed 10 years. Section 211.44 is changed so that 
only one phrase is used.
    (85) Two commenters state that they do not understand why in 
proposed rules that the suspension of operations necessary for remedial 
operations must be approved by the Assistant Secretary and that this 
matter is best left to the authority of the agency office.
    Response: The final regulations are changed to clarify that the 
suspension of operations is at the discretion of the Secretary, 
although the suspension action will likely be issued by the authorized 
officer for Sec. 211.44(a) and for Sec. 211.44(b) by the area director 
or superintendent, under authority delegated by the Secretary.
    (86) One commenter states that proposed Sec. 211.44(a) makes 
reference to minimum royalty requirements but finds no minimum royalty 
requirement in the proposed regulations.
    Response: The final regulations are clarified to provide that 
suspension of operations or production after expiration of the primary 
term of lease duration shall not relieve the lessee from liability for 
the payment of rental and other payments as required by lease 
provisions.
    (87) One commenter states that proposed Sec. 211.46 should make 
clear to whom the books and records will be made available.
    Response: Section 211.46 is modified to provide that lessees shall 
allow the Indian mineral owner's representatives, or any authorized 
representative of the Secretary to enter all parts of the leased 
premises for the purposes of inspection and audit, that lessees shall 
keep a full and correct account of all operations as required by the 
lease and applicable regulations, and that books and records shall be 
made available during regular business hours.
    (88) One commenter states that clarification should be added under 
Sec. 211.46 to indicate that under the FOGRMA of 1982 a lessee is 
required only to maintain records of this type for 6 years after the 
records are generated unless the Secretary notifies the record holder 
that he has initiated an audit or investigation involving such records 
and that such records must be maintained for a longer period.
    Response: Record keeping requirements are set forth in the 
operating regulations of BLM, MMS, and OSM which are included by 
reference at Secs. 211.4, 211.5, and 211.6.
    (89) One tribal commenter signifies that proposed Sec. 211.47 be 
expanded to include protection of all Indian lands from drainage, 
whether leased or not. Another tribal commenter states that the burden 
falls on the Tribe to prove that additional development of leased lands 
is required by the prudent operator standard. One industry commenter 
states that no compensatory royalties should be assessed if ``the 
superintendent has denied approval of a cooperative agreement for any 
reason.''
    Response: These regulations only concern the leasing of tribal 
lands, and the requirements which are properly placed on lessees. These 
regulations do not properly include provisions for dealing with 
drainage from unleased lands. However, the standard that will be 
applied to lessees as concerns the leased land is clear. Lessees are 
required, among other requirements to exercise diligence in mining, 
drilling and operating wells, protect the lease from drainage. This 
standard imposes an affirmative duty on the lessee. No

[[Page 35648]]

changes in response to these tribal comments were made. Also, no 
changes were made in response to the industry comment seeking relief 
from the compensatory royalty provision in Sec. 211.47(b). A proposed 
cooperative agreement may properly be rejected by the Department when 
such proposed agreement fails to protect the lease. If an inappropriate 
cooperative agreement has been rejected by the Department, the 
rejection should not serve to relieve the lessee from the lessee's 
obligations under the lease.
    (90) One tribal commenter requests that the 200 feet setback 
requirement for well pads and operations be increased to a minimum of 
500 feet.
    Response: The proposed section merely carries forward the 
limitation contained in current Sec. 211.19. Because the current 
regulation provides a minimum setback requirement, a tribe may 
negotiate for a greater setback whenever it deems this to be necessary. 
Also a greater setback may be requested by the authorized officer prior 
to issuance of permission to drill. For these reasons no change is made 
at Sec. 211.47(f) in final regulations.
    (91) One commenter advises that proposed Sec. 211.47(j) be revised 
to provide that the lessee pay the surface owner or tenant all damages, 
including damages to crops, buildings, other improvements of the 
surface owner occasioned by the lessee's operations as determined by 
the Secretary with the consent of the Indian mineral owner.
    Response: No change is made in Sec. 211.47 in the final regulations 
because the suggested change would create rights that would not be 
authorized in law.
    (92) One industry commenter states that proposed Sec. 211.47(i) 
gives the superintendent sole authority to establish the payment due 
the Indian tribe or allottee for surface damages and expresses the 
opinion that this should be a matter of negotiation, or based on an 
independent appraisal with at most, approval of the superintendent.
    Response: Authority for the determination of payment of damages to 
the surface owner is retained by the Secretary, who may employ a BIA 
appraiser in the decision making process, in this instance the 
superintendent, for those situations in which the mineral and surface 
estates have been separated and/or surface damages are at issue.
    (93) One industry commenter objects to the provision that written 
permission must be secured from the Secretary before any operations are 
started on the leased premises.
    Response: The applicable operating and reclamation regulations 
administered by the Bureau of Land Management and the Office of Surface 
Mining Reclamation and Enforcement require prior approval for drilling 
or mining operations. Therefore, the only change made in this paragraph 
is to the authorities cited to include the Office of Surface Mining 
Reclamation and Enforcement. The intent of this paragraph is to alert 
the mineral industry that a mineral lease issued by an Indian mineral 
owner, still requires the approval of the Secretary. After the lease is 
approved, lessees are still required to secure written permission 
(written approval) from the appropriate agency or agencies before 
beginning any operations on the lease.
    (94) A tribal commenter feels that Sec. 211.48 should be amended to 
include the need for written permission of the Indian mineral owner 
before operations are started and that after permission is secured, 
operation must also be in accordance with all operating rules and 
regulations promulgated by the Secretary or the Indian mineral owner.
    Response: Indian mineral owners are always consulted prior to final 
approval of any activity involving Indian mineral lands, if it is an 
action or activity that requires approval or consultation with the 
Indian mineral owner.
    (95) Two industry commenters object to Sec. 211.49 stating that the 
broad and vague language could be used to restrict or preclude a lessee 
from developing a lease. Both commenters suggest that any necessary 
restrictions be spelled out in the lease.
    Response: This section carries into final rules Sec. 211.21(a) of 
regulations currently in place. This provision has been contained in 
the Department's regulations for many years. The authority stated in 
this section has rarely been used, and to our knowledge, has never been 
used to preclude development of a lease. The section is necessary to 
ensure that the Secretary has the ability to fulfill the fiduciary duty 
to protect the trust resource.
    (96) One commenter objects that proposed Sec. 211.51 does not 
explicitly address the option of surrender of an operating oil and gas 
property to the tribe, but rather appears to be confined to lease 
surrenders after which all production ceases.
    Response: There is no barrier in either proposed or final 
regulations to a request to surrender an operating property to an 
Indian mineral owner, subject to approval of the Secretary. There is a 
requirement in proposed and final regulations that the lessee discharge 
all lease obligations upon surrender, as required.
    (97) Several commenters state that the requirement in proposed 
Sec. 211.51(d) that the original lease documents be delivered to the 
Department with the request to surrender is not supported by any reason 
and imposes an additional administrative burden without providing any 
benefit.
    Response: The requirement that the original lease documents be 
surrendered is intended, to the extent possible, to prevent any 
confusion as to the extent and location of lands that are leased. 
Additionally, surrender will prevent fraudulent assignments. This 
requirement has been in the Department's regulations for several 
decades (see Sec. 211.27(b)(6)). Also, it is standard industry practice 
to require surrender of the documents. Because it is standard industry 
practice the requirement does not impose an additional burden on 
lessees.
    (98) One tribal commenter questions whether this section is 
sufficient to ensure that all reclamation be performed in an 
environmentally sound manner.
    Response: Section 211.51 requires that the leased land be left in 
an environmentally sound condition and that all environmental work, 
such as reclamation, be done. Changes are made in final regulations to 
paragraph (h) to avoid any possible conflict with this requirement.
    (99) Two industry commenters seek qualification to the paragraph in 
this section requiring the lessee to pay for all drainage which occurs 
prior to acceptance of surrender of the lease. One commenter states 
that it is unreasonable to permit liability for compensatory royalty to 
continue to accrue after filing an application to surrender. One 
commenter asks that a provision be added to excuse the lessee from 
payment of compensatory royalties for drainage if a cooperative 
agreement has been denied ``for any reason'' by the Department.
    Response: The provisions contained in proposed Sec. 211.51(g) are 
an updated version of the current requirement found in 
Sec. 211.27(b)(10). An addition to the proposed regulations is an 
explicit reference to compensatory royalties for drainage. Neither of 
the proposed changes are included in final regulations because they 
could permit unacceptable actions on the part of the lessee. First, it 
may be necessary and reasonable for the Department to assess 
compensatory royalties for waste or drainage, if lack of diligence or 
poor workmanship on the lease continues to cause the lessor damage 
after the date of surrender. For instance, if a lessee has

[[Page 35649]]

missed the opportunity to enter into a cooperative agreement, and then 
seeks immediately to surrender the lease, the lessor may not be able to 
prevent drainage immediately. The lessee may not avoid liability for 
the drainage by attempting to surrender the lease. Similarly, the fact 
that a lessee at one time submitted a cooperative agreement for 
approval will not relieve the lessee from responsibilities under the 
regulations and lease provisions. The authority reserved to the 
Secretary in final regulations is to ``impose reasonable and equitable 
terms and conditions to protect the interests of the Indian mineral 
owner.'' If however, the lessee believes that provisions imposed are 
arbitrary or capricious, then the lessee may appeal under 25 CFR Part 
2. We feel that these procedures provide adequate protection to 
lessees.
    (100) Three industry commenters object to the increase in filing 
fees in proposed Sec. 211.52, by stating that the increase is 
unjustified and imposes an additional burden on a struggling industry.
    Response: For over four decades the BIA did not raise filing fees. 
The increase from $10.00 to $75.00 reflects inflation that has occurred 
during four decades and is in keeping with the current filing fees of 
the Bureau of Land Management, which increased the filing fees to 
$75.00 on December 22, 1987. However, surrender of leases no longer 
must be accompanied by a filing fee, because most standard mineral 
leases specify a surrender fee.
    (101) Both tribes and industry comment that assignments of 
stratigraphic horizons or intervals should be permitted. Tribes and 
industry indicate that this practice is common within the industry and 
would provide economic benefits to the Indian mineral owner.
    Response: In final regulations the provisions in proposed rules at 
Sec. 211.53(a) that prohibit such assignments are removed. Assignment 
of stratigraphic thicknesses or intervals is permitted.
    (102) One commenter states that Sec. 211.53 should be revised so 
that the broad definition of ``assignment'' that is implied in the 
Sec. 211.26(b), formerly in place, is retained.
    Response: Proposed Sec. 211.53 is rewritten to be more nearly 
compatible with Sec. 211.26 formerly in place and retain the existing 
and widely understood concept of an assignment in current use with 
respect to Indian mineral leases.
    (103) Three commenters state that overrides and production payments 
may render prudent economic development, or otherwise economic 
operations and proposals uneconomic or prematurely uneconomic. One 
commenter recommends that both the Secretary and the Indian mineral 
owner approve overrides, production payments, and operating agreements; 
one commenter recommends that overrides, production payments, and 
operating agreements require approval; one commenter states that at a 
minimum overriding royalties and operating agreements should be 
forwarded to the Secretary for review.
    Response: The creation of overrides, production payments, and use 
of operating agreements have been standard business practices in the 
minerals industry for many years and often serve as the necessary 
economic incentive for the development of, and subsequent production 
from, mineral properties, especially for oil and gas. Commenters 
concerns are valid that under some conditions (e.g. a sudden decline in 
value of the mineral product) mineral properties can be burdened by 
overrides and production payments. In response to the concerns of 
commenters, provision is made in final regulation that the Indian 
mineral owner shall be notified of proposed assignments and agreements 
creating overriding royalties or payments out of production, or 
agreements designating operators shall be filed with the 
superintendent. In those instances where the overrides, production 
payments, and operating agreements are of concern to the Indian mineral 
owner during the leasing process, the prospective lessors and lessees 
may wish to arrive at a minerals agreement under the IMDA (25 CFR Part 
225).
    (104) Four tribal commenters state that the approval or consent of 
the Indian mineral owner should be required for all assignments; one, 
if required by lease or by tribal law; another, if any instrument or 
agreement either makes a present conveyance of an interest in the 
minerals or obligates one party to convey an interest in the minerals 
to another party upon performance of some condition; a third, 
regardless of whether the right of approval is retained in the lease 
document; and a fourth, would require approval of the Indian mineral 
owner for all actions regardless of whether the lease requires such 
approval. One industry commenter states that the language of proposed 
Sec. 211.53 is appropriate but not consistent with the various tribal 
ordinances applicable to oil and gas leases; another perceives that 
proposed Sec. 211.53 is a restatement of current regulatory practice 
and that new regulations should place no greater restriction on the 
lessee than currently exists.
    Response: Section 211.53 is rewritten in language more nearly 
resembling 25 CFR Part 211 and 212 formerly in place and is therefore 
more familiar to both Indian mineral owners and prospective lessees. 
There is no consensus or general agreement among Indian mineral owners 
and/or industry upon the conditions of approval of assignments and 
related agreements. Therefore, final regulations provide for a broad 
right of assignment of an approved lease for Indian owned minerals, so 
long as there is no change in the material provisions of the lease. 
Final regulations are applicable to existing and future leases issued 
under the Act of May 11, 1938 (25 U.S.C. 396a) and the Act of March 3, 
1909 (25 U.S.C. 396). Indian mineral owners that wish to require 
consent may, under the IMDA, or by negotiated, individual (not 
necessarily standard) lease provisions under the Act of May 11, 1938; 
either of which allow the Indian mineral owner to specify the 
provisions under which owner consent and/or approval would be required 
for lease assignments, overriding royalties, and operating agreements.
    (105) One industry commenter objects to proposed lease cancellation 
and notice of non-compliance provisions (Sec. 211.54) on the grounds 
these provisions would allow the Bureau of Indian Affairs (BIA), to 
``assume responsibility for enforcement not only of the provisions of 
the IMDA, but of other laws and regulations as well.'' The commenter 
objects to the idea that the BIA might interfere with the authorities 
which SMCRA vests with the Secretary, who acts through the Office of 
Surface Mining Reclamation and Enforcement (OSM).
    Response: Nothing in this section is intended to interfere with the 
authority of OSM to administer SMCRA. Section 211.54 is a continuation 
of the cancellation provision in current 25 CFR Sec. 211.27(a) but 
includes more due process procedures to protect lessees, and provides 
the Department with the new option of issuing a notice of non-
compliance rather than threatening lease cancellation for any and all 
offenses, no matter how minor. This section applies to leases issued 
under the Act of May 11, 1938 (25 U.S.C. 396a). These regulations 
neither govern IMDA agreements nor purport to govern the type of 
activities governed by SMCRA. However, it should be clearly understood 
that violations of SMCRA can also be violations of the lease which, in 
turn, could lead to cancellation of the lease. Only the BIA,

[[Page 35650]]

pursuant to these regulations, has authority to cancel the lease 
itself. Therefore, Sec. 211.54 does not provide the BIA with authority 
that overlaps over the authority of OSM.
    (106) One tribal commenter asks that a procedure be added for 
tribes to report any non-compliance which they may observe.
    Response: Because of the close working relationship between the 
tribes and the BIA agency and area offices, it has been determined that 
a formal regulatory procedure for tribes to share lease compliance 
information with the BIA is not necessary. Information of any type and 
in any format from tribes concerning lease compliance by lessees is 
always welcomed by the Department.
    (107) One tribal commenter asks that tribes be granted a larger 
independent right to cancel a lease for non-compliance.
    Response: The request for tribal authority to cancel leases is not 
included in final regulations. The mineral lease approved by the 
Secretary concerns lands which the Department has a statutory 
obligation to protect. The Secretary will review any and all 
information an Indian mineral owner may have concerning whether or not 
a lease should be cancelled but the final decision to cancel must 
remain with the Secretary: See Yavapai-Prescott Indian Tribe v. Watt, 
707 F.2d 1072 (9th Cir. 1983), cert. denied 464 U.S. 1017.
    (108) One tribal commenter asks that a time limit be imposed on the 
Secretary to issue a decision with regard to a lease cancellation.
    Response: The request for a time limit for issuance of a decision 
on cancellation of a lease is not included in final regulations. The 
factors to be considered and the unique nature of most lease 
cancellation actions makes a time deadline for action by the Secretary 
inappropriate.
    (109) One tribal commenter suggests that proposed Sec. 211.54(a) be 
expanded to include the enabling of the noncompliance and cancellation 
processes in the event the Secretary determines that a lessee or 
permittee has failed to comply with applicable tribal laws and 
regulations, and mining or reclamation plans.
    Response: Section 211.54(a) is rewritten in the interest of 
simplification and to clarify that Sec. 211.54 is enabled in the event 
of noncompliance with lease provisions, these regulations, or other 
applicable rules and regulations. Although BLM and OSM are primarily 
responsible under those agencies' regulations for enforcement of mining 
and reclamation plans, under some circumstances it may be appropriate 
for BIA officials to issue notices of non-compliance for violations of 
such plans. Tribal administrative and judicial remedies will often be 
the appropriate means for redressing violations of tribal laws and 
regulations. But the revised language of this regulation leaves open 
the possibility of enforcement under this Part when an alleged 
violation raises mixed issues of Federal and tribal law.
    (110) One commenter suggests that service by certified mail should 
be deemed to occur seven (7) rather than five (5) days after the date 
of mailing (in both Secs. 211.54 and 211.55) to be consistent with MMS 
regulations regarding constructive service of official correspondence.
    Response: In the interest of consistency the date of service is 
deemed to be five (5) working days after the date of mailing in final 
regulations.
    (111) One commenter states that in proposed Sec. 211.54 there is no 
provision for a hearing before the Secretary prior to lease 
cancellation and that denial of the right to a hearing is the denial of 
the right to due process that exists in present regulations and that 
this right should be restored.
    Response: Section 211.54 is rewritten in final regulations to 
clarify noncompliance and cancellation procedures. Final regulations 
provide lessees and permittees adequate time for response to notices of 
noncompliance, orders of cessation, and notices of proposed 
cancellation or of cancellation. Hearings may be requested in the 
responses of lessees and permittees to notices and orders and the 
rights of lessees and permittees under 25 CFR Part 2 (Sec. 211.58) are 
not abridged. The suggested provisions are not included at Sec. 211.54.
    (112) One commenter states that in proposed Sec. 211.54 reference 
is made to an ``order of cessation'' and it is not clear what an order 
of cessation is or how it differs from a notice of noncompliance. 
Another commenter states that BIA does not define a ``cessation 
order.''
    Response: Section 211.54 is rewritten in final regulations to 
clarify noncompliance and cancellation procedures.
    (113) Several industry commenters object to proposed Sec. 211.55 
and request that it be removed for a number of reasons. First, several 
commenters challenge the authority of the Department to impose civil 
penalties. Second, the $1,000.00 per day limit is challenged as unduly 
high. Finally, even though the commenters maintain that the Secretary 
lacks authority to impose civil penalties, the commenters object to the 
civil penalties as duplicative of other civil penalties which the 
Secretary has authority to impose.
    Response: The proposed civil penalties provision is not new. The 
current regulations contain Sec. 211.22 that provides for a $500.00 per 
day civil penalty for violations of terms of the lease, regulations or 
orders. Section 211.22 has been contained in the leasing regulations 
for unallotted lands for many years. The proposed revisions to this 
section do two things. First, the dollar limit for a violation is 
updated to accord with current penalty limits contained in other 
Departmental regulations (see 43 CFR Sec. 3162 and Sec. 3163.2). In 
fact this dollar figure is conservative when compared to the $5,000.00 
per violation per day limit contained in the Bureau of Land 
Management's regulations. The second change provides lessees and 
permittees with additional due process procedures to ensure that no 
penalty is unfairly imposed. The Department believes that the broad 
authority granted to the President by Congress to regulate Indian 
affairs (see 25 U.S.C. Secs. 2 and 9), the longstanding administrative 
interpretation of these statutes as granting authority to assess 
penalties, and the unique responsibilities imposed on the Secretary to 
protect Indian trust resources support this section. However, in 
response to industry comments a provision has been added to this 
section in final rules to clarify that no penalty may be assessed under 
this section for a violation over which the BLM, OSM, or MMS have 
either statutory or regulatory authority to assess a penalty. This will 
ensure that this section does not duplicate any other penalty provision 
and that no duplicative penalties will be issued.
    (114) Five industry commenters express concern that the language in 
proposed Sec. 211.56 is not adequate to protect the rights of the data 
owner and more specifically that there are no requirements on the part 
of the Indian mineral owner to protect the confidentiality of the data 
provided to them. Three Indian commenters felt that the proposed 
regulation is too weak, because it does not provide specifically for 
submittal of collected data to the Indian mineral owner.
    Response: The concern regarding the lack of confidentiality 
requirements on the part of the Indian mineral owner is best considered 
at the time of negotiation between the Indian mineral owner and the 
proponent of the permit. Therefore, no specific change is made in final 
regulation with respect to this item. Section 211.56 is rewritten to

[[Page 35651]]

reflect the major concerns of the commenters and provides that copies 
of collected data shall be forwarded to the Indian mineral owner, 
unless otherwise provided in the permit.
    (115) One industry commenter expresses concern that seismic option 
agreements are not covered in proposed regulation.
    Response: The comment regarding seismic option agreements is not 
considered because it is deemed that such agreements are best concluded 
as minerals agreements under the provisions of the IMDA (25 CFR Part 
225).
    (116) One of the Indian commenters requests that the regulations 
provide for the issuance of geological and geophysical permits by the 
Indian mineral owner to university students. The same commenter 
proposes that all collected data be submitted to the Indian mineral 
owner, who in turn will provide it to the Secretary and also recommends 
that the phrase that allows a permittee to take samples for assay and 
experimental purposes be deleted.
    Response: The recommendation that issuance of geological and 
geophysical permits to universities be addressed in final regulations 
is not included in final regulations because such requests should be 
considered on a case-by-case basis by the Indian mineral owner, who has 
the option of requesting assistance from the Secretary if consideration 
of such permits pose problems in approval. The related recommendation 
for deletion from Sec. 211.56(b) of the provision for the taking of 
assay samples for experimental purposes is also not included because, 
at times, the taking of experimental assay samples can be of benefit to 
the Indian mineral owner.
    (117) One industry commenter recommends that ``Indian owner'' in 
Sec. 211.56(a) be changed to ``Indian mineral owner'' in order to 
distinguish between the Indian surface owner and the Indian mineral 
owner. The same commenter recommends that the word ``shall'' rather 
than ``may'' (Sec. 211.56(c)) be used in regard to the Secretary's 
responsibility to maintain for a reasonable period of time the 
confidentiality of data submitted.
    Response: The words ``Indian owner'' are changed to ``Indian 
mineral owner'' to aid in distinction between the Indian mineral owner 
and the Indian surface owner. Language in this section is unchanged in 
that the Secretary ``may'' release information after six (6) years, 
with the consent of the Indian mineral owner if no time period for 
release is prescribed in the permit. The word ``may'' is retained in 
the final regulations because the six years is a minimum time period 
for information retention. It may not be in the best interest of the 
Indian mineral owner to release information after the prescribed 
retention period.
    (118) One commenter states that the definition of Indian lands in 
Sec. 212.3 should be limited to lands owned by any individual Indian or 
Alaska native. Otherwise there is no substantive provision in the 
regulations in Part 212 which limits their applicability to allotted 
lands.
    Response: The Secretary does not lease Indian lands without the 
consent of the individual Indian mineral owner(s), and thus does not 
unilaterally execute a lease for the individual Indian mineral owner, 
except as provided in Sec. 212.21. Successors in title to approved and 
issued mineral leases follow without respect to these regulations. No 
change is made in the final rules.
    (119) One commenter states that the definition of a lessor should 
be changed to read that a lessor is an Indian mineral owner who has 
accepted or consented to a lease or for whom the Secretary has executed 
a lease, and any successor in title to an original lessor.
    Response: The Secretary does not lease Indian mineral lands without 
the consent of the individual Indian mineral owner(s), and thus does 
not unilaterally execute a lease for the individual Indian mineral 
owner, except as provided by specific statutory exceptions which allow 
the Secretary to lease allotted lands when the allottee has died and 
his heirs are undetermined or when the owner cannot be located. 
Successors in title to approved and issued mineral leases follow 
without respect to these regulations. No change is made in the final 
rules.
    (120) One commenter states that to receive optimal benefit for the 
Indian landowner, royalty rates should be considered in the bidding 
process.
    Response: Royalty rates are considered in the bidding process in 
the announcement of lease sale. Royalty bidding is not customarily 
included in either written or oral bidding because of the difficulty in 
determining the total value of bid based on multiple variables of say, 
total value of bonus bid, plus rental bid, plus royalty bid, or any 
combination thereof. Royalty rates may be considered or reconsidered 
separately if the lease is subsequently negotiated on behalf of the 
Indian mineral owner.
    (121) One tribal commenter recommends an addition to proposed 
Sec. 212.20 to provide that prior to negotiation for lease, a mineral 
property must be listed but not successfully won in the most recent 
lease sale of no later than the preceding 12-month period.
    Response: Section 212.20 is rewritten to provide that the option in 
leasing procedures be decided by the Indian mineral owner. In the event 
that the leasing option cannot be determined by the Indian mineral 
owner(s) the Secretary will act on their behalf, and in the best 
interest of the Indian mineral owner(s).
    (122) One tribal commenter suggests that proposed Sec. 212.20 be 
modified to provide that if an offer to lease a mineral property is 
made, and no tribal property exists within the same section or spacing 
order, and given the approval of the Indian mineral owner, or the 
majority of owners; the BIA or the Indian mineral owners themselves be 
able to negotiate a lease agreement, subject to approval of the 
Secretary.
    Response: The suggested modifications to Sec. 212.20 place a great 
many restrictions on the leasing procedures. The required consent of 
all Indian mineral owners to the leasing of mineral lands composed of 
both tribal and individual mineral ownership could adversely affect all 
owners if difficulty is experienced in reaching a consensus. Thus, the 
suggested modifications are not made in final regulations. However, 
provision is made in final regulations at Sec. 212.20 that the Indian 
mineral owner be advised of the results of bidding and that the lease 
shall not be approved until the consent of the Indian mineral owner has 
been obtained.
    (123) One commenter suggests that a sentence be added to proposed 
Sec. 212.20(b)(5) to provide that the Secretary shall not disperse any 
bonus money to the Indian mineral owner(s) until such time as the lease 
has been signed by the Indian mineral owner(s) unless otherwise agreed 
to by the successful bidder.
    Response: Bonus monies are not dispensed until the lease is issued. 
Money received is placed in a special account at the BIA area or agency 
where it is retained until a lease number can be assigned; whereupon 
money is distributed after the lease is signed and a number assigned to 
the lease instrument.
    (124) One commenter states that the language of proposed 
Sec. 212.20(a) should be the same as that in proposed Sec. 211.20(a) 
providing the same superintendent is meant at both places, otherwise, 
guidance as to the appropriate superintendent should be given.
    Response: We agree. Change is made in the final regulations such 
that both paragraphs now include a reference to

[[Page 35652]]

the superintendent having jurisdiction over the lands, because the same 
superintendent is the same in both instances.
    (125) One commenter suggests changes in Sec. 212.30 (a) and (b) to 
restrict references to lessors and lessees to the mineral interest only 
and that there does not appear to be any good reason for relieving 
[from the supervision of the Secretary] the unrestricted land of an 
existing lease.
    Response: Changes are not made in response to this comment because 
the references in these paragraphs are to the unrestricted owners and 
not to the owners under restriction. Protection for the lessee existing 
prior to the removal of restriction are contained in Sec. 212.30(b) 
which provides that the Supervision of the Secretary shall continue 
until adequate arrangements have been made to account for the mineral 
resources of the restricted land separately from those of the 
unrestricted. The unrestricted lands must be relieved from the 
Supervision of the Secretary because the removal of restriction also 
removes the authority of the Secretary.
    (126) One commenter states that the 30-day notice to lessee and 
lessor in proposed Sec. 212.33(a) is not adequate for the lessee to 
prepare title opinions in order to timely and properly pay rentals and 
royalties and suggests that a 120-day notice is appropriate unless a 
shorter period is agreed to by the parties [to the lease instrument].
    Response: The 30-day notice to principals in the event the 
Secretary relinquishes supervision during the life of a mineral lease 
instrument is standard and has been in the present regulations 
(Sec. 212.29) for many years without causing difficulty. No change is 
made in the final regulations.
    (127) One commenter points out that the word ``fee'' is used in a 
dual sense in Sec. 212.33 and suggests that distinction be made between 
monetary fees and fee simple title and also suggests other changes in 
this section in the interest of clarity.
    Response: We agree. Sec. 212.33(b) is rewritten in final regulation 
to clarify and simplify the provisions of this section.
    (128) One commenter states that Sec. 212.56(c) should be amended to 
state specifically that the subject section is applicable to allotted 
lands only.
    Response: The title of 25 CFR Part 212 states that these 
regulations are applicable to the leasing of allotted lands for mineral 
development and full explanation of the purpose and scope of Parts 211 
and 212 are contained in Secs. 211.1 and 212.1 and to considerable 
extent in preamble. This paragraph, although redesignated, remains 
unchanged.
    (129) One commenter states that the use of the words ``surface 
occupant'' in proposed Sec. 212.56(c) be changed to ``surface owner.'' 
Otherwise the lessee may be in the position of not knowing who to 
negotiate with, the surface occupant or the surface owner.
    Response: The lessee may have to negotiate with both the surface 
occupant and the surface owner depending upon land use (e.g., row crops 
during the growing season on leased surface) and provisions of the 
surface lease between the surface lessor and surface lessee. The 
surface occupant is oftentimes the individual easiest to find. This 
section is unchanged in final rules.
    (130) One commenter states that proposed Sec. 212.56 should be 
revised to make clear that the consent of the Indian surface owner is 
not required by these regulations and that the consent referred to in 
proposed paragraph (c) is required only if made ``necessary'' by some 
other applicable law.
    Response: Section 212.56 in final regulations provides that where 
the Indian mineral owner is not the surface owner, the lessee must 
obtain any additional necessary permits or rights of ingress or egress 
from the surface occupant. This information is provided to lessees so 
that the lessee will know that under some conditions a mineral lease 
does not automatically authorize surface ingress and egress.

III. Conclusion

    The scope and purpose of these final rules are to revise, 
streamline and update implementation of the Act of May 11, 1938, as 
amended, and the Act of March 3, 1909, as amended, that provide for the 
leasing of Indian tribal and allotted lands, respectively, for mineral 
development. By means of these final rules, the Department provides, 
within statutory limitations, increased communication between the 
Indian mineral owner and the Secretary and provides the Indian mineral 
owner greater recognition and authority in the mineral leasing of 
Indian lands within the framework of the Secretary's trust 
responsibility and the determination of the best interest of the Indian 
mineral owner. The Department understands the concerns and importance 
to tribes of the recognition of tribal authority and responsibility in 
matters of the management generally of their own mineral resources. 
This authority and responsibility are recognized at Secs. 211.1 and 
211.29 in final rules. Section 211.29 specifically permits the 
supersedence of Federal regulations by the provisions of ordinance, 
resolution, or other action authorized under any properly issued tribal 
constitution, bylaw, or charter. Superseding provisions that: (1) 
nullify the provisions of enacted legislation or judicial decision that 
preclude the exercise of tribal authority; (2) modify the provisions of 
an existing lease or permit which constitute substantially the 
consideration of the lease or permit, or without which the lease or 
permit would not have been made; or (3) provide for a regulatory taking 
cannot be approved by the Secretary. Also, the rules formerly in place 
have not been revised in entirety since 1938 and therefore the action 
of the Department, in this revision, reflects in final regulation the 
enactment of legislation, court decisions, evolution of usual and 
common business and administrative practices, and changes and 
reorganizations within the Federal government that has taken place 
during the last 58 years.

Executive Order No. 12866 and Regulatory Flexibility Act

    These rules have been reviewed under Executive Order 12866. In 
addition, the Department of the Interior has determined that these 
rules will not have a significant economic effect on a substantial 
number of small entities under the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.).
    This final rulemaking will have equal impact on anyone desiring to 
engage in prospecting for or developing Indian-owned minerals, 
including oil and gas and geothermal resources. The promulgation of 
final rulemaking reduces the regulatory burden imposed on such persons 
in several instances. This rulemaking will increase the filing fee 
(from $10.00 to $75.00) that must accompany each application for lease, 
permit, or assignment thereof and is no different from the filing fees 
presently required when filing on Federal lands. This increase is 
necessary to partially compensate the United States for its costs of 
processing those documents, but experience shows that this increase is 
not an amount that will discourage or prevent any small business from 
contracting to engage in mineral development on Indian lands. The 
minimum rental for mineral leases on Indian land will be increased from 
$1.25 to $2.00 per acre which is no different from the minimum rentals 
imposed on lessees of Federal minerals. The minimum annual development 
expenditure on leases other than oil and gas and geothermal resources 
will increase from $10.00 to $20.00 per acre. The increases in minimum 
rental and annual development expenditure reflect

[[Page 35653]]

the effects of inflation during the last several years on the cost of 
doing business, helps ensure diligent development of the Indian mineral 
estate, and helps to protect the Indian mineral owner against the 
decline through time in purchasing power of dollars received from the 
Indian mineral leases. These rules promote economic growth by providing 
tribes and individual Indian mineral owners greater opportunity to 
negotiate or participate in the negotiation of leases and permits that 
maximize their best economic interest and minimize any adverse 
environmental and cultural impact and at the same time enhance economic 
growth by allowing wise use of a portion of the National mineral 
reserve base that might not be otherwise available.

Executive Order No. 12612

    The Department has determined that these rules do not have 
significant federalism effects. These rules support the goals of E.O. 
No. 12612 by enhancing self determination among the Indian communities 
by encouraging tribes to responsibly and independently achieve their 
personal, cultural, and economic objectives through their own efforts.

Executive Order No. 12630

    In accordance with E.O. 12630, the Department has determined that 
these rules do not have significant takings implications.

Executive Order No. 12988

    The Department has determined that these regulations meet the 
applicable standards provided in Sections 3(a) and 3(b) (2) of 
Executive Order No. 12988.

National Environmental Policy Act of 1969

    The changes made in this final rulemaking are for the purpose of 
streamlining and updating the regulations implementing the Act of May 
11, 1938, as amended, and the Act of March 3, 1909, as amended. These 
rules constitute an administrative action and do not impact on the 
physical environment. The approval of mineral leases, permits, and 
assignments will require compliance with the provisions of the National 
Environmental Policy Act of 1969, including public participation in 
compliance with the regulations of the Council on Environmental 
Quality. In analyzing the alternatives to the changes in previously 
proposed rulemaking that were made, the Bureau of Indian Affairs 
considered the changes to be of such minor variation and degree that 
the impacts were deemed equal to or less than the changes made by the 
previously proposed rulemaking. The Department of the Interior has 
determined therefore, that there will be no significant impact to the 
human environment.

Paperwork Reduction Act of 1980

    This rule is exempt from the information collections requirement 
under the Paperwork Reduction Act, Pub. L. 95-511 (44 U.S.C. 3501 et 
seq.).

List of Subjects in 25 CFR Parts 211 and 212

    Geothermal energy, Indians--lands, Mineral resources, Mines, Oil 
and gas exploration, Reporting and recordkeeping requirements.

Words of Issuance

    For the reasons set out in the preamble, Parts 211 and 212 of Title 
25, Chapter I of the Code of Federal Regulations are revised as set 
forth below.

PART 211--LEASING OF TRIBAL LANDS FOR MINERAL DEVELOPMENT

Subpart A--General

Sec.
211.1  Purpose and scope.
211.2  Information collection.
211.3  Definitions.
211.4  Authority and responsibility of the Bureau of Land Management 
(BLM).
211.5  Authority and responsibility of the Office of Surface Mining 
Reclamation and Enforcement (OSM).
211.6  Authority and responsibility of the Minerals Management 
Service (MMS).
211.7  Environmental studies.
211.8  Government employees cannot acquire leases.
211.9  Existing permits or leases for minerals issued pursuant to 43 
CFR chapter II and acquired for Indian tribes.

Subpart B--How To Acquire Leases

 211.20  Leasing procedures.
211.21  [Reserved]
211.22  Leases for subsurface storage of oil or gas.
211.23  Corporate qualifications and requests for information.
211.24  Bonds.
211.25  Acreage limitation.
211.26  [Reserved]
211.27  Duration of leases.
211.28  Unitization and communitization agreements, and well 
spacing.
211.29  Exemption of leases and permits made by organized tribes.

Subpart C--Rents, Royalties, Cancellations and Appeals

211.40  Manner of payments.
211.41  Rentals and production royalty on oil and gas leases.
211.42  Annual rentals and expenditures for development on leases 
other than oil and gas, and geothermal resources.
211.43  Royalty rates for minerals other than oil and gas.
211.44  Suspension of operations.
211.45  [Reserved]
211.46  Inspection of premises, books and accounts.
211.47  Diligence, drainage and prevention of waste.
211.48  Permission to start operations.
211.49  Restrictions on operations.
211.50  [Reserved]
211.51  Surrender of leases.
211.52  Fees.
211.53  Assignments, overriding royalties, and operating agreements.
211.54  Lease or permit cancellation; Bureau of Indian Affairs 
notice of noncompliance.
211.55  Penalties.
211.56  Geological and geophysical permits.
211.57  Forms.
211.58  Appeals.

    Authority: Sec. 4, Act of May 11, 1938, (52 Stat. 347): Act of 
August 1, 1956 (70 Stat. 774): 25 U.S.C. 396a-g; and 25 U.S.C. 2 and 
9.

Subpart A--General


Sec. 211.1   Purpose and scope.

    (a) The regulations in this part govern leases and permits for the 
development of Indian tribal oil and gas, geothermal, and solid mineral 
resources except as provided under paragraph (e) of this section. These 
regulations are applicable to lands or interests in lands the title to 
which is held in trust by the United States or is subject to a 
restriction against alienation imposed by the United States. These 
regulations are intended to ensure that Indian mineral owners desiring 
to have their resources developed are assured that they will be 
developed in a manner that maximizes their best economic interests and 
minimizes any adverse environmental impacts or cultural impacts 
resulting from such development.
    (b) The regulations in this part shall be subject to amendment at 
any time by the Secretary of the Interior. No regulation that becomes 
effective after the date of approval of any lease or permit shall 
operate to affect the duration of the lease or permit, rate of royalty, 
rental, or acreage unless agreed to by all parties to the lease or 
permit.
    (c) The regulations of the Bureau of Land Management, the Office of 
Surface Mining Reclamation and Enforcement, and the Minerals Management 
Service that are referenced in Secs. 211.4, 211.5, and 211.6 are 
supplemental to the regulations in this part, and apply to parties 
holding leases or permits for development of Indian mineral resources 
unless specifically stated otherwise in this part or in such other 
Federal regulations.
    (d) Nothing in the regulations in this part is intended to prevent 
Indian tribes

[[Page 35654]]

from exercising their lawful governmental authority to regulate the 
conduct of persons, businesses, operations or mining within their 
territorial jurisdiction.
    (e) The regulations in this part do not apply to leasing and 
development governed by regulations in 25 CFR Parts 213 (Members of the 
Five Civilized Tribes of Oklahoma), 226 (Osage), or 227 (Wind River 
Reservation).


Sec. 211.2   Information collection.

    The information collection requirements contained in this part do 
not require a review by the Office of Management and Budget under the 
Paperwork Reduction Act (44 U.S.C. 3501; et seq.).


Sec. 211.3   Definitions.

    As used in this part, the following words and phrases have the 
specified meaning except where otherwise indicated:
    Applicant means any person seeking a permit, lease, or an 
assignment from the superintendent or area director.
     Approving official means the Bureau of Indians Affairs official 
with delegated authority to approve a lease or permit.
    Area director means the Bureau of Indian Affairs official in charge 
of an area office.
    Authorized officer means any employee of the Bureau of Land 
Management authorized by law or by lawful delegation of authority to 
perform the duties described in this part and in 43 CFR Parts 3160, 
3180, 3260, 3280, 3480 and 3590.
    Cooperative agreement means a binding arrangement between two or 
more parties purporting to the act of agreeing or of coming to a mutual 
arrangement that is accepted by all parties to a transaction (e.g., 
communitization and unitization).
    Director's representative means the Office of Surface Mining 
Reclamation and Enforcement director's representative authorized by law 
or lawful delegation of authority to perform the duties described in 30 
CFR part 750.
    Gas means any fluid, either combustible or non-combustible, that is 
produced in a natural state from the earth and that maintains a gaseous 
or rarefied state at ordinary temperature and pressure conditions.
    Geological and geophysical permit means a written authorization to 
conduct on-site surveys to locate potential deposits of oil and gas, 
geothermal or solid mineral resources on the lands.
    Geothermal resources means:
    (1) All products of geothermal processes, including indigenous 
steam, hot water and hot brines;
    (2) Steam and other gases, hot water, and hot brines, resulting 
from water, gas or other fluids artificially introduced into geothermal 
formations;
    (3) Heat or other associated energy found in geothermal formations; 
and
    (4) Any by-product derived therefrom.
    In the best interest of the Indian mineral owner refers to the 
standards to be applied by the Secretary in considering whether to take 
an administrative action affecting the interests of an Indian mineral 
owner. In considering whether it is ``in the best interest of the 
Indian mineral owner'' to take a certain action (such as approval of a 
lease, permit, unitization or communitization agreement), the Secretary 
shall consider any relevant factor, including, but not limited to: 
economic considerations, such as date of lease expiration; probable 
financial effect on the Indian mineral owner; leasability of land 
concerned; need for change in the terms of the existing lease; 
marketability; and potential environmental, social, and cultural 
effects.
    Indian lands means any lands owned by any individual Indian or 
Alaska Native, Indian tribe, band, nation, pueblo, community, 
rancheria, colony, or other tribal group which owns land or interests 
in the land, the title to which is held in trust by the United States 
or is subject to a restriction against alienation imposed by the United 
States.
    Indian mineral owner means an Indian tribe, band, nation, pueblo 
community, rancheria, colony, or other tribal group which owns mineral 
interests in oil and gas, geothermal or solid mineral resources, title 
to which is held in trust by the United States, or is subject to a 
restriction against alienation imposed by the United States.
    Indian surface owner means any individual Indian or Indian tribe 
whose surface estate is held in trust by the United States, or is 
subject to restriction against alienation imposed by the United States.
    Lease means any contract approved by the United States under the 
Act of May 11, 1938 (52 Stat. 347) (25 U.S.C. 396a-396g), as amended, 
that authorizes exploration for, extraction of, or removal of any 
minerals.
    Lessee means a natural person, proprietorship, partnership, 
corporation, or other entity that has entered into a lease with an 
Indian mineral owner, or who has been assigned an obligation to make 
royalty or other payments required by the lease.
    Lessor means an Indian mineral owner who is a party to a lease.
    Minerals includes both metalliferous and non-metalliferous 
minerals; all hydrocarbons, including oil and gas, coal and lignite of 
all ranks; geothermal resources; and includes but is not limited to, 
sand, gravel, pumice, cinders, granite, building stone, limestone, 
clay, silt, or any other energy or non-energy mineral.
    Minerals Management Service official means any employee of the 
Minerals Management Service (MMS) authorized by law or by lawful 
delegation of authority to perform the duties described in 30 CFR 
chapter II, subchapters A and C.
    Mining means the science, technique, and business of mineral 
development including, but not limited to: opencast work, underground 
work, and in-situ leaching directed to severance and treatment of 
minerals; Provided, when sand, gravel, pumice, cinders, granite, 
building stone, limestone, clay or silt is the subject mineral, an 
enterprise is considered ``mining'' only if the extraction of such a 
mineral exceeds 5,000 cubic yards in any given year.
    Oil means all nongaseous hydrocarbon substances other than those 
substances leasable as coal, oil shale, or gilsonite (including all 
vein-type solid hydrocarbons). Oil includes liquefiable hydrocarbon 
substances such as drip gasoline and other natural condensates 
recovered or recoverable in a liquid state from produced gas without 
resorting to a manufacturing process.
    Permit means any contract issued by the superintendent and/or area 
director to conduct exploration on; or removal of less than 5,000 cubic 
yards per year of common varieties of minerals from Indian lands.
    Permittee means a person holding or required by this part to hold a 
permit to conduct exploration operations on; or remove less than 5,000 
cubic yards per year of common varieties of minerals from Indian lands.
    Secretary means the Secretary of the Interior or an authorized 
representative.
    Solid minerals means all minerals excluding oil, gas and geothermal 
resources.
    Superintendent means the Bureau of Indian Affairs official in 
charge of the agency office having jurisdiction over the minerals 
subject to leasing under this part.


Sec. 211.4  Authority and responsibility of the Bureau of Land 
Management (BLM).

    The functions of the Bureau of Land Management are found in 43 CFR 
part 3160--Onshore Oil and Gas Operations, 43 CFR part 3180--Onshore 
Oil and Gas

[[Page 35655]]

Unit Agreements: Unproven Area, 43 CFR part 3260--Geothermal Resources 
Operations, 43 CFR part 3280--Geothermal Resources Unit Agreements: 
Unproven Areas, 43 CFR part 3480--Coal Exploration and Mining 
Operations, and 43 CFR part 3590--Solid Minerals (other than coal) 
Exploration and Mining Operations; and currently include, but are not 
limited to, resource evaluation, approval of drilling permits, mining 
and reclamation, production plans, mineral appraisals, inspection and 
enforcement, and production verification. These regulations, apply to 
leases and permits approved under this part.


Sec. 211.5  Authority and responsibility of the Office of Surface 
Mining Reclamation and Enforcement (OSM).

    The OSM is the regulatory authority for surface coal mining and 
reclamation operations on Indian lands pursuant to the Surface Mining 
Control and Reclamation Act of 1977 (30 U.S.C. 1201 et seq.). The 
relevant regulations for surface coal mining and reclamation operations 
are found in 30 CFR part 750. Those regulations apply to mining and 
reclamation on leases approved under this part.


Sec. 211.6  Authority and responsibility of the Minerals Management 
Service (MMS).

    The functions of the MMS for reporting, accounting, and auditing 
are found in 30 CFR chapter II, subchapters A and C, which, apply to 
leases approved under this part. To the extent the parties to a lease 
or permit are able to provide reasonable provisions satisfactorily 
addressing the functions governed by MMS regulations, the Secretary may 
approve alternate provisions in a lease or permit.


Sec. 211.7  Environmental studies.

    (a) The Secretary shall ensure that all environmental studies are 
prepared as required by the National Environmental Policy Act of 1969 
(NEPA) and the regulations promulgated by the Council on Environmental 
Quality (CEQ), found in 40 CFR parts 1500 through 1508.
    (b) The Secretary shall ensure that all necessary surveys are 
performed and clearances obtained in accordance with 36 CFR parts 60, 
63, and 800 and with the requirements of the Archaeological and 
Historic Preservation Act (16 U.S.C. 469 et seq.), the National 
Historic Preservation Act (16 U.S.C. 470 et seq.), The American Indian 
Religious Freedom Act (42 U.S.C. 1996), and Executive Order 11593, 
Protection and Enhancement of the Cultural Environment (3 CFR, 1971 
through 1975 Comp., p. 559). If these surveys indicate that a mineral 
development will have an adverse effect on a property listed on or 
eligible for listing on the National Register of Historic Places, the 
Secretary shall:
    (1) Seek the comments of the Advisory Council on Historic 
Preservation, in accordance with 36 CFR part 800;
    (2) Ensure that the property is avoided, that the adverse effect is 
mitigated, or;
    (3) Ensure that appropriate excavations or other related research 
is conducted and ensure that complete data describing the historic 
property is preserved.


Sec. 211.8  Government employees cannot acquire leases.

    U.S. Government employees are prevented from acquiring leases or 
interests in leases by the provisions of 25 CFR part 140 and 43 CFR 
part 20 pertaining to conflicts of interest and ownership of an 
interest in trust land.


Sec. 211.9  Existing permits or leases for minerals issued pursuant to 
43 CFR chapter II and acquired for Indian tribes.

    (a) Title to the minerals underlying certain Federal lands, which 
were previously subject to general leasing and mining laws, is now held 
in trust by the United States for Indian tribes. Existing mineral 
prospecting permits, exploration and mining leases on these lands, 
issued prior to these lands being placed in trust status or becoming 
Indian lands, pursuant to 43 CFR chapter II (and its predecessor 
regulations), and all actions on the permits and leases shall be 
administered by the Secretary in accordance with the regulations set 
forth in 30 CFR chapters II and VII and 43 CFR chapter II, as 
applicable, provided, that all payment or reports required by a non-
producing lease or permit, issued pursuant to 43 CFR chapter II, shall 
be made to the superintendent having administrative jurisdiction over 
the land involved, instead of the officer of the Bureau of Land 
Management designated in 43 CFR unless specifically stated otherwise in 
the statutes authorizing the United States to hold the land in trust 
for an Indian tribe. Producing lease payments and reports will be 
submitted to the Minerals Management Service in accordance with 30 CFR 
chapter II, subchapters A and C.
    (b) Administrative actions regarding an existing lease or permit 
under this section, may be appealed pursuant to 25 CFR part 2.

Subpart B--How to Acquire Leases


Sec. 211.20  Leasing procedures.

    (a) Indian mineral owners may, with the approval of the 
superintendent or area director, lease their land for mining purposes. 
No oil and gas lease shall be approved unless it has first been offered 
for bidding at an advertised lease sale in accordance with this 
section. Leases for minerals other than oil and gas shall be advertised 
for bids as prescribed in this section unless the Secretary grants the 
Indian mineral owners written permission to negotiate for lease. 
Application for leases shall be made to the superintendent having 
jurisdiction over the lands.
    (b) Indian mineral owners may request that the Secretary prepare 
and advertise or negotiate (if the requirements of this section have 
been met) mineral leases on their behalf. If requested by an applicant 
interested in acquiring rights to Indian-owned minerals, the Secretary 
shall promptly notify the Indian mineral owner, and advise the owner in 
writing of the alternatives available, including the right to decline 
to lease. If the Indian mineral owner decides to have the leases 
advertised, the Secretary shall consult with the Indian mineral owner 
concerning the appropriate royalty rate and rental. The Secretary may 
then undertake the responsibility to advertise and lease in accordance 
with the following procedures:
    (1) Leases shall be advertised to receive optimum competition for 
bonus consideration, under sealed bid, oral auction, or a combination 
of both. Notice of such advertisement shall be published in at least 
one local newspaper and in one trade publication at least thirty (30) 
days in advance of sale. If applicable, such notice must identify the 
reservation within which the tracts to be leased are found. No specific 
description of the tracts to be leased need be published. Specific 
description of such tracts shall be available at the office of the 
superintendent and/or area director upon request. The complete text of 
the advertisement, including a specific description, shall be mailed to 
each person listed on the appropriate agency or area mailing list. 
Individuals and companies interested in receiving advertisements of 
lease sales should send their mailing information to the appropriate 
superintendent or area director for future reference.
    (2) The advertisement shall offer the tracts to the responsible 
bidder offering the highest bonus. The Secretary, after consultation 
with the Indian mineral owner, shall establish the rental and

[[Page 35656]]

royalty rates which shall be stated in the advertisement and shall not 
be subject to negotiation. The advertisement shall provide that the 
Secretary reserves the right to reject any or all bids, and that 
acceptance of the lease bid by the Indian mineral owner is required.
    (3) Each sealed bid must be accompanied by a cashier's check, 
certified check or postal money order, or any combination thereof, 
payable to the payee designated in the advertisement, in an amount not 
less than 25 percent of the bonus bid, which shall be returned if that 
bid is not accepted.
    (4) A successful oral auction bidder will be allowed five (5) 
working days to remit the required 25 percent deposit of the bonus bid.
    (5) A successful bidder shall, within thirty (30) days after 
notification of the bid award, remit to the Secretary the balance of 
the bonus, the first year's rental, a $75 filing fee, its prorated 
share of the advertising costs as determined by the Bureau of Indian 
Affairs, and file with the Secretary all required bonds. The successful 
bidder shall also file the lease in completed form at that time. 
However, for good reasons, the Secretary may grant extensions of time 
in thirty (30) day increments for filing of the lease and all required 
bonds, provided that additional extension requests are submitted and 
approved prior to the expiration of the original thirty (30) days or 
the previously granted extension. Failure on the part of the bidder to 
take all reasonable actions necessary to comply with the foregoing 
shall result in forfeiture of the required payment of 25 percent of any 
bonus bid for the use and benefit of the Indian mineral owner.
    (6) If no satisfactory bid is received, or if the accepted bidder 
fails to complete all requirements necessary for the approval of the 
lease, or if the Secretary determines that it is not in the best 
interest of the Indian mineral owner to accept any of the bids the 
Secretary may re-advertise the lease for sale, or, subject to the 
consent of the Indian mineral owner, the lease may be let through 
private negotiations.
    (c) The Secretary shall advise the Indian mineral owner of the 
results of the bidding, and shall not approve the lease until the 
consent of the Indian mineral owner has been obtained.
    (d) The Indian mineral owner may also submit negotiated leases to 
the Secretary for review and approval.


Sec. 211.21  [Reserved]


Sec. 211.22  Leases for subsurface storage of oil or gas.

    (a) The Secretary, with the consent of the Indian mineral owners, 
may approve storage leases, or modifications, amendments, or extensions 
of existing leases, on Indian lands to provide for the subsurface 
storage of oil or gas, irrespective of the lands from which production 
is initially obtained. The storage lease, or modification, amendment, 
or extension to an existing lease, shall provide for the payment of 
such storage fee or rental on such oil or gas as may be determined 
adequate in each case, or, in lieu thereof, for a royalty other than 
that prescribed in the oil and gas lease when such stored oil and gas 
is produced in conjunction with oil or gas not previously produced.
    (b) The Secretary, with consent of the Indian mineral owners, may 
approve a provision in an oil and gas lease under which storage of oil 
and gas is authorized, for continuance of the lease at least for the 
period of such storage use and so long thereafter as oil or gas not 
previously produced is produced in paying quantities.
    (c) Applications for subsurface storage of oil or gas shall be 
filed in triplicate with the authorized officer and shall disclose the 
ownership of the lands involved, the parties in interest, the storage 
fee, rental, or royalty offered to be paid for such storage, and all 
essential information showing the necessity for such project. Enough 
copies of the final agreement signed by the Indian mineral owners and 
other parties in interest shall be submitted for the approval of the 
Secretary to permit retention of five copies by the Department after 
approval.


Sec. 211.23  Corporate qualifications and requests for information.

    (a) The signing in a representative capacity and delivery of bids, 
geological and geophysical permits, mineral leases, or assignments, 
bonds, or other instruments required by the regulations in this part 
constitutes certification that the individual signing (except a surety 
agent) is authorized to act in such capacity. An agent for a surety 
shall furnish a power of attorney.
    (b) A corporate applicant proposing to acquire an interest in a 
permit or lease shall have on file with the superintendent or area 
director a statement showing:
    (1) The State(s) in which the corporation is incorporated, and that 
the corporation is authorized to hold such interests in the State where 
the land described in the instrument is situated; and
    (2) A notarized statement that the corporation has power to conduct 
all business and operations as described in the lease or permit.
    (c) The Secretary may, either before or after the approval of a 
permit, mineral lease, assignment, or bond, call for any reasonable 
additional information necessary to carry out the regulations in this 
part, or other applicable laws and regulations.


Sec. 211.24  Bonds.

    (a) The lessee, permittee or prospective lessee acquiring a lease, 
or any interest therein, by assignment shall furnish with each lease, 
permit or assignment a surety bond or personal bond in an amount 
sufficient to ensure compliance with all of the terms and conditions of 
the lease(s), permit(s), or assignment(s) and the statutes and 
regulations applicable to the lease, permit, or assignment. Surety 
bonds shall be issued by a qualified company approved by the Department 
of the Treasury (see Department of the Treasury Circular No. 570).
    (b) An operator may file a $75,000 bond for all geothermal, mining, 
or oil and gas leases, permits, or assignments in any one State, which 
may also include areas on that part of an Indian reservation extending 
into any contiguous State. Statewide bonds are subject to approval in 
the discretion of the Secretary.
    (c) An operator may file a $150,000 bond for full nationwide 
coverage to cover all geothermal or oil and gas leases, permits, or 
assignments without geographic or acreage limitation to which the 
operator is or may become a party. Nationwide bonds are subject to 
approval in the discretion of the Secretary.
    (d) Personal bonds shall be accompanied by:
    (1) Certificate of deposit issued by a financial institution, the 
deposits of which are federally insured, explicitly granting the 
Secretary full authority to demand immediate payment in case of default 
in the performance of the provisions and conditions of the lease or 
permit. The certificate shall explicitly indicate on its face that 
Secretarial approval is required prior to redemption of the certificate 
of deposit by any party;
    (2) Cashier's check;
    (3) Certified check;
    (4) Negotiable Treasury securities of the United States of a value 
equal to the amount specified in the bond. Negotiable Treasury 
securities shall be accompanied by a proper conveyance to the Secretary 
of full authority to sell such securities in case of default in the 
performance of the provisions and conditions of a lease or permit; or
    (5) Letter of credit issued by a financial institution authorized 
to do business in the United States and whose

[[Page 35657]]

deposits are federally insured, and identifying the Secretary as sole 
payee with full authority to demand immediate payment in the case of 
default in the performance of the provisions and conditions of a lease 
or permit.
    (i) The letter of credit shall be irrevocable during its term.
    (ii) The letter of credit shall be payable to the Bureau of Indian 
Affairs upon demand, in part or in full, upon receipt from the 
Secretary of a notice of attachment stating the basis thereof (e.g., 
default in compliance with the lease or permit provisions and 
conditions or failure to file a replacement in accordance with 
paragraph (d)(5)(v) of this section).
    (iii) The initial expiration date of the letter of credit shall be 
at least one (1) year following the date it is filed in the proper 
Bureau of Indian Affairs office.
    (iv) The letter of credit shall contain a provision for automatic 
renewal for periods of not less than one (1) year in the absence of 
notice to the proper Bureau of Indian Affairs office at least ninety 
(90) days prior to the originally stated or any extended expiration 
date.
    (v) A letter of credit used as security for any lease or permit 
upon which operations have taken place and final approval for 
abandonment has not been given, or as security for a statewide or 
nationwide bond, shall be forfeited and shall be collected by the 
Secretary if not replaced by other suitable bond or letter of credit at 
least thirty (30) days before its expiration date.
    (e) The required amount of bonds may be increased in any particular 
case at the discretion of the Secretary.


Sec. 211.25  Acreage limitation.

    A lessee may acquire more than one lease but no single lease shall 
be granted for mineral leasing purposes on Indian tribal or restricted 
lands in excess of the following acreage except where the rule of 
approximation applies:
    (a) Leases for oil and gas and all other minerals except coal are 
to be contained within one United States Governmental survey section of 
land and shall be described by legal subdivisions including lots or 
tract equivalents not to exceed 640 acres; in instances of irregular 
surveys, including lands not surveyed under the United States 
Governmental survey, lands shall be considered in multiples of 40 acres 
or the nearest aliquot equivalent thereof;
    (b) Leases for coal shall ordinarily be limited to 2,560 acres in a 
reasonably compact form and shall be described by legal subdivisions 
including lots or tract equivalents. In instances of irregular surveys, 
including lands not surveyed under the United States Governmental 
survey, lands shall be considered in multiples of 40 acres or the 
nearest aliquot equivalent thereof. The Secretary may, upon application 
and with the consent of the Indian mineral owner, approve the issuance 
of a single lease for more than 2,560 acres, in a reasonably compact 
form, upon a finding that the issuance is in the best interest of the 
lessor.


Sec. 211.26  [Reserved]


Sec. 211.27  Duration of leases.

    (a) All leases shall be for a term not to exceed a primary term of 
lease duration of ten (10) years and, absent specific lease provisions 
to the contrary, shall continue as long thereafter as the minerals 
specified in the lease are produced in paying quantities. Absent 
specific lease provisions to the contrary, all provisions in leases 
governing their duration shall be measured from the date of approval by 
the Secretary.
    (b) An oil and gas or geothermal resource lease which stipulates 
that it shall continue in full force and effect beyond the expiration 
of the primary term of lease duration (``commencement clause'') if 
drilling operations have commenced during the primary term, shall be 
valid and shall hold the lease beyond the primary term of lease 
duration if the lessee or the lessee's designee has commenced actual 
drilling by midnight of the last day of the primary term of the lease 
with a drilling rig designed to reach the total proposed depth, and 
drilling is continued with reasonable diligence until the well is 
completed to production or abandoned. However, in no case shall such 
drilling hold the lease longer than 120 days past the primary term of 
lease duration without actual production of oil, gas, or geothermal 
resources. Provided, that this extension does not allow a lease to 
continue past the 10-year statutory limitation. Drilling which meets 
the requirements of this section and occurs within a unit or 
communitization agreement to which the lease is committed shall be 
considered as if it occurs on the leasehold itself. If there is a 
conflict between the commencement clause and the habendum clause of a 
lease, the commencement clause will control.
    (c) A solid minerals lease which stipulates that it shall continue 
in full force and effect beyond the expiration of the primary term of 
lease duration if mining operations have commenced during the primary 
term (commencement clause), shall be valid and hold the lease beyond 
the primary term of lease duration if the lessee or the lessee's 
designee has by midnight of the last day of the primary term of the 
lease commenced actual removal of mineral materials intended for sale 
and upon which royalties will be paid. If there is a conflict between 
the commencement clause and the habendum clause of a lease, the 
commencement clause will control.


Sec. 211.28  Unitization and communitization agreements, and well 
spacing.

    (a) For the purpose of promoting conservation and efficient 
utilization of minerals, the Secretary may approve a cooperative unit, 
drilling or other development plan on any leased area upon a 
determination that approval is advisable and in the best interest of 
the Indian mineral owner. For the purposes of this section, a 
cooperative unit, drilling or other development plan means an agreement 
for the development or operation of a specifically designated area as a 
single unit without regard to separate ownership of the land included 
in the agreement. Such cooperative agreements include, but are not 
limited to, unit agreements, communitization agreements and other types 
of agreements that allocate costs and benefits.
    (b) The consent of the Indian mineral owner to such unit or 
cooperative agreement shall not be required unless such consent is 
specifically required in the lease. However, the Secretary shall 
consult with the Indian mineral owner prior to making a determination 
concerning a cooperative agreement or well spacing plan.
    (c) Requests for approval of cooperative agreements which comply 
with the requirements of all applicable rules and regulations shall be 
filed with the superintendent or area director.
    (d) All Indian mineral owners of any right, title or interest in 
the mineral resources to be included in a cooperative agreement must be 
notified by the lessee at the time the agreement is submitted to the 
superintendent or area director. An affidavit from the lessee stating 
that a notice was mailed to each mineral owner of record for whom the 
superintendent or area director has an address will satisfy this notice 
requirement.
    (e) A request for approval of a proposed cooperative agreement, and 
all documents incident to such agreement, must be filed with the 
superintendent or area director at least ninety (90) days prior to the 
first expiration date of any of the Indian leases in the area proposed 
to be covered by the cooperative agreement.

[[Page 35658]]

    (f) Unless otherwise provided in the cooperative agreement, 
approval of the agreement commits each lease to the unit in the area 
covered by the agreement on the date approved by the Secretary or the 
date of first production, whichever is earlier, as long as the 
agreement is approved before the lease expiration date.
    (g) Any lease committed in part to any such cooperative agreement 
shall be segregated into a separate lease or leases as to the lands 
committed and lands not committed to the agreement. Segregation shall 
be effective on the date the agreement is effective.
    (h) Wells shall be drilled in conformity with a well spacing 
program approved by the authorized officer.


Sec. 211.29  Exemption of leases and permits made by organized tribes.

    The regulations in this part may be superseded by the provisions of 
any tribal constitution, bylaw or charter issued pursuant to the Indian 
Reorganization Act of June 18, 1934 (48 Stat. 984; 25 U.S.C. 461-479), 
the Alaska Act of May 1, 1936 (49 Stat. 1250; 48 U.S.C. 362,258a), or 
the Oklahoma Indian Welfare Act of June 26, 1936 (49 Stat. 1967; 25 
U.S.C., and Sup., 501-509), or by ordinance, resolution, or other 
action authorized under such constitution, bylaw or charter; Provided, 
that such tribal law may not supersede the requirements of Federal 
statutes applicable to Indian mineral leases. The regulations in this 
part, in so far as they are not so superseded, shall apply to leases 
and permits made by organized tribes if the validity of the lease or 
permit depends upon the approval of the Secretary of the Interior.

Subpart C--Rents, Royalties, Cancellations and Appeals


Sec. 211.40  Manner of payments.

    Unless otherwise specifically provided for in a lease, once 
production has been established, all payments shall be made to the MMS 
or such other party as may be designated, and shall be made at such 
time as provided in 30 CFR chapter II, subchapters A and C. Prior to 
production, all bonus and rental payments, shall be made to the 
superintendent or area director.


Sec. 211.41  Rentals and production royalty on oil and gas leases.

    (a) A lessee shall pay, in advance, beginning with the effective 
date of the lease, an annual rental of $2.00 per acre or fraction of an 
acre or such other greater amount as prescribed in the lease. This 
rental shall not be credited against production royalty nor shall the 
rental be prorated or refunded because of surrender or cancellation.
    (b) The Secretary shall not approve leases with a royalty rate less 
than 16-\2/3\ percent of the amount or value of production produced and 
sold from the lease unless a lower royalty rate is agreed to by the 
Indian mineral owner and is found to be in the best interest of the 
Indian mineral owner. Such approval may only be granted by the area 
director if the approving official is the superintendent and by the 
Assistant Secretary for Indian Affairs if the approving official is the 
area director.
    (c) Value of lease production for royalty purposes shall be 
determined in accordance with applicable lease provisions and 
regulations in 30 CFR chapter II, subchapters A and C. If the valuation 
provisions in the lease are inconsistent with the regulations in 30 CFR 
chapter II, subchapters A and C, the lease provisions shall govern.
    (d) If the leased premises produce gas in excess of the lessee's 
requirements for the development and operation of said premises, then 
the lessor may use sufficient gas, free of charge, for any desired 
school or other buildings belonging to the tribe, by making his own 
connections to a regulator installed, connected to the well and 
maintained by the lessee, and the lessee shall not be required to pay 
royalty on gas so used. The use of such gas shall be at the lessor's 
risk at all times.


Sec. 211.42  Annual rentals and expenditures for development on leases 
other than oil and gas, and geothermal resources.

    (a) Unless otherwise authorized by the Secretary, a lease for 
minerals other than oil, gas and geothermal resources shall provide for 
a yearly development expenditure of not less than $20 per acre. All 
such leases shall provide for a rental payment of not less than $2.00 
for each acre or fraction of an acre payable on or before the first day 
of each lease year.
    (b) Within twenty (20) days after the lease year, an itemized 
statement, in duplicate, of the expenditure for development under a 
lease for minerals other than oil and gas shall be filed with the 
superintendent or area director. The lessee must certify the statement 
under oath.


Sec. 211.43  Royalty rates for minerals other than oil and gas.

    (a) Except as provided in paragraph (b) of this section, the 
minimum rates for leases of minerals other than oil and gas shall be as 
follows:
    (1) For substances other than coal, the royalty rate shall be 10 
percent of the value of production produced and sold from the lease at 
the nearest shipping point.
    (2) For coal to be strip or open pit mined the royalty rate shall 
be 12\1/2\ percent of the value of production produced and sold from 
the lease, and for coal removed from an underground mine, the royalty 
rate shall be 8 percent of the value of production produced and sold 
from the lease.
    (3) For geothermal resources, the royalty rate shall be 10 percent 
of the amount or value of steam, or any other form of heat or energy 
derived from production of geothermal resources under the lease and 
sold or utilized by the lessee. In addition, the royalty rate shall be 
5 percent of the value of any byproduct derived from production of 
geothermal resources under the lease and sold or utilized or reasonably 
susceptible of sale or utilization by the lessee, except that the 
royalty for any mineral byproduct shall be governed by the appropriate 
paragraph of this section.
    (b) A lower royalty rate shall be allowed if it is determined to be 
in the best interest of the Indian mineral owner. Approval of a lower 
rate may only be granted by the area director if the approving official 
is the superintendent or by the Assistant Secretary for Indian Affairs, 
if the approving official is the area director.


Sec. 211.44  Suspension of operations.

    (a) After the expiration of the primary term of the lease the 
Secretary may approve suspension of operations for remedial purposes 
which are necessary for continued production, to protect the resource, 
the environment, or for other good reasons. Provided, that such 
remedial operations are conducted in accordance with 43 CFR part 3160, 
subpart 3165 and under such stipulations and conditions as may be 
prescribed by the Secretary and are conducted with reasonable 
diligence. Any suspension shall not relieve the lessee from liability 
for the payment of rental and other payments as required by lease 
provisions.
    (b) An application for permission to suspend operations or 
production for economic or marketing reasons on a lease capable of 
production after the expiration of the primary term of lease duration 
must be accompanied by the written consent of the Indian mineral owner, 
an economic analysis, and an executed amendment by the parties to the 
lease setting forth the provisions pertaining to the suspension of 
operations and production. Such application shall be treated as a 
negotiated change to lease provisions,

[[Page 35659]]

and as such, shall be subject to review and approval by the Secretary.


Sec. 211.45  [Reserved]


Sec. 211.46  Inspection of premises, books and accounts.

    Lessees shall allow the Indian mineral owner, the Indian mineral 
owner's representatives, or any authorized representative of the 
Secretary to enter all parts of the leased premises for the purpose of 
inspection and audit. Lessees shall keep a full and correct account of 
all operations and submit all related reports required by the lease and 
applicable regulations. Books and records shall be available for 
inspection during regular business hours.


Sec. 211.47  Diligence, drainage and prevention of waste.

    The lessee shall:
    (a) Exercise diligence in mining, drilling and operating wells on 
the leased lands while minerals production can be secured in paying 
quantities;
    (b) Protect the lease from drainage (if oil and gas or geothermal 
resources are being drained from the lease premises by a well or wells 
located on lands not included in the lease, the Secretary reserves the 
right to impose reasonable and equitable terms and conditions to 
protect the interest of the Indian mineral owner of the lands, such as 
payment of compensatory royalty for the drainage);
    (c) Carry on operations in a good and workmanlike manner in 
accordance with approved methods and practices;
    (d) Have due regard for the prevention of waste of oil or gas or 
other minerals, the entrance of water through wells drilled by the 
lessee to other strata, to the destruction or injury of the oil or gas, 
other mineral deposits, or fresh water aquifers, the preservation and 
conservation of the property for future productive operations, and the 
health and safety of workmen and employees;
    (e) Securely plug all wells and effectively shut off all water from 
the oil or gas-bearing strata before abandoning them;
    (f) Not construct any well pad location within 200 feet of any 
structures or improvements without the Indian surface owner's written 
consent;
    (g) Carry out, at the lessee's expense, all reasonable orders and 
requirements of the authorized officer relative to prevention of waste;
    (h) Bury all pipelines crossing tillable lands below plow depth 
unless other arrangements are made with the Indian surface owner; and
    (i) Pay the Indian surface owner all damages, including damages to 
crops, buildings, and other improvements of the Indian surface owner 
occasioned by the lessee's operations as determined by the 
superintendent.


Sec. 211.48  Permission to start operations.

    (a) No exploration, drilling, or mining operations are permitted on 
any Indian lands before the Secretary has granted written approval of a 
mineral lease or permit pursuant to the regulations in this part.
    (b) After a lease or permit is approved, written permission must be 
secured from the Secretary before any operations are started on the 
leased premises, in accordance with applicable rules and regulations in 
25 CFR part 216; 30 CFR chapter II, subchapters A and C; 30 CFR part 
750 (Requirements for Surface Coal Mining and Reclamation Operations on 
Indian Lands), 43 CFR parts 3160, 3260, 3480, 3590, and Orders or 
Notices to Lessees (NTLs) issued thereunder.


Sec. 211.49  Restrictions on operations.

    Leases issued under the provisions of the regulations in this part 
shall be subject to such restrictions as to time or times for well 
operations and production from any leased premises as the Secretary 
judges may be necessary or proper for the protection of the natural 
resources of the leased land and in the interest of the lessor.


Sec. 211.50  [Reserved]


Sec. 211.51  Surrender of leases.

    A lessee may, with the approval of the Secretary, surrender a lease 
or any part of it, on the following conditions:
    (a) All royalties and rentals due on the date the request for 
surrender is received must be paid;
    (b) The superintendent, after consultation with the authorized 
officer, must be satisfied that proper provisions have been made for 
the conservation and protection of the property, and that all 
operations on the portion of the lease surrendered have been properly 
reclaimed, abandoned, or conditioned, as required;
    (c) If a lease has been recorded, the lessee must submit a release 
along with the recording information of the original lease so that, 
after acceptance of the release, it may be recorded;
    (d) If a lessee requests to surrender an entire lease or an entire 
undivided portion of a lease document, the lessee must deliver to the 
superintendent or area director the original lease documents; Provided, 
that where the request is made by an assignee to whom no copy of the 
lease was delivered, the assignee must deliver to the superintendent or 
area director only its copy of the assignment;
    (e) If the lease (or a portion thereof being surrendered) is owned 
in undivided interests, all lessees owning undivided interests in the 
lease must join in the request for surrender;
    (f) No part of any advance rental shall be refunded to the lessee, 
nor shall any subsequent surrender or termination of a lease relieve 
the lessee of the obligation to pay advance rental if advance rental 
became due prior to the date the request for surrender was received by 
the superintendent or area director;
    (g) If oil, gas, or geothermal resources are being drained from the 
leased premises by a well or wells located on lands not included in the 
lease, the Secretary reserves the right, prior to acceptance of the 
surrender, to impose reasonable and equitable terms and conditions to 
protect the interests of the Indian mineral owners of the lands 
surrendered. Such terms and conditions may include payment of 
compensatory royalty for any drainage; and
    (h) Upon expiration or surrender of a solid mineral lease the 
lessee shall deliver the leased premises in a condition conforming to 
the approved reclamation plan. Unless otherwise provided in the lease, 
the machinery necessary to operate the mine is the property of the 
lessee. However, the machinery may not be removed from the leased 
premises without the written permission of the Secretary.


Sec. 211.52  Fees.

    Unless otherwise authorized by the Secretary, each permit, lease, 
sublease, or other contract, or assignment, thereof shall be 
accompanied by a filing fee of $75.00 at the time of filing.


Sec. 211.53  Assignments, overriding royalties, and operating 
agreements.

    (a) Approved leases or any interest therein may be assigned or 
transferred only with the approval of the Secretary. The Indian mineral 
owner must also consent if approval of the Indian mineral owner is 
required in the lease. If consent is not required, then the Secretary 
shall notify the Indian mineral owner of the proposed assignment. To 
obtain the approval of the Secretary the assignee must be qualified to 
hold the lease under existing rules and regulations and shall furnish a 
satisfactory bond conditioned for the faithful performance of the 
covenants and conditions of the lease.
    (b) No lease or interest therein or the use of such lease shall be 
assigned, sublet, or transferred, directly or indirectly, by working or 
drilling contract, or otherwise, without the consent of the Secretary.
    (c) Assignments of leases, and stipulations modifying the 
provisions of

[[Page 35660]]

existing leases, which stipulations are also subject to the approval of 
the Secretary, shall be filed with the superintendent within five (5) 
working days after the date of execution. Upon execution of 
satisfactory bonds by the assignee the Secretary may permit the release 
of any bonds executed by the assignor. Upon execution of satisfactory 
bonds the assignee accepts all the assignor's responsibilities and 
prior obligations and liabilities of the assignor (including but not 
limited to any underpaid royalties and rentals) under the lease.
    (d) Agreements creating overriding royalties or payments out of 
production shall not be considered as interests in the leases as such 
provision is used in this section. Agreements creating overriding 
royalties or payments out of production, or agreements designating 
operators are hereby authorized and the approval of the Secretary shall 
not be required with respect thereto, but such agreements shall be 
subject to the condition that nothing in such agreements shall be 
construed as modifying any of the obligations of the lessee, including, 
but not limited to, obligations imposed by requirements of the MMS for 
reporting, accounting, and auditing; obligations for diligent 
development and operation, protection against drainage and mining in 
trespass, compliance with oil and gas, geothermal, and mining 
regulations (25 CFR part 216; 43 CFR parts 3160, 3260, 3480, and 3590; 
and those applicable rules found in 30 CFR chapter II, subchapters A 
and C) and the requirements for Secretarial approval before abandonment 
of any oil and gas or geothermal well or mining operation. All such 
obligations are to remain in full force and effect, the same as if free 
of any such overriding royalties or payments. The existence of 
agreements creating overriding royalties or payments out of production, 
whether or not actually paid, shall not be considered as justification 
for the approval of abandonment of any oil and gas or geothermal well 
or mining operation. Nothing in this paragraph revokes the requirement 
for approval of assignments and other instruments which is required in 
this section, but any overriding royalties or payments out of 
production created by the provisions of such assignments or instruments 
shall be subject to the condition stated in this section. Agreements 
creating overriding royalties or payments out of production, or 
agreements designating operators shall be filed with the superintendent 
unless incorporated in assignments or instruments required to be filed 
pursuant to this section.


Sec. 211.54  Lease or permit cancellation; Bureau of Indian Affairs 
notice of noncompliance.

    (a) If the Secretary determines that a permittee or lessee has 
failed to comply with the terms of the permit or lease; the regulations 
in this part; or other applicable laws or regulations; the Secretary 
may:
    (1) Serve a notice of noncompliance specifying in what respect the 
permittee or lessee has failed to comply with the requirements 
referenced in this paragraph, and specifying what actions, if any, must 
be taken to correct the noncompliance; or
    (2) Serve a notice of proposed cancellation of the lease or permit. 
The notice of proposed cancellation shall set forth the reasons why 
lease or permit cancellation is proposed and shall specify what 
actions, if any, must be taken to avoid cancellation.
    (b) The notice of noncompliance or proposed cancellation shall 
specify in what respect the permittee or lessee has failed to comply 
with the requirements referenced in paragraph (a), and shall specify 
what actions, if any, must be taken to correct the noncompliance.
    (c) The notice shall be served upon the permittee or lessee by 
delivery in person or by certified mail to the permittee or lessee at 
the permittee's or lessee's last known address. When certified mail is 
used, the date of service shall be deemed to be when the notice is 
received or five (5) working days after the date it is mailed, 
whichever is earlier.
    (d) The lessee or permittee shall have thirty (30) days (or such 
longer time as specified in the notice) from the date that the notice 
is served to respond, in writing, to the official or the Bureau of 
Indian Affairs office that issued the notice.
    (e) If a permittee or lessee fails to take any action that is 
prescribed in the notice of proposed cancellation, fails to file a 
timely written response to the notice, or files a written response that 
does not, in the discretion of the Secretary, adequately justify the 
permittee's or lessee's actions, then the Secretary may cancel the 
lease or permit, specifying the basis for the cancellation.
    (f) If a permittee or lessee fails to take corrective action or to 
file a timely written response adequately justifying the permittee's or 
lessee's actions pursuant to a notice of noncompliance, the Secretary 
may issue an order of cessation of operations. If the permittee or 
lessee fails to comply with the order of cessation, or fails to timely 
file an appeal of the order of cessation pursuant to paragraph (h), the 
Secretary may issue an order of lease or permit cancellation.
    (g) Cancellation of a lease or permit shall not relieve the lessee 
or permittee of any continuing obligations under the lease or permit.
    (h) Orders of cessation or of lease or permit cancellation issued 
pursuant to this section may be appealed under 25 CFR part 2.
    (i) This section does not limit any other remedies of the Indian 
mineral owner as set forth in the lease or permit.
    (j) Nothing in this section is intended to limit the authority of 
the authorized officer or the MMS official to take any enforcement 
action authorized pursuant to statute or regulation.
    (k) The authorized officer, MMS official, and the superintendent 
and/or area director should consult with one another before taking any 
enforcement actions.


Sec. 211.55  Penalties.

    (a) In addition to or in lieu of cancellation under Sec. 211.54, 
violations of the terms and conditions of any lease, or the regulations 
in this part, or failure to comply with a notice of noncompliance or a 
cessation order issued by the Secretary, or, in the case of solid 
minerals the authorized officer, may subject a lessee or permittee to a 
penalty of not more than $1,000 per day for each day that such a 
violation or noncompliance continues beyond the time limits prescribed 
for corrective action.
    (b) A notice of a proposed penalty shall be served on the lessee or 
permittee either personally or by certified mail to the lessee or 
permittee at the lessee's or permittee's last known address. The date 
of service by certified mail shall be deemed to be the date when 
received or five (5) working days after the date mailed, whichever is 
earlier.
    (c) The notice shall specify the nature of the violation and the 
proposed penalty, and shall specifically advise the lessee or permittee 
of the lessee's or permittee's right to either request a hearing within 
thirty (30) days from receipt of the notice or pay the proposed 
penalty. Hearings shall be held before the superintendent and/or area 
director whose findings shall be conclusive, unless an appeal is taken 
pursuant to 25 CFR part 2.
    (d) If the lessee or permittee served with a notice of proposed 
penalty requests a hearing, penalties shall accrue each day the 
violations or noncompliance set forth in the notice

[[Page 35661]]

continue beyond the time limits prescribed for corrective action. The 
Secretary may issue a written suspension of the requirement to correct 
the violations pending completion of the hearings provided by this 
section only upon a determination, at the discretion of the Secretary, 
that such a suspension will not be detrimental to the lessor and upon 
submission and acceptance of a bond deemed adequate to indemnify the 
lessor from loss or damage. The amount of the bond must be sufficient 
to cover the cost of correcting the violations set forth in the notice 
or any disputed amounts plus accrued penalties and interest.
    (e) Payment in full of penalties more than ten (10) days after a 
final decision imposing a penalty shall subject the lessee or permittee 
to late payment charges. Late payment charges shall be calculated on 
the basis of a percentage assessment rate of the amount unpaid per 
month for each month or fraction thereof until payment is received by 
the Secretary. In the absence of a specific lease provision prescribing 
a different rate, the interest rate on late payments and underpayments 
shall be a rate applicable under Sec. 6621(a)(2) of the Internal 
Revenue Code of 1954. Interest shall be charged only on the amount of 
payment not received and only for the number of days the payment is 
late.
    (f) None of the provisions of this section shall be interpreted as:
    (1) Replacing or superseding the independent authority of the 
authorized officer, the director's representative or the MMS official 
to impose penalties for violations of applicable regulations pursuant 
to 43 CFR part 3160, and 43 CFR Groups 3400 and 3500, 30 CFR part 750, 
or 30 CFR chapter II, subchapters A and C;
    (2) Replacing or superseding any penalty provision in the terms and 
conditions of a lease or permit approved by the Secretary pursuant to 
this part; or
    (3) Authorizing the imposition of a penalty for violations of lease 
or permit terms for which the authorized officer, director's 
representative or MMS official, have either statutory or regulatory 
authority to assess a penalty.


Sec. 211.56  Geological and geophysical permits.

    Permits to conduct geological and geophysical operations on Indian 
lands which do not conflict with any mineral leases entered into 
pursuant to this part, may be approved by the Secretary with the 
consent of the Indian mineral owner under the following conditions:
    (a) The permit must describe the area to be explored, the duration, 
and the consideration to be paid the Indian owner;
    (b) The permit will not grant the permittee any option or 
preference rights to a lease or other development contract, or 
authorize the production of, or removal of oil and gas, geothermal 
resources, or other minerals, except samples for assay and experimental 
purposes, unless specifically so stated in the permit; and
    (c) Copies of all data collected pursuant to operations conducted 
under the permit shall be forwarded to the Secretary and the Indian 
mineral owner, unless otherwise provided in the permit. Data collected 
under a permit may be held by the Secretary as privileged and 
proprietary information for the time prescribed in the permit. Where no 
time period is prescribed in the permit, the Secretary may release such 
information after six (6) years, with the consent of the Indian mineral 
owner.


Sec. 211.57  Forms.

    Leases, bonds, permits, assignments, and other instruments relating 
to mineral leasing shall be on forms, prescribed by the Secretary, that 
may be obtained from the superintendent or area director. The 
provisions of a standard lease or permit may be changed, deleted, or 
added to by written agreement of all parties with the approval of the 
Secretary.


Sec. 211.58  Appeals.

    Appeals from decisions of Bureau of Indian Affairs officers under 
this part may be taken pursuant to 25 CFR part 2.

PART 212--LEASING OF ALLOTTED LANDS FOR MINERAL DEVELOPMENT

Subpart A--General

Sec.
212.1  Purpose and scope.
212.2  Information collection.
212.3  Definitions.
212.4  Authority and responsibility of the Bureau of Land Management 
(BLM).
212.5  Authority and responsibility of the Office of Surface Mining 
Reclamation and Enforcement (OSM).
212.6  Authority and responsibility of the Minerals Management 
Service (MMS).
212.7  Environmental studies.
212.8  Government employees cannot acquire leases.

Subpart B--How to Acquire Leases

212.20  Leasing procedures.
212.21  Execution of leases.
212.22  Leases for subsurface storage of oil or gas.
212.23  Corporate qualifications and requests for information.
212.24  Bonds.
212.25  Acreage limitation.
212.26  [Reserved]
212.27  Duration of leases.
212.28  Unitization and communitization agreements, and well 
spacing.
212.29  [Reserved]
212.30  Removal of restrictions.
212.31  [Reserved]
212.32  [Reserved]
212.33  Terms applying after relinquishment.
212.34  Individual tribal assignments excluded.

Subpart C--Rents, Royalties, Cancellations, and Appeals

212.40  Manner of payments.
212.41  Rentals and production royalty on oil and gas leases.
212.42  Annual rentals and expenditures for development on leases 
other than oil and gas, and geothermal resources.
212.43  Royalty rates for minerals other than oil and gas.
212.44  Suspension of operations.
212.45  [Reserved]
212.46  Inspection of premises, books and accounts.
212.47  Diligence, drainage and prevention of waste.
212.48  Permission to start operations.
212.49  Restrictions on operations.
212.50  [Reserved]
212.51  Surrender of leases.
212.52  Fees.
212.53  Assignments, overriding royalties, and operating agreements.
212.54  Lease or permit cancellation; Bureau of Indian Affairs 
notice of noncompliance.
212.55  Penalties.
212.56  Geological and geophysical permits.
212.57  Forms.
212.58  Appeals.

    Authority: Act of March 3, 1909, (35 Stat. 783; 25 U.S.C. 396 
(as amended)): Act of May 11, 1938, (Sec. 2, 52 Stat. 347; 25 U.S.C. 
396 b-g: Act of August 1, 1956, (70 Stat. 774)); and 25 U.S.C. 2 and 
9.

Subpart A--General


Sec. 212.1  Purpose and scope.

    (a) The regulations in this part govern leases for the development 
of individual Indian oil and gas, geothermal and solid mineral 
resources. These regulations are applicable to lands or interests in 
lands the title to which is held, for any individual Indian, in trust 
by the United States or is subject to restriction against alienation 
imposed by the United States. These regulations are intended to ensure 
that Indian mineral owners desiring to have their resources developed 
are assured that they will be developed in a manner that maximizes 
their best economic interests and minimizes any adverse environmental 
impacts or cultural impacts resulting from such development.
    (b) The regulations in this part shall be subject to amendment at 
any time by the Secretary of the Interior. No regulation that becomes 
effective after

[[Page 35662]]

the date of approval of any lease or permit shall operate to affect the 
duration of the lease or permit, rate of royalty, rental, or acreage 
unless agreed to by all parties to the lease or permit.
    (c) Nothing in the regulations in this part is intended to prevent 
Indian tribes from exercising their lawful governmental authority to 
regulate the conduct of persons, businesses, operations or mining 
within their territorial jurisdiction.
    (d) The regulations of the Bureau of Land Management, the Office of 
Surface Mining Reclamation and Enforcement, and the Minerals Management 
Service that are referenced in Secs. 212.4, 212.5, and 212.6 of this 
part are supplemental to these regulations, and apply to parties 
holding leases or permits for development of Indian mineral resources 
unless specifically stated otherwise in this part or in such other 
Federal regulations.
    (e) The regulations in this part do not apply to leasing and 
development governed by regulations in 25 CFR parts 213 (Members of the 
Five Civilized Tribes of Oklahoma), 226 (Osage), or 227 (Wind River 
Reservation).


Sec. 212.2  Information collection.

    The information collection requirements contained in this part do 
not require a review by the Office of Management and Budget under the 
Paperwork Reduction Act (44 U.S.C. 3501; et seq.).


Sec. 212.3  Definitions.

    As used in this part, the following words and phrases have the 
specified meaning except where otherwise indicated:
    Applicant means any person seeking a permit, lease, or an 
assignment from the superintendent or area director.
    Approving official means the Bureau of Indian Affairs official with 
delegated authority to approve a lease or permit.
    Area director means the Bureau of Indian Affairs official in charge 
of an area office.
    Authorized officer means any employee of the Bureau of Land 
Management authorized by law or by lawful delegation of authority to 
perform the duties described herein and in 43 CFR parts 3160, 3180, 
3260, 3280, 3480, and 3590.
    Cooperative agreement means a binding arrangement between two or 
more parties purporting to the act of agreeing or of coming to a mutual 
arrangement that is accepted by all parties to a transaction (e.g., 
communitization and unitization).
    Director's representative means the Office of Surface Mining 
Reclamation and Enforcement director's representative authorized by law 
or lawful delegation of authority to perform the duties described in 30 
CFR part 750.
    Gas means any fluid, either combustible or non-combustible, that is 
produced in a natural state from the earth and that maintains a gaseous 
or rarefied state at ordinary temperature and pressure conditions.
    Geological and geophysical permit means a written authorization to 
conduct on-site surveys to locate potential deposits of oil and gas, 
geothermal or solid mineral resources on the lands.
    Geothermal resources means:
    (1) All products of geothermal processes, including indigenous 
steam, hot water and hot brines;
    (2) Steam and other gases, hot water, and hot brines, resulting 
from water, gas or other fluids artificially introduced into geothermal 
formations;
    (3) Heat or other associated energy found in geothermal formations; 
and
    (4) Any by-product derived therefrom.
    In the best interest of the Indian mineral owner refers to the 
standards to be applied by the Secretary in considering whether to take 
an administrative action affecting the interests of an Indian mineral 
owner. In considering whether it is ``in the best interest of the 
Indian mineral owner'' to take a certain action (such as approval of a 
lease, permit, unitization or communitization agreement), the Secretary 
shall consider any relevant factor, including, but not limited to: 
economic considerations, such as date of lease expiration; probable 
financial effect on the Indian mineral owner; leasability of land 
concerned; need for change in the terms of the existing lease; 
marketability; and potential environmental, social, and cultural 
effects.
    Indian lands means any lands owned by any individual Indian or 
Alaska Native, Indian tribe, band, nation, pueblo, community, 
rancheria, colony, or other tribal group which owns lands or interest 
in the minerals, the title to which is held in trust by the United 
States or is subject to restriction against alienation imposed by the 
United States.
    Indian mineral owner means any individual Indian or Alaska Native 
who owns mineral interests in oil and gas, geothermal, or solid mineral 
resources, title to which is held in trust by the United States, or is 
subject to the restriction against alienation imposed by the United 
States.
    Indian surface owner means any individual Indian or Indian tribe 
whose surface estate is held in trust by the United States, or is 
subject to restriction against alienation imposed by the United States.
    Lease means any contract, approved by the Secretary of the Interior 
under the Act of March 3, 1909 (35 Stat. 783)(25 U.S.C. 396), as 
amended, and the Act of May 11, 1938 (52 Stat. 347) (25 U.S.C. 396a-
396g), as amended, that authorize exploration for, extraction of, or 
removal of any minerals.
    Lessee means a natural person, proprietorship, partnership, 
corporation, or other entity which has entered into a lease with an 
Indian mineral owner, or who has been assigned an obligation to make 
royalty or other payments required by the lease.
    Lessor means an Indian mineral owner who is a party to a lease.
    Minerals includes both metalliferous and non-metalliferous 
minerals; all hydrocarbons, including oil, gas, coal and lignite of all 
ranks; geothermal resources; and includes but is not limited to, sand, 
gravel, pumice, cinders, granite, building stone, limestone, clay, 
silt, or any other energy or non-energy mineral.
    Minerals Management Service official means any employee of the 
Minerals Management Service (MMS) authorized by law or by lawful 
delegation of authority to perform the duties described in 30 CFR 
chapter II, subchapters A and C.
    Mining means the science, technique, and business of mineral 
development including, but not limited to: opencast work, underground 
work, and in-situ leaching directed to severance and treatment of 
minerals; Provided, when sand, gravel, pumice, cinders, granite, 
building stone, limestone, clay or silt is the subject mineral, an 
enterprise is considered ``mining'' only if the extraction of such a 
mineral exceeds 5,000 cubic yards in any given year.
    Oil means all nongaseous hydrocarbon substances other than those 
substances leasable as coal, oil shale, or gilsonite (including all 
vein-type solid hydrocarbons). Oil includes liquefiable hydrocarbon 
substances such as drip gasoline and other natural condensates 
recovered or recoverable in a liquid state from produced gas without 
resorting to a manufacturing process.
    Permit means any contract issued by the superintendent and/or area 
director to conduct exploration on; or removal of less than 5,000 cubic 
yards per year of common varieties of minerals from Indian lands.
    Permittee means a person holding or required by this part to hold a 
permit to conduct exploration operations on; or remove less than 5,000 
cubic yards per

[[Page 35663]]

year of common varieties of minerals from Indian lands.
    Secretary means the Secretary of the Interior or an authorized 
representative.
    Solid minerals means all minerals excluding oil and gas and 
geothermal resources.
    Superintendent means the Bureau of Indian Affairs official in 
charge of the agency office having jurisdiction over the minerals 
subject to leasing under this part.


Sec. 212.4  Authority and responsibility of the Bureau of Land 
Management (BLM).

    The functions of the Bureau of Land Management are found in 43 CFR 
part 3160--Onshore Oil and Gas Operations, 43 CFR part 3180-- Onshore 
Oil and Gas Unit Agreements: Unproven Area, 43 CFR part 3260--
Geothermal Resources Operations, 43 CFR part 3280--Geothermal Resources 
Unit Agreements: Unproven Areas, 43 CFR part 3480--Coal Exploration and 
Mining Operations, and 43 CFR part 3590--Solid Minerals (other than 
coal) Exploration and Mining Operations, and currently include, but are 
not limited to, resource evaluation, approval of drilling permits, 
mining and reclamation, production plans, mineral appraisals, 
inspection and enforcement, and production verification. Those 
regulations, apply to leases or permits issued under this part.


Sec. 212.5  Authority and responsibility of the Office of Surface 
Mining Reclamation and Enforcement (OSM).

    The OSM is the regulatory authority for surface coal mining and 
reclamation operations on Indian lands pursuant to the Surface Mining 
Control and Reclamation Act of 1977 (30 U.S.C. 1201 et seq.). The 
relevant regulations for surface coal mining and reclamation operations 
are found in 30 CFR part 750. Those regulations apply to mining and 
reclamation on leases issued under this part.


Sec. 212.6  Authority and responsibility of the Minerals Management 
Service (MMS).

    The functions of the MMS for reporting, accounting, and auditing 
are found in 30 CFR chapter II, subchapters A and C, which apply to 
leases approved under this part. To the extent the parties to a lease 
or permit are able to provide reasonable provisions satisfactorily 
addressing the functions governed by MMS regulations, the Secretary may 
approve alternate provisions in a lease or permit.


Sec. 212.7  Environmental studies.

    The provisions of Sec. 211.7 of this subchapter, as amended, are 
applicable to leases under this part.


Sec. 212.8  Government employees cannot acquire leases.

    U.S. Government employees are prevented from acquiring leases or 
interests in leases by the provisions of 25 CFR part 140 and 43 CFR 
part 20 pertaining to conflicts of interest and ownership of an 
interest in trust land.

Subpart B--How to Acquire Leases


Sec. 212.20  Leasing procedures.

    (a) Application for leases shall be made to the superintendent 
having jurisdiction over the lands.
    (b) Indian mineral owners may request the Secretary to prepare, 
advertise and negotiate mineral leases on their behalf. Leases for 
minerals shall be advertised for bids as prescribed in this section 
unless one or more of the Indian mineral owners of a tract sought for 
lease request the Secretary to negotiate for a lease on their behalf 
without advertising. Unless the Secretary decides that negotiation of a 
mineral lease is in the best interests of the Indian mineral owners, he 
shall use the following procedure for leasing:
    (1) Leases shall be advertised to receive optimum competition for 
bonus consideration, under sealed bid, oral auction, or a combination 
of both. Notice of such advertisement shall be published in at least 
one local newspaper and in one trade publication at least thirty (30) 
days in advance of sale. If applicable, such notice must identify the 
reservation within which the tracts to be leased are found. No specific 
description of the tracts to be leased need be published. Specific 
description of such tracts shall be available at the office of the 
superintendent and/or area director upon request. The complete text of 
the advertisement, including a specific description, shall be mailed to 
each person listed on the appropriate agency or area mailing list. 
Individuals and companies interested in receiving advertisements on 
lease sales should send their mailing information to the appropriate 
agency or area office for future reference.
    (2) The advertisement shall offer the tracts to a responsible 
bidder offering the highest bonus. The Secretary shall establish the 
rental and royalty rates which shall be stated in the advertisement and 
will not be subject to negotiation. The advertisement shall provide 
that the Secretary reserves the right to reject any or all bids, and 
that acceptance of the lease bid by or on behalf of the Indian mineral 
owner is required. The requirements under Sec. 212.21 are applicable to 
the acceptance of a lease bid.
    (3) Each sealed bid must be accompanied by a cashier's check, 
certified check or postal money order, or any combination thereof, 
payable to the payee designated in the advertisement, in an amount not 
less than 25 percent of the bonus bid, which shall be returned if that 
bid is not accepted.
    (4) A successful oral auction bidder will be allowed five (5) 
working days to remit the required 25 percent deposit of the bonus bid.
    (5) A successful bidder shall, within thirty (30) days after 
notification of the bid award, remit to the Secretary the balance of 
the bonus, the first year's rental, a $75 filing fee, its prorated 
share of the advertising costs as determined by the Bureau of Indian 
Affairs, and file with the Secretary all required bonds. The successful 
bidder shall also file the lease in completed form, signed by the 
Indian mineral owner(s), at that time. However, for good reasons, the 
Secretary may grant extensions of time in thirty (30) day increments 
for filing of the lease and all required bonds, provided that 
additional extension requests are submitted and approved prior to the 
expiration of the original thirty (30) days or the previously granted 
extension. Failure on the part of the bidder to take all reasonable 
actions necessary to comply with the foregoing shall result in 
forfeiture of the required payment of 25 percent of any bonus bid for 
the use and benefit of the Indian mineral owner.
    (6) If no satisfactory bid is received, or if the accepted bidder 
fails to complete all requirements necessary for approval of the lease, 
or if the Secretary determines that it is not in the best interest of 
the Indian mineral owner to accept any of the bids the Secretary may 
re-advertise the tract for sale, or subject to the consent of the 
Indian mineral owner, a lease may be let through private negotiations.
    (c) The Secretary shall advise the Indian mineral owner of the 
results of the bidding, and shall not approve the lease until the 
consent of the Indian mineral owner has been obtained. The requirements 
under Sec. 212.21 are applicable to the approval of a mineral lease.


Sec. 212.21  Execution of leases.

    (a) The Secretary shall not execute a mineral lease on behalf of an 
Indian mineral owner, except when such owner is deceased and the heirs 
to or devisee of the estate have not been determined, or if determined, 
some or all of them cannot be located. Leases involving such interests 
may be executed by the Secretary, provided that the mineral interest 
shall have been

[[Page 35664]]

offered for sale under the provisions of section 212.20(b) (1) through 
(6).
    (b) The Secretary may execute leases on behalf of minors and 
persons who are incompetent by reason of mental incapacity; Provided, 
that there is no parent, guardian, conservator, or other person who has 
lawful authority to execute a lease on behalf of the minor or person 
with mental incapacity.
    (c) If an owner is a life tenant, the procedures set forth in 25 
CFR part 179 (Life Estates and Future Interests), shall apply.


Sec. 212.22  Leases for subsurface storage of oil or gas.

    The provisions of Sec. 211.22 of this subchapter are applicable to 
leases under this part.


Sec. 212.23  Corporate qualifications and requests for information.

    The provisions of Sec. 211.23 of this subchapter are applicable to 
leases under this part.


Sec. 212.24  Bonds.

    The provisions of Sec. 211.24 of this subchapter are applicable to 
leases under this part.


Sec. 212.25  Acreage limitation.

    The provisions of Sec. 211.25 of this subchapter are applicable to 
leases under this part.


Sec. 212.26  [Reserved]


Sec. 212.27  Duration of leases.

    The provisions of Sec. 211.27 of this subchapter are applicable to 
leases under this part.


Sec. 212.28  Unitization and communitization agreements, and well 
spacing.

    (a) For the purpose of promoting conservation and efficient 
utilization of minerals, the Secretary may approve a cooperative unit, 
drilling or other development plan on any leased area upon a 
determination that approval is advisable and in the best interest of 
the Indian mineral owner. For the purposes of this section, a 
cooperative unit, drilling or other development plan means an agreement 
for the development or operation of a specifically designated area as a 
single unit without regard to separate ownership of the land included 
in the agreement. Such cooperative agreements include, but are not 
limited to, unit agreements, communitization agreements and other types 
of agreements that allocate costs and benefits.
    (b) The consent of the Indian mineral owner to such unit or 
cooperative agreement shall not be required unless such consent is 
specifically required in the lease.
    (c) Requests for approval of cooperative agreements which comply 
with the requirements of all applicable rules and regulations shall be 
filed with the superintendent or area director.
    (d) All Indian mineral owners of any right, title or interest in 
the mineral resources to be included in a cooperative agreement must be 
notified by the lessee at the time the agreement is submitted to the 
superintendent or area director. An affidavit from the lessee stating 
that a notice was mailed to each mineral owner of record for whom the 
superintendent or area director has an address will satisfy this notice 
requirement.
    (e) A request for approval of a proposed cooperative agreement, and 
all documents incident to such agreement, must be filed with the 
superintendent or area director at least ninety (90) days prior to the 
first expiration date of any of the Indian leases in the area proposed 
to be covered by the cooperative agreement.
    (f) Unless otherwise provided in the cooperative agreement, 
approval of the agreement commits each lease to the unit in the area 
covered by the agreement on the date approved by the Secretary or the 
date of first production, whichever is earlier, as long as the 
agreement is approved before the lease expiration date.
    (g) Any lease committed in part to any such cooperative agreement 
shall be segregated into a separate lease or leases as to the lands 
committed and lands not committed to the agreement. Segregation shall 
be effective on the date the agreement is effective.
    (h) Wells shall be drilled in conformity with a well spacing 
program approved by the authorized officer.


Sec. 212.29  [Reserved]


Sec. 212.30  Removal of restrictions.

    (a) Notwithstanding the provisions of any mineral lease to the 
contrary, the removal of all restrictions against alienation shall 
operate to divest the Secretary of all supervisory authority and 
responsibility with respect to the lease. Thereafter, all payments 
required to be made under the lease shall be made directly to the 
owner(s).
    (b) In the event restrictions are removed from a part of the land 
included in any lease approved by the Secretary, the entire lease shall 
continue to be subject to the supervision of the Secretary until such 
times as the holder of the lease and the unrestricted Indian owner 
submits to the Secretary satisfactory evidence that adequate 
arrangements have been made to account for the mineral resources of the 
restricted land separately from those of the unrestricted. Thereafter, 
the unrestricted portion shall be relieved from the supervision of the 
Secretary, the lease, the regulations of this part, and all other 
applicable laws and regulations.


Secs. 212.31, 212.32  [Reserved]


Sec. 212.33  Terms applying after relinquishment.

    All leases for individual Indian lands approved by the Secretary 
under this part shall contain provisions for the relinquishment of 
supervision and provide for operations of the lease after such 
relinquishment. These leases shall contain provisions that address the 
following issues:
    (a) Provisions of Relinquishment. If the Secretary relinquishes 
supervision at any time during the life of the lease instrument as to 
all or part of the acreage subject to the lease, the Secretary shall 
give the Indian mineral owner and the lessee thirty (30) days written 
notice prior to the termination of supervision. After notice of 
relinquishment has been given to the lessee, the lease shall be subject 
to the following conditions:
    (1) All rentals and royalties thereafter accruing shall be paid 
directly to the lessor or the lessor's successors in title, or to a 
trustee appointed under the provisions of paragraph (b) of this 
section.
    (2) If, at the time supervision is relinquished by the Secretary, 
the lessee has made all payments then due and has fully performed all 
obligations on the lessee's part to be performed up to the time of such 
relinquishment, the bond given to secure the performance of the lease, 
on file in the appropriate agency or area office, shall be of no 
further force or effect.
    (3) Should relinquishment affect only part of the lease, then the 
lessee may continue to conduct operations on the land covered by the 
lease as an entirety; Provided, that the lessee shall pay, in the 
manner prescribed by the lease and regulations for the benefit of 
lessor, the same proportion of all rentals and royalties due under the 
provisions of this part as the acreage retained under the supervision 
of the Secretary bears to the entire acreage of the lessee, and shall 
pay the remainder of the rentals and royalties directly to the 
remaining lessors or successors in title or said trustee as the case 
may be, as provided in paragraph (a) (1) of this section.
    (b) Division of fee. If, after the execution of the lease and after 
the

[[Page 35665]]

Secretary relinquishes supervision thereof, the fee of the leased land 
is divided into separate parcels held by different owners, or if the 
rental or royalty interest is divided in ownership, the obligations of 
the lessee shall not be modified in any manner except as specifically 
provided by the provisions of the lease. Notwithstanding such separate 
ownership, the lessee may continue to conduct operations on said 
premises as an entirety. Each separate owner shall receive such 
proportion of all rental and royalties accruing after the vesting of 
its title as the acreage of the fee, or rental or royalty interest, 
bears to the entire acreage covered by the lease; or to the entire 
rental or royalty interest as the case may be. If at any time after 
departmental supervision of the lease is relinquished, in whole or in 
part, to rentals and royalties, whether said parties are so entitled by 
virtue of undivided interest or by virtue of ownership of separate 
parcels of the land covered, the lessee may elect to withhold the 
payment of further rentals or royalties (except as the portion due the 
Indian lessor while under restriction), until all of said parties shall 
agree upon and designate a trustee in writing and in a recordable 
instrument to receive all payments due thereunder on behalf of said 
parties and their respective successors in title. Payments to said 
trustee shall constitute lawful payments, and the sole risk of an 
improper or unlawful distribution of said funds by said trustee shall 
rest upon the parties naming said trustee and their said respective 
successors in title.


Sec. 212.34  Individual tribal assignments excluded.

    The reference in this part to Indian mineral owners does not 
include assignments of tribal lands made pursuant to tribal 
constitutions or ordinances for the use of individual Indians and 
assignees of such lands.

Subpart C--Rents, Royalties, Cancellations, and Appeals


Sec. 212.40  Manner of payments.

    The provisions of Sec. 211.40 of this subchapter are applicable to 
leases under this part.


Sec. 212.41  Rentals and production royalty on oil and gas leases.

    (a) A lessee shall pay, in advance, beginning with the effective 
date of the lease, an annual rental of $2.00 per acre or fraction of an 
acre or such other greater amount as prescribed in the lease. This 
rental shall not be credited against production royalty nor shall the 
rental be prorated or refunded because of surrender or cancellation.
    (b) The Secretary shall not approve leases with a royalty rate less 
than 16-\2/3\ percent of the amount or value of production produced and 
sold from the lease unless a lower royalty rate is agreed to by the 
Indian mineral owner and is found to be in the best interest of the 
Indian mineral owner. Such approval may only be granted by the area 
director if the approving official is the superintendent and the 
Assistant Secretary for Indian Affairs if the approving official is the 
area director.
    (c) Value of lease production for royalty purposes shall be 
determined in accordance with applicable lease provisions and 
regulations in 30 CFR chapter II, subchapters A and C. If the valuation 
provisions in the lease are inconsistent with the regulations in 30 CFR 
chapter II, subchapters A and C, the lease provisions shall govern.


Sec. 212.42  Annual rentals and expenditures for development on leases 
other than oil and gas, and geothermal resources.

    The provisions of Sec. 211.42 of this subchapter are applicable to 
leases under this part.


Sec. 212.43  Royalty rates for minerals other than oil and gas.

    The provisions of Sec. 211.43 of this subchapter are applicable to 
leases under this part.


Sec. 212.44  Suspension of operations.

    The provisions of Sec. 211.44 of this subchapter are applicable to 
leases under this part.


Sec. 212.45  [Reserved]


Sec. 212.46  Inspection of premises, books, and accounts.

    The provisions of Sec. 211.46 of this subchapter are applicable to 
leases under this part.


Sec. 212.47  Diligence, drainage and prevention of waste.

    The provisions of Sec. 211.47 of this subchapter are applicable to 
leases under this part.


Sec. 212.48  Permission to start operations.

    The provisions of Sec. 211.48 of this subchapter are applicable to 
leases under this part.


Sec. 212.49  Restrictions on operations.

    The provisions of Sec. 211.49 of this subchapter are applicable to 
leases under this part.


Sec. 212.50  [Reserved]


Sec. 212.51  Surrender of leases.

    The provisions of Sec. 211.51 of this subchapter are applicable to 
leases under this part.


Sec. 212.52  Fees.

    The provisions of Sec. 211.52 of this subchapter are applicable to 
leases under this part.


Sec. 212.53  Assignments, overriding royalties, and operating 
agreements.

    The provisions of Sec. 211.53 of this subchapter are applicable to 
leases under this part.


Sec. 212.54  Lease or permit cancellation; Bureau of Indian Affairs 
notice of noncompliance.

    The provisions of Sec. 211.54 of this subchapter are applicable to 
leases under this part.


Sec. 212.55  Penalties.

    The provisions of Sec. 211.55 of this subchapter are applicable to 
this part.


Sec. 212.56  Geological and geophysical permits.

    (a) Permits to conduct geological and geophysical operations on 
Indian lands which do not conflict with any mineral lease entered into 
pursuant to this part may be approved by the Secretary with the consent 
of the Indian owner under the following conditions:
    (1) The permit must describe the area to be explored, the duration 
and the consideration to be paid the Indian owner;
    (2) The permit may not grant the permittee any option or preference 
rights to a lease or other development contract, authorize the 
production of, or removal of oil and gas, or geothermal resources, or 
other minerals except samples for assay and experimental purposes, 
unless specifically so stated in the permit; and
    (3) Copies of all data collected pursuant to operations conducted 
under the permit shall be forwarded to the Secretary and made available 
to the Indian mineral owner, unless otherwise provided in the permit. 
Data collected under a permit shall be held by the Secretary as 
privileged and proprietary information for the time prescribed in the 
permit. Where no time period is prescribed in the permit, the Secretary 
may, in the discretion of the Secretary, release such information after 
six (6) years.
    (b) A permit may be granted by the Secretary without 100 percent 
consent of the individual mineral owners if:
    (1) The minerals are owned by more than one person, and the owners 
of a

[[Page 35666]]

majority of the interest therein consent to the permit;
    (2) The whereabouts of one or more owners of the minerals or an 
interest therein is unknown, and all the remaining owners of the 
interests consent to the permit;
    (3) The heirs or devisee of a deceased owner of the land or an 
interest therein have not been determined, and the Secretary finds that 
the permit activity will cause no substantial injury to the land or any 
owner thereof; or
    (4) The owners of interests in the land are so numerous that the 
Secretary finds it would be impractical to obtain their consent, and 
also finds that the permit activity will cause no substantial injury to 
the land or any owner thereof.
    (c) A lessee does not need a permit to conduct geological and 
geophysical operations on Indian lands, if provided for in the lessee's 
mineral lease, where the Indian mineral owner is also the surface land 
owner. In instances where the Indian mineral owner is not the surface 
owner, the lessee must obtain any additional necessary permits or 
rights of ingress or egress from the surface occupant.


Sec. 212.57  Forms.

    The provisions of Sec. 211.57 of this subchapter are applicable to 
leases under this part.


Sec. 212.58  Appeals.

    The provisions of Sec. 211.58 of this subchapter are applicable to 
leases under this part.

    Dated: June 13, 1996.
Ada E. Deer,
Assistant Secretary--Indian Affairs.
[FR Doc. 96-16036 Filed 7-5-96; 8:45 am]
BILLING CODE 4310-02-P