[Federal Register Volume 59, Number 122 (Monday, June 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15462]
[[Page Unknown]]
[Federal Register: June 27, 1994]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Part 206
Establishment of the Federal Gas Valuation Negotiated Rulemaking
Committee
AGENCY: Minerals Management Service, Interior.
ACTION: Establishment of advisory committee.
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SUMMARY: As required by Section 9(a)(2) of the Federal Advisory
Committee Act (FACA), 5 U.S.C. App., the Department of the Interior
(Department) is giving notice of the establishment of the Federal Gas
Valuation Negotiated Rulemaking Committee (Committee) to develop
specific recommendations with respect to Federal gas valuation pursuant
to its responsibilities imposed by the Federal Oil and Gas Royalty
Management Act of 1982, 30 U.S.C. 1701 et seq. (FOGRMA). The Department
has determined that the establishment of this Committee is in the
public interest and will assist the Agency in performing its duties
under FOGRMA. Copies of the Committee's charter will be filed with the
appropriate committees of Congress and the Library of Congress in
accordance with section 9(c) of FACA.
FOR FURTHER INFORMATION CONTACT:
Ms. Deborah Gibbs Tschudy, Chief, Valuation and Standards Division,
Minerals Management Service, Royalty Management Program, P.O. Box
25165, MS-3920, Denver, Colorado, 80225-0165, telephone number (303)
275-7200, fax number (303) 275-7227.
SUPPLEMENTARY INFORMATION: Through an informal study group, MMS has
conducted discussions to receive input on the current gas market and
identify the challenges facing royalty valuation of gas produced from
Federal leases for royalty purposes. The discussions have gone well and
needs for regulatory changes have been identified. The MMS now believes
that using a negotiated rulemaking committee to make specific
recommendations with respect to Federal gas valuation would help the
agency in developing a rulemaking. The Department is, therefore,
establishing the Federal Gas Valuation Negotiated Rulemaking Committee.
Background
Since the publication of the March 1, 1988, gas valuation
regulations (30 CFR Part 206) many of MMS's constituents have expressed
concern about the current ``tracing method'' of valuing production from
unit and communization agreements. Of particular concern is determining
the proper value, for royalty purposes, when the working interest owner
sells none of the production allocated to him under the agreement.
Likewise, constituents have pointed out difficulties with the current
benchmark system utilized to value non-arm's-length and no-sales
situations. Those difficulties include issues of comparability,
certainty, and access to information. As part of Vice President Gore's
National Performance Review (NPR), the Royalty Management Program
recently initiated a Reinvention Laboratory Team to examine ways to
streamline the royalty management process. One of the recommendations
of that team was to improve the valuation benchmark system. The NPR
Team recommended to the Royalty Management Advisory Committee (RMAC)
that a pilot be conducted to evaluate the use of spot prices as the
second benchmark.
In commenting on the recommendations of the NPR Team, RMAC
recommended that the entire benchmark system be evaluated and that the
evaluation be limited to gas produced from Federal leases.
Statutory Provisions
Pursuant to FOGRMA (30 U.S.C. 1701 et seq.), 30 CFR Part 206 (1993)
and Federal oil and gas lease and agreement terms, certain principles
of royalty accounting will form the basis for a proposed rule:
Volume: Royalties must be paid each month on the volume of
production allocated to or produced from the Federal lease under the
agreement terms.
Royalty Rate: Royalties must be paid in accordance with the royalty
rate specified in each lease unless specified otherwise under the terms
of the agreement.
Value of Production: Value should be determined at the time of
production. Value should be based on the fair market value at the
lease.
Payment Responsibility: Federal lessees or their working interest
owners are ultimately responsible for paying royalties, but other
entities can be assigned the royalty payment responsibility.
The Committee and Its Process
During the winter and spring of 1994, MMS met with representatives
of the oil and gas industry and States to receive input about the
current gas market and identify regulatory changes needed to add
certainty and simplicity to valuation, for royalty purposes, of gas
produced from Federal leases in a new gas market. An informal study
group format was used to obtain and clarify varying viewpoints. The
materials received to date during the input sessions are available for
inspection and copying at the address referenced above for Ms. Deborah
Gibbs Tschudy.
Members of the study group include representatives of the American
Petroleum Institute (API), the Council of Petroleum Accountants
Societies (COPAS), the Rocky Mountain Oil and Gas Association (RMOGA),
the Independent Petroleum Association of America (IPAA), the
Independent Petroleum Association of Mountain States (IPAMS), the
Natural Gas Supply Association (NGSA), an independent marketer, and
representatives of the States of Utah, North Dakota, Montana, and New
Mexico. The MMS and the study group participants believe that the input
sessions have been mutually beneficial. As a result, MMS now believes
it would be appropriate for the study group to transform itself and
make specific regulatory recommendations for implementing a rulemaking
regarding Federal gas valuation. The Department is therefore
establishing the Federal Gas Valuation Negotiated Rulemaking Committee.
The recently enacted Negotiated Rulemaking Act of 1990 (Pub. L.
101-648) contemplates a ``convening'' process which involves
identifying the potential parties and issues, publishing a notice of
intent to form a committee, waiting 30 days for comments to be
submitted responding to the notice, and only then proceeding with the
establishment of the committee provided it meets the criteria of the
Act. In this case, the study group process has served the same function
as the convening--parties that would be significantly affected and the
issues in controversy have been identified. The study group's
discussions have also enabled the MMS to determine that the criteria
for negotiated rules, as spelled out in the Negotiated Rulemaking Act,
are met for this rule:
The rule is needed, since royalty payors are not able to
comply with the current regulations particularly in the current gas
market.
A limited number of identifiable interests will be
significantly affected by the rule. Those parties are oil and gas
companies who produce gas and pay royalties on Federal leases and
States who receive royalties from gas produced from Federal leases
located in their State.
Representatives can be selected to adequately represent
these interests, as reflected above.
The interests are willing to negotiate in good faith to
attempt to reach a consensus on a proposed rule.
There is a reasonable likelihood that the Committee will
reach consensus on a proposed rule within a reasonable time. This
determination has been made based on discussions of the study group,
and hence is built on the developments to date.
The use of the negotiation will not delay the development
of the rule if time limits are placed on the negotiation. Indeed, its
use will expedite both development and ultimate acceptance of the rule.
The Department is not proposing to issue a separate notice of
intent to form a negotiated rulemaking committee for this rule. Given
the evolution of this committee, the publication of such a notice would
only show down the rulemaking process and the functions of the notice
of intent have either already been met or are provided for in this
notice. Moreover, the Negotiated Rulemaking Act specifically provides
that its provisions are not mandatory.
The Negotiated Rulemaking Act does anticipate an outreach to ensure
that people who were not contacted during the convening process can
come forward to explain why they believe they would be significantly
affected and yet are not represented on the Committee or to argue why
they believe the rule should not be negotiated. The MMS believes that
the interests who would be significantly affected by this rule are
represented by the informal study group already in place which includes
representatives from API, COPAS, RMOGA, IPAA, IPAMS, NGSA, an
independent marketer, and the states of Utah, Montana, North Dakota,
and New Mexico. If anyone believes that their interests are not
adequately represented by these organizations, they must demonstrate
and document that assertion through an application submitted no later
than 10 calendar days following publication of this notice. You may fax
your documentation to (303) 275-7227.
Certification
I hereby certify that the Federal Gas Valuation Negotiated
Rulemaking Committee is in the public interest in connection with the
performance of duties imposed on the Department of the Interior by 30
U.S.C. 1701 et seq.
Dated: June 2, 1994.
Bruce Babbit,
Secretary of the Interior.
[FR Doc. 94-15462 Filed 6-24-94; 8:45 am]
BILLING CODE 4310-MR-M