[Federal Register Volume 61, Number 129 (Wednesday, July 3, 1996)]
[Rules and Regulations]
[Pages 34730-34732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17013]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Part 256
RIN 1010-AC18
Leasing of Sulphur or Oil and Gas in the Outer Continental Shelf
AGENCY: Minerals Management Service (MMS), Interior.
ACTION: Final rule.
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SUMMARY: This rule amends the regulations of MMS to allow the
authorized officer to extend the 90-day time period within which we
must accept or reject the high bids received on Outer Continental Shelf
(OCS) tracts offered for sale. Unforeseen circumstances including a
flood, a furlough, and an extremely high bid response may create a need
for more time to evaluate bids. The rule gives the authorized officer
authority to extend the time period for 15 working days or longer,
beyond 90 days after the date on which the bids are opened, when
circumstances warrant.
EFFECTIVE DATE: This rule is effective July 18, 1996.
FOR FURTHER INFORMATION CONTACT:
Dr. Marshall Rose, Chief, Economic Evaluation Branch, telephone (703)
787-1536.
SUPPLEMENTARY INFORMATION: The time to accept or reject bids is
established under the regulations at 30 CFR 256.47. The authorized
officer must accept or reject the high bids within 90 days after the
bid opening, except for tracts or blocks identified by the Secretary of
the Interior as subject to:
(1) Another nations's claims of jurisdiction and control which
conflict with the claims of the United States, or
(2) Defense-related activities that may be incompatible with
mineral exploration/development activities. Any bid not accepted within
that period is deemed rejected.
In the Central Gulf of Mexico Sale 157, held April 24, 1996, we
received 1,381 bids on 924 tracts, 632 of which passed to Phase 2 for
detailed reviews. This unprecedented response by industry in Sale 157
resulted from the enactment of the Outer Continental Shelf Deep Water
Royalty Relief Act (Pub. L. 104-58, DWRRA) and other factors, such as
higher natural gas and oil prices. Consequently, MMS is unable to
conduct and complete the entire bid review process within the 90 days,
i.e., by July 22, 1996. If we do not modify the timing restriction
before the 90 days expire for Sale 157, dozens of high bids received on
tracts offered in that sale may be rejected because of our inability to
complete the statutorily mandated review for fair market value.
Therefore, in accordance with 5 U.S.C. 553(b)(3)(B), this rule is
effective July 18, 1996. It is in the public interest to ensure that
adequate time is available to give all high bids a full and appropriate
review and to ensure the receipt of fair market value.
The 90-day period was established in 1982 because of the change
from nomination to areawide sales and from presale to postsale
evaluations. Since then, MMS has held mainly areawide sales. The DWRRA
amended the Outer Continental Shelf Lands Act and defined a new bidding
system which provides for royalty suspensions. The deep water incentive
law did not amend the requirement that we receive fair market value for
tracts leased. Any lease sale held before November 28, 2000, must use
the new bidding system for all tracts located in water depths of 200
meters or more in the Gulf of Mexico west of 87 degrees, 30 minutes
west longitude. The large number of bids received in response to the
new statutory requirements resulted in an increased workload which we
expect will exceed our ability to complete the bid review process
within 90 days as required by 30 CFR 256.47(e)(2).
This rule allows the authorized officer authority to extend the
time period for 15 working days or longer when circumstances warrant.
Recent examples include floods and furloughs; however, other
circumstances such as an excessive unanticipated workload may arise
which could warrant the need for a longer time for bid evaluation.
This rule addresses a housekeeping issue and will enable us to
adjust the bid acceptance/rejection time period to meet changing
conditions. It recognizes that 90 days may not be enough time to
complete the review process, which would result in the rejection of the
high bids which we fail to evaluate within 90 days. This would result
in fewer leases being issued because of failure to complete the bid
review process within time and resource constraints. The Government may
receive less bonus and rental monies.
Today, without authority to extend the bid review period, the 1982
90-day rule is arbitrarily too rigid and may not allow sufficient time
given the current complexities inherent in evaluating certain tracts.
It is in the public interest to ensure that adequate time is available
to give all high bids a full and appropriate review, to ensure the
receipt of fair market value, and ultimately to increase natural gas
and oil supplies.
This rulemaking finalizes the rule, with one substantive
modification, as originally proposed and published in the Federal
Register (61 FR 24466, May 15, 1996). Seven respondents--a trade
organization and six companies--submitted comments on the proposed rule
during the public comment period. The MMS reviewed and analyzed the
comments. The following is a discussion of the comments received and
our response.
Narrative Responses to Comments
Comment: Although MMS now pays interest on the one-fifth bonus held
during the evaluation period, industry must set aside the four-fifths
of the bonus and first year rental to pay for the lease when and if
awarded. Delays in rejecting a lease may cause a company to miss
participating in a significant opportunity elsewhere. Delays in
awarding leases can cause delays in planning further seismic
evaluation, hazard surveys, rig commitment, and budgeting of wells. On
the other hand, industry does not want the retention of the 90-day
period to result in the rejection of the high bids because MMS does not
have sufficient time to evaluate them.
Response: We realize that any extension beyond the 90 days could
result in some missed opportunities and impact exploration and
development activities, but MMS must fulfill its duty to obtain fair
market value for offshore leased tracts. Because we accept tracts
sequentially during the bid review period, on only a small portion of
tracts will MMS require more than 90 days to
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complete the evaluation. We plan to extend the bid review period only
when circumstances beyond our control arise, such as weather
conditions, furloughs, or an unusually large number of unanticipated
tracts receiving bids causing disruptions in our workload. We would
rather ensure that adequate time is available to give all high bids a
full and appropriate review, than have to reject high bids for
insufficient time to evaluate, which could be the case without this
rule. To accommodate the concern to keep the review time extension as
short as possible, MMS has reduced the minimum extension time from 30
days as proposed to 15 working days in the final rule.
Comment: The ``authorized officer'' should not be allowed authority
to extend the time period for more than 30 days. This extension of time
should only apply to the evaluation of Sale 157 bids and should not be
for additional time caused by a change in the bid adequacy procedures,
for example, elimination of the 3-bid rule.
Response: Our recent experience with floods and furloughs, which
resulted in extensions of the bid review period for 14 and 9 days each,
would indicate that it is unlikely that the authorized officer will
extend the time period for more than 15 working days. As a result, we
have modified the proposed 30 days to 15 working days. However, in
those rare circumstances that may arise which could warrant a longer
time for bid evaluation, this rule gives the authorized officer the
flexibility to respond appropriately and in the public interest. With
respect to Sale 157, more than three times the normal number of tracts
went to Phase 2 for further evaluation, only a small percentage of
which was attributable to the elimination of the 3-bid rule. The
excessive workload burden is a result primarily of industry competition
and bidding in Sale 157 and not a change in the bid adequacy
procedures.
Comment: The fact that a tract is covered by the DWRRA should not
be a factor in evaluating the high bid on that tract.
Response: The MMS must fulfill its duty to obtain fair market value
for offshore leased tracts. The fact that a tract may benefit from the
DWRRA will normally cause the bidders to adjust their bids accordingly.
Therefore, any bid review procedure should take this effect into
consideration as well.
Comment: The regulation and the notice granting the extension
should make clear the event or circumstances which require the
extension.
Response: Based on past experience, the rule does not list all
possible reasons, or combination of reasons, that could trigger an
extension. Examples of circumstances that might apply are: Inclement
weather that results in closing the office; damage to the building
(e.g., explosion, fire, or water); lack of electrical power; etc. Any
announcement of an extension beyond the 90-day period will include the
reasons warranting the extension.
Comment: An extension to accept or reject the high bids is
acceptable provided the additional time is warranted, and the sale
schedule in the Central and Western Gulf of Mexico is not seriously
affected. The alternative of rejecting high bids not evaluated because
of insufficient time does not serve the best interest of the companies
or the Government.
Response: We, like the companies, do not want to extend the bid
review period any more than absolutely necessary because MMS wants to
continue to meet our sales schedule. We also realize that companies
might delay exploration and development decisions because considerable
amounts of financial resources, which could be better employed
elsewhere, are tied up during this period. Any extensions should be for
the minimum time warranted and affect a small number of tracts.
Comment: The 90-day period would be sufficient if MMS limited its
evaluation efforts in Phase 2 to those tracts where there is current
activity or new production offsetting a tract receiving bids.
Response: Because we are required to receive fair value for all
tracts leased, the existing bid adequacy procedures do not limit Phase
2 evaluation efforts only to those tracts where there is current
activity or new production offsetting a tract receiving bids. The rule
recognizes that more than 90 days may be needed to complete the
process. We will continue to review our procedures and, based on
knowledge gained from experience in lease sales, may identify
modifications which might reduce the length of the bid review period.
Author: This document was prepared by Mary Vavrina, Offshore
Resource Evaluation Division, MMS.
Executive Order (E.O.) 12866
This rule does not meet the criteria for a significant rule
requiring review by the Office of Management and Budget (OMB) under
E.O. 12866.
Regulatory Flexibility Act
The Department of the Interior (DOI) has determined that this rule
will not have a significant economic effect on a substantial number of
small entities. Any direct effects of this rulemaking will primarily
affect the lessees and operators--entities that are not, by definition,
small due to the technical complexities and financial resources
necessary to conduct OCS activities. Small entities are more likely to
operate onshore or in State waters--areas not covered by this rule. The
indirect effect of this rulemaking on small entities that provide
support for offshore activities has also been determined to be small.
When small entities work on the OCS, they are more likely to be
contractors rather than lessees. While these contractors must follow
the rules governing OCS operations, we are not changing the rules that
govern actual operations on a lease. We are only modifying the rules
governing the actual acceptance or rejection of a high bid for a lease.
Paperwork Reduction Act
The rule has been examined under the Paperwork Reduction Act of
1995 and has been found to contain no new reporting and information
collection requirements.
Takings Implication Assessment
The DOI certifies that this rule does not represent a governmental
action capable of interference with constitutionally protected property
rights. A Takings Implication Assessment prepared under E.O. 12630,
Government Action and Interference with Constitutionally Protected
Property Rights, is not required.
E.O. 12988
The DOI has certified to OMB that the rule meets the applicable
reform standards provided in Section 3(b)(2) of E.O. 12988.
National Environmental Policy Act
The DOI has determined that this rule does not constitute a major
Federal action significantly affecting the quality of the human
environment; therefore, an environmental impact statement is not
required.
Unfunded Mandate Reform Act of 1995
The DOI has determined and certifies according to the Unfunded
Mandates Reform Act, 2 U.S.C. 1502 et seq., that this rule will not
impose a cost of $100 million or more in any given year on local,
tribal, or State governments or the private sector.
List of Subjects in 30 CFR Part 256
Administrative practices and procedures, Continental shelf,
Government contracts, Incorporation by reference, Oil and gas
exploration,
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Public lands--mineral resources, Reporting and recordkeeping
requirements, Surety bonds.
Dated: June 27, 1996.
Sylvia V. Baca,
Assistant Secretary, Land and Minerals Management.
For the reasons set forth in the preamble, we amend 30 CFR part 256
as follows:
PART 256--LEASING OF SULPHUR OR OIL AND GAS IN THE OUTER
CONTINENTAL SHELF
1. The Authority citation for part 256 continues to read as
follows:
Authority: 43 U.S.C. 1331 et seq.
2. Section 256.47(e)(2) is revised to read as follows:
Sec. 256.47 Award of leases.
* * * * *
(e) * * *
(2) The authorized officer must accept or reject the bid within 90
days. The authorized officer may extend the time period for acceptance
or rejection of a bid for 15 working days or longer, if circumstances
warrant. Any bid not accepted within the prescribed time period,
including any extension thereof, is deemed rejected.
* * * * *
[FR Doc. 96-17013 Filed 7-2-96; 8:45 am]
BILLING CODE 4310-MR-M