[Federal Register Volume 61, Number 211 (Wednesday, October 30, 1996)] [Rules and Regulations] [Pages 55887-55889] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-27782] ----------------------------------------------------------------------- DEPARTMENT OF THE INTERIOR 30 CFR Part 256 RIN 1010-AC15 Outer Continental Shelf Lease Terms AGENCY: Minerals Management Service, Interior. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: This rule amends the regulations governing the term for certain leases on the Outer Continental Shelf (OCS) based on water depth. This rule changes the current depth margins for 8-year leases from 400 to 900 meters to 400 to 800 meters while retaining the mandatory 5-year drilling requirement for all 8-year leases. The amendment allows the Minerals Management Service (MMS) to set lease terms of 8 to 10 years in water depths ranging from 800 to 900 meters. The intended effect of this rule is to simplify administration of OCS leases for the MMS and the lessees. [[Page 55888]] EFFECTIVE DATE: This final rule is effective on November 29, 1996. FOR FURTHER INFORMATION CONTACT: Judith M. Wilson, Engineering and Standards Branch, telephone (703) 787-1600. SUPPLEMENTARY INFORMATION: Currently, MMS offers 10-year terms for leases in water depths of 900 meters or more. In water depths of 400 to 900 meters, MMS offers 8-year lease terms subject to a requirement that the lessee begin an exploratory well within the first 5 years, 30 CFR 256.37. On June 5, 1996, MMS published a notice of proposed rulemaking in the Federal Register (61 FR 28528). MMS proposed to amend its regulation at 30 CFR 256.37 to remove the requirement that the lessee must begin exploratory drilling within 5 years on 8-year leases. The proposed amendment also changed the 400 to 900 meter depth requirement for 8-year leases to 400 to 800 meters. MMS proposed this rule because, among other reasons, we considered the financial incentive established by the OCS Deep Water Royalty Relief Act (DWRRA) to be more effective than the drilling requirement as a means of achieving earlier drilling. Comments During the 60-day comment period, MMS received ten comments. Two- thirds of the comments came from the ``major'' oil companies. The remaining one-third of the comments came from ``independents'' and drilling contractors. Generally, the majors support the proposed rule and urged MMS to adopt the change before the September 25, 1996, Gulf of Mexico OCS lease sale. They agree that the recently enacted DWRRA serves as a more effective incentive to encourage earlier or expedited development and were confident operators will continue to be diligent in conducting exploratory drilling. They supported the change in water depth range for 8-year leases. The independents and drilling contractors, however, strongly oppose the proposed rule maintaining that the drilling requirement is necessary to ensure diligence. While the DWRRA should provide a financial incentive to develop leases in water depths greater than 400 meters, MMS should use the 5-year drilling requirement as a safeguard to ensure that the Nation's resources are produced in a timely manner. Finally, they claim that the myriad of smaller entities supporting the oil and gas industry have the greatest stake in the results of this rule which ought to be significant under E.O. 12866. Response to Comments MMS based the proposed rule on the observation that the 5-year drilling requirement has not resulted in meaningful, if any, increases in exploratory drilling. The data to support this observation comes from 8-year leases issued from 1985 to 1990. Leases issued at later dates were not analyzed because, at the time MMS initiated the proposed rule, it was too early to tell whether these leases would be drilled before the 5-year drilling window expired. In light of the independents' strong opposition to the proposed rule, MMS will review the 5-year drilling requirement after we have more data from 8-year leases issued for several years subsequent to 1990. The analysis will allow MMS to view the statistics for time periods of declining and increasing exploratory drilling. Thus, under the final rule, if your lease is in 400 to 800 meters of water, it will have an initial lease term of 8 years. You must begin an exploratory well within 5 years or the leases will be canceled. The final rule also gives MMS the flexibility to set an initial lease term between 8 and 10 years in water depths ranging from 800 to 900 meters. If MMS issues leases for more than 8 years in the 800 to 900 meter depth margin, the current mandatory drilling requirement for that depth margin would be eliminated. MMS does not believe that the longer lease and the lack of the drilling requirement will have a significant impact on smaller entities. Leases in water depths less than 400 meters or more than 900 meters are not addressed in this rule. See 30 CFR 256.37(a)(1). Author: This document was prepared by Judy Wilson, Engineering and Standards Branch, MMS. Executive Order (E.O.) 12866 This rule is not a significant rule requiring Office of Management and Budget review under E.O. 12866. Regulatory Flexibility Act The Department of the Interior (DOI) has determined that this rule will not have a significant effect on a substantial number of small entities. Most entities that engage in offshore activities as operators are not small because of the technical and financial resources and experience necessary to conduct offshore activities. Small entities are more likely to operate onshore or in State waters--areas not covered by this rule. When small entities work in the OCS, they are more likely to be contractors rather than operators. For example, a company that collects geologic and geophysical data might be a small entity. While these contractors must follow rules governing OCS operations, we are not changing the rules that govern the actual operations of a lease. We are only modifying the provision setting the water depths at which particular primary terms apply. This modification will have no effect on small entities. Paperwork Reduction Act The final rule does not contain new information collection requirements that require approval by the Office of Management and Budget (OMB). The information collection requirements in 30 CFR part 256 are approved by OMB under approval No. 1010-0006. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. MMS estimates the public reporting burden for this information will average 3.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining data needed, and completing and reviewing the information collection. 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 pursuant to E.O. 12630, Government Action and Interference with Constitutionally Protected Property Rights, 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, State governments, or the private sector. E.O. 12988 The DOI has certified to OMB that the rule meets the applicable civil justice reform standards provided in Sections 3(a) and 3(b)(2) of E.O. 12988. National Environmental Policy Act MMS has examined the rule and has determined that it does not constitute a major Federal action significantly affecting the quality of the human environment pursuant to Section 102(2)(c) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(c)). [[Page 55889]] List of Subjects in 30 CFR Part 256 Administrative practice and procedures, Continental shelf, Environmental Protection, Government contracts, Mineral royalties, Oil and gas exploration, Pipelines, Public lands--mineral resources, Public lands--rights-of-way, Reporting and recordkeeping requirements, Surety bonds. Dated: October 21, 1996. Sylvia V. Baca, Deputy Assistant Secretary, Land and Minerals Management. For the reasons set forth in the preamble, the Minerals Management Service amends 30 CFR part 256 as follows: PART 256--LEASING OF SULPHUR OR OIL OR 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. In Sec. 256.37, the concluding text of paragraph (a) is removed, paragraph (a)(2) is revised, and paragraph (a)(3) is added to read as follows: Sec. 256.37 Lease Term. (a) (1) * * * (2) If your oil and gas lease is in water depths between 400 and 800 meters, it will have an initial lease term of 8 years unless MMS establishes a different lease term under paragraph (a)(1) of this section. (3) For leases issued with an initial term of 8 years, you must begin an exploratory well within the first 5 years of the term to avoid lease cancellation. * * * * * [FR Doc. 96-27782 Filed 10-29-96; 8:45 am] BILLING CODE 4310-MR-M