[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