MMS Seeks Comments on Offer of Bonus or Royalty Credits for Relinquishing Certain Leases Offshore Florida

FEDERAL REGISTER
73 FR 6073
PROPOSED RULE
Feb. 1, 2008

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 256

[Docket ID: MMS-2007-OMM-0064]

RIN 1010-AD44

Bonus or Royalty Credits for Relinquishing Certain Leases Offshore Florida

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Proposed rule.

SUMMARY: The MMS proposes to amend its regulations for oil and gas leases on the <Outer> <Continental> <Shelf> to implement a mandate in the Gulf of Mexico Energy Security Act of 2006. This proposed rule would (1) provide a credit to lessees who relinquish certain eligible leases in the Gulf of Mexico; (2) define eligible leases as those within 125 miles of the Florida coast in the Eastern Planning Area and certain leases within 100 miles of the Florida coast in the Central Planning Area; and (3) allow lessees to use the credits in lieu of monetary payment for either a lease bonus bid or royalty due on oil and gas production from most other leases in the Gulf of Mexico or to transfer the credits to other Gulf of Mexico lessees for their use.

DATES: Submit comments by April 1, 2008. The MMS may not fully consider comments received after this date. Submit comments to the Office of Management and Budget on the information collection burden in this proposed rule by March 3, 2008.

FOR FURTHER INFORMATION CONTACT: Marshall Rose, Chief, Economics Division, at (703) 787-1536.

ADDRESSES: You may submit comments on the rulemaking by any of the following methods. Please use the Regulation Identifier Number (RIN) 1010-AD44 as an identifier in your message. See also Public Availability of Comments under Procedural Matters.

     • Federal eRulemaking Portal: http://www.regulations.gov. Select “Minerals Management Service” from the agency drop-down menu, then click “submit.” In the Docket ID column, select MMS-2007-OMM-0064 to submit public comments and to view supporting and related materials available for this rulemaking. Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available through the site’s “User Tips” link. All comments will be posted to the docket.

     • Mail or hand-carry comments to the Department of the Interior; Minerals Management Service; Attention: Regulations and Standards Branch (RSB); 381 Elden Street, MS-4024, Herndon, Virginia 20170-4817. Please reference “Bonus or Royalty Credits for Relinquishing Certain Leases Offshore Florida, 1010-AD44” in your comments and include your name and return address.

     • Send comments on the information collection in this rule to: Interior Desk Officer 1010-AD44, Office of Management and Budget; 202-395-6566 (fax); e-mail: oira_docket@nullomb.eop.gov. Please also send a copy to MMS.

SUPPLEMENTARY INFORMATION:

Background and Summary of the Proposed Rule

     Congress passed, and on December 20, 2006, the President signed, the Gulf of Mexico Energy Security Act of 2006 (GOMESA), Public Law No. 109-432. Section 104(c) of that statute authorizes the Secretary of the Interior (Secretary) to issue a bonus or royalty credit for the exchange of certain leases located offshore of the State of Florida. The statute defines leases eligible for the credit as those in existence on the enactment date of the GOMESA and located both within specified <Outer> <Continental> <Shelf> (<OCS>) planning areas and distances from the Florida coastline. The statute sets the size of the credit as equal to the bonus and rental paid for the relinquished eligible lease, and limits its use to payments by lessees of bonuses and royalties for leases in the Gulf of Mexico (GOM) not subject to revenue sharing under section 8(g) of the <Outer> <Continental> <Shelf> Lands Act (OCSLA) (43 U.S.C. 1337(g)). Finally, the statute mandates a regulatory process for notifying the Secretary of a lessee’s decision to exchange a lease for a credit, issuing the credit, allocating the credit among multiple lease owners, and transferring the credit to other parties.

[Page 6074]

     To implement section 104(c), MMS proposes to add a new subpart N to 30 CFR part 256. Part 256 deals with <OCS> lease administration, including transfer and termination of a lease. After briefly reviewing the credit issuing process, the following discussion explains how MMS proposes to handle redemption of the credits.

Issuing Credits

     Section 104, together with the definitions in section 102(1), (4), and (5), identifies the offshore area in which existing leases are located to be eligible to be exchanged for the credit. Therein, reference is made to parts of the Central Planning Area (CPA) and the Eastern Planning Area, as designated in the Draft Proposed Program <Outer> <Continental> <Shelf> Oil and Gas Leasing Program 2007-2012, dated February 2006. However, the area does not include all of the CPA in the area eligible for the credits. The GOMESA limits the included part of the CPA to the portion of the CPA within 100 miles of the coastline of the State of Florida, and to the area that lies either within a particular area shown on a map that MMS published 10 years ago, or, east of a particular coordinate line on the Pensacola Official Protraction Diagram.

     The MMS previously delineated the area in which leases are eligible for the credit using Official Protraction Diagram (OPD) designations. The OPD, in conjunction with the <OCS> block numbers, uniquely identifies each <OCS> block by a designated numbering system. The planning area boundaries that were in effect when MMS published the referenced maps coincided with the OPD boundaries. After recent changes MMS made in the boundary between its Eastern, Central, and Western Planning Areas for the GOM, the new planning area boundaries do not coincide with the pre-existing OPD boundaries. Thus, definitions added to §  § 256.5 and 256.90 propose to use OPD boundaries to define the western extent of the eligible area. The northern and eastern extent of the eligible area is the seaward boundary of the State of Florida.

     The GOMESA defines the southern extent of the eligible area by reference to the distance from the Florida coastline. Parts of three OPDs (Desoto Canyon, Destin Dome, and Pensacola) are both in the eligible part of the new CPA and within the requisite 100 miles of the Florida coastline. Other parts of these three OPDs, as well as other OPDs, are in the new Eastern planning area and within the requisite 125 miles of the Florida coastline. These areas contain a total of 79 still active leases as of the end of calendar year 2006. The GOMESA makes all of these leases that were in effect on December 20, 2006, the date of enactment of the GOMESA, eligible for this exchange program. The MMS seeks comments on whether this interpretation of eligibility for the credits based on location and lease status complies with the requirements specified in GOMESA.

     Section 256.91 proposes to grant credits equal to the original bonus paid for the relinquished lease plus the cumulative rental paid on that lease since issuance. Because the GOMESA explicitly values the credits as equal only to the sum of these two costs, no authority exists to include reimbursement for any other costs. Thus, MMS will not credit or value any exploration costs incurred in connection with eligible leases for purposes of issuing credits; nor will MMS include time value of money (interest) in calculating the amount of a credit. The MMS estimates the aggregate value of credits available under the statutory formula as slightly more than $60 million.

     The following table lists each lease identified under the proposed interpretation of GOMESA that is eligible for the credit and the amount of the credit. MMS seeks comments about whether any variations exist between the data in this table and the information held by the lease owners.

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