Outer Continental Shelf; oil, gas, and sulphur operations: Oil and gas activities; costs recovery,
[Federal Register: November 14, 2005 (Volume 70, Number 218)]
[Proposed Rules]
[Page 69118-69128]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14no05-26]
DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Parts 250, 251, and 280
RIN 1010-AD23
Oil, Gas, and Sulphur Operations and Leasing in the Outer Continental Shelf (OCS)--Recovery of Costs Related to the Regulation of Oil and Gas Activities on the OCS
AGENCY: Minerals Management Service (MMS), Interior.
ACTION: Proposed rule.
SUMMARY: MMS is proposing regulations which impose new fees to process certain plans, applications, and permits. The proposed service fees would offset MMS's costs of processing these plans, applications, and permits.
DATES: MMS will consider all comments received by January 13, 2006. MMS will begin reviewing comments and may not fully consider comments received after January 13, 2006.
ADDRESSES: You may submit comments on the proposed rule by any of the following methods listed below. Please use the regulatory identifier number (RIN) 1010-AD23 as an identifier in your message. See also Public Comment Procedures under Procedural Matters.
Federal e-Rulemaking Portal: http://www.regulations.gov.
Follow the instructions on the website for submitting comments.
E-mail MMS at rules.comments@mms.gov. Use the RIN in the subject line.
Fax: 703-787-1546. Identify with the RIN.
Mail or hand-carry comments to the Department of the Interior; Minerals Management Service; Attention: Rules Processing Team (RPT); 381 Elden Street, MS-4024; Herndon, Virginia 20170-4817. Please reference ``Recovery of Costs Related to the Regulation of Oil and Gas Activities on the OCS-AD23'' in your comments.
You may also send comments on the information collection aspects of this rule directly to the Office of Management and Budget (OMB) via: OMB e-mail: (OIRA_DOCKET@omb.eop.gov); mail or hand carry to the Office of Information and Regulatory Affairs, OMB Attention: Desk Officer for the Department of the Interior (1010-AD23) or by fax (202) 395-6566. Please also send a copy to MMS.
FOR FURTHER INFORMATION CONTACT: Martin Heinze, Program Analyst, Office of Planning, Budget and International Affairs at (703) 787-1010.
SUPPLEMENTARY INFORMATION:
Background
Federal agencies are generally authorized to recover the costs of providing services to non-federal entities through the provisions of the Independent Offices Appropriation Act of 1952 (IOAA), 31 U.S.C. 9701. The Act requires implementation through rulemaking. There are several policy documents that provide MMS guidance on the process of charging applicants for service costs. The governing language concerning cost recovery can be found in OMB Circular No. A-25 which states in part, ``The provisions of this Circular cover all federal activities that convey benefits to recipients beyond those accruing to the general public. * * * When a service (or privilege) provides special benefits to an identifiable recipient, beyond those that accrue to the general public, a charge would be imposed (to recover the full costs to the Federal Government for providing this specific benefit, or the market price). * * * The general policy is that user charges will be instituted through the promulgation of regulations.'' The Department of the Interior (DOI) Manual mirrors this policy (330 DM 1.3 A.).
In this rulemaking, ``cost recovery'' means reimbursement to MMS for its costs of performing a service by charging a fee to the identifiable applicant/beneficiary of the service. Further guidance is provided by Solicitor's Opinion M-36987, ``BLM's Authority to Recover Costs of Minerals Document Processing'' (December 5, 1996). As explained in that Solicitor's Opinion, some costs, such as the costs of programmatic environmental studies and programmatic environmental assessments in support of a general agency program are not recoverable because they create an ``independent public benefit'' rather than a specific benefit to an identifiable recipient. Id. at 9-10.
On March 25, 2005, MMS published an Advance Notice of Proposed Rulemaking (ANPR) in the Federal Register titled, ``Recovery of Costs Related to the Regulation of Oil and Gas Activities on the Outer Continental Shelf,'' (70 FR 15246). (The cost recovery fees MMS is addressing in this proposed rule are for different activities than those addressed in the recently promulgated final rule issued on August 25, 2005 (70 FR 49871)). Through the ANPR, MMS alerted the public that we seek to recover the costs of processing certain permits and applications through the rulemaking process. MMS believes that cost recovery for the MMS-provided service of reviewing and
[[Page 69119]]
approving applications and permits is warranted because such service provides an identifiable recipient--the applicant--with direct benefits beyond those received by the general public.
The ANPR invited comments, recommendations, and specific remarks on a program of collecting fees for reviewing certain plans and permit applications such as:
Exploration Plans (Sec. 250.203).
Development and Production Plans (Sec. 250.204).
Deep Water Operations Plans (Notice To Lessees No. 2000- N06).
Application for Permit to Drill (APD; form MMS-123).
Application for Permit to Modify (APM; form MMS-124).
Application to Remove a Platform (required by Sec. 250.1727).
Facility Permits (required by Sec. 250.901 for the installation, modification, or repair of a platform).
Conservation Information Documents (Notice to Lessees No. 2000-N05).
Geological and Geophysical (G&G) Permits: Permit for Geophysical Exploration for Mineral Resources or Scientific Research on the Outer Continental Shelf (form MMS-328); Permit for Geological Exploration for Mineral Resources or Scientific Research on the OCS (form MMS-329).
Sand and Gravel Permits: Permit for Geophysical Prospecting for Mineral Resources or Scientific Research on the Outer Continental Shelf Related to Minerals Other than Oil, Gas, and Sulphur (form MMS-135); Permit for Geological Prospecting for Mineral Resources or Scientific Research on the Outer Continental Shelf Related to Minerals Other than Oil, Gas, and Sulphur (form MMS-136). The ANPR also solicited specific comments on the following:
-
Are there other actions for which MMS should require fees to recover costs from operators?
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MMS plans to calculate the fees in a manner similar to that used in the recently published Cost Recovery Rule (RIN 1010-AD16, August 25, 2005, 70 FR 49871). Are there alternative ways to determine fair and equitable fees?
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MMS may have large cost differences associated with issuing permits and reviewing plans in the different Regions (Gulf of Mexico, Pacific, Alaska); should the fee be uniform nationwide or vary by Region?
Comments on the ANPR
MMS received nine comment letters from industry and the general public. Four of the comment letters complained that there was insufficient time (30 days) provided for comment in the ANPR. The commenters asked for an extension of the comment period that ranged from 30-45 days. One commenter provided examples of recent comment time frames on MMS rulemakings that ranged from 30-90 days, and suggested that future rules have a standard comment period of either 60 or 90 days.
An ANPR simply informs the public that an agency expects to publish a proposed rule. Because the public is given another opportunity to comment in connection with the proposed rule, MMS believes that 30 days is a sufficient comment period for an ANPR. This proposed rule now being published has a 60-day comment period.
Three comment letters presented more extensive views of the offshore oil and gas industry. Two letters were from individual companies, and one letter was from a consortium of eight trade organizations that represented thousands of companies involved in the United States (U.S.) oil and gas industry. In general, industry respondents stated that the total of lease bonuses, rentals and royalty fees paid by industry adequately compensate MMS and the Federal Government for any service provided in the issuance of permits. Several commenters pointed to the MMS statistics for monies collected as proof that the Federal Government had been adequately compensated for the process of issuing offshore leases as well as ``for processing the necessary paperwork required by regulations to facilitate lessees bringing their leases to production.''
The relevant mineral leasing law (the Outer Continental Shelf Lands Act (OCSLA)), which granted the Secretary the authority to issue leases offshore on the OCS, was not enacted as a cost recovery mechanism. The monies collected as bonuses, rentals, and royalties under those leases are not intended to compensate the government for administrative costs. They instead reflect the value of the public's interest in the resource and property. When a lease is issued, the working interest is conveyed to the lessee(s) to whom it is issued. The government reserves a royalty interest, which is a cost-free share of the production or the value of the production. Under the bidding system that is characteristic of most of the leases, the lessee pays a bonus to obtain the lease that is the result of competitive bidding. During the primary term of a lease and before the lease goes into production (in other words, during the time the lessor is not receiving any benefit from its retained royalty interest), the lessee must pay annual rentals. All of these obligations (royalties, bonus payments and rentals) reflect the value of the lessor's (i.e., the public's) property interest in the leased minerals. None of these obligations was ever intended to compensate the government for administrative costs.
In a related remark, one industry commenter asserted that a document cited by MMS, OMB Circular No. A-25, provides that new user charges should not be imposed in cases where other revenues from individuals already finance the government services provided to them. The commenter appears to be citing paragraph 7.c. of OMB Circular No. A-25, which addresses excise taxes. The paragraph states that ``[n]ew user charges should not be proposed in cases where an excise tax currently finances the government services that benefit specific individuals'' (giving the example of a gasoline tax to finance highway construction). Royalties, bonus payments, and rentals are not taxes, but payments that reflect the value of the resources. Reference to this paragraph of the OMB Circular is thus inappropriate.
Several commenters asserted that because neither existing lease terms nor regulations in effect at the time of lease issuance contain provisions allowing the new cost recovery fees, regulations imposing such fees that are promulgated after lease issuance ``are not within the scope of the contract''. They cite Mobil Exploration and Producing Southeast, Inc. v. United States, 530 U.S. 604 (2000), as standing for the proposition that offshore leases are subject only to regulations in existence at the time of lease issuance and those promulgated thereafter that concern prevention of waste and conservation of resources.
These comments fail to acknowledge that the Independent Officers Appropriation Act (IOAA), the statute under whose authority MMS is promulgating this rule, was enacted in 1952, and predates the OCSLA and the leases issued under the authority of that Act. The comments also misinterpret the Mobil decision. In Mobil, the Supreme Court addressed a statute enacted by Congress years after lease issuance (the Outer Banks Protection Act) whose substantive effect was to prohibit exploration of a certain class of existing leases. The Supreme Court held the statute to be a breach of contract on the part of the U.S. The Supreme Court in Mobil did not address regulations promulgated under authority already granted to the Secretary under a statute that predated the leases involved.
Only two commenters responded to the MMS list of specific questions. These commenters: (1) Did not agree
[[Page 69120]]
that MMS should charge the proposed fees and, therefore, had no suggestions for additional cost recovery; (2) did not propose alternative methods for determining fees (they did, however, recommend that MMS continue efforts to improve cost effectiveness and provide specific details on how any fees are to be determined); and (3) suggested that fees be assigned to the different regions based on the actual costs in those regions.
Regarding this last suggestion, MMS found, first, that the number of plans and permits processed in the Pacific and Alaska OCS Regions is very small. More than 98 percent of the MMS plan and permit applications processed are in the Gulf of Mexico (GOM) OCS Region. Second, MMS found that, due to the smaller number of plans in the Pacific and Alaska OCS Regions, and the controversy often involved with them, the processing costs per plan or permit in those regions are considerably higher than in the Gulf of Mexico OCS Region. MMS has determined that because of the higher expense and the small number of plans, applications and permits MMS processed in the Pacific and Alaska Regions, it is reasonable to set as the standard fee for all such activities the average cost for the GOM OCS Region. This fee structure will avoid creating disparity among leases in different parts of the country, due to unusual conditions in some regions, for receiving a similar final determination from MMS.
Regarding the comment that MMS should improve its cost and effectiveness, MMS will continue in its efforts to reduce costs through initiatives such as OCS Connect, a multi-year initiative to automate major business transactions and plan/application/permit reviews, resulting in more timely decisions.
One citizen commented that fees should also be recovered on applications for lease term pipelines; seismic data acquisition; surface co-mingling of OCS production; and applications for departures from operational requirements. All but the applications for departures have been included in the proposed rule. Departures were not included because departure requests are almost always part of another permit application.
Finally, several commenters believed that the fees proposed by the ANPR seem contrary to the administration's national energy policy. They maintained that every dollar collected by MMS for the processing of applications and permits is a dollar that would not be spent producing energy on the OCS.
MMS works closely with industry to ensure that energy production on the OCS will continue to contribute significantly to the nation's energy supply. For example, MMS provides incentives for industry production of offshore oil and gas, such as royalty relief for deep- water and deep-gas development. The proposed service fees would not affect existing incentives and would only marginally add to the cost of operating offshore.
Proposed Regulation
What Type of Fees Does This Proposed Rule Propose?
MMS is proposing fixed fees for certain services based on cost recovery principles. A fixed fee would remain the same for each request of a similar type. The fixed fee approach would provide objectivity and certainty because each applicant's fees are based on the same predetermined fee structure.
Which MMS Services Would Be Subject To a Cost Recovery Fee?
The following table lists the plan/application/permit requests for which we are proposing a cost recovery fee under this proposed rule. The table includes some additional requests that were not included in the ANPR.
Service: processing of the following . . .
Proposed fee
30 CFR citation
Exploration Plan (EP)....... $3,250 for each Sec. 250.211(d). surface location. Development and Production $3,750 for each well Sec. 250.241. Plan (DPP)/Development
proposed. Operations Coordination Document (DOCD). Deepwater Operations Plan... $3,150.............. Sec. 250.292. Conservation Information $24,200............. Sec. 250.296. Document. Application for Permit to $1,850 Initial
Sec. 250.410(d); Drill (APD; form MMS-123). applications only, Sec. 250.411; no fee for
Sec. 250.460; revisions.
Sec. 250.513; Sec. 250.515; Sec. 250.1605; Sec. 250.1617; Sec. 250.1622. Application for Permit to $110................ Sec. 250.460; Sec. Modify (APM; form MMS-124).
250.465; Sec. 250.513; Sec. 250.515; Sec. 250.613; Sec. 250.615; Sec. 250.1618; Sec. 250.1622; Sec. 250.1704. New Facility Production $4,750 (> 125
Sec. 250.802(e) Safety System Application. components). (Additional fee of $12,500 will be charged if MMS deems it necessary to visit a facility offshore; and $6,500 to visit a facility in a shipyard). $1,150 (25-125 components). (Additional fee of $7,850 will be charged if MMS deems it necessary to visit a facility offshore; and $4,500 to visit a facility in a shipyard). $570 (125
Sec. 250.802(e). Application--Modification. components). $190 (25-125 components). $80 (2S or a zone where the presence of H2S is unknown, information pursuant to Sec. 250.490 of this part; and
(5) Payment of the service fee listed in Sec. 250.125. * * * * *
-
In Sec. 250.613, revise the last sentence in paragraph (a) and revise the introductory language of paragraph (b) and paragraphs (b)(2) and (3) and adding (b)(4) to read as follows:
Sec. 250.613 Approval and reporting for well-workover operations.
(a) * * * Approval for such operations must be requested on Form
[[Page 69126]]
MMS-124, Application for Permit to Modify.
(b) You must submit the following with Form MMS-124: * * * * *
(2) When changes in existing subsurface equipment are proposed, a schematic drawing of the well showing the zone proposed for workover and the workover equipment to be used;
(3) Where the well-workover is in a zone known to contain H2S or a zone where the presence of H2S is unknown, information pursuant to Sec. 250.490 of this part; and
(4) Payment of the service fee listed in Sec. 250.125. * * * * *
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In Sec. 250.802, add a new paragraph (e)(7) to read as follows:
Sec. 250.802 Design, installation, and operation of surface production safety systems.
* * * * *
(e) * * *
(7) The service fee listed in Sec. 250.125 of this part. The fee you must pay will be determined by the number of components involved in the review and approval process.
-
In Sec. 250.905, revise the introductory language and table headings add paragraph (k) to the table to read as follows:
Sec. 250.905 How do I get approval for the installation, modification, or repair of my platform?
The Platform Approval Program requires that you submit the information, documents and fees listed in the following table for your proposed project.
Required submittal
Required contents Other requirements j
* * * * * * * (k) Payment of the service fee listed in Sec. 250l.125.
-
In Sec. 250.1000, revise paragraph (b) to read as follows:
Sec. 250.1000 General Requirements.
* * * * *
(b) An application must be accompanied by payment of the service fee listed in Sec. 250.125 and submitted to the Regional Supervisor and approval obtained before:
(1) Installation, modification or abandonment of a lease term pipeline
(2) Installation or modification of a right-of-way (other than lease term) pipeline; or
(3) Modification or relinquishment of a pipeline right-of way. * * * * *
-
In Sec. 250.1008, revise paragraph (e) to read as follows:
Sec. 250.1008 Reports.
* * * * *
(e) The lessee or right-of-way holder must notify the Regional Supervisor before the repair of any pipeline or as soon as practicable. Your notification must be accompanied by payment of the service fee listed in Sec. 250.125. You must submit a detailed report of the repair of a pipeline or pipeline component to the Regional Supervisor within 30 days after the completion of the repairs. In the report you must include the following:
(1) Description of repairs,
(2) Results of pressure test, and
(3) Date returned to service. * * * * *
-
In Sec. 250.1204, revise paragraph (a)(1) to read as follows:
Sec. 250.1204 Surface commingling.
(a) * * *
(1) Submit a written application to, and obtain approval from, the Regional Supervisor before commencing the commingling of production or making changes to previously approved commingling applications. Your application must be accompanied by payment of the service fee listed in Sec. 250.125. The service fees are divided into two levels for simple applications and complex applications.
Application type
Actions
(i) Simple applications consist of Lease terminations. those that update or correct
Well status changes. previously approved measurement and Well name changes. commingling records such as: Platform removals. Application cancellations FMP status changes. Meter updates. Operator changes. Meter proving and well test waivers. Applications to temporarily reroute production. Production tests prior to pipeline construction.
(ii) Complex applications include
Creation of a new facility applications not categorized as simple measurement points (FMPs). and entail:
Association of leases or units to existing FMPs. Inclusion of production from additional structures. Meter updates which add buy- back gas meters or pigging meters. Other applications which are deviations from the approved allocation procedures.
* * * * *
-
In Sec. 250.1617, revise paragraph (a) to read as follows:
Sec. 250.1617 Application for permit to drill.
(a) Before drilling a well under an approved Exploration Plan, Development and Production Plan, or Development Operations Coordination Document, you must file Form MMS-123, APD, with the District Manager for approval. The submission of your APD must be accompanied by payment of the service fee listed in Sec. 250.125. Before
[[Page 69127]]
starting operations, you must receive written approval from the District Manager unless you received oral approval under Sec. 250.140. * * * * *
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In Sec. 250.1618, revise the section heading and paragraph (a) to read as follows:
Sec. 250.1618 Application for Permit to Modify.
(a) You must submit requests for changes in plans, changes in major drilling equipment, proposals to deepen, sidetrack, complete, workover, or plug back a well, or engage in similar activities to the District Manager on Form MMS-124, Application for Permit to Modify (APM). The submission of your APM must be accompanied by payment of the service fee listed in Sec. 250.125. Before starting operations associated with the change, you must receive written approval from the District Manager unless you received oral approval under Sec. 250.140. * * * * *
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In Sec. 250.1704, revise the Decommissioning Applications and Reports Table to read as follows:
Sec. 250.1704 When must I submit decommissioning applications and reports?
* * * * *
Decommissioning Applications and Reports Table
Decommissioning applications and reports
When to submit
Instructions
(a) Initial platform removal In the Pacific OCS Include information application [not required Region or Alaska required under Sec. in the Gulf of Mexico OCS OCS Region, submit 250.1726. Region].
the application to the Regional Supervisor at least 2 years before production is projected to cease. (b) Final removal
Before removing a Include information application for a platform platform or other required under Sec. or other facility.
facility in the
250.1727. Gulf of Mexico OCS Region, or not more than 2 years after the submittal of an initial platform removal application to the Pacific OCS Region and the Alaska OCS Region. (c) Post-removal report for Within 30 days after Include information a platform or other
you remove a
required under Sec. facility.
platform or other 250.1729. facility * * *. (d) Pipeline decommissioning Before you
Include information application.
decommission a
required under Sec. pipeline * * *.
250.1751(a) Sec. 250.1752(a), as applicable. (e) Post-pipeline
Within 30 days after Include information decommissioning report. your decommission a required under Sec. pipeline * * *.
250.1753. (f) Site clearance report Within 30 days after Include information for a platform or other you complete site required under Sec. facility.
clearance
250.1743(b) verification activities. (g) Form MMS-124,
(1) Before you
Include information Application for Permit to temporarily abandon required under Sec. Modify (APM). The
or permanently plug Sec. 250.1712 submission of your APM must a well or zone. and 250.1721. be accompanied by payment of the service fee listed in Sec. 250.125. (2) Within 30 days Include information after you plug a required under Sec. well.
250.1717. (3) Before you
Refer to Sec. install a subsea 250.1722(a). protective device. (4) Within 30 days Include information after your complete required under a protective device 250.1722(d). trawl test. (5) Before you
Refer to Sec. remove any casing 250.1723. stub or mud line suspension equipment and any subsea protective device. (6) Within 30 days Include information after you complete required under Sec. site clearance
250.1743(a). verfication activities.
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In Sec. 250.1727, revise the introductory paragraph to read as follows:
Sec. 250.1727 What information must I include in my final application to remove a platform or other facility?
You must submit to the Regional Supervisor, a final application for approval to remove a platform or other facility. Your application must be accompanied by payment of the service fee listed in Sec. 250.125. If you are proposing to use explosives, provide three copies of the application. If you are not proposing to use explosives, provide two copies of the application. Include the following information in the final removal application, as applicable: * * * * *
-
In Sec. 250.1751, revise paragraph (a) introductory text to read as follows:
Sec. 250.1751 How do I decommission a pipeline in place?
* * * * *
(a) Submit a pipeline decommissioning application in triplicate to the Regional Supervisor for approval. Your application must be accompanied by payment of the service fee listed in Sec. 250.125. Your application must include the following information: * * * * *
-
In Sec. 250.1752, revise the introductory text of paragraph (a) to read as follows:
Sec. 250.1752 How do I remove a pipeline?
* * * * *
(a) Submit a pipeline removal application in triplicate to the Regional Supervisor for approval. Your application must be accompanied by payment of the service fee listed in Sec. 250.125. Your application must include the following information: * * * * *
[[Page 69128]]
PART 251--GEOLOGICAL AND GEOPHYSICAL (G&G) EXPLORATIONS OF THE OUTER CONTINENTAL SHELF
-
The authority citation for part 251 is revised to read as follows:
Authority: 43 U.S.C. 1331 et seq.; 31 U.S.C. 9701.
-
In Sec. 251.5, revise paragraph (a) to read as follows:
Sec. 251.5 Applying for permits or filing Notices.
(a) Permits. You must submit a signed original and three copies of the MMS permit application form (Form MMS-327). The form includes names of persons, type, location, purpose, and dates of activity, and environmental and other information. A nonrefundable service fee of $ 1,900 must accompany your application. The time period for extensions is defined on the permit form (Form MMS-328 (Geophysical Prospecting) or MMS-329 (Geological Prospecting)). * * * * *
PART 280--PROSPECTING FOR MINERALS OTHER THAN OIL, GAS, AND SULPHUR ON THE OUTER CONTINENTAL SHELF
-
The authority citation for part 280 is revised to read as follows:
Authority: 43 U.S.C. 1331 et seq.; 42 U.S.C. 4332 et seq.; 31 U.S.C. 9701.
-
In Sec. 280.12, revise paragraph (a) to read as follows:
Sec. 280.12 What must I include in my application or notification?
(a) Permits. You must submit to the RD a signed original and three copies of the permit application form (form MMS-134) at least 30 days before the startup date for activities in the permit area. If unusual circumstances prevent you from meeting this deadline, you must immediately contact the RD to arrange an acceptable deadline. The form includes names of persons, type, location, purpose, and dates of activity, as well as environmental and other information. A nonrefundable service fee of $ 1,900 must accompany your application. The time period for extensions is defined on the permit form (Form MMS- 135 (Geophysical Exploration) or MMS-136 (Geological Exploration)). * * * * *
[FR Doc. 05-22504 Filed 11-10-05; 8:45 am]
BILLING CODE 4310-MR-P
