Citation and Date

Summary

This final rule amends existing deep gas royalty relief regulations to reflect statutory changes enacted in the Energy Policy Act of 2005. It provides additional royalty relief for certain ultra-deep wells on Outer Continental Shelf leases in shallow water in the Gulf of Mexico. It extends both the existing and the additional deep gas royalty relief to Outer Continental Shelf leases in deeper water than before. Finally, this final rule applies discretionary royalty relief procedures that have been used by deepwater leases in the Gulf of Mexico to leases offshore of Alaska.

This final rule became effective December 18, 2008.

30 CFR Part 250.175
May 4, 2007

The Regional Supervisor may grant a SOO to conduct additional geological 
and geophysical data analysis that may lead to the drilling 

of a well below 25,000 feet true vertical depth below the datum at mean 

sea level (TVD SS) when all of the following conditions are met:

    (1) The lease was issued with a primary lease term of:

    (i) 5 years; or

    (ii) 8 years with a requirement to drill within 5 years.

    (2) Before the end of the fifth year of the primary term, you or 

your predecessor in interest must have acquired and interpreted 

geophysical information that:

    (i) Indicates that all or a portion of a potential hydrocarbon-

bearing formation lies below 25,000 feet TVD SS; and

    (ii) Includes full 3-D depth migration over the entire lease area.

65 FR 55476
September 14, 2000

This proposed rule outlines why and how we may issue Outer continental Shelf (OCS) leases after November 2000 with royalty suspensions. It also presents a plain-language revision of the existing rules for bidding systems and joint bidding restrictions. It does not change the current policies on royalty suspensions for leases issued before December 2000, though it does add one minor reporting requirement for leases issued with royalty suspension.

64 FR 37560
July 12, 1999

The Minerals Management Service (MMS) has changed a criterion in its existing bid adequacy procedures for ensuring receipt of fair market value on Outer continental Shelf (OCS) oil and gas leases. The change ensure consistency in the evaluation of tracts.

64 FR 6677
February 10, 1999

The Minerals Management Service (MMS) is modifying one element of its existing bid adequacy procedures for ensuring receipt of fair market value on the Outer Continental Shelf (OCS) oil and gas leases. The modification establishes a new criterion for acceptance under the number of bids rule for selected tracts in Phase 1. Specifically, for viable confirmed wildcat (C&W) tracts receiving three or more qualified bids, where the third largest bid is within 50 percent of the high bid, acceptance under the number of bids rule will apply only to those viable C&WS tracts having high bids that are in the top 75 percent of high bids on a per acre basis for all three-or-more-bid C&S tracts within designated water depth categories. unless stated otherwise, usually in the final notice of sale, the designated categories in the Gulf of Mexico are: water depths of less than 800 meters and water depths of 800 meters or more.

This change has been made following a review of bidding activity in recent OCS sales. The new criterion for the number of bids rule was developed in part because in these sales a disproportionately large number of the three-bid confirmed and wildcat tracts with relatively low high bids were accepted in Phase 1, while tracts of this type with much larger high bids tended to be passed to Phase 2 in the evaluation process. Yet, in sales held without a number of bids rule for Phase 1 acceptance, it was found that of the set of tracts receiving three or more bids, the ones that tended to get rejected were those receiving relatively small high bids. Thus, this new criterion will allow the MMS to better ensure receipt of fair market value through more efficient targeting of its tract evaluation resources.

Another reason for the change is that the previous three-bid rule provided an incentive to submit lower bids. By doing so, a bidder could raise the chance that if it was the high bidder, the third largest bid would fall within the required 50 percent of its high bid. Under the proposed change, bidders would be discouraged from adopting this strategy because attempts to implement it would likely cause the potential high bid to fall below the new requirement that an acceptable high bid in Phase 1 must be in the top 75 percent of all high bids in the tract's class. Indeed, the 75 percent parameter was chosen, in part, because in recent sales, there were no cases in which a high bidder could have successfully implemented this strategy with the proposed change in the rule in place.

62 FR 37589
July 14, 1997

The Minerals Management Service (MMS) has modified its existing bid adequacy procedures for ensuring receipt of fair market value on Outer Continental Shelf (OCS) oil and gas leases. In Phase 1, these procedures establish a new number of bids rule for acceptance of selected tracts. In Phase 2, these procedures expand the scope of tract evaluation; replace the geometric average evaluation of tract with a revised arithmetic average measure of the tract; eliminate the one-eighth rule for anomalous bids; and clarify the treatment of tracts identified as having unusual bidding patterns.

These changes were made following a review of bidding activity in OCS sales. The new number of bids rule relies more on market-determined factors to ensure receipt of fair market value. This new rule, along with expansion of evaluation procedures beyond only tract specific assessments, will allow for earlier acceptance on tracts that would be accepted later in the evaluation process. The revised average measure is designed to generate a better estimate of tract value when all bids fall below the Government's original estimate of tract value. The stricter screening rules associated with the revised average measure eliminate the need for the one-eighth rule. The Regional Director's expanded authority to handle documented instances of unusual bidding patterns provides flexibility to modify certain acceptance rules and allows for a decision to reject the high bid on identified tracts.

61 FR 34730
July 3, 1996

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 bid 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.

61 FR 14162
March 29, 1996

The Minerals Management Service (MMS) has modified its existing bid adequacy procedures for ensuring receipt of fair market value on Outer Continental Shelf (OCS) oil and gas leases. This procedure eliminates in Phase 1 the number of bids rule, which effectively allowed for immediate acceptance of high bids on confirmed or wildcat tracts receiving three or more bids.

61 FR 12022
March 25, 1996

The Outer Continental Shelf Deep Water Royalty Relief Act (Act) authorizes the Secretary of the Interior (Secretary) to offer Outer Continental Shelf tracts for lease with suspension of royalties for a volume, value, or period of production. The Act requires the Secretary to use this bidding system on tracts offered for lease in water depths of 200 meters or more in parts of the Gulf of Mexico through November 28, 2000. The Minerals Management Service (MMS) intends to hold a lease sale in April 1996. This interim rule specifies the royalty suspension terms under which the Secretary will make tracts available for that sale.

61 FR 3800
February 2, 1996

This rule amends the regulations of the Minerals Management Service (MMS) to modify the bidding systems available for use on tracts offered for lease under the Outer Continental Shelf Lands Act (OCSLA). The change gives the Secretary of the Interior more flexibility in setting the terms of a lease sale. This rule provides four methods of modifying the existing alternative bidding systems:

1. setting the minimum prescribed royalty rate charged on Federal offshore leases below 12 1/2 per centum but greater than zero per centum;
    
2. permitting operating allowances when computing payment obligations under the lease
    
3. suspending or deferring royalty for a specific time period, volume, or value of production; and
    
4. expanding the methods for calculating royalty rates under variable royalty systems to include produce prices, as well as value and amount of production, with the ability to use different formulas across time periods. The rule does not affect existing leases.