Notice of Intent To Establish an Indian Oil Valuation Negotiated Rulemaking Committee

AGENCY:

Minerals Management Service, Interior.

ACTION:

Notice of intent to establish an Indian Oil Valuation Negotiated Rulemaking Committee; request for nominees and comments.

SUMMARY:

The Minerals Management Service (MMS) is announcing its intent to establish an Indian Oil Valuation Negotiated Rulemaking Committee (Committee). The Committee will develop specific recommendations regarding proposed revisions to the existing Indian Oil regulations for oil production from Indian leases, especially the major portion valuation requirement. The Committee will include representatives of parties who would be affected by a final rule. The MMS solicits comments on this initiative and requests interested parties to nominate representatives for membership on the Committee.

DATES:

You must submit written comments and requests for membership on or before May 28, 2008.

ADDRESSES:

Submit written comments to Hyla Hurst, Regulatory Specialist, Minerals Management Service, Minerals Revenue Management, P.O. Box 25165, MS 302B2, Denver, Colorado 80225. If you use an overnight courier service or wish to hand-carry your comments, our courier address is Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver, Colorado 80225. You may also e-mail your comments to us at mrm.comments@mms.gov. Include the title of this Federal Register notice in the “Attention” line of your comment. Also include your name and return address. If you do not receive a confirmation that we have received your e-mail, contact Ms. Hurst at (303) 231-3495.

FOR FURTHER INFORMATION CONTACT:

John Barder, Indian Oil and Gas Compliance and Asset Management, MMS; telephone (303) 231-3702; fax (303) 231-3755; e-mail to John.Barder@mms.gov. Mailing address: Minerals Management Service, Minerals Revenue Management, Compliance and Asset Management, Indian Oil and Gas Compliance and Asset Management, P.O. Box 25165, MS 396B2, Denver, Colorado 80225-0165.

SUPPLEMENTARY INFORMATION:

I. Background

The existing rule for valuation of oil produced from Indian leases, codified at 30 CFR 206.50, was published on March 1, 1988 (53 FR 1184). Since then, many changes have occurred in the oil market. Also, concerns have arisen about the need for revised valuation methodologies to address paragraph 3(c) of standard Indian oil and gas leases, such as the major portion analysis requirement for valuation of oil production from Indian leases.

The MMS published proposed rules for Indian oil valuation in February 1998 (63 FR 7089) and in January 2000 (65 FR 403). Each of these proposed rules was subsequently withdrawn because of market changes and the passage of time. In addition, the MMS held a series of eight public meetings during 2005 to consult with Indian tribes and individual Indian mineral owners and to obtain information from interested parties. Then MMS published a third proposed rule in February 2006 (71 FR 7453). Tribal and industry commenters on the 2006 proposed rule did not agree on most issues regarding oil valuation, and none of the commenters supported the major portion provisions.

The Royalty Policy Committee Indian Oil Valuation Subcommittee evaluated the 2006 proposed rule but was unable to reach consensus about how the Department should proceed. Thus, MMS decided to make only technical amendments to the existing Indian oil valuation regulations and to convene a negotiated rulemaking committee to make specific recommendations regarding the major portion provision. On December 17, 2007, MMS published a final rule that addressed the technical amendments (72 FR 71231).

II. Statutory Provisions

The Negotiated Rulemaking Act of 1996 (NRA) (5 U.S.C. 561 et seq.); the Federal Advisory Committee Act (FACA) (5 U.S.C. Appendix 2, section 1 et. seq.); the Indian Mineral Development Act of 1982 (25 U.S.C. 2101-2108); 30 CFR part 206 (2007), 25 CFR part 225 (2007); and Indian oil and gas lease and agreement terms.

III. The Committee and Its Process

In a negotiated rulemaking, a proposed rule is developed by a committee composed of representatives of government and the interests that will be significantly affected by the rule. Decisions are made by “consensus.”

“[C]onsensus” means unanimous concurrence among the interests represented on a negotiated rulemaking committee established under this subchapter, unless such committee (A) agrees to define such term to mean a general but not unanimous concurrence; or (B) agrees upon another specified definition.

5 U.S.C. 562(2)(A) and (B)

The negotiated rulemaking process is initiated by the agency's identification of interests potentially affected by the rulemaking under consideration. By this notice, MMS is soliciting comments on this action.

Following receipt of comments, MMS will establish a negotiated rulemaking committee representing the identified interests to negotiate the provisions of a proposed rule. The MMS will be a member of the committee to represent the Federal Government's statutory mission. The committee will be chaired by a facilitator. After the committee reaches consensus on the provisions of a proposed rule, MMS will develop a proposed rule to be published in the Federal Register.

Section 563 of the NRA requires the head of the agency to determine that the use of the negotiated rulemaking procedure is in the public interest. In making such a determination, the agency head must consider certain factors. The MMS has determined a negotiated rulemaking is in the public interest because:

1. A rule is needed. Royalty payors have considerable difficulty in complying with the current regulations.

2. A limited number of identifiable interests will be significantly affected by the rule. Such interests are oil and gas companies who produce oil and pay royalties on Indian leases, and Indian tribes and individual Indian mineral owners who receive royalties from oil produced from Indian leases located on their lands.

3. There is a reasonable likelihood that a committee can be convened with a balanced representation of persons who can adequately represent the interests discussed in paragraph (2), and MMS will be able to determine that the interests are willing to negotiate in good faith to attempt to reach a consensus on provisions of a proposed rule.

4. There is a reasonable likelihood that the committee will reach consensus on a proposed rule within a fixed period of time.

5. The use of negotiated rulemaking will not unreasonably delay the development of a proposed rule if time limits are placed on the negotiation. It is anticipated that negotiation will expedite a proposed rule and ultimately the acceptance of a final rule.

6. The MMS is making a commitment that it will ensure the committee has sufficient resources to complete its work in a timely fashion.

7. The MMS, to the maximum extent possible, consistent with its statutory mission and the legal obligations of the agency, will seek to use the consensus of the committee as the basis for a proposed rule for public notice and comment.

IV. Negotiated Rulemaking Procedures

In compliance with FACA and NRA, MMS will use the following procedures and guidelines for this negotiated rulemaking. The MMS may modify them in response to comments received on this notice or during the negotiation process.

A. Committee Formation

A committee will be formed and operated in full compliance with the requirements of FACA and NRA and specifically under the guidelines of its charter.

B. Interests Involved

The MMS intends to ensure full and adequate representation of those interests that are expected to be significantly affected by the proposed rule. Under Section 562(5) of the NRA, “interest means, with respect to an issue or matter, multiple parties which have a similar point of view or which are likely to be affected in a similar manner.” As discussed above, MMS believes the interests significantly affected are oil and gas companies who produce oil and pay royalties on Indian leases, and Indian tribes and individual Indian mineral owners who receive royalties from oil produced from Indian leases located on their lands.

C. Members

The committee should not exceed 25 members, and MMS prefers 15. The MMS will provide at least two members plus a facilitator. The facilitator will not count against the membership.

Section 568(c) of the NRA states:

Members of a negotiated rulemaking committee shall be responsible for their own expenses of participation in such committee, except that an agency may, in accordance with section 7(d) of the FACA, pay for a member's reasonable travel and per diem expenses, expenses to obtain technical assistance, and a reasonable rate of compensation, if

(1) Such member certifies a lack of adequate financial resources to participate in the committee; and

(2) The agency determines that such member's participation in the committee is necessary to assure an adequate representation of the member's interest.

Therefore, MMS commits to pay the travel and per diem expenses of committee members if appropriate under the NRA and the Federal travel regulations.

D. Request for Nominations

The MMS solicits nominations for appointment to membership on the committee. Members can be individuals or representatives of organizations. An organization should identify the individual who will be its representative.

Committee members need to have authorization to negotiate on behalf of their interests and be willing to negotiate in good faith. MMS interprets good faith to include: (1) A willingness to bring all issues to the table; and (2) not to discuss the issues in other forums. Good faith also includes a willingness to move away from taking adversarial positions and instead to explore openly all relevant and productive ideas that may emerge from the discussion of the committee.

Authorization for each application or nomination must include:

1. The name of the applicant or nominee and a description of the interests such person will represent;

2. A description of the person's qualifications and expertise regarding those interests;

3. Whether the participant will be seeking agency resources to participate on the committee; and

4. A written commitment of the applicant or nominee to actively participate in good faith in the negotiated rulemaking and keep all issues at the table.

E. Tentative Schedule

When MMS publishes a notice establishing the committee and appointing its members, it will include a proposed agenda and schedule for completing the work of the committee, including a date for the first meeting. The committee will agree on dates, times, and locations of future meetings. The MMS plans to terminate the committee if it does not reach consensus on the provisions of a proposed rule within 24 months of the first meeting. The committee may end earlier if the committee itself so recommends.

V. Request for Nominations and Comments

To comply with negotiated rulemaking procedures, MMS invites written comments on this initiative and nominations for the negotiated rulemaking committee. Written comments are specifically requested on the suitability of using the negotiated rulemaking procedure to develop a proposed valuation rule for oil production from Indian leases. Nominations are for all interests that could be affected by an Indian oil valuation rulemaking and must comply with paragraph IV, D, Request for Nominations, of this notice. All written comments and nominations must be sent to an appropriate address as listed in the ADDRESSES section of this notice.

Certification

For the above reasons, I hereby certify that the Indian Oil Valuation Negotiated Rulemaking Committee is in the public interest.