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PART 259-MINERAL LEASING:

DEFINITIONS

Sec.
259.001 Purpose and scope.
259.002 Definitions.

AUTHORITY: Pub. L. 83-212, 67 Stat. 462, 43 U.S.C. 1331 et seq., as amended by Pub. L. 95-372, 92 Stat. 629.

manner designed to provide information which can be compared with the results of studies conducted prior to OCS oil and gas development. This shall be done to identify any significant changes in the quality and productivity of such environments, to establish trends in the areas studies, and to design experiments identifying the causes of such changes. Findings from such studies shall be used to recommend modifications in practices which are employed to mitigate the effects of OCS activities and to enhance the data/information base for predicting impacts which might result from a single lease sale or cumulative OCS activities.

(e) Information available or collected by the studies program shall, to the extent practicable, be provided in a form and in a timeframe that can be used in the decision-making process associated with a specific leasing action or with longer term OCS minerals management responsibilities.

8 259.001 Purpose and scope.

The purpose of this part 259 is to define various terms appearing in parts 260, 261 and 262 of this chapter.

(48 FR 1182, Jan. 11, 1983)

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8 259.002 Definitions.

For purposes of parts 260, 261, and 262 of this chapter:

Area or region means the geographic area or region over which the MMS designated official has jurisdiction, unless the context in which those words are used indicates that a different meaning is intended.

Designated official means a representative of DOI subject to the direction and supervisory authority of the Director, MMS, and the appropriate Regional Manager of the MMS authorized and empowered to supervise and direct all oil and gas operations and to perform other duties prescribed in 30 CFR part 250 (offshore).

Director means Director, MMS, DOI.

DOI means the Department of the Interior, including the Secretary of the Interior, or his or her delegate.

Federal lease means an agreement which, for any consideration, including, but not limited to, bonuses, rents or royalties conferred, and convenants to be observed, authorizes a person to explore for, or develop, or produce (or to do any or all of these) oil and gas, coal, oil shale, tar sands, and goethermal resources on lands or interests in lands under Federal jurisdiction.

Gas means natural gas as defined by the Federal Energy Regulatory Commission.

MMS means Minerals Management Service.

OCS means the Outer Continental Shelf, which includes all submerged lands (1) that lie seaward outside of the area of lands beneath navigable waters as defined in the Submerged

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relate to the fostering of competition including, but not limited to, regulations to prohibit joint bidding for development rights by certain types of joint ventures; the implementation of alternative bidding systems; and the establishment of diligence requirements for Federal OCS leases issued under the OCSLA.

Lands Act (Pub. L. 31-35, 67 Stat. 29, (43 U.S.C. 1301)) and (2) of which the subsoil and seabed appertain to the United States are subject to its jurisdiction and control.

OCSLA means the Outer Continental Shelf Lands Act, as amended (Act of August 7, 1953, Ch. 345, 67 Stat. 462, 43 U.S.C. 1331 et seq., as amended by Pub. L. 95-372, 92 Stat. 629).

Oil means a mixture of hydrocarbons that exists in a liquid or gaseous phase in an underground reservoir and which remains or becomes liquid at atmospheric pressure after passing through surface separating facilities, including condensate recovered by means other than a manufacturing process. (48 FR 1182, Jan. 11, 1983)

§ 260.002 Definitions.
For purposes of this part 260:

OCSLA means the Outer Continental Shelf Lands Act (Act of August 7, 1953, ch. 345, 67 Stat. 462 (43 U.S.C. 1331 et seq.), as amended by Pub. L. 95-372, 92 Stat. 629).

OCS lease means a Federal lease for oil and gas issued under the OCSLA.

Person includes, in addition to a natural person, an association, a State, or a private, public, or municipal corporation.

PART 260_OUTER CONTINENTAL SHELF OIL AND GAS LEASING

Subpart A-General Provisions

Sec. 260.001 Purpose and scope. 260.002 Definitions.

Subpart B-Bidding Systems

Subpart B-Bidding Systems $ 260,101 Purpose and scope.

(a) This subpart establishes the several bidding systems that may be utilized in connection with the offering and sale of Federal leases for the exploration, development and production of oil and gas resources located on the OCS.

(b) Only bidding systems established by his subpart shall be utilized in OCS lease sales.

260.101 Purpose and scope. 260.102 Definitions. 260.110 Bidding systems. 260.111 Criteria for selection of bidding

systems and bidding system components.

Subpart C-[Reserved)

Subpart D-Joint Bidding 260.301 Purpose. 260.302 Definitions. 260.303 Joint bidding requirements.

AUTHORITY: Act of August 7, 1953, ch. 345, secs. 2 and 8, 67 Stat. 468 (43 U.S.C. 1331 and 1337), as amended by sec. 205, Pub. L. 95-372, 92 Stat. 462 and 629; secs. 302, 303 and 644.

SOURCE: 45 FR 9539, Feb. 12, 1980, unless otherwise noted. Redesignated at 48 FR 1182, Jan. 11, 1983.

$ 260.102 Definitions.

For purposes of this subpart B

Highest responsible qualified bidder means a person who has met the appropriate requirements of 30 CFR part 256, subpart G and has submitted a bid higher than any other bids by qualified bidders on the same tract.

Highest royalty rate means the highest per centum rate payable to the United States, as specified in the lease, in amount or value of the production saved, removed or sold.

Lowest royalty rate means the lowest per centum rate payable to the United States, as specified in the lease, in amount or value of the production saved, removed or sold.

OCS lease sale means the DOI proceeding by which leases for certain

Subpart A-General Provisions

8 260.001 Purpose and scope.

The purpose of this part 260 is to implement OCSLA, 43 U.S.C. 1331 et seq., as amended by Pub. L. 95-372, 92 Stat. 629 by providing regulations which

OCS tracts are offered for sale by competitive bidding and during which bids are received, announced and recorded.

Production period means the period during which the amount of oil and gas produced from a tract, or, if the tract is unitized, the amount of oil and gas as allocated under a unitization formula, will be measured for purposes of determining the amount of royalty payable to the United States.

Qualified bidder means a person, who has met the appropriate requirements of 30 CFR part 256, subpart G.

Tract means a designation assigned solely for administrative purposes to a block or combination of blocks that are identified by a leasing map or, an official protraction diagram prepared by DOI.

Value of production means the value of all oil and gas production saved, removed or sold from a tract, or, if the tract is unitized, the value of all oil and gas production saved, removed or sold and credited to the tract under a unitization formula, during a production period, which value is determined in accordance with § 260.110(b).

(iii) The annual rental to be paid by the highest responsible qualified bidder shall be the amount specified in the notice of OCS lease sale published in the FEDERAL REGISTER.

(2) Royalty rate bid based on per centum in amount or value of the production saved, removed or sold, with a fixed cash bonus and an annual rental. (i) The royalty rate to be paid is determined by the qualified bidder submitting the bid and shall be based on a percentage of the amount or value of the production saved, removed, or sold.

(ii) The cash bonus to be paid by the highest responsible qualified bidder shall be an amount specified in the notice of OCS lease sale published in the FEDERAL REGISTER.

(iii) The annual rental to be paid by the highest responsible qualified bidder shall be the amount specified in the notice of OCS lease sale published in the FEDERAL REGISTER.

(3) Cash bonus bid with diminishing or sliding royalty rate of not less than 1242 per centum at the beginning of the lease period in amount or value of the production saved, removed, or sold, and annual rental. (i) (A) The royalty rate to be paid by the highest responsible qualified bidder shall be a percentage of the amount or value of the production saved, removed or sold. The royalty rate shall be calculated by utilizing either a sliding scale formula, which relates the royalty rate established thereby to the adjusted value of the oil and gas produced during the production period, or a schedule that establishes the royalty rate that will be applied to specified ranges of adjusted value of production. The description of the sliding scale formula or schedule shall include the relationship between adjusted value of production and royalty rate, and a stipulation of the lowest royalty rate and highest royalty rate. The sliding scale formula or schedule shall be included in the lease issued to the person who is the successful bidder as one of the lease terms and conditions.

(B) The royalty rate shall not be less than 1242 per centum at the beginning of the lease period in amount or value of the production saved, removed or sold and shall be specified in the

$ 260.110 Bidding systems.

(a) A single bidding system selected from those listed in this paragraph shall be applied to each tract included in an OCS lease sale.

(1) Cash bonus bid with a fixed royalty rate of not less than 12/2 per centum in amount or value of the production saved, removed or sold and an annual rental. (i) The royalty rate to be paid by the highest responsible qualified bidder shall be a percentage of the amount or value of the production saved, removed or sold. Such royalty rate shall not be less than 1242 per centum at the beginning of the lease period in amount or value of production and shall be specified in the notice of OCS lease sale published in the FEDERAL REGISTER.

(ii) The amount of cash bonus to be paid is determined by the qualified bidder submitting the bid. Any deferment and the schedule of payments shall be included in the notice of OCS lease sale published in the FEDERAL REGISTER.

notice of OCS lease sale published in the FEDERAL REGISTER.

(C) Royalty payment calculation. (1) The royalty rate utilized in the calculation of royalty payments is based on an adjusted value of production, and is established through application of a sliding scale formula or a schedule to the adjusted value of production.

(2) The adjusted value of production shall be determined by applying an inflation factor to the actual value of production.

(3) The established royalty rate is applied to the actual value of production, which results in the determination of amount in dollars to be paid to the United States by the person awarded the lease or the amount of royalty oil and gas to be taken in kind by the United States.

(4) The production period for purposes of determining value of production shall be stated in the notice of OCS lease sale that is published in the FEDERAL REGISTER. The inflation factor utilized shall be based on the gross national product fixed weighted price index that is first published in the Survey of Current Business by the Bureau of Economic Analysis, U.S. Department of Commerce, for a calendar period corresponding to a production period. The procedures for making the inflation adjustment shall be stated in the notice of OCS lease sale published in the FEDERAL REGISTER.

(ii) The amount of cash bonus to be paid is determined by the qualified bidder submitting the bid. Any deferment and the schedule of payments shall be included in the notice of OCS lease sale published in the FEDERAL REGISTER.

(iii) The annual rental to be paid by the highest responsible qualified bidder shall be the amount specified in the notice of OCS lease sale published in the FEDERAL REGISTER.

(4) Cash bonus bid with a fixed share of the net profits of no less than 30 per centum to be derived from the production of oil and gas from the lease area and a fixed annual rental-(i) Net profit share payment calculation. The amount of the net profit share pay. ment to the United States by the person awarded the lease shall be determined for each month by multiply

ing the net profit share base times the net profit share rate, in accordance with § 220.022.

(A) Net profit share base. (1) The net profit share base shall be calculated in accordance with $ 220.021. (2) The capital recovery

factor needed to calculate the allowance for capital recovery, in accordance with $ 220.020, shall be specified in the notice of OCS lease sale published in the FEDERAL REGISTER and may vary from tract to tract.

(B) Net profit share rate. The net profit share rate, which determines the fixed share of the net profits owed to the United States, shall be a percentage that is specified in the notice of OCS lease sale published in the FEDERAL REGISTER. Such net profit share rate shall not be less than 30 percent of the net profit share base and may vary from tract to tract,

(ii) The amount of cash bonus to be paid is determined by the person submitting the bid. Any deferment and the schedule of payments shall be included in the notice of OCS lease sale published in the FEDERAL REGISTER.

(iii) The annual rental to be paid by the person awarded the lease shall be the amount specified in the notice of OCS lease sale published in the FEDERAL REGISTER.

(b) The value basis for determining the actual value of production and for purposes of computing royalty in accordance with the bidding systems established by paragraph (a) of this section shall be as described in 30 CFR 206.102, 206.152, and 206.153; Provided, however, That with respect to oil, the first sale of which is controlled under 10 CFR part 212, the value shall not exceed the lawful first sale price of such oil; and Provided further, That with respect to gas, the value shall not exceed the sale price established by the Federal Energy Regulatory Commission.

(c) MMS may, by rule, add to or modify the bidding systems listed in paragraph (a) of this section, in accordance with the procedural requirements of OCSLA, 43 U.S.C. 1331 et seq., as amended by Pub. L. 95-372, 92 Stat. 629.

(45 FR 9539, Feb. 12, 1980, as amended at 45 FR 36800, May 30, 1980; 46 FR 29689, June 2, 1981; 46 FR 35625, July 9, 1981. Redesignated at 48 FR 1182, Jan. 11, 1983, and amended at 48 FR 24874, June 3, 1983; 56 FR 23648, May 23, 1991)

determines that the maximum and minimum per centum limitations set forth in this section are inconsistent with the purposes and policies of the OCSLA.

(45 FR 9539, Feb. 12, 1980. Redesignated and amended at 48 FR 1182, Jan. 11, 1983)

Subpart C-[Reserved]

Subpart D-Joint Bidding

SOURCE: 45 FR 62031, Sept. 18, 1980, unless otherwise noted. Redesignated at 48 FR 1182, Jan. 11, 1983.

8 260.301 Purpose.

The purpose of the regulations in this subpart D is to encourage participation in OCS oil and gas lease sales by limiting the requirement for filing Statements of Production to certain joint bidders.

$ 260.302 Definitions.

For purposes of this subpart D, all the terms used shall be defined as in 30 CFR 256.38.

260.111. Criteria for selection of bidding

systems and bidding system compo

nents. (a) In analyzing the application of one of the bidding systems listed in $ 260.110(a) to tracts selected for any OCS lease sale, MMS may, in its discretion, consider the following purposes and policies, recognizing that each of the purposes and policies may not be specifically applicable to the selection process for a particular bidding system and tract or may present a conflict that will have to be resolved in the process of bidding system selection, and that the order of listing does not denote a ranking:

(1) Providing fair return to the Federal Government;

(2) Increasing competition; (3) Assuring competent and safe operations;

(4) Avoiding undue speculation;

(5) Avoiding unnecessary delays in exploration, development, and production;

(6) Discovering and recovering oil and gas;

(7) Developing new oil and gas resources in an efficient and timely manner;

(8) Limiting administrative burdens on Government and industry; and

(9) Providing an opportunity to experiment with various bidding systems to enable the identification of those that are the most appropriate for the satisfaction of the objectives of the United States in OCS lease sales.

(b) In performing the analysis referred to in paragraph (a), MMS may, in its discretion, take into account the following in relation to their impact upon the purposes and policies enumerated in paragraph (a) of this section.

(c) The bidding systems listed in $ 260.110(a) (2) and (3) shall be applied to not less than 20 per centum and not more than 60 per centum of the total area offered for leasing each year during the five-year period commencing on September 18, 1978, unless DOI

§ 260.303 Joint bidding requirements.

(a) Any person who submits a joint bid for any OCS oil and gas lease during a six-month bidding period and who was chargeable for the prior production period with an average daily production in excess of 1.6 million barrels of crude oil, natural gas equiva. lents, and liquefied petroleum products, shall have filed a Statement of Production with the Director, MMS, in accordance with the requirements of 30 CFR 256.38. The Statement of Production shall state that the person filing the Statement is chargeable for the prior production period with an average daily production in excess of 1.6 million barrels of crude oil, natural gas equivalents, and liquefied petroleum products.

(b) No person chargeable for the prior production period with an average daily production in excess of 1.6 million barrels of crude oil, natural gas equivalents, and liquefied petroleum products may submit a joint bid for any OCS oil and gas lease during the applicable six-month bidding period with any other person similarly

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