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Subpart K-Termination of Leases

production plan, a lease may be maintained in force by directional wells drilled under the leased area from surface locations on adjacent or adjoining land not covered by the lease. In such circumstances, drilling shall be considered to have commenced on the leased area when drilling is commenced on the adjacent or adjoining land for the purpose of directional drilling under the leased area through any directional well surfaced on adjacent or adjoining land. Production, drillling or reworking of any such directional well shall be considered production or drilling or reworking operations on the leased area for all purposes of the lease.

§ 256.76 Relinquishment of leases or parts

of leases. A lease or any officially designated subdivision thereof may be surrendered by the record title holder by filing a written relinquishment, in triplicate, with the appropriate OCS office of the MMS. No filing fee is required. A relinquishment shall take effect on the date it is filed subject to the continued obligation of the lessee and the surety to make all payments due, including any accrued rentals, royalties and deferred bonuses and to abandon all wells and condition or remove all platforms and other facilities on the land to be relinquished to the satisfaction of the Director.

8 256.72 Compensatory payments as pro

duction. If an oil and gas lessee makes compensatory payments and if the lease is not being maintained in force by other production of oil or gas in paying quantities or by other approved drilling or reworking operations, such payments shall be considered as the equivalent of production in paying quantities for all purposes of the lease. (44 FR 38276, June 29, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982, and amended at 54 FR 50617, Dec. 8, 1989)

8 256.73 Effect of suspensions on lease

term. (a) If the Regional Supervisor directs the suspension of either operations or production, or both, under the provisions of 30 CFR 250.10(a), (b)(2) through (b)(7), or (c) with respect to any lease in its primary term, the primary term of the lease shall be extended by a period equivalent to the period of the suspension.

(b) If the Regional Supervisor orders or approves the suspension of either operations or production, or both, under the provision for 30 CFR 250.10(a), (b)(2) through (b)(7), or (c) with respect to any lease extended beyond its primary term, the term of the lease shall not be deemed to expire so long as the suspension remains in effect.

8 256.77 Cancellation of leases.

(a) Any nonproducing lease issued under the act may be cancelled by the authorized officer whenever the lessee fails to comply with any provision of the act or lease or applicable regulations, if such failure to comply continues for 30 days after mailing of notice by registered or certified letter to the lease owner at the owner's record post office address. Any such cancellation is subject to judicial review as provided in section 23(b) of the Act.

(b) Producing leases issued under the Act may be cancelled by the Secretary whenever the lessee fails to comply with any provision of the Act, applicable regulations or the lease only after judicial proceedings as prescribed by section 5(d) of the Act.

(c) Any lease issued under the Act, whether producing or not, shall be canceled by the authorized officer upon proof that it was obtained by fraud or misrepresentation, and after notice and opportunity to be heard has been afforded to the lessee.

(d) Pursuant to section 5(a) of the Act, the Secretary may cancel a lease when:

(1) Continued activity pursuant to such lease would probably cause serious harm or damage to life, property, any mineral, national security or defense, or to the marine, coastal or human environment;

(44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated at 47 47006, Oct. 22, 1982, and amended at 54 FR 50617, Dec. 8, 1989)

(2) The threat of harm or damage will not disappear or decrease to an acceptable extent within a reasonable period of time; and

(3) The advantages of cancellation outweigh the advantages of continuing such lease or permit in force. Procedures and conditions contained in 30 CFR 250.12 shall apply as appropriate. (44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982)

sonably to interfere with or endanger operations under the existing lease. No sulphur leases shall be granted by the United States on any area while such area is included in a lease covering sulphur under section 6(b) of the Act.

Subpart M-Studies

Subpart 1-Section 6 Leases

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& 256.79 Effect of regulations on lease.

(a) All regulations in this part, insofar as they are applicable, shall supersede the provisions of any lease which is maintained under section 6(a) of the Act. However, the provisions of a lease relating to area, minerals, rentals, roy. alties (subject to sections 6(a) (8) and (9) of the Act), and term (subject to section 6(a)(10) of the Act and, as to sulfur, subject to section 6(b)(2) of the Act) shall continue in effect, and, in the event of any conflict or inconsistency, shall take precedence over these regulations.

(b) A lease maintained under section 6(a) of the Act shall also be subject to all operating and conservation regulations applicable to the OCS. In addition, the regulations relating to geophysical and geological exploratory operations and to pipeline rights-ofway are applicable, to the extent that those regulations are not contrary to or inconsistent with the lease provisions relating to area, the minerals, rentals, royalties and term. The lessee shall comply with any provision of the lease as validated, the subject matter of which is not covered in the regulations in this part. (44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated at 47 FR 47006, Oct. 22, 1982)

8 256.82 Environmental studies.

(a) The Director shall conduct a study of any area or region included in any lease sale in order to establish information needed for assessment and management

impacts on the human, marine and coastal environments which may be affected by OCS oil and gas activities in such area or region. Any study shall, to the extent practicable, be designed to predict environmental impacts of pollutants introduced into the environments and of the impacts of offshore activities on the seabed and affected coastal areas.

(b) Studies shall be planned and carried out in cooperation with the af. fected States and interested parties and, to the extent possible, shall not duplicate studies done under other laws. Where appropriate, the Director shall, to the maximum extent practicable, enter into agreements with the National Oceanic and Atmospheric Administration in executing the environmental studies responsibilities. By agreement, the Director may also utilize services, personnel or facilities of any Federal, State or local government agency in the conduct of such study.

(c) Any study of an area or region required by paragraph (a) of this section for a lease sale shall be commenced not later than six months prior to holding a lease sale for that area. The Director may utilize information col. lected in any prior study. The Director may initiate studies for areas or regions not identified in the leasing program.

(d) After the leasing and developing of any area or region, the Director shall conduct such studies as are deemed necessary to establish additional information and shall monitor the human, marine and coastal envi. ronments of such area or region in a

8 256.80 Leases of other minerals.

The existence of a lease that meets the requirements of section 6(a) of the Act shall not preclude the issuance of other leases of the same area for deposits of other minerals. However, no other lease of minerals shall authorize or permit the lessee thereunder unrea

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.

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