Onshore and Outer Continental Shelf Oil and Gas Leasing and Operations

LC 2 2 2 ENq _+art No. 8 2 - i l l bKK ONSHORE AND OUTER CONTINENTAL SHELF O I L AND GAS L E A S I N G AND O P E R A T I O K 3 bY William H. Hymes Analyst Environment and Natural Resources Policy Division COMPLIMENTS OF Gene Snyder June 7, 1982 HD 9560 U . S . B T h e Congressional Research Service works exclusively for the Congress, conducting research, analyzing legislation, and providing information at the request of committees, Members, and their staffs. The Service makes such research available, without partisan bias, in many forms including studies, reports, compilations, digests, and background briefings. Upon request, CRS assists committees in analyzing legdative proposals and issues, and in assessing the possible effects of these proposals and their alternatives. The Service's senior specialists and subject analysts are also available for personal consultations in their respective fields of expertise. ABSTRACT The following paper is a discussion of the procedures involved in the leasing and operational aspects of acquiring crude oil and natural gas from lands onshore and in the Outer Cnntinental Shelf (OCS) which are under the jurisdiction of the United States. This includes the departments and agencies of the Government in teras of their responsibilities for leasing and for oil and gas operations; the categories of Federal land ownership and control; the mechanics of leasing; rents and royalties. Also discussed are the rules and regulations which govern the operations of extracting oil and gas, and handling the products after extraction. Page ABSTRACT ....................................................... ONSHORE 9 I L AND GAS LEASING .................................... Government Departments/Agencies Responsible for Onshore Oil and Gas Leasing Department of the Interior Bureau of Land Yanagement U.S. Geological Survey Yinerals I.ianagenent Service (?C.lS) National Park Service Bureau of Indian Affairs Department of Agriculture Forest Service ............................................ ............................. ........................... .............................. ................... ............................... ............................ .............................. ...................................... Land Ownership ............................................. Federal public domain lands ............................ Federal acquired lands ................................. Federal land withdrawals ............................... Yatinnal wildlife refuges .............................. Indian lands ........................................... Seophysical exploration .................................... Tlechanics of Onshore Oil and Gas Leasing ................... Noncompetitive leases ................................. Competitive leases .................................... Simultaneous filings. selection. and selection procedures .............................................. Bonds ................................................. Lease term ............................................ Acreage limitation and lease size ..................... Rentals and Royalties ...................................... Rental requirements ................................... Royalty on production ................................. Waiver. suspension or reduction of rental. miniinum royalty ............................................ iii .................................. Regulations .......................................... Area oil and gas supervisor ........................... Protective measures ................................... Development of the oil and gas field .................. Production records .................................... Sales agreements ...................................... ONSHORE OIL AND GAS OPERATIONS Sus~ensionor resumption of drilling or production operations Requirements for lessees ......................................... .............................. OUTER CONTINENTAL SHELF OIL AND GAS LEASING ..................... Definition of the Outer Continental Shelf (OCS) ............. Authority for Leasing OCS Lands for Oil and Gas ............ Laws Which Affect Implementing the OCS Lands Act ........... Government Departments/Agencies Administering OCS Leases and Operations ................................................. Department of Commerce. National Oceanic and Atmospheric Administration (NOAA) .................................... Department of Defense/U.S. Army Corps of Engineers ...... Department of Energy .................................... Department of the Interior .............................. Minerals Management Service (MMS) ................... U.S. Geological Survey (USGS) ...................... National Park Service .............................. Department of Justice ................................... Department of Transportation ............................ U.S. Coast Guard ................................... Materials Transportation Bureau. Office of Pipeline Safety .......................................... U.S. Environmental Protection Agency .................... OCS Leasing Program and Schedules .......................... Geophysical and Geological Exploration in the OCS .......... ................... ..... .............................. ............. ..................... Y e c h a n i c s of OCS O i l a n d Gas L e a s i n g Introduction V o n i n a t i o n o f T r a c t s o f OCS L a n d s f o r L e a s i n q Resource r e p o r t s C a l l f o r n o m i n a t i o n s a n d comments Tentative t r a c t selection Environmental impact s t a t e m e n t OCS L e a s e S a l e s Proposed n o t i c e o f s a l e Final tract selection F i n a l n o t i c e of s a l e Bidding systems Submission of c o m p e t i t i v e b i d s J o i n t bidding Lease Conditions Lease s i z e T e r n s of l e a s e Rentals Royalties Bond ...................................... ................ ....................... ......................... .......................... ............................... ................ ................................. ................................... .................................. .................................... ..............................*. Coastal ....................................... ..................................... .......................................... Zone l i a n a ~ , e r n e n t A c t o f 1 9 7 2 .................... OUTEK CONCINKNTAL SL!ELF C)IL AN:) G A S OPERATIONS *............. Laws a n d R e g u l a t i o n s f o r O i l a n d Gas O p e r a t i o n s i n t h e OCS ................................................. ...... Functions of t h e a r e a o i l and g a s s u p e r v i s o r ?lodification of r o y a l t i e s and r e n t a l .............. R e q u i r e m e n t s f o r t h e L e s s e e s o f O i l a n d Gas i n t h e OCS . D i l i g e n t d r i l l i n g ................................. E x p l o r a t o r y d r i l l i n g p l a n o n l e a s e d l a n d s ......... D e v e l o p m e n t a n d p r o d u c t i o n p l a n s .................. Compliance w i t h t h e N a t i o n a l Environrserltal P o l t c y Act Well r e c o r d s Well c o n t r o l Pollution Abandonment o f w e l l s . . . . . . . . . . . q . . . . . . . * . l . . . . r . . . . ............................................ ...................................... ..................................... ......................................... S e c r e t a r i a l p r o d u c t i o n a s s i s t a n c e was p r o v i d e d by A r l e t t e M . G i l l i s. ONSHORE AND OUTER COllTINENTAL STIELF OIL AND GAS LEASING A , ' OPERATIONS INTRODUCTION The F e d e r a l Government owns a b o u t o n e t h i r d o f t h e t o t a l l a n d o f t h e c o n t i n e n t a l U n i t e d S t a t e s , o r a b o u t 738 m i l l i o n a c r e s o u t o f t h e t o t a l o f 2.3 b i l l i o n a c r e s . 1/ A p p r o x i m a t e l y 8 5 0 , 0 0 0 s q u a r e m i l e s o f O u t e r C o n t i n e n t a l S h e l f (OCS) l a n d s a r e u n d e r t h e j u r i s d i c t i o n o f t h e U n i t e d S t a t e s a n d c o u l d be l e a s e d f o r m i n e r a l r e s o u r c e s . 2 / Both t h e o n s h o r e l a n d s a n d t h e OCS l a n d s a r e i m p o r t a n t s o u r c e s of o i l and g a s a s p a r t of t h e N a t i o n ' s e n e r g y s u p p l y and i n p o r t a n t s o u r c e s of r e v e n u e t o t h e n a t i o n a l t r e a s u r y . F o r e x a m p l e , a c c o r d i n g t o s t a t i s t i c s from t h e Departnent of t h e I n t e r i o r , A/ a b o u t 5.84 p e r c e n t o f t h e U n i t e d S t a t e s ' p r o d u c t i o n o f o i l a n d c o n d e n s a t e s , a n d more t h a n 23.10 p e r c e n t o f t h e N a t i o n ' s n a t u r a l g a s came f r o m t h e OCS i n 1 9 8 0 . O i l a n d g a s v a l u e d a t $13.06 b i l l i o n w i t h r o y a l t i e s a m o u n t i q t o $2.14 b i l l i o n came f r o m t h e OCS i n 1 9 8 0 . Onshore p r o d u c t i o n o f o i l and g a s from p u b l i c l a n d s i n 1980 41 was v a l u e d a t $4.88 b i l l i o n w h i c h p r o v i d e d r o y a l t i e s o f $605 m i l l i o n . - 11 U.S. D e p a r t m e n t o f t h e I n t e r i o r . B u r e a u o f Land Management. Land S t a t i s t i c s 1 9 8 0 . W a s h i n g t o n , G o v t . P r i n t . O f f . , 1 9 8 1 , p . 1 0 . Public 2 / P l a l e y , T e r r y S . Handbook o f k l i n e r a l Law. S e c o n d e d i t i o n , B o i s e , I d a h o . IUIRC ? % b l i c a t i o n s , 1 9 7 9 , p . 3 8 . 3 1 U.S. D e p a r t m e n t o f t h e I n t e r i o r , G e o l o g i c a l S u r v e y . O u t e r C o n t i n e n t a l s h e l f - s t a t i s t i c s , 1 9 5 3 T h r o u g h 1 9 8 0 . C a s h i n g t o n , U.S. G o v t . P r i n t . O f f . , J u n e 1 9 8 1 , p. 8 9 . 4 1 U.S. D e p a r t m e n t o f t h e I n t e r i o r . G e o l o g i c a l S u r v e y . F e d e r a l a n d I n d i a n ~ a n d s - c o a l , P h o s p h a t e , P o t a s h , Sodium, a n d O t h e r Y i n e r a l P r o d u c t i o n , R o y a l t y Income a n d R e l a t e d S t a t i s t i c s , 1 9 2 0 T h r o u g h 1 9 8 0 . W a s h i n g t o n , U.S. G o v t . P r i n t . O f f . , J u n e 1 9 3 1 , p. 2 0 . S i n c e t h e p u b l i c l a n d s , i n c l u d i n g t h e OCS l a n d s , a r e p a r t of t h e n a t i o n a l h e r i t a g e , t h e C o n g r e s s h a s a l w a y s been i n t e r e s t e d i n a c h i e v i n g t h e optimum r e t u r n i n needed p r o d u c t s from t h e s e l a n d s , w h i l e a t t h e same t i m e , s a f e g u a r d i n g them a n d t h e i r e n v i r o n m e n t s , and c o n s e r v i n g t h e i r n a t u r a l r e s o u r c e s . To t h e s e e n d s , C o n g r e s s began t o e n a c t l e g i s l a t i o n c o n t r o l l i n g m i n i n g and o t h e r m i n e r a l a c t i v i t i e s on p u b l i c l a n d s a s e a r l y a s 1807. S i n c e t h a t t i m e , Congress h a s p a s s e d more t h a n 70 l e g i s l a t i v e a c t s r e l a t e d t o t h e c o n t r o l and d i r e c t i o n of mining and o t h e r a c t i v i t i e s r e l a t e d t o a c q u i r i n g minerals f r o n l a n d s under j u r i s d i c t i o n of t h e United S t a t e s . The l a w s , t o g e t h e r w i t h t h e many r e g u l a t i o n s r e q u i r e d by t h e l a w s , p r o v i d e ample g u i d a n c e f o r t h e p r o f e s s i o n a l s who a r e c o n c e r n e d on a d a i l y b a s i s w i t h m a t t e r s p e r t a i n i n g t o l e a s i n g p u b l i c l y owned The o b j e c t i v e o f t h i s p a p e r i s t o make a v a i l a b l e t o o i l and g a s l a n d s . c o n g r e s s i o n a l r e a d e r s a summary o f some of t h e i m p o r t a n t a s p e c t s of o i l and g a s l e a s i n g and o p e r a t i o n s i n t h e p u b l i c l y h e l d l a n d s . There a r e volumes of l a w s and r e g u l a t i o n s c o v e r i n g o n s h o r e and OCS o i l and g a s l e a s i n g . T h e r e f o r e , a summary s u c h a s p r e s e n t e d i n t h i s p a p e r amounts t o s e l e c t i n g c e r t a i n s u b j e c t s f o r coverage. R e a d e r s who may w i s h t o go i n t o g r e a t d e t a i l o n e i t h e r o n s h o r e o r OCS o i l and g a s l e a s i n g w i l l f i n d t h i s p a p e r t o o b r i e f f o r t h a t p u r p o s e . However, t h e p a p e r s h o u l d be u s e f u l t o t h o s e i n d i v i d u a l s who need a b r i e f o v e r v i e w o f t h e s u b j e c t o r who f o l l o w t h e f o o t n o t e s t o more b a s i c documents. Sone r e f e r e n c e s which f u r n i s h d e t a i l e d i n f o r m a t i o n on o n s h o r e and OCS l e a s i n g i n c l u d e t h e l a w s on m i n e r a l l a n d s and mining ( 3 0 U.S.C. 181 e t seq.); t h e O u t e r C o n t i n e n t a l S h e l f Lands Act a s amended ( 4 3 U.S.C. 1 3 3 1 e t s e q . ) ; Code o f F e d e r a l R e g u l a t i o n s (CFR) 4 3 , P u b l i c Lands; CFR 3 0 , M i n e r a l R e s o u r c e s ; C o m p i l a t i o n of R e g u l a t i o n s R e l a t e d t o I f i n e r a 1 Res o u r c e s A c t i v i t i e s o n t h e OCS, p u b l i s h e d by t h e U.S. Department of t h e I n t e r i o r , J a n u a r y 1981; and Handbook of M i n e r a l Law by T e r r y S. Maley [ s e e n o t e 2 1 . ONSHORE OIL AlJD GAS LEASING A u t h o r i z a t i o n f o r l e a s i n g onshore l a n d s under t h e j u r i s d i c t i o n of t h e United S t a t e s f o r e x p l o r i n z and producing o i l and g a s i s c o n t a i n e d i n t h e Y i n e r a l Lands L e a s i n g Act o f F e b r u a r y 2 5 , 1 9 2 0 , a s amended ( U . S . 3 0 , Y i n e r a l L a n d s a n d ' , l i n i n g , C h a p t e r s 3 A and 5 ) . a s amended by P . L . 97-78, Code, t i t l e S e c t i o n 1 9 1 of t i t l e 30, contains the following general provision f o r leasing mineral lands : D e p o s i t s of c o a l , p h o s p h a t e , s o d i u m , p o t a s s i u m , o i l , o i l s h a l e , q i l s o n i t e ( i n c l u d i n g a l l vein-type s o l i d hydrocarbons), o r g a s , and l a n d s c o n t a i n i n g s u c h d e p o s i t s owned by t h e U n i t e d S t a t e s , i n c l u d i n g t h o s e i n n a t i o n a l f o r e s t s , but excluding lands acquired under t h e Appalachian F o r e s t A c t , and t h o s e i n i n c o r p o r a t e d c i t i e s , t o w n s , a n d v i l l a g e s a n d i n n a t i o n a l p a r k s a n d monuments, t h o s e a c q u i r e d u n d e r o t h e r A c t s s u b s e q u e n t t o February 25, 1920, and l a n d s w i t h i n t h e n a v a l p e t r o l e u m and o i l - s h a l e reserves, except a s h e r e i n a f t e r provided, s h a l l be subject t o d i s p o s i t i o n i n t h e form and manner p r o v i d e d by t h i s c h a p t e r t o c i t i z e n s o f t h e United S t a t e s , o r a s s o c i a t i o n s of such c i t i z e n s , o r t o any c o r p o r a t i o n o r g a n i z e d u n d e r t h e l a w s of t h e U n i t e d S t a t e s , o r o f a n y S t a t e o r T e r r i t o r y t h e r e o f , o r i n t h e c a s e of c o a l , o i l , o i l s h a l e , o r g a s , t o m u n i c i p a l i t i e s . C i t i z e n s of a n o t h e r c o u n t r y , t h e l a w s , customs, o r r e g u l a t i o n s o f w h i c h deny s i m i l a r o r l i k e p r i v i l e g e s t o c i t i z e n s o r c o r p o r a t i o n s o f t h i s c o u n t r y , s h a l l n o t by s t o c k o w n e r s h i p , s t o c k h o l d i n ? , o r s t o c k c o n t r o l , own a n y i n t e r e s t i n a n y l e a s e a c q u i r e d u n d e r t h p~ r o v i s i o n s o f t h i s c h a p t e r . According t o s t a t u t e ( 4 3 U.S.C., section Z), t h e S e c r e t a r y of t h e I n t e r i o r o r o t h e r o f f i c e r s w h i c h t h e S e c r e t a r y may d e s i g n a t e s h a l l p e r f o r m a l l e x e c u t i v e d u t i e s p e r t a i n i n g t o t h e s u r v e y i n g and s a l e of t h e p u b l i c l a n d s of t h e United States. F u r t h e r , s e c t i o n 226 o f t i t l e 30 s p e c i f i c a l l y a u t h o r i z e s t h e S e c r e t a r y of t h e I n t e r i o r t o l e a s e l a n d s s u b j e c t t o d i s p o s i t i o n u n d e r t h i s l a w w h i c h a r e known o r b e l i e v e d t o c o n t a i n o i l o r g a s d e p o s i t s . Government D e p a r t m e n t s l h g e n c i e s R e s p o n s i b l e f o r O n s h o r e O i l a n d Gas L e a s i n g D e p a r t m e n t of t h e I n t e r i o r The D e p a r t m e n t o f t h e I n t e r i o r (DOI) i s t h e e x e c u t i v e d e p a r t m e n t w h i c h h a s j u r i s d i c t i o n o v e r n e a r l y 70 p e r c e n t o f a l l F e d e r a l l a n d s ; l a n d s h e l d i n t r u s t hy t h e U n i t e d S t a t e s ; c o n s e r v a t i o n a n d d e v e l o p n e n t o f m i n e r a l a n d w a t e r r e s o u r c e s ; the conservation, development, and utilization of fish and wildlife resources; preservation and administration of the Nation's scenic and historic areas; a variety of other activities involving conservation and reclamation efforts as well as economic and social development in the United States and its territories. 5/ The DO1 is responsible for administering oil and gas leasing, exploration, and production of oil and gas on lands either owned or under the jurisdiction of the United States. Several bureaus and offices of the DO1 have specific responsibilities and/or functions in leasing onshore oil and gas lands and in the activities which involve oil and gas exploration, develo~mentand production. However, these responsibilities do not constitute the sole prerogatives of any of DOI's bureaus or offices. Bureau of Land Management. The Bureau of Land Xanagement (BLX) is re- sponsible for the management of about 341 inillion acres of public lands which are located primarily in the western States and Alaska with scattered parcels located in other States. The BLM has mineral management responsibilities for all lands under the jurisdiction of the U.S., including public lands and the Outer Continental Shelf (OCS). It also is responsible for subsurface resource management of some 169 million acres where mineral rights have been reserved to the Federal Government. 61 Land resources under the management of the BLM include non-fuelminerals, oil and gas, geothermal energy, wildlife habitats, endangered plant and animal species, rangeland vegetation, recreational and cultural resources, 51 Office of the Federal Register, National Archives and Records Service, ~ e n e r a lAdministration. The United States Government Xanual 1981/82. Washington, U.S. Govt. Print. Off., May 1981, p. 338. 61 Office of the Federal Register. 1981/82, p. 356. The United States Government Manual w i l d and s c e n i c r i v e r s , d e s i g n a t e d c o n s e r v a t i o n and w i l d e r n e s s a r e a s , and open s p a c e s . 11 A s t h e l e a s i n g a g e n t f o r o i l a n d g a s , t h e BLM p r e p a r e s , i s s u e s , a n d admini s t e r s a l l r e g u l a t i o n s on o i l and g a s l e a s i n g , i n c l u d i n g l e a s e s a l e s . It conducts n e c e s s a r y s t u d i e s a n d a n a l y s e s a n d makes r e c o m m e n d a t i o n s t o t h e S e c r e t a r y o f t h e I n t e r i o r concerning a l l m a t t e r s p e r t a i n i n g t o o i l and g a s l e a s i n g . The h e a d q u a r t e r s o f t h e BLY i s l o c a t e d i n W a s h i n g t o n , D . C . , o f f i c e s a r e l o c a t e d throughout t h e United S t a t e s . and f i e l d An E a s t e r n S t a t e s o f f i c e l o c a t e d i n A l e x a n d r i a , V i r g i n i a , s e r v e s a l l o f t h e S t a t e s b o r d e r i n g o n a n d east of t h e Y i s s i s s i p p i River. An o f f i c e l o c a t e d i n B i l l i n g s , Y o n t a n a , s e r v e s t h e a r e a i n t h e S t a t e s of Montana, N o r t h D a k o t a , a n d S o u t h D a k o t a . An o f f i c e i n S a n t a F e , New ?lexica, h a s a n a r e a o f r e s p o n s i b i l i t y w h i c h e n c o m p a s s e s Dklahoma, T e x a s , and New X e x i c o . The a r e a s o f Wyoming, K a n s a s , a n d N e b r a s k a a r e u n d e r t h e j u r i s d i c t i o n o f a n o f f i c e i n Cheyenne, Wyoming. O t h e r o f f i c e s w i t h r e s p o n s i b i l i t i e s o n l y f o r t h e a r e a s o f S t a t e s i n which t h e y r e s i d e i n c l u d e t h o s e i n Anchorage, Alaska; do; Phoenix, Arizona; Sacramento, C a l i f o r n i a ; Denver, Colora- B o i s e , I d a h o ; Reno, Nevada, a n d S a l t Lake C i t y , U t a h . U.S. Geological Survey. The o b j e c t i v e s o f t h e U.S. 81 G e o l o g i c a l Survey (USGS) a r e t o p e r f o r m s u r v e y s , i n v e s t i g a t i o n s , a n d r e s e a r c h c o n c e r n i n g t o p o g r a p h y , m i n e r a l and water r e s o u r c e s ; c l a s s i f y l a n d a s t o m i n e r a l c h a r a c t e r and w a t e r r e s o u r c e s ; and e n f o r c e d e p a r t m e n t a l r e g u l a t i o n s a p p l i c a b l e t o w a t e r r e s o u r c e s . The USGS m a i n t a i n s 3 r e g i o n a l o f f i c e s . 91 An o f f i c e i n R e s t o n , V i r g i n i a , s e r v e s t h e e a s t e r n r e g i o n which i n c l u d e s t h e f o l l o w i n g States: l l a i n e , New 71 - O f f i c e of t h e F e d e r a l R e g i s t e r . The U.S. Government Y a n u a l 1 9 8 1 1 8 2 , p . 356. 8/ - Office of t h e Federal Register. The U.S. Government ? l a m a 1 1 9 8 1 / 8 2 , p. 355. 9/ - O f f i c e of t h e F e d e r a l R e g i s t e r . The U.S. Government Manual 1 9 8 1 / 8 2 , p . 351. Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, Pennsylvania, New Jersey, Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida, Yississippi, Alabama, Tennessee, Kentucky, Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Puerto Rico and the Virgin Islands. An office in Denver, Colorado, serves the central region which comprises North Dakota, South Dakota, Montana, Wyoming, Nebraska, Utah, Colorado, Kansas, Iowa, Xissouri, Oklahoma, New Mexico, Texas, Arkansas, and Louisiana. The western region consists of Washington, Oregon, Idaho, California, Nevada, Arizona, Alaska, and Hawaii, and is served by an office located in Menlo Park, California. 101 Minerals Management Service (XMS). The !@IS was established on January 19, 1982, to improve the management, and provide more effectiver management oversight and accountability for the minerals related activities previously conducted by the former Conservation Division of the U.S. Geological Survey.c/ The functions of the MMS include enforcing departmental regulations applicable to oil, gas and other mineral leases, permits, licenses, development contracts and gas storage contracts; and publishing and disseminating data obtained from these activities. lease sales. The MMS appraises mineral property values prior to It supervises exploration, development, and exploitation operations for leases on Federal, Indian and certain naval petroleum reserve land and is responsible for the collection of rents and royalties and the mqintenance of production records of Federal leases. The :I?IS assists the BLM in discharging its responsibilities for leasing. Offices of the EMS are co-located with those of the USGS. 101 - Office of the Federal Register. The U.S. Government Manual, 1981/82, p. 318. 111 U.S. Department of the Interior. Secretarial Order No. 3071. Federal Register. v. 47, no. 22, Feb. 2, 1982, p. 4751. National Park Service. The National Park Service of the DO1 administers the system of national parks, monuments, historic sites, and recreation areas. Among the objectives of the National Park Service are protection of the natural environment of areas under its jurisdiction, assisting State and local governments and citizen groups in the development of park areas, the protection of the natural environment, and the preservation of historic properties. 121 Lands within the National Parks are not generally open to the extraction of minerals either under leases or patented mining claims. However, the exercise of rights to minerals which do not belong to the United States often involves park lands and, consequently, the National Park Service. Access to minerals, including oil and gas, which do not belong to the United States are often on or through park lands. The minerals may be in lands which be- long to private entities and are obtainable only by the use of park lands. In other instances, land containing mineral deposits may have been transfered to the United States and made a part of the National Park System with the previous owner retaining rights to the minerals. The Park Service is responsible for administering the Park Service regulations (36 CFR Part 9) which control all activities on national park lands related to the exercise of mineral rights. In accordance with mining laws, the Park Service participates with the BUl and the !PIS in the management of leases of land in the National Park System. 131 Bureau of Indian Affairs. The principal objectives of the Bureau of Indian Affairs (BIA) of the D O 1 are to actively encourage and train Indian and Alaskan Native persons to manage their own affairs under the trust relationships with the Federal Government; to facilitate further development of their human and 121 p. 316. Office of the Federal Register. 131 Maley, Terry S. - U.S. Government Manual 198111982, Handbook of Xineral Law, p. 32. n a t u r a l r e s o u r c e p o t e n t i a l ; t o m o b i l i z e p u b l i c and p r i v a t e a i d s t o t h e advancement o f I n d i a n and Alaska N a t i v e p e o p l e f o r u s e by them; and t o u t i l i z e t h e s k i l l and c a p a b i l i t i e s of t h e s e p e r s o n s . 141 The B I A i s r e s p o n s i b l e f a r s u p e r v i s i n g t h e i s s u a n c e and a d m i n i s t r a t i o n o f m i n e r a l l e a s e s , i n c l u d i n g o i l and g a s l e a s e s on I n d i a n l a n d s . The MMS i s r e s p o n s i b l e f o r t h e t e c h n i c a l a s p e c t s of t h e l e a s i n g o f I n d i a n l a n d s f o r o i l and ga,s p r o d u c t i o n . Department of A g r i c u l t u r e Forest Service. The F o r e s t S e r v i c e o f t h e Department of A g r i c u l t u r e i s r e - sponsible f o r the national i n t e r e s t i n forestry. To d i s c h a r g e i t s r e s p o n s i b i l i t y , t h e F o r e s t S e r v i c e i n c l u d e s among i t s o b j e c t i v e s and p o l i c i e s t h e promotion and a c h i e v e m e n t of a p a t t e r n o f f o r e s t r y u s e s t h a t w i l l meet t i m b e r r e q u i r e m e n t s now and i n t h e f u t u r e ; p r o t e c t and improve t h e q u a l i t y o f a i r , w a t e r , s o i l , and n a t u r a l b e a u t y ; a n d e n c o u r a g e growth and development o f f o r e s t r y - b a s e d e n t e r p r i s e s t h a t r e a d i l y r e s p o n d t o consumers' c h a n g i n g n e e d s . The F o r e s t S e r v i c e manages 154 n a t i o n a l f o r e s t a r e a s and 19 n a t i o n a l g r a s s l a n d a r e a s c o m p r i s i n g 1 8 8 m i l l i o n a c r e s i n 4 1 S t a t e s and P u e r t o Rico. 151 The F o r e s t S e r v i c e a d m i n i s t e r s r e g u l a t i o n s (36 CFR P a r t s 251, 252, and 293) which c o v e r p r o s p e c t i n g , e x p l o r a t i o n and mining a c t i v i t i e s i n t h e N a t i o n a l F o r e s t System by i n d i v i d u a l s o p e r a t i n g i n compliance w i t h mining l a w s . The S e r v i c e a l s o works w i t h t h e BLM and MMS i n managing l e a s e s on N a t i o n a l F o r e s t l a n d s pursuant t o t h e mining laws. 141 p . 320. 161 O f f i c e of t h e F e d e r a l R e g i s t e r . 1 5 / O f f i c e of t h e F e d e r a l R e g i s t e r . pp. 127-128. 161 - Maley, T e r r y S. The U.S. Government Manual, 198111982, The U.S. Government Manual, 1981/1982, Handbook of M i n e r a l Law, p. 20. Land O w n e r s h i p F e d e r a l P u b l i c Domain Lands On t h e b a s i s o f s i z e , t h e F e d e r a l p u b l i c domain l a n d s r e p r e s e n t t h e most important c a t e g o r y of F e d e r a l ownership. t r a n s f e r r e d from F e d e r a l o w n e r s h i p . Lands i n t h i s c a t e g o r y h a v e n e v e r been A c c o r d i n g t o t h e BLM o f t h e D e p a r t m e n t o f t h e I n t e r i o r , 1 7 1 t h e r e a t e a b o u t 678 m i l l i o n a c r e s o f l a n d i n t h e p u b l i c domain c a t e g o r y . Of t h i s a m o u n t , a b o u t 1 6 0 m i l l i o n a c r e s a r e r e s e r v e d a s N a t i o n a l F o r e s t Lands under t h e j u r i s d i c t i o n o f t h e F o r e s t S e r v i c e o f t h e D e p a r t m e n t o f A g r i c u l t u r e , and a b o u t 6 1 m i l l i o n a c r e s a r e r e s e r v e d a s p a r k l a n d under t h e National Park S e r v i c e of t h e D O I . The F i s h a n d W i l d l i f e S e r v i c e h a s a p p r o x i m a t e l y 59 m i l l i o n a c r e s a n d t h e B u r e a u o f I n d i a n A f f a i r s h a s a b o u t 227 t h o u s a n d a c r e s i n t h e p u b l i c d o n a i n . There a r e o t h e r departments, a g e n c i e s and b u r e a u s o f t h e F e d e r a l Government w i t h l a n d h o l d i n g s i n t h e p u b l i c domain b u t t h e BLil h a s by f a r t h e l a r g e s t h o l d i n g w i t h j u r i s d i c t i o n o v e r a b o u t 395 million acres. 181 - Federal acauired lands F e d e r a l a g e n c i e s may a c q u i r e t i t l e t o l a n d s f r o m p r i v a t e o w n e r s u n d e r s p e c i a l circumstances such a s purchases, condemnations, o r by d o n a t i o n s . t h u s o b t a i n e d a r e known a s a c q u i r e d l a n d s . 191 Lands S t a t i s t i c s concerning these l a n d s a r e r e p o r t e d s e p a r a t e l y f r o m t h o s e p e r t a i n i n g t o F e d e r a l p u b l i c domain l a n d s . A c c o r d i n g t o t h e BLM, 2 0 1 t h e F e d e r a l Government owns a b o u t 6 0 m i l l i o n a c r e s of a c q u i r e d l a n d s . 171 Of t h i s t o t a l amount, t h e F o r e s t S e r v i c e h o l d s U.S. Department of t h e I n t e r i o r . P u b l i c Land S t a t i s t i c s 1 9 8 0 , p p . 181 - U.S. Department of t h e I n t e r i o r . P u b l i c Land S t a t i s t i c s 1 9 8 0 , p . 11. 191 - Maley, T e r r y S. 111-112. Handbook o f N i n e r a l Law, p. 3 7 . 201 U.S. D e p a r t m e n t o f t h e I n t e r i o r . - P u b l i c Land S t a t i s t i c s 1 9 8 0 , p . 1 2 . a b o u t 27.5 m i l l i o n a c r e s . The P a r k S e r v i c e h a s a b o u t 7 m i l l i o n a c r e s and t h e F i s h and W i l d l i f e S e r v i c e and t h e BLM h o l d 4 . 3 and 2.3 m i l l i o n a c r e s , r e spectively. The Bureau of I n d i a n A f f a i r s h a s a b o u t 0 . 5 m i l l i o n a c r e s . The M i n e r a l L e a s i n g Act f o r A c q u i r e d Lands of August 7 , 1947 ( 3 0 U.S.C., s e c t i o n s 352-359) c o n t a i n s p r o v i s i o n s which g o v e r n t h e l e a s i n g of m i n e r a l d e p o s i t s on a c q u i r e d l a n d s , i n c l u d i n g . o i 1 and g a s . The l a w r e c o g n i z e s t h a t t h e U n i t e d S t a t e s may n o t own a n y m i n e r a l i n t e r e s t , o r may own o n l y a p a r t i a l m i n e r a l i n t e r e s t , i n a p a r t i c u l a r p a r c e l of l a n d which i s u n d e r c o n s i d e r a t i o n f o r leasing. The S e c r e t a r y o f t h e I n t e r i o r i s a u t h o r i z e d t o l e a s e p a r t i a l i n t e r e s t , and f u t u r e i n t e r e s t i n t h o s e i n s t a n c e s i n which t h e U n i t e d S t a t e s h a s no mineral i n t e r e s t a t t h e time of l e a s i n g , i f t h e S e c r e t a r y considers such a c t i o n s t o be b e n e f i c i a l t o t h e p u b l i c . The Handbook o f Y i n e r a l Law 2 1 1 e x p l a i n s how t h a t t h e U n i t e d S t a t e s may have a p a r t i a l i n t e r e s t , o r n o i n t e r e s t i n t h e m i n e r a l s i n s o n e a c q u i r e d l a n d s . O r i g i n a l l y , t h e F e d e r a l Government h e l d t i t l e t o b o t h t h e s u r f a c e and m i n e r a l estate. A s t h e l a n d was conveyed t o S t a t e and p r i v a t e o w n e r s h i p u n d e r a v a r i e t y o f d i s p o s a l laws, t h r e e g e n e r a l t y p e s of t i t l e s were t r a n s f e r r e d : ( 1 ) t i t l e i n f e e s i m p l e o r t h e F e d e r a l Government's e n t i r e i n t e r e s t i n t h e l a n d ; ( 2 ) t h e s u r f a c e e s t a t e was conveyed b u t t h e e n t i r e m i n e r a l e s t a t e was r e s e r v e d t o t h e U n i t e d S t a t e s ; and ( 3 ) t h e s u r f a c e e s t a t e and a p o r t i o n o f t h e m i n e r a l e s t a t e w e r e conveyed, b u t c e r t a i n m i n e r a l s o r t y p e s of m i n e r a l s were r e s e r v e d t o t h e United S t a t e s . These t h r e e g e n e r a l t y p e s of t i t l e s make i t p o s s i b l e f o r a t i t l e f o r a p a r t i c u l a r t r a c t o f l a n d t o b e s p l i t i n t o two o r more p a r t s . F o r example, on a p a r t i c u l a r t r a c t of l a n d , t h e F e d e r a l Government may own t h e leasable minerals ( o i l , gas, coal, potash, etc.); t h e S t a t e may own a l l minerals except t h e leasable minerals (copper, lead, i r o n , etc.); 211 - Maley, T e r r y S. Handbook of M i n e r a l Law, pp. 75-79. and t h e surface estate may be in private ownership. Thus, when the Federal Government acquires land, the title to such lands may be split as discussed above. Therefore, with respect to every parcel of land, the results can be that the United States has partial interests in the mineral deposits in the lands, no interest in such deposits, or title to the entire nineral estate. Federal Land Withdrawals The term "withdrawal" is defined in section 103(j) of the Federal Land Policy and Hanagement Act of 1976 (P.L. 94-579)) as follows: ... withholding an area of Federal land from settlement, sale, location, or entry, under some or all of the general land laws, for the purpose of limiting activities under those laws in order to maintain other public values in the area or reserving the area for a particular public purpose or program .... Several categories of withdrawals are significant in the leasing of lands in the public domain or of acquired lands for oil and gas exploration and production. The Forest Reserve Act of 1891 (16 U.S.C. 471) authorized the Pres- ident to establish National Forests by Presidential Proclamation. The basic legislative authorities governing the administration and management of the National Forest Lands are the Organic Administration Act of 1897 ( 16 U.S.C. 475), and the National Forest Yanagement Act of 1976 (43 U.S.C. 1701). Vacant unappropriated public lands within the National Forest System are generally open to entry under mining and mineral leasing laws. The Wilderness Act of September 3, 1964 ( 16 U.S.C. 1131) provides that from September 3, 1964, until December 31, 1983, lands classified under the National Wilderness Preservation System will remain open to mineral exploration. However, effective January 1984, the wilderness areas will be withdrawn from all forms of appropriation under the mining and mineral leasing laws. 221 221 - 43 CFR, Subpart 3100. The Wild and Scenic Rivers Act of October 2, 1968 ( 16 U.S.C. 1271-1287) was passed for the purpose of preserving in a free-flowing condition certain selected rivers with scenic, historic, wildl-ife,and other special values. For the rivers designated in the Wild and Scenic River System, ainerals in Federal lands within a quarter of mile of the banks are withdrawn from all forms of appropriation under the mining laws and the mineral leasing laws. Many of the rivers designated as part of the Wild and Scenic River System are also "navigable waters" as defined in the Submerged Lands Act of August 7, 1953 (43 U.S.C. 1301-1343). This means that the river beds may be owned by the State, while lands on either side of the river bed may be under Federal jurisdiction. 23/ National parks have been withdrawn through specific acts of Congress and national monuments are established by the Congress or by Executive authorizations. Lands in national parks and monuments are generally not subject to mining except where specifically authorized by law. 24/ National Wildlife Refuges In accordance with the provisions of the National Uildlife Refuge System Administration Act of 1966 (16 U.S.C. 668dd-668 jj), national wildlife refuges are established and maintained for the restoration, preservation, and management of wildlife and wild lands habitat. Although Congress has established some refuges by statute, most refuges have been established by executive action in consonance with the law. The aggregate of national wildlife refuges is refer- red to as the "National Wildlife Refuge System." According to the Department of the Interior, 25/ the national wildlife refuge system encompasses all lands, 23/ Haley, Terry S. Yandbook of Mineral Law, pp. 39-40. 24/ - Handbook of Xineral Law, p. 96. Maley, Terry S. 25/ U.S. Department of the Interior. U.S. Fish and Wildlife Service. ~ i r e c t o rof ~ National Wildlife Refuges. Washington, U.S. Govt Print. Off., 1977, p. 1. . w a t e r s , a n d i n t e r e s t s t h e r e i n a d m i n i s t e r e d by t h e U.S. a s w i l d l i f e r e f u g e s and waterfowl prod;~ction a r e a s . F i s h and Wildlife Service The t o t a l r e f u g e s y s t e m c o n s i s t s of about 34,000,000 a c r e s mostly l o c a t e d on F e d e r a l l a n d s and w a t e r s . At t h e p r e s e n t t i n e , t h e r e a r e 410 r e f u g e u n i t s . A l t h o u g h most o f t h e r e f u g e s a r e w i t h d r a w n f r o m m i n i n g a n d m i n e r a l l e a s i n g laws, s e v e r a l r e f u g e s a r e a t l e a s t p a r t i a l l y open. For example, a c c o r d i n g t o t h e " F i n a l E n v i r o n m e n t a l S t a t e m e n t on O p e r a t i o n o f t h e N a t i o n a l W i l d l i f e R e f u g e S y s t e m , " 1 2 r e f u g e s had p r o d u c i n g o i l o r g a s w e l l s i n 1 9 7 4 . 261 Indian lands I n d i a n r e s e r v a t i o n s a r e l a n d s o r i g i n a l l y b e l o n g i n g t o t h e p u b l i c domain w h i c h a r e s e t a s i d e by t r e a t y , a c t o f C o n g r e s s , o r E x e c u t i v e o r d e r f o r a p a r t i c u l a r g r o u p of I n d i a n s . Such r e s e r v a t i o n l a n d s a r e e f f e c t i v e l y w i t h d r a w n f r o m e n t r y , and F e d e r a l mining l s w s do n o t a p p l y . 271 iiowever, m o s t m i n e r a l s i n I n d i a n l a n d s a r e a v a i l a b l e t h r o u g h a l e a s i n g s y s t e m w h i c h i s a u t h o r i z e d by t h e T r i b a l C o u n c i l o r o t h e r a u t h o r i z e d r e ~ r e s e n t a t i v eo f t h e t r i b e . Geophysical Exploration O i l and g a s e x p l o r a t i o n i s t h e s e a r c h f o r r e s e r v o i r t r a p s o r underground r o c k f o r m a t i o n s w i t h accumulations o f o i l and g a s . p l o r a t i o n methods i s t h e g e o p h y s i c a l s u r v e y . One o f t h e commonly u s e d ex- T h i s t y p e o f s u r v e y m i g h t employ o n e o r more o f s e v e r a l d e v i c e s s u c h a s g r a v i m e t e r s , m a g n e t o m e t e r s , a n d / o r seismographs. 281 2 6 / U.S. Department of t h e I n t e r i o r . U.S. F i s h a n d W i l d l i f e S e r v i c e . ~ i n a l E n v i r o n m e n t a 1S t a t e m e n t , O p e r a t i o n o f t h e N a t i o n a l W i l d l i f e R e f u g e System. W a s h i n g t o n , G o v t . P r i n t . O f f . , 1 9 7 6 , p. 111-81. 2 7 1 M a l e y , T e r r y S. - Handbook o f Y i n e r a l Law, pp. 281 W i l l i a m s , Howard R. a n d C h a r l e s J. M e y e r s . ~ d i t i z ) N e w York, M a t t h e w B e n d e r , 1 9 7 3 , p. 4 . . 9 7 , 389-402. O i l a n d Gas Law. (Abridged Although geophysical exploration is allowed on oil and gas leases, exploration can be conducted without a lease if an exploration permit is obtained. Simultaneously with the filing of the notice of intent to conduct oil and gas exploration, and before entering the land, a compliance bond in the amount of $5,000 must be filed with the district manager of the BL!. 291 Upon completion of the oil and gas exploration, a notice of completion is filed and the district manager has 90 days to notify the permittee as to whether or not the conditions of the permit have been met. Nationwide bonds of $50,000 and statewide bonds of $25,000 are permitted which provide coverage respectively for nationwide and statewide oil and gas explorations. for oil and gas operations pursuant to leases. Bonds are also required Holders of nationwide and state- wide bonds for oil and gas operations under leases are permitted to amend these bonds to include exploration activities in lieu of furnishing additional and separate bonds. 30/ Yechanics of Onshore Oil and Gas Leasing Noncompetitive leases Under the provisions of the Mineral Leasing Act of 1920, as amended (30 U.S.C. 181, et seq.), lands in the public domain which are not within any known geologic structure (KGS) of a producing oil or gas field may be leased to the first qualified applicant without competitive bidding. As defined by the Depart- ment of the Interior, a KGS is technically the trap in which an accumulation of oil or gas has been discovered by drilling and has been determined to be productive. limits of a KGS extend to all contiguous acreage that is presumptively productive. 29/ - 43 CFR 3104.9. 30/ 43 CFR 3104. 9-4. 31/ 43 CFR 3100. 0-5. - The %/ A p p l i c a t i o n s t o l e a s e must b e f i l e d i n t h e S t a t e l a n d o f f i c e o f t h e BLM. If t h e l a n d i s i n a S t a t e f o r which t h e r e i s no l a n d o f f i c e , t h e a p p l i c a t i o n m u s t be f i l e d w i t h t h e BLY i n W a s h i n g t o n , D.C. As s t i p u l a t e d i n t h e l e a s i n g r e g u l a t i o n s , a p p l i c a t i o n s must b e a c c o m p a n i e d by a f i l i n g f e e o f $75 a n d t h e f i r s t y e a r r e n t a l a t a r a t e of $ 1 p e r a c r e . 321 Competitive l e a s e s L a n d s w i t h i n a KGS g e o l o g i c a l s t r u c t u r e o f a p r o d u c i n g o i l o r g a s f i e l d may b e l e a s e d o n l y by c o m p e t i t i v e b i d d i n g t o t h e h i g h e s t q u a l i f i e d b i d d e r . 33/ Competitive o i l and g a s l e a s e s o n s h o r e a r e o f f e r e d t h r o u g h n o t i c e s of s a l e s p u b l i s h e d i n newspapers which a r e c i r c u l a t e d i n t h e c o u n t y i n which t h e l a n d s o r d e p o s i t s a r e s i t u a t e d o r i n o t h e r p u b l i c a t i o n s which t h e a p p r o p r i a t e o f f i c e r o f t h e BLX may a u t h o r i z e . The n o t i c e o f s a l e m u s t c o n t a i n a d e s c r i p t i o n o f t h e l a n d s o f f e r e d , c o n d i t i o n s of t h e s a l e , s p e c i f i e d r e n t a l and r o y a l t y r a t e , time and p l a c e of s a l e , and t h e procedures f o r s u b m i t t i n g b i d s . Simultaneous f i l i n g s , s e l e c t i o n , and r e s e l e c t i o n p r o c e d u r e s C e r t a i n l a n d s may b e l e a s e d o n l y i n a c c o r d a n c e w i t h t h e r u l e s f o r s i m u l t a n e o u s f i l i n g of a p p l i c a t i o n s f o r l e a s e s . T h i s i n c l u d e s a l l l a n d s which are n o t w i t h i n a KGS a n d a r e c o v e r e d by c a n c e l l e d o r r e l i n q u i s h e d l e a s e s , l e a s e s w h i c h have been t e r m i n a t e d because r e n t h a s n o t been p a i d , o r l e a s e s which w i l l e x p i r e a t t h e end of t h e i r primary o r extended t e r m s i n a c c o r d a n c e w i t h l e a s i n g laws. 341 A l i s t o f l a n d s f o r w h i c h a p p l i c a t i o n s may b e r e c e i v e d must b e p o s t e d i n t h e a p p r o p r i a t e BLPl o f f i c e a t t h e b e g i n n i n g o f b u s i n e s s o n t h e f i r s t w o r k i n g day o f J a n u a r y , March, Yay, J u l y , S e p t e m b e r , a n d November. The p o s t e d l i s t 321 43 CFR 3103.1-3 a n d 3103.3-1, a s amended by r u l e - n a k i n g t h e F'ederal R e g i s t e r , v . 4 7 , n o . 1 3 , J a n . 2 0 , 1 9 8 2 , p. 2 8 6 4 . 3 4 1 4 3 CFR 3112.1-1. - published i n must include a notice that the lands listed will be subject to filing or lease applications from the time of the posting until the close of business on the fifteenth working day thereafter. The lands must be properly described in the notices. Applications should be filed in the appropriate BLM office and each application must be accompanied by a filing fee in the amount of $75. 35/ The selection procedure for the first qualified applicant begins with randomly selecting three applications for each numbered parcel of land. The order in which the applications are selected fixes the order in which the successful applicants shall be determined. Where only two applicants file for a particular parcel, the successful applicant also will be determined in the order in which the applications are selected. h single filing for a parcel of land automatically will render the applicant successful if otherwise 361 qualified. - If properly filed applications are omitted from the selection process, reselection procedures must be effected. hitted applications may not be withdrawn by the applicants. The reselection will consist of the omitted application(s) and a number of blank applications equal to the nunber of applications which were included in the first selection. manner as the original selection. The reselection is conducted in the same If an omitted application is not selected first, second, or third priority in the new selection, the priority established in the original selection will stand. If an omitted application is selected first, second, or third priority, it will displace any application selected with the same and lower priorities in the original selection. However, no application(s) 351 43 CFR 3103.1-3 and 3103.1, as amended by rule-making published by ruG-making published in Federal Register, v . 47, No. 13, January 20, 1981, p. 2864. 361 43 CFQ. 3112.3-1. - chosen in the first selection nay be eliminated from priority as a result of the selection of an omitted application in the reselection. of priorities shall be increased as necessary. The number x/Simultaneous filings and the selection process are sometimes referred to as oil lotteries. The processes of applying for and bidding on onshore oil and gas leases are summarized in attachment I. Bonds The Xineral Leasing Act of 1920, as amended (30 U.S.C. ?finera1 Leasing Act for Acquired Lands of 1947 (30 U.S.C. 181 et seq.) and the 351) authorize the Secretary of the Interior to issue regulations which require oil and gas operators to post bonds conditioned upon compliance with all terms and conditions of leases. There are several categories of bond coverage delineated in the pertinent regulations. E/ A general lease and drilling bond in the amount of not less than $1,000 must be furnished prior to entry and commencement of geophysical exploration or drilling operations by the lessee or his operator. Alternatively, an operator's bond in the amount of not less than $1,000 may be furnished in lieu of a general lease and drilling bond. The approved unit operator may furnish and maintain a unit operator's bond. The latter must be furnished upon request and in at least the amount recommended by the area oil and gas supervisor. In lieu of general lease and drilling bonds and operator's bonds, holders of leases or approved operating agreements may furnish a bond in the amount of at least $25,000 covering all leases and operations in any one State. Similarly, holders of leases or approved operating agreements may furnish a bond in the 371 43 CFR 3112.3-2. 381 - 43 CFR 3104. amount of at least $150,000 covering all leases or operations on a nationgide basis. The authorized officer, on his volition, or upon the recommendation of the area oil and gas supervisor, may elect to increase the amount of any bond required by regulations. Lease term The primary term for all noncompetitive leases is 10 years and so long thereafter as oil or gas is produced in paying quantities. 39/ The primary term for competitive leases is 5 years and so long thereafter as oil or gas is produced in paying quantities. 40/ The oil and gas leasing regulations include provisions for extending or renewing leases on the basis of applications from the lessees and approval of the applications. 41/ Leases on lands not within the RGS of a producing oil or gas field may be extended for a period of 5 years, and so long thereafter as oil or gas is produced in paying quantities. Leases on lands within the KGS of a producing oil or gas field may be extended for a period of 2 years and so long thereafter as oil or gas is produced in paying quantities. Acreage limitation and lease size An offer for a noncompetitive lease nay not include more than 10,240 acres. The lands in the offer should be entirely within an area of 6 miles square or within an area not exceeding 6 surveyed sections in length or width measured in cardinal directions. No offer may be made for less than 640 acres except un- der certain specified conditions. 391 43 CFR 3110. 40/ - 43 CFR 3120. 41/ - 43 CFR 3107. 421 - 43 CFR 3110, 3120. L a n d s w h i c h a r e w i t h i n t h e KGS o f a p r o d u c i n g o i l o r g a s f i e l d w i l l be d i v i d e d i n t o l e a s i n g b l o c k s o r t r a c t s o f n o t g r e a t e r t h a n 640 a c r e s e a c h a n d I f two o r more u n i t s t h e s e must b e a s n e a r l y compact i n a r e a a s p o s s i b l e . a r e awarded t o a n y b i d d e r , t h e u n i t s w h e r e t h e a c r e a g e d o e s n o t e x c e e d 640 a c r e s may b e i n c l u d e d i n a s i n g l e l e a s e . A l e s s e e may h o l d a maximum o f 246,000 a c r e s i n a n y o n e S t a t e e x c e p t A l a s k a w h e r e a l e s s e e may h o l d a maximum of 3 0 0 , 0 0 0 a c r e s . may b e h e l d u n d e r o p t i o n by a l e s s e e i n a n y S t a t e . Not more t h a n 2 0 0 , 0 0 0 acres 431 A c c o r d i n g t o t h e Hand- book o f Y i n e r a l Law, a n o p t i o n i s a s p e c i a l a g r e e m e n t w h i c h g i v e s t h e p o t e n t i a l l e s s e e e x c l u s i v e r i g h t t o e x p l o r e l a n d , t h e r i g h t t o c a n c e l t h e agreement w h i l e conducting e x p l o r a t i o n , and t h e r i g h t t o l e a s e d u r i n g o r a t t h e end o f t h e o p t i o n period. 441 R e n t a l s and R o y a l t i e s Rental requirements Payments of r e n t s a r e r e q u i r e d i n a d v a n c e . The f i r s t f i l i n g o f a n o f f e r must b e a c c o m p a n i e d by f u l l payment o f t h e f i r s t y e a r ' s r e n t . i n CFR 4 3 , s e c t i o n 3103.3-1 A s delineated a s amended, r e n t a l r a t e s v a r y f r o m $0.50 p e r a c r e p e r y e a r t o $3.00 p e r a c r e p e r y e a r f o r l e a s e s w h i c h h a v e b e e n h e l d f o r more t h a n 5 y e a r s . The r e n t a l r a t e o f $0.50 p e r a c r e p e r y e a r a p p l i e s o n l y t o l e a s e s i s s u e d i n Alaska p r i o r t o September 2 , 1960. O t h e r f a c t o r s which i n f l u e n c e r e n t a l r a t e s a r e w h e t h e r l e a s e s a r e i s s u e d c o m p e t i t i v e l y o r noncomp e t i t i v e l y , and whether o r n o t p a r t i c u l a r l e g i s l a t i v e p r o v i s i o n s a r e a p p l i c a b l e 451 to certain leases. 431 - 4 3 CFR 3101.1-5. 441 - M a l e y , T e r r y S. Sandhook o f X i n e r a l Law, p . 4 5 5 . 4 5 1 4 3 CFR 3103. 2-1, 3103. 3-1, 3103. 3-2. - CRS-20 R o y a l t y on p r o d u c t i o n The m i n e r a l l a n d s a n d m i n i n g l a w ( 3 0 U . S . C . 181, e t s e q . ) , w i t h b u t few e x c e p t i o n s , r e q u i r e s r o y a l t y r a t e s o f n o t l e s s t h a n 12 112 p e r c e n t i n smoclnt o r v a l u e o f p r o d u c t i o n removed o r s o l d f r o m l e a s e s . L e a s e s d e s i g n a t e d by r e g u l a t i o n s 4 6 1 t o r e q u i r e a minimum r o y a l t y r a t e o f 12 1 1 2 p e r c e n t i n c l u d e nonc o m p e t i t i v e l e a s e s ; a l l l e a s e s i s s u e d p r i o r t o ~Zugust8 , 1946, e x c e p t conpeti t i v e , exchange, and renewal l e a s e s ; l e a s e s on land w i t h i n t h e productive l i m i t s o f a n y o i l o r g a s d e p o s i t o n A u g u s t 8 , 1 9 4 6 ; and l e a s e s on new d e p o s i t s w h i c h a r e d e f i n e d a s t h o s e d i s c o v e r e d a f t e r May 2 7 , 1 4 4 1 . Several substantive amendments t o t h e m i n e r a l l a n d s a n d n i n i n g l a w s became e f f e c t i v e o n t h e p a s s a g e o f t h e A c t o f August 8 , 1 9 4 6 , a n d t h e r e s u l t s o f some o f t h e s e amendments f o r m t h e b a s i s f o r t h e c u r r e n t r e g u l a t i o n s on r o y a l t y a n d p r o d u c t i o n . According t o t h e r e g u l a t i o n s on r o y a l t i e s f o r o i l , 4 7 1 renewed a n d exchange l e a s e s , which p r e v i o u s l y c a r r i e d a f l a t 5 p e r c e n t r o y a l t y , have r o y a l t y r a t e s which i n c r e a s e a s t h e p r o d u c t i v i t y of w e l l s i n c r e a s e . The r a t e b e g i n s w i t h 1 2 1 1 2 p e r c e n t on a v e r a g e p r o d u c t i o n o f n o t o v e r 1 1 0 b a r r e l s p e r d a y p e r w e l l f o r t h e c a l e n d a r month a n d i n c r e a s e s t o a maximum r o y a l t y r a t e of 2 5 p e r c e n t f o r p r o d u c t i o n o f o v e r 400 b a r r e l s p e r d a y p e r w e l l f o r t h e c a l e n d a r month. Noncompetitive l e a s e s which were i s s u e d p r i o r t o September 2 , 1960, may be e x t e n d e d o r renewed o n t h e b a s i s o f a p p l i c a t i o n s f o r l e s s e e s . variable step-scale royalty r a t e s apply t o these leases. o f 20 y e a r s , r e n e w a l o f 20-year The L e a s e s f o r terms l e a s e s , o r e x c h a n g e s f o r 20-year leases issued p r i o r t o A u g u s t 8 , 1 9 4 6 , may b e e x c h a n g e d f o r new l e a s e s w h i c h w i l l c o n e u n d e r the variable step-scale royalty rate. exchanges and e x t e n s i o n s i s 5 y e a r s . 461 - 4 3 CFR 471 - Ibid. 481 - 34 CFR The p r i n a r y term f o r l e a s e s o b t a i n e d b y 48/ An e x c e p t i o n t o t h e r e q u i r e m e n t c h a t t h e r o y a l t y r a t e f o r o i l a n d g a s e x t r a c t e d f r o m p u b l i c l a n d s b e n o t l e s s t h a n 1 2 112 D e r c e n t i n v o l v e s h o l d e r s o f l e a s e s f o r l a n d s i n Alaska which were i s s u e d and were o u t s t a n d i n g p r i o r t o Nay 3 , 1 9 5 8 . L e s s e e s who d r i l l a n d make t h e f i r s t d i s c o v e r i e s o f o i l a n d g a s i n commercial q u a n t i t i e s i n a n y g e o l o g i c a l s t r u c t u r e a r e r e q u i r e d t o pay r o y a l t y on a l l p r o d u c t i o n u n d e r t h e s e l e a s e s a t t h e r a t e o f 5 p e r c e n t f o r t h e f i r s t 10 y e a r s f o l l o w i n g t h e d a t e o f d i s c o v e r y . After t h e f i r s t 10 year p e r i o d , t h e r o y a l t y r a t e of 1 2 112 p e r c e n t i s r e q u i r e d . 491 Royalty r a t e s on l e a s e s i s s u e d on t h e b a s i s o f c o m p e t i t i v e b i d d i n g a r e p r e s c r i b e d i n t h e n o t i c e s announcing t h e l e a s e s a l e s . Leases issued subsequent t o t h e s a l e require use of t h e published royalty rates. The r o y a l t y r a t e s on g a s , i n c l u d i n g i n f l a m a b l e g a s , h e l i u m , c a r b o n d i o x i d e , n a t u r a l g a s e s , and a i x t u r e s o f n a t u r a l g a s e s , n a t u r a l o r c a s i n g head g a s o l i n e , and o t h e r l i q u i d p r o d u c t s o b t a i n e d from g a s a r e d e t e r m i n e d on t h e b a s i s o f t h e m e a s u r e d volume o f g a s coming f r o m t h e w e l l s a n d t h e a p p l i c a t i o n o f r o y a l t y r a t e s o f 1 2 112 o r 1 6 213 p e r c e n t a s p r e s c r i b e d i n t h e r e g u l a t i o n s . If the a v e r a g e p r o d u c t i o n o f g a s p e r w e l l p e r d a y f o r t h e c a l e n d a r month d o e s n o t exceed 5 m i l l i o n c u b i c f e e t , t h e a p p l i c a b l e r o y a l t y r a t e i s 1 2 112 p e r c e n t . If t h e a v e r a g e p r o d u c t i o n o f g a s p e r w e l l p e r d a y f o r t h e c a l e n d a r month e x c e e d s 5 m i l l i o n c u b i c f e e t , t h e a p p l i c a b l e r o y a l t y r a t e i s 1 6 213 p e r c e n t . 501 Under c e r t a i n c o n d i t i o n s , a l e s s e e n a y Day a minimum r o y a l t y o f $ 1 p e r a c r e per year i n l i e u of r e n t a l . T h i s i s payable a t t h e e x p i r a t i o n of each l e a s e y e a r a f t e r a d i s c o v e r y h a s b e e n made o n t h e l e a s e d l a n d s . 49/ 4 3 CFR 3103.3-4. 5 0 1 4 3 CFR 3103.3-4. - The l e a s e e i t h e r m u s t h a v e b e e n i s s u e d on o r a f t e r August 8 , 1 9 4 6 , o r i s s u e d p r i o r t o t h a t d a t e w i t h t h e l e s s e e h a v i n g f i l e d a n e l e c t i o n u n d e r s e c t i o n 1 5 of t h e Act of August 8 , 1348. 511 Waiver, S u s p e n s i o n , o r R e d u c t i o n of R e n t a l o r Minimum R o y a l t y A s a u t h o r i z e d by t h e Act of June 3 , 1 9 4 8 , ( 6 2 S t a t . 2 9 2 ) , t h e S e c r e t a r y of t h e I n t e r i o r , f o r t h e p u r p o s e o f e n c o u r a g i n g t h e g r e a t e s t u l t i m a t e r e c o v e r y of o i l and g a s and i n t h e i n t e r e s t of c o n s e r v a t i o n , may w a i v e , s u s p e n d , o r r e d u c e t h e r e n t a l , r o y a l t y , o r minimum r o y a l t y on a n e n t i r e l e a s e h o l d o r p a r t t h e r e o f . The S e c r e t a r y may t a k e t h i s a c t i o n when i t h a s been d e t e r m i n e d t o be n e c e s s a r y t o promote d e v e l o p m e n t , o r when i t h a s been found t h a t a l e a s e c a n n o t be succ e s s f u l l y o p e r a t e d under t h e o r i g i n a l terms. 511 - 43 CFR 3103.3-5. 521 - 4 3 CPR 3103.3-7. 521 ONSHORE OIL AND GAS OPERATIONS Regulations The operational phase (or extraction of oil and gas from onshore lands owned or controlled by the United States) occurs under regulations based on laws on mineral lands and mining under 3 0 U.S.C., section 226, et seq. . The regula- tions which pertain to oil and gas operations are delineated in 3 0 CFR, Part 221. If Indian lands are involved, the pertinent regulations are found in 25 CFR, Subchapter P , Yining, and Subchapter Q, Oil and Gas. Area oil and gas supervisor The area oil and gas supervisor, under the supervision of the Minerals :lanagement Service (**L"IS), is responsible for administering a11 regulations pertaining to oil and gas operations on lands owned or controlled by the United States, including Indian lands. The functions of the area supervisor are to require compliance with applicable regulations which assure that all operations result in maximum recovery of oil and gas, and that the environment is protected from harmful practices. The supervisor has the authority to supervise and direct oil and gas operations and to perform other duties prescribed in the regulations, including making inspections and issuing instructions. Some specific operations which require the attention of the supervisor include drilling and producing operations; measuring gas and oil; determination of royalty liability; receipt and delivery of royalty; assessment Of damage to the land; 531 and determination of infractions of regulations. - Protective measures When necessary, the supervisor must require correction of any condition which is causing or is likely to cause damage to any formation containing oil or gas, or other mineral deposits. 531 - 3 0 CFS 221.3. Conditions which are dangerous to life or p r o p e r t y , o r w a s t e f u l of o i l , g a s , o r w a t e r , must b e c o r r e c t e d . Substantially v e r t i c a l d r i l l i n g m u s t b e r e q u i r e d when n e c e s s a r y t o p r o t e c t t h e i n t e r e s t s i n other properties. The s u p e r v i s o r r e q u i r e s p l u g g i n g a n d a b a n d o n i n g o f a n y w e l l o r w e l l s which a r e no l o n g e r used o r u s e f u l a s planned. In instances w h e r e t h e lessee f a i l s t o comply w i t h s u c h p r o t e c t i v e m e a s u r e s , t h e s u p e r v i s o r w i l l p e r f o r m t h e n e c e s s a r y work a t t h e e x p e n s e o f t h e l e s s e e o r by e x p e n d i t u r e o f a v a i l a b l e p u b l i c f u n d s , and submit r e p o r t s a s a b a s i s f o r a c t i o n t o o b t a i n reinbursement. 541 - Development o f t h e o i l a n d g a s f i e l d Development i s d e f i n e d a s d r i l l i n g i n a proven f i e l d f o r t h e purpose of c o m p l e t i n g t h e d e s i r e d p a t t e r n of o i l and g a s p r o d u c t i o n . 551 The s u p e r v i s o r i s r e q u i r e d t o a p p r o v e w e l l - s p a c i n g and w e l l - c a s i n g programs which have been determined t o b e n e c e s s a r y f o r t h e p r o p e r development of l e a s e s . The s u p e r v i s o r h a s t h e a u t h o r i t y t o f i x t h e percentage of t h e p o t e n t i a l c a p a c i t y of any o i l o r g a s w e l l t o b e r e c o v e r e d a n d t o s p e c i f y t h e t i m e a n d method f o r d e t e r m i n i n g the potential capacity of wells. It i s a l s o t h e s u p e r v i s o r ' s r e s p o n s i b i l i t y t o a s s i s t and a d v i s e l e s s e e s i n p l a n n i n g and c o n d u c t i n g t e s t s and e x p e r i m e n t s f o r t h e purpose of increasing e f f i c i e n c y of operations. 561 Production records The s u p e r v i s o r i s r e q u i r e d t o c o m p i l e a n d m a i n t a i n r e c o r d s o f p r o d u c t i o n and p r i c e s and t o determine r o y a l t i e s accrued. He o r s h e must e s t i m a t e d r a i n a g e a n d compute l o s s e s t o t h e l e s s o r r e s u l t i n g f r o m t h e s e , a n d e s t i m a t e t h e amount 541 - 3 0 CFR 221.9. 5 5 1 K a s h , Don E. E n e r g y Under t h e Oceans. ~ o r m a cOklahoma, 1 9 7 3 , p . 4 9 . 5 6 1 30 CFR 2 2 1 . 1 0 , 221.11. - U n i v e r s i t y o f Oklahoma P r e s s . and value of oil, gas, and other products wasted. On a monthly basis, the super- visor renders statements to the lessee or his agents, showing the amount of oil, gas or other hydrocarbons produced or sold and the amount or value of production accruing to the lessor as royalty from each lease. The statement for each month must show the loss by drainage or waste and the compensation due to the lessor as reimbursement. In case of loss or waste of natural gas, reimbursement must be computed at a price of not less than 5 cents per 1000 cubic feet. The computa- tion for loss of gas does not include any disposal of gas that has been determined to be sanctioned by the laws of the United States or the State in which it occurs. In instances of leases on Indian lands, and lands within naval reserves, the supervisor shall determine rental liability, record rental royalty and other payments, and maintain lease accounts. 571 Sales agreements The supervisor is authorized to approve field orders or temporary purchase agreements granting to transportation agencies or purchasers authority to receive products from leased lands, sign receipts for royalty oil or gas delivered to a representative of the lessor, and approve sales agreements and contracts. All of these acts may be accomplished under any special con- ditions prescribed by the supervisor, but they are subject to modification 581 or revocation, as a result of review by higher authorities. Suspension or resumption of drilling or production operations The area oil and gas supervisor has authority to grant temporary approval of applications for suspension of operations or production, or relief from drilling or production requirements under leases or to reject such applications. 571 - 30 CFS 221.12. 581 - 3 0 CFR 221.13. The applicant has the r i g h t t o appeal t h e supervisor's decision. When d r i l l i n g o r producing o p e r a t i o n s have been suspended on a l e a s e , t h e s u p e r v i s o r h a s a u t h o r i t y t o approve resumption of t h e s e operations. 591 Requirements f o r l e s s e e s L e s s e e s a r e r e q u i r e d t o comply w i t h t h e t e r m s o f l e a s e s , a p p l i c a b l e r e g u l a t i o n s a n d amendments, a n d w i t h w r i c t e n i n s t r u c t i o n s o f t h e s u p e r v i s o r . They a r e r e q u i r e d t o t a k e a l l r e a s o n a b l e p r e c a u t i o n s t o p r e v e n t w a s t e , damage t o f o r m a t i o n s o r d e p o s i t s c o n t a i n i n g o i l , g a s , w a t e r , o r n i n e r a l d e p o s i t s , and i n j u r y t o l i f e o r property. B e f o r e commencing d r i l l i n g o r o t h e r o p e r a t i o n s , l e s s e e s m u s t h a v e s u b m i t t e d a s a t i s f a c t o r y bond. Specific requirements f o r lessees include t h e following: 601 ( 1 ) Wells may n o t b e d r i l l e d w i t h i n 200 f e e t o f t h e o u t e r b o u n d a r i e s o f l e a s e d l a n d s o r w i t h i n 200 f e e t o f t h e b o u n d a r y o f a n y l e g a l s u b d i v i s i o n . L e s s e e s o f I n d i a n l a n d s may n o t d r i l l w e l l s w i t h i n 200 f e e t o f h o u s e s o r b a r n s s t a n d i n g on l e a s e d l a n d s . Exceptions t o t h e s e r e s t r i c t i o n s on t h e l o c a t i o n s o f w e l l s may b e o b t a i n e d by s p e c i a l p e r m i s s i o n . ( 2 ) When r e q u i r e d by t h e s u p e r v i s o r , l e s s e e s a r e r e s p o n s i b l e f o r s u b n i t t i n g a c c e p t a b l e well-spacing and well-casing programs. ( 3 ) L e s s e e s must o b t a i n p e r m i s s i o n from t h e s u p e r v i s o r t o d r i l l , r e d r i l l , r e p a i r , deepen, p l u g back, s h o o t , p l u g and abandon w e l l s , u s e a n y a l t e r n a t i v e methods o f r e c o v e r i n g p r o d u c t i o n , o r u s e a w e l l o r f o r m a t i o n f o r s t o r a g e of gas o r disposal of water. ( 4 ) Lessees a r e r e q u i r e d t o d r i l l d i l i g e n t l y and t o produce c o n t i n u o u s l y t o p r o t e c t t h e l e s s o r f r o m l o s s o f r o y a l t y by d r a i n a g e . 591 3d CFR 221.14. 601 - 30 CFR 221.18-221.35. S h o u l d l o s s e s by d r a i n a g e o c c u r , l e s s e e s m u s t p a y sums e s t i m a t e d by t h e s u p e r v i s o r t o r e i a b u r s e the l e s s o r s f o r l o s s of royalty. ( 5 ) Whenever d r i l l i n g o r p r o d u c i n g o p e r a t i o n s a r e s u s p e n d e d f o r 2 4 h o u r s o r more, l e s s e e s must c l o s e t h e mouths o f t h e wells w i t h s u i t a b l e p l u g s o r o t h e r f i t t i n g s acceptable t o the supervisor. (6) Vertical d r i l l i n g is required unless permission f o r deviation i s obtained f ron the supervisor. ( 7 ) L e s s e e s a r e r e q u i r e d t o t e s t f o r t h e p r e s e n c e o f o i l a n d g a s i n comm e r c i a l p r o d u c t i o n q u a n t i t i e s a t t h e t i m e t h e o i l a n d g a s f o r m a t i o n s a r e penet r a t e d and b e f o r e suspending d r i l l i n g o p e r a t i o n s . ( 8 ) L e s s e e s may n o t p o l l u t e s t r e a m s , d a m a ~ et h e l a n d s u r f a c e , o r p o l l u t e t h e underground water o f t h e l e a s e d o r o t h e r land. I f useless l i q u i d products c a n n o t b e t r e a t e d , d e s t r o y e d , o r d i s p o s e d o f by u s u a l m e t h o d s , t h e s u p e r v i s o r must be c o n s u l t e d a n d a n y a l t e r n a t i v e method o f d i s p o s a l a p ~ r o v e db y t h e supervisor. ( 9 ) L e s s e e s a r e responsible f o r g a u g i n g o r u e a s u r i n g t h e o i l p r o d u c e d o n l e a s e d l a n d s a n d must p r o v i d e f o r s t o r a g e o n t h e l e a s e h o l d i n s u i t a b l e t a n k s . ( 1 0 ) Upon abandonment, t h e l e s s e e must i m m e d i a t e l y p l u g t h e w e l l o r condition i t a s a water well. I n i n s t a n c e s where t h e l e s s e e o f l a n d s o f t h e United S t a t e s s t r i k e s water i n s t e a d of o i l o r g a s , and t h e w a t e r i s of suff i c i e n t q u a n t i t y and s u i t a b l e q u a l i t y t o b e v a l u a b l e and u s a b l e a t a reasona b l e c o s t , t h e S e c r e t a r y o f t h e I n t e r i o r may t a k e o v e r t h e w e l l . I f a sa- t i s f a c t o r y a g r e e m e n t i s r e a c h e d , t h e l e s s e e may c o n d i t i o n t h e w e l l i n l i e u of p l u g g i n g and abandoning i t . ( 1 1 ) L e s s e e s a r e o b l i g a t e d t o p r e v e n t t h e w a s t e of o i l o r g a s . To t h i s e n d , t h e l e s s e e m u s t consume i t b e n e f i c i a l l y , m a r k e t i t , o r r e t u r n i t t o t h e productive formation. I f w a s t e o f g a s o c c u r s , t h e l e s s e e must pay t h e l e s s o r t h e f u l l v a l u e of a l l g a s w a s t e d a t a p r i c e of n o t l e s s t h a n 5 c e n t s f o r e a c h 1000 c u b i c f e e t . OUTER CONTINENTAL SHELF OIL AND GAS LEASIN; Definition of the Outer Continental Shelf (OCS) The position of the United States Government regarding jurisdiction over the Outer Continental Shelf (OCS) lands was established by Presidential Pro- clamation 2627 of September 28, 1945. 61/ is: The pertinent part of that proclamation ... the Government of the United States regards the natural resources of the subsoil and seabed of the Continental Shelf beneath the high seas but contiguous to the coasts of the United States as appertaining to the United States, subject to its jurisdiction and control. The Submerged Lands Act of May 22, 1954 (43 U.S.C. 1305-1315) granted the Coastal States all lands in the zone that extends seaward three geographical miles from the coastline. A court decision provided that in the Gulf of Xexico, the Coastal States' jurisdiction extends to three marine leagues or about nine geographical miles. 1953, (43 U.S.C. The Outer Continental Shelf Lands Act of August 7, 1331-1343), specifically provided that all lands seaward of the three geographical mile limit (about nine geographical miles in the Gulf of Yexico) are under Federal ownership and jurisdiction. For the purpose of Fed- eral ownership and leasing, the seaward limit of the OCS is the 200-meter contour line of water depth which is sometimes referred to as the 100-fathom or 600-foot contour. This line was established in 1958 by the Geneva Convention on the Outer Continental Shelf and the convention was ratified by the United States in 1961. 621 The pertinent language in the Geneva Convention is: ... to a depth of 200 meters or beyond that limit, to where the depth of the superadjacent waters admit to the exploration of the natural resources of the said areas. 611 U.S. Congress. House. Outer Continental Shelf Lands Act Amendments of 1977. House Report No. 95-590, 95th Congress. 1st sess. Report by Ad Hoc Select Committee on the Outer Continental Shelf. Washington, U.S. Govt. Print. Off. , 1977, p. 56. 62/ Borgese, Elisabeth and Ginsburg, Norton. Chicago, University of Chicago, 1978, p . 277. Ocean Yearbook. London and Authority for Leasing OCS Lands for Oil and Gas Authorization for leasing OCS lands for oil and gas, as well as other minerals, is contained in the OCS Lands Act of August 7, 1953 (67 Stat. 462), as amended by the OCS Lands Act Amendments of September 18, 1978 (92 Stat.629). This legislation authorized the Secretary of the DO1 to ad~inistermineral exploration and development and to conserve the natural resources of the OCS. It established a national policy for OCS oil and gas development embracing a concept of a balance between the potentials for environmental damage, discovery of oil and gas, and adverse inpact on the coastal zone. Timing and locations of OCS lease sales are required to be delineated in 5-year plans which must be prepared by the Secretary of the DO1 and submitted to the Congress for approval or disapproval. The law includes provisions for establishing systems of bidding on OSC lands which are expected to promote competition and participation by small companies in OCS lease sales and to ensure the public a fair and equitable return on its lands. Appropriate consideration is required for the impacts related to OCS oil and gas activities, both onshore and at sea, which might cause damage to the environment, property, endanger human life and health, or adversely alter the social and economic fabric of Coastal States. Provisions are included in the law to render funds available to assist Coastal States with onshore impacts of OCS activities, pay claims for damage or loss of fishing gear, and defray costs of cleaning up oil spills. The law provides for participation of Coastal States and local governments in OCS policy and planning decisions which affect their jurisdictions. The OCS Lands Act requires the Secretary of the Interior to prescribe rules and regulations as necessary to implement the provisions of the law. , Further, the Secretary may at any tine amend these rules and regulations as determined to be necessary for the prevention of waste and to insure conservation of the natural resources of the OCS. In enforcing the law and regulations, the Secretary of the Interior is required to cooperate with the other departments and agencies of the Federal Government and the affected States. Laws Which Affect Implementing the OCS Lands Act Several other legislative acts have applications or direct impacts on implementing the provisions of the OCS Lands Act. In some instances the leg- islation on leasing OCS lands requires that these related or supporting laws be observed or taken into account. In other instances, these supporting laws require or authorize participation of other agencies or de~artmentsof the Federal Government. Some examples of related or supporting laws are: Coastal Zone Xanagement Act of 1972 (16 U.S.C. 1451-1464) National Environmental Policy Act of 1969 (42 U.S.C. 4332) Longshoremen's and Harbor Workers' Compensation Act (33 U.S.C. Fish and Vildlife Act (16 U.S.C. 742(a)0754) Water Pollution Prevention and Control Act (33 U.S.C. Clean Air Act (42 U.S.C. 901) 1251-1356) 7401 et seq.) Natural Gas Act (15 U.S.C. 717). Government ~epartments/AgenciesAdministering OCS Leases and Operations Department of Commerce, National Oceanic and Atmospheric Administration (NOAA) The Department of Commerce, through the National Oceanic and Atmospheric Administration (NOAA), has a supporting role in the leasing of OCS lands for the development of oil and natural qas. The basic mission of NOAA is the execution of programs and functions destgned to further the Nation's safety, welfare, security and conmerce through increasing the knowledge and rational u s e o f t h e n a t u r a l environment, i n c l u d i n g t h e atmosphere, oceans, and t h e i r 631 boundaries. - The c a p a b i l i t i e s , e x p e r t i s e , and a s s i g n e d r e s p o n s i b i l i t i e s o f NOAA i n i t s b a s i c m i s s i o n a r e i n v o l v e d i n t h e l e a s i n g o f OCS l a n d s f o r o i l and g a s development and p r o d u c t i o n . An example of t h e u s e of NOAA's c a p a b i l i t i e s i n OCS o i l and g a s l e a s i n g i s t h e p r e - l e a s e environmental assessment of t h e Alaskan c o n t i n e n t a l s h e l f . I n t h i s program, NOAA c o l l e c t s and p r o c e s s e s e n v i r o n m e n t a l d a t a f o r d e l i v e r y t o t h e appropriate o f f i c e i n the DOI. T y p i c a l l y , t h e s e d a t a would p e r t a i n t o o c e a n t r a n s p o r t p r o c e s s e s a n d o t h e r p h y s i c a l and c h e m i c a l o c e a n o g r a p h i c f a c t o r s , and t o marine fauna. 641 The C o a s t a l Zone Management Act (CZMA) of 1 9 7 2 , a s amended ( 1 6 U.S.C. 1451-1464), i s a d m i n i s t e r e d by NOAA. Under t h e CZMA, two p r o g r a m s , t h e C o a s t a l E n e r g y Impact Program (CEIP) a n d t h e C o a s t a l Zone Management (CZM) Program, i n c l u d e methods a n d f u n d i n g t o a s s i s t C o a s t a l S t a t e s i n c o p i n g w i t h t h e i m p a c t s of OCS o i l and g a s development o f f t h e i r c o a s t s . F o r e x a m p l e , t h e r e s o u r c e s o f t h e CEIP program a r e d i r e c t e d toward s u c h i m p a c t s of OCS a c t i v i t i e s a s p o p u l a t i o n c h a n g e s i n t h e c o a s t a l z o n e ; c h a n g e s i n employment p a t t e r n s , i n c l u d i n g t h o s e i n f i s h i n g a n d t o u r i s m ; damages, t h r e a t s o f damages, o r d e g r a d a t i o n of v a l u a b l e e n v i r o n m e n t a l o r r e c r e a t i o n a l r e s o u r c e s ; i n c r e a s e d , o r t h r e a t s of increased r i s k s t o public health, safety, o r r e a l property. 651 631 U.S. L i b r a r y of C o n g r e s s . C o n g r e s s i o n a l R e s e a r c h S e r v i c e . Ocean ~ u n c t z n so f t h e F e d e r a l Government of t h e U n i t e d S t a t e s . R e p o r t No. 80-190 ENR, by W i l l i a m H. Hymes. Washington, 1980. p. 44. 641 U.S. Department of t h e I n t e r i o r . O u t e r C o n t i n e n t a l S h e l f O i l and Gas ~ n f o r m a t i o nProgram: A l a s k a I n d e x (December 1974-June 1 9 7 9 ) . U.S. G e o l o g i c a l S u r v e y , U.S. G e o l o g i c a l S u r v e y . Open-File R e p o r t 73-1345. P r e p a r e d by M i t r e C o r p o r a t i o n , Aug. 1979. McLean, V i r g i n i a , 1979, pp. 72-73. 6 5 1 1 5 CFR, P a r t 931. - D e p a r t m e n t of Defense1U.S. Army C o r p s o f E n g i n e e r s . The OCS Lands A c t Amendments o f 1 9 7 8 , ( 9 2 S t a t . 6 2 9 ) , e x t e n d e d t h e a u t h o r i t y o f t h e S e c r e t a r y o f t h e Army t o p r e v e n t o b s t r u c t i o n s t o n a v i g a t i o n i n t h e n a v i g a b l e w a t e r s of t h e United S t a t e s t o i n c l u d e a r t i f i c i a l i s l a n d s , i n s t a l l a t i o n s , and o t h e r d e v i c e s u s e d o n t h e OCS. U.S. A s t h e a g e n t f o r t h e S e c r e t a r y o f t h e Army, t h e Army C o r p s o f E n g i n e e r s i s r e s p o n s i b l e f o r i s s u i n g n a v i g a t i o n p e r m i t s . The C o r p s i s a l s o r e s p o n s i b l e f o r t h e i s s u a n c e o f p e r m i t s f o r t h e c o n s t r u c t i o n of p i p e l i n e s i n n a v i g a b l e w a t e r s . D e p a r t m e n t of E n e r g y . The D e p a r t m e n t o f E n e r g y ( D O E ) i n f l u e n c e s t h e OCS o i l a n d g a s l e a s i n g p r o g r a m s by i t s r e s p o n s i b i l i t i e s f o r d e v e l o p i n q a n d m a i n t a i n i n g a n a t i o n a l e n e r g y p o l i c y . 661 The DOE i s r e s p o n s i b l e f o r d e v e l o p i n g a n d s u b m i t t i n g b i d d i n g s y s t e m s i n a c c o r d a n c e w i t h t h e p r o v i s i o n s o f t h e OCS L a n d s A c t Amendments o f 1 9 7 8 ( 9 2 S t a t . 6 2 9 ) . D e ~ a r r m e n t of t h e I n t e r i o r l l i n e r a l s llanagement S e r v i c e . The 3 i n e r a l s Ilanagement S e r v i c e (MIIS), e s t a b - l i s h e d i n J a n u a r y 1 9 8 2 , i s r e s p o n s i b l e f o r l e a s i n g a s w e l l a s o t h e r a s p e c t s of o i l a n d g a s d e v e l o p n e n t i n t h e OCS. Some o f t h e s p e c i f i c f u n c t i o n s o f t h e XYS i n c l u d e e s t i m a t i o n of q u a n t i t i e s o f proven o i l and g a s r e s e r v e s ; s e l e c t i o n of t r a c t s of l a n d f o r l e a s i n g ; s u p e r v i s i o n of e x p l o r a t i o n and o t h e r o p e r a t i o n s ; c o l l e c t i o n s of r e n t , r o y a l t i e s and o t h e r f e e s ; maintenance of production r e c o r d s ; t h e i s s u a n c e o f i n f o r m a t i o n on p r o d u c t i o n a n d r e v e n u e s r e c e i v e d . The !INS p r e p a r e s a n d i s s u e s r e g u l a t i o n s f o r t h e OCS o i l a n d g a s a c t i v i t i e s u n d e r i t s j u r i s d i c t i o n , approves o p e r a t i n g p l a n s and i s s u e s d r i l l i n g p e r m i t s . 671 661 - 42 USC 7 1 7 2 ( b ) . 6 7 1 T e l e p h o n e c o n v e r s a t i o n w i t h MYS r e p r e s e n t a t i v e , A p r i l 8 , 1 9 8 2 . - Responsibilities for leasing lands in the OCS were shifted from the Bureau of Land Management (BLM) to the MMS in May, 1982. 681 The responsibilities for leasing includes functions such as planning and scheduling lease sales, preparing environmental inpact statements, coordinating activities with State and local government officials prior to lease sales, holding public hearings, publishing notices of sales, and administering the lease sales. In addition to offices in Reston, Virginia, near Washington, D.C., the FlMS has regional offices which are concerned with OCS oil and gas in Anchorage, Alaska, Los Angeles, California, Metairie, Louisiana, and New York City, New York. 69/ U.S. Geological Survey (USGS). The USGS furnishes estimates of the quanti- ties of undiscovered oil and gas reserves in OCS lands. The USGS also assists the 14MS in selecting tracts of OCS lands for leases and in making decisions as to whether or not leases should be issued. National Park Service. The National Park Service provides information and advice in OCS leasing and operations planning activities as appropriate for its areas of interest and expertise. Generally such advice and information pertains to possible impacts of OCS activities on parks and conservation areas. s/ Department of Justice. The Department of Justice is responsible for reviewing reports on OCS lease sales for the purpose of ascertaining whether or not sales are in compliance with the provisions of antitrust laws. The Department of Justice also has 68/ Watts consolidates offshore leasing in MMS; unsettles BLM onshore officzls. Federal Lands News Weekly, May 17, 1982, pp. 1 and 5. 69/ Telephone conversation with MMS representative, April 8, 1952. 70/ U.S. Department of Interior. Outer Continental Shelf Oil and Gas Informazon Program: Directory of Federal, State, and Local OCS-Related Activities and Contracts. U.S. Geological Survey. U.S. Geological Survey Open-File Report 79-1481. Washington, U.S. Govt. Print. Off., 1980, pp. 2-16. responsibilities for reviewing proposed permits for gas pipelines to insure compliance with competitive principles. 711 Department of Transportation U.S. Coast Guard. This agency has functions in OCS oil and gas extraction, development, and production which involve issuing permits, monitoring OCS operations, and preparing and enforcing safety regulations. Lessees must obtain permits for aids to navigation from the USCG before initiating drilling. The USCG, together with the DOI, requires that the best available and safest technolog es be used in the operation of artificial islands, installations and other devices on the OCS. Promulgation of regulations or standards which apply to unregulated hazardous working conditions is a responsibility of the USCG. The USCG, in collaboration with the National Institute of Occupational Safety and Health, is required to conduct studies of underwater diving techniques 721 and equipment to enhance human safety and to improve diver performance. Materials Transportation Bureau, Office of Pipeline Safety" The Office of Pipeline Safety of the Piaterials Transportation Bureau is responsible for regulations governing pipelines on the OCS. 731 U.S. Environmental Protection Agency. The Federal Water Pollution Control Act, as amended (33 U.S.C. 1251-1376), authorized the Administrator of the Environmental Protection Agency (EPA) to issue permits under the National Pollutant Discharge Elimination System (NPDES) and to prescribe conditions under which such permits would be issued. 71/ 92 Stat. 639. 721 - 92 Stat. 655. 731 92 Stat. 638. - Under t h e a u t h o r i t y o f t h i s a c t , t h e EPA i s s u e s NPDES p e r n i t s f o r d r i l l i n g on t h e OCS. 741 OCS L e a s i n g Program and S c h e d u l e s The OCS Lands Act Amendments o f 1978 ( 4 3 U.S.C. 1801-1866), r e q u i r e t h e S e c r e t a r y o f t h e I n t e r i o r t o p r e p a r e , p e r i o d i c a l l y r e v i s e , and m a i n t a i n a n o i l and g a s l e a s i n g program. The l e a s i n g program i s t o c o n s i s t of a sched- u l e of proposed l e a s e s a l e s i n d i c a t i n g , a s p r e c i s e l y a s p o s s i b l e , t h e s i z e , t i m i n g , and l o c a t i o n of l e a s i n g a c t i v i t y which, a c c o r d i n g t o t h e S e c r e t a r y ' s d e t e r m i n a t i o n , w i l l b e s t meet n a t i o n a l e n e r g y n e e d s f o r t h e f i v e - y e a r p e r i o d following i t s approval o r reapproval. During t h e p r e p a r a t i o n of a n y proposed l e a s i n g program, t h e S e c r e t a r y of t h e I n t e r i o r i n v i t e s and c o n s i d e r s s u g g e s t i o n s from a n y i n t e r e s t e d F e d e r a l agency, i n c l u d i n g t h e Department of J u s t i c e , and from t h e Governors of a f f e c t e d S t a t e s . The S e c r e t a r y a l s o may c o n s i d e r s u g g e s t i o n s from t h e execut i v e s of a f f e c t e d l o c a l g o v e r n m e n t s , t h o s e s u g g e s t i o n s which have been s u b m i t t e d p r e v i o u s l y t o t h e G o v e r n o r s o f t h e S t a t e s , and t h o s e f r o m a n y o t h e r p e r s o n s . A f t e r t h e p r e p a r a t i o n of t h e l e a s i n g programs and a t l e a s t s i x t y d a y s p r i o r t o publication i n t h e Federal R e g i s t e r , t h e Secretary sends copies t o the Governors of a f f e c t e d S t a t e s f o r r e v i e w and conment. The Governors may s o l i c i t comments from e x e c u t i v e s o f l o c a l governments i n t h e i r S t a t e s . I f com- ments from Governors a r e r e c e i v e d a t l e a s t f i f t e e n d a y s p r i o r t o t h e s u b m i s s i o n o f t h e p r o p o s e d program t o t h e C o n g r e s s and i n c l u d e r e q u e s t s f o r m o d i f i c a t i o n of t h e p r o p o s e d program, t h e S e c r e t a r y must r e p l y i n w r i t i n g , % r a n t i n g o r d e n y i n g t h e s e r e q u e s t s i n whole o r i n p a r t . A l l c o r r e s p o n d e n c e between t h e S e c r e t a r y and t i l e Governors o f a f f e c t e d S t a t e s , t o g e t h e r w i t h a n y a d d i t i o n a l i n f o r m a t i o n 741 - 30 S t a t . 1 1 5 2 . CRS-37 and related data, acconpanies the submission of the proposed program to the Congress. The Congress approves or disapproves the program. Geophysical and Geological Exploration in the OCS According to the provisions of the OCS Lands Act Amendments of 1978 (92 Stat. 629), any person may conduct geophysical or geological exploration, or geological and geophysical scientific research in the OCS. These activities may be conducted on unleased lands, or on lands under lease to a third party. Regulations issued by the DO1 (30 CFR 251.2) define "geological exploration of mineral resources" as any operation conducted in the OCS which utilizes geological or geochemical techniques such as core and test drilling, well-logging techniques, and various bottom sampling techniques to produce information and data on mineral resources. Geophysical or geological scientific research consists of investigations conducted in the OCS using solid or liquid explo- sives, or drilling activities for scientific research purposes. Geophysical or geological exploration and scientific research are conducted on the basis of permits issued by the USGS and notification of planned activities submitted to the W:S by the operators. Regulations issued by the DO1 (30 CFR 251-5) prescribe requirements for permits and notices. The geological and geophysical activities for mineral exploration or scientific research must be conducted in such a manner as to preclude: interfering with or endangering operations under any lease; causing harm or damage to aquatic life; causing pollution; or interfering with other uses of the ocean area. Operators must report to the ?.@ISthe occurrences of hydrocarbon detection, any encounter with or occurrence of environmental hazards, and any adverse effect on the environment or aquatic life induced by the exploration activities. Test drilling activities under geophysical or geological exploration and scientific research require special permits. A permit for deep stratigraphic test drilling requires the submission of a drilling plan to the ?mS for approval. The term, "deep stratigraphic test," according to regulations issued by the DO1 ( 3 0 CFR 251.2), means drilling which involves penetration into the sea bottom of more than 50 feet (15.2 meters) in consolidated rocks or a total of more than 300 feet (91.4 meters) in sediment and rock. Before issuing a permit, or accepting a notification of shallow test drilling, the ?IMS may require the operator to furnish certain geological and/or geophysical data. Shallow test drilling means drilling into the sea bottom to depths less than those specified in the definition of a deep stratigraphic test. All regulations relating to drilling on the OCS pertain to drilling activities for geological or geophysical exploration, or scientific research. 75/ (See OCS Oil and Gas Operations, page 48.) In order to minimize duplicative geological exploration activities involving the penetration of the seabed of the OCS, a person proposing to drill a deep stratigraphic test must afford all interested parties, through a signed agreement, an opportunity to participate in the drilling on a cost-sharing basis. E/ Data and information collected in geophysical or geological exploration, or from scientific research are available to the XMS on the basis of reimbursement to the permittees. Under the provisions of the Freedom of Information Act (5 U.S.C. 552) and regulations on disclosure of information and data submitted under permits, the 75/ - 30 CFR 761 - 30 CFR 771 - 3 0 CFR ?IMS has the authority to make these data widely available. 771 Mechanics of OCS Oil and Gas Leasing Introduction The leasing of OCS lands for oil and gas is conducted in accordance with leasing programs discussed above and the regulations of 43 CFR 3300, both of which are authorized by the OCS Lands Act,(67 Stat.462) as amended by the OCS Lands Act Amendments (92 stat. 629). the leasing programs. The schedule for leases is contained in All leasinq activities are conducted by the Bureau of Land Management with the assistance of the MNS and the U.S. Geological Survey. Nomination of Tracts of OCS Lands for Leasine Resource reports. Technical resource reports are furnished by pertinent Federal agencies on the broad geographical OCS area under consideration for 78/ a lease sale. - These reports include information on geology, potential mineral resources, other valuable resources, and the potential effects of mineral operations on all the resources within the natural as well as the socioecononic environment of the area under consideration. Call for nominations and comments. After completion of the review of resource reports, the geographical area to be covered by the call for nominations and comments is defined. Upon approval by the Secretary of the Interior, an of- ficial "call for nominations and comments" is published in the Federal Register. The purposes of the "call" are to solicit nominations and comments from Federal agencies, State and local governments, industry, special interest groups and the public about (a) the tracts to be selected for leasing, (b) which tracts may require special attention and analysis, or (c) which tracts may have resource activities such as fishing which should be considered during tract selection 78/ U.S. Department of the Interior. Outer Continental Shelf Oil and Gas ~nformationProgram: Directory of Federal, State, and local OCS-Related Activities and Contracts, pp 2-5. procedures. 791 A tract is defined as the geographical and legal extent of a single lease area which is usually 5760 acres [9 square miles] in size. E/ Respondents are normally allowed 60 to 90 days to submit tract nominations, depending on the OCS area under consideration. Tentative tract selection. When the nominations and comments have been received, a tentative selection of tracts is made for study in a specific area or region through the environmental impact study (EIS) process. Tracts may be included which have not been nominated by respondents. The process of tentatively selecting tracts requires consideration of all available environmental information, multiple use conflicts, resource potential, industry interest and many other factors. Comments received from State and local governments and interested parties in response to calls for nominations and comments must 811 be considered. Environmental impact statement. The National Environmental Policy Act of 1969 (42 USC 4321-4347), requires that an Environmental Impact Statement (EIS) be prepared before final selection of tracts. Initially, a draft EIS is prepared by an OCS regional office to describe the existing environment, proposed action, and probable envlronnental impacts. for review and comment. The draft EIS is published Public hearings are held to discuss the draft EIS and to solicit further comments. A final EIS is published after all comments and recommendations on the draft have been considered. OCS Lease Sales Proposed notice of sale. On the basis of the recommendations of the BLY and after consideration of other comments and recommendations, the Secretary of 791 43 CFR 80/ 43 CFR 811 Ibid. t h e I n t e r i o r approves ( o r disapproves) t h e proposed n o t i c e of s a l e . I f approved by t h e S e c r e t a r y , t h e proposed n o t i c e o f s a l e i s s e n t t o t h e Governors o f a n y a f f e c t e d S t a t e s and p u b l i s h e d i n t h e F e d e r a l R e g i s t e r . S a l e s procedures and methods of b i d d i n g a r e i n c l u d e d i n t h e proposed n o t i c e . W i t h i n 60 d a y s a f t e r r e c e i v i n g n o t i c e o f a p r o p o s e d l e a s e s a l e , Governors of a f f e c t e d S t a t e s o r o f f i c i a l s of a n y a f f e c t e d l o c a l governments may s u b m i t recommendations t o t h e S e c r e t a r y o n t h e s i z e , t i m i n g , o r l o c a t i o n o f t h e l a n d s The S e c r e t a r y i s r e q u i r e d t o communicate of t h e proposed l e a s e s a l e . t o t h e Governors i n w r i t i n g t h e r e a s o n s f o r a c c e p t a n c e o r r e j e c t i o n of Gov e r n o r s ' recommendations. I n a d d i t i o n , t h e Department of Energy n o r m a l l y i s a l l o w e d 30 d a y s t o r e v i e w and comment on t h e proposed n o t i c e o f l e a s e s a l e . 821 Final t r a c t selection. A t t h e c l o s e o f t h e 60-day p e r i o d d u r i n g which comments a r e a l l o w e d , a f i n a l d e c i s i o n i s made a s t o w h e t h e r o r n o t a l e a s e w i l l be h e l d , and i f s o , which t r a c t s w i l l b e o f f e r e d , t h e m e t h o d ( s ) o f b i d d i n g , l e a s e s t i p u l a t i o n s , and a l l o t h e r t e r m s and c o n d i t i o n s o f t h e s a l e . 83/ F i n a l n o t i c e of s a l e . The f i n a l n o t i c e of s a l e i s p u b l i s h e d i n t h e F e d e r a l R e g i s t e r a s t h e o f f i c i a l p u b l i c a t i o n , and may be p u b l i s h e d i n o t h e r media. The n o t i c e must a p p e a r i n t h e F e d e r a l R e g i s t e r a t l e a s t 30 d a y s p r i o r t o t h e d a t e o f t h e l e a s e s a l e , a n d must s t a t e t h e p l a c e and t i m e a t which b i d s s h o u l d 841 be f i l e d , and a t which b i d s w i l l be opened. - The OCS l e a s i n g p r o c e s s i s summarized i n Attachment 11. 821 - 43 CFR 3315.2, 3315.3. 831 U.S. Department of t h e I n t e r i o r . O u t e r C o n t i n e n t a l S h e l f O i l and Gas ~ n f o r z t i o nProgram: D i r e c t o r y o f F e d e r a l , S t a t e , and L o c a l OCS-Related A c t i v i t i e s and C o n t r a c t s , pp. 2 - 7 . 841 - 4 3 CFR 3315.4. Bidding systems. The OCS L a n d s Act Amendments o f 1 9 7 8 ( 9 2 S t a t . 6 2 9 ) , r e q u i r e s i x b i d d i n g s y s t e m s f o r u s e i n b i d d i n g f o r l e a s e s o n OCS l a n d s . These s y s t e m s a r e d e l i n e a t e d i n 1 0 C F R , P a r t 3 7 6 , a n d a r e summarized below: ( 1 ) Cash b o n u s b i d w i t h a f i x e d r o y a l t y r a t e of n o t l e s s t h a n 1 2 1 / 2 p e r centum i n amount o r v a l u e of t h e p r o d u c t i o n s a v e d , removed o r s o l d and a n a n n u a l r e n t a l . The amount o f c a s h . b o n u s t o b e p a i d i s d e t e r m i n e d by t h e successful bidder. The r o y a l t y r a t e o f n o t l e s s t h a n 1 2 112 p e r c e n t u m a t t h e b e g i n n i n g o f t h e l e a s e p e r i o d , and t h e a n n u a l r e n t a l r a t e t o b e p a i d a r e s p e c i f i e d i n t h e " n o t i c e o f OCS l e a s e s a l e " w h i c h i s p u b l i s h e d i n t h e F e d e r a l Register. ( 2 ) R o y a l t y r a t e b i d b a s e d on p e r centum i n amount o r v a l u e o f t h e p r o d u c t i o n s a v e d , removed o r s o l d , w i t h a f i x e d c a s h b o n u s , and a n a n n u a l r e n t a l . The r o y a l t y r a t e t o b e p a i d i s d e t e r m i n e d b y t h e s u c c e s f u 1 , b i d d e r . The c a s h b o n u s a n d t h e a n n u a l r e n t a l f e e t o b e p a i d a r e s p e c i f i e d i n t h e n o t i c e of lease sale. ( 3 ) Cash bonus b i d w i t h d i m i n i s h i n g o r s l i d i n g r o y a l t y r a t e of n o t l e s s t h a n 1 2 1 1 2 p e r centum a t t h e b e g i n n i n g o f t h e l e a s e p e r i o d i n amount o r v a l u e of t h e p r o d u c t i o n s a v e d , removed, o r s o l d and a n n u a l r e n t a l . The r o y a l t y r a t e t o b e p a i d b y t h e s u c c e s s f u l b i d d e r w i l l b e a p e r c e n t a g e o f t h e amount o r v a l u e of p r o d u c t i o n s a v e d , removed o r s o l d . The r o y a l t y r a t e w i l l b e c a l c u l a t e d u s i n g e i t h e r a s l i d i n g s c a l e f o r m u l a , which r e l a t e s t h e r o y a l t y r a t e e s t a b l i s h e d t h e r e b y t o t h e a d j u s t e d v a l u e of t h e o i l and g a s produced d u r i n g t h e p r o d u c t i o n p e r i o d , o r a s c h e d u l e t h a t e s t a b l i s h e s t h e r o y a l t y r a t e t h a t w i l l be a p p l i e d t o s p e c i f i e d ranges of a d j u s t e d v a l u e of production. The r o y a l t y r a t e m u s t n o t b e l e s s t h a n 1 2 112 p e r c e n t u a a t t h e b e g i n n i n g o f t h e l e a s e p e r i o d and s h a l l be s p e c i f i e d i n t h e n o t i c e o f OCS l e a s e s a l e w h i c h a p p e a r s i n t h e Federal Register. of l e a s e s a l e . The amount o f r e n t a l must b e s p e c i f i e d i n t h e n o t i c e The amount of c a s h bonus i s d e t e r m i n e d by t h e s u c c e s s f u l b i d d e r . ( 4 ) Cash bonus b i d w i t h a f i x e d s h a r e of t h e n e t p r o f i t s of no l e s s t h a n 30 p e r centum t o be d e r i v e d f r o a t h e p r o d u c t i o n of o i l and g a s from t h e l e a s e a r e a and a f i x e d a n n u a l r e n t a l . The amount o f c a s h bonus t o be p a i d i s d e t e r - mined by t h e s u c c e s s f u l b i d d e r . The a n n u a l r e n t a l t o be p a i d w i l l be s p e c i f i e d i n t h e " n o t i c e o f l e a s e s a l e " p u b l i s h e d i n t h e F e d e r a l R e g i s t e r . The c a p i t a l r e c o v e r y f a c t o r needed t o c a l c u l a t e t h e a l l o w a n c e f o r c a p i t a l r e c o v e r y i n a c c o r d a n c e w i t h 1 0 CFR 390.320, i s s p e c i f i e d i n t h e n o t i c e of l e a s e s a l e . Net p r o f i t s h a r e b a s e d e t e r m i n a t i o n and n e t p r o f i t s h a r e c a l c u l a t i o n s a r e made i n a c c o r d a n c e w i t h i n s t r u c t i o n s p r e s c r i b e d i n 1 0 CFR 390.021 and 390.022, respectively. ( 5 ) Net p r o f i t s h a r e r a t e b i d w i t h a f i x e d c a s h bonus and a n a n n u a l r e n t a l . The amount o f c a s h bonus and t h e a n n u a l r e n t a l t o b e p a i d a r e s p e c i f i e d i n t h e n o t i c e of l e a s e s a l e p u b l i s h e d i n t h e F e d e r a l R e g i s t e r . The c a p i t a l r e c o v e r y f a c t o r , o r a schedule f o r determining t h e c a p i t a l recovery f a c t o r on t h e b a s i s of t h e n e t p r o f i t s h a r e r a t e b i d , needed t o c a l c u l a t e t h e a l l o w a n c e f o r c a p i t a l r e c o v e r y i n a c c o r d a n c e w i t h 1 0 CFR 390.020, i s s p e c i f i e d i n t h e n o t i c e o f OCS l e a s e s a l e published i n t h e Federal Register. The n e t p r o f i t s h a r e b a s e i s c a l c u l a t e d i n a c c o r d a n c e w i t h 1 0 CFR 390.021. The n e t p r o f i t s h a r e r a t e , which d e t e r m i n e s t h e f i x e d s h a r e of t h e n e t p r o f i t s t o b e p a i d , i s d e t e r m i n e d by t h e s u c c e s s f u l b i d d e r . ( 6 ) Work commitment b i d based on a d o l l a r amount f o r e x p l o r a t i o n w i t h a f i x e d c a s h bonus, a f i x e d r o y a l t y i n amount o r v a l u e of t h e p r o d u c t i o n s a v e d , removed, o r s o l d , and a n a n n u a l r e n t a l . The work commitment i s t h e b i d f o r t h e l e a s e and i s d e t e r m i n e d by t h e s u c c e s s f u l b i d d e r . The b i d must be s u b m i t t e d i n a c c o r d a n c e w i t h s p e c i f i c a t i o n s c o n t a i n e d i n t h e n o t i c e of 3CS l e a s e s a l e which i s p u b l i s h e d i n t h e F e d e r a l R e g i s t e r . The work commitment i s t h e d o l l a r amount w h i c h t h e b i d d e r must s a t i s f y by e i t h e r p e r f o r m a n c e o f s u f f i c i e n t q u a l i f y i n g e x p l o r a t i o n a c t i v i t i e s o r , f a i l i n g t h a t , by c a s h p a y m e n t s , o r by a combination of e x p l o r a t i o n a c t i v i t i e s and c a s h payments. A t h i s option, t h e l e s s e e must make a c a s h d e p o s i t f o r t h e f u l l amount o f t h e work comrnitm e n t , o r s u b m i t a p e r f o r m a n c e bond. , T h e amount o f b o n u s , r o y a l t y r a t e , a n d a n n u a l r e n t a l a r e s p e c i f i e d i n t h e n o t i c e o f OCS l e a s e s a l e w h i c h i s p u b l i s h e d i n t h e Federal Register. The e x p l o r a t i o n a c t i v i t i e s w h i c h q u a l i f y f o r c r e d i t a g a i n s t t h e b i d encompass g e o l o g i c a l i n v e s t i g a t i o n s a n d d i r e c t l y r e l a t e d a c t i v i t i e s ; g e o p h y s i c a l i n v e s t i g a t i o n s i n c l u d i n g s e i s m i c , geomagnetic, and g r a v i t y s u r v e y s ; d a t a p r o c e s s i n g and i n t e r p r e t a t i o n s ; e x p l o r a t o r y d r i l l i n g , c o r e d r i l l i n g , red r i l l i n g ; and w e l l c o m p l e t i o n a n d abandonment. Qualifying a c t i v i t i e s a l s o i n c l u d e d r i l l i n g o f w e l l s s u f f i c i e n t t o d e t e r m i n e t h e s i z e and a r e a l e x t e n t of a n y n e w l y d i s c o v e r e d f i e l d , t h e c o s t o f m o b i l i z a t i o n a n d d e m o b i l i z a t i o n of d r i l l i n g equipment, and a n y o t h e r a c t i v i t i e s a s s p e c i f i e d i n t h e approved plan. Submission of c o m p e t i t i v e b i d s . p e t i t i v e bidding. A l l t r a c t s a r e o f f e r e d f o r l e a s e by com- S e p a r a t e s e a l e d b i d s must b e s u b m i t t e d f o r e a c h t r a c t u n i t a s d e s c r i b e d i n t h e n o t i c e o f l e a s e s a l e . B i d s may n o t b e s u b m i t t e d f o r l e s s than a n e n t i r e t r a c t . One-fifth ( 1 1 5 ) o f t h e amount o f t h e c a s h bonus must b e s u b m i t t e d a l o n g w i t h e a c h b i d u n l e s s o t h e r w i s e s t a t e d i n t h e n o t i c e of sale. 851 B i d s r e c e i v e d i n r e s p o n s e t o t h e n o t i c e o f l e a s e s a l e must be opened a t t h e time and p l a c e s p e c i f i e d . 85/ - 4 3 CFR 3 3 1 6 . 4 . The o p e n i n g o f b i d s i s f o r t h e s o l e p u r p o s e o f p u b l i c l y announcing and r e c o r d i n g t h e b i d s r e c e i v e d and no b i d s a r e a c c e p t e d o r r e j e c t e d a t t h e t i m e t h e y a r e opened. The S e c r e t a r y of t h e I n t e r i o r h a s t h e a u t h o r i t y t o r e j e c t a n y and a l l b i d s r e c e i v e d f o r a n y t r a c t , r e g a r d l e s s o f t h e amount o f f e r e d f o r a n y t r a c t . The A t t o r n e y G e n e r a l may r e v i e w t h e r e s u l t s o f t h e l e a s e s a l e p r i o r t o t h e a c c e p t a n c e o f b i d s and i s s u a n c e o f l e a s e s . 861 L e a s e s a r e awarded t o t h e h i g h e s t r e s p o n s i b l e , q u a l i f i e d bidder. I f t h e S e c r e t a r y of t h e I n t e r i o r o r h i s r e p r e s e n t a t i v e , u s u a l l y a n a u t h o r i z e d o f f i c i a l o f t h e ELM, d o e s n o t a c c e p t t h e h i g h e s t b i d f o r a l e a s e w i t h i n 60 days a f t e r t h e d a t e on which t h e b i d s were opened, a l l b i d s f o r t h a t l e a s e w i l l be c o n s i d e r e d r e j e c t e d . B i d d e r s whose d e p o s i t s h a v e b e e n h e l d must be p r o m p t l y n o t i f i e d of t h e a c t i o n which i s b e i n g t a k e n by t h e a u t h o r i z e d o f f i c i a l . J o i n t bidding. J o i n t b i d s , o r b i d s by two o r more p e r s o n s , a r e p e r m i t t e d under t h e p r o v i s i o n s of t h e OCS Lands A c t , a s amended. 871 The l a w d e f i n e s a "person" t o include, i n a d d i t i o n t o a n a t u r a l person, a n a s s o c i a t i o n , a S t a t e , a p o l i t i c a l s u b d i v i s i o n of a S t a t e , o r a p r i v a t e , p u b l i c o r m u n i c i p a l corporation. Lease C o n d i t i o n s Lease s i z e . A l e a s e may n o t exceed 5,760 a c r e s u n l e s s a n a u t h o r i z e d o f f i c i a l of t h e D O 1 d e t e r m i n e s t h a t a n a r e a o f l a r g e r s i z e i s n e c e s s a r y t o a c h i e v e a r e a s o n n a b l e economic p r o d u c t i o n u n i t . 88/ The n a x i ~ u ml e a s e s i z e o f 5,760 a c r e s , o r 9 s q u a r e m i l e s , was a d o p t e d i n t h e OCS t o be c o m p a t i b l e w i t h b l o c k s o f submerged 86/ - 9 2 S t a t . 645. 87/ - 43 CFR 3316.3. 58/ - 4 3 CFR 3314. l a n d s i n t h e Gulf of i l e x i c o which were b e i n g l e a s e d by t h e S t a t e o f Texas a t t h e t i m e when t h e OCS l a n d s Act was e n a c t e d . Terms of l e a s e . O i l and g a s l e a s e s must b e i s s u e d f o r a n i n i t i a l p e r i o d of 5 y e a r s , o r n o t t o e x c e e d 1 0 y e a r s where i t i s found t h a t a l o n g e r p e r i o d i s n e c e s s a r y t o e n c o u r a g e e x p l o r a t i o n and development b e c a u s e of u n u s u a l l y deep water o r o t h e r unusually adverse conditions. L e a s e s may c o n t i n u e a f t e r t h e i n i t i a l p e r i o d of 5 y e a r s f o r a s l o n g as o i l o r g a s i s produced i n p a y i n g q u a n t i t i e s , o r a p p r o v e d d r i l l i n g o r w e l l r e w o r k i n g o p e r a t i o n s a r e conducted. 891 Rentals. R e n t a l s a r e p a y a b l e i n advance on a n a n n u a l b a s i s a t t h e r a t e specified i n t h e lease. 901 T y p i c a l r e n t a l r a t e s a r e $3 p e r a c r e p e r y e a r f o r unproven a r e a s and $10 p e r a c r e p e r y e a r f o r p r o v e n a r e a s . Royalties. 911 The OCS Lands A c t , a s amended, r e q u i r e s t h a t r o y a l t i e s on o i l and g a s s h a l l n o t be l e s s t h a n 1 2 112 p e r centum of t h e amount o r v a l u e o f t h e p r o d u c t i o n s a v e d , removed o r s o l d from t h e l e a s e s . amounts t o 1 6 213 p e r centum f o r OCS o i l and g a s . Bond. The r a t e g e n e r a l l y 921 S u c c e s s f u l b i d d e r s a r e r e q u i r e d t o f u r n i s h c o r p o r a t e s u r e t y bonds i n t h e amount of $50,000 c o n d i t i o n e d upon compliance w i t h a l l t e r m s of t h e l e a s e . B l a n k e t bonds t o c o v e r a l l l e a s e s i n t h e amount of $300,000 may be substituted. A d d i t i o n a l bond may be r e q u i r e d a t t h e d i s c r e t i o n of t h e Bureau 931 o f Land Management. 891 - 4 3 CFR 3316. 901 - 43 CFR 3317. 911 - Maley, T e r r y S. Handbook of M i n e r a l Law, p . 352. 921 - Maley, T e r r y S . Handbook o f Y i n e r a l Law, p. 352. 931 - 4 3 CFR 3318. C o a s t a l Zone Management A c t o f 1 9 7 2 The C o a s t a l Zone Management A c t o f 1972 ( 1 6 USC 1 4 5 1 , e t s e q . ) r e q u i r e s t h a t a f t e r t h e c o a s t a l z o n e management p r o g r a m o f a S t a t e h a s b e e n a p p r o v e d by t h e S e c r e t a r y o f Commerce, a n y p e r s o n who s u b m i t s a p l a n f o r e x p l o r a t i o n , d e v e l o p m e n t , o r p r o d u c t i o n o n t h e OCS, m u s t h a v e t h e p l a n r e v i e w e d by t h e a f f e c t e d State. The p l a n must b e i n c o m p l i a n c e w i t h r e q u i r e m e n t s f o r c o n s i s t e n c y w i t h t h e S t a t e ' s c o a s t a l z o n e management program. According t o the provisions of the OCS L a n d s A c t , a s amended, t h e S e c r e t a r y o f t h e I n t e r i o r may n o t a p p r o v e t h e p l a n s u n l e s s t h e y a r e i n compliance w i t h requirements f o r c o n s i s t e n c y , t h a t i s , c o n s i s t e n t w i t h t h e S t a t e ' s approved c o a s t a l program. OUTER CONTINENTAL SHELF OIL AND GAS OPERATIONS Laws and Regulations for Oil and Gas Operations in the OCS The OCS Lands Act (67 Stat. 4 6 7 ) and the OCS Lands Act Amendments ( 9 2 Stat. 6 2 9 ) contains provisions which authorize the Secretary of the Interior to prepare and issue regulations to govern all aspects of oil and gas operations in the OCS. Pertinent regulations are contained in 30 CFR 250. The regulations are administered by area oil and gas supervisors who are under supervision of the MMS. Functions of the area oil and gas supervisor Under the MMS, the jurisdiction of the area oil and gas supervisor includes drilling and production operations, handling and measurement of production, determination and collection of rents and royalties, and generally all operations 941 conducted on the basis of oil and gas leases. - The supervisor has the authority to act on requests, applications, and notices from lessees submitted in accordance with the regulations, and to require lessees to comply with applicable laws, regulations, lease terms, and OCS orders. The supervisor is responsible for insuring that all opera- tions are conducted in a manner which will protect the natural resources of the OCS and result in the maximum recovery of oil and gas in a manner cornpatible with sound conservation practices. 951 The supervisor is required to inspect and regulate all o~erationsand is authorized to issue OCS or other orders needed to prevent damage to or waste of natural resources, or injury to life or property. The supervisor may authorize departures from OCS or other orders when such departures 94/ 30 CFR 250.10. 951 - 30 CFR 250.11. are necessary for: the proper control of a well; conservation of natural re- sources; protection of aquatic life; protection of human health, safety, or property; or protection of the natural environment. The supervisor may suspend any operation which, in his or her judgment, threatens serious or irreparable harm to life, property, the leased deposits, or to the environment. 96/ Requests from lessees for suspension of operations or production may be acted on by the supervisor. x/ The supervisor may require samples, tests, or surveys to determine the energy of reservoirs, the quality and quantity of oil and gas or other minerals, and other characteristics of the oil and gas structure. The supervisor is responsible for approving operations such as well location, well spacing, well capacity, and production rates. Other operations which require the supervisor's approval include easements to construct and maintain platforms, pipelines, fixed structures and artificial islands on the OCS for use in drilling, producing, handling, storing and heating operations. The supervisor also approves the amount or value of production due the lessor from royalty and the amount due from waste or failure to drill and produce. 98/ Yodification of royalties and rental The MMS may reduce the rental or royalty on a deposit, or part of a deposit, if it cannot be operated successfully at the existing rental and royalty rates. A decision such as this would be made for the purpose of in- creasing recovery of leased mineral deposits. 99/ 96/ 30 - C F R 250.11. 97/ 30 - CFR 250.12. 981 - 30 CFR 250.13-250.20. 99/ - 30 CFR 250.21. R e q u i r e m e n t s f o r t h e L e s s e e s of O i l and Gas O p e r a t i o n s i n t h e O C S Diligent drilling The l e s s e e o r t h e d e s i g n a t e d o p e r 2 t o r i s r e q u i r e d t o d r i l l d i l i g e n t l y a n d p r o d u c e a l l w e l l s w h i c h a r e n e c e s s a r y t o p r o t e c t t h e l e s s o r f r o m d r a i n a g e by p r o d u c t i o n on o t h e r p r o p e r t i e s , o r e l s e t o c o m p e n s a t e t h e l e s s o r f o r t h e l o s s . 100/ E x p l o r a t o r y d r i l l i n g p l a n on l e a s e d l a n d s B e f o r e commencing e a c h e x p l o r a t o r y d r i l l i n g p r o g r a m on a l e a s e , i n c l u d i n g t h e c o n s t r u c t i o n of p l a t f o r m s , t h e l e s s e e i s r e q u i r e d t o submit a p l a n t o t h e supervisor f o r approval. T h i s p l a n must c o n t a i n a d e s c r i p t i o n o f t h e d r i l l i n g v e s s e l s , platforms, o r o t h e r s t r u c t u r e s together with t h e i r locations, design, and o t h e r major f e a t u r e s , i n c l u d i n g f e a t u r e s p e r t a i n i n g t o t h e p r e v e n t i o n and c o n t r o l of pollution. The g e n e r a l l o c a t i o n o f e a c h w e l l must b e shown. The p l a n m u s t show s t r u c t u r a l i n t e r p r e t a t i o n s b a s e d o n a v a i l a b l e g e o l o g i c a l a n d g e o p h y s i c a l d a t a , and o t h e r i n f o r m a t i o n a s r e q u i r e d by t h e s u p e r v i s o r . 101/ The e x p l o r a t i o n p l a n , t o g e t h e r w i t h a n e n v i r o n m e n t a l r e p o r t p e r t a i n i n g t o t h e e x p l o r a t i o n , s h o u l d b e s u b m i t t e d a t t h e same t i m e . P r i o r t o approval of t h e p l a n , t h e s u p e r v i s o r f u r n i s h e s e a c h a f f e c t e d S t a t e w i t h a n advance copy o f t h e environmental r e p o r t . The S t a t e s h a v e 1 0 d a y s t o r e g i s t e r ob- j e c t i o n s . A f t e r t h e s u p e r v i s o r determines t h e adequacy of t h e p l a n , c o p i e s o f t h e p r o p o s e d p l a n a r e f u r n i s h e d t o t h e G o v e r n o r s a n d c o a s t a l z o n e management a g e n c i e s o f a f f e c t e d S t a t e s , t o t h e U.S. t o t h e public. O f f i c e o f C o a s t a l Zone Management, and The s u p e r v i s o r may n o t a p p r o v e o r d e n y t h e p l a n u n t i l w r i t t e n 100/ 3 0 CFR 2 5 0 . 3 3 101/ - 30 CFR 250.34-1. comments have been received from each affected State or until 30 days after each State has received a copy of the plan. be approved by the supervisor. Any revision to the plan must 1021 Wells for exploration may not he drilled until the supervisor approves an application for a permit to drill. When an application is received, the 1031 supervisor furnishes copies to the affected States. Development and production plans Prior to commencing development and production activities, the lessee is required to submit a proposed development and production plan for the supervisor's approval. An environmental report must accompany the proposed plan. (The environmental report for exploration plans, and that for development and production plans are similar, but the latter is more detailed.) The plan must include a description of the work to be performed, a time schedule, description of the drilling vessels, platforms or other offshore structures to be used and their location, and locations of each proposed well. The contents of the plan must include interpretations of all available geological and geophysical data, descriptions of the environmental safeguards to be implemented, safety standards and features for the proposed operation, and other data or information as required by the supervisor. 1041 The proposed development and production plan, with the exception of portions containing proprietary and financial information, is furnished to the Governors of affected States, their Coastal Zone Nanagement Offices, and the U.S. Office of Coastal Zone Xanagement. 1021 30 CFR 250.34-1. 1031 - 30 CFR 250.34-1. 1041 - 30 CFR 250.34-2. The Governors are allowed 60 days to comment on proposed plans. Within 60 days following the close of the 60-day comment period, the supervisor must approve or disapprove the plan. 1051 Along with development and production plans, lessees are required to submit environmental reports. These reports include information such as the locations, descriptions, and sizes of offshore and land-based facilities; amounts of land, rights-of-way, and easements required in states; proposed means of transporting oil and gas to shore and proposed means of transportation on land; estimates of frequency of boat and aircraft arrivals and departures from onshore terminals and routes needed; requirements for labor, material and energy; the approximate number, timing, and duration of employment of persons who will be engaged in onshore development and production activities; the approximate number of people and families to be added to the existing population; such other information as the supervisor may require. These reports are furnished to the Governors and other officials of the States by the supervisor. 1061 The supervisor may not approve plans affecting land or water use in areas covered, or which conflict with a State's coastal zone management plan which has been approved pursuant to the Coastal Zone Management Act (CZMA) of 1972, unless that State agrees to the plan. This is a requirement of the OCS Lands Acts Amendments of 1978 (92 Stat. 652) and the CZMA (90 Stat. 1018). Compliance with the National Environmental Policy Act Prior to approval of a pro~osedexploration, or development and production plan, or of significant revisions to these plans, the supervisor is required to prepare an environmental assessment to deteraine if the proposed activities constitute a major Federal action which affects significantly the quality of 1051 30 CFR 250.34.2. 1061 - 30 CFR 250.34-3. the human environment, and consequently would require a preparation of an environmental impact statement. This preliminary assessment is also required by a provision of the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4347). Whenever the supervisor determines that an E I S is necessary, the MNS will determine whether or not i t should cover a specific site, or whether or not the ELS should cover other areas for which plans have been proposed or are expected to be proposed. 1071 Well records The lessee is required to make available to the supervisor complete records of all well operations. The record must include entries such as data on production, drilling, casing, safety devices, redrilling, deepening, repairing, cementing, plugging, and abandoning of wells, and the data on the characteristics of oil and gas, mineral deposits, and water in each formation. 1081 - Well control Lessees are required to conetruct and equip wells in a manner which will control the formation of pressures and fluids, and support unconsolidated sediments. Sufficient qvantitios o f material must be used to prevent blowouts. Blow-out prevention and related well-control equipment must be installed and maintained in operative condition. The supervisor may require additional measures depending on the nature and characteristics of particular wells. 1091 Pollution The lessee must take precautionary measures not to pollute the ocean by spillage or leakage ~f oil or waste materials. 1071 - 30 CFR 250.34-4. 1081 - 30 CFR 250.38. 1091 30 CFR 250.41. - All spills must be recorded; m a j o r s p i l l s m u s t b e r e p o r t e d t o t h e s u p e r v i s o r , t h e LC o a s t Guard a n d t h e D i r e c t o r o f t h e F e d e r a l Water P o l l u t i o n C o n t r o l Adm'inistration. If o i l spills 110/ r e s u l t i n damages, t h e l e s s e e i s r e s p o n s i b l e f o r c o n t r o l and removal. Abandonment o f w e l l s . -. . The l e s s e e i s r e q u i r e d t o p r o m p t l y p l u g qnds'abaridon wells t h a t a r e hot u s e d o r a r e n o t u s e f u l . However, p r o d u c t i v e w e l l s inay n o t b e a b a n d o n e d u n t i l t h e i r l a c k of c a p a c i t y f o r f u r t h e r p r o f i t a b l e p r o d u c t t o n o f z o i l and g a s h a s b e e n d e m o n s t r a t e d t o t h e s a t i s f a c t i o n o f t h e s u p e r v i s o r . No well may b e a b a n d o n e d - u n t i l t h e s u p e r v i s o r a p p r o v e s t h e p l u g g i n g p r o c e d u r e s , 1111 110/ 30 CFR 2 5 0 . 4 3 . Ill/ - 30 CFR 2 5 0 . 4 4 . Applications/Bids for Onshore and Gas Leases !Ioncompetitive Leases Simultaneous Fillings Application to lease filed in State: land office of the : Bureav of Land : Nanagement with filing fee of $75 : and first year'e : rental for land at : Sllacre. List of lands available for simultaneous filings posted/advertised on 1st business day of every 2nd month beginning with January. : Lease offered 50 : 2.: the ftrst qualified : : applicant. Conpetitive Leases : : : : : : Applicants submit : "simultaneously oil : and gas entry cards." Each: : entry card accompanied by : : filing fee of $75.00. : Applicants may file only : : one applicationlcard for : : each parcel of land. : Drawing held. Three entry: : cards drawn for each : leasing unit and the order: : in which : they are drawn : : determines the : priority : : for offering the parcel : of land for lease. : Notice of snle usually published once a week for 5 consecutive weeks in newspapers and other media in county(s) where land is situated. Notice describes land, specifies rent and royalties required . : Time and place of sale specified. : Bids submitted on day of 2.: sale together with 115 of : the amount bid. : Lease awarded to : the highest qualified : bidder. : : ATTACHMENT I1 Outer Continental Shelf Lease Sale Process 1. : : : : : : Review of resource reports on area(s) under consideration: i.e., geology, mineral resources, other minerals. 6. : 7. 2. : : : : : : Notice of sale. : Lease sale at least 30 : days after notice of : sale published. Call for nominations and comments from Federal agencies, State and local gvt., industry, and others. 8. : Bids accepted or rejected : : within 60 days after sale : : and announced in press : release. 3. 4. 5. : : : : Tentative tract selection: based on nominations and : comments, resource reports, and other data. : : Draft Environmental Impact Statement (DEIS) : : : : : : : : : : : Public hearings on DEIS. : Final Environmental Impact Statement. Proposed notice of sale : at least 30 days prior : to the date of the lease : sale. :