[Federal Register: March 8, 2006 (Volume 71, Number 45)]
[Proposed Rules]
[Page 11559-11561]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08mr06-22]
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DEPARTMENT OF THE INTERIOR
Bureau of Land Management
43 CFR Part 3100
Minerals Management Service
30 CFR Part 203
[WO-310-06-1310-24 1A]
RIN 1004-AD81
Gas Hydrate Production Incentives
AGENCY: Bureau of Land Management, Minerals Management Service,
Interior.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Bureau of Land Management (BLM) and the Minerals
Management Service (MMS) request comments and suggestions to assist in
the preparation of proposed regulations governing Gas Hydrate
Production Incentives. The rule would provide incentives to promote
natural gas production from the natural gas hydrate resources on
Federal lands in Alaska and in Federal waters on the Outer Continental
Shelf. We encourage the public to provide comments and suggestions to
help clarify and define the requirements for Gas Hydrate Production
Incentives as described in the Energy Policy Act of 2005.
DATES: We will accept comments and suggestions on the advance notice of
proposed rulemaking until April 7, 2006.
ADDRESSES: You may submit comments by any of the following methods
listed below.
Federal rulemaking portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov (Follow the
instructions for submitting comments.)
Internet e-mail: comments_washington@blm.gov. (Include ``Attn:
AD81'').
Mail: Director (630), Bureau of Land Management, Administrative Record,
Room 401-LS, Eastern States Office, 7450 Boston Boulevard, Springfield,
Virginia 22153. Personal or messenger delivery: Room 401, 1620 L
Street, NW., Washington, DC 20036.
FOR FURTHER INFORMATION CONTACT: For onshore, Thomas J. Zelenka at
(202) 452-0334 and for offshore, Marshall Rose at (703) 787-1536, as to
the substance of the advance notice, or Ted Hudson at (202) 452-5042,
as to procedural matters. Persons who use a telecommunications device
for the deaf (TDD) may call the Federal Information Relay Service
(FIRS) at 1-800-877-8330, 24 hours a day, seven days a week, to contact
the above individuals.
SUPPLEMENTARY INFORMATION:
I. Public Comment Procedures
II. Background
III. Description of Information Requested
I. Public Comment Procedures
A. How Do I Ccomment on the Advance Notice of Proposed Rulemaking?
Your written comments should:
Be specific;
Explain the reason for your comments and suggestions; and
Be about the issues outlined in the notice.
Comments and recommendations that will be most useful and likely to
influence decisions on the content of the proposed rule are:
[[Page 11560]]
Those supported by quantitative information or studies,
and
Those that include citations to and analyses of any
applicable laws and regulations.
We are particularly interested in receiving comments and
suggestions about the topics listed under Section III. Description and
Information Requested.
If you wish to comment, you may submit your comments by any one of
several methods, in each case referring to ``1004-AD81''.
You may mail comments to Director (630), Bureau of Land
Management, Administrative Record, Room 401 LS, Eastern States Office,
7450 Boston Boulevard, Springfield, Virginia 22153.
You may deliver comments to Room 401, 1620 L Street, NW.,
Washington, DC 20036.
You may comment on this advance notice at the Federal
eRulemaking Portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov, following the
instructions at that link.
You may also comment via email to:
comments_washington@blm.gov.
We may not necessarily consider or include in the Administrative
Record for the final rule comments received after the close of the
comment period (see DATES) or comments delivered to an address other
than those listed above (see ADDRESSES).
B. May I Review Comments Submitted by Others?
Comments, including names and street addresses of respondents, will
be available for public review at the address listed under ADDRESSES
Personal or messenger delivery--during regular business hours (7:45
a.m. to 4:15 p.m.), Monday through Friday, except holidays.
Individual respondents may request confidentiality, which we will
honor to the extent allowable by law. If you wish to withhold your name
or address, except for the city or town, you must state this
prominently at the beginning of your comment. We will make all
submissions from organizations or businesses, and from individuals
identifying themselves as representatives or officials of organizations
or businesses, available for public inspection in their entirety.
II. Background
A. Statutory
The Energy Policy Act of 2005, at Section 353, GAS HYDRATE
PRODUCTION INCENTIVE, is intended to ``promote natural gas production
from the natural gas hydrate resources on the outer Continental Shelf
and Federal lands in Alaska by providing royalty incentives.'' The
statute directs the Secretary to conduct a rulemaking and grant royalty
relief ``if the Secretary determines that such royalty relief would
encourage production of natural gas from gas hydrate resources. . ..''
The Energy Policy Act of 2005, at Section 353(d) also directs the
Secretary to issue an Advance Notice of Proposed Rulemaking within 180
days of the August 8, 2005, date of enactment.
B. Technical Review
Gas hydrates are crystalline substances composed of water and gas
together in solid form far above the freezing point of water, in which
a solid water-lattice accommodates gas molecules in a cage-like
structure, or clathrate. The estimated amount of gas in the hydrate
accumulations of the world greatly exceeds the volume of known
conventional gas resources. However, the role that gas hydrate
resources may play in contributing to the world's energy requirements
will depend ultimately on the availability of producible gas hydrate
resources and the cost to extract them.
The discovery of large gas hydrate accumulations in terrestrial
permafrost regions of the Arctic and beneath the sea along the outer
continental margins of the world's oceans has heightened interest in
gas hydrate resources as a possible energy resource. However, technical
issues need to be resolved before gas hydrate resources can be
considered a viable option for affordable supplies of natural gas. The
combined information from Arctic gas-hydrate studies shows that, in
permafrost regions, gas hydrate resources may exist at subsurface
depths ranging from about 130 to 2,000 meters. The presence of gas
hydrate resources in offshore continental margins has been inferred
mainly from anomalous seismic reflectors, known as bottom-simulating
reflectors, that have been mapped at depths below the sea floor ranging
from about 100 to 1,100 meters.
In 1995, the U.S. Geological Survey completed its most detailed
assessment of U.S. gas hydrate resources. The USGS study estimated the
in-place gas resource within the gas hydrate of the United States
ranged from 112,000 trillion cubic feet to 676,000 trillion cubic feet,
with a mean value of 320,000 trillion cubic feet of gas. Subsequent
refinements of the data in 1997 have suggested that the mean should be
adjusted slightly downward, to around 200,000 trillion cubic feet--
still larger by several orders of magnitude than the estimated 1,200
trillion cubic feet of conventional recoverable gas resources and
reserves in the United States.
Recently, several countries, including Japan, India, and the United
States, launched ambitious national projects to further examine the
resource potential of gas hydrate resources. These projects may help
answer key questions dealing with the properties of gas hydrate
reservoirs, the design of production systems, and, most importantly,
the relative costs and economics of gas hydrate production.
Even though gas hydrate resources are known to occur in numerous
marine and Arctic settings, little is known about the technology
necessary to produce gas hydrate. Most of the existing gas hydrate
``resource'' assessments do not address the problem of gas hydrate
recoverability. Proposed methods of gas recovery from gas hydrate
resources usually deal with dissociating or ``melting'' in-situ gas
hydrates by (1) heating the reservoir beyond hydrate formation
temperatures, (2) decreasing the reservoir pressure below hydrate
equilibrium, (3) injecting an inhibitor such as methanol or glycol into
the reservoir to create conditions that could decrease hydrate
stability, or (4) some combination of these methods. Gas hydrate
computer production models and a limited number of research and
development production tests have shown that gas can be produced from
hydrate resources at sufficient rates to make gas hydrate a technically
recoverable resource. However, the economic costs associated with the
various proposed production schemes have not been assessed. Several
recent studies have documented the need for extended gas hydrate
production field tests in order to allow further development of various
gas hydrate production technologies.
C. Ongoing Research and Development Activities
It is possible that gas hydrate resources may become an important
global source of natural gas. For the MMS and BLM, gas hydrates are
potentially a large untapped resource occurring on Federally-managed
lands and waters. To develop a complete regional understanding of this
potential energy resource, the Department of the Interior through MMS,
BLM, and the U.S. Geological Survey (USGS), is actively assessing the
energy resource potential of gas hydrate resources in the Outer
Continental Shelf of the United States and onshore in northern Alaska.
This ongoing work has combined the resource assessment responsibilities
of MMS and USGS with the surface management and permitting
responsibilities of MMS and BLM. As interest in gas hydrate resources
[[Page 11561]]
continues to grow, information generated from these activities will
help guide these agencies to promote responsible development of this
potential energy resource.
The Methane Hydrate Research and Development Act of 2000 (Pub. L.
106-193) authorized the expenditure of $43 million over 5 years and
directed the U.S. Department of Energy (DOE), in consultation with
USGS, MMS, the National Science Foundation, the Department of Defense,
and the Department of Commerce, to commence basic and applied research
to identify, explore, assess, and develop methane hydrate resources as
a source of energy. Under this Act, DOE funded laboratory and field
research on both Arctic and marine gas hydrate resources. The Energy
Policy Act of 2005 renews the Methane Hydrate Research and Development
Act. In addition, the Energy Policy Act of 2005 provides the Secretary
of the Interior with the authority to create incentives through royalty
relief for gas hydrate production. Such incentives may encourage new
technology and advance the timing of recovery.
III. Description of Information Requested
We are committed to carrying out the provisions of the Energy
Policy Act of 2005. The potential for natural gas production from gas
hydrate resources exists but has not yet been demonstrated to be
technically feasible. Until exploration, development and production
technologies are better determined, a rule providing for a flexible
case-by-case assessment of each gas hydrate application for royalty
relief would appear to be the most logical approach.
The gas hydrate production incentive aims to promote natural gas
production from gas hydrate resources by providing a royalty suspension
volume of up to 30 billion cubic feet (Bcf) per eligible lease, the
maximum amount authorized under the statute. If the Secretary
determines, pursuant to Section 353(b)(3) of the Energy Policy Act of
2005, that royalty relief would encourage production of natural gas
from gas hydrate resources, and adopts a regulation providing for such
relief, a lease may be eligible for this royalty relief if it is:
A lease under the Outer Continental Shelf (OCS) Lands Act;
or
An oil and gas lease for onshore Federal lands in Alaska;
Issued prior to January 1, 2016, that commences natural
gas production from gas hydrate resources prior to January 1, 2018.
Section 353(d)(2) requires that any final rule must define gas
hydrate resources as both the natural gas content of gas hydrates
within the hydrate stability zone and free natural gas trapped by and
beneath the hydrate stability zone. The royalty relief, if authorized
under a final rule and approved for a lease, would apply only to
production occurring on or after the date of publication of this
advance notice of proposed rulemaking, as provided by Section 353(b)(3)
of the EPAct. While relief is retroactive to the date of this advance
notice of proposed rulemaking, lessees must pay royalty on production
that occurs before publication of a final rule but may request a refund
after a final rule is published. In addition, pursuant to Section
353(b)(4) of the EPAct, the royalty relief may be conditioned on the
market price of natural gas, and so may be subject to a natural gas
price threshold or other market based limitations.
We are interested in receiving comments regarding incentive
provisions that would encourage production of natural gas hydrate
resources. Topics we are considering for the proposed regulations
include, but are not limited to, the following:
1. If the Secretary determines that incentives are warranted, does
a case-specific assessment approach for gas hydrate resources provide
the appropriate framework for the intended incentives?
2. How should the assessment be structured with regard to
determining whether royalty relief is needed? Is it reasonable to
expect that such assessments can be consistently and reliably completed
for a wide variety of projects? If the Secretary determines that relief
is warranted, how should the amount of relief be calculated? What
information should be required?
3. Given that the technologies needed to produce this hydrate
resource are still in the early stages of development, should
incentives be structured to adapt to changes in technology and project
economics? If yes, how?
4. Should the relief awarded be conditioned on market price? If
yes, how?
5. If an approach other than a case-specific approach is advocated,
what decision criteria should be used? What methodology should be used?
What information should be required? How would this approach address
the evolution of the technologies and operational processes? Should the
process be the same for onshore leases and offshore leases?
6. Are there other incentives that could be offered to encourage
development of gas hydrate resources production?
7. How should royalty relief be structured for production of gas
hydrate resources? How should royalty relief for production of gas
hydrate resources relate to other royalty relief?
8. Should royalty relief for the production of gas hydrate
resources differentiate between instances that produce hydrate
resources directly, and those that produce free natural gas trapped
beneath the hydrate stability zone?
9. Are there other issues that should be considered?
As a result of comments received in response to this Advance Notice
of Proposed Rulemaking, the Secretary may determine that a production
royalty incentive is either unnecessary to promote gas hydrate
production or is insufficient to encourage production of natural gas
from gas hydrate resources. If a production royalty is insufficient to
encourage production, other options for promoting gas hydrate resources
production, possibly in combination with the options discussed above,
may need to be analyzed instead. Therefore, the Secretary is not yet
prepared to make the determination under Section 353(b)(3) of the
Energy Policy Act that royalty relief would encourage production of
natural gas from gas hydrate resources. However, pursuant to that
subsection of the Energy Policy Act, if BLM and/or MMS adopt a royalty
relief rule it would be applicable to any eligible production occurring
on or after the publication date of this Advance Notice of Proposed
Rulemaking in the Federal Register.
Dated: February 1, 2006.
Johnnie Burton,
Acting Assistant Secretary of the Interior.
[FR Doc. 06-2169 Filed 3-7-06; 8:45 am]
BILLING CODE 4310-MR-P