[Federal Register: July 23, 2008 (Volume 73, Number 142)]
[Proposed Rules]
[Page 42925-42975]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jy08-23]
[[Page 42925]]
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Part II
Department of the Interior
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Bureau of Land Management
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43 CFR Parts 3900, 3910, 3920 et al.
Oil Shale Management--General; Proposed Rule
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DEPARTMENT OF THE INTERIOR
Bureau of Land Management
43 CFR Parts 3900, 3910, 3920, and 3930
[WO-320-1310-OSHL]
RIN 1004-AD90
Oil Shale Management--General
AGENCY: Bureau of Land Management, Interior.
ACTION: Proposed rule.
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SUMMARY: The Bureau of Land Management (BLM) is proposing regulations
to set out the policies and procedures for the implementation of a
commercial leasing program for the management of federally-owned oil
shale and any associated minerals located on Federal lands. The Energy
Policy Act of 2005 (EP Act) directs the Secretary of the Interior to:
Make public lands available for conducting oil shale research and
development activities; complete a Programmatic Environmental Impact
Statement (PEIS) for a commercial leasing program for both oil shale
and tar sands resources on the BLM administered lands in Colorado,
Utah, and Wyoming; and issue regulations establishing a commercial oil
shale leasing program.
These proposed regulations would incorporate specific provisions of
the Mineral Leasing Act of 1920 (MLA) and the EP Act relating to:
Maximum oil shale lease size; maximum acreage limitations; rental; and
lease diligence.
These proposed regulations would also address the diligent
development requirements of the EP Act by establishing work
requirements and milestones to ensure diligent development of leases.
The proposed rule would also provide for other standard components of a
BLM mineral leasing program, including lease administration and
operations.
DATES: Send your comments to reach the BLM on or before September 22,
2008. The BLM will not necessarily consider any comments received after
the above date during its decision on the proposed rule.
ADDRESSES: Mail: U.S. Department of the Interior, Director (630),
Bureau of Land Management, Mail Stop 401 LS, 1849 C St., NW.,
Attention: 1004-AD90, Washington, DC 20240.
Personal or messenger delivery: 1620 L Street, NW., Room 401,
Washington, DC 20036.
Federal eRulemaking Portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov. Follow the
instructions at this Web site.
You may also send comments on the information collection aspects of
this proposed rule directly to: Interior Desk Officer (1004-AD90),
Office of Information and Regulatory Affairs, Office of Management and
Budget (OMB), (202) 395-6566 (facsimile); e-mail: oira_
docket@omb.eop.gov. Please also send a copy to the BLM.
FOR FURTHER INFORMATION CONTACT: Mitchell Leverette, Chief, Division of
Solid Minerals at (202) 452-5088 for issues related to the BLM's
commercial oil shale leasing program or Kelly Odom at (202) 452-5028
for regulatory process issues. Persons who use a telecommunications
device for the deaf (TDD) may call the Federal Information Relay
Service (FIRS) at 1-800-877-8339, 24 hours a day, 7 days a week, to
leave a message or question with the above individuals. You will
receive a reply during normal business hours.
SUPPLEMENTARY INFORMATION:
I. Public Comment Procedures
II. Background
III. Discussion of the Proposed Rule
IV. Procedural Matters
I. Public Comment Procedures
A. How do I comment on the proposed rule?
If you wish to comment, you may submit your comments by any one of
several methods:
You may mail comments to U.S. Department of the Interior,
Director (630), Bureau of Land Management, Mail Stop 401 LS, 1849 C
St., NW., Attention: 1004-AD90, Washington, DC 20240.
You may deliver comments to Room 401, 1620 L Street, NW.,
Washington, DC 20036.
You may access and comment on the proposed rules at the
Federal eRulemaking Portal by following the instructions at that site
(see ADDRESSES).
Please make your comments on the proposed rule as specific as possible,
confine them to issues pertinent to the proposed rule, and explain the
reason for any changes you recommend. Where possible, your comments
should reference the specific section or paragraph of the proposal that
you are addressing.
The BLM may not necessarily consider or include in the
Administrative Record for the final rule comments that we receive 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 hours (7:45 a.m. to 4:15
p.m.), Monday through Friday, except holidays. The comments are also
available for public review on http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov.
Before including your address, telephone number, e-mail address, or
other personal identifying information in your comment, be advised that
your entire comment--including your personal identifying information--
may be made publicly available at any time. While you can ask us in
your comment to withhold from public review your personal identifying
information, we cannot guarantee that we will be able to do so.
II. Background
The BLM is proposing these regulations to implement the EP Act (42
U.S.C. 15927), which became law on August 8, 2005. Section 369 of the
EP Act addresses oil shale development and authorizes the Secretary of
the Interior to establish regulations for a commercial leasing program.
The MLA of 1920 (30 U.S.C. 241(a)) provides the authority for the BLM
to allow for the exploration, development, and utilization of oil shale
resources on the BLM-managed public lands. Additional statutory
authorities for these proposed regulations are:
(1) The Mineral Leasing Act for Acquired Lands of 1947 (30 U.S.C.
351-359); and
(2) The Federal Land Policy and Management Act (FLPMA) of 1976 (43
U.S.C. 1701 et seq., including 43 U.S.C. 1732).
Oil shale is a fine-grained sedimentary rock containing organic
matter from which shale oil may be produced. Oil shale is a marlstone
and contains no oil; rather, it contains un-decayed algae called
kerogen (not oil). In fact, the word kerogen is a Greek word
interpreted to mean ``to produce wax''--``kero'' (wax), ``gen'' to
produce. The waxy substance produced from oil shale rock is not the
same as conventional crude oil. The kerogen only has a market value as
an energy source after it has been refined and converted to synthetic
crude oil.
Oil shale is a solid rock and must be mined or treated in place to
release the kerogen oil from the rock. Energy companies and petroleum
researchers have, over the past 60 years, developed
[[Page 42927]]
and tested a variety of technologies on a small scale for recovering
shale oil from oil shale and processing it to produce fuels and
byproducts. Both surface processing and in-situ technologies have been
examined. Generally, surface processing consists of three major steps:
(1) Oil shale mining and ore preparation; (2) pyrolysis of oil shale to
produce kerogen oil; and (3) processing kerogen oil to produce refinery
feedstock and high-value chemicals. This sequence is illustrated below.
Conversion of Oil Shale to Products (Surface Process) Resource -->Ore
Mining-->Retorting-->Oil Upgrading-->Fuel and Chemical Markets
For deeper, thicker deposits, not as amenable to surface- or deep-
mining methods, the shale oil can be produced by in-situ technology.
In-situ processes minimize or, in the case of true in-situ, eliminate
the need for mining and surface pyrolysis by heating the resource in
its natural depositional setting. This sequence is illustrated below.
Conversion of Oil Shale to Products (True In-Situ Process) Resource --
>In-Situ Pyrolysis-->Oil Upgrading-->Fuel and Chemical Markets
The American Association of Petroleum Geologists estimates that the
total world oil shale resources contain the equivalent of 2.6 trillion
barrels of oil. According to estimates by the U.S. Geological Survey,
the United States holds more than 50 percent of the world's oil shale
resources.
The largest known deposits of oil shale in the world are located in
a 16,000 square mile area in the Green River formation in Colorado,
Utah, and Wyoming (underlying the Piceance, Uinta, Green River, and
Washakie Basins), which is estimated to contain the equivalent of
between 1.5 and 1.8 trillion barrels of oil. Federal lands comprise 72
percent of the total surface of oil shale acreage and 82 percent of the
oil shale resources in the Green River formation.
As stated in the June 9, 2005 call for nominations for the
research, development, and demonstration (R, D and D) (70 FR 33753)
leases, the BLM opted for a staged oil shale leasing program. The first
stage is the research and development program followed by these
proposed commercial leasing regulations.
BLM oil shale initiatives since 1983.
In 1973, four leases were issued in the oil shale prototype leasing
program. During the 1973-74 oil shale prototype program, there were
expectations of an economic boom in western Colorado which never
materialized. The oil shale industry collapsed on May 2, 1982, commonly
referred to as Black Sunday.
In 1983, the BLM established an Oil Shale Task Force to address:
(1) Access to unconventional energy resources (such as oil shale)
on public lands;
(2) Impediments to oil shale development on public lands;
(3) Industry interest in research and development and commercial
opportunities on public lands; and
(4) Secretarial options to capitalize on these opportunities.
On February 11, 1983, the BLM published a proposed rule for an oil
shale leasing program (48 FR 6510). Due to apparent lack of interest in
the development of oil shale, the BLM withdrew the proposed rule,
effective September 25, 1985 (50 FR 38867).
In order to be better able to expand and diversify domestic energy
production, on November 22, 2004, the BLM published a notice in the
Federal Register (69 FR 67935) requesting public comments on the
potential for oil shale development within the Piceance Creek Basin in
Colorado, the Uinta Basin in Utah, and the Green River and Washakie
Basins in Wyoming. The Federal Register notice also requested comments
on a proposed draft oil shale R, D and D lease form. Comments received
were incorporated, as appropriate, into the final R, D and D lease
form.
On June 9, 2005, the BLM published a notice in the Federal Register
(70 FR 33753) which initiated a R, D and D leasing program by
soliciting nominations of 160-acre parcels of public land to be leased
in Colorado, Utah, and Wyoming for conducting oil shale recovery
technologies. In response to the 19 nominations of parcels that the BLM
received, the BLM issued 6 R, D and D leases--5 in Colorado that were
effective January 1, 2007, and an additional R, D and D lease in Utah
that was effective on July 1, 2007. Each of the R, D and D leases
contains a preference right for conversion to a commercial lease of
additional acreage upon demonstration of a successful method of
producing oil from shale rock.
One of the purposes of the R, D and D leases, as stated in the
notice was to provide the BLM, state and local governments, and the
public with important information that could be utilized as the BLM
works with communities, states, and other Federal agencies to develop
strategies for managing the environmental effects of production. The R,
D and D lease form was published as an attachment (Appendix A) to the
June 9, 2005, Federal Register notice.
The PEIS and National Environmental Policy Act (NEPA) Compliance
On December 13, 2005, the BLM published in the Federal Register a
notice of intent (NOI) to prepare a PEIS (70 FR 73791) for oil shale
and tar sands resources leasing on lands administered by the BLM in
Colorado, Utah, and Wyoming. The NOI alerted the public that the BLM
was intending to amend several resource management plans (RMPs) to open
lands for oil shale and tar sands resources leasing in Colorado, Utah,
and Wyoming. The NOI also informed the public of the development of the
oil shale regulations required by Section 369(d)(2) of the EP Act. The
RMPs are BLM planning documents prepared under Section 202 of the FLPMA
that present guidelines for making resource management decisions.
The draft PEIS evaluates the following RMPs for possible amendment:
(1) Wyoming: Green River, Great Divide, and Kemmerer;
(2) Utah: Price River, San Juan, San Rafael, Henry Mountain, Book
Cliffs, and Diamond Mountain; and
(3) Colorado: Grand Junction, White River, and Glenwood Springs.
Although the PEIS covers planning for tar sands, these proposed
regulations do not address tar sands leasing since the BLM has
regulations in place that address tar sands leasing (see 43 CFR part
3140).
On December 21, 2007, the BLM published the notice of availability
for the draft PEIS and has made the draft PEIS available for public
comment (72 FR 72751). The BLM intends to finalize the PEIS before
these regulations are final. The PEIS is primarily intended to analyze
the impacts of land use allocation and not site specific oil shale
leasing.
Advance Notice of Proposed Rulemaking
The BLM recognizes that the creation of the rules governing the
development of oil shale would need to address different possible
technologies that have different associated impacts and costs.
Therefore, to increase public participation and to aid in the
development of oil shale regulations, the BLM published in the Federal
Register an advance notice of proposed rulemaking (ANPR) (71 FR 50378)
on August 25, 2006. The ANPR requested public comments on the following
five
[[Page 42928]]
key components of the proposed regulations:
(1) What should be the royalty rate and point of royalty
determination?
(2) Should the regulations establish a process for bid adequacy
evaluation,i.e., Fair Market Value (FMV) determination, or should the
regulations establish a minimum acceptable lease bonus bid?
(3) How should diligent development be determined?
(4) What should be the minimum production requirement?
(5) Should there be provisions for small tract leasing?
On September 26, 2006, the BLM published a Federal Register notice
reopening the comment period for the ANPR and extending the comment
period until October 25, 2006 (71 FR 56085). In response to the ANPR,
the BLM received 48 comments.
Comments were received from individuals, public interest groups,
and industry representatives. Although the ANPR focused on the 5 areas
previously identified, commenters addressed a variety of topics,
including whether or not they were supportive of a commercial oil shale
leasing program. Below is a discussion of the ANPR organized by topic.
Public comments BLM received on the ANPR are discussed in this preamble
at the appropriate section of this rule.
Royalty Rate and Point of Royalty Determination--Section 369(o) of
the EP Act does not prescribe a royalty rate, but does provide that the
royalty rate for oil shale should encourage development of the resource
and should ensure a fair return to the United States. The ANPR comments
received were extremely varied and recommended a wide range of royalty
rates. Discussion of the ANPR royalty comments can be found in the
discussion of section 3903.52 of this rule.
Bid Adequacy Evaluation (Fair Market Value)--It is the policy of
the United States, stated in Section 102(a) of FLPMA (43 U.S.C.
1701(a)(9)) and Section 369(o)(2) of the EP Act, that the United States
receive FMV for the issuance of Federal mineral leases. The BLM's
purpose for requesting comments on the FMV it should receive for lease
tracts was to solicit ideas on how FMV would be determined for a
resource that has little or no history of comparable sales. The public
comments received on the ANPR are discussed in section 3924.10 of this
rule.
Diligent Development--Section 369(f) of the EP Act requires that
the BLM establish work requirements and milestones to ensure diligent
development of Federal oil shale leases. The BLM requested public
comment on diligent development to assist us in determining lease
diligence requirements for an industry that has yet to be successfully
established. A discussion of the ANPR comments we received on diligence
can be found in section 3927.50 of this proposed rule.
Minimum Production Requirement--The BLM specifically asked in the
ANPR for suggestions from the public about what the minimum production
requirement should be to assist us in determining lease production
requirements for an industry that has yet to be successfully
established. A discussion of the public comments we received on minimum
production requirements can be found in section 3903.51 of this
proposed rule.
Small Tract Leasing--In the ANPR the BLM requested comments on
whether there should be small tract leasing or leasing small acreages
of land for oil shale development. A discussion of the public comments
we received on small tract leasing can be found in section 3927.20 of
this proposed rule.
We also received several comments unrelated to the five questions
in the ANPR. Those comments are discussed in the respective section
discussions for the rule.
Listening Sessions With Governor's Representatives From Colorado, Utah,
and Wyoming
The BLM, in coordination with the Minerals Management Service
(MMS), held three ``listening sessions'' with representatives of the
governors of the States of Colorado, Utah, and Wyoming. The BLM and the
MMS met with these representatives in Denver, Colorado (December 14,
2006), Salt Lake City, Utah (April 26, 2007), and Cheyenne, Wyoming
(August 8, 2007). The purpose of the listening sessions was to provide
the governors' representatives the opportunity to share their ideas,
issues, and concerns relating to the proposed commercial oil shale
leasing regulations.
Section 369(e) of the EP Act requires the Department of the
Interior to consult with the governors of Colorado, Utah, and Wyoming,
representatives of local governments, interested Indian tribes, and the
public to determine the level of support for conducting oil shale lease
sales. The BLM plans to consult with the affected states prior to
conducting the first oil shale lease sale, and following publication of
the final rule.
Consolidated Appropriations Act of 2008
A provision in section 433 of the Consolidated Appropriations Act
of 2008 (Pub. L. 110-161) prohibits the use of funds for the
preparation or publication of final oil shale regulations, but does not
apply to a proposed rule. Therefore, the BLM is publishing this
proposed rule and will analyze comments received on the proposed rule,
but will not prepare or publish a final rule using fiscal year 2008
funds as provided by this Congressional directive.
III. Discussion of the Proposed Rule
Part 3900--Oil Shale Management--General
This part would contain regulations on the general management of
the oil shale program, including discussions of the descriptions and
acreage in oil shale leases, qualifications requirements, fees,
rentals, royalties, bonds and trust funds, and lease exchanges.
Subpart 3900--Oil Shale Management--Introduction
This subpart would establish competitive oil shale leasing
administrative procedures for implementing a long-term commercial oil
shale leasing program.
The proposed rule would contain specific provisions required by
Section 369 of the EP Act. Many of the sections of the proposed rule
contain regulatory requirements similar to the regulations in the BLM's
existing mineral programs namely, coal, non-energy leasable minerals,
and oil and gas. In creating a regulatory framework for this proposed
oil shale commercial leasing program, the BLM proposes to adopt certain
basic components and processes common to the BLM's leasing programs.
Most of the BLM's leasing programs are governed by the MLA. The
regulations governing those programs and this program would include the
following types of provisions: Pre-lease exploration; leasing
processes; bonding; operations (including plan of development);
reclamation; and inspection and enforcement.
Section 3900.2 would contain the definitions and terms used in
these proposed regulations. Many of the terms and definitions found in
this section would be similar to terms and definitions in the
regulations of other BLM mineral leasing programs. Because most of the
terms and concepts in this section are well-established, this section
of the preamble does not address each of the definitions, but focuses
only on definitions for certain terms that directly affect the reader's
understanding of the regulatory framework of the oil shale leasing
program or that are unique to these regulations.
[[Page 42929]]
The term ``commercial quantities'' means production of shale oil
quantities in accordance with the approved Plan of Development for the
proposed project through the research, development, and demonstration
activities conducted on the lease, based on and at the conclusion of
which a reasonable expectation exists that the expanded operation would
provide a positive return after all costs of production have been met,
including the amortized costs of the capital investment.
The term ``infrastructure'' means all support structures necessary
for the production or development of shale oil. The definition lists
examples of the different types of support structures that the BLM
would consider to be infrastructure. This term is defined in these
proposed regulations because it is critical to the BLM's review of
lease applications. Infrastructure impacts are a key component of the
plan of operations that the BLM will review when undertaking various
analyses such as those required by NEPA. Furthermore, the BLM believes
that a detailed itemization of examples is necessary since installation
of infrastructure is one of the proposed diligent development
milestones.
The term ``oil shale'' means a fine-grained sedimentary rock
containing:
(1) Organic matter which was derived chiefly from aquatic organisms
or waxy spores or pollen grains, which is only slightly soluble in
ordinary petroleum solvents, and of which a large proportion is
distillable into synthetic petroleum; and
(2) Inorganic matter, which may contain other minerals. This term
is applicable to any argillaceous, carbonate, or siliceous sedimentary
rock which, through destructive distillation, will yield synthetic
petroleum.
The BLM defined the term ``production'' to acknowledge the various
technologies associated with operations for extraction of shale oil,
shale gas, or shale oil by-products.
Section 3900.5 would leave a place holder for the information
collection requirements in parts 3900-3930 under 44 U.S.C. 3501 et seq.
The BLM will add the OMB form number once we receive OMB's approval for
information collection in the final regulations. The table in paragraph
(d) of this section lists the subparts in the rule requiring the
information and its title and summarizes the reasons for collecting the
information and how the BLM would use the information.
Section 3900.10 would identify which lands would be subject to
leasing under parts 3900 through 3930. Section 21 of the MLA authorizes
the issuance of oil shale leases (30 U.S.C. 241(a)).
Section 3900.20 would address the right to appeal the BLM decisions
issued under these regulations to the Interior Board of Land Appeals
under 43 CFR part 4. This section would adopt standard appeals language
found in the regulations of other BLM mineral programs.
Section 3900.30 would contain standard language providing that
documents (i.e., applications, statements of qualification, plans of
development and supporting information, etc.) required by these
proposed regulations be filed in the proper BLM office with the
required fees. The term ``proper BLM office'' is defined in the
definitions section of this rule.
Section 3900.40 would address the multiple use mandate of FLPMA, by
providing that the BLM's issuance of an exploration license or lease
for the development or production of oil shale would not preclude the
issuance of other exploration licenses or leases on the same lands for
deposits of other minerals or other resource uses. This provision is
similar to regulatory provisions in the BLM's other leasing programs,
which also promote multiple use of the public lands.
Section 3900.50 would clarify the relationship of land use plans
and NEPA to the BLM's proposed commercial oil shale leasing program.
This section would provide that any lease or exploration license issued
under these regulations would be issued under the decisions, terms, and
conditions of a comprehensive land use plan. The land use planning
process is the key tool used by the BLM to protect resources and
designate uses for BLM-administered lands. Compliance with NEPA and
land use planning is required prior to the BLM's issuing a lease or
exploration license.
Section 3900.61 would address the procedures the BLM would follow
concerning consent and consultation where the surface of public land is
administered by other Federal agencies outside of the Department of the
Interior and procedures for particular situations where the U.S. has
conveyed title to or transferred control of the surface. Paragraphs (a)
and (b) would address those procedures the BLM would follow concerning
consent and consultation where the surface of public lands is
administered by other agencies outside of the Department of the
Interior. Paragraph (c) would provide procedures an applicant may
pursue in challenging a decision issued by a particular agency outside
of the Department of the Interior relating to special stipulations or
refusal of consent. Paragraph (d) would not allow the BLM to issue a
lease or license on National Forest Service lands without the consent
of the Forest Service. Under paragraph (d), the BLM's decision whether
to issue the lease or license is based on a determination as to whether
the interests of the United States would best be served by issuing the
lease or license. The provisions of this section closely mirror BLM
regulations for oil and gas, coal, and non-energy leasable minerals.
Paragraph (e) would provide that the BLM make the final decision as to
whether to issue a lease or license in those cases not involving a
Federal agency, where the United States has conveyed title to any state
or political subdivision or agency, including a college or any other
educational corporation or association, to a charitable or religious
corporation or association, or to a private entity.
Section 3900.62 would address situations where the BLM may require
lease or exploration license stipulations to protect lands and
resources. Stipulations are site specific provisions that the BLM may
add to standard lease or license terms prior to issuance for the
purpose of protecting Federal resource values and mitigating impacts to
other values identified in a NEPA document. Stipulations frequently
restrict operations on the lease or permit by limiting surface
disturbance for the purpose of protecting the environment. This
includes the protection of wildlife, plants, and cultural or other
resources. This provision is similar to those found in the BLM's other
mineral leasing programs.
Subpart 3901--Land Descriptions and Acreage
Section 3901.10 would contain the BLM's requirements for land
descriptions in applications or documents submitted to the BLM. This
section is similar to the regulatory provisions addressing land
descriptions found in other BLM leasing programs and would establish
consistent standards for land descriptions in applications submitted to
the BLM.
Sections 3901.20 and 3901.30 would incorporate the provisions of
Section 369(j)(2) of the EP Act that 50,000 acres would be the maximum
acreage of oil shale leases on public lands that any entity may hold in
any one state and that the oil shale lease acreage would not count
toward acreage limitations associated with oil and gas leases. Another
50,000 acres may be held on acquired lands. Since the provisions in
this section relating to maximum acreage holdings are statutory, the
BLM
[[Page 42930]]
does not have the authority to revise the requirements in this section.
Subpart 3902--Qualification Requirements
Sections under this subpart would detail the various statutory
requirements under Section 27 of the MLA relating to who can hold
Federal oil shale leases and interests. These proposed regulations
would mirror many of the qualification provisions of the BLM's other
mineral leasing regulations, namely oil and gas (43 CFR subpart 3102),
geothermal (43 CFR subpart 3202), coal (43 CFR subpart 3425), and non-
energy leasable minerals (43 CFR subpart 3502).
Section 3902.10 would enumerate the requirements of the MLA
relating to who is authorized to hold leases or interests in leases (30
U.S.C. 181, 352). These requirements have a longstanding statutory and
regulatory history and are found in the regulations for the BLM's
mineral leasing programs.
Sections 3902.21 and 3902.22 would explain the filing procedures
for qualification documents, including when and where to file
documents. Section 3902.21 would also require that all documentation
submitted to the BLM as evidence of qualifications be current,
accurate, and complete.
Sections 3902.23 through 3902.29 would detail the type of
qualifications documentation that the BLM would require from:
(1) Individuals (section 3902.23);
(2) Associations, including partnerships (section 3902.24);
(3) Corporations (section 3902.25);
(4) Guardians or trustees (section 3902.26);
(5) Heirs and devisees (section 3902.27);
(6) Attorneys-in-fact (section 3902.28); and
(7) Other parties in interest (section 3902.29).
The requirements proposed in these sections are similar to the
standard requirements of other BLM regulations to show evidence of
qualifications to hold a lease under the MLA.
Subpart 3903--Fees, Rentals, and Royalties
For payments of required rental and royalties, sections 3903.20 and
3903.30 would address the acceptable forms of payment (section 3903.20)
and where to submit payment for processing or filing fees, rentals,
bonus payments, and royalties (section 3903.30). The acceptable forms
of payment listed in section 3903.20 would mirror the forms of payment
accepted in the BLM's other mineral leasing regulations.
Section 3903.40 would incorporate the requirement of Section 369(j)
of the EP Act that the annual rental rate for an oil shale lease would
be $2.00 per acre. Since the statute sets the rental rate, the BLM has
no discretion to revise it.
Section 3903.51 would address the minimal annual production
requirement that would apply to every lease. It also would discuss
payments in lieu of production beginning with the 10th lease year. The
BLM would determine the payment in lieu of annual production, but in no
case would it be less than $4 per acre. Payments in lieu of production
are not unique to this proposed rule. They are a requirement of other
BLM mineral leasing regulations and the BLM believes they provide an
incentive to maintain production.
Setting the payment in lieu of production at no less than $4 per
acre should be an adequate payment to the Federal government to justify
allowing the lessee to continue holding a lease absent production, but
should not be high enough to cause the lessee to relinquish the lease.
A payment in lieu of production of $4 per acre for the maximum lease
size of 5,760 acres equals a payment of $23,040 per year.
In response to the ANPR, the BLM received comments expressing
various ideas concerning minimum production amounts and requirements.
The comments are summarized as follows:
(1) Minimum production should be 1,000 barrels a day;
(2) Minimum production should be based on the viability of the
operation;
(3) Minimum production levels should be based on resource potential
and production levels identified in the plan of development;
(4) Minimum royalties should be assessed at the end of the primary
term;
(5) Minimum production should be based on a percentage of the
projected resource base; and
(6) There should not be a minimum production requirement.
We agree with several of the commenter's suggestions. The
suggestions to base minimum production on the approved plan of
development and the specifics of the operation were incorporated into
proposed sections 3930.30(c) and 3930.30(d). The suggestions related to
defining the minimum production on a percentage of the resource base
were not incorporated into the proposed rule because of the
difficulties associated with defining the recoverable resource, the
variables associated with the different development technologies, and
the differing kerogen content of the shales. We consider the suggestion
that identified 1,000 barrels a day as the correct minimum production
requirement too inflexible a standard because it does not allow for
differences in shale quality and differences in extraction technology.
Section 3903.52--Royalty Rates on Oil Shale Production
Section 3903.52 would establish a royalty rate for all products
that are sold from or transported off of the lease area. The BLM
recognizes that encouraging oil shale development presents some unique
challenges compared to BLM's traditional role in managing conventional
oil and gas operations. We received a wide range of comments presenting
alternative royalty approaches as part of the ANPR process, and we
address those comments below. However, while we have narrowed the range
of options based on the ANPR comments, we have not yet settled on a
single royalty rate for this proposed rule. Instead, we are presenting
two royalty rate alternatives in the proposed rule (as outlined later
in this section), and requesting public comment on those specific
alternatives. In addition, we are considering a third alternative, a
sliding scale royalty rate (also outlined in this preamble), and we are
seeking public comment on the appropriate parameters for the sliding
scale royalty rate should the BLM choose to adopt this alternative. We
anticipate adopting one of these alternatives, or variations on one of
these alternatives, at the final rule stage.
EP Act (Section 369(o)) directs the agency to establish royalties
and other payments for oil shale leases that ``shall--
(1) Encourage development of the oil shale and tar sands resources;
and
(2) Ensure a fair return to the United States.''
The market demand for oil shale resources based on the price of
competing sources (e.g., crude oil) of similar end products is expected
to provide the primary incentive for future oil shale development.
Additional encouragement for development may be provided through the
royalty terms employed for oil shale relative to conventional oil and
gas royalty terms, but we recognize that such incentives must be
balanced against the objective of providing a fair return to taxpayers
for the sale of these resources. Through the ANPR process, the BLM
initially examined a wide range of royalty options, including:
(1) 12.5 percent royalty rate on the first marketable product;
[[Page 42931]]
(2) 12.5 percent royalty rate on the value of the mined oil shale
rock, as proposed in 1983;
(3) 8 percent royalty rate on products sold for 10 years with
optional increases of 1 percent per year up to a maximum of 12.5
percent, similar to the rates established by the State of Utah in 1980;
(4) Initial 2 percent royalty to encourage production and a 5
percent maximum upon establishment of infrastructure;
(5) Sliding scale royalty rate tied to timeframes up to a maximum
of 12.5 percent;
(6) Sliding scale royalty rate tied to production amounts up to a
maximum of 12.5 percent;
(7) Sliding scale royalty rate with royalty rates tied to the price
of crude oil;
(8) Royalty rate of 1 percent of gross profit before payout and
royalty rate of 25 percent net profit after payout--(Canadian oil sands
model);
(9) Royalty based on cents per ton as proposed in the 1973 oil
shale prototype program; and
(10) Royalty based on British Thermal Unit (Btu) content as
compared to crude oil.
In evaluating an appropriate royalty rate system for oil shale that
would meet the dual EP Act objectives of encouraging development and
ensuring a fair return to the government, the BLM also reviewed other
Federal royalty rates for Federal minerals set by statute and under
existing regulations administered by Department of the Interior
bureaus, and royalty rates applied to oil shale production in other
countries.
The royalty rates for other Federal energy minerals vary.
Specifically, current royalty rates for Federal energy minerals under
Department of the Interior leasing programs include:
(1) Onshore oil and gas (12.5 percent);
(2) Offshore oil and gas (16.67 percent), Gulf of Mexico Region
(18.75 percent);
(3) Underground coal (8 percent);
(4) Surface coal (12.5 percent) and
(5) Geothermal (for new leases: 1.75 percent for the first 10 years
and 3.5 percent thereafter. For leases issued prior to the EP Act, 10
percent on net proceeds after deductions).
Many of these programs allow for royalty rate relief under certain
circumstances.
The BLM also looked at royalty applications for oil shale and
similar unconventional fuels in other countries, including:
(1) For oil sands, Canada applies a royalty rate of 1 percent of
the gross revenue before payout (before companies have recouped
investment costs) with a 25 percent net profit royalty rate applied
after payout;
(2) Australia has a 10 percent gross royalty on the value of the
shale oil produced;
(3) Brazil applies a 3 percent gross royalty rate;
(4) Estonia does not have a royalty; and
(5) No information on a royalty rate for shale oil produced in
China was available.
It should be noted that Canada produces oil from oil sands, not oil
shale. The oil in the sands is the same as crude oil, but dispersed in
sand. Extraction and processing is more expensive than for conventional
crude oil production, but less expensive than is anticipated for oil
shale. Canadian operators have never reached the payout point due to
the continued capital expenditures in new equipment, so to date, Canada
has received a 1 percent royalty on oil sands production.
Australian operations are using the Alberta Taciuk Process, which
is the same type of technology currently used by the Oil Shale
Exploration Company (OSEC) in Utah. Despite their 10 percent royalty
rate, the Australian oil shale project (the Stuart Project) was heavily
subsidized by the Australian government through other means (tax
incentives). Even the government subsidies could not sustain oil shale
operations in Australia. The last three operators went into bankruptcy
after brief operations. Suncor, the founder of the Stuart Project and a
successful developer of the Canadian tar sands, exited the Australian
oil shale business after losing approximately one hundred million
dollars.\1\ For its Utah demonstration project, OSEC is also expected
to test the Petrosix horizontal retort process, which is currently
being used by Petrobras, Brazil, for oil shale operations.
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\1\ Environmental News Service, July 22, 2005, http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.ens-newswire.com.
---------------------------------------------------------------------------
Australia and Brazil are the only other known countries that are
producing or have produced oil shale using the same technologies as in
the U.S. Oil shale developmental efforts in China and Estonia are owned
by their respective governments. Because no other country has yet
achieved successful commercial oil shale operations and because of the
wide variety of oversight and revenue structures employed in each
country, the BLM's review of these systems did not identify a useful
model for a royalty system to be used for oil shale development on
Federal lands in the U.S.
In the ANPR, the BLM solicited public input on the royalty rate and
point of royalty determination. The BLM's purpose for requesting
comments was to solicit ideas on these royalty issues for a resource
that has little or no history of commercial development.
There were approximately thirty-one entities that provided comments
through the ANPR process that were specific to royalty rate and royalty
point of determination. The comments suggested royalty rates that
ranged from a royalty rate of zero to a royalty rate of 12.5 percent.
Of the royalty-related comments, three suggested that the royalty be
set at 12.5 percent, the same rate as in BLM's oil and gas program,
while some comments described a 12.5 percent royalty rate as
unreasonable. It is contemplated that the primary products produced
from oil shale will compete directly with those from onshore oil and
gas production, which has a 12.5 percent royalty rate. However, the BLM
recognizes that the nature of potential oil shale operations differs
from that of conventional oil and gas operations and that these
differences may suggest the need for a royalty system other than the
traditional flat rate of 12.5 percent used for conventional onshore oil
and gas operations.
In determining the royalty rate for oil shale, it should be noted
that there is a significant difference between oil shale mineral
deposits and a conventional crude oil reservoir. As discussed in the
Background section of this preamble, oil shale is a marlstone that
contains no oil, but kerogen, that needs to be refined and converted to
synthetic crude oil.
Currently, proposed processes to extract kerogen from an oil shale
deposit are also considerably different, as well as labor and capital
intensive. Oil shale is a solid rock that must be mined or treated in
place to release the kerogen. Two of these processes are discussed in
the Background section of this preamble.
Seven of the comments recommended that a ``very low royalty rate''
be established until after companies have recouped the costs of their
investments (debt service and capital investment). Many among the seven
recommended that a 1 percent royalty rate be the starting point, and
they used the Canadian oil sands royalty scheme as an example. As
discussed above, the BLM looked at royalty applications for oil shale
and similar unconventional fuels in other countries. The Canadian tar
sand model presents two challenges. First, because of the continual
infusion of capital to acquire new equipment the payout point is never
being reached.
[[Page 42932]]
Secondly, because of the complexity of determining when payout may
occur, such a royalty scheme is subject to easy manipulation and higher
administrative costs. Therefore, the BLM considered the investment
payout scheme as inconsistent with the premise of ``a fair return'' to
the taxpayers as mandated in EP Act.
Three of the ANPR comments recommended that ``royalties must be
high enough'' to support local communities and infrastructure; however,
these comments did not provide specific royalty rates. Oil shale
royalties are not designated for community and infrastructure support,
but by statute are required to be split between the Federal Treasury
and the states (30 U.S.C. 191). Presumably states could choose to
direct a portion of the royalty revenues they receive to local
community and infrastructure support, but that would be a state choice,
and for the purposes of this rulemaking, these comments were not
considered because they assume a use of royalty revenues not available
under current law.
Three comments suggested that royalties should not be charged on
hydrocarbons unavoidably lost or used on the lease for the benefit of
the lease, but did not directly address the royalty rate issue.
One comment suggested the royalty be ``based on the material as it
exists naturally in the land, and as it is removed from the land.''
This comment seems to suggest that royalty should be based on mined raw
shale. While the BLM acknowledges the inherent differences between an
oil shale deposit and other deposits from which similar products can be
produced, this suggestion was not considered because there is no known
value for raw oil shale since there is no oil shale industry or an
established market for raw oil shale. However, it should be noted that
in 1983 the BLM proposed a rule to establish a royalty rate equivalent
to 12.5 percent of the value of oil shale after mining or resource
extraction and before processing, as determined by the BLM. The 1983
proposed rule was published on February 11, 1983 (48 FR 6510). The 1983
proposed rule provided that ``the derivation methodology for this value
shall be announced prior to the solicitation of bids.'' The proposed
rule further stated that ``the royalty rate shall, to the extent
practicable, not be levied on any value added by the production process
after the point of resource extraction.'' It would be unreasonable to
adopt such a proposal today, due to the changes in extraction
methodology (in situ versus ex situ). It would also be challenging to
develop a fair and transparent process to calculate the royalty
equivalent in today's economic environment, and no values were assigned
to the mined or unprocessed rock and tonnage in the 1983 proposed rule.
As noted, the 1983 proposed rule deferred the determination of those
parameters to a later date.
In addition to ANPR comments received on royalty rates, the BLM
looked at an initial 2 percent royalty to encourage production and a
maximum 5 percent rate upon establishment of infrastructure. This
method recognizes the high costs involved in producing shale oil.
However, we dismissed this approach because of the difficulty involved
in determining when necessary infrastructure is in place.
The BLM also considered the 8 percent royalty rate established by
the State of Utah for state oil shale leases. It was determined that
this rate represents the historic base royalty rate for solid fuel
minerals on the State of Utah School and Institutional Trust Lands
Administration lands--including asphaltic sands, uranium, and coal. To
date, none of the state leases in Utah have been developed. Based on
these facts, the BLM determined that there is not currently a
sufficient basis for simply adopting the State of Utah's royalty rate
for oil shale on Federal lands.
After examining the basis for setting rates, as suggested in the
ANPR comments, the BLM determined that a flat 12.5 percent royalty rate
for all future production may not allow oil shale to become competitive
with traditional oil and gas development and therefore could be viewed
as inconsistent with the requirements of EP Act. The BLM has decided to
consider other alternatives in this proposed rule that may provide some
additional incentive beyond that of a flat 12.5 percent royalty rate
while also meeting the EP Act objective of providing a fair return to
taxpayers.
Royalty Rate Alternatives Proposed for Further Consideration
As noted previously, we are not proposing a single royalty system
in the proposed rule. Based on the information the BLM has reviewed to
date and considering the unique challenge of trying to set a royalty
rate on oil shale production in light of the many uncertainties
regarding the economics and technology of a potential future oil shale
industry, we are instead presenting two different royalty rate
alternatives in the proposed rule text:
1. A flat 5 percent royalty rate; and
2. A 5 percent royalty rate on a specific volume of initial
production beginning within a prescribed timeframe, with a 12.5 percent
rate applied thereafter.
In addition, we are seeking comment on the appropriate parameters
for a third option: A two-three tiered sliding scale royalty based on
the market price of competing products (e.g., crude oil and natural
gas). A further explanation of each of these proposals is presented
below. We are requesting the public to comment on these specific
options.
Option 1. Flat 5 Percent Royalty
Although mitigated somewhat by the much greater geographic
concentration of oil shale resources, there is a significant difference
between the energy value of oil shale and crude oil. On a per-pound
basis, very high quality oil shale rock generates 4,300 Btu, coal
generates an average of 10,600 Btu, while crude oil generates 19,000
Btu. Even wood has more heating capacity than oil shale rock,
generating an average of 6,500 Btu. Applying the relative Btu value of
oil shale to crude oil would result in a 2.6 percent royalty for oil
shale. Using the same comparison to the royalty rate for underground
coal would result in a 3.2 percent royalty rate for oil shale. In other
words, it would require almost 5 times as much oil shale to produce the
Btu value of crude oil and more than 2 times as much oil shale to
produce the equivalent Btu value of coal.
The BLM looked at royalty rates on leases issued under Interior's
1973 Prototype Leasing Program. The prototype leases provided for
royalties of $.12 per ton for oil shale with a quality of 30 gallons of
oil per ton (30 g/t) with the addition of $.01 for every increase in
gallon per ton of oil shale. In 1973, the average price of a barrel of
oil was $3.89. At $.24 per ton of 42 g/t or one barrel/ton of oil
shale, the royalty per barrel of oil would have been 5 percent. This
rate is similar to the rate derived by comparing production costs to
royalty rates as recommended by these proposed regulations.
The BLM also estimated what royalty rates for shale oil might be,
based on comparisons of production costs for similar products. The cost
of removing oil from shale rock is currently estimated to be two to
three times higher than the current cost of producing conventional
crude oil from onshore operations. The current estimated production
cost for shale oil ranges from about $37.75-$65.21 a barrel. The
production cost for conventional onshore crude is
[[Page 42933]]
approximately $19.50 a barrel.\2\ The table below compares the
estimated cost of shale oil production for different technologies with
the estimated cost of current onshore U.S. conventional oil production.
The table also estimates what royalty rates for oil shale production
might be, for the different production methods, compared to a 12.5
percent royalty rate for conventional oil production, if the higher
anticipated production costs for oil shale are taken into account.
---------------------------------------------------------------------------
\2\ Energy Information Administration, Crude Oil Production,
dated July 3, 2008. http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.eia.doe.gov/neic/infosheets/crudeproduction.html and http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.eia.doe.gov/emeu/perfpro/tab_12.htm. The production cost at the time of analysis was
approximately $18 per barrel.
----------------------------------------------------------------------------------------------------------------
Royalty calculation based on Adjusted
Estimated shale difference in production cost of a royalty for
Technology oil production barrel of conventional oil versus shale oil
costs per barrel shale oil (percent)
----------------------------------------------------------------------------------------------------------------
Surface mining............................ $44.24 $19.50/$44.24 = 44.07% x 12.5% = 5.5
5.51%.
Underground mining........................ 54.00 $19.50/$54 = 36.11% x 12.5% = 4.5
4.51%.
Fracturing and heating in place........... 65.21 $19.50/$65.21 = 29.90% x 12.5% = 3.75
3.74%.
Heating only in place..................... 37.75 $19.50/$37.75 = 51.65% x 12.5% = 6.5
6.46%.
----------------------------------------------------------------------------------------------------------------
Adjusting royalty rates based on higher anticipated production cost
for oil from oil shale is not a new concept and is similar to the
situation in the coal program where underground coal operations compete
with surface coal operations, which have lower production costs.
Congress addressed this disparity in production costs by allowing for
different royalty rates for coal mined underground versus coal mined at
the surface.
Please specifically comment on whether or not the anticipated costs
of producing oil shale should be considered in establishing the royalty
rate for all oil shale products and whether the BLM has chosen
appropriate reference points for this production cost comparison.
Therefore, one alternative that considers the decreased energy
content and increased production costs, while encouraging production
and ensuring an appropriate return to the government is to set a flat
royalty rate of 5%. This alternative assumes that oil shale will
continue to be more expensive to produce for many years when compared
to new conventional oil.
Option 2. A 5 Percent Royalty on Initial Production, With 12.5 Percent
Thereafter
This alternative would provide a reduced royalty rate of 5% as a
temporary incentive for early production of oil shale (similar to
royalty incentives offered to spur initial Outer Continental Shelf
(OCS) deepwater production), but with the standard 12.5% onshore oil
and gas royalty rate applying to all oil shale production after a set
timeframe and a set amount of production has taken place. Like the
other royalty options, this option would require oil shale lessees to
pay royalties on the amount or value of all products of oil shale that
are sold from or transported off of the lease. This section would
explain that the standard royalty rate for the products of oil shale is
12.5 percent of the amount or value of production. However, under this
option, for leases that begin production of oil shale within 12 years
of the issuance of the first oil shale commercial lease, the royalty
rate would be 5 percent of the amount or value of production on the
first 30 million barrels of oil equivalent produced.
The advantage of this alternative over a flat 5% royalty (Option 1)
is that it provides a better return to taxpayers on later production if
oil prices remain high and oil shale production becomes competitive
with new conventional oil projects. At $60/barrel, this would amount to
roughly $1.8 billion in production allowed per lease at the lower 5%
royalty rate, providing roughly a $135 million in savings per lease
compared to using the standard onshore oil and gas royalty rate of
12.5%.
One potential downside to this alternative is that offering royalty
incentives without regard to oil prices increases the likelihood that,
if oil prices remain high, the government will sacrifice revenue
without affecting actual oil shale development. For example, at $120/
barrel, the savings would be worth $270 million, even though oil shale
operations would be more profitable than at oil prices of $60/barrel.
Therefore, we are also requesting comment on whether, if this
proposal were adopted in the final rule, the temporary 5% royalty on
initial production should also be conditioned on crude oil and natural
gas prices (similar to OCS deepwater royalty incentives) and if so,
what oil and gas price level would trigger payment at the higher 12.5%
rate if prices exceeded the threshold. We would also like comments on
the 12 year timeframe for reduced royalty.
Option 3. Sliding Scale Royalty Based on the Market Price of Oil
Two comments suggested a sliding scale royalty format. One comment
specifically suggested a sliding scale royalty scheme based on a
royalty schedule that varies with the price of conventional crude, as
follows:
At $10 per barrel of conventional crude, the royalty rate should be
zero;
At $15 per barrel, royalty should be 0.25 percent and should
increase by 0.25 percent for every $5 per barrel increase up to $35 per
barrel;
At $40 per barrel, the royalty rate should be 2 percent and should
increase by 0.5 percent for every $5 per barrel increase in the price
of conventional crude oil until the price of conventional crude reaches
$100 per barrel; and
At $100 per barrel, royalty rate should be 8 percent and should
remain at 8 percent at prices above $100 per barrel.
Another comment suggested two approaches to calculating royalty.
The first part of the comment suggested that a simple way to accomplish
royalty rates would be to index the value of barrels of oil equivalent
to some percentage of NYMEX futures (say, 30 day average front month)
prices. The commenter suggested that the index should be some fraction
of the price, such as 50 to 65 percent. In the second part of the
comment, the commenter suggested that, as an alternative to indexing,
the BLM use a sliding royalty rate that is calculated on the difference
between product price and the highest-cost production in the industry.
The commenter cautioned that ``there need to be provisions that
deferred portions of the royalty do not reduce mineral lease payments
to the States, if an escalating royalty rate is used.''
[[Page 42934]]
The BLM, in consultation with the MMS, evaluated these variable
royalty options, but decided that as presented, they would be highly
complex, and therefore, cumbersome to administer. With price volatility
in the crude oil market, an intricate sliding scale royalty scheme
could make enforcing compliance very difficult for the MMS. In
addition, there is uncertainty about the types of products that would
be derived from oil shale refining. Royalties based on oil shale
quality would also be difficult for the BLM to administer when
attempting to verify production quantities. For instance, if oil shale
is extracted in an underground heating system, it would be extremely
difficult for the BLM to determine how much oil or other product came
from a particular volume or area of in-place oil shale.
While the BLM and MMS are concerned about the complexity of
administering some of the proposed sliding scale royalty proposals, we
recognize that there is some merit to the sliding scale concept, and in
a simpler form, a sliding scale royalty may prove useful in meeting the
dual goals of encouraging production and ensuring a fair return to
taxpayers from future oil shale development.
One of the concerns that has been expressed regarding oil shale
development is that potential oil shale developers may be reluctant to
make the large upfront investments required for commercial operations
if they believe there is a chance that crude oil prices might drop in
the future below the point at which oil shale production would be
profitable (i.e., competitive with new conventional oil production). A
sliding scale royalty system could allow the government to at least
partially mitigate this development risk by providing for a lower
royalty rate if crude oil prices fall below a certain price threshold.
The basic concept is that in return for the government accepting a
greater share of the price risk that an operator faces when prices are
low (in the form of a lower royalty), the government would receive a
greater share of the rewards (through a higher royalty) when prices are
high.
The BLM has not decided on the specific parameters of a sliding
scale royalty system, but is considering a simplified, two- or three-
tiered system based on the current royalty rates already in effect for
conventional fuel minerals and with a 5 percent royalty rate (Option 1)
representing the first tier. The applicable royalty rate would be
determined based on market prices of competing products (e.g., crude
oil and natural gas) over a certain time period. If prices remain below
a certain point during the applicable period, the royalty rate on oil
shale products would be 5 percent for that period. If prices are above
that range for the period, a higher royalty would be charged. In a
three-tiered system, a third royalty rate would apply if prices rise
above a second price threshold during the applicable period.
The BLM seeks comment on the specific parameters that could be
applied to a sliding scale royalty system, should the BLM choose to
adopt such a system in the final rule. More specifically, the BLM would
like feedback on the following questions:
1. Should a sliding scale system include two or three tiers?
Assuming a 5 percent royalty for the first tier, what would be
appropriate royalty rates for the second and/or third tiers?
2. What are appropriate price thresholds to apply to each tier?
Should the thresholds be fixed (in real dollar terms), or should they
float relative to a published index?
3. Should the sliding scale apply to all products, or should
nonfuel products pay a traditional flat rate?
4. Are there other ways to simplify a sliding scale royalty to
reduce the administrative costs for BLM, MMS, and producers?
Under a sliding scale system, if prices fall below the lower range,
producers would have a ``safety net'' in the form of the lower 5%
royalty rate. Whether or not the lower royalty kicks in at some point,
simply having it in place provides some added certainty for investors
that would help encourage oil shale production. In return for this
``safety net'' that conventional oil and gas producers do not enjoy,
oil shale producers would be required to pay a higher royalty rate(s)
when crude oil and/or natural gas prices are high (and where oil shale
is expected to be substantially more profitable).
There are a couple of advantages of this alternative. It reduces
the risk for oil shale operators that oil prices might fall below the
point that continued oil shale production would be economic. However,
it also ensures an improved return to the government if prices remain
within one of the higher expected ranges at which oil shale may be
profitable. One disadvantage is that taxpayers accept a greater risk of
lower returns if prices fall and remain well below the lowest
threshold. However, with the lowest royalty rate step set at 5 percent,
this risk is no greater than under a flat 5 percent royalty system
(Option 1).
Other Royalty Issues
The BLM also received 5 comments specific to the royalty point of
determination. Two of the comments suggested that royalty should be
determined ``at the point at which the oil product exits a process
facility in a marketable state.'' One comment suggested that ``the
point of royalty determination be at the earliest point of liquid or
gaseous product marketability.'' Another comment suggested that ``the
oil produced should be measured at the point at which the oil product
exits a processing facility in a marketable state.'' The last comment
did not provide a specific suggestion; rather, it stated that the BLM
``must set the royalty rate and point of royalty determination with
reference to the economic cost of emissions that would be created from
developing, and then burning, the oil shale resource.'' After a careful
evaluation of these comments and consultation with the MMS, under the
proposed rule the royalty would be assessed on all products of oil
shale that are sold from or transported off of the lease. This proposed
point of royalty determination is similar to points of royalty
determination for other Interior Department minerals programs.
The BLM received three ANPR comments relating to the oil shale
research, development, and demonstration (R, D and D) program. One
comment encouraged the BLM to ``continue the existing BLM R, D and D
leasing program for access to oil shale for companies wishing to test
unproven technologies.'' Another comment suggested that the BLM
``should let several `boutique' small companies with large R, D and D
budgets to develop a small number of sites,'' on the condition that
those companies ``would have to agree to allow their findings to be
shared.'' The last comment specifically requested that the ``commercial
leasing regulations make clear that the BLM will not hold a commercial
lease sale for Federal oil shale resources until successful
technologies have been developed and demonstrated on R, D and D
leases.'' These proposed regulations do not address the first comment.
The Secretary has discretion under the EP Act to offer additional
tracts for R, D and D leasing. These regulations do not decide whether
additional R, D and D leasing is necessary. Although the BLM could
require that proprietary information be made public as a condition of
further R, D and D leasing, we believe that the industry would not be
interested in leasing under such conditions.
[[Page 42935]]
Furthermore, as previously explained, these regulations do not
address any new R, D and D leases. The BLM could not incorporate the
third comment, because it suggested a limitation that is inconsistent
with the terms of the EP Act. Sections 369(c) and 369(e) of the EP Act
authorize the commercial leasing of oil shale following promulgation of
regulations and consultation with interested parties without the
limitations sought by the comment.
Finally, it is important to note that the proposed rule allows the
Federal Government to readjust royalty rates on leases after the first
20-year term.
Currently, there is no oil shale industry and the oil shale
extractive technology is still in its rudimentary stages; as such,
commercial oil shale production does not exist anywhere in the world.
As research and development of oil shale technology progresses, the BLM
will have adequate time to reexamine and readjust royalty rates for oil
shale production, either up or down. Please specifically comment on the
time necessary to develop an oil shale industry.
The BLM is proposing alternatives for the royalty rate and the
products on which the royalties will be collected. The BLM anticipates
selecting one of these alternatives, or based on public comment and
further analysis, variations on these alternatives in the final rule in
order to provide predictability for the industry and ease of
administration both for the United States and for payers. However, the
Department is not proposing corresponding MMS valuation regulations at
this time. Because the oil shale industry is still in the research and
development phase, it would be speculative to predict whether the
industry as it matures would predominantly sell from its leases mined
solid oil shale, shale oil, synthetic petroleum, shale gas, natural
gas, or products in several different forms or stages of processing. It
is also difficult to predict whether or when multi-buyer/multi-seller
markets would develop that would provide FMV pricing for products of
oil shale. Therefore, the MMS will promulgate royalty valuation
regulations before oil shale leases are required to begin paying
production royalties under this rule.
To the extent possible, the MMS will ensure that any oil shale
valuation regulation is consistent with other valuation regulations and
will incorporate principles of simplicity, early certainty, and reduced
administrative costs in the oil shale valuation regulations it
promulgates. For example, the MMS could promulgate regulations similar
to the current Federal oil valuation regulation to value crude oil
produced from oil shale. Under this regulation, the value of oil sold
at arm's-length would be based on gross proceeds less allowable costs
of transporting oil to the point of sale. The value of oil not sold at
arm's-length would be based on a market index price or the affiliate's
arm's-length resale price. In both arm's-length and non-arm's-length
situations, the regulations provide for adjustments for location,
quality, and transportation allowances. Further, lessees also can
petition for alternate valuation agreements that are situation specific
when regulatory provisions do not apply.
Royalties would not be payable on potentially valuable minerals or
inorganic matter that are not sold or transported off the lease for
commercial purposes. Those materials would be considered waste, and
would be subject to management and reclamation requirements as provided
in the lease or in an approved plan of development.
The Department seeks comments on what future royalty valuation
regulations need to contain. In particular, the Department is seeking
comments on the potential types of oil shale products, the most
equitable and practical point and method to determine the value on
which to apply the royalty rate, and whether there are or should be
opportunities to determine value by market proxy or indices. The
Department also seeks comments on alternative approaches to valuation
and royalty rates.
In the economic analysis for this rule, the BLM analyzed the
royalty implications of a range of royalty rates. Specifically, the BLM
conducted a simulation-based analysis to estimate the revenue, profit,
and royalty implication of a production scenario \3\ using three
discount rates (7 percent, 3 percent, and 20 percent), three world
crude oil price projections (EIA's 2007 reference, high, and low price
projections \4\), and six different royalty rates (1 percent, 3
percent, 5 percent, 7 percent, 9 percent, and 12.5 percent). The
likelihood of a company, in the face of numerous technological
challenges, having the incentive to develop Federal oil shale reserves
and experiencing economic success will depend on a number of factors.
However, because the simulated scenario analysis is based on a given
production scenario and set production costs, the analysis did not
assist in determining the project(s) economic viability due to the
royalty rate applied. The analysis did, however, clearly identify world
oil price as a critical variable determining a project's economic
viability. Under EIA's 2007 low oil price projection all operations are
assumed to be uneconomic based on the set production costs used in the
analysis of the rule.
---------------------------------------------------------------------------
\3\ America's Strategic Unconventional Fuels Resources, Volume
III Resource and Technology Profiles, Task Force on Strategic
Unconventional Fuels, September 2007, page III-17, Table III-4.
Potential Oil Shale Development Schedule--Base Case, (http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.unconventionalfuels.org).
\4\ Department of Energy, Energy Information Administration,
Annual Energy Outlook 2007, Report : DOE/EIA-0383(2007),
February 2007.
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Section 3903.53 would require the filing of documentation of all
overriding royalties associated with a lease and would require that the
filing must occur within 90 days of the date of execution of the
assignment. This section is similar to that of the BLM's other mineral
leasing programs.
Section 3903.54 would contain the requirements for filing an
application for waiver, suspension, or reduction of rental or payment
in lieu of production, or a reduction in royalty, or waiver of royalty
in the first 5 years of the lease. As with the BLM's other mineral
leasing programs, this section is intended to encourage the maximum
ultimate recovery of the mineral(s) under lease. This section is
similar to the BLM's coal leasing regulations and similarly includes a
case-by-case processing fee under 43 CFR 3000.11.
Section 3903.60 would provide that late payments or underpayment
charges would be assessed under MMS regulations at 30 CFR 218.202.
Subpart 3904--Bonds and Trust Funds
Sections in this subpart would address the requirements associated
with bonding and trust funds, including the:
(1) Types of bonds the BLM requires and when bonds would be
required (section 3904.10);
(2) When and where bonds would be filed (sections 3904.11 and
3904.12);
(3) Acceptable types collateral for personal bonds (section
3904.13);
(4) Individual lease, exploration license, and reclamation bonds
(section 3904.14);
(5) Amount of bond coverage (section 3904.15);
(6) Default (section 3904.20); and
(7) Long-term water treatment trust funds (section 3904.40).
Since all of the BLM's mineral leasing programs require bonds, the
requirements in subpart 3904 would be similar to the regulatory
provisions in the BLM's other mineral leasing programs. The bonding
requirements in this rule are consistent with the bonding
[[Page 42936]]
requirements under the BLM's mining law program. Both programs require
that bonds cover the full cost of reclamation. Both programs also allow
for the use of long-term trust funds as a mechanism to address
potential long-term water issues.
Bonding ensures performance at a cost up to the bond amount in the
event of default by a lessee or licensee. Sections of this subpart
would establish that the BLM would require two types of bonds; a lease
or exploration license bond and a reclamation bond. This subpart would
also explain that reclamation bonds would be required to be in an
amount sufficient to cover the entire cost of reclamation of the
disturbed areas as if they were to be performed by a contracted third
party.
Section 3904.10 would provide that prior to lease or an exploration
license issuance, the BLM would require a lease or exploration license
bond for each lease or exploration license to cover all liabilities on
a lease, except reclamation, and all liabilities on a license. The bond
would be required to cover all record title owners, operating rights
owners, operators, and any person who conducts operations on or is
responsible for making payments under a lease or license. This section
would also require the lessee or operator to file a reclamation bond to
cover all costs the BLM estimates would be necessary to cover
reclamation on a lease. This is similar to the requirement found in
other BLM mineral regulations.
Section 3904.11 would require the lessee or operator to file a
lease bond prior to issuance of a lease, file a reclamation bond prior
to approval of a plan of development, and file an exploration bond
prior to exploration license issuance. This section is similar to other
BLM bonding regulations as it would require the filing of a bond before
liabilities may accrue.
Section 3904.12 would require that a copy of the bond with original
signatures be filed in the proper BLM office and section 3904.13 would
describe the different types of bonds that the BLM would accept. These
sections are similar to the bonding regulations in other BLM mineral
leasing programs.
Section 3904.13 would address the types of personal and surety
bonds the BLM would accept. Personal bonds would be limited to pledges
of cash, cashier's check, certified check, or U.S. Treasury bond. The
BLM state offices would list qualified sureties for bonds.
Section 3904.14 would provide that the BLM will establish bond
amounts on a case-by-case basis. These regulations would set the
minimum lease bond amount at $25,000. Although the minimum lease bond
amount is greater than that required in other BLM mineral leasing
programs, the BLM believes that it is justified because the potential
liability may be greater and there are still some unknowns. Reclamation
and exploration bond amounts would be established to cover the costs of
reclamation as if it were to be performed by a contracted third party.
Past oil shale operations have required extensive reclamation, and
this has demonstrated the need to have a reclamation bond that covers
the full cost of reclamation. By requiring that the bond equal the
estimated costs of having a third party perform the reclamation, the
BLM anticipates that the cost of reclamation would be covered.
This section would provide that the BLM may enter into agreements
with states to accept a state-approved reclamation bond to satisfy the
BLM's reclamation requirements and protect the BLM to the extent the
bond is adequate to cover all the operator's liabilities on Federal,
state, and private lands. This would avoid duplicate procedures and the
inconvenience and cost of filing separate bonds with both the state and
the BLM. Such agreements were recommended by state representatives at
the BLM listening sessions and are also addressed in regulatory
provisions of other BLM mineral leasing programs.
Section 3904.15 would explain that under this proposed rule the BLM
may increase or decrease the bond amount if it determines that a change
in coverage is warranted to cover the costs and obligations of
complying with the requirements of the lease or license and these
proposed regulations. This section would also explain that the BLM
would not decrease the bond amount below the minimum established in
section 3904.14(a). This section would require the lessee or operator
to submit a revised cost estimate of the reclamation costs to the BLM
every three years after reclamation bond approval. If the current bond
would not cover the revised estimate of the reclamation costs, the
lessee or operator would be required to increase the reclamation bond
amount to meet or exceed the revised cost estimate. This section is
consistent with the bonding regulations that currently exist for other
BLM minerals programs.
Section 3904.20 would describe what actions the BLM would take in
the event of a default payment from a lease, exploration, or
reclamation bond to cover nonpayment of any obligations that were not
met. It also would require the bond to be restored to the pre-default
level. This section is similar to sections in the other BLM mineral
regulations regarding default.
Section 3904.21 would allow the termination of the period of
liability of a bond. The BLM will not consent to the termination of the
period of liability under a bond unless an acceptable replacement bond
has been filed or until all of the terms and conditions of the license
or lease have been fulfilled. Termination of the period of liability of
a bond would end the period during which obligations continue to
accrue, but would not relieve the surety of the responsibility for
obligations that accrued during the period of liability.
Section 3904.40 would establish trust funds or other funding
mechanisms to ensure the continuation of long-term treatment to achieve
water quality standards and for other long-term, post-mining
maintenance requirements. Experience in other mineral programs has
shown the need for a mechanism to ensure the long-term treatment of
water. This provision is similar to regulations in the BLM's mining law
program under 43 CFR 3809.552 and is designed to address similar long-
term water protection issues. In determining whether a trust fund will
be required, the BLM will consider the following factors:
(1) The anticipated post-mining obligations (PMO) that are
identified in the environmental document and/or approved plan of
development;
(2) Whether there is a reasonable degree of certainty that the
treatment will be required based on accepted scientific evidence and/or
models;
(3) The determination that the financial responsibility for those
obligations rests with the operator; and
(4) Whether it is feasible, practical, or desirable to require
separate or expanded reclamation bonds for those anticipated long-term
PMOs.
The determination that a trust fund is needed and the amount needed
in the fund may be made during review of the proposed plan of
development or later as a result of further inspections or reviews of
the operations.
Subpart 3905--Lease Exchanges
This subpart would allow the BLM to approve oil shale lease
exchanges.
Section 3905.10 would explain that the BLM would approve a lease
exchange if it would facilitate the recovery of oil shale and it would
consolidate mineral interests into manageable areas. It also states
that oil shale lease exchanges would be governed by the regulations
under 43 CFR part 2200. Section 206 of FLPMA
[[Page 42937]]
authorizes land exchanges of interests in Federal lands for non-Federal
lands (43 U.S.C. 1716).
Part 3910--Oil Shale Exploration Licenses
The regulations proposed under this part would address exploration
licenses. An exploration license would allow a licensee to enter the
Federal land covered by an exploration license and explore for
minerals, but it would not authorize the licensee to extract any
minerals, except for experimental or demonstration purposes. Since
regulatory provisions for the issuance and approval of exploration
licenses are common to the BLM mineral leasing programs, this part
would contain similar regulatory provisions, particularly with respect
to:
(1) Lands that are subject to exploration (section 3910.21);
(2) Lands managed by agencies other than the BLM (section 3910.22);
(3) Requirements for conducting exploration activities (section
3910.23);
(4) Application procedures (section 3910.31);
(5) Environmental analysis (section 3910.32);
(6) License requirements (section 3910.40);
(7) Issuance, modification, relinquishment, termination, and
cancellation (section 3910.41);
(8) Limitations on exploration licenses (section 3910.42);
(9) Collection and submission of data (section 3910.44); and
(10) Surface use (section 3910.50).
Section 3910.21 would authorize the issuance of oil shale
exploration licenses on all Federal lands subject to leasing under
section 3900.10, except lands within an existing oil shale lease or in
preference right lease areas under the R, D and D program. This type of
limitation on which lands the BLM may issue an exploration license is
consistent with that of other BLM minerals exploration regulations.
Section 3910.22 would make it clear that the consent and
consultation procedures under section 3900.61 that apply to leases also
apply to exploration licenses. The BLM would issue these licenses under
the terms and conditions prescribed by the surface managing agency
concerning the use and protection of the nonmineral interests in those
lands. Section 3910.22 is similar to regulations for BLM's other
mineral leasing regulations requiring consent and consultation for
exploration licenses.
Section 3910.23 would require the operator to have a lease or
license before conducting any exploration activities on Federal lands.
This section would also allow that under an exploration license small
amounts of material may be removed for testing purposes only; however,
any material removed cannot be sold. This is similar to regulations in
other BLM mineral programs that recognize that some removal of material
is necessary for testing purposes.
Section 3910.31 would identify specific requirements for filing an
application for an exploration license. Application requirements under
this section would include:
(1) Submission of a nonrefundable filing fee;
(2) Description of lands covered by the application;
(3) An exploration plan;
(4) Compliance with maximum acreage limitations for an exploration
license; and
(5) Submission of information to prepare a notice of invitation for
other parties to participate in exploration.
Mirroring the coal regulations, this section would establish an
acreage limit of 25,000 acres as the maximum size allowable for an
exploration license. As is the case for other BLM leasing programs
which provide for exploration licenses, there would be no required
application form. The $295 filing fee for an exploration license is
based on the current filing fee for a coal exploration license. The BLM
anticipates that the time required to process an oil shale exploration
license would be similar to that for a coal exploration license, and
therefore believes the same filing fee is justified.
Section 3910.32 would require the BLM to perform the appropriate
NEPA analysis before issuing an exploration license. The section also
explains that the BLM would include in an exploration license terms and
conditions to mitigate impacts to the environment analyzed in a NEPA
document and to protect Federal resource values of the area and to
ensure reclamation of the lands disturbed by exploration activities.
Section 3910.40 would provide that a licensee must comply with all
applicable Federal laws and regulations and the terms and conditions of
the license and approved exploration plan as well as applicable state
and local laws not otherwise preempted by Federal laws, such as FLPMA.
Section 3910.41 would explain provisions relating to the
administration of the exploration license, including the license term,
the effective date of an exploration license, conditions for approval,
and provisions relating to the modification, relinquishment, and
cancellation of an exploration license. Like exploration licenses for
other BLM mineral leasing programs, the term of an exploration license
would be 2 years. The requirements proposed here for oil shale
exploration licenses are similar to existing requirements in
regulations relating to exploration licenses in other BLM minerals
programs, particularly coal.
Section 3910.42 would provide that issuance of an exploration
license would not preclude the issuance of a Federal oil shale lease
for the same area. This section would also make it clear that if an oil
shale lease is issued for an area covered by an exploration license,
the BLM would cancel the exploration license effective the date of
lease issuance.
Section 3910.44 would address collection and submission of data
relating to an exploration license and would include provisions
relating to confidentiality of data. This section is similar to
provisions in other BLM minerals programs.
Section 3910.50 would address the issue of surface damage resulting
from exploration operations and would require that exploration
activities not unreasonably interfere with or endanger any other lawful
activity on the same lands or damage any surface improvements on the
lands. This is similar to other BLM minerals regulations that address
surface use.
Part 3920--Oil Shale Leasing
The foundation for the proposed oil shale leasing program would be
a competitive leasing process similar to the BLM's coal leasing
program. Prior to making areas available for consideration for leasing
through a competitive lease sale, the BLM is proposing a 2-step process
that would begin with a call for expressions of leasing interest
(section 3921.30), to be followed by a call for applications (section
3921.60) if the BLM determines that there is interest in a competitive
lease sale. In addition to contributing to the orderly development of
the resource, this process would facilitate compliance with NEPA by
focusing the analysis on areas in which there is active interest in
obtaining a lease.
Subpart 3921--Pre-Sale Activities
The sections under this subpart would contain regulatory provisions
relating to pre-leasing activities. Many of the sections would be
similar to existing provisions of other BLM mineral leasing programs,
particularly coal.
Section 3921.10 would explain that a BLM State Director may
announce in the Federal Register a call for
[[Page 42938]]
expressions of interest for those areas identified in the land use plan
as available for oil shale leasing.
Section 3921.20 clarifies that the appropriate NEPA analysis must
be prepared for the proposed leasing area under the Council on
Environmental Quality's regulations at 40 CFR parts 1500 through 1508
and Department of the Interior methods and procedures developed
pursuant to NEPA.
Section 3921.30 would provide that the notice announcing calls for
expressions of leasing interest would be published in the Federal
Register and in at least 1 newspaper of general circulation in the
affected state. The notice would allow a minimum of 30 days to submit
expressions of leasing interest, including a legal land description and
other specified information.
Section 3921.40 would require that the BLM notify the appropriate
state governor's office, local governments, and interested Indian
tribes of their opportunity, after the BLM receives responses to the
call for expression of leasing interest, to provide comments regarding
the responses and other issues related to oil shale leasing. The BLM
included this requirement in the proposed rule in response to
discussion at the three listening sessions with the governors'
representatives.
Section 3921.50 would explain that after analyzing expressions of
leasing interest, the BLM would determine a geographic area for
receiving applications to lease. This section would also explain that
the BLM may add lands to those areas identified by the public in the
expressions of leasing interest.
Under proposed section 3921.60, the BLM's call for applications
would be published in the Federal Register and would identify the
geographic area available for application under proposed subpart 3922.
Under this section, the public would have at least 90 days to submit
applications for lease.
Subpart 3922--Application Processing
The sections under this subpart would contain regulatory provisions
relating to application requirements, including:
(1) A nonrefundable case-by-case processing fee (section 3922.10);
(2) Content of application (section 3922.20);
(3) Additional information (section 3922.30); and
(4) Tract delineation (section 3922.40).
These provisions are similar to existing regulations of other BLM
mineral leasing programs.
Section 3922.10 would require an applicant nominating a tract for
competitive leasing to pay a cost recovery or processing fee that the
BLM will determine on a case-by-case basis as described in 43 CFR
3000.11 and as modified by provisions of section 3922.10. The section
would provide that the applicant who nominates a tract will pay to the
BLM the processing costs that the BLM incurs up to the publication of
the competitive lease sale notice. That fee amount would be included in
the sale notice. If the applicant is the successful bidder, the
applicant would then also pay all processing costs the BLM incurs after
the date of the sale notice. Payment of all cost recovery fees is
required prior to lease issuance.
If the successful bidder is someone other than the original
applicant, the successful bidder would be required to submit an
application under section 3922.20 within 30 days after the lease sale
and would be responsible for paying to the BLM the fee amount included
in the sale notice. In such circumstances, the BLM will refund the fees
the original applicant paid to the BLM. The successful bidder would
also be responsible for any processing costs the BLM incurs after the
date of the sale notice. If there is no successful bidder, the
applicant would be responsible for processing costs, and there would be
no refund.
With respect to costs incurred relating to the NEPA analysis to
support a competitive lease sale, the BLM processing fees noted in the
sale notice would include, if applicable, the BLM's costs associated
with preparation of the NEPA analysis, which may include BLM costs
incurred in contracting with a third party to perform the NEPA
analysis. In cases where there are several applications that have been
filed for the same area, it is likely that the BLM would prepare a
single NEPA analysis, which would address issues related to
environmental impacts identified in all applications that were filed in
response to the call for applications.
In the case where the successful bidder for a tract is not the
original applicant, the successful bidder would be responsible for
paying the fee noted in the sale notice and any additional BLM
processing costs, including any additional NEPA analysis.
For example, in the case where a successful high bidder is not the
original applicant and the technology that the successful bidder
proposes to use was not previously analyzed in the NEPA analysis, the
successful bidder would be responsible for paying for the cost of that
NEPA analysis and any additional NEPA analysis that would be necessary.
It should be noted that an applicant would not be reimbursed for
moneys the applicant (and not the BLM) may pay directly to third
persons to perform studies, including any required analyses under NEPA.
Under section 3922.10, the BLM is proposing adopting case-by-case
processing fees for applications that would mirror case-by-case fee
requirements applicable to the leasing of coal and non-energy leasable
minerals offered through competitive lease sales. The BLM's minerals
material sales regulations also contain case-by-case processing fees.
Case-by-case fees would allow the BLM to recoup its processing costs by
charging an applicant the reasonable costs the BLM incurs in processing
a particular application. Cost recovery is authorized under the
Independent Offices Appropriation Act of 1952, as amended, 31 U.S.C.
9701, which states that Federal agencies should be ``self-sustaining to
the extent possible'' and authorizes agency heads to ``prescribe
regulations establishing the charge for a service or thing of value
provided by the agency.'' The BLM also has specific authority to charge
fees for processing applications and other documents relating to public
lands, including Environmental Impact Statements (EISs), under Section
304(b) of FLPMA (43 U.S.C. 1734(b)). Cost recovery policies are
explained in Office of Management and Budget Circular A-25 (Revised),
entitled ``User Charges.'' The general Federal policy stated in
Circular A-25 (Revised) is that a charge will be assessed against each
identifiable recipient for special benefits derived from Federal
activities beyond those received by the general public.
Additionally, this section states that the BLM will not issue a
lease offered by competitive sale without having first received an
application from the successful bidder under section 3922.20. Under
section 3922.10(b)(5) a successful bidder at a competitive lease sale
who was not an applicant must file an application within 30 calendar
days after the lease sale.
Section 3922.20 would identify specific information that an
applicant would be required to include in a lease application to enable
the BLM to have sufficient information to prepare the appropriate NEPA
analysis to evaluate the impacts of proposed leasing. The amount of
information requested as part of an oil shale lease application differs
from other mineral leasing programs because the methodology for
recovering oil shale is not as standardized as it is for more
conventional fuels. The NEPA
[[Page 42939]]
compliance documents at this stage in the leasing process are necessary
because the PEIS addresses land use planning decisions and not leasing
decisions and was unable to anticipate with any certainty the effects
of oil shale leasing development due to the newness of the industry.
The possible oil shale development technologies are very different
from conventional mining methods associated with other BLM minerals
programs, as are the impacts associated with each. The technologies are
yet to be proven, or commercially viable and their associated impacts
are unknown. Because the BLM is presently uncertain of the mining
methods (and associated impacts) that may be used for oil shale
development, additional NEPA analysis will be performed during the
application and leasing process. When required by applicable law, the
BLM will conduct site-specific NEPA analysis, including a period of
public review, to evaluate the impacts on known resource values on the
lands in any application. Although no specific form is required,
information the applicant would be required to provide includes, but is
not limited to:
(1) Proposed extraction method (including personnel requirements,
production levels, and transportation methods) and estimate of the
maximum surface area to be disturbed at any one time;
(2) Sources and quantities of water to be used and treatment and
disposal methods necessary to meet applicable water quality standards;
(3) Air emissions;
(4) Anticipated noise levels from proposed development;
(5) How proposed lease development would comply with all applicable
statutes and regulations governing management of chemicals and disposal
of waste;
(6) Reasonably foreseeable social, economic, and infrastructure
impacts of the proposed development on the surrounding communities and
on state and local governments;
(7) Mitigation of impacts on species and habitats; and
(8) Proposed reclamation methods.
Section 3922.30 would provide that the BLM could request additional
information from the applicant, and explain that failure to provide the
best available and most accurate information might result in suspension
or termination of processing of the application or in a decision to
reject the application. The BLM's ability to obtain additional
information at this stage is essential to the NEPA analysis to support
leasing. Failure to provide the needed information would have a direct
impact on the adequacy of the NEPA analysis and therefore could greatly
impact the BLM's decision to proceed with a lease sale.
Section 3922.40 would make it clear that the purpose of tract
delineation for a competitive lease sale is to provide for the orderly
development of the oil shale resource. This section would also clarify
that in addition to adding or deleting lands from an area covered by an
application, where lands covered by applications overlap, the BLM may
delineate those lands that overlap as separate tracts. The BLM may
delineate tracts in any area acceptable for further consideration for
leasing, regardless of whether it received expressions of interest or
applications for those areas. The need to delineate tracts for adequate
development of the mineral resource is recognized in all the BLM
mineral leasing programs, and provisions similar to this are contained
in the other BLM mineral leasing regulations.
Subpart 3923--Minimum Bid
Section 3923.10 would implement the policy of the United States
under Section 102(a) of FLPMA (43 U.S.C. 1701(a)(9)) that the Federal
government should receive a FMV for leasing its minerals. Also, Section
369(o) of the EP Act which requires that payments for leases under that
section must ensure a fair return to the United States. Under section
3924.10 of the proposed rule, the BLM sales panel would determine if
the high bid reflects the FMV of the tract, which we equate to fair
return. We anticipate that the sales panel will analyze the bids and
make a determination, taking into account, among other things, the
geology, market conditions, mining methods, and industry economics.
The BLM recognizes the difficulty in determining a value for a
resource (oil shale) that has tremendous potential, but has not yet
been proven to be economic to develop. The risk of setting pre-sale
FMVs that are too high and would discourage development of a commercial
leasing program is very real. The BLM is also aware that the oil shale
industry is presently in the research and development stage and
comparable lease sales might be rare or unavailable when leasing first
occurs under these regulations, but this will not always be the case.
Competitive lease sales of Federal oil shale leases in the 1970s
resulted in bids of $10,000 per acre, or higher, indicating that even
though development risks are high, the potential reward is also high.
Both the economic and the technological circumstances have changed
since the 1970s, but the vast quantities of oil shale within the
Federal acreage weigh in favor of high minimum bid amounts. For
comparison purposes, the coal program has a minimum bid amount of $100
per acre and the oil and gas program has a minimum bid amount of $2 per
acre. This section would set a minimum bid of $1,000 per acre, but the
BLM invites comments supporting reasonable alternative minimum bid
amounts.
Subpart 3924--Lease Sale Procedures
Provisions of this subpart would identify the process by which
tracts of land would be made available for competitive lease sale. The
BLM proposes to lease oil shale through a competitive bidding leasing
procedure that would mirror competitive lease sales procedures
currently in place for other solid minerals leasing programs,
particularly coal.
Section 3924.5 would detail the contents of the sale notice that
the BLM would publish in the Federal Register and newspapers of general
circulation in the area of the proposed lease. The purpose of the
notice is to alert the public that the BLM will be holding an oil shale
lease sale and to provide enough of the details about the proposed
lease terms and conditions, lease area, and leasing limitations for the
public to make an informed decision whether to participate in the lease
sale. This section would be similar to other BLM mineral leasing
regulations that require notification of the lease sale and is a
necessary part of the oil shale leasing program.
Section 3924.10 would detail competitive lease sale procedures,
including receipt and opening of sealed bids, submission of the one-
fifth of the amount of the bonus bid, requirements for future
submission of remaining installments of the bonus bid, and post-sale
procedures for determining the successful bidder. This section would
also address the actions of the sale panel in determining whether or
not to accept the high bid, including a FMV determination. This section
is similar to the BLM's competitive leasing regulations for coal and
non-energy leasable minerals. The BLM is proposing to adopt this
process because it has been successful in these other mineral leasing
programs and because we believe this process is appropriate for oil
shale leasing.
The BLM will rely on the appraisal process to estimate the fair
market value (FMV) for commercial oil shale leases under the proposed
regulations. An appraisal is an unbiased estimate of the value of
property. The appraisal process
[[Page 42940]]
is a systematic approach to property valuation. It consists of defining
data requirements, assembling the best available data, and applying an
appropriate appraisal method. The principles of property valuation are
presented in the Uniform Appraisal Standards for Federal Land
Acquisitions and in The Appraisal of Real Estate. The term ``fair
market value'' is defined in the Uniform Appraisal Standards for
Federal Land Acquisitions as the amount in cash, or on terms reasonably
equivalent to cash, for which in all probability the property would be
sold by a knowledgeable owner willing, but not obligated, to sell to a
knowledgeable purchaser who desired, but is not obligated, to buy.
In ascertaining that figure, consideration should be given to all
matters that might be brought forward and substantial weight given in
bargaining by persons of ordinary prudence. Factors that will affect
the market value of an oil shale lease include the lease terms which
encompass rental and royalty obligations. The bonus bid for the lease
must be equal or greater than the lease FMV.
There are three methodologies generally used in appraising real
property: the comparable sales approach, income approach, and
replacement cost approach. Normally, the replacement cost approach is
not applied to appraisals involving property such as mineral leases.
In the comparable sales approach, the value of a property is
estimated from prior sales of comparable properties. The basis for
estimation is that the market would impute value to the subject
property in the same manner that it determines value of comparable
competitive properties. When reliable comparable sales data are
available, it generally is assumed that the comparable sales approach
will provide the best indication of value.
In the income approach, the value assigned to the property is
derived from the present worth of future net income benefits. If
sufficiently similar sales are not available, the FMV determination
will generally rely on the income approach.
The FMV determination follows a pre-existing valuation standard,
which utilizes the circumstances of place, time, the existence of
comparable precedents, and the evaluation principles of each involved
party. In determining the FMV under this rule, our determination would
be based on comparison with identical or similar past, actual, or
expected services and goods relating to oil shale. It is the policy of
the United States, stated in Section 102(a) of FLPMA (43 U.S.C.
1701(a)(9)) and Section 369(o)(2) of the EP Act, that the United States
receive FMV for the issuance of Federal mineral leases.
In the ANPR, the BLM solicited public input on the process for bid
adequacy evaluation and minimum acceptable lease bonus bid. The BLM's
purpose for requesting comments on the FMV it should receive for lease
tracts was to solicit ideas on how FMV would be determined for a
resource that has little or no history of comparable sales.
The public comments received were primarily concerned with the need
to receive an appropriate value for the lease. The BLM received
comments from 6 entities related to this question, specifically
mentioning that: a FMV determination needs to reflect private sector
valuations; competitive bidding should establish a lease's FMV; the
process for establishing FMV should be modeled after the Federal coal
leasing program; bonus payments are needed to stop speculation; and
sealed bidding ensures the most competitive bonus bid. The comments
also posed arguments for and against using a minimum acceptable bonus
bid. In addition, the BLM received comments that bonus bids should be
high and suggested that the 1974 bonus bid amounts pertaining to 4 oil
shale leases that were offered in Colorado and Utah, with bonus bids
that ranged from $74 million to $210 million, were indicative of
expected bonus bid amounts.
In response to the ANPR comments and other considerations, the BLM
proposes to establish oil shale lease FMV using a process similar to
that used in the Federal coal leasing program. This proposed process
relies on the appraisal process in an attempt to estimate the market
value for those leases. As such, the proposed process relies on many of
the procedures used in private sector valuations, and where available,
will rely on private sector transactions to establish the market value
for Federal oil shale leases. The Federal coal leasing program and this
proposed rule, utilize competitive bidding, specifically sealed
bidding, for determining who receives the lease.
In the rule, the BLM is proposing to establish a minimum acceptable
bonus bid for Federal oil shale leases. The amount is not a reflection
of FMV, but is intended to establish a floor value to limit or dissuade
nuisance bids. The proposed rule requires a minimum acceptable bonus
bid of $1,000 per acre. The assumption is that such an amount will not
exceed FMV or be a deterrent to companies interested in bidding for the
lease tracts. At the same time, the BLM has requested further comments
on the value proposed.
As per comments on specific values, the proposed rule does not
attempt to establish actual FMV for future Federal oil shale leases.
Values received in the 1970's may not be an accurate indicator for
future values.
Subpart 3925--Award of Lease
Section 3925.10 would provide that the lease would ordinarily be
awarded to the qualified bidder submitting the highest bid which
exceeds the minimum bid amount. It also contains requirements for the
submission of the necessary lease bond, the first year's rental, any
unpaid cost recovery fees, including costs associated with the NEPA
analysis, and the bidder's proportionate share of the cost of
publication of the sale notice. The provisions in this section are
similar to regulations in the BLM's competitive leasing regulations for
coal and non-energy leasable minerals.
Subpart 3926--Conversion of Preference Right for Research,
Demonstration, and Development Leases
Section 3926.10 would provide application procedures or
requirements to convert R, D and D leases and preference rights
acreages to commercial leases. Under this section, a lessee of any of
the R, D and D lease would be required to apply for conversion to a
commercial lease no later than 90 days after the BLM determines that
commencement of production in commercial quantities had occurred. As
stated in Section 23 of the R, D and D leases (issued in response to
the BLM's call for nominations of parcels for R, D and D leasing (70 FR
33753 and 33754, June 9, 2005) R, D and D lessees can acquire
contiguous acreage of the remaining preference right lease area up to a
total of 5,120 acres. In order to acquire the contiguous acreage and
convert to a commercial lease, the lessee would be required to
demonstrate to the BLM that the technology tested in the original lease
would have the ability to produce shale oil in commercial quantities.
In addition, the lessee, as required in R, D and D leases, would be
required to submit to the BLM:
(1) Documentation that there have been commercial quantities of oil
shale produced from the lease, including the narrative required by
Section 23 of R, D and D leases;
(2) Documentation that the lessee consulted with state and local
officials to develop a plan for mitigating the socioeconomic impacts of
commercial
[[Page 42941]]
development on communities and infrastructure;
(3) A bid payment no less than that specified in section 3923.10
and equal to the FMV of the lease; and
(4) Bonding as required by section 3904.14.
The BLM would approve the conversion application, in whole or in
part, if it determined that:
(1) There have been commercial quantities produced from the lease;
(2) The bid payment for the lease met or exceeded FMV;
(3) The lessee consulted with state and local officials to develop
a plan for mitigating the socioeconomic impacts of commercial
development on communities and infrastructure;
(4) The bond provided is consistent with section 3904.14; and
(5) Commercial scale operations can be conducted, subject to
mitigation measures to be specified in stipulations or regulations,
without unacceptable environmental consequences.
Subpart 3927--Lease Terms
Sections in this subpart would address lease form, lease size,
lease duration, dating of leases, diligent development, and production.
Section 3927.10 would provide that the BLM would issue oil shale
leases on a standard form approved by the BLM Director. This section
mirrors similar requirements in other BLM mineral leasing regulations.
Section 3927.20 would set the maximum oil shale lease size at 5,760
acres, which is the maximum size authorized under Section 369(j) of the
EP Act. Several comments received in response to the BLM's ANPR
included lease size recommendations varying from 500 acres to 10 square
miles as the appropriate maximum lease size. Of those comments, one
commenter supported a maximum lease size of 5,760 acres, which is
consistent with the EP Act. One commenter stated that ``Leases need to
be large enough to encourage development yet not outlandishly large to
allow for speculation.'' The maximum lease size contained in this
section is not discretionary since it was established by statute (see
Section 369(j) of the EP Act).
Although the EP Act does not establish a minimum lease size, in
keeping with the size restrictions of the oil shale R, D and D leases,
section 3927.20 would also establish 160 acres as the minimum size of
an oil shale lease. The BLM received several comments relating to
whether the BLM's commercial oil shale leasing regulations should
include provisions for small tract leasing, all of which generally were
in favor of making small lease tracts available. One comment suggested
that smaller tracts would be particularly appropriate in the early
years of the commercial leasing program in light of new technologies,
and it recommended a minimum tract size of 1,280 acres. Recommendations
relating to a minimum tract size stated in other comments ranged from
over 320 acres to one square mile. Two comments suggested that there
should be restrictions for small tract leasing. Of those comments, one
commenter stated that small tract leasing should not be a mechanism to
thwart potential development. Another commenter recommended that small
tracts should only be allowed in cases where ``the tracts have been
orphaned, in between larger leases, basin edge or other fee-owned
lands.'' Although section 3927.20 would not formally establish small
tract leasing, the 160-acre minimum lease size set by this section
would provide a lessee the opportunity to develop a relatively small-
scale leasehold, identical to the lease size authorized under the BLM's
oil shale R, D and D program. Thus, rather than the BLM incorporating
small tract leasing as a separate component of the commercial oil shale
leasing program, establishing a minimum lease size of 160 acres
provides an opportunity for a lessee to utilize a preferred technology
on a relatively small tract that is consistent with the size of
existing R, D and D leases. For this reason, the BLM did not adopt ANPR
comments that recommended a larger minimum lease size. With respect to
the comment expressing concern that small tract leasing could thwart
potential development and the comment recommending that small tract
leasing should be allowed only in limited situations as stated above,
it is the policy of the BLM, when delineating tracts to be offered
through competitive lease sale, to make efforts to ensure that the
configuration of any small acreage tracts would likely promote
development of oil shale. The BLM believes that configuration of tracts
in this manner would not impede development on any existing oil shale
leases located in the vicinity of smaller tracts. As is the case in
other BLM mineral leasing programs, the tract delineation process for a
competitive lease sale includes the gathering of detailed information
on tracts and conducting various analyses. Because the steps
customarily included in the tract delineation process are designed to
promote or encourage development of mineral resources, the BLM
maintains that establishing a minimum lease size of 160 acres will not
thwart potential development of oil shale resources. Likewise, the
competitive leasing process and the required minimum bonus bids would
discourage speculation.
One comment endorsing small tract leasing also recommended that a
small tract lease should include a preference right for additional
adjoining acreage. The BLM is not adopting this recommendation since it
maintains that the concept of a preference right for the future leasing
of additional acreage--a key component of the R, D and D leasing
program--is not a necessary provision in a commercial leasing program
in light of lease modification provisions under proposed subpart 3932.
In the event that a lessee of a small tract has interest in obtaining
additional acreage adjacent to its lease, under the proposed rule the
lessee could apply for a lease modification to include Federal lands
adjacent to the lease, but not to exceed the maximum lease size (see
section 3932.10).
Two comments received in response to the ANPR contained
recommendations relating to consolidation of leases into larger
development units. One of the comments suggested that oil shale
commercial leasing regulations should include a provision to allow for
consolidation of multiple contiguous leases for individual leaseholders
as long as there remains one operator. The BLM interprets these
comments as a recommendation to establish a mechanism similar to a
logical mining unit that exists in BLM's coal leasing program. As
defined in the coal leasing regulations at 43 CFR 3480(a)(19),
``Logical mining unit (LMU) means an area of land in which the
recoverable coal reserves can be developed in an efficient, economical,
and orderly manner as a unit with due regard to conservation of
recoverable coal reserves and other resources.'' Due to the fact that
the commercial oil shale leasing regulations proposed here today are
aimed at establishing a new mineral leasing program; a program that
does not have any history of oil shale development in the U.S., does
not require any standardized extraction methods, and also adopts
different diligence requirements than those of the coal leasing
program, it is the BLM's position that establishing a mechanism similar
to a LMU is not warranted at this time. After the promulgation of final
regulations and after the oil shale industry is more well-established,
if the BLM determines that the creation of a mechanism similar to an
LMU is
[[Page 42942]]
warranted, then the BLM would pursue rulemaking to adopt this
recommendation. Please specifically comment on whether or not the final
rule should include provisions for the establishment of LMUs for oil
shale leases.
Section 3927.30 would provide that an oil shale lease will be for a
period of 20 years and so long thereafter as the condition of annual
minimum production is met. Section 21 of the MLA (30 U.S.C. 241(a)(3))
authorizes issuance of oil shale leases for ``indeterminate periods.''
The BLM chose a 20-year period for the original lease term for ease of
administration because Section 21 of the MLA (30 U.S.C. 241(a)(4))
specifies that leases should be subject to readjustment at the end of
each 20-year period. Lease readjustment is common to other BLM mineral
leasing programs, including coal and certain non-energy leasable
minerals.
Section 3927.40 would identify the effective date of the lease and
the process used to determine the effective date of the lease. This
section is similar to regulations on the effective dating of leases
under the BLM's coal program.
Diligent development is a component of other mineral leasing
programs such as coal and oil and gas and is required under Section
369(f) of the EP Act.
Section 3927.50 would require lessees to meet diligent development
milestones and annual minimum production requirements. The BLM
considers continued minimum annual production a necessary part of
diligent development of the lease. This requires that a company
continue to produce the minimum annual requirement or make payments in
lieu of production in order to hold the lease.
Part 3930--Management of Oil Shale Exploration Licenses and Leases
Sections in this part would address the requirements for
exploration and leases, including general performance standards,
operations, diligent development milestones, plans of development and
exploration plans, lease modifications and readjustments, assignments
and subleases, relinquishments, cancellations and terminations, post-
mining and development hazards, production and sale records, and
inspection and enforcement.
Sections 3930.10 through 3930.13 would explain the performance
standards for exploration, development, production, and the preparation
and the handling of oil shale under Federal leases and licenses.
Additional standards may be required at the time of lease issuance and
as operations proceed. The BLM used the coal program as basis of many
of the performance standards for these sections because of the
similarity of the mining and exploration methods and the possible
impacts associated with those methods. The performance standards for in
situ operations were derived from aspects of the standards used for
exploration and standards applicable to the BLM's oil and gas program.
Section 3930.20 would establish the various standard operating
requirements associated with development of an oil shale lease,
including requirements concerning the maximum economic recovery (MER)
of the resource, how to report new geologic information, and compliance
with Federal laws. The section would also address disposal and
treatment of solid wastes. This section provides operational
requirements that are common to other BLM mineral leasing programs.
The BLM received 6 comments regarding diligent development in
response to the ANPR. The comments received primarily expressed the
view that diligent development requirements are necessary to prevent
speculation, but that they should not be so onerous as to prevent
investment in oil shale development. Most of the comments concerning
the diligence provisions were related to either plan of development
requirements or production requirements and requiring payment of a
minimum royalty in lieu of production. The comments received suggested:
(1) Making diligence a requirement of operations;
(2) Not starting the diligence requirement until after the needed
infrastructure is in place;
(3) Requiring submittal of a plan of development;
(4) Staging the permitting process to essentially define diligence
as accomplishing necessary sequential steps in the development process;
(5) Escalating minimum royalty;
(6) Requiring minimum production levels; and
(7) Requiring production of a percentage of the resource base.
The BLM incorporated the following commenter's suggestions into the
proposed rule:
(1) Diligent development and staged development requirements
(section 3930.30 (a));
(2) Requirements for a plan of development (section 3930.30(a)(1));
and
(3) Requirements for minimum production (section 3930.30(d)).
The BLM's proposed diligent development requirements are based on
fulfilling tasks necessary to reach production, such as applying for
permits, submitting plans of development, and installing needed
infrastructure within specified timeframes. Comments related to basing
diligence on production of a percentage of the reserve base were
considered, but rejected based on the difficulty of administering such
a scheme with varying technologies, recovery rates, and shale
characteristics. The comment regarding infrastructure was incorporated
into the proposed rule as a diligence development step towards
production.
Section 3930.30 would list the milestones for diligent development
of an oil shale lease. The requirement for establishing milestones is
in Section 369(f) of the EP Act. The BLM considered many options when
determining how to establish milestones that would ensure diligent
development of the lease. The BLM considered requiring production based
on a percentage of the resource similar to coal and requirements for
minimum dollar expenditures per year similar to the BLM's geothermal
program. Because the oil shale mining technology that is being tested
is new, and there is little experience to rely on, it would be
difficult to base milestones on production or monetary expenditures.
Ultimately, the BLM determined that the milestones should be the series
of steps necessary for the development of the oil shale. Defining
milestones this way is logical because the steps are necessary to begin
production and the BLM believes the requirement would encourage
development. This section would require a lessee to meet the following
five diligent development milestones:
(1) Within 2 years of lease issuance, submit to the BLM a proposed
plan of development which would meet the requirements of subpart 3931;
(2) Within 3 years of lease issuance, submit a final plan of
development;
(3) Within 2 years after the BLM approves the plan of development,
apply for all required permits and licenses;
(4) Before the end of the 7th lease year, begin infrastructure
installation, as described by the BLM approved plan of development; and
(5) Begin production by the end of the 10th lease year.
Each of the milestones in this section would be an opportunity for
the lessee or operator to fulfill the statutory requirements and would
provide
[[Page 42943]]
evidence of its commitment to diligent development of the resource.
The requirement to maintain production under an approved plan of
development is also in this section. Although it is not a milestone,
the BLM would require yearly production as part of the diligent
development of the lease. This section also would allow payments in
lieu of production to meet the requirement of yearly production.
Minimum annual production is required starting the 10th year of the
lease. Payment in lieu of production in year 10 of the lease satisfies
the milestone requiring production by the end of the 10th year of the
lease.
Section 3930.40 would identify the penalties for not achieving the
required milestones. The BLM views these penalties as incentives for
maintaining development of the resource and prevent speculation. Under
this proposed rule, the BLM would assess a penalty of $50 per acre for
each missed diligence milestone for each year until the operator or
lessee complies with the diligence milestone. The BLM believes that
this penalty process would provide operators incentive for diligent
development of the resource, and also that the dollar amount of the
penalties is high enough to be a deterrent to speculation.
Subpart 3931--Plans of Development and Exploration Plans
Sections in this subpart would provide requirements for submission
of a plan of development (section 3931.10), required contents of a plan
of development (section 3931.11), reclamation of all disturbed areas
(section 3931.20), suspending operations and production on a lease
(section 3931.30), exploration on a lease prior to plan of development
approval (section 3931.40), information to be included in the
exploration plan (section 3931.41), modification of exploration or
development plans (section 3931.50), maps of underground and surface
mining workings and in situ surface operations (3931.60), production
reporting (section 3931.70), geologic information (section 3931.80),
and boundary pillars (section 3931.100).
Section 3931.10 would require submission of a plan of development
that details all aspects of development of the resource and protection
of the environment, including reclamation. It would also identify the
need for a similar plan for exploration activities. The plan of
development is a key document that would detail the specifics of all
activities associated with developing or exploring the lease.
Section 3931.11 would list and describe the contents of a plan of
development. Some of the contents include a general description of
geologic conditions and mineral resources, maps or aerial photography,
proposed methods of operation and development, public protection, well
completion reports, quantity and quality of the oil shale resources,
environmental aspects, reclamation plan, and the method of abandonment
of operations. The information in the plan of development is necessary
so that the BLM can review the plan and ensure that operations,
production, and reclamation will occur consistent with Federal law and
regulation and to ensure the protection of the resource and the
environment.
Section 3931.20 would describe the requirements for reclamation of
all disturbed areas under a lease or exploration license. This section
is similar to requirements in other BLM mineral program regulations
requiring prompt reclamation of disturbed areas.
Section 3931.30 would detail the requirements for suspending
operations and production on a lease. Under this section, if the BLM
determined it was in the interest of conservation, it may order or
agree to a suspension of operations and production. If the BLM approved
the suspension, the lessee or operator would be relieved of the
obligation to pay rental, to meet upcoming diligent development
milestones, or to meet minimum annual production, including payments in
lieu of production. The term of the lease would be extended by the
amount of time the lease is suspended. The need to suspend operations
is well established and similar provisions are found in other BLM
mineral leasing regulations.
Section 3931.40 would provide the requirements necessary for the
BLM to authorize exploration on an exploration license or on a lease
prior to plan of development approval. Often, exploration is necessary
after lease issuance to acquire the geologic information necessary to
prepare a plan of development.
Section 3931.41 would list the information required for an
exploration plan. The information required is similar to that required
in other BLM mineral regulations and is necessary to adequately
evaluate the proposed exploration activities and the measures to
protect or limit environmental impacts in accordance with applicable
laws.
Section 3931.50 would explain how the operator or lessee may apply
for a modification of exploration or development plans to address
changing conditions and situations that might develop during the course
of normal exploration activities or to correct an oversight. This
section would also explain that the BLM may, on its own initiative,
require modification of a plan. Finally, this section would explain
that the BLM may approve a partial exploration plan or plan of
development in circumstances where operations are dependent on factors
that would not be known until exploration or development progresses.
These modification provisions are similar to those in other BLM
minerals programs.
Section 3931.60 would contain information relating to the format
and certification of required maps of underground and surface mining
workings and in situ surface operations. These maps are necessary for
the BLM to properly assess the potential impacts associated with
exploration and mining.
Section 3931.70 would explain the requirements for production
reporting, the associated maps and surveys for mining operations, and
maps showing the measurement systems for in situ operations. This
section would require accurate maps and production reports and would
explain the requirements for production reporting. These are necessary
requirements for the Federal government to track lease production
accurately.
Section 3931.80 would address requirements for handling geologic
information resulting from exploration activities. Additional
requirements related to abandonment operations, well conversions, and
blow-out prevention equipment would also be addressed in this section.
This section contains requirements similar to those in the BLM's oil
and gas operations regulations.
Section 3931.100 would detail the standards for boundary pillars
and provisions to protect adjacent lands. This section would allow for
the recovery of the pillars if the operator provided evidence to the
BLM that the recovery activities would not damage the Federal resource
or those of the adjacent lands. These provisions are similar to those
in the BLM's coal program.
Subpart 3932--Lease Modifications and Readjustments
Sections in this subpart would provide requirements for lease size
modification, (section 3932.10), availability of lands for a lease
modification (section 3932.20), terms and conditions of a modified
lease (section 3932.30), and the readjustment of lease terms (section
3932.40).
Section 3932.10 would provide the requirements for lease size
[[Page 42944]]
modifications and is similar to sections in the other BLM mineral
program regulations. This section would explain that the lands in the
modified lease must not exceed the acreage limitation in section
3927.20. The section also would explain what items are necessary for a
complete application, including the filing fee and qualifications
statements.
Section 3932.20 would provide the land availability criteria for
lease modifications. The language in this section is similar to
language used in other BLM mineral program regulations and is necessary
to facilitate effective development of the resource. This section would
explain the conditions under which the BLM would grant a lease
modification, and that the BLM may approve the modification (adding
lands to the lease) if there is no competitive interest in the lands.
This section would explain that before the BLM will approve a
modification application, the applicant must pay the FMV for the
interest to be conveyed. This section would also make it clear that the
BLM will not approve a lease modification prior to conducting the
appropriate NEPA analysis and receipt of the processing costs.
Section 3932.30 would provide that the terms and conditions of any
modified lease will be adjusted so that they are consistent with law,
regulations, and land use plans applicable at the time the lands are
added by the modification. Under this proposed section, the royalty
rate of the modified lease would be the same as that in the original
lease. Bonding and lessee acceptance requirements would also be
addressed in this section. This section is similar to those in other
BLM minerals program regulations.
Section 3932.40 would provide that all oil shale leases are subject
to readjustment of lease terms, conditions, and stipulations, except
royalty rates, at the end of the first 20-year period (the primary term
of the lease) and at the end of each 10-year period thereafter. Royalty
rates would be subject to readjustment at the end of the primary term
and every 20 years thereafter. The procedures for the readjustment of
the lease would be detailed in this section. Under this section, the
BLM would provide the lessee with written notification of the
readjustment. This section would also allow lessees to appeal the
readjustment of lease terms.
Subpart 3933--Assignments and Subleases
Sections in this subpart would address various requirements related
to assignments or subleases of record title (section 3933.31) and
overriding royalty interests (section 3933.32). This subpart would also
address requirements for:
(1) Assigning or subleasing leases in whole or part (section
3933.10);
(2) Filing fees (section 3933.20);
(3) Lease account status and assumption of liability (section
3933.40);
(4) Bonding (sections 3933.51);
(5) Continuing responsibility (section 3933.52);
(6) Effective date (section 3933.60); and
(7) Extensions (section 3933.70).
The sections in this subpart would be similar to the regulatory
requirements of BLM's other mineral leasing programs.
Section 3933.10 would provide that all leases may be assigned or
subleased in whole or in part to any person, association, or
corporation as long as the qualification requirements are met. Section
30 of the MLA requires an assignee to obtain BLM approval for an
assignment.
Section 3933.20 would require payment of a $60 non-refundable
filing fee for processing an assignment, sublease of record title, or
overriding royalty. The filing fee would be the same fee required by
the coal regulations for filing an assignment. The BLM anticipates that
lease assignment, sublease of record title, or overriding royalty
activities associated with an oil shale lease would be similar to the
same activities in the BLM's coal program, and therefore believes the
same filing fee is justified.
Section 3933.31 would require that assignment applications be filed
with the BLM within 90 days of the date of final execution of the
assignment, and would list what must be included in the assignment
application, including the filing fee. This section also explains that
the assignment of all interests in a specific portion of a lease would
create a separate lease.
Section 3933.32 would explain that overriding royalty interests do
not have to be approved by the BLM, but would be required to be filed
with the BLM. The filing of overriding royalty interests provides a
more complete record of the financial transaction affecting the Federal
lease. The BLM has found this information to be useful in other mineral
leasing programs, especially in making rent and royalty reduction
determinations.
Section 3933.40 would require that the lease account be in good
standing before the BLM would process a lease assignment.
Section 3933.51 would require that assignees have sufficient bond
coverage before the BLM will approve the assignment. This is a
necessary component of the bonding program and is similar to
requirements of other BLM solid mineral leasing programs.
Section 3933.52 would address the responsibilities, obligations,
and liabilities of the assignor and assignee. In addition to stating
expressly that an assignor is responsible after an assignment for
accrued obligations, this section addresses joint and several
liabilities of the lessee and operating rights owner. After the
effective date of the sublease, the sublessor and sublessee are jointly
and severally liable for the performance of all lease obligations,
notwithstanding any term in the sublease to the contrary.
Section 3933.60 would explain that the effective date of an
assignment and sublease would be the first day of the month following
the BLM's final approval, or if the assignee requested it in advance,
the first day of the month of the approval. This is the customary
effective date for an assignment in other BLM leasing programs.
Consistent with other BLM mineral leasing programs, section 3933.70
would provide that the BLM's approval of an assignment or sublease does
not extend the readjustment period of the lease.
Subpart 3934--Relinquishments, Cancellations, and Terminations
Sections in this subpart would contain requirements for
relinquishments (section 3934.10), termination of leases and
cancellation and/or termination of exploration licenses (section
3934.30), written notice of cancellation (section 3934.21), cause and
procedures for lease cancellations (section 3934.22), payments due
(section 3934.40), and bona fide purchasers (section 3934.50). Sections
in this subpart are similar to sections found in regulations for other
BLM mineral leasing programs.
Section 3934.10 would provide that the record title holder of a
lease may relinquish all or part of the lease if the requirements in
this section are met. This section would also contain provisions for
the relinquishment of an exploration license. Prior to relinquishment,
the licensee must give any other parties participating in the
exploration license an opportunity to take over operations under the
exploration license.
Section 3934.21 would require the BLM to notify the lessee or
licensee in writing of any default, breach, or cause of forfeiture, and
the corrective actions that could be taken to avoid defaulting on the
lease terms and lease cancellation.
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Section 3934.22 would explain the procedure for the BLM to cancel a
lease. Section 31 of the MLA requires that lease cancellation take
place in the United States District Court for the district in which all
or part of the lands covered by the lease are located.
Section 3934.30 would provide the reasons that the BLM may cancel a
license, including:
(1) The BLM issued it in violation of law or regulation;
(2) The licensee is in default of the terms and conditions of the
license; and
(3) The licensee has not complied with the exploration plan.
Unlike leases, the BLM may cancel an exploration license
administratively.
Section 3934.40 would provide that if a lease is canceled or
relinquished for any reason, all bonus, rentals, royalties, or minimum
royalties paid would be forfeited and any amounts not paid would be
immediately payable to the United States.
Section 3934.50 would address the rights of bona fide purchasers
and provide that the BLM would not immediately cancel a lease or an
interest in a lease if, at the time of purchase, the purchaser could
not reasonably have been aware of a violation of the regulations,
legislation, or lease terms.
Subpart 3935--Production and Sale Records
Section 3935.10 would address books of account. Operators and
lessees must maintain accurate records. This section would explain what
records must be maintained, and that the records must be made available
to the BLM during normal business hours.
Subpart 3936--Inspection and Enforcement
Like other BLM minerals inspection and enforcement (I and E)
programs, the objective of BLM's oil shale I and E program would be to:
(1) Ensure the protection of the resource;
(2) Ensure that Federal oil shale resources are properly developed
in a manner that would maximize recovery while minimizing waste; and
(3) Ensure the proper verification of production reported from
Federal lands.
The BLM would also be responsible for lease inspections to
determine compliance with applicable statutes, regulations, orders,
notices to lessees, plans of development, and lease terms and
conditions. These terms and conditions would include those related to
drilling, production, and other requirements related to lease
administration.
This subpart would address inspection of underground and surface
operations and facilities (section 3936.10), issuance of notices of
noncompliance and orders (section 3936.20), enforcement of notices of
noncompliance and orders (section 3936.30), and appeals (section
3936.40).
Section 3936.10 would require operators or lessees to allow the BLM
to inspect underground or surface mining and exploration operations at
any time both to determine compliance with the plan of development and
to verify oil shale production.
Section 3936.20 would advise the operator, licensee, or lessee of
the procedures the BLM would follow when issuing orders and notices of
noncompliance. The section would also address delivery of notices and
verbal orders.
Section 3936.30 would explain the procedures the BLM would follow
when enforcing notices of noncompliance. This section explains the
action the BLM may take in cases of noncompliance, including orders to
cease operations and the initiation of lease or license cancellation or
termination procedures. An example of the type of non-compliance that
might warrant the BLM issuing a cease operations order would be
noncompliance with the BLM approved plan of development and refusal to
comply with the notice of noncompliance.
Section 3936.40 would allow a lessee or operator to appeal BLM
decisions under 43 CFR part 4. This section would also provide that the
BLM decisions and orders remain in full force and effect pending
appeal, unless the BLM or the Interior Board of Lands Appeals decides
otherwise. Appeals language in this section mirrors regulatory
provisions in other BLM minerals programs.
IV. Procedural Matters
Executive Order 12866, Regulatory Planning and Review
This document is a significant rule and the Office of Management
and Budget has reviewed this rule under Executive Order 12866. We have
made the assessments required by E.O. 12866 and the results are
available by writing to the address in the ADDRESSES section.
(1) This rule will have an effect of $100 million or more on the
economy. It will not adversely affect in a material way the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities. Please
see the discussion below.
(2) This rule will not create a serious inconsistency or otherwise
interfere with an action taken or planned by another agency. The rule
addresses the issuance and administration of Federal oil shale leases,
which by statute is under the jurisdiction of the Department of the
Interior. The BLM worked closely with the MMS in drafting the royalty
provisions of this rule, but the rule should have no effect on other
agencies.
(3) This rule does not alter the budgetary effects of entitlements,
grants, user fees, or loan programs or the rights or obligations of
their recipients. The rule would not impact any of these except that
the rule institutes certain fees (discussed earlier in the preamble to
this rule and in the economic and threshold analyses for the rule) in a
manner that is consistent with BLM and Departmental policy.
(4) This rule does not raise novel legal or policy issues. As
stated earlier in this preamble, the legal and policy issues addressed
by this rule are already dealt with in a similar manner in other BLM
regulations currently in effect, therefore they are not novel.
Executive Order 12866 requires agencies to assess, where practical,
the anticipated costs and benefits of proposed regulatory actions to
determine if the regulation is significant. As has been noted above,
there is no domestic oil shale industry to help substantiate or form
the basis for the projections and assumptions concerning what the
future might hold for the leasing and development of oil shale
resources on Federal lands. In addition, the assumption is that any
significant production of shale oil is not likely to occur for a number
of years. The potential events described, if they occur at all, may be
in the distant future. As such, future costs and benefits must be
discounted. The OMB's Circular A-94 states that a real discount rate of
7 percent should be used as a base-case for regulatory analysis. In
addition to analyzing the potential future costs and benefits using a 7
percent discount rate, the BLM also used a discount rate of 20 percent
to reflect these substantial risks and associated uncertainties in the
opportunity costs that would not be reflected in the historic industry
average of 7 percent. We also analyzed the future costs and benefits
using a 3 percent discount rate.
The proposed regulations have the potential to generate net
economic benefits to the Nation by allowing for the development of our
vast domestic oil shale resources, though there is substantial
uncertainty about the magnitude and timing of these benefits. The most
significant direct benefit of this regulatory action is to provide a
vehicle for the leasing and development of Federal oil shale resources.
Operators
[[Page 42946]]
will have the opportunity to obtain leases with the right to develop
the oil shale and ultimately produce shale oil in an environmentally
sound manner. Companies' willingness to take advantage of the leasing
and development opportunities provided by this rule would determine the
level of production of shale oil, exploration, development and
production costs incurred, and conceivably the profits (or losses) to
be enjoyed.
The lack of a domestic oil shale industry makes it speculative to
project the demand for oil shale leases, the technical capability to
develop the resource, and the economics of producing shale oil.
Projections that have been prepared vary significantly in not only the
potential volume of shale oil that could be produced, but also the
assumptions used to generate those projections. The recent report
prepared by the Strategic Unconventional Fuels Task Force (Task Force)
provided shale oil production projections under three scenarios. For
our simulation-based analysis, we focused on the Task Forces' base case
as a plausible scenario. This scenario presents a future without any
subsidies in the form of tax credits or cost-sharing. The base case
production of 0.5 million barrels per day is approximately 182.50
million barrels per year, all from true in-situ projects. The Task
Force's base case scenario assumes production commencing in 2015, with
full production reached by 2020. Please comment on the uncertainty
surrounding the quantity and quality of recoverable oil shale,
specifically as it relates to potential production of shale oil.
The Task Force estimates that resulting production could reduce the
cost of oil imports by $0.41 billion per year in 2015 to $4.21 billion
per year in 2035. This estimate is based on EIA's 2006 oil price
projection. In their report, the Task Force also provides estimates of
oil shale development's contribution to Gross Domestic Product (GDP).
In the base case, annual direct contributions to GDP for the oil shale
industry activity rises from $0.65 billion per year in the early years,
to $5.72 billion per year in 2035.
We estimated the revenue, profit, and royalty implication of the
Task Force's base case production scenario using three discount rates
(7 percent, 3 percent, and 20 percent), three world crude oil price
projections (EIA's 2007 reference, high, and low price projections) and
6 different royalty rates (1 percent, 3 percent, 5 percent, 7 percent,
9 percent, and 12.5 percent). The following summarizes the findings
based on the 7 percent discount rate and a 5 percent royalty rate. The
full range of calculations is presented in the Economic Analysis.
We estimate the value of the forecasted production, using EIA's
2007 reference case assumptions, could be approximately $9.5 billion
for 2020, up to $11 billion by 2035. The gross present value, using a 7
percent discount rate, of all shale oil produced for the period of
analysis (2007 to 2035) is estimated at about $50 billion. The gross
present value of production for the year 2020 is estimated at about
$3.9 billion using a 7 percent discount rate. The gross present value
of the shale oil produced in 2035 would be approximately $1.7 billion
with a 7 percent discount rate.
Oil shale development is characterized by high capital investment
and long periods of time between expenditure of capital and the
realization of production revenues and return on investment. The Task
Force estimated the breakeven price for true in-situ operations at
$37.75 per barrel. Using the base case production projection, the cost
to produce 182.50 million barrels annually would be almost $6.9
billion. The present value of the production costs for 2020 would be
about $2.9 billion using a 7 percent discount rate. For production
occurring in 2035, the present value of those production costs would be
about $1 billion. For the period of analysis (2007 to 2035), the
present value of all production costs is estimated at about $34 billion
using a 7 percent discount rate. Please specifically comment on the
state of technology necessary to recover or produce oil from shale and
the associated production costs.
With the opportunity to lease and ultimately develop Federal oil
shale resources, companies would be expected to generate profits from
their commercial activities. Using the base case production scenario,
cost projection assumptions, and EIA's reference oil price, by the year
2020 lessees/operators could see profits from oil shale development of
over $2.6 billion per year, with a net present value of $1 billion with
a 7 percent discount rate. For 2035, we estimate the present value of
the potential profit could be approximately $670 million using a 7
percent discount rate. The net present value of shale oil produced in
the period of analysis (2007 to 2035) is estimated at approximately
$16.2 billion.
Using EIA's high crude oil price scenario, calculated profits were
substantially high. Total undiscounted profits for the period of
analysis were $187 billion, with a present value of $50.6 billion using
a 7 percent discount rate. For EIA's low oil price projection all
operations are uneconomic regardless of the discount rate and/or
royalty rate applied. In addition to these monetary costs and benefits
associated with potential oil shale development, there could be
significant environmental and socioeconomic costs and benefits. These
potential costs and benefits could affect a wide range of resources,
including groundwater quality and quantity, air quality, cultural
resources, wildlife habitat, competing land uses, and local employment
and infrastructure.
Impacts on livestock grazing activities are generally the result of
activities that affect forage levels, of the ability to construct range
improvements, and of human disturbance or harassment of livestock
within grazing allotments. Using the Task Force's base case scenario of
three in-situ operations, with total maximum lease acreage of 17,280,
and some fairly significant simplifying assumptions, there could be a
loss of approximately 5,700 animal unit months (AUMs).
Recreational use of BLM-administered lands within the three-state
study area (Colorado, Utah, and Wyoming) is varied and dispersed.
Impacts on recreation would be considered significant if potential oil
shale development results in long-term elimination or reduction of
recreation opportunities, activities, or experience, or they compromise
public health and safety. As such, the significant of potential impacts
from oil shale development could have on recreational opportunities
will depend on the location of potential development.
In addition to oil shale, the study area contains a wide range of
energy and mineral resources. Mineral resource development conflicts
may occur with oil shale development. The issuance of oil shale
exploration licenses and leases does not preclude the BLM from issuing
licenses and leases for other minerals. However, the BLM generally
attempts to avoid issuing conflicting authorizations on the same lands.
Many multiple use outputs from BLM land are not traded in markets
and might not have measurable onsite expenditures associated with them.
The absence of market price does not, however, mean an absence of value
to society. Please specifically comment on the uses that oil shale
production may displace under the base case scenario and the associated
value of the displaced uses.
In addition to land use conflicts, water consumption is a major
concern in the arid intermountain region. Certain types of oil shale
development
[[Page 42947]]
are anticipated to consume significant quantities of water. Increasing
the demand for water resources in the arid West must be considered a
major opportunity cost to society associated with oil shale development
and fully analyzed before commercial development is allowed to proceed.
Demand for reliable, long-term water supplies to support oil shale
development could lead to the conversion of water rights from current
uses. While it is not presently known how much surface water will be
needed to support future development of an oil shale industry, or the
role that groundwater would play in future development, it is likely
that additional agricultural water rights could be acquired. Depending
on the locations and magnitude of such acquisitions, there could be a
noticeable reduction in local agricultural production and use.
Prospective oil shale developers would need to employ appropriate
control technologies to reduce potential air emissions which otherwise
could result from construction and operation of surface facilities. In
addition to the emissions associated with the operations themselves,
extraction of oil from shale could consume immense quantities of
electricity. This would necessitate the building of new power plants,
which could further contribute air emissions. Impacts on air quality
would be limited by applicable local, state, Tribal, and Federal
regulations, standards, and implementation plans established under the
Clean Air Act and administered by the applicable air quality regulatory
agency, with EPA oversight.
Using the assumption of 3 in-situ projects, solid waste generated
would be the drill cuttings and those would be handled as they are for
oil and gas, which is to bury them on-site, in compliance with the
Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act and the Hazardous Solid Waste Amendments of 1984 (42
U.S.C. 6901 et seq.).
Aquatic habitats include perennial and intermittent streams,
springs, and flat-water (lakes and reservoirs) that support fish or
other aquatic organisms through at least a portion of the year.
The wildlife species that may be associated with any particular
project would depend on the specific location of the project and on the
plant communities and habitats present at the site.
A total of 210 plant and animal species are either federally (U.S.
Fish and Wildlife Service (USFWS) and BLM) or state-listed (Colorado,
Utah, and Wyoming) and occurs or could occur in counties within oil
shale basins. In the study areas, 32 species are listed or candidates
for listing by the USFWS under the Endangered Species Act (ESA); 78
species are listed as sensitive by the BLM; 24 are listed by the State
of Colorado; 33 are listed by the State of Utah; and 121 are listed by
the State of Wyoming. Species listed by the USFWS under the ESA have
the potential to occur in all oil shale basins. The likelihood of
occurrence in study areas cannot be fully determined at this time
because actual project locations and footprints will not be determined
until some later date. A complete evaluation of listed species in the
study areas will be made at that time, before project activities begin.
Project-specific NEPA assessments, ESA consultations, and coordination
with state natural resource agencies will address project specific
impacts more thoroughly. These assessments and consultations will
result in required actions to avoid or mitigate impacts on protected
species.
Oil shale development, initially in the western states of Colorado,
Wyoming, and Utah, requires infrastructure to support industry
development and operation, including refining capacity, pipelines, and
sources of natural gas and electricity.
The socioeconomic environment potentially affected by the
development of oil shale resources includes a region of influence in
each state (Colorado, Utah, and Wyoming), consisting of the counties
and communities most likely impacted by development of oil shale
resources. Construction and operation of oil shale facilities could
have a major affect on the local communities, impacting the economy and
the social and demographic make-up of the affected communities. For
example, oil shale industry development could result in the addition of
thousands of new, high-value, long-term jobs in the construction,
manufacturing, mining, production, and refining sectors of the domestic
economy. Construction and operations could result in a direct loss of
recreation employment in the recreation sectors and indirect effects
such as declining recreation employee wage and salary spending and
expenditures by the recreation section on materials equipment and
services.
The Task Force provided employment projections for their production
scenarios, including their base case. Direct employment could range
from 120 to 9,700 personnel in the base case. The total number of
petroleum sector jobs (including indirect employment), estimated by the
Task Force, ranges from 2,930 employees in 2015 to 20,830 in 2035 for
their base case.
A resource commitment is considered irreversible when direct and
indirect impacts from its use limit future use options. Irreversible
and irretrievable commitments of resources could occur as a result of
future commercial oil shale projects that are authorized, constructed,
and operated. The nature and magnitude of these commitments would
depend on the specific location of the project development as well as
its specific design and operational requirements. The construction of
future commercial oil shale projects could result in the consumption of
sands, gravels, and other geologic resources, as well as fuel,
structural steel, and other materials. Water resources could also be
consumed during construction, although water use would be temporary and
largely limited to on-site concrete mixing and dust abatement
activities. In general, the impact on biological resources from future
project construction and operation would not constitute an irreversible
and irretrievable commitment of resources. During project construction
and operation, individual animals would be impacted.
The potential effects of developing the oil shale resources are
likely to be quite significant; however, at this point, with the
significant unknowns as to what may be developed and how it may be
developed, plus where and when development may occur, there is no
practical way to quantify the potential environmental and socioeconomic
consequences, much less put a monetary value on them.
Before oil shale development could occur, additional project-
specific NEPA analyses would be performed at two points in time: (1)
Prior to leasing; and (2) Prior to plan of development approval. These
analyses would address environmental impacts of oil shale production
including impacts to livestock grazing, recreation uses, energy and
mineral resources, water use, air, aquatic habitat, and wildlife and
would be subject to public and agency review and comment.
The Act requires the Secretary to establish royalties, fees,
rentals, bonus, or other payments for oil shale leases that encourage
development of the resource, but also ensuring a fair return to the
government. As a result of any leasing and development, the Federal and
state governments will benefit from the revenue generated through the
bonuses, rents, and eventually royalties. These bid, rental, and
royalty payments are revenue to the public, but a cost to the lessee/
operator of obtaining,
[[Page 42948]]
holding, and producing from the Federal leases. Monetary payments, such
as rents, royalties, and bonus bids, from the lessee to the government,
do not affect total resources available to society and in the context
of a benefit-cost analysis are considered transfer payments.
The bonus is the amount paid by the successful high bidder when a
parcel is offered for lease. By statute the parcel must be leased for
fair market value. At this juncture there is no practical way to
generate a meaningful estimate of the potential bonus bids or fair
market values for potential lease parcels.
Until the operation starts paying a production royalty, the lessee
is required to pay the government a rental. The proposed regulations
include a rental rate of $2 per acre. Maximum lease acreage is 5,760
acres for a maximum annual rental payment per lease of $11,520
(constant-dollars) per year until an operation commences shale oil
production. Based on the Task Force's base case of three in-situ
operations, with total maximum lease acres of 17,280 acres, those three
leases could generate a rental income of $34,560 per year.
Producing leases will be required to pay a production royalty. One
alternative in the proposed regulations calls for a production royalty
of 5 percent on all products of oil shale that are sold from or
transported off of the lease. Using the production projections and
other assumptions presented in the economic analysis, royalty payments
for the period of analysis (2007 to 2035) could be almost $9.1 billion,
with a net present value of $2.5 billion (7 percent discount rate). We
also analyzed the Federal revenue implications of alternative royalty
rates given constant production and production cost assumptions. These
alternative royalty revenue calculations are presented in the economic
analysis.
Beginning in the 10th lease year, for leases that have not
commenced production, the lessee is subject to a payment in lieu of
production of no less than $4 per acre. For an operation with 5,760
acres under lease and no production by the end of the eleventh lease
year, the payment in lieu of production would be $23,040 (constant-
dollars) per year. Based on the Task Force's base case of three in-situ
operations, with total maximum lease acres of 17,280 acres, should
operations on those three leases not commence production, the payment
in lieu of production could generate payments to the Federal Government
of $69,120 per year.
The proposed regulations require license and lease bonds for
exploration licenses and oil shale leases. These bonds are intended to
guarantee payments (rents, royalties, and deferred bonuses) the lessee
may owe the government. The bond amount will be determined on a case-
by-case basis. The minimum lease bond is proposed at $25,000. The
operator is also obligated to provide the BLM with a reclamation bond.
The amount of these bonds will be based on the estimated cost for the
government to contract with a third party to reclaim the operation
should the operator be unable or unwilling to fulfill their reclamation
obligations. The amounts of these reclamation bonds are likely to be
quite significant; however, at this point there is no practical way to
estimate the amount of these reclamation bonds.
There will be increases in BLM administrative costs associated with
the issuance of leases and licenses and review and approval of
operational plans. Most of these costs are relatively minor and will be
subject to cost recovery that will be paid for by the benefiting party.
There will be some BLM actions that will not be subject to cost
recovery, including increased costs associated with ongoing inspection
and enforcement responsibilities.
Above are various costs and benefits associated with the proposed
rule. Some effects are directly tied to the provisions found in the
proposed regulations, such as royalty rates of 5 or 12.5% percent of
the value of the amount or value of production removed or sold from the
lease. Other costs and benefits are tied to companies' ability and
willingness to take advantage of the opportunities provided by the
leasing regulations. The most significant of these costs and benefits
include the value of shale oil that may be produced, the cost to
produce the shale oil, and the environmental and socioeconomic
consequences of resource development. The present values of the
quantified monetary effects are expected to be in excess of the $100
million annual threshold.
We estimate the net present value of the potential monetary costs
and benefits considered in this analysis to be approximately $13.6
billion using a 7 percent discount rate, $28.5 billion using a 3
percent discount rate, and $1.8 billion using a 20 percent discount
rate. This conclusion is based on the calculated present value of the
profit from shale oil produced from our analysis period (2007 to 2035)
using EIA's reference oil price.
This conclusion includes one significant caveat. The socioeconomic
and environmental costs and benefits associated with oil shale
development are likely to be quite large. As has been noted above, we
have no reasonable way to generate meaningful scenarios to quantify the
potential impacts for an industry that does not exist or technologies
that have not been deployed. As such, the net present value of the
benefits of the proposed rule may be significantly larger or smaller
than the estimates presented in this analysis.
Clarity of the Regulations
Executive Order 12866 requires each agency to write regulations
that are simple and easy to understand. We invite your comments on how
to make these proposed regulations easier to understand, including
answers to questions such as the following:
(1) Are the requirements in the proposed regulations clearly
stated?
(2) Do the proposed regulations contain technical language or
jargon that interferes with their clarity?
(3) Does the format of the proposed regulations (grouping and order
of sections, use of headings, paragraphing, etc.) aid or reduce their
clarity?
(4) Would the regulations be easier to understand if they were
divided into more (but shorter) sections? (A ``section'' appears in
bold type and is preceded by the symbol ``Sec. '' and a numbered
heading, for example (Sec. 3902.24 Associations, including
partnerships.)
(5) Is the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble helpful in
understanding the proposed regulations? How could this description be
more helpful in making the proposed regulations easier to understand?
Please send any comments you have on the clarity of the regulations
to the address specified in the ADDRESSES section.
Small Business Regulatory Enforcement Fairness Act (SBREFA).
This rule is a major rule under 5 U.S.C. 804(2), the Small Business
Regulatory Enforcement Fairness Act. This rule:
(1) Has an annual effect on the economy of $100 million or more.
Please see the discussion of Executive Order 12866, above.
(2) Will not cause a major increase in costs or prices for
consumers, individual industries, Federal, state, or local government
agencies, or geographic regions. Should production from Federal oil
shale resources occur, it is anticipated that if there is any impact to
costs or prices as a result of
[[Page 42949]]
additional production entering the market, it would be to decrease
them.
(3) Does not have significant adverse effects on competition,
employment, investment, productivity, innovation, or the ability of
U.S.-based enterprises to compete with foreign-based enterprises. The
issuance of Federal oil shale leases and production of oil shale
resources from those Federal leases would not lead to adverse effect on
any of the above because an increase in products from oil shale would
tend to lead to a decrease in prices and potentially lead to increased
competition, employment, investment, productivity, and innovation and
the ability of U.S.-based enterprises to compete with foreign-based
enterprises.
National Environmental Policy Act
The BLM has prepared an environmental assessment (EA) and has found
that the proposed rule would not constitute a major Federal action
significantly affecting the quality of the human environment under
Section 102(2)(C) of the National Environmental Policy Act of 1969
(NEPA), 42 U.S.C. 4332(2)(C). A detailed statement under NEPA is not
required. The BLM has placed the EA on file in the BLM Administrative
Record at the address specified in the ADDRESSES section. The BLM
invites the public to review these documents and suggests that anyone
wishing to submit comments in response to the EA do so in accordance
with the Public Comment Procedures section above.
Regulatory Flexibility Act
Congress enacted the Regulatory Flexibility Act of 1980 (RFA), as
amended, 5 U.S.C. 601-612, to ensure that Government regulations do not
unnecessarily or disproportionately burden small entities. The RFA
requires a regulatory flexibility analysis if a rule would have a
significant economic impact, either detrimental or beneficial, on a
substantial number of small entities. The RFA establishes an analytical
process for determining how public policy goals can best be achieved
without erecting barriers to competition, stifling innovation, or
imposing undue burdens on small entities. Executive Order 13272
reinforces executive intent that agencies give serious attention to
impacts on small entities and develop regulatory alternatives to reduce
the regulatory burden on small entities. To meet these requirements,
the agency must either conduct a regulatory flexibility analysis or
certify that the final rule will not have ``a significant economic
impact on a substantial number of small entities.''
Section 369 of the EP Act requires the Department of the Interior
to establish regulations for a commercial oil shale leasing program.
Although this rule would only affect entities that choose to explore
and develop oil shale resources from land administered by the BLM,
there is no way to determine which firms would hold exploration
licenses or leases or operate on Federal lands in the future. The
extent to which the proposed rule would have an actual impact on any
firm depends on whether the firm would hold exploration licenses or
leases or would operate on Federal lands.
Currently, active oil shale research and development on Federal
lands is limited to a few firms. Chevron, EGL Resources, Oil Shale
Exploration Company, and Shell Oil Company hold R, D and D leases and
are the only companies currently conducting operations on Federal oil
shale leases. Of the four companies holding R, D and D leases, two are
major oil companies and two are small research and development firms.
With implementation of these regulations, technological advances,
and favorable market conditions that would support oil shale
development, the BLM anticipates an increase in the number of firms
involved in oil shale development. However, the number of firms, large
or small, involved in oil shale development on Federal lands would
likely remain quite limited. Given the likely size of the industry that
may eventually be involved in the leasing and development of Federal
oil shale resources, it is reasonable to conclude that this rule would
not significantly impact a ``substantial number of small entities.''
This rule would provide for the leasing and management of oil shale
resources on Federal lands. Provisions covered in this proposed rule
include exploration license and competitive leasing procedures,
requirements and terms, and plan of development and operational
requirements.
To explore on Federal lands, the operator would have to have an
exploration license or an oil shale lease. The proposed process to
obtain an exploration license would be relatively straightforward and
would not entail significant fees, e.g., $295 nonrefundable filing fee.
As proposed, commercial oil shale leases would primarily rely on a
process of leasing parcels nominated by industry. The BLM may also
choose to offer certain lands for lease. All leases would be offered
competitively. The BLM would not collect an application or nomination
fee; however, the successful high bidder would be required to pay
certain costs associated with the BLM offering the tract for lease, in
addition to the bonus bid. At the time of lease sale, the high bidder
would be required to submit a payment of one fifth of the amount of the
bonus bid. Leases would also be subject to a $2.00 per acre rental.
The proposed terms and conditions for operating under an
exploration license or commercial lease are those needed to protect the
environment and resource values of the area and to ensure reclamation
of the lands disturbed by the activities. Exploration and development
plans must be submitted to the BLM for approval. All operations,
whether under an exploration license or a commercial oil shale lease,
are required to provide the BLM with a license or lease bond. In
addition, operators are required to provide the government with a bond
to cover the cost of site reclamation and closure.
Production from commercial oil shale leases will be subject to a
Federal royalty. A royalty on the amount or value of production removed
or sold from the lease would apply to commercial production from these
leases.
The ability to obtain an exploration license and/or to compete for
a commercial oil shale lease is not affected by the size of the
company. Exploration licenses require a nominal filing fee ($295 per
filing) and have no minimum acreage. Leases have minimum tract acreage
of 160 acres; lease processing costs are paid by the successful bidder;
and bonus bids may be deferred over a 5-year period. These aspects of
the proposed licensing and leasing procedures allow small entities to
better compete for Federal oil shale licenses and leases with larger,
well capitalized companies. As required by the EP Act, all royalties,
rentals, bonus bids, and other payments proposed in this rule are to
encourage development of the oil shale resources while ensuring a fair
return to the government. The proposed regulatory provisions, including
filing fees, rentals, and production royalties, will not have a
significant economic impact on lessees or operators, regardless of the
firm's size.
Therefore, the BLM has determined that under the RFA this proposed
rule would not have a significant economic impact on a substantial
number of small entities.
Unfunded Mandates Reform Act
In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501
et seq.) the proposed rule would not impose an unfunded mandate on
state,
[[Page 42950]]
local, or tribal governments or the private sector, in the aggregate,
of $100 million or more per year; nor would this rule have a
significant or unique effect on state, local, or tribal governments.
The rule would impose no requirements on any of those entities.
Therefore, the BLM is not required to prepare a statement containing
the information required by the Unfunded Mandates Reform Act.
Executive Order 12630, Governmental Actions and Interference With
Constitutionally Protected Property Rights (Takings)
The proposed rule is a not a government action capable of
interfering with constitutionally protected property rights. A takings
implication assessment is not required. The proposed rule does not
authorize any specific activities that would result in any effects on
private property. Therefore, the Department of the Interior has
determined that the rule would not cause a taking of private property
or require further discussion of takings implications under this
Executive Order.
Executive Order 13132, Federalism
The proposed rule will not have a substantial direct effect on the
states, on the relationship between the national government and the
states, or on the distribution of power and responsibilities among the
levels of government. It would not apply to states or local governments
or state or local governmental entities. The management of Federal oil
shale leases is the responsibility of the Secretary of the Interior and
the BLM. This rule does not alter any lease management or revenue
sharing provisions with the states, nor does it impose any costs on the
states. Therefore, in accordance with Executive Order 13132, the BLM
has determined that this proposed rule does not have sufficient
Federalism implications to warrant preparation of a Federalism
Assessment.
Executive Order 12988, Civil Justice Reform
Under Executive Order 12988, the BLM determined that this proposed
rule would not unduly burden the judicial system and that it meets the
requirements of sections 3(a) and 3(b)(2) of the Order.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
In accordance with Executive Order 13175, we have found that this
rule may include policies that have Tribal implications. The proposed
rule would make changes in the Federal oil shale leasing and management
program, which does not apply on Indian Tribal lands. At present, there
are no oil shale leases or agreements on Tribal or allotted Indian
lands. If tribes or allottees should ever enter into any leases or
agreements with the approval of the Bureau of Indian Affairs, the BLM
would then likely be responsible for the approval of any proposed
operations on Indian oil shale leases and agreements. In light of this
possibility, and because Tribal interests could be implicated in oil
shale leasing on Federal lands, the BLM has begun consultation with
potentially affected Tribes on the proposed oil shale regulations, and
will continue to consult with Tribes during the comment period on the
proposed rule.
Information Quality Act
In developing this proposed rule, we did not conduct or use a
study, experiment or survey requiring peer review under the Information
Quality Act (Section 515 of Pub. L. 106-554).
Executive Order 13211, Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
In accordance with Executive Order 13211, the BLM has determined
that the proposed rule is not likely to have a substantial direct
effect on the supply, distribution, or use of energy. Executive Order
13211 requires an agency to prepare a Statement of Energy Effects for a
proposed rule that is:
A significant regulatory action under Executive Order 12866 or any
successor order; and
Likely to have a significant adverse effect on the supply,
distribution, or use of energy.
As discussed earlier in this preamble, the BLM believes that the
rule will likely increase energy production and would not have an
adverse effect on the supply, distribution, or use of energy, and
therefore has determined that the preparation of a Statement of Energy
Effects is not required.
Executive Order 13352, Facilitation of Cooperative Conservation
In accordance with Executive Order 13352, the BLM has determined
that this proposed rule would not impede facilitating cooperative
conservation; would take appropriate account of and consider the
interests of persons with ownership or other legally recognized
interest in the land or other natural resources; properly accommodates
local participation in the Federal decision-making process; and provide
that the programs, projects, and activities are consistent with
protecting public health and safety. State and local governments were
cooperating agencies in the preparation of the PEIS. The BLM, in
coordination with the MMS, held three ``listening sessions'' with
representatives of the governors of the states of Colorado, Utah, and
Wyoming. The purpose of the ``listening sessions'' was to provide the
governor's representatives the opportunity to share their ideas,
issues, and concerns relating to the proposed commercial oil shale
leasing regulations. Section 369(e) of the EP Act requires that not
later than 180 days after the publication of the final regulations, the
Secretary (as delegated to the BLM), is to consult with the governors
of the states with significant oil shale and tar sands resources on
public lands, representatives of local governments in such states,
interested Indian tribes, and other interested persons to determine the
level of support and interest in the states in the development of oil
shale resources. In addition, the proposed regulations contain a
section providing for comments from state governors, local governments,
and interested Indian tribes prior to offering lands for lease for oil
shale. The comment period would occur prior to the BLM's publication of
a call for nominations.
Paperwork Reduction Act of 1995 (PRA)
This proposed rule would contain new information collection
requirements. As required by the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)), the BLM has submitted a copy of the proposed
regulations to the OMB for review. The BLM will not require collection
of this information until OMB has given its approval.
As part of our continuing effort to reduce paperwork and respondent
burden, we invite the public and other Federal agencies to comment on
any aspect of the reporting burden through the information collection
process. Submit written comments by either fax (202) 395-6566 or e-mail
(OIRA_Docket@omb.eop.gov) directly to the Office of Information and
Regulatory Affairs, OMB, Attention: Desk Officer for the Department of
the Interior [OMB Control Number ICR 1004-New, as it relates to the
proposed Oil Shale Management rule].
The title of the new information collection request (ICR) is
``Parts 3900-3930--Oil Shale Management--General.'' The intent of this
proposed rulemaking is to establish regulations for a commercial
leasing program. The BLM will collect information from
[[Page 42951]]
individuals, corporations, and associations in order to:
(1) Learn the extent and qualities of the public oil shale
resource;
(2) Evaluate the environmental impacts of oil shale leasing and
development;
(3) Determine the qualifications of prospective lessees to acquire
and hold Federal oil shale leases;
(4) Administer statutes applicable to oil shale mining, production,
resource recovery and protection, operations under oil shale leases,
and exploration under leases and licenses;
(5) Ensure lessee compliance with applicable statutes, regulations,
and lease terms and conditions; and
(6) Ensure that accurate records are kept of all Federal oil shale
produced.
Prospectively estimating the annual burden hours for the commercial
oil shale program is difficult because the oil shale industry is at the
research and development stage where there is a lack of available
information and the future technology to be used is uncertain. The
burden hour estimates in the following charts were derived from a
previous ICR completed for the Federal coal program, as the information
collection associated with that program is somewhat similar to the
proposed oil shale leasing program. The coal burden hour estimates were
adjusted to reflect differences in the two processes. It is also
difficult to make a prospective estimate of the number of annual
responses; therefore, the BLM has used one response for each activity
as a starting point, except for the number of applications received. We
anticipate that we could receive several applications after these
regulations are promulgated. The BLM estimates that this ICR for the
oil shale management program will result in 22 responses totaling 1,784
burden hours at a total annual burden cost of $86,492 (Table 1). This
estimate is based on the number of actions multiplied by the estimated
burden hours per action multiplied by a $48.48 wage per hour (Table 2).
Additionally, the BLM estimates that there will be processing/cost
recovery fees in the amount of $526,592 (Table 3). See the following
tables for burden hours and processing/cost recovery fees by CFR
citation:
Table 1.--Burden Breakdown
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average number
Parts 3900-3930 burden activity Information collected Hour burden of annual Average annual Total annual
responses burden hours burden cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart 3904--Bonds and Trust Funds
--------------------------------------------------------------------------------------------------------------------------------------------------------
A lessee or licensee must furnish a bond before Section 3904.12.--File one copy of the 1 1 1 $48
a lease or exploration license may be issued bond form with original signatures in
or transferred or a plan of development the proper BLM state office. Bonds
approved. The BLM will review the bond and, if must be filed on an approved BLM form.
adequate as to amount and execution, will The obligor of a personal bond must
accept it in order to indemnify the United sign the form. Surety bonds must have
States against default on payments due or the lessee's and the acceptable
other performance obligations. The BLM may surety's signature.
also adjust the bond amount to reflect changed
conditions. The BLM will cancel the bond when
all requirements are satisfied
Section 3904.14(c)(1).--Prior to the 1 1 1 48
approval of a plan of development, in
those instances where a state bond
will be used to cover all of the BLM's
reclamation requirements, evidence
verifying that the existing state bond
will satisfy all the BLM reclamation
bonding requirements must be filed in
the proper BLM office. The BLM will
use no specific form to collect this
information.
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Part 3910--Oil Shale Exploration Licenses
--------------------------------------------------------------------------------------------------------------------------------------------------------
For those lands where no exploration data is Section 3910.31.--The BLM will use no 24 1 24 1,164
available, the lease applicant may apply for specific form to collect the
an exploration license to conduct exploration information. The applicant will be
on unleased public lands to determine the required to submit the following
extent and specific characteristics of the information: (1) Name and address of
Federal oil shale resource. The BLM will use applicant(s); (2) A nonrefundable
the information in the application to: (1) filing fee of $295; (3) A general
Locate the proposed exploration site; (2) description of the area to be drilled
Determine if the lands are subject to entry described by legal land description;
for exploration; (3) Prepare a notice of and (4) 3 copies of an exploration
invitation to other parties to participate in plan that includes the exact location
the exploration; and (4) Ensure the of the affected lands, the name,
exploration plan is adequate to safeguard address, and telephone number of the
resource values, and public and worker health party conducting the exploration
and safety activities, a description of the
proposed methods and extent of
exploration, and reclamation.
The BLM will use this information from a Section 3910.44.--Upon the BLM's 8 1 8 388
licensee to determine if it will offer the request, the licensee must provide
land area for lease copies of all data obtained under the
exploration license in the format
requested by the BLM. The BLM will
consider the data confidential and
proprietary until the BLM determines
that public access to the data will
not damage the competitive position of
the licensee or the lands involved
have been leased, whichever comes
first. Submit all data obtained under
the exploration license to the proper
BLM office.
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Subpart 3921--Pre-Sale Activities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporations, associations, and individuals may Section 3921.30.--The BLM will request 4 1 4 194
submit expressions of leasing interest for this information through the
specific areas to assist the applicable BLM publication of a notice in the Federal
State Director in determining whether or not Register and will use no specific form
to lease oil shale. The information provided to collect the information. The
will be used in the consultation with the expression of leasing interest will
governor of the affected state and in setting contain specific information
a geographic area for which a call for consisting of name and address and
applications will be requested area of interest described by legal
land description.
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[[Page 42952]]
Subpart 3922--Application Processing
--------------------------------------------------------------------------------------------------------------------------------------------------------
Entities interested in leasing the Federal oil Section 3922.20 and 3922.30.--Lease 308 3 924 44,796
shale resource must file an application in a applications must be filed in the
geographic area for which the BLM has issued a proper BLM state office. No specific
``Call for Applications.'' The information form of application is required, but
provided by the applicant will be used to the application must include
evaluate the impacts of issuing a proposed information necessary to evaluate the
lease on the human environment. Failure to impacts of issuing the proposed lease
provide the requested additional information on the human environment, including,
may result in suspension or termination of but not limited to, the following: (1)
processing of the application or in a decision Name, address, telephone number of
to deny the application applicant, and a qualification
statement, as required by subpart
3902; (2) A delineation of the
proposed lease area or areas, the
surface ownership (if other than the
United States) of those areas, a
description of the quality, thickness,
and depth of the oil shale and of any
other resources the applicant proposes
to extract, and environmental data
necessary to assess impacts from the
proposed development; (3) A
description of the proposed extraction
method, including personnel
requirements, production levels, and
transportation methods including: (a)
A description of the mining,
retorting, or in situ mining or
processing technology that the
operator would use and whether the
proposed development technology is
substantially identical to a
technology or method currently in use
to produce marketable commodities from
oil shale deposits; (b) An estimate of
the maximum surface area of the lease
area that will be disturbed or
undergoing reclamation at any one
time; (c) A description of the source
and quantities of water to be used and
of the water treatment and disposal
methods necessary to meet applicable
water quality standards; (d) A
description of the air quality
emissions; (e) A description of the
anticipated noise levels from the
proposed development; (f) A
description of how the proposed lease
development would comply with all
applicable statutes and regulations
governing management of chemicals and
disposal of solid waste. If the
proposed lease development would
include disposal of wastes on the
lease site, include a description of
measures to be used to prevent the
contamination of soil and of surface
and ground water; (g) A description of
how the proposed lease development
would avoid, or, to the extent
practicable, mitigate impacts to
species or habitats protected by
applicable state or Federal law or
regulations, and impacts to wildlife
habitat management; (h) A description
of reasonably foreseeable social,
economic, and infrastructure impacts
to the surrounding communities, and to
state and local governments from the
proposed development; (i) A
description of the known historical,
cultural, or archeological resources
within the lease area; (j) A
description of infrastructure that
would likely be required for the
proposed development and alternative
locations of those facilities, if
applicable; (k) A discussion of
proposed measures to mitigate any
adverse impacts to the environment and
to nearby communities; (l) A brief
description of the reclamation methods
that will be used; (m) Any other
information that shows that the
application meets the requirements of
this subpart or that the applicant
believes would assist the BLM in
analyzing the impacts of the proposed
development; and (n) A map, or maps,
showing: (i) The topography, physical
features, and natural drainage
patterns; (ii) Existing roads,
vehicular trails, and utility systems;
(iii) The location of any proposed
exploration operations, including
seismic lines and drill holes; (iv) To
the extent known, the location of any
proposed mining operations and
facilities, trenches, access roads, or
trails, and supporting facilities
including the approximate location and
extent of the areas to be used for
pits, overburden, and tailings; and
(v) The location of water sources or
other resources that may be used in
the proposed operations and
facilities. At any time during
processing of the application, or the
environmental or similar assessments
of the application, the BLM may
request additional information from
the applicant.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart 3924--Lease Sale Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prospective lessees will be required to submit Section 3924.10.--The BLM will request 8 1 8 388
a bid at a competitive sale in order to be the following bid information via the
issued a lease notice of oil shale lease sale: (1) A
certified check, cashier's check, bank
draft, money order, personal check, or
cash for one-fifth of the amount of
the bonus; and (2) A qualifications
statement signed by the bidder as
described in subpart 3902.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 42953]]
Subpart 3926--Conversion of Preference Right for Research, Demonstration, and Development (R, D and D) Leases
--------------------------------------------------------------------------------------------------------------------------------------------------------
The lessee of an R, D and D lease may apply for Section 3926.10(c).--A lessee of an R, 308 1 308 14,932
conversion of the R, D and D lease to a D and D lease identified in subpart
commercial lease 3926 must apply for the conversion of
the R, D and D lease to a commercial
lease no later than 90 days after the
commencement of production in
commercial quantities. No specific
form of application is required. The
application for conversion must be
filed in the BLM state office that
issued the R, D and D lease. The
conversion application must include:
(1) Documentation that there has been
commercial quantities of oil shale
produced from the lease, including the
narrative required by section 23 of R,
D and D leases; and (2) Documentation
that the lessee consulted with state
and local officials to develop a plan
for mitigating the socioeconomic
impacts of commercial development on
communities and infrastructure. (3) A
bonus payment equal to the FMV of the
lease; and (4) Bonding to cover all
costs associated with reclamation.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart 3930--Management of Oil Shale Exploration and Leases
--------------------------------------------------------------------------------------------------------------------------------------------------------
The records, logs, and samples provide Section 3930.11(b).--The operator/ 19 1 19 921
information necessary to determine the nature lessee must retain for one year all
and extent of oil shale resources on Federal drill and geophysical logs. The
lands and to monitor and adjust the extent of operator must also make such logs
the oil shale reserve. available for inspection or analysis
by the BLM. The BLM may require the
operator/lessee to retain
representative samples of drill cores
for 1 year. The BLM uses no specific
form to collect the information.
Section 3930.20(b).--The operator must 19 1 19 921
record any new geologic information
obtained during mining or in situ
development operations regarding any
mineral deposits on the lease. The
operator must report this new
information in a BLM-approved format
to the proper BLM office within 90
days of obtaining the information.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart 3931--Plans of Development and Exploration Plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
The plan of development must provide for Section 3931.11.--The plan of
reasonable protection and reclamation of the development must contain, at a
environment and the protection and diligent minimum, the following: (a) Names,
development of the oil shale resources in the addresses, and telephone numbers of
lease. those responsible for operations to be
conducted under the approved plan and
to whom notices and orders are to be
delivered, names and addresses of
Federal oil shale lessees and
corresponding Federal lease serial
numbers, and names and addresses of
surface and mineral owners of record,
if other than the United States; (b) A
general description of geologic
conditions and mineral resources
within the area where mining is to be
conducted, including appropriate maps;
(c) A copy of a suitable map or aerial
photograph showing the topography, the
area covered by each lease, the name
and location of major topographic and
cultural features; (d) A statement of
proposed methods of operation and
development, including the following
items as appropriate: (1) A
description detailing the extraction
technology to be used; (2) The
equipment to be used in development
and extraction; (3) The proposed
access roads; (4) The size, location,
and schematics of all structures,
facilities, and lined or unlined pits
to be built; (5) The stripping ratios,
development sequence, and schedule;
(6) The number of acres in the Federal
lease(s) or license(s) to be affected;
(7) Comprehensive well design and
procedure for drilling, casing,
cementing, testing, stimulation, clean-
up, completion, and production, for
all drilled well types, including
those used for heating, freezing, and
disposal; (8) A description of the
methods and means of protecting and
monitoring all aquifers; (9) Surveyed
well location plats or project-wide
well location plats; (10) A
description of the measurement and
handling of produced fluids, including
the anticipated production rates and
estimated recovery factors; and (11) A
description/discussion of the controls
that the operator will use to protect
the public, including identification
of: (i) Essential operations,
personnel, and health and safety
precautions; (ii) Programs and plans
for noxious gas control (hydrogen
sulfide, ammonia, etc.); (iii) Well
control procedures; (iv) Temporary
abandonment procedures; and (v) Plans
to address spills, leaks, venting, and
flaring; (e) An estimate of the
quantity and quality of the oil shale
resources; (f) An explanation of how
MER of the resource will be achieved
for each Federal lease; and (g)
Appropriate maps and cross sections
showing: (1) Federal lease boundaries
and serial numbers; (2) Surface
ownership and boundaries; (3)
Locations of any existing and
abandoned mines and existing oil and
gas well (including well bore
trajectories) and water well
locations, including well bore
trajectories; (4)
[[Page 42954]]
Typical geological structure cross 308 1 308 14,932
sections; (5) Location of shafts or
mining entries, strip pits, waste
dumps, retort facilities, and surface
facilities; (6) Typical mining or in
situ development sequence, with
appropriate time-frames; (h) A
narrative addressing the environmental
aspects of the proposed mine or in
situ operation, including at a
minimum, the following: (1) An
estimate of the quantity of water to
be used and pollutants that may enter
any receiving waters; (2) A design for
the necessary impoundment, treatment,
control, or injection of all produced
water, runoff water, and drainage from
workings; and (3) A description of
measures to be taken to prevent or
control fire, soil erosion,
subsidence, pollution of surface and
ground water, pollution of air, damage
to fish or wildlife or other natural
resources, and hazards to public
health and safety; (i) A reclamation
plan and schedule for all Federal
lease(s) or exploration license(s)
that details all reclamation
activities necessary to fulfill the
requirements of Sec. 3931.20; (j)
The method of abandonment of
operations on Federal lease(s) and
exploration license(s) proposed to
protect the unmined recoverable
reserves and other resources,
including: (1) The method proposed to
fill in, fence, or close all surface
openings that are hazardous to people
or animals; and (2) For in situ
operations, a description of the
method and materials to be used to
plug all abandoned development or
production wells; and (k) Any
additional information that the BLM
determines is necessary for analysis
or approval of the plan of development.
The BLM may, in the interest of conservation, Section 3931.30.--An application by a 24 1 24 1,164
order or agree to a suspension of operations lessee for suspension of operations
and production. and production must be filed in
duplicate in the proper BLM office and
must set forth why it is in the
interest of conservation to suspend
operations and production. The BLM
will use no specific form to collect
this information.
Except for casual use, before conducting any Section 3931.41.--The BLM will use no 24 1 24 1,164
exploration operations on federally-leased or specific form to collect this
federally-licensed lands, the lessee must information. Exploration plans must
submit an exploration plan to the BLM for contain the following information: (1)
approval. The name, address, and telephone
number of the applicant, and, if
applicable, that of the operator or
lessee of record; (2) The name,
address, and telephone number of the
representative of the applicant who
will be present during, and
responsible for, conducting
exploration; (3) A description of the
proposed exploration area, cross-
referenced to the map required under
section 3931.41, including: (a)
Applicable Federal lease and
exploration license serial numbers;
(b) Surface topography; (c) Geologic,
surface water, and other physical
features; (d) Vegetative cover; (e)
Endangered or threatened species
listed under the Endangered Species
Act of 1973 (16 U.S.C. 1531 et seq.)
that may be affected by exploration
operations; (f) Districts, sites,
buildings, structures, or objects
listed on, or eligible for listing on,
the National Register of Historic
Places that may be present in the
lease area; and (g) Known cultural or
archaeological resources located
within the proposed exploration area;
(4) A description of the methods to be
used to conduct oil shale exploration,
reclamation, and abandonment of
operations, including, but not limited
to: (a) The types, sizes, numbers,
capacity, and uses of equipment for
drilling and blasting and road or
other access route construction; (b)
Excavated earth-disposal or debris-
disposal activities; (c) The proposed
method for plugging drill holes; and
(d) The estimated size and depth of
drill holes, trenches, and test pits;
(5) An estimated timetable for
conducting and completing each phase
of the exploration, drilling, and
reclamation; (6) The estimated amounts
of oil shale or oil shale products to
be removed during exploration, a
description of the method to be used
to determine those amounts, and the
proposed use of the oil shale removed;
(7) A description of the measures to
be used during exploration for Federal
oil shale to comply with the
performance standards for exploration
(43 CFR 3930.10) and applicable
requirements of an approved state
program; (8) A map at a scale of
1:24,000 or larger showing the areas
of land to be affected by the proposed
exploration and reclamation. The map
must show: (a) Existing roads,
occupied dwellings, and pipelines; (b)
The proposed location of trenches,
roads, and other access routes and
structures to be constructed; (c)
Applicable Federal lease and
exploration license boundaries; (d)
The location of land excavations to be
conducted; (e) Oil shale exploratory
holes to be drilled or altered; (f)
Earth-disposal or debris-disposal
areas; (g) Existing bodies of surface
water; and (h) Topographic and
drainage features; and (9) The name
and address of the owner of record of
the surface land, if other than the
United States. If the surface is owned
by a person other than the applicant
or if the Federal oil shale is leased
to a person other than the applicant,
a description of the basis upon which
the applicant claims the right to
enter that land for the purpose of
conducting exploration and reclamation.
[[Page 42955]]
Approved exploration, mining and in situ Section 3931.50.--The BLM will use no 24 1 24 1,164
development plans may be modified by the specific form to collect this
operator or lessee to adjust to changed information. The operator or lessee
conditions or to correct an oversight. may apply in writing to the BLM for
modification of the approved
exploration plan or plan of
development to adjust to changed
conditions or to correct an oversight.
To obtain approval of an exploration
plan or plan of development
modification, the operator or lessee
must submit to the proper BLM office a
written statement of the proposed
modification and the justification for
such modification.
Production of all oil shale products or Section 3931.70.--(1) Report production 16 1 16 776
byproducts must be reported to the BLM on a of all oil shale products or by-
monthly basis. products to the BLM on a monthly
basis. (2) Report all production and
royalty information to the MMS under
30 CFR parts 210 and 216. (3) Submit
production maps to the proper BLM
office at the end of each royalty
reporting period or on a schedule
determined by the BLM. Show all
excavations in each separate bed or
deposit on the maps so that the
production of minerals for any period
can be accurately ascertained.
Production maps must also show surface
boundaries, lease boundaries,
topography, and subsidence resulting
from mining activities. (4) For in
situ development operations, the
lessee or operator must submit a map
showing all surface installations
including pipelines, meter locations,
or other points of measurement
necessary for production verification
as part of the plan of development.
All maps must be modified as necessary
to adequately represent existing
operations. (5) Within 30 days after
well completion, the lessee or
operator must submit to the proper BLM
office 2 copies of a completed Form
3160-4, Well Completion or
Recompletion Report and Log, limited
to information that is applicable to
oil shale operations. Well logs may be
submitted electronically using a BLM
approved electronic format. Describe
surface and bottom-hole locations in
latitude and longitude.
Within 30 days after drilling completion the Section 3931.80.--Within 30 days after 16 1 16 776
operator or lessee must submit to the BLM a drilling completion, the operator or
signed copy of records of all core or test lessee must submit to the proper BLM
holes made on the lands covered by the lease office a signed copy of records of all
or exploration license. core or test holes made on the lands
covered by the lease or exploration
license. The records must show the
position and direction of the holes on
a map. The records must include a log
of all strata penetrated and
conditions encountered, such as water,
gas, or unusual conditions, and copies
of analysis of all samples. Provide
this information to the proper BLM
office in either paper copy or in a
BLM-approved electronic format. Within
30 days after creation, the operator
or lessee must also submit to the
proper BLM office a detailed
lithologic log of each test hole and
all other in-hole surveys or other
logs produced. Upon the BLM's request,
the operator or lessee must provide to
the BLM splits of core samples and
drill cuttings.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart 3932--Lease Modifications and Readjustments
--------------------------------------------------------------------------------------------------------------------------------------------------------
A lessee may apply for a modification of a Section 3932.10(b) and Section 12 1 12 582
lease to include additional Federal lands 3932.30(c).--The BLM will use no
adjoining those in the lease. specific form to collect this
information. An application for
modification of the lease size must:
(1) Be filed with the proper BLM
office; (2) Contain a legal
description of the additional lands
involved; (3) Contain a justification
for the modification; (4) Explain why
the modification would be in the best
interest of the United States; (5)
Include a nonrefundable processing fee
that the BLM will determine under 43
CFR 3000.11; and (6) Include a signed
qualifications statement consistent
with subpart 3902. Before the BLM will
approve a lease modification, the
lessee must file a written acceptance
of the conditions in the modified
lease and a written consent of the
surety under the bond covering the
original lease as modified. The lessee
must also submit evidence that the
bond has been amended to cover the
modified lease.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart 3933--Assignments and Subleases
--------------------------------------------------------------------------------------------------------------------------------------------------------
Any lease may be assigned or subleased in whole Section 3933.31.--(1) The BLM will use 10 1 10 485
or in part to any person, association, or no specific form to collect this
corporation that meets the qualification information. File in triplicate at the
requirements at subpart 3902. proper BLM office a separate
instrument of assignment for each
lease assignment. File the assignment
application within 90 days of the date
of final execution of the assignment
instrument and with it include: (a)
Name and current address of assignee;
(b) Interest held by assignor and
interest to be assigned; (c) The
serial number of the affected lease
and a description of the lands to be
assigned as described in the lease;
(d) Percentage of overriding royalties
retained; and (e) Date and signature
of assignor. (2) The assignee must
provide a single copy of the request
for approval of assignment which must
contain a: (a) Statement of
qualifications and holdings as
required by subpart 3902; (b) Date and
signature of assignee; and (c)
Nonrefundable filing fee of $60.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 42956]]
Subpart 3934--Relinquishments, Cancellations, and Terminations
--------------------------------------------------------------------------------------------------------------------------------------------------------
A lease or exploration license may be Section 3934.10.--The BLM will use no 18 1 18 873
surrendered in whole or in part. specific form to collect this
information. The record title holder
must file a written relinquishment, in
triplicate, in the BLM state office
having jurisdiction over the lands
covered by the relinquishment.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Subpart 3935--Production and Sale Records
--------------------------------------------------------------------------------------------------------------------------------------------------------
Operators or lessees must maintain production Section 3935.10.--Operators or lessees 16 1 16 776
and sale records which must be available for must maintain accurate records: (1)
the BLM's examination during regular business Oil shale mined; (2) Oil shale put
hours. through the processing plant and
retort; (3) Mineral products produced
and sold; (4) Shale oil products,
shale gas, and shale oil by-products
sold; (5) Relevant quality analyses of
oil shale mined or processed and of
synthetic petroleum, shale oil or
shale oil by-products sold; and (6)
Shale oil products and by-products
that are consumed on lease for the
beneficial use of the lease.
--------------------------------------------------------------------------------------------------------
Totals..................................... ....................................... .............. 22 1,784 86,492
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
BLS
Job category occupational Mean hourly 40% for Hourly rate Weight (%) Weighted value
code wage* benefits per hour
--------------------------------------------------------------------------------------------------------------------------------------------------------
Attorney................................................ 23-1011 $56.29 $22.52 $78.81 10 $7.88
Managerial.............................................. 11-0000 45.53 18.21 63.74 20 12.75
Technical/Professional.................................. 17-2151 38.44 15.38 53.82 40 21.53
Clerical................................................ 43-0000 15.04 6.02 21.06 30 6.32
-----------------------------------------------------------------------------------------------
Total Weighted Value per Hour....................... .............. .............. .............. .............. 100 48.48
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Derived from Bureau of Labor Statistics: May 2006 National Occupational Employment and Wage Estimates, (http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://stats.bls.gov/oes/current/oes_nat.htm#b00-0000); and revised to reflect a 3.0 percent increase from the 2nd quarter of 2006 to the 2nd quarter of 2007 as reported in the Bureau of
Labor Statistics Civilian Employer Costs for Employee Compensation (http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://data.bls.gov/cgi-bin/surveymost?cm).
Based on an average number of actions, we estimate the processing
and cost recovery fees as follows:
Table 3
----------------------------------------------------------------------------------------------------------------
Estimated
case-by- Total
Estimated collections from processing and cost recovery case- Estimated Processing case cost estimated
by-case fees number of fee per recovery annual
actions action fee per collection
action
----------------------------------------------------------------------------------------------------------------
Part 3910--Oil Shale Exploration Licenses................... 1 $295 (\1\) $295
Subpart 3922--Application Processing........................ 3 (\1\) $172,323 516,969
The case-by-case processing fee does not include any
required studies or analyses that are completed by third
party contractors and funded by the applicant. The
regulations at 43 CFR 3000.11 provide the regulatory
framework for determining the cost recovery value.
Subpart 3925--Award of Lease................................ 1 60 (\1\) 60
The successful bidder must submit the necessary lease bond
(see subpart 3904), the first year's rental, and the
bidder's proportionate share of the cost of publication of
the sale notice.
Subpart 3932--Lease Size Modification....................... 1 (\1\) 9,208 9,208
Subpart 3933--Assignments and Subleases..................... 1 60 (\1\) 60
---------------------------------------------------
Totals.................................................. 7 ........... ........... 526,592
----------------------------------------------------------------------------------------------------------------
\1\ Not applicable.
The BLM will consider comments by the public on this proposed
collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the agency to perform its duties, including whether the
information is useful;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
[[Page 42957]]
(3) Enhance the quality, usefulness, and clarity of the information
to be collected; and
(4) Minimize the burden on the respondents, including the use of
automated collection techniques or other forms of information
technology.
The OMB is required to make a decision concerning the collection of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, a comment to OMB is best assured of having its full effect
if OMB receives it within 30 days of publication. This does not affect
the deadline for the public to comment to BLM on the proposed
regulations.
Authors
The principal authors of this proposed rule are Charlie Beecham,
II, and Mary Linda Ponticelli, Division of Solid Minerals (Washington
Office); assisted by Mavis Love, BLM Wyoming State Office; James
Kohler, Sr., BLM Utah State Office; Hank Szymanski, BLM Colorado State
Office; Paul McNutt, Division of Solid Minerals (Washington Office);
Kelly Odom, Division of Regulatory Affairs (Washington Office); and
Richard McNeer, Department of the Interior, Office of the Solicitor.
List of Subjects
43 CFR Part 3900
Administrative practice and procedure, Environmental protection,
Intergovernmental relations, Mineral royalties, Oil shale reserves,
Public lands-mineral resources, Reporting and recordkeeping
requirements, Surety bonds.
43 CFR Part 3910
Environmental protection, Exploration licenses, Intergovernmental
relations, Oil shale reserves, Public lands-mineral resources,
Reporting and recordkeeping requirements.
43 CFR Part 3920
Administrative practice and procedure, Environmental protection,
Intergovernmental relations, Oil shale reserves, public lands-mineral
resources, Reporting and recordkeeping requirements.
43 CFR Part 3930
Administrative practice and procedure, Environmental protection,
Mineral royalties, Oil shale reserves, Public lands-mineral resources,
Reporting and recordkeeping requirements, Surety bonds.
Accordingly, for the reasons stated in the preamble and under the
authorities stated below, the BLM proposes to amend 43 CFR subtitle B
Chapter II as follows:
C. Stephen Allred,
Assistant Secretary, Land and Minerals Management.
1. Add part 3900 to subchapter C to read as follows:
PART 3900--OIL SHALE MANAGEMENT--GENERAL
Subpart 3900--Oil Shale Management--Introduction
Sec.
3900.2 Definitions.
3900.5 Information collection.
3900.10 Lands subject to leasing.
3900.20 Appealing the BLM's decision.
3900.30 Filing documents.
3900.40 Multiple use development of leased or licensed lands.
3900.50 Land use plans and environmental considerations.
3900.61 Federal minerals where the surface is owned or administered
by other Federal agencies, by state agencies or charitable
organizations, or by private entities.
3900.62 Special requirements to protect the lands and resources.
Subpart 3901--Land Descriptions and Acreage
3901.10 Land descriptions.
3901.20 Acreage limitations.
3901.30 Computing acreage holdings.
Subpart 3902--Qualification Requirements
3902.10 Who may hold leases.
3902.21 Filing of qualification evidence.
3902.22 Where to file.
3902.23 Individuals.
3902.24 Associations, including partnerships.
3902.25 Corporations.
3902.26 Guardians or trustees.
3902.27 Heirs and devisees.
3902.28 Attorneys-in-fact.
3902.29 Other parties in interest.
Subpart 3903--Fees, Rentals, and Royalties
3903.20 Forms of payment.
3903.30 Where to submit payments.
3903.40 Rentals.
3903.51 Minimum production and payments in lieu of production.
3903.52 Production royalties.
3903.53 Overriding royalties.
3903.54 Waiver, suspension, or reduction of rental or payments in
lieu of production, or reduction of royalty, or waiver of royalty in
the first 5 years of the lease.
3903.60 Late payment or underpayment charges.
Subpart 3904--Bonds and Trust Funds
3904.10 Bonding requirements.
3904.11 When to file bonds.
3904.12 Where to file bonds.
3904.13 Acceptable forms of bonds.
3904.14 Individual lease, exploration license, and reclamation
bonds.
3904.15 Amount of bond.
3904.20 Default.
3904.21 Termination of the period of liability.
3904.40 Long-term water treatment trust funds.
Subpart 3905--Lease Exchanges
3905.10 Oil shale lease exchanges.
Authority: 30 U.S.C. 189, 359, and 241(a), 42 U.S.C. 15927, 43
U.S.C. 1732(b) and 1740.
Subpart 3900--Oil Shale Management--Introduction
Sec. 3900.2 Definitions.
As used in this part and parts 3910 through 3930 of this chapter,
the term:
Acquired lands means lands which the United States obtained through
purchase, gift, or condemnation, and mineral estates that are not
public domain lands, including mineral estates associated with lands
previously disposed of under the public land laws, including the mining
laws.
Act means the Mineral Leasing Act of 1920, as amended and
supplemented (30 U.S.C. 181 et seq.).
BLM means the Bureau of Land Management and includes the individual
employed by the Bureau of Land Management authorized to perform the
duties set forth in this part and parts 3910 through 3930.
Commercial quantities means production of shale oil quantities in
accordance with the approved Plan of Development for the proposed
project through the research, development, and demonstration activities
conducted on the lease, based on, and at the conclusion of which, there
is a reasonable expectation that the expanded operation would provide a
positive return after all costs of production have been met, including
the amortized costs of the capital investment.
Department means the Department of the Interior.
Diligent development means achieving or completing the prescribed
milestones listed in Sec. 3930.30 of this chapter.
Director means the Director, Bureau of Land Management.
Entity means a person, association, or corporation, or any
subsidiary, affiliate, corporation, or association controlled by or
under common control with such person, association, or corporation.
Exploration means drilling, excavating, and geological, geophysical
or geochemical surveying operations designed to obtain detailed data on
the physical and chemical characteristics of Federal oil shale and its
environment including:
[[Page 42958]]
(1) The strata below the Federal oil shale;
(2) The overburden;
(3) The strata immediately above the Federal oil shale; and
(4) The hydrologic conditions associated with the Federal oil
shale.
Exploration license means a license issued by the BLM that allows
the licensee to explore unleased oil shale deposits to obtain geologic,
environmental, and other pertinent data concerning the deposits.
Exploration plan means a plan prepared in sufficient detail to show
the:
(1) Location and type of exploration to be conducted;
(2) Environmental protection procedures to be taken;
(3) Present and proposed roads, if any; and
(4) Reclamation and abandonment procedures to be followed upon
completion of operations.
Fair market value (FMV) means the monetary amount for which the oil
shale deposit would be leased by a knowledgeable owner willing, but not
obligated, to lease to a knowledgeable purchaser who desires, but is
not obligated, to lease the oil shale deposit.
Federal lands means any lands or interests in lands, including oil
shale interests underlying non-Federal surface, owned by the United
States, without reference to how the lands were acquired or what
Federal agency administers the lands.
Infrastructure means all support structures necessary for the
production or development of shale oil, including, but not limited to:
(1) Offices;
(2) Shops;
(3) Maintenance facilities;
(4) Pipelines;
(5) Roads;
(6) Electrical transmission lines;
(7) Well bores;
(8) Storage tanks;
(9) Ponds;
(10) Monitoring stations;
(11) Processing facilities--retorts; and
(12) Production facilities.
In situ operation means the processing of oil shale in place.
Interest in a lease, application, or bid means any:
(1) Record title interest;
(2) Overriding royalty interest;
(3) Working interest;
(4) Operating rights or option or any agreement covering such an
interest; or
(5) Participation or any defined or undefined share in any
increments, issues, or profits that may be derived from or that may
accrue in any manner from a lease based on or under any agreement or
understanding existing when an application was filed or entered into
while the lease application or bid is pending.
Kerogen means the solid, organic substance in sedimentary rock that
yields oil when it undergoes destructive distillation.
Lease means a Federal lease issued under the mineral leasing laws,
which grants the exclusive right to explore for and extract a
designated mineral.
Lease bond means the bond or equivalent security given to the
Department to assure performance of all obligations associated with all
lease terms and conditions.
Maximum economic recovery means that, based on standard industry
operating practices, all profitable portions of a leased Federal oil
shale deposit must be mined. This requirement does not restrict the
authority of the BLM to ensure the conservation of the oil shale
reserves and other resources and to prevent the wasting of oil shale.
MMS means the Minerals Management Service.
Oil shale means a fine-grained sedimentary rock containing:
(1) Organic matter which was derived chiefly from aquatic organisms
or waxy spores or pollen grains, which is only slightly soluble in
ordinary petroleum solvents, and of which a large proportion is
distillable into synthetic petroleum; and
(2) Inorganic matter, which may contain other minerals. This term
is applicable to any argillaceous, carbonate, or siliceous sedimentary
rock which, through destructive distillation, will yield synthetic
petroleum.
Permit means any of the required approvals that are issued by
Federal, state, or local agencies.
Plan of development means the plan created for oil shale operations
that complies with the requirements of the Act and that details the
plans, equipment, methods, and schedules to be used in oil shale
development.
Production means:
(1) The extraction of shale oil, shale gas, or shale oil by-
products through surface retorting or in situ recovery methods; or
(2) The severing of oil shale rock through surface or underground
mining methods.
Proper BLM office means the Bureau of Land Management office having
jurisdiction over the lands under application or covered by a lease or
exploration license and subject to the regulations in this part and in
parts 3910 through 3930 of this chapter (see subpart 1821 of part 1820
of this chapter for a list of BLM state offices).
Public domain lands means lands, including mineral estates, which:
(1) Never left the ownership of the United States;
(2) Were obtained by the United States in exchange for public
domain lands;
(3) Have reverted to the ownership of the United States; or
(4) Were specifically identified by Congress as part of the public
domain.
Reclamation means the measures undertaken to bring about the
necessary reconditioning or restoration of lands or waters affected by
exploration, mining, in situ operations, onsite processing operations
or waste disposal in a manner which will meet the requirements imposed
by the BLM under applicable law.
Reclamation bond means the bond or equivalent security given to the
BLM to assure performance of all obligations relating to reclamation of
disturbed areas under an exploration license or lease.
Secretary means the Secretary of the Interior.
Shale gas means the gaseous hydrocarbon-bearing products of surface
retorting of oil shale or of in situ extraction that is not liquefied
into shale oil. In addition to hydrocarbons, shale gas might include
other gases such as carbon dioxide, nitrogen, helium, sulfur, other
residual or specialty gases, and entrained hydrocarbon liquids.
Shale oil means synthetic petroleum derived from the destructive
distillation of oil shale.
Sole party in interest means a party who alone is or will be vested
with all legal and equitable rights and responsibilities under a lease,
bid, or application for a lease.
Surface management agency means the Federal agency with
jurisdiction over the surface of federally-owned lands containing oil
shale deposits.
State Director means an employee of the Bureau of Land Management
designated as the chief administrative officer of one of the BLM's 12
administrative areas designated as states.
Surface retort means the above-ground facility used for the
extraction of kerogen by heating mined shale.
Surface retort operation means the extraction of kerogen by heating
mined shale in an above-ground facility.
Synthetic petroleum means synthetic crude oil manufactured from
shale oil and suitable for use as a refinery feedstock and for
petrochemical production.
[[Page 42959]]
Sec. 3900.5 Information collection.
(a) OMB has approved the information collection requirements in
parts 3900 through 3930 of this chapter under 44 U.S.C. 3501 et seq.
The table in paragraph (d) of this section lists the subpart in the
rule requiring the information and its title, provides the OMB control
number, and summarizes the reasons for collecting the information and
how the BLM uses the information.
(b) Respondents are oil shale lessees and operators. The
requirement to respond to the information collections in these parts
are mandated under the EP Act, (42 U.S.C. 15927), the Mineral Leasing
Act for Acquired Lands of 1947 (30 U.S.C. 351-359), and the Federal
Land Policy and Management Act (FLPMA) of 1976 (43 U.S.C. 1701 et seq.,
including 43 U.S.C. 1732).
(c) The Paperwork Reduction Act of 1995 requires us to inform the
public that an agency may not conduct or sponsor, and you are not
required to respond to, a collection of information unless it displays
a currently valid OMB control number.
(d) The BLM is collecting this information for the reasons given in
the following table:
------------------------------------------------------------------------
43 CFR parts 3900-3930, Reasons for collecting information and
general (1004-XXXX) how used
------------------------------------------------------------------------
Sections 3904.12, A lessee or licensee must furnish a bond
3904.14(c)(1). before a lease or exploration license
may be issued or transferred or a plan
of development approved. The BLM will
review the bond and, if adequate as to
amount and execution, will accept it in
order to indemnify the United States
against default on payments due or other
performance obligations. The BLM may
also adjust the bond amount to reflect
changed conditions. The BLM will cancel
the bond when all requirements are
satisfied.
Sections 3910.31, 3910.44.... For those lands where no exploration data
is available, the lease applicant may
apply for an exploration license to
conduct exploration on unleased public
lands to determine the extent and
specific characteristics of the Federal
oil shale resource. The BLM will use the
information in the application to:
(1) Locate the proposed exploration site;
(2) Determine if the lands are subject to
entry for exploration;
(3) Prepare a notice of invitation to
other parties to participate in the
exploration; and
(4) Ensure the exploration plan is
adequate to safeguard resource values,
and public and worker health and safety.
The BLM will use this information from a
licensee to determine if it will offer
the land area for lease.
Section 3921.30.............. Corporations, associations, and
individuals may submit expressions of
leasing interest for specific areas to
assist the applicable BLM State Director
in determining whether or not to lease
oil shale. The information provided will
be used in the consultation with the
governor of the affected state and in
setting a geographic area for which a
call for applications will be requested.
Sections 3922.20 and 3922.30. Entities interested in leasing the
Federal oil shale resource must file an
application in a geographic area for
which the BLM has issued a ``Call for
Applications.'' The information provided
by the applicant will be used to
evaluate the impacts of issuing a
proposed lease on the human environment.
Failure to provide the requested
additional information may result in
suspension or termination of processing
of the application or in a decision to
deny the application.
Section 3924.10.............. Prospective lessees will be required to
submit a bid at a competitive sale in
order to be issued a lease.
Section 3926.10(c)........... The lessee of an R, D and D lease may
apply for conversion of the R, D and D
lease to a commercial lease.
Section 3930.11(b), The records, logs, and samples provide
3930.20(b). information necessary to determine the
nature and extent of oil shale resources
on Federal lands and to monitor and
adjust the extent of the oil shale
reserve.
Section 3931.11.............. The plan of development must provide for
reasonable protection and reclamation of
the environment and the protection and
diligent development of the oil shale
resources in the lease.
Section 3931.30.............. The BLM may, in the interest of
conservation, order or agree to a
suspension of operations and production.
Section 3931.41.............. Except for casual use, before conducting
any exploration operations on federally-
leased or federally-licensed lands, the
lessee must submit an exploration plan
to the BLM for approval.
Section 3931.50.............. Approved exploration, mining and in situ
development plans may be modified by the
operator or lessee to adjust to changed
conditions or to correct an oversight.
Section 3931.70.............. Production of all oil shale products or
byproducts must be reported to the BLM
on a monthly basis.
Section 3931.80.............. Within 30 days after drilling completion
the operator or lessee must submit to
the BLM a signed copy of records of all
core or test holes made on the lands
covered by the lease or exploration
license.
Sections 3932.10(b) and A lessee may apply for a modification of
3932.30(c). a lease to include additional Federal
lands adjoining those in the lease.
Section 3933.31.............. Any lease may be assigned or subleased in
whole or in part to any person,
association, or corporation that meets
the qualification requirements at
subpart 3902.
Section 3934.10.............. A lease or exploration license may be
surrendered in whole or in part.
Section 3935.10.............. Operators or lessees must maintain
production and sale records which must
be available for the BLM's examination
during regular business hours.
------------------------------------------------------------------------
Sec. 3900.10 Lands subject to leasing.
The BLM may issue oil shale leases under this part on all Federal
lands except:
(a) Those lands specifically excluded from leasing by the Act; and
(b) Any other lands withdrawn from leasing.
Sec. 3900.20 Appealing the BLM's decision.
Any party adversely affected by a BLM decision made under this part
or parts 3910 through 3930 of this chapter may appeal the decision
under part 4 of this title. All decisions and orders by the BLM under
these parts remain effective pending appeal unless the BLM decides
otherwise. A petition for the stay of a decision may be filed with the
Interior Board of Land Appeals.
Sec. 3900.30 Filing documents.
(a) All necessary documents must be filed in the proper BLM office.
A document is considered filed when the proper BLM office receives it
with any required fee.
[[Page 42960]]
(b) All information submitted to the BLM under the regulations in
this part or parts 3910 through 3930 will be available to the public
unless exempt from disclosure under the Freedom of Information Act (5
U.S.C. 552), under part 2 of this title, or unless otherwise provided
for by law.
Sec. 3900.40 Multiple use development of leased or licensed lands.
(a) The granting of an exploration license or lease for the
exploration, development, or production of deposits of oil shale does
not preclude the BLM from issuing other exploration licenses or leases
for the same lands for deposits of other minerals. Each exploration
license or lease reserves the right to allow any other uses or to allow
disposal of the leased lands if it does not unreasonably interfere with
the exploration and mining operations of the lessee. The lessee or the
licensee must make all reasonable efforts to avoid interference with
other such authorized uses.
(b) Subsequent lessee or licensee will be required to conduct
operations in a manner that will not interfere with the established
rights of existing lessees or licensees.
(c) When the BLM issues an oil shale lease, it will cancel all oil
shale exploration licenses for the leased lands.
Sec. 3900.50 Land use plans and environmental considerations.
(a) Any lease or exploration license issued under this part or
parts 3910 through 3930 of this chapter will be issued in conformance
with the decisions, terms, and conditions of a comprehensive land use
plan developed under part 1600 of this chapter.
(b) Before a lease or exploration license is issued, the BLM, or
the appropriate surface management agency, must comply with the
requirements of the National Environmental Policy Act of 1969 (NEPA).
(c) Before the BLM approves a plan of development, the BLM must
comply with NEPA, in cooperation with the surface management agency
when possible, if the surface is managed by another Federal agency.
Sec. 3900.61 Federal minerals where the surface is owned or
administered by other Federal agencies, by state agencies or charitable
organizations, or by private entities.
(a) Public domain lands. Unless consent is required by law, the BLM
will issue a lease or exploration license only after the BLM has
consulted with the surface management agency on public domain lands
where the surface is administered by an agency outside of the
Department. The BLM will not issue a lease or an exploration license on
lands to which the surface managing agency withholds consent required
by statute.
(b) Acquired lands. The BLM will issue a lease on acquired lands
only after receiving written consent from an appropriate official of
the surface management agency.
(c) Lands covered by lease or license. If a Federal surface
management agency outside of the Department has required special
stipulations in the lease or license or has refused consent to issue
the lease or license, an applicant may pursue the administrative
remedies to challenge that decision offered by that particular surface
management agency, if any. If the applicant notifies the BLM within 30
calendar days after receiving the BLM's decision that the applicant has
requested the surface management agency to review or reconsider its
decision, the time for filing an appeal to the Interior Board of Land
Appeals under part 4 of this title is suspended until a decision is
reached by such agency.
(d) The BLM will not issue a lease or exploration license on
National Forest System Lands without the consent of the Forest Service.
(e) State's, charitable organization's, or private entity's
ownership of surface overlying Federal Minerals. Where the United
States has conveyed title to, or otherwise transferred the control of
the surface of lands to any state or political subdivision, agency, or
instrumentality thereof, other than another Federal agency, but
including a college or any other educational corporation or
association, to a charitable or religious corporation or association,
or to a private entity, the BLM will send such parties written
notification by certified mail of the application for exploration
license or lease. In the written notification, the BLM will give the
parties a reasonable time, not to exceed 90 calendar days, within which
to suggest any lease stipulations necessary for the protection of
existing surface improvements or uses and to set forth the facts
supporting the necessity of the stipulations or file any objections it
may have to the issuance of the lease or license. The BLM makes the
final decision as to whether to issue the lease or license and on what
terms based on a determination as to whether the interests of the
United States would best be served by issuing the lease or license with
the particular stipulations. This is true even in cases where the party
controlling the surface opposes the issuance of a lease or license or
wishes to place restrictive stipulations on the lease.
Sec. 3900.62 Special requirements to protect the lands and resources.
The BLM will specify stipulations in a lease or exploration license
to protect the lands and their resources. This may include stipulations
required by the surface management agency or recommended by the surface
management agency or non-Federal surface owner and accepted by the BLM.
Subpart 3901--Land Descriptions and Acreage
Sec. 3901.10 Land descriptions.
(a) All lands in an oil shale lease must be described by the legal
subdivisions of the public land survey system or if the lands are
unsurveyed, the legal description by metes and bounds.
(b) Unsurveyed lands will be surveyed, at the cost of the lease
applicant, by a surveyor approved or employed by the BLM.
Sec. 3901.20 Acreage limitations.
No entity may hold more than 50,000 acres of Federal oil shale
leases in any one state. Oil shale lease acreage does not count toward
acreage limitations associated with leases for other minerals.
Sec. 3901.30 Computing acreage holdings.
The maximum acreage in any one state refers to the acres an entity
may hold under a Federal lease on either public domain lands or
acquired lands. Acquired lands and public domain lands are counted
separately, so an entity may hold up to the maximum acreage of each at
the same time.
Subpart 3902--Qualification Requirements
Sec. 3902.10 Who may hold leases.
(a) The following entities may hold leases or interests therein:
(1) Citizens of the United States;
(2) Associations (including partnerships and trusts) of such
citizens; and
(3) Corporations organized under the laws of the United States or
of any state or territory thereof.
(b) Citizens of a foreign country may only hold interest in leases
through stock ownership, stock holding, or stock control in such
domestic corporations. Foreign citizens may hold stock in United States
corporations that hold leases if the Secretary has not determined that
laws, customs, or regulations of their country deny similar privileges
to citizens or corporations of the United States.
[[Page 42961]]
(c) A minor may not hold a lease. A legal guardian or trustee of a
minor may hold a lease.
(d) An entity must be in compliance with Section 2(a)(2)(A) of the
Act in order to hold a lease. If the BLM erroneously issues a lease to
an entity that is in violation of Section 2(a)(2)(A) of the Act, the
BLM will void the lease.
Sec. 3902.21 Filing of qualification evidence.
Applicants must file with the BLM a statement and evidence that the
qualification requirements in this subpart are met. These may be filed
separately from the lease application, but must be filed in the same
office as the application. After the BLM accepts the applicant's
qualifications, any additional information may be provided to the same
BLM office by referring to the serial number of the record in which the
evidence is filed. All changes to the qualifications statement must be
in writing. The evidence provided must be current, accurate, and
complete.
Sec. 3902.22 Where to file.
The lease application and qualification evidence must be filed in
the proper BLM office (see subpart 1821 of part 1820 of this chapter).
Sec. 3902.23 Individuals.
Individuals who are applicants must provide to the BLM a signed
statement showing:
(a) U.S. citizenship; and
(b) That acreage holdings do not exceed the limits in Sec. 3901.20
of this chapter. This includes holdings through a corporation,
association, or partnership in which the individual is the beneficial
owner of more than 10 percent of the stock or other instruments of
control.
Sec. 3902.24 Associations, including partnerships.
Associations that are applicants must provide to the BLM:
(a) A signed statement that:
(1) Lists the names, addresses, and citizenship of all members of
the association who own or control 10 percent or more of the
association or partnership, and certifies that the statement is true;
(2) Lists the names of the members authorized to act on behalf of
the association; and
(3) Certifies that the association or partnership's acreage
holdings and those of any member under paragraph (a)(1) of this section
do not exceed the acreage limits in Sec. 3901.20 of this chapter; and
(b) A copy of the articles of association or the partnership
agreement.
Sec. 3902.25 Corporations.
Corporate officers or authorized attorneys-in-fact who represent
applicants must provide to the BLM a signed statement that:
(a) Names the state or territory of incorporation;
(b) Lists the name and citizenship of, and percentage of stock
owned, held, or controlled by, any stockholder owning, holding, or
controlling more than 10 percent of the stock of the corporation, and
certifies that the statement is true;
(c) Lists the names of the officers authorized to act on behalf of
the corporation; and
(d) Certifies that the corporation's acreage holdings, and those of
any stockholder identified under paragraph (b) of this section, do not
exceed the acreage limits in Sec. 3901.20 of this chapter.
Sec. 3902.26 Guardians or trustees.
Guardians or trustees for a trust, holding on behalf of a
beneficiary, who are applicants must provide to the BLM:
(a) A signed statement that:
(1) Provides the beneficiary's citizenship;
(2) Provides the guardian's or trustee's citizenship;
(3) Provides the grantor's citizenship, if the trust is revocable;
and
(4) Certifies the acreage holdings of the beneficiary, the
guardian, trustee, or grantor, if the trust is revocable, do not exceed
the aggregate acreage limitations in Sec. 3901.20 of this chapter; and
(b) A copy of the court order or other document authorizing or
creating the trust or guardianship.
Sec. 3902.27 Heirs and devisees.
If an applicant or successful bidder for a lease dies before the
lease is issued:
(a) The BLM will issue the lease to the heirs or devisees, or their
guardian, if probate of the estate has been completed or is not
required. Before the BLM will recognize the heirs or devisees or their
guardian as the record title holders of the lease, they must provide to
the proper BLM office:
(1) A certified copy of the will or decree of distribution, or if
no will or decree exists, a statement signed by the heirs that they are
the only heirs and citing the provisions of the law of the deceased's
last domicile showing that no probate is required; and
(2) A statement signed by each of the heirs or devisees with
reference to citizenship and holdings as required by Sec. 3902.23 of
this chapter. If the heir or devisee is a minor, the guardian or
trustee must sign the statement; and
(b) The BLM will issue the lease to the executor or administrator
of the estate, if probate is required, but is not completed. In this
case, the BLM considers the executor or administrator to be the record
title holder of the lease. Before the BLM will issue the lease to the
executor or administrator, the executor or administrator must provide
to the proper BLM office:
(1) Evidence that the person who, as executor or administrator,
submits lease and bond forms has authority to act in that capacity and
to sign those forms;
(2) A certified list of the heirs or devisees of the deceased; and
(3) A statement signed by each heir or devisee concerning
citizenship and holdings, as required by Sec. 3902.23 of this chapter.
Sec. 3902.28 Attorneys-in-fact.
Attorneys-in-fact must provide to the proper BLM office evidence of
the authority to act on behalf of the applicant and a statement of the
applicant's qualifications and acreage holdings if it is also empowered
to make this statement. Otherwise, the applicant must provide the BLM
this information separately.
Sec. 3902.29 Other parties in interest.
If there is more than one party in interest in an application for a
lease, include with the application the names of all other parties who
hold or will hold any interest in the application or in the lease. All
interested parties who wish to hold an interest in a lease must provide
to the BLM the information required by this subpart to qualify to hold
a lease interest.
Subpart 3903--Fees, Rentals, and Royalties
Sec. 3903.20 Forms of payment.
All payments must be by U.S. postal money order or negotiable
instrument payable in U.S. currency. In the case of payments made to
the MMS, such payments may also be made by electronic funds transfer
(see 30 CFR part 218 for the MMS's payment procedures).
Sec. 3903.30 Where to submit payments.
(a) All filing and processing fees, all first-year rentals, and all
bonuses for leases issued under this part or parts 3910 through 3930 of
this chapter must be paid to the BLM state office that manages the
lands covered by the application, lease, or exploration license, unless
the BLM designates a different state office. The first one-fifth bonus
installment is paid to the appropriate BLM state office. All remaining
bonus installment payments are paid to the MMS.
[[Page 42962]]
(b) All second-year and subsequent rentals and all other payments
for leases are paid to the MMS.
(c) All royalties on producing leases and all payments under leases
in their minimum production period are paid to the MMS.
Sec. 3903.40 Rentals.
(a) The rental rate for oil shale leases is $2.00 per acre, or
fraction thereof, payable in advance of the lease year. Rentals paid
for any 1 year are credited against any production royalties accruing
for that year.
(b) The BLM will send a notice demanding payment of late rentals
within 30 calendar days after receipt of the notification. Failure to
provide payment within 30 calendar days after notification will result
in the BLM taking action to cancel the lease (see Sec. 3934.30 of this
chapter).
Sec. 3903.51 Minimum production and payments in lieu of production.
(a) Each lease must have a minimum annual production amount of
shale oil or make a payment in lieu of production for any particular
lease year, beginning with the 10th lease year.
(b) The payment in lieu of annual production is established in the
lease and will not be less than $4 per acre or fraction thereof per
year, payable in advance. Production royalty payments will be credited
to payments in lieu of annual production for that year only.
Option 1
Sec. 3903.52 Production royalties.
(a) The lessee must pay royalties on all products of oil shale that
are sold from or transported off of the lease.
(b) The royalty rate for the products of oil shale is 5 percent of
the amount or value of production.
Option 2
Sec. 3903.52 Production royalties.
(a) The lessee must pay royalties on the amount or value of all
products of oil shale that are sold from or transported off of the
lease.
(b) The standard royalty rate for the products of oil shale is 12.5
percent of the amount or value of production.
(c) For any lease that begins production of oil shale within 12
years of issuance of the first commercial oil shale lease issued under
subpart 3925 or subpart 3926, the royalty rate is 5 percent of the
amount or value of production on the first 30 million barrels of oil
equivalent produced from that oil shale lease.
Sec. 3903.53 Overriding royalties.
The lessee must file documentation of all overriding royalties
associated with the lease in the proper BLM office within 90 calendar
days after execution of the assignment of the overriding royalties.
Sec. 3903.54 Waiver, suspension, or reduction of rental or payments
in lieu of production, or reduction of royalty, or waiver of royalty in
the first 5 years of the lease.
(a) In order to encourage the maximum economic recovery (MER) of
the leased mineral(s), and in the interest of conservation, whenever
the BLM determines it is necessary to promote development or finds that
leases cannot be successfully operated under the lease terms, the BLM
may waive, suspend, or reduce the rental or payment in lieu of
production, reduce the rate of royalty, or in the first 5 years of the
lease, waive the royalty.
(b) Applications for waivers, suspension or reduction of rentals or
payment in lieu of production, reduction in royalty, or waiver of
royalty for the first 5 years of the lease must contain the serial
number of the lease, the name of the record title holder, the operator
or sub-lessee, a description of the lands by legal subdivision, and the
following information:
(1) The location of each oil shale mine or operation, and include:
(i) A map showing the extent of the mining or development
operations;
(ii) A tabulated statement of the minerals mined and subject to
royalty for each month covering a period of not less than 12 months
immediately preceding the date of filing of the application; and
(iii) The average production per day mined for each month, and
complete information as to why the minimum production was not attained;
(2) Each application must contain:
(i) A detailed statement of expenses and costs of operating the
entire lease;
(ii) The income from the sale of any leased products;
(iii) All facts showing whether the mines can be successfully
operated under the royalty or rental fixed in the lease; and
(iv) Where the application is for a reduction in royalty,
information as to whether royalties or payments out of production are
paid to anyone other than the United States, the amounts so paid, and
efforts made to reduce those payments;
(3) Any overriding royalties cannot be greater in aggregate than
one-half the royalties paid to the United States.
(c) Contact the proper BLM office for detailed information on
submitting copies of these applications electronically.
Sec. 3903.60 Late payment or underpayment charges.
Late payment or underpayment charges will be assessed under MMS
regulations at 30 CFR 218.202.
Subpart 3904--Bonds and Trust Funds
Sec. 3904.10 Bonding requirements.
(a) Prior to issuing a lease or exploration license, the BLM
requires exploration license or lease bonds for each lease or
exploration license that covers all liabilities, other than
reclamation, that may arise under the lease or license. The bond must
cover all record title owners, operating rights owners, operators, and
any person who conducts operations or is responsible for payments under
a lease or license.
(b) Before the BLM will approve a plan of development, the lessee
must provide to the proper BLM office a reclamation bond to cover all
costs the BLM estimates will be necessary to cover reclamation.
Sec. 3904.11 When to file bonds.
File the lease bond prior to lease issuance, file the reclamation
bond prior to the plan of development approval, and file the
exploration bond prior to exploration license issuance.
Sec. 3904.12 Where to file bonds.
File one copy of the bond form with original signatures in the
proper BLM state office. Bonds must be filed on an approved BLM form.
The obligor of a personal bond must sign the form. Surety bonds must
have the lessee's and the acceptable surety's signature.
Sec. 3904.13 Acceptable forms of bonds.
(a) The BLM will accept either a personal bond or a surety bond.
Personal bonds are pledges of any of the following:
(1) Cash;
(2) Cashier's check;
(3) Certified check; or
(4) Negotiable U.S. Treasury bonds equal in value to the bond
amount. Treasury bonds must give the Secretary authority to sell the
securities in the case of failure to comply with the conditions and
obligations of the exploration license or lease.
(b) Surety bonds must be issued by qualified surety companies
approved by the Department of the Treasury. A list of qualified
sureties is available at any BLM state office.
[[Page 42963]]
Sec. 3904.14 Individual lease, exploration license, and reclamation
bonds.
(a) The BLM will determine individual lease bond amounts on a case-
by-case basis. The minimum lease bond amount is $25,000.
(b) The BLM will determine reclamation bond and exploration license
bond amounts on a case-by-case basis when it approves a plan of
development or exploration plan. The reclamation or exploration license
bond must be sufficient to cover the estimated cost of site
reclamation.
(c) The BLM may enter into agreements with states to accept a state
reclamation bond to cover the BLM's reclamation bonding requirements.
The BLM may request additional information from the lessee or operator
to determine whether the state bond will cover all of the BLM's
reclamation requirements.
(1) If a state bond is to be used to satisfy the BLM bonding
requirements, evidence verifying that the existing state bond will
satisfy all the BLM reclamation bonding requirements must be filed in
the proper BLM office.
(2) The BLM will require an additional bond if the BLM determines
that the state bond does not cover all of the BLM bonding requirements.
Sec. 3904.15 Amount of bond.
(a) The BLM may increase or decrease the required bond amount if it
determines that a change in amount is appropriate to cover the costs
and obligations of complying with the requirements of the lease or
license and these regulations. The BLM will not decrease the bond
amount below the minimum (see Sec. 3904.14(a) of this chapter).
(b) The lessee or operator must submit to the BLM every three years
after reclamation bond approval a revised cost estimate of the
reclamation costs. If the current bond does not cover the revised
estimate of reclamation costs, the lessee or operator must increase the
reclamation bond amount to meet or exceed the revised cost estimate.
Sec. 3904.20 Default.
(a) The BLM will demand payment from the lease bond to cover
nonpayment of any rental or royalty owed or the reclamation or
exploration license bond for any reclamation obligations that are not
met. The BLM will reduce the bond amount by the amount of the payment
made to cover the default.
(b) After any default, the BLM will provide notification of the
amount required to restore the bond to the required level. A new bond
or an increase in the existing bond to its pre-default level must be
provided to the proper BLM office within 6 months of the BLM's written
notification that the bond is below its required level. The BLM may
accept separate or substitute bonds for each exploration license or
lease. The BLM may take action to cancel the lease or exploration
license covered by the bond if a replacement bond is not provided
within the time period stated in the notification.
Sec. 3904.21 Termination of the period of liability.
(a) The BLM will not consent to termination of the period of
liability under a bond unless an acceptable replacement bond has been
filed or until all of the terms and conditions of the license or lease
have been fulfilled.
(b) Terminating the period of liability of a bond ends the period
during which obligations continue to accrue, but does not relieve the
surety of the responsibility for obligations that accrued during the
period of liability.
Sec. 3904.40 Long-term water treatment trust funds.
(a) The BLM may require the operator or lessee to establish a trust
fund or other funding mechanism to ensure the continuation of long-term
treatment to achieve water quality standards and for other long-term,
post-mining maintenance requirements. The funding must be adequate to
provide for the construction, long-term operation, maintenance, or
replacement of any treatment facilities and infrastructure, for as long
as the treatment and facilities are needed after mine closure. The BLM
may identify the need for a trust fund or other funding mechanism
during plan review or later.
(b) In determining whether a trust fund will be required, the BLM
will consider the following factors:
(1) The anticipated post-mining obligations (PMO) that are
identified in the environmental document or approved plan of
development;
(2) Whether there is a reasonable degree of certainty that the
treatment will be required based on accepted scientific evidence or
models;
(3) The determination that the financial responsibility for those
obligations rests with the operator; and
(4) Whether it is feasible, practical, or desirable to require
separate or expanded reclamation bonds for those anticipated long-term
PMOs.
Subpart 3905--Lease Exchanges
Sec. 3905.10 Oil shale lease exchanges.
To facilitate the recovery of oil shale, the BLM may consider land
exchanges where appropriate and feasible to consolidate land ownership
and mineral interest into manageable areas. Exchanges are covered under
part 2200 of this chapter.
2. Add part 3910 to subchapter C to read as follows:
PART 3910--OIL SHALE EXPLORATION LICENSES
Subpart 3910--Exploration Licenses
Sec.
3910.21 Lands subject to exploration.
3910.22 Lands managed by agencies other than the BLM.
3910.23 Requirements for conducting exploration activities.
3910.31 Filing of an application for an exploration license.
3910.32 Environmental analysis.
3910.40 Exploration license requirements.
3910.41 Issuance, modification, relinquishment, and cancellation.
3910.42 Limitations on exploration licenses.
3910.44 Collection and submission of data.
3910.50 Surface use.
Authority: 25 U.S.C. 396(d) and 2107, 30 U.S.C. 241(a), 42
U.S.C. 15927, 43 U.S.C. 1732(b) and 1740.
Subpart 3910--Exploration Licenses
Sec. 3910.21 Lands subject to exploration.
The BLM may issue oil shale exploration licenses for all Federal
lands subject to leasing under Sec. 3900.10 of this chapter, except
lands that are in an existing oil shale lease or in preference right
leasing areas under the research, development, and demonstration (R, D
and D) program. The BLM may issue exploration licenses for lands in
preference right lease areas only to the R, D and D lessee.
Sec. 3910.22 Lands managed by agencies other than the BLM.
(a) The consent and consultation procedures required by Sec.
3900.61 of this chapter also apply to exploration license applications.
(b) If exploration activities could affect the adjacent lands under
the surface management of a Federal agency other than the BLM, the BLM
will consult with that agency before issuing an exploration license.
Sec. 3910.23 Requirements for conducting exploration activities.
Exploration activities on Federal lands must be conducted under an
exploration license or oil shale lease and an approved exploration plan
under Sec. 3904.41 of this chapter. The licensee may not remove any
oil shale for sale, but may remove a reasonable amount of oil shale for
analysis and study.
[[Page 42964]]
Sec. 3910.31 Filing of an application for an exploration license.
(a) Applications for exploration licenses must be submitted to the
proper BLM office.
(b) No specific form is required. Applications must include:
(1) The name and address of the applicant(s);
(2) A nonrefundable filing fee of $295;
(3) A description of the lands covered by the application according
to section, township and range in accordance with the public lands
survey system or, if the lands are unsurveyed lands, the legal
description by metes and bounds; and
(4) An acceptable electronic format or 3 paper copies of an
exploration plan that complies with the requirements of Sec. 3931.41
of this chapter. Contact the proper BLM office for detailed information
on submitting copies electronically.
(c) An exploration license application may cover no more than
25,000 acres in a reasonably compact area and entirely within one
state. An application for an exploration license covering more than
25,000 acres must include justification for an exception to the normal
acreage limitation.
(d) Applicants for exploration licenses are required to invite
other parties to participate in exploration under the license on a pro
rata cost share basis.
(e) Using information supplied by the applicant, the BLM will
prepare a notice of invitation and post the notice in the proper BLM
office for 30 calendar days. The applicant will publish the BLM-
approved notice once a week for 2 consecutive weeks in at least 1
newspaper of general circulation in the area where the lands covered by
the exploration license application are situated. The notification must
invite the public to participate in the exploration under the license
and contain the name and location of the BLM office in which the
application is available for inspection.
(f) If any person wants to participate in the exploration program,
the applicant and the BLM must receive written notice from that person
within 30 calendar days after the end of the 30-day posting period. A
person who wants to participate in the exploration program must:
(1) State in their notification that they are willing to share in
the cost of the exploration on a pro-rata share basis; and
(2) Describe any modifications to the exploration program that the
BLM should consider.
(g) To avoid duplication of exploration activities in an area, the
BLM may:
(1) Require modification of the original exploration plan to
accommodate the exploration needs of those seeking to participate; or
(2) Notify those seeking to participate that they should file a
separate application for an exploration license.
Sec. 3910.32 Environmental analysis.
(a) Before the BLM will issue an exploration license, the BLM, in
consultation with any affected surface management agency, will perform
the appropriate NEPA analysis of the application.
(b) For each exploration license, the BLM will include terms and
conditions needed to protect the environment and resource values of the
area and to ensure reclamation of the lands disturbed by the
exploration activities.
Sec. 3910.40 Exploration license requirements.
The licensee must comply with all applicable Federal, state, and
local laws and regulations, the terms and conditions of the license,
and the approved exploration plan.
Sec. 3910.41 Issuance, modification, relinquishment, and
cancellation.
(a) The BLM may:
(1) Issue an exploration license, or
(2) Reject an application for an exploration license based on, but
not limited to:
(i) The need for resource information;
(ii) The environmental analysis;
(iii) The completeness of the application; or
(iv) Any combination of these factors.
(b) An exploration license is effective on the date the BLM
specifies, which is also the date when exploration activities may
begin. An exploration license is valid for a period of up to 2 years as
specified in the lease after the effective date of the license.
(c) The BLM-approved exploration plan will be attached and made a
part of each exploration license (see subpart 3931 of part 3930 of this
chapter).
(d) After consultation with the surface management agency, the BLM
may approve modification of the exploration license proposed by the
licensee in writing if geologic or other conditions warrant. The BLM
will not add lands to the license once it has been issued.
(e) Subject to the continued obligation of the licensee and the
surety to comply with the terms and conditions of the exploration
license, the exploration plan, and these regulations, a licensee may
relinquish an exploration license for any or all of the lands covered
by it. A relinquishment must be filed in the BLM state office in which
the original application was filed.
(f) The BLM may cancel an exploration license for noncompliance
with its terms and conditions and parts 3900 through 3930 of this
chapter after the BLM provides the licensee with reasonable notice and
an opportunity to correct the noncompliance.
Sec. 3910.42 Limitations on exploration licenses.
(a) The issuance of an exploration license for an area will not
preclude the BLM's approval of an exploration license or issuance of a
Federal oil shale lease for the same lands.
(b) If an oil shale lease is issued for an area covered by an
exploration license, the BLM will cancel the exploration license
effective the date of the lease for those lands that are common to
both.
Sec. 3910.44 Collection and submission of data.
Upon the BLM's request, the licensee must provide copies of all
data obtained under the exploration license in the format requested by
the BLM. As authorized by the Freedom of Information Act, the BLM will
consider the data confidential and proprietary until the BLM determines
that public access to the data will not damage the competitive position
of the licensee or the lands involved have been leased, whichever comes
first. Submit all data obtained under the exploration license to the
proper BLM office.
Sec. 3910.50 Surface use.
Operations conducted under an exploration license must:
(a) Not unreasonably interfere with or endanger any other lawful
activity on the same lands;
(b) Not damage any improvements on the lands; and
(c) Comply with all applicable Federal, state, and local laws and
regulations.
3. Add part 3920 to subchapter C to read as follows:
PART 3920--OIL SHALE LEASING
Subpart 3921--Pre-Sale Activities
Sec.
3921.10 Special requirements related to land use planning.
3921.20 Compliance with the National Environmental Policy Act.
3921.30 Call for expression of leasing interest.
3921.40 Comments from governors, local governments, and interested
Indian tribes.
3921.50 Determining the geographic area for receiving applications
to lease.
3921.60 Call for applications.
Subpart 3922--Application Processing
3922.10 Application processing fee.
[[Page 42965]]
3922.20 Application contents.
3922.30 Application--Additional information.
3922.40 Tract delineation.
Subpart 3923--Minimum Bid
3923.10 Minimum bid.
Subpart 3924--Lease Sale Procedures
3924.5 Notice of sale.
3924.10 Lease sale procedures and receipt of bids.
Subpart 3925--Award of Lease
3925.10 Award of lease.
Subpart 3926--Conversion of Preference Right for Research,
Demonstration, and Development (R, D and D) Leases
3926.10 Conversion of an R, D and D lease to a commercial lease.
Subpart 3927--Lease Terms
3927.10 Lease form.
3927.20 Lease size.
3927.30 Lease duration.
3927.40 Effective date of leases.
3927.50 Diligent development.
Authority: 30 U.S.C. 241(a), 42 U.S.C. 15927, 43 U.S.C. 1732(b)
and 1740.
Subpart 3921--Pre-Sale Activities
Sec. 3921.10 Special requirements related to land use planning.
The BLM State Director may announce a call for expressions of
leasing interest as described in Sec. 3921.30 of this chapter after
areas available for leasing have been identified in a land use plan
completed under part 1600 of this chapter.
Sec. 3921.20 Compliance with the National Environmental Policy Act.
Before the BLM will offer a tract for competitive lease sale under
subpart 3924 of this chapter, the BLM must prepare a NEPA analysis of
the proposed lease area under 40 CFR parts 1500 through 1508 either
separately or in conjunction with a land use planning action.
Sec. 3921.30 Call for expression of leasing interest.
The BLM State Director may implement the provisions of Sec. Sec.
3921.40 through 3921.60 of this subpart after review of any responses
received as a result of a call for expression of leasing interest. The
BLM notice announcing a call for expressions of leasing interest will:
(a) Be published in the Federal Register and in at least 1
newspaper of general circulation in each affected state for 2
consecutive weeks;
(b) Allow no less than 30 calendar days to submit expressions of
interest;
(c) Request specific information including the name and address of
the respondent and the legal land description of the area of interest;
(d) State that all information submitted under this subpart must be
available for public inspection; and
(e) Include a statement indicating that data which is considered
proprietary must not be submitted as part of an expression of leasing
interest.
Sec. 3921.40 Comments from governors, local governments, and
interested Indian tribes.
After the BLM receives responses to the call for expression of
leasing interest, the BLM will notify the appropriate state governor's
office, local governments, and interested Indian tribes and allow them
an opportunity to provide comments regarding the responses and other
issues related to oil shale leasing. The BLM will only consider those
comments it receives within 60 calendar days after the notification
requesting comments.
Sec. 3921.50 Determining the geographic area for receiving
applications to lease.
After analyzing expressions of leasing interest received under
Sec. 3921.30 of this chapter and complying with the procedures at
Sec. 3921.40 of this chapter, the BLM State Director may determine a
geographic area for receiving applications to lease. The BLM may also
include additional geographic areas available for lease in addition to
lands identified in expressions of interest to lease.
Sec. 3921.60 Call for applications.
If as a result of the analysis of the expression of leasing
interest the BLM State Director determines that there is interest in
having a competitive sale, the BLM State Director may publish a notice
in the Federal Register announcing a call for applications to lease.
The notice will:
(a) Describe the geographic area the BLM determined is available
for application under Sec. 3921.50 of this chapter;
(b) Allow no less than 90 calendar days for interested parties to
submit applications to the proper BLM office; and
(c) Provide that applications submitted to the BLM must meet the
requirements at subpart 3922 of this part.
Subpart 3922--Application Processing
Sec. 3922.10 Application processing fee.
(a) An applicant nominating or applying for a tract for competitive
leasing must pay a cost recovery or processing fee that the BLM will
determine on a case-by-case basis as described in Sec. 3000.11 of this
chapter and as modified by the following provisions.
(b) The cost recovery process for a competitive oil shale lease is
as follows:
(1) The applicant nominating the tract for competitive leasing must
pay the fee before the BLM will process the application and publish a
notice of competitive lease sale;
(2) The BLM will publish a sale notice no later than 30 days before
the proposed sale. The BLM will include in the sale notice a statement
of the total cost recovery fee paid to the BLM by the applicant, up to
30 calendar days before the sale;
(3) Before the lease is issued:
(i) The successful bidder, if someone other than the applicant,
must pay to the BLM the cost recovery amount specified in the sale
notice, including the cost of the NEPA analysis; and
(ii) The successful bidder must pay all processing costs the BLM
incurs after the date of the sale notice;
(4) If the successful bidder is someone other than the applicant,
the BLM will refund to the applicant the amount paid under paragraph
(b)(1) of this section;
(5) If there is no successful bidder, the applicant is responsible
for all processing fees; and
(6) If the successful bidder is someone other than the applicant,
within 30 calendar days after the lease sale, the successful bidder
must file an application in accordance with Sec. 3922.20 of this
chapter.
Sec. 3922.20 Application contents.
A lease application must be filed by any party seeking to obtain a
lease. Lease applications must be filed in the proper BLM state office.
No specific form of application is required, but the application must
include information necessary to evaluate the impacts of issuing the
proposed lease or leases on the human environment. Except as otherwise
requested by the BLM, the application must include, but is not limited
to, the following:
(a) Name, address, and telephone number of applicant, and a
qualification statement, as required by subpart 3902 of part 3900 of
this chapter;
(b) A delineation of the proposed lease area or areas, the surface
ownership (if other than the United States) of those areas, a
description of the quality, thickness, and depth of the oil shale and
of any other resources the applicant proposes to extract, and
environmental data necessary to assess impacts from the proposed
development; and
(c) A description of the proposed extraction method, including
personnel requirements, production levels, and transportation methods,
including:
[[Page 42966]]
(1) A description of the mining, retorting, or in situ mining or
processing technology that the operator would use and whether the
proposed development technology is substantially identical to a
technology or method currently in use to produce marketable commodities
from oil shale deposits;
(2) An estimate of the maximum surface area of the lease area that
will be disturbed or be undergoing reclamation at any one time;
(3) A description of the source and quantities of water to be used
and of the water treatment and disposal methods necessary to meet
applicable water quality standards;
(4) A description of the regulated air emissions;
(5) A description of the anticipated noise levels from the proposed
development;
(6) A description of how the proposed lease development would
comply with all applicable statutes and regulations governing
management of chemicals and disposal of solid waste. If the proposed
lease development would include disposal of wastes on the lease site,
include a description of measures to be used to prevent the
contamination of soil and of surface and ground water;
(7) A description of how the proposed lease development would
avoid, or, to the extent practicable, mitigate impacts on species or
habitats protected by applicable state or Federal law or regulations,
and impacts on wildlife habitat management;
(8) A description of reasonably foreseeable social, economic, and
infrastructure impacts on the surrounding communities, and on state and
local governments from the proposed development;
(9) A description of the known historical, cultural, or
archaeological resources within the lease area;
(10) A description of infrastructure that would likely be required
for the proposed development and alternative locations of those
facilities, if applicable;
(11) A discussion of proposed measures to mitigate any adverse
impacts to the environment and to nearby communities;
(12) A brief description of the reclamation methods that will be
used;
(13) Any other information that shows that the application meets
the requirements of this subpart or that the applicant believes would
assist the BLM in analyzing the impacts of the proposed development;
and
(14) A map, or maps, showing:
(i) The topography, physical features, and natural drainage
patterns;
(ii) Existing roads, vehicular trails, and utility systems;
(iii) The location of any proposed exploration operations,
including seismic lines and drill holes;
(iv) To the extent known, the location of any proposed mining
operations and facilities, trenches, access roads, or trails, and
supporting facilities including the approximate location and extent of
the areas to be used for pits, overburden, and tailings; and
(v) The location of water sources or other resources that may be
used in the proposed operations and facilities.
Sec. 3922.30 Application--Additional information.
At any time during processing of the application, or the
environmental or similar assessments of the application, the BLM may
request additional information from the applicant. Failure to provide
the best available and most accurate information may result in
suspension or termination of processing of the application, or in a
decision to deny the application.
Sec. 3922.40 Tract delineation.
(a) The BLM will delineate tracts for competitive sale to provide
for the orderly development of the oil shale resource.
(b) The BLM may delineate more or less lands than were covered by
an application for any reason the BLM determines to be in the public
interest.
(c) The BLM may delineate tracts in any area acceptable for further
consideration for leasing, whether or not expression of leasing
interest or applications have been received for those areas.
(d) Where the BLM receives more than 1 application covering the
same lands, the BLM may delineate the lands that overlap as a separate
tract.
Subpart 3923--Minimum Bid
Sec. 3923.10 Minimum bid.
The BLM will not accept any bid that is less than the FMV. In no
case may the minimum bid be less than $1,000 per acre.
Subpart 3924--Lease Sale Procedures
Sec. 3924.5 Notice of sale.
(a) After the BLM complies with Sec. 3921.20 of this chapter, the
BLM may publish a notice of the lease sale in the Federal Register
containing all information required by paragraph (b) of this section.
The BLM will also publish a similar notice of lease sale that complies
with this section once a week for 3 consecutive weeks, or such other
time deemed appropriate by the BLM, in 1 or more newspapers of general
circulation in the county or counties in which the oil shale lands are
situated.
(b) The notice of the sale will:
(1) List the time and place of sale, the bidding method, and the
legal land descriptions of the tracts being offered;
(2) Specify where a detailed statement of lease terms, conditions,
and stipulations may be obtained;
(3) Specify the royalty rate and the amount of the annual rental;
(4) Specify that, prior to lease issuance, the successful bidder
for a particular lease must pay the identified cost recovery amount,
including the bidder's proportionate share of the total cost of the
NEPA analysis and of publication of the notice; and
(5) Contain such other information as the BLM deems appropriate.
(c) The detailed statement of lease terms, conditions, and
stipulations will, at a minimum, contain:
(1) A complete copy of each lease and all lease stipulations to the
lease; and
(2) Resource information relevant to the tracts being offered for
lease and the minimum production requirement.
Sec. 3924.10 Lease sale procedures and receipt of bids.
(a) The BLM will accept sealed bids only as specified in the notice
of sale and will return to the bidder any sealed bid submitted after
the time and date specified in the sale notice. Each sealed bid must
include:
(1) A certified check, cashier's check, bank draft, money order,
personal check, or cash for one-fifth of the amount of the bonus; and
(2) A qualifications statement signed by the bidder as described in
subpart 3902 of part 3900 of this chapter.
(b) At the time specified in the sale notice, the BLM will open and
read all bids and announce the highest bid. The BLM will make a record
of all bids.
(c) No decision to accept or reject the high bid will be made at
the time of sale.
(d) After the sale, the BLM will convene a sale panel to determine:
(1) If the high bid was submitted in compliance with the terms of
the notice of sale and these regulations;
(2) If the high bid reflects the FMV of the tract; and
(3) Whether the high bidder is qualified to hold the lease.
(e) The BLM may reject any or all bids regardless of the amount
offered, and will not accept any bid that is less than the FMV. The BLM
will notify in writing the high bidder whose bid has been rejected and
include a statement of reasons for the rejection.
(f) The BLM may offer the lease to the next highest qualified
bidder if the
[[Page 42967]]
successful bidder fails to execute the lease or for any reason is
disqualified from receiving the lease.
(g) The balance of the bonus bid is due and payable to the MMS in 4
equal annual installments on each of the first 4 anniversary dates of
the lease, unless otherwise specified in the lease.
Subpart 3925--Award of Lease
Sec. 3925.10 Award of lease.
(a) The lease will be awarded to the highest qualified bidder whose
bid exceeds the minimum bid, except as provided in Sec. 3924.10 of
this chapter. The BLM will provide the successful bidder 3 copies of
the oil shale lease form for execution.
(b) Within 60 calendar days after receipt of the lease forms, the
successful bidder must sign all copies and return them to the proper
BLM office. The successful bidder must also submit the necessary lease
bond (see subpart 3904 of this chapter), the first year's rental, any
unpaid cost recovery fees, including costs associated with the NEPA
analysis, and the bidder's proportionate share of the cost of
publication of the sale notice. The BLM may, upon written request,
grant an extension of time to submit the items under this paragraph.
(c) If the successful bidder does not comply with this section, the
BLM will not issue the lease and the bidder forfeits the one-fifth
bonus payment submitted with the bid.
(d) If the lease cannot be awarded for reasons determined by the
BLM to be beyond the control of the successful bidder, the BLM will
refund the deposit submitted with the bid.
(e) If the successful bidder was not an applicant under Sec.
3922.20 of this chapter, the successful bidder must submit an
application and the BLM may require additional NEPA analysis of the
successful bidder's proposed operations.
Subpart 3926--Conversion of Preference Right for Research,
Demonstration, and Development (R, D and D) Leases
Sec. 3926.10 Conversion of an R, D and D lease to a commercial lease.
(a) Applications to convert R, D and D leases, including preference
right areas, into commercial leases, are subject to the regulations at
parts 3900 and 3910, this part, and part 3930, except for lease sale
procedures at subparts 3921 and 3924 and Sec. 3922.40.
(b) A lessee of an R, D and D lease must apply for the conversion
of the R, D and D lease to a commercial lease no later than 90 calendar
days after the commencement of production in commercial quantities. No
specific form of application is required. The application for
conversion must be filed in the BLM state office that issued the R, D
and D lease. The conversion application must include:
(1) Documentation that there has been commercial quantities of oil
shale produced from the lease, including the narrative required by the
R, D and D leases;
(2) Documentation that the lessee consulted with state and local
officials to develop a plan for mitigating the socioeconomic impacts of
commercial development on communities and infrastructure;
(3) A bid payment no less than specified in Sec. 3923.10 of this
chapter and equal to the FMV of the lease; and
(4) Bonding as required by Sec. 3904.14 of this chapter.
(c) The lessee of an R, D and D lease has the exclusive right to
acquire any and all portions of the preference right area designated in
the R, D and D lease up to a total of 5,120 acres in the lease. The BLM
will approve the conversion application, in whole or in part, if it
determines that:
(1) There have been commercial quantities of shale oil produced
from the lease;
(2) The bid payment for the lease met or exceeded FMV;
(3) The lessee consulted with state and local officials to develop
a plan for mitigating the socioeconomic impacts of commercial
development on communities and infrastructure;
(4) The bond is consistent with Sec. 3904.14 of this chapter; and
(5) Commercial scale operations can be conducted, subject to
mitigation measures to be specified in stipulations or regulations,
without unacceptable environmental consequences.
(d) The commercial lease must contain terms consistent with the
regulations in parts 3900 and 3910, this part, and part 3930 and
stipulations developed through appropriate NEPA analysis.
Subpart 3927--Lease Terms
Sec. 3927.10 Lease form.
Leases are issued on a BLM approved standard form. The BLM may
modify those provisions of the standard form that are not required by
statute or regulations and may add such additional stipulations and
conditions, as appropriate, with notice to bidders in the notice of
sale.
Sec. 3927.20 Lease size.
The maximum size of an oil shale lease is 5,760 acres and the
minimum size of an oil shale lease is 160 acres.
Sec. 3927.30 Lease duration.
Leases issue for a period of 20 years and continue as long as there
is annual minimum production or as long as there are payments in lieu
of production (see Sec. 3903.51 of this chapter). The BLM may initiate
procedures to cancel a lease under subpart 3934 of part 3930 of this
chapter for not maintaining annual minimum production, for not making
the payment in lieu of production, or for not complying with the lease
terms, including the diligent development milestones (see Sec. 3930.30
of this chapter).
Sec. 3927.40 Effective date of leases.
Leases are dated and effective the first day of the month following
the date the BLM signs it. However, upon receiving a prior written
request, the BLM may make the effective date of the lease the first day
of the month in which the BLM signs it.
Sec. 3927.50 Diligent development.
Oil shale lessees must meet:
(a) Diligent development milestones;
(b) Annual minimum production requirements or payments in lieu of
production starting the 10th lease year, except when the BLM determines
that operations under the lease are interrupted by strikes, the
elements, or causes not attributable to the lessee. Market conditions
are not considered a valid reason to waive or suspend the requirements
for annual minimum production. The BLM will determine the annual
production requirements based on the extraction technology to be used
and on the BLM's estimate of the recoverable resources on the lease,
expected life of the operation, and other factors.
4. Add part 3930 to subchapter C to read as follows:
PART 3930--MANAGEMENT OF OIL SHALE EXPLORATION AND LEASES
Subpart 3930--Management of Oil Shale Exploration Licenses and Leases
Sec.
3930.10 General performance standards.
3930.11 Performance standards for exploration and in situ
operations.
3930.12 Performance standards for underground mining.
3930.13 Performance standards for surface mines.
3930.20 Operations.
3930.30 Diligent development milestones.
3930.40 Penalties for missing diligence milestones.
Subpart 3931--Plans of Development and Exploration Plans
3931.10 Exploration plans and plans of development for mining and in
situ operations.
[[Page 42968]]
3931.11 Content of plan of development.
3931.20 Reclamation.
3931.30 Suspension of operations and production.
3931.40 Exploration.
3931.41 Content of exploration plan.
3931.50 Exploration plan and plan of development modifications.
3931.60 Maps of underground and surface mine workings and in situ
surface operations.
3931.70 Production maps and production reports.
3931.80 Core or test hole samples and cuttings.
3931.100 Boundary pillars.
Subpart 3932--Lease Modifications and Readjustments
3932.10 Lease size modification.
3932.20 Lease modification land availability criteria.
3932.30 Terms and conditions of a modified lease.
3932.40 Readjustment of lease terms.
Subpart 3933--Assignments and Subleases
3933.10 Leases subject to assignment or sublease.
3933.20 Filing fees.
3933.31 Record title assignments.
3933.32 Overriding royalty interests.
3933.40 Lease account status.
3933.51 Bond coverage.
3933.52 Continuing responsibility under assignment and sublease.
3933.60 Effective date.
3933.70 Extensions.
Subpart 3934--Relinquishment, Cancellations, and Terminations
3934.10 Relinquishments.
3934.21 Written notice of cancellation.
3934.22 Causes and procedures for lease cancellation.
3934.30 License terminations.
3934.40 Payments due.
3934.50 Bona fide purchasers.
Subpart 3935--Production and Sale Records
3935.10 Accounting records.
Subpart 3936--Inspection and Enforcement
3936.10 Inspection of underground and surface operations and
facilities.
3936.20 Issuance of notices of noncompliance and orders.
3936.30 Enforcement of notices of noncompliance and orders.
3936.40 Appeals.
Authority: 25 U.S.C. 396d and 2107, 30 U.S.C. 241(a), 42 U.S.C.
15927, 43 U.S.C. 1732(b), 1733, and 1740.
Subpart 3930--Management of Oil Shale Exploration Licenses and
Leases
Sec. 3930.10 General performance standards.
The operator/lessee must comply with the following performance
standards concerning exploration, development, and production:
(a) All operations must be conducted to achieve Maximum Economic
Recovery;
(b) Operations must be conducted under an approved plan of
development or exploration plan;
(c) The operator/lessee must diligently develop the lease and must
comply with the diligence development milestones and production
requirements at Sec. 3930.30 of this chapter;
(d) The operator/lessee must notify the BLM promptly if operations
encounter unexpected wells or drill holes that could adversely affect
the recovery of shale oil or other minerals producible under an oil
shale lease during mining operations, and must not take any action that
would disturb such wells or drill holes without the BLM's prior
approval;
(e) The operator/lessee must conduct operations to:
(1) Prevent waste and conserve the recoverable oil shale reserves
and other resources;
(2) Prevent damage to or degradation of oil shale formations;
(3) Ensure that other resources are protected upon abandonment of
operations; and
(f) The operator must save topsoil for use in final reclamation
after the reshaping of disturbed areas has been completed.
Sec. 3930.11 Performance standards for exploration and in situ
operations.
The operator/lessee must adhere to the following standards for all
exploration and in situ drilling operations:
(a) At the end of exploration operations, all drill holes must be
capped with at least 5 feet of cement and plugged with a permanent
plugging material that is unaffected by water and hydrocarbon gases and
will prevent the migration of gases and water in the drill hole under
normal hole pressures. For holes drilled deeper than stripping limits,
the operator/lessee, using cement or other suitable plugging material
the BLM approves in advance, must plug the hole through the thickness
of the oil shale bed(s) or mineral deposit(s) and through aquifers for
a distance of at least 50 feet above and below the oil shale bed(s) or
mineral deposit(s) and aquifers, or to the bottom of the drill hole.
The BLM may approve a lesser cap or plug. Capping and plugging must be
managed to prevent water pollution and the mixing of ground and surface
waters and to ensure the safety of people, livestock, and wildlife;
(b) The operator/lessee must retain for 1 year all drill and
geophysical logs. The operator must also make such logs available for
inspection or analysis by the BLM. The BLM may require the operator/
lessee to retain representative samples of drill cores for 1 year;
(c) The operator/lessee may, after the BLM's written approval, use
drill holes as surveillance wells for the purpose of monitoring the
effects of subsequent operations on the quantity, quality, or pressure
of ground water or mine gases; and
(d) The operator/lessee may, after written approval from the BLM
and the surface owner, convert drill holes to water wells. When
granting such approvals, the BLM will include a transfer to the surface
owner of responsibility for any liability, including eventual plugging,
reclamation, and abandonment.
Sec. 3930.12 Performance standards for underground mining.
(a) Underground mining operations must be conducted in a manner to
prevent the waste of oil shale, to conserve recoverable oil shale
reserves, and to protect other resources. The BLM must approve in
writing permanent abandonment and operations that render oil shale
inaccessible.
(b) The operator/lessee must adopt mining methods that ensure the
proper recovery of recoverable oil shale reserves.
(c) Operators/lessees must adopt measures consistent with known
technology to prevent or, where the mining method used requires
subsidence, control subsidence, maximize mine stability, and maintain
the value and use of surface lands. If the plan of development
indicates that pillars will not be removed and controlled subsidence is
not part of the plan of development, the POD must show that pillars of
adequate dimensions will be left for surface stability, considering the
thickness and strength of the oil shale beds and the strata above and
immediately below the mined interval.
(d) The lessee/operator must have the BLM's approval to temporarily
abandon a mine or portions thereof.
(e) The operator/lessee must have the BLM's prior approval to mine
any recoverable oil shale reserves or drive any underground workings
within 50 feet of any of the outer boundary lines of the federally-
leased or federally-licensed land. The BLM may approve operations
closer to the boundary after taking into consideration state and
Federal environmental laws and regulations.
(f) The lessee/operator must have the BLM's prior approval before
drilling any
[[Page 42969]]
lateral holes within 50 feet of any outside boundary.
(g) Either the operator/lessee or the BLM may initiate the proposal
to mine oil shale in a barrier pillar if the oil shale in adjoining
lands has been mined out. The lessee/operator of the Federal oil shale
must enter into an agreement with the owner of the oil shale in those
adjacent lands prior to mining the oil shale remaining in the Federal
barrier pillars (which otherwise may be lost).
(h) The BLM must approve final abandonment of a mining area.
Sec. 3930.13 Performance standards for surface mines.
(a) Pit widths for each oil shale seam must be engineered and
designed to eliminate or minimize the amount of oil shale fender to be
left as a permanent pillar on the spoil side of the pit.
(b) Considering mine economics and oil shale quality, the amount of
oil shale wasted in each pit must be minimal.
(c) The BLM must approve the final abandonment of a mining area.
(d) The BLM must approve the conditions under which surface mines,
or portions thereof, will be temporarily abandoned, under the
regulations in this part.
(e) The operator/lessee may, in the interest of conservation, mine
oil shale up to the Federal lease or license boundary line, provided
that the mining:
(1) Complies with existing state and Federal mining, environmental,
reclamation, and safety laws and rules; and
(2) Does not conflict with the rights of adjacent surface owners.
(f) The operator must save topsoil for final application after the
reshaping of disturbed areas has been completed.
Sec. 3930.20 Operations.
(a) Maximum Economic Recovery (MER). All mining and in situ
development and production operations must be conducted in a manner to
yield the MER of the oil shale deposits, consistent with the protection
and use of other natural resources, the protection and preservation of
the environment, including, land, water, and air, and with due regard
for the safety of miners and the public. All shafts, main exits, and
passageways, and overlying beds or mineral deposits that at a future
date may be of economic importance must be protected by adequate
pillars in the deposit being worked or by such other means as the BLM
approves.
(b) New geologic information. The operator must record any new
geologic information obtained during mining or in situ development
operations regarding any mineral deposits on the lease. The operator
must report this new information in a BLM-approved format to the proper
BLM office within 90 calendar days after obtaining the information.
(c) Statutory compliance. Operators must comply with applicable
Federal and state law, including, but not limited to the following:
(1) Clean Air Act (42 U.S.C. 1857 et seq.);
(2) Federal Water Pollution Control Act, as amended (30 U.S.C. 1151
et seq.);
(3) Solid Waste Disposal Act as amended by the Resource
Conservation and Recovery Act (42 U.S.C. 6901 et seq.);
(4) National Historic Preservation Act, as amended (16 U.S.C. 470
et seq.);
(5) Archaeological and Historical Preservation Act, as amended (16
U.S.C. 469 et seq.);
(6) Archaeological Resources Protection Act, as amended (16 U.S.C.
470aa et seq.); and
(7) Native American Graves Protection and Repatriation Act, as
amended (25 U.S.C. 3001 et seq.).
(d) Resource protection. The following additional resource
protection provisions apply to oil shale operations:
(1) Operators must comply with applicable Federal and state
standards for the disposal and treatment of solid wastes. All garbage,
refuse, or waste must either be removed from the affected lands or
disposed of or treated to minimize, so far as is practicable, their
impact on the lands water, air, and biological resources;
(2) Operators must conduct operations in a manner to prevent
adverse impacts to threatened or endangered species and any of their
habitat that may be affected by operations.
(3) If the operator encounters any scientifically important
paleontological remains or any historical or archaeological site,
structure, building, or object on Federal lands, it must immediately
notify the BLM. Operators must not, without prior BLM approval,
knowingly disturb, alter, damage, or destroy any scientifically
important paleontological remains or any historical or archaeological
site, structure, building, or object on Federal lands.
Sec. 3930.30 Diligent development milestones.
(a) Operators must diligently develop the oil shale resources
consistent with the terms and conditions of the lease, plan of
development, and these regulations. If the operator does not maintain
or comply with diligent development milestones, the BLM may initiate
lease cancellation. In order to be considered diligently developing the
lease, the lessee/operator must comply with the following diligence
milestones:
(1) Milestone 1. Within 2 years of the lease issuance date, submit
to the proper BLM office an initial plan of development that meets the
requirements of subpart 3931. The operator must revise the plan of
development following subpart 3931 of this part, if the BLM determines
that the initial plan of development is unacceptable;
(2) Milestone 2. Within 3 years of the lease issuance date, submit
a final plan of development. The BLM may, based on circumstances beyond
the control of the lessee or operator, or on the complexity of the plan
of development, grant a 1 year extension to the lessee or operator to
submit a complete plan of development;
(3) Milestone 3. Within 2 years after the BLM approves the final
plan of development, apply for all required Federal and state permits
and licenses;
(4) Milestone 4. Before the end of the 7th year after lease
issuance, begin infrastructure installation, as required by the BLM
approved plan of development; and
(5) Milestone 5. Before the end of the 10th year after lease
issuance, begin oil shale production.
(b) Operators may apply for additional time to complete a
milestone. The BLM may grant additional time for completing a milestone
if the operator provides documentation that shows to the BLM's
satisfaction that achieving the milestone by the deadline is not
possible for reasons that are beyond the control of the operator.
(c) Operators must maintain minimum annual production every year
after the 10th lease year or pay in lieu of production according to the
lease terms.
(d) Each lease will provide for minimum production. The minimum
production requirement stated in the lease must be met by the end of
the 10th lease year and will be based on the BLM's estimate of the
extraction technology to be used, the recoverable resources on the
lease, expected life of the operation, and other factors the BLM
considers.
(e) Each lease will provide for payment in lieu of the minimum
production for any particular year starting the 10th lease year.
Payments in lieu of production in year 10 of the lease satisfies
Milestone 5 in paragraph (a)(5) of this section.
[[Page 42970]]
Sec. 3930.40 Penalties for missing diligence milestones.
The BLM will assess a penalty of $50 for each acre in the lease for
each missed diligence milestone each year until the operator or lessee
complies with Sec. 3930.30(a) of this chapter. For example: If the
operator does not submit the required plan of development within 2
years of lease issuance (the first milestone), the BLM will assess the
operator an additional $50 per acre penalty each year until the
milestone is met. If the operator does not meet the second milestone
(apply for all required permits and licenses by 2 years after the BLM
approves the plan of development), the BLM will assess the operator $50
per acre penalty per year resulting in a total penalty of $100 per
acre, per year. If the operator does not begin production by the end of
the initial lease term, or make payments in lieu thereof, the BLM may
initiate lease cancellation procedures (see Sec. Sec. 3934.21 and
3934.22 of this part).
Subpart 3931--Plans of Development and Exploration Plans
Sec. 3931.10 Exploration plans and plans of development for mining
and in situ operations.
(a) The plan of development must provide for reasonable protection
and reclamation of the environment and the protection and diligent
development of the oil shale resources in the lease.
(b) The operator must submit to the proper BLM office an
exploration plan or plan of development describing in detail the
proposed exploration, testing, development, or mining operations to be
conducted. Exploration plans or plans of development must be consistent
with the requirements of the lease or exploration license and protect
nonmineral resources and provide for the reclamation of the lands
affected by the operations on Federal lease(s) or exploration
license(s). All plans of development and exploration plans must be
submitted to the proper BLM office.
(c) The lessee or operator must submit 3 copies of the plan of
development to the proper BLM office or submit it in an acceptable
electronic format. Contact the proper BLM office for detailed
information on submitting copies electronically (see Sec. 3931.40 for
submission of exploration plans).
(d) The BLM will consult with any other Federal, state, or local
agencies involved and review the plan. If the BLM denies the plan, it
will indicate what additional information is necessary to complete the
application.
(e) All development and exploration activities must comply with the
BLM-approved plan of development or exploration plan.
(f) Activities under Sec. 3931.40 of this subpart, other than
casual use, may not begin until the BLM approves an exploration plan or
plan of development.
Sec. 3931.11 Content of plan of development.
The plan of development must contain, at a minimum, the following:
(a) Names, addresses, and telephone numbers of those responsible
for operations to be conducted under the approved plan and to whom
notices and orders are to be delivered, names and addresses of Federal
oil shale lessees and corresponding Federal lease serial numbers, and
names and addresses of surface and mineral owners of record, if other
than the United States;
(b) A general description of geologic conditions and mineral
resources within the area where mining is to be conducted, including
appropriate maps;
(c) A copy of a suitable map or aerial photograph showing the
topography, the area covered by each lease, the name and location of
major topographic and cultural features;
(d) A statement of proposed methods of operation and development,
including the following items as appropriate:
(1) A description detailing the extraction technology to be used;
(2) The equipment to be used in development and extraction;
(3) The proposed access roads;
(4) The size, location, and schematics of all structures,
facilities, and lined or unlined pits to be built;
(5) The stripping ratios, development sequence, and schedule;
(6) The number of acres in the Federal lease(s) or license(s) to be
affected;
(7) Comprehensive well design and procedure for drilling, casing,
cementing, testing, stimulation, clean-up, completion, and production,
for all drilled well types, including those used for heating, freezing,
and disposal;
(8) A description of the methods and means to protect and monitor
all aquifers;
(9) Surveyed well location plats or project-wide well location
plats;
(10) A description of the measurement and handling of produced
fluids, including the anticipated production rates and estimated
recovery factors; and
(11) A description/discussion of the controls that the operator
will use to protect the public, including identification of:
(i) Essential operations, personnel, and health and safety
precautions;
(ii) Programs and plans for noxious gas control (hydrogen sulfide,
ammonia, etc.);
(iii) Well control procedures;
(iv) Temporary abandonment procedures; and
(v) Plans to address spills, leaks, venting, and flaring;
(e) An estimate of the quantity and quality of the oil shale
resources;
(f) An explanation of how MER of the resource will be achieved for
each Federal lease;
(g) Appropriate maps and cross sections showing:
(1) Federal lease boundaries and serial numbers;
(2) Surface ownership and boundaries;
(3) Locations of any existing and abandoned mines and existing oil
and gas well (including well bore trajectories) and water well
locations, including well bore trajectories;
(4) Typical geological structure cross sections;
(5) Location of shafts or mining entries, strip pits, waste dumps,
retort facilities, and surface facilities;
(6) Typical mining or in situ development sequence, with
appropriate time-frames;
(h) A narrative addressing the environmental aspects of the
proposed mine or in situ operation, including at a minimum, the
following:
(1) An estimate of the quantity of water to be used and pollutants
that may enter any receiving waters;
(2) A design for the necessary impoundment, treatment, control, or
injection of all produced water, runoff water, and drainage from
workings; and
(3) A description of measures to be taken to prevent or control
fire, soil erosion, subsidence, pollution of surface and ground water,
pollution of air, damage to fish or wildlife or other natural
resources, and hazards to public health and safety;
(i) A reclamation plan and schedule for all Federal lease(s) or
exploration license(s) that details all reclamation activities
necessary to fulfill the requirements of Sec. 3931.20;
(j) The method of abandonment of operations on Federal lease(s) and
exploration license(s) proposed to protect the unmined recoverable
reserves and other resources, including:
(1) The method proposed to fill in, fence, or close all surface
openings that are hazardous to people or animals; and
(2) For in situ operations, a description of the method and
materials to be used to plug all abandoned development or production
wells; and
(k) Any additional information that the BLM determines is necessary
for
[[Page 42971]]
analysis or approval of the plan of development.
Sec. 3931.20 Reclamation.
(a) The operator or lessee must restore the disturbed lands to
their pre-mining or pre-exploration use or to a BLM-determined higher
use.
(b) The operator must reclaim the area disturbed by taking
reasonable measures to prevent or control onsite and offsite damage to
lands and resources.
(c) Reclamation includes, but is not limited to:
(1) Measures to control erosion, landslides, and water runoff;
(2) Measures to isolate, remove, or control toxic materials;
(3) Reshaping the area disturbed, application of the topsoil, and
re-vegetation of disturbed areas, where reasonably practicable; and
(4) Rehabilitation of fisheries and wildlife habitat.
(d) The operator or lessee must substantially fill in, fence,
protect, or close all surface openings, subsidence holes, surface
excavations, or workings which are a hazard to people or animals. These
protected areas must be maintained in a secure condition during the
term of the lease or exploration license. During reclamation, but
before abandonment of operations, all openings, including water
discharge points, must be closed to the BLM's satisfaction. For in situ
operations, all drilled holes must be plugged and abandoned, as
required by the approved plan.
(e) The operator or lessee must reclaim or protect surface areas no
longer needed for operations as contemporaneously as possible as
required by the approved plan.
Sec. 3931.30 Suspension of operations and production.
(a) The BLM may, in the interest of conservation, agree to a
suspension of lease operations and production. Applications by lessees
for suspensions of operations and production must be filed in duplicate
in the proper BLM office and must explain why it is in the interest of
conservation to suspend operations and production.
(b) The BLM may order a suspension of operations and production if
the suspension is necessary to protect the resource or the environment:
(1) While the BLM performs necessary environmental studies or
analysis;
(2) To ensure that necessary environmental remediation or cleanup
is being performed as a result of activity or inactivity on the part of
the operator; or
(3) While necessary environmental remediation or cleanup is being
performed as a result of unwarranted or unexpected actions.
(c) The term of any lease will be extended by adding thereto any
period of suspension of operations and production during such term.
(d) A suspension will take effect on the date the BLM specifies.
Rental, upcoming diligent development milestones, and minimum annual
production will be suspended:
(1) During any period of suspension of operations and production
beginning with the first day of the lease month on which the suspension
of operations and production is effective; or
(2) If the suspension of operations and production is effective on
any date other than the first day of a lease month, beginning with the
first day of the lease month following such effective date.
(e) The suspension of rental and minimum annual production will end
on the first day of the lease month in which the suspension ends.
(f) The minimum annual production requirements of a lease will be
proportionately reduced for that portion of a lease year for which a
suspension of operations and production is directed or granted by the
BLM, as would any payments in lieu of production.
Sec. 3931.40 Exploration.
To conduct exploration operations under an exploration license or
on a lease after lease issuance, but prior to approval of the plan of
development, the following rules apply:
(a) Except for casual use, before conducting any exploration
operations on federally-leased or federally-licensed lands, the
operator or lessee must submit to the proper BLM office for approval 5
copies of the exploration plan or a copy of the plan in an acceptable
electronic format. Contact the proper BLM office for detailed
information on submitting copies electronically. As used in this
paragraph, casual use means activities that do not cause appreciable
surface disturbance or damage to lands or other resources and
improvements. Casual use does not include use of heavy equipment,
explosives, or vehicular movement off established roads and trails.
(b) The exploration activities must be consistent with the
requirements of the underlying Federal lease or exploration license,
and address protection of recoverable oil shale reserves and other
resources and reclamation of the surface of the lands affected by the
exploration operations. The exploration plan must meet the requirements
of Sec. 3931.20 and must show how reclamation will be an integral part
of the proposed operations and that reclamation will progress as
contemporaneously as practicable with operations.
Sec. 3931.41 Content of exploration plan.
Exploration plans must contain the following:
(a) The name, address, and telephone number of the applicant, and,
if applicable, that of the operator or lessee of record;
(b) The name, address, and telephone number of the representative
of the applicant who will be present during, and responsible for,
conducting exploration;
(c) A description of the proposed exploration area, cross-
referenced to the map required under paragraph (h) of this section,
including:
(1) Applicable Federal lease and exploration license serial
numbers;
(2) Surface topography;
(3) Geologic, surface water, and other physical features;
(4) Vegetative cover;
(5) Endangered or threatened species listed under the Endangered
Species Act of 1973 (16 U.S.C. 1531 et seq.) that may be affected by
exploration operations;
(6) Districts, sites, buildings, structures, or objects listed on,
or eligible for listing on, the National Register of Historic Places
that may be present in the lease area; and
(7) Known cultural or archaeological resources located within the
proposed exploration area;
(d) A description of the methods to be used to conduct oil shale
exploration, reclamation, and abandonment of operations including, but
not limited to:
(1) The types, sizes, numbers, capacity, and uses of equipment for
drilling and blasting, and road or other access route construction;
(2) Excavated earth-disposal or debris-disposal activities;
(3) The proposed method for plugging drill holes; and
(4) The estimated size and depth of drill holes, trenches, and test
pits;
(e) An estimated timetable for conducting and completing each phase
of the exploration, drilling, and reclamation;
(f) The estimated amounts of oil shale or oil shale products to be
removed during exploration, a description of the method to be used to
determine those amounts, and the proposed use of the oil shale or oil
shale products removed;
(g) A description of the measures to be used during exploration for
Federal oil shale to comply with the performance standards for
exploration (Sec. 3930.10);
(h) A map at a scale of 1:24,000 or larger showing the areas of
land to be affected by the proposed exploration and reclamation. The
map must show:
[[Page 42972]]
(1) Existing roads, occupied dwellings, and pipelines;
(2) The proposed location of trenches, roads, and other access
routes and structures to be constructed;
(3) Applicable Federal lease and exploration license boundaries;
(4) The location of land excavations to be conducted;
(5) Oil shale exploratory holes to be drilled or altered;
(6) Earth-disposal or debris-disposal areas;
(7) Existing bodies of surface water; and
(8) Topographic and drainage features; and
(i) The name and address of the owner of record of the surface
land, if other than the United States. If the surface is owned by a
person other than the applicant or if the Federal oil shale is leased
to a person other than the applicant, include evidence of authority to
enter that land for the purpose of conducting exploration and
reclamation.
Sec. 3931.50 Exploration plan and plan of development modifications.
(a) The operator or lessee may apply in writing to the BLM for
modification of the approved exploration plan or plan of development to
adjust to changed conditions or to correct an oversight. To obtain
approval of an exploration plan or plan of development modification,
the operator or lessee must submit to the proper BLM office a written
statement of the proposed modification and the justification for such
modification.
(b) The BLM may require a modification of the approved exploration
plan or plan of development.
(c) The BLM may approve a partial exploration plan or plan of
development, if circumstances warrant, or if development of an
exploration or plan of development for the entire operation is
dependent upon unknown factors that cannot or will not be determined
until operations progress. The operator or lessee must not, however,
perform any operation not covered in a BLM-approved plan.
Sec. 3931.60 Maps of underground and surface mine workings and in
situ surface operations.
Maps of underground workings and surface operations must be to a
scale of 1:24,000 or larger if the BLM requests it. All maps must be
appropriately marked with reference to government land marks or lines
and elevations with reference to sea level. When required by the BLM,
include vertical projections and cross sections in plan views. Maps
must be based on accurate surveys and certified by a professional
engineer, professional land surveyor, or other professionally qualified
person. Accurate copies of such maps must be furnished by the operator
to the BLM when and as required. All maps submitted must be in a format
acceptable to the BLM. Contact the proper BLM office for information on
what is the acceptable format to submit maps.
Sec. 3931.70 Production maps and production reports.
(a) Report production of all oil shale products or by-products to
the BLM on a monthly basis.
(b) Report all production and royalty information to the MMS under
30 CFR parts 210 and 216.
(c) Submit production maps to the proper BLM office at the end of
each royalty reporting period or on a schedule determined by the BLM.
Show all excavations in each separate bed or deposit on the maps so
that the production of minerals for any period can be accurately
ascertained. Production maps must also show surface boundaries, lease
boundaries, topography, and subsidence resulting from mining
activities.
(d) If the lessee or operator does not provide the BLM the maps
required by this section, the BLM will employ a licensed mine surveyor
to make a survey and maps of the mine, and the cost will be charged to
the operator or lessee.
(e) If the BLM believes any map submitted by an operator or lessee
is incorrect, the BLM may have a survey performed, and if the survey
shows the map submitted by the operator or lessee to be substantially
incorrect in whole or in part, the cost of performing the survey and
preparing the map will be charged to the operator or lessee.
(f) For in situ development operations, the lessee or operator must
submit a map showing all surface installations, including pipelines,
meter locations, or other points of measurement necessary for
production verification as part of your plan of development. All maps
must be modified as necessary for adequate representation of existing
operations.
(g) Within 30 calendar days after well completion, the lessee or
operator must submit to the proper BLM office 2 copies of a completed
Form 3160-4, Well Completion or Recompletion Report and Log, limited to
information that is applicable to oil shale operations. Well logs may
be submitted electronically using a BLM-approved electronic format.
Describe surface and bottom-hole locations in latitude and longitude.
Sec. 3931.80 Core or test hole samples and cuttings.
(a) Within 30 calendar days after drilling completion, the operator
or lessee must submit to the proper BLM office a signed copy of records
of all core or test holes made on the lands covered by the lease or
exploration license. The records must show the position and direction
of the holes on a map. The records must include a log of all strata
penetrated and conditions encountered, such as water, gas, or unusual
conditions, and copies of analysis of all samples. Provide this
information to the proper BLM office in either paper copy or in a BLM-
approved electronic format. Contact the proper BLM office for
information on submitting copies electronically. Within 30 calendar
days after creation, the operator or lessee must also submit to the
proper BLM office a detailed lithologic log of each test hole and all
other in-hole surveys or other logs produced. Upon the BLM's request,
the operator or lessee must provide to the BLM splits of core samples
and drill cuttings.
(b) The lessee or operator must abandon surface exploration drill
holes for development or holes for exploration to the BLM's
satisfaction by cementing or casing or by other methods approved in
advance by the BLM. Abandonment must be conducted in a manner to
protect the surface and not endanger any present or future underground
or surface operation or any deposit of oil, gas, other mineral
substances, or ground water.
(c) Operators may convert drill holes to surveillance wells for the
purpose of determining the effect of subsequent operations upon the
quantity, quality, or pressure of ground water or mine gases. The BLM
may require such conversion or the operator may request that the BLM
approve such conversion. Prior to lease or exploration license
termination, all surveillance wells must be plugged and abandoned and
reclaimed, unless the surface owner assumes responsibility for
reclamation of such surveillance wells. The transfer of liability for
reclamation will not be considered complete until the BLM approves it
in writing.
(d) Drilling equipment must be equipped with blowout control
devices suitable for the pressures encountered and acceptable to the
BLM.
Sec. 3931.100 Boundary pillars.
(a) All boundary pillars must be at least 50 feet thick, unless
otherwise
[[Page 42973]]
specified in writing by the BLM. Boundary and other main pillars may be
mined only with the BLM's prior written consent or on the BLM's order.
(b) If the oil shale on adjacent Federal lands has been worked out
beyond any boundary pillar and no hazards exist, the operator or lessee
must, on the BLM's written order, mine out and remove all available oil
shale in such boundary pillar, both in the lands covered by the lease
and in the adjacent Federal lands, when the BLM determines that such
oil shale can be mined safely without undue hardship to the operator or
lessee.
(c) If the mining rights in adjacent lands are privately owned or
controlled, the lessee must have an agreement with the owners of such
interests for the extraction of the oil shale in the boundary pillars.
Subpart 3932--Lease Modifications and Readjustments
Sec. 3932.10 Lease size modification.
(a) A lessee may apply for a modification of a lease to include
Federal lands adjacent to those in the lease. The total area of the
lease, including the acreage in the modification application and any
previously authorized modification, must not exceed the maximum lease
size (see Sec. 3927.20 of this chapter).
(b) An application for modification of the lease size must:
(1) Be filed with the proper BLM office;
(2) Contain a legal land description of the additional lands
involved;
(3) Contain an explanation of how the modification would meet the
criteria in Sec. 3932.20(a) which qualifies the lease for
modification;
(4) Explain why the modification would be in the best interest of
the United States;
(5) Include a nonrefundable processing fee that the BLM will
determine under Sec. 3000.11 of this chapter; and
(6) Include a signed qualifications statement consistent with
subpart 3902 of part 3900 of this chapter.
Sec. 3932.20 Lease modification land availability criteria.
(a) The BLM may grant a lease modification if:
(1) There is no competitive interest in the lands covered by the
modification application;
(2) The lands covered by the modification application cannot be
reasonably developed as part of another independent federally-approved
operation;
(3) The modification would be in the public interest; and
(4) The modification does not cause a violation of lease size
limitations under Sec. 3927.20 of this chapter or acreage limitations
under Sec. 3901.20 of this chapter.
(b) The BLM may approve adding lands covered by the modification
application to the existing lease without competitive bidding, but
before the BLM will approve adding lands to the lease, the applicant
must pay in advance the FMV for the interests to be conveyed.
(c) Before modifying a lease, the BLM will prepare any necessary
NEPA analysis covering the proposed lease area under 40 CFR parts 1500
through 1508 and recover the cost of such analysis from the applicant.
Sec. 3932.30 Terms and conditions of a modified lease.
(a) The terms and conditions of a lease modified under this subpart
will be made consistent with the laws, regulations, and land use plans
applicable at the time the lands are added by the modification.
(b) The royalty rate for the lands in the modification is the same
as for the original lease.
(c) Before the BLM will approve a lease modification, the lessee
must file a written acceptance of the conditions in the modified lease
and a written consent of the surety under the bond covering the
original lease as modified. The lessee must also submit evidence that
the bond has been amended to cover the modified lease and pay BLM
processing costs.
Sec. 3932.40 Readjustment of lease terms.
(a) All leases are subject to readjustment of lease terms,
conditions, and stipulations at the end of the first 20-year period
(the primary term of the lease) and at the end of each 10-year period
thereafter.
(b) Royalty rates will be subject to readjustment at the end of the
primary term and every 20 years thereafter.
(c) At least 30 days prior to the expiration of the readjustment
period, the BLM will notify the lessee by written decision if any
readjustment is to be made and of the proposed readjusted lease terms,
including any revised royalty rate.
(d) Readjustments may be appealed. In the case of an appeal, unless
the readjustment is stayed by the Interior Board of Land Appeals or the
courts, the lessee must comply with the revised lease terms, including
any revised royalty rate, pending the outcome of the appeal.
Subpart 3933--Assignments and Subleases
Sec. 3933.10 Leases subject to assignment or sublease.
Any lease may be assigned or subleased in whole or in part to any
person, association, or corporation that meets the qualification
requirements in subpart 3902 of part 3900 of this chapter to hold such
lease. The BLM may approve or disapprove assignments and subleases.
Sec. 3933.20 Filing fees.
Each application for assignment or sublease of record title or
overriding royalty must include a nonrefundable filing fee of $60. The
BLM will not accept any assignment that does not include the filing
fee.
Sec. 3933.31 Record title assignments.
(a) File in triplicate at the proper BLM office a separate
instrument of assignment for each lease assignment. File the assignment
application within 90 calendar days after the date of final execution
of the assignment instrument and with it include the:
(1) Name and current address of assignee;
(2) Interest held by assignor and interest to be assigned;
(3) Serial number of the affected lease and a description of the
lands to be assigned as described in the lease;
(4) Percentage of overriding royalties retained; and
(5) Dated signature of assignor.
(b) The assignee must provide a single copy of the request for
approval of assignment which must contain a:
(1) Statement of qualifications and holdings as required by subpart
3902 of part 3900 of this chapter;
(2) Date and the signature of the assignee; and
(3) Nonrefundable filing fee of $60.
(c) The approval of an assignment of all interests in a specific
portion of the lands in a lease will create a separate lease, which
will be given a new serial number.
Sec. 3933.32 Overriding royalty interests.
File at the proper BLM office, for record purposes only, all
overriding royalty interest assignments within 90 calendar days after
the date of execution of the assignment.
Sec. 3933.40 Lease account status.
The BLM will not approve an assignment of a lease unless the lease
account is in good standing.
Sec. 3933.51 Bond coverage.
Before the BLM will approve an assignment, the assignee must submit
to
[[Page 42974]]
the proper BLM office a new bond in an amount to be determined by the
BLM, or, in lieu thereof, documentation of consent of the surety on the
present bond to the substitution of the assignee as principal (see
subpart 3904 of part 3900 of this chapter).
Sec. 3933.52 Continuing responsibility under assignment and sublease.
(a) The assignor and its surety are responsible for the performance
of any obligation under the lease that accrues prior to the effective
date of the BLM's approval of the assignment. After the effective date
of the BLM's approval of the assignment, the assignee and its surety
are responsible for the performance of all lease obligations that
accrue after the effective date of the BLM's approval of the assignment
of the lease, notwithstanding any terms in the assignment to the
contrary. If the BLM does not approve the assignment, the assignor's
obligation to the United States continues as though no assignment had
been filed.
(b) After the effective date of approval of a sublease, the
sublessor and sublessee are jointly and severally liable for the
performance of all lease obligations, notwithstanding any terms in the
sublease to the contrary.
Sec. 3933.60 Effective date.
An assignment or sublease takes effect, so far as the United States
as lessor is concerned, on the first day of the month following the
BLM's final approval, or if the assignee requests it in advance, the
first day of the month of the approval.
Sec. 3933.70 Extensions.
The BLM's approval of an assignment or sublease does not extend the
readjustment period of the lease.
Subpart 3934--Relinquishments, Cancellations, and Terminations
Sec. 3934.10 Relinquishments.
(a) A lease or exploration license or any legal subdivision thereof
may be surrendered by the record title holder by filing a written
relinquishment, in triplicate, in the BLM state office having
jurisdiction of the lands covered by the relinquishment.
(b) To be relinquished, the lease account must be in good standing
and the relinquishment must be considered to be in the public interest.
(c) A relinquishment will take effect on the date the BLM approves
it, subject to the:
(1) Continued obligation of the lessee or licensee and surety to
make payments of all accrued rentals and royalties;
(2) The proper rehabilitation of the lands to be relinquished to a
condition acceptable to the BLM under these regulations;
(3) Terms of the lease or license; and
(4) Approved exploration plan or development plan.
(d) Prior to relinquishment of an exploration license, the licensee
must give any other parties participating in activities under the
exploration license the opportunity to take over operations under the
exploration license. The licensee must provide to the BLM written
evidence that the offer was made to all other parties participating in
the exploration license.
Sec. 3934.21 Written notice of cancellation.
The BLM will provide the lessee or licensee written notice of any
default, breach, or cause of forfeiture, and provide a time period of
30 calendar days to correct the default, to request an extension of
time in which to correct the default, or to submit evidence showing why
the BLM is in error and why the lease or exploration license should not
be canceled.
Sec. 3934.22 Causes and procedures for lease cancellation.
(a) The BLM will take appropriate steps in a United States District
Court of competent jurisdiction to institute proceedings for the
cancellation of the lease if the lessee:
(1) Does not comply with the provisions of the Act as amended and
other relevant statutes;
(2) Does not comply with any applicable regulations; or
(3) Defaults in the performance of any of the terms, covenants, and
stipulations of the lease, and the BLM does not formally waive the
default, breach, or cause of forfeiture.
(b) A waiver of any particular default, breach, or cause of
forfeiture will not prevent the cancellation and forfeiture of the
lease for any other default, breach, or cause of forfeiture, or for the
same cause occurring at any other time.
Sec. 3934.30 License terminations.
The BLM may terminate an exploration license if:
(a) The BLM issued it in violation of any law or regulation, or if
there are substantive factual errors, such as a lack of title;
(b) The licensee does not comply with the terms and conditions of
the exploration license; or
(c) The licensee does not comply with the approved exploration
plan.
Sec. 3934.40 Payments due.
If a lease is canceled or relinquished for any reason, all bonus,
rentals, royalties, and minimum royalties paid will be forfeited, and
any amounts not paid will be immediately payable to the United States.
Sec. 3934.50 Bona fide purchasers.
The BLM will not cancel a lease or an interest in a lease of a
purchaser if at the time of purchase the purchaser was not aware and
could not have reasonably determined from the BLM records the existence
of a violation of any of the following:
(a) Federal regulatory requirements;
(b) The Act, as amended; or
(c) Lease terms and conditions.
Subpart 3935--Production and Sale Records
Sec. 3935.10 Accounting records.
(a) Operators or lessees must maintain records that provide an
accurate account of, or include all:
(1) Oil shale mined;
(2) Oil shale put through the processing plant and retort;
(3) Mineral products produced and sold;
(4) Shale oil products, shale gas, and shale oil by-products sold;
and
(5) Shale oil products and by-products that are consumed on-lease
for the beneficial use of the lease.
(b) The records must include relevant quality analyses of oil shale
mined or processed and of all products including synthetic petroleum,
shale oil, shale gas, and shale oil by-products sold.
(c) Production and sale records must be made available for the
BLM's examination during regular business hours.
Subpart 3936--Inspection and Enforcement
Sec. 3936.10 Inspection of underground and surface operations and
facilities.
Operators, licensees, or lessees must allow the BLM, at any time,
either day or night, to inspect or investigate underground and surface
mining or exploration operations to determine compliance with lease or
license terms and conditions, compliance with the approved exploration
or development plan, and to verify production.
Sec. 3936.20 Issuance of notices of noncompliance and orders.
(a) If the BLM determines that an operator, licensee, or lessee has
not complied with established requirements, the BLM will issue to the
operator, licensee, or lessee a notice of noncompliance.
(b) If operations threaten immediate, serious, or irreparable
damage to the environment, the mine or deposit being
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mined, or other valuable mineral deposits or other resources, the BLM
will order the cessation of operations and will require the operator,
licensee, or lessee to revise the plan of development or exploration
plan.
(c) The operator, licensee, or lessee will be considered to have
received all orders or notices of noncompliance and orders that the
operator, licensee, or lessee receives by personal delivery or
certified mail. The BLM will consider service of any notice of
noncompliance or order to have occurred 7 business days after the date
the notice or order is mailed. Verbal orders and notices may be given
to officials at the mine or exploration site, but the BLM will confirm
them in writing within 10 business days. The operator or lessee must
notify the BLM of any change of address or operator or lessee name.
Sec. 3936.30 Enforcement of notices of noncompliance and orders.
(a) If the operator, licensee, or lessee does not take action in
accordance with the notice of noncompliance, the BLM may issue an order
to cease operations or initiate legal proceedings to cancel or
terminate the lease or license under subpart 3934 of this chapter.
(1) A notice of noncompliance will state how the operator,
licensee, or lessee has not complied with established requirements, and
will specify the action which must be taken to correct the
noncompliance and the time limits within which such action must be
taken. The operator, licensee, or lessee must notify the BLM when
noncompliance items have been corrected.
(2) If the operator, licensee, or lessee does not comply with the
notice of noncompliance or order within the specified time frame, the
operator, licensee, or lessee must pay a fine of $500 per day until the
noncompliance is corrected to the BLM's satisfaction.
(3) Noncompliance with the approved exploration or development plan
that results in wasted resource may result in the lessee or licensee
being assessed royalty at the market value, in addition to the
noncompliance fine.
(b) If the BLM determines that the failure to comply with the
exploration or development plan threatens health or human safety or
immediate, serious, or irreparable damage to the environment, the mine
or the deposit being mined or explored, or other valuable mineral
deposits or other resources, the BLM may, either in writing or verbally
followed with written confirmation within 5 business days, order the
cessation of operations or exploration without prior notice.
Sec. 3936.40 Appeals.
Notices of noncompliance and orders or decisions issued under the
regulations in this part may be appealed as provided in part 4 of this
title. All decisions and orders by the BLM under this part remain
effective pending appeal unless the BLM decides otherwise. A petition
for the stay of a decision may be filed with the Interior Board of Land
Appeals.
[FR Doc. E8-16275 Filed 7-22-08; 8:45 am]
BILLING CODE 4310-84-P