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Agency Information Collection Activities: Proposed Collection, Comment Request

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Minerals Management Service (MMS), Interior.


Notice of a revision of a currently approved information collection (OMB Control Number 1010-0119).


To comply with the Paperwork Reduction Act of 1995 (PRA), we are inviting comments on a collection of information that we will submit to the Office of Management and Budget (OMB) for review and approval. The title of this information collection request (ICR) is “30 CFR 208—Sale of Federal Royalty Oil; Sale of Federal Royalty Gas; and Commercial Contracts (Forms MMS-4070, Application for the Purchase of Royalty Oil; MMS-4071, Letter of Credit; and MMS-4072, Royalty-in-Kind Contract Surety Bond).” We changed the title of this ICR to clarify the regulatory language we are covering under 30 CFR part 208 and the Royalty-in-Kind (RIK) 5-Year Business Plan, and to reflect OMB consolidation approval of five RIK-related ICRs. Those ICRs were titled:

  • 1010-0042: 30 CFR part 208—Sale of Federal Royalty Oil; Royalty-in-Kind (RIK) Program (Form MMS-4070, Application for the Purchase of Royalty Oil);
  • 1010-0119: 30 CFR part 208—Sale of Federal Royalty Oil, Royalty Oil Sales to Eligible Refiners (30 CFR 208.4(a) and (d));
  • 1010-0126: Royalty-in-Kind (RIK) Pilot Program Directed Communications by Operators of Federal Oil and Gas Leases;
  • 1010-0129: Royalty-in-Kind Pilot Program—Offers, Financial Statements, and Surety Instruments for Sales of Royalty Oil and Gas; and
  • 1010-0135: 30 CFR 208.11(a), (b), (d), and (e)—Surety Requirements (Forms MMS-4071 and MMS-4072).

In the five ICRs, much of the general information was repeated and cross referenced. This consolidated ICR 1010-0119 eliminates that duplication of effort and redundancy of data. It also provides for all RIK information-collection requirements to be reviewed on a MMS RIK operational program-wide basis.


Submit written comments on or before May 6, 2005.


Submit written comments to Sharron L. Gebhardt, Lead Regulatory Start Printed Page 11028Specialist, Minerals Management Service, Minerals Revenue Management, PO Box 25165, MS 302B2, Denver, Colorado 80225. If you use an overnight courier service, our courier address is Building 85, Room A-614, Denver Federal Center, Denver, Colorado 80225. You may also e-mail your comments to us at Include the title of the information collection and the OMB control number in the “Attention” line of your comment. Also include your name and return address. Submit electronic comments as an ASCII file avoiding the use of special characters and any form of encryption. If you do not receive a confirmation that we have received your e-mail, contact Ms. Gebhardt at (303) 231-3211.

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Sharron L. Gebhardt, telephone (303) 231-3211, fax (303) 231-3781, or e-mail

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Title: 30 CFR 208—Sale of Federal Royalty Oil; Sale of Federal Royalty Gas; and Commercial Contracts (Forms MMS-4070, Application for the Purchase of Royalty Oil; MMS-4071, Letter of Credit; and MMS-4072, Royalty-in-Kind Contract Surety Bond).

OMB Control Number: 1010-0119.

Bureau Form Number: Forms MMS-4070, MMS-4071, and MMS-4072.

Abstract: The Secretary of the U.S. Department of the Interior is responsible for collecting royalties from lessees who produce minerals from leased Federal and Indian lands and the Outer Continental Shelf (OCS). The Secretary is required by various laws to manage mineral resources production on Federal and Indian lands, collect the royalties due, and distribute the funds in accordance with those laws. The MMS performs the royalty management functions for the Secretary.

The MMS is responsible for ensuring that all revenues from Federal and Indian mineral leases are accurately collected, accounted for, and disbursed to recipients. Historically, most of these revenues have been received in the form of cash royalty payments, i.e., royalty in value payments. These payments are paid by mineral development interests. In recent years, MMS had conducted pilots to test the approach of taking royalties in kind.

The Federal Government's MMS RIK pilot program has become a permanent operational program after several years of pilot project testing. The MMS RIK operational program takes payment from mineral lessees “in kind” in the form of produced crude oil and natural gas volumes, rather than in cash payments. The lessee transfers the title of the oil or gas to the Federal Government, and MMS sells the received product (oil or gas) to agents in the marketplace and disburses revenues as prescribed by law. The MMS sells some product competitively in the unrestricted marketplace, and other RIK product is sold competitively to eligible refiners (a small and independent refiner, as defined in 30 CFR 208.2). Additionally, when directed, MMS delivers the RIK product to other Federal Agencies, as has been the case during the fill of the Strategic Petroleum Reserve (SPR), directed by the President in 2001, with scheduled completion in 2005. Specifically, within the MMS RIK operational program, RIK conducts the eligible refiner program and the SPR program, in addition to the Wyoming crude oil, offshore unrestricted crude oil, and offshore natural gas programs.

The MMS has consolidated and revised existing procedures and policies guiding the sale of onshore and offshore royalty crude oil and natural gas to establish uniformity within the regulatory and operational framework, to provide industry with a more efficient and responsive MMS RIK operational program, and to improve the Federal Government's administration of this program. For example, several of the reporting requirements for eligible refiners under 30 CFR part 208 have been combined with reporting requirements for other RIK purchasers. However, due to the unique nature of the sale of crude oil to eligible refiners, certain requirements pertain only to that eligible refiner program.

Applicable citations of the laws pertaining to the taking and selling of the Federal Government's royalty share of mineral leases in the form of production (royalties “in kind”) include 30 CFR part 208; Mineral Leasing Act of 1920, section 36, as amended (30 U.S.C. 192); Outer Continental Shelf Lands Act of 1953, section 27, as amended (43 U.S.C. 1353); 30 U.S.C. 189 pertaining to Public Lands; 30 U.S.C. 359 pertaining to Acquired Lands; and 43 U.S.C. 1334 pertaining to OCS Lands. These citations, as well as specific language in the actual lease documents, authorize the Secretary to sell royalty oil and gas accruing to the United States. The standard lease terms state that royalties are due in amount or in value. In addition, these citations authorize the Secretary to prescribe proper rules and regulations and to do any and all things necessary to accomplish the purpose of applicable laws. The MMS directs communications between MMS operators and RIK purchasers through commercial contracts, situation-specific “Dear Operator” letters, or in the case of eligible refiners, through regulations at 30 CFR part 208. Proprietary information submitted to MMS under this collection is protected, and no items of a sensitive nature are collected.

Eligible Refiner Information—This information was previously collected under ICRs 1010-0042 and 1010-0119.

When the Secretary determines that eligible refiners do not have access to adequate supplies of oil, the Secretary may dispose of any royalty oil taken by conducting a sale of such oil, through an allocation process to eligible refiners. For the eligible refiners to participate in the eligible refiner RIK program, according to 30 CFR 208.4(a) and (b), MMS periodically completes a needs assessment to determine if eligible refiners continue to require access to domestic crude oil at competitive prices. The most recent assessment was completed in early 2004. The first step in this process is to issue a Federal Register notice requesting specific information from eligible refiners.

Under 30 CFR 208.4(c), the MMS, on behalf of the Secretary, performs a Determination of Need prior to issuing a notice of availability of sale in the Federal Register, advising industry of a forthcoming RIK crude oil sale for eligible refiners. The MMS uses the feedback from the Determination of Need respondents (eligible refiners or other interested parties, such as lessees or operators) to assess current marketplace conditions, i.e., whether small and independent eligible refiners have access to ongoing supplies of crude oil at equitable prices. If MMS determines that eligible refiners do not have adequate access to crude oil supplies, MMS then takes the Federal Government's royalty oil in kind and offers the oil for sale to eligible refiners.

The eligible refiners interested in purchasing royalty oil must submit Form MMS-4070, Application for the Purchase of Royalty Oil, in accordance with instructions in the Determination of Need notice and instructions issued by MMS for completion of the form. The Federal Government's administration of the eligible refiner program is aided significantly by the collection of information requested on Form MMS-4070. The MMS uses the information collected on Form MMS-4070 to determine the eligibility of refiners wanting to enter into contracts to purchase royalty oil and to provide a basis for the allocation of available royalty oil among eligible refiners, when necessary; that is, they meet the small refiner eligibility requirements issued by the Small Business Administration, as explained under 30 CFR 208.6. Under 30 CFR 208.10(e), eligible refiners who Start Printed Page 11029purchase royalty oil cannot transfer, assign, or sell their rights or interest in a royalty oil contract without written approval of the Director, MMS. This provision is intended to ensure that only qualified eligible refiners benefit from these sales of royalty oil.

Directed Communications by Operators of Federal Oil and Gas Leases—This information was previously collected under ICR 1010-0126.

Collection of RIK oil and gas for eligible refiners and other RIK purchasers requires communication between MMS and the operators of a lease to ensure accurate and timely delivery of MMS's royalty share of production volumes. In order to take MMS's crude oil or natural gas in kind, MMS, as the responsible steward of oil and gas royalties, must direct operators of affected MMS leases to provide three types of communication:

  • Report information about the projected volumes and qualities of RIK crude oil or natural gas production the operator expects to make available for delivery in the following month, and report corrections to those projected volumes and qualities for previous months, submitting monthly no later than 10 days before the first day of following month;
  • Report cost/invoicing information about transportation charges incurred for delivering the RIK product to the delivery point, when applicable; and
  • Report month-end summary information (lease imbalance statement) regarding total RIK crude oil or natural gas volumes and qualities needed to carry over to the next month to resolve aggregated imbalances that have occurred in prior months of RIK deliveries.

These information requirements are standard business practices in the oil and gas industry.

In marketing the product, information received through MMS's directed communication is essential for MMS to ensure the delivery and acceptance of verifiable quantities and qualities of oil and gas. In cases when MMS is directed to deliver the product to other Federal Agencies, these types of information are necessary so that exchange contractors can arrange to timely accept accurate amounts and qualities of royalty oil that will be delivered by MMS's exchange partner and for MMS to verify timely fulfillment of operators' and lessees' royalty obligations to the Federal Government.

Third-Party Agreements—This information was previously collected under ICR 1010-0042.

Title 30 CFR 208.9 requires that eligible refiners who purchase royalty oil must submit to MMS two copies of any written third-party agreements, or two copies of a complete written explanation of any oral third-party agreements, relating to the method and costs of delivery of royalty oil, or crude oil exchanged for the royalty oil, from the point of delivery under the contract to the purchaser's refinery. Also, this section requires that the purchaser must submit copies of agreements pertaining to quality differentials that may occur between the lease(s) and the delivery point(s). However, in practice MMS does not currently require the eligible refiners to submit these agreements.

Offers, Financial Statements, and Surety Instruments for Sales of Royalty Oil and Gas—This information was previously collected under ICRs 1010-0129 and 1010-0135.

The Secretary is obligated to hold competition when selling to the public to protect actual RIK production before, during, and after any sale, and to obtain a fair return on royalty production sold. The MMS must fulfill those obligations for the Secretary. The reporting requirements are (1) actual offers that potential purchasers will submit when MMS offers production for competitive sale; (2) offerors' statements of financial qualification; and (3) surety instruments, such as a Letter of Credit (LOC), bond, prepayment, or parent guaranty when financial qualification is not sufficient.

The MMS will evaluate offers, which competing potential purchasers may choose to submit, in response to a variety of types of offerings in the MMS RIK operational program. The format for offers will be specified in the offering and may vary among offerings. The MMS may offer royalty oil and gas production by Invitation for Offers (IFOs). The IFO will be open only to offerors who have previously established their qualifications. The MMS will evaluate all offers to determine which combination of price and other terms comprises the best return to the Federal Treasury and to any affected State.

The MMS may request that a bidder submit its public-available statement of its financial condition (brought briefly up to date, if needed) or other related qualification information. The MMS evaluates the qualification information to determine whether bidders are reliable to follow through on payment of the dollar amount (or delivery of exchange production) offered as they bid, and to determine their ability to timely perform activities attendant to the taking of oil and/or gas. The MMS performs this step to reduce the risk to the Federal Government in these transactions.

Under MMS's current practice, eligible refiners are subject to the same requirements as other RIK purchasers regarding MMS-acceptable surety instruments and qualification information. Reporting requirements in 30 CFR 208.11 discuss surety instruments for eligible refiners. Surety instruments include the broad field of financial instruments that may be collected, such as bonds, prepayments, and parent guaranties. When required, eligible refiners and other RIK purchasers must provide surety documents to protect the Federal Government's interest, such as but not limited to, Form MMS-4071, Letter of Credit; Form MMS-4072, Royalty-In-Kind Contract Surety Bond; or other acceptable commercial surety, within 5 business days prior to the first delivery under the contract. For bonds, MMS requires a specific MMS-approved format.

Frequency of Response: On occasion, weekly, monthly, annually, frequency varies within monthly reporting cycle, or as necessary.

Estimated Number and Description of Respondents: 145 Federal lessees and/or operators; and 80 commercial oil and gas purchasers and/or refiners.

Estimated Annual Reporting and Recordkeeping “Hour” Burden: 5,099 hours.

We are revising this ICR to include reporting requirements that were overlooked in the previous renewal, and we have adjusted the burden hours accordingly. The following chart shows the breakdown of the estimated burden hours by CFR section and paragraph.Start Printed Page 11030

Section A.12. Burden Breakdown

Citation 30 CFR part 208Reporting and recordkeeping requirementHour burdenAverage number of annual responsesAnnual burden hours
Subpart A—General Provisions
208.4 Royalty Oil Sales to Eligible Refiners
208.4(a)(a) Determination to take royalty oil in kind. The Secretary may evaluate crude oil market conditions from time to time. * * * The Secretary will review these items and will determine whether eligible refiners have access to adequate supplies of crude oil and whether such oil is available to eligible refiners at equitable prices. * * *4832
208.4(b)(b) Sale to eligible refiners (1) * * * The Secretary may authorize MMS to offer royalty oil for sale to eligible refiners only for use in their refineries. * * *Hour burden covered under § 208.4(a).
208.4(c)(c) Upon a determination by the Secretary * * * that eligible refiners do have access to adequate supplies of crude oil at equitable prices, MMS will not take royalties in kind from oil and gas leases for exclusive sale to such refiners. * * *Hour burden covered under § 208.4(a).
208.4(d)(d) Interim sales. * * * The potentially eligible refiners, individually or collectively, must submit documentation demonstrating that adequate supplies of crude oil at equitable prices are not available for purchase. * * *Hour burden covered under § 208.4(a).
208.6 General Application Procedures
208.6(a) and (b)(a) To apply for the purchase of royalty oil, an applicant must file a Form MMS-4070 with MMS in accordance with instructions provided in the “Notice of Availability of Royalty Oil” and in accordance with any instructions issued by MMS for completion of Form MMS-4070. The applicant will be required to submit a letter of intent from a qualified financial institution stating that it would be granted surety coverage for the royalty oil for which it is applying, or other such proof of surety coverage, as deemed acceptable by MMS. The letter of intent must be submitted with a completed Form MMS-40701.25810
(b) In addition to any other application requirements specified in the Notice, the following information is required on Form MMS-4070 at the time of application: * * *
208.7 Determination of Eligibility
208.7(a)(a) The MMS will examine each application and may request additional information if the information in the application is inadequate. * * *0.2511 1
208.8 Transportation and Delivery
208.8(a)(a) * * * The purchaser must have physical access to the oil at the alternate delivery point and such point must be approved by MMS111
208.8(b)(b) * * * If the delivery point is on or immediately adjacent to the lease, the royalty oil will be delivered without cost to the Federal Government as an undivided portion of production in marketable condition at pipeline connections or other facilities provided by the lessee, unless other arrangements are approved by MMS. If the delivery point is not on or immediately adjacent to the lease, MMS will reimburse the lessee for the reasonable cost of transportation to such point in an amount not to exceed the transportation allowance determined pursuant to 30 CFR part 206. * * *Hour burden covered by OMB Control Number 1010-0140 (Form MMS-2014, expires 10/31/2006). This provision is no different than the transportation allowances allowed in 30 CFR 206 for royalties paid in value. The lessee enters allowance amount on Form MMS-2014.
208.9 Agreements
208.9(a)(a) A purchaser must submit to MMS two copies of any written third-party agreements, or two copies of a full written explanation of any oral third- party agreements, relating to the method and costs of delivery of royalty oil, or crude oil exchanged for the royalty oil, from the point of delivery under the contract to the purchaser's refinery. In addition, the purchaser must submit copies of agreements pertaining to quality differentials which may occur between leases and delivery points.188
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208.10 Notices
208.10(d)(d) After MMS notification that royalty oil will be taken in kind, the operator shall be responsible for notifying each working interest on the Federal lease. * * *22040
208.10(e)(e) A purchaser cannot transfer, assign, or sell its rights or interest in a royalty oil contract without written approval of the Director, MMS. * * * Without express written consent from MMS for a change in ownership, the royalty oil contract shall be terminated. * * *111
208.11 Surety Requirements [for eligible refiners]
208.11 (a), (b) (d), and (e)(a) The eligible purchaser, prior to execution of the contract, shall furnish an “MMS-specified surety instrument,” in an amount equal to the estimated value of royalty oil that could be taken by the purchaser in a 99-day period, plus related administrative charges. * * *4416
(b) * * * The purchaser or its surety company may elect not to renew the letter of credit at any monthly anniversary date, but must notify MMS of its intent not to renew at least 30 days prior to the anniversary date. * * *
(d) The “MMS-specified surety instrument” shall be in the form specified by MMS instructions or approved by MMS. * * *
(e) All surety instruments must be in a form acceptable to MMS and must include such other specific requirements as MMS may require adequately to protect the Government's interests
208.15 Audits
208.15Audits of the accounts and books of lessees, operators, payors, and/or purchasers of royalty oil taken in kind may be made annually or at other such times as may be directed by MMS. * * *Produce Records: The ORA determined that the audit process is not covered by the PRA because MMS staff asks non-standard questions to resolve exceptions.
Directed Communications by Operators of Federal Oil and Gas Leases
Contract-DirectedWyoming Oil1100100
Natural Gas [Texas 8G and Gulf of Mexico (GOM)]13,6003,600
GOM Oil15050
SPR Fill Initiative (The SPR is expected to reach full capacity by the end of FY 2005. At that point, MMS will shift SPR oil volumes to the commercial GOM Oil RIK program. Thus, information-collection responses will continue at the same level after SPR is filled to capacity.)1300300
Eligible RefinersHour burden covered under § 208.10(d).
Offers, Financial Statements, and Surety Instruments for Sales of Royalty Oil and Gas
Financial Statements12020
Surety Instruments42080
Total Burden4,9815,099
1 Rounded up from 0.25.

Estimated Annual Reporting and Recordkeeping ``Non-hour Cost'' Burden: We have identified no ``non-hour'' cost burdens.

Public Disclosure Statement: The PRA (44 U.S.C. 3501 et seq.) provides that an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

Comments: Before submitting an ICR to OMB, PRA Section 3506(c)(2)(A) requires each agency “* * * to provide notice * * * and otherwise consult with members of the public and affected agencies concerning each proposed collection of information * * *.” Agencies must specifically solicit comments to: (a) Evaluate whether the proposed collection of information is necessary for the agency to perform its duties, including whether the information is useful; (b) evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) enhance the quality, usefulness, and clarity of the information to be collected; and (d) minimize the burden on the respondents, including the use of Start Printed Page 11032automated collection techniques or other forms of information technology.

The PRA also requires agencies to estimate the total annual reporting “non-hour cost” burden to respondents or recordkeepers resulting from the collection of information. We have not identified non-hour cost burdens for this information collection. If you have costs to generate, maintain, and disclose this information, you should comment and provide your total capital and startup cost components or annual operation, maintenance, and purchase of service components. You should describe the methods you use to estimate major cost factors, including system and technology acquisition, expected useful life of capital equipment, discount rate(s), and the period over which you incur costs. Capital and startup costs include, among other items, computers and software you purchase to prepare for collecting information; monitoring, sampling, and testing equipment; and record storage facilities. Generally, your estimates should not include equipment or services purchased: (i) Before October 1, 1995; (ii) to comply with requirements not associated with the information collection; (iii) for reasons other than to provide information or keep records for the Government; or (iv) as part of customary and usual business or private practices.

We will summarize written responses to this notice and address them in our ICR submission for OMB approval, including appropriate adjustments to the estimated burden. We will provide a copy of the ICR to you without charge upon request. The ICR also will be posted on our Web site at​Laws_​R_​D/​FRNotices/​FRInfColl.htm.

Public Comment Policy: We will post all comments in response to this notice on our Web site at​Laws_​R_​D/​FRNotices/​FRInfColl.htm. We also will make copies of the comments available for public review, including names and addresses of respondents, during regular business hours at our offices in Lakewood, Colorado. Upon request, we will withhold an individual respondent's home address from the public record, as allowable by law. There also may be circumstances in which we would withhold from the rulemaking record a respondent's identity, as allowable by law. If you request that we withhold your name and/or address, state your request prominently at the beginning of your comment. However, we will not consider anonymous comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses, available for public inspection in their entirety.

MMS Information Collection Clearance Officer: Arlene Bajusz (202) 208-7744.

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Dated: February 23, 2005.

Richard Adamski,

Acting Associate Director for Minerals Revenue Management.

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[FR Doc. 05-4333 Filed 3-4-05; 8:45 am]