Oil and Gas and Sulphur Operations on the Outer Continental Shelf (OCS)-Oil and Gas Production Requirements, 9884-9901 [E7-3846]

Agencies

• DEPARTMENT OF THE INTERIOR
• Minerals Management Service

[Federal Register Volume 72, Number 43 (Tuesday, March 6, 2007)]
[Proposed Rules]
[Pages 9884-9901]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-3846]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 250

RIN 1010-AD12


Oil and Gas and Sulphur Operations on the Outer Continental Shelf 
(OCS)--Oil and Gas Production Requirements

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Proposed rule.

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SUMMARY: MMS proposes to amend the regulations regarding oil and 
natural gas production. This is a complete rewrite of these 
regulations, addressing issues such as production rates, burning oil, 
and venting and flaring natural gas. The proposed rule would eliminate 
most restrictions on production rates and clarify flaring and venting 
limits. The proposed rule was written using plain language, so it will 
be easier to read and understand.

DATES: Submit comments by June 4, 2007. MMS may not fully consider 
comments received after this date. Submit comments to the Office of 
Management and Budget on the information collection burden in this rule 
by April 5, 2007.

ADDRESSES: You may submit comments on the rulemaking by any of the 
following methods. Please use the Regulation Identifier Number (RIN) 
1010-AD12 as an identifier in your message. See also Public Comment 
Procedures under Procedural Matters.
     MMS's Public Connect on-line commenting system, https://
ocsconnect.mms.gov. Follow the instructions on the Web site for 
submitting comments.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions on the Web site for submitting comments.
     E-mail MMS at rules.comments@mms.gov. Use RIN 1010-AD12 in 
the subject line.

[[Page 9885]]

     Fax: 703-787-1546. Identify with the RIN, 1010-AD12.
     Mail or hand-carry comments to the Department of the 
Interior; Minerals Management Service; Attention: Rules Processing Team 
(RPT); 381 Elden Street, MS-4024; Herndon, Virginia 20170-4817. Please 
reference ``Oil and Gas Production Requirements, 1010-AD12'' in your 
comments and include your name and return address.
     Send comments on the information collection in this rule 
to: Interior Desk Officer 1010-AD12, Office of Management and Budget; 
202/395-6566 (facsimile); e-mail: oira_docket@omb.eop.gov.

FOR FURTHER INFORMATION CONTACT: Amy C. White, Regulations and 
Standards Branch, 703-787-1665.

SUPPLEMENTARY INFORMATION: This rule proposes to revise subpart K, Oil 
and Gas Production Rates, of 30 CFR 250. The new version of subpart K 
would represent a major change in the structure and readability of the 
regulation with some changes in the requirements. This revision would 
eliminate some requirements that are no longer necessary in today's 
industry and clarify other requirements. Some of these revisions are 
based on a Government Accountability Office (GAO) report on natural gas 
flaring and venting.

GAO Report

    In July 2004, the GAO issued a report on world-wide emissions from 
vented and flared natural gas titled, ``Natural Gas Flaring and 
Venting--Opportunities to Improve Data and Reduce Emissions'' (GAO-04-
809). This report is available on the GAO Web site at: https://
www.gao.gov/new.items/d04809.pdf. This report reviewed the flaring and 
venting data available, the extent of flaring and venting, their 
contributions to greenhouse gas emissions, and opportunities for the 
federal government to reduce flaring and venting. The report found 
that:
     The amount of gas emitted through flaring and venting 
worldwide is small compared with global natural gas production and 
represents a small portion of greenhouse gas emissions.
     Worldwide flaring and venting is estimated to contribute, 
respectively, about 4 percent of the total methane and about 1 percent 
of the total carbon dioxide emissions caused by human activity.
     EIA [Energy Information Administration] estimates that the 
United States flares or vents about 0.4 percent of its production, 
representing only 3 percent of the world's total amount of natural gas 
flared and vented.
     In the United States, there are well-developed natural gas 
markets and infrastructure to reduce the flaring and venting of 
associated natural gas.
     Since 1990, the quantity of oil produced has increased, 
but because of various global reduction initiatives, the quantity of 
natural gas flared and vented has remained constant. Consequently, 
natural gas emissions as a percentage of oil production have decreased.
     Since the impact of methane (venting) on the earth's 
atmosphere is about 23 times greater than that of carbon dioxide 
(flaring), a small change in the ratio of flaring to venting could 
cause a disproportionate change in the impact of emissions.
    The report concluded that more accurate records on flaring and 
venting are needed to determine the amount of the resource that is lost 
and the volume of greenhouse gas emissions these practices contribute 
to the atmosphere each year. The GAO made two recommendations to the 
Secretary of the Interior: (1) ``Consider the cost and benefit of 
requiring that companies flare the natural gas, whenever possible, when 
flaring or venting is necessary,'' and (2) ``consider the cost and 
benefit of requiring that companies use flaring and venting meters to 
improve oversight.'' In addition, there was a recommendation to the 
Secretary of Energy to consider, ``in consultation with EPA 
[Environmental Protection Agency], MMS, and BLM [Bureau of Land 
Management], how to best collect separate statistics on flaring and 
venting.''
    In comments on the draft report, the Department of the Interior 
(DOI) concurred with the report's recommendations and agreed to assess 
the cost effectiveness of requiring the oil and gas industry to 
implement these changes. MMS conducted analyses to assess the costs and 
benefits of requiring flare/vent meters and also of requiring flaring 
instead of venting. The first analysis supported the recommendation to 
require meters provided that the facilities process more than 2,000 
barrels of oil per day (BOPD). This requirement is included in the 
proposed rule.
    The second analysis indicated that a regulatory change to require 
flaring instead of venting may be appropriate. However, the cost of 
implementing this requirement is significant, and input from 
potentially affected parties is necessary to establish a reasonable 
threshold. MMS plans to work directly with interested parties to 
determine the best approach in considering the GAO recommendation to 
require flaring instead of venting natural gas. We are soliciting 
comments on this issue in this proposed rule. We would like comments 
related to additional costs, environmental impacts, and conditions or 
situations where flaring may not be advisable. We are planning a 
workshop to discuss the issue. The workshop would be followed by 
appropriate rulemaking.
    To improve data collection, as the GAO report suggested, MMS is 
proposing that operators report flaring and venting volumes to MMS 
separately. Currently, MMS only collects information on the total 
natural gas flared and vented. Operators do not need to differentiate 
between the two categories. In addition, MMS inspectors currently use 
infrared cameras to verify natural gas venting.

Proposed Rule

Organization

    The proposed rule would completely restructure subpart K. The new 
version is divided into shorter, easier-to-read sections. Each section 
focuses on one topic instead of the arrangement in the current version, 
which covers multiple topics in each section. For example, in the 
current edition of subpart K, the regulations regarding burning liquid 
hydrocarbons, as well as those governing flaring or venting natural 
gas, are in one section. In the proposed rule, these same requirements 
are in five sections, making it easier for an operator to find the 
information that applies to its particular situation. The numbering for 
subpart K would start at Sec.  250.1150 instead of Sec.  250.1100 to 
accommodate other planned rulemaking. The proposed structure is shown 
in the following table:

------------------------------------------------------------------------
              Current rule                        Proposed rule
------------------------------------------------------------------------
Sec.   250.1100 Definitions for          Sec.   250.105 Definitions.
 production rates.
Sec.   250.105 Definitions.
Sec.   250.1101 General requirements     Sec.   250.1150 General
 and classification of reservoirs.        reservoir production
                                          requirements.
                                         Sec.   250.1154 How do I
                                          determine if my reservoir is
                                          sensitive?
                                         Sec.   250.1155 What
                                          information must I submit for
                                          sensitive reservoirs?

[[Page 9886]]

 
                                         Sec.   250.1156 What steps must
                                          I take to receive approval to
                                          produce within 500 feet of a
                                          unit or lease line?
                                         Sec.   250.1157 How do I
                                          receive approval to produce
                                          gas from an oil reservoir with
                                          an associated gas cap?
Sec.   250.1102 Oil and gas production   Requirements for production
 rates.                                   rates are largely eliminated.
                                          Portions retained were
                                          combined with new information
                                          in ``Sec.   250.1159 May the
                                          Regional Supervisor limit my
                                          well or reservoir production
                                          rates?''
Sec.   250.1103 Well production testing  Sec.   250.1151 How often must
                                          I conduct well production
                                          tests?
                                         Sec.   250.1152 How do I
                                          conduct well tests?
Sec.   250.1104 Bottomhole pressure      Sec.   250.1153 When must I
 survey.                                  conduct a static bottomhole
                                          pressure survey?
Sec.   250.1105 Flaring or venting of    Sec.   250.1160 When may I
 gas and burning liquid hydrocarbons.     flare or vent gas?
                                         Sec.   250.1161 When may I
                                          flare or vent gas for extended
                                          periods of time?
                                         Sec.   250.1162 When may I burn
                                          produced liquid hydrocarbons?
                                         Sec.   250.1163 How must I
                                          measure gas flaring or venting
                                          and liquid hydrocarbon burning
                                          volumes and what records must
                                          I maintain?
                                         Sec.   250.1164 What are the
                                          requirements for flaring or
                                          venting gas containing H2S?
Sec.   250.1106 Downhole commingling...  Sec.   250.1158 How do I
                                          receive approval to downhole
                                          commingle hydrocarbons?
Sec.   250.1107 Enhanced oil and gas     Sec.   250.1165 What must I do
 recovery operations.                     for enhanced recovery
                                          operations?
New....................................  Sec.   250.1159 May the
                                          Regional Supervisor limit my
                                          well or reservoir production
                                          rates?
                                         Sec.   250.1166 What additional
                                          reporting is required for
                                          developments in the Alaska
                                          Region?
                                         Sec.   250.1167 What
                                          information must I submit for
                                          approvals?
------------------------------------------------------------------------

    The organization of the proposed rule reflects the actual sequence 
of events that occurs as wells are developed and the resources 
produced. The proposed rule is written in plain language to conform to 
the DOI's standards for rule writing. These changes include 
incorporating tables, using a question format for section headings, and 
using pronouns. These changes would make the rule easier to understand. 
Finally, a table at the end of the rule lists the information that 
operators would have to submit to MMS to receive approvals for various 
operations.

Major Changes to the Rule

    Some requirements from the previous edition of subpart K would be 
eliminated by the proposed rule because they are unnecessary in today's 
petroleum industry. For example, MMS required operators to establish 
maximum production rates (MPR's) for producing well completions, and 
maximum efficient rates (MER's) for producing reservoirs, in OCS Order 
No. 11 in 1974, during a period of oil shortages and energy crises. In 
1988, MMS reduced the MER requirement. Currently, MER's are required 
only on sensitive reservoirs (primarily oil reservoirs with associated 
gas caps). Determining and maintaining production rates imposes a 
significant burden on operators. Based on the past 30 years of 
experience, MMS has concluded that maximum rate requirements and 
production balancing requirements can be largely eliminated without 
significant detriment to efforts for conservation and maximization of 
ultimate recovery. However, the proposed rule would allow the Regional 
Supervisor to set production rates in cases where excessive production 
could harm ultimate recovery from the reservoir.
    The proposed rule would clarify required information submittals to 
MMS, including requirements relating to the documents submitted to MMS 
and the timing of those submissions. For example, there is additional 
guidance on notifying adjoining operators regarding production within 
500 feet of a common lease or unit line. The proposed rule would 
provide more detail as to when the notification must occur, what the 
notice must include, and how to verify the notification with MMS.
    The proposed rule would incorporate several Notices to Lessees and 
Operators (NTLs) that clarify the current regulations. These NTLs would 
be obsolete if the proposed rule becomes final and MMS would withdraw 
all of these NTLs at that time. However, if necessary, MMS would issue 
additional NTLs to provide guidance. The NTLs affected include:
     NTL No. 97-16, ``Production Within 500 Feet of a Unit or 
Lease Line,'' effective August 1, 1997. This NTL clarifies MMS policy 
on issuing approvals for production within 500 feet of a unit or lease 
line, and includes details on what the requesting operator needs to 
provide to MMS for approval. Those details are addressed in the 
proposed rule.
     NTL No. 98-23, ``Interim Reporting Requirements for 30 CFR 
250, subpart K, Oil and Gas Production Rates,'' effective October 15, 
1998. This NTL addressed oral approvals for gas flaring and relaxed 
some of the requirements regarding production rates, including MER and 
MPR in certain circumstances. The NTL clarified the submittal of 
written summary letters on flaring incidents that received oral 
approval. These requirements are addressed in the proposed rule.
     NTL No. 99-G20, ``Downhole Commingling Applications,'' 
effective September 7, 1999. This NTL was issued in conjunction with 
NTL No. 99-G19. It clarifies what information the applicant needs to 
include in downhole commingling applications to ensure that the 
application is processed without delay. These information requirements 
were added to the proposed rule.
     NTL No. 2006-N06, ``Flaring and Venting Approvals,'' 
effective December 19, 2006. This NTL clarifies the definitions of 
flaring and venting, the record-keeping requirements, the 
classification of emitted natural gas, and the MMS policy regarding 
continuous flaring or venting of small volumes of oil-well gas or gas-
well gas from storage vessels or other low-pressure production vessels 
when the gas cannot be economically recovered. These issues are 
addressed in the proposed rule. This NTL also provides contact 
information for each Region and provides sample

[[Page 9887]]

field records. These two items are not addressed in the proposed rule. 
MMS would issue a new NTL to include only this information, after we 
publish the final rule.
    The most significant change, with regard to cost, would be a 
proposed requirement for natural gas flare/vent meters on facilities 
that process significant volumes of oil. The current MMS requirements 
rely heavily on the accuracy of operator calculations and record 
keeping. Recent incidents have shown that these methods are 
insufficient to accurately capture actual flaring and venting volumes. 
The proposed rule would require the installation of meters to 
accurately measure all flared and vented natural gas on facilities that 
process more than 2,000 BOPD. These facilities have the potential to 
flare or vent significant volumes of associated gas.
    MMS estimates the cost of purchasing and installing these meters to 
be $77,000 per facility. Limiting the requirement to facilities that 
process over 2,000 BOPD ensures that the meters are a small expense 
relative to the cost of operating those facilities and relative to the 
income generated by those facilities; and that the requirement would 
not be an unfair burden to small operators. MMS estimates that 34 
operators would have to install the meters on 112 facilities. Of those 
operators that would have to install the meters, nine are considered 
small businesses, according to the North American Industry 
Classification System (NAICS).
    The July 2004 GAO report on world-wide emissions from vented and 
flared natural gas, discussed above, recommended that more accurate 
records on flaring and venting are needed to determine the amount of 
the resource that is wasted, and the volume of greenhouse gas these 
practices contribute to the atmosphere each year. The report 
recommended that DOI consider requiring flare/vent meters to measure 
the gas lost. MMS agrees with that recommendation. However, MMS 
believes installing these meters on facilities that process less than 
2,000 BOPD would not be cost effective, and might be an undue burden on 
smaller operators.
    MMS is also proposing to add new definitions for ``flaring'' and 
``venting'' to 30 CFR part 250 subpart A, and to revise the definition 
for ``sensitive reservoir.''
    The following is a brief section-by-section description of the 
substantive proposed changes to subpart K:
    Sec.  250.105 Definitions. In the current rule, definitions appear 
in subpart A at 30 CFR 250.105 and in subpart K at 30 CFR 250.1100. MMS 
proposes removing the definitions from subpart K because they already 
appear in subpart A.
General
    Sec.  250.1150 What are General Reservoir Production Requirements? 
Because the first section of subpart K would no longer contain the 
definitions, this section would contain the general requirements for 
producing wells and reservoirs.
Well Tests and Surveys
    Sec.  250.1151 How often must I conduct well production tests? Well 
production testing is required for all wells. This proposed section 
defines when an operator must perform the tests and describes the 
conditions for the tests. This section would cover well flow potential 
tests, semi-annual well tests, and any special tests that the Regional 
Supervisor may require. Operators would no longer be required to submit 
Semiannual Well Test Reports within 45 days of the tests. Instead, they 
would submit the reports within 45 days after the end of the calendar 
half-year. This would allow operators to submit all their well tests at 
one time and include the most recent tests for those few completions 
that produced during the 6-month period, but were not tested within the 
last 45 days.
    Sec.  250.1152 How do I conduct well tests? This proposed section 
describes how operators must conduct a well test. The testing 
procedures would be the same as in the current version of the rule. 
However, the section would be reformatted to make the procedures easier 
to follow. This reformatting would include the procedure for ensuring 
that the well is stabilized before conducting the test; the required 
duration of the test; the usage of correction factors and adjustments; 
and an option to use other procedures with approval from the Regional 
Supervisor. It also discusses conducting additional tests that the 
Regional Supervisor may require.
    Sec.  250.1153 When must I conduct a static bottomhole pressure 
survey? Static bottomhole pressure surveys are required on all new 
producing reservoirs, and annually on reservoirs with three or more 
producing completions. This proposed section addresses when operators 
must conduct static bottomhole pressure surveys and what information 
operators must submit to MMS. The proposed new provision would allow 
the operator to request a departure from this requirement from the 
Regional Supervisor, with appropriate justification.
Classifying Reservoirs
    Sec.  250.1154 How do I determine if my reservoir is sensitive? MMS 
requires that operators classify all reservoirs as either sensitive or 
non-sensitive. A sensitive reservoir is a reservoir in which high 
reservoir production rates would decrease ultimate recovery. This 
section would define the requirements for classifying reservoirs; when 
the Regional Supervisor may reclassify a reservoir; and when an 
operator may or must request reclassification of a reservoir. There are 
not substantive changes between the requirements of the current version 
of the rule and the proposed; this section would be reorganized and 
easier to read.
    Sec.  250.1155 What information must I submit for sensitive 
reservoirs? This proposed section defines what information MMS requires 
for sensitive reservoirs and when operators must submit that 
information. The only proposed change is that the Regional Supervisor 
may request that the operator submit Form MMS-127 (Sensitive Reservoir 
Information Report) and supporting information.
Approvals Prior to Production
    Sec.  250.1156 What steps must I take to receive approval to 
produce within 500 feet of a unit or lease line? In the current version 
of subpart K, a number of requirements, including approval for 
producing within 500 feet of a unit or lease line and basic 
classification requirements, are included in one section, 30 CFR 
250.1101. In the proposed rule, each of these issues is addressed in a 
separate section. Title 30 CFR 250.1156 would address only the approval 
and service fee for producing within 500 feet of a lease or unit line.
    The proposed approval requirements are clearer than in the current 
rule, and include issues addressed in NTL 97-16. In addition to 
receiving approval from the Regional Supervisor, operators must notify 
operators of adjacent leases. The requirement to notify adjacent 
operators would be clearer, and there is a list of information the 
notification would have to include.
    Sec.  250.1157 How do I receive approval to produce gas from an oil 
reservoir with an associated gas cap? This section would address how to 
receive approval to produce from an associated gas cap and its service 
fee. The required supporting information is listed in the table at 
proposed 30 CFR 250.1167 at the end of the rule.
    Sec.  250.1158 How do I receive approval to downhole commingle 
hydrocarbons? This section would address how to obtain MMS approval to

[[Page 9888]]

downhole commingle hydrocarbons and the service fee that must accompany 
your request. For downhole commingling in a competitive reservoir, the 
operator would be required to notify the operators of all leases that 
contain the reservoir. The request for approval must document this 
notification. Operators of the other leases would have 30 days after 
the notification to provide the Regional Supervisor with letters of 
acceptance or objection. If the notified operators do not respond 
within the specified period, the Regional Supervisor will assume the 
operators do not object. The Regional Supervisor will consider any 
objections, but may approve the commingling request to protect 
correlative rights. This section would also incorporate issues 
addressed in NTL's No. 99-G19 and 99-G20.
Production Rates
    Sec.  250.1159 May the Regional Supervisor limit my well or 
reservoir production rates? Generally, this proposed rule would 
eliminate MPR's and MER's. However, this section would retain the 
Regional Supervisor's authority to set an MPR for a producing well 
completion or an MER for a sensitive reservoir. If the Regional 
Supervisor sets an MPR or MER, it would be subject to the terms and 
conditions set by the Regional Supervisor. Those terms and conditions 
would include production restrictions that allow for normal variations 
and fluctuations in production rates.
Flaring, Venting, and Burning Hydrocarbons
    Sec.  250.1160 When may I flare or vent gas? The current regulation 
contains all of the flaring, venting, and burning regulations in one 
section. The proposed rule covers these in separate sections, so it is 
easier to find the requirements for a given situation. The new format 
also allows for the inclusion of more detail and clarification of 
flaring and venting situations that are not described in the current 
rule. Since there are many situations under which flaring and venting 
might occur, the table in this section reflects general categories that 
encompass the situations under which MMS would allow flaring or venting 
without approval from the Regional Supervisor. Under most 
circumstances, the proposed rule would allow operators to treat gas 
flashing from gas-well condensate similar to oil-well gas for flaring 
and venting approval purposes.
    The proposed rule would require operators to receive approval 
before flaring or venting gas in volumes higher than those specified in 
their previously-approved plans. This would enable MMS to ensure that 
flaring and venting activities are in compliance with environmental 
laws.
    The proposed rule would also allow the Regional Supervisor to 
specify flaring and venting volume limits (in addition to time limits) 
in order to prevent air quality degradation or the loss of reserves. 
This is sometimes necessary because offshore production facilities are 
now capable of flaring or venting extremely large volumes in a short 
amount of time.
    Sec.  250.1161 When may I flare or vent gas for extended periods of 
time? This section would define when operators must receive approval 
from the Regional Supervisor to flare or vent gas for an extended 
period of time. If there is a need to flare or vent a small amount of 
gas (less than 10 MCF per day) due to improperly working valves or pipe 
fittings and the Regional Supervisor determines that it is prudent to 
postpone the repair until a scheduled facility shutdown occurs, then 
the proposed rule would allow the Regional Supervisor to exempt the 
amount flared or vented from the time limits set in Sec.  250.1160.
    Sec.  250.1162 When may I burn produced liquid hydrocarbons? The 
regulations on burning produced liquid hydrocarbon would not change. 
Operators must receive approval from the Regional Supervisor in all 
cases before burning liquid hydrocarbons.
    Sec.  250.1163 How must I measure gas flaring or venting volumes, 
and liquid hydrocarbon burning volumes; and what records must I 
maintain? Requirements for measuring and keeping records on flaring, 
venting, and burning would change. The proposed rule would require 
vent/flare meters on all facilities that process more than 2,000 BOPD. 
Operators would be required to install these meters within 120 days 
after the final rule is published. This extended time frame is to 
accommodate operators that are required to install meters at multiple 
facilities. Facilities that do not process more than 2,000 BOPD when 
the final rule is published, but increase production above this level 
after the rule is published, would be required to install meters within 
90 days.
    Operators would be required to keep records on flaring, venting, 
and burning for 6 years to comply with 30 CFR Part 212--Records and 
Files Maintenance. The operators would be required to store these 
records on the facility for the first 2 years after the flaring, 
venting, or burning event. After that, the operator would be able to 
keep the records at a separate location, but they must be available for 
MMS review.
    The proposed rule would clarify reporting procedures and require 
operators to report flared and vented volumes separately. The 
previously discussed GAO report concluded that MMS should collect 
flared and vented volumes separately. MMS tentatively agrees with this 
conclusion, and does not believe it will pose a significant burden on 
operators because they already report the volumes of gas flared and 
vented to MMS on Form MMS-4054 (Oil and Gas Operations Report). 
Operators would only need to identify whether the gas volumes were 
flared or vented.
    The proposed rule would require operators to identify the 
facilities where the gas is flared or vented. This would enable MMS to 
directly compare volumes reported on Forms MMS-4054 with field records. 
This requirement would also reduce the burden on operators during 
royalty audits because operators would no longer have to reconstruct 
historical flare/vent allocations for MMS auditors.
    The proposed rule would require operators to retain meter 
recordings on facilities that require flare/vent meters. This would 
allow MMS to compare eyewitness observations with field records and 
ensure that flaring and venting incidents are properly recorded. MMS 
does not believe this would be a significant burden on those facilities 
with flare/vent meters because these meters typically record such 
events automatically and operators usually maintain these electronic 
records for their own purposes.
    In addition, the proposed rule would clarify when royalties are due 
on flared gas, vented gas, and burned liquid hydrocarbons under 30 CFR 
202.100 Royalty on Oil and 30 CFR 202.150 Royalty on Gas. As in the 
current rule, royalties would not be due if the hydrocarbons were 
unavoidably lost. In most cases, MMS will consider hydrocarbons that 
are flared, vented or burned with MMS approval as ``unavoidably lost'' 
and the operator would not be required to pay royalties. However, MMS 
would retain the authority to determine whether or not the loss was 
avoidable or due to negligence, even if approved by MMS. For example, 
if you received MMS approval to flare 100 MCF of gas per day, then 
actually flared 100,000 MCF of gas per day under conditions that would 
not have been approved, MMS might determine that the entire volume 
flared was ``avoidably lost'' and royalties would be due on the entire 
volume. MMS would also be able to

[[Page 9889]]

pursue civil penalties, under 30 CFR 250 subpart N--Outer Continental 
Shelf (OCS) Civil Penalties, if we determine that the loss was 
avoidable or due to negligence.
    Sec.  250.1164 What are the requirements for flaring or venting gas 
containing H2S? The proposed rule would require Regional 
Supervisor approval before emitting more than 15 lbs of SO2 
per hour per mile from shore. This would ensure that flaring activities 
are in compliance with environmental laws. MMS does not believe this 
would create an excessive burden on operators. The proposed regulations 
specify the records that the operator would have to keep. These records 
must be kept for 6 years, meeting the same requirements as in the 
previous section.
Enhanced Recovery
    Sec.  250.1165 What must I do for enhanced recovery operations? 
There are no significant proposed changes to the regulations regarding 
enhanced recovery operations. Operators would still be required to 
initiate enhanced recovery operations; receive Regional Supervisor 
approval for the plans; and submit reports on the substances injected, 
produced, or reproduced.
Special Alaska OCS Region Requirements
    Sec.  250.1166 What additional reporting is required for 
developments in the Alaska Region? This new section addresses special 
proposed reporting requirements for Alaska. This would require 
operators to submit an annual reservoir management report to the 
Regional Supervisor for any development in Alaska. If a development is 
regulated by both the MMS and the State of Alaska, the operator would 
be able to coordinate reporting requirements with MMS and the State of 
Alaska Oil and Gas Conservation Commission. This section would also 
require operators to request an MER for sensitive reservoirs in Alaska.
    This is necessary for the MMS Alaska Region to administer Section 7 
Agreements between the Secretary of the Interior and the Governor of 
the State of Alaska. Under existing Section 7 Agreements, oil and gas 
reserves underlying a common geologic structure must be unitized and 
the allocation of production between Federal and State leases for 
royalty payment must be based on recoverable oil and gas. Under 
agreement with the State, this determination will be based on reservoir 
performance following completion of the development drilling program 
and sustained production. Annual reservoir management plans enable the 
MMS to monitor recoverable oil and assure proper allocation of reserves 
for royalty payment and to be consistent with the State of Alaska 
requirements.
    This provision would also enable the MMS to manage its 
responsibility for conservation of resources on a real time basis. The 
number, type, spacing and sequencing of development wells (producers 
and injectors) will vary from the original approved development and 
production plan as more information on the reservoir is obtained. An 
annual reservoir management plan would enable the MMS to track 
development activities with the approved development and production 
plan and assure maximum recovery based on the most current knowledge of 
the reservoir.
Information Needed With Forms and for Approvals
    Sec.  250.1167 What information must I submit with forms and for 
approvals? This proposed table is designed to be an easy-to-use 
reference to determine the information and supporting documentation to 
submit to the Regional Supervisor and to remind lessees to pay the 
appropriate service fee. Forms MMS-126 (Well Potential Test Report) and 
MMS-127 (Sensitive Reservoir Information Report) would require 
supporting documents. Also, several operations covered under subpart K 
(gas cap production, downhole commingling, reservoir reclassification, 
and production within 500 feet of a unit or lease line), would require 
that the operator submit applications and supporting documents to the 
Regional Supervisor. All of these documents are covered in the table.

Questions

    In addition to comments on these proposed regulations, MMS is 
requesting comments on the following questions.
    1. Are these regulations well organized and easy to read?
    2. Is the submittal table useful?
    3. Is the 2,000 BOPD requirement for installing flare/vent meters 
reasonable? Are the cost estimates accurate?
    4. Would the requirement to install flare/vent meters pose a safety 
hazard by restricting flow during emergency facility blowdowns, or are 
accurate meters (such as ultrasonic meters) available that do not 
impede gas flow?
    5. Should MMS require operators to flare natural gas instead of 
venting it, under approved flaring and venting conditions? This 
question is based on a recommendation from the GAO report on flaring 
and venting natural gas, and reflects concerns about the amount of 
greenhouse gas that is released into the environment by venting. MMS is 
studying this recommendation before proposing any regulatory change. We 
would like comments on this issue, including comments related to 
additional costs, environmental impacts, and conditions or situations 
where flaring may not be advisable.

Procedural Matters

Public Availability of Comments

    Before including your address, phone number, e-mail address, or 
other personal identifying information in your comment, you should be 
aware 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 your personal identifying 
information from public review, we cannot guarantee that we will be 
able to do so.

Regulatory Planning and Review (Executive Order (E.O.) 12866)

    This proposed rule is not a significant rule as determined by the 
Office of Management and Budget (OMB) and is not subject to review 
under E.O. 12866.
    (1) The proposed rule would not have an annual economic effect of 
$100 million or more on the economy. It would 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. A cost-benefit and economic analysis is not 
required.
    This proposed rule revises the requirements for oil and gas 
production. The changes in the rule are not significant enough to have 
an impact on the economy or an economic sector, productivity, jobs, the 
environment, or other units of government. Some of the current 
requirements would be relaxed. For example, limits on production rates 
were eliminated in most cases. This would allow the operators to 
produce the oil and gas at the rates that they determine are best, and 
would not have a significant effect on any sector of the economy.
    (2) The proposed rule would not create a serious inconsistency or 
otherwise interfere with action taken or planned by another agency 
because MMS is the only Federal government agency directly involved in 
setting production requirements for the offshore oil and natural gas 
industry.
    (3) This proposed rule would not alter the budgetary effects of 
entitlements, grants, user fees or loan programs, or the rights and 
obligations of their recipients.

[[Page 9890]]

    (4) This proposed rule would not raise novel legal or policy 
issues. There are some changes in production requirements in this 
proposal, but most of the changes clarify existing MMS requirements. 
Some may require additional paperwork for the operators. Since the 
basic production requirements are not changed, and restrictions on 
production rates are decreased, this proposed rule should not raise 
novel legal or policy issues.

Regulatory Flexibility Act (RFA)

    The Department of the Interior certifies that this proposed rule 
would not have a significant economic effect on a substantial number of 
small entities as defined under the RFA (5 U.S.C. 601 et seq.). An 
initial Regulatory Flexibility Analysis is not required. Accordingly, a 
Small Entity Compliance Guide is not required.
    This rule applies to all lessees operating on the OCS. Lessees fall 
under the Small Business Administration's North American Industry 
Classification System (NAICS) code 211111, Crude Petroleum and Natural 
Gas Extraction. Under this NAICS code, companies with less than 500 
employees are considered small businesses. MMS estimates that 130 
lessees explore for and produce oil and gas on the OCS; approximately 
70 percent of them (91 companies) fall into the small business 
category. The proposed regulation would therefore affect a substantial 
number of small entities. However, we have determined that it would not 
have a significant economic effect on these small entities.
    One new requirement that would impose a cost to operators is a 
requirement to install flaring/venting meters on all facilities that 
process more than 2,000 BOPD. The GAO report on flaring and venting 
natural gas, released in July 2004, recommended that MMS require these 
meters to improve oversight. MMS agrees with this recommendation. MMS 
regulations allow flaring and venting in very limited circumstances. 
These meters would help MMS:
     Verify the amounts of natural gas that operators flare or 
vent into the environment;
     Prevent waste of resources;
     Collect the proper royalties on avoidably flared or vented 
gas;
     Determine if an operator is violating MMS regulations; and
     Assess the impacts on the environment.
    In determining the criteria for which facilities must install the 
meters, MMS considered the cost of the meters and the amount of 
production needed to justify the cost. To ensure that the requirement 
to install flare/vent meters would not produce an undue burden on small 
companies, it was limited to those facilities that process more than an 
average of 2,000 BOPD.
    MMS estimates that 34 companies would have to install meters on 112 
facilities at an average cost of $77,000 per facility and a total cost 
to industry of $8,624,000 (112 x $77,000 = $8,624,000). Of those, nine 
companies are considered small businesses, based on the NAICS. These 
nine companies represent only 7 percent of the 130 operators on the 
OCS. We estimate that seven of these nine companies would need to 
install meters on one facility each; one company would need to install 
meters on two facilities; and one company would need to install meters 
on three facilities. This represents an average cost of $105,875 for 
each of the small companies (11 facilities x $77,000/9 companies). The 
average cost to non small companies would be $311,080 per company (101 
facilities x $77,000/25 companies). In addition, this does not 
represent an unfair burden to small companies because the cost of these 
meters is small in comparison to the revenues generated by the amount 
of oil processed by those facilities.
    Your comments are important. The Small Business and Agriculture 
Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were 
established to receive comments from small businesses about Federal 
agency enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to small 
business. If you wish to comment on the actions of MMS, call 1-888-734-
3247. You may comment to the Small Business Administration without fear 
of retaliation. Disciplinary action for retaliation by an MMS employee 
may include suspension or termination from employment with the DOI.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    The proposed rule is not a major rule under SBREFA (5 U.S.C. 
804(2)). This proposed rule:
    a. Would not have an annual effect on the economy of $100 million 
or more. This proposed rule revises the requirements for oil and gas 
production. The changes would not have an impact on the economy or an 
economic sector, productivity, jobs, the environment, or other units of 
government. Most of the new requirements are paperwork requirements, 
and would not add significant time to development and production 
processes. One new requirement would add new costs for some operators. 
Operators would be required to install flare/vent meters on any 
facility that processes more than an average of 2,000 BOPD. MMS 
estimates that 34 companies would have to install meters on 112 
facilities at an average cost of $77,000 per facility and a total cost 
to industry of $8,624,000 (112 x $77,000 = $8,624,000).
    b. Would not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions.
    In most cases, this proposed rule would eliminate the requirement 
for operators to set limits on production rates, allowing the operators 
to determine the best rate to produce their reservoirs. The limits on 
burning, flaring, and venting are clearer. These limits would encourage 
conservation of our natural resources, without putting undue production 
restrictions on operators. There would be a new requirement to install 
meters on facilities that process more than an average of 2,000 BOPD. 
As discussed above, this requirement would not significantly increase 
the cost of doing business offshore.
    c. Would 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. This 
proposed rule would eliminate the requirement for operators to set 
limits on production rates, allowing the operators to determine the 
best rate to produce their reservoirs. There are clearer limits on 
burning, flaring, and venting, which would encourage conservation of 
our natural resources.

Unfunded Mandates Reform Act (UMRA) of 1995

    This proposed rule would not impose an unfunded mandate on State, 
local, or tribal governments or the private sector of more than $100 
million per year. The proposed rule would not have a significant or 
unique effect on State, local, or tribal governments or the private 
sector. A statement containing the information required by UMRA (2 
U.S.C. 1531 et seq.) is not required. This is because the proposal 
would not affect State, local, or tribal governments, and the effect on 
the private sector is small.

Takings Implication Assessment (Executive Order 12630)

    The proposed rule is not a governmental action capable of 
interference with constitutionally protected property rights. Thus, MMS 
did not need to prepare a Takings Implication Assessment according to

[[Page 9891]]

E.O. 12630, Governmental Actions and Interference with Constitutionally 
Protected Property Rights.

Federalism (Executive Order 13132)

    With respect to E.O. 13132, this proposed rule would not have 
federalism implications. This proposed rule would not substantially and 
directly affect the relationship between the Federal and State 
governments. To the extent that State and local governments have a role 
in OCS activities, this proposed rule would not affect that role.
    MMS has the authority to regulate offshore oil and gas production. 
State governments do not have authority over offshore production in 
Federal waters.

Civil Justice Reform (Executive Order 12988)

    With respect to E.O. 12988, the Office of the Solicitor has 
determined that the proposed rule would not unduly burden the judicial 
system and does not meet the requirements of sections 3(a) and 3(b)(2) 
of the Order. MMS drafted this proposed rule in plain language to 
provide clear standards. We consulted with the Department of the 
Interior's Office of the Solicitor throughout the drafting process for 
the same reasons.

Paperwork Reduction Act (PRA)

    The proposed rule contains a collection of information that has 
been submitted to OMB for review and approval under Sec.  3507(d) of 
the PRA. As part of our continuing effort to reduce paperwork and 
respondent burdens, MMS invites the public and other Federal agencies 
to comment on any aspect of the reporting and recordkeeping burden. You 
may submit your comments on the information collection aspects of this 
proposed rule directly to the Office of Management and Budget (OMB), 
Office of Information and Regulatory Affairs, OMB Attention: Desk 
Officer for the Department of the Interior via OMB e-mail: (OIRA--
DOCKET@omb.eop.gov); or by fax (202) 395-6566; identify with 1010-AD12. 
Send a copy of your comments to the Rules Processing Team (RPT), Attn: 
Rules Comments; 381 Elden Street, MS-4024; Herndon, Virginia 20170-
4817. Please reference ``Oil and Gas Production Requirements--AD12'' in 
your comments. You may obtain a copy of the supporting statement for 
the new collection of information by contacting the Bureau's 
Information Collection Clearance Officer at (202) 208-7744.
    The PRA 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. OMB is 
required to make a decision concerning the collection of information 
contained in these proposed regulations 30-60 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 by April 5, 
2007. This does not affect the deadline for the public to comment to 
MMS on the proposed regulations.
    The title of the collection of information for the rule is ``30 CFR 
250, Subpart K, Oil and Gas Production Requirements.'' The proposed 
regulations concern oil and gas production requirements, and the 
information is used in our efforts to conserve natural resources, 
prevent waste, and protect correlative rights, including the 
government's royalty interest.
    Respondents are the approximately 130 Federal oil and gas and 
sulphur lessees. Responses to this collection are mandatory. The 
frequency of response is on occasion, monthly, semi-annually, annually, 
and as a result of situations encountered depending upon the 
requirement. The information collection (IC) does not include questions 
of a sensitive nature. MMS will protect proprietary information 
according to the Freedom of Information Act (5 U.S.C. 552) and its 
implementing regulations (43 CFR part 2), and 30 CFR 250.196, ``Data 
and information to be made available to the public,'' and 30 CFR part 
252, ``OCS Oil and Gas Information Program.'' Proprietary information 
concerning geological and geophysical data will be protected according 
to 43 U.S.C. 1352.
    The collection of information required by the current subpart K 
regulations is approved under OMB Control Number 1010-0041. The 
proposed rule imposes minor changes to the information collection 
burden. The changes are:
     Report to Minerals Revenue Management (MRM) measured gas 
flaring or venting and liquid hydrocarbon burning. Submit periodic 
reports of volumes of oil, gas, or other substances injected, produced, 
or produced for a second time. Both requirements and burdens are now 
reported to MRM and their respective burdens are covered under OMB 
Control Number 1010-0139 (-154 burden hours);
     Request Regional Supervisor approval for emitting more 
than 15 lbs. of SO2 (+10 burden hours);
     Submit to Regional Supervisor air quality modeling 
analysis report. The proposed burden hours represent an adjustment to a 
current requirement for information that was not previously collected 
(+40 burden hours);
     For Alaska Region Only: Submit to Regional Supervisor 
annual reservoir management report and supporting information. (At this 
time, the state requires the same information and MMS receives a copy). 
Alaska has started producing in state waters. If new development occurs 
in Federal waters, a minimal burden for submitting an annual reservoir 
management report, and burden hours for annual revisions are being 
added (+161 burden hours).
     Maintain meter records for detailing gas flaring or 
venting, and liquid hydrocarbon burning for 6 years. These new burden 
requirements do not add additional burden hours.
     General departure or alternative compliance requests (+5 
burden hours).
    The currently approved information collection for this subpart 
(1010-0041) will be superseded by this collection when final 
regulations take effect.
    Currently, regulations covered under OMB Control Number 1010-0041 
have 43,065 annual burden hours. MMS estimates the total annual 
reporting and recordkeeping ``hour'' burden for the proposed rule to be 
43,127 hours; this is an increase of 62 burden hours. With the 
exception of the recordkeeping requirement changes and the items 
identified as ``new'' in the following chart, the burden estimates 
shown are those that are estimated for the current subpart K 
regulations.

----------------------------------------------------------------------------------------------------------------
                                                                              Fee/non-hour cost
                                          Reporting &       ----------------------------------------------------
       30 CFR 250 Subpart K              recordkeeping                        Average number of    Annual burden
                                          requirement          Hour burden     annual responses        hours
----------------------------------------------------------------------------------------------------------------
1151(a), (c); 1155; 1165;          Submit form MMS-126 and                3  1,325 forms........           3,975
 1166(c); 1167.                     supporting information.
                                   Submit form MMS-127 and              2.2  2,189 forms........           4,816
                                    supporting information.

[[Page 9892]]

 
                                   Submit form MMS-128 and           0.1--3  13,000 GOM forms...          1,336*
                                    supporting information.                  600 POCS forms.....
1151(b)..........................  Request extension of                 0.5  37 requests........              19
                                    time to submit results
                                    of semiannual well test.
1152(b), (c).....................  Obtain Regional                      0.5  37 requests........              19
                                    Supervisor approval to
                                    conduct well testing
                                    using alternative
                                    procedures; conduct
                                    tests/retests to
                                    establish proper MPR or
                                    MER; conduct multipoint
                                    backpressure test for
                                    open flow potential.
1152(d)..........................  Provide advance notice               0.5  10 notices.........               5
                                    of time and date of
                                    well tests.
1153.............................  Submit results of all                 14  1,270 surveys......          17,780
                                    static bottomhole                     1  120 survey waivers.             120
                                    pressure surveys
                                    obtained by lessee
                                    using form MMS-140.
                                    Request departure
                                    requirement w/
                                    justification to
                                    Regional Supervisor;
                                    submit with Form MMS-
                                    140 and supporting
                                    information.
1154; 1167.......................  Request reclassification               6  20 requests........             120
                                    of reservoir for
                                    Regional Supervisor
                                    approval and submit
                                    supporting information.
1156; 1167.......................  Request approval to                    5  50 requests........             250
                                    produce within 500 feet
                                    of a unit or lease line
                                    and submit supporting
                                    information; notify
                                    operators; provide
                                    proof of date to
                                    Regional Supervisor.
                                                            ----------------------------------------------------
                                                                        3,300 x 50 requests = $165,000
                                                            ----------------------------------------------------
1157; 1167.......................  Request approval to                   12  125 requests.......           1,500
                                    produce gas cap of a
                                    sensitive reservoir and
                                    submit supporting
                                    information; obtain
                                    approval to produce gas
                                    from an oil reservoir
                                    with an associated gas
                                    cap.
                                                            ----------------------------------------------------
                                                                       $4,200 x 125 requests = $525,000
                                                            ----------------------------------------------------
1158; 1167.......................  Submit request to                      6  119 applications...             714
                                    downhole commingle
                                    hydrocarbons and
                                    supporting information;
                                    notify operators;
                                    provide proof of date
                                    to Regional Supervisor.
                                                            ----------------------------------------------------
                                                                     $4,900 x 119 applications = $583,100
                                                            ----------------------------------------------------
1160; 1161.......................  Request Regional                     0.5  1,007 requests.....             504
                                    Supervisor approval/
                                    inform to flare or vent
                                    oil-well gas or gas-
                                    well gas/exceed volume;
                                    submit documentation.
                                                            ----------------------------------------------------
1162; 1163(e)....................  Request approval to burn             0.5  60 requests........              30
                                    produced liquid
                                    hydrocarbons; submit
                                    documentation.
NEW 1163.........................  Initial purchase and                   0  112................               0
                                    install gas meters to
                                    measure the amount of
                                    gas flared or vented.
                                    This is a non-hour cost
                                    burden.
                                                            ----------------------------------------------------
                                                                     112 meters @ $77,000 ea = $8,624,000
                                  ------------------------------------------------------------------------------
NEW 1163(b); 1165(c).............  Report to MRM measured gas flaring or venting and liquid                    0
                                    hydrocarbon burning--burden covered under 1010-0139
                                  ------------------------------------------------------------------------------
NEW 1164(b)(1)...................  Request Regional                     0.5  20 requests........              10
                                    Supervisor approval for
                                    emitting more than 15
                                    lbs. of SO2.
                                  ------------------------------------------------------------------------------
1164(b)(2).......................  H2S Contingency, Exploration, or Development and Production                 0
                                    Plans--burden covered under 1010-0141 and 1010-0151
                                  ------------------------------------------------------------------------------
NEW 1164(b)(3)...................  Submit to Regional                    40  1 modeling analysis              40
                                    Supervisor air quality
                                    modeling analysis.
1164(c)..........................  Submit monthly reports                 2  3 operators x 12                 72
                                    of flared or vented gas                   mos. = 36.
                                    containing H2S.
1165.............................  Submit proposed plan for              12  27 plans...........             324
                                    enhanced recovery
                                    operations.
                                  ------------------------------------------------------------------------------
1165(c)..........................  Submit periodic reports of volumes of oil, gas, or other                    0
                                    substances injected, produced, or produced for a second
                                    time--burden covered under OMB approval 1010-0139

[[Page 9893]]

 
NEW 1166.........................  Alaska Region only:                    1  1 (required by                    1
                                    submit to Regional       ..............   State, MMS gets     ..............
                                    Supervisor annual        ..............   copy).              ..............
                                    reservoir management                100  1 new develop not               100
                                    report and supporting                     State lands.
                                    information.
                                  ---------------------------------------------------------------
                                                                         20  3 annual revisions.              60
NEW 1150-1167....................  General departure or                   1  5..................               5
                                    alternative compliance
                                    requests not
                                    specifically covered
                                    elsewhere in subpart K.
----------------------------------------------------------------------------------------------------------------
                             Reporting Subtotal                              20,175.............          31,800
----------------------------------------------------------------------------------------------------------------
1163(c), (d).....................  Maintain records for 6                13  869 platforms......          11,297
                                    years detailing gas
                                    flaring or venting;
                                    maintain meter records
                                    and provide copies if
                                    requested.
1163(c)..........................  Maintain records for 6               0.5  60 occurrences.....              30
                                    years detailing liquid
                                    hydrocarbon burn