Allocation and Disbursement of Royalties, Rentals, and Bonuses-Oil and Gas, Offshore, 30331-30340 [E8-11709]

Agencies

• DEPARTMENT OF THE INTERIOR
• Minerals Management Service

[Federal Register Volume 73, Number 102 (Tuesday, May 27, 2008)]
[Proposed Rules]
[Pages 30331-30340]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-11709]


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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 219

[Docket ID: MMS-2007-OMM-0067]
RIN 1010-AD46


Allocation and Disbursement of Royalties, Rentals, and Bonuses--
Oil and Gas, Offshore

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Proposed rule.

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SUMMARY: The MMS proposes to amend the regulations on distribution and 
disbursement of royalties, rentals, and bonuses to include the 
allocation and disbursement of revenues from certain leases on the Gulf 
of Mexico Outer Continental Shelf in accordance with the provisions of 
the Gulf of Mexico Energy Security Act of 2006. The regulations would 
set forth the formula and methodology for calculating and allocating 
revenues to the States of Alabama, Louisiana, Mississippi, and Texas 
and their eligible political subdivisions. This proposed rule seeks to 
establish and ensure that the process for implementing the Gulf of 
Mexico Energy Security Act of 2006 provisions and the resulting 
distribution of revenues is accurate, transparent, and fully complies 
with our statutory responsibilities.

DATES: Submit comments by July 28, 2008. The MMS may not fully consider 
comments received after this date.

ADDRESSES: You may submit comments on the rulemaking by any of the 
following methods. Please use the Regulation Identifier Number (RIN) 
1010-AD46 as an identifier in your message. See also Public 
Availability of Comments under Procedural Matters.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Under the tab ``More Search Options,'' click Advanced Docket Search, 
then select ``Minerals Management Service'' from the agency drop-down 
menu, then click ``submit.'' In the Docket ID column, select MMS-2007-
OMM-0067 to submit public comments and to view supporting and related 
materials available for this rulemaking. Information on using 
Regulations.gov, including instructions for accessing documents, 
submitting comments, and viewing the docket after the close of the 
comment period, is available through the site's ``User Tips'' link. The 
MMS will post all comments to the docket.
     Mail or hand-carry comments to the Department of the 
Interior; Minerals Management Service; Attention: Regulations and 
Standards Branch (RSB); 381 Elden Street, MS-4024, Herndon, Virginia 
20170-4817. Please reference ``Allocation and Disbursement of 
Royalties, Rentals, and Bonuses--Oil and Gas, Offshore, 1010-AD46'' in 
your comments and include your name and return address.

FOR FURTHER INFORMATION CONTACT: Marshall Rose, Chief, Economics 
Division, Offshore Minerals Management at (703) 787-1538.

SUPPLEMENTARY INFORMATION:

Background

    President George W. Bush signed the Gulf of Mexico Energy Security 
Act of 2006 (GOMESA) into law on December 20, 2006 (Pub. L. No. 109-
432, 120 Stat. 2922), as part of H.R. 6111, The Tax Relief and Health 
Care Act of 2006, which also extended several energy tax programs that 
encourage efficiency and conservation, as well as the production and 
use of renewable energy sources. With regard to the Gulf of Mexico 
(GOM) Outer Continental Shelf (OCS) provisions (Division C, Title 1, 
120 Stat. 3000), GOMESA:
     Lifted the congressional moratorium on oil and gas leasing 
and development in a portion of the Central GOM and mandates lease 
sales in two areas of the GOM (the 181 Area and 181 South Area as 
defined by GOMESA) notwithstanding the omission of those two areas from 
any OCS leasing program under section 18 of the OCS Lands Act (43 
U.S.C. 1344);
     Established a moratorium through June 30, 2022 in the vast 
majority of the Eastern Planning Area and a small portion of the 
Central Planning Area;
     Provided for the establishment of a process to exchange 
existing leases in the new moratorium areas for bonus or royalty 
credits that may only be used in the GOM; and
     Provided for the distribution of certain OCS revenues to 
the Gulf producing States of Alabama, Louisiana, Mississippi, and 
Texas, and to certain coastal political subdivisions within those 
States.
    This proposed rule sets forth how the Department of the Interior 
plans to implement the GOMESA requirements related to the distribution 
of OCS revenues to the Gulf producing States and their coastal 
political subdivisions.

Summary

    For each of the fiscal years from 2007 through 2016, GOMESA directs 
the Secretary of the Treasury to deposit 50 percent of qualified OCS 
revenues--bonuses, rents, and royalties--from OCS oil and gas leases in 
areas designated as the 181 Area in the Eastern Planning Area and the 
181 South Area into a special account in the United States Treasury. 
The GOMESA directs the Secretary of the Interior, for each of these 
fiscal years, to disburse 25 percent of the revenues in the special 
account to the Land and Water Conservation Fund (LWCF) and the 
remaining 75 percent to the States of Alabama, Louisiana, Mississippi, 
and Texas (collectively identified as the ``Gulf producing States'') 
and their eligible coastal political subdivisions. The revenues are to 
be allocated among the Gulf producing States based on their inverse 
proportional distance from the leases in the 181 Area in the Eastern 
Planning Area and the 181 South Area and in accordance with regulations 
established by the Secretary of the Interior. The GOMESA also provides 
that in determining the individual Gulf producing States' share of the 
qualified OCS revenues, no State, irrespective of the amount 
established by the application of the inverse proportional distance 
formula, shall receive less than 10 percent of the revenues to be 
disbursed.
    The GOMESA directs the Secretary of the Interior to disburse 20 
percent of the funds allocated to each Gulf producing State to 
political subdivisions within the State which are located in the 
State's coastal zone and are within 200 nautical miles of the 
geographic center of any OCS leased tract. Revenues are allocated to 
the coastal political subdivisions based on their population, miles of 
coastline, and their inverse proportional distance from designated 
leases in the 181 Area in the Eastern Planning Area.

  Revenue Distribution of Qualified OCS Revenues Under GOMESA 2007-2016
------------------------------------------------------------------------
                                                           Percentage of
           Recipient of qualified OCS revenues             qualified OCS
                                                             revenues
------------------------------------------------------------------------
U.S. Treasury...........................................            50.0
Land and Water Conservation Fund........................            12.5

[[Page 30332]]

 
Gulf Producing States...................................            30.0
Eligible Coastal Political Subdivisions.................             7.5
------------------------------------------------------------------------

    The GOMESA requires that each Gulf producing State and coastal 
political subdivision use all amounts received for one or more of the 
following purposes:
     Projects and activities for the purposes of coastal 
protection, including conservation, coastal restoration, hurricane 
protection, and infrastructure directly affected by coastal wetland 
losses.
     Mitigation of damage to fish, wildlife, or natural 
resources.
     Implementation of a Federally-approved marine, coastal, or 
comprehensive conservation management plan.
     Mitigation of the impact of OCS activities through the 
funding of onshore infrastructure projects.
     Planning assistance and administrative costs not to exceed 
3 percent of the amounts received.
    The GOMESA establishes a separate revenue sharing provision to be 
implemented for fiscal year 2017 and thereafter. This proposed rule and 
the resulting final rule will apply to the fiscal years 2007 through 
2016 time period only; the later period will be addressed in a 
subsequent rulemaking.
    The following sections provide specific information on the 
applicable GOMESA provisions and how MMS proposes to implement them.

Definitions

    The MMS proposes, in some instances, to clarify the GOMESA 
definitions to make them more precise and consistent with MMS's 
existing leasing, financial, and accounting practices. The MMS also 
proposes to include additional definitions in the rule. The definitions 
we propose to add or to expand in order to clarify the meaning are 
discussed below. Other terms defined in proposed Sec.  219.411 of the 
regulation have the exact same definition as stated in section 102 of 
GOMESA.
    181 Area--adopted directly from section 102 of GOMESA.
    181 Area in the Eastern Planning Area--is comprised of the area of 
overlap of the two geographic areas defined in GOMESA as the ``181 
Area'' and the ``Eastern Planning Area.'' A map of the ``181 Area in 
the Eastern Planning Area'' can be found with publicly available 
information for GOM Eastern Sale 224 at: https://www.gomr.mms.gov/
homepg/lsesale/224/egom224.html.
    181 South Area--adopted from section 102 of GOMESA. Means any area 
located south of the 181 Area, west of the Military Mission Line and in 
the Central Planning Area. A map of the 181 South Area can be found 
with the Call for Information and Nominations, Central GOM Planning 
Area South of Sale 181 Area at: https://www.gomr.mms.gov/homepg/lsesale/
208/cgom208.html.
    Applicable Leased Tract--The term ``applicable leased tract'' means 
a tract that is subject to a lease under section 6 or 8 of the OCS 
Lands Act for the purpose of drilling for, developing, and producing 
oil or natural gas resources and is located fully or partially in 
either the 181 Area in the Eastern Planning Area or in the 181 South 
Area
    Central Planning Area--adopted directly from Section 102 of GOMESA.
    Coastal Political Subdivision--The term ``coastal political 
subdivision'' means a political subdivision of a Gulf producing State 
any part of which political subdivision is:
    (a) Within the coastal zone (as defined in section 304 of the 
Coastal Zone Management Act of 1972 (16 U.S.C. 1453)) of the Gulf 
producing State as of December 20, 2006; and
    (b) Not more than 200 nautical miles from the geographic center of 
any leased tract.
    The only difference between this definition and the GOMESA 
definition is that GOMESA refers to political subdivisions that were 
within the coastal zone of a Gulf producing State ``as of the date of 
enactment of this Act.'' The definition proposed for this rule would 
refer to the actual date GOMESA was enacted.
    Coastline--The term ``coastline'' means the line of ordinary low 
water along that portion of the coast which is in direct contact with 
the open sea and the line marking the seaward limit of inland waters.
    This is the definition of the coastline used in section 2 of the 
Submerged Lands Act (43 U.S.C. 1301) and refers to the same line as 
that established for use in the Coastal Impact Assistance Program 
(CIAP) by section 384 of the Energy Policy Act of 2005 (EPAct) codified 
at 43 U.S.C 1356a.
    Distance--The term ``distance'' means the minimum great circle 
distance.
    Eastern Planning Area--adopted directly from section 102 of GOMESA.
    Gulf Producing State--adopted directly from section 102 of GOMESA.
    Leased Tract--The term ``leased tract'' means a tract that is 
subject to a lease under section 6 or 8 of the OCS Lands Act for the 
purpose of drilling for, developing, and producing oil or natural gas 
resources.
    Military Mission Line--adopted directly from section 102 of GOMESA.

Qualified OCS Revenues

    (a) IN GENERAL--The term ``qualified OCS revenues'' means, in the 
case of each of fiscal years 2007 through 2016, all rentals, royalties, 
bonus bids, and other sums received by the United States from leases 
entered into on or after December 20, 2006, located in:
    (1) The 181 Area in the Eastern Planning Area; and
    (2) the 181 South Area.
    (b) For applicable leased tracts intersected by the planning area 
administrative boundary line (e.g., separating the GOM Central Planning 
Area from the Eastern Planning Area), only the percent of revenues 
equivalent to the percent of surface acreage in the 181 Area in the 
Eastern Planning Area will be considered qualified OCS revenues.
    (c) Exclusions--The term ``qualified OCS revenues'' does not 
include:
    (1) Rental revenues or user fees credited to MMS appropriated funds 
through the annual Congressional appropriations process,
    (2) Revenues from the forfeiture of a bond or other surety securing 
obligations other than royalties,
    (3) Civil penalties, and
    (4) Royalties taken by the Secretary in-kind and not sold.
    The proposed definition of ``qualified OCS revenues'' includes 
several variations from the GOMESA definition. First, the GOMESA 
definition refers to ``leases entered into on or after the date of 
enactment of this Act.'' The definition proposed for this rule would 
refer to the actual date GOMESA was enacted.
    Second, in paragraph (a)(1), consistent with the way MMS has 
interpreted a similar CIAP provision, MMS interprets the phrase ``due 
and payable to'' to mean ``received by.'' The GOMESA definition of 
qualified OCS revenues refers to ``* * * all rentals, royalties, bonus 
bids, and other sums due and payable to the United States * * *,'' 
which could imply that the revenues to be allocated to the Gulf 
producing States, coastal political subdivisions, and the LWCF for a 
given fiscal year would be the amounts owed by lessees for the payment 
of royalties in that fiscal year, whether or not the payments were 
actually received by MMS during that fiscal year. This interpretation, 
however,

[[Page 30333]]

is not consistent with MMS's system of collecting and disbursing 
royalty revenues.
    Royalties on oil and gas produced in 1 month are due and payable by 
the end of the following month, e.g., royalties on oil and gas produced 
in October must be paid by the end of November. The MMS does not 
calculate royalty amounts owed and bill payors; rather, MMS accepts the 
amounts payors report and pay subject to subsequent audit and other 
verification procedures.
    Royalty payors frequently make adjustments to previous months' 
royalty payments as final data become available on sales, volumes, 
prices, and the amount of allowable transportation or processing 
deductions. The adjustments may result in payors paying additional 
royalties or, if previous royalties were overpaid, claiming a credit 
against their current royalty obligation. These adjustments may not 
occur until several months after the payment was originally due. As a 
result, payments made in 1 fiscal year may be adjusted in a subsequent 
fiscal year.
    The value of these adjustments for the leases that are subject to 
the GOMESA revenue sharing provisions are not expected to be 
substantial and, further, will in any event, tend to balance out over 
time as both positive and negative adjustments are made from 1 fiscal 
year to the next. Attempting to track all the adjustments and account 
for them in the revenue allocation process would be labor intensive, 
prohibitively costly, and require an uneconomic use of scarce Federal 
resources. Consequently, for the purposes of this rule, MMS proposes to 
use all rentals, royalties, bonus bids, and other sums traditionally 
received and subsequently transferred to the Treasury General Fund 
Miscellaneous Receipt Account as a proxy for revenues due and payable.
    With the passage of the GOMESA, qualified OCS revenues will be 
deposited into the Treasury General Fund Miscellaneous Receipt Account 
(50 percent Federal share) and the Treasury Special Account (50 percent 
LWCF-State-CPS share).
    Third, in paragraph (c)(1), to maintain consistency with all 
rentals, royalties, bonus bids, and other sums traditionally received 
and subsequently transferred to the Treasury General Fund Miscellaneous 
Receipt Account, this definition of qualified OCS revenues excludes any 
rental revenues and cost recovery user fees that may be designated by 
Congress to MMS through the annual appropriations process. Since 1993, 
Congress has funded a significant part of MMS' operations with a 
portion of the OCS rental revenue receipts and cost recovery fees.
    The fiscal year 2009 President's Budget proposed appropriation 
language allocates to MMS:

    * * * an amount not to exceed $133,730,000, to be credited to 
this appropriation and to remain available until expended, from 
additions to [rental] receipts resulting from increases to rates in 
effect on August 5, 1993.

    This reference to the receipts resulting from increases to rates in 
effect on August 5, 1993, provides a significant share of MMS 
appropriated funds. These receipts are retained by MMS to fund current 
operations.
    The fiscal year 2009 President's Budget adds appropriations 
language confirming GOMESA qualified OCS revenues do not include 
Congress' appropriation of OCS rental receipts to MMS.

    Provided further, that the term ``qualified Outer Continental 
Shelf revenues'', as defined in section 102(9)(A) of the Gulf of 
Mexico Energy Security Act, Division C of Public Law 109-432, shall 
include only the portion of rental revenues that would have been 
collected at the rental rates in effect before August 5, 1993.

    Additionally, payments made by owners of applicable leases for 
provision of special services are collected by MMS under the authority 
based on the direct cost of providing that service to the lessees, and 
are not considered receipts directly emerging from a lease's revenues 
themselves. These fees are collected by MMS under the authority of the 
Independent Office Appropriations Act and are consistent with the 
Office of Management and Budget's Circular A-25. This revenue also 
provides a significant share of MMS operating funds. For these reasons, 
rentals and cost recovery fees designated by Congress as part of MMS 
appropriations are not included as qualified OCS revenues.
    Fourth, this definition of qualified OCS revenues omits GOMESA 
subparagraph Sec.  102(9)(A)(ii), that defines qualified OCS revenues 
for the period 2017, and thereafter because the allocation of qualified 
OCS revenues during that period will be addressed in a regulation to be 
issued later.
    Fifth, this definition of qualified OCS revenues omits GOMESA 
subparagraph Sec.  102(9)(B)(ii) (revenues generated from leases 
subject to section 8(g) of the Outer Continental Shelf Lands Act (43 
U.S.C. 1337(g)) since none of the applicable (GOMESA) leased tracts are 
within the so-called 8(g) zone.
    Sixth, GOMESA excludes from the definition of qualified OCS 
revenues, revenues from the forfeiture of a bond or other surety 
securing obligations other than royalties, civil penalties, or 
royalties taken by the Secretary in-kind and not sold (which would 
include oil taken in-kind and transferred into the Strategic Petroleum 
Reserve).
    Finally, for applicable leased tracts intersected by the planning 
area administrative boundary line (e.g., separating the GOM Central 
Planning Area from the Eastern Planning Area), only the percentage of 
revenues equal to the percentage of acreage in the 181 Area in the 
Eastern Planning Area will be considered qualified OCS revenues. This 
is consistent with the distribution of revenues from tracts only 
partially within the 8(g) zone. When a tract is only partially within 
the 8(g) zone, States receive 27 percent of a percentage of bonuses, 
rents, and royalties equal to the percentage of surface acreage within 
the 8(g) zone.
    We believe these elements of the definitions are consistent with 
the intent of the GOMESA provisions and other applicable laws. We 
welcome your comments and suggestions on the definitions as proposed by 
MMS.

Disposition of Qualified OCS Revenues to Gulf Producing States

    For the fiscal year 2007 through fiscal year 2016, GOMESA provides 
that 50 percent of qualified OCS revenues are to be placed in a special 
Treasury account from which the Secretary of the Interior shall 
disburse:
     75 percent to the Gulf producing States (of which 20 
percent would subsequently be allocated to local eligible coastal 
political subdivisions); and
     25 percent to provide financial assistance to States in 
accordance with section 6 of the LWCF.
    The GOMESA provides that qualified OCS revenues shall be allocated 
to each Gulf producing State in amounts that are inversely proportional 
to the respective distances between the point on the coastline of each 
Gulf producing State that is closest to the geographic center of the 
applicable leased tract and the geographic center of the leased tract. 
Implementation of this provision requires MMS to make three key sets of 
determinations:
     The points that are the geographic centers of each 
applicable leased tract;
     The point on the coastline of each Gulf producing State 
that is closest to the geographic center of each applicable leased 
tract; and
     The distances between the two points for each applicable 
leased tract.
    Although the set of States and leases involved differs between the 
two

[[Page 30334]]

programs, MMS proposes to use a similar methodology to calculate the 
distances between the Gulf producing States and the geographic center 
of the applicable leased tracts for GOMESA as it does for CIAP. 
Likewise, the formula and methodology MMS will use to calculate the 
Gulf producing States' shares of qualified OCS revenues is based on 
their inverse proportional distance from the applicable leased tracts, 
which is the same concept employed for the CIAP.
    The GOMESA provides that in determining the individual Gulf 
producing States' share of the qualified OCS revenues, no State, 
irrespective of the amount established by the application of the 
inverse proportional distance formula, shall receive less than 10 
percent of the revenues to be disbursed.

Procedures for Distance Calculations

    The following information describes how MMS proposes to calculate 
the distances between the Gulf producing States and coastal political 
subdivisions and applicable leased tracts which would be used in the 
inverse proportional distance calculations to allocate the qualified 
OCS revenues.
    Determination of leased tract center points--From MMS databases, we 
will identify all applicable leased tracts (i.e., all blocks that were 
subject to an oil and gas lease either on the first or last day of the 
fiscal year) in the 181 Area located in the Eastern Planning Area and 
in the 181 South Area. The MMS will calculate, by mathematical methods, 
the geographic center of each leased tract in the two areas using 
standard accepted mapping software (ArcGIS). The center will be that 
location which provides a balancing point in two-dimensional space. If 
the leased tract is intersected by the planning area administrative 
boundary line (administrative boundary between the Central Planning 
Area and Eastern Planning Area), MMS will use the geographic center of 
the entire leased tract to calculate the inverse distance. In the 
unusual case where a lease is both awarded and relinquished between the 
first and last days of the same fiscal year, we count the lease 
revenues but not the lease's location in applying the distribution 
formula.
    Determination of measurement points on State coastlines--According 
to the Submerged Lands Act (43 U.S.C. 1301), the term ``coast line'' 
means the line of ordinary low water along that portion of the coast 
which is in direct contact with the open sea and the line marking the 
seaward limit of inland waters. For purposes of both international and 
domestic law, the boundary line dividing the land from the ocean is 
called the baseline. The baseline is determined according to principles 
described in the 1958 United Nations Convention on the Territorial Sea 
and the Contiguous Zone and the 1982 United Nations Convention on the 
Law of the Sea (LOS Convention), and is normally the low water line 
along the coast, as marked on charts officially recognized by the 
coastal nation.
    In the United States, the definition has been further refined based 
on Federal court decisions; the U.S. baseline is the mean lower low 
water line along the coast, as shown on official U.S. nautical charts. 
The baseline is the set of points and connected lines, representing the 
mean lower low water line in direct contact with the open sea and 
marking the seaward limit of open water. The baseline is drawn across 
river mouths, the opening of bays, and along the outer points of 
complex coastlines. The normal baseline from which the maritime zones 
are charted can be considered synonymous with the coastline as defined 
by the Submerged Lands Act.
    We will use the latitudinal and longitudinal data for the baseline 
data points in conjunction with the leased tract center point data to 
identify the points on the States' coastlines that are closest to the 
geographic center of the applicable leased tracts.
    Measurement of distances from States to leased tracts--Using the 
data identifying the geographic centers of the applicable leased tracts 
and the above described points on the States' coastlines, we will find 
the nearest coastline points to each applicable leased tract by 
measuring the distances between all of the appropriate data points, 
using calculated coastline-to-leased tract distances, and then 
determining the pairs of points with the shortest distance for each 
State/applicable leased tract pair.
    The EPAct requires MMS to use the great circle distance to 
establish the distances between the States' coastlines and the leased 
tracts in the CIAP and MMS proposes to use the great circle distance 
for the GOMESA program as well. The great circle distance is the 
shortest distance between any two points on the surface of the Earth 
measured along a path on the surface of the Earth. Between any two 
points on a sphere which are not directly opposite each other, there is 
a unique great circle. The two points separate the great circle into 
two arcs. The length of the shorter arc is the great circle distance 
between the points.

Calculation of Gulf Producing State Revenue Allocations

    The MMS will calculate each Gulf producing State's share of the 
qualified OCS revenues using the following proposed procedure:
    (1) For each Gulf producing State, we propose to calculate and 
total, over all applicable leased tracts, the mathematical inverses of 
the distances between the points on the State's coastline that are 
closest to the geographic centers of the applicable leased tracts and 
the geographic centers of the applicable leased tracts.
    (2) For each Gulf producing State, we would divide the sum of each 
State's inverse distances, from all applicable leased tracts, by the 
sum of the inverse distances from all applicable leased tracts across 
all four Gulf producing States. We would multiply the result by the 
amount of qualified OCS revenues to be shared, as shown below. In the 
formulas, IAL, ILA, IMS, and ITX represent the sum of the inverses of 
the closest distances between Alabama, Louisiana, Mississippi, and 
Texas and all applicable leased tracts, respectively.

Alabama Share = (IAL / (IAL + ILA + IMS + ITX)) x Qualified OCS 
Revenues
Louisiana Share = (ILA / (IAL + ILA + IMS + ITX)) x Qualified OCS 
Revenues
Mississippi Share = (IMS / (IAL + ILA + IMS + ITX)) x Qualified OCS 
Revenues
Texas Share = (ITX / (IAL + ILA + IMS + ITX)) x Qualified OCS Revenues

    The following simplified example, involving only two applicable 
leased tracts, illustrates the application of the steps above in 
calculating the revenue allocations for the Gulf producing States and 
also demonstrates how the inverse distance formulas work to reward 
those closest to the sources of revenue.
    Suppose there are two applicable leased tracts (t1 and 
t2) and that the following table represents the closest 
distance from each Gulf producing State to the geographic centers of 
each applicable leased tract:

[[Page 30335]]



----------------------------------------------------------------------------------------------------------------
                                                     Applicable leased tracts
                                 ----------------------------------------------------------------
                                                t1                              t2                    Sum of
      Gulf producing state       ----------------------------------------------------------------     inverse
                                     Distance                        Distance                        distances
                                     (nautical        Inverse        (nautical        Inverse
                                      miles)         distance         miles)         distance
----------------------------------------------------------------------------------------------------------------
Alabama.........................              50          0.0200              70          0.0143          0.0343
Louisiana.......................              90          0.0111              80          0.0125          0.0236
Mississippi.....................              70          0.0143              60          0.0167          0.0310
Texas...........................             230          0.0043             210          0.0048          0.0091
                                 -------------------------------------------------------------------------------
    All States..................             440          0.0497             420          0.0483          0.0980
----------------------------------------------------------------------------------------------------------------

    Further, suppose that fiscal year qualified OCS revenues are $96 
million, $12 million of which would go to the LWCF and $36 million of 
which would be allocated to the Gulf producing States. Applying the 
formulas above, the $36 million would be allocated to the Gulf 
producing States as shown below.

Alabama Share = (0.0343 / 0.0980) x $36 million = $12,600,000.00
Louisiana Share = (0.0236 / 0.0980) x $36 million = $8,669,387.76
Mississippi Share = (0.0310 / 0.0980) x $36 million = $11,387,755.10
Texas Share = (0.0091 / 0.0980) x $36 million = $3,342,857.14

    However, because Texas' share is less than $3.6 million or 10 
percent of the allocation of $36 million, we would allocate a 10 
percent share to Texas and recalculate the other Gulf producing States' 
shares omitting Texas and its 10 percent share from the calculation as 
shown below.

Alabama Share = (0.0343 / (0.0980-0.0091)) x $32.4 million = 
$12,500,787.40
Louisiana Share = (0.0236 / (0.0980-0.0091)) x $32.4 million = 
$8,601,124.86
Mississippi Share = (0.0310 / (0.0980-0.0091)) x $32.4 million = 
$11,298,087.74
Total = $32,400,000
Texas Share = 10% x $36 million = $3,600,000

    Adding the three States' shares to the Texas' 10 percent share sums 
to $36,000,000.

Payments to Coastal Political Subdivisions

    The MMS will pay 20 percent of the allocable share of each Gulf 
producing State to eligible coastal political subdivisions of the Gulf 
producing State. The coastal political subdivisions eligible for GOMESA 
funds are shown in the table below.

  Coastal Political Subdivisions Eligible for a Share of Qualified OCS
          Revenues Under the Gulf of Mexico Energy Security Act
------------------------------------------------------------------------
    Alabama                            Mississippi
    counties     Louisiana parishes      counties       Texas counties
------------------------------------------------------------------------
Baldwin, Mobile  Assumption,         Hancock,         Arkansas,
                  Calcasieu,          Harrison,        Brazoria,
                  Cameron, Iberia,    Jackson          Calhoun, Cameron,
                  Jefferson,                           Chambers,
                  Lafourche,                           Galveston,
                  Livingston,                          Harris, Jackson,
                  Orleans,                             Jefferson,
                  Plaquemines, St.                     Kenedy, Kleberg,
                  Bernard, St.                         Matagorda,
                  Charles, St.                         Nueces, Orange,
                  James, St. John                      Refugio, San
                  the Baptist, St.                     Patricio,
                  Martin, St. Mary,                    Victoria, Willacy
                  St. Tammany,
                  Tangipahoa,
                  Terrebonne,
                  Vermillion
------------------------------------------------------------------------

    In the allocation of revenues among the States' coastal political 
subdivisions, GOMESA refers to the CIAP provisions in EPAct that amend 
section 31 of the Outer Continental Shelf Lands Act (43 U.S.C. 1356a). 
Specifically, GOMESA states that the funds shall be allocated to each 
coastal political subdivision in accordance with subparagraphs (B), 
(C), and (E) of section 31(b)(4) of the Outer Continental Shelf Lands 
Act (43 U.S.C. 1356a(b)(4)) which provides that:
    ``(B) FORMULA.--Of the amount paid by the Secretary to coastal 
political subdivisions under subparagraph (A)--
    (i) 25 percent shall be allocated to each coastal political 
subdivision in the proportion that--
    (I) The coastal population of the coastal political subdivision; 
bears to
    (II) The coastal population of all coastal political subdivisions 
in the producing State;
    (ii) 25 percent shall be allocated to each coastal political 
subdivision in the proportion that--
    (I) The number of miles of coastline of the coastal political 
subdivision; bears to
    (II) The number of miles of coastline of all coastal political 
subdivisions in the producing State; and
    (iii) 50 percent shall be allocated in amounts that are inversely 
proportional to the respective distances between the points in each 
coastal political subdivision that are closest to the geographic center 
of each leased tract, as determined by the Secretary.
    (C) EXCEPTION FOR THE STATE OF LOUISIANA.--For the purposes of 
subparagraph (B)(ii), the coastline for coastal political subdivisions 
in the State of Louisiana without a coastline shall be considered to be 
\1/3\ the average length of the coastline of all coastal political 
subdivisions with a coastline in the State of Louisiana.
 * * *
    (E) EXCLUSION OF CERTAIN LEASED TRACTS.--For purposes of 
subparagraph (B)(iii), a leased tract or portion of a leased tract 
shall be excluded if the tract or portion of a leased tract is located 
in a geographic area subject to a leasing moratorium on January 1, 
2005, unless the lease was in production on that date.''
    We will allocate 50 percent of the funds available to the coastal 
political subdivisions based on the population formula (25 percent), 
coastline formula (25 percent) and (B)(i) and (ii) above. To determine 
coastal political subdivision coastline lengths for calculating the 
coastline length shares, we will use standard geographical information 
system software (ArcGIS). To determine the population shares, we will 
make our

[[Page 30336]]

allocations using the latest official U.S. Census Bureau census 
population data.
    We will allocate the remaining 50 percent of the funds available to 
the coastal political subdivisions ((B)(iii)) by calculating and 
applying the inverse proportional distance ratios in the same way we do 
for allocating revenues to the Gulf producing States in this proposed 
rule, except we would exclude leased tracts in the 181 South Area due 
to the provisions of paragraph (E) of section 31(b)(4) of the Outer 
Continental Shelf Lands Act (43 U.S.C. 1356a(b)(4)) as amended by the 
Energy Poly Act of 2005. The 181 South Area was under a moratorium as 
of January 1, 2005, and no lease has ever produced in this area, thus 
those tracts cannot be included in the calculations for coastal 
political subdivisions in accordance with paragraph (E). In calculating 
the inverse proportional distances for States, we will use applicable 
leased tracts in the 181 Area in the Eastern Planning Area and in the 
181 South Area. For the coastal political subdivisions, however, we 
will only use applicable leased tracts in the 181 Area in the Eastern 
Planning Area.
    There is a slight possibility that there could be a fiscal year in 
which there are no applicable leased tracts in the 181 Area in the 
Eastern Planning Area, so there would be no way to allocate the 50 
percent funds to coastal political subdivisions based on their inverse 
proportional distances to applicable leased tracts. This would only 
occur if no leasing occurred in the 181 Area in the Eastern Planning 
Area or all leases awarded in this area were relinquished at some point 
before 2016. In the event this situation should occur, we propose to 
allocate:
     50 percent of the funds based on the proportion that each 
coastal political subdivision's population bears to the coastal 
population of all coastal political subdivisions in the Gulf producing 
State; and
     50 percent of the funds based on the proportion that each 
coastal political subdivision's miles of coastline bears to the number 
of miles of coastline of all coastal political subdivisions in the 
producing State.
    We believe this proposal is fair and is the alternative that is 
most consistent with the GOMESA provisions. We welcome your suggestions 
and recommendations about other alternatives to allocate funds among 
coastal political subdivisions if there were no applicable leased 
tracts in the Sale 181 Area in the Eastern Gulf of Mexico Planning Area 
in the fiscal year for which funds are being disbursed.

Bonus or Royalty Credits for Relinquished Leases

    Section 104(c) of GOMESA authorizes the Secretary of the Interior 
(Secretary) to issue a bonus or royalty credit for use only in the Gulf 
of Mexico for the exchange of certain leases located offshore of the 
State of Florida. The proposed regulations for Bonus or Royalty Credits 
authorized under GOMESA can be found in the proposed rule RIN 1010-
AD44, Bonus or Royalty Credits for Relinquishing Certain Leases 
Offshore, published February 1, 2008 (FR 73 6073). The statute does not 
exclude these credits from being applied to bonus or royalty 
obligations for leases subject to GOMESA revenue sharing provisions. To 
the extent this occurs, the United States would receive less qualified 
OCS revenues than if the bidders or lessees had paid in cash. It 
necessarily follows that any distribution of royalty or bonus payments 
to a State or coastal political subdivision would result in a 
corresponding reduction from what it would have been had the entire 
payment been made in cash.
    The MMS projects the effect of section 104(c) on GOMESA revenue 
sharing during fiscal years 2007 through 2016 to be very limited. Since 
the GOMESA distribution requirements apply only to revenues derived 
from new leases issued in the portion of the 181 Area located in the 
Eastern Planning Area and to the 181 South Area, production, and hence 
royalty, from such leases likely will not occur anytime soon. Further, 
MMS allocates the portion of qualified OCS revenues paid to Gulf 
producing States between those States based on an inverse distance 
formula. This effect on a particular State from a reduction in a 
particular bonus payment for a new lease in the subject areas, because 
of use of a bonus credit, would be minimal. Finally, given the 
thousands of other leases to which the credits may be applied, the 
credits are more likely to be used to pay bonus and royalty obligations 
on leases that are not subject to revenue sharing provisions.

Timing of Annual Disbursements to States and Coastal Political 
Subdivisions

    Per Section 105(c) of GOMESA, funds are required to be made 
available during the fiscal year immediately following the applicable 
fiscal year.
    For the portion of qualified OCS revenues represented by bonuses 
and rental payments, the calculation of the revenue sharing 
distribution on applicable leased tracts can be finalized relatively 
quickly once the computational software is operational. In the case of 
the royalty portion, additional time can be expected. However, it will 
likely be several years before there are any royalties paid on GOMESA 
leases subject to revenue sharing during 2007-2016. Accordingly, MMS 
expects that during the first few years of the 2007-2016 revenue 
sharing period, before there are any producing leases, revenue sharing 
funds can be distributed within the first half of the following fiscal 
year.

Procedural Matters

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) This proposed rule would not have an annual 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. The GOMESA directs the Secretary to 
disburse a portion of qualified OCS revenues to the Gulf producing 
States, coastal political subdivisions, and the LWCF. This proposed 
rule describes the formula and methodology MMS would use to allocate 
the revenues among the Gulf producing States and the coastal political 
subdivisions. The transfer of revenues from the Federal Government to 
State and local governments would not impose additional costs on any 
sector of the U.S. economy, and would not have any appreciable effect 
on the National economy. Internal estimates in June 2007, made for 
official budget projections, indicate that the annual transfers will 
total less than the $100 million annual threshold because of the 
relatively small OCS area whose bonus, rental, and royalty payments are 
subject to revenue sharing.
    (2) This proposed rule would not create any serious inconsistency 
or otherwise interfere with an action taken or planned by another 
agency. No other agency is affected by the disbursements mandated by 
GOMESA.
    (3) This proposed rule would not alter the budgetary effects of 
entitlements, grants, user fees, or loan programs or the rights or 
obligations of their recipients.
    (4) This proposed rule does not raise novel legal or policy issues. 
This proposed rule would merely provide formulas and methods to 
implement an Act of Congress. Previously, section 8(g) of the OCS Lands 
Act and section 384 of the Energy Policy Act of 2005 have provided for 
the distribution of a

[[Page 30337]]

portion of OCS revenues to coastal States and local governments with 
distributions under the latter statute using essentially the same 
formulas and methods proposed in this rule.

Regulatory Flexibility Act

    The Department of the Interior (DOI) certifies that this proposed 
rule would not have a significant economic effect on a substantial 
number of small entities under the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.). The provisions of this proposed rule specify how 
qualified OCS revenues would be allocated to certain States and 
eligible coastal political subdivisions. The proposed rule would have 
no effect on the amount of royalties, rents, or bonuses owed by 
lessees, operators, or payors regardless of size and, consequently, 
would not have a significant economic effect on offshore lessees and 
operators, including those classified as small businesses. Small 
entities may benefit from expenditures funded by these shared revenues, 
but it is not possible to estimate that effect since under the statute, 
States, and political subdivisions will be receiving such revenues.
    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

    This proposed rule is not a major rule under 5 U.S.C. 804(2) of the 
Small Business Regulatory Enforcement Fairness Act. This proposed rule:
    a. Would not have an annual effect on the economy of $100 million 
or more. The provisions of this proposed rule specify how qualified OCS 
revenues would be allocated to States and coastal political 
subdivisions. The proposed rule would have no effect on the amount of 
royalties, rents, or bonuses owed by lessees, operators, or payors 
regardless of size and, consequently, would not have a significant 
adverse economic effect on offshore lessees and operators, including 
those classified as small businesses. The Gulf producing States and 
coastal political subdivision recipients of the revenues would likely 
fund contracts that would benefit the local economies, small entities, 
and the environment. These effects are projected to be less than $100 
million annually.
    b. Would not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, local government 
agencies, or geographic regions.
    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. The 
effects, if any, of distributing revenues to the States and coastal 
political subdivision are projected to be beneficial.

Unfunded Mandates Reform Act

    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 the Unfunded 
Mandates Reform Act (2 U.S.C. 1531 et seq.) is not required because the 
proposal is not a mandate. It merely provides the formulas and methods 
to implement an allocation of revenue to certain States and eligible 
coastal political subdivisions, as directed by Congress. Further, the 
statute allows 3 percent of funds allocated to Gulf producing States 
and coastal political subdivisions to be used for planning and 
administrative activities.

Takings Implication Assessment (E.O. 12630)

    Under the criteria in E.O. 12630, this proposed rule does not have 
significant takings implications. The proposed rule is not a 
governmental action capable of interference with constitutionally 
protected property rights. A takings implication assessment is not 
required.

Federalism (E.O. 13132)

    Under the criteria in E.O. 13132, this proposed rule does not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment. 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, 
though it may fund activities that mitigate local challenges attributed 
to OCS exploration and development. A Federalism Assessment is not 
required.

Civil Justice Reform (E.O. 12988)

    This proposed rule complies with the requirements of E.O. 12988. 
Specifically, this proposed rule:
    (a) Meets the criteria of section 3(a) requiring that all 
regulations be reviewed to eliminate errors and ambiguity and be 
written to minimize litigation; and
    (b) Meets the criteria of section 3(b)(2) requiring that all 
regulations be written in clear language and contain clear legal 
standards.

Consultation With Indian Tribes (E.O. 13175)

    Under the criteria in E.O. 13175, we have evaluated this proposed 
rule and determined that it has no potential effects on federally 
recognized Indian tribes. There are no Indian or tribal lands in the 
OCS or tribes that qualify as GOMESA revenue sharing recipients.

Paperwork Reduction Act

    The proposed revisions do not contain any information collection 
subject to the Paperwork Reduction Act (PRA) and does not require a 
submission to OMB for review and approval under section 3507(d) of the 
PRA.

National Environmental Policy Act

    This proposed rule does not constitute a major Federal action 
significantly affecting the quality of the human environment. The MMS 
has analyzed this rule under the criteria of the National Environmental 
Policy Act (NEPA) and 516 Departmental Manual 6, Appendix 10.4C(1). The 
MMS completed a Categorical Exclusion Review for this action and 
concluded that the rulemaking is categorically excluded from NEPA 
because it involves ``issuance and modification of regulations * * * 
for which the impacts are limited to administrative, economic, or 
technical effects * * *.'' Therefore, preparation of an environmental 
analysis or environmental impact statement will not be required.

Data Quality Act

    In developing this proposed rule we did not conduct or use a study, 
experiment, or survey requiring peer review under the Data Quality Act 
(Pub. L. 106-554, app. C Sec.  515, 114 Stat. 2763, 2763A-153-154).

Effects on the Energy Supply (E.O. 13211)

    This proposed rule is not a significant energy action under the 
definition in

[[Page 30338]]

E.O. 13211. A Statement of Energy Effects is not required.

Clarity of This Regulation

    We are required by E.O. 12866, E.O.12988, and by the Presidential 
Memorandum of June 1, 1998, to write all rules in plain language. This 
means that each rule we publish must:
    (a) Be logically organized;
    (b) Use the active voice to address readers directly;
    (c) Use clear language rather than jargon;
    (d) Be divided into short sections and sentences; and
    (e) Use lists and tables wherever possible.
    If you feel that we have not met these requirements, send us 
comments by any of the methods listed in the ADDRESSES section. To 
better help us revise the rule, your comments should be as specific as 
possible. For example, you should tell us the numbers of the sections 
or paragraphs that you find unclear, which sections or sentences are 
too long, the sections where you feel lists or tables would be useful, 
etc.

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.

List of Subjects in 30 CFR Part 219

    Government contracts, Indian--lands, Mineral royalties, Oil and gas 
exploration, Public lands--mineral resources.

    Dated: March 25, 2008.
C. Stephen Allred,
Assistant Secretary--Land and Minerals Management.
    For the reasons stated in the preamble, the Minerals Management 
Service (MMS) proposes to amend 30 CFR part 219 as follows:

PART 219--DISTRIBUTION AND DISBURSEMENT OF ROYALTIES, RENTALS, AND 
BONUSES

    1. The authority citation for part 219 is revised to read as 
follows:

    Authority: Section 104, Pub. L. 97-451, 96 Stat. 2451 (30 U.S.C. 
1714), Pub. L. No. 109-432, Div C, Title I, 120 Stat. 3000.

    2. Amend part 219 by adding a new Subpart D--Oil and Gas, Offshore, 
to read as follows:

Subpart D--Oil and Gas, Offshore

Sec.
219.410 What does this subpart contain?
219.411 What definitions apply to this subpart?
219.412 How will the qualified OCS revenues be divided?
219.413 How will the coastal political subdivisions of Gulf 
producing States share in the qualified OCS revenues?
219.414 How will MMS determine each Gulf producing State's share of 
the qualified OCS Revenues?
219.415 How will bonuses and royalty credits effect revenues 
allocated to Gulf producing States?
219.416 How will the qualified OCS revenues be allocated to coastal 
political subdivisions within the Gulf producing States?
219.417 How will MMS disburse qualified OCS revenues to the coastal 
political subdivisions if, during any fiscal year, there are no 
applicable leased tracts in the 181 Area in the Eastern Gulf of 
Mexico Planning Area?
219.418 When will funds be disbursed to Gulf producing States and 
eligible coastal political subdivisions?


Sec.  219.410  What does this subpart contain?

    The Gulf of Mexico Energy Security Act of 2006 directs the 
Secretary of the Interior to disburse a portion of the rentals, 
royalties, bonus, and other sums derived from certain Outer Continental 
Shelf (OCS) leases in the Gulf of Mexico to the States of Alabama, 
Louisiana, Mississippi, and Texas (collectively identified as the Gulf 
producing States); to eligible coastal political subdivisions within 
those States; and to the Land and Water Conservation Fund. This subpart 
sets forth the formula and methodology MMS will use to determine the 
amount of revenues to be disbursed and the amount to be allocated to 
each Gulf producing State and each eligible coastal political 
subdivision.


Sec.  219.411  What definitions apply to this subpart?

    Terms in this subpart have the following meaning:
    181 Area means the area identified in map 15, page 58, of the 
Proposed Final Outer Continental Shelf Oil and Gas Leasing Program for 
1997-2002, dated August 1996, of the Minerals Management Service, 
available in the Office of the Director of the Minerals Management 
Service, excluding the area offered in OCS Lease Sale 181, held on 
December 5, 2001.
    181 Area in the Eastern Planning Area is comprised of the area of 
overlap of the two geographic areas defined as the ``181 Area'' and the 
``Eastern Planning Area''.
    181 South Area means any area--
    (1) located--
    (i) south of the 181 Area;
    (ii) West of the Military Mission Line; and
    (iii) in the Central Planning Area;
    (2) excluded from the Proposed Final Outer Continental Shelf Oil 
and Gas Leasing Program for 1997-2002, dated August 1996, of the 
Minerals Management Service; and
    (3) Included in the areas considered for oil and gas leasing, as 
identified in map 8, page 37 of the document entitled ``Draft Proposed 
Program Outer Continental Shelf Oil and Gas Leasing Program 2007-
2012'', dated February 2006.
    Applicable Leased Tract means a tract that is subject to a lease 
under section 6 or 8 of the Outer Continental Shelf Lands Act for the 
purpose of drilling for, developing, and producing oil or natural gas 
resources and is located fully or partially in either the 181 Area in 
the Eastern Planning Area or in the 181 South Area.
    Central Planning Area means the Central Gulf of Mexico Planning 
Area of the outer Continental Shelf, as designated in the document 
entitled ``Draft Proposed Program Outer Continental Shelf Oil and Gas 
Leasing Program 2007-2012'', dated February 2006.
    Coastal political subdivision means a political subdivision of a 
Gulf producing State any part of which political subdivision is--
    (1) Within the coastal zone (as defined in section 304 of the 
Coastal Zone Management Act of 1972 (16 U.S.C. 1453)) of the Gulf 
producing State as of December 20, 2006; and
    (2) Not more than 200 nautical miles from the geographic center of 
any leased tract.
    Coastline means the line of ordinary low water along that portion 
of the coast which is in direct contact with the open sea and the line 
marking the seaward limit of inland waters. This is the same definition 
used in section 2 of the Submerged Lands Act (43 U.S.C. 1301).
    Distance means the minimum great circle distance.
    Eastern Planning Area means the Eastern Gulf of Mexico Planning 
Area of the Outer Continental Shelf, as designated in the document 
entitled ``Draft Proposed Program Outer Continental Shelf Oil and Gas 
Leasing Program 2007-2012'', dated February 2006.
    Gulf Producing State means each of the States of Alabama, 
Louisiana, Mississippi, and Texas.

[[Page 30339]]

    Leased Tract means any tract that is subject to a lease under 
section 6 or 8 of the Outer Continental Shelf Lands Act for the purpose 
of drilling for, developing, and producing oil or natural gas 
resources.
    Military Mission Line means the north-south line at 86[deg]41' W. 
longitude.
    Qualified OCS Revenues--
    (1) The term ``qualified OCS revenues'' means, in the case of each 
of fiscal years 2007 through 2016, all rentals, royalties, bonus bids, 
and other sums received by the United States from leases entered into 
on or after December 20, 2006, located:
    (i) In the 181 Area in the Eastern Planning Area; and
    (ii) In the 181 South Area.
    (2) For applicable leased tracts intersected by the planning area 
administrative boundary line (e.g., separating the GOM Central Planning 
Area from the Eastern Planning Area), only the percent of revenues 
equivalent to the percent of surface acreage in the 181 Area in the 
Eastern Planning Area will be considered qualified OCS revenues.
    (3) Exclusions to the term ``qualified OCS revenues'' include:
    (i) Rental revenues or user fees credited to MMS appropriated funds 
through the annual Congressional appropriations process;
    (ii) Revenues from the forfeiture of a bond or other surety 
securing obligations other than royalties;
    (iii) Civil penalties; and
    (iv) Royalties taken by the Secretary in-kind and not sold.


Sec.  219.412  How will the qualified OCS revenues be divided?

    For each of the fiscal years 2007 through 2016, 50 percent of the 
qualified OCS revenues will be placed in a special United States 
Treasury account from which 75 percent of the revenues will be 
disbursed to the Gulf producing States and 25 percent will be disbursed 
to the Land and Water Conservation Fund. Each Gulf producing State will 
receive at least 10 percent of the qualified OCS revenues available for 
allocation to the Gulf producing States each fiscal year.

       Revenue Distribution of Qualified OCS Revenues Under GOMESA
------------------------------------------------------------------------
                                                          Percentage of
          Recipient of qualified OCS revenues             qualified OCS
                                                             revenues
------------------------------------------------------------------------
U.S. Treasury..........................................             50
Land and Water Conservation Fund.......................             12.5
Gulf Producing States..................................             30
Eligible Coastal Political Subdivisions................              7.5
------------------------------------------------------------------------

Sec.  219.413  How will the coastal political subdivisions of the Gulf 
producing States share in the qualified OCS revenues?

    Of the revenues allocated to a Gulf producing State, 20 percent 
will be distributed to the coastal political subdivisions within that 
State.


Sec.  219.414  How will MMS determine each Gulf producing State's share 
of the qualified OCS revenues?

    (a) The MMS will determine the geographic centers of each 
applicable leased tract and, using the great circle distance method, 
will determine the closest distance from the geographic centers of each 
applicable leased tract to each Gulf producing State's coastline.
    (b) Based on these distances, we will calculate the qualified OCS 
revenues to be disbursed to each Gulf producing State using the 
following proposed procedure:
    (1) For each Gulf producing State, we will calculate and total, 
over all applicable leased tracts, the mathematical inverses of the 
distances between the points on the State's coastline that are closest 
to the geographic centers of the applicable leased tracts and the 
geographic centers of the applicable leased tracts. For applicable 
leased tracts intersected by the planning area administrative boundary 
line, the geographic center used for the inverse distance determination 
will be the geographic center of the entire lease as if it were not 
intersected.
    (2) For each Gulf producing State, we would divide the sum of each 
State's inverse distances, from all applicable leased tracts, by the 
sum of the inverse distances from all applicable leased tracts across 
all four Gulf producing States. We would multiply the result by the 
amount of qualified OCS revenues to be shared, as shown below. In the 
formulas, IAL, ILA, IMS, and ITX represent the sum of the inverses of 
the closest distances between Alabama, Louisiana, Mississippi, and 
Texas and all applicable leased tracts, respectively.

Alabama Share = (IAL / (IAL + ILA + IMS + ITX)) x Qualified OCS 
Revenues
Louisiana Share = (ILA / (IAL + ILA + IMS + ITX)) x Qualified OCS 
Revenues
Mississippi Share = (IMS / (IAL + ILA + IMS + ITX)) x Qualified OCS 
Revenues
Texas Share = (ITX / (IAL + ILA + IMS + ITX)) x Qualified OCS Revenues

    (3) If in any fiscal year, this calculation results in less than a 
10 percent allocation of the qualified OCS revenues to any Gulf 
producing State, we will recalculate the distribution. We will allocate 
10 percent of the qualified OCS revenues to the State and recalculate 
the other States' shares of the remaining qualified OCS revenues 
omitting the State receiving the 10 percent minimum share and its 10 
percent share from the calculation.


Sec.  219.415  How will the use of bonus and royalty credits effect 
revenue allocation to Gulf producing States?

    If bonus and royalty credits issued under Section 104(c) of the 
Gulf of Mexico Energy Security Act are used to pay bonuses or royalties 
on leases in the 181 Area located in the Eastern Planning Area and the 
181 South Area, then there will be a corresponding reduction in 
qualified OCS revenues available for distribution.


Sec.  219.416  How will the qualified OCS revenues be allocated to 
coastal political subdivisions within the Gulf producing States?

    The MMS will disburse funds to the coastal political subdivisions 
in accordance with the following criteria:
    (a) Twenty-five percent of the qualified OCS revenues will be 
allocated to a Coastal producing State's coastal political subdivisions 
in the proportion that each coastal political subdivision's population 
bears to the population of all coastal political subdivisions in the 
producing State;
    (b) Twenty-five percent of the qualified OCS revenues will be 
allocated to a Coastal producing State's coastal political subdivisions 
in the proportion that each coastal political subdivision's miles of 
coastline bears to the number of miles of coastline of all coastal 
political subdivisions in the producing State. Except that, for the 
State of Louisiana, proxy coastline lengths for coastal political 
subdivisions without a coastline will be considered to be one-third the 
average length of the coastline of all political subdivisions within 
Louisiana having a coastline.
    (c) Fifty percent of the revenues will be allocated to a Coastal 
producing State's coastal political subdivisions in amounts that are 
inversely proportional to the respective distances between the 
geographic center of each applicable leased tract and the point in each 
coastal political subdivision that is

[[Page 30340]]

closest to the geographic center of each applicable leased tract. 
Except that, an applicable leased tract will be excluded from this 
calculation i