Allocation and Disbursement of Royalties, Rentals, and Bonuses-Oil and Gas, Offshore, 78622-78631 [E8-30469]

Agencies

• DEPARTMENT OF THE INTERIOR
• Minerals Management Service

[Federal Register Volume 73, Number 247 (Tuesday, December 23, 2008)]
[Rules and Regulations]
[Pages 78622-78631]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-30469]


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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: Final rule.

-----------------------------------------------------------------------

SUMMARY: The MMS is amending 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 set 
forth the formula and methodology for calculating and allocating 
revenues to the States of Alabama, Louisiana, Mississippi, and Texas, 
their eligible political subdivisions, and the Land and Water 
Conservation Fund from the 181 Area in the Eastern Planning Area and 
181 South Area in the Gulf of Mexico. The Secretary of the Interior 
will begin to disburse these revenues beginning on or before March 31, 
2009.

DATES: Effective Date: This final rule becomes effective January 22, 
2009.

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

SUPPLEMENTARY INFORMATION: The MMS published a proposed rule on the 
allocation and disbursement of qualified offshore royalties, rentals, 
and bonuses in the Federal Register on Tuesday, May 27, 2008 (73 FR 
30331), with a 60-day comment period. A single, 14-day extension (73 FR 
43673) to the comment period was announced on July 28, 2008, and the 
comment period closed on August 11, 2008. The MMS received six comment 
letters. Of the comment letters received, three were from States, one 
each was received from a locality, a nonprofit foundation, and an 
individual citizen.
    The comments submitted in large part requested clarification on the 
authorized uses of the Gulf of Mexico Energy Security Act of 2006 
(GOMESA) revenue sharing funds, timing of disbursements, and fund 
restrictions upon transfer to the States and Coastal Political 
Subdivisions (CPSs). Separate letters were received from the States of 
Alabama, Louisiana, and Texas. All three States addressed the stated 
purposes of GOMESA revenue sharing funds and individual State needs for 
coastal restoration and protection. Alabama and Louisiana requested 
more specifics in the timing of disbursements and inquired about the 
second phase of revenue sharing authorized by GOMESA. Louisiana alone 
objected to the definition of qualified OCS revenues as defined in the 
proposed regulation. The City of Mobile, Alabama, and the National 
Maritime Museum of the Gulf of Mexico submitted comments related to the 
use of funds for coastal protection, conservation, and restoration, and 
the educational purposes of the National Maritime Museum, and an 
individual citizen provided comments on MMS accounting of royalty 
revenues and designation of this rule as ``not a major rule.''
    This final rule is substantially the same as the proposed rule. In 
response to comments, MMS made four changes to the rule. One minor 
clarifying language change was also made. Thus, the final rule, like 
the proposed rule, provides the methodology and formula for the 
distribution of GOMESA revenues from the 181 Area in the Eastern 
Planning Area and the 181 South Area.

Background

    President George W. Bush signed the Gulf of Mexico Energy Security 
Act of 2006 into law on December 20, 2006 (Pub. L. 109-432, 120 Stat. 
2922; codified at 43 U.S.C. 1331 note (2007) (Gulf of Mexico Energy 
Security)), as part of H.R. 6111, the Tax Relief and Health Care Act of 
2006, which also extended several energy tax programs

[[Page 78623]]

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 CPSs within those States.
    This final rule sets forth how the Department of the Interior (DOI) 
will implement the GOMESA requirements related to the distribution of 
OCS revenues to the Gulf producing States and their CPSs.

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 U.S. 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 CPSs. 
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 CPSs 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
                                                         qualified OCS
         Recipient of qualified OCS revenues                revenues
                                                           (percent)
------------------------------------------------------------------------
U.S. Treasury (General Fund).........................               50
Land and Water Conservation Fund.....................               12.5
Gulf Producing States................................               30
Gulf Producing State Coastal Political Subdivisions..                7.5
------------------------------------------------------------------------

    For the following examples, results are rounded after each 
intermediate calculation for methodology demonstration purposes. Actual 
MMS calculations of shared revenue will be computed to full precision 
and only the final disbursement amount will be rounded. The following 
example shows the revenue sharing formula used to calculate each Gulf 
producing State's share of GOMESA qualified OCS revenues.
    (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.
    (2) For each Gulf producing State, we will 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 will 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:

----------------------------------------------------------------------------------------------------------------
                                                     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......................             N/A          0.0497             N/A          0.0483          0.0980
----------------------------------------------------------------------------------------------------------------


[[Page 78624]]

    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 million.
    The MMS will distribute 20 percent of each Gulf producing State's 
allocable share to eligible coastal political subdivisions. Each 
State's CPS share is calculated by the following formula:
    (1) Twenty-five percent shall be allocated to each CPS in the 
proportion that the coastal population of the CPS bears to the coastal 
population of all CPSs in the producing State;
    (2) Twenty-five percent shall be allocated to each CPS in the 
proportion that the number of miles of coastline of the CPS bears to 
the number of miles of coastline of all CPSs in the producing State. 
For the State of Louisiana, proxy coastline lengths for CPSs without a 
coastline will be considered to be \1/3\ the average length of the 
coastline of all political subdivisions within Louisiana having a 
coastline.
    (3) Fifty percent shall be allocated in amounts that are inversely 
proportional to the respective distances between the points in each CPS 
that are closest to the geographic center of each leased tract.
    The following is a continuation of the prior example, detailing the 
estimated allocations for the two State of Alabama eligible CPSs--
Baldwin and Mobile counties. For this example, it is assumed that 
t1 and t2 are both in the 181 Area in the Eastern 
Planning Area. The revenue allocated to the Alabama CPSs is 20 percent 
of the $12,500,787 calculated above which is $2,500,157.
    Twenty-five percent of the allocation, equal to $625,039, is based 
on the CPS's population proportion. The 2000 Census numbers are: 
Baldwin County--140,415; Mobile County--399,843, and the corresponding 
population proportions are 25.99 percent and 74.01 percent, 
respectively. Thus, $162,448 is allocated to Baldwin, and $462,591 is 
allocated to Mobile.
    A second 25 percent of the allocation is based on the CPS's 
proportion of coastline length. The coastline lengths in nautical miles 
for Alabama's CPSs are: Baldwin--28.249; Mobile--22.045, and the 
corresponding proportions of coastline length are 56.17 percent and 
43.83 percent, respectively. Thus, $351,084 is allocated to Baldwin, 
and $273,955 is allocated to Mobile.
    Finally, 50 percent of the allocation, equal to $1,250,079, is 
based on the proportion of summed inverse distances between the CPSs 
and the applicable leased tracts. The distance measures and inverse 
distance calculations for the CPSs are conceptually identical to those 
employed above in assessing the State shares. Let us assume the 
following distances and resulting inverse distance calculations for the 
two CPSs:

----------------------------------------------------------------------------------------------------------------
                                                     Applicable leased tracts
                                 ----------------------------------------------------------------
                                                t1                              t2                    Sum of
      Alabama eligible CPS       ----------------------------------------------------------------     inverse
                                     Distance                        Distance                        distances
                                     (nautical        Inverse        (nautical        Inverse
                                      miles)         distance         miles)         distance
----------------------------------------------------------------------------------------------------------------
Baldwin.........................              50          0.0200              70          0.0143          0.0343
Mobile..........................              54          0.0185              74          0.0135          0.0320
                                 -------------------------------------------------------------------------------
    All CPS.....................  ..............          0.0385  ..............          0.0278          0.0663
----------------------------------------------------------------------------------------------------------------

    According to the table above, the proportions of the summed inverse 
distances for each CPS are: Baldwin County--51.73 percent; Mobile 
County--48.27 percent, so the allocation amounts are $646,666 and 
$603,413, respectively. The total allocation for each CPS, based on the 
three components, is shown below:

----------------------------------------------------------------------------------------------------------------
                                                                                      Inverse
                 Alabama county                     Population       Coastline       distance          Total
                                                    allocation      allocation      allocation      allocation
----------------------------------------------------------------------------------------------------------------
Baldwin.........................................        $162,448        $351,084        $646,666      $1,160,198
Mobile..........................................         462,591         273,955         603,413       1,339,959
----------------------------------------------------------------------------------------------------------------

    In this hypothetical example, the county of Baldwin would receive 
$1,160,198 (46.41 percent) and the county of Mobile $1,339,959 (53.59 
percent) of the $2,500,157 Alabama CPS share.
    The GOMESA requires that each Gulf producing State and CPS 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

[[Page 78625]]

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 rule covers 
revenue sharing provisions for the 181 Area in the Eastern Planning 
Area and 181 South Area, which are the only revenues shared through 
2016. While revenue sharing from these two areas will continue to be 
shared indefinitely according to GOMESA, the second phase of GOMESA 
revenue sharing adds qualified OCS revenue from GOM leases issued after 
December 20, 2006, in the 181 Call Area and 2002-2007 GOM Planning 
Areas subject to withdrawal or moratoria restrictions and revenue caps 
identified in the act. The second phase of GOMESA revenue sharing will 
be addressed in a subsequent rulemaking.

Comments Leading to Rule Modifications

    The States of Alabama and Louisiana requested that MMS clarify the 
timing and nature of GOMESA revenue disbursements to the Gulf producing 
States and eligible CPSs so that recipients can effectively plan 
projects and be certain of the date they will receive funds. Further, 
both States requested that funds be disbursed as early in the fiscal 
year as possible. The MMS has revised Sec.  219.418 of the rule to 
affirm that MMS intends to disburse revenues on or before March 31st of 
the year following the fiscal year of qualified OCS revenues. The MMS 
requires several months to complete end-of-year audit procedures and 
validate the allocations of the inverse distance formulas. While issues 
could potentially arise making it difficult to meet the March 31st date 
for disbursement of all applicable revenues to all recipients, if MMS 
cannot meet this date, revenue recipients would be alerted. Revenues 
will be disbursed by electronic funds transfer (EFT) to each State and 
CPS. The EFT is a standard practice of the Federal Government, and EFT 
disbursement procedures are not included in the regulation. The MMS has 
contacted each State and CPS to obtain recipient electronic fund 
transfer and account information.
    The State of Louisiana requested the regulation identify a single 
bureau point of contact for GOMESA revenue sharing questions. The MMS 
has designated the Chief, Financial Management, Minerals Revenue 
Management, as the lead contact on GOMESA revenue sharing issues. 
Contact information is found in Sec.  219.410.
    The State of Louisiana commented that the exclusion in the proposed 
regulation of rental revenues or user fees credited to MMS appropriated 
funds through the annual Congressional appropriations process from 
revenue sharing is contrary to the requirements of GOMESA. The 
definition of qualified OCS revenues in the Sec.  219.411 definition 
has been modified in response to Louisiana's comment.
    As discussed in the preamble of the proposed rule, appropriations 
language has been included annually since 1993 which provides MMS 
rental revenues above the $3.00/acre rate in effect on August 5, 1993, 
up to an annual cap, to fund current operations. The GOMESA revenue 
sharing formula created an unforeseen dual claim on rental revenues. To 
avoid any ambiguity, the regulation has been changed from the proposed 
rule to recognize that in the absence of a specific exclusion of 
qualified OCS revenues from leases in statute or appropriations 
language, GOMESA lease revenues are shared first with States/CPSs and 
the LWCF by the revenue sharing formula in this regulation and the 
remainder would be available for other uses as identified by statute or 
appropriations law. An exception would occur if Congress adopts 
explicit appropriations or statutory language which restricts or 
eliminates the sharing of certain GOMESA revenues from this revenue 
sharing program, or changes the definition of GOMESA qualified OCS 
revenues to recognize a different treatment of revenues. In those cases 
the circumscribed revenues would not be shared under the GOMESA revenue 
sharing program.
    The State of Louisiana also objected to the exclusion of user fees 
from qualified OCS revenues. Unlike bonuses, rentals, and royalties, 
user fees (also called cost recovery fees) are not revenue ``from 
leases.'' User fees are payments made by operators or lessees for 
provisions of special services such as transfer of record title and 
review of exploration or development plans. They are collected by MMS 
based on the direct cost of providing a service to the lessees, and are 
not considered receipts directly emerging from a lease's revenues 
themselves. A civil penalty payment, which was excluded in the GOMESA, 
is similar to a user fee payment. A civil penalty is a payment for a 
violation of regulations and a user fee is payment for a service. While 
civil penalties and user fees may be paid for an action or 
authorization that happens on a lease, they are not revenues resulting 
from the lease itself. The revenues from a lease (bonuses, rentals, and 
royalties) reflect the value of the lessor's (i.e., the Federal 
Government's) property interest in the leased minerals. Since GOMESA 
revenue sharing is intended to share revenues resulting from the oil 
and gas property interest, user fees are not from leases, and thus, 
excluded from qualified OCS revenues for GOMESA revenue sharing.
    The MMS has provided a separate line in the Sec.  219.411 
definition to recognize that user fees are not from leases and not 
shared under the GOMESA revenue sharing formula.
    Comments were received from Alabama, Louisiana, and the State of 
Texas General Land Office related to authorized uses of the GOMESA 
revenue sharing funds. In summary, each Gulf producing State receiving 
GOMESA funds has different coastal conservation needs, and subsequently 
will utilize GOMESA funds to accomplish diverse goals via a variety of 
projects and activities. Therefore, Gulf producing States and CPSs have 
requested broad discretion to interpret the GOMESA legislation in a 
manner that accomplishes each State's coastal conservation and 
protection needs, such as hurricane protection measures and specific 
educational uses.
    In this regard, it is important to note that GOMESA does not 
provide the Secretary of the Interior a compliance responsibility or 
enforcement mechanism similar to the plan review and approval authority 
included in the OCSLA Coastal Impact Assistance Program (CIAP). 
Accordingly, while the recipients of the GOMESA revenue sharing funds 
are legally obligated under GOMESA to expend the funds received only on 
the authorized uses enumerated in the Act, the MMS's role in this 
program is to calculate shares and transfer the applicable funds to the 
States and CPSs in a manner similar to the approach it follows in 
disbursing revenue sharing funds to the States under the offshore 8(g) 
program or the onshore oil and gas revenue sharing program. That is, 
once the funds are transferred, MMS no longer has Federal oversight. 
However, since the GOMESA enumerates the authorized uses for shared 
revenues, GOMESA's authorized uses have been added to the Sec.  219.410 
subpart introduction. The regulations do not include Interior 
compliance or enforcement activities since none were assigned by the 
GOMESA.

[[Page 78626]]

Comments Not Leading to Rule Modifications

    The State of Louisiana requested that States and their CPSs be 
allowed to designate a trustee to receive their annual GOMESA revenue 
allocations. Louisiana further states that assigning funds to a trustee 
would provide States and their CPSs a ``capability to maximize their 
ability to further the purposes of GOMESA by leveraging their payment 
streams into long-term financing instruments.''
    The regulation remains silent on the designation of a funds 
trustee. The GOMESA specifically enumerates the four Gulf producing 
States, CPSs, and the LWCF as the recipients of GOMESA revenue sharing 
funds. It is MMS's standard practice to disburse revenue sharing funds 
to the Government entity to which the revenues are shared. Therefore, 
MMS intends to distribute GOMESA revenues to the designated State or 
CPS account in the name of State or CPS and not directly to a trustee. 
A State or CPS is then free to adopt spending procedures involving 
trustees.
    A Texas General Land Office comment requested clarification on how 
GOMESA's revenue sharing 200-mile limit from the center of a leased 
tract will affect certain Texas coastal counties. Some Texas CPSs are 
beyond 200 miles from the center of an applicable leased tract in the 
181 Area in the Eastern Planning Area.
    There are several points in the GOMESA that contribute to the 
understanding of the revenue allocations to Texas CPSs from the revenue 
sharing provisions under this rule. First, no State shall receive less 
than 10 percent of the revenues. Because Texas is the farthest distance 
from the revenue sharing areas of any Gulf producing State, the inverse 
distance calculation will provide less revenue to Texas than the other 
Gulf producing States, so Texas is the State most likely to be affected 
by the minimum distribution requirement. Second, the CPSs receive 20 
percent of the revenues allocated to the States, so the statute 
provides a share of Texas revenues to the CPSs. Third, and key to 
understanding the implications on Texas CPSs of the revenue sharing 
provisions under this rule, there is the difference between an 
applicable leased tract and any leased tract.
    The MMS defines both applicable leased tract and leased tract in 
the regulation. The term applicable leased tract appears twice in 
section 105 of the GOMESA at paragraphs (b)(1)(A) and (2)(A)(i), and 
this term clearly refers to tracts in the 181 and 181 South Area only. 
In section 102, paragraph (10)(B), an eligible CPS is defined as one in 
which any part is ``not more than 200 miles from the geographic center 
of any leased tract,'' not just those in the 181 and 181 South Area. In 
addition, this is how the 2007-2010 Coastal Impact Assistance Program 
defined leased tract. If the GOMESA authors wanted to limit eligible 
CPSs only to those within 200 miles of an applicable leased tract, this 
was the place to do it; yet, they did not provide that constraint. 
Thus, since all Texas CPSs are within 200 miles of a leased tract in 
the GOM, all will share in the revenue sharing provisions of this rule.
    The States of Alabama and Louisiana requested that MMS specify in 
the regulations that a State can use GOMESA funds to match Federal 
grant programs that are consistent with GOMESA's authorized uses. As 
noted in Louisiana's comments, the GOMESA is silent on the use of 
GOMESA funds for cost sharing or matching requirements with other 
Federal grant programs and various other forms of Federal assistance. 
Thus, consistent with a Federal grant program's application of funds 
for GOMESA authorized uses, it appears that GOMESA funds may be used to 
meet a certain Federal program's recipient matching requirement 
depending on whether or not that specific Federal program's statutory 
language or guidelines specifically excludes Federal funds from being 
used by the recipient as matching funds.
    The State of Alabama Department of Conservation and Natural 
Resources, inquired about the timing of when MMS will publish the rule 
for GOMESA revenue sharing to be implemented for fiscal year 2017 and 
thereafter. The State of Louisiana commented that this rule should not 
be restricted to the 2007-2016 period, but should include the 
additional GOMESA revenue sharing provisions that will begin in 2017 
from leases issued after December 20, 2006, in the 2002-2007 GOM 
planning areas. We intend to publish the rulemaking for the second 
phase of GOMESA revenue sharing within the next 2 years. This will 
provide time for MMS to incorporate any lessons learned during the 
first phase of GOMESA revenue sharing and to include similar revenue 
sharing provisions if authorized in future legislation, while avoiding 
the need to extend the publication date of this rule.
    In addition to the request that this rulemaking include the second 
phase of GOMESA revenue sharing, Louisiana asserted that GOMESA 
required rulemaking to ensue within 1 year of its passage and that MMS 
has not met this requirement. We note that this interpretation of 
GOMESA by Louisiana is incorrect. The requirement that rulemaking be 
promulgated not later than 1 year after the passage of the GOMESA only 
applies to Section 104 of the Act. The regulations required by GOMESA 
section 104(c)(4) only address the issuance of credits for the 
relinquishment of select leases offshore of Florida. Section 105 of the 
GOMESA addresses the revenue sharing provisions in this rule, and it 
includes no deadline for promulgation of rulemaking.
    The State of Louisiana raises several points related to the 
definition of qualified OCS revenues found in Sec.  219.411, including 
the exclusion of rental revenues allocated to MMS through the annual 
appropriations process, user fees, royalty-in-kind oil delivered to the 
Strategic Petroleum Reserve and not sold, and alternative energy/use 
revenues. The intent and requirement of GOMESA is that we promulgate 
regulations that describe in specific detail the distribution of GOMESA 
qualified OCS revenues. This rulemaking defines qualified OCS revenues 
to properly account for situations, revenue sources, and claims on OCS 
revenues not clearly identified in GOMESA. Our conclusion on the proper 
treatment of rental revenues and user fees is found in the preceding 
section which covers modifications made to the proposed rule.
    The State of Louisiana requested that this regulation provide 
revenue shares to the Gulf producing States based on royalties from 
GOMESA qualified leases taken by the Secretary in-kind, delivered to 
the Strategic Petroleum Reserve (SPR), and later drawn down. Louisiana 
also requested that the proposed rule be revised to require MMS to sell 
all royalty-in-kind (RIK) oil it receives from GOMESA leases, which 
will raise the State revenue shares, but will mean that none of that 
oil could be delivered to the SPR.
    The MMS policies related to RIK oil are designed to optimize 
benefits to the Nation as a whole. The GOMESA is clear that RIK oil not 
sold and, by implication, transferred or used for trades to stock the 
Department of Energy's SPR is excluded from qualified OCS revenue. 
Accordingly, MMS has no authority to selectively exclude oil from 
GOMESA leases or to compensate Louisiana with proceeds from a 
subsequent sale of oil from the SPR that originated as RIK oil 
following a draw down order from the President.
    The SPR is managed as a National strategic asset by the Department 
of

[[Page 78627]]

Energy. The DOI has no authority over the SPR. Thus, the rule will 
continue to exclude RIK royalties for oil or gas taken in-kind and not 
sold.
    The State of Louisiana requests that Sec.  219.415 in the proposed 
rule be revised to not reduce the revenues shared with States and CPSs 
if bonus or royalty credits are used on GOMESA leases. Section 219.415 
states that use of bonus or royalty credits on a GOMESA lease will 
reduce qualified OCS revenues available for distribution.
    Section 104(c) of GOMESA authorizes the Secretary of the Interior 
to issue a bonus or royalty credit for use only in the GOM for the 
exchange of certain leases located offshore of the State of Florida. 
Thus, there is a possibility that some of the credits could be used on 
GOMESA revenue sharing leases. However, given the thousands of other 
leases to which the credits may be applied, and the incentives for 
credit holders to use them quickly, by far the bulk of the credits are 
likely to be used to pay bonus and royalty obligations on leases that 
are not subject to GOMESA revenue sharing provisions.
    Moreover, the regulations for bonus or royalty credits authorized 
under GOMESA are found in the final rule titled Bonus or Royalty 
Credits for Relinquishing Certain Leases Offshore, RIN 1010-AD44, 
published September 12, 2008 (FR 73 52917). This rule deals with this 
same issue. Unlike the case with revenue from 8(g) leases, GOMESA 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 U.S. would receive less qualified OCS 
revenues on GOMESA leases 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 CPS based on lower qualified revenues should 
result in a corresponding reduction from what it would have been had 
the entire payment been made in cash on the eligible leases.
    However, the MMS projects the effect of bonus or royalty credits 
from section 104(c) of GOMESA on revenue sharing to be very limited. 
Since 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. 
Additionally, these credits must be claimed by October 2010 and there 
are thousands of other leases where the credits, amounting to $60.4 
million, could be promptly applied. We have not complied with 
Louisiana's request and have not changed the regulation because we see 
little chance that the credits will affect State allocations and too 
much complexity is required to exclude such a remote possibility.
    The State of Louisiana proposes that revenues derived from 
alternative uses of the OCS in the 181 Area in the Eastern Planning 
Area and 181 South Area should also be shared according to the GOMESA 
revenue sharing formula. The State comments further that this rule 
inappropriately limits revenue sharing to oil and gas activity while 
GOMESA was not intended to be so constrained.
    In this rule applicable leased tract and leased tract are defined 
as oil and gas leases. It is revenue from these oil and gas leases that 
qualifies as OCS revenues to be shared under this rule. While section 
105 of GOMESA does not specifically limit revenue sharing to oil and 
gas leases, the two revenue sharing areas covered by this rule (181 
Area in the Eastern Planning Area and 181 South Area) are opened to oil 
and gas leasing in Section 103 of GOMESA. Additionally, when the 181 
Area in the Eastern Planning Area and 181 South Area are defined in 
section 102 of the GOMESA, these areas are delineated for oil and gas 
leasing, not simply for revenue sharing geographic boundaries as the 
commenter proposes. Accordingly, it is clearly the intent of Congress 
that the revenue sharing provisions of GOMESA apply only to oil and gas 
leases.
    It is noteworthy that the revenue sharing provisions of the Energy 
Policy Act of 2005 (EPAct) already provide a separate and different 
revenue sharing formula for revenue generated from alternative energy 
leases authorized in Section 388. Louisiana acknowledges its 
familiarity with the provisions of EPAct under which 27 percent of the 
revenues from alternative energy projects within the 8(g) zone would be 
shared with applicable States. If Congress wished to share revenues 
from alternative energy leases outside of the 8(g) area defined in 43 
U.S.C. 1337(p)(2) of the OCS Lands Act, it could have included those 
provisions in section 388 of EPAct, or made that arrangement explicit 
in GOMESA. In fact, Congress chose to do neither.
    A letter from a private citizen critiqued assumptions in the 
proposed rule related to the categorization of this rule as not major, 
since it does not meet the $100 million annual threshold. We point out, 
however, that the MMS states in the proposed rule, and again in this 
final rule, that this is not a major rule under Small Business 
Regulatory Enforcement Fairness Act (5 U.S.C. 804(2)) since it will not 
have an annual effect on the economy of $100 million or more or meet 
the other major rule criteria. The commenter further requests that MMS 
reconsider the expected revenues to be shared under this program 
considering current price projections and the designation of this rule 
as not a major rule. Cited are the $340 million in high bids for leases 
sold in Sale 181 in 2001. However, the GOMESA revenue sharing 
methodology and formula covered by this rule only involve two areas in 
the Central and Eastern GOM. The first area, known as 181 Area in the 
Eastern Planning Area, is a subset of the Sale 181 Call Area, and does 
not include the Final Sale 181 Area. So revenues from the Sale 181 Area 
and reoffering leases expiring from the Sale 181 Area will not be 
shared revenues under this rule. A map of the area can be found at: 
https://www.gomr.mms.gov/homepg/lsesale/224/egom224.html. The 181 South 
Area, which will also share revenues under this rule, is not actually 
in the Sale 181 Call Area, but south of the 181 Call Area. A map of the 
area can be found at: https://www.gomr.mms.gov/homepg/lsesale/208/
cgom208.html. For both of these revenue sharing areas, using June 2008 
estimates for oil and gas prices and expected production volumes, MMS 
does not expect the 50 percent of GOMESA revenues shared with the 
States, CPSs and LWCF to exceed $100 million annually through 2016. 
Beyond 2016, revenues received from the leases issued in the two Sale 
181 areas will mostly depend on the quantity of production, and in-
turn, the royalties earned from production in these areas. Because 
exploration has not started in these areas, royalty revenue streams are 
considered too speculative to affect the classification of this rule.
    The commenter also questions the effect of royalty collection 
adjustments on revenue shared under this rule ``since more than $2.5 
billion in additional mineral revenues have been collected through 
compliance activities since 1982, this indicates that MMS may not be 
capable of doing a full accounting of royalties.'' To the contrary, the 
collection of these substantial revenues indicates that MMS is quite 
effective in auditing royalty payments initiated by its many lessees. 
Moreover, MMS does not expect these adjustments for the applicable 
leased tracts to be substantial in any 1 year and will, in any event, 
tend to balance out over time as both positive and negative adjustments 
are made from one fiscal year to the next.

[[Page 78628]]

    Finally, like other Federal energy revenue sharing programs with 
the States (e.g., Mineral Leasing Act, Section 8(g) of the OCS Lands 
Act), GOMESA revenue sharing is based on the revenue received each 
year, including any compliance collections reflecting prior year 
adjustments. Compliance activities are conducted to ensure the Federal 
Government receives all the money it is entitled. Moreover, all GOMESA 
collections of qualified OCS revenues, including compliance 
collections, will be shared with States, CPSs, and the LWCF.

Other Changes to the Rule

    The definition for applicable leased tract has been revised. The 
proposed rule included OCS Lands Act section 6 leases in the definition 
of an applicable oil and gas leased tract for GOMESA revenue sharing. 
Since section 6 of the OCS Lands Act applies to leases issued by States 
prior to the passage of the OCS Lands Act, and GOMESA revenue sharing 
provisions apply to applicable leased tracts issued after the passage 
of GOMESA, this previous inclusion was incorrect.

Procedural Matters

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

    This 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 rule will not have an annual effect of $100 million or 
more on the economy. It will not adversely affect in a material way the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities. The GOMESA directs the Secretary of the Interior to 
disburse a portion of qualified OCS revenues to the Gulf producing 
States, CPSs, and the LWCF. This rule describes the formula and 
methodology MMS will use to allocate the revenues among the Gulf 
producing States and the CPSs. The transfer of revenues from the 
Federal Government to State and local governments does not impose 
additional costs on any sector of the U.S. economy, and will not have 
any appreciable effect on the National economy. Internal estimates in 
June 2008, 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 rule will 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 rule will not alter the budgetary effects of entitlements, 
grants, user fees, or loan programs or the rights or obligations of 
their recipients.
    (4) This rule does not raise novel legal or policy issues. This 
rule will 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 portion of OCS revenues to coastal States and local governments with 
distributions under the latter statute using essentially the same 
formulas and methods in this rule.

Regulatory Flexibility Act

    The Department of the Interior certifies that this rule will 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 rule specify how qualified OCS revenues will 
be allocated to certain States and eligible CPSs. The rule will have no 
effect on the amount of royalties, rents, or bonuses owed by lessees, 
operators, or payers regardless of size and, consequently, will 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 decide how such revenues are spent.
    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. Allegations of discrimination/retaliation filed with 
the Small Business Administration will be investigated for appropriate 
action.

Small Business Regulatory Enforcement Fairness Act

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

Unfunded Mandates Reform Act

    This rule will not impose an unfunded mandate on State, local, or 
tribal governments or the private sector of more than $100 million per 
year. The final rule will 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 rule is not a 
mandate. It merely provides the formulas and methods to implement an 
allocation of revenue to certain States and eligible CPSs, as directed 
by Congress. Further, the statute allows 3 percent of funds allocated 
to Gulf producing States and CPSs to be used for planning and 
administrative activities.

Takings Implication Assessment (E.O. 12630)

    Under the criteria in E.O. 12630, this rule does not have 
significant takings implications. The 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 rule does not have 
sufficient federalism implications to warrant the preparation

[[Page 78629]]

of a Federalism Assessment. This rule will 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 rule will 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 rule complies with the requirements of E.O. 12988. 
Specifically, this 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 final rule 
and determined that it has no substantial effects on federally 
recognized Indian tribes. There are no Indian or tribal lands in the 
OCS.

Paperwork Reduction Act

    There are no information collection requirements subject to the 
Paperwork Reduction Act (PRA) and this rulemaking does not require a 
submission to OMB for review and approval under section 3507(d) of the 
PRA.

National Environmental Policy Act

    This rule does not constitute a major Federal action significantly 
affecting the quality of the human environment. The MMS has analyzed 
this final rule under the criteria of the National Environmental Policy 
Act and 516 Departmental Manual 15. This final rule meets the criteria 
set forth in 516 Departmental Manual 2 (Appendix 1.10) for a 
Departmental ``Categorical Exclusion'' in that this final rule is ``* * 
* of an administrative, financial, legal, technical, or procedural 
nature and whose environmental effects are too broad, speculative, or 
conjectural to lend themselves to meaningful analysis * * *.'' This 
final rule also meets the criteria set forth in 516 Departmental Manual 
15.4(C)(1) for a MMS ``Categorical Exclusion'' in that its impacts are 
limited to administration, economic or technological effects. Further, 
the MMS has analyzed this final rule to determine if it meets any of 
the extraordinary circumstances that would require an environmental 
assessment or an environmental impact statement as set forth in 516 
Departmental Manual 2.3, and Appendix 2. The MMS concluded that this 
final rule does not meet any of the criteria for extraordinary 
circumstances as set forth in 516 Departmental Manual 2 (Appendix 2).

Data Quality Act

    In developing this 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 rule is not a significant energy action under the definition 
in E.O. 13211. A Statement of Energy Effects is not required.

List of Subjects in 30 CFR Part 219

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

    Dated: December 9, 2008.
Foster L. Wade,
Deputy Assistant Secretary--Land and Minerals Management.

0
For the reasons stated in the preamble, the Minerals Management Service 
(MMS) amends 30 CFR part 219 as follows:

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

0
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. 109-432, Div C, Title I, 120 Stat. 3000.


0
2. Amend part 219 by adding 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 bonus and royalty credits affect 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?

Subpart D--Oil and Gas, Offshore


Sec.  219.410  What does this subpart contain?

    (a) The Gulf of Mexico Energy Security Act of 2006 (GOMESA) 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 (GOM) 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. 
Shared GOMESA revenues are reserved for the following purposes:
    (1) Projects and activities for the purposes of coastal protection, 
including conservation, coastal restoration, hurricane protection, and 
infrastructure directly affected by coastal wetland losses.
    (2) Mitigation of damage to fish, wildlife, or natural resources.
    (3) Implementation of a federally-approved marine, coastal, or 
comprehensive conservation management plan.
    (4) Mitigation of the impact of OCS activities through the funding 
of onshore infrastructure projects.
    (5) Planning assistance and administrative costs not-to-exceed 3 
percent of the amounts received.
    (b) 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. For questions related to the revenue sharing 
provisions in this subpart, please contact: Chief, Financial 
Management, Minerals Revenue Management; P.O. Box 25165; Denver Federal 
Center, Building 85; MS-350B1; Denver, CO 80225-0165, or at (303) 231-
3429.


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

[[Page 78630]]

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 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.
    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 mean--
    (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 U.S. 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.
    (iii) 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.
    (2) Exclusions to the term qualified OCS revenues include:
    (i) Revenues from the forfeiture of a bond or other surety securing 
obligations other than royalties;
    (ii) Civil penalties;
    (iii) Royalties taken by the Secretary in-kind and not sold;
    (iv) User fees; and
    (v) Lease revenues explicitly circumscribed from GOMESA revenue 
sharing by statute or appropriations law.


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 U.S. 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
                                                         qualified OCS
         Recipient of qualified OCS revenues                revenues
                                                           (percent)
------------------------------------------------------------------------
U.S. Treasury (General Fund).........................               50
Land and Water Conservation Fund.....................               12.5
Gulf Producing States................................               30
Gulf Producing State Coastal Political Subdivisions..                7.5
------------------------------------------------------------------------

Sec.  219.413  How will the coastal political subdivisions of 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 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 will 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 will 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.


[[Page 78631]]


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 bonus and royalty credits affect revenues 
allocated 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 Gulf 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 Gulf producing State's