Electronic Provision of Records During an Audit, 59350-59353 [2022-20495]

Agencies

• DEPARTMENT OF THE INTERIOR
• Office of Natural Resources Revenue

[Federal Register Volume 87, Number 189 (Friday, September 30, 2022)]
[Proposed Rules]
[Pages 59350-59353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20495]


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DEPARTMENT OF THE INTERIOR

Office of Natural Resources Revenue

30 CFR Parts 1206, 1208, 1217, and 1220

[Docket No. ONRR-2022-0001; DS63644000 DRT000000.CH7000 223D1113RT]
RIN 1012-AA32


Electronic Provision of Records During an Audit

AGENCY: Office of Natural Resources Revenue (ONRR), Department of the 
Interior.

ACTION: Proposed rule.

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SUMMARY: ONRR proposes to amend its regulations to allow ONRR and other 
authorized Department of the Interior (``Department'') representatives 
the option to require that an auditee use electronic means to provide 
records requested during an audit of an auditee's royalty reporting and 
payment.

DATES: Comment period: To be assured consideration, comments must be 
received at one of the addresses provided below by 11:59 p.m. EST on 
November 29, 2022.

ADDRESSES: You may submit comments to ONRR using the following method. 
Please reference the Regulation Identifier Number (``RIN'') for this 
action, ``RIN 1012-AA32,'' in your comment:
     Electronically via the Federal eRulemaking Portal: Please 
visit https://www.regulations.gov. In the Search Box, enter Docket ID 
``ONRR-2022-0001'' and click ``search'' to view the publications 
associated with the docket folder. Locate the document with an open 
comment period and then click ``Comment.'' Follow the instructions to 
submit your public comments prior to the close of the comment period.
    Instructions: All comments must include the agency name and docket 
number or RIN for this rulemaking. All comments, including any personal 
identifying information or confidential business information contained 
in a comment, will be posted without change to https://www.regulations.gov.

[[Page 59351]]

    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov and locate the 
docket folder by searching the Docket ID (ONRR-2022-0001) or RIN number 
(RIN 1012-AA32).

FOR FURTHER INFORMATION CONTACT: For questions concerning this proposed 
rulemaking, contact Amanda Johnson, Regulatory Specialist, at (303) 
231-3171 or by email at [email protected].

SUPPLEMENTARY INFORMATION: 

I. Explanation of Proposed Rulemaking

    ONRR is responsible for the efficient, timely, and accurate 
collection and disbursement of revenue originating from the leasing and 
production of natural resources and energy, including oil, gas, coal, 
geothermal and solid minerals, from Federal and Indian lands. See 30 
U.S.C. 1711; Sec. Order. 3299, as amended; U.S. Department of the 
Interior Departmental Manual, 112 DM 34 (Dec. 9, 2020). To verify that 
lessees and other persons accurately report and pay royalties and other 
amounts due, ONRR audits royalty and other reporting and payment. 30 
U.S.C. 1711(c).
    Various sections of ONRR's regulations, which were adopted in 
accordance with the Congressional directive found in 30 U.S.C. 1711(a), 
provide for audits by ONRR and other Department representatives. These 
sections include:
    (1) 30 CFR 1206.250(d), which addresses audits for Federal coal 
leases.
    (2) 30 CFR 1206.350(b), which addresses audits for geothermal 
leases.
    (3) 30 CFR 1206.450(d), which addresses audits for Indian coal 
leases.
    (4) 30 CFR 1208.15, which addresses audits for royalty oil taken in 
kind.
    (5) 30 CFR 1217.50, which addresses audits for oil and gas leases.
    (6) 30 CFR 1217.300, which addresses audits for geothermal leases.
    (7) 30 CFR 1220.033(e), which addresses audits for oil and gas net 
profit share leases.
    States or Indian Tribes sometimes perform the audits authorized by 
these sections under delegations or cooperative agreements with ONRR. 
See 30 U.S.C. 1732 and 1735; 30 CFR parts 1227 and 1228.
    Congress and the President mandate that Federal agencies use new 
technologies to improve Government operations. For example, the 
Paperwork Reduction Act of 1995, Public Law 104-13, and the Information 
Technology Management Reform Act of 1996, Public Law 104-106, authorize 
the use of new technologies to improve the productivity, efficiency, 
and effectiveness of Government programs. See 44 U.S.C. 3501(10), 44 
U.S.C. 3504(a)(1)(B)(vi) and (h), 40 U.S.C. Parts 11302 and 11303. In 
addition, the Office of Management and Budget (``OMB'') issued a 
memorandum on June 28, 2019, entitled ``Transition to Electronic 
Records'' (M-19-21), directing Federal agencies to ensure that all 
Federal records are created, retained, and managed in electronic 
formats, with appropriate metadata.
    To meet these Federal mandates and to take advantage of rapidly 
improving technologies for the electronic transmission and storage of 
records, ONRR proposes to amend its regulations to allow ONRR and other 
Department representatives the option to require that records be 
provided for an audit by secure electronic means. Because this 
amendment would apply to all oil, gas, geothermal, coal, and other 
solid mineral royalty audits performed by ONRR or other Department 
representatives, ONRR proposes to:
    (1) Add a new section, 30 CFR 1217.10, under the general provisions 
to 30 CFR part 1217--Audits and Inspections, to specify the methods by 
which ONRR or other Department representatives can require an auditee 
to provide records during an audit.
    (2) Add references to part 1217 in Sec. Sec.  1206.250(d), 
1206.350(b), 1206.450(d), 1208.15, and 1220.033(e) to clarify that ONRR 
or an authorized State or Tribe may require an auditee to provide 
records for an audit by one or more of the methods specified in the new 
30 CFR 1217.10.
    Auditees keep most, if not all, records for natural resources 
revenue reporting and payment in electronic format and generally 
prefer, when under audit, to provide the records electronically. For 
records that an auditee maintains only in electronic form, the 
electronic production and transmission of these records for an audit 
avoids printing and other costs of submitting records in paper form. 
For records an auditee maintains in paper form, technologies exist to 
readily allow for the conversion of these records to electronic form 
when needed for an audit. Providing records electronically helps avoid 
administrative costs and expenses to the Department and auditees for 
preparing, submitting, processing, and preserving paper records. ONRR 
or other Department representatives will still sometimes need to 
inspect paper records or to conduct an entrance or other conference at 
an auditee's business location. However, the option to require that 
records be produced and transmitted electronically could shorten or 
possibly eliminate onsite audit activities in appropriate situations. 
It will also help ONRR and auditees to better navigate disruptive 
events--such as the recent COVID-19 pandemic--that may make onsite 
inspection of records more burdensome, impractical, or unavailable.
    ONRR regulations specifically provide that information that 
``constitutes trade secrets or commercial or financial information that 
is identified as privileged or confidential, or that is exempt from 
disclosure under the Freedom of Information Act, 5 U.S.C. 552, shall 
not be available for inspection or made public or disclosed without the 
consent of the lessee, except as provided by law or regulation.'' 30 
CFR 1210.207. To preserve the confidentiality of records produced 
electronically for use in an audit, this rule proposes to allow 
Department representatives the option to require that records be 
provided electronically only by means which are secure. A secure means 
of transmission involves the use of password protection, encryption, or 
other security measures, to prevent unauthorized access to the 
transmission by a third-party. The Department maintains computer 
systems and updates or replaces software as technology changes, which 
will allow auditees to securely transmit records for an audit. When 
requesting electronic production and transmission of records, a 
Department representative will specify the format in which the records 
are to be transmitted electronically and provide instructions for 
submitting the records securely. Factors that would contribute to what 
ONRR or a Department representative would consider acceptable would 
include the availability and completeness of documentation and the 
availability of applications that can interpret it. ONRR is seeking 
public comments specific to what it should consider to be acceptable 
formats.
    This proposed rule is published pursuant to authority delegated to 
ONRR by the Secretary of the Interior. See 30 U.S.C. 189; 30 U.S.C. 
1751; 43 U.S.C. 1334; 30 U.S.C. 1023; Secretarial Order 3299, sec. 5; 
and Secretarial Order 3306, sec. 3-4.

II. Procedural Matters

A. Regulatory Planning and Review (Executive Orders 12866 and 13563)

    Executive Order (E.O.) 12866 provides that the Office of 
Information and Regulatory Affairs (``OIRA'') in OMB will review all 
significant rules. OIRA has determined this rulemaking is not 
significant. E.O. 13563 reaffirms the

[[Page 59352]]

principles of E.O. 12866 while calling for improvements in the Nation's 
regulatory system to promote predictability, to reduce uncertainty, and 
to use the most innovative, and least burdensome tools for achieving 
regulatory ends. E.O. 13563 directs agencies to consider regulatory 
approaches that reduce burdensome tools and maintain flexibility and 
freedom of choice for the public where these approaches are relevant, 
feasible, and consistent with regulatory objectives. E.O. 13563 further 
emphasizes those regulations must be based on the best available 
science and that the rulemaking process must allow for public 
participation and an open exchange of ideas. ONRR developed this 
proposed rule in a manner consistent with these requirements.

B. Regulatory Flexibility Act

    ONRR certifies that promulgation of this rulemaking would not have 
a significant economic effect on a substantial number of small entities 
under the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. 
because it only requires auditees--when the Department requests--to 
provide records and files electronically that they would otherwise be 
required to provide in hard copy at their business premises.

C. Small Business Regulatory Enforcement Fairness Act

    This rulemaking is not a major rule under 5 U.S.C. 804(2), the 
Small Business Regulatory Enforcement Fairness Act.
    This rulemaking:
    (1) Does not have an annual effect on the economy of $100 million 
or more.
    (2) Will not cause a major increase in costs or prices for 
consumers; individual industries; or geographic regions.
    (3) Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
United States-based enterprises to compete with foreign-based 
enterprises.

D. Unfunded Mandates Reform Act

    This proposed rule does not impose an unfunded mandate on State, 
local, or Tribal governments or the private sector of more than $100 
million per year. This rulemaking does not have a significant or unique 
effect on State, local, or Tribal governments or the private sector. 
Therefore, ONRR is not required to provide a statement pursuant to the 
Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq.).

E. Takings (E.O. 12630)

    Under the criteria in section 2 of E.O. 12630, this proposed rule 
does not have any significant takings implications. This proposed rule 
does not impose conditions or limitations on the use of any private 
property because the rulemaking only amends how a lessee, operator, 
payor, and other person must produce and transmit records upon request. 
This proposed rule does not require a takings implication assessment.

F. Federalism (E.O. 13132)

    Under the criteria in section 1 of E.O. 13132, the proposed rule 
does not have sufficient Federalism implications to warrant the 
preparation of a federalism summary impact statement. This rulemaking 
would not impose administrative costs on States or local governments or 
substantially and directly affect the relationship between the Federal 
and State governments. Thus, a federalism summary impact statement is 
not required.

G. Civil Justice Reform (E.O. 12988)

    The proposed rule complies with the requirements of E.O. 12988. 
Specifically, the proposed rule:
    (1) Meets the criteria of Section 3(a), which requires that ONRR 
review all regulations to eliminate errors and ambiguity in order to 
minimize litigation.
    (2) Meets the criteria of Section 3(b)(2), which requires that all 
regulations be written in clear language using clear legal standards.

H. Consultation With Indian Tribal Governments (E.O. 13175)

    ONRR strives to strengthen its government-to-government 
relationship with Indian Tribes through a commitment to consultation 
with Indian Tribes and in recognition of their right to self-governance 
and Tribal sovereignty. ONRR evaluated the proposed rule and the 
criteria in E.O. 13175 and determined that the proposed rule would not 
have substantial direct effects on Federally recognized Indian Tribes. 
Thus, consultation under ONRR's Tribal consultation policy is not 
required.

I. Paperwork Reduction Act

    This proposed rule does not contain any new information collection 
requirements or meet the definition of ``collection of information'' 
under 44 U.S.C. 3502(3). A submission to OMB under the Paperwork 
Reduction Act (44 U.S.C. 3501 et seq.) is not required.

J. National Environmental Policy Act

    This rulemaking does not constitute a major Federal action 
significantly affecting the quality of the human environment. A 
detailed statement under the National Environmental Policy Act of 1969 
(``NEPA'') is not required because this proposed rule is categorically 
excluded. See 43 CFR 46.210(i) and the Department's Departmental 
Manual, Part 516, section 15.4.D. ONRR has determined that this 
rulemaking is not involved in any of the extraordinary circumstances 
under 43 CFR 46.215 that would require further analysis under NEPA. The 
procedural changes resulting from these amendments have no consequence 
with respect to the physical environment. This rulemaking will not 
alter in any material way natural resource exploration, production, or 
transportation.

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

    This proposed rule is not a significant energy action under the 
definition in E.O. 13211 and, therefore does not require a Statement of 
Energy Effects.

L. Clarity of This Regulation

    ONRR is required by E.O. 12866 (section 1(b)(12)), E.O. 12988 
(section 3(b)(1)(B)), and E.O. 13563 (section 1(a)), and by the 
Presidential Memorandum of June 1, 1998, to write all rules in plain 
language. This means that each rule ONRR publishes must:
    (1) Be logically organized.
    (2) Use the active voice to address readers directly.
    (3) Use common, everyday words and clear language rather than 
jargon.
    (4) Be divided into short sections and sentences.
    (5) Use lists and tables wherever possible.
    If you feel that ONRR has not met these requirements, send your 
comments to [email protected]. To better help ONRR 
revise the proposed rule, your remarks should be as specific as 
possible. For example, you should tell ONRR the numbers of the sections 
or paragraphs that are not clearly written, which sections or sentences 
are too long, the sections where you feel lists or tables would be 
useful, etc.

Howard Cantor,
Acting Director, Office of Natural Resources Revenue.

List of Subjects

30 CFR Part 1206

    Coal, Continental shelf, Geothermal energy, Government contracts, 
Indian

[[Page 59353]]

lands, Mineral royalties, Oil and gas exploration, Public lands--
mineral resources, Reporting and recordkeeping requirements.

30 CFR Part 1208

    Continental shelf, Government contracts, Mineral royalties, Public 
lands--minerals resources, Reporting and recordkeeping requirements, 
Small businesses.

30 CFR Part 1217

    Coal, Government contracts, Mineral royalties, Oil and gas 
exploration, Public lands--mineral resources, Reporting and 
recordkeeping requirements.

30 CFR Part 1220

    Accounting, Continental shelf, Government contracts, Mineral 
royalties, Oil and gas exploration, Public lands--mineral resources, 
Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons discussed in the preamble, ONRR proposes to amend 
30 CFR parts 1206, 1208, 1217, and 1220 as set forth below:

PART 1206--PRODUCT VALUATION

0
1. The authority citation for part 1206 continues to read as follows:

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq., 396a et 
seq., 2101 et seq.; 30 U.S.C. 181 et seq., 351 et seq., 1001 et 
seq., 1701 et seq.; 31 U.S.C. 9701.; 43 U.S.C. 1301 et seq., 1331 et 
seq., and 1801 et seq.

Subpart F--Federal Coal

0
2. Amend Sec.  1206.250 by revising paragraph (d) to read as follows:


Sec.  1206.250  What is the purpose and scope of this subpart?

* * * * *
    (d) ONRR may audit and order you to adjust all royalty payments. 
ONRR or an authorized State may require you to provide records for the 
audit by one or more of the methods specified in 30 CFR 1217.10.

Subpart H--Geothermal Resources

0
3. Amend Sec.  1206.350 by revising paragraph (b) to read as follows:


Sec.  1206.350  What is the purpose and scope of this subpart?

* * * * *
    (b) ONRR may audit and order you to adjust all royalty and fee 
payments. ONRR or an authorized State or Tribe may require you to 
provide records for the audit by one or more of the methods specified 
in 30 CFR 1217.10.
* * * * *

Subpart J--Indian Coal

0
4. Amend Sec.  1206.450 by revising paragraph (d) to read as follows:


Sec.  1206.450  What is the purpose and scope of this subpart?

* * * * *
    (d) ONRR may audit and order you to adjust all royalty payments. 
ONRR or an authorized Tribe may require you to provide records for the 
audit pursuant to 30 CFR 1217.10.
* * * * *

PART 1208--SALE OF FEDERAL ROYALTY OIL

0
5. The authority citation for part 1208 continues to read as follows:

    Authority  5 U.S.C. 301 et seq.; 30 U.S.C. 181 et seq., 351 et 
seq., 1701 et seq.; 31 U.S.C. 9701; 41 U.S.C. 601 et seq.; 43 U.S.C. 
1301 et seq., 1331 et seq., and 1801 et seq.

Subpart A--General Provisions

0
6. Revise Sec.  1208.15 to read as follows:


Sec.  1208.15  Audits.

    Audits of the accounts and books of lessees, operators, payors, 
and/or purchasers of royalty oil taken in kind may be made annually or 
at such other times as may be directed by ONRR. Such audits will be for 
the purpose of determining compliance with applicable statutes, 
regulations, and royalty oil contracts. ONRR may require you to provide 
records for the audit pursuant to 30 CFR 1217.10.

PART 1217--AUDITS AND INSPECTIONS

0
7. The authority citation for part 1217 continues to read as follows:

    Authority: 35 Stat. 312; 35 Stat. 781, as amended; secs. 32, 6, 
26, 41 Stat. 450, 753, 1248; secs. 1, 2, 3, 44 Stat. 301, as 
amended; secs. 6, 3, 44 Stat. 659, 710; secs. 1, 2, 3, 44 Stat. 
1057; 47 Stat. 1487; 49 Stat. 1482, 1250, 1967, 2026; 52 Stat. 347; 
sec. 10, 53 Stat. 1196, as amended; 56 Stat. 273; sec. 10, 61 Stat. 
915; sec. 3, 63 Stat. 683; 64 Stat. 311; 25 U.S.C. 396, 396a-f, 30 
U.S.C. 189, 271, 281, 293, 359. Interpret or apply secs. 5, 5, 44 
Stat. 302, 1058, as amended; 58 Stat. 483-485; 5 U.S.C. 301, 16 
U.S.C. 508b, 30 U.S.C. 189, 192c, 271, 281, 293, 359, 43 U.S.C. 387, 
unless otherwise noted.
0
8. Add subpart A, consisting of Sec.  1217.10, to read as follows:

Subpart A--General Provisions


Sec.  1217.10  Providing records during an audit.

    (a) The Office of Natural Resources Revenue (ONRR) or an authorized 
State or Tribe may specify the method an auditee must use to provide 
records for all audits conducted under this chapter, statute, or 
agreement. The methods may include one or more of the following:
    (1) Inspect records at an auditee's place of business during normal 
business hours;
    (2) Send records using secure electronic means. When requesting 
that records be provided electronically, ONRR or the authorized State 
or Tribe will specify the format in which the records shall be 
produced, directions for electronic transmission, and instructions to 
ensure secure transmission; or
    (3) Deliver hard copy records using the U.S. Postal Service, 
special courier, overnight mail, or other delivery service to an 
address specified by ONRR or an authorized State or Tribe.
    (b) [Reserved]

PART 1220--ACCOUNTING PROCEDURES FOR DETERMINING NET PROFIT SHARE 
PAYMENT FOR OUTER CONTINENTAL SHELF OIL AND GAS LEASE

0
9. The authority citation for part 1220 continues to read as follows:

    Authority:  Sec. 205, Pub. L. 95-372, 92 Stat. 643 (43 U.S.C. 
1337).

0
10. Amend Sec.  1220.033 by revising paragraph (e) to read as follows:


Sec.  1220.033  Audits.

* * * * *
    (e) ONRR or its authorized agent may require you to provide records 
for the audit by one or more of the methods specified in 30 CFR 
1217.10.

[FR Doc. 2022-20495 Filed 9-29-22; 8:45 am]
BILLING CODE 4335-30-P