Bureau of Land Management April 21, 2015 – Federal Register Recent Federal Regulation Documents

The Bureau of Land Management (BLM) is issuing this Advanced Notice of Proposed Rulemaking (ANPR) to solicit public comments and suggestions that may be used to update the BLM's regulations related to royalty rates, annual rental payments, minimum acceptable bids, bonding requirements, and civil penalty assessments for Federal onshore oil and gas leases. As explained below, each of these elements is important to the appropriate management of the public's oil and gas resources. They help ensure a fair return to the taxpayer, diligent development of leased resources, adequate reclamation when development is complete; and that there is adequate deterrence for violations of legal requirements, including trespass and unauthorized removal. Aspects of these elements are fixed by statute and beyond the Secretary's authority to revise; however, in many instances they have been further constrained by regulatory provisions (e.g., minimum bond amounts) that have not been reviewed or adjusted in decades. The purpose of this ANPR is to seek comments on this situation and the need for, and content of, potential changes or updates to the existing regulations in these areas. Specifically, the BLM is seeking comments and suggestions that would assist the agency in preparing a proposed rule that gives the Secretary of the Interior (Secretary), through the BLM, the flexibility to adjust royalty rates in response to changes in the oil and gas market. Absent near-term enactment of new statutory flexibility for new non-competitively issued leases, a future proposed rule would limit any contemplated royalty rate changes to new competitively issued oil and gas leases on BLM-managed lands, because the royalty rate that is charged on non-competitively issued leases is currently fixed by statute at 12.5 percent. The intent of any anticipated changes to the royalty rate regulations would be to provide the BLM with the necessary tools to ensure that the American people receive a fair return on the oil and gas resources extracted from BLM-managed lands. In addition to the royalty rate, the BLM is also seeking input on: (1) How to update its annual rental payment, minimum acceptable bid, and bonding requirements for oil and gas leases, and (2) Whether to remove the caps established by existing regulations on civil penalties that may be assessed under the Federal Oil and Gas Royalty Management Act (FOGRMA). With respect to annual rental payments, the intent of any potential increase in annual payments would be to provide a greater financial incentive for oil and gas companies to develop their leases promptly or relinquish them, including for potential re-leasing, as appropriate, by other parties, and to ensure that leases acquired non- competitively provide a fair financial return to the taxpayer. With respect to the minimum acceptable bid, the intent of any potential changes is to ensure that the American taxpayers receive a fair financial return at BLM oil and gas lease sale auctions. With respect to bonding requirements, the intent of any potential bonding updates would be to ensure that bonds required for oil and gas activities on public lands adequately capture costs associated with potential non- compliance with any terms and conditions applicable to a Federal onshore oil and gas lease. The BLM's existing regulations currently set bond minimums that have not been adjusted in 50 years. With respect to penalty assessments, the intent of the potential removal of the regulatory caps would be to ensure that the penalties provide adequate deterrence of unlawful conduct, particularly drilling on Federal onshore leases without authorization and drilling into leased parcels in knowing and willful trespass. The anticipated updates to BLM's onshore oil and gas royalty rate regulations and other potential changes to its standard lease fiscal terms address recommendations from the Government Accountability Office (GAO), and will help ensure that taxpayers are receiving a fair return from the development of these resources. The anticipated changes to the royalty rate regulations will also support implementation of reform proposals in the Administration's Fiscal Year (FY) 2016 budget.