BOEM publishes revised leasing regs

New rule updates previous regs to reflect evolving processes, policies and procedures for oil, gas and sulfur leases on the OCS

ALAN BAILEY

Petroleum News

The Bureau of Ocean Energy Management has announced the publication of revisions to regulations for the leasing of federal outer continental shelf land for oil, gas and sulfur exploration and development.

The agency says the new regulations streamline the existing regulations, bringing the regulations up to date and more effectively reflecting leasing processes, policies and procedures that have evolved over the years. The regulations take into account legislation that has been enacted since the regulations were last revised. And the regulations reflect the fact that the Minerals Management Service, the precursor agency to BOEM, was re-organized and divided into three separate organizations, BOEM says. The restructuring of the Minerals Management Service resulted from lessons learned from the Deepwater Horizon Disaster in the Gulf of Mexico.

The new regulations do not significantly address bonding, which will be the subject of a separate rule making, BOEM says.

Following publication of the revised regulations in the Federal Register, the public will have 60 days to comment before the regulations go into effect.

BOEM says that efforts to revise the leasing regulations actually date from the late 1990s but that a proposed new rule was not published until May 2009. The new rule codifies many existing bureau policies and practices while also correcting errors that arose from the MMS re-organization. For example, as is current practice, the regulations require bidders on a tract to submit certain types of data and information along with their bids, BOEM says.

The general process for planning and conducting five-year oil and gas leasing programs on the outer continental shelf remains essentially unaltered, albeit with some tidying of terminology and some clarified language. The rule retains a standard lease tract size limit of 5,760 acres, with provisions for larger tracts if deemed necessary, but now requires specifications of larger tract sizes as part of lease sale notices. The standard primary term of an OCS lease remains five years, unless BOEM determines that adverse conditions warrant an extension to 10 years. But the new rule eliminates a regulation allowing an eight-year primary term in certain water depths under specific conditions.

The regulations update the categories of entities that can purchase leases, while also updating the factors that disqualify an entity from holding leases. The regulations include a new definition of what is meant by the designated operator of a lease.

There are qualification requirements for types of entities such as limited liability companies and trusts, with a provision that entities must be acceptable to BOEM. Entities must notify BOEM as soon as is practical of any mergers, name changes or changes to business form.

The regulations now distinguish between three different types of lease interest: the ownership of the title to the lease, subleasing for exploration and development in specific lease tracts, and an economic interest in a lease, such as an overriding royalty interest or payment from production. The regulations spell out the monetary and non-monetary obligations and the transfer of interests rules relating to the lease interests. A lease title holder can sublease the operating rights for up to three depth intervals within a lease. And, subject to BOEM approval, an operating rights owner can assign all or part of its operating rights to another entity. Economic interests can be created, transferred or assigned without BOEM approval. There is a schedule of service fees for different types of transfers of lease interests.

There are specific rules for lease relinquishment.

And the new regulations allow for the electronic filing of documents and data transmissions.