Voglio sapere a riguardo di…

LOTTER on DSK11XQN23PROD with RULES1

54056

Federal Register / Vol. 86, No. 187 / Thursday, September 30, 2021 / Rules and Regulations
costs, and processing costs, as well as the cost of any ensuing disputes. For the reasons described in Section II, which discusses various defects in the promulgation of the 2020 Rule, and III.A, which describes ONRRs unwarranted and overbroad attempt to incentivize production, and because the 2020 Rule did not adequately explain why it was shifting to average index prices, ONRR withdraws this provision of the 2020 Rule.
Similarly, the use of the highest bidweek price is consistent with frequently-seen royalty schemesthe lessee is required to pay the lessor on the higher or highest of multiple measures of royalty value to protect against valuation measures that may prove inapplicable or otherwise fail in some instances, and to minimize the impact of any self-dealing or exercise of poor business judgment. See, e.g., Federal and Indian lease and regulation provisions requiring payment based on a a major portion price if higher see 30 CFR 1206.54 and 1206.174a4 and 47 FR 47774 Oct. 27, 1982, b the value of gas as unprocessed gas if higher than the value of gas as processed gas 30 CFR 1206.176 and 52 FR 1257 Jan.
15, 1988, and c no less than gross proceeds 30 CFR 1206.174g and 53 FR
1275 Jan. 15, 1988; see also, Competitive Oil and Gas Lease, State of Alaska, Department of Natural Resources, Sec. 36a, https dog.dnr.
alaska.gov/Documents/Leasing/
SaleDocuments/AKPeninsula/2016/
LeaseForm-DOG201503.pdf, which requires royalty payments based on the highest of four measures of value; and Oil and Gas Lease, State of Wyoming, Sec. 1div, https lands.wyo.gov/
trust-land-management/mineralleasing/oil-gas-leases, which requires payment based a value no less than that received by the United States for its royalties in the same field.
Public Comment: Some commenters stated that by requiring the highest bidweek price, ONRR is extracting royalties above what it may be entitled to receive because the average bidweek price is more representative of the gross proceeds that a typical lessee may receive.
ONRR Response: With very minor exceptions, no lessee is required, but rather elects, to use the index-based valuation option for its non-arms-length gas sales. 30 CFR 1206.141c and 1206.142d. A lessee that concludes that its use of the index-based valuation formula would increase its royalty obligation above what it considers due the United States does not have to use the formula. Moreover, neither the governing statutes nor lease terms cap
VerDate Sep<11>2014

17:35 Sep 29, 2021

Jkt 253001

royalty value at an individual lessees gross proceeds or typical or average gross proceeds. Also, as referenced above, lessors frequently require that royalties be paid on the highest of multiple measures of royalty value, including measures that may exceed a lessees average gross proceeds.
Public Comment: Some commenters opposed the withdrawal of the 2020
Rule, alleging it creates inconsistency between valuation of Federal gas, Federal oil, and Federal NGLs. Another commenter stated it creates an inconsistency with Indian gas valuation.
ONRR Response: No statute or lease term requires identical treatment for Federal oil, Federal NGLs, Federal gas, and Indian gas, and there are many instances where those commodities are treated differently. Cf. 30 CFR
1206.153b1 allowing a transportation allowance for Federal gas for the unused portion of an armslength contracts firm demand fee with 30 CFR 1206.178 allowing only the used portion of that fee for Indian gas.
Furthermore, with respect to the difference between Federal residue gas and NGLs, index-based valuation is, in most instances, an optional reporting methodology. See 30 CFR 1206.141c and 1206.142d. In designing an optional reporting methodology, ONRR
strives to find a path that ensures it receives a fair return. As a result, ONRR
determined in the 2016 Valuation Rule that a lessee who elects to use the indexbased valuation option must apply the highest bidweek price to value its residue gas. 81 FR 43347. On the other hand, because it is optional for all but a small number of lessees, most lessees can eschew the option and, instead, use actual sales prices, transportation costs, and processing costs.
Public Comment: Some commenters wrote that using the highest bidweek price instead of the average bidweek price will reduce the number of lessees that elect to use index-based pricing.
ONRR Response: ONRR is under no statutory obligation to offer an indexbased pricing option. If, as reporting under the index-based valuation option in 2016 continues, lessees reporting shows no or insignificant use of indexbased reporting, ONRR will have data upon which to evaluate the further use of index-based reporting, including the possible need to amend the price.
However, at this time, ONRR believes use of the highest bid-week price is necessary to ensure that the Federal lessor receives fair market value for its mineral resources.

PO 00000

Frm 00028

Fmt 4700

Sfmt 4700

2. Defective Reduction to Index To Account for Transportation The 2016 Valuation Rules indexbased valuation method provided for a reduction to index prices to account for transportation costs. The amount of the reduction was calculated by ONRR
based on ONRRs review and analysis of lessee-reported transportation costs for production years 20072010. For those years, the average reported transportation cost for the Gulf of Mexico was 4.6 percent of index value, and for all other areas, it was 8.6 percent of index value. In the 2016 Valuation Rule, the index-based valuation formula included a 5 percent reduction to index for the Gulf of Mexico and a 10 percent reduction for all other areas. 30 CFR
1206.141c1iv and 1206.142d1iv.
Since the promulgation of the 2016
Valuation Rule, ONRR conducted a similar economic analysis for three other time periods. One of those time periods predated the Proposed 2020
Rule and ONRRs drafting of the final 2020 Rule. That period was used as a basis for the 2020 Rule. For production years 20142018, ONRRs analysis showed average lessee-reported transportation costs of 13.7 percent for the Gulf of Mexico and 16.8 percent for all other areas. Based on this information, the 2020 Rule increased the reductions to index from 5 percent to 10 percent for the Gulf of Mexico and from 10 percent to 15 percent for all other areas, again bounded by certain minimum and maximum amounts. 86
FR 4655.
Since publication of the 2020 Rule, ONRR conducted two additional analysesone of production years 20162020 and the second for production years 20072020. These analyses showed average lessee-reported transportation costs of 19.6 percent and 14 percent for the Gulf of Mexico and 16.6 percent and 16.9 percent for all other areas, respectively.
In ONRRs experience, lessee-reported transportation costs may overstate allowable transportation costs for several reasons. First, costs reported at or soon after the time of production are estimates, and while, under 30 CFR
1210.30, a lessee must amend its reported royalties within 30 days of the discovery of an error, a lessee generally has up to six years after its initial royalty reporting is due to amend its reported costs. 30 U.S.C. 1721aa. As a result, reported costs for recent time periods can be unreliable.
Second, a lessee frequently claims transportation costs in excess of the amounts allowed. Too often, a lessee
E:FRFM30SER1.SGM

30SER1