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MMS Proposes Major Expansion of Fee System for OCS

Dealing with the federal government on offshore leases will get more expensive under new fee schedules proposed to recover the costs of its services by the Minerals Management Service (MMS) in two recently issued notices of proposed rulemaking.

The two proposals would collect a total of $15.5 million for services and activities the agency provides to the offshore oil and gas industry in the Outer Continental Shelf (OCS). Earlier this month the agency also proposed 25-27% increases in its base lease rental rates, citing inflation since the current rates were set in the mid-1990s. The MMS currently collects about $8 billion a year in royalties, bonus bids and fees, mainly from oil and gas exploration both on- and offshore.

The first request for comments is in the form of a proposed rulemaking to establish new fixed fees that would add up to $2 million for the MMS, while the second request for comments refers to an Advanced Notice of Proposed Rulemaking (ANPR) for an additional $13.5 million in new cost recovery fees in the future for operations currently not covered.

The first MMS request was published as a proposed rule in the Federal Register on March 15. Comments are due by April 14. Under the proposed rule, seven services provided by MMS would incur fees for the first time, two services would incur fee increases, and three services would see a fee decrease.

The services with fees imposed for the first time are: change in designation of operator, $140; suspensions of operations or suspensions of production, $1,700; 500 feet from lease unit line production requests, $3,100; gas cap production requests, $4,000; downhold commingling requests, $4,600; voluntary unitization proposal or unit expansion, $10,000; and unitization revision or modification, $720.

Fees would be increased for the following: pipeline right-of-way (ROW) assignment, from $60 to $160; and nonrequired document filings, from $25 to $170. Fees would be decreased for the following: record title/operations rights (transfer), from $185 to $160; pipeline ROW grant applications, from $2,350 to $1,100; and pipeline conversion of lease term to ROW, from $300 to $180.

The bulk of the new fees would be collected under the advance notice published in the Federal Register March 25 , which calls for comments on new cost recovery fees called for in the agency's fiscal year 2006 budget request. These affect operations different from those in the first notice. These comments are due April 25.

The plans and permits identified in the ANPR for potential fees include exploration plans, development and production plans, deepwater operations plans, applications for permit to drill, applications for permit to modify, applications to remove a platform, platform approvals, conservation and information documents, G&G permits and sand and gravel permits.

The ANPR notes that the MMS may have large cost differences in issuing permits and reviewing plans in the different regions, for instance the Gulf of Mexico, Pacific area and Alaska, and asks if the fee schedule should be uniform nationwide or should vary by region. The agency said it plans to calculate the fees in a manner similar to that used in the recently published Cost Recovery Rule (RIN 1010-AD16, 70 FR 12626). It asks if there are other ways it could determine the fees.

In addition to the proposed fees, the MMS collects millions of dollars in bonus bids for the leases, production royalties of either 16.33% or 12.5%, depending on the water depth, and annual rental fees for leased acreage.

Comments on both rules may be submitted electronically through MMS' online system at https://ocsconnect.mms.gov, or through the Federal Rulemaking Portal at http://www.regulations.gov.

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