The Department of the Interior’s Minerals Management Service (MMS)
published new regulations today in the Federal Register designed to
promote production from “marginal” oil and gas properties while
reducing administrative costs to lease holders and to the Federal
government.
The final rule, termed “Accounting and Auditing Relief for Marginal
Properties,” establishes how lessees and their designees can obtain
accounting and auditing relief for production from Federal oil and gas
leases that qualify as “marginal” properties. A marginal property is
defined as having average daily well production of less than 15
barrels of oil equivalent (BOE) per well per day, or 1,000 BOE per
property per year.
“This new rule encourages lease holders to continue production from
marginal properties by offering relief in terms of administrative and
other reporting,” said Lucy Querques Denett, Associate Director of
Minerals Revenue Management. It provides, Denett added, “another
incentive for lessees to continue recovering all oil and gas resources
from a marginal property.”
The new rule is being implemented in compliance with the Federal
Oil and Gas Royalty Simplification and Fairness Act (RSFA), originally
signed into law in 1996. In simple terms, the rule provides specific
relief that lease holders of “marginal” properties can now report and
make royalty payments on an annual basis rather than on a monthly
basis. The rule also provides for other forms of accounting and
auditing relief that lessees may request.
Eliminating the monthly reporting requirements is expected to
reduce the administrative costs incurred by lessees or their designees
in providing monthly royalty reports, and reduce the government’s
costs associated with processing thousands of monthly reports for such
small production volumes. That, in turn, provides an incentive for
lessees to continue production from marginal properties instead of
abandoning those properties before all oil and gas resources have been
recovered.
The Federal Register notice specifies that if the marginal property
is located on Federal onshore lands, states where the production
occurs - and which share in royalty receipts - must concur before the
relief will be granted. If the marginal property is located in the
Outer Continental Shelf in Federal waters, the Federal government can
approve the reporting relief.
Copies of the Federal Register notice are available at:
http://a257.g.akamaitech.net/7/257/2422/06jun20041800/edocket.access.gpo.gov/2004/04-20560.htm