Innovation #11

Innovative Achievements

MMS Proposes Rule to Amend Lease Term Requirement for
Outer Continental Shelf Oil and Gas Operations

The U.S. Department of the Interior's Minerals Management Service (MMS) announced today a proposed rule that would amend federal regulations to eliminate the requirement that exploratory drilling commence in the first five years for 8-year term natural gas and oil leases on the Outer Continental Shelf (OCS). These leases are currently located in water depths between 400 and 900 meters. The proposed rule, which appears in the June 5 Federal Register, also allows MMS to change the water depth margin for 8-year lease terms to 800 meters, which conforms to the depth margins of the OCS Deep Water Royalty Relief Act. Once final, this rule will affect requirements for future lease sales.

Commenting on the proposed rule, MMS Director Cynthia Quarterman said, "By adding flexibility in drilling, we expect to see increased competition in bidding, ultimately ensuring fair market value on leased tracts and increased domestic OCS production of natural gas and oil. In addition, the recently passed royalty relief bill provides sufficient incentive for companies to explore and develop as quickly as possible."

The proposed rule is designed to provide lessees with sufficient time to explore in deeper water (depths of 400 to 800 meters), while allowing MMS to promote due diligence, as required by law. Comments on the proposed rule are due to MMS by August 5.

MMS is the federal agency that manages the Nation's natural gas, oil, and other mineral resources on the OCS, and collects, accounts for, and disburses about $4 billion yearly in revenues from offshore mineral leases and from onshore mineral leases on federal and Indian lands.

-MMS-

MMS Internet website address: http://www.mms.gov
24 hour Fax-on- Demand Service: (202) 219-1703