Consultation Packet

United States Department of the Interior Bureau of Indian Affairs

Tribal Consultation Packet

25 C.F.R. Part 226—Leasing of Osage Reservation Lands for Oil and Gas Mining

September 2016 Tribal Consultation Packet Osage Oil & Gas Regulations—25 C.F.R. Part 226

Contents

1. Overview

2. Tentative Timeline

3. List of Federal Government Participants

4. Suggested Discussion Topics—Tribal Consultation Meeting 1

5. Act of June 28, 1906, 34 Stat. 539

6. Current Regulations—25 C.F.R. Part 226 (April 1, 2015)

7. Osage Final Rule—80 Fed. Reg. 26994 (May 11, 2015) (remanded)

Osage Oil & Gas Regulations—25 C.F.R. Part 226

Overview

The subsurface mineral estate in Osage County, Oklahoma (“Osage Mineral Estate”) is held in trust by the United States for the benefit of the Osage. Act of June 28, 1906, Pub. L. No. 59-321, § 3, 34 Stat. 539, 543-44 (“1906 Act”). Pursuant to the 1906 Act, leases of the Osage Mineral Estate are made by the Osage Mineral Council, with the approval of the Secretary of the Interior and subject to such rules and regulations as he/she may prescribe. Id. The regulations governing oil and gas mining operations within the Osage Mineral Estate are found in 25 C.F.R. Part 226, Leasing of Osage Reservation Lands for Oil and Gas Mining.

The Bureau of Indian Affairs (“BIA”) has determined that a review of the regulations in 25 C.F.R. Part 226 is appropriate to consider whether, and to what extent, certain provisions in the regulations should be revised in order to strengthen BIA’s management and administration of the Osage Mineral Estate. As part of that process, we are conducting Tribal consultation to obtain your input regarding the need for, and nature of, any such revisions or updates. To assist you in preparing for these consultation sessions we’ve enclosed several documents for your review. The first is a list of suggested topics we would like to discuss at the first consultation session. These topics are related to provisions of the regulations that may require revision or updating. Please note that while the list is intended to guide the discussion, it does not foreclose the discussion of any other topics or provisions of the regulations that the Tribal representatives would like to address. The second is a copy of the regulations that are currently in force in Osage County, 25 C.F.R. Part 226 (2015). Finally, we’ve included a copy of the Osage Final Rule, 80 Fed. Reg. 26994 (May 11, 2015), that was remanded to the agency for further consideration. The May 2015 Osage Final Rule was the product of negotiated rulemaking by the BIA, Osage Nation and Osage Minerals Council to revise 25 C.F.R. Part 226. However, due to litigation following its publication, the Osage Final Rule never went into effect and was ultimately remanded to the agency in November 2015. Although the May 2015 Osage Final Rule was never made effective, we believe that it may be informative to the present discussion.

To the extent that revision and updating of the the current regulations in 25 C.F.R. Part 226 is warranted, our goal would be to draft such regulations and publish a proposed rule in the Federal Register by Spring 2017. Tribal consultation is an important part of meeting this objective and we look forwarding to receiving your input regarding the regulations. If you have any questions regarding any of the materials in the Tribal Consultation Packet, please contact Ms. Elizabeth Appel, Office of Regulatory Affairs & Collaborative Action, at (202) 208-7163.

Osage Oil & Gas Regulations—25 C.F.R. Part 226

Tentative Timeline

BIA Identification of Need for Review

WE ARE HERE Initiation of Tribal Consultation September 2016

First Tribal Con sultation Meeting October 2016

Continue here if BIA Preparation of Discussion Draft of regulations Regulations will be revised

Second Tribal Consultation Meeting December 2016-January 2017

BIA Review of Feedback on Draft Regulations

BIA Preparation of Proposed Rule

Publication of Proposed Rule in Federal Register Spring 2017

BIA Review of Public Comments Received on Proposed Rule

BIA Preparation of Final Rule

Publication of Final Rule in Federal Summer 2017 Register

** All dates are tentative and subject to change.

Osage Oil & Gas Regulations—25 C.F.R. Part 226

Federal Government Participants in the Tribal Consultation Process

Bureau of Indian Affairs

Michael Black, Director Eddie Streater, Regional Director, Eastern Oklahoma Region Robin Phillips, Superintendent, Osage Agency Richard Winlock, Deputy Superintendent, Osage Agency Elizabeth Appel, Director, Office of Regulatory Affairs and Collaborative Action

Office of Natural Resources Revenue

Heidi Badaracco, Program Manager, State and Indian Coordination Yvette Smith, Indian & Tribal Liaison, State and Indian Coordination Michel Mouton, Minerals Revenue Specialist

Office of the Solicitor

Kenneth Dalton, Director, Indian Trust Litigation Office Kristen Kokinos, Attorney-Advisor, Indian Trust Litigation Office Stephen Simpson, Senior Attorney, Division of Indian Affairs Charles Babst, Senior Attorney, Tulsa Field Solicitor’s Office

Osage Oil & Gas Regulations—25 C.F.R. Part 226

Tribal Consultation Meeting 1 Suggested Discussion Topics

1. Need for Revision and Updating of Regulations

2. Overview of the Process and Timeline

3. Computation of Royalties a. NYMEX Calendar Month Average Price (oil) b. Oklahoma Zone 1 Index Pricing (gas)

4. Bonding a. Per well vs. per lease bonding b. Bond amount c. Bonding requirement for assignments with multiple working interests

5. Gas Purchaser Contracts

6. Site Security Measures a. Valves b. Meters

7. Seismic Exploration Permits

8. Rental for SWD wells located off the leased premises

9. Adoption of BLM Onshore Orders

10. Administration of the Osage Royalty Management Program by ONRR a. Reporting b. Enforcement c. Appeals d. Civil Penalties

11. Penalties

12. Any Other Relevant Topics or Issues

Act of June 28, 1906, 34 Stat. 539 FIFTY-NINTH CONGRESS. SESS. I. Cns. 3569-3572. 1906. 539

CHAP. 3569.-An Act To amend section twenty-eight hundred and forty-four June 28, 1906. of the Revised Statutes of the United States, and to provide for an authentication of 1H. -. 19756.] invoices of merchandise shipped to the United States from the Philippine Islands. [Public, No. 318,] Be it enacted by the Senate and lbouse qf Representative8of the United States of Awericat i .fR.-S.(onfIrss a8s, mt d, That section numbered Invoices.sec. 2944,1,. :51, twenty-eight hundred and forty-four of the Revised Statutes of the a...ee. United Sttes is hereby amended by adding thereto the following: Provided, That the authentication may be made by the collector or a hniies n deputy collector of customs in the case of merchandise shipped to the United States from the Philippine Islands." Approved, June 28, 1906.

CHAP. 3570.-An Act To authorize the Monongahela Connecting Railroad Com- June 28, 1906. pany to construct a bridge across the Monongahela River in the State of Pennsylvania. [H. R. 19850. -FFTIblie. N. R19.I .... 1 Be it enacted by t/e Senate and Ilouse o4 Representative8 of the United States of Amcrlca In C(gres assembled, That the Monongahela Con- MonongahelaMonongahela River. Con- necting Railroad Company, a corporation organized under the laws of n tingRailroa,dCom- the State of Pennsylvania, its successors and assigns, be, and they are pany may bri,dge, at hereby, authorized to construct, maintain, and operate a bridge and Pittsbnrg, Pa. approaches thereto across the Monongahela River at Pittsbrg, from a point on the north shore between Hazlewood avenue and the Glen- wood highway bridge to a point on the south shore in the township of Baldwin or the township of Lower Saint Clair, in Allegheny County, in the State of Pennsylvania, in accordance with the l)rovisions of the A ate, p. 84. Act entitled "Al Act to regulate the construction of bridges over navigable waters," approved March twenty third, nineteen hundred and six. SEc. 2. That the right to alter, amend, or repeal this Act is hereby Amendment. expressly reserved. Approved, June 28, 1906.

CHAP. 3571.-An Act To authorize the board of supervisors of Sunflower County, June 28, 1906. Mississippi, to construct a bridge across Sunflower River. [H. R. 19854.1 [Pulhlic. Kr,590I1 Be It enacted by the Senate and louse of Representatiesoft/c United .. States of Anierica in Congress assembled, That the board of super- Sunflower River, Sunflower County, visors of Sunflower County, Mississippi, be, and they are hereby, an -3iss., may bridge, at thorized to construct, maintain, and operate a bridge and approaches Lehrton. thereto across the Sunflower River at Lehrton, in Sunflower County, in the State of Mississippi, in accordance with the provisions of the Ae, p. 84. Act entitled 'An Act to regulate the construction of bridges over navigable waters," approved -March twenty-third, nineteen hundred and six. SEc. 2. That the right to alter, amend, or repeal this Act is hereby Amendment. expressly reserved. Approved, June 28, 1906.

CHAP. 3572.-An Act For the division of the lands and funds of the Osage Indians June 28, 1906. in Oklahoma Territory, and for other purposes. [H. R. 15333.] [Public. No. 321.1 Be it enacted by tle Senate and House of Representativesof the United I States of America in Congress assembled, That the roll of the Osage Okla.Osage Indians, tribe of Indians, as shown by the records of the United States in the Division of tribal office of the United States Indian agent at the Osage Agency. Okla- land, etc. Tribal roll. 540 FIFTY-NINTH CONGRESS. SEss. 1. CH. 35i 2. i906.

homa Territory, as it existed on the first day of January, nineteen hundred and six, and all children born between January first, nineteen hundred and six, and July first, nineteen hundred and seven, to persons whose names are on said roll on January first, nineteen hundred and six, and all children whose names are not now on said roll, but who were born to members of the tribe whose names were on the said roll on January first, nineteen hundred and six, including the children of members of the tribe who have, or have had, white hus- bands, is hereby declared to be the roll of said tribe and to constitute the Proviso. Fraudulent enroll- legal membership thereof: Prodded, That the principal chief of the nt. Osages shall, within three months from and after the approval of this Act, file with the Secretary of the Interior a list of the names which the tribe claims were placed upon the roll by fraud, but no name shall be included in said list of any person or his descendants that was placed on said roll prior to the ihirty-first day of December, eighteen hundred and eighty-one, the date of the adoption of the Osage constitu- tion, and the Secretary of the Interior, as early as practicable, shall carefully investigate such cases and shall determine which of said persons, if any, are entitled to enrollment; but the tribe must affirmatively Restriction, show what names have been placed upon said roll by fraud; but where the rights of persons to enrollment to the Osage roll have been inves- tigated by the Interior Department and it has been determined by the Secretary of the Interior that such persons were entitled to enrollment, their naues shall not be stricken from the roll for fraud except upon newly discovered evidence; and the Secretary of the Interior shall have authority to place on the Osage roll the names of all persons found by him, after investigation, to be so entitled, whose applica- Revision of roll. tions were pending on the date of the approval of this Act: and the said Secretary of the Interior is hereby authorized to strike from the said roll the names of persons or their descendants which he finds were placed thereon by or through fraud, and the said roll as above provided, after the revision and approval of the Secretary of the Interior, as herein provided, shall constitute the approved roll of said tribe; Decision of Seere- and the action of the Secretary of the Interior in the revision of the Lary final. roll as herein provided shall be final, and the provisions of the Act of Congress of August fifteenth, Twenty-eighth Statutes at, Large, eighteenpage three hundred hundred and and ninety-four, five, granting persons of Indian blood who have been denied allotments the right to appeal to the courts, are hereby repealed as far as the same relate to the (sage Indians; and the tribal lands and tribal funds of said tribe shall be equally divided among the members of said tribe as hereinafter provided. Division of lai.&. SEC. 2. That all lands belonging to the Osage tribe of Indians in Oklahoma Territory, except as herein provided, shall be divided among the members of said tribe, giving to each his or her fair share thereof in acres, as follows: First selection. First. Each member of said tribe, as shown by the roll of membership made up as herein provided, shall be permtted to select one hun- Filing notic. dred and sixty acres of land as a first selection; and the adult members shall select their first selections and file notice of the same with the United States Indian agent for the Osages within three months after Ratificati. the approval of this Act: Jtrodd d, That all selections of lands heretofore made by any member of said tribe, against which no contest is pending, be. and the same are hereby, ratified and confirmed as one of Failure to select, the selections of such imbcr. And'if any adult menber fails, refuses, or is unable to inake such selection within said time, then it shall be the duty of the United States Indian agent for the Osages to make such selection for such member or members, subject to the approval of First selections for the Secretary of the Interior. That all said first selections for minors i...... shall be made by the United States Indian agent for the Osages, sub- FIFTY-NINTH CONGRESS. SESS. 1. CH. 3572. 1906. 541 ject to the approval of the Secretary of the Interior: Proo';ded, That Parents may select. said first selections for minors having parents ma be made Lv said parents, and the word "minor" or "minors" used in this Act slhall be held to mean those who are under twenty-one years of age: And pro- Time of selection. i'nhdf,,rtheir, That all children horn to meibers of said tribe between January first, nineteen hundred and six, and the first day of January, nineteen hundred and seven, shall have their selections made for them within six months after approval of this Act, or within six months after their respective births. That all children born to members of said tribe on and after the first day of January, nineteen hundred and seven, and before the first day of "July, nineteen hundred and seven, shall have their selections Made for them on or before the last day of July, nineteen hundred and seven, the proof of birth of such children to be made to the United States Indian agent for the Osages. Second. That in making his or her first selection of land, as herein Prior rights pro- provided for, a member shall not be permitted to select land already teeted. selected by. or in possession of, another member of said tribe as a irst selection, unless such other member is in possession of nore land than he and his family are entitled to for first selections under this Act; and in such cases the member in possession and having houses, orchards, barns, or plowed land thereon shall have the prior right to make the first selection: 1 nh!d, That where• lnembers of the tribe are in })os-t DisposalDoisoo. of imaprove- sess ion of more land than they are entitled to for first selections merts. if herein, said members shall have sixty days after the approval of this Act to dispose of the improvements on said lands to other members of the tribe. Third. After each ineniber has selected his or her first selection as Second selection. herein provided, he or she shall be permitted to make a second selection of one hundred and sixty acres of land in the manner herein provided for the first selection. Fourth. After each inembher has selected his or her second selection Third selection. of one hundred and sixty acres of land as herein provided, he or she shall be permitted to make a third selection of one hundred and sixty acres of land in the manner herein provided for the first and second selections: lo'tded,That, all selections herein provided for shall con- Pio form to the existing public surveys in tracts of not less than forty Sur,,e> acres, or a legal subdivision of a less amount, designated a " lot." Hme.ea ds in- Each member of said tribe shall le permitted to designate which of his three selections shall be a homestead, and his certificate of allotment and deed shall designate the same as a homestead, and the same e shall be inalienable and nontaxable until otherwise provided by Act of Congress. The other two selections of each membei, together with his Surpius lands. d share of the remaining lands allotted to the member, shall be known as surphls l'tnd, and shall be inalienable for twenty-five years, except as hereinafter provided. Fifth. After each member has selected his or her first, second, and Disposal of remain third selections of one hundred and sixty acres of land, as herein pro- inglan.it vided, the remaining lands of said tribe li Oklahoma Territory, except as herein provided, shall be divided as equally as practicable among said members by a commission to be appointed to supervise the selection and division of said Osage lands. Sixth. The selection and division of lands herein provided for shall comissio. be made under the supervision of, or by, a commission consisting of one member of the Osage tribe, to be selected by the Osage council, and two persons to be selected by the Commissioner of Indian Affairs I subject to the approval of the Secretary of the Interior; and said com- Dnties. mission shall settle all controversies between members of the tribe relative to said selections of land: and the schedules of said selections e and division of lands herein provided for shall be subject to the approval of the Secretary of the Interior. The surveys, salaries of said con- Expenses. 542 FIFTY-NINTH CONGRESS. SESS. I. Cn. 3572. 1906.

mission, and all other proper expenses necessary in making the selections and division of land as herein provided shall be paid by the Secretary of the Interior, out of any Osage funds derived from the sale of town lots, -royalties from oil, gas, or other minerals, or rents from grazing land. Authority to sell se- Seventh. That the Secretary of the Interior, in his discretion, at the leed lands. request and upon the petition of any adult member of the tribe, may issue to such member a certificate of competency, authorizing him to sell and convey any of the lands deeded him by reason of this Act, Homesteads ex- except his homestead, which shall remain inalienable and nontaxable cepted. for a period of twenty-five years, or during the life of the homestead allottee, if upon investigation, consideration, and examination of the request he shall find any such member fully competent and capable of transacting his or her own business and caring for his or her own indi- Provisos. vidual affairs: Povided, That upon the issuance of such certificate of A Taxation, etc. competency the lands of such member (except his or her homestead) t shall become subject to taxation, and such member, except as herein provided, shall have the right to manage, control, and dispose of his f or her lands the same as any citizen of the United States: J rmode, n That the surplus lands shall be nontaxable for the period of three years h from the approval of this Act, except where certificates of compe- ti of the allottee, unless otherwise c tency are issued or in case of the death herein shall Saleof oil,etc.,lands prvie by Congress:-,-Congress: Adptd drovjidedd fiutltcr, That nothing. - prohibited. authorize the sale of the oil, gas, coal, or other minerals covered by rt said lands, said minerals being reserved to the use of the tribe for a 0 period of twenty -five years, and the royalty to be paid to said tribe as ndividual owner- hereinafter provided: :In mnocidedf't1 u-, That the oil, gas, coal, and hip after Z years, other minerals upon said allotted lands shall become the property of the individual owner of said land at the expiration of said twenty-five years, unless otherwise provided for by Act of Congress. SistersofSaintFran- Eighth. There shall be reserved from selection and division, as 0 ois. Land donated to. herein provided, one hundred and sixty acres on which tie Saint Louis School, near Pawhuska, is located, and the one hundred and sixty acres on which the Saint John's School, on Hominy Creek, Osage Indian Reservation, is located, said tracts to conform to the public surveys; and said tracts of land are hereby set aside and donated to the order of the Sisters of Saint Francis; and said tracts shall be con-eved to said order, the Sisters of Saint Francis, as early as practicable, by deed. e LandHreserednar There shall also be reserved from selection and division forty- acres of Gay Horse. land near Gray Horse, to be designated by the Secretary of the Inte- a rior, on which are located the dwelling houses of John N. Florer, Walter 0. Florer, and John L. Bird; and said John N. Florer shall be a allowed to purchase said forty acres at the appraised value placed e thereon by the Osage Allotting Commission, the proceeds of the sale to be placed to the credit of the Indians and to be distributed like other o funds herein provided for. Lad reserved or Ninth. There shall be reserved from selection and division, as herein dwelling purposes. provided, the northeast quarter df section three, township twenty-five, a range nine east, of the Indian meridian, and one hundred and sixty R acres to conform to the public survey at the town of Gray Horse, including the Government doctor's building, other valuable buildings, and the cemetery, and the one hundred and sixty acres to conform to the public survey, adjoining or near the town site of Hominy; said tl lands or tracts are hereby set aside for the use and benefit of the Osage Indians. exclusively, for dwelling purposes, for a period of twenty-five years from and after the first day of January, nineteen hundred and SalePalviof of1 reserved seven: Provide, That said land may, in the discretion of the Osage lands. tribe, be sold under such rules and regulations as the Secretary of the Interior may prescribe; and the proceeds of the same under such sale shall be apportioned and placed to the credit of the individual members k of the tribe according to the roll herein provided for. o FIFTY-NINTH CONGRESS. SESS. I. CH. 3572. 1906. 543

Tenth. The Osage Boarding School reserve of eighty-seven and Osage Boarding five-tenth acres, and the reservoir reserve of seventeen and three- school reserve, etc. tenths acres, and the agent's residence reserve, together with all the buildings located on said reservations in the town site of Pawhuska, as shown by the official plat of the same, are hereby reserved from selection and division as herein provided: and the same may be sold Saleof. in the discretion of the Osage tribe, under such rules and regulations as the Secretary of the Interior may provide: and the proceeds of Proceeds. such sale shall be apportioned and placed to the credit of the individual members of said tribe according to the roll herein provided for. Eleventh. That the United States Indian agent's office building, the Sale of Government Osage council building, and all other buildings which are for the buildings, etc. occupancy and use of Government employees, in the town of Paw- huska, together with the lots on which the said buildings are situated, shall be sold to the highest bidder as early as practicable, under such rules and regulations as the Secretary of the Interior may prescribe; and with the proceeds he shall erect other suitable buildings for the Erection of new uses mentioned, on such sites as he may select, the remaining proceeds, buildings. if any, to be placed to the credit of the individual members of the Osage tribe of Indians: Provided, That the house known as the chief's . reserved house, together with the lot or lots on which said house is located, and from sale. the house known as the United States interpreter's house, in Pawhnska, Oklahoma Territory, together with the lot or lots on which said houses are located, shall be reserved from sale to the highest bidder and shall be sold to the principal chief of the Osages and the United States interpreter for the Osages, respectively, at the appraised value of the same, said apprais.ement to be made by the Osage town-site commission, subject to the approval of the Secretary of the Interior. Twelfth. That the cemetery reserve of twenty acres in the town site Cemetera reserve aside donated toPawhuska. of Pawhuska, as shown by the official plat thereof, is hereby set and donated to the town of Pawhuska for the purposes of sepulture, on condition that if said cemetery reserve of twenty acres, or any part Reversion. thereof, is used for purposes other than that of sepulture, the whole of said cemetery reserve of twenty acres shall revert to the use and benefit of the individual members of the Oqagd tribe, according to the roll herein provided, or to their heirs; and said tract shall be conveyed to the said town of Pawbuska by deed, and said deed shall recite and set out in full the conditions under which the above donation and conveyance are made. That the provisions of an Act entitled "An Act making appropria- ogn town-site tions for the current and contingent expenses of the Indian Depart- Present law not af- ment and for fulfilling treaty stipulations with various Indian tribes feced. for the fiscal year ending June thirtieth, nineteen hundred and six, and for other purposes," approved March third, nineteen hundred and five, relating to the Osage Reservation, pages one thousand and Vol.SSpp. 1061,1062. sixty-one and one thousand and sixty-two, volume thirty-three, United States Statutes at Large, be, and the same are hereby, continued in full force and effect. SEC. 3. That the oil, gas, coal, or other minerals covered by the lands.Oil and mineral lands for the selection and division of which provision is herein -made Leases. are hereby reserved to the Osage tribe for a period of twenty-five years from and after the eighth day of April, nineteen hundred and six; and leases for all oil, gas, and other minerals, covered by selections and division of land herein provided for, may be made by the Osage tribe of Indians through its tribal council, and with the approval of the Secretary of the Interior, and under such rules and regulations as he may prescribe: Pro 'ided, That the royalties to be paid to the Osage rovisos. tribe under any mineral lease so made' shall be detelrmined by the oralties. President of the United States: And providedfurthet, That no mining Prospecting re- of or prospecting for any of said mineral or minerals shall be per- sicted. initted on the homestead selections herein provided for without the 544 FIFTY-NINTH CONGRESS. SESS. I. CH. 3572. 1906.

written consent of the Secretary of the Interior: Provided, /iowe'er, Existing contract , That nothing herein contained sfiall be construed as affecting any valid etc.,not affected. existing lease or contract. Trust fund. SEC. 4. That all funds, belonging to the Osage tribe, and all moneys due, and all moneys that may become due, or may hereafter be found to be due the said Osage tribe of Indians. shall be held in trust by the United States for the period of twenty-five years from and after the first day of January, nineteen hundred and seven, except as herein provided: Segregation of First. That all the funds of the Osage tribe of Indians, and all the funds. moneys now due or that may hereafter be found to be due to the said Osage tribe of Indians, and all moneys that may be received from the sale of their lands in Kansas under existing laws, and all moneys found to be due to said Osage tribe of Indians on claims against the United States, after all proper expenses are paid, shall be segregated as soon Pro rata division, after January first, nineteen hundred and seven, as is practicable and placed to the credit of the individual members of the said Osage tribe on a basis of a pro rata division among the members of said tribe, as shown by the authorized roll of membership as herein provided for, or to their heirs as hereinafter provided, said credit to draw interest as Interest payments. now authorized by law; -and the interest that may accrue thereon shall be paid quarterly to the members entitled thereto, except in the case of minors, in which case the interest shall be paid quarterly to the Prois s. parents until said minor arrives at the age of twenty-one years: mone minereso Provided, That if the Commissioner of Indian Affairs beconies satis- fied that the said interest of any minor is being mistied or squandered Payments he may withhold the payment of such interest: And pow'dcdftlur, dians. to gu'r- That said interest of minors whose parents are deceased shall be paid to their legal guardians, as above provided. Deposit of funds to credit of Indians. Second. That the royalty received from oil, gas, coal, and other mineral leases upon the lands for which selection and division are herein provided, and all moneys received from the sale of town lots, together with the buildings thereon, and all moneys received from the sale of the three reservations of one hundred and sixty acres each heretofore reserved for dwelling purpoges, and all moneys received from grazing lands, shall be placed in the Treasury of the Lnited States to the credit of the members of the Osage tribe of Indians as other moneys of said Distribution of. tribe are to be deposited under the provisions of this Act, and the same shall be distributed to the individual members of said Osage tribe according to the roll provided for herein, in the manner and at the same time that payments are made of interest on other moneys held in trust for the Osages by the United States, except as herein provided. Royalies reserved Third. There shall be set aside froni the royalties received froni oil for sctool purposes. and gas not to exceed fifty thousand dollars per annum for ten years from the first day of January, nineteen hundred and seven, for the stip- port of the Osage Boarding School and for other schools on the Osage Indian Reservation conducted or to be established and conducted for the education of Osage children. For agency pur- Fourth. There shall be set aside and reserved from the royalties poses. received from oil, gas, coal, or other mineral leases, and moneys received from the sale of town lots, and rents from grazing lands not to exceed thirty thousand dollars per annum for agency purposes and an emergency fund for the Osage tribe, which shall be paid out from time to time, upon the requisition of the Osagetribal council, with the approval of the Secretary of the Interior. Terminationof trust SEC. 5. That at the expiration of the period of twenty-five years fund. from and after the first day of January, nineteen hundred and seven, the lands, mineral interests, and moneys, herein provided for and held in trust by th6 United States shall be the absolute property of the individual members of the Osage tribe, according to the roll herein provided for, or their heirs, as herein provided, and deeds to said lands FIFTY-NINTH CONGRESS. SEss. I. CH. 3572. 1906. 1 545 shall be issued to said members, or to their heirs, as herein provided, and said moneys shall be distributed to said members, or to their heirs. as herein provided, and said members shall have full control of said lands, moneys, and mineral interests, except a.s hereinbefore provided. SEc. 6. That the lands, moneys, and mineral interests, herein pro- Right of inherit- vided for. of any deceased lnember of the Osage tribe shall descend to ance. his or her le-al heirs, according to the laws of the Territory of Okla- homa, or of the State in which said reservation may be hiereinafter incorporated, except where the decedent leaves no issue, nor husband Exception. nor wife, in which case said lands, moneys, and mineral interests must go to the mother and father equally. lands herein provided for are set aside for the sole Leases for farming SaC. 7. That the purposes. use and benefit of the individual members of the tribe entitled thereto, or to their heirs, as herein provided, and said members, or their heirs, shall have the right to use and to lease said lands for farming, grazing, or any other purpose not otherwise specifically provided for herein, and said members shall have full control of the same, including the proceeds thereof: Provded, That parents of minor members of the Provisos. Parents to control tribe shall have the control and use of said minors' lands, together with minors' lands. the proceeds of the same, until said minors arrive at their majority: And prorbded frter, That all leases given on said lands for thle Approval of leases. benefit of the individual members of the tribe entitled thereto, or for their heirs, shall be subject only to the approval of the Secretary of the Interior. SEC. 8. That all deeds to said Osage lands or any part thereof shall Deeds. be executed by the principal chief for the Osages, but no such deeds shall be valid until approved by the Secretary of the Interior. SEC. 9. That there shall be' a biennial election of officers for the Tribal ofcers. etc. Osage tribe as follows: A principal chief, an assistant principal chief, Elections, and eight members of the Osage tribal council, to succeed the officers elected in the year nineteen hundred and six, said officers to be elected at a general election to be held in the town of Pawhuska, Oklahoma Territorv, on the first Monday in June; and the first election for said officers shall be held on the first Monday in June, nineteen hundred and eight. in the manner to be prescribed by the Commissioner of Indian Affairs, and said officers shall be elected for a period of two years, commencing on the first day of July following said election, and in case of a vacancv in the office of principal chief, by death, resigna- tion, or otherwise, the assistant principal chief shall succeed to said office, and all vacancies in the Osage tribal council shall be filled in a manner to be prescribed by the Osage tribal council, and the Secretary of the Interior is hereby authorized to remove from the council any member or members thereof for good cause, to be by him determined. SEc. 10. That public highways or roads, two rods in width, being Public highways. one rod on each side of all section lines, in the Osage Indian Reserva- tion, may be established without any compensation therefor. SEc. 11. That all lands taken or condemned by any railroad cor_M_ purposes,Lands for railroad pany in the Osage Reservation, in pursuance of any Act of Congress Vol. 32, p. 47. or regulation of the Department of the Interior, for rights of way, station grounds, side tracks, stock pens and cattle yards, water stations, terminal facilities, and any other railroad purpose, shall be, and are hereby, reserved from selection and allotment and confirmed in such railroad companies for their use and benefit in the construction h Proiso. operation. and maintenance of their railroads: Provided, That sucgIResriotion. railroad companies shall not take or acquire hereby any right or title to any oil, gas, or other mineral in any of said lands. Sac. 12. That all things necessary to carry into effect the provisions Enforcement- of this Act not otherwise herein specifically provided for shall be done under the authority and direction of the Secretary of the Interior. Approved, ,June 28, 1906. VOL XXXIV. PT 1-35 546 F-4FTY-NINTfl CONGRESS. SESS. I. Ciis. 3573-3576. 1906.

lune 28, 1906. CHAP. 3573.-An Act To provide a seal for United States commissioners. [H. R. 7.] [Public, No. 322.1 Be it enacted by the Senate and House of Representativesof the United

United Statescourts. States of America in Congress assembled, That each United States Seal of commis- commissioner shall provide himself with an official impression seal, to sioners,Use of. be prescribed by the Attorney-General, which said seal shall be affixed Fees. to each jurat or certificate of the official acts of said commissioner, but no increase of fees shall be allowed by reason thereof. Approved, June 28, 1906.

June 28, 1906. CHAP. 3574.-An Act To amend section fifty-four hundred and eighty-one of [H. R. 9721.] the Revised Statutes of the United States. [Public. No. 323.] Be it enacted by the Senate and House of Representativesof the Unhited Official misconduct. States of'Aerica in Conress assembled, That section fifty-four hun- R. S., sec. 5481, p. 1063, amended. dred and eighty-one of the Revised Statutes of the United States be, and the same is hereby, amended to read as follows: Extortion. "SEC. 5481. Every officer, clerk, agent, or employee of the United Punishment for, extended to clerks and States, and every person representing himself to be or assuming to employees. act as such officer, clerk, agent, or employee, who is guilty of extortion, under color of his office, clerkship, agency, or employment, or under color of his pretended or assumed office, clerkship, agency, or employment, and every person who shall attempt any act which if Penalty. performed would make him guilty of such extortion, shall be punished by a fine of not more than five hundred dollars or by imprisonment for not more than one year, or by both such fine and imprisonment, except those officers or agents of the United States otherwise differ- ently and specially provided for in the subsequent sections of this chapter." Approved, June 28, 1906.

June 28. 1906. CHAP. 3575.-An Act In relation to contracts with the District of Columbia. [H. R. 10074.] [Public, No. 324.1 Be it enacted by the Senate and House of Representatives(f the United Districtof Columbia. States ofAnerica in Congress assembled, That in all cases where the Nobond required in Commissioners of the District of Columbia contract for work or contracts less than five hundred dollars,. material involving a sun not exceeding live hundred dollars, it Shall Vol. 83, p. sl. not be necessary for said Commissioners to require a bond with said .Restriction. contract; but no work capable of execution under a single contract, nor any purchase of material where the total expenditure involved is greater than five hundred dollars, shall be subdivided or lessened for the purpbse of reducing the sum of money to be paid therefor to less than that amount. Repeal. SEC. 2. That all laws or parts of laws inconsistent with the provisions hereof are hereby repealed. Approved, June 28, 1906.

June 28, 1906. CHAP. 3576.-An Act To authorize the holding of a regular term of the district [H. R. 11029.] and circuit courts of the United States for the western district of Virginia in the city [Public, No. 325.] of Big Stone Gap, Virginia. I Be it enacted by the Senate and Hbouse of Representatives of the United United States courts. Virginiawestern dis- States of Amer ca in Congress assembled, That chapter fourteen hun- trict. dred and twenty-one, entitled "An Act to authorize holding of the Vol. 33, p. 249. regular term of the district and circuit courts of the United States for

Current Regulations—25 C.F.R. Part 226 (April 1, 2015) § 225.38 25 CFR Ch. 1 (4-1-15 Edition) the notice continue beyond the time § 225.38 Appeals. limits presented for corrective action. Appeals from decisions of Officials of The Secretary may issue a written sus- the Bureau of Indian Affairs under this pension of the requirement to correct part may be taken pursuant to 25 CFR the violations pending completion of part 2. the hearings provided by this section only upon a determination, at the dis- § 225.39 Fees. cretion of the Secretary, that such a (a) Unless otherwise authorized by suspension will not be detrimental to the Secretary, each minerals agree- the Indian mineral owner and upon ment or assignment thereof, shall be submission and acceptance of a bond accompanied by a filing fee of $75.00 at deemed adequate to indemnify the In- the time of filing. dian mineral owner from loss or dam- (b) An Indian mineral owner shall not age. The amount of the bond must be be required to pay a filing fee if the In- sufficient to cover the cost of cor- dian mineral owner, pursuant to a pro- recting the violations set forth in the vision in the existing minerals agree- notice or any disputed amounts plus ment, acquires an additional interest accrued penalties and interest. in that minerals agreement. (e) Payment of penalties in full more than ten (10) days after a final decision §225.40 Government employees cannot imposing a penalty shall subject the acquire minerals agreements. operator to late payment charges. Late U.S. Government employees are pre- payment charges shall be calculated on vented from acquiring any interest(s) the basis of a percentage assessment in minerals agreements by the provi- rate of the amount unpaid per month sions of 25 CFR part 140 and 43 CFR for each month or fraction thereof part 20 pertaining to conflicts of inter- until payment is received by the Sec- est and ownership of an interest in retary. In the absence of a specific min- trust land. erals agreement provision prescribing a different rate, the interest rate on late PART 226-LEASING OF OSAGE payments and underpayments shall be RESERVATION LANDS FOR OIL a rate applicable under section AND GAS MINING 6621(a)(2) of the Internal Revenue Code of 1954. Interest shall be charged only Sec. on the amount of payment not received 226.1 Definitions. and only for the number of days the payment is late. LEASING PROCEDURE, RENTAL AND ROYALTY (f) None of the provisions of this sec- 226.2 Sale of leases. tion shall be interpreted as: 226.3 Surrender of lease. (1) Replacing or superseding the inde- 226.4 Form of payment. pendent authority of the Authorized 226.5 Leases subject to current regulations. Officer, the Director's Representative, 226.6 Bonds. 226.7 Provisions of forms made a part of the or the MMS Official to impose pen- regulations. alties under applicable statutory or 226.8 Corporation and corporate informa- regulatory authorities; tion. (2) Replacing, superseding, or repli- 226.9 Rental and drilling obligations. cating any penalty provision in the 226.10 Term of lease. terms and conditions of a minerals 226.11 Royalty payments. agreement approved by the Secretary 226.12 Government reserves right to pur- pursuant to this part; or chase oil. 226.13 Time of royalty payments and re- (3) Authorizing the imposition of a ports. penalty for violations of minerals 226.14 Contracts and division orders. agreement provisions for which the Au- 226.15 Unit leases, assignments and related thorized Officer, Director's Representa- instruments. tive, or MMS Official has either statutory or regulatory authority to assess OPERATIONS a penalty. 226.16 Commencement of operations. Bureau of Indian Affairs, Interior § 226.1

226.17 How to acquire permission to begin (a) Secretary means the Secretary of operations on a restricted homestead al- the Interior or his authorized rep- lotment. resentative acting under delegated au- 226.18 Information to be given surface owners prior to commencement of drilling thority. operations. (b) Osage Tribal Council means the 226.19 Use of surface of land. duly elected governing body of the 226.20 Settlement of damages claimed. Osage Nation or Tribe of Indians of 226.21 Procedure for settlement of damages Oklahoma vested with authority to claimed. lease or take other actions on oil and 226.22 Prohibition of pollution. gas mining pertaining to the Osage 226.23 Easements for wells off leased prem- Mineral Estate. ises. 226.24 Lessee's use of water. (c) Superintendent means the Super- 226.25 Gas well drilled by oil lessees and intendent of the Osage Agency, vice versa. Pawhuska, Oklahoma, or his author- 226.26 Determining cost of well. ized representative acting under dele- 226.27 Gas for operating purposes and tribal gated authority. use. (d) Oil lessee means any person, firm, CESSATION OF OPERATIONS or corporation to whom an oil mining lease is made under the regulations in 226.28 Shutdown, abandonment, and plug- this part. ging of wells. 226.29 Disposition of casings and other im- (e) Gas lessee means any person, firm, provements. or corporation to whom a gas mining lease is made under the regulations in REQUIREMENTS OF LESSEES this part. 226.30 Lessees subject to Superintendent's (f) Oil and gas lessee means any per- orders; books and records open to inspec- son, firm, or corporation to whom an tion. oil and gas mining lease is made under 226.31 Lessee's process agents. the regulations in this part. 226.32 Well records and reports. (g) Primary term means the basic pe- 226.33 Line drilling. 226.34 Wells and tank batteries to be riod of time for which a lease is issued marked. during which the lease contract may be 226.35 Formations to be protected. kept in force by payment of rentals. 226.36 Control devices. (h) Major purchaser means any one of 226.37 Waste of oil and gas. the minimum number of purchasers 226.38 Measuring and storing oil. taking 95 percent of the oil in Osage 226.39 Measurement of gas. County, Oklahoma. Any oil purchased 226.40 Use of gas for lifting oil. by a purchaser from itself, its subsidi- 226.41 Accidents to be reported. aries, partnerships, associations, or PENALTIES other corporations in which it has a fi- 226.42 Penalty for violation of lease terms. nancial or management interest shall 226.43 Penalties for violation of certain op- be excluded from the determination of erating regulations. a major purchaser. (i) Casinghead gas means gas pro- APPEALS AND NOTICES duced from an oil well as a consequence 226.44 Appeals. of oil production from the same forma- 226.45 Notices. tion. 226.46 Information collection. (j) Natural gas means any fluid, either AUTHORITY: Sec. 3, 34 Stat. 543; secs. 1, 2, 45 combustible or noncombustible, recov- Stat. 1478; sec. 3, 52 Stat. 1034, 1035; sec. 2(a), ered at the surface in the gaseous 92 Stat. 1660. phase and/or hydrocarbons recovered at SOURCE: 39 FR 22254, June 21, 1974, unless the surface as liquids which are the re- otherwise noted. Redesignated at 47 FR 13327, sult of condensation caused by reduc- Mar. 30, 1982. tion of pressure and temperature of hydrocarbons originally existing in a res- § 226.1 Definitions. ervoir in the gaseous phase. As used in this part 226, terms shall (k) Authorized representative of an oil have the meanings set forth in this sec- lessee, gas lessee, or oil and gas lessee tion. means any person, group, or groups of § 226.2 25 CFR Ch. 1 (4-1-15 Edition) persons, partnership, association, com- the bidder fails to pay the full cash pany, corporation, organization or consideration within said period or agent employed by or contracted with fails to file the completed lease within a lessee or any subcontractor to con- said period or extention thereof, or if duct oil and gas operations or provide the lease is rejected through no fault of facilities to market oil and gas. the Osage Tribal Council or the Super- (1) Oil well means any well which pro- intendent, 25 percent of the cash bonus duces one (1) barrel or more of crude bid will be forfeited for the use and petroleum oil for each 15,000 standard benefits of the Osage Tribe. The Super- cubic feet of natural gas. intendent may reject a lease made on (m) Gas well means any well which: an accepted bid, upon evidence satis- (1) Produces natural gas not associ- factory to him of collusion, fraud, or ated with crude petroleum oil at the other irregularity in connection with time of production or the notice of sale. The Superintendent (2) Produces more than 15,000 stand- may approve oil leases, gas leases, and ard cubic feet of natural gas to each oil and gas leases made by the Osage barrel of crude petroleum oil from the Tribal Council in conformity with the same produeing formation. notice of sale, regulations in this part, bonds, and other instruments required. [39 FR 22254, June 21, 1974, as amended at 41 (c) Each oil and/or gas lease and ac- FR 50648, Nov. 17, 1976; 43 FR 8135, Feb. 28, 1978. Redesignated at 47 FR 13327, Mar. 30, tivities and installations associated 1982, as amended at 55 FR 33114, Aug. 14, 1990] therewith subject to these regulations shall be assessed and evaluated for its LEASING PROCEDURE, RENTAL AND environmental impact prior to its ap- ROYALTY proval by the Superintendent. (d) Lessee shall accept a lease with § 226.2 Sale of leases. the understanding that a mineral not (a) Written application, together covered by his lease may be leased sep- with any nomination fee, for tracts to arately. be offered for lease shall be filed with (e) No lease, assignment thereof, or the Superintendent. interest therein will be approved to (b) The Superintendent, with the con- any employee or employees of the Gov- sent of the Osage Tribal Council, shall ernment and no such employee shall be publish notices for the sale of oil permitted to acquire any interest in leases, gas leases, and oil and gas leases covering the Osage Mineral Es- leases to the highest responsible bidder tate by ownership of stock in corpora- on specific tracts of the unleased Osage tions having leases or in any other Mineral Estate. The Superintendent manner. may require any bidder to submit sat- (f) The Osage Tribal Council may uti- isfactory evidence of his good faith and lize the following procedures among ability to comply with all provisions of others, in entering into a mining lease. the notice of sale. Successful bidders A contract may be entered into must deposit with the Superintendent through competitive bidding as out- on day of sale a check or cash in an lined in §226.2(b), negotiation, or a amount not less than 25 percent of the combination of both. The Osage Tribal cash bonus offered as a guaranty of Council may also request the Super- good faith. Any and all bids shall be intendent to undertake the prepara- subject to the acceptance of the Osage tion, advertisement and negotiation. Tribal Council and approval of the Su- The Superintendent may approve any perintendent. Within 20 days after noti- such contract made by the Osage Trib- fication of being the successful bidder, al Council. and said bidder must submit to the Su- [39 FR 22254, June 21, 1974, as amended at 43 perintendent the balance of the cash FR 8135, Feb. 28, 1978. Redesignated at 47 FR bonus, a $10 filing fee, and the lease in 13327, Mar. 30, 1982] completed form. The Superintendent may extend the time for the comple- § 226.3 Surrender of lease. tion and submission of the lease form, Lessee may, with the approval of the but no extension shall be granted for Superintendent and payment of a $10 remitting the balance of moneys due. If filing fee, surrender all or any portion Bureau of Indian Affairs, Interior § 226.8 of any lease, have the lease cancelled less than $5,000 for each quarter section as to the portion surrendered and be re- or fractional quarter section covered lieved from all subsequent obligations by said lease: Provided, however, That and liabilities. If the lease, or portion one bond in the penal sum or not less being surrendered, is owned in undi- than $50,000 may be filed on Form G vided interests by more than one party, covering all oil, gas and combination then all parties shall join in the appli- oil and gas leases not in excess of 10,240 cation for cancellation: Provided, That acres to which Lessee is or may become if this lease has been recorded, Lessee a party. shall execute a release and record the (b) In lieu of the bonds required same in the proper office. Such sur- under paragraph (a) of this section, a render shall not entitle Lessee to a re- bond in the penal sum of $150,000 may fund of the unused portion of rental be filed on Form 5-5438 for full nation- paid in lieu of development, nor shall it wide coverage of all leases, without ge- relieve Lessee and his sureties of any ographic or acreage limitation, to obligation and liability incurred prior which the Lessee is or may become a to such surrender: Provided further, party. That when there is a partial surrender (e) A bond on Form H shall be filed in of any lease and the acreage to be re- an amount of not less than $5,000 cov- tained is less than 160 acres or there is ering a lease acquired through assign- a surrender of a separate horizon, such ment where the assignee does not have surrender shall become effective only a collective bond on form G or nation- with the consent of the Osage Tribal wide bond, or the corporate surety does Council and approval of the Super- not execute its consent to remain intendent. bound under the original bond given to [43 FR 8135, Feb. 28, 1978. Redesignated at 47 secure the faithful performance of the FR 13327, Mar. 30, 1982] terms and conditions of the lease. (d) The right is specifically reserved § 226.4 Form of payment. to increase the amount of bonds pre- Sums due under a lease contract and/ scribed in paragraphs (a) and (c) of this or the regulations in this part shall be section in any particular case when the paid by cash or check made payable to Superintendent deems it proper. The the Bureau of Indian Affairs and deliv- nationwide bond may be increased at ered to the Osage Agency, Pawhuska, any time in the discretion of the Sec- Oklahoma 74056. Such sums shall be a retary. prior lien on all equipment and unsold [39 FR 22254, June 21, 1974, as amended at 43 oil on the leased premises. FR 8135, Feb. 28, 1978; 43 FR 11815, Mar. 22, §226.5 Leases subject to current regu- 1978. Redesignated at 47 FR 13327, Mar. 30, 1982, as amended at 55 FR 33114, Aug. 14, 1990] lations. Leases issued pursuant to this part § 226.7 Provisions of forms made a shall be subject to the current regula- part of the regulations. tions of the Secretary, all of which are Leases, assignments, and supporting made a part of such leases: Provided, instruments shall be in the form pre- That no amendment or change of such scribed by the Secretary, and such regulations made after the approval of forms are hereby made a part of the any lease shall operate to affect the regulations. term of the lease, rate of royalty, rental, or acreage unless agreed to by both §226.8 Corporation and corporate in- parties and approved by the Super- formation. intendent. (a) If the applicant for a lease is a corporation, it shall file evidence of au- § 226.6 Bonds. thority of its officers to execute pa- Lessees shall furnish with each lease pers; and with its first application it a corporate surety bond acceptable to shall also file a certified copy of its Ar- the Superintendent as follows: ticles of Incorporation and, if foreign (a) A bond on Form D shall be filed to the State of Oklahoma, evidence with each lease submitted for approval. showing compliance with the corpora- Such bond shall be in an amount of not tion laws thereof. § 226.9 25 CFR Ch. 1 (4-1-15 Edition)

(b) Whenever deemed advisable the cancellation as to the acreage or hori- Superintendent may require a corpora- zon the further development of which tion to file any additional information was ordered: Provided further, That the necessary to carry out the purpose and Superintendent may impose restric- intent of the regulations in this part, tions as to time of drilling and rate of and such information shall be fur- production from any well or wells when nished within a reasonable time. in his judgment, such action may be necessary or proper for the protection § 226.9 Rental and drilling obligations. of the natural resources of the leased (a) Oil leases, gas leases, and com- land and the interests of the Osage bination oil and gas leases. Unless Les- Tribe. The superintendent may con- see shall complete and place on produc- sider, among other things, Federal and tion a well producing and selling oil Oklahoma laws regulating either drill- and/or gas in paying quantities on the ing or production. If a lessee holds both land embraced within the lease within an oil lease and a gas lease covering 12 months from the date of approval of the same acreage, such lessee is subject the lease, or as otherwise provided in to the provisions of this section as to the lease terms, or 12 months from the both the oil lease and the gas lease. date the Superintendent consents to (b) The Superintendent may, with drilling on any restricted homestead the consent of and under terms ap- selection, the lease shall terminate un- proved by the Osage Tribal Council, less rental at the rate of not less than grant an extension of the primary term $1 per acre for an oil or gas lease, or of a lease on which the actual drilling not less than $2.00 per acre for a com- of a well shall have commenced within bination oil and gas lease, shall be paid the term thereof or for the purpose of before the end of the first year of the enabling Lessee to obtain a market for lease. The lease may also be held for his oil and/or gas production. the remainder of its primary term [43 FR 8135, Feb. 28, 1978. Redesignated at 47 without drilling upon payment of the FR 13327, Mar. 30, 1982] specified rental annually in advance, commencing with the second lease §226.10 Term of lease. year. The lease shall terminate as of Leases issued hereunder shall be for a the due date of the rental unless such primary term as established by the rental shall be received by the Super- Osage Tribal Council, approved by the intendent, or shall have been mailed as Superintendent, and so stated in the indicated by postmark on or before notice of sale of such leases and so long said date. The completion of a well pro- thereafter as the minerals specified are ducing in paying quantities shall, for produced in paying quantities. so long as such production continues, relieve Lessee from any further pay- [43 FR 8136, Feb. 28, 1978. Redesignated at 47 ment of rental, except that should such FR 13327, Mar. 30, 1982] production cease during the primary term the lease may be continued only § 226.11 Royalty payments. during the remaining primary term of (a) Royalty on oil (1) Royalty rate. the lease by payment of advance rental Lessee shall pay or cause to be paid to which shall commence on the next an- the Superintendent, as royalty, the niversary date of the lease. Rental sum of not less than 1623 percent of the shall be paid on the basis of a full year gross proceeds from sales after deduct- and no refund will be made of advance ing the oil used by Lessee for develop- rental paid in compliance with the reg- ment and operation purposes on the ulations in this part: Provided, That lease: Provided, That when the quantity the Superintendent in his discretion of oil taken from all the producing may order further development of any wells on any quarter-section or frac- leased acreage or separate horizon if, in tion thereof, according to the public his opinion, a prudent operator would survey, during any calendar month is conduct further development. If Lessee sufficient to average one hundred or refuses to comply, the refusal will be more barrels per active producing well considered a violation of the lease per day the royalty on such oil shall be terms and said lease shall be subject to not less than 20 percent. The Osage Bureau of Indian Affairs, Interior § 226.13

Tribal Council may, upon presentation market value value of all natural gas of justifiable economic evidence by and products extracted therefrom pro- Lessee, agree to a revised royalty rate duced and sold from his lease. Natural subject to approval by the Super- gas used in the reasonable and prudent intendent, applicable to additional oil operation and development of said produced from a lease or leases by en- lease shall be exempted from royalty hanced recovery methods, which rate payment. shall not be less than 121/2 percent of (3) Combination oil and gas lease. Les- the gross proceeds from sale of oil pro- see shall pay royalty as provided in duced by enhanced recovery processes, paragraphs (b)(1) and (2) of this section. other than gas injection, after deduct- (c) Minimum royalty. In no event shall ing the oil used by Lessee for develop- the royalty paid from producing leases ment and operating purposes on the during any year be less than an amount lease or leases. equal to the annual rental specified for (2) Unless the Osage Tribal Council, the lease. Any underpayment of min- with approval of the Secretary, shall imum royalty shall be due and payable elect to take the royalty in kind, pay- within 45 days following the end of the ment is owing at the time of sale or release year. After the primary term, moval of the oil, except where pay- Lessee shall submit with his payment ments are made on division orders, and evidence that the lease is producing in settlement shall be based on the actual paying quantities. The Superintendent selling price, but at not less than the is authorized to determine whether the highest posted price by a major pur- lease is actually producing in paying chaser (as defined in §226.1(h)) in Osage quantities or has terminated for lack County, Oklahoma, who purchases proof such production. Payment for any duction from Osage oil leases. underpayment not made within the (3) Royalty in kind. Should Lessor, time specified shall be subject to a late with approval of the Secretary, elect to charge at the rate of not less than 11/2 take the royalty in kind, Lessee shall percent per month for each month or furnish free storage for royalty oil for fraction thereof until paid. a period not to exceed 60 days from [39 FR 22254, June 21, 1974, as amended at 43 date of production after notice of such FR 8136, Feb. 28, 1978; 43 FR 11815, Mar. 22, election. 1978. Redesignated at 47 FR 13327, Mar. 30, (b) Royalty on gas (1) Oil lease. All 1982, as amended at 55 FR 33114, Aug. 14, 1990; casinghead gas shall belong to the oil 59 FR 22104, Apr. 28, 1994] Lessee subject to any rights under existing gas leases. All casinghead gas re- §226.12 Government reserves right to moved from the lease from which it is purchase oil. produced shall be metered unless other- Any of the executive departments of wise approved by the Superintendent the U.S. Government shall have the op- and be subject to a royalty of not less tion to purchase all or any part of the than 162/3 percent of the market value oil produced from any lease at not less of the gas and all products extracted than the highest posted price as de- therefrom, less a reasonable allowance fined in §226.11. for manufacture or processing. If an oil § 226.13 Time of royalty payments and Lessee supplies casinghead gas produced from one lease for operation and/ reports. or development of other leases, either (a) Royalty payments due may be his/hers or others, a royalty of not less paid by either purchaser or Lessee. Un- than 162/3 percent shall be paid on the less otherwise provided by the Osage market value of all casinghead gas so Tribal Council and approved by the Su- used. All casinghead gas not utilized by perintendent, all payments shall be due the oil Lessee may, with the approval by the 25th day of each month and of the Superintendent, be utilized or shall cover the sales of the preceding sold by the gas Lessee, subject to the month. Failure to make such payments prescribed royalty of not less than 162/3 shall subject Lessee or purchaser, who- percent of the market value. ever is responsible for royalty pay- (2) Gas lease. Lessee shall pay a roy- ment, to a late charge at the rate of alty of not less than 1623 percent of the not less than 11/2 percent for each § 226.14 25 CFR Ch. 1 (4-1-15 Edition) month or fraction thereof until paid. tension of time, not to exceed 10 days, The Osage Tribal Council, subject to for furnishing this statement. the approval of the Superintendent, [39 FR 22254, June 21, 1974. Redesignated at 47 may waive the late charges. FR 13327, Mar. 30, 1982, as amended at 55 FR (b) Lessee shall furnish certified 33114, Aug. 14, 1990] monthly reports by the 25th of each §226.15 Unit leases, assignments and following month covering all oper- related instruments. ations, whether there has been production or not, indicating therein the (a) Unitization of leases. The Osage total amount of oil, natural gas, Tribal Council and Lessee or Lessees, casinghead gas, and other products may, with the approval of the Super- subject to royalty payment. intendent, unitize or merge, two or more oil or oil and gas leases into a (c) Failure to remit payments or re- unit or cooperative operating plan to ports shall subject Lessee to further promote the greatest ultimate recov- penalties as provided in §§226.42 and ery of oil and gas from a common 226.43 and shall subject the division source of supply or portion thereof em- order to cancellation. bracing the lands covered by such lease [39 FR 22254, June 21, 1974. Redesignated at 47 or leases. The cooperative or unit FR 13327, Mar. 30, 1982, as amended at 55 FR agreement shall be subject to the regu- 33114, Aug. 14, 1990] lations in this part and applicable laws governing the leasing of the Osage Min- § 226.14 Contracts and division orders. eral Estate. Any agreement between the parties in interest to terminate a (a) Lessee may enter into division or- unit or cooperative agreement as to all ders or contracts with the purchasers or any portion of the lands included of oil, gas, or derivatives therefrom shall be submitted to the Super- which will provide for the purchaser to intendent for his approval. Upon ap- make payment of royalty in accord- proval the leases included thereunder ance with his lease: Provided, That such shall be restored to their original division orders or contracts shall not terms: Provided, That for the purpose of relieve Lessee from responsibility for preventing waste and to promote the the payment of the royalty should the greatest ultimate recovery of oil and purchaser fail to pay. No production gas from a common source of supply or shall be removed from the leased prem- portion thereof, all oil leases, oil and ises until a division order and/or con- gas leases, and gas leases issued here- tract and its terms are approved by the tofore and hereafter under the provi- Superintendent: Provided further, That sions of the regulations in this part the Superintendent may grant tem- shall be subject to any unit develop- porary permission to run oil or gas ment plan affecting the leased lands from a lease pending the approval of a that may be required by the Super- division order or contract. Lessee shall intendent with the consent of the file a certified monthly report and pay Osage Tribal Council, and which plan royalty on the value of all oil and gas shall adequately protect the rights of used off the premises for development all parties in interest including the and operating purposes. Lessee shall be Osage Mineral Estate. responsible for the correct measure- (b) Assignments. Approved leases or any interest therein may be assigned ment and reporting of all oil and/or gas or transferred only with the approval taken from the leased premises. of the Superintendent. The assignee (b) Lessee shall require the purchaser must be qualified to hold such lease of oil and/or gas from his/her lease or under existing rules and regulations leases to furnish the Superintendent, and shall furnish a satisfactory bond no later than the 25th day of each conditioned for the faithful perform- month, a statement reporting the gross ance of the covenants and conditions barrels of oil and/or gross Mcf of gas thereof. Lessee must assign either his sold during the preceding month. The entire interest in a lease or legal sub- Superintendent may authorize an ex- division thereof, or an undivided interest in the whole lease: Provided, That Bureau of Indian Affairs, Interior § 226.17 when an assignment covers only a por- drilling contracts with a stipulation tion of a lease or covers interests in that such approval does not in any way separate horizons such assignment bind the Department to approve subse- shall be subject to both the consent of quent assignments that may be pro- the Osage Tribal Council and approval vided for in said contracts. Approval of the Superintendent. If a lease is di- merely authorizes entry on the lease vided by the assignment of an entire for the purpose of development work. interest in any part, each part shall be (e) Combining leases. The lessee own- considered a separate lease and the as- ing both an oil lease and gas lease cov- signee shall be bound to comply with ering the same acreage is authorized to all the terms and conditions of the convert such leases to a combination original lease. A fully executed copy of oil and gas lease. the assignment shall be filed with the Superintendent within 30 days after [39 FR 22254, June 21, 1974. Redesignated at 47 FR 13327, Mar. 30, 1982, as amended at 55 FR the date of execution by all parties. If 33115, Aug. 14, 1990] requested within the 30-day period, the Superintendent may grant an exten- OPERATIONS sion of 15 days. A filing fee of $10 shall accompany each assignment. § 226.16 Commencement of operations. (c) Overriding royalty. Agreements creating overriding royalties or pay- (a) No operations shall be permitted ments out of production shall not be upon any tract of land until a lease covering such tract shall have been ap- considered as an interest in a lease as such term is used in paragraph (b) of proved by the Superintendent: Pro- this section. Agreements creating over- vided, That the Superintendent may riding royalties or payments out of grant authority to any party under such rules, consistent with the regula- production are hereby authorized and the approval of the Department of the tions in this part that he deems proper, Interior or any agency thereof shall to conduct geophysical and geological not be required with respect thereto, exploration work. but such agreements shall be subject to (b) Lessee shall submit applications the condition that nothing in any such on forms to be furnished by the Super- agreement shall be construed as modi- intendent and secure his approval be- fying any of the obligations of Lessee fore: under his lease and the regulations in (1) Well drilling, treating, or this part. All such obligations are to workover operations are started on the remain in full force and effect, the leased premises. same as if free of any such royalties or (2) Removing casing from any well. payments. The existence of agreements (c) Lessee shall notify the Super- creating overriding royalties or pay- intendent a reasonable time in advance ments out of production, whether or of starting work, of intention to drill, not acutally paid, shall not be consid- redrill, deepen, plug, or abandon a well. ered in justifying the shutdown or abandonment of any well. Agreements § 226.17 How to acquire permission to creating overriding royalties or pay- begin operations on a restricted homestead allotment. ments out of production need not be filed with the Superintendent unless (a) Lessee may conduct operations incorporated in assignments or instru- within or upon a restricted homestead ments required to be filed pursuant to selection only with the written consent paragraph (b) of this section. An agree- of the Superintendent. ment creating overriding royalties or (b) If the allottee is unwilling to per- payment out of production shall be sus- mit operations on his homestead, the pended when the working interest in- Superintendent will cause an examina- come per active producing well is equal tion of the premises to be made with to or less than the operational cost of the allottee and lessee or his represent- the well, as determined by the Super- ative. Upon finding that the interests intendent. of the Osage Tribe require that the (d) Drilling contracts. The Super- tract be developed, the Superintendent intendent is authorized to approve will endeavor to have the parties agree § 226.18 25 CFR Ch. 1 (4-1-15 Edition) upon the terms under which operations eral development or operations, and as on the homestead may be conducted. to the procedure for settlement thereof (c) In the event the allottee and les- as provided in §226.21 see cannot reach an agreement, the (d) Where the drilling is to be on re- matter shall be presented by all parties stricted land, lessee or his authorized before the Osage Tribal Council, and representative in the manner provided the Council shall make its rec- above shall meet with the Super- ommendations. Such recommendations intendent. shall be considered as final and binding (e) When the surface owner or his/her upon the allottee and lessee. A guard- representative is not a resident of, or is ian may represent the allottee. Where not physically present in, Osage Coun- no one is authorized or where no person ty, Oklahoma, or cannot be contacted is deemed by the Superintendent to be at the last known address, the Super- a proper party to speak for a person of intendent may authorize lessee to pro- unsound mind or feeble understanding, ceed with operations. the Principal Chief of the Osage Tribe [39 FR 22254, June 21, 1974, as amended at 41 shall represent him. FR 50648, Nov. 17, 1976; 43 FR 8136, Feb. 28, (d) If the allottee or his representa- 1978. Redesignated at 47 FR 13327, Mar. 30, tive does not appear before the Osage 1982, as amended at 55 FR 33115, Aug. 14, 1990] Tribal Council when notified by the Su- perintendent, or if the Council fails to § 226.19 Use of surface of land. act within 10 days after the matter is (a) Lessee or his/her authorized rep- referred to it, the Superintendent may resentative shall have the right to use authorize lessee to proceed with oper- so much of the surface of the land ations in conformity with the provi- within the Osage Mineral Estate as sions of his lease and the regulations in may be reasonable for operations and this part. marketing. This includes but is not limited to the right to lay and main- § 226.18 Information to be given sur- tain pipelines, electric lines, pull rods, face owners prior to commence- other appliances necessary for oper- ment of drilling operations. ations and marketing, and the right-of- Except for the surveying and staking way for ingress and egress to any point of a well, no operations of any kind of operations. If Lessee and surface shall commence until the lessee or his/ owner are unable to agree as to the her authorized representative shall routing of pipelines, electric lines, etc., meet with the surface owner or his/her said routing shall be set by the Super- representative, if a resident of and intendent. The right to use water for present in Osage County, Oklahoma. lease operations is established by Unless waived by the Superintendent §226.24. Lessee shall conduct his/her op- or otherwise agreed to between the les- erations in a workmanlike manner, see and surface owner, such meeting commit no waste and allow none to be shall be held at least 10 days prior to committed upon the land, nor permit the commencement or any operations, any unavoidable nuisance to be main- except for the surveying and staking of tained on the premises under his/her the well. At such meeting lessee or his/ control. her authorized representative shall (b) Before commencing a drilling op- comply with the following require- eration, Lessee shall pay or tender to ments: the surface owner commencement (a) Indicate the location of the well money in the amount of $25 per seismic or wells to be drilled. shot hole and commencement money in (b) Arrange for route of ingress and the amount of $300 for each well, after egress. Upon failure to agree on route which Lessee shall be entitled to im- ingress and egress, said route shall be mediate possession of the drilling site. set by the Superintendent. Commencement money will not be re- (c) Impart to said surface owners the quired for the redrilling of a well which name and address of the party or rep- was originally drilled under the cur- resentative upon whom the surface rently lease. A drilling site shall be owner shall serve any claim for dam- held to the minimum area essential for ages which he may sustain from min- operations and shall not exceed one Bureau of Indian Affairs, Interior § 226.20 and one-half acres in area unless au- mined by arbitration as provided by thorized by the Superintendent. Com- § 226.21. mencement money shall be a credit to- [39 FR 22254, June 22, 1974, as amended at 43 ward the settlement of the total dam- FR 8136, Feb. 28, 1978; 43 FR 11815, Mar. 22, ages. Acceptance of commencement 1978. Redesignated at 47 FR 13327, Mar. 30, money by the surface owner does not 1982, as amended at 55 FR 33115, Aug. 14, 1990] affect his/her right to compensation for damages as described in §226.20, occa- § 226.20 Settlement of damages sioned by the drilling and completion claimed. of the well for which it was paid. Since (a) Lessee or his authorized rep- actual damage to the surface from op- resentative or geophysical permittee erations cannot necessarily be shall pay for all damages to growing ascertained prior to the completion of crops, any improvements on the lands, a well as a serviceable well or dry hole, and all other surface damages as may a damage settlement covering the be occasioned by operations. Com- drilling operation need not be made mencement money shall be a credit to- until after completion of drilling oper- ward the settlement of the total dam- ations. ages occasioned by the drilling and (c) Where the surface is restricted completion of the well for which it was land, commencement money shall be paid. Such damages shall be paid to the paid to the Superintendent for the owner of the surface and by him appor- landowner. All other surface owners tioned among the parties interested in shall be paid or tendered such com- the surface, whether as owner, surface mencement money direct. Where such lessee, or otherwise, as the parties may surface owners are not residents of mutually agree or as their interests Osage County nor have a representa- may appear. If lessee or his authorized tive located therein, such payment representative and surface owner are shall be made or tendered to the last unable to agree concerning damages, known address of the surface owner at the same shall be determined by arbi- least 5 days before commencing drill- tration. Nothing herein contained shall ing operation on any well: Provided, be construed to deny any party the That should lessee be unable to reach right to file an action in a court of the owner of the surface of the land for competent jurisdiction if he is dissatis- the purpose of tendering the com- fied with the amount of the award. mencement money or if the owner of (b) Surface owners shall notify their the surface of the land shall refuse to lessees or tenants of the regulations in accept the same, lessee shall deposit this part and of the necessary proce- such amount with the Superintendent dure to follow in all cases of alleged by check payable to the Bureau of In- damages. If so authorized in writing, dian Affairs. The superintendent shall surface lessees or tenants may rep- thereupon advise the owner of the sur- resent the surface owners. face of the land by mail at his last (c) In settlement of damages on re- known address that the commence- stricted land all sums due and payable ment money is being held for payment shall be paid to the Superintendent for to him upon his written request. credit to the account of the Indian en- (d) Lessee shall also pay fees for tank titled thereto. The Superintendent will sites not exceeding 50 feet square at make the apportionment between the the rate of $100 per tank site or other Indian landowner or owners and sur- vessel: Provided, That no payment shall face Lessee of record. be due for a tank temporarily set on a (d) Any person claiming an interest well location site for drilling, com- in any leased tract or in damages thereto, must furnish to the Super- pleting, or testing. The sum to be paid intendent a statement in writing show- for a tank occupying more than 50 feet ing said claimed interest. Failure to square shall be agreed upon between furnish such statement shall constitute the surface owner and lessee or, on fail- a waiver of notice and estop said per- ure to agree, the same shall be deter- son from claiming any part of such § 226.21 25 CFR Ch. 1 (4-1-15 Edition) damages after the same shall have been (d) As soon as the third arbitrator is disbursed. appointed, the arbitrators shall meet; [39 FR 22254, June 21, 1974, as amended at 41 hear the evidence and arguments of the FR 50649, Nov. 17, 1976; 43 FR 8137, Feb. 28, parties; and examine the lands, crops, 1978. Redesignated at 47 FR 13327, Mar. 30, improvements, or other property al- 1982] leged to have been injured. Within 10 §226.21 Procedure for settlement of days they shall render their decision as damages claimed. to the amount of the damage due. The arbitrators shall be disinterested per- Where the surface owner or his lessee sons. The fees and expenses of the third suffers damage due to the oil and gas arbitrator shall be borne equally by the operations and/or marketing of oil or claimant and Lessee or his authorized gas by lessee or his authorized rep- representative. Each Lessee or his au- resentative, the procedure for recovery thorized representative and claimant shall be as follows: (a) The party or parties aggrieved shall pay the fee and expenses for the shall, as soon as possible after the dis- arbitrator appointed by him. covery of any damages, serve written (e) When an act of an oil or gas lessee notice to Lessee or his authorized rep- or his authorized representative results resentative as provided by §226.18. in injury to both the surface owner and Written notice shall contain the nature his lessee, the parties aggrieved shall and location of the alleged damages, join in the appointment of an arbi- the date of occurrence, the names of trator. Where the injury complained of the party or parties causing said dam- is chargeable to one or more oil or gas ages, and the amount of damages. It is Lessee, or his authorized representa- not intended by this requirement to tive, such lessee or said representative limit the time within which action shall join in the appointment of an ar- may be brought in the courts to less bitrator. than the 90-day period allowed by sec- (f) Any two of the arbitrators may tion 2 of the Act of March 2, 1929 (45 make a decision as to the amount of Stat. 1478, 1479). damage due. The decision shall be in (b) If the alleged damages are not ad- writing and shall be served forthwith justed at the time of such notice, Les- upon the parties in interest. Each see or his authorized representative party shall have 90 days from the date shall try to adjust the claim with the the decision is served in which to file party or parties aggrieved within 20 days from receipt of the notice. If the an action in a court of competent juris- claimant is the owner of restricted diction. If no such action is filed within property and a settlement results, a said time and the award is against Les- copy of the settlement agreement shall see or his/her authorized representa- be filed with the Superintendent. If the tive, he/she shall pay the same, to- settlement agreement is approved by gether with interest at an annual rate the Superintendent, payment shall be established for the Internal Revenue made to the Superintendent for the Service from date of award, within 10 benefit of said claimant. days after the expiration of said period (c) If the parties fail to adjust the for filing an action. claim within the 20 days specified, then (g) Lessee or his authorized rep- within 10 days thereafter each of the resentative shall file with the Super- interested parties shall appoint an ar- intendent a report on each settlement bitrator who immediately upon their agreement, setting out the nature and appointment shall agree upon a third location of the damage, date, and arbitrator. If the two arbitrators shall amount of the settlement, and any fail to agree upon a third arbitrator other pertinent information. within 10 days, they shall immediately notify the parties in interest. If said [39 FR 22254, June 21, 1974, as amended at 41 parties cannot agree upon a third arbi- FR 50649, Nov. 17, 1976. Redesignated at 47 FR trator within 5 days after receipt of 13327, Mar. 30, 1982, as amended at 55 FR such notice, the Superintendent shall 33115, Aug. 14, 1990; 64 FR 13896, Mar. 23, 1999] appoint the third arbitrator. Bureau of Indian Affairs, Interior § 226.25

§ 226.22 Prohibition of pollution. from above-mentioned drilling fluids to allow for separate disposal. (a) All operators, contractors, drillers, service companies, pipe pull- [39 FR 22254, June 21, 1974. Redesignated at 47 ing and salvaging contractors, or other FR 13327, Mar. 30, 1982, as amended at 55 FR 33115, Aug. 14, 1990] persons, shall at all times conduct their operations and drill, equip, oper- § 226.23 Easements for wells off leased ate, produce, plug and abandon all premises. wells drilled for oil or gas, service wells The Superintendent, with the con- or exploratory wells (including seismic, sent of the Osage Tribal Council, may core and stratigraphic holes) in a man- grant commercial and noncommercial ner that will prevent pollution and the easements for wells off the leased migration of oil, gas, salt water or premises to be used for purposes associ- other substance from one stratum into ated with oil and gas production. Rent- another, including any fresh water al payable to the Osage Tribe for such bearing formation. easements shall be an amount agreed (b) Pits for drilling mud or delete- to by Grantee and the Osage Tribal rious substance used in the drilling, Council subject to the approval of the completion, recompletion, or workover Superintendent. Grantee shall be re- of any well shall be constructed and sponsible for all damages resulting maintained to prevent pollution of sur- from the use of such wells and settle- face and subsurface fresh water. These ment therefor shall be made as provided in §226.21. pits shall be enclosed with a fence of at least four strands of barbed wire, or an [39 FR 22254, June 21, 1974. Redesignated at 47 approved substitute, stretched taut to FR 13327, Mar. 30, 1982, as amended at 55 FR 33115, Aug. 14, 1990] adequately braced corner posts, unless the surface owner, user, or the Super- §226.24 Lessee's use of water. intendent gives consent to the con- Lessee or his contractor may, with trary. Immediately after completion of the approval of the Superintendent, use operations, pits shall be emptied and water from streams and natural water leveled unless otherwise requested by courses to the extent that same does surface owner or user. not diminish the supply below the re- (c) Drilling pits shall be adequate to quirements of the surface owner from contain mud and other material ex- whose land the water is taken. Simi- tracted from wells and shall have ade- larly, Lessee or his contractor may use quate storage to maintain a supply of water from reservoirs formed by the mud for use in emergencies. impoundment of water from such (d) No earthen pit, except those used streams and natural water courses, in the drilling, completion, recomple- provided such use does not exceed the tion or workover of a well, shall be quantity to which they originally constructed, enlarged, reconstructed or would have been entitled had the res- used without approval of the Super- ervoirs not been constructed. Lessee or intendent. Unlined earthen pits shall his contractor may install necessary not be used for the continued storage lines and other equipment within the Osage Mineral Estate to obtain such of salt water or other deleterious sub- water. Any damage resulting from such stances. installation shall be settled as provided (e) Deleterious fluids other than fresh in § 226.21. water drilling fluids used in drilling or workover operations, which are dis- § 226.25 Gas well drilled by oil lessees placed or produced in well completion and vice versa. or stimulation procedures, including Prior to drilling, the oil or gas lessee but not limited to fracturing, shall notify the other lessees of his/her acidizing, swabbing, and drill stem intent to drill. When an oil lessee in tests, shall be collected into a pit lined drilling a well encounters a formation with plastic of at least 30 mil or a or zone having indications of possible metal tank and maintained separately gas production, or the gas lessee in drilling a well encounters a formation § 226.26 25 CFR Ch. 1 (4-1-15 Edition) or zone having indication of possible the lessees do not accept the apportion- oil production, he/she shall imme- ment, the oil or gas lessee who drilled diately notify the other lessee and the the well must plug the well. Superintendent. Lessee drilling the (c) Lands not leased. If the gas lessee well shall obtain all information which shall drill an oil well upon lands not a prudent operator utilizes to evaluate leased for oil purposes or vice versa, the productive capability of such for- the Superintendent may, until such mation or zone. time as said lands are leased, permit (a) Gas well to be turned over to gas les- the lessee who drilled the well to oper- see. If the oil lessee drills a gas well, he/ ate and market the production there- she shall, without removing from the from. When said lands are leased, the well any of the casing or other equip- lessee who drilled and completed the ment, immediately shut the well in and well shall be reimbursed by the oil or notify the gas lessee and the Super- gas lessee, for the cost of drilling said intendent. If the gas lessee does not, well, including all damages paid and within 45 days after receiving notice the cost in-place of casing, tubing, and and cost of drilling, elect to take over other equipment. If the lessee does not sueh well and reimburse the oil lessee elect to take over said well as provided the cost of drilling, including all damages paid and the cost in-place of cas- above, the disposition of such well and ing, tubing, and other equipment, the the production therefrom shall be de- oil lessee shall immediately confine termined by the Superintendent. In the the gas to the original stratum. The event the oil lessee and gas lessee can- disposition of such well and the produc- not agree on the cost of the well, such tion therefrom shall then be subject to cost shall be apportioned between the the approval of the Superintendent. In oil and gas lessee by the Super- the event the oil lessee and gas lessee intendent. If such apportionment is not cannot agree on the cost of the well, accepted, the well shall be plugged by such cost shall be apportioned between the oil and gas lessee who drilled the the oil and gas lessee by the Super- well. intendent. If such apportionment is not [39 FR 22254, June 21, 1974. Redesignated at 47 accepted, the well shall be plugged by FR 13327, Mar. 30, 1982, as amended at 55 FR the oil and gas lessee who drilled the 33115, Aug. 14, 1990; 64 FR 13896, Mar. 23, 1999] well. (b) Oil well to be turned over to oil § 226.26 Determining cost of well. lessee. If the gas lessee drills an oil The term "cost of drilling" as applied well, he/she must immediately, without where one lessee takes over a well removing from the well any of the cas- drilled by another, shall include all ing or other equipment, notify the oil reasonable, usual, necessary, and prop- lessee and the superintendent. er expenditures. A list of expenses men- (1) If the oil lessee does not, within 45 tioned in this section shall be pre- days after receipt of notice and cost of sented to proposed purchasing lessee drilling, elect to take over the well, he/ she must immediately notify the gas within 10 days after the completion of lessee. From that point, the super- the well. In the event of a disagree- intendent must approve the disposition ment between the parties as to the of the well, and any gas produced from charges assessed against the well that it. is to be taken over, such charges shall (2) If the oil lessee chooses to take be determined by the Superintendent. over the well, he/she must pay to the §226.27 Gas for operating purposes gas lessee: and tribal use. (i) The cost of drilling the well, including all damages paid; and (a) Gas to be furnished oil lessee. Les- (ii) The cost in place of casing and see of a producing gas lease shall fur- other equipment. nish the oil lessee sufficient gas for op- (3) If the oil lessee and the gas lessee erating purposes at a rate to be agreed cannot agree on the cost of the well, upon, or on failure to agree the rate the superintendent will apportion the shall be determined by the Super- cost between the oil and gas lessees. If intendent: Provided, That the oil lessee Bureau of Indian Affairs, Interior § 226.29 shall at his own expense and risk, fur- CESSATION OF OPERATIONS nish and install the necessary connections to the gas lessee's well or pipe- § 226.28 Shutdown, abandonment, and plugging of wells. line. All such connections shall be reported in writing to the Super- No productive well shall be aban- intendent. doned until its lack for further profit- (b) Use of gas by Osage Tribe. (1) Gas able production of oil and/or gas has from any well or wells shall be fur- been demonstrated to the satisfaction nished any Tribal-owned building or of the Superintendent. Lessee shall not enterprise at a rate not to exceed the shut down, abandon, or otherwise dis- price less royalty being received or of- continue the operation or use of any fered by a gas purchaser: Provided, well for any purpose without the writ- That such requirement shall be subject ten approval of the Superintendent. All to the determination by the Super- applications for such approval shall be submitted to the Superintendent on intendent that gas in sufficient quan- forms furnished by him/her. tities is available above that needed for (a) Application for authority to per- lease operation and that no waste manently shut down or discontinue use would result. In the absence of a gas or operation of a well shall set forth purchaser the rate to be paid by the justification, probable duration the Osage Tribe shall be determined by the means by which the well bore is to be Superintendent based on prices being protected, and the contemplated even- paid by purchasers in the Osage Min- tual disposition of the well. The meth- eral Estate. The Osage Tribe is to fur- od of conditioning such well shall be nish all necessary material and labor subject to the approval of the Super- for such connection with Lessee's gas intendent. system. The use of such gas shall be at (b) Prior to permanent abandonment the risk of the Osage Tribe at all times. of any well, the oil lessee or the gas (2) Any member of the Osage Tribe lessee, as the case may be, shall offer residing in Osage County and outside a the well to the other for his recomple- corporate city is entitled to the use at tion or use under such terms as may be his own expense of not to exceed 400,000 mutually agreed upon but not in con- cubic feet of gas per calendar year for flict with the regulations. Failure of his principal residence at a rate not to the Lessee receiving the offer to reply exceed the amount paid by a gas pur- within 10 days after receipt thereof chaser plus 10 percent: Provided, That shall be deemed as rejection of the such requirement shall be subject to offer. If, after indicating acceptance, the determination by the Super- the two parties cannot agree on the intendent that gas in sufficient quan- terms of the offer within 30 days, the tities is available above that needed for disposition of such well shall be deter- lease operation and that no waste mined by the Superintendent. would result. In the absence of a gas (c) The Superintendent is authorized purchaser the amount to be paid by the to shut in a lease when the lessee fails Tribal member shall be determined by to comply with the terms of the lease, the Superintendent. Gas to Tribal the regulations, and/or orders of the members is not royalty free. The Trib- Superintendent. al member is to furnish all necessary [39 FR 22254, June 21, 1974. Redesignated at 47 material and labor for such connection FR 13327, Mar. 30, 1982, as amended at 55 FR to Lessee's gas system, and shall main- 33115, Aug. 14, 1990] tain his own lines. The use of such gas shall be at the risk of the Tribal mem- §226.29 Disposition of casings and ber at all times. other improvements. (3) Gas furnished by Lessee under (a) Upon termination of lease, perma- paragraphs (b) (1) and (2) of this section nent improvements, unless otherwise may be terminated only with the ap- provided by written agreement with proval of the Superintendent. Written the surface owner and filed with the application for termination must be Superintendent, shall remain a part of made to the Superintendent showing said land and become the property of justification. the surface owner upon termination of § 226.30 25 CFR Ch. 1 (4-1-15 Edition) the lease, other than by cancellation. hole from bottom to top: Provided, Exceptions include personal property That if a satisfactory agreement is not limited to tools, tanks, pipelines, reached between Lessee and the surface pumping and drilling equipment, der- owner, subject to the approval of the ricks, engines, machinery, tubing, and Superintendent, Lessee may condition the casings of all wells: Provided, That the well for use as a fresh water well when any lease terminates, all such and shall so indicate on the plugging personal property shall be removed the record. The manner in which plugging word "terminates"; and in the last sen- material shall be introduced and the tence of the paragraph, within 90 days type of material so used shall be sub- or such reasonable extension of time as ject to the approval of the Super- may be granted by the Superintendent. intendent. Within 10 days after plug- Otherwise, the ownership of all casings ging, Lessee shall file with the Super- shall revert to Lessor and all other perintendent a complete report of the sonal property and permanent improve- plugging of each well. When any well is ments to the surface owner. Nothing plugged and abandoned, Lessee shall, herein shall be construed to relieve les- within 90 days, clean up the premises see of responsibility for removing any around sueh well to the satisfaetion of such personal property or permanent the Superintendent. improvements from the premises if re- [39 FR 22254, June 21, 1974. Redesignated at 47 quired by the Superintendent and re- FR 13327, Mar. 30, 1982, as amended at 55 FR storing the premises as nearly as prac- 33115, Aug. 14, 1990] ticable to the original state. (b) Upon cancellation of lease. When REQUIREMENTS OF LESSEES there has been a cancellation for cause, Lessor shall be entitled and authorized § 226.30 Lessees subject to Super- to take immediate possession of the intendent's orders; books and lease premises and all permanent im- records open to inspection. provements and all other equipment Lessee shall comply with all orders necessary for the operation of the or instructions issued by the Super- lease. intendent. The Superintendent or his (c) Wells to be abandoned shall be representative may enter upon the promptly plugged as prescribed by the leased premises for the purpose of in- Superintendent. Applications to plug spection. Lessee shall keep a full and shall include a statement affirming correct account of all operations, re- compliance with §226.28(b) and shall set ceipts, and disbursements and make re- forth reasons for plugging, a detailed ports thereof, as required. Lessee's statement of the proposed work includ- books and records shall be available to ing kind, location, and length of plugs the Superintendent for inspection. (by depth), plans for mudding and cementing, testing, parting and removing §226.31 Lessee's process agents. casing, and any other pertinent infor- (a) Before actual drilling or develop- mation: Provided, That the Super- ment operations are commenced on intendent may give oral permission leased lands, Lessee or Assignee, if not and instructions pending receipt of a a resident of the State of Oklahoma, written application to plug a newly shall appoint a local or resident rep- drilled hole. Lessee shall remit a fee of resentative within the State of Okla- $15 with each written application for homa on whom the Superintendent authority to plug a well. This fee will may serve notice or otherwise commu- be refunded if permission is not grant- nicate in securing compliance with the ed. regulations in this part, and shall no- (d) Lessee shall plug and fill all dry tify the Superintendent of the name or abandoned wells in a manner to con- and post office address of the rep- fine the fluid in each formation bearing resentative appointed. fresh water, oil, gas, salt water, and (b) Where several parties own a lease other minerals, and to protect it jointly, one representative or agent against invasion of fluids from other shall be designated whose duties shall sources. Mud-laden fluid, cement, and be to act for all parties concerned. Des- other plugs shall be used to fill the ignation of such representative should Bureau of Indian Affairs, Interior § 226.36 be made by the party in charge of oper- to the satisfaction of the Super- ations. intendent. (c) In the event of the incapacity or (e) Upon request and in the manner absence from the State of Oklahoma of and form prescribed by the Super- such designated local or resident rep- intendent, Lessee shall furnish a plat resentative, Lessee shall appoint a sub- showing the location, designation, and stitute to serve in his stead. In the ab- status of all wells on the leased lands, sence of such representative or ap- together with such other pertinent in- pointed substitute, any employee of formation as the Superintendent may Lessee upon the leased premises or per- require. son in charge of drilling or related operations thereon shall be considered § 226.33 Line drilling. the representative of Lessee for the purpose of service of orders or notices Lessee shall not drill within 300 feet as herein provided. of boundary line of leased lands, nor locate any well or tank within 200 feet of § 226.32 Well records and reports. any public highway, any established (a) Lessee shall keep accurate and watering plaee, or any building used as complete records of the drilling, re- a dwelling, granary, or barn, except drilling, deepening, repairing, treating, with the written permission of the Su- plugging, or abandonment of all wells. perintendent. Failure to obtain ad- These records shall show all the forma- vance written permission from the Su- tions penetrated, the content and char- perintendent shall subject lessee to acter of oil, gas, or water in each for- cancellation of his/her lease and/or mation, and the kind, weight, size, plugging of the well. landed depth and cement record of casing used in drilling each well; the [39 FR 22254, June 21, 1974. Redesignated at 47 record of drill-stem and other bottom FR 13327, Mar. 30, 1982, as amended at 55 FR hole pressure or fluid sample surveys, 33116, Aug. 14, 1990] temperature surveys, directional sur- §226.34 Wells and tank batteries to be veys, and the like; the materials and marked. procedure used in the treating or plugging of wells or in preparing them for Lessee shall clearly and permanently temporary abandonment; and any mark all wells and tank batteries in a other information obtained in the conspicuous place with number, legal course of well operation. description, operator, and telephone (b) Lessee shall take such samples number, and shall take all necessary and make such tests and surveys as precautions to preserve these mark- may be required by the Superintendent ings. to determine conditions in the well or producing reservoir and to obtain in- [55 FR 33116, Aug. 14, 1990] formation concerning formations § 226.35 Formations to be protected. drilled, and shall furnish reports thereof as required by the Superintendent. Lessee shall, to the satisfaction of (c) Within 10 days after completion of the Superintendent, take all proper operations on any well, Lessee shall precautions and measures to prevent transmit to the Superintendent the ap- damage or pollution of oil, gas, fresh plicable information on forms fur- water, or other mineral bearing forma- nished by the Superintendent; a copy tions. of electrical, mechanical or radioactive log, or other types of survey of the well §226.36 Control devices. bore; and core analysis obtained from In drilling operations in fields where the well. Lessee shall also submit other high pressures, lost circulation, or reports and records of operations as other conditions exist which could re- may be required and in the manner and sult in blowouts, lessee shall install an form prescribed by the Superintendent. (d) Lessee shall measure production approved gate valve or other control- of oil, gas, and water from individual ling device which is in proper working wells at reasonably frequent intervals § 226.37 25 CFR Ch. 1 (4-1-15 Edition) condition for use until the well is com- and the standard of temperature shall pleted. At all times preventative meas- be 60 degrees F. All measurements of ures must be taken in all well oper- gas shall be adjusted by computation ations to maintain proper control of to these standards, regardless of the subsurface strata. pressure and temperature at which the gas was acutally measured, unless oth- [55 FR 33116, Aug. 14, 1990] erwise authorized in writing by the Su- § 226.37 Waste of oil and gas. perintendent. Lessee shall conduct all operations in § 226.40 Use of gas for lifting oil. a manner that will prevent waste of oil Lessee shall not use natural gas from and gas and shall not wastefully utilize a distinct or separate stratum for the oil or gas. The Superintendent shall purpose of flowing or lifting the oil, ex- have the authority to impose such re- cept where said Lessee has an approved quirements as he deems necessary to right to both the oil and the gas, and prevent waste of oil and gas and to pro- then only with the approval of the Su- mote the greatest ultimate recovery of perintendent of such use and of the oil and gas. Waste as applied herein in- manner of its use. cludes, but is not limited to, the inefficient excessive or improper use or dis- § 226.41 Accidents to be reported. sipation of reservoir energy which Lessee shall make a complete report would reasonably reduce or diminish to the Superintendent of all accidents, the quantity of oil or gas that might fires, or acts of theft and vandalism oc- ultimately be produced, or the unnec- curring on the leased premises. essary or excessive surface loss or destruction, without beneficial use, of oil PENALTIES and/or gas. §226.42 Penalty for violation of lease § 226.38 Measuring and storing oil. terms. All production run from the lease Violation of any of the terms or con- shall be measured according to meth- ditions of any lease or of the regula- ods and devices approved by the Super- tions in this part shall subject the intendent. Facilities suitable for con- lease to cancellation by the Super- taining and measuring accurately all intendent, or Lessee to a fine of not crude oil produced from the wells shall more than $500 per day for each day of be provided by Lessee and shall be lo- such violation or noncompliance with cated on the leasehold unless otherwise the orders of the Superintendent, or to approved by the Superintendent. Les- both such fine and cancellation. Fines see shall furnish to the Superintendent not received within 10 days after notice a copy of 100-percent capacity tank of the decision shall be subject to late table for each tank. Meters and instal- charges at the rate of not less than 112 lations for measuring oil must be ap- percent per month for each month or proved, and tests of their accuracy fraction thereof until paid. The Osage shall be made when directed by the Su- Tribal Council, subject to the approval perintendent. of the Superintendent, may waive the late charge. § 226.39 Measurement of gas. [39 FR 22254, June 21, 1974. Redesignated at 47 All gas, required to be measured, FR 13327, Mar. 30, 1982, as amended at 55 FR shall be measured by meter (preferably 33116, Aug. 14, 1990] of the orifice meter type) unless other- § 226.43 Penalties for violation of cer- wise agreed to by the Superintendent. All gas meters must be approved by the tain operating regulations. Superintendent and installed at the ex- In lieu of the penalties provided pense of Lessee or purchaser at such under §226.42, penalties may be im- places as may be agreed to by the Su- posed by the Superintendent for viola- perintendent. For computing the vol- tion of certain sections of the regula- ume of all gas produced, sold or subject tions of this part as follows: to royalty, the standard of pressure (a) For failure to obtain permission shall be 14.65 pounds to the square inch, to start operations required by Bureau of Indian Affairs, Interior Pt. 227

§226.16(b), $50 per day until permission § 226.45 Notices. is obtained. Notices and orders issued by the Su- (b) For failure to file records required perintendent to the representative and/ by §226.32, $50 per day until compliance or operator shall be binding on the les- is met. see. The Superintendent may in his/her (c) For failure to mark wells and discretion increase the time allowed in tank batteries as required by §226.34, his/her orders and notices. $50 for each well and tank battery. (d) For failure to construct and main- [55 FR 33116, Aug. 14, 1990] tain pits as required by §226.22, $50 for §226.46 Information collection. each day after operations are com- The Office of Management and Budg- menced on any well until compliance is met. et has determined that the information collection requirements contained in (e) For failure to comply with §226.36 this part need not be submitted for regarding valve or other approved con- clearance pursuant to 44 U.S.C. 3501 et trolling device, $100. seq. (f) For failure to notify Super- intendent before drilling, redrilling, [55 FR 33116, Aug. 14, 1990] deepening, plugging, or abandoning any well, as required by §§226.16(c) and PART 227-LEASING OF CERTAIN 226.25, $200. LANDS IN WIND RIVER INDIAN (g) For failure to properly care for RESERVATION, WYOMING, FOR and dispose of deleterious fluids as pro- OIL AND GAS MINING vided in § 226.22, $500 per day until compliance is met. Sec. (h) For failure to file plugging re- 227.1 Definitions. ports as required by §226.29 and for fail- How To ACQUIRE LEASES ure to file reports as required by §226.13, $50 per day for each violation 227.2 Applications for leases. until compliance is met. 227.3 Leases to citizens of the United States except Government employees. (i) For failure to perform or start an 227.4 Sale of oil and gas leases. operation within 5 days after ordered 227.5 Terms of leases, procedure for renewal by the Superintendent in writing under and execution. authority provided in this part, if said 227.6 Corporations and corporate informa- operation is thereafter performed by or tion. through the Superintendent, the actual 227.7 Additional information from applicant. cost of performance thereof, plus 25 227.8 Bonds. percent. 227.9 Acreage limitation: Leases on non- (j) Lessee or his/her authorized rep- contiguous tracts. resentative is hereby notified that 227.10 Minerals other than oil and gas. criminal procedures are provided by 18 227.11 Bureau of Land Management to be U.S.C. 1001 for knowingly filing fraudu- furnished copy of lease. 227.12 Mineral reserves in nonmineral en- lent reports and information. tries. [39 FR 22254, June 21, 1974. Redesignated at 47 227.13 Vested rights to be respected. FR 13327, Mar. 30, 1982, as amended at 55 FR 227.14 Government reserves right to pur- 33116, Aug. 14, 1990] chase oil and gas. RENTS AND ROYALTIES APPEALS AND NOTICES 227.15 Manner of payment. § 226.44 Appeals. 227.16 Crediting advance annual payments. 227.17 Rates of rents and royalties. Any person, firm or corporation ag- 227.18 Free use of gas by lessor. grieved by any decision or order issued 227.19 Division orders. by or under the authority of the Super- intendent, by virtue of the regulations OPERATIONS in this part, may appeal pursuant to 25 227.20 Permission to start operations. CFR part 2. 227.21 Restrictions on operations. 227.22 Diligence and prevention of waste. [55 FR 33116, Aug. 14, 1990] 227.23 Wells.

Osage Final Rule—80 Fed. Reg. 26994 (May 11, 2015)

(remanded) FEDERAL REGISTER

Vol. 80 Monday, No. 90 May 11, 2015

Part II

Department of the Interior

Bureau of Indian Affairs 25 CFR Part 226 Leasing of Osage Reservation Lands for Oil and Gas Mining; Final Rule 26994 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

DEPARTMENT OF THE INTERIOR Q. Comments Related to Section 226.33 regarding the United States' alleged R. Comments Related to Section 226.34 mismanagement of the Osage Nation's Bureau of Indian Affairs S. Comments Related to Section 226.35 oil and gas mineral estate, along with T. Comments Related to Section 226.36 U. Comments Related to Section 226.37 other unrelated claims. In the 25 CFR Part 226 V. Comments Related to Section 226.38 Settlement Agreement, the parties [1 56A21 00DD/AAKC001 030/ W. Comments Related to Section 226.39 agreed "to address means of improving AOA501010.999900 253G] X. Comments Related to Section 226.40 the trust management of the Osage Y. Comments Related to Section 226.41 Mineral Estate, the Osage Tribal Trust RIN 1076-AF17 Z. Comments Related to Section 226.45 Account, and Other Osage Accounts." AA. Comments Related to Section 226.46 The parties agreed that a review and Leasing of Osage Reservation Lands BB. Comments Related to Section 226.47 for Oil and Gas Mining CC. Comments Related to Section 226.48 revision of the existing regulations is DD. Comments Related to Section 225.53 warranted to better assist the Bureau of AGENCY: Bureau of Indian Affairs, EE. Comments Related to Section 226.56 Indian Affairs (BIA or Bureau) in Interior. FF. Comments Related to Section 226.57 managing the Osage mineral estate. The ACTION: Final rule. GG. Comments Related to Section 226.59 parties agreed to engage in a negotiated HH. Comments Related to Section 226.60 rulemaking for this purpose. Pursuant to SUMMARY: The Bureau of Indian Affairs II. Comments Related to Section 226.62 the required, applicable procedures, is issuing its final revisions to the JJ. Comments Related to Section 226.63 KK. Comments Related to Section 226.65 after the Tribal Trust Settlement was regulations addressing mineral LL. Comments Related to Section 226.66 executed, the Department of the Interior development of the Osage minerals MM. Subpart F (226.67 to 226.70) (Department) established a Negotiated estate. This rule updates the leasing NN. Abandoned Wells Rule Making Committee in July 2012 procedures and the rental, operations, V. Procedural Requirements and commenced structured negotiations safety and royalty requirements for oil A. Regulatory Planning and Review (E.O. on the amendment and revision of Rule and gas production on Osage mineral 12866 and 13563) 226. For additional information on this lands and is the result of a negotiated B. Regulatory Flexibility Act C. Small Business Regulatory Enforcement negotiated rulemaking process, please rulemaking. Fairness Act visit http://www.bia.gov/osageregneg/. DATES: This rule is effective on July 10, D. Unfunded Mandates Reform Act The Negotiated Rule Making 2015. E. Takings (E.O. 12630) Committee submitted its report to BIA F. Federalism (E.O. 13132) FOR FURTHER INFORMATION CONTACT: Mr. G. Civil Justice Reform (E.O. 12988) on April 25, 2013. On August 28, 2013, Eddie Streater, Designated Federal H. Consultation with Indian Tribes (E.O. BIA published a proposed rule based on Officer, Bureau of Indian Affairs, P.O. 13175) the Committee's report. See 78 FR Box 8002, Muscogee, OK 74402; I. Paperwork Reduction Act 53083. In order to provide additional telephone (918) 781-4608; fax (918) J. National Environmental Policy Act time for parties to comment on the 718-4604; or email osageregneg@ K. Effects on the Energy Supply (E.O. proposed rule, BIA extended the bia.gov. Additional information on the 13211) original comment deadline until negotiated rulemaking can be found at: I. Executive Summary of Rule November 18, 2013. See 78 FR 68859 http://www.bia.gov/osageregneg. (November 1, 2013). After a thorough This rule updates the existing oil and evaluation of the many comments by SUPPLEMENTARY INFORMATION: gas regulations governing Osage County, various stakeholders with respect to the I. Executive Summary of Rule Oklahoma as set forth in 25 CFR part proposed rule, BIA revised and II. Background 226. It is intended to strengthen the amended the proposed rule to III. Detailed Explanation of Revisions management and administration of the incorporate those changes and IV. Explanation of Changes Made in Osage mineral estate for the benefit of Response to Departmental Review amendments that BIA considered the Osage. These provisions strengthen V. Comments on the Proposed Rule and meritorious and beneficial in preparing the rule's reporting and inspection Responses the final rule as published herein. A. Overview/General requirements, offer more specificity B. Comments Related to Section 226.1 regarding a lessee's obligations with III. Detailed Explanation of Revisions C. Comments Related to Section 226.3 respect to its mining operations, and D. Comments Related to Section 226.4 adjust royalty rate calculations and This final rule revises the existing E. Comments Related to Section 226.5 bonding amounts, in order to protect the rule for "Leasing of Osage Reservation F. Comments Related to Section 226.6 best interests of the Osage mineral Lands for Oil and Gas Mining" with the G. Comments Related to Section 226.8 estate, ensure safety, and discourage textual and substantive changes as set H. Comments Related to Section 226.9 future regulatory violations. forth in Table 1. The BIA's additional I. Comments Related to Section 226.14 revisions to the proposed rule that J. Comments Related to Section 226.15 II. Background resulted from the comment period and K. Comments Related to Section 226.18 L. Comments Related to Section 226.19 On October 14, 2011, the United BIA's consideration and evaluation of M. Comments Related to Section 226.20 States and the Osage Nation (formerly those comments (as set forth in Section N. Comments Related to Section 226.25 known and referred to in Rule 226 as IV below) were adopted in BIA's final G. Comments Related to Section 226.27 the "Osage Tribe") signed a Settlement rule as published herein and as set forth P. Comments Related to Section 226.29 Agreement to resolve litigation in Table 2. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 26995

TABLE 1

Current 25 CFR section Final rule section Final rule change

Part 226 ...... Part 226 ...... Throughout the final rule the use of "Osage Tribal Council" has been deleted and replaced with "Osage Minerals Council" ("OMC") because the former no longer exists and the lat- ter holds the authority to make decisions regarding the Osage minerals estate. Similarly, all references to "lease cancellation" in the existing rule have been changed to "lease termination," unless the reference in the final rule is to a voluntary lease cancellation by a lessee. Also, to clarify time deadlines, all references to due dates are to be uniformly calculated by calendar days, unless specifically noted otherwise. In addition, the final rule adds the term "other marketable product" to existing references to oil and gas in order that other minerals will not leave a gap and resulting in unregulated minerals. 2 2 6 .1 ...... I 2 2 6 .1 ...... The final rule deletes the terms "contract" and "agreement" and substitutes the term "lease"; provides definition for a "lease;" clarifies that "an authorized representative of a lessee" is bound by those regulations that apply to the lessee represented; deletes the definition for "major purchaser" because it is no longer relevant; replaces and combines the definitions for "casinghead gas" and "natural gas" into one definition for "raw natural gas" and "gas"; adds definitions for the additional following new terms: "avoidably lost," "condensate," "drainage," "marketable condition," "maximum ultimate economic recovery," "natural gas liquids," "notice to lessee," "onshore oil and gas order," "other marketable product," "production in paying quantities," "surface owner," and "waste of oil and gas or other marketable product". N/A ...... 226.2 (New) ...... The final rule sets forth sources of governing requirements for activities in Osage County related to oil and gas and the development of "other marketable products". N/A ...... 226.3 (New) ...... The final rule sets forth the authority of Bureau of Indian Affairs ("BIA") to issue certain notices and orders after consultation with the OMC. N/A ...... 226.4 (New) ...... The final rule enumerates the responsibilities and authority of the Superintendent with respect to management and administration of the Osage mineral estate. 2 2 6 .2 ...... 1 2 2 6 .5 ...... The final rule breaks the prior regulation into subparts and removes references to oil and gas in paragraphs (b) and (d), extends the time for a successful bidder to deposit his/her payment, requires that payment be made in a specified form other than cash; increases the filing fee for submitting a completed lease form; enumerates the circumstances in which a portion of the bonus bid will be forfeited; requires that the Superintendent post legal descriptions within 30 days of a lease sale; and authorizes the OMC to request comparable lease sales data from the Superintendent. 2 2 6 .3 ...... 2 2 6 .6 ...... The final rule increases the filing fee, adds requirements regarding lessee's responsibility for plugging and abandoning wells upon surrender, and deletes the reference to allowing surrender of separate horizons. 2 2 6 .4 ...... 2 2 6 .7 ...... The final rule amends the provision to allow the Superintendent to specify the manner and method of payments due under a lease or regulation. 2 2 6 .5 ...... 2 2 6 .8 ...... No substantive change from current rule. 2 2 6 .6 ...... 2 2 6 .9 ...... The final rule sets forth each bonding requirement in its own paragraph to improve readability, it adds personal bonds to surety bonds as acceptable bonding methods, it sets forth the requirements for personal and surety bonds and changes the bonding amount from a per lease-area bond to a $5,000 per well bond for up to 25 wells. The final rule also adds back in nationwide bonding, which was not in the proposed rule. 226.6(d) ...... 226.10 ...... The final rule moves the provision allowing the Superintendent to increase the amount of a required bond to its own section and amends the previous provision under which the Su- perintendent can increase the amount of a bond. N/A ...... 226.11 (New) ...... The final rule sets forth the circumstances under which the Superintendent must release a bond. 2 2 6 .7 ...... 226.12 ...... No substantive change from current rule. 2 2 6 .8 ...... 226.13 ...... No substantive change from current rule. 2 2 6 .9 ...... 226.14 ...... The final rule sets forth each current requirement in its own paragraph to improve readability. It also increases rental rates, clarifies the lessee's responsibility for diligent development, adds a new provision allowing the Osage Minerals Council to request a determination as to the diligent development of a lease and new procedures for the automatic termination of a lease for failure to diligently develop. N/A ...... 226.15 (New) ...... The final rule sets forth lessee's new obligations to protect land from drainage of its oil or gas content by wells outside the lease N/A ...... 226.16 (New) ...... The final rule specifies the Superintendent's new remedies for requiring protective action once drainage has occurred. 2 2 6 .10 ...... 226.17 ...... No substantive change from current rule. 2 2 6 .1 1 ...... (See below) ...... The final rule divides the current section on royalties into several new sections to improve readability, as shown below. 226.11(a) ...... 226.18 ...... The final rule clarifies that royalty may be taken in-kind. It also amends the royalty rate calculation for oil, subject to a price adjustment for gravity. N/A ...... 226.19 (new) ...... The final rule sets forth how the gravity adjustment is calculated. 226.11(b) ...... 226.20 ...... The final rule amends the royalty rate calculation for gas and specifies how gross proceeds are calculated; allows the Superintendent to direct that gross proceeds be calculated in an alternative manner where reasonable cost of processing cannot be obtained; and adds a minimum royalty provision. N/A ...... 226.21 (new) ...... The final rule provides that royalty must be paid for any oil and gas avoidably lost and allows the Superintendent to determine the volume and quality of the lost oil and gas. 26996 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

TABLE 1-Continued

Current 25 CFR section Final rule section Final rule change

226.11 (c) ...... 226.22 ...... The final rule amends the date for payment of royalties and adds provision for adjusting the minimum royalty. 226.11 (e) ...... 226.23 (New) ...... The final rule sets forth the minimum royalty due for "other marketable products" and clarifies that it is in addition to any royalty that may be due on oil or gas. 226.12 ...... 226.24 ...... The final rule amends the reference to royalty payment to ensure that the federal government purchases oil consistent with the new requirements. 226.13(a) ...... 226.25 ...... The final rule requires lessees to provide a written agreement when purchaser is the party responsible for payment; provides procedure for making royalty payments and late payments; describes how royalty payments are made; and deletes the provision allowing the Osage Minerals Council to waive late charges with approval of the Superintendent. 226.13(b), (c) ...... 226.26 ...... The final rule sets forth those reports that lessees must submit to the Superintendent and further specifies the format and content of those reports. The final rule also adds a requirement that the Osage Minerals Council be copied on all such reports, as well as es- tablishing the date that the monthly reports are due. 226.14 ...... 226.27 ...... The final rule sets forth each current requirement for division orders in its own paragraph to improve readability. It also extends the due date in paragraph (b) for submitting the reporting statement for oil and gas sold should the due date fall on a weekend or holiday. 226.15 ...... (See below) ...... The final rule divides the current section on lease unitizations and assignments into several new sections to improve readability, as shown below. 226.15(a) ...... 226.28 ...... No substantive change from current rule. 226.15(b) ...... 226.29 ...... The final rule sets forth each current requirement in its own paragraph to improve readability. It also adds provisions relating to the responsibilities and liabilities of assignors and assignees and deletes the provisions that allowed for the assignment of separate lease horizons. 226.15(c) ...... 226.30 ...... No substantive change from current rule. 226.15(d) ...... 226.31 ...... No substantive change from current rule. 226.15(e) ...... 226.32 ...... No substantive change from current rule. N/A ...... 226.33 (New) ...... Sets forth the general requirements governing leasing operations. 2 2 6 .16 ...... 226.34 ...... The final rule sets forth each current requirement in its own paragraph to improve readability and adds specific reference to the existing requirement that the Superintendent comply with the National Environmental Policy Act and the National Historic Preservation Act where applicable. 2 2 6 .17 ...... 226.35 ...... No substantive change from current rule. 2 2 6 .18 ...... 226.36 ...... The final rule reformats this section to improve readability. It also adds requirements for notice to surface owners before lessees conduct certain activities and eliminates any dif- ference in notice based on the surface owner's residence status as within or outside Osage County. 226.19(a) ...... 226.37 ...... The final rule sets forth in its own paragraph each current aspect of a lessee's rights and responsibilities in using the surface of the land to improve readability. It also adds a provision requiring notification to the lessee and surface owner before the Superintendent sets the routing of pipelines, electric lines, etc. 226.19(b), (c) ...... 226.38 ...... The final rule sets forth each current requirement with respect to commencement money into its own paragraph to improve readability. It also increases the amount of commencement money the lessee must pay the surface owner. 226.19(d) ...... 226.39 ...... The final rule increases per tank siting fees and provides for arbitration to determine fees to be paid for tanks occupying more than 2500 sq. feet if the parties are unable to agree. 226.20 ...... 226.40 ...... No substantive change from current rule. 2 2 6 .2 1 ...... 226.41 ...... No substantive change from current rule. N/A ...... 226.42 (New) ...... The final rule sets forth additional obligations with respect to lessee's obligation for production and marketability. N/A ...... 226.43 (New) ...... The final rule requires documentation for transportation of oil, gas or other marketable product to enable the Superintendent to inspect and confirm proper transportation. 226.22 ...... 226.44 ...... The final rule sets forth each current requirement in its own paragraph to improve its readability. It also adds provisions in paragraph (e) clarifying that pits or tanks used for col- lecting deleterious fluids must have fencing and be removed and reclaimed immediately after operations. N/A ...... 226.45 (New) ...... The final rule sets forth a lessee's specific environmental responsibilities and obligations while conducting operations. N/A ...... 1 226.46 (New) ...... The final rule requires certain safety standards and equipment for lessee operations, as well as compliance with the National Electric Code. 226.23 ...... 226.47 ...... The final rule adds a provision requiring the Superintendent to notify or attempt to notify surface owners before decisions are made with respect to easements of leased premises. 226.24 ...... 226.48 ...... No substantive change from current rule. 226.25 ...... 226.49 ...... The final rule has reformatted this section on the responsibility of other types of lessees when they are not the lessee drilling in order to improve its readability. It also deletes prior/current requirements that wells be plugged if no apportionment agreement is accepted, making the Superintendent's decision on apportionment final. 226.26 ...... 226.50 ...... No substantive change from current rule. 226.27 ...... 226.51 ...... The final rule adds general requirement that gas for tribal use must be odorized and treated to ensure public safety. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 26997

TABLE 1-Continued

Current 25 CFR section Final rule section Final rule change

226.28 ...... 226.52 ...... The final rule provides new standards for determining whether a well may be permanently abandoned on a showing that it is incapable of future profitable production, as opposed to being capable of producing in paying quantities. 226.29 ...... 226.53 ...... The final rule has reformatted this section to improve its readability. In paragraph (a), it also eliminates an exception for termination of a lease, other than for cause. In paragraph (c), it also adds a requirement that a Superintendent's orders for plugging a well must be in writing, as well as eliminating the fee for submitting an application to plug a well. 226.30 ...... 226.54 ...... The final rule divides paragraph (b) into two provisions, thereby adding a paragraph (c). It also adds paragraph (d), which requires that lessees maintain records for a period of 6 years, unless notified to maintain certain records for a longer period. 226.31 ...... 226.55 ...... The final rule deletes the provision applying when several parties own a lease jointly allowing the designation of a representative be made by the party in charge of operations when several parties own a lease jointly, to requiring that all of the parties must jointly designate the representative. 226.32 ...... 226.56 ...... The final rule reformats this section to improve its readability. 226.33 ...... 226.57 ...... No substantive change from current rule. 226.34 ...... 226.58 ...... The final rule adds a requirement that wells and tank batteries be marked with lessee's name. 226.35 ...... 226.59 ...... No substantive change from current rule. 226.36 ...... 226.60 ...... The final rule adds paragraphs (b)-(f), which require safety precautions for drilling wells generally, drilling vertical wells, maintaining and controlling high pressure or loss of circulation in wells, protecting fresh water and other minerals and ensuring safety and protection when hydrogen sulfide gas is present at certain levels by adopting BLM On-Shore Oil and Gas Order 6. 226.37 ...... 2 2 6 .6 1 ...... No substantive change from current rule. 226.38 ...... 226.62 ...... The final rule adds paragraphs (b)-(d), which specify requirements for measuring, calibrating and adjusting meters, including notice to and follow-up by the Superintendent; require notification to the Superintendent when an oil tank is ready for removal or for witnessing gaugings, and provide that repeated failures to comply with the new provisions subject the lessee to lease termination after consultation with the Osage Minerals Council. 226.39 ...... 226.63 ...... The final rule adds paragraphs requiring measurement of gas to be done in accordance with BLM Onshore Oil and Gas Order 5, specify a lessee's obligations for calibrating, inspect- ing and adjusting meters, including notification and inspection by the Superintendent, and provide that repeated failures to comply will subject the lease to termination after consultation with the Osage Minerals Council. 226.40 ...... 226.64 ...... No substantive change from current rule. N/A ...... 226.65 (New) ...... The final rule sets forth specific safety and other requirements to ensure proper site security. 2 2 6 .4 1 ...... 226.66 ...... The final rule adds requirements to ensure that incidents are reported in a timely manner, that notification is provided when environmental or other types of accidents occur, specifying who must be notified, including impacted surface owners. 226.42 ...... 226.67 ...... The final rule allows lease provisions for different fines and penalties, and it deletes the provision allowing the Osage Minerals Council to waive late charges. 226.43 ...... 226.68 ...... No substantive change from current rule. 226.44 ...... 226.69 ...... No substantive change from current rule. 226.45 ...... 226.70 ...... No substantive change from current rule. 226.46 ...... 226.71 ...... The final rule adds information concerning approval of OMB and the assigned OMB Control Number.

Table 2 below sets forth the rule to the text of the proposed rule as for each of these changes is discussed in substantive changes made in the final published August 28, 2013. The basis the next section of this preamble. TABLE 2

Section Final rule's change to proposed rule

2 2 6 .1 ...... The final rule adds a definition for "surface owner", references "other marketable product" in the definition of "lease" and "Osage Minerals Council" and amends the definition of "waste of oil or gas or other marketable product." 2 2 6 .2 ...... The final rule adds a reference to other marketable products. 2 2 6 .3 ...... The final rule deletes the reference in 226.3(a) to the Administrative Procedure Act and replaces it with "applicable law and regulations" and also adds the phrase "where appropriate" after the reference to consultation with the Osage Minerals Council because not all of the items listed in the provision are subject to the APA or the Department's Consultation Policy. 226.4(a)(4) ...... The final rule deletes reference to "other" as unnecessary. 226.4(a)(10) ...... The final rule adds the phrase "unless otherwise approved by the Superintendent" at the end. 2 2 6 .4 (b ) ...... The final rule removes provisions that allowed the Superintendent to issue oral orders. 2 2 6 .4 (c) ...... The final rule adds a requirement that any history of noncompliance be documented. 226.5(a)(4) (ii) ...... The final rule removes the phrase "twenty five percent of the bonus bid" at the beginning of the provision and adds a reference to paragraph 5 in subparagraph (c). 26998 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

TABLE 2-Continued

Section Final rule's change to proposed rule

2 2 6 .5 (b ) ...... Deletes references to oil and gas as unnecessary. 226.5(d) ...... Language added to end of the provision to clarify that the environmental analyses will be completed in accordance with existing Bureau procedures. 2 2 6 .5 (f) ...... Amends the reference to corporation 2 2 6 .6 ...... The final rule deletes the reference to "surrender of a separate horizon" in (b)(4). It also adds a paragraph (c) that requires the Superintendent to determine that wells have been plugged and abandoned or that legal liability therefore has been otherwise assumed before approving surrender or partial surrender of a lease. 2 2 6 .9 ...... The final rule adds paragraph (f), which allows for a bond for nationwide coverage in lieu of a surety or personal bond. 2 2 6 .1 1 ...... Paragraph (c) was deleted. 2 2 6 .1 4 ...... The final rule changed time period for non-production of a lease from 90 days to 120 days in paragraph (e) and the deadline for requesting a temporary suspension of operations to 20 days prior to the expiration of the 120- day period, rather than the 45th day in which the lease has not produced. The final rule also deletes waiver language and adds a requirement of good cause in order for the Superintendent to extend a temporary extension. 2 2 6 .1 5 ...... In paragraph (b), the final rule replaces the reference to "in paying quantities" with "for a reasonable profit". It also adds that assignors are liable for drainage upon determination of the Superintendent 2 2 6 .1 8 ...... Paragraph (a) of the final rule was amended to allow royalty to be taken in kind. In paragraph (b) the provision regarding time for payment was deleted, and in subparagraph (b)(2) the reference to NYMEX was moved to subparagraph (b)(1). 2 2 6 .2 0 ...... In paragraph (b) of the final rule, the calculation for determining gross proceeds was amended and a method for determining the heating value of gas was added. In paragraph (c) the reference to 1206.173 was replaced with a reference to 1206.180(a)-(b). 2 2 6 .2 0 ...... The final rule defines how the minimum royalty is to be calculated, and it deletes paragraph (d). 2 2 6 .2 5 ...... In paragraph (a), the final rule adds a provision requiring that the Superintendent be notified if the purchaser is the responsible party for making payment. In paragraph (b), it deletes the provision stating "unless otherwise provided by the Osage Minerals Council and approved by the Superintendent," in an effort to standardize and ensure prompt, consistent payments. Paragraph (c) was revised to reference back to paragraph (a) and to delete language allowing other rates to be set and the waiver of late fees. 2 2 6 .2 7 ...... In paragraph (a) at the end, the words "his lease" are replaced with "Section 226.25". In paragraph (b), the provision allowing the Superintendent to authorize extensions was deleted. 2 2 6 .2 9 ...... The final rule deletes the provision allowing assignment of separate horizons. It also adds paragraphs (a)(i) and (a)(ii), which specify the liability and obligations of both the assignor and assignee when a lease is assigned. 2 2 6 .3 4 ...... The final rule explicitly requires compliance with NEPA and NHPA. 2 2 6 .3 6 ...... In paragraph (b), the final rule requires the Superintendent to notify or attempt to notify both the surface owner and the lessee of their opportunity to meet and submit information before the Superintendent issues a decision. 2 2 6 .3 7 ...... The final rule adds a requirement that the Superintendent to notify or attempt to notify both the surface owner and lessee before setting routes. 226.40(a) ...... The final rule deletes the last sentences referencing a court of competent jurisdiction and replaces it with an express reference to 226.41, which provides for the same relief after compliance with the dispute resolution provisions. 2 2 6 .4 4 ...... The final rule adds requirements for pits or tanks containing deleterious fluids in order to protect the environment. 2 2 6 .4 6 ...... The final rule adds a requirement for compliance with the National Electric Code. 2 2 6 .4 7 ...... The final rule adds a requirement for the Superintendent to notify or attempt to notify both surface owner and lessee before easements are granted. 2 2 6 .5 2 ...... The final rule amends the provision allowing wells to be permanently abandoned if they are no longer capable of producing in paying quantities rather than for lack of further profitable production. 2 2 6 .5 3 ...... In paragraph (a), the final rule deletes the provision that creates an exception for termination of a lease other than for cause, and paragraph (c) adds a requirement that the Superintendent's orders for plugging a well be in writing. 226.55(b) ...... In the final rule, the provision allowing the designation of the parties' representative to be made by the "party in charge of operations" was deleted and changed to require that all of the parties must jointly designate a representative. 2 2 6 .6 2 ...... The final rule in paragraph (c) deletes the provision regarding penalties and the adjustment provision for penalties. 2 2 6 .6 6 ...... The final rule clarifies that accidents include environmental and other types of accidents. It also requires the reporting of thefts within one business day, rather than "promptly" and requires lessees to notify, or attempt to notify, the surface owner or agent in writing. Subpart F (226.67-68) ...... The final rule reverts to the language in the current/prior version of the regulation and deletes the Committee's recommendations for penalties for violations of lease terms, instead adding a provision that the lease can specify alternative fines and penalties. In 226.68() the provision regarding criminal penalties was deleted as unnecessary because criminal laws are applicable irrespective of their inclusion or reference within these regulations.

IV. Explanation of Changes Made in review, in addition to its review and references to "other marketable Response to Departmental Review analysis of the public comments. This product" in the definitions of "lease" In drafting the final rule, the section sets forth those the changes and "Osage Mineral Council" in order Department made revisions to the made as a result of that internal review. to fully incorporate the addition of the proposed rule based on its own internal In Section 226.1, the Department added term "other marketable product" into Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 26999 the regulations. Without these changes, In Section 226.5(a)(4)(ii), the phrase In Section 226.22, the Department the Department was concerned that "twenty five percent of the bonus bid" revised how minimum royalty is "other marketable product" would not at the beginning of the provision was calculated because, as set out in the have been fully and consistently deleted because it was inconsistent with proposed rule, the provision confuses referenced as part of the Osage minerals subsection (a)(3). That subsection separate lease concepts. Minimum estate, which was the original intent of requires that a minimum deposit of royalty is a separate lease term and not the Negotiated Rulemaking Committee. twenty five percent of the cash bonus be a subset of royalty, and Section 226.22 For the same reason, references to offered, but it is possible for additional is not about underpayment of minimum "other marketable product" were added amounts to be deposited, and the intent royalty, but about the occurrence of a to Section 226.2 and the words "oil and of Section 226.5(a)(4)(ii) is for all of the circumstance that triggers the obligation gas" were deleted from 226.5(b) and (d), deposit to be forfeited under certain to pay minimum royalty. so that the provision references all circumstances. Section 226.5(a)(4)(ii)(C) In Section 226.25, the Department leases generally. was amended to add a reference to added a requirement to subsection (a) The Department revised the definition subsection 5 for clarification purposes. that requires lessees to provide a written of "waste of oil or gas or other To address confusion within Osage agreement if the purchaser has agreed to marketable product" to clarify that County regarding the applicability of be the responsible party for making waste only occurs after the environmental laws, Section 226.5(d) payments. This change is intended to Superintendent makes a specific was amended to clarify that the Agency reduce the administrative burden placed finding. The Department was concerned must comply with applicable laws, on the Superintendent when having to that without that change, the regulations including the National Environmental determine the responsible party. Also, a would suggest that any production Policy Act (NEPA), before issuing leases cross-reference to subsection (a) was without the advance approval of the and will do so by following applicable added to subsection (c) for consistency. Superintendent would be considered BIA regulations. Section 226.5(f) was In addition, the phrase "unless waste, resulting in unnecessary amended to delete the reference to otherwise provided by the Osage administrative burdens. ownership of stock and instead Minerals Council and approved by the In 226.3, the Department qualified reference an employee who acquires an Superintendent" was deleted to that that consultation with the Osage interest in a corporation or business standardize and ensure prompt, Minerals Council is required where entity holding a lease, because one consistent payments. For the same appropriate and notes that consultation cannot acquire an "interest in a lease" reason, and to aid in the administrative must be conducted in accordance with by merely owning stock in a company. implementation of the provision, the the Department's Tribal Consultation In Section 226.6(b)(4), the Department Department deleted the provisions in Policy where applicable. Similarly, the deleted the reference to surrender of a subsection (c), allowing the notice and comment requirements of the Superintendent to set other rates for late separate horizon because the Osage Administrative Procedure Act (APA) do fees and allowing the Osage Minerals Agency does not lease or sublease by not apply to each of the proposed Council to waive late fees, with separate horizons, in light of the actions and the reference to requiring approval by the Superintendent. adherence to the APA has been removed administrative burdens those In Section 226.27(a), the Department to avoid any presumption that arrangements have caused in the past. added that royalty payments on division notwithstanding the limitations of the Furthermore, allowing surrender of orders or contracts must be made in APA, it automatically applies. Rather, it separate horizons causes similar accordance with Section 226.25, since it should be noted that the APA only problems and is not permitted is Section 226.25 that governs payments applies where required by law. For elsewhere on other Indian and Federal of royalties and all leases are subject to example, notices to lessees (NTLs) are lands. the regulations. And, in subsection interpretive rules that are not subject to The Department deleted subsection 226.27(b,) the provision allowing the the notice and comment requirements of (c) in 226.11 because it was repetitive of Superintendent to authorize extensions the APA. See e.g., Perez v. Mortgage the prior paragraph and the release was deleted in order to reduce the Bankers Assoc., No. 13-1041, U.S. language was moved to the beginning considerable administrative burden on (March 9, 2015). for clarification. In 226.14(c), the 90 day the Superintendent of having to The Department deleted the word timeline for a determination on diligent consider requests for extensions on a "other" from 226.4(a)(4) because it was production was deleted because it is case by case basis. confusing. The Superintendent is considered overly burdensome, The Department added provisions in responsible for approving and administratively. Instead, a provision 226.29 to clarify liability for wells and monitoring all lease proposals, not was added that allows the related facilities once a lease is "other" lease proposals. Superintendent to require the lessee and assigned. The Department found that The phrase "unless otherwise Osage Minerals Council to submit there has been a concern both by surface approved by the Superintendent" was additional information so that he/she owners during the negotiated added to the end of Section 226.4(a)(10) can make an informed determination. rulemaking and the Office of Inspector because as drafted it did not allow the In Section 226.18, the Department General with respect to the Superintendent to approve actions that amended subsection (a) to allow royalty abandonment of wells within Osage might have adverse effects on other to be taken in kind so that the provision County. The new provisions regarding mineral resources. However, there might is consistent with subsection (b). In liability will provide additional be instances where the Osage Minerals 226.18(b), the provision regarding time protections for enforcement after a lease Council wants to allow certain mining for payment was deleted because timing is assigned and provide greater clarity to have adverse effects on other lesser of payment is governed by Section and transparency regarding lessee mineral resources, and the Department 226.25, and in subparagraph (b)(2) the obligations. determined that the Superintendent provision relating to the availability of In 226.34, the Department added a must retain discretion to approve those the average NYMEX daily price was new provision making clear that NEPA actions depending on the moved to subparagraph (b)(1) to correct and the National Historic Preservation circumstances. an error in the proposed rule. Act (NHPA) continue to apply within 27000 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

Osage County. These are not new legal Osage with some potential increased affected parties as part of the Negotiated requirements and do not create new costs to industry. Moreover, this Rule Rulemaking Committee. Some of these responsibilities over what is already brings Osage closer in line to how oil commenters suggested that the actual required. However, the Department and gas operations are regulated on process of the rulemaking normally determined it was necessary to other Indian and Federal lands and takes 2 years to ensure that all expressly recognize these reflects the availability of new interested parties may be properly responsibilities in the Rule given technology and improved industry notified of the proposed rule changes, confusion within Osage County with standards since the regulations were be given adequate time to comment and respect to the Agency's and lessees' initially promulgated. understandhow new regulations will duties under NEPA and NHPA. The Some commenters stated that the impact private citizens. Whereas, Department also added an express proposed regulations should not be commenters stated that in this requirement that, where applicable, approved because the Bureau is already circumstancethe rule making was requires the lessee to submit certain short-staffed and has no budgetary pushed through in a little over seven information to aid the Agency in resources to handle the additionalwork months resultingin a lack of due meeting its obligations under NEPA and and explained that the proposed process and a one-sided nature of the NHPA. changes will threaten oil lessees and proposed rules. The Department amended Section have negative impacts on Osage The Department does not believe it is 226.52 to allow for the permanent headright owners quarterlypayments. necessary to restart the negotiated abandonment of a well upon a showing These comments do not relate to the rulemaking process. Formation of the that the well is no longer producing in rule but to internal agency operations Negotiated Rulemaking Committee was paying quantities, rather than a showing that are outside the scope of the first announced in the Federal Register of its lack of further profitable rulemaking. However, the Osage Agency on June 18, 2012, and the final production of oil, because the standard developed a staffing plan in 2013 to Committee was announced on July 31, for showing that a well is no longer address concerns regarding lease 2012. All meetings of the Committee producing in paying quantities is more enforcement and compliance issues. were published in the Federal Register objective, less administratively The Osage Agency requested additional at least thirty (30) days in advance, as burdensome to determine, and funding as part of its Fiscal Year (FY) well as, posted at the Osage Agency and consistent with the standard applied 2014 and 2015 budgets, which will be the Osage Minerals Council offices. with respect to Indian leases outside of incorporated into its base funding for Throughout the process, the Committee Osage County. the FY 2016 budget cycle. The Osage provided extensive opportunity for Agency has also created 13 additional public comment during meetings and V. Comments on the Proposed Rule and positions for inspections, enforcement also welcomed written comment Responses and lease compliance, lease between meetings. Issues raised during A. Overview/General management and oil and gas accounting. that process included, but were not While compliance with the regulations limited to, the benchmark index, Several commenters stated that it was may result in some additional upfront bonding fees and requirements, and not necessary to change the regulations costs to both industry and the Bureau, commencement fees. Other matters were and that the proposed changes to the the majority of the new regulations also discussed across multiple meetings, regulations would make oil and gas address shortfalls that resulted in the recorded in meeting summaries, and operationsin Osage County more Osage's lawsuit against the United proposals to the regulations were cumbersome and costly to the industry States for breach of trust related to adjusted where the Committee because the burden is being put entirely mismanagement of the Osage minerals determined it appropriate, in multiple on the lessees. estate, including royalty collection, drafts of the regulations during that During the negotiated rulemaking it auditing, accounting, record keeping, process. The administrative record was explained that the United States inspections and lease compliance. There shows, through the meeting summaries was sued by the Osage for breach of was also no evidence presented to show from the Committee meetings, that the trust with respect to management and that finalization of the rule would Committee not only provided administration of the Osage minerals negatively impact royalty payments, substantial time for public comment, estate. The United States settled with rather the rule has increased protections but the Committee also engaged the Osage for $380 million and, as part for ensuring royalty collection and extensively with commenters in of the settlement, agreed to engage in a provisions to ensure that lessees are dialogue. Committee members asked negotiated rulemaking to revise the calculating royalty in a manner that questions and explored options with the regulations governing Osage in order to minimizes third party manipulation. commenter, and sought to reach an improve the management and Some commenters suggested that accommodation or revision where administration of the minerals estate. management and enforcement of appropriate. Overall, the Committee Further, not all of the regulations are regulations governing surface use and provided 21 public comment sessions being revised. To the extent that some lease violations is key. totaling some 18.25 hours of public of the regulations are revised, the These comments relate to agency comment during the eight meetings over Department acknowledges that there operations and implementation and do its August 2012 to April 2013 process. may be some additional upfront costs to not relate to any particular regulation. On April 2, 2013, the Committee met for ensure compliance with the regulations. The Department agrees that its final meeting and concurrence on a However, the regulations are necessary management and enforcement of the proposed package of revised regulations to improve management and regulations is key and has worked over was reached between the Federal caucus administration of the Osage mineral the last few years to address staffing and Osage caucus. estate. Overall, given the Osage tribal concerns and budgetary limitations at The Departmentreceived numerous trust litigation and resulting settlement, the Osage Agency. form letters generally opposing the the Department had to balance the need Numerous commenters suggested that regulations and suggesting that making to ensure that the regulations fulfill the the Departmentrestart the negotiated the lessees within Osage County comply United States trust responsibility to the rulemaking process and include all with Bureau of Land Management (BLM) Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27001 regulations will make Osage lose its This is a legal issue outside the scope Executive Orders 12866 and 13175 appeal as a one-stop shop and asserting of the rulemaking. The Department does because it adversely affects the Nation that the regulations will lengthen the not need to address the impacts, if any, and its members. The proposed rule drilling permittingprocess, diminish the of the Irby case in order to revise these also has tribal implications and requires Osage minerals estate and impact regulations. The United States holds the the Bureau to incur new costs that income generated. Osage mineral estate in trust and the require consultation with the Nation. The Department acknowledges that Secretary has authority under the Act of There is no evidence that the Bureau some of the new provisions in the June 28, 1906, § 3, 34 Stat. 539, as has consulted with the Nation. regulations are modeled after existing amended, to promulgate regulations to Pursuant to the Osage Tribal Trust Federal regulations governing oil and manage and administer the mineral Settlement, the Bureau is required to gas on other Indian and Federal lands estate, and this Rule is being consult twice annually with the Osage governed by BLM. However, under the promulgated pursuant to that authority. Minerals Council, the duly elected rule, BLM is not delegated with the At least one commenter requests that governing body within the Osage Nation responsibility for oil and gas operations the Departmentand the Osage Minerals that oversees the Osage mineral estate. within Osage County. Rather, BIA has Council enter into a cooperative Throughout the Negotiated Rulemaking that responsibility. Additionally, it is agreement with the State of Oklahoma Process, the Bureau held its required relevant to note that some commenters to delegate responsibilityfor consultations to discuss the rulemaking noted their disagreement with the form management and administrationof oil process and other issues with the Osage letters submitted opposing the proposed and gas operations to the State. Minerals Council. During those regulations. This comment does not relate to the meetings a tribal representative of the At least one commenter requested revised regulations and is outside the Nation was invited and present. that the Departmentamend the rules so scope of the rulemaking process. It is Additionally, the Negotiated that they properly recognize the State of relevant to note that one commenter Rulemaking Committee was comprised disagreed with the request for a Oklahoma'sprimacy and exclusive role of duly appointed members of the Osage cooperative agreement that gives the in environmental regulation of oil and Minerals Council. State administrative jurisdiction in gas exploration and production At least one commenter requested Osage County and cites, 25 U.S.C. la & activities in Osage County as well as the that the Bureau make more information 9, noting that Congress granted State's right to regulate the waters available to surface owners and the authority over Indian Affairs to the within its borders. The commenter public with respect to operations within President. This commenter also cited 25 asserted that the State is better Osage County, including but not limited CFR 1.4(a), for the proposition that the equipped to freshwater aquifermaps, well to design, administerand President, acting on his authority, has location maps, mineral lease-holder enforce laws and regulationsrelated to specifically excluded States from maps and contact information, oil and gas development. exercising jurisdiction over Indian and lease inspection reports. The commenter The United States holds the Osage property, including Indian water rights; mineral estate in trust pursuant to the and further cited legal precedent for the suggested that lessees should be Act of June 28, 1906 § 3, 34 Stat. 539, proposition that the Department cannot required to report the amount and type 543-44, amended in relevant part by delegate authority to a State without of chemicals used in any hydraulic Act of March 2, 1929, 45 Stat. 1478 tribal consent and the Osage Nation has fracturingoperation to (extending restricted trust status of not consented to such jurisdiction or www.fracfocus.org. mineral estate to 1959); Act of June 24, delegation. See Assiniboine and Sioux These comments are not within the 1938, 52 Stat. 1034 (extending restricted Tribes of the Fort Peck Indian scope of this rulemaking. However, as trust status of mineral estate to 1983); Reservation v. Bd. Of Oil and Gas an operational matter, the Bureau is Act of Oct. 21, 1978, 92 Stat. 1660 Conservation of the State of Montana, exploring opportunities to make oil and (extending restricted trust status of 792 F.2d 782 (9th Cir. 1986). gas operations more transparent by mineral estate in perpetuity). Thus, the At least one commenter suggested possibly developing a Web site that United States, through the Department, that the rule should reflect the separate would contain pertinent information, has a non-delegable fiduciary obligation and unique relationships(a) between consistent with the Freedom of to manage the mineral estate for the the Department of the Interior,and the Information Act requirements, with benefit of the Osage. It is relevant to Osage headrightholders, Osage Mineral regards to oil and gas activities within note that one commenter disputed the Estate, and the Osage Minerals Council the Osage County. assertion that the State is better under the 1906 Act; and (b) between the At least one commenter suggested equipped to address oil and gas leasing Department and the Osage Nation that the Departmentcommit to regularly in Osage County and explains that the under the 2004 Act. publish monthly statistical data, provide Osage Nation and the United States This comment does not relate to the headrightholders with detailed have more experience and knowledge in revised regulations and is outside the statements regardingoperational and administering and enforcing oil and gas scope of the rulemaking process. The royalty data, provide all relevant data to leases in Osage County. The first lease United States holds the Osage mineral the Minerals Council, and develop an in Osage County was developed in 1896, estate in trust under the Act of June 28, accessible and auditable database. eleven years before creation of the State, 1906, § 3, 34 Stat. 539, as amended, and This comment is outside the scope of and the United States has regulated and the revised regulations only pertain to the rulemaking. The Osage Agency managed the Osage mineral estate since the United States' responsibilities to the regularly provides detailed information 1896. Osage as defined in that Act. The 2004 regarding the Osage mineral estate to the At least one commenter objected to Act, Public Law 108-431, 118 Stat. 2609 Osage Minerals Council on a regular references to "reservation lands" in (Dec. 3, 2004) speaks to tribal basis and, consistent with the Freedom Osage County and asserts that the membership issues for purposes other of Information Act, headright holders reservation was disestablishedin Osage than those defined by the 1906 Act. may request information relating to the Nation v. Irby, 597 F.3d 1117 (1Oth Cir At least one commenter suggested Osage mineral estate from the Osage 2010). that the proposed rule likely violates Agency. 27002 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

At least one commenter suggested that provides information regarding the The Department believes the current that the mineral estate be independently source, type, and status of the funds in definition of Osage Minerals Council in audited under the auspices of the the mineral estate account, the the Rule is consistent with this Department's Office of Inspector beginning and ending balance for the comment and reflects that the Osage General and that the audit results be period reported, all gains and losses in Minerals Council is a duly elected provided to headrightholders. the account and all receipts and governing body within the Osage This comment is outside the scope of disbursements for the account. Nation. the rulemaking process. The Department At least one commenter suggested At least one commenter sought notes, however, that the Office of that in any provision where the clarification on the definition of "Other Inspector General (OIG) issued a regulations require consultation with Marketable Product" because it is publicly available report on the Osage the Osage Minerals Council, such unclearwhether language 'for which Agency in October 2014 (No, CR-EV- references should be replaced with there is a market" refers to a local BIA-0002-2013). That report states that "approval by the Osage Minerals market or any national or international the Osage Agency needs to institute Council." market. For example, simply because substantial changes to improve the The Secretary, not the Osage Minerals carbon-dioxidemay be selling in management and administration of the Council, has been delegated the Montana, does not mean there is a Osage mineral estate, and further authority to manage the Osage mineral willing buyer or market for an Osage provides that many of the OIG's estate by Congress. Thus, while the lessee. proposed recommendations and Bureau is willing to consult with the The Department does not believe that concerns will be addressed upon Osage Minerals Council on matters there is a need to further expand the finalization of this rule. relating to the Osage mineral estate, it definition. "[F]or which there is a Some commenters requested that must retain its ability to take corrective market" was intended to be left STRONGER should be invited to do an actions against lessees that are in sufficiently broad to mean any market audit of the Osage Agency and provide violation of the regulations, including which there is a demand that makes it recommendationsfor transparency, economically feasible to develop the termination of the lease after accountabilityand enforcement, as well non-hydrocarbon. consultation with the Osage Minerals as to strengthen regulations. At least one commenter suggested This comment is outside the scope of Council (Sections 226.25(c), 226.62(b)- that the definition of "royalty" be (c), 226.63(c), the rulemaking. Moreover, STRONGER 226.67, and 226.70). In amended to reflect the many diverse is an organization that focuses on State, addition, the Department must retain types of payments made by lessees not Federal, reviews of oil and gas the discretion to make changes to the included in the draft regulations, save regulations and best management regulations in the future. for tank fees and fees to arbiters. practices. As noted in response to other At least one commenter has requested Royalty is not defined in the comments, the Department's OIG has that the reference to "for the benefit of definitions section of the rule, but is recently performed an audit of the the Osage" needs to be changed to "for defined by the amount a lessee must pay Osage Agency and has issued a public the benefit of the Osage shareholder! on the amount of oil, gas, or other report providing specific headright owner." marketable product sold in accordance recommendations to improve The phrase commented on is in the with Sections 226.18 through 226.23. management and administration of the Executive Summary of the Rule that was Other fees paid under the regulations Osage mineral estate. That report notes proposed in the Federal Register on are for administrative costs or expenses. that many of the areas in which August 28, 2013, and is not a comment At least one commenter suggested improvement is needed will be relating to the rule. that the definition of "Superintendent" addressed upon finalization of this rule, B. Comments Related to Section 226.1 be amended to reflect the ability of the and other issues are being addressed Superintendent to delegate authority operationally. In addition, the At least one commenter suggested only to employees of the Bureau and Negotiated Rulemaking Committee was that the definition of "headright enumerate an extensive set of duties comprised of a team of experts in all holders" be amended to reflect the and responsibilities. fields of Federal oil and gas operations distinction that Congress has made The Department does not believe that (BLM, Office of Natural Resource between (a) the Osage MineralEstate this level of specificity is required or Revenue (ONRR), BIA, and the Office of and its headrightholders and (b) the necessary. The 1906 Act delegated to Indian Energy and Economic Osage Nation. the Secretary of the Interior the Development) to evaluate Osage Agency The rule does not define "headright responsibility to manage and administer operations and to make holders" and the Department does not the Osage mineral estate and such recommendations for improving the believe it is necessary to define this delegations are governed by applicable management and administration of the term because it is defined in the 1906 authority, including the Departmental Osage mineral estate. Act. Moreover, the distinction made by Manual. If the Secretary delegates a At least one commenter suggested the commenter is not relevant to the specific duty to the Superintendent, the that the Department of the Interior rule. The rule only relates to the Osage Superintendent may only further provide for full end-to-end accounting mineral estate as defined in the 1906 delegate that responsibility in to headright holders of withdrawals to Act and not to other purposes. accordance with the Departmental the Osage mineral estate, royalty At least one commenter suggested Manual. Further, to the extent that the payments made, expenses withdrawn, that the definition of the "Osage Secretary delegates certain interest earned and quarterly Minerals Council" be amended to reflect responsibilities to the Superintendent, disbursements to headrightholders. the Council's role as the elected those delegations may be changed by This comment is outside of the scope representative of the Osage headright the Secretary, and this authority is of the rulemaking; however, the holders, composed of headrightholders, expressly retained in the definition of Department provides the Osage and vested with authority to enter leases "Superintendent" in Section 226.1. Minerals Council with a periodic and take other actions related to the At least one commenter suggested statement, at least on a quarterly basis, mineral estate. that the provision allowing the Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27003

Superintendent to delegate her authority is an accurate reference because the The Negotiated Rulemaking needs to be clarified; it could be read to Osage Minerals Council is a duly Committee reviewed all of the BLM's allow the Superintendent to delegate to elected governing body within the larger onshore orders and after much the Osage Nation, which includes non- Osage Nation. Only Osage headright discussion and public comment only headright owners. holders are eligible to vote for recommended adopting Orders 5 and 6. No changes were made in response to candidates for the Osage Minerals However, the Committee recommended, this comment. The question of the Council. and the final rule adopts the Superintendent's authority to delegate is recommendation, that the Bureau be C. Comments Related to Section 226.3 not controlled by the regulation but is expressly provided the authority to an independent question of Federal At least one commenter stated that adopt other onshore oil and gas orders authority. The Superintendent can only the BLM regulations and on-shore oil in the future. The requirement that the make delegations consistent with and gas orders are onerous and costly Bureau consult with the Osage Minerals applicable authorities including to comply with and lessees don't know Council prior to any such future Departmental Manuals. how to navigate them. This commenter adoption is consistent with Executive At least one commenter suggested suggested that it cost them over $87,400 Order 13175 on tribal consultation. In that the term "surface owner" be for a drillingpermit in Kay County, addition, the Bureau must comply with defined in the regulations as "any Oklahoma, and that following BLM the Administrative Procedure Act in person, firm, corporation or other entity requirements will make the decision to adopting any future onshore oil and gas that owns the surface of the land on drill more cost-based rather than orders. which oil and gas development is potential-based. proposed or occurs." Section 226.3 allows the Bureau, in D. Comments Related to Section 226.4 In response to this comment, a consultation with the Osage Minerals At least one commenter suggested definition of "surface owner" was Council, to adopt BLM onshore oil and that in Section 226.4(a)(i 0), the added to Section 226.1 to include "any gas orders, notices to lessees or related Superintendent's responsibilitieswith person or entity that owns a surface onshore oil and gas regulations, but respect to protection of the estate within Osage County, irrespective does not require adoption. Prior to environment,public health, and safety of whether the surface estate is held in adoption, the Bureau must comply with need to be expanded and strengthened. fee, restricted fee or trust status." the Administrative Procedure Act. This The rule already adequately addresses With respect to the definition of rule does adopt two BLM onshore oil this comment, however, an additional "waste of oil or gas or other marketable and gas orders that relate to the change was made to Section 224.44(e) to product" (226.1), one commenter measurement of gas in Section further address this and other comments suggested clarification,noting that even 226.63(a), and hydrogen sulfide in related to safety and the environment. using a reasonableand prudent Section 226.60(f), but neither of these For example, in addition to Section operatingstandard, subcategory (1)"a relate to the drilling permit process. 226.4(a)(10), the rule has specific reduction in quantity or quality of Moreover, while Section 226.34 protections against hydrogen sulfide gas product from a reservoir"may prove so (previously numbered Section 226.16), in Section 226.60(f), which was added vague and open to interpretationthat it which relates to drilling permits, was during the negotiated rulemaking will be both unworkable and subject to amended to expressly provide that process to address concerns from the disagreementwhenever such a claim is National Environmental Policy Act and public regarding the existence of made. the National Historic Preservation Act hydrogen sulfide within Osage County. The definition of "waste of oil or gas apply, those statues are already Section 226.44 also provides additional or other marketable product" must be applicable within Osage County. The requirements with respect to the lessee's read in conjunction with Section amendment only makes clear that obligations for preventing pollution and 226.21, which specifies who makes a lessees must submit certain an additional provision was added for determination regarding royalty environmental information to assist the safety, to require fences around pits and payments for lost or avoidably wasted agency in complying with those laws. tanks and that removal and remediation materials. Section 226.21 allows the To the extent that the comment could be of tank and pit sites occur immediately lessee to submit information in support interpreted to imply that Section 226.60 after completion of operations. Section of his/her position that gas was not (previously numbered Section 226.36) is 225.45 provides additional requirements wasted or avoidably lost before a finding revised to add requirements regarding with respect to other environmental is made. This provision ensures that the well safety, those requirements were responsibilities. These are just some of Superintendent has all relevant adopted from the BLM regulations, but the provisions that ensure lessees take information from the lessee before do not impact the drilling permit steps to protect the environment and making a final decision. In addition, process. It is also relevant to note that ensure public health and safety. during the Negotiated Rulemaking when the rule does not become effective until At least one commenter opposed this provision was discussed by the 60 days after publication and the Bureau Section 226.4(b) of the proposed rule Committee and the public, it was noted is working on a plan to educate lessees because it allows oral orders, which that the Superintendent's decision is in Osage County regarding the changes could risk creating additional subject to appeal under 25 CFR part 2. to the regulations to ensure compliance uncertaintyin the supervision of At least one commenter noted that and understanding of any new operations and could be misinterpreted references to the "Osage Nation" in the requirements before the rules go into and/orunclear. It was suggested that a rule diminish the rights of the headright effect. written order clearly identifying specific owners because the Nation includes At least one commenter suggested violations, necessary corrective actions, non-headrightholders. The commenter that all seven of the BLM's current and the time for compliance would also stated that the Osage Tribe (under onshore orders be adopted immediately ensurefull compliance and create a the 1906 Act) is not the same as the and that future onshore orders be record in the event of an enforcement Osage Nation today. adopted automaticallyby the Bureau action or surface owner lawsuit. The reference to the Osage Nation in without consultation with the Osage The Department agrees that written the definition of Osage Minerals Council Minerals Council. orders are preferable and has removed 27004 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations all references in the rule allowing oral to-day operations affecting them and the of a conflict between the regulations and orders so that it is clear that written Bureau of Indians Affairs must apply an oil and gas agreement, the terms of orders must be issued. Indian preference to positions open in the oil and gas agreement control. These Some commenters suggested that the the Osage Agency. The Department is commenters expressed a lack of clarity Bureau should inspect oil and gas leases not persuaded by the assertion that in the intent behind Section 226.8 and at least once annually and that the Osage headright holders who may be proposed to make clear whether 226.8 Bureau should promptly address and employed by the Osage Agency will includes a pre-existing lease. One such more frequently inspect non-compliant refuse to enforce regulations simply to commenter requested leaving existing leases. It was suggested that there is a advance their alleged personal self- leases as they are (highest posted price) general lack of day-to-day oversight and interests. In any event, employees are and only making new leases subject to that most rancheshave old scars or accountable to their supervisors and NYMEX, stating that otherwise there current pollution issues associatedwith ultimately to the Secretary. If there are will be legal challenges. oil and gas production and saltwater issues with non-compliance, members The Department does not believe a spills. Commenters also suggested of the public may contact the change in the rule is needed to address posting information regarding Department to report such violations. this comment. Section 226.8 has only inspections like the BLM does because been renumbered in the rule (previously it allows landowners and the public to E. Comments Related to Section 226.5 numbered as Section 226.7). That see when wells are inspected and At least one commenter suggested provision specifies that amendments or violations reported. that Section 226.5(c) be revised to changes to the regulations cannot To the extent that these comments require the Superintendent to notify the change the terms of pre-existing relate to the rule, they are already surface owner beneath whose land approved leases with respect to the term addressed by the rule. In Section minerals are leased. of the lease, rate of royalty, rental or 226.4(c), leases with a history of This comment is adequately acreage, unless otherwise approved of noncompliance must be reviewed at addressed in the rule. The Negotiated by the parties and the Superintendent. least once annually. The Bureau has Rulemaking Committee agreed in Thus, the rate of royalty in pre-existing also established a toll-free 24 hour response to similar public comments approved leases will not change as a hotline (855) 495-0373 for reporting raised in the negotiated rulemaking result of the rule, but the provision spills or accidents and a tracking system process that surface owners should have describing how royalty is calculated has been created to ensure that all calls access to information regarding whether (i.e., NYMEX at Cushing), could are responded to in a timely manner and an oil and gas lease covers their surface properly apply to pre-existing leases. other officials are notified as estate. Thus, as proposed and adopted This rule could also affect such matters appropriate. The Bureau has also in the final rule, Section 226.5(c) as lease operations and maintenance discussed creating a Web site for the requires that the Superintendent post at requirements, reporting requirements, Osage Agency where it can post the the Agency, within 30 days following and other aspects of pre-existing leases results of investigations and other approval of a lease, a legal description other than the key lease terms specified information related to oil and gas of the mineral estate that was leased. in Section 226.8. operation in Osage County. However, This ensures that surface owners have H. Comments Related to Section 226.9 this is being done outside the access to information regarding lands rulemaking and any information posted leased, while reducing the burden of the Some commenters noted that the must be reviewed for compliance with Osage Agency in locating and notifying proposed rule requires each lessee to the Freedom of Information Act. each individual surface owner. pay a new and unique bond for the Additionally, the Office of Inspector development of the Osage minerals General (OIG) issued a publicly F. Comments Related to Section 226.6 estate and does not include recognition available report on the Osage Agency in At Jeast one commenter suggested or acceptance of alreadyestablished October 2014 (No, CR-EV-BIA-0002- that in Section 226.6(a), regulatory and sufficiently protective nationwide 2013) that discovered some of the same language be included clarifying that a bonds regularlyposted by lessees. These concerns, but many of the OIG's lessee that surrendersits lease is still commenters suggested that not allowing proposed recommendations and liable for plugging, abandonment,and a nationwide bond would be completely concerns will be addressed upon reclamation obligations associatedwith atypical and singularlyapplicable to the finalization of this rule. The Bureau is the lease area. Osage Agency and could hinder also making a number of operational In response to this and other development. changes that are discussed in that report comments concerning abandoned and The Department agrees with this in order to strengthen the management unplugged wells, the Department has comment and has added the provision and administration of the Osage mineral added a paragraph (c) to Section 226.6, allowing nationwide bonds back into estate. to require the Superintendent to ensure Section 226.9 of the rule. At least one commenter suggested that the lessee has either plugged all Several commenters objected to the that a new subsection should be added wells and reclaimed the surface, in increase in the amount of bonding to Section 226.4 to require the accordance with the regulations, or required and asserted that requiring Superintendent to adopt rules show in writing that upon surrender the bonding at $5,000 per well is prohibitingOsage mineral headright future liability for all wells located unaffordable. Some argued that lessees holders from working in the lease within the lease or portion of the lease will have to plug wells because they inspection division of the Bureau to to be surrendered has been transferred won't be able to afford bonding or that avoid conflicts of interest. to another party. the new amount will tie up capital Congress has recognized that Indian available to the lessee to develop tribes and their members should have G. Comments Related to Section 226.8 production. direct involvement in federal programs Some commenters suggested that the The Department disagrees with this enacted for their benefit. Under 25 terms of an oil and gas agreement comment and in reviewing the record U.S.C. 472, Congress recognized that should be given primacy so that the has found that there is a need for Indians should be involved in the day- regulations recognize that in the event increased bonding. The Department Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27005 found that the Committee looked at the found that the Committee considered, throughout the oil and gas industry and actual cost to plug wells and tried to but rejected after substantial public those who want to engage in oil and gas find a balance between covering the cost comment in opposition, the notion to operations must expect to be required to of plugging a well while, at the same require bonding at 125 percent the cost provide assurance that they will time, not overly burdening lessees. The of plugging a well. properly plug and reclaim their well original bonding amounts were based on Some commenters requested that a sites. a quarter section and did not correspond final rule provide a grandfather Some commenters asserted that in any way to plugging and remediation provision for bonds on existing leases bonding at $5,000 per well is costs related to wells, which must be that would also apply to any new leases unaffordable and will cause small done on a per well basis. The new that the same lessee may acquire. lessees to go out of business because regulation ties bonding to the number of The Department has concluded that it most wells are either not able to produce wells and caps the per well bonding is necessary to make changes to bonding enough to cover the bonding amount or requirement at 25 wells for all leases, with Osage County and there have been are inactive and pose no threat the corresponding more directly to the fact historical problems with adequate environment. that plugging costs are incurred on a per bonding in Osage County as found in For many of the reasons addressed in well basis. While some commenters the recent report issued by the OIG in other responses to comments on requested that the Department include October 2014. The Department found bonding, no additional changes are an allowance for nationwide bonding, that the issue of bonding was discussed necessary in response to this comment. none of public comments justified an throughout the negotiated rulemaking In addition, the unused and unplugged alternative bonding amount. Thus, the process and that members of the or abandoned wells do pose a threat to Department found that overall, the Committee and the public noted that the the environment such as possible Committee recommendation was current rate of bonding does not relate pollution of fresh water formations due reasonable and reduces administrative at all to the fact that costs for plugging to migration of oil, gas, saltwater and costs because the per well bonding occur on a per well and not per lease other substances. For example, basis. Moreover, members of the public streamlines implementation. The abandoned wells can provide pathways have commented that they believe there Department also found it necessary to for oil, gas or brine-laden water to is a problem throughout Osage County maintain per well bonding requirements contaminate groundwater supplies or to with abandoned and unplugged wells in light of a recent report on the Osage travel up to the surface due to the and current bonding rates were not Agency issued by the Department OIG, deterioration of the casing or surface which discussed and noted the sufficient to address or encourage remedying these issues. Thus, the equipment deterioration or malfunction. historical failure to plug wells in Osage If the production is insufficient to cover County and the need to ensure that this Department believes that it is reasonable to adopt the revised bonding amounts the cost of bonding, the Department is problem is addressed in the future. concerned that the production will also Some commenters argued that proposed by the Negotiated Rulemaking be insufficient to cover the cost of limiting bonding to $5,000 per well for Committee to better relate bonding to plugging and reclamation. Thus the up to 25 wells is inadequate to ensure the cost of plugging a well and increase in surety amounts will help sufficient remediation and incentivize lessees to plug wells that ensure the operator's diligence in recommended no less than $5,000 for will no longer be used so that they can plugging and abandoning and shallow wells (less than 3,000 feet in get a release of their bond. The rule also depth) and $10,000 for deep wells provides new provisions for ensuring reclaiming the surface. (deeper than 3,000 feet) and deletion of that the Bureau releases bonds in a At least one commenter suggests that any cap. Some of these commenters timely manner. there should be a ceiling to the bonding requested that the per-well bonding Some commenters asserted that most requirement, like the State of amount should be defined as an amount insurance companies won't write oil Oklahoma's cap at $25,000 per lessee. sufficient to cover 125% of the cost of and gas lease bonds now and the new This comment is already addressed by (i) plugging a single well and (ii) regulation will make it more difficult. the rule, which does provide a cap for reclaiming the well site and surrounding The Department does not believe that bonding in Section 226.9(c) at $5,000 land impacted thereby. the rule will make it more difficult to per well for a maximum of 25 wells per The Department believes that the rule obtain oil and gas lease bonds. lessee for all leases held within Osage sufficiently balances the need for Moreover, while the amount of bonding County. Additionally, in response to increased bonding with the fact that has increased, the rule caps the amount public comment, the rule was further bonding is only for insurance purposes of the increased bond to a maximum of revised to allow nationwide bonding. and does not eliminate the lessee's 25 wells. The rule allows for different At least one commenter suggested obligations to plug abandoned wells and ways to acquire a bond, including the that the cap on bonding amounts should remediate surface lands in coordination ability to obtain a surety bond that be eliminatedfrom the regulations. with surface owners. Bonding is only meets the requirements of the rule, and The Department disagrees with this intended to provide assurances to the the Department has further revised the comment because it is generally Bureau that the lessee has incentive to rule to allow nationwide bonds, which accepted within the oil and gas industry plug a well and is not intended to create are accepted elsewhere on other Indian that bonding is for insurance purposes complete upfront funding for the and Federal lands. While the and is not intended to cover the entirety plugging of a well at an unknown time Department understands that there may of the costs associated with plugging in the future. Nor is bonding intended be some lessees that for various reasons and remediation of every well site, to cover surface remediation. To the may not be able to get a bond, the rather bonding provides an incentive to extent that a surface owner is Negotiated Rulemaking Committee perform plugging and remediation of unsatisfied with remediation on the part discussed that some of the issues related well sites and screens out unreliable of a lessee, he or she may seek damages to those failures were due in part to lessees who fail to perform these duties in accordance with Sections 226.40-41, defaults caused by particular lessees because lessees that default on their or pursue any other legal remedies and are not attributable to the cost of responsibilities will not be able to get a available to him or her. The Department bonding. Bonding is a requirement bond in the future. 27006 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

At least one commenter suggests plugged and abandoned all wells and/or commenters noted that people have bonding should follow the Oklahoma that another party is taking full legal otherfull time jobs and can't get work Energy Resources Board model used in liability for the wells within the lease or done quickly and it sometimes takes a the rest of the State of Oklahoma. partial lease to be surrendered. In few months to get work done. Another No changes to the rule are necessary addition, a new provision was added as commenter stated that the one-year with respect to this comment. The Section 226.29(a)(i), clarifying that the termination provision has been working Oklahoma Energy Resources Board assignment is subject to the continuing fine and it is expensive to hire people (OERB) does not bond or plug wells. obligations of the assignor to meet its to fix problems and lessees don't always The OERB is a State-incorporated plugging and abandonment obligations, have the money. Some commenters surface restoration agency that lessees in and a new Section 226.29(a)(ii) was noted that oftentimes equipment is the State of Oklahoma voluntarily added making clear that the assignee backordered or weather causes delay contribute to for remediation and retains all responsibility for all and they wouldn't be able to comply reclamation of abandoned well sites at unplugged wells under the lease or with the 90-day requirement. no cost to surface owners. The Bureau partial lease assigned. In response to comments, the has met with OERB and confirmed that To address the abandoned well issue Department has further revised the rule OERB has historically been willing to within Osage County, one commenter to change the time period for operate within Osage County and suggested that a company fund be termination for non-production from 90 currently works with surface owners established whereby lessees would pay days to 120 days and require that and the Bureau for Remediation within in the value of 2 barrels of oil per year requests for extension of time be Osage County in accordance with its for each active well less than 4,500 feet submitted at least 20 days prior to normal process and procedures. The and 3 barrels of oil for wells less than expiration of the 120-day period, but goal of the regulation is to prevent 7,500 feet and the fund would be used given the additional time for non- orphan wells that will further burden to plug abandoned wells. production and the need to reduce OERB and the responsible operators The Department does not believe this administrative burdens in enforcing this who fund it. is an issue within the scope of the provision, the Department deleted the Some commenters noted that they are rulemaking. The regulations govern on- provision allowing the Superintendent generallypleased with the proposed going oil and gas operations. To the to waive the 20 days advance notice regulations but noted their concerns extent that there are historical issues requirement. For clarification purposes, with plugging wells. Specifically, with respect to abandoned wells and the Department also added a standard commenters stated that bonding needs well sites, the Department can explore for extending temporary suspensions to to be more proactive and well sites with the Osage Minerals Council require good cause. The Department remediated because the proposed whether or not a voluntary fund could found that there was substantial regulations do not address current be established to address the historical discussion on this issue during the abandoned wells and, rather than issues. The Department also reiterates negotiated rulemaking and the Osage plugging the wells, lessees often just that as stated in responses to other representatives on the Committee were pass wells to the next lessee when they comments, OERB does operate within opposed to allowing nonproduction for assign or sell their lease. Osage County to remediate abandoned periods of 180 days or more. Although This is an issue that cannot entirely well sites and the Osage Minerals the Osage representatives on the be addressed in the regulations, which Council currently operates the program Committee also rejected a 120-day govern on-going oil and gas operations. for plugging abandoned wells. timeframe during the negotiated The Department recognizes that there is L Comments Related to Section 226.14 rulemaking process, the Department had an issue with respect to abandoned to balance the concerns of the Osage wells within Osage County and works Numerous comments were received representatives with the concerns of the with the Osage Minerals Council to objecting to the terminationfor non- lessees regarding operation address these issues. The Osage production in Section 226.14(e). contingencies and its ability to Minerals Council has contracted with Commenters suggested that the administratively manage leases for the Bureau to take over the function of timeframe for terminationfor nonproduction. The Department did not plugging orphaned or abandoned wells nonproduction needs to be increased view as relevant, concerns that a lessee and currently operates the program and/orkept at one year and not 90 days. may have another job that inhibits his within Osage County. In addition, as One commenter noted that if a or her ability to produce within a mentioned in previous responses, OERB particularwell produces very little, it is particular timeframe or concerns that a operates in Osage County to remediate necessary to have the time to evaluate particular lessee may not be able to the surface area around orphaned or the upper and lower potential of the afford equipment or staff because abandoned wells that have been well regardingfuture oil and gas Section 226.14(c) states that all lessees plugged. To the extent that this issue opportunities,as well as the ability to have an obligation to diligently develop can be remedied in the future by the shut the well in for short periods when their lease. The Department also found rule, the Department has increased the price of the oil or gas becomes that concerns regarding the ability to bonding to more closely relate to costs uneconomical to produce at that well put a well into production were associated with plugging a well and without the lease being terminated. misplaced because Section 226.14(e) reclamation (on a per well basis) to Another noted that the 90-day only contemplates termination for provide an incentive to ensure lessees requirement will prevent companies nonproduction after the primary term of properly plug and abandon wells and from purchasing tracts because they will the lease when the lessee is expected to has also added a provision, Section not have time to put the tracts into begin production. 226.6(c), requiring that before a lease production. One commenter suggests At least one commenter suggested can be surrendered or partially that a more reasonablerequirement that lessees aren't in a rush to do surrendered, the lessee retains any past would be a 180 day period, with notice business in Osage County and the liability incurred within the lease or to the Superintendent that the lessee Bureau needs to encouragelessees to partial lease to be surrendered, and needs an extension 20 days priorto the keep their properties up, not terminate must show that he has either properly expiration of the 180 day period. Some them. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27007

No response is necessary to this held in trust by the United States and operational costs. Subsection (d) was comment because it is not substantive was reserved by the United States for also amended to clarify that an assignee and does not provide any the purpose of mineral development. is responsible for drainage even if it recommendations. The rule also does not change the basic would not be economic, at the time of At least one commenter objected to premise of law that a surface estate is assignment, to drill an offset well, to 226.14(e) on the basis that some wells subservient to a dominant mineral ensure that the Osage are protected if a only produce one barrelper day and oil estate. The rule recognizes that a lessee lease is assigned. The Department also will not be picked up for sale within 90 is permitted to use as much of the notes that 226.16(d)(1) is intended to days or for at least six months, and surface estate that is reasonable for clarify that a well drilled to protect under this provision this producing well operations. See Section 226.37. Thus, against drainage must be in continuous would be considerednon-producing the regulations provide limitations on production and the obligation to pay because no sale took place within 90 size of drilling sites (Section compensatory royalty can be revived if days and that is unfair. 226.38(a)(3)) and require that lessees the protective wells cease production. This comment misinterprets Section conduct operations to protect other K. Comments Related to Section 226.18 226.14(e), which does not provide that natural resources and environmental wells that are producing in paying quality, life and property (Sections Several commenters suggested that quantities would be terminated for 226.33(a)(2)-(3) & 226.45), and require measuring oil royalties based on nonproduction within the prescribed lessees to take certain steps to prevent NYMEX pricing is unattainableand that timeframe. It is understood that sales are pollution (Section 226.44). At the same it is unfair to require lessees to pay a intermittent in nature and that a well time, lessees have an affirmative royalty based on a price they cannot may be producing but that a sale may obligation to diligently produce a lease obtain. One commenter suggested that not occur within 90 or 120 days. So long (Sections 226.14(c) & 226.33(a)(4)) in NYMEX will gouge small lessees and as the lessee reports production, the accordance with the overall statutory others suggested that NYMEX will hurt lease will continue, it is only the failure and regulatory framework. In the event Osage shareholders.A few commenters to produce, not the failure to sell, that that a lessee is violating the regulations, suggested, rather than NYMEX, royalty terminates a lease under this provision. the Superintendent has authority to take rates should be commensurate and The regulations, however, expressly actions to remedy the violations competitive with those found in the provide that all lessees have an (Sections 226.67 & 226.68). region and in similarplaces around the obligation to diligently develop their country. One commenter suggested that leases as set forth in Section 226.14(c). J. Comments Related to Section 226.15 only if the rule required lessees to be A commenter stated that the At least one commenter objected to paid NYMEX prices would it be fair. requirement to drill on every quarter 226.15 with respect to drainage Another noted that it is okay to use section in order to hold a lease exposes asserting that drilling offset wells to market center price as a reference point, lessee to excessive financial risk and prevent drainage is not necessary but the market center price must be causes excessive impacts to the land because the Nation owns all the adjusted for location and quality. and wildlife. Leases should instead be minerals in Osage County. Drilling offset Another stated that because many wells structured to allow focused drilling. wells would not only require in Osage County are stripper wells and This comment does not accurately considerable time, resources and produce low volumes and are only characterize Section 226.14(a). Section expense, but this unnecessary drilling profitable under the existing 226.14(a) requires a lessee to place a could adversely affect environmental regulations, NYMEX would harm well in production within the land damage. It was suggested that the profitabilityand shorten production life embraced by a lease within 12 months Bureau should considerremoving this of leases, and suggested instead that of the date of approval of the lease, or section entirely or narrowingits scope to royalty should be based only on the as otherwise provided for in the lease clarify the conditions where offset wells price paid to lessees, allowing the terms, but does not require a lessee to are necessary and also ensure that there competitive marketplace to set the drill in every quarter section. A lease is an appeal process to protect against prices. One commenter noted that may encompass an entire quarter arbitrarydecision making. NYMEX will cost as much or more than section or a larger land area. Lessees are Under the 1906 Act, the mineral $3 per barrel more than what is being required to act prudently in addition to estate is held in trust by the United paid now. diligently developing the mineral estate. States for the benefit of the Osage. In the Osage Tribal Trust Settlement, The rule also includes provisions to However, the drainage provision in the the Department agreed to engage in a ensure that lessees conduct all Rule is intended to ensure diligent negotiated rulemaking and, among other operations in a manner that protects development of all lease sites because things, identify appropriate revisions to other natural resources, environmental not all leases have the same royalty rate. the methods for calculating royalty for quality, life and property. See Section Thus, if a lessee holds multiple leases oil and gas. The Negotiated Rulemaking 226.33. next to each other, the drainage Committee reviewed various indices to At least one comment was received provision will ensure that the lessee is utilize for calculating royalty. The suggesting that the factors in Section not able to focus drilling only the lease Committee sought a price benchmark 226.14, governing when the site that has a lower royalty rate to the that (1) was appropriate for oil sold in Superintendent may impose restrictions detriment of the Osage. However, to Osage County, (2) accurately reflected as to time of drilling and rate of further clarify the provision and reduce the oil market in Oklahoma, (3) was production, should be expanded to the burden on lessees, subsection (b) widely published, and (4) independent. encompass environmental, public was revised to clarify that drainage does The committee found that NYMEX was health and safety concerns, and the not occur if the lessee can show that it the only benchmark that met all four interests of the Osage Tribe, because could not produce a paying quantity of criteria. After public comment, the activity should not unduly interfere with oil or gas "for a reasonable profit", Committee decided to propose NYMEX surface uses. rather than "in paying quantities." at Cushing, Oklahoma, as the index for The Department disagrees with this Usually "in paying quantities" only calculating oil royalties. The Bureau had comment. The Osage mineral estate is means enough to recover day to day the ONRR review and evaluate NYMEX 27008 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations at Cushing to determine whether it was benchmark be established at the highest deductions would: (1) Increase revenue an appropriate market center for Osage rate that the market will bear.Both to the Osage, (2) reduce litigation costs County. The ONRR's report would allow leases to be competitively to the Tribe and industry, (3) provide recommends using NYMEX at Cushing bid or negotiated to acquire the certainty to the industry and assure based on its review and analysis of price maximum ultimate economic recovery. more contemporaneous compliance and data from Osage County and the The Department agrees that there is (4) reduce administrative costs to the surrounding area coupled with ONRR's merit to the use of WTI as the pricing Federal government and the industry. experience using different index prices benchmark for Osage oil. That was Based on those recommendations and for Federal oil valuation. Specifically, considered during the sub-committee the Bureau's desire to reduce ONRR found that NYMEX is widely evaluation of the various benchmark administrative costs while at the same used and accepted by the industry and options. Use of WTI was ultimately time fulfilling its trust responsibility, is representative of the value of oil and rejected by the Committee because it the Department decided against gas received on and near Osage County. would require location differential allowing transportation allowances. The ONRR also found that because Osage pricing and transportation adjustments Department also found that there was County is so close to Cushing, that did not satisfy the request for discussion of whether to allow Oklahoma, adjusting NYMEX for simplicity and the need to minimize transportation allowances during the location is unnecessary. The rule, in administrative burdens. Furthermore, negotiated rulemaking, but the Section 226.19 (gravity adjustment WTI did not mirror the Oklahoma Committee also chose not to allow for table) also provides for adjustments to market as well as NYMEX settlement at such deductions for a variety of reasons, NYMEX based on the quality of the oil. Cushing. Benchmarks based on including the difficulty in developing a The Department also found that during weighted average prices of arms-length simple formula and the administrative the public comment process in the transactions in a given market area are burdens of enforcing accurate negotiated rulemaking meetings generally considered a fair transportation deductions. virtually no alternative indices for representation of market value. Terms One commenter noted that under royalty valuation of oil were suggested that require "the highest rate the market Section 226.18(c), for royalty taken in by the public, other than keeping the will bear" are, by their very nature, kind, a lessee can be requiredto supply highest posted price. The Department dismissive of transactions that occur free storage for a period of 60 days, and found that the Committee explained to below that threshold. As such, they this subsection should provide that if the public that a change in royalty was would be unfair to parties that are able the lessor elects to exercise this right, to negotiate satisfactory arms-length needed because some on the Committee the lessee should be indemnified or held did not believe that the highest posted agreements below "the highest rate the harmless for losses of such oil by causes price was protective of the trust market will bear." Pricing based on such beyond the lessee's control. terms would not be considered fair beneficiary and that highest posted Section 226.18(c) was previously price was subject to manipulation and market value. Several commenters requested that a numbered as Section 226.11(a)(3), and did not protect the trust beneficiary transportationallowance for trucking or has not been revised through this from non-arms-length transactions. The piping oil to Cushing should be factored rulemaking. No further changes are Department is required to establish into the calculations when the lessee necessary to this provision at this time regulations concerning Indian oil uses the Cushingposted price in and the Department has not been valuation based on its federal trust accordance with Section 226.18(b)(1). provided with sufficient information to responsibility to act in the best interests Some of these commenters stated that reasonably support a change. of the Indian beneficiary, including a transportationallowances are also duty to maximize revenue for Indian L. Comments Related to Section 226.19 appropriatewhen, under Section tribes and Indian mineral beneficiaries. 226.18(b)(2), a lessee sells oil in a One commenter requested that The Department also found that during location other than Cushing and the Section 226.19 be clarified to provide the negotiated rulemaking, a staff actual sales price exceeds the Cushing that the Superintendent must comply member to the Committee noted that in price because of the transportationcosts with the rulemaking notice and his view since 1994, the highest posted incurred by the lessee. Other comment process before the price was often below sale prices for commenters suggested that Superintendent may publish new gravity many lessees and, as a result, Osage transportationcosts need to be taken adjustments "based on substantial headright holders were not always into account because of the economic evidence, that market conditions so receiving the full royalty amount that fact that there is a cost involved if you warrant." they were due. In conjunction with the want to sell oil. No changes are necessary in response Report from the ONRR and the The Bureau had the ONRR review and to this comment because actions of the recommendations from the Committee, evaluate NYMEX at Cushing, Oklahoma, Department must comply with the the Department has determined that to determine whether it was an Administrative Procedure Act. utilizing NYMEX at Cushing, Oklahoma appropriate market center for Osage Moreover, it is uncertain whether or not to calculate royalty payments for oil County. The ONRR's report the Superintendent would publish new protects the interests of head right recommends using NYMEX at Cushing gravity adjustments in the future or holders and is not overly based on its review and analysis of price what process the Superintendent would administratively burdensome to data from Osage County and ONRR's follow to do so. If and when that occurs implement or enforce. experience in using this process for in the future, any final decision may be A commenter suggested that the oil Federal oil valuation. The ONRR also challenged in accordance with the royalty benchmark be establishedat the found that because Osage County is so Administrative Procedure Act. highest rate that the market will bear on close to Cushing, Oklahoma, adjusting One commenter suggested that the the basis of the sale of West Texas NYMEX for location is unnecessary. The Department of the Interiorshould not Intermediate (WTI) crude, not NYMEX ONRR recommended against allowing allow any exceptions or deductions that futures contracts. Similarly, a transportation deductions and noted are not specifically permitted by the commenter suggested the gas royalty that eliminating transportations 1906 Act or other applicablelaws. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27009

It is unclear whether this commenter is so that if the actual reasonable cost of N. Comments Related to Section 226.25 was referring to deductions for oil processing as required by this section At least one commenter suggested (Section 226.19) or gas (Section 226.20). cannot be determined, the lessee is that the due date for royalty payments Regardless, the only deduction required to perform the accounting for doesn't need to be changed to allowance for royalty paid on oil is comparison (dual accounting) as accommodate any entity other than the based on a gravity adjustment. See outlined in 30 CFR 1206.180(a)-(b). On Bureau. are Section 226.19. No deductions other Indian and Federal lands outside The due date for royalty was changed allowed for royalties paid on residue gas of Osage County, approval for the to make it consistent with the date that produced on a lease, and the only alternative methodology rests with royalty payments are due to the ONRR, deduction allowed for royalties on ONRR, not the tribe. In Osage County, in the event that the Secretary delegates natural gas are the "reasonable cost for unless otherwise delegated, ensuring royalty collections and audits to ONRR processing not to exceed 50 percent of compliance with those same provisions to aid the actual sales value of natural gas liquids Bureau in its management and is now vested in the Superintendent administration of the Osage mineral produced from the lease (including drip because this rule makes them applicable condensate)." See Section 226.20(c). estate. ONRR has the capacity to to Osage. In all cases, the application of provide assistance to the Bureau M. Comments Related to Section 226.20 alternative methodologies for without the Bureau having to duplicate accounting are directly tied to the lack One commenter noted that 226.20(a), services that ONRR already provides on of transparency of processing costs and other Indian and Federal lands. which provides that royalties would be an inability to determine those costs for assessed and measured before water allowance purposes. The requirement 0. Comments Related to Section 226.27 vapor is removed from the gas and the does not interfere with any agreements gas is in a marketable condition, and At least one commenter objected to the lessee has or will make. Section 226.27(a)(2), which requires the asserts that this would artificiallyinflate One commenter asserted that Section meter volumes without increasing the Superintendent to approve all division 226.20 requires a double royalty to be order and sales contracts before volume of gas produced. paid where gas producedfrom one well The Department is confused by this production may "be removed from the is used comment because nowhere does 226.20 for lift purposes on another leased premises." It was suggested that state that gas volumes must be well-solely because it passes the point this provision would impose a determined prior to removing water of metering on both wells-and substantialadministrative burden on vapor. It is assumed that the commenter disagreed with this, noting that it is the Bureau when they already face was actually referring to 226.20(b). The widely accepted that gas used on-site for backlogs and uncertain funding. requirement in 226.20(b) was added to beneficial purposes of the lease is not Section 226.27(a)(2) was not prohibit adjustment to the measured royalty-bearing and this proposal would substantively changed through this volume of gas for assumed water vapor run counter to that principle. rulemaking, but was renumbered (from content. This requirement does not Section 226.20 requires only that all Section 226.14(a) in the old regulations prohibit the physical removal of water gas removed from the lease be metered to Section 226.27(a)(2)) and reformatted vapor or placing the gas into marketable before removal and subject to a royalty for readability only. Issues relating to condition prior to measurement, of not less than 20 percent, unless staffing and funding are also outside the however. We agree with the commenter otherwise approved. That regulation scope of this rulemaking, although the that the wording was unclear and have ensures that the Osage get royalty for Bureau has worked with the Osage changed the wording in 226.20(b) to any gas moved off the lease site, even if Agency over the last few years to clarify this and have also added specific it is used for operations at another address budget shortfalls and staffing technical requirements that were location. The regulation does not needs. prohibit gas developed from a lease site previously missing to address P. Comments Related to Section 226.29 calculating the heating volume of gas to from being used for operations on the aid the lessee in complying with this same lease site. On the other hand, At least one commenter objects to the section. Section 226.63 does require that all gas provision in Section 226.29(a) that One commenter stated that Section be measured in accordance with BLM requires lease assignments to be 226.20(c) establishes a dual accounting Onshore Oil and Gas Order 5, to ensure approved by both the Superintendent system, but the use of a dual accounting that all gas that is required to be and the Osage Minerals Council because system to calculategross proceeds is an measured is properly accounted for, but no procedure or standardis specified issue that is more properly addressed royalty payments on gas are controlled for obtainingthose approvals or and negotiated by the Nation and the by Sections 226.20, 226.21 & 226.22. appealingthe decisions. It is also not lessee in the lease document at the time A commenter expressed support for clear what happens if there is a it is signed. Empowering the the attempt to provide for a royalty on disagreementbetween the Superintendent to change this residual and other marketableproducts Superintendent and the Minerals calculation system on such short notice and urged that the meaning of the Council. introduces substantialuncertainty into relevant calculation be made clear. The regulations have always required the calculation of royalties, The Department is not certain it lease assignments to be approved by discouragingprospective lessees from understands this comment, but notes both the Osage Minerals Council and entering into agreements with the that the determination of royalty on the Superintendent. This rule does not Nation. other marketable products is explained change that requirement, but deletes the The Department disagrees with this in Section 226.23, which is a provision provision allowing lessees to assign comment. The Department did find that that was contained in the prior separate horizons because the the reference for dual accounting in the regulations, but revised in the final rule Department found, in reviewing the proposed rule (30 CFR 1206.173) was to clarify that royalty due on other rule, that such assignments do not incorrect and has added the correct marketable products is in addition to generally occur at Osage and when they reference (30 CFR 1206.180(a)-(b)). any royalty that may be due on oil and did, they were so administratively However, the purpose of the provision gas in accordance with the regulations. burdensome that the Agency could not 27010 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations monitor those assignments. As a general should regularly consult with Federal, homestead and this section ensures that matter, the Minerals Council is the State, and local wildlife agencies to the appropriate procedures are followed entity that enters into and approves all reduce conflicts between wildlife to enable the Bureau to participate in a leases and assignments in accordance conservation and oil and gas decision impacting the restricted with their governing authority and production. homestead in order to protect the procedures. Once the Minerals Council Notwithstanding the regulations, the restricted surface owner to which the approves a lease or lease assignment, it Bureau is required to ensure compliance United States has a trust responsibility, is submitted to the Superintendent for with the National Environmental Policy but those provisions do not change the federal review and approval. Any final Act (NEPA), 42 U.S.C. 4321 et seq. legal principles related to the surface decision of the Superintendent is Further, Section 226.5(d) makes clear and subsurface mineral estate that are governed by 25 CFR part 2 and the that before approval of each oil and/or applicable in Osage County. Administrative Procedure Act. gas lease and activities and installations associated therewith must be assessed T. Comments Related to Section 226.36 Q. Comments Related to Section 226.33 and evaluated for its environmental One commenter stated that Section One commenter requested that there impact. Although the Bureau already 226.36 should also require that no should be additionalrestrictions to undertakes environmental reviews operationsmay begin until the lessee protect naturalresources and public before approving certain actions, can meet and negotiate in good faith safety and the restrictions should Section 226.34 has been further with the surface owner to ensure the provide sufficient detail to allow lessees amended to expressly note that the health and safety of the lessee and the to comply and the Bureau to enforce. NEPA is part of the environmental health and safety of others using the The commenter also suggested that best compliance review and must be State's wildlife management area. management practices should be completed before the Superintendent No change has been made in response developed to protect wildlife and other may grant authority under a lease to to this comment. Section 226.36 only natural resources. conduct certain operations. relates to commencement of operations, This comment is already addressed in and Section 226.33 of the rule provides Section 226.33 of the final rule, which S. Comments Related to Section 226.35 that lessees are required to comply with requires that lessees conduct all At least one commenter suggested all applicable laws and regulations, operations in a manner that protects that Section 226.35 as written appears including protecting natural resources other natural resources and to reverse the ancient rule that the and environmental quality, and life and environmental quality and protects life surface estate is subservient to the property during their operations. To the and property while also balancing those subsurface/mineralestate, thereby extent a surface owner believes that a responsibilities with the requirement to giving the surface owner a veto over lessee is engaged in operations that are maximize production of oil, gas and mineral development. In particular, harmful to the health and safety of other marketable products. Sections paragraph(b) only provides that the humans, such actions should be 226.44-226.45 also provide additional Superintendent will endeavor to bring reported immediately to the proper protections for the prevention of the parties to terms so that a lessee may authorities and the Bureau maintains a pollution and environmental concerns develop on a restrictedhomestead and 24-hour hotline for such purposes. and were added in response to similar this is different than allowing the lessor One commenter disagreed with concerns raised during the negotiated to enter upon surface lands and utilize provision allowing the Superintendent rulemaking process. To the extent that subsurface rights and would delay to set routes of ingress and egress in the commenter desires the Bureau to development. Additionally, paragraph Section 226.36(b)(2) if no agreement develop best management practices (c) provides that when no agreement between lessee and surface owner can outside the regulations, those comments between a surface owner and lessee can be made and suggests using an unbiased are beyond the scope of the rulemaking. be reached for surface usage, the alternative decision maker. However, the Bureau is currently Minerals Council can make a final In response to comments, we have engaged in a process with the U.S. binding decision, but this paragraph further revised Section 226.36(b)(2) to Environmental Protection Agency (EPA) does not include a requirement that the allow both the surface owner and the to revise and update an existing Osage Minerals Council recognize the legal lessee to meet with and submit Lessees Manual that addresses subservience of a surface owner's right information regarding such routes environmental protection and response, or take into account the reasonableness before a final determination is made. including best management practices. of the lessee's request, or apply This will allow for the consideration of The Osage Minerals Council, Osage standard methods of valuation to the relevant parties before making a Nation, State of Oklahoma, lessees, and interests being adjudicated.This determination, which provides added surface owners were involved in the commenter notes that it is also unclear protection for all parties. public listening sessions as part of that what appeals rights a lessee has to such At least one comment was received process. Moreover, the rule does not determinations. noting that it is not clear how Section replace other applicable environmental Section 226.35 (previously numbered 226.36(b), requiringthe lessee to meet laws or regulations and EPA is 226.17) was not substantively changed with the surface owner or his/her responsible for overseeing certain in the rule. References to the "Osage representative, is met when there are aspects of oil and gas operations within Tribal Council" to the "Osage Minerals tracts with multiple or numerous Osage County. Council" were changed because the surface owners. The commenter Osage Tribal Council no longer exists proposes that the Bureau qualify that R. Comments Related to Section 226.34 and it is the Osage Minerals Council this provision is met by meeting with the One commenter noted that the Bureau that oversees the Osage Mineral Estate. majority owner(s). should not approve a lease, installation, Moreover, Section 226.35 governs the No change has been made in response permit or other activity until an use of restricted homestead and not all to this comment. A particular lease environmental impact assessment has surface lands within Osage County. The could include multiple tracts of land been completed and any issues have Bureau has a unique role with respect that are owned by different surface been resolved. To that end, the Bureau to operations that occur on a restricted owners and the owners of each surface Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27011 estate must be separately met with to specifying the lessee's operational some measure of compensation before ensure proper notice and due process. obligationsbe expanded beyond they are able to recover damages for "workmanlike manner" to include actual impacts to the surface as a result U. Comments Related to Section 226.37 avoiding waste, degradation of of oil and gas operations. An increase in Some commenters suggested requiring environmental quality, avoidable commencement fees in conjunction lessees to meet priorto operations and nuisance, threats to public safety and with the ability of surface owners to enter into a written surface use health. continue to recover full damages strikes agreement to address, among other The rule sufficiently addresses this this balance. things: (a) Identify and limit the size comment without requiring a change to At least one commenter suggested and locations of well pads, roads, Section 226.37(c). Section 226.37 that no geophysical, geologic pipelines and power lines; (b) govern the governs the use of surface lands exploration or surveying or staking timing and scope of operations to generally, but is not the only provision activities be allowed without the lessee minimize disturbance to landowner's in the regulation regarding a lessee's entering into a written agreement with operations;and (c) outline reclamation duties and obligations. Section the surface owner regardingseismic and clean up obligations. In addition, 226.33(a)(2)-(3) already requires that activities. some of these commenters suggested that the lessee conduct operations in a Section 226.38 governs that lessees should adhere to BLM best manner that protects other natural commencement of operations and practices and that any dispute should resources and environmental quality provides that a lessee may commence be governed by arbitration. and that protects life and property. operations, including seismic activities, Section 226.36(a) already requires the Section 226.44 further specifies once the commencement fees are paid lessee to notify or attempt to notify requirements that lessees must follow to in accordance with that section. This surface owners prior to commencement prevent pollution, and Section 226.45 section in particular, has been revised of certain operations and Section delineates lessee's other environmental from the previous regulations to 226.36(b) requires that lessee request a responsibilities. In addition, Section increase the fees in response to surface meeting with surface owners to provide 226.46 provides that a lessee must owner comments during the negotiated information regarding location of wells, perform all operations and maintain rulemaking process, but the majority of route of ingress and egress and contact equipment in a safe and workmanlike the section was not revised. The information for damage claims. In manner and take all precautions Department found that there was response to comments, however, the necessary to provide adequate discussion during the negotiated Department has added a requirement to protection for the health and safety of rulemaking with respect to the concept Section 226.36(b)(2), which requires life and the protection of property. of requiring some kind of a surface use that in the event that the surface owner agreement before operations could and lessee cannot agree on a route of V. Comments Related to Section 226.38 begin, but ultimately the Committee did ingress or egress, both the surface owner Some comments were received not propose that approach. Based on the and the lessee will be notified by the objecting to the amount of record, the Department believes the rule Superintendent and provided with an commencement money in Section contains sufficient standards governing opportunity to meet and/or to submit 226.38 as grossly inadequate and stating the use of surface lands (Sections any information in conjunction with it should be significantly increased to 226.36(b) & 226.37), including that process. In addition, Section fairly compensate landownersfor provisions aimed at ensuring that 226.37, governing use of surface lands, immediate and long term impacts and surface owners are notified of already provides standards for surface loss of land as a result of well pads, operations (Section 226.5(c); Section use without the need for an additional roads, pipelines, power lines, tanks and 226.36; 226.38(b)) and have the requirement of surface use plans other infrastructureand operations. opportunity to participate in the process between the surface owner and lessee. Commencement money is not where applicable. See e.g., Section The rule has always implicitly provided intended to compensate surface owners 226.37(a). In addition, the rule that the lessee and surface owner should for all damages to land as a result of oil continues to allow surface owners to work together regarding locations of and gas operations. Rather, it is seek compensation for damages caused well pads, roads, pipelines and electric intended to provide an upfront payment by operations and provides an lines and expressly provides a process to surface owners that will be credited arbitration process to settle disputes for the routing of rights-of-ways towards future damages. The rule has a between surface owners and lessees. See including, for example, pipelines and process in Section 226.40, by which Section 226.40. electric lines, in the event that the surface owners may seek additional Some comments were received surface owner and lessee cannot agree damages. A number of commenters also requesting that the Bureau recognize on a particular route. However, in raised concerns that increased that a surety performance bond is response to comments, the Department commencement fees would be overly generallyrequired by the surface owner has also added a requirement to Section burdensome to smaller lessees. prior to conducting oil and gas 226.37(a) (similar to Section However, the commencement fees are activities-arequirement that is 226.36(b)(2)) to provide that the intended to provide all surface owners, applicablein the State of Oklahoma Superintendent will notify or attempt to regardless of whether the lessee is a under State law. notify both the surface owner and lessee small or large producer, with the same Oil and gas operations within Osage and provide them with an opportunity up front compensation for the initial use County are governed by federal law, to meet and/or to submit any of surface lands. During the rulemaking including the 1906 Act and its information in conjunction with that the Committee heard from many surface implementing regulations. Under the process. In addition, Section 226.38 owners that the amount of rule, Section 226.38 requires provides limitations regarding the size commencement money was inadequate commencement fees, rather than a of drilling sites that lessees must follow to the surface cover damage the surface. surety performance bond, be paid to in conducting operations. Thus, there is a need to balance these surface owners before operations may A commenter suggested that Section concerns while ensuring that surface begin. During the negotiated rulemaking 226.37(c) should also include a clause owners are treated equally and receive in response to public comment, the 27012 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

Committee agreed to propose increases X. Comments Related to Section 226.40 compliance with BLM Onshore Oil and in the amount of commencement money One commenter noted that in his/her Gas Order 6 regarding H2S safety due and this rule adopts those view, Section 226.40(a), regarding (Section 226.60(f)), adding requirements recommendations. Moreover, the compensation to surface owners for for ensuring well safety (Section regulations have always provided that damages encompassing "all other 226.60(b)-(e)), site security (Section the lessee and surface owner must surface damages as maybe occasioned 226.65), and safety standards for lessee negotiate settlement of damages after by operations," is open-ended and operations and equipment (Section commencement of operations and these could result in needless confrontations 226.46). Moreover, the regulations have always had provisions regarding provisions remain unchanged in the or litigation. The commenter suggests damages to surface lands and an final rule. narrowing the provision to provide for arbitration process for resolving At least one comment was received damages to "growing crops [and] any disputes that remain in the rule. It is objecting to the increase commencement improvements on the lands." relevant to note that one commenter fees in Section 226.38(a) on the basis Section 226.40(a) was not changed specifically noted that the proposed rule that it will only destroy small lessees substantively from the prior regulations does provide protections for the surface who work in an old oil field. (original 226.20(a)). Moreover, this owner, for example, Section 226.38 No evidence was submitted to support comment contradicts the purpose of the requires lessees to remit a $2,500 this comment. Further, this issue was damage provisions in the rule, which commencement fee for each well drilled discussed during the Negotiated are intended to be broad enough to which is credited to the final settlement, Rulemaking Committee and this change cover any claims for damages that a and is an increase from the past rule of was made in response to surface owner surface owner may have against a lessee. only $300. In addition, the payment of complaints regarding damages and The provision is not intended to take a commencement fees does not affect the lessee complaints regarding access. In position on whether a particular claim surface owner's ability to seek particular, the Negotiated Rulemaking for damages does or does not have additional monies for damages and Committee explained that the increase merit, but allows for such issues to be Section 226.40 allows a surface owner in the commencement fee from $300 to worked out between the surface owner to seek additional monies for damages. $2,500 was made because $300 is an and the lessee. Specifically, Section 226.41 provides for outdated amount and is creating Y. Comments Related to Section 226.41 an impartial arbitrator to resolve issues development issues between the surface and allows for arbitration awards to be At least one commenter suggested owners and lessees, as evidenced by the challenged in a court of competent that damage claims recurring issue in Osage County of should be settled by jurisdiction. Lastly, all Osage leases surface owners blocking lessee access to the terms of surface use agreements and require the lessee to conduct operations then, secondarily,by arbitrationin lease sites because they believe the consistent with a prudent operator commencement fees are insufficient. Section 226.41. standard and failure to abide by that Thus, the Committee increased the For the reasons stated in responses to standard or regulations specifically commencement fee to $2,500 to help other comments, the rule does not aimed at protecting the environment can mitigate this issue and believed it is a require a surface use agreement. The subject the lease to termination under fair amount that would be applied to rule does provide for a surface owner to Sections 226.67 and 226.68. future damages, while at the same time be compensated for damages as a result balancing concerns of surface owners of operations and arbitration may be AA. Comments Related to Section who are concerned about immediate sought if issues between the surface 226.46 damages to their surface estate. owner and lessee cannot be resolved. A commenter suggested that a specific Committee members agreed that this fee Nothing in the rule prohibits the surface reference in Section 226.46 be made to should be paid before beginning owner and lessee from discussing issues prohibit leaving REDA cable on the operations, not at the time of permitting. related to operations early in the process ground. to minimize disagreements. The Department agrees that there is a W. Comments Related to Section 226.39 Z. Comments Related to Section 226.45 need to address this issue, and has further revised Section 226.46 to A commenter suggested that Section Some commenters raised concerns 226.39, re: tank fees, be folded into the include a provision requiring lessees to that the proposed regulationsfail to comply the National Electric Code with commencement money provision at protect the land, environment, public Section 226.38(a). regard to the running and maintenance health and safety and property rights of of electrical lines to ensure that Commencement money is not surface owners and suggested language minimum standards are required. intended to cover fees for the siting of to expand environmental protections. tanks. At the time that a lessee This comment was addressed during BB. Comments Related to Section commences operations, he or she may the negotiated rulemaking and there is 226.47 not know how many tanks will be sited no need to further revise the rule. In A commenter suggested that in on the well site. Section 226.39 provides response to similar public comments Section 226.47, the granting of that when a tank is sited on a well site, during the negotiated rulemaking, the easements for wells off the leased the lessee will pay the requisite fees in Committee proposed, and the premises be at the consent of surface accordance with that section. This Department is enacting in the final rule, owners as well as the Osage Minerals provision ensures that the surface owner several new provisions aimed Council. will be compensated for the siting of a specifically at protection of the land, The Department disagrees with this tank at the time they are placed on a environment, and public health and comment. However, the Department well site, while allowing the lessee to safety. Those provisions include, for does agree that a surface owner should begin operations after the payment of example, clarifying and specifying the be able to submit information as part of commencement fees and before he or lessee's environmental responsibilities the process and has revised Section she may know how many tanks will be and obligations while conducting 226.47 to provide that the placed at the well site. operations (Section 226.45), adding Superintendent will notify or attempt to Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27013 notify the affected surface owner(s) and can be "shut in," and that the lessee This rule did not change Section provide an opportunity to meet and/or should remediate a site within 90 days 226.57 and it remains substantively the submit information before an easement of well plugging. same as in the current regulations is granted. These comments are adequately (previously found at Section 226.33). addressed in the rule to the extent The Department also found a lack of CC. Comments Related to Section necessary. Section 226.53(a) makes clear information submitted in conjunction 226.48 that any permanent improvements with this comment justifying the need to Several comments were received become the property of the surface have an across the board minimum assertingthat all of the surface water owner and the only portion of that setback beyond 300 feet of the leased within Osage County belongs to the provision that was deleted was the land boundary and 200 feet of public State of Oklahoma, so all permits for exception for permanent improvement highways, established watering places, surface and groundwatershould be to become part of the surface when dwellings, granaries and barns. stopped. termination of a lease is for something Moreover, it is relevant to note that Section 226.48 governs the use of other than cause, because it did not Section 226.57 provides minimum surface water and was not substantively make sense to have such an exception setbacks and the lessee and surface changed as part of this rule. The as a legal matter. To the extent that a owner may further discuss the need for ownership of surface water is a legal surface owner has been damaged by the an increase in the setback in any question that does not need to be, and siting of a permanent improvement, the particular circumstance. cannot be, resolved as part of this regulations have always contemplated rulemaking process. that the surface owner would seek GG. Comments Related to Section Several comments were received damages in accordance with the 226.59 suggesting that Section 226.48 in its damages provisions. Section 226.53(a) A commenter suggested that the currentform authorizes the un- also already requires that a lessee Bureau should undertake a permitted use of surface water in Osage remove all personal property within 90 comprehensive review and update of its County and, in effect, the regulation days of termination of the lease. And, freshwater data/maps and, until then, purports to preempt the State of Section 225.53(c) requires that a lessee surface casing should be required to a Oklahoma'sregulatory authority. These must plug all wells that are to be depth 200 feet below that recommended comments propose amending Section abandoned and Section 225.53(d)(4) by the Bureau's current data/maps. 226.48 to state that Oklahoma law requires that within 90 days of plugging This comment does not relate directly applies to all uses of water within Osage the well, the lessee must clean up the to the rule and no change to the rule is County. These commenters also suggest premises around the well. necessary. Section 226.59 specifies that that all use of water must be permitted the lessee must take certain precautions by the State, including use in oil and gas EE. Comments Related to Section 226.56 to prevent damage or pollution to exploration, production or other One commenter requested that the freshwater. The Department agrees that operations otherwise shortages could Bureau ensure that well records and the Bureau should endeavor to work occur for those using the same water subsurface data required to be reported with the best available data regarding source pursuant to an Oklahoma Water in Section 226.56 be made accessible in freshwater data and maps applicable in Resources Board permit. a database to the public and be accurate Osage County and it will work with the As noted above, Section 226.48 to ensure that groundwateris properly United States Geological Survey and governs the use of surface water and protected. The commenter suggests that EPA to ensure that it has the most up was not substantively changed as part of all new wells should be logged and the to date information. The Bureau must this rule. The ownership of surface electronic logs should be required and review and approve operations water is a legal question that does not incorporatedinto the database. consistent with the best available need to be, and cannot be, resolved as This comment is outside the scope of information it has available and it part of this rulemaking process. the regulations and relates to the would be arbitrary to require all surface Comments were also received expressly internal procedures for how the Bureau casings to go to a depth greater than 200 disputing any comments asserting that should store information required to be feet irrespective of the data and all water use is subject to State law and submitted under the regulations and information available to the Bureau. this commenter notes that the Osage how such information is or can be Instead, Section 226.59 gives the Nation's ownership and regulatory disseminated to the public. However, Superintendent broad authority to take control of reserved waters within Osage Section 226.60(e) already requires the necessary steps to protect fresh water or County is a historical fact and without lessee to protect freshwater from other mineral bearing formations question, which is made clear by the contamination and the Bureau will depending on particular circumstances. creation of the Osage Reservation in further consider this comment as it For example, in some instances 1872 and the Osage Mineral Estate in considers the development of a Web site depending on the hydrology in a 1906. This comment further supports for information related to oil and gas particular area, the Superintendent may leaving Section 226.48 unchanged; operations within Osage County and require surface casing to a depth greater moreover Section 226.48 was originally evaluates the information that could be than 200 feet. In other areas within codified in 1974 and has remained posted for the benefit of the public Osage County, the hydrology may be unchanged for over 40 years. consistent with the Freedom of such that freshwater and other mineral Information Act. bearing formations are adequately DD. Comments Related to Section protected if surface casing are set at a 225.53 FF. Comments Related to Section 226.57 depth less than 200 feet. Nothing in the A commenter suggested that a lessee's A commenter suggested that in rule prohibits a person or entity from permanent improvements and personal Section 226.57, minimum setbacks submitting for consideration by the property should be removed from the between oilfield activities and boundary Superintendent, information relating to site when a well is abandoned, that lines of leased land, public roads, the depth of nearby residential water there should be an upper limit of watering places, and dwellings, wells that may require setting the perhaps three years up to which wells granaries,and barns be increased. depths for a particular well deeper than 27014 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations shown on the best available maps that visibility of the flame and a produced notification system is intended to the Bureau has on file. light using a closed-combustion provide a better system that will enable Some commenters suggested that, in chamber system. Other commenters Bureau employees to plan where they Section 226.56(a) and/or226.59, lessees suggested using current best industry should be on any given day to ensure be mandated to report freshwater well standardsfor flaring following that field inspections include areas drilling data to the Bureau and the American Petroleum Institute guidelines where tanks are ready to be picked up Oklahoma Water Resources Board, that and utilizing "clean burn variable tip by lessees or meters will be calibrated. the Bureau require water well testing flare" technology. The Department has determined that the within 2,000 feet of oil or gas wellbores, These comments are adequately additional burden on the public of and that lessees be requiredto keep addressed in Section 226.60(f) of the requiring more detail or increased cement well logs for all cement jobs rule and no further change in necessary. frequency in reporting under the across the freshwater zone. Section 226.60(f) requires compliance Paperwork Reduction Act is not clearly This rule did not change Section with BLM Onshore Oil and Gas Order justified by any potential benefit. To the 226.59 and it remains substantively the No. 6. This Order identifies the Bureau extent that the commenter suggests that same (previously found at Section of Land Management's requirements Bureau employees be trained, such 226.35). Further, Section 226.59 gives and minimum standards of performance comments are outside the scope of the the Superintendent broad authority to expected from operators when rulemaking. However, the Departmental address these types of concerns on a conducting operations involving oil or employees must meet certain case by case basis because the gas that is known or could reasonably be qualifications before they are hired by regulations allow the Superintendent to expected to contain hydrogen sulfide the Bureau and field inspectors are take necessary steps to protect fresh (H2S) or which results in the emission participating in the BLM's PET water or other mineral bearing of sulfur dioxide (S02) as a result of certification training. formations depending on the particular flaring H2S. This Order also identifies circumstances. the gravity of violations, probable JJ. Comments Related to Section 226.63 Some comments were received HH. Comments Related to Section corrective action(s), and normal suggesting that wells on a lease already 226.60 abatement periods. In addition, the Bureau has been working with EPA to have a meter at the well or near the A commenter suggested that well develop an Environmental Compliance wellhead and requiringinstallation of control requirements in Section 226.60 Manual for Osage County and has meters at other locations is unnecessary. are insufficient and that, instead,BLM received comments from the public to The Negotiated Rulemaking Onshore Oil and Gas Order No. 2 include in that manual best Committee made the recommendation should be substituted. management practices, including best to adopt the standards in On-Shore Oil No further revision to Section 226.60 practices for venting and flaring and Gas Order 5 because the regulations is necessary in response to this hydrogen sulfide gas. were too vague and did not provide comment. Section 226.60 was guidance to lessees for the measurement recommended by the Negotiating I. Comments Related to Section 226.62 of gas. This has resulted in lessees Rulemaking Committee in an attempt to A commenter suggested that the utilizing different standards for the balance the need to have additional Department should requiremore measurement of gas, which has caused safeguards for maintaining well control detailed and timely reportingin both the concern with respect to proper and the Committee specifically final rule and in OMB-approved forms. accounting of gas production and proper reviewed and examined BLM rules and This reporting would be offset by the payment of royalties for gas. Ensuring procedures. The Department found that Department requiringroutine proper measurement of gas was also an that section combines existing language inspections of all withdrawalsfrom tank issue in the tribal trust litigation against from the regulations with language from batteries and contemporaneous the United States and was one of the BLM regulations governing well control. recordation of all of the appropriate issues that the Committee was tasked For example, paragraph (a) is text from data, periodicfacility inspection, and with addressing in this rulemaking. the old regulations, but paragraphs (b) spot inspection for compliance. The Adoption of On-Shore Oil and Gas through (e) were adopted consistent commenter also recommended that Order 5, in Section 226.63, now with BLM regulations regarding well inspections be performed by qualified specifies uniform standards consistent control. The Department believes that Bureau officers; that periodic,random, with how gas is measured on all other these new provisions provide additional and risk-based inspections be Indian and Federal lands. In particular, protections to ensure well control that performed; and that the Bureau inspect On-Shore Oil and Gas Order 5 requires have not been in place before in Osage all oil withdrawals. lessees to measure gas on the lease, unit, County. Moreover, if appropriate, under The rule contains mechanisms that unit participating area or communitized Section 226.3, in accordance with the allow the Bureau to more efficiently area and that any measurements at Administrative Procedure Act the perform inspections. For example, in locations off the lease, unit, unit Bureau can adopt BLM's Onshore Oil Section 226.62(c), lessees are required to participating area, or communitized area and Gas Order No. 2 in the future. give notice to the Superintendent before must be approved by the Several commenters raised concerns a purchaser is notified to remove a tank Superintendent. To the extent that a regarding the venting of hydrogen of oil to allow Bureau employees to lessee already has installed meters on sulfide gas at any level, and the flaring perform periodic and random their lease consistent with On-Shore Oil of hydrogen sulfide in excess of 10 parts inspections to ensure accountability. In and Gas Order 5, no changes will be per million. Some of these commenters addition, under Section 226.63(c), a required. However, the Department suggested that if short term flaring must lessee must provide 48 hour notice believes this change is necessary to be slowed, the lessee should be required before a lessee calibrates or adjusts gas bring uniformity throughout Osage to use the best currentflaring meters. Osage County is approximately County in the measurement of gas and technology for the oil and gas industry, 1.5 million acres and the Bureau cannot ensure that it is fulfilling its trust and any flaring of natural gas should be inspect all oil withdrawals or be at responsibility to the beneficiaries of the done in a manner to eliminate the every gas meter calibration, but the Osage mineral estate. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27015

Some comments were received Several commenters noted that in that there are uniform safeguards suggesting that the requirement in their view, the new requirementfor site regarding accountability for oil and gas Section 226.62(c) to call the Bureau security plans is duplicative of the SPCC production within Osage County and it prior to running a tank of oil seems to Plans required by the EPA. provides transparency and ensures that serve no purpose. It was noted that if the The SPCC plans are required by the lessees are all following a minimum intent is to inspect more runs, then the EPA and are submitted to the EPA only standard. Additionally, the Department tribe will need to employ more to prevent a spill of oil into navigable has discovered through the negotiated inspectors, if there is no intent to waters or shorelines, whereas site rulemaking process and public inspect then this is anotherfutile security plans are required by the comments that there are genuine exercise in useless recordkeeping. Bureau and submitted for all oil and gas concerns regarding well site safety and The requirement that a lessee give operations to proactively address a the new requirement in Section notice to the Superintendent before a multitude of public safety concerns. For 226.65(c) will help with transparency tank of oil is removed by a purchaser these reasons, the site security plans are and ensure that lessees have a uniform was added by the Negotiated not duplicative of the SPCC Plans. The standard to comply with and are aware Rulemaking Committee to specifically site security plans will help promote of their responsibilities. address concerns that the Bureau needs lessee compliance with EPA's At least one commenter noted that to more efficiently inspect and monitor requirement for SPCC plans regarding site security plans will not stop stealing operations within Osage County in oil spills, because lessees will have in Osage County. order to verify accuracy of tank sales. information more readily available from This comment does not suggest any Given that Osage County consists of 1.5 the site security plans to assist them in changes to the rule. However, the million acres, the Department agrees completing an SPCC Plan. Department's intended purpose of with the Committee that requiring Some commenters suggested that the Section 226.65(b) is to provide a notice will enable it to better assess requirement in site security plans minimum standard to aid in where field inspectors need to be on any requiring that all valves have seals is accountability of oil and gas production given day to maximize the number of "ridiculous," "arbitrary"and "totally and Section 226.65(c) adds new inspections that can be done, rather impracticable"and that lessees can't protections regarding site security that than sending out field inspectors to keep recordsfor six years. Others noted have not previously been required of all random locations in the hopes of that most lessees don't have the lessees. finding tanks that are full and will be manpower or time to comply with this Some commenters suggested that picked up, as is the current practice. requirement and it would add costs that surface owners should be consulted The Bureau has also created more could force early abandonment. regardingsite security and proposed site positions for inspectors within Osage No evidence has been presented security plans should be included in County to address staffing shortfalls. regarding estimated increased costs in surface use agreements. During discussions on this topic in the relation to this comment. The United The Osage mineral estate is unique in Negotiated Rulemaking, it was noted States has a legal obligation to maintain that the entire subsurface is held in trust that lessees have to make calls to inform records regarding operations for which by the United States for the benefit of a purchaser that a tank is ready and the it is responsible. The Department must the Osage Tribe. Notwithstanding that, Department determined that the burden be able to go back for at least six years the public, including surface owners, of calling the Bureau in addition to the and collect documents and data related were able to participate in the purchaser seemed minimal. to operations because the statute of Negotiated Rulemaking process and the At least one commenter suggested limitations for damage claims on behalf Committee added the site security that if the Bureau wants compliance of or against the Department is six years. provisions to the regulations in direct with the current regulations,it would Furthermore, the Department finds it response to surface owner concerns. In request more funds to install electronic relevant that on all other Indian and addition, the Department has never monitoring of tanks. Federal lands, the United States requires required surface use agreements in This comment is outside the scope of lessees adhere to minimum site security Osage County, but there are provisions and does not relate to the rulemaking, standards for oil and gas operations. The for the surface owner to work with the rather it concerns internal budgetary requirements in Section 226.65 were lessees and collect damages for use of operations. added in response to concerns from surface lands. The Department surface owners regarding well site encourages surface owners and lessees KK. Comments Related to Section safety, as well as, from the members of to work together to address issues 226.65 the Osage Minerals Council, who were related to surface lands. Some commenters noted that concerned with ensuring accountability importing the requirementsfor site of oil and gas production. In response to LL. Comments Related to Section 226.66 security plans that the BLM requires on these concerns, the provisions in A commenter suggested that lessees other Indian and Federal lands will be Section 226.65(b) were added to provide be required to report accidents,fires, too labor-intensiveto afford for small a minimum standard for ensuring theft, vandalism, and environmental lessees within Osage County. accountability regarding oil and gas accidents to the Superintendent, the The Department received numerous operations. The rule is intended to bring surface owner(s), and law enforcement comments regarding public safety Osage County in line with minimum (in case of theft) within one business concerns around well sites from surface requirements that are used on all other day of discovery. owners and found that the site security Indian and Federal lands. Section In response to this comment, the plan requirements were added by the 226.65 mirrors the standard applicable Department has further revised Section Committee to specifically address these to other Indian and Federal lands for oil 226.66 (previously numbered 226.41) to concerns. Site security plans are not and gas operations that is found in the require that, in addition to requiring intended to be costly or labor intensive BLM's regulations. In particular the lessees to report fires, theft, and and are generally required for oil and Department finds paragraph (b) vandalism, lessees also report gas operations on all other Indian and addressed concerns from the Osage environmental accidents to the Federal lands. Minerals Council relating to ensuring Superintendent and within one business 27016 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations day after discovery provide notice to ensure that minimum standards are Federal, State, or local government local law enforcement agencies and required. If surface owners or others agencies, or geographic regions. Nor will internal company security. The have concerns regarding exposed pipes this rule have significant adverse effects revisions also require the lessee to or other health and safety issues they on competition, employment, provide or attempt to provide notice to may contact the Bureau through its investment, productivity, innovation, or the surface owner or the current reporting hotline at 1-855-495-0373. the ability of the U.S.-based enterprises resident/occupant in writing by U.S. Surface owners can contact OERB at 1- to compete with foreign-based mail of any such incidents. 800-664-1301 and consistent with their enterprises because the rule is limited to process, OERB can remediate management and administration of the MM. Subpart F (226.67 to 226.70) abandoned well sites in Osage County. Osage mineral estate. One commenter recommended including a requirement that all sums V. Procedural Requirements D. Unfunded Mandates Reform Act due be paid to the Bureau. A. Regulatory Planning and Review This rule does not impose an This comment is outside the scope of (E.O. 12866 and 13563) unfunded mandate on State, local, or the regulatory process. The Anti- tribal governments or the private sector Executive Order (E.O.) 12866 provides Deficiency Act, 31 U.S.C. 1341, requires of more than $100 million per year. The that the Office of Information and that fees and penalties be transmitted to rule does not have a significant or Regulatory Affairs (OIRA) at the Office the United States Treasury. Absent unique effect on State, local, or tribal of Management and Budget (OMB) will specific legislation to the contrary, the governments or the private sector. A review all significant rules. OIRA has Osage Agency must comply with the statement containing the information determined that this rule is not Anti-Deficiency Act and remit fees and required by the Unfunded Mandates significant. penalties to the United States Treasury. Reform Act (2 U.S.C. 1531 et seq.) is not Some commenters noted that fines in E.O. 13563 reaffirms the principles of required. SubpartF of the Rule should be paid to E.O. 12866 while calling for the shareholder/headrightowner and improvements in the nation's regulatory E. Takings (E.O. 12630) not the Bureau of Indian Affairs. system to promote predictability, to Under the criteria in Executive Order The Bureau does not keep fines that reduce uncertainty, and to use the best, 12630, this rule does not affect are collected, but is required to transmit most innovative, and least burdensome individual property rights protected by those to the United States Treasury in tools for achieving regulatory ends. The the Fifth Amendment nor does it accordance with the Anti-Deficiency E.O. directs agencies to consider involve a compensable "taking." A Act. regulatory approaches that reduce takings implication assessment is Some commenters suggested that burdens and maintain flexibility and therefore not required. heavy fines will make Osage a less freedom of choice for the public where attractiveplace. these approaches are relevant, feasible, F. Federalism (E.O. 13132) Fines are not mandatory, but are only and consistent with regulatory Under the criteria in Executive Order imposed when a lease is not operating objectives. E.O. 13563 emphasizes 13132, this rule has no substantial direct in accordance with the regulations. further that regulations must be based effect on the States, on the relationship Fines are intended to deter violations on the best available science and that between the national government and and encourage lessees to comply with the rulemaking process must allow for the States, or on the distribution of the regulations. public participation and an open power and responsibilities among the A commenter suggested that a penalty exchange of ideas. We have developed various levels of government. of $1,000/day should be levied for this rule in a manner consistent with environmental pollution. these requirements. This rule is also G. Civil Justice Reform (E.Q. 12988) The Department has decided not to part of the Department's commitment This rule complies with the change the fines and penalties section of under the Executive Order to reduce the requirements of Executive Order 12988. the rule and the fines and penalties as number and burden of regulations and Specifically, this rule has been reviewed stated in the prior regulations remain provide greater notice and clarity to the to eliminate errors and ambiguity and intact, unless otherwise set forth in a public. written to minimize litigation, and is lease. To further encourage lessees to written in clear language and contains B. Regulatory Flexibility Act comply with the regulations, the clear legal standards. Department has, however, deleted the The Department of the Interior H. Consultation With Indian Tribes provision in 226.67 allowing the Osage certifies that this rule will not have a Minerals Council to waive late fees. significant economic effect on a (E.O. 13175) substantial number of small entities In accordance with the President's NN. Abandoned Wells under the Regulatory Flexibility Act (5 memorandum of April 29, 1994, Some comments regardingabandoned U.S.C. 601 et seq.). "Government-to-Government Relations wells, abandonedpump-jacks and with Native American Tribal exposed pipes on land noted that these C. Small Business Regulatory Enforcement FairnessAct Governments," Executive Order 13175 conditions cause damage and a hazard (59 FR 22951, November 6, 2000), and and stated that the existing This rule is not a major rule under 5 512 DM 2, we have evaluated the requirements to clean-up abandoned U.S.C. 804(2), the Small Business potential effects on federally recognized wells needs to be enforced. Regulatory Enforcement Fairness Act. It Indian tribes and Indian trust assets. To the extent that these comments can will not result in the expenditure by This rule was developed by negotiated be addressed by the rule, the State, local, or tribal governments, in the rulemaking with representatives of the Department has further revised Section aggregate, or by the private sector, of affected tribe. 226.46 to include a provision requiring $100 million or more in any one year. lessees to comply with the National The rule's requirements will not result L PaperworkReduction Act Electric Code with regard to the running in a major increase in costs or prices for This rule includes information and maintenance of electrical lines to consumers, individual industries, collections requiring approval under the Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27017

Paperwork Reduction Act (PRA), 44 the comments on the rule related to requirements and rental, production, U.S.C. 3501 et seq. These information information collections in sections and royalty requirements for leasing the collections have not been approved 226.65 and 226.66. In response to reservation lands of the Osage Nation previously because the last update to 25 comments on 226.66, the final rule for oil and gas mining. The Secretary CFR 226 was prior to amendments to specifies that reports of theft must occur must perform the information collection the PRA subjecting these information within one business day of discovery, requests in this part to obtain the collection requirements to OMB rather than "promptly" and the final information necessary to complete approval. In the Federal Register of rule adds a requirement to notify the leasing transactions and monitor leased August 28, 2013, the Department surface owner under this section. The property. Responses to these published the proposed rule and invited new requirement to notify the surface information collection requests are comments on the proposed collection of owner resulted in a small increase in the required to obtain a benefit (e.g., information. The Department submitted number of responses (14,436, as commercial transactions). the information collection request to the compared to the proposed estimate of Type of Review: New information Office of Management and Budget 14,414) and hour burden (21,954, as collection. (OMB) for review and approval. The compared to the proposed estimate of OMB did not approve this collection of Respondents: Indians, businesses, and 21,932). tribal authorities. information, but instead, filed comment. OMB has approved the information In filing comment on this collection of collections in this final rule and Number of Respondents: 965. information, OMB requested that, before assigned it OMB Control No. 1076- Frequency of Collection:On occasion. publication of the final rule, the 0180. This approval will expire on 03/ Estimated Hours per Response: Department provide all comments on 31/2018. Questions or comments Ranges from 15 minutes to 8 hours (see the recordkeeping and reporting concerning this information collection table below). requirements in the proposed rule, the should be directed to the person listed Estimated Total Annual Responses: Department's response to these in the FOR FURTHER INFORMATION 14,436. comments, and a summary of any CONTACT section of this preamble. Estimated Total Annual Burden changes to the information collections. OMB Control Number: 1076-0180. We did not receive any public Title: Leasing of Osage Reservation Hours: 21,954. comments regarding the information Lands for Oil and Gas Mining, 25 CFR Non-Hour Cost Burden: $496. collection burden estimates in response 226. The table showing the burden of the to publication of the proposed rule in Brief Description of Collection: This information collection is included the Federal Register; however, some of part contains leasing procedures and below for your information.

Hourly Total Hourly annual responses Section Information collection Respondents burdenresponse per burdenhourly

226.5 ...... Lessee must submit completed lease form ...... 160 80 226.9 ...... Lessee m ust subm it bonds ...... 160 80 226.13 ...... Corporate lessee must submit evidence of its 150 *38 officers' authority to execute papers and a copy of its Articles of Incorporation. 226.26, 226.27(a) ...... Lessee must provide certified monthly reports 8,400 4,200 covering operations and on value of all oil/ gas used off premises for development and operation. 226.27(b) ...... Purchaser of oil or gas to furnish statement of 540 270 gross barrels of oil or gross Mcf of gas sold and sales price per barrel or gross Mcf during the preceding month. 226.28 ...... Submit agreement to unitize or terminate unit- 1 1 ization of oil or gas leases to Secretary. 226.29 ...... Submit assignment or transfer of lease to Sec- 500 250 retary. 226.34(b), 226.52 ...... Lessee must submit applications on BIA forms 600 4,800 for well drilling, treating, or workover operations, removing casing from well. Application to shut down or plug well, with justification. 226.36 ...... Lessee must notify and request meeting with 160 160 surface owners by certified mail, provide copy to Superintendent, and provide info at meeting. 226.40, 226.41 ...... Any person claiming an interest in the leased tract or in damages must provide a statement showing the claimed interest. 60 226.43 ...... Drivers must carry documentation showing the 30 amount, origin and intended first purchaser of the oil or gas or marketable product. 160 226.45(d) ...... Lessee must submit a contingency plan, when 800 required. 27018 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

Hourlylurlypannual Total Section Information collection Respondents hourly responses burdenresponse per burden

226.54 ...... Lessee must keep a full and correct account of 700 700 1 700 all operations, receipts, and disbursements and make reports thereof, as required, make available for inspection, and maintain for 6 years. 226.56 ...... Lessee must keep records of drilling, redrilling, 700 700 1 700 deepening, repairing, treating, plugging or abandonment of all wells and furnish reports as required in manner and method specified by Superintendent. 226.56 ...... Lessee must transmit to Superintendent appli- 700 700 8 5,600 cable information of completion of operations on any well on BIA forms; a copy of electrical, mechanical or radioactive log, or other types of survey of well bore, and core analysis of well. 226.56 ...... Upon request, Lessee must furnish plat of wells 700 700 2 1,400 in manner, form, and method prescribed by Superintendent. 226.65 ...... Lessee must maintain site security plan, includ- 700 700 4 2,800 ing facility diagram. 226.66 ...... Lessee must report accidents, fires, vandalism 22 44 1 44 including an estimate of the volume of oil involved and notify surface owner.

T o ta l ...... 14 ,4 3 6 ...... 2 1,9 5 4

J. National Environmental PolicyAct Subpart A-Leasing Procedure 226.21 Who determines royalty on lost or 226.3 What orders and notices can BIA wasted minerals? This rule does not constitute a major 226.22 What is the minimum royalty Federal action significantly affecting the issue? 226.4 What responsibilities does the payment for all leases? quality of the human environment. It is Superintendent have? 226.23 What royalty is due on other categorically excluded from further 226.5 What are the requirements for lease marketable products? review under 43 CFR 46.210(i) because sales and approvals? 226.24 What purchase options does the these are regulations "whose 226.6 How does a lessee surrender a lease? Federal Government have? environmental effects are too broad, 226.7 What forms of payment are 226.25 How are royalty payments made? speculative, or conjectural to lend acceptable? 226.26 What reports are required to be themselves to meaningful analysis and 226.8 How do changes in the current provided? 226.27 Can a lessee enter into royalty will later be subject to the NEPA process regulations impact leases? payment contracts and division orders? either collectively or case by case." No 226.9 What are the bonding requirements extraordinary circumstances exist that for leases? Unit Leases, Assignments and Related would require greater NEPA review. 226.10 Can the Superintendent increase the Instruments amount of the bond required? 226.28 When is unitization allowed? 226.11 When can the Superintendent K. Effects on the Energy Supply (E.O. 226.29 How are leases assigned? release a bond? 13211) 226.30 Are overriding royalty agreements 226.12 What forms are made a part of the allowed? This rule is not a significant energy regulations? 226.31 When are drilling contracts allowed? action under the definition in Executive 226.13 What information must a 226.32 When can an oil lease and a gas Order 13211. A Statement of Energy corporation submit? lease be combined? Effects is not required. Subpart B-Rental, Production and Royalty Subpart C-Operations List of Subjects in 25 CFR Part 226 Rental, Drilling and Production Obligations 226.33 What are the general requirements Indians-lands. 226.14 What are the requirements for rental, governing operations? 226.34 What requirements apply to For the reasons stated in the drilling, and production? 226.15 What are the lessee's obligations commencement of operations on a lease? preamble, the Department of the regarding drainage? 226.35 How does a lessee acquire Interior, Bureau of Indian Affairs, 226.16 What can the Superintendent do permission to begin operations on a revises part 226 in Title 25 of the Code when drainage occurs? restricted homestead allotment? of Federal Regulations to read as 226.36 What kind of notice and information follows: Lease Term is required to be given surface owners 226.17 What is the term of a lease? prior to commencement of drilling PART 226-LEASING OF OSAGE operations? RESERVATION LANDS FOR OIL AND Royalty Payments 226.37 How much of the surface may a GAS MINING 226.18 What is the royalty rate for oil? lessee use? 226.19 How is the gravity adjustment 226.38 What commencement money must Sec. calculated? the lessee pay to the surface owner? 226.1 Definitions. 226.20 How is the royalty on gas 226.39 What fees must lessee pay to a 226.2 What requirements govern? calculated? surface owner for tank siting? Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27019

226.40 What is a settlement of damages Authority: Sec. 3, 34 Stat. 543; secs. 1, 2, sufficiently free from impurities and claimed? 45 Stat. 1478; sec. 3, 52 Stat. 1034, 1035; sec. otherwise so conditioned that a 226.41 What is the procedure for settlement 2(a), 92 Stat. 1660. purchaser will accept them under a of damages claimed? § 226.1 Definitions. sales contract typical for the field or 226.42 What are a lessee's obligations for area. production? As used in this part, terms have the 226.43 What documentation is required for meanings set forth in this section. Maximum ultimate economic transportation of oil or gas or other Authorized representative of an oil recovery means the recovery of oil and marketable product? lessee, gas lessee, or oil and gas lessee gas and any other marketable product 226.44 What are a lessee's obligations for means any person, group, or groups of from leased lands that a prudent lessee preventing pollution? persons, partnership, association, could be expected to make from that 226.45 What are a lessee's other company, corporation, organization, or field or reservoir given existing environmental responsibilities? agent employed by or contracted with a knowledge of reservoir and other 226.46 What safety precautions must a lessee or any subcontractor to conduct pertinent facts and using common lessee take? oil and gas operations or provide industry practices for primary, 226.47 When can the Superintendent grant facilities to market oil and gas. secondary or tertiary recovery easements for wells off leased premises? operations. 226.48 A lessee's use of water. Avoidably lost means the venting or 226.49 What are the responsibilities of an flaring of produced gas or other Natural gas liquids (NGLs) means oil lessee when a gas well is drilled and marketable product without the prior those gas plant products consisting of vice versa? authorization, approval, ratification, or ethane, propane, butane, or heavier 226.50 How is the cost of drilling a well acceptance of the Superintendent and liquid hydrocarbons. determined? the loss of produced oil or gas or other Notice to lessees (NTLs) means a 226.51 What are the requirements for using marketable product when the written notice issued or adopted by the gas for operating purposes and tribal Superintendent determines that such Superintendent. NTLs implement the uses? loss occurred as a result of: regulations in this part and operating Subpart D-Cessation of Operations (1) Negligence on the part of the orders, and serve as instructions on lessee; or specific item(s) of importance. 226.52 When can a lessee shutdown, (2) The failure of the lessee to take all abandon, and plug a well? Oil and gas lessee means any person, 226.53 When must a lessee dispose of reasonable measures to prevent and/or firm, or corporation to whom an oil and casings and other improvements? control the loss; or gas mining lease is made under the (3) The failure of the lessee to comply regulations in this part, or an authorized Subpart E-Requirements of Lessees fully with the applicable lease terms representative. 226.54 What general requirements apply to and regulations, applicable orders and Oil lessee means any person, firm, or lessees? notices, or the written orders of the corporation to whom an oil mining lease 226.55 When must a lessee designate Superintendent; or is made under the regulations in this process agents? (4) Any combination of the foregoing. part, or an authorized representative. 226.56 What are the lessee's record and Condensatemeans liquid hydro- Oil well means any well that produces reporting requirements for wells? carbons (normally exceeding 40 degrees one barrel or more of crude petroleum 226.57 What line drilling limitations must a of API gravity) recovered at the surface lessee comply with? oil for each 15,000 standard cubic feet without resorting to processing. of raw natural gas. 226.58 What are the requirements for Condensate is the mixture of liquid marking wells and tank batteries? Onshore oil and gas order means a 226.59 What precautions must a lessee take hydrocarbons that results from formal order issued or adopted by the to ensure natural formations are condensation of petroleum Director of the Bureau of Indian Affairs, protected? hydrocarbons existing initially in a which implements and supplements the 226.60 What are a lessee's obligations to gaseous phase in an underground regulations in this part. maintain control of wells? reservoir. Osage Minerals Council means the 226.61 How does a lessee prevent waste of Drainagemeans the migration of duly elected governing body of the oil and gas and other marketable hydrocarbons, inert gases, or associated Osage Nation or Tribe of Indians of products? resources caused by production from Oklahoma vested with authority to enter 226.62 How does a lessee measure and store other wells. oil? Gas lessee means any person, firm, or into leases or take other actions on oil 226.63 How is gas measured? corporation to whom a gas mining lease and gas mining and other marketable 226.64 When can a lessee use gas for lifting is made under the regulations in this products pertaining to the Osage oil? part, or an authorized representative. mineral estate. 226.65 What site security standards apply Other marketable product means a to oil and gas and other marketable Gas well means any well that: (1) Produces raw natural gas not non-hydrocarbon product, including but product leases? not limited to helium, nitrogen, and 226.66 What are a lessee's reporting associated with crude petroleum oil at carbon-dioxide, for which there is a requirements for accidents, fires, theft, the time of production; or and vandalism? (2) Produces more than 15,000 market. standard cubic feet of raw natural gas to Primary term means the basic period Subpart F-Penalties each barrel of crude petroleum oil from of time for which a lease is issued 226.67 What are the penalties for violations the same producing formation. during which the lease contract may be of lease terms? Lease means any contract approved kept in force by payment of rentals. 226.68 What are the penalties for violation by the United States under the Act of Productionin paying quantities of certain operating regulations? June 28, 1906 (34 Stat. 539), as means production from a lease of oil Subpart G-Appeals and Notices amended, that authorizes exploration and/or gas of sufficient value to exceed 226.69 Who can file an appeal? for, extraction of, or removal of oil or direct operating costs and the cost of 226.70 Are the notices by the gas or other marketable product. lease rentals or minimum royalties. Superintendent binding? Marketable condition means a Raw naturalgas or gas means gas 226.71 Information collection. condition in which lease products are produced from oil and gas wells, 27020 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations including all natural gas liquids before §226.4 What responsibilities does the mineral estate. The Superintendent may any treating or processing. Superintendent have? require any bidder to submit satisfactory Secretarymeans the Secretary of the (a) The Superintendent is authorized evidence of his/her good faith and Interior or the Secretary's authorized and directed to: ability to comply with all provisions of representative acting under delegated (1) Approve unitization, the notice of sale. authority. communitization, gas storage and other (3) A successful bidder must deposit Superintendent means the contractual agreements; with the Superintendent within 5 Superintendent of the Osage Agency, (2) Assess compensatory royalty; business days following the sale, a Pawhuska, Oklahoma, or the (3) Approve suspensions of operations cashier's check, money order, or Superintendent's authorized or production, or both; electronic funds transfer in an amount representative acting under delegated (4) Approve and monitor lessee not less than 25 percent of the cash authority, or such other person as the proposals for drilling, development or bonus offered as a guaranty of good Secretary or Superintendent may production of oil and gas and any other faith. Any and all bids are subject to delegate to fulfill the responsibilities marketable product; acceptance by the Osage Minerals and exercise the authorities under this (5) Perform administrative reviews; Council and approval by the part. (6) Impose monetary assessments or Superintendent. Surface owner means any person or penalties; (4) Within 20 days after being entity that owns a surface estate within (7) Provide technical information and notified, the successful bidder must Osage County, irrespective of whether advice relative to oil and gas and any submit to the Superintendent the the surface estate is held in fee, other marketable product development balance of the bonus, a $75 filing fee, restricted fee or trust status. and operations; and a completed lease form. Waste of oil or gas or other (8) Approve, inspect, and regulate the (i) The Superintendent may extend marketable product means any act or operations that are subject to the the deadline for submitting the failure to act by the lessee that the regulations in this part; completed lease form, but no extension Superintendent finds was not necessary (9) Require compliance with lease will be granted for remitting the balance for proper development and production terms, with the regulations in this title of monies due. and that results in: and all other applicable regulations and (ii) The deposit will be forfeited for (1) A reduction in the quantity or laws; and the use and benefit of the Osage mineral quality of oil and gas or other (10) Require that all operations be estate if any of the following occur: marketable product ultimately conducted in a manner which protects (A) The bidder fails to pay the full producible from a reservoir under natural resources and environmental consideration by the required deadline; prudent and proper operations; or quality, protects life and property, and or (2) Avoidable surface loss of oil or gas results in the maximum ultimate (B) The bidder fails to file the or other marketable product. recovery of oil and gas and any other completed lease by the required marketable product with minimum deadline or extension thereof; or §226.2 What requirements govern? waste and with minimum adverse effect (C) The lease is rejected, pursuant to All oil and gas activities or activities on the ultimate recovery of other subsection 5, through no fault of the related to development of other mineral resources unless otherwise Osage Minerals Council or the marketable products conducted in approved by the Superintendent. Superintendent. Osage County are subject to: (b) The Superintendent may issue (5) The Superintendent may reject a (a) The regulations in this part; written orders to govern specific lease lease made on an accepted bid, upon (b) Lease terms; operations. Before approving operations satisfactory evidence of collusion, fraud, (c) Orders of the Superintendent; and or other irregularity in connection with (d) All other applicable laws, on a leasehold, the Superintendent must regulations, and authorities. determine that the lease is in effect, that the notice of sale. acceptable bond coverage has been (b) The Superintendent may approve Subpart A-Leasing Procedure provided, and that the proposed plan of leases made by the Osage Minerals operations is sound. Council in conformity with the notice of §226.3 What orders and notices can BIA (c) The Superintendent must establish sale, regulations in this part, bonds, and issue? procedures to ensure that each lease site other instruments required. (a) In accordance with applicable laws which has a documented history of (c) Within 30 calendar days following and regulations, the Bureau of Indian noncompliance with applicable approval of a lease, the Superintendent Affairs (BIA), after consultation with the provisions of law or regulations, lease shall post at the Agency, a legal Osage Minerals Council where terms, orders or directives be inspected description of the mineral estate that appropriate, is authorized to: at least once annually. was leased. (1) Issue and make effective in Osage (d) Prior to approval by the County oil and gas orders or notices to §226.5 What are the requirements for Superintendent, each oil and/or gas lessees (NTLs); or lease sales and approvals? lease shall be assessed and evaluated for (2) Adopt onshore oil and gas orders, (a) The steps in a lease sale are as their environmental impact in NTLs, or related oil and gas regulations follows: accordance with Bureau regulations issued by the Bureau of Land (1) A written application, together implementing the National Management. with any nomination fee, for tracts to be Environmental Policy Act and other (b) Adoptions by the Bureau of Indian offered for lease shall be filed with the applicable laws. Affairs remain in effect according to Superintendent. (e) The lessee accepts a lease with the their terms and cannot be modified by (2) The Superintendent, with the understanding that a mineral not any action of the Bureau of Land consent of the Osage Minerals Council, covered by the lease may be leased Management unless the Director issues shall publish notices for the sale of oil separately. further orders to that effect in leases, gas leases, and oil and gas leases (f) No lease, assignment thereof, or accordance with the Administrative to the highest responsible bidder on interest therein will be approved to any Procedure Act where applicable. specific tracts of the unleased Osage employee or employees of the Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27021

Government and no such employee is §226.7 What forms of payment are Negotiable Treasury securities must be permitted to acquire any interest in a acceptable? accompanied by a proper conveyance to corporation or other business entity Sums due under a lease contract and/ the Superintendent of full authority to holding a lease of the Osage mineral or the regulations in this part must be sell such securities in case of default in estate. paid in the manner and method the performance of the terms and (g) The Osage Minerals Council may specified by the Superintendent, unless conditions of a lease. utilize the following procedures among otherwise specified in these regulations. (5) An irrevocable letter of credit others, in entering into a lease: Such sums constitute a prior lien on all issued by a financial institution, the (1) A lease may be entered into equipment and unsold oil on the leased deposits of which are Federally insured, through competitive bidding as outlined premises. for a specific term, identifying the in paragraph (a)(2) of this section, Superintendent as sole payee with full § 226.8 How do changes in the current authority to demand immediate negotiation, or a combination of both; regulations impact leases? (2) The Osage Minerals Council may payment in the case of default in the Leases issued pursuant to this part are request the Superintendent undertake performance of the terms and conditions subject to the current regulations of the the preparation, advertisement and of a lease. Letters of credit are subject Secretary, all of which are made a part negotiation of leases; and/or to the following conditions: of such leases: Provided, that no (3) The Osage Minerals Council may (i) The letter of credit must be issued amendment or change of such request the Superintendent to provide only by a financial institution organized regulations made after the approval of information regarding the current or authorized to do business in the any lease operates to affect the term of estimated value of any or all or each of United States; the lease, rate of royalty, rental, or the leases to the Osage Minerals Council (ii) The letter of credit must be acreage unless agreed to by both parties based on comparable sales of Federal, irrevocable during its term. A letter of and approved by the Superintendent. Indian, State, and private leases. credit used as security for any lease (h) The Superintendent may approve §226.9 What are the bonding upon which drilling has taken place and any lease made by the Osage Minerals requirements for leases? final approval of all abandonment has not been given must be collected by the Council. Lessees shall furnish surety bonds or Superintendent if not replaced by other personal bonds acceptable to the § 226.6 How does a lessee surrender a suitable bond or letter of credit at least Superintendent as follows: lease? 30 calendar days before its expiration (a) The per-well "Bonding Amount" date; (a) The lessee may, with the approval shall be $5,000. of the Superintendent and payment of a (iii) The letter of credit must be (b) A surety bond or personal bond payable to the Superintendent upon $75 filing fee, surrender all or any equal to the Bonding Amount must be portion of any lease, have the lease demand, in part or in full, upon receipt filed at the time an Application for from the Superintendent of a notice of cancelled as to the portion surrendered Permit to Drill is approved and/or the and be relieved from all future attachment stating the basis therefor, lessee acquires liability for existing e.g., default in compliance with the obligations and liabilities. wells on a lease. (b) If the lease, or portion, being lease terms and conditions or failure to (c) A lessee must at all times maintain file a replacement in accordance with surrendered is owned in undivided on file with the Superintendent surety paragraph (c)(5)(ii) of this section; interests by more than one party, then bonds and/or personal bonds in an the following requirements apply: (iv) The initial expiration date of the amount equal to the Bonding Amount letter of credit must be at least 1 year (1) All parties must join in the times the number of wells on the application for cancellation; following the date it is filed; and lessee's leases, up to a maximum of 25 (v) The letter of credit must contain a (2) If the lease has been recorded, then wells. the lessee must execute a release and provision for automatic renewal for (d) To meet the requirements of this periods of not less than 1 year in the record the same in the proper office; section, a surety bond must be issued by absence of notice to the Superintendent (3) Surrender does not entitle the a qualified surety company approved by at least 90 calendar days prior to the lessee to a refund of the unused portion the Department of the Treasury (see originally stated or any extended of rental paid in lieu of development, Department of the Treasury Circular No. expiration date. nor does it relieve the lessee and his or 570). (f) In lieu of a surety or personal bond her sureties of any obligation and (e) Personal bonds must be required under this section, a bond in liability incurred prior to the surrender; accompanied by at least one of the the penal sum of $150,000 may be filed (4) When there is a partial surrender following: with the Superintendent for full of any lease and the acreage to be (1) A certificate of deposit issued by nationwide coverage of all leases to retained is less than 160 acres, the a financial institution, the deposits of which the Lessee is or may become a surrender is effective only with consent which are federally insured, explicitly party. of the Osage Minerals Council and granting the Secretary full authority to approval of the Superintendent. demand immediate payment in case of §226.10 Can the Superintendent increase (c) The Superintendent cannot default in the performance of the terms the amount of the bond required? approve the surrender or partial and conditions of the lease. The (a) The Superintendent may require surrender of a lease until a certificate must explicitly indicate on its an increase in the amount of any bond determination has been made that all face that Secretarial approval is required in appropriate circumstances, including, wells have either been properly plugged prior to redemption of the certificate of but not limited to, a history of previous and abandoned, and/or the future legal deposit by any party. violations, uncollected royalties due, or liability for plugging and abandoning (2) A cashier's check. when the total cost of plugging existing wells within the lease or partial lease to (3) A certified check. wells and reclaiming lands exceeds the be surrendered has been assumed in (4) Negotiable Treasury securities of present bond amount based on the writing by another financially the United States of a value equal to the estimates determined by the responsible party. amount specified in the bond. Superintendent. 27022 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

(b) The increase in bond amount may months from the date the will be considered a violation of the be to any level specified by the Superintendent consents to drilling on lease terms and said lease will be Superintendent, but in no any restricted homestead selection, the terminated as to the acreage or horizon circumstances shall it exceed the total of lease will terminate unless rental at the the further development of which was the estimated costs of plugging and rate of not less than $3 per acre for an ordered, after any appeal of an order. reclamation, the amount of uncollected oil or gas lease, or not less than $6 per The Superintendent will promptly royalties due, plus the amount of acre for a combination oil and gas lease, notify the lessee of such termination. monies owed to the lessor due to is paid at the beginning of the first year (e) Except for a lease during its previous violations remaining of the lease. primary term for which rental payment outstanding. (1) The lease may also be held for the has been paid, a lease that does not remainder of its primary term without produce in paying quantities for 120 §226.11 When can the Superintendent drilling upon payment of the specified consecutive calendar days is thereby release a bond? rental annually in advance, terminated by operation of law, effective Within 45 calendar days of receiving commencing with the second lease year. immediately. The Superintendent will written notice from a lessee that a well (2) The lease will terminate as of the notify the lessee of such termination. has been plugged or a lease has expired, due date of the rental unless such rental (1) The Superintendent has the the Superintendent must release the is received by the Superintendent on or authority before termination to approve bond upon confirming that: before said date. in writing a temporary suspension of (a) The well has been properly (3) The completion of a well operations tolling the 120-day period for plugged and the well site has been producing in paying quantities will, for a specified number of days, due to force so long as such production continues, reclaimed, or the lease site has been majeure, other hardship, or other reclaimed; relieve the lessee from any further extenuating circumstance. payment of rental, except that, should (b) All property has been removed (2) Any request for a temporary (unless otherwise agreed to in writing such production cease during the primary term the lease may be suspension of operations must be made by the surface owner). in writing to the Superintendent at least continued only during the remaining 20 calendar § 226.12 What forms are made a part of the primary term of the lease by payment of days prior to the expiration regulations? advance rental which will be due on the of the 120-day period in which the lease Leases, assignments, and supporting next anniversary date of the lease. has not produced in paying quantities. instruments must be in the form Rental must be paid on the basis of a (3) The Superintendent, for good prescribed by the Secretary, and such full year and no refund will be made of cause, may extend in writing the time of forms are hereby made a part of the advance rental paid in compliance with any temporary suspension of operations. regulations. the regulations in this part. (4) The Superintendent must provide (b) The Superintendent may, with the a copy of any decision under this §226.13 What information must a consent of and under terms approved by paragraph (e) to the Osage Minerals corporation submit? the Osage Minerals Council, grant an Council at the same time it is delivered (a) If the applicant for a lease is a extension of the primary term of a lease to the lessee. corporation, it must file evidence of on which actual drilling of a well has (f) Whenever the Osage Minerals authority of its officers to execute commenced within the term thereof, or Council identifies any lease that has papers; and with its first application it for the purpose of enabling the lessee to terminated or may be subject to must also file a certified copy of its obtain a market for his/her oil and/or termination for any reason, the Osage Articles of Incorporation and, if foreign gas production. Minerals Council has the right to to the State of Oklahoma, evidence (c) Irrespective of whether the lessee request in writing appropriate action by showing compliance with the has drilled or paid rental, the the Superintendent, including but not corporation laws thereof. Superintendent in his/her discretion limited to the issuance of a notice of (b) Whenever deemed advisable, the may order further development of any termination to the lessee, and may Superintendent may require a leased acreage or a specific horizon in submit any materials or analysis in corporation to file any additional any lease term if, in his/her opinion, a support of its request. Upon receipt of information necessary to carry out the prudent lessee would conduct further such a request, within 90 calendar days purpose and intent of the regulations in development. A prudent lessee will the Superintendent must either take the this part, and such information must be diligently develop the minerals requested action or issue a written furnished within a reasonable time. underlying the leasehold. The Osage decision responsive to the request. Minerals Council has the right to (g) The Superintendent may impose Subpart B-Rental, Production and request a determination of whether restrictions as to time of drilling and Royalty there is diligent development by the rate of production from any well or Rental, Drilling and Production Superintendent as to any lease and may wells when the Superintendent judges Obligations submit any materials or analysis to these restrictions to be necessary or support its request. Upon receipt of a proper for the protection of the natural § 226.14 What are the requirements for request, the Superintendent will resources of the leased land and the rental, drilling, and production? evaluate the request and may require interests of the Osage mineral estate. (a) Oil leases, gas leases, and additional information be submitted by The Superintendent may consider, combination oil and gas leases. Unless the lessee and the Osage Minerals among other things, Federal and the lessee completes and places in Council before making a final Oklahoma laws regulating either drilling production a well producing and selling determination. or production. oil and/or gas in paying quantities on (d) If the lessee refuses to comply (h) If a lessee holds both an oil lease the land embraced within the lease with an order by the Superintendent to and a gas lease covering the same within 12 months from the date of diligently develop its leasehold as a acreage, such lessee is subject to the approval of the lease, or as otherwise result of a determination under provisions of this section as to both the provided in the lease terms, or 12 paragraph (c) of this section, the refusal oil lease and the gas lease. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27023

§ 226.15 What are the lessee's obligations §226.16 What can the Superintendent do Lease Term regarding drainage? when drainage occurs? § 226.17 What is the term of a lease? (a) The Superintendent may send a (a) Where lands in any leases are Leases issued under this part are for being drained of their oil or gas content demand letter by certified mail, return receipt requested, or personally serve a primary term as established by the by wells outside the lease, the lessee Osage Minerals Council, approved by must drill or modify and produce all the lessee with notice, if the Superintendent believes that drainage is the Superintendent, and so stated in the wells necessary to protect the leased notice of sale of such leases and so long lands from drainage within a reasonable occurring. However, the lessee's responsibility to take protective action thereafter as the minerals specified are time after the earlier of when the lessee produced in paying quantities. knew or should have known of the arises when it first knew or had drainage. In lieu of drilling or modifying constructive notice of the drainage, even Royalty Payments when that date precedes the demand necessary wells, the lessee may, with letter. § 226.18 What is the royalty rate for oil? the consent of the Superintendent, pay (b) Since the time required to drill (a) The lessee must deliver to the compensatory royalty for drainage that Superintendent a royalty on production has occurred or is occurring. and produce a protective well varies according to the location and conditions removed or sold from the lease, that (b) Actions under paragraph (a) of this of the oil and gas reservoir, the proportion specified in the notice of sale section are not required if the lessee Superintendent will determine this on a (but not less than 20 percent) of the proves to the Superintendent that when case-by-case basis. The Superintendent amount or value of the oil determined it first knew or had constructive notice will consider several factors, including, under paragraph (b) of this section. of drainage it could not produce a but not limited to: (b) Unless the Osage Minerals paying quantity of oil or gas from a Council, with approval of the (1) The time required to evaluate the Superintendent, elects to take the protective well on the lease for a characteristics and performance of the reasonable profit above the cost of royalty in kind, the settlement value per draining well; barrel is the greater of: drilling, completing and operating the (2) Rig availability; protective well. (1) The average NYMEX daily price of (3) Well depth; oil at Cushing, Oklahoma, for the month (c) A lessee has constructive notice (4) Required environmental analysis; in which the produced oil was sold, that drainage may be occurring when (5) Special lease stipulations that adjusted for gravity using the scale well completion or first production applicable under § 226.19. The reports for the draining well are provide limited time frames in which to drill; and applicable average NYMEX daily price publicly available, or, if the lessee of oil at Cushing, Oklahoma and gravity operates or owns any interest in the (6) Weather conditions. adjustment scale will be available from draining well or lease, upon completion (c) If the Superintendent determines the Superintendent upon request, on or of drill stem, production, pressure that a lessee did not take protective before the fifth day of the month analysis, or flow tests of the draining action in a timely manner, the lessee following production; or well. will owe compensatory royalty for the (2) The actual selling price for the (d) If a lessee assigns its interest in a period of the delay. transaction as adjusted for gravity. lease or transfers its operating rights, it (d) The Superintendent will assess (c) Should the lessor, with approval of is liable for drainage that occurs before compensatory royalty beginning on the the Secretary, elect to take the royalty in the date the assignment or transfer is first day of the month following the kind, the lessee must furnish free approved by the Superintendent. Any earliest reasonable time the lessee storage for royalty oil for a period not to exceed 60 calendar days from date of lessee who acquires an interest in a should have taken protective action and production after notice of such election. lease on which the Superintendent has continuing until: determined that the assignor was (1) The lessee drills sufficient § 226.19 How is the gravity adjustment required to take action under paragraph economic protective wells and the wells calculated? (a) of this section is liable for paying remain in continuous production; (a) The gravity adjustment of Average compensatory royalties associated with (2) The draining well stops producing; Daily NYMEX Price of oil at Cushing, production occurring on and after the or Oklahoma under § 226.18(b)(1) is a date the assignment or transfer is (3) The lessee relinquishes its interest deduction from the price per barrel, as approved by the Superintendent. in the lease. follows:

If the gravity of the oil is . . . the rate is . . . for each . . .

(1) At or between 40.0 and 44.9 degrees ...... zero. (2) At or between 35.0 and 39.9 degrees ...... $0.02 ...... degree or fraction thereof below 40.0. (3) Below 35.0 degrees ...... $0.10 plus an additional $0.015 one-tenth of one degree below 35.0. (4) Above 44.9 degrees ...... $0.015 ...... for each one-tenth of one degree above 44.9.

(b) The Superintendent may, on or on substantial evidence, that market otherwise approved by the before the fifth day of the month conditions so warrant. Superintendent and be subject to a following production, publish a gravity royalty of not less than 20 percent of the § 226.20 How is the royalty on gas adjustment scale for oil of gravity below calculated? gross proceeds of the gas. Unless the 40.0 degrees or above 44.9 degrees that Osage Minerals Council, with approval supersedes this paragraph, but only if (a) All gas removed from the lease of the Superintendent, elects to take the from which it is produced must be the Superintendent determines, based royalty in kind, gross proceeds must be metered before removal unless 27024 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations calculated under paragraph (b) of this volume and quality in favor of the than 11/2 percent for each month or section; except that the Superintendent lessor. fraction thereof until paid. may direct (and the Osage Minerals Council may request that the §226.22 What is the minimum royalty § 226.26 What reports are required to be payment for all leases? provided? Superintendent direct) any lessee, upon no less than 30 calendar days notice, to Minimum royalty will be owed in the The lessee must furnish certified calculate gross proceeds at the higher event the royalty paid from producing monthly reports covering all operations royalty value of paragraph (b) or leases during any year is less than the in a form specified by the paragraph (c) of this section. annual rental specified for the lease. Superintendent, whether there has been (b) Under this paragraph, gross Minimum royalty is due and payable at production or not, indicating therein the proceeds of the gas must be determined the end of the lease year in an amount total amount of oil, raw natural gas, and by multiplying the measured volume of equal to the annual rental less the other products subject to royalty gas at the well (Mcf), times the heating amount paid in royalty on production. payment, by the end of the month volume of the gas (MMBtu/Mcf), times (a) After the primary term, the lessee following the month during which the the index price of the gas ($/MMBtu) for must submit with his/her payment oil and gas is produced and sold, except Oklahoma Zone 1 published by the evidence that the lease is producing in when the last day of the month falls on Department of the Interior's Office of paying quantities. a weekend or holiday. In such cases, Natural Resources Revenue. If that (b) The Superintendent is authorized reports are due on the first business day Monthly Index Price ceases to be to determine whether the lease is of the succeeding month. published and/or is not otherwise actually producing in paying quantities (a) Reports covering oil production available, the price must be calculated or has terminated for lack of such must include the date of each sale of oil, in a comparable manner to be production. well or lease identity, lessee, purchaser, determined by the Superintendent. The (c) Payment for any underpayment volume of oil sold, gravity of oil sold, heating value of the gas shall be not made within the time specified is price paid per barrel for the sale, 40- calculated in accordance with American subject to a late charge at the rate of not degree price used for the sale, gravity Petroleum Institute MPMS Chapter 14, less than 11/2 percent per month for each adjustment scale used for the sale, and Section 5, and shall be reported under month or fraction thereof until paid, or total amount paid for the sale. the following conditions: Dry (no water such other rate as may be set by the (b) Reports covering gas production vapor), real, gross, and adjusted Superintendent after consultation with must contain the total volume of raw pressure of 14.73 psi and a temperature the Osage Minerals Council. natural gas measured at the well, the of 60 degrees Fahrenheit. If any lessee BTU value of raw natural gas produced supplies gas produced from one lease § 226.23 What royalty is due on other at the well, the periodic gas analysis for operation and/or development of any marketable products? applicable to the sale, and the total other lease, including another lease held A royalty on other marketable value paid for the raw natural gas, by the same lessee, the royalty products must be paid at the rate of not residue gas, natural gas liquids, and calculated under this section must be less than 20 percent of the actual sales condensate. paid on all gas so used. value of the other marketable products (c) Report forms must be submitted in (c) Under this paragraph, gross sold, in addition to any other royalty .csv (comma separated value) or ASCII proceeds of the gas will be 100 percent due on oil or gas. format, or such other equivalent format of the actual proceeds from sales of all specified by the Superintendent. The residue gas produced from the lease and §226.24 What purchase options does the Superintendent must specify the Federal Government have? one hundred percent of the actual method of transmittal. The proceeds from sales of all natural gas Any of the executive departments of Superintendent may specify that lessees liquids produced from the lease minus the United States Government have the must submit the reports and information the actual, reasonable cost of processing option to purchase all or any part of the required by this section directly to other not to exceed 50 percent of the actual oil produced from any lease at not less agencies within the Department of the sales value of the natural gas liquids than the price as defined in § 226.18. Interior, in lieu of the Superintendent. (including drip condensate). If the § 226.25 How are royalty payments made? (d) The Superintendent must provide actual reasonable cost of processing to the Osage Minerals Council copies of cannot be obtained, upon approval by (a) Royalty payments due may be paid all reports under this section on at least the Superintendent, the lessee may by either the purchaser or the lessee, a quarterly basis in the format originally determine such cost in accordance with provided that the lessee must provide a received by the lessee. Upon written the alternative methodology and written agreement to the Superintendent request by the Osage Minerals Council, procedures in 30 CFR 1206.180(a) or (b). if the purchaser has agreed to be the the Superintendent will require lessees No other deductions of any kind, responsible party for making royalty to provide to the Osage Minerals payments. whether monetary or volumetric or Council copies of run tickets. otherwise, for any purpose, including (b) All payments are due by the end (e) Failure to remit reports subjects but not limited to compression, of the month following the month the lessee to further penalties as dehydration, gathering, treating, or during which the oil and gas is provided in § 226.67 and § 226.68 and transportation are allowed. produced and sold, except when the last subjects any royalty payment contract or day of the month falls on a weekend or division order to termination. §226.21 Who determines royalty on lost or holiday. In such cases, payments are wasted minerals? due on the first business day of the §226.27 Can a lessee enter into royalty Royalty is due on all oil and gas succeeding month. All payments must payment contracts and division orders? wasted or avoidably lost, the volume cover the sales of the preceding month. (a) The lessee may enter into division and quality of which will be determined (c) Failure to make such payments orders or contracts with the purchasers by the Superintendent after taking into subjects the responsible party as of oil, gas, or derivatives therefrom that consideration information provided by provided in paragraph (a) of this section will provide for the purchaser to make the lessee, but resolving all doubts about to a late charge at the rate of not less payment of royalty in accordance with Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27025

§ 226.25. The following requirements ultimate recovery of oil and gas from a after the date of execution by all parties. apply in these cases: common source of supply or portion If requested within the 30-day period, (1) The division orders or contracts do thereof, all oil leases, oil and gas leases, the Superintendent may grant an not relieve the lessee from responsibility and gas leases issued under this part extension of 15 calendar days. for the payment of the royalty should may be required to join a unit (d) A filing fee of $75 must the purchaser fail to pay. development plan affecting the leased accompany each assignment. (2) No production may be removed lands by the Superintendent with the consent of the Osage Minerals Council. §226.30 Are overriding royalty from the leased premises until a agreements allowed? division order and/or contract and its This plan must adequately protect the terms are approved by the rights of all parties in interest, including Agreements creating overriding Superintendent: the Osage mineral estate. royalties or payments out of production (3) The Superintendent may grant are not considered as an interest in a §226.29 How are leases assigned? temporary permission to run oil or gas lease as such term is used in § 226.29. from a lease pending the approval of a Leases or any interest therein may be Agreements creating overriding royalties division order or contract. assigned or transferred only with the or payments out of production are (4) The lessee must file a certified approval of the Superintendent. The hereby authorized and the approval of monthly report and pay royalty on the assignee must be qualified to hold such the Department of the Interior or any value of all oil and gas used off the lease under existing rules and agency thereof is not required with premises for development and operating regulations and furnish a satisfactory respect thereto, but nothing in any such purposes. bond conditioned for the faithful agreement modifies any of the (5) The lessee is responsible for the performance of the covenants and obligations of the lessee under its lease correct measurement and reporting of conditions thereof. and the regulations in this part. All such all oil and/or gas taken from the leased (a) The lessee must assign either his/ obligations are to remain in full force premises. her entire interest in a lease or legal and effect, the same as if free of any (b) The lessee must require the subdivision thereof, or an undivided such royalties or payments. purchaser of oil and/or gas from its lease interest in the whole lease: Provided, (a) The existence of agreements or leases to furnish the Superintendent, however, that the Superintendent may creating overriding royalties or a statement reporting the gross barrels of approve an assignment that covers only payments out of production, whether or oil and/or gross Mcf of gas sold and a portion of a lease with the consent of not actually paid, will not be considered sales price per barrel and/or gross Mcf the Osage Minerals Council. Approval in justifying the shutdown or during the preceding month, by the end by the Superintendent of a lease abandonment of any well. (b) Agreements creating overriding of the month following the month assignment or transfer of an interest in royalties or payments out of production during which the oil and gas is a lease or legal subdivision, is subject to need not be filed with the produced and sold, except when the last the following: (1) After the Superintendent approves Superintendent unless incorporated in day of the month falls on a weekend or the assignment or transfer, the lessee assignments or instruments required to holiday. In such cases, statements are who made the assignment will continue be filed pursuant to § 226.29. due on the first business day of the to be responsible, jointly and severally succeeding month. with the assignee, for lease obligations §226.31 When are drilling contracts allowed? Unit Leases, Assignments and Related that accrued before the approval date, Instruments whether or not they were identified at The Superintendent is authorized to the time of the assignment or transfer. approve drilling contracts with a §226.28 When is unitization allowed? This includes paying compensatory stipulation that such approval does not The Osage Minerals Council and the royalties for drainage. It also includes in any way bind or require the lessee or lessees, may, with the approval responsibility for plugging wells and Department to approve subsequent of the Superintendent, unitize or merge, abandoning facilities that were drilled, assignments that may be contemplated two or more oil or oil and gas leases into installed, or used before the effective or provided for in the particular drilling a unit or cooperative operating plan to date of the assignment or transfer. contract approved by the Department. promote the greatest ultimate recovery (2) The assignee agrees to comply Approval merely authorizes entry on the of oil and gas from a common source of with the terms of the original lease as it lease for the purpose of development supply or portion thereof embracing the applies to the rights that were acquired. work. lands covered by such lease or leases. Among other obligations, the assignee § 226.32 When can an oil lease and a gas (a) The cooperative or unit agreement must plug and abandon all unplugged lease be combined? is subject to the regulations in this part wells, reclaim the lease site, and remedy A lessee owning both an oil lease and and applicable laws governing the all environmental problems in existence leasing of the Osage mineral estate. gas lease covering the same acreage is that a purchaser exercising reasonable authorized to convert such leases to a (b) Any agreement between the parties diligence should have known at the combination oil and gas lease. in interest to terminate a unit or time of the transfer. The assignee must cooperative agreement as to all or any also maintain a bond in accordance with Subpart C-Operations portion of the lands included must be these regulations. submitted to the Superintendent for his/ (b) If a lease is divided by the §226.33 What are the general her approval. assignment of an entire interest in any requirements governing operations? (c) Upon approval of unit termination part, each part will become a separate (a) The lessee must comply with under paragraph (b) of this section, the lease and the assignee is bound to applicable laws and regulations; with leases included under the cooperative or comply with all the terms and the lease terms; and with orders and unit agreement will be restored to their conditions of the original lease. instructions of the Superintendent. original terms. (c) A fully executed copy of the These include, but are not limited to, (d) For the purpose of preventing assignment must be filed with the conducting all operations in a manner waste and to promote the greatest Superintendent within 30 calendar days that: 27026 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations

(1) Ensures the proper handling, draft environmental assessment, which Superintendent that it plans to begin measurement, disposition, and site will be reviewed and evaluated by the conducting the following activities over security of leasehold production; Superintendent before deciding whether the term of its lease: Archeological or (2) Protects other natural resources to prepare an Environmental Impact biological surveys, or staking of wells. and environmental quality; Statement or issue a Finding of No (b) No operations of any kind may (3) Protects life and property; and Significant Impact. The Superintendent commence until the lessee or its (4) Results in maximum ultimate will also notify the lessee of any other authorized representative meets with economic recovery of oil and gas and information that must be submitted, the surface owner or his/her other marketable products with such as cultural resources survey representative. The lessee must request minimum waste and with minimum reports/archeological surveys when the meeting in writing by certified mail adverse effect on ultimate recovery of needed to comply with the National and provide a copy of the letter to the other mineral resources. Historic Preservation Act and the Superintendent. Unless waived by the (b) The lessee must permit properly Secretary's Standards and Guidelines Superintendent or otherwise agreed to identified authorized representatives of for Archeology and Historic between the lessee and surface owner, the Superintendent to enter upon, travel Preservation. such meeting must be held at least 10 across, and inspect lease sites and calendar days prior to the records normally kept on the lease §226.35 How does a lessee acquire permission to begin operations on a commencement or any operations. At pertinent thereto without advance restricted homestead allotment? such meeting lessee or its authorized notice. Inspections normally will be (a) The lessee may conduct operations representative must comply with the conducted during those hours when within or upon a restricted homestead following requirements: responsible persons are expected to be (1) Indicate the location of the well or present at the operation being inspected. selection only with the written consent of the Superintendent. wells to be drilled. Such permission must include access to (b) If the allottee is unwilling to (2) Arrange for a route of ingress and egress. Upon failure to agree on a route secured facilities on such lease sites for permit operations on his/her homestead, of ingress and egress, the purpose of making any inspection or the Superintendent will cause an said route will be investigation for determining whether examination of the premises to be made set by the Superintendent after the there is compliance with applicable law, with the allottee and lessee or his/her Superintendent has notified or the regulations in this part, and any representative. Upon finding that the attempted to notify both the surface applicable orders, notices or directives. interests of the Osage mineral estate owner and lessee in writing of their (c) For the purpose of making any require that the tract be developed, the opportunity to meet and submit inspection or investigation, the Superintendent will endeavor to have information for consideration before a Superintendent has the same right to the parties agree upon the terms under final decision is made. enter upon or travel across any lease site which operations on the homestead may (3) Furnish to said surface owners the as the lessee. be conducted. name and address of the party or (c) In the event the allottee and lessee representative upon whom the surface §226.34 What requirements apply to owner must serve any claim for damages commencement of operations on a lease? cannot reach an agreement, the matter which he may sustain from mineral (a) No operations are permitted upon must be presented by all parties before the Osage Minerals Council, and the development or operations, and as to any tract of land until a lease covering the procedure for settlement thereof as such tract is approved by the Council will make its recommendations. Such recommendations will be provided in § 226.41. Superintendent. The Superintendent (4) Where the drilling is to be on may, however, grant authority to any considered as final and binding upon the allottee and lessee. A guardian may restricted land, the lessee or its party under such lease, consistent with authorized representative must meet the regulations in this part that he or she represent the allottee. Where no one is authorized or where no person is with and provide the information in deems proper, to conduct geophysical paragraphs (b)(i)-(3) of this section to and geological exploration work. deemed by the Superintendent to be a proper party to speak for a person of the Superintendent. (b) The lessee must submit (5) When the surface owner or its applications on forms to be furnished by unsound mind or feeble understanding, the Principal Chief of the Osage Nation representative cannot be contacted at the Superintendent and secure approval the last known address or has not before: will represent him. (d) If the allottee or his/her accepted a meeting request within 30 (1) Well drilling, treating, or workover representative does not appear before calendar days of receipt of the request, operations are started on the leased the Osage Minerals Council when the Superintendent is required to premises. notified by the Superintendent, or if the authorize lessee, in writing, to proceed (2) Removing casing from any well. with operations. (c) The lessee must notify the Council fails to act within 10 calendar Superintendent a reasonable time in days after the matter is referred to it, the § 226.37 How much of the surface may a Superintendent may authorize the advance of starting work, of intention to lessee use? drill, redrill, deepen, plug, or abandon lessee to proceed with operations in The lessee or its authorized a well. conformity with the provisions of his/ representative has the right to use so (d) Prior to approving any operations her lease and the regulations in this much of the surface of the land within under this section, the Superintendent part. the Osage mineral estate as may be will determine whether an §226.36 What kind of notice and reasonable for operations and environmental assessment or other information is required to be given surface marketing. This includes, but is not information is required to comply with owners prior to commencement of drilling limited to the right to, lay and maintain applicable laws such as the National operations? pipelines, electric lines, pull rods, other Environmental Policy Act. If an (a) The lessee must notify or attempt appliances necessary for operations and environmental assessment is deemed to notify the surface owner in one marketing, and the right-of-way for necessary, the Superintendent will general written notification sent by ingress and egress to any point of notify the lessee that it must submit a certified mail with a copy to the operations. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27027

(a) If the lessee and surface owner are (b) Where the surface is restricted determined by arbitration as provided unable to agree as to the routing of land, commencement money must be by § 226.41. pipelines, electric lines, etc., said paid to the Superintendent for the (b) Surface owners must notify their routing will be set by the landowner. All other surface owners lessees or tenants of the regulations in Superintendent after the Superintendent must be paid or tendered such this part and of the necessary procedure has notified or attempted to notify both commencement money directly. to follow in all cases of alleged damages. the surface owner and lessee in writing (1) Where such surface owners are If so authorized in writing, surface of their opportunity to meet and submit neither residents of Osage County, nor lessees or tenants may represent the information for consideration before a have a representative located therein, surface owners. final decision is made. such payment must be made or tendered (c) In settlement of damages on (b) The right to use water for lease to the last known address of the surface restricted land, all sums due and operations is established by § 226.48. owner at least 5 calendar days before payable must be paid to the (c) The lessee must conduct its commencing drilling operation on any Superintendent for credit to the account operations in a workmanlike manner, well. of the Indian entitled thereto. The commit no waste and allow none to be (2) If the lessee is unable to reach the Superintendent will make the committed upon the land, nor permit owner of the surface of the land for the apportionment between the Indian any avoidable nuisance to be purpose of tendering the landowner or owners and surface lessee maintained on the premises under its commencement money or if the owner of record. control. (d) Any person claiming damages to of the surface of the land refuses to an interest in any leased tract, must accept the same, the lessee must deposit §226.38 What commencement money furnish to the Superintendent a such amount with the Superintendent must the lessee pay to the surface owner? statement in writing showing its by check payable to the Bureau of (a) Before commencing actual claimed interest. Failure to furnish such Indian Affairs. The Superintendent exploration and/or development, the statement will constitute a waiver of must thereupon advise the owner of the lessee must pay or tender to the surface notice and estop said person from surface of the land by mail at his/her owner commencement money in the claiming any part of such damages after last known address that the amount of $25 per shot hole for the same has been disbursed. explosive source (for the acquisition of commencement money is being held for Single Fold (100 per cent Seismic)), or payment to him upon his/her written §226.41 What is the procedure for $400 per linear mile for surface source request. settlement of damages claimed? data acquisition. For the purpose of § 226.39 What fees must lessee pay to a Where the surface owner or his/her conducting a 3D seismic survey, the surface owner for tank siting? lessee suffers damage due to the oil and lessee must pay commencement money gas operations and/or marketing of oil or in the amount of $10 per acre occupied The lessee must pay fees for each tank gas by lessee or its authorized during the time the survey is conducted. sited at the rate of $500 per tank, except representative, the procedure for The lessee must also pay that: recovery is as follows: commencement money in the amount of (a) No payment is due for a tank (a) The party or parties aggrieved will, $2500 for each well. temporarily set on a well location site as soon as possible after the discovery (1) After payment of commencement for drilling, completing, or testing; and of any damages, serve written notice to money the lessee will be entitled to (b) The sum to be paid for a tank lessee or its authorized representative. immediate possession of the drilling occupying an area more than 2500 The written notice must describe the site. square feet will be agreed upon between nature and location of the alleged (2) Commencement money will not be the surface owner and lessee or, on damages, the date of occurrence, the required for the redrilling of a well failure to agree, the same will be names of the party or parties causing which was originally drilled under the determined by arbitration as provided said damages, and the amount of current lease. by § 226.41. damages. This requirement does not (3) A drilling site must be held to the § 226.40 What is a settlement of damages limit the time within which action may minimum area essential for operations be brought in the courts to less than the claimed? and not exceed one and one-half acres 90-day period allowed by section 2 of in area unless authorized by the (a) The lessee or its authorized the Act of March 2, 1929 (45 Stat. 1478, Superintendent. representative or geophysical permittee 1479). (4) Commencement money is a credit must pay for all damages to growing (b) If the alleged damages are not toward the settlement of the total crops, any improvements on the lands, adjusted at the time of such notice, the damages. and all other surface damages as may be lessee or its authorized representative (5) Acceptance of commencement occasioned by operations. must try to adjust the claim with the money by the surface owner does not Commencement money will be credited party or parties aggrieved within 20 affect its right to compensation for toward the settlement of the total calendar days from receipt of the notice. damages as described in § 226.40, damages occasioned by the drilling and If the claimant is the owner of restricted occasioned by the drilling and completion of the well for which it was property and a settlement results, a copy completion of the well for which it was paid. Such damages must be paid to the of the settlement agreement must be paid. owner of the surface and by him submitted to the Superintendent for (6) Since actual damage to the surface apportioned among the parties approval. If the settlement agreement from operations cannot necessarily be interested in the surface, whether as concerning the restricted property is ascertained prior to the completion of a owner, surface lessee, or otherwise, as approved by the Superintendent, well as a serviceable well or dry hole, the parties may mutually agree or as payment must be made to the a damage settlement covering the their interests may appear. If the lessee Superintendent for the benefit of said drilling operation need not be made or its authorized representative and claimant. until after completion of drilling surface owner are unable to agree (c) If the parties fail to adjust the operations. concerning damages, the same will be claim within the 20 calendar days 27028 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations specified, then within 10 calendar days §226.42 What are a lessee's obligations § 226.44 What are a lessee's obligations thereafter each of the interested parties for production? for preventing pollution? must appoint an arbitrator who (a) The lessee must put into (a) All lessees, contractors, drillers, immediately upon their appointment marketable condition at no cost to the service companies, pipe pulling and must agree upon a third arbitrator. If the lessor, all oil, gas, and other marketable salvaging contractors, or other persons, two arbitrators fail to agree upon a third products produced from the leased land. must at all times conduct their arbitrator within 10 calendar days, they (b) Where oil accumulates in a pit, operations and drill, equip, operate, must immediately notify the parties in such oil must either be: produce, plug, and abandon all wells drilled for oil or gas, service wells or interest. If said parties cannot agree (1) Recirculated through the regular exploratory wells (including seismic, upon a third arbitrator within 5 calendar treating system and returned to the stock tanks for sale; or core, and stratigraphic holes) in a days after receipt of such notice, the manner that will prevent pollution (2) Pumped into a stock tank without and Superintendent will appoint the third the migration of oil, gas, salt water, or treatment and measured for sale in the arbitrator. other substance from one stratum into same manner as from any sales tank in (d) As soon as the third arbitrator is another, including any fresh water accordance with applicable orders and appointed, the arbitrators must meet; bearing formation. notices. hear the evidence and arguments of the (b) Pits for drilling mud or deleterious (c) In the absence of prior approval parties; and examine the lands, crops, substances used in the drilling, from the Superintendent, no oil may be improvements, or other property alleged completion, recompletion, or workover pumped into a pit except in an to have been injured. Within 10 of any well must be constructed and emergency. Each such pumping maintained to prevent pollution of calendar days they will render their occurrence must be reported to the decision as to the amount of the damage surface and subsurface fresh water. Superintendent and the oil promptly These pits must be enclosed with a due. The arbitrators will be recovered in accordance with applicable disinterested persons. The fees and fence of at least four strands of barbed orders and notices. wire, or an approved substitute, expenses of the third arbitrator must be stretched taut to adequately braced borne equally by the claimant and the §226.43 What documentation is required corner posts, unless the surface owner, lessee or its authorized representative. for transportation of oil or gas or other marketable product? user, or the Superintendent gives Each lessee or its authorized consent to the contrary. Immediately representative and claimant must pay (a) Any person engaged in transporting by motor vehicle any oil after completion of operations, pits must the fee and expenses for the arbitrator be emptied, reclaimed, and leveled from any lease site, or allocated to any appointed by him. unless otherwise requested by surface such lease site, must carry on his/her owner or user. (e) When an act of an oil or gas lessee person, in his/her vehicle, or in his/her or its authorized representative results (c) Drilling pits must be adequate to immediate control, documentation contain mud and other material in injury to both the surface owner and showing at a minimum; the amount, his/her lessee, the parties aggrieved extracted from wells and must have origin, and intended first purchaser of adequate storage to maintain a supply of must join in the appointment of an the oil. arbitrator. Where the injury complained mud for use in emergencies. (b) Any person engaged in (d) No earthen pit, except those used of is chargeable to more than one oil or transporting any oil or gas or other gas lessee, or its authorized in the drilling, completion, marketable product by pipeline recompletion or workover of a well, may representative, all such chargeable produced from or allocated to any lease be constructed, enlarged, reconstructed lessees or representatives must join in site, must maintain documentation or used without approval of the the appointment of an arbitrator. showing, at a minimum, the amount, Superintendent. Unlined earthen pits (f) Any two of the arbitrators may origin, and intended first purchaser of may not be used for the storage of salt make a decision as to the amount of such oil or gas or other marketable water or other deleterious substances. damage due. The decision must be in product. (e) Deleterious fluids other than fresh writing and served forthwith upon the (c) On any lease site, any authorized water drilling fluids used in drilling or parties in interest. Each party has 90 representative of the Superintendent workover operations, which are calendar days from the date the decision who is properly identified may stop and displaced or produced in well is served in which to file an action in inspect any motor vehicle that he/she completion or stimulation procedures, a court of competent jurisdiction. If no has probable cause to believe is carrying including, but not limited to, fracturing, such action is filed within said time and oil produced from or allocated to any acidizing, swabbing, and drill stem the award is against the lessee or its such lease site, to determine whether tests, must be collected into a pit lined authorized representative, he/she must the driver possesses proper with plastic of at least 30 mil or a metal pay the same, together with interest at documentation for the load of oil. or fiberglass tank and maintained an annual rate established for the (d) Any authorized representative of separately from above-mentioned Internal Revenue Service from date of the Superintendent who is properly drilling fluids to allow for separate award, within 10 calendar days after the identified and who is accompanied by disposal. These pits or tanks must be expiration of said period for filing an an appropriate law enforcement officer, enclosed with a fence of at least four or an appropriate law enforcement strands of barbed wire, or an approved action. officer alone, may stop and inspect any substitute, stretched taut to adequately (g) The lessee or its authorized motor vehicle which is not on a lease braced corner posts, unless the surface representative must file with the site if he/she has probable cause to owner or the Superintendent gives Superintendent a report on each believe the vehicle is carrying oil consent to the contrary. Immediately settlement agreement, setting out the produced from or allocated to a lease after completion of operations, tanks nature and location of the damage, date, site, to determine whether the driver must be removed and any pits must be and amount of the settlement, and any possesses proper documentation for the emptied, reclaimed, and leveled unless other pertinent information. load of oil. otherwise requested by surface owner. Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27029

§226.45 What are a lessee's other health and safety requirements under (a) Gas well to be turned over to gas environmental responsibilities? applicable laws or regulations. lessee. If an oil lessee drills a gas well, (a) The lessee must conduct it must, without removing from the well operations in a manner which protects §226.47 When can the Superintendent any of the casing or other equipment, grant easements for wells off leased the mineral resources, other natural premises? immediately shut the well in and notify resources, and environmental quality. the gas lessee and the Superintendent. The lessee must comply with the The Superintendent, with the consent (1) If the gas lessee does not, within pertinent orders of the Superintendent of the Osage Minerals Council, may 45 calendar days after receiving notice and other standards and procedures as grant commercial and noncommercial and determining the cost of drilling, set forth in the applicable laws, easements for wells off the leased elect to take over such well and regulations, lease terms and conditions, premises to be used for purposes reimburse the oil lessee the cost of and the approved drilling plan or associated with oil and gas production; drilling, including all damages paid and subsequent operations plan. provided that the Superintendent the cost in-place of casing, tubing, and (b) The lessee must exercise due care notifies or attempts to notify both the other equipment, the oil lessee must and diligence to assure that leasehold surface owner and lessee in writing of immediately confine the gas to the operations do not result in undue their opportunity to meet with and original stratum. The disposition of damage to surface or subsurface submit information for consideration such well and the production therefrom resources or surface improvements. before a final decision is made. Rents will then be subject to the approval of (1) All produced water must be payable to the Osage mineral estate for the Superintendent. disposed of by injection into the such easements must be in an amount (2) If the oil lessee and gas lessee subsurface, in approved pits, or by other agreed to by Grantee and the Osage cannot agree on the cost of the well, the methods which have been approved by Minerals Council, subject to the Superintendent will apportion the cost the Superintendent. approval of the Superintendent. The between the oil and gas lessees. (2) Upon the conclusion of operations, Grantee is responsible for all damages (b) Oil well to be turned over to oil the lessee must reclaim the disturbed resulting from the use of such wells and lessee. If a gas lessee drills an oil well, surface in a manner approved or settlement for any damages must be then it must immediately, without prescribed by the Superintendent. made as provided in § 226.41. removing from the well any of the (c) All spills or leakages of oil, gas, casing or other equipment, notify the oil §226.48 A lessee's use of water. other marketable products, produced lessee and the Superintendent. water, toxic liquids, or waste materials, The lessee or his/her contractor may, (1) If the oil lessee does not, within 45 blowouts, fires, personal injuries, and with the approval of the calendar days after receipt of notice and fatalities must be reported by the lessee Superintendent, use water from streams cost of drilling, elect to take over the to the Superintendent as soon as and natural water courses to the extent well, it must immediately notify the gas discovered, but not later than the next that such use does not diminish the lessee. From that point, the business day. supply below the requirements of the Superintendent must approve the (1) The lessee must exercise due surface owner from whose land the disposition of the well, and any gas diligence in taking necessary measures, water is taken. Similarly, the lessee or produced from it. subject to approval by the his/her contractor may use water from (2) If the oil lessee chooses to take Superintendent, to control and remove reservoirs formed by the impoundment over the well, it must pay to the gas pollutants and to extinguish fires. of water from such streams and natural lessee: (2) A lessee's compliance with the water courses, if such use does not (i) The cost of drilling the well, requirements of the regulations in this exceed the quantity to which they including all damages paid; and part does not relieve the lessee of the originally would have been entitled had (ii) The cost in place of casing and obligation to comply with other the reservoirs not been constructed. The other equipment. applicable laws and regulations. lessee or his/her contractor may install (3) If the oil lessee and the gas lessee (d) When required by the necessary lines and other equipment cannot agree on the cost of the well, the Superintendent, a contingency plan within the Osage mineral estate to Superintendent will apportion the cost must be submitted describing obtain such water. Any damage between the oil and gas lessees. procedures to be implemented to protect resulting from such installation must be (c) Lands not leased. If a gas lessee life, property, and the environment. settled as provided in § 226.41. drills an oil well upon lands not leased (e) The lessee's liability for damages for oil purposes or vice versa, the to third parties is governed by §226.49 What are the responsibilities of Superintendent may, until such time as an oil lessee when a gas well is drilled and applicable law. said lands are leased, permit the lessee vice versa? who drilled the well to operate and §226.46 What safety precautions must a Prior to drilling, an oil or gas lessee market the production therefrom. When lessee take? must notify the other lessees of its intent said lands are leased, the lessee who The lessee must perform operations to drill. When an oil lessee in drilling drilled and completed the well must be and maintain equipment in a safe and a well encounters a formation or zone reimbursed by the oil or gas lessee for workmanlike manner, including having indications of possible gas the cost of drilling said well, including compliance with National Electrical production, or the gas lessee in drilling all damages paid and the cost of in- Code for the installation, running, a well encounters a formation or zone place casing, tubing, and other maintenance and use of all electric having indication of possible oil equipment. If the lessee does not elect lines. The lessee must take all production, the lessee must to take over said well as provided above, precautions necessary to provide immediately notify the other lessee and the disposition of such well and the adequate protection for the health and the Superintendent. The lessee drilling production therefrom will be safety of life and the protection of the well must obtain all information that determined by the Superintendent. In property. Such precautions do not a prudent lessee would utilize to the event the oil lessee and gas lessee relieve the lessee of the responsibility evaluate the productive capability of cannot agree on the cost of the well, for compliance with other pertinent such formation or zone. such cost will be apportioned between 27030 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations the oil and gas lessee by the determination by the Superintendent § 226.53 When must a lessee dispose of Superintendent. that gas in sufficient quantities is casings and other improvements? available above that needed for lease (a) Upon termination of a lease, § 226.50 How is the cost of drilling a well operation and that no waste would determined? permanent improvements, unless result. In the absence of a gas purchaser, otherwise provided by written The term "cost of drilling" as applied the amount to be paid by the Tribal agreement with the surface owner and where one lessee takes over a well member will be determined by the filed with the Superintendent, remain a drilled by another, includes all Superintendent. Gas delivered to Tribal part of said land and become the reasonable, usual, necessary, and proper members is not royalty free. The Tribal property of the surface owner upon expenditures. A list of expenses member is to furnish all necessary termination of the lease. This rule does mentioned in this section must be material and labor for such connection not apply to personal property, presented to proposed purchasing lessee to the lessee's gas system, and must including but not limited to, tools, within 10 calendar days after the maintain his/her own lines. The use of tanks, pipelines, pumping and drilling completion of the well. In the event of such gas is at the risk of the Tribal equipment, derricks, engines, a disagreement between the parties as to member at all times. machinery, tubing, and the casings of all the charges assessed against the well (3) Gas furnished by the lessee under wells. When any lease terminates, all that is to be taken over, such charges paragraphs (b)(1) and (2) of this section such personal property must be will be determined by the may be terminated only with the removed within 90 calendar days or Superintendent. approval of the Superintendent. A such reasonable extension of time as §226.51 What are the requirements for written application for termination must may be granted by the Superintendent. using gas for operating purposes and tribal be made to the Superintendent showing Otherwise, the ownership of all casings uses? justification. reverts to the lessor and all other All gas used in accordance with this personal property and permanent Subpart D-Cessation of Operations section must first be odorized and improvements to the surface owner. treated in accordance with industry §226.52 When can a lessee shutdown, This should not be construed to relieve standards for safe use. abandon, and plug a well? the lessee of responsibility for removing (a) Gas to be furnished to oil lessee. No well may be permanently any such personal property or The lessee of a producing gas lease must abandoned until it is no longer permanent improvements from the furnish the oil lessee sufficient gas for producing oil and/or gas in paying premises if required by the operating purposes at a rate to be agreed quantities and such a showing has been Superintendent and restoring the upon, or on failure to agree, the rate will demonstrated to the satisfaction of the premises as nearly as practicable to the be determined by the Superintendent: Superintendent. The lessee may not original state. Provided, that the oil lessee must at his/ shut down, abandon, or otherwise (b) Upon termination of lease for her own expense and risk, furnish and discontinue the operation or use of any cause. When there has been a install the necessary connections to the well for any purpose without the termination for cause, the lessor is gas lessee's well or pipeline. All such written approval of the Superintendent. entitled and authorized to take connections must be reported in writing All applications for such approval must immediate possession of the lease to the Superintendent. be submitted to the Superintendent on premises and all permanent (b) Use of gas by Osage Tribe. (1) Gas forms furnished by the Superintendent. improvements and all other equipment from any well or wells must be (a) An application for authority to necessary for the operation of the lease. furnished to any Tribal-owned building permanently shut down or discontinue (c) Wells to be abandoned must be or enterprise at a rate not to exceed the the use or operation of a well must set promptly plugged as prescribed in price being received or offered by a gas forth the justification, the means by writing by the Superintendent. purchaser, less royalty. This which the well bore is to be protected, Applications to plug must include a requirement is subject to the and the contemplated eventual statement affirming compliance with determination by the Superintendent disposition of the well. The method of § 226.52 and must set forth reasons for that gas in sufficient quantities is conditioning such well is subject to the plugging, a detailed statement of the available above that needed for lease approval of the Superintendent. proposed work, including the kind, operation and that no waste would (b) Prior to permanent abandonment location, and length of plugs (by depth), result. In the absence of a gas purchaser, of any well, the oil lessee or the gas plans for mudding and cementing, the rate to be paid by the Osage Nation lessee, as the case may be, must offer the testing, parting and removing casing, will be determined by the well to the other for his/her and any other pertinent information. Superintendent based on prices being recompletion or use under such terms as The lessee must submit a written paid by purchasers in the Osage mineral may be mutually agreed upon but not in application for authority to plug a well. estate. The Osage Nation is to furnish all conflict with the regulations. Failure of (d) The lessee must plug and fill all necessary materials and labor for such the lessee receiving the offer to reply dry or abandoned wells in a manner to connection with the lessee's gas system. within 10 calendar days after receipt confine the fluid in each formation The use of such gas is at the risk of the thereof will be deemed a rejection of the bearing fresh water, oil, gas, salt water, Osage Nation at all times. offer. If, after indicating acceptance, the and other minerals, and to protect it (2) Any member of the Osage Nation two parties cannot agree on the terms of against invasion of fluids from other residing in Osage County and outside a the offer within 30 calendar days, the sources. Mud-laden fluid, cement, and corporate city is entitled to the use at disposition of such well will be other plugs must be used to fill the hole his/her own expense of not to exceed determined by the Superintendent. from bottom to top. 400,000 cubic feet of gas per calendar (c) The Superintendent is authorized (1) If a satisfactory agreement is year for his/her principal residence at a to shut in a lease when the lessee fails reached between the lessee and the rate not to exceed the amount paid by to comply with the terms of the lease, surface owner, subject to the approval of a gas purchaser plus 10 percent. This the regulations, and/or orders of the the Superintendent, the lessee may requirement is subject to the Superintendent. condition the well for use as a fresh Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27031 water well and must so indicate on the designated local or resident pertinent information as the plugging record. representative. In the absence of such Superintendent may require. (2) The manner in which plugging representative or appointed substitute, material will be introduced and the type any employee of the lessee upon the §226.57 What line drilling limitations must a lessee comply with? of material used is subject to the leased premises or person in charge of approval of the Superintendent. drilling or related operations thereon The lessee may not drill within 300 (3) Within 10 calendar days after will be considered the representative of feet of the boundary line of leased lands, plugging, the lessee must file with the the lessee for the purpose of service of or locate any well or tank within 200 Superintendent a complete report of the orders or notices as herein provided. feet of any public highway, any plugging of each well. established watering place, or any (4) When any well is plugged and § 226.56 What are the lessee's record and building used as a dwelling, granary, or reporting requirements for wells? abandoned, the lessee must, within 90 barn, except with the written calendar days, clean up the premises (a) The lessee must keep accurate and permission of the Superintendent. around such well to the satisfaction of complete records of the drilling, Failure to obtain advance written the Superintendent. redrilling, deepening, repairing, permission from the Superintendent treating, plugging, or abandonment of will subject the lessee to termination of Subpart E-Requirements of Lessees all wells. These records must show: the lease and/or plugging of the well. (1) All the formations penetrated, the §226.54 What general requirements apply content and character of the oil, gas, §226.58 What are the requirements for marking wells and tank batteries? to lessees? other marketable product, or water in (a) The lessee must comply with all each formation, and the kind, weight, The lessee must clearly and orders or instructions issued by the size, landed depth, and cement record permanently mark all wells and tank Superintendent. The Superintendent or of casing used in drilling each well; batteries in a conspicuous place with his/her representative may enter upon (2) The record of drill-stem and other the number, legal description, operator's the leased premises for the purpose of bottom hole pressure or fluid sample name, lessee's name and telephone inspection. surveys, temperature surveys, number, and must take all necessary (b) The lessee must keep a full and directional surveys, and the like; precautions to preserve these markings. correct account of all operations, (3) The materials and procedure used §226.59 What precautions must a lessee receipts, and disbursements and make in the treating or plugging of wells or in take to ensure natural formations are reports thereof, as required. preparing them for temporary protected? (c) The lessee's books and records abandonment; and The lessee must, to the satisfaction of must be available to the Superintendent (4) Any other information obtained in the Superintendent, take all proper for inspection. the course of well operation. precautions and measures to prevent (d) The lessee must maintain and (b) The lessee must take such samples damage or pollution of oil, gas, fresh preserve records for 6 years from the and make such tests and surveys as may water, or other mineral bearing day on which the transaction recorded be required by the Superintendent to formations. occurred unless the Superintendent determine conditions in the well or notifies the lessee of an audit or producing reservoir and to obtain § 226.60 What are a lessee's obligations to investigation involving the records and information concerning formations maintain control of wells? that they must be maintained for a drilled, and furnish such reports as (a) In drilling operations in fields longer period. When an audit or required in the manner and method where high pressures, lost circulation, investigation is underway, records must specified by the Superintendent. or other conditions exist which could be maintained until the lessee is (c) Within 10 calendar days after result in blowouts, the lessee must released in writing from the obligation completion of operations on any well, install an approved gate valve or other to maintain the records. the lessee must transmit to the controlling device in proper working Superintendent: condition for use until the well is §226.55 When must a lessee designate (1) All applicable information on completed. At all times, preventative process agents? forms furnished by the Superintendent; measures must be taken in all well (a) Before actual drilling or (2) A copy of the electrical, operations to maintain proper control of development operations are commenced mechanical or radioactive log, or other subsurface strata. on leased lands, the lessee or assignee, types of surveys of the well bore; and (b) Drilling wells. The lessee must take if not a resident of the State of (3) The core analysis obtained from all necessary precautions to keep each Oklahoma, must appoint a local or the well. well under control at all times, and resident representative within the State (d) The lessee must also submit other must utilize and maintain materials and of Oklahoma on whom the reports and records of operations as may equipment necessary to insure the safety Superintendent may serve notice or be required and in the manner, form, of operating conditions and procedures. otherwise communicate in securing and method prescribed by the (c) Vertical drilling. The lessee must compliance with the regulations in this Superintendent. conduct drilling operations in a manner part, and notify the Superintendent of (e) The lessee must measure so that the completed well does not the name and post office address of the production of oil, gas, other marketable deviate significantly from the vertical representative appointed. product, and water from individual without the prior written approval of (b) Where several parties own a lease wells at reasonably frequent intervals to the Superintendent. Significant jointly, the parties must designate one the satisfaction of the Superintendent. deviation means a projected deviation of representative or agent whose duties are (f) Upon request and in the manner, the well bore from the vertical of 100 or to act for all parties concerned. form and method prescribed by the more, or a projected bottom hole (c) The lessee must appoint a Superintendent, the lessee must furnish location which could be less than 200 substitute to serve in his/her stead in a plat showing the location, designation, feet from the spacing unit or lease the event of the incapacity or absence and status of all wells on the leased boundary. Any well which deviates from the State of Oklahoma of such lands, together with such other more than 100 from the vertical or could 27032 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations result in a bottom hole location less to the Superintendent a copy of 100- subject to royalty, the standard of than 200 feet from the spacing unit or percent capacity tank table for each pressure is 14.65 pounds to the square lease boundary without prior written tank. Meters and installations for inch, and the standard of temperature is approval must be reported promptly to measuring oil must be approved. 60 degrees F. All measurements of gas the Superintendent. In these cases, a (b) The lessee must ensure that each must be adjusted by computation to directional survey is required. Lease Automatic Custody Transfer these standards, regardless of the (d) High pressure or loss of (LACT) meter is inspected, calibrated, pressure and temperature at which the circulation.The lessee must take and adjusted at least twice in each gas was actually measured, unless immediate steps and utilize necessary calendar year. Each inspection, otherwise authorized in writing by the resources to maintain or restore control calibration, and adjustment must be Superintendent. of any well in which the pressure separated by a period of not less than (c) The lessee must ensure that each equilibrium has become unbalanced. five months. The lessee must give the meter is inspected, calibrated, and (e) Protection of fresh water and other Superintendent at least 48 hours prior adjusted at least twice in each calendar minerals. The lessee must isolate notice of all LACT meter inspections, year. Each inspection, calibration and freshwater-bearing and other usable calibrations, and adjustments. The adjustment must be separated by a water containing 5,000 ppm or less of Superintendent has the right to witness, period of not less than five months dissolved solids and other mineral- unannounced, all LACT meter apart. The lessee must give the bearing formations and protect them inspections, calibrations, and Superintendent at least 48 hours prior from contamination. Tests and surveys adjustments. The lessee must fully notice of all meter inspections, of the effectiveness of such measures cooperate with such witnessing. If the calibrations, and adjustments. The must be conducted by the lessee using Superintendent is not present, then he Superintendent has the right to witness, procedures and practices approved or may request records relating to all LACT unannounced, all meter inspections, prescribed by the Superintendent. meter inspections, calibrations, and calibrations, and adjustments. The (f) The lessee must conduct activities adjustments. Repeated failures to lessee must fully cooperate with such in accordance with the standards and comply with this subparagraph will witnessing. If the Superintendent is not procedures set forth in Bureau of Land render the lease subject to termination present, he may request records relating Management Onshore Oil and Gas Order after consultation with the Osage to all meter inspections, calibrations, No. 6, Hydrogen Sulfide Operations. Minerals Council. and adjustments. Repeated failures to (c) When a tank of oil is ready for comply with this subparagraph will § 226.61 How does a lessee prevent waste removal by the purchaser, the lessee render the lease subject to termination of oil and gas and other marketable must ensure that the Superintendent is products? after consultation with the Osage informed of that fact before the Minerals Council. (a) The lessee must conduct all purchaser is so informed via an operations in a manner that will prevent electronic or telephonic method § 226.64 When can a lessee use gas for waste of oil and gas and other established by the Superintendent for lifting oil? marketable products and must not reporting pursuant to this subparagraph. The lessee must not use raw natural wastefully utilize oil or gas or other Repeated failures to inform the gas from a distinct or separate stratum marketable products. Superintendent will render the lease for the purpose of flowing or lifting oil, (b) The Superintendent has the subject to termination after consultation except where the lessee has an approved authority to impose such requirements with the Osage Minerals Council. right to both the oil and the gas, and as he deems necessary to prevent waste (d) The Superintendent has the right then only with the approval of the of oil and gas and other marketable to witness all gaugings, unannounced, Superintendent of such use and of the products and to promote the greatest on each lease. The lessee must fully manner of its use. ultimate recovery of oil and gas and cooperate with such gaugings and other marketable products. repeated failures to comply will render §226.65 What site security standards (c) For purposes of this section, waste the lease subject to termination after apply to oil and gas and other marketable product leases? includes, but is not limited to, the consultation with the Osage Minerals inefficient, excessive or improper use or Council. (a) Definitions. The following dissipation of reservoir energy which definitions apply to terms used in this would reasonably reduce or diminish §226.63 How is gas measured? section. the quantity of oil or gas or other (a) All gas required to be measured Appropriate valves. Those valves in a marketable product that might must be measured in accordance with particular piping system, i.e., fill lines, ultimately be produced, or the the standards, procedures, and practices equalizer or overflow lines, sales lines, unnecessary or excessive surface loss or set forth in Bureau of Land Management circulating lines, and drain lines that destruction, without beneficial use, of Onshore Oil and Gas Order No. 5, must be sealed during a given operation. oil, gas or other marketable product. Measurement of Gas. To the extent that Effectively sealed. The placement of a Onshore Oil and Gas Order 5 conflicts seal in such a manner that the position § 226.62 How does a lessee measure and with any provision of these regulations, of the sealed valve may not be altered store oil? these regulations control. without the seal being destroyed. (a) All production run from the lease (b) All gas, required to be measured, Productionphase. That period of time must be measured according to methods must be measured by orifice meter or mode of operation during which and devices approved by the unless otherwise agreed to in writing by crude oil is delivered directly to or Superintendent. Facilities suitable for the Superintendent. All gas meters must through production vessels to the containing and measuring accurately all be approved by the Superintendent and storage facilities and includes all crude oil produced from the wells must installed at the expense of the lessee or operations at the facility other than be provided by the lessee and must be purchaser at such places as may be those defined as being in the sales located on the leasehold unless agreed to in writing by the phase. otherwise approved by the Superintendent. For computing the Sales phase. That period of time or Superintendent. The lessee must furnish volume of all gas produced, sold or mode of operation during which crude Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations 27033 oil is removed from the storage facilities (7) Any lessee may request the (2) No format is prescribed for facility for sales, transportation or other Superintendent to approve a variance diagrams. They are to be prepared on purposes. from any of the minimum standards 812" x 11" paper, if possible, and be Seal. A device, uniquely numbered, prescribed by this section. The variance legible and comprehensible to a person which completely secures a valve. request must be submitted in writing to with ordinary working knowledge of oil (b) Minimum standards.Each lessee the Superintendent who may consider field operations and equipment. The must comply with the following such factors as regional oil field facility diagram need not be drawn to scale. minimum standards to assist in characteristics and fenced, guarded (3) A site facility diagram must providing accountability for oil or gas sites. The Superintendent may approve accurately reflect the actual conditions production: a variance if the proposed alternative at the site and must, commencing with (1) All lines entering or leaving oil will ensure measures equal to or in the header if applicable, clearly identify storage tanks must have valves capable excess of the minimum standards the vessels, piping, metering system, of being effectively sealed during the provided in paragraph (b) of this section and pits, if any, which apply to the production and sales operations unless will be put in place to detect or prevent handling and disposal of oil, gas and otherwise modified by other internal and external theft, and will water. The diagram must indicate which subparagraphs of this paragraph. Any result in proper production valves must be sealed and in what equipment needed for effective sealing, accountability. position during the production or sales excluding the seals, must be located at (c) Site security plans. (1) Site security phase. The diagram must clearly the site. For a minimum of 6 years the plans, which include the lessee's plan identify the lease on which the facility lessee must maintain a record of seal for complying with the minimum is located and the site security plan to numbers used and must document on standards enumerated in paragraph (b) which it is subject, along with the which valves or connections they were of this section for ensuring location of the plan. used as well as when they were accountability of oil/condensate production are required for all facilities §226.66 What are a lessee's reporting installed and removed. The site facility requirements for accidents, fires, theft, and diagram(s) must show which valves will and the lessee must maintain such vandalism? be sealed in which position during both facilities in compliance with the plan. For new facilities, notice must be given Lessees must make a complete report the production and sales phases of to the Superintendent of all accidents operation. that it is subject to a specific existing plan, or a notice of a new plan must be environmental or otherwise, fires, or (2) Each LACT system must employ submitted, no later than 60 days after acts of theft and vandalism occurring on meters that have non-resettable completion of construction or first the leased premises as soon as totalizers. There may not be any by-pass discovered, but not later than the next production, whichever is earlier, and on piping around the LACT. All that date the facilities must be in business day. Said report must include components of the LACT that are used compliance with the plan. At the an estimate of the volume of oil for volume or quality determinations of lessee's option, a single plan may involved. Lessees also are expected to the oil must be effectively sealed. For include all of the lessee's leases, units, report such thefts within one business systems where production may only be and communitized areas, provided the day to local law enforcement agencies, removed through the LACT, no sales or plan clearly identifies each lease, unit, internal company security. Lessees must equalizer valves need be sealed. or communitized area included within also notify or attempt to notify the However, any valves which may allow the scope of the plan and the extent to surface owner or his/her designated access for removal of oil before which the plan is applicable to each agent in writing by U.S. mail of any measurement through the LACT must be lease, unit, or communitized area so such incident covered under this effectively sealed. identified. section. (3) There must not be any by-pass (2) The lessee must retain the plan piping around gas meters. Equipment and notify the Superintendent of its Subpart F-Penalties which permits changing the orifice plate completion and which leases, units, and §226.67 What are the penalties for without bleeding the pressure off the gas communitized areas are involved. Such violations of lease terms? meter run is not considered a by-pass. notification is due at the time the plan Unless otherwise set forth in a lease, (4) For oil measured and sold by hand is completed as required by paragraph violations of any of the terms or gauging, all appropriate valves must be (c)(1) of this section. Such notification conditions of any lease or of the sealed during the production or sales must include the location and normal regulations in this part will subject the phase, as applicable. business hours of the office where the lease to termination by the (5) Circulating lines having valves plan will be maintained. Upon request, Superintendent, or Lessee to a fine of which may allow access to remove oil plans must be made available to the not more than $500 per day for each day from storage and sales facilities to any Superintendent. of such violation or noncompliance other source except through the treating (3) The plan must include the with the orders of the Superintendent, equipment back to storage must be frequency and method of the lessee's or to both such fine and termination of effectively sealed as near the storage inspection and production volume the lease. Fines not received within 10 tank as possible. recordation. The Superintendent may, business days after notice of the (6) The lessee, with reasonable upon examination, require adjustment decision will be subject to late charges frequency, must inspect all leases to of the method or frequency of at the rate of not less than 11/2 percent determine production volumes and that inspection. per month for each month or fraction the minimum site security standards are (d) Site facility diagrams. (1) Facility thereof until paid. being met. The lessee must retain diagrams are required for all facilities records of such inspections and which are used in storing oil/ §226.68 What are the penalties for measurements for 6 years from condensate. Facility diagrams must be violation of certain operating regulations? generation. Such records and filed within 60 calendar days after new Unless otherwise set forth in a lease, measurements must be available to the measurement facilities are installed or in lieu of the penalties provided under Superintendent upon request. existing facilities are modified. § 226.67, penalties may be imposed by 27034 Federal Register/Vol. 80, No. 90/Monday, May 11, 2015/Rules and Regulations the Superintendent for violation of in § 226.44(e), $500 per day until §226.70 Are the notices by the certain sections of the regulations of this compliance is met. Superintendent binding? part as follows: (h) For failure to file plugging reports Notices and orders issued by the (a) For failure to obtain permission to as required by § 226.53(d) and for failure Superintendent to the representative are start operations required by § 226.34(a), to file reports as required by § 226.26, binding on the lessee. The $50 per day. Superintendent may in his/her $50 per day for each violation until (b) For failure to file records required discretion increase the time allowed in compliance is met. by § 226.56, $50 per day until his/her orders and notices. compliance is met. (i) For failure to perform or start an (c) For failure to mark wells or tank operation within 5 calendar days after §226.71 Information collection. batteries as required by § 226.58, $50 ordered by the Superintendent in The collections of information in this per day for each well or tank battery. writing under authority provided in this part have been approved by the Office (d) For failure to construct and part, if said operation is thereafter of Management and Budget under 44 maintain pits as required by performed by or through the U.S.C. 3501 et seq. and assigned OMB § 226.44(b)-(d), $50 for each day after Superintendent, the actual cost of Control Number 1076-0180. Response is operations are commenced on any well performance thereof, plus 25 percent. required to obtain or retain a benefit. A until compliance is met. Federal agency may not conduct or (e) For failure to comply with § 226.60 Subpart G-Appeals and Notices sponsor, and you are not required to regarding control of wells, $100 per day. respond to, a collection of information (f) For failure to notify §226.69 Who can file an appeal? unless it displays a currently valid OMB Superintendent before drilling, Control Number. redrilling, deepening, plugging, or Any person, firm or corporation Dated: May 4, 2015. abandoning any well, as required by aggrieved by any decision or order §§ 226.34(b)-(c) and 226.49, $200 per issued by or under the authority of the Kevin K. Washburn, day. Superintendent, by virtue of the Assistant Secretary-IndianAffairs. (g) For failure to properly care for and regulations in this part, may appeal [FR Doe. 2015-11314 Filed 5-8-15; 8:45 am] dispose of deleterious fluids as provided pursuant to 25 CFR part 2. BILLING CODE 4337-15-P