[Federal Register: January 16, 2008 (Volume 73, Number 11)]
[Notices]
[Page 2938-2940]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ja08-85]
-----------------------------------------------------------------------
DEPARTMENT OF THE INTERIOR
Minerals Management Service
Royalty-in-Kind (RIK) Eligible Refiner, Determination of Need
AGENCY: Minerals Management Service, Interior.
ACTION: Solicitation of comments.
-----------------------------------------------------------------------
SUMMARY: The Minerals Management Service (MMS), an agency of the U.S.
Department of the Interior, is requesting written comments from
interested parties, particularly refiners who qualify under the RIK
eligible refiner program, regarding their experiences in the crude oil
marketplace. Specifically, we are interested in eligible refiners'
experiences in gaining access to adequate supplies of crude oil at
equitable prices. This Determination of Need process will assist the
Secretary of the Interior in deciding whether or not to continue with
sales of Federal Government royalty crude oil under the RIK eligible
refiner program.
DATES: Submit written comments on or before March 3, 2008.
ADDRESSES: Submit written comments to Colin Bosworth, Minerals
Management Service, Minerals Revenue Management, P.O. Box 25165, MS
330B2, Denver, Colorado 80225. If you use an overnight courier service
or wish to hand-carry your comments, our courier address is Building
85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd.,
Denver, Colorado 80225. You may also e-mail your comments to us at
mrm.comments@mms.gov. Include the title of this Federal Register notice
in the ``Attention'' line of your comment. Also include your name and
return address. If you do not receive a confirmation that we have
received your e-mail, contact Mr. Bosworth at (303) 231-3186.
FOR FURTHER INFORMATION CONTACT: Armand Southall, telephone (303) 231-
3221, FAX (303) 231-3781, or e-mail armand.southall@mms.gov.
SUPPLEMENTARY INFORMATION:
Introduction: Under the provisions of the Mineral Leasing Act of
1920 (MLA), as amended (30 U.S.C. 192), and the Outer Continental Shelf
Lands Act (OCSLA) of August 7, 1953, as amended (43 U.S.C. 1334, 1353),
the Secretary of the Interior can take Federal royalty crude oil in
kind, in lieu of royalty payment, and sell it to eligible refiners for
use in their refineries. The sale of royalty crude oil from Federal
leases by the United States to eligible refiners is governed by the
regulations at 30 CFR part 208, effective December 1, 1987, published
in the Federal Register on October 30, 1987 (52 FR 41908).
To purchase royalty crude oil under the eligible refiner program,
an eligible refiner, as defined at 30 CFR 208.2, means a crude oil
refiner meets the following criteria:
(1) For the purchase of royalty oil from onshore leases, it
means a refiner that qualifies as a small and independent refiner as
those terms are defined in sections 3(3) and 3(4) of the Emergency
Petroleum Allocation Act, 15 U.S.C. 751 et seq., except that the
time period for determination contained in section 3(3)(A) would be
the calendar quarter immediately preceding the date of the
applicable ''Notice of Availability of Royalty Oil.''
The Emergency Petroleum Allocation Act of 1973 (Public Law No. 93-
159; 87
[[Page 2939]]
Stat. 627) defines a small refiner as a refiner who:
(a) Obtained directly or indirectly more than 70 percent of its
refinery input of domestic crude oil, or 70 percent of its refinery
input of domestic and imported crude oil, from producers who do not
control, are not controlled by, and are not under common control
with, such refiner; and
(b) marketed or distributed in such quarter and continues to
market or distribute a substantial volume of gasoline refined by it
through branded independent marketers or non-branded independent
marketers.
Additionally, the term ``small refiner'' means a refiner whose
total refinery capacity, including the refinery capacity of any
person who controls, is controlled by, or is under common control
with such refiner, does not exceed 175,000 barrels per day. Crude
oil received in exchange for the refiner's own production is
considered to be part of the refiner's own production for purposes
of this section.
In addition, 30 CFR 208.2 defines eligible refiner for the purchase
of royalty oil from offshore leases as follows:
(2) For the purchase of royalty oil from leases on the Outer
Continental Shelf, it means a refiner that qualifies as a small
business enterprise under the rules of the Small Business
Administration (13 CFR part 121).
The Small Business Administration (SBA), as updated and published
in the Federal Register on March 28, 2003 (68 FR 15047), states the
following:
The SBA standard for a small business within the Petroleum
Refining Industry is a concern with a total Operable Atmospheric
Crude Oil Distillation Capacity of less than or equal to 125,000
barrels per calendar day, and that has no more than 1,500 employees.
Capacity includes owned or leased facilities as well as facilities
under a processing agreement or an arrangement such as an exchange
agreement or throughput.
The regulation at 30 CFR 208.4(a) governs the Determination of Need
process and states that:
The Secretary may evaluate crude oil market conditions from time
to time. The evaluation will include, among other things, the
availability of crude oil and the crude oil requirements of the
Federal Government, primarily those requirements concerning matters
of national interest and defense. The Secretary will review these
items and will determine whether eligible refiners have access to
adequate supplies of crude oil and whether such oil is available to
eligible refiners at equitable prices. Such determinations may be
made on a regional basis * * *.
Under its rules, the SBA draws no distinction between offshore and
onshore oil purchases; thus, for a refiner to qualify as an eligible
refiner, the refiner must have no more than 1,500 employees regardless
of onshore or offshore oil purchases.
Background: The MMS established the eligible refiner program to
ensure fair and equitable prices for eligible refiners as defined at 30
CFR 208.2. Historically, these eligible refiners have supplied U.S.
military functions with jet fuel and other energy needs on military and
naval bases. In the past, the MMS found that the eligible refiner
program provided the following benefits to eligible refiners:
Stability of supply;
Access to domestic oil streams;
Ease of hardship on obtaining capital.
The RIK eligible refiner program has been an important source of
crude oil for eligible refiners in the past. In September 2007, there
were three eligible refiners participating in the eligible refiner
program. However, beginning in October 2007, the number of
participating refiners was two. This decline in participation can be
partially attributed to a number of eligible refiners merging, thus
becoming ineligible, along with the removal of Pacific and onshore
properties from the eligible refiner program.
In 1997, MMS undertook an examination of the RIK eligible refiner
program and determined that it should use a ``proactive, structured,
and documented methodology'' to conduct future RIK Determinations of
Need. The MMS performed a full analysis in 1999; an update of that
analysis in 2001; another full analysis in 2003; and an update to that
previous analysis in 2005. These analyses supported MMS's continuation
of the program, and each was followed by subsequent RIK sales to
eligible refiners. The intent of the current analysis is for MMS to
determine the need for the program in the market's current state and to
make a recommendation concerning the program's continuation.
Information Requested: To assist MMS in completing this
Determination of Need, please respond in writing to the following
questions:
(1) Indicate your position as it relates to the domestic crude oil
market:
(a) Small/Independent Refiner
(b) Large Refiner
(c) Oil Producer
(d) Oil Transporter
(e) Oil Marketer
(f) Other (please specify)
(2) Describe your experience with the domestic crude oil market and
your perception of the need for the eligible refiner program.
(3) What is your perception of whether a benefit exists in
conducting separate sales for onshore and offshore Federal lease crude
oil?
(4) Under the definition criteria outlined above, are you an
eligible refiner of offshore lease crude oil, onshore lease crude oil,
or both?
If you answered yes to any of the categories in question (4),
please address all the questions that follow. If you have multiple
refineries, please respond to questions (a) through (i) for each
refinery:
(a) For your immediate region or geographic area of operation, how
would you characterize the general availability of crude oil?
(b) Is your refinery operating at full or near-full capacity in
both summer and winter? If not, why not?
(c) What is the slate of refined products and their volumes from
your refinery over each of the past 12 months?
(d) What percentage of onshore versus offshore crude oil volumes do
you currently run through your refinery?
(e) What type of crude oil do you need to sustain your mix of
refined products (e.g., Wyoming Sour, Heavy Louisiana Sweet, Light
Louisiana Sweet, etc.)?
(f) Have you been denied access to crude oil supplies in the past
18 months? If yes, what was the basis for the denial? For example, was
the denial attributable to unavailability of desired crude oil, a lack
of access to the transportation pipeline, or other reasons? Please
provide documentation supporting any claim of denial.
(g) Do you use exchange agreements? Why?
(h) Are the feeder stocks you purchase priced above market value
for your geographic area? In other words, do you pay a bonus or premium
because of your status as an eligible refiner? Please identify, by
crude oil type, what you pay on the average barrel of crude oil.
(i) Have you previously participated in the Federal royalty oil
program? If you left the program, why did you leave? How would you now
benefit from receiving Federal royalty oil? If you have never
participated in the program, what has deterred you from participating?
(j) Do you currently provide refined products (e.g., heating oil,
jet fuel, etc.) to a U.S. military base or Federal installation? If
yes, identify the recipient facility and how long you have been
supplying refined products.
(k) Do you anticipate any near term developments that would change
your access to necessary supplies of crude oil at equitable prices?
Potential respondents should note that MMS's decision to conduct a
Determination of Need in no way presupposes that there will or will not
be subsequent eligible refiner RIK sales.
[[Page 2940]]
A Determination of Need is a logical first step in identifying general
marketplace conditions. However, any MMS decision to conduct additional
RIK eligible refiner sales will necessarily be predicated on the
regulatory criteria of ``access'' and ``equity,'' i.e., whether a
significant number of refiners have limited or no access to the
marketplace and/or have experienced difficulty in negotiating a fair
price for feeder stocks.
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.)
requires us to inform you that this information is being collected by
MMS under an approved information collection, OMB Control Number 1010-
0119, titled ``30 CFR Part 208--Sale of Federal Royalty Oil; Sale of
Federal Royalty Gas; and Commercial Contracts.'' All correspondence,
records, or information received, in response to this Notice and
specifically in response to the questions listed above, are subject to
disclosure under the Freedom of Information Act (FOIA). All information
provided will be made public unless the respondent identifies which
portions are proprietary. Please highlight the proprietary portions,
including any supporting documentation, or mark the page(s) that
contain proprietary data. Proprietary information is protected by the
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1733),
FOIA (5 U.S.C. 552 (b)(4), the Indian Minerals Development Act of 1982
(25 U.S.C. 2103), and Department regulations (43 CFR 2). An agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid OMB
Control Number. Public reporting burden is estimated to be 4 hours per
response. Comments on the accuracy of this burden estimate, or
suggestions on reducing this burden, should be directed to the
Information Collection Clearance Officer, MMS, MS-4230, 1849 C Street,
NW., Washington, DC 20240.
Dated: January 10, 2008.
Lucy Querques Denett,
Associate Director for Minerals Revenue Management.
[FR Doc. E8-624 Filed 1-15-08; 8:45 am]
BILLING CODE 4310-MR-P