a system has been developed which analyzes pertinent factors impacting on the Department's three leasing goals of receipt of fair market value, environmental protection and orderly and timely resource development. (Further discussion of the system and factors are found in the answer to question 40.) The royalty, under either a sealed bonus bidding with fixed royalty or royalty bidding with a fixed cash bonus, is, by law, not to be less than 1212% for oil and gas leases. Onshore The following discusses the extent the specific price is prescribed by law and the discretionary authority exercised by the Department: the amount of the minimum bonus is discretionary in all cases and the amount is determined through the evaluation system discussed under answer 3. Coal Rental by law is prescribed at not less than 25 cents per acre for the first year, 50 cents per acre for years two through five, and $1.00 per acre for years six on. Royalty by law is prescribed at not less than 5 cents per ton of mined coal. Recently, the Department has specified the royalty as a percentage of the value of the coal produced, but not less than 5 cents per ton. Onshore Oil and Gas Rental. by law, is not less than 50 cents per acre for non-competitive leases and not less than $2.00 per acre for competitive leases. Royalty, by law, is not less than 12% of the oil and gas produced, with a minimum royalty of $1.00 per acre. Oil Shale Rental, by law, is not less than 50 cents per acre. Geothermal Energy Rental, by law, is not less than $1.00 per acre. Royalty, by law, is not less than 10%, nor more than 15% of the value of steam or other energy produced. However, upon readjustment 35 years after steam is produced, royalty may be raised to a maximum of 22%. By-products are generally not less than 5% of the value produced. Uranium Neither rental nor royalty is collected on public domain mining claims. Uranium deposits subject to location under the 1872 Mining Law are not subject to any fees levied by the Federal Government. There is no statutory provision for payment of any bonus, rental, or royalty, nor is there any Secretarial discretion to impose such fees. If the claimant patents his claim he must pay a purchase price of $5.00 per acre for a lode claim or $2.50 per acre for a placer claim. Rental and royalty on uranium leases are generally within the discretion of the responsible agency head on acquired lands. Question 9. What is the term of a lease, permit, sale, or other right to each resource? (a) Can the contract provisions be reviewed and amended within this term, and if so, with respect to what conditions? (b) To what extent are the term and the scope of review and amendment prescribed by law, or within the discretionary authority of the Interior Department? Answer 9. OCS The OCS Lands Act prescribes that Oil and gas leases be issued for a period of five years and so long thereafter, as oil or gas may be produced in paying quantities. (a) The conservation and waste prevention provisions of an OCS oil and gas lease may, in effect, be amended during the lease term because each lease incorporates by reference the provisions of the Department's regulations and is specifically made subject "... to regulations hereafter issued by the Secretary as he may determine to be necessary and proper in order to provide for the prevention of waste and for the conservation of natural resources," etc. (b) The amendment of the conservation and waste prevention regulations from time to time lies within the discretionary authority of the Secretary of the Interior. The OCS Lands Act prescribes that oil and gas leases be issued subject to such regulations as the Secretary may promulgate. Onshore The Mineral Leasing Act and the Mineral Leasing Act for Acquired Lands do not provide for amendment of contract provisions during the life of oil and gas leases. Existing leases generally have not provided for any amendment during the term of the lease. Nevertheless, some latitude for discretion does exist for the inclusion in leases of conditions for adjustment of environmental protection requirements during the lease term. However, leases for coal, oil shale, and geothermal steam must provide for renewal periods and the adjustment of terms and conditions of the lease at the time of renewal. It is the policy of the Department that exploration and development of minerals must include adequate measures to avoid, minimize, or correct damage to the environment and to avoid, minimize, or correct hazards to the public health and safety. To accomplish this, exploration or development plans must be submitted and approved before operations which will create land disturbance are undertaken. Onshore Oil and Gas By law, the oil and gas primary lease term is 10 years and so long thereafter as oil or gas is produced in paying quantities. Coal Coal prospecting permit terms, by law, are for two years and may be extended for an additional period of two years under certain conditions. Coal leases (preference right and competitive), by law, are issued for indeterminate periods upon condition of diligent development and continued operation with a further condition that readjustment of terms will be made at the end of each twenty-year period as the Secretary may determine. Oil Shale By law, oil shale leases may be for indeterminate periods, upon such conditions as may be imposed by the Secretary, including covenants relative to methods of mining, prevention of waste, and productive development. Under the Department's proposed prototype oil shale leasing program, leases would be for 20-year periods and so long thereafter as there is production in paying quantities. Geothermal Steam By law. Geothermal leases shall be for a primary term of ten years. If geothermal steam is produced or utilized in commercial quantities. within this term, such lease shall continue for so long thereafter as geothermal steam is produced or utilized in commercial quantities, but such continuation shall not exceed an additional forty years. If, at the end of such forty years, steam is produced or utilized in commercial quantities and the lands are not needed for other purposes. the lessee shall have a preferential right to a renewal of such lease for a second forty-year term in accordance with such terms and conditions as the Secretary deems appropriate. Any lease for land on which, or for which under an approved cooperative or unit plan of development or operation, actual drilling operations were commenced prior to the end of its primary term and are being diligently prosecuted at that time shall be extended for five years, and as long thereafter as geothermal steam is produced or utilized in commercial quantities, but for not more than thirty-five years. If, at the end of such extended term, steam is being produced or utilized in commercial quantities and the lands are not needed for other purposes, the lessee shall have a preferential right to a renewal of such lease for a second term in accordance with such terms and conditions as the Secretary deems appropriate. Question 10. What are the conditions for renewal or continuation of a lease, permit, sale, or other right to each energy resource? (a) To what extent may the conditions for renewal or continuation differ or be made different from the original conditions for issuance of the lease, permit, or right? (b) To what extent are the conditions of renewal prescribed by low, or within the discretionary authority of the Interior Department? Answer 10. OCS (a and b) The OCS Act makes no provision for the renewal of an oil and gas lease, but it does provide that such a lease will continue in effect for a period of five years and as long thereafter as oil and gas may be produced in paying quantities or drilling or well reworking operations approved by the Secretary are being conducted under the lease. The authority of the Secretary to suspend operations or production, or both, on an OCS lease and to grant an extension equal to the period of suspension is now before the U.S. Court of Appeals for the Ninth Circuit in Gulf Oil Co. et al v. Morton. There is, therefore. no period of time at which the statute provides for a readjustment of terms and conditions. However, section 5(a) (1) of the statute provides that the Secretary may at any time prescribe and amend regulations which he determines to be necessary and proper in order to provide for the prevention of waste and conservation of the natural resources of the OCS and for the protection of correlative rights therein. Any changes in the regulations for those purposes may thus be made applicable to existing leases, and in this manner the Secretary may make effective changes in some of the terms and conditions governing an OCS lease. Moreover, 30CFR 250.11 authorizes the oil and gas supervisor to issue OCS orders from time to time to supplement the regulations, and those OCS orders are binding on the lessees. The Secretary's only authority to change rentals and royalties is under section 5(a)(1) of the statute which authorizes him to issue regulations providing for, in the interest of conservation, reduction of rentals or royalties. Onshore (a and b) C'oal The conditions for continuation of a coal lease are diligent development and continued operation, except when such operation is interrupted by strikes, the elements, or casualties not attributable to the lessee. The Secretary is authorized by law to provide for the payment of an annual advance royalty in lieu of the provision requiring continuous operation. A coal permit may be extended for one 2-year period if the permittee has been unable, with the exercise of reasonable diligence, to determine the existence or workability of coal deposits in the area covered by the permit and desires to prosecute further prospecting or exploration, of for other reasons in the opinion of the Secretary warranting such extension. (a) The readjustment of terms and conditions is discretionary with the Secretary. (b) The Mineral Leasing Act grants the Secretary wide discretionary latitude in establishing lease terms and conditions. Shale Oil "Readjustment of royalty and operating terms may be made at the end of each 20 year period", per Proposed Prototype Oil Shale Leasing Program. Under the Proposed Prototype Leasing Program the lease would extend beyond 20 years so long as there is production in paying quantities. (a) The readjustment of terms and conditions is discretionary with the Secretary. (b) The Mineral Leasing Act grants the Secretary wide discretionary latitude in establishing lease terms and conditions. Geothermal Steam The Geothermal Steam Act provides in Section 6 (b) that "the lessee shall have a preferential right to a renewal of such lease for a second forty-year term in accordance with such terms and conditions as the Secretary deems appropriate." Geothermal leases shall be for a primary term of ten years. If geothermal steam is produced or utilized in commercial quantities within this term, such lease shall continue for so long thereafter as geothermal steam is produced or utilized in commercial quantities but such continuation shall not exceed an additional forty years. If, at the end of such forty years, steam is produced or utilized in commercial quantities and the lands are not needed for other purposes, the lessee shall have a preferential right to a renewal of such leases for a second forty-year term in accordance with such terms and conditions as the Secretary deems appropriate. Any lease for land on which, or for which under an approved cooperative or unit plan of development or operation, actual drilling operations were commenced prior to the end of its primary term and are being diligently prosecuted at that time shall be extended for five years and so long thereafter, but not more than thirty-five years, as geothermal steam is produced or utilized in commercial quantities. If. at the end of such extended term, steam is being produced or utilized in commercial quantities and the lands are not needed for other purposes, the lessee shall have a preferential right to a renewal of such lease for a second term in accordance with such terms and conditions as the Secretary deems appropriate. Oil and Gas Leases are issued at the discretion of the Secretary for a period of five (competitive) or ten (non-competitive) years and as long thereafter as oil or gas is produced in paying quantities. If actual drilling operations are underway when the primary term expires, and are being diligently prosecuted at that time, the lease shall be extended for two years and so long thereafter as oil or gas is produced in paying quantities. Question 11. Where law or regulation establishes a performance standard (producible, commercial production, diligent development, valid discovery, etc.) for issuance, continuance or renewal of a lease, permit, or other right: (a) How is this standard defined in law, in regulation, and in administrative practice? (b) What, if any, test is conducted or required by the Interior Department to determine whether this standard has been fulfilled? Who makes and/or reviews these tests? Answer 11. OCS (a) Section 8(b) of the OCS Lands Act authorizes continuance of an oil and gas lease beyond its five-year term by establishing a performance standard defined as "... for a period of five years and as long thereafter as oil or gas may be produced from the area in paying quantities, or drilling or well re-working operations as approved by the Secretary are conducted thereon". 43 CFR 3302.2 also provides that after the initial five-year term an oil and gas lease may be continued . . . so long thereafter as oil and gas may be produced from the leasehold in paying quantities. . . The Act does not define "production in paying quantities". The habendum clauses of the lease have been held in court decisions to mean "... production in quantities sufficient to yield a return in excess to operating costs, even though drilling and equipment costs may never be repaid, and the undertaking considered as a whole may ulti |