[Federal Register: October 7, 2005 (Volume 70, Number 194)]
[Rules and Regulations]
[Page 58853-58880]

Part IV

Department of the Interior
Bureau of the Interior
43 CFR Parts 3000, 3100, 3110, 3120, 3130, 3200, 3470, 3500, 3600, 3800, 3830, 3833, 3835, 3836, 3860, and 3870

Oil and Gas Leasing; Geothermal Resources Leasing; Coal Management; Management of Solid Minerals Other Than Coal; Mineral Materials Disposal; and Mining Claims Under the General Mining Laws; Final Rule

SUMMARY: The Bureau of Land Management (BLM) is issuing this final rule to amend its mineral resources regulations to increase certain fees and to impose new fees to cover BLM's costs of processing documents relating to its minerals programs. The new fees include costs of actions such as environmental studies performed by BLM, lease applications, name changes, corporate mergers, lease consolidations and reinstatements, and other processing-related costs. BLM established some fixed fees and some fees on a case-by-case basis. BLM based these fee changes on statutory authorities, which authorize us to charge for our processing costs, and on policy guidance from the Office of Management and Budget (OMB) and the Department of the Interior (DOI) requiring BLM to charge these fees. This rule also responds to recommendations issued in audit reports by the DOI's Office of Inspector General (OIG). The final rule also reflects changes to the proposed rule required by the Energy Policy Act of 2005.

DATES: This rule is effective November 7, 2005.

ADDRESSES: You may mail suggestions or inquiries to Bureau of Land Management, Minerals Group, Room 501 LS 1849 C Street, NW., Washington, DC 20240-0001.

FOR FURTHER INFORMATION CONTACT: Tim Spisak, Fluid Minerals Group Manager (202) 452-5061 or Ted Murphy, Solid Minerals Group Manager (202) 452-0351, for issues related to BLM's minerals programs, or Cynthia Ellis, Regulatory Affairs Group (202) 452-5012, for regulatory process issues. Persons who use a telecommunications device for the deaf may contact these individuals through the Federal Information Relay Service at 1-800-877-8339, 24 hours a day, 7 days a week.

SUPPLEMENTARY INFORMATION:
I. Background
A. Procedural Background
B. Authority for This Rule
C. Continuation of Rulemaking
II. How Does the Final Rule Differ From the Proposed Rule?
III. Responses to Comments on the December 2000 and July 2005 Proposed Rules
A. General Comments
B. Comments on Oil and Gas Leasing Cost Recovery
C. Comments on Geothermal Leasing Cost Recovery
D. Comments on Coal Leasing Cost Recovery
E. Comments on Cost Recovery for Leasing of Solid Minerals Other Than Coal
F. Comments on Cost Recovery for Mineral Materials Sales
G. Comments on Cost Recovery for Mining Law Administration
IV. Procedural Matters

I. Background

A. Procedural Background

On December 15, 2000, BLM published a proposed rule to amend our mineral resource regulations to increase many fees and to impose new fees to cover our costs of processing certain documents relating to our mineral programs (65 FR 78440). The fee changes were BLM's response to recommendations made in a 1988 OIG report (No. 89-25). That report was part of a 1980s Presidential initiative that called for all Federal agencies to charge appropriate user fees, consistent with the law, for agency services. The OIG recommended that BLM collect fees for processing mineral-related documents whenever possible.

On July 19, 2005, BLM reissued the proposed rule (70 FR 41532), and added the following fees that were not included in the 2000 proposed rule:

1. A processing fee for oil and gas applications for permit to drill (APDs),
2. A processing fee for geothermal permits to drill (GPDs),
3. A processing fee for geothermal exploration permits, and
4. A processing fee for renewing mineral materials competitive contracts.

The 2005 proposed rule also included a fixed fee for the processing of oil and gas geophysical exploration permits, instead of the case-by-case fee that we proposed in 2000.

This final rule adopts many provisions of the July 19, 2005 proposal. We discuss below changes we have made from that proposal. The rationale for most of this final rule was set forth in the July 2005 preamble and BLM continues to rely on the discussions contained therein.

B. Authority for This Rule

Federal agencies are authorized to charge processing costs by the Independent Offices Appropriation Act of 1952 (IOAA), 31 U.S.C. 9701. BLM also has specific authority to charge fees for processing applications and other documents relating to public lands under Section 304 of the Federal Land Policy and Management Act of 1976 (FLPMA), 43 U.S.C. 1734. This section was discussed in greater detail in the July 2005 preamble. In FLPMA, public land means all lands or interests in land owned by the United States and administered by BLM, excluding outer continental shelf lands and Native American lands (43 U.S.C. 1702(e)). This includes Federal mineral lands with private or state surface as well as lands where the United States owns both the surface and mineral rights. A mineral lease or mineral materials disposal administered by BLM, and a mining claim (for which BLM determines validity), even in land where another agency administers the surface, are "interests in land" for the purposes of FLPMA.

The IOAA and Section 304 of FLPMA authorize BLM to charge applicants for the cost of processing documents by issuing regulations, which BLM is doing in this rule. The IOAA also states that these charges should pay for the agency services, as much as possible. Cost recovery policies are explained in OMB Circular No. A-25 (Revised) (Circular A-25), entitled "User Charges." Part 346 of the Departmental Manual (DM) also provides guidance. The general Federal policy as stated in Circular A-25 is that a charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the public. The Circular establishes Federal policy regarding fees assessed for government services and for sales or use of government goods or resources. It provides information on the scope and types of activities subject to user charges and the basis upon which agencies set user charges. Finally, Circular A-25 guides agency implementation of charges and the disposition of collections.

Section 365 of the Energy Policy Act of 2005 (Pub. L. 109-58) authorized a pilot project to improve Federal permit coordination, and directed in subsection (i) that "the Secretary shall not implement a rulemaking that would enable an increase in fees to recover additional costs related to processing drilling-related permit applications and use authorizations." The provisions of the proposed rule related to drilling-related permit applications and use authorizations are those that would have required cost recovery for oil and gas and geothermal permits to drill (APDs and GPDs), and geophysical and geothermal exploration permits. Therefore, we have removed all provisions regarding APDs, GPDs, and geophysical and geothermal exploration permits that appeared in the proposed rule from this final rule. The remainder of the 2005 proposed rule was not affected by the Energy Policy Act and may be finalized.

C. Continuation of Rulemaking

In the preamble to the July 19, 2005, proposed rule, we explained that in the final rule we might provide that BLM would recover costs of validity examinations and reports performed in connection with plan of operations (PoO) applications submitted under parts of the Code of Federal Regulations other than 43 CFR part 3800, such as those submitted under 36 CFR part 9, which implements the Mining in the Parks Act. (See 70 FR 41538.) The National Park Service (NPS) submitted a comment urging BLM to include in the final rule recovery of such costs for applications submitted pursuant to NPS regulations. At this time, BLM has not made a final decision whether to extend the rule to cover such other costs. Thus, BLM is including in this final rule the provision as proposed, but is continuing the rulemaking on the issue of whether it will revise the provision to include recovery of costs of validity examinations and reports associated with PoOs submitted under other parts of the CFR. BLM may issue a further final rule to address this issue. If BLM decides to promulgate a final rule that would recover such costs, the next final rule would likely contain conforming amendments to such other parts to notify affected applicants of the applicability of the cost recovery provisions of this rule.

II. How Does the Final Rule Differ From the Proposed Rule?

As stated earlier, in response to Congress's direction in the Energy Policy Act, BLM is not implementing cost recovery fees for APDs, GPDs, and geophysical and geothermal exploration permits.

Other changes we made are:

1. We adjusted the fees proposed in 2000 by using the Implicit Price Deflator for 4th Quarter 2004 (110.077) (IPD), rounded to the nearest $5.00. For example, for an oil and gas lease reinstatement, the cost recovery fee proposed in 2000 was $60. Applying the IPD, the equivalent cost recovery fee for the 4th Quarter 2004 would be $66.05. For this final rule, we rounded this figure to $65.

2. We amended the coal lease by application regulations. The proposed rule did not adequately account for case-by-case fee situations where the successful bidder is an entity other than the original applicant. The final coal leasing regulations at 43 CFR 3473.2 provide that the applicant who nominates a tract will pay BLM the processing costs that we incur up to the publication of the competitive lease sale notice. That fee amount will be included in the notice itself, and the successful bidder, if someone other than the original applicant, will be responsible for paying that amount to BLM. In such circumstances, BLM will refund the fees the original applicant paid to BLM. If there is no successful bidder, the applicant will remain responsible for processing fees and there will be no refund. It should be noted that an applicant will not be reimbursed for moneys the applicant (and not BLM) may pay directly to third persons to perform studies, because it is not clear that FLPMA Section 304 applies in that situation.

Because persons other than the applicant could also be a successful bidder under BLM's other programs, we have made similar changes to the regulations at 43 CFR part 3500 applicable to the leasing of solid minerals other than coal, and to the mineral materials sales regulations at 43 CFR part 3600.

3. We amended the mining claim patent application adjudication fee so that patent applications covering 10 or fewer claims will be charged only half the cost recovery fee that applications with more than 10 claims will be charged. This change was made in response to comments expressing concern that the proposed fee would be too burdensome on claimants who submit patent applications for only a few claims. We selected the 10-claim threshold because that is the number Congress chose to define the class of miners who may perform assessment work in lieu of paying the claim maintenance fee. The adjudication fee in the proposed rule was a fixed fee based on a weighted average of BLM's adjudication costs. We believe that the commenters may have a valid concern and that it may be more reasonable to base the adjudication fees on the per claim costs depending on how many claims are included in an application. BLM plans to reassess its costs of adjudication and may propose a revision to this fee in the future. In this final rule, we decided that it was reasonable to phase in the adjudication fee for patent applications that contain 10 or fewer claims. A discussion of phasing in fees is contained in the preamble to the proposed rule. 70 FR 41533. This rule contains the first step of this phasing-in process.

4. The final rule adds language at section 3000.11 to clarify that a decision of BLM to change a fixed fee to a case-by-case fee may be appealed to the Interior Board of Land Appeals.

5. In response to comments objecting to the applicability of the fee provisions to applications pending when this rule is made final, we have revised the rule to make the fee provisions of the final rule applicable only to documents BLM receives after the effective date of this rule. Section 3000.10(d) has been restructured to clarify the timing of the applicability of both fixed and case-by-case fees established by this rule. Because both the new fixed and case-by-case fee provisions apply only to documents received after the effective date of this rule, proposed section 3000.11(c), which would have addressed how to treat costs of pending documents, is not necessary and has not been included in the final rule. Also, rather than include in section 3000.10(a) a statement that required fees must be included with documents that are filed, we moved the statement to section 3000.12(a) of this chapter to make it clear that such a requirement applies only to fixed fees. We have also amended paragraphs (d)(1) and (d)(2) of section 3000.10 to make it clear that the documents for which BLM will begin to charge the new fees are those that BLM receives on or after November 7, 2005. The proposed rule referred to documents that BLM "accepted." We have amended this language to avoid confusion. The date of receipt may be easily evidenced by a log-in date on the document or by a receipt given to an applicant by BLM.

6. We amended the language of section 3000.11(b)(4)(i) to clarify that we will not stop ongoing processing if we re-estimate the costs associated with a case-by-case document. (This issue is further discussed in the preamble under III.A. General Comments.) We also moved the last sentence of section 3000.11(b)(4)(ii) regarding refunds into a new paragraph (b)(4)(iii) to make it clear that whenever money paid as a case-by-case fee was not spent on processing costs, BLM will refund that money once processing is complete.

We wish to make one further clarification with regard to section 3000.11, relating to the charging of processing fees on a case-by-case basis. Under paragraph (a), if at any time BLM decides that a particular document designated for a fixed fee will have a unique processing cost, such as an Environmental Impact Statement, we may set the fee under the case-by-case procedures. BLM intends to recover on a case-by-case basis those costs that BLM incurs following the decision that the document processing will have a unique processing cost. BLM will not charge for costs that BLM incurred before that decision was made. The applicant will receive a credit for any fixed fee already paid against the case-by-case fees that are billed.

7. We have clarified the final regulatory text for section 3800.5 as it relates to the applicability of case-by-case cost processing for validity examinations and common variety determinations associated with mining notices, applications for PoOs, and applications for patents. We divided proposed paragraph (b) into final paragraphs (b) and (c). Revised paragraph (b) relates to mining notices and plans of operation and redesignated paragraph (c) applies to patent applications.

Revised paragraph (b) makes it clear that a notice level operation or an applicant for a plan of operations for which a mineral examination, including a validity examination or a common variety determination, and associated reports, are performed and prepared under 43 CFR 3809.100 or 3809.101, must pay a processing fee on a case-by-case basis. It was not BLM's intent to include validity examinations BLM may perform on its own volition that are not performed under sections 3809.100 or 3809.101. This change is in response to comments that the regulatory text contained in the July 2005 proposed rule was confusing. It also should be noted that the cost recovery provisions are not intended to modify BLM policy as to when mineral examinations are performed.

Final paragraph (c) provides that an applicant for a mineral patent under 43 CFR subpart 3860 must pay a processing fee on a case-by-case basis as described in section 3000.11 for any validity examination and report prepared in connection with the application. This includes any analyses performed in connection with the validity examination and report, such as common variety determinations. Although contained in a new paragraph, this is not a substantive change from the July 2005 proposed rule. 43 CFR subpart 3860 applies to all mineral patent applications that BLM processes, regardless of the agency with surface management responsibility for the lands covered by the patent applications. Thus, case-by-case cost recovery will occur for validity examinations associated with BLM processing of mineral patent applications, whether the surface is administered by BLM, the U.S. Forest Service, NPS, or other agencies.

BLM wishes to make one further clarification with regard to section 3800.5(a), relating to the case-by-case cost recovery for the processing of PoOs requiring the preparation of an environmental impact statement. Under paragraph (a), an applicant for a PoO under 43 CFR part 3800 must pay a processing fee on a case-by-case basis as described in 43 CFR 3000.11 whenever BLM decides that consideration of the PoO requires the preparation of an Environmental Impact Statement (EIS). The costs that BLM intends to recover on a case-by-case basis under the final rule are those costs BLM incurs following the decision that an EIS is necessary, not costs that BLM may have incurred before that decision.

8. As a conforming amendment, we added language revising section 3835.32(c) so that it refers to a processing fee rather than a non-refundable service charge. Paragraph (c) includes a cross-reference to the table in section 3830.21 on service charges and fees, which BLM considered for amendment in the proposed rule. This conforming amendment to section 3835.32 was inadvertently omitted in the proposed rule.

The rule also contains other technical conforming and editorial changes.

Today's rule adopts both fixed fees and case-by-case fees. The table below sets forth the final fees that are imposed by this rule, compared to the fees as proposed in 2000 and 2005.

Table 1.--Fees for FY 2006
[Note that fees will be adjusted annually for changes in the IPD-GDP, published in the Federal Register, and posted on BLM's website. Revised fees are effective each October 1.]

\1\ The fees proposed in July 2005 adjusted the fees proposed in 2000 by using the Implicit Price Deflator 4th Quarter 2003 (106.244) and rounding to the nearest dollar.
\2\ The fees in this final rule adjusted the fees proposed in 2000 by using the Implicit Price Deflator for 4th Quarter 2004 (110.077), then rounding to the nearest $5.00.
\3\ The existing fee for recording a mining claim or site location (43 CFR 3833) is a total of $165. This includes the initial maintenance fee of $125 and one time $30 location fee required by statute and the $10 service charge shown in the table. The service charge becomes a $15 processing fee in this final rule, making the total fee $170.
\4\ In this final rule, the fixed fee for adjudication of mineral patents has been modified in response to comments received. Applications with 10 or fewer claims will be charged a fixed fee of $1,260. Where the mineral patent application includes more than 10 claims, the fee will be $2,520.

III. Responses to Comments on the December 2000 and July 2005 Proposed Rules

In this section of the preamble, we respond to the substantive comments that we received on the December 15, 2000, proposed rule (65 FR 78440) and on the proposed rule published in the Federal Register on July 19, 2005 (70 FR 41532). In response to the December 15, 2000, proposed rule (65 FR 78440), BLM received approximately 136 comments. In response to the 2005 re-proposed rule (70 FR 41532), BLM received approximately 43 comments.

A. General Comments

Although BLM received some comments in support of the rule, the majority of comments generally opposed any fee increases in BLM Mineral Programs. The commenters expressed many reasons for opposing the rule. Some commenters said that BLM appeared to have based the fee changes on out-of-date data from fiscal years 1988 to 1990. Similarly, a commenter said that BLM used cost recovery data from a period of low activity, resulting in an inaccurate fee structure.

The commenters are incorrect in asserting that BLM based the fees solely on data from fiscal years 1988 to 1990. In the mid-1990s, BLM reanalyzed the data and conducted spot checks to verify their continued validity as explained in more detail in the preamble to the proposed rule (70 FR 41534). BLM's processes covered by this rule have not changed significantly since that time. Moreover, we have adjusted the fees using the Implicit Price Deflator for 4th Quarter 2004 to reflect current costs. Accordingly, we believe that the fees in this final rule are not out of date. Moreover, the period for which BLM collected data was not a period of particularly low activity.

Some commenters asserted that the cost recovery fees are equivalent to a tax on producers. The commenters also objected to the proposed rule because operators already pay for the services provided by BLM through taxes. They recommended that operators be given a tax incentive or tax credit to offset the cost of these higher fees.

We disagree. The fees in this rule are not a tax. The fees are charged for special benefits received by identifiable beneficiaries and are intended to reimburse the agency for the costs of processing the various energy and minerals related filings. Creating tax incentives and tax credits to offset the cost to the operator of these fees is not part of this rule, and it is outside BLM's or DOI's jurisdiction or authority to initiate such a rule.

Some commenters asserted that the fees in this rule are unjustified in light of the fact that the government receives other revenues such as royalties, bonus bids, and rentals for the mineral activities covered by these fees, which in their view should cover processing costs. A commenter recommended that BLM deduct the costs of processing minerals and energy documents from the royalties that BLM is already paid. As an example, a commenter stated that the public receives "the vast portion of the revenues from the proceeds from the federal coal lease" but has no overhead costs or investment risks.

We disagree. Royalties, rents, and bonus bids reflect the value of the resource to the lessor. Congress authorized BLM to recover processing costs, and did so fully aware that BLM was already collecting bonuses, rents, and royalties, so there cannot have been any legislative intent that one fee should offset another.

BLM charges processing fees pursuant to its authorities under the Independent Offices Appropriation Act, as amended, 31 U.S.C. 9701 (IOAA); Section 304(a) of FLPMA; Circular A-25; DOI Manual 346 DM 1.2 A; and case law (also see the preamble to the proposed rule at 70 FR 41533 and Solicitor's Opinion M-36987 (December 5, 1996)). Congress clearly intended for agencies to recover processing costs in addition to bonuses, rents, and royalties.

The IOAA states that Federal agencies should be "self-sustaining to the extent possible," and authorizes agency heads to "prescribe regulations establishing the charge for a service or thing of value provided by the agency." Section 304(a) of FLPMA specifically authorizes the Secretary of the Interior to "establish reasonable filing and service fees and reasonable charges and commissions with respect to applications and other documents relating to the public lands." Circular A-25 sets forth a general policy that a user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public.

A commenter said that other public land users who do not pay royalties should also pay processing costs.

BLM has implemented or is considering implementing cost recovery for other programs that it administers.

One commenter stated that, because much of the processing fees go toward satisfying other government regulations, as additional regulatory requirements are imposed and become part of BLM's processing, costs would continue to increase.

We appreciate the commenter's concern. In the short term, potential new requirements would not affect BLM's fixed fees. Over the longer term, BLM may have to reassess the fixed fees if our processing costs change significantly. Although we do not foresee increased regulatory burdens that would significantly affect processing costs, case-by-case fees would include any such increases. It is important to note, however, that as technology and automation improve, our document processing costs may decrease, which will be reflected in reduced case-by-case fees.

Some commenters asserted that case-by-case fees are open-ended and contain no cap, which makes it difficult to plan for future costs. Some of these commenters asked how an applicant would know in advance whether they could afford to submit an application.

Although case-by-case fees do not contain a prescribed cap, the process that BLM has established for case-by-case fees provides that cost estimates be given to applicants before processing begins. In advance of an application being submitted to BLM, an operator may also discuss the project with BLM and ask for cost projections. We expect that with time and experience, case-by-case fees will become more predictable.

Some commenters are concerned that the rule provisions give BLM too much authority to convert fixed fees into case-by-case fees under the provision that allows BLM to change a document designated for a fixed fee to a case-by-case fee if BLM decides that it will have a unique processing cost. The commenters said that BLM might arbitrarily change the designation during processing and set a higher fee under the case-by-case procedures. A commenter requested that, if possible, BLM identify fixed fees that will not be subject to case-by-case cost recovery.

We do not agree that the rule gives BLM unlimited discretion to convert fixed fees into case-by-case fees. By "unique processing costs," BLM means costs associated with a processing step that would result in significantly higher costs than are customary for that fixed-fee category. When applied to certain fixed-fee categories, costs of efforts such as EISs, cultural resource surveys, or threatened or endangered species consultations and studies, may be considered unique because they are not usually required for actions in those categories. Although most fixed fees are not of a type that could incur unique processing costs, BLM cannot guarantee that any particular transaction cannot give rise to unique circumstances that would warrant case-by-case processing. However, BLM has guidelines for determining when it takes actions such as those referenced above and will not decide that a document will require such processing steps unless those guidelines are satisfied.

If the applicant disagrees with BLM's determination that the application merits a case-by-case fee, the applicant may appeal that determination to IBLA under BLM's appeals process at 43 CFR part 4, subpart E, when it receives the cost estimate from BLM. In response to the commenters' concern, we have added language to the rule text clarifying that such a determination may be appealed. If the applicant prevails, BLM will refund the disputed fee and charge only the fixed fee.

A commenter stated that, although estimated processing costs can be appealed, he has no confidence in the ability of IBLA to process those cases expeditiously. The comment concluded that there is apparently no motivation for BLM or IBLA to move quickly on any appeals.

With respect to appeals, there is little BLM can do to shorten the period between when an appeal is filed and when an appeal is resolved. However, the regulations provide that an applicant can ensure that BLM will continue processing the document and issue a decision while an appeal is pending by paying the disputed fee under protest.

Some commenters contended that the fees would have a negative impact on small operators or miners. Some commenters said the proposed rule would have a negative impact on the national and local economies, especially as it relates to exploration, and will result in an increase in the number of energy and mineral projects being abandoned. They generally stated that higher fees would adversely affect mining industry ability to compete.

The Record of Compliance that BLM prepared for the 2005 proposed rule concluded that, when mineral industry revenues are compared with the cost increases in this rule, the projected annual total for these increases amounts to less than one percent of sales. Even if the entire amount of the increases were to be borne by small business entities, the effects would be minimal. For example, under this rule, we project that small oil and gas operators will pay an additional $2 million annually, approximately, while generating sales of about $1 billion annually from operations on Federal lands. As a matter of prudence, operators will factor these fees into their business decisions before pursuing on-the-ground operations. In addition, for competitive leasing, these higher costs may be reflected in the successful bid.

The increases in the fees paid by the applicants represent the direct economic impact of complying with the final rule. We estimate the cost of the rule, in the form of higher fees, will be approximately $7 million annually. We do not anticipate any measurable reduction in economic activity due to these fees.

Several commenters said that BLM did not adequately consider the FLPMA factors when calculating the proposed fee increases, and challenged BLM's statement that the projects for which fees are charged in this rule usually provide little or no service to the public. A commenter stated that developers are involved in tremendous financial risks in producing minerals, and urged that the rule should consider the financial risks involved and potential positive benefits to the general public. Commenters stated that we did not consider various benefits of mining, including improved grazing land, improved wildlife habitat on reclaimed mine lands, and maintenance of trails that benefit recreational and subsistence users. Some commenters asserted providing heat and electricity to homes and businesses and other mineral uses are an obvious service and benefit to the public. A few commented that BLM should give applicants a credit for the data they produce, or reimburse them for providing it. A commenter concluded that BLM should include discussion of how these factors were considered in the final decision-making process on the fee procedures.

A commenter also discussed the importance of coal production and contended that because coal resources from Federal leases are vital to supplying electricity at a reasonable price and in an environmentally sound manner, BLM should not charge additional document processing costs. The commenter contended that a FLPMA factor mandates that BLM not impose additional processing costs for leasable minerals because the public receives significant benefit from lease revenues.

BLM agrees that the domestic mining industry is vital to the American economy and provides immense benefits to the public. However, the FLPMA factor of "service to the public" concerns whether the applicant's project itself provides some significant direct service or benefit to the general public, not the fact that members of the public are the ultimate consumers of mineral resources extracted from the public lands (which is true of virtually all public land resources). Companies extracting resources from the public lands do not necessarily engage in extraction operations for the benefit of the public, but are for-profit enterprises. There is thus no basis for using the public's ultimate consumption of the resource as a reason for reducing processing fees below BLM's actual processing costs.

BLM agrees that there are times when the applicant's project itself does result in tangible benefits to the public, such as the identification of cultural and archaeological sites in resource surveys, trail maintenance, and others mentioned above. For documents processed on a case-by-case fee basis, BLM will consider each of the FLPMA factors as it relates to that individual project. For the fixed fee documents, we considered the likelihood of activities in those categories providing substantial direct benefits to the public. We concluded that such potential benefits from transactions in the fixed fee categories are too speculative to warrant charging less than BLM's actual costs of processing, particularly when weighed against the monetary value of the project to the applicant.

With regard to operators' financial risks, such investment risks and overhead costs of a for-profit entity operating on public land are normal costs of doing business and should not be a reason for BLM to collect less than its actual processing costs under the FLPMA reasonableness factors.

Some commenters asserted that BLM's processing activities provide benefits to the general public such that BLM should charge less than its actual costs of processing. Some commenters also objected that many of BLM's processing activities benefit only the public and not the applicant.

BLM disagrees. The processing fees charged in this rule are for the documents that an applicant must submit to satisfy various statutory and regulatory requirements pertaining to the various minerals programs that BLM administers. The processing of an application necessarily benefits the applicant. See 70 FR 41541. BLM considered the potential benefits to the public of its processing of the fixed fee documents in this rule and concluded that the monetary value to the applicant outweighs the possible benefit to the public.

Several commenters were unclear how the fees relate to situations where the applicant directly pays a third party to perform required studies. Some commenters suggested that because they often pay third party contractors to perform required environmental studies, BLM should credit those costs by reducing the fees BLM charges.

A credit is inappropriate because the fees in this rule do not include any costs that an applicant pays directly to a third party. For third party contracts, BLM's cost recovery is restricted to recovering the costs of its own activities, such as supervising the contractor, reviewing and approving the final document. If BLM pays for
environmental studies in connection with its document processing, it will include those costs in its fee.

Some commenters said that because the industry already pays for the privilege of operating on public lands by performing many studies and inventories, and compiling National Environmental Policy Act (NEPA) documents, the Federal Government should consider reimbursing industry for performing these undertakings.

BLM will not be reimbursing operators for studies they perform in compliance with various laws, mandates, and policies. All such costs are borne by the operator. The operator conducts these studies for their own benefit because an operator cannot receive a permit or authorization to extract resources from public lands until all required studies are completed. The operator does have the option of paying a BLM-permitted contractor to conduct these studies or they can ask BLM to conduct them at a charge to the operator.

Some commenters contended that BLM must ensure efficient and timely processing and provide time frames within which it will complete processing. A commenter suggested that BLM undertake an independent review of the processes that are funded by these increased fees before they are implemented in the final rule.

BLM recognizes that we have a responsibility to administer our programs in an efficient and effective manner, and review our procedures for processing applications to ensure their efficiency on an on-going basis. However, this is not a basis for delaying the implementation of this rule. Setting time frames for BLM processing is not part of this cost recovery rulemaking.

A few commenters asked BLM to hold public meetings before finalizing any fee increases. Several commenters asked that we extend the comment period. Another commenter asked BLM to develop regulations governing minerals management programs with more industry involvement.

BLM believes that adequate public involvement has occurred with respect to this rule. The original proposal, in December 2000, was very similar to this final rule, and the comment period at that time was open for over six months. We also provided a 30-day comment period for the July 2005 proposal.

Some commenters said that BLM's current fees are much higher than those charged by local governments and private industry for similar services.

BLM bases its fees on its own processing costs in conjunction with its consideration of the FLPMA reasonableness factors. Neither the states nor private industry has the same statutory responsibilities, as does BLM.

A commenter said that use of a weighted average creates a situation where they are charged more than is necessary and that they should not be penalized if a BLM office is less cost efficient than another one. A commenter requested that BLM define "weighted average" and said that this mathematical cost basing leads to unequal application under the law and creates a cost structure slanted toward higher than necessary fees. A commenter asked what authority gives BLM the means to use a "weighted average" instead of the actual or average cost.

BLM relied on its regulatory authority in FLPMA (43 U.S.C. 1740) to determine the proper method of analysis. BLM used a weighted average for fixed fees to incorporate economies of scale achieved by offices that process many more documents than those with less active oil and gas (or other mineral) programs. The processing cost fees in this rule are based on a weighted average, rather than a simple average, of BLM-wide processing costs for each type of document. This method gave greater weight to the processing cost data from field offices having a heavy workload, and thus more expertise, in processing a particular type of document. Offices that process a greater number of a particular type of document generally have a lower processing cost per document of that type. We first estimated the actual cost for a type of document and then considered each of the FLPMA factors to see if any of them might cause a fee to be set at less than actual cost. We then decided
the amount of the fee, which cannot be more than our processing cost.

A commenter said that BLM failed to set reasonable ground rules like limits on dollars per hour for BLM staff to work on administering the project.

BLM will base case-by-case fees on the actual costs incurred in processing the application. Before processing begins, BLM will provide the applicant with an estimate of BLM's costs and its key components. The applicant will have an opportunity to object if it believes the estimated costs are excessive.

A commenter asked why there are differences in costs among BLM State Offices for the same program elements and services. Another commenter asked how BLM's processes can be "reasonably efficient" when BLM's preliminary review of the data showed large cost differences among BLM offices for processing certain types of documents as well as large numbers of documents filed and processed.

As stated in the proposed rule preamble, BLM determined that the differences in costs cited by the commenters were attributable to site-or sale-specific factors or economies of scale.

Some commenters said that BLM was attempting to circumvent the budgeting process by burdening industry with additional fees and increasing existing fees as much as 15 times the current fee.

BLM is not circumventing the budgeting process. Congress authorized BLM to recover processing costs under the IOAA and FLPMA, and OMB directives require us to do so. The IOAA states that Federal agencies should be self-sustaining to the extent possible and authorizes agency heads to "prescribe regulations establishing the charge for a service or thing of value provided by the agency." Section 304(a) of FLPMA specifically authorizes the Secretary of the Interior to "establish reasonable filing and service fees and reasonable charges and commissions with respect to applications and other documents related to the public lands." The IOAA and FLPMA give BLM authority to charge fees for processing applications. Moreover, Circular A-25 provides that the general Federal policy is that a charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the public.

A commenter stated that BLM went too far beyond what is reasonable in setting the proposed fees beyond the fees established in previous regulations.

BLM disagrees. The prior filing fees were more in the nature of a recordation fee, and were not intended to recover BLM's processing costs.

Several commenters argued that BLM's proposed cost recovery regulations are flawed because they rely on an incorrect legal conclusion in Solicitor's Opinion M-36987 (December 5, 1996) that cost recovery is mandatory under FLPMA and the IOAA.

The commenters are mistaken. The Solicitor's Opinion did not conclude that those statutes require cost recovery, nor did BLM's preamble to the proposed rule characterize the Opinion's conclusion as such. Solicitor's Opinion M-36987 concluded that "BLM has authority under applicable statutory and case law to recover costs of minerals document processing * * *. Because it has this authority and because the Departmental Manual and OMB policy require that costs be recovered where possible, BLM should take steps to initiate cost recovery * * *."

Commenters also maintained that the Department mistakenly relies on the BLM Manual to create a mandatory cost recovery obligation.

By "BLM Manual," we assume the commenters meant to refer to the Departmental Manual, which was cited in both the Solicitor's Opinion and the proposed rule preamble. The commenters' objection that the Manual does not have the force or effect of law and cannot override a Federal statute misses the point. As explained in the preamble to the proposed rule, Congress has authorized cost recovery in both the IOAA and FLPMA. The executive branch, through Circular A-25, has stated the general Federal policy to be that charges will be assessed against identifiable recipients of special benefits. The Secretary of the Interior, in the Departmental Manual, has instructed bureaus and offices within DOI to recover costs that they are authorized to recover. There is no issue here of a conflict between the Departmental Manual and statutory authority--the Manual, the OMB guidance, and the statutes are all in accord. Nor is there any issue, as the commenters assert, of BLM interpreting the Manual as directing it to disregard one of the FLPMA factors. As explained in the preamble to the proposed rule, BLM carefully considered each of the FLPMA factors in setting the proposed fees.

One commenter asserted that BLM appears to rid itself of its responsibility to prepare any special studies as outlined in NEPA and stated that BLM must maintain the necessary staff and resources to perform NEPA requirements.

BLM recognizes that it has continuing responsibilities to satisfy its requirements under NEPA. The provision in section 3000.11(b) simply allows the applicant to ask BLM's approval to do studies or other activities, under BLM supervision and to BLM standards, on a voluntary basis. If the applicant chooses not to do the work, BLM will perform the work and include the cost in the case-by-case fee. Nothing in these regulations relieves BLM from fulfilling any of its statutory responsibilities.

One commenter expressed concern that the fee increases will adversely affect academic interests involved in fossil research.

The cost recovery provisions apply to applications for certain commercial activities. Academic interests involved in fossil research, including collectors of petrified wood under 43 CFR subpart 3622 and other kinds of researchers under 43 CFR part 2930, will not be affected by this rule.

A few commenters stated that BLM should not be pursuing a prior administration's agenda or initiative.

The changes in this final rule do not represent the agenda of any particular administration. BLM's efforts to recover costs were initiated in response to recommendations from the OIG in 1988, as part of a 1980s Presidential initiative calling for all Federal agencies to charge appropriate user fees for agency services.

A commenter asked if BLM had considered implementing electronic filings of ownership transfers before implementing a new fee schedule.

BLM intends ultimately to implement electronic filings for title transfers. We will then review the processing costs and adjust them as necessary. This is not a reason to delay implementation of this rule.

A commenter said that the rule could be abused in its implementation by BLM offices seeking to delay or deny permit applications, including those that state regulatory agencies handle expeditiously.

The comment is speculative. We have carefully explained how the fees will be implemented in accordance with applicable authority. These fees will not be used to delay any BLM action unnecessarily.

A commenter said it is unclear what, if any, BLM costs other than land use plan studies and programmatic environmental assessments (EAs) were exempted from the rule.

BLM intends this rule to provide for the collection of document-specific costs rather than programmatic costs.

A commenter said that if BLM proceeds with this rule, it must ensure that all management overhead is excluded, citing Nevada Power Co. v. Watt, 711 F.2d 913, 931 (10th Cir. 1983).

BLM's actual costs are the sum of both direct and indirect costs. However, under FLPMA, BLM cannot recover the costs of management overhead. We have interpreted this to mean the costs of BLM State Directors and Washington Office staff, except when a member of this group works on a specific authorization such as a lease. We have not excluded the costs of Deputy State Directors or other supervisory staff because they are typically involved in day-to-day decision making. BLM's cost accounting system is intended to reflect this distinction.

One commenter noted that it appeared that BLM was attempting to "double-dip" by assessing both an application fee and a filing fee. Another commenter noted that BLM was only assessing application and filing fees for some actions and questioned why BLM was not collecting the processing fee for those same actions.

Some commenters seem to have misunderstood how BLM structured the fixed fees. Some fixed fees were already-existing, nominal filing fees that we did not propose to change. Filing fees serve to limit filing to serious applicants and are not intended to reimburse processing costs. This rule adds certain fixed fees for other documents based on BLM's processing costs. Each action for which this rule charges a fee has either a filing fee or a processing fee. No action has both a filing fee and a cost recovery processing fee. We may in the future change some filing fees to processing fees. As explained in the preamble to the proposed rule, BLM intends to continue to work on establishing and collecting fees for other documents (70 FR 41533).

Some commenters stated that these provisions appear to create further delays in an already time consuming set of procedures. A commenter stated that at a minimum the final regulations should include provisions to establish an escrow-type account that BLM can access. A commenter recommended that BLM add the following language to proposed section 3000.11: "You may elect to establish a standing contingency fund to be accessed and utilized by BLM in case of shortfall, to assure that processing continues. Provisions for appeals and fees paid under protest in subsection (c)(6) will apply equally to any funds utilized from such an account."

This rule does not provide for escrow or contingency accounts to facilitate payments of case-by-case fees. However, based on these comments, we have amended the language of section 3000.11(b)(4)(i) to clarify that we will not stop ongoing processing if we re-estimate the costs associated with a case-by-case document. This revision should reduce potential delays associated with re-estimation of costs.

The commenter also asked BLM to consider that cost recovery should be limited to the costs of the actual hours that BLM staff worked directly on the project being charged and specifically should exclude any staff training.

The preamble to the proposed rule explained what costs BLM includes in determining its fees in this rule. Both direct and indirect costs are included. Training is only included to the extent that it is allowable as indirect costs.

One commenter asked that BLM consider dedicating funds collected from increased fees to paying personnel who process the permits for which the fees are levied. The commenter said that BLM staff that is responsible for the minerals permitting process should not have other assignments within their respective offices.

BLM intends to structure its budget processes to return fees collected to the BLM office which processes the actions. BLM staff workload is determined by the needs of individual BLM offices.

One commenter asked for further explanation of the relationship between existing Federal fees, assessments, and levies and the proposed charges, asserting that existing fees already cover certain BLM document processing costs. Specifically, the commenter contended that net smelter royalties, other Mining Law Administration Program (MLAP) funds, and bonus bid payments that cover document processing costs should essentially be counted as document processing fees, and that BLM should not seek additional revenue from applicants if double recovery of such fees would occur.

As discussed earlier in this preamble, we have addressed the relationship between royalties, bonus bids, rents, and the processing fees in this rule. We address here the relationship between the processing fees and Mining Law fees, such as the annual maintenance fee on unpatented mining claims and the location fee on new claims.

Moneys that Congress has directed BLM to collect as location and maintenance fees are deposited directly to the Treasury and are to be used as an offset to BLM's appropriation, up to a certain ceiling. The purpose for the maintenance fee is to replace the $100 assessment work requirement in the Mining Law. The assessment work requirement was intended to show a mining claimant's bona fides in exploring for or developing minerals. Similarly, the location fee is intended to discourage speculative filings of mining claims. Consequently, the fundamental purpose for those fees is not for cost recovery.

The Interior Department's appropriation act specifies two purposes for which BLM can use mining claim fees. First, Congress has directed that a set amount of mining claim fees be used to cover the costs of administering the mining claim fee program. The mining claim fee program is the program under which BLM collects and processes the $125 claim maintenance fee and the location fee. We did not propose and have not adopted any additional processing fee for collecting and processing the statutory mining claim fees. Although the terminology may appear similar (the word "location" is used in both), the fee this rule imposes for processing location notices is intended to cover BLM's processing costs related to the statutory filing requirement imposed by FLPMA Section 314 (43 U.S.C. 1744), and is unrelated to the collection of the statutorily imposed location fee.

Second, Congress has directed that the bulk of the appropriation that is offset by mining claim fees be used for the MLAP generally This appropriation has averaged approximately $34 million a year for the past few years, and is used for the entire range of administrative costs incurred by the MLAP; it has historically been inadequate to operate all aspects of the program. In the past, BLM has used appropriated funds to cover the processing costs of documents when no processing fees were being charged. The fact that general Mining Law Program funds were used to cover these costs in the past, however, does not mean that these costs "should" be funded from those collections, or that BLM cannot now exercise its statutory authority to charge a specific processing fee to cover certain document processing costs. When general Mining Law Program funds no longer have to be directed to cover all processing costs, they can and will be directed to cover other aspects of the program.

The commenter also stated that because claim maintenance fees and location fees generate millions of dollars, which will increase as fees are increased, BLM should re-evaluate the need to impose additional processing fees.

As is the case with royalties, bonus bids, and rents, Congress imposes claim maintenance and location fees for purposes different from covering the costs of document processing. BLM cannot predict how much money will be collected from these statutory fees or the size of future Congressional appropriations for Mining Law administration. In the IOAA and FLPMA, Congress has also separately authorized the collection of fees to cover the costs of document processing. Those fees are the ones that will be collected under this rule.

One commenter objected to BLM charging for pending documents where processing has already begun. The commenter asserted that charging new fees on pending documents would constitute an unlawful retroactive application of new requirements. The commenter also asserted that equitable concerns arise regarding such charges since the charges could not have been anticipated and planned for in the planning phase of the action. In addition, the commenter stated that often the applicant has no control over the pace of document processing, and thus would be unfairly punished due to BLM's processing backlogs.

As discussed earlier in this preamble, BLM will apply both fixed and case-by-case fee provisions in this final rule to applications submitted after the effective date of this rule, and not to applications pending on that date. Although BLM disagrees with the characterization of the proposed regulations as retroactive, BLM is sensitive to practical concerns relating to applying this rule to pending applications, as well as perceived inequities, and has revised the rule accordingly.

Another commenter stated that any cost reimbursement policy should prohibit the imposition of significant new processing fees upon the lessee or operator of an existing lease, other than future minor filing fees, for specific actions such as processing right-of-way applications. The commenter asserted that at the time existing leases were bid upon and issued, BLM represented by implication and conduct that fees would be imposed under existing law and regulation only for certain activities, such as rights-of-way, and that other administrative costs associated with existing leases were reasonably expected to be borne by BLM. The commenter concluded that lessees' bids reflected those assumptions.

BLM rejects the comment. The commenter's assertions are based on speculation, not fact. Existing lessees do not have any contractual or other basis to be exempt from BLM cost recovery assessments. To the contrary, BLM leases typically contain a condition that lessees must comply with present and future BLM regulations. The recovery of processing costs by government agencies is not a new phenomenon, and BLM's doing so under existing authorities could have been anticipated by lessees at the time of lease acquisition.

Some commenters stated that deadlines are particularly important for documents where fees are collected on a case-by-case basis, and should be established preliminarily through negotiations between the applicant and BLM during the time period when they would be working together on the cost estimate.

This rule does not establish mandatory timelines for processing documents. BLM agrees, however, that it would be helpful to all persons if BLM and an applicant reach a common understanding as to the estimated time when various steps will be achieved.

B. Comments on Oil and Gas Leasing Cost Recovery

A commenter said that BLM's added costs do not address any improvement in services to industry. The commenter stated that by increasing fees BLM is attempting to drive up the cost of doing business on Federal lands and discourage companies from exploration and development of oil and gas.

A commenter said that poor customer service and long periods to process documents by BLM have been long-standing industry concerns, and that BLM's budget and staffing have not kept up with increasing industry activity. The comment continued that this has created delays and permit backlogs. The commenter said these issues are more important than "incremental cost recovery."

Several commenters stated that if the price of energy decreases they would still be required to pay higher fees for reduced service from BLM and less commodity. Several commenters said they had concerns with BLM's quality of "customer service." Others stated that the proposed cost recovery rule is contrary to the new National Energy Plan; and an impediment to domestic oil and gas exploration and development.

BLM takes seriously its customer service obligations, and is constantly looking to improve the means by which it addresses permit processing and its other program responsibilities. To the extent moneys recovered from processing fees are directed back to the offices from which they were collected, we hope this will serve to maintain or enhance the level of service that BLM provides.

We disagree that processing fees should decrease if the price of energy decreases. A processing fee covers the cost of a service that provides a benefit to the applicant and should be considered by the applicant as equivalent to any other cost of doing business. BLM's costs to process documents submitted by an applicant are unrelated to market fluctuations. Just as fees will not increase due to market upswings, they will not decrease due to market declines. BLM's economic analysis indicates that the new fees will not be an impediment to domestic oil and gas or other mineral development. The fees are minor in the context of the overall energy market.

Some commenters stated that these fee increases could result in operators not filing assignments and transfers with BLM. Another commenter said that the current fees are considerably higher when compared to those charged by local governments and private industry for similar services, and in order for operators to have good title to any oil and gas lease, the leases and transfers must be recorded in the county. The commenter continued that, because BLM requires a second set of records on BLM-prescribed forms to be filed with field offices, operators must undertake expensive curative title work when BLM records do not match the county records.

BLM disagrees that an increase in fees would result in operators not filing assignments and transfers with BLM. In accordance with statutory requirements, including the MLA, BLM must approve title transfers and, until they are approved, the transfer is not effective regardless of any private agreements between parties. While we appreciate the commenters' concern about a second set of title records, this is required by statute. Earlier in this preamble we have addressed the relationship between BLM fees and state and local fees.

A commenter said that BLM must set minimum fees that reflect the lesser of the reasonable or actual BLM administrative costs to conduct a pre-lease EA and promptly issue the lease. The commenter urged that any cost recovery program provide the lessee with a schedule of maximum fees and a time period for payment.

We agree that under FLPMA, BLM's fees must be based on the lesser of reasonable or actual costs. The fees in this rule were determined after a consideration of all of the FLPMA factors and reflect BLM's reasonable costs. As explained in the preamble to the proposed rule (70 FR 41540), the fixed fees for oil and gas leasing in this rule do not include the steps required to prepare an individual sale parcel before preparing the sale notice, such as earlier NEPA costs, even though such costs are recoverable. The fees are based on costs that BLM incurs from the point of preparing the sale notice. Unless there is a unique cost that would cause the conversion of the fixed fee to a case-by-case fee, the fees are established in the schedule in this rule.

A commenter asked BLM to return a portion of all revenues back to BLM districts based on the level of oil and gas activities in the district.

BLM is establishing a procedure through which the fees collected will go back to the office from which they were generated. Some commenters asked BLM to abandon all case-by-case fees for oil and gas operations on Federal land.

BLM proposed case-by-case fees for certain oil and gas transactions in the 2000 proposed rule on cost recovery. However, they were not in the 2005 proposed rule, and they are not in this final rule.

Another commenter stated that the fee increases would be acceptable if the fees covered expenses that the operator has incurred. However, according to the commenter, many environmental, social, and economic issues have to be reviewed before land is listed in public auctions. The commenter said that these reviews are for the benefit of the public, and that it would be unfair to pass these costs on to the user and accuse users of causing this expense.

The fees in this final rule for BLM's oil and gas program do not include the environmental, social, and economic costs that BLM incurs before land is listed in public auctions. As was stated in the preambles to both the 2000 and 2005 proposed rules, we may propose in future rulemaking to recover those costs. As explained earlier in this preamble, these reviews are associated with a special benefit to an identifiable beneficiary and are recoverable under FLPMA and the IOAA.

A commenter stated that BLM's authority to impose cost recovery is discretionary, not required by statute. The commenter said that previous administrations chose not to impose this cost recovery proposal on oil and gas operators and lessees for sound public policy reasons and urged BLM to continue this policy and reconsider the proposed rule in its entirety.

Under the Administrative Procedure Act, an agency may change its policy if such changes have a rational basis and are supported by law. BLM has explained both its basis and purpose and the legal authority supporting this rule.

A commenter said that the transfer-of-operating-rights fees are inappropriate because the documents are not adjudicated, but only filed.

While operating rights transfers do not involve the same adjudicative processing steps as other documents, BLM must still review these documents for legal adequacy, and the cost recovery fee is appropriate.

C. Comments on Geothermal Leasing Cost Recovery

A commenter asked if we have considered fee increases from a national strategic energy viewpoint. For example, according to the comment, increased geothermal production from Federal lands would address the local energy shortages in the West in an environmentally benign way. The commenter therefore questions whether BLM should increase such fees.

As mentioned earlier in this preamble, this final rule does not include processing fees for geothermal permits to drill or geothermal exploration permits. Any remaining geothermal fees established by this rule will not hinder geothermal development.

D. Comments on Coal Leasing Cost Recovery

A commenter suggested that BLM offset the processing fees for a competitive coal lease by an equivalent reduction in the fair market value bid for the lease.

Prospective bidders independently determine what they consider the fair market value of a coal lease to be. Companies will take all costs, including processing costs, into account when bidding. BLM will do the same when it makes its pre-lease determination of a minimum acceptable bid. Fair market value cannot be further reduced by the amount of processing costs, since those were already taken into account by the market. Also, Congress authorized the recovery of both fair market value and processing fees.

A commenter stated that BLM did not consider how the final rule would determine fees when the same or similar activity has been undertaken by another Federal or state agency with regard to the same transaction. The commenter stated that BLM should withdraw the rule until this issue is addressed.

To the greatest extent possible, BLM and other Federal agencies make diligent efforts to reduce or eliminate duplicative Federal or state requirements. This reduces the work burden for the agencies and provides better service to our customers. BLM and the Office of Surface Mining (OSM) have eliminated as many duplications of effort as possible. Moreover, in determining the fixed fees in this rule, we averaged our processing costs based on a survey of our actual costs (which included only our review time) plus consideration of the reasonableness factors. For the case-by-case fees, we will charge only for the time it actually takes BLM to process the document.

The commenter raised an issue about Resource Recovery and Protection Plans (R2P2). There are no fees currently assessed or proposed to be assessed for BLM to process an R2P2 for a Federal lease.

As stated in the preamble to the 2005 proposed rule at 70 FR 41536, at the time BLM was preparing the proposed rule for publication, BLM became aware that the case-by-case procedures outlined in proposed section 3000.11 were not appropriate for fees charged to the successful bidder in a lease sale or mineral materials sale context. Because a competitive sale requires BLM to perform work before conducting the sale, and BLM has the ability to track associated processing costs, the preamble to the 2005 proposed rule stated that it is our intent to include in the final rule a different set of procedures for charging a case-by-case fee to the successful bidder in the context of coal lease sales, solid mineral lease sales, and competitive mineral materials sales. Although the 2005 proposed rule contained revisions to sections 3473.2, 3508.21, and 3602.44, the proposed revisions did not address procedures for charging case-by-case fees to successful bidders, including situations in which the applicant is not the successful bidder. The final rule provides more extensive revisions to those sections as well as to related sections. These changes are described in an earlier section of this preamble.

One commenter suggested that BLM provide a mechanism whereby an unsuccessful bidder for a coal lease is not assessed any of the processing fees for the lease sale.

BLM agrees. As described above, the final rule requires the successful bidder to pay lease sale processing costs that BLM incurs.

A commenter asked BLM to clarify what happens when proprietary data is collected through activities that are covered by cost recovery. The commenter asked that BLM consider revising the regulation by incorporating mechanisms to ensure that any baseline data or information collected or contracted for collection by the applicant that is in excess of that information specifically required for applications would remain the property of the applicant, regardless of the outcome of the application process.

BLM will protect proprietary information in its possession to the extent provided under applicable law.

One commenter asserted that having an open-ended case-by-case cost recovery determination with no cap could easily create a disincentive to the coal lease modification process. The commenter stated that coal lease modifications are designed to maximize the recovery of the coal resources by allowing for a quick process and procedure to incorporate coal that cannot or will not be mined by anyone else into an existing coal lease. The commenter stated that BLM should encourage this practice, and that, in most instances, the additional royalties and bonus bids received more than offset the cost of processing these lease modifications.

BLM disagrees with this comment. We do not view a case-by-case fee as opposed to a fixed fee as a disincentive to filing an application for a coal lease modification. A lease modification is intended to provide the lessee an opportunity to obtain non-competitively adjoining tracts of coal that would otherwise be bypassed and that are not independently commercially viable. Other than not requiring a competitive lease sale and related public hearings on fair market value and maximum economic recovery, processing a lease modification application mirrors the processing steps associated with a competitive lease sale. The distinction between royalties and bonuses on the one hand and processing costs on the other was discussed earlier in this preamble. See also the earlier comment response in this preamble regarding the amounts and procedures related to case-by-case fees.

One commenter stated that a royalty rate reduction is an important component if a company reaches a critical financial or operational stage of their operation, and that if an operation is losing money and potentially facing closure of the property, then the Federal Government is also at risk of losing Federal mineral royalty income. The commenter stated that an open-ended case-by-case cost recovery process with no cap could be a big disincentive for a struggling company to overcome.

BLM disagrees with this comment. The commenter speculates as to the impact of the cost recovery process on a company requesting a royalty rate reduction. If a company requesting a royalty rate reduction objects to the cost estimate that BLM provides in a case-by-case cost recovery situation, it may appeal. BLM will apply the FLPMA reasonableness factors in setting cost recovery fees in case-by-case situations, as it applied them in setting the fixed fees in this rule. The authority for a royalty rate reduction (30 U.S.C. 209) does not address processing the royalty rate reduction applications. The MLA provides no authority to waive, suspend, or reduce recovery of processing costs. BLM will, of course, in its application of the FLPMA reasonableness factors, consider the facts that were presented in support of a royalty rate reduction.

One commenter stated that the proposed rule fails to recognize that applicants sometimes voluntarily pay for approved third-party contractors to perform studies to avoid certain delays associated with BLM processing of these documents. For example, the commenter stated, many applicants operating under the MLA pay BLM-approved third-party contractors to prepare the EISs associated with their leasing application.

BLM acknowledges that applicants have voluntarily paid for the preparation of an EIS for many actions to expedite the processing of that action. We anticipate that a similar process may continue under these regulations. Under this rule, if BLM pays for the preparation of studies such as an EIS, BLM's preparation costs will be included in the costs charged for case-by-case processing. If the coal lease applicant pays a third party directly for the preparation of an EIS, for instance, these regulations do not provide that the applicant will be reimbursed if the applicant is not the successful bidder. The coal lease applicant will have the choice whether to pay a third party directly for the preparation of the environmental study or to have BLM fund the study, the cost of which, including BLM contracting costs, will be part of the fee charged to the successful bidder.

E. Comments on Cost Recovery for Leasing of Solid Minerals Other Than Coal

Comments received regarding leasing solid minerals other than coal were general in nature and have been addressed in the General Comments section earlier in this preamble.

F. Comments on Cost Recovery for Mineral Materials Sales

Most comments received regarding mineral materials sales were general in nature and have been addressed in the General Comments section earlier in this preamble.

One commenter inquired as to whether mineral materials free use permits will be subject to cost recovery fees.

Under this final rule, processing fees do not apply to free use permits issued under 43 CFR subpart 3604.

G. Comments on Cost Recovery for Mining Law Administration

A commenter suggested that the fees under part 3860 be dropped in the final rule and that if and when patents are allowed in the future BLM should consider cost recovery fees at that time.

BLM has established the fees relating to mineral patent applications so that they will be in place if Congress chooses to lift the current moratorium on issuing mineral patents.

Some commenters said they opposed the proposed fee changes because mining claimants have a stake in the patent process and, therefore, those who have paid for the patent process should not be charged additional fees.

BLM disagrees that steps that an applicant must take to qualify for a patent can substitute for BLM's recovery of its processing costs.

A commenter said the proposed rule conflicts with BLM's published policy on when and under what circumstances a validity or common variety mineral examination will be required.

This rule does not change the existing published policy concerning when mineral examinations are performed. It only requires that cost recovery be initiated if a validity or common variety mineral examination is performed under 43 CFR 3809.100 and 3809.101.

A commenter noted that BLM recently reported to Congress that BLM processes most PoOs within six months, with some plans taking longer to process. The commenter suggested that, because BLM thus processes most PoOs in an efficient manner, it is not justified in imposing cost recovery fees. It also suggested that if BLM had needed additional funds to process PoOs, it would have mentioned that in its report. The commenter suggested that because most PoOs are processed within six months, it would be reasonable and more efficient for BLM to establish a fixed processing fee for PoOs. Based on BLM's report that it processes most PoOs within six months and the failure of the report to express a need for additional funds, the commenter contended that it is inappropriate for BLM to assert in the July 2005 proposed rule a need to increase fees. Another commenter suggested that the BLM be required to demonstrate that the currently available fee and other subsidies are insufficient.

BLM disagrees with the commenters. The fact that BLM reported that it processes most PoOs within six months has no bearing on whether BLM recovers its processing costs. Whether or not a report to Congress stated that BLM "needs" additional funds in order to efficiently process PoOs is also not a determining factor in BLM's cost recovery effort. The report was prepared in response to a Congressional directive to create a PoO tracking system, report on how long it took BLM to process PoOs, and describe ways in which BLM's processing time could improve. It was not intended to address BLM's cost recovery efforts. As explained in the preamble to the proposed rule, the Department's OIG has determined that BLM should be recovering the costs included in this rule, and both the OMB, in Circular A-25, and the Secretary of the Interior, in the Departmental Manual, have directed that BLM should assess charges against identifiable recipients for special benefits. That is what BLM is doing in this rule. It needs to be recognized that PoOs that are processed within six months are those that require only an EA, not those that require an EIS. BLM agrees that it may be reasonable and efficient to set a fixed fee for PoOs that are authorized under an EA. However, in this rule BLM is not charging any fee for PoOs that are authorized under an EA. The rule imposes a fee, on a case-by-case basis, only for PoOs that require the preparation of an EIS. Case-by-case fees are appropriate for PoOs that require an EIS because of the significant variability in costs that may occur in the preparation of EISs and associated studies. We will consider whether to propose fees for PoOs that are authorized under an EA, and may propose a future rule on the subject.

Commenters also asserted that applicants for PoOs and other types of applications already typically pay significant costs by hiring third-party contractors to prepare the NEPA documentation, and often subsidize a BLM employee or retain a contractor to work as a project coordinator. In light of these costs already often borne by applicants, commenters contend that companies should not be required to subsidize additional costs, and that any additional costs should be covered by claim location and maintenance fees.

BLM recognizes that many companies have incurred financial expenditures related to processing PoOs. Such payments to third parties will not be included in BLM's case-by-case fees. The fee will only include costs that BLM incurs. BLM statutory responsibilities require that it independently review any analysis performed by an outside contractor. This review is an integral part of the processing required before BLM can act on an application. It is therefore reasonable and necessary that BLM consider the review costs in calculating its costs for processing a document, notwithstanding that a company may have incurred other expenses related to processing. We have addressed earlier in this preamble the relationship between claim location and maintenance fees and processing costs.

Another commenter was concerned that the procedure in proposed section 3000.11(b)(2) under which BLM will not process documents until BLM gives the applicant a written estimate of costs will not work in situations where BLM has to begin processing an application in order to decide whether a case-by-case fee will be imposed. The commenter used as an example that when BLM receives a mining PoO application, it must begin processing to determine whether an EIS is required.

The estimate that BLM provides under section 3000.11(b) precedes any case processing. However, if the initial estimate under section 3000.11(b)(4) needs to be revised, the rule provides that BLM will re-estimate its reasonable processing costs under section 3000.11(b)(4)(i). There is no fee in this rule for BLM's processing of a PoO that does not require an EIS. Therefore, the processing that BLM performs up to the point where a decision is made that an EIS will or will not be required is not charged to the applicant. In response to this and other comments, we have stated earlier in this preamble that when a determination is made during the processing of a PoO that an EIS is required, the processing costs will be tracked and charged to the applicant on a case-by-case basis only from that point forward. This same principle applies when a fixed fee is changed to a case-by-case fee under section 3000.11(a).

A commenter said that third parties should not be permitted to appeal a BLM cost estimate because this could be used by opponents of the project as a delaying tactic.

It is clear from the context of the regulatory text at section 3000.11(b)(7), and confirmed by the preamble discussion in the proposed rule at 70 FR 41536-37, that only applicants may appeal a BLM cost estimate made under section 3000.11(b)(4).

Several commenters expressed opposition to BLM's proposed case-by-case fees because activities associated with case-by-case fee processing will add costs, especially when BLM has to re-evaluate cost estimates.

BLM appreciates the commenters' concern. However, we have not made changes to the final rule based on this comment. Means exist to keep costs down. For instance, an applicant should submit an application as complete as possible to allow BLM to provide an accurate initial cost estimate and to reduce BLM's processing costs. BLM already uses an automatic accounting system to streamline this process.

Commenters stated that a paying party should be permitted to audit BLM's accounting in case-by-case situations.

BLM disagrees that a paying party needs to audit BLM's accounting in case-by-case situations. The process has been set up to provide estimates as close as possible to actual costs, with re-estimates if BLM encounters higher or lower costs than anticipated. The applicant may appeal BLM's estimates. The process provides that the applicant may comment on BLM's written estimate of costs before BLM provides a final estimate.

A commenter stated that section 3800.5 contains provisions requiring applicants to pay for EISs and validity examinations if the Field Office requires them, and asserted that if the application is for a simple PoO, BLM has enough control to prevent severe environmental degradation.

It appears that this comment addresses PoOs that do not require an EIS. This rule does not impose cost recovery for processing PoOs that do not require an EIS. We note that validity examinations are not directly related to preventing severe environmental degradation.

A commenter stated that the proposed rule is inconsistent with the Mining and Mineral Policy Act of 1970, and that BLM should demonstrate that the proposed rule is consistent with the Act.

The Mining and Mineral Policy Act of 1970 (30