Overregulating G&G data

The U.S. Minerals Management Service should follow advice of the oil and gas industry and cancel its proposed changes for handling geological and geophysical (G&G) data from the Outer Continental Shelf. At stake is nothing less than booming activity in the Gulf of Mexico (see related story, p. 30).

MMS wants to raise reporting requirements for transactions involving G&G data in ways that would trample industry practice. If successful, it would seriously restrict speculative seismic surveys, now a rich source of the geophysical intelligence crucial to exploratory and development drilling and reservoir management.

Competitive concerns

In speculative surveys, common in the Gulf of Mexico, contractors acquire and process data that they later license or otherwise transfer to operators. Oil and gas companies usually withhold information about data licenses so as not to reveal interest in specific areas. Disclosure of such interest can hurt them in competition for federal oil and gas leases.

Because MMS must rule on adequacy of lease sale bids, the agency has a proper claim to seismic information from the OCS. It therefore needs to know when data become available. At present, it requires notification about initial analysis and interpretation of seismic data and can request updates. It gains access to data through holders of the permits it issues for geophysical exploration.

MMS proposes to require notification whenever data are analyzed, processed, or interpreted. It also seeks notification whenever seismic data change hands and wants to make its access to the data a condition of any such transfer. License-holders would share with permit-holders the liability to MMS for data disclosure.

The proposed notification rules would multiply reporting demands and add greatly to paperwork burdens. And the disclosure requirements would force companies and contractors to renegotiate most if not all existing license agreements. The requirements might also run afoul of constitutional property protections by forcing companies with licensed data to share with MMS information processed with proprietary methods.

Problems don't end there. A proposed requirement for "consultation and coordination" by a geophysical permit-holder with others in a survey area raises antitrust and competitive issues. And proposed rules for geophysical research, which requires notification but not permits, might limit the abilities of contractors to test new equipment and methods.

MMS hopes to issue a final rule by yearend. If enacted in its proposed form, the measure will certainly reduce the amount of seismic data acquired, processed, and interpreted in the Gulf of Mexico. It thus will weaken a key ingredient of the gulf's recent revival. Furthermore, by exposing data license-holders to competitive compromise, it will make speculative surveys unattractive to many companies. The likely results: fewer speculative surveys and less of the relatively inexpensive but vital information that they yield. A regrettable side effect would be reduced gulf activity by independent producers, who depend heavily on speculative surveys for marine seismic data.

Unclear motives

MMS's motives are unclear. Some industry representatives think the agency is disappointed with performance under a trial procedure set up in January 1996 to ensure federal access to specially processed seismic data acquired around subsurface salt bodies. If so, why doesn't MMS just toughen requirements for specially processed data acquired near salt?

The proposed rule goes too far. As it did with its proposal to overhaul royalty oil valuation, MMS is overreacting to isolated lapses and paying too little attention to the commercial, state, and national interests that its actions place in jeopardy (OGJ, July 14, 1997, p. 17; see letter, Aug. 11, p. 6). It should scrap the G&G rule and quit bludgeoning problems with bureaucracy.