October 1969 or from section 6 leases at a delivery point to be designated by the lessee. If the delivery point is on or immediately adjacent to the lease, the royalty oil will be delivered without cost to the Federal Government as an undivided portion of production in marketable condition at pipeline connections or other facilities provided by the lessee, unless other arrangements are approved by MMS. If the delivery point is not on or immediately adjacent to the lease, MMS will reimburse the lessee for the reasonable cost of transportation to such point in an amount not to exceed the transportation allowance determined pursuant to 30 CFR part 206. The MMS will include such transportation costs in the price charged for the oil taken in kind to reflect the value of the oil at the delivery point. Arrangements for delivery of the royalty oil from, or exchange of the oil at, the delivery point, and related transportation costs, are the responsibility of the purchaser of the royalty oil. In addition, quality differentials between the royalty oil to which a purchaser is entitled and the oil which is made available at the delivery point are matters to be resolved between the purchaser and the operator.

(c) When the purchaser has physical access to the royalty oil at the delivery point, the lessee shall deliver such oil in marketable condition at pipeline connections or other facilities designated by MMS. If the lessee is unable to provide the royalty portion of actual production from the lease, the lessee must provide crude oil to the purchaser which is equivalent in volume or value to the royalty oil to which the purchaser is entitled. The lessee will deliver the royalty oil to the purchaser during normal operating hours and in reasonable quantities and intervals. The lessee will make available and the purchaser will accept delivery of the royalty oil entitlement no later than the last day of the calendar month immediately following the calendar month in which the oil was produced. Failure to accept deliveries shall constitute grounds for the termination of the contract.

(d) Upon termination of deliveries under a royalty oil contract, the trans

portation allowance and delivery point designation authorized by this section no longer will remain in effect.

§ 208.9 Agreements.

(a) A purchaser must submit to MMS two copies of any written third-party agreements, or two copies of a full written explanation of any oral thirdparty agreements, relating to the method and costs of delivery of royalty oil, or crude oil exchanged for the royalty oil, from the point of delivery under the contract to the purchaser's refinery. In addition, the purchaser must submit copies of agreements pertaining to quality differentials which may occur between leases and delivery points.

(b) A purchaser may not sell royalty oil which it purchases pursuant to this part except for purposes of an exchange for other crude oil on a volume or equivalent value basis.

(c) Royalty oil purchased under this part, or crude oil received in exchange for such royalty oil, must be processed into refined petroleum products in the purchaser's refinery.

§ 208.10 Notices.

(a) The MMS shall notify each operator, by certified mail, of the Secretary's decision to take royalty oil in kind. This notice shall be mailed at least 45 days in advance of the effective date of delivery and will specify delivery points for offshore oil for OCS leases issued after September 1969.

(b) Deliveries of royalty oil may be partially terminated only with the written approval of the Director, MMS.

(c) Before terminating the delivery of royalty oil taken in kind, MMS, if possible, will notify each operator by certified mail of the change in requirements at least 30 days in advance of the effective date.

(d) After MMS notification that royalty oil will be taken in kind, the operator shall be responsible for notifying each working interest on the Federal lease. As soon as practicable after the date of each royalty oil sale, MMS will publish in the FEDERAL REGISTER a notice of the leases from which royalty oil will be taken, the purchasers of the royalty oil, and the leases from which

royalty oil deliveries will be discontinued on terminated contracts.

(e) A purchaser cannot transfer, assign, or sell its rights or interest in a royalty oil contract without written approval of the Director, MMS. If the purchaser changes ownership or its assets are sold or liquidated for any reason, it cannot transfer, assign, or sell its rights or interest in the royalty oil contract without written approval of the Director, MMS. Without express written consent from MMS for a change in ownership, the royalty oil contract shall be terminated. The successor company must meet the definition of an eligible refiner in §208.2 of this part for MMS to consider assignment of the royalty oil contract. § 208.11 Surety requirements.

(a) The eligible purchaser, prior to execution of the contract, shall furnish

an

"MMS-specified surety instrument," in an amount equal to the estimated value of royalty oil that could be taken by the purchaser in a 99-day period, plus related administrative charges. The MMS may require the purchaser to increase the amount of the surety instrument when necessary to protect the Government's interest or may allow the purchaser to decrease the amount of the surety instrument where necessary to further the purposes of the Royalty-in-Kind Program.

(b) If a letter of credit is furnished as the surety instrument, it must be effective for a 9-month period beginning the first day the royalty oil contract is effective, with a clause providing for automatic renewal monthly for a new 9-month period. The purchaser or its surety company may elect not to renew the letter of credit at any monthly anniversary date, but must notify MMS of its intent not to renew at least 30 days prior to the anniversary date. The MMS may grant the purchaser 45 days to obtain a new surety instrument. If no replacement surety instrument is provided, MMS will terminate the contract effective at least 6 months prior to the expiration date of the letter of credit. Notwithstanding the above provisions, the letter of credit also may contain a clause providing for automatic termination 6 months after the royalty oil contract

terminates. If a certificate of deposit is furnished as the surety instrument, it must be effective for the life of the contract plus 6 months after the royalty oil contract terminates.

(c) For the purposes of this section. an "MMS-specified surety instrument" means either: an MMS-specified surety bond, an MMS-specified irrevocable letter of credit, or a financial institution book-entry certificate of deposit.

(d) The "MMS-specified surety instrument" shall be in a form specified by MMS instructions or approved by MMS. A bond must be issued by a qualified surety company that has been approved by the Department of the Treasury. An irrevocable letter of credit or a certificate of deposit must be from a financial institution acceptable to MMS. The MMS will use a bank rating service to determine whether a financial institution has an acceptable rating to provide a surety instrument deemed adequate to indemnify the Government from loss or damage.

(e) All surety instruments must be in a form acceptable to MMS and must include such other specific requirements as MMS may require adequately to protect the Government's interests.

[58 FR 64901, Dec. 10, 1993]

§ 208.12 Payment requirements.

(a) All payments to MMS by a purchaser of royalty oil will be due on the date and at the location specified in the contract, or, if there is no contractual provision, as specified by MMS. The purchaser shall tender all payments to MMS in accordance with 30 CFR 218.51. Payments made by a payor pursuant to the requirements of paragraph (b) of this section and § 208.13 also shall be tendered in accordance with 30 CFR 218.51.

(b)(1) Payments from a purchaser of royalty oil not received by MMS when due, or that portion of the payment less than the full amount due, will be subject to a late payment charge equivalent to an interest assessment on the amount past due for the number of days that the payment is late at the underpayment rate applicable under section 6621 of the Internal Revenue Code of 1954.

(2) The MMS may assess interest to a payor for any underpayments which

are the result of the payor's late or underreporting, or for adjustments reported by the payor, or made as a result of audit, reconciliation, or other procedures. The interest for late payment and underpayment will be assessed pursuant to 30 CFR 218.54.

(c) If payment for royalty oil is not received by the due date specified in the contract, a notice of nonreceipt will be sent to the purchaser by certified mail. If payment is not received by MMS within 15 days from the date of such notice, MMS may cancel the contract and collect under the MMSspecified surety instrument. See § 208.11.

(d) If the purchaser disagrees with the amount of payment due, it must pay the amount due as computed by MMS, unless the purchaser appeals the amount and posts an MMS-specified surety instrument pursuant to the provisions of 30 CFR part 243. The MMS may, at its discretion, waive the appeal surety requirements if it determines that the contract surety instrument is sufficient protection for an amount under appeal.

[52 FR 41913, Oct. 30, 1987, as amended at 64901, Dec. 10, 1993]

§ 208.13 Reporting requirements.

If MMS underbills a purchaser under a royalty oil contract because of a payor's underreporting or failure to report on Form MMS-2014 pursuant to 30 CFR 210.52, the payor will be liable for payment of such underbilled amounts plus interest if they are unrecoverable from the purchaser or the surety instrument related to the contract.

[58 FR 64902, Dec. 10, 1993]

§ 208.14 Civil and criminal penalties.

Failure to abide by the regulations in this part may result in civil and criminal penalties being levied on that person as specified in sections 109 and 110 of the Federal Oil and Gas Royalty Management Act of 1982, 30 U.S.C. 171920, and regulations at 30 CFR part 241. Civil penalties applicable under the OCSLA and the Mineral Leasing Act of 1920 may also be imposed.

194-113 D-01--6

Form No., name, and filing date

MMS-4025-Oil and Gas Payor Information Form- Due 30 days after issuance of a new lease or change to an existing lease MMS-4030-Solid Minerals Payor Information Form-Due 30 days after issuance of a new lease or change to an existing account established by an earlier form MMS-4051-Facility and Measurement Information Form and Supplement- Due at the request of MMS during the initial conversion of the facility and measurement device operators MMS-4053-First Purchaser Report- Due at the request of MMS

MMS-4054-Oil and Gas Operations ReportDue by the 15th day of the second month following the production month MMS-4055-Gas Analysis Report- Due by the 15th day of the second month following the production month MMS-4056-Gas Plant Operations ReportDue by the 15th day of the second month following the production month

OMB No.

1010-0033

1010-0064

1010-0040

1010-0040

1010-0040

1010-0040

1010-0040

MMS-4058-Production

Allocation Schedule

Report- Due by the 15th day of the second month following the production month MMS-4059-Solid Minerals Operation Report

1010-0040

Due by the 15th day of the second month following the production month MMS-4060 Solid Minerals Facility ReportDue by the 15th day of the second month following the production month MMS-4070-Application of the Purchase of Royalty Oil- Due prior to the date of sale in accordance with the instructions in the Notice of Availability of Royalty Oil MMS-4109 Gas Processing Allowance Summary Report- Initial report due within 3 months following the last day of the month for which an allowance is first claimed, unless a longer period is approved by MMS MMS-4110-Oil Transportation Allowance Report- Initial report due within 3 months following the last day of the month for which an allowance is first claimed, unless a longer period is approved by MMS MMS-4280-Application for Reward for Original Information- Due when a reward is claimed for information provided which may lead to the recovery of royalty or other payments owed to the United States MMS-4292-Coal Washing Allowance ReportDue prior to or at the same time that the allowance is first reported on Form MMS-2014 and annually thereafter if the allowance does not change MMS-4293-Coal Transportation Allowance Report- Due prior to or at the same time that the allowance is first reported on Form MMS2014 and annually thereafter if the allowance does not change MMS-4295-Gas Transportation Allowance Report- Initial report due within 3 months following the last day of month for which an allowance is first claimed unless a longer period is approved by MMS MMS-4377-Stripper Royalty Rate Reduction Notification Due for each 12-month qualifying period that a reduced royalty rate is granted by the Bureau of Land Management

1010-0063

1010-0063

1010-0042

1010-0075

1010-0061

1010-0076

1010-0074

1010-0074

1010-0075

1010-0090

The information required on the forms identified in the table above is being

collected by the Department of the Interior to meet its congressionally mandated accounting and auditing responsibilities relating to Federal and Indian mineral royalty management. The purpose of the forms and the estimated : public reporting burden associated with each form are described in paragraph (c) of this section. With the exception of Forms MMS 4109, MMS-4110, MMS 4280, MMS 4292, MMS 4293, and MMS 4295, the forms are mandatory. Information on Forms MMS 4109, MMS 4110, MMS 4292, MMS 4293, and MMS 4295 is required to receive a benefit. Information required on Form MMS-4280 must be provided voluntarily to claim a reward. Information collected relative to production, royalties, and other payments due the Government from activities on leased Federal or Indian land is authorized by the Federal Oil and Gas Royalty Management Act of 1982, 30 U.S.C. 1701 et seq. for oil and gas production, and by 30 U.S.C. 189, 30 U.S.C. 359, and 30 U.S.C. 396d for solid mineral production.

(b) MMS mailing addresses-This paragraph identifies the MMS address(es) to be used for requesting forms and/or for mailing completed forms to MMS.

(1) Requests for Forms MMS-2014 or MMS 4070 should be addressed to the Minerals Management Service, Royalty Management Program, P.O. Box 5760, Denver, Colorado 80217-5760. The completed Form MMS-2014 should be mailed to the Minerals Management Service, Royalty Management Program, P.O. Box 5810, Denver, Colorado 80217-5810. The address to which a completed Form MMS 4070 should be mailed will be identified in a FEDERAL REGISTER Notice of Availability of Royalty Oil. (See 30 CFR 208.5.)

(2) Requests for Forms MMS 4025 or MMS 4030 should be addressed to the Minerals Management Service, Royalty Management Program, P.O. Box 5760, Denver, Colorado 80217-5760. The completed forms should be mailed to the same address.

(3) Requests for Forms MMS-3160, MMS-4051, MMS 4052, MMS 4053, MMS4054, MMS 4055, MMS 4056, MMS 4057, MMS-4058, MMS-4059, MMS-4060, or MMS-4061 should be addressed to the Minerals Management Service, Royalty Management Program, P.O. Box

17110, Denver, Colorado 80217-0110. The completed forms should be mailed to the same address.

(4) Requests for processing or transportation allowance forms (Forms MMS 4109, MMS-4110, MMS 4292, MMS4293, or MMS-4295) should be addressed to the Minerals Management Service, Royalty Management Program, P.O. Box 25165, Denver, Colorado 80225-0165. The completed allowance forms should be mailed to the Minerals Management Service, Royalty Management Program, P.O. Box 5200, Denver, Colorado 80217-5200.

(5) Requests for Form MMS 4280 should be addressed to the Minerals Management Service, Royalty Management Program, P.O. Box 25165, Denver, Colorado 80225 0165. The completed form should be mailed to the same address. (See 30 CFR 218.57(b)).

(6) Reports delivered to MMS by special couriers or overnight mail shall be addressed as follows: Minerals Management Service, Royalty Management Program, Building 85, Denver Federal Center, room A-212, Denver, Colorado 80225.

(c) Purpose of forms and estimated public reporting burden-This paragraph describes the purpose of the information being collected and the estimated public reporting burden associated with the OMB approved forms identified in paragraph (a) of this section.

(1) MMS-2014-Used monthly to report lease-related transactions essential for royalty management to determine the correct royalty amount due, reconcile or audit data, and distribute payments to appropriate accounts. Public reporting burden for paper submission is estimated to average 7 minutes to complete each line item on the form, including the time necessary to assemble data, calculate value and royalty, and enter data on the form. Companies reporting electronically may average 2 minutes to complete each line item on the form. Comments submitted relative to this information collection should reference the information collection titled Report of Sales and Royalty Remittance, OMB Control Number 1010-0022.

(2) MMS-3160-Used by onshore oil and gas lease operators to report monthly oil and gas production to