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CHAPTER 11-MINERALS MANAGEMENT

SERVICE,
DEPARTMENT OF THE INTERIOR

(Parts 200 to 699)

SUBCHAPTER A-ROYALTY MANAGEMENT

Part 201 202 203 206 207

Page

5 5 11 12

78 80 88 97

208 210 212 215 216 217 218

99 106

108

General........
Royalties ......
Relief or reduction in royalty rates
Product valuation ...............
Sales agreements or contracts governing the dis-

posal of lease products .......
Sale of Federal royalty oil .....
Forms and reports ...............
Records and files maintenance ............
Accounting and auditing standards (Reserved]
Production accounting
Audits and inspections...
Collection of royalties, rentals, bonuses and other

monies due the Federal Government.
Distribution and disbursement of royalties, rent-

als, and bonuses .......
Accounting procedures for determining net profit

share payment for outer Continental Shelf oil

and gas leases........
Cooperative activities with States and Indian

tribes..............
Delegation to States...
Recoupments and refunds
Interest payments (Reserved]
Escrow and investments (Reserved]
Bonding-payment liability (Reserved]
Penalties..............
Notices and orders (Reserved]

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Sec. 201.100 Responsibilities of the Associate

Director for Royalty Management.

Subpart D-Oil, Gas and Sulphur, Offshore

(Reserved)

Subpart E-Coal-[Reserved)

Subpart F-Other Solid Minerals—(Reserved)

8 201.100 Responsibilities of the Associate

Director for Royalty Management. The Associate Director is responsible for the collection of certain rents, royalties, and other payments; for the receipt of sales and production reports; for determining royalty liability; for maintaining accounting records; for any audits of the royalty payments and obligations; and for any and all other functions relating to royalty management on Federal and Indian oil and gas leases. (47 FR 47768, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983)

Subpart G-Geothermal Resources,

[Reserved)

Subpart H-Indian Lands—(Reserved)

Subpart D-Oil, Gas and Sulphur,

Offshore-[Reserved)

Subpart E-Coal-[Reserved)

Subpart F-Other Solid Minerals

[Reserved]

AUTHORITY: The Act of February 25, 1920 (30 U.S.C. 181, et seq.), as amended; the Act of May 21, 1930 (30 U.S.C. 301-306); the Mineral Leasing Act for Acquired Lands (30 U.S.C. 351-359), as amended; the Act of March 3, 1909 (25 U.S.C. 396), as amended; the National Environmental Policy Act of 1969 (42 U.S.C. 4321, et seq.) as amended; the Act of May 11, 1938 (25 U.S.C. 396a396g), as amended; the Act of February 28, 1891 (25 U.S.C. 397), as amended; the Act of May 29, 1924 (25 U.S.C. 398); the Act of March 3, 1927 (25 U.S.C. 398a-398e); the Act of June 30, 1919 (25 U.S.C. 399), as amend. ed; R.S. § 441 (43 U.S.C. 1457), see also Attorney General's Opinion of April 2, 1941 (40 Op. Atty. Gen. 41); the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 471, et seq.), as amended; the Nation. al Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), as amended; the Act of December 12, 1980 (Pub. L. 96-514, 94 Stat. 2964); the Combined Hydrocarbon Leasing Act of 1981 (Pub. L. 97-78, 95 Stat. 1070); the Outer Continental Shelf Lands Act (43 U.S.C. 1331, et seq.), as amended; section 2 of Reorganization Plan No. 3 of 1950 (64 stat. 1262); Secretarial Order No. 3071 of January 19, 1982, as amended; and Secretarial Order 3087, as amended.

Subpart G-Geothermal Resources,

[Reserved]

Subpart H-Indian Lands

[Reserved]

PART 202-ROYALTIES

Subpart A-General Provisions-[Reserved)

Subpart B-Oil, Gas, and OCS Sultur, General

Sec. 202.51 Scope and definitions. 202.52 Royalties. 202.53 Minimum royalty.

Subpart C-Federal and Indian Oil

202.100 Royalty on oil. 202.101 Standards for reporting and paying

royalties.

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Subpart H-Geothermal Resources

202.350 Scope and definitions. 202.351 Royalties on geothermal resources. 202.352 Minimum royalty. 202.353 Measurement standards for report

ing and paying royalties.

Subpart 1-OCS Sulfur-[Reserved]

AUTHORITY: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq.; 25 U.S.C. 396a et seq.; 25 U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.; 30 U.S.C. 351 et seq.; 30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et seq.; 31 U.S.C. 9701; 43 U.S.C. 1301 et seq.; 43 U.S.C. 1331 et seq.; 43 U.S.C. 1801 et seq.

Subpart A-General Provisions

(Reserved)

Subpart B-Oil, Gas, and OCS Sulfur,

General

8 202.100 Royalty on oil.

(a) Royalties due on oil production from leases subject to the requirements of this part, including condensate separated from gas without processing, shall be at the royalty rate established by the terms of the lease. Royalty shall be paid in value unless MMS requires payment in-kind. When paid in value, the royalty due shall be the value, for royalty purposes, determined pursuant to part 206 of this title multiplied by the royalty rate in the lease.

(b)(1) All oil (except oil unavoidably lost or used on, or for the benefit of, the lease, including that oil used offlease for the benefit of the lease when such off-lease use is permitted by the MMS or BLM, as appropriate) produced from a Federal or Indian lease to which this part applies is subject to royalty.

(2) When oil is used on, or for the benefit of, the lease at a production facility handling production from more than one lease with the approval of the MMS or BLM, as appropriate, or at a production facility handling unitized or communitized production, only that proportionate share of each lease's production (actual or allocated) necessary to operate the production facility may be used royalty-free.

(3) Where the terms of any lease are inconsistent with this section, the lease terms shall govern to the extent of that inconsistency.

(c) If BLM determines that oil was avoidably lost or wasted from an onshore lease, or that oil was drained from an onshore lease for which compensatory royalty is due, or if MMS

SOURCE: 53 FR 1217, Jan. 15, 1988, unless otherwise noted.

$ 202.51 Scope and definitions.

(a) This subpart is applicable to Federal and Indian (Tribal and allotted) oil and gas leases (except leases on the Osage Indian Reservation, Osage County, Oklahoma) and OCS sulfur leases.

(b) The definitions in subparts C, D, and I of part 206 of this title are applicable to subparts B, C, D, and I of this part.

§ 202.52 Royalties.

(a) Royalties on oil, gas, and OCS sulfur shall be at the royalty rate specified in the lease, unless the Secretary, pursuant to the provisions of the applicable mineral leasing laws, re

determines that oil was avoidably lost or wasted from an offshore lease, then the value of that oil shall be determined in accordance with 30 CFR part 206.

(d) If a lessee receives insurance compensation for unavoidably lost oil, royalties are due on the amount of that compensation. This paragraph shall not apply to compensation through self-insurance.

(e)(1) In those instances where the lessee of any lease committed to a federally approved unitization or communitization agreement does not actually take the proportionate share of the agreement production attributable to its lease under the erms of th agreement, the full share of production attributable to the lease under the terms of the agreement nonetheless is subject to the royalty payment and reporting requirements of this title. Except as provided in paragraph (e)(2) of this section, the value, for royalty purposes, of production attributable to unitized or communitized leases will be determined in accordance with 30 CFR part 206. In apply. ing the requirements of 30 CFR part 206, the circumstances involved in the actual disposition of the portion of the production to which the lessee was entitled but did not take shall be considered as controlling in arriving at the value, for royalty purposes, of that portion as though the person actually selling or disposing of the production were the lessee of the Federal or Indian lease.

(2) If a Federal or Indian lessee takes less than its proportionate share of agreement production, upon request of the lessee MMS may authorize a royalty valuation method different from that required by paragraph (e)(1) of this section, but consistent with the purposes of these regulations, for any volumes not taken by the lessee but for which royalties are due.

(3) For purposes of this subchapter, all persons actually taking volumes in excess of their proportionate share of production in any month under a unitization or communitization agreement shall be deemed to have taken ratably from all persons actually taking less than their proportionate share of the agreement production for that month.

(4) If a lessee takes less than its proportionate share of agreement production for any month but royalties are paid on the full volume of its proportionate share in accordance with the provisions of this section, no additional royalty will be owed for that lease for prior periods when the lessee subsequently takes more than its proportionate share to balance its account or when the lessee is paid a sum of money by the other agreement participants to balance its account.

(f) For production from Federal and Indian leases which are committed to federally-approved unitization or communitization agreements, upon request of a lessee MMS may establish the value of production pursuant to a method other than the method required by the regulations in this title if: (1) The proposed method for establishing value is consistent with the requirements of the applicable statutes, lease terms, and agreement terms; (2) persons with an interest in the agreement, including, to the extent practical, royalty interests, are given notice and an opportunity to comment on the proposed valuation method before it is authorized; and (3) to the extent practical, persons with an interest in a Federal or Indian lease committed to the agreement, including royalty interests, must agree to use the proposed method for valuing production from the agreement for royalty purposes.

(53 FR 1217, Jan. 15, 1988)

8 202.101 Standards for reporting and

paying royalties. Oil volumes are to be reported in barrels of clean oil of 42 standard U.S. gallons (231 cubic inches each) at 60°F. When reporting oil volumes for royalty purposes, corrections must have been made for Basic Sediment and Water (BS&W) and other impurities. Reported American Petroleum Institute (API) oil gravities are to be those determined in accordance with standard industry procedures after correction to 60°F.

(53 FR 1217, Jan. 15, 1988)

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