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Title 30: Mineral Resources
PART 1202—ROYALTIES
Subpart H—Geothermal Resources
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§ 1202.351 Royalties on geothermal resources.
(a)(1) Royalties on geothermal resources, including byproducts, or on electricity produced using
geothermal resources, will be at the royalty rate(s) specified in the lease, unless the Secretary of the
Interior temporarily waives, suspends, or reduces that rate(s). Royalties are determined under 30 CFR
part 1206, subpart H.
(2) Fees in lieu of royalties on geothermal resources are prescribed in 30 CFR part 1206, subpart H.
(3) Except for the amount credited against royalties for in-kind deliveries of electricity to a State or
county under §1218.306, you must pay royalties and direct use fees in money.
(b)(1) Except as specified in paragraph (b)(2) of this section, royalties or fees are due on—
(i) All geothermal resources produced from a lease and that are sold or used by the lessee or are
reasonably susceptible to sale or use by the lessee, or
(ii) All proceeds derived from the sale of electricity produced using geothermal resources produced from
a lease.
(2) For purposes of this subparagraph, the terms “Class I lease,” “Class II lease,” and “Class III lease”
have the same meanings prescribed in §1206.351.
(i) For Class I leases, ONRR will allow free of royalty—
(A) Geothermal resources that are unavoidably lost or reinjected before use on or off the lease, as
determined by the Bureau of Land Management (BLM), or that are reasonably necessary to generate
plant parasitic electricity or electricity for Federal lease operations; and
(B) A reasonable amount of commercially demineralized water necessary for power plant operations or
otherwise used on or for the benefit of the lease.
(ii) For Class II and Class III leases where the lessee uses geothermal resources for commercial
production or generation of electricity, or where geothermal resources are sold at arm's length for the
commercial production or generation of electricity, ONRR will allow free of royalty or direct use fees
geothermal resources that are:
(A) Unavoidably lost or reinjected before use on or off the lease, as determined by BLM;
(B) Reasonably necessary for the lessee to generate plant parasitic electricity or electricity for Federal
lease operations, as approved by BLM; or

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(C) Otherwise used for Federal lease operations related to commercial production or generation of
electricity, as approved by BLM.
(iii) For Class II and Class III leases where the lessee uses the geothermal resources for a direct use or
in a direct use facility, as defined in §1206.351, resources that are used to generate electricity for
Federal lease operations or that are otherwise used for Federal lease operations are subject to direct
use fees, except for geothermal resources that are unavoidably lost or reinjected before use on or off the
lease, as determined by BLM.
(3) Royalties on byproducts are due at the time the recovered byproduct is used, sold, or otherwise
finally disposed of. Byproducts produced and added to stockpiles or inventory do not require payment of
royalty until the byproducts are sold, utilized, or otherwise finally disposed of. The ONRR may ask BLM
to increase the lease bond to protect the lessor's interest when BLM determines that stockpiles or
inventories become excessive.
(c) If BLM determines that geothermal resources (including byproducts) were avoidably lost or wasted
from the lease, or that geothermal resources (including byproducts) were drained from the lease for
which compensatory royalty (or compensatory fees in lieu of compensatory royalty) are due, the value of
those geothermal resources, or the royalty or fees owed, will be determined under 30 CFR part 1206,
subpart H.
(d) If a lessee receives insurance or other compensation for unavoidably lost geothermal resources
(including byproducts), royalties at the rates specified in the lease (or fees in lieu of royalties) are due on
the amount of, or as a result of, that compensation. This paragraph will not apply to compensation
through self-insurance.
[72 FR 24458, May 2, 2007]
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e-CFR Data is current as of October 15, 2010
Title 30: Mineral Resources
PART 1202—ROYALTIES
Subpart H—Geothermal Resources
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§ 1202.353 Measurement standards for reporting and paying royalties and direct use
fees.
(a) For geothermal resources used to generate electricity, you must report the quantity on which royalty
is due on Form MMS–2014 (Report of Sales and Royalty Remittance) as follows:
(1) For geothermal resources for which royalty is calculated under §1206.352(a), you must report
quantities in:
(i) Thousands of pounds to the nearest whole thousand pounds if the contract for the geothermal
resources specifies delivery in terms of weight; or
(ii) Millions of Btu to the nearest whole million Btu if the sales contract for the geothermal resources
specifies delivery in terms of heat or thermal energy.
(2) For geothermal resources for which royalty is calculated under §1206.352(b), you must report the
quantities in kilowatt-hours to the nearest whole kilowatt-hour.
(b) For geothermal resources used in direct use processes, you must report the quantity on which a
royalty or direct use fee is due on Form MMS–2014 in:
(1) Millions of Btu to the nearest whole million Btu if valuation is in terms of heat or thermal energy used
or displaced;
(2) Millions of gallons to the nearest million gallons of geothermal fluid produced if valuation or fee
calculation is in terms of volume;
(3) Millions of pounds to the nearest million pounds of geothermal fluid produced if valuation or fee
calculation is in terms of mass; or
(4) Any other measurement unit ONRR approves for valuation and reporting purposes.
(c) For byproducts, you must report the quantity on which royalty is due on Form MMS–2014 consistent
with ONRR-established reporting standards.
(d) For commercially demineralized water, you must report the quantity on which royalty is due on Form
MMS–2014 in hundreds of gallons to the nearest hundred gallons.
(e) You need not report the quality of geothermal resources, including byproducts, to ONRR. However,
you must maintain quality measurements for audit purposes. Quality measurements include, but are not
limited to:

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(1) Temperatures and chemical analyses for fluid geothermal resources; and
(2) Chemical analyses, weight percent, or other purity measurements for byproducts.
[72 FR 24458, May 2, 2007]
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e-CFR Data is current as of October 15, 2010
Title 30: Mineral Resources
PART 1206—PRODUCT VALUATION
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Subpart F—Federal Coal
Source: 54 FR 1523, Jan. 13, 1989, unless otherwise noted.
§ 1206.250 Purpose and scope.
(a) This subpart is applicable to all coal produced from Federal coal leases. The purpose of this subpart
is to establish the value of coal produced for royalty purposes, of all coal from Federal leases consistent
with the mineral leasing laws, other applicable laws and lease terms.
(b) If the specific provisions of any statute or settlement agreement between the United States and a
lessee resulting from administrative or judicial litigation, or any coal lease subject to the requirements of
this subpart, are inconsistent with any regulation in this subpart then the statute, lease provision, or
settlement shall govern to the extent of that inconsistency.
(c) All royalty payments made to the Office of Natural Resources Revenue (ONRR) are subject to later
audit and adjustment.
[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5479, Feb. 12, 1996; 67 FR 19111, Apr. 18, 2002]

§ 1206.251 Definitions.
Ad valorem lease means a lease where the royalty due to the lessor is based upon a percentage of the
amount or value of the coal.
Allowance means a deduction used in determining value for royalty purposes. Coal washing allowance
means an allowance for the reasonable, actual costs incurred by the lessee for coal washing.
Transportation allowance means an allowance for the reasonable, actual costs incurred by the lessee for
moving coal to a point of sale or point of delivery remote from both the lease and mine or wash plant.
Area means a geographic region in which coal has similar quality and economic characteristics. Area
boundaries are not officially designated and the areas are not necessarily named.
Arm's-length contract means a contract or agreement that has been arrived at in the marketplace
between independent, nonaffiliated persons with opposing economic interests regarding that contract.
For purposes of this subpart, two persons are affiliated if one person controls, is controlled by, or is
under common control with another person. For purposes of this subpart, based on the instruments of
ownership of the voting securities of an entity, or based on other forms of ownership:
(a) Ownership in excess of 50 percent constitutes control;
(b) Ownership of 10 through 50 percent creates a presumption of control; and

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(c) Ownership of less than 10 percent creates a presumption of noncontrol which ONRR may rebut if it
demonstrates actual or legal control, including the existence of interlocking directorates.
Notwithstanding any other provisions of this subpart, contracts between relatives, either by blood or by
marriage, are not arm's-length contracts. The ONRR may require the lessee to certify ownership control.
To be considered arm's-length for any production month, a contract must meet the requirements of this
definition for that production month as well as when the contract was executed.
Audit means a review, conducted in accordance with generally accepted accounting and auditing
standards, of royalty payment compliance activities of lessees or other interest holders who pay
royalties, rents, or bonuses on Federal leases.
BLM means the Bureau of Land Management of the Department of the Interior.
Coal means coal of all ranks from lignite through anthracite.
Coal washing means any treatment to remove impurities from coal. Coal washing may include, but is not
limited to, operations such as flotation, air, water, or heavy media separation; drying; and related
handling (or combination thereof).
Contract means any oral or written agreement, including amendments or revisions thereto, between two
or more persons and enforceable by law that with due consideration creates an obligation.
Gross proceeds (for royalty payment purposes) means the total monies and other consideration
accruing to a coal lessee for the production and disposition of the coal produced. Gross proceeds
includes, but is not limited to, payments to the lessee for certain services such as crushing, sizing,
screening, storing, mixing, loading, treatment with substances including chemicals or oils, and other
preparation of the coal to the extent that the lessee is obligated to perform them at no cost to the Federal
Government. Gross proceeds, as applied to coal, also includes but is not limited to reimbursements for
royalties, taxes or fees, and other reimbursements. Tax reimbursements are part of the gross proceeds
accruing to a lessee even though the Federal royalty interest may be exempt from taxation. Monies and
other consideration, including the forms of consideration identified in this paragraph, to which a lessee is
contractually or legally entitled but which it does not seek to collect through reasonable efforts are also
part of gross proceeds.
Lease means any contract, profit-share arrangement, joint venture, or other agreement issued or
approved by the United States for a Federal coal resource under a mineral leasing law that authorizes
exploration for, development or extraction of, or removal of coal—or the land covered by that
authorization, whichever is required by the context.
Lessee means any person to whom the United States issues a lease, and any person who has been
assigned an obligation to make royalty or other payments required by the lease. This includes any
person who has an interest in a lease as well as an operator or payor who has no interest in the lease
but who has assumed the royalty payment responsibility.
Like-quality coal means coal that has similar chemical and physical characteristics.
Marketable condition means coal that is sufficiently free from impurities and otherwise in a condition that
it will be accepted by a purchaser under a sales contract typical for that area.
Mine means an underground or surface excavation or series of excavations and the surface or
underground support facilities that contribute directly or indirectly to mining, production, preparation, and
handling of lease products.
Net-back method means a method for calculating market value of coal at the lease or mine. Under this
method, costs of transportation, washing, handling, etc., are deducted from the ultimate proceeds
received for the coal at the first point at which reasonable values for the coal may be determined by a
sale pursuant to an arm's-length contract or by comparison to other sales of coal, to ascertain value at
the mine.
Net output means the quantity of washed coal that a washing plant produces.
Netting is the deduction of an allowance from the sales value by reporting a one line net sales value,

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instead of correctly reporting the deduction as a separate line item on the Form MMS–4430.
Person means by individual, firm, corporation, association, partnership, consortium, or joint venture.
Sales type code means the contract type or general disposition (e.g., arm's-length or non-arm's-length)
of production from the lease. The sales type code applies to the sales contract, or other disposition, and
not to the arm's-length or non-arm's-length nature of a transportation or washing allowance.
Spot market price means the price received under any sales transaction when planned or actual
deliveries span a short period of time, usually not exceeding one year.
[54 FR 1523, Jan. 13, 1989, as amended at 55 FR 35433, Aug. 30, 1990; 61 FR 5479, Feb. 12, 1996;
64 FR 43288, Aug. 10, 1999; 66 FR 45769, Aug. 30, 2001; 73 FR 15891, Mar. 26, 2008]

§ 1206.252 Information collection.
The information collection requirements contained in this subpart have been approved by the Office of
Management and Budget (OMB) under 44 U.S.C. 3501 et seq. The forms, filing date, and approved
OMB control numbers are identified in part 1210—Forms and Reports.
[73 FR 15891, Mar. 26, 2008]

§ 1206.253 Coal subject to royalties—general provisions.
(a) All coal (except coal unavoidably lost as determined by BLM under 43 CFR part 3400) from a
Federal lease subject to this part is subject to royalty. This includes coal used, sold, or otherwise
disposed of by the lessee on or off the lease.
(b) If a lessee receives compensation for unavoidably lost coal through insurance coverage or other
arrangements, royalties at the rate specified in the lease are to be paid on the amount of compensation
received for the coal. No royalty is due on insurance compensation received by the lessee for other
losses.
(c) If waste piles or slurry ponds are reworked to recover coal, the lessee shall pay royalty at the rate
specified in the lease at the time the recovered coal is used, sold, or otherwise finally disposed of. The
royalty rate shall be that rate applicable to the production method used to initially mine coal in the waste
pile or slurry pond; i.e. , underground mining method or surface mining method. Coal in waste pits or
slurry ponds initially mined from Federal leases shall be allocated to such leases regardless of whether it
is stored on Federal lands. The lessee shall maintain accurate records to determine to which individual
Federal lease coal in the waste pit or slurry pond should be allocated. However, nothing in this section
requires payment of a royalty on coal for which a royalty has already been paid.
[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5479, Feb. 12, 1996]

§ 1206.254 Quality and quantity measurement standards for reporting and paying
royalties.
For all leases subject to this subpart, the quantity of coal on which royalty is due shall be measured in
short tons (of 2,000 pounds each) by methods prescribed by the BLM. Coal quantity information will be
reported on appropriate forms required under 30 CFR part 210—Forms and Reports.
[54 FR 1523, Jan. 13, 1989, as amended at 57 FR 52720, Nov. 5, 1992; 66 FR 45769, Aug. 30, 2001;
73 FR 15891, Mar. 26, 2008]

§ 1206.255 Point of royalty determination.
(a) For all leases subject to this subpart, royalty shall be computed on the basis of the quantity and
quality of Federal coal in marketable condition measured at the point of royalty measurement as
determined jointly by BLM and ONRR .
(b) Coal produced and added to stockpiles or inventory does not require payment of royalty until such

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coal is later used, sold, or otherwise finally disposed of. ONRR may ask BLM to increase the lease bond
to protect the lessor's interest when BLM determines that stockpiles or inventory become excessive so
as to increase the risk of degradation of the resource.
(c) The lessee shall pay royalty at a rate specified in the lease at the time the coal is used, sold, or
otherwise finally disposed of, unless otherwise provided for at §1206.256(d) of this subpart.
[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5480, Feb. 12, 1996]

§ 1206.256 Valuation standards for cents-per-ton leases.
(a) This section is applicable to coal leases on Federal lands which provide for the determination of
royalty on a cents-per-ton (or other quantity) basis.
(b) The royalty for coal from leases subject to this section shall be based on the dollar rate per ton
prescribed in the lease. That dollar rate shall be applicable to the actual quantity of coal used, sold, or
otherwise finally disposed of, including coal which is avoidably lost as determine by BLM pursuant to 43
CFR part 3400.
(c) For leases subject to this section, there shall be no allowances for transportation, removal of
impurities, coal washing, or any other processing or preparation of the coal.
(d) When a coal lease is readjusted pursuant to 43 CFR part 3400 and the royalty valuation method
changes from a cents-per-ton basis to an ad valorem basis, coal which is produced prior to the effective
date of readjustment and sold or used within 30 days of the effective date of readjustment shall be
valued pursuant to this section. All coal that is not used, sold, or otherwise finally disposed of within 30
days after the effective date of readjustment shall be valued pursuant to the provisions of §1206.257 of
this subpart, and royalties shall be paid at the royalty rate specified in the readjusted lease.
[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5480, Feb. 12, 1996]

§ 1206.257 Valuation standards for ad valorem leases.
(a) This section is applicable to coal leases on Federal lands which provide for the determination of
royalty as a percentage of the amount of value of coal (ad valorem). The value for royalty purposes of
coal from such leases shall be the value of coal determined under this section, less applicable coal
washing allowances and transportation allowances determined under §§1206.258 through 1206.262 of
this subpart, or any allowance authorized by §1206.265 of this subpart. The royalty due shall be equal to
the value for royalty purposes multiplied by the royalty rate in the lease.
(b)(1) The value of coal that is sold pursuant to an arm's-length contract shall be the gross proceeds
accruing to the lessee, except as provided in paragraphs (b)(2), (b)(3), and (b)(5) of this section. The
lessee shall have the burden of demonstrating that its contract is arm's-length. The value which the
lessee reports, for royalty purposes, is subject to monitoring, review, and audit.
(2) In conducting reviews and audits, ONRR will examine whether the contract reflects the total
consideration actually transferred either directly or indirectly from the buyer to the seller for the coal
produced. If the contract does not reflect the total consideration, then the ONRR may require that the
coal sold pursuant to that contract be valued in accordance with paragraph (c) of this section. Value may
not be based on less than the gross proceeds accruing to the lessee for the coal production, including
the additional consideration.
(3) If ONRR determines that the gross proceeds accruing to the lessee pursuant to an arm's-length
contract do not reflect the reasonable value of the production because of misconduct by or between the
contracting parties, or because the lessee otherwise has breached its duty to the lessor to market the
production for the mutual benefit of the lessee and the lessor, then ONRR shall require that the coal
production be valued pursuant to paragraph (c)(2) (ii), (iii), (iv), or (v) of this section, and in accordance
with the notification requirements of paragraph (d)(3) of this section. When ONRR determines that the
value may be unreasonable, ONRR will notify the lessee and give the lessee an opportunity to provide
written information justifying the lessee's reported coal value.
(4) ONRR may require a lessee to certify that its arm's-length contract provisions include all of the
consideration to be paid by the buyer, either directly or indirectly, for the coal production.

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(5) The value of production for royalty purposes shall not include payments received by the lessee
pursuant to a contract which the lessee demonstrates, to ONRR's satisfaction, were not part of the total
consideration paid for the purchase of coal production.
(c)(1) The value of coal from leases subject to this section and which is not sold pursuant to an arm'slength contract shall be determined in accordance with this section.
(2) If the value of the coal cannot be determined pursuant to paragraph (b) of this section, then the value
shall be determined through application of other valuation criteria. The criteria shall be considered in the
following order, and the value shall be based upon the first applicable criterion:
(i) The gross proceeds accruing to the lessee pursuant to a sale under its non-arm's-length contract (or
other disposition of produced coal by other than an arm's-length contract), provided that those gross
proceeds are within the range of the gross proceeds derived from, or paid under, comparable arm'slength contracts between buyers and sellers neither of whom is affiliated with the lessee for sales,
purchases, or other dispositions of like-quality coal produced in the area. In evaluating the comparability
of arm's-length contracts for the purposes of these regulations, the following factors shall be considered:
Price, time of execution, duration, market or markets served, terms, quality of coal, quantity, and such
other factors as may be appropriate to reflect the value of the coal;
(ii) Prices reported for that coal to a public utility commission;
(iii) Prices reported for that coal to the Energy Information Administration of the Department of Energy;
(iv) Other relevant matters including, but not limited to, published or publicly available spot market
prices, or information submitted by the lessee concerning circumstances unique to a particular lease
operation or the saleability of certain types of coal;
(v) If a reasonable value cannot be determined using paragraphs (c)(2) (i), (ii), (iii), or (iv) of this section,
then a net-back method or any other reasonable method shall be used to determine value.
(3) When the value of coal is determined pursuant to paragraph (c)(2) of this section, that value
determination shall be consistent with the provisions contained in paragraph (b)(5) of this section.
(d)(1) Where the value is determined pursuant to paragraph (c) of this section, that value does not
require ONRR's prior approval. However, the lessee shall retain all data relevant to the determination of
royalty value. Such data shall be subject to review and audit, and ONRR will direct a lessee to use a
different value if it determines that the reported value is inconsistent with the requirements of these
regulations.
(2) Any Federal lessee will make available upon request to the authorized ONRR or State
representatives, to the Inspector General of the Department of the Interior or other persons authorized to
receive such information, arm's-length sales value and sales quantity data for like-quality coal sold,
purchased, or otherwise obtained by the lessee from the area.
(3) A lessee shall notify ONRR if it has determined value pursuant to paragraphs (c)(2) (ii), (iii), (iv), or
(v) of this section. The notification shall be by letter to the Director for Office of Natural Resources
Revenue of his/her designee. The letter shall identify the valuation method to be used and contain a
brief description of the procedure to be followed. The notification required by this section is a one-time
notification due no later than the month the lessee first reports royalties on the Form MMS–4430 using a
valuation method authorized by paragraphs (c)(2) (ii), (iii), (iv), or (v) of this section, and each time there
is a change in a method under paragraphs (c)(2) (iv) or (v) of this section.
(e) If ONRR determines that a lessee has not properly determined value, the lessee shall be liable for
the difference, if any, between royalty payments made based upon the value it has used and the royalty
payments that are due based upon the value established by ONRR. The lessee shall also be liable for
interest computed pursuant to §1218.202 of this chapter. If the lessee is entitled to a credit, ONRR will
provide instructions for the taking of that credit.
(f) The lessee may request a value determination from ONRR. In that event, the lessee shall propose to
ONRR a value determination method, and may use that method in determining value for royalty
purposes until ONRR issues its decision. The lessee shall submit all available data relevant to its
proposal. The ONRR shall expeditiously determine the value based upon the lessee's proposal and any
additional information ONRR deems necessary. That determination shall remain effective for the period

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stated therein. After ONRR issues its determination, the lessee shall make the adjustments in
accordance with paragraph (e) of this section.
(g) Notwithstanding any other provisions of this section, under no circumstances shall the value for
royalty purposes be less than the gross proceeds accruing to the lessee for the disposition of produced
coal less applicable provisions of paragraph (b)(5) of this section and less applicable allowances
determined pursuant to §§1206.258 through 1206.262 and §1206.265 of this subpart.
(h) The lessee is required to place coal in marketable condition at no cost to the Federal Government.
Where the value established under this section is determined by a lessee's gross proceeds, that value
shall be increased to the extent that the gross proceeds has been reduced because the purchaser, or
any other person, is providing certain services, the cost of which ordinarily is the responsibility of the
lessee to place the coal in marketable condition.
(i) Value shall be based on the highest price a prudent lessee can receive through legally enforceable
claims under its contract. Absent contract revision or amendment, if the lessee fails to take proper or
timely action to receive prices or benefits to which it is entitled, it must pay royalty at a value based upon
that obtainable price or benefit. Contract revisions or amendments shall be in writing and signed by all
parties to an arm's-length contract, and may be retroactively applied to value for royalty purposes for a
period not to exceed two years, unless ONRR approves a longer period. If the lessee makes timely
application for a price increase allowed under its contract but the purchaser refuses, and the lessee
takes reasonable measures, which are documented, to force purchaser compliance, the lessee will owe
no additional royalties unless or until monies or consideration resulting from the price increase are
received. This paragraph shall not be construed to permit a lessee to avoid its royalty payment obligation
in situations where a purchaser fails to pay, in whole or in part or timely, for a quantity of coal.
(j) Notwithstanding any provision in these regulations to the contrary, no review, reconciliation,
monitoring, or other like process that results in a redetermination by ONRR of value under this section
shall be considered final or binding as against the Federal Government or its beneficiaries until the audit
period is formally closed.
(k) Certain information submitted to ONRR to support valuation proposals, including transportation, coal
washing, or other allowances under §1206.265 of this subpart, is exempted from disclosure by the
Freedom of Information Act, 5 U.S.C. 522. Any data specified by the Act to be privileged, confidential, or
otherwise exempt shall be maintained in a confidential manner in accordance with applicable law and
regulations. All requests for information about determinations made under this part are to be submitted
in accordance with the Freedom of Information Act regulation of the Department of the Interior, 43 CFR
part 2.
[54 FR 1523, Jan. 13, 1989, as amended at 55 FR 35433, Aug. 30, 1990; 57 FR 52720, Nov. 5, 1992;
61 FR 5480, Feb. 12, 1996; 66 FR 45769, Aug. 30, 2001]

§ 1206.258 Washing allowances—general.
(a) For ad valorem leases subject to §1206.257 of this subpart, ONRR shall, as authorized by this
section, allow a deduction in determining value for royalty purposes for the reasonable, actual costs
incurred to wash coal, unless the value determined pursuant to §1206.257 of this subpart was based
upon like-quality unwashed coal. Under no circumstances will the authorized washing allowance and the
transportation allowance reduce the value for royalty purposes to zero.
(b) If ONRR determines that a lessee has improperly determined a washing allowance authorized by this
section, then the lessee shall be liable for any additional royalties, plus interest determined in
accordance with §1218.202 of this chapter, or shall be entitled to a credit without interest.
(c) Lessees shall not disproportionately allocate washing costs to Federal leases.
(d) No cost normally associated with mining operations and which are necessary for placing coal in
marketable condition shall be allowed as a cost of washing.
(e) Coal washing costs shall only be recognized as allowances when the washed coal is sold and
royalties are reported and paid.
[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5480, Feb. 12, 1996; 64 FR 43288, Aug. 10, 1999]

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§ 1206.259 Determination of washing allowances.
(a) Arm's-length contracts. (1) For washing costs incurred by a lessee under an arm's-length contract,
the washing allowance shall be the reasonable actual costs incurred by the lessee for washing the coal
under that contract, subject to monitoring, review, audit, and possible future adjustment. The lessee shall
have the burden of demonstrating that its contract is arm's-length. ONRR' prior approval is not required
before a lessee may deduct costs incurred under an arm's-length contract. The lessee must claim a
washing allowance by reporting it as a separate line entry on the Form MMS–4430.
(2) In conducting reviews and audits, ONRR will examine whether the contract reflects more than the
consideration actually transferred either directly or indirectly from the lessee to the washer for the
washing. If the contract reflects more than the total consideration paid, then the ONRR may require that
the washing allowance be determined in accordance with paragraph (b) of this section.
(3) If ONRR determines that the consideration paid pursuant to an arm's-length washing contract does
not reflect the reasonable value of the washing because of misconduct by or between the contracting
parties, or because the lessee otherwise has breached its duty to the lessor to market the production for
the mutual benefit of the lessee and the lessor, then ONRR shall require that the washing allowance be
determined in accordance with paragraph (b) of this section. When ONRR determines that the value of
the washing may be unreasonable, ONRR will notify the lessee and give the lessee an opportunity to
provide written information justifying the lessee's washing costs.
(4) Where the lessee's payments for washing under an arm's-length contract are not based on a dollarper-unit basis, the lessee shall convert whatever consideration is paid to a dollar value equivalent.
Washing allowances shall be expressed as a cost per ton of coal washed.
(b) Non-arm's-length or no contract. (1) If a lessee has a non-arm's-length contract or has no contract,
including those situations where the lessee performs washing for itself, the washing allowance will be
based upon the lessee's reasonable actual costs. All washing allowances deducted under a non-arm'slength or no contract situation are subject to monitoring, review, audit, and possible future adjustment.
The lessee must claim a washing allowance by reporting it as a separate line entry on the Form MMS–
4430. When necessary or appropriate, ONRR may direct a lessee to modify its estimated or actual
washing allowance.
(2) The washing allowance for non-arm's-length or no contract situations shall be based upon the
lessee's actual costs for washing during the reported period, including operating and maintenance
expenses, overhead, and either depreciation and a return on undepreciated capital investment in
accordance with paragraph (b)(2)(iv) (A) of this section, or a cost equal to the depreciable investment in
the wash plant multiplied by the rate of return in accordance with paragraph (b)(2)(iv)(B) of this section.
Allowable capital costs are generally those for depreciable fixed assets (including costs of delivery and
installation of capital equipment) which are an integral part of the wash plant.
(i) Allowable operating expenses include: Operations supervision and engineering; operations labor;
fuel; utilities; materials; ad valorem property taxes, rent; supplies; and any other directly allocable and
attributable operating expense which the lessee can document.
(ii) Allowable maintenance expenses include: Maintenance of the wash plant; maintenance of
equipment; maintenance labor; and other directly allocable and attributable maintenance expenses
which the lessee can document.
(iii) Overhead attributable and allocable to the operation and maintenance of the wash plant is an
allowable expense. State and Federal income taxes and severance taxes, including royalities, are not
allowable expenses.
(iv) A lessee may use either paragraph (b)(2)(iv)(A) or (B) of this section. After a lessee has elected to
use either method for a wash plant, the lessee may not later elect to change to the other alternative
without approval of the ONRR.
(A) To compute depreciation, the lessee may elect to use either a straight-line depreciation method
based on the life of equipment or on the life of the reserves which the wash plant services, whichever is
appropriate, or a unit of production method. After an election is made, the lessee may not change
methods without ONRR approval. A change in ownership of a wash plant shall not alter the depreciation
schedule established by the original operator/lessee for purposes of the allowance calculation. With or
without a change in ownership, a wash plant shall be depreciated only once. Equipment shall not be
depreciated below a reasonable salvage value.

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(B) ONRR shall allow as a cost an amount equal to the allowable capital investment in the wash plant
multiplied by the rate of return determined pursuant to paragraph (b)(2)(v) of this section. No allowance
shall be provided for depreciation. This alternative shall apply only to plants first placed in service or
acquired after March 1, 1989.
(v) The rate of return must be the industrial rate associated with Standard and Poor's BBB rating. The
rate of return must be the monthly average rate as published in Standard and Poor's Bond Guide for the
first month for which the allowance is applicable. The rate must be redetermined at the beginning of
each subsequent calendar year.
(3) The washing allowance for coal shall be determined based on the lessee's reasonable and actual
cost of washing the coal. The lessee may not take an allowance for the costs of washing lease
production that is not royalty bearing.
(c) Reporting requirements —(1) Arm's-length contracts. (i) The lessee must notify ONRR of an
allowance based on incurred costs by using a separate line entry on the Form MMS–4430.
(ii) ONRR may require that a lessee submit arm's-length washing contracts and related documents.
Documents shall be submitted within a reasonable time, as determined by ONRR.
(2) Non-arm's-length or no contract. (i) The lessee must notify ONRR of an allowance based on the
incurred costs by using a separate line entry on the Form MMS–4430.
(ii) For new washing facilities or arrangements, the lessee's initial washing deduction shall include
estimates of the allowable coal washing costs for the applicable period. Cost estimates shall be based
upon the most recently available operations data for the washing system or, if such data are not
available, the lessee shall use estimates based upon industry data for similar washing systems.
(iii) Upon request by ONRR, the lessee shall submit all data used to prepare the allowance deduction.
The data shall be provided within a reasonable period of time, as determined by ONRR.
(d) Interest and assessments. (1) If a lessee nets a washing allowance on the Form MMS–4430, then
the lessee shall be assessed an amount up to 10 percent of the allowance netted not to exceed $250
per lease sales type code per sales period.
(2) If a lessee erroneously reports a washing allowance which results in an underpayment of royalties,
interest shall be paid on the amount of that underpayment.
(3) Interest required to be paid by this section shall be determined in accordance with §1218.202 of this
chapter.
(e) Adjustments. (1) If the actual coal washing allowance is less than the amount the lessee has taken
on Form MMS–4430 for each month during the allowance reporting period, the lessee shall pay
additional royalties due plus interest computed under §1218.202 of this chapter from the date when the
lessee took the deduction to the date the lessee repays the difference to MMS. If the actual washing
allowance is greater than the amount the lessee has taken on Form MMS–4430 for each month during
the allowance reporting period, the lessee shall be entitled to a credit without interest.
(2) The lessee must submit a corrected Form MMS–4430 to reflect actual costs, together with any
payment, in accordance with instructions provided by MMS.
(f) Other washing cost determinations. The provisions of this section shall apply to determine washing
costs when establishing value using a net-back valuation procedure or any other procedure that requires
deduction of washing costs.
[54 FR 1523, Jan. 13, 1989, as amended at 57 FR 52720, Nov. 5, 1992; 61 FR 5480, Feb. 12, 1996; 64
FR 43288, Aug. 10, 1999; 66 FR 45769, Aug. 30, 2001; 73 FR 15891, Mar. 26, 2008]

§ 1206.260 Allocation of washed coal.
(a) When coal is subjected to washing, the washed coal must be allocated to the leases from which it
was extracted.

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(b) When the net output of coal from a washing plant is derived from coal obtained from only one lease,
the quantity of washed coal allocable to the lease will be based on the net output of the washing plant.
(c) When the net output of coal from a washing plant is derived from coal obtained from more than one
lease, unless determined otherwise by BLM, the quantity of net output of washed coal allocable to each
lease will be based on the ratio of measured quantities of coal delivered to the washing plant and
washed from each lease compared to the total measured quantities of coal delivered to the washing
plant and washed.

§ 1206.261 Transportation allowances—general.
(a) For ad valorem leases subject to §1206.257 of this subpart, where the value for royalty purposes has
been determined at a point remote from the lease or mine, ONRR shall, as authorized by this section,
allow a deduction in determining value for royalty purposes for the reasonable, actual costs incurred to:
(1) Transport the coal from a Federal lease to a sales point which is remote from both the lease and
mine; or
(2) Transport the coal from a Federal lease to a wash plant when that plant is remote from both the
lease and mine and, if applicable, from the wash plant to a remote sales point. In-mine transportation
costs shall not be included in the transportation allowance.
(b) Under no circumstances will the authorized washing allowance and the transportation allowance
reduce the value for royalty purposes to zero.
(c)(1) When coal transported from a mine to a wash plant is eligible for a transportation allowance in
accordance with this section, the lessee is not required to allocate transportation costs between the
quantity of clean coal output and the rejected waste material. The transportation allowance shall be
authorized for the total production which is transported. Transportation allowances shall be expressed as
a cost per ton of cleaned coal transported.
(2) For coal that is not washed at a wash plant, the transportation allowance shall be authorized for the
total production which is transported. Transportation allowances shall be expressed as a cost per ton of
coal transported.
(3) Transportation costs shall only be recognized as allowances when the transported coal is sold and
royalties are reported and paid.
(d) If, after a review and/or audit, ONRR determines that a lessee has improperly determined a
transportation allowance authorized by this section, then the lessee shall pay any additional royalties,
plus interest, determined in accordance with §1218.202 of this chapter, or shall be entitled to a credit,
without interest.
(e) Lessees shall not disproportionately allocate transportation costs to Federal leases.
[54 FR 1523, Jan. 13, 1989, as amended at 61 FR 5481, Feb. 12, 1996; 64 FR 43288, Aug. 10, 1999]

§ 1206.262 Determination of transportation allowances.
(a) Arm's-length contracts. (1) For transportation costs incurred by a lessee pursuant to an arm's-length
contract, the transportation allowance shall be the reasonable, actual costs incurred by the lessee for
transporting the coal under that contract, subject to monitoring, review, audit, and possible future
adjustment. The lessee shall have the burden of demonstrating that its contract is arm's-length. The
lessee must claim a transportation allowance by reporting it as a separate line entry on the Form MMS–
4430.
(2) In conducting reviews and audits, ONRR will examine whether the contract reflects more than the
consideration actually transferred either directly or indirectly from the lessee to the transporter for the
transportation. If the contract reflects more than the total consideration paid, then the ONRR may require
that the transportation allowance be determined in accordance with paragraph (b) of this section.
(3) If ONRR determines that the consideration paid pursuant to an arm's-length transportation contract

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does not reflect the reasonable value of the transportation because of misconduct by or between the
contracting parties, or because the lessee otherwise has breached its duty to the lessor to market the
production for the mutual benefit of the lessee and the lessor, then ONRR shall require that the
transportation allowance be determined in accordance with paragraph (b) of this section. When ONRR
determines that the value of the transportation may be unreasonable, ONRR will notify the lessee and
give the lessee an opportunity to provide written information justifying the lessee's transportation costs.
(4) Where the lessee's payments for transportation under an arm's-length contract are not based on a
dollar-per-unit basis, the lessee shall convert whatever consideration is paid to a dollar value equivalent
for the purposes of this section.
(b) Non-arm's-length or no contract —(1) If a lessee has a non-arm's-length contract or has no contract,
including those situations where the lessee performs transportation services for itself, the transportation
allowance will be based upon the lessee's reasonable actual costs. All transportation allowances
deducted under a non-arm's-length or no contract situation are subject to monitoring, review, audit, and
possible future adjustment. The lessee must claim a transportation allowance by reporting it as a
separate line entry on the Form MMS–4430. When necessary or appropriate, ONRR may direct a lessee
to modify its estimated or actual transportation allowance deduction.
(2) The transportation allowance for non-arm's-length or no-contract situations shall be based upon the
lessee's actual costs for transportation during the reporting period, including operating and maintenance
expenses, overhead, and either depreciation and a return on undepreciated capital investment in
accordance with paragraph (b)(2)(iv)(A) of this section, or a cost equal to the depreciable investment in
the transportation system multiplied by the rate of return in accordance with paragraph (b)(2)(iv)(B) of
this section. Allowable capital costs are generally those for depreciable fixed assets (including costs of
delivery and installation of capital equipment) which are an integral part of the transportation system.
(i) Allowable operating expenses include: Operations supervision and engineering; operations labor;
fuel; utilities; materials; ad valorem property taxes; rent; supplies; and any other directly allocable and
attributable operating expense which the lessee can document.
(ii) Allowable maintenance expenses include: Maintenance of the transportation system; maintenance of
equipment; maintenance labor; and other directly allocable and attributable maintenance expenses
which the lessee can document.
(iii) Overhead attributable and allocable to the operation and maintenance of the transportation system is
an allowable expense. State and Federal income taxes and severance taxes and other fees, including
royalties, are not allowable expenses.
(iv) A lessee may use either paragraph (b)(2)(iv)(A) or paragraph (b)(2)(iv)(B) of this section. After a
lessee has elected to use either method for a transportation system, the lessee may not later elect to
change to the other alternative without approval of ONRR.
(A) To compute depreciation, the lessee may elect to use either a straight-line depreciation method
based on the life of equipment or on the life of the reserves which the transportation system services,
whichever is appropriate, or a unit of production method. After an election is made, the lessee may not
change methods without ONRR approval. A change in ownership of a transportation system shall not
alter the depreciation schedule established by the original transporter/lessee for purposes of the
allowance calculation. With or without a change in ownership, a transportation system shall be
depreciated only once. Equipment shall not be depreciated below a reasonable salvage value.
(B) ONRR shall allow as a cost an amount equal to the allowable capital investment in the transportation
system multiplied by the rate of return determined pursuant to paragraph (b)(2)(B)(v) of this section. No
allowance shall be provided for depreciation. This alternative shall apply only to transportation facilities
first placed in service or acquired after March 1, 1989.
(v) The rate of return must be the industrial rate associated with Standard and Poor's BBB rating. The
rate of return must be the monthly average rate as published in Standard and Poor's Bond Guide for the
first month for which the allowance is applicable. The rate must be redetermined at the beginning of
each subsequent calendar year.
(3) A lessee may apply to ONRR for exception from the requirement that it compute actual costs in
accordance with paragraphs (b)(1) and (b)(2) of this section. ONRR will grant the exception only if the
lessee has a rate for the transportation approved by a Federal agency or by a State regulatory agency
(for Federal leases). ONRR shall deny the exception request if it determines that the rate is excessive as

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compared to arm's-length transportation charges by systems, owned by the lessee or others, providing
similar transportation services in that area. If there are no arm's-length transportation charges, ONRR
shall deny the exception request if:
(i) No Federal or State regulatory agency costs analysis exists and the Federal or State regulatory
agency, as applicable, has declined to investigate under ONRR timely objections upon filing; and
(ii) The rate significantly exceeds the lessee's actual costs for transportation as determined under this
section.
(c) Reporting requirements —(1) Arm's-length contracts. (i) The lessee must notify ONRR of an
allowance based on incurred costs by using a separate line entry on the Form MMS–4430.
(ii) ONRR may require that a lessee submit arm's-length transportation contracts, production
agreements, operating agreements, and related documents. Documents shall be submitted within a
reasonable time, as determined by ONRR.
(2) Non-arm's-length or no contract —(i) The lessee must notify ONRR of an allowance based on the
incurred costs by using a separate line entry on Form MMS–4430.
(ii) For new transportation facilities or arrangements, the lessee's initial deduction shall include estimates
of the allowable coal transportation costs for the applicable period. Cost estimates shall be based upon
the most recently available operations data for the transportation system or, if such data are not
available, the lessee shall use estimates based upon industry data for similar transportation systems.
(iii) Upon request by ONRR, the lessee shall submit all data used to prepare the allowance deduction.
The data shall be provided within a reasonable period of time, as determined by ONRR.
(iv) If the lessee is authorized to use its Federal- or State-agency-approved rate as its transportation cost
in accordance with paragraph (b)(3) of this section, it shall follow the reporting requirements of
paragraph (c)(1) of this section.
(d) Interest and assessments. (1) If a lessee nets a transportation allowance on Form MMS–4430, the
lessee shall be assessed an amount of up to 10 percent of the allowance netted not to exceed $250 per
lease sales type code per sales period.
(2) If a lessee erroneously reports a transportation allowance which results in an underpayment of
royalties, interest shall be paid on the amount of that underpayment.
(3) Interest required to be paid by this section shall be determined in accordance with §1218.202 of this
chapter.
(e) Adjustments. (1) If the actual coal transportation allowance is less than the amount the lessee has
taken on Form MMS–4430 for each month during the allowance reporting period, the lessee shall pay
additional royalties due plus interest computed under §1218.202 of this chapter from the date when the
lessee took the deduction to the date the lessee repays the difference to ONRR. If the actual
transportation allowance is greater than amount the lessee has taken on Form MMS–4430 for each
month during the allowance reporting period, the lessee shall be entitled to a credit without interest.
(2) The lessee must submit a corrected Form MMS–4430 to reflect actual costs, together with any
payments, in accordance with instructions provided by ONRR.
(f) Other transportation cost determinations. The provisions of this section shall apply to determine
transportation costs when establishing value using a net-back valuation procedure or any other
procedure that requires deduction of transportation costs.
[54 FR 1523, Jan. 13, 1989, as amended at 57 FR 41864, Sept. 14, 1992; 57 FR 52720, Nov. 5, 1992;
61 FR 5481, Feb. 12, 1996; 64 FR 43288, Aug. 10, 1999; 66 FR 45769, Aug. 30, 2001; 73 FR 15891,
Mar. 26, 2008]

§ 1206.263 [Reserved]

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§ 1206.264 In-situ and surface gasification and liquefaction operations.
If an ad valorem Federal coal lease is developed by in-situ or surface gasification or liquefaction
technology, the lessee shall propose the value of coal for royalty purposes to ONRR. The ONRR will
review the lessee's proposal and issue a value determination. The lessee may use its proposed value
until ONRR issues a value determination.
[54 FR 1523, Jan. 13, 1989, as amended at 65 FR 43289, Aug. 10, 1999]

§ 1206.265 Value enhancement of marketable coal.
If, prior to use, sale, or other disposition, the lessee enhances the value of coal after the coal has been
placed in marketable condition in accordance with §1206.257(h) of this subpart, the lessee shall notify
ONRR that such processing is occurring or will occur. The value of that production shall be determined
as follows:
(a) A value established for the feedstock coal in marketable condition by application of the provisions of
§1206.257(c)(2)(i-iv) of this subpart; or,
(b) In the event that a value cannot be established in accordance with subsection (a), then the value of
production will be determined in accordance with §1206.257(c)(2)(v) of this subpart and the value shall
be the lessee's gross proceeds accruing from the disposition of the enhanced product, reduced by
ONRR-approved processing costs and procedures including a rate of return on investment equal to two
times the Standard and Poor's BBB bond rate applicable under §1206.259(b)(2)(v) of this subpart.
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e-CFR Data is current as of October 15, 2010
Title 30: Mineral Resources
PART 1210—FORMS AND REPORTS
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Subpart E—Production and Royalty Reports—Solid Minerals
Source: 66 FR 45771, Aug. 30, 2001, unless otherwise noted.
§ 1210.200 What is the purpose of this subpart?
This subpart explains your reporting requirements if you produce coal or other solid minerals from
Federal or Indian leases. Included are your requirements for reporting production, sales, and royalties.

§ 1210.201 How do I submit Form MMS–4430, Solid Minerals Production and Royalty
Report?
(a) What to submit. (1) You must submit a completed Form MMS–4430 for—
(i) Production of all coal and other solid minerals from any Federal or Indian lease;
(ii) Sale of any such mineral;
(iii) Any such mineral held in stockpile or inventory; and
(iv) Payment of rents (other than those for which you receive from ONRR a Courtesy Notice as defined
in §1218.51(a) of this chapter), minimum royalty, deferred bonus, advance royalty, minimum royalty
payable in advance, settlements, recoupments, and other financial obligations.
(2) You must submit a completed Form MMS–4430 for any product you sell from a remote storage site.
If you sell from five or fewer remote storage sites, you must report sales from each site on separate
Forms MMS–4430. If you sell from more than five remote storage sites, you must total the data from all
sites and report the summarized data on one Form MMS–4430.
(3) Instructions for completing and submitting Form MMS–4430 are available on our Internet reporting
web site or you may contact us toll free at 1–888–201–6416.
(b) When to submit. (1) Unless your lease terms specify a different frequency for royalty payments, you
must submit your Form MMS–4430 on or before the end of the month following the month in which you
produce any solid mineral, sell any solid mineral, or hold any solid mineral production in stockpile or
inventory. However, if the last day of the month falls on a weekend or holiday, your Form MMS–4430 is
due on the next business day.
(2) If your lease terms specify a different frequency for royalty payment, then you must submit your Form
MMS–4430 on or before the date on which you must pay royalty under the terms of the lease.

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(3) You must submit your Form MMS–4430 for payment of rents (other than those for which you receive
from ONRR a Courtesy Notice as defined in §1218.51(a) of this chapter), minimum royalty, deferred
bonus, advance royalty, minimum royalty payable in advance, settlements, recoupments, and other
financial obligations on or before the date on which you must pay those obligations under the terms of
the lease.
(4) If the information on a previously reported Form MMS–4430 is no longer correct, you must submit a
revised Form MMS–4430 by the last day of the month in which you learn that the previously reported
information is no longer correct, except when the last day of the month falls on a weekend or holiday. If
the last day of the month falls on a weekend or holiday, your revised Form MMS–4430 is due on the first
business day of the following month.
(c) How to submit. (1) You must submit Form MMS–4430 electronically using our Internet reporting web
site unless you meet the conditions in paragraph (c)(2). We will provide written instructions and a valid
login and password before you begin reporting.
(2) You are not required to report electronically if you are a small business as defined by the U.S. Small
Business Administration (13 CFR 121.201) and you have no computer, no plans to purchase a
computer, and no contract with an electronic reporting service.
(3) If you do not report electronically, you must submit the completed Form MMS–4430 to us at one of
the following addresses, unless ONRR publishes notice in theFederal Registergiving a different address:
(i) For U.S. Postal Service regular mail or Express Mail: Office of Natural Resources Revenue (ONRR),
P.O. Box 5810, Denver, Colorado 80217–5810; or
(ii) For courier service or overnight mail (excluding Express Mail): Office of Natural Resources Revenue,
Building 85, Denver Federal Center, Room A–614, Denver, Colorado 80225.
[66 FR 45771, Aug. 30, 2001; 66 FR 50827, Oct. 5, 2001]

§ 1210.202 How do I submit sales summaries?
(a) What to submit. (1) You must submit sales summaries for all coal and other solid minerals produced
from Federal and Indian leases and for any remote storage site from which you sell Federal or Indian
solid minerals. You do not have to submit a sales summary for those months in which you do not sell
any Federal or Indian production.
(2) If you sell from five or fewer remote storage sites, you must submit a sales summary for each site. If
you sell from more than five remote storage sites, you may total the data from all sites and submit the
summarized data as one sales summary. The details you report on the sales summary are for the same
sales reported on Form MMS–4430.
(3) Use the following table to determine the time frames for submitting sales summaries and the data
elements you must include. Your submitted sales summaries must include the following data but may be
internally generated documents from your own records. You do not need to re-format them before
submitting them to us:

Data element
Coal
(i) Purchaser Monthly
Name or
Unique
Identification
(ii) Sales Units Monthly

Western
Sodium/potassium phosphate Metals
Monthly
Monthly
Monthly

Monthly

Monthly

Monthly

All other All other
leases
leases
with ad with no ad
valorem valorem
royalty
royalty
terms
terms
Monthly
As
Requested

Monthly

Monthly

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(iii) Gross
Monthly
Proceeds
(iv)
Monthly
Processing or
washing costs
(v)
Monthly
Transportation
costs
(vi) Name of Not
product type Required
sold
(vii) Btu/lb
Monthly
(viii) Ash %

Monthly

Not Required

(ix) Sulfur %

Monthly

Not Required

(x) lbs SO2

Monthly

Not Required

(xi) Moisture
%
(xii) Byproduct Units
(xiii) P2O5 %

Monthly
Not
Required
Not
Required
Not
Required
Not
Required

(xiv) Size
(xv) Net
Smelter
Return data
(xvi) Other
Data e.g.,
Royalty
Calculation
Worksheet

Monthly

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Not
Required
Not
Required

Monthly

Monthly

Monthly

Monthly

Monthly

Not
Required

Monthly

Monthly

Not
Required

Monthly

Not
Required

Monthly

Monthly

As
Requested

Not Required

Not Required

Not
Required
Not
Required
Not
Required
Not
Required
Monthly

As Requested

Monthly

Not Required

Monthly

Not Required

Not
Required
Not
Required

Not
Not
Not
Required Required Required
Not
Not
Not
Required Required Required
Not
Not
Not
Required Required Required
Not
Not
Not
Required Required Required
Not
Not
Not
Required Required Required
As
As
Not
Requested Requested Required
Not
Not
Not
Required Required Required
Not
As
Not
Required Requested Required
Monthly
Not
Not
Required Required

Monthly

Not Required

As
Monthly
Requested

Not
Required
Not
Required

As
As
As
As
Requested Requested Requested Requested.

(b) When to submit. (1) For leases with ad valorem royalty terms (that is, leases for which royalty is a
percentage of the value of production), you must submit your sales summaries monthly at the same time
you submit Form MMS–4430. You do not have to submit a sales summary for any month in which you
did not sell Federal or Indian production.
(2) For leases with no ad valorem royalty terms (that is, leases in which the royalty due is not a function
of the value of production, such as cents-per-ton or dollars-per-unit), you must submit monthly sales
summaries only if we specifically request you to do so.
(c) How to submit. (1) You should provide the sales summary data via electronic mail where possible.
We will provide instructions and the proper email address for these submissions.
(2) If you submit sales summaries by paper copy, mail them to one of the following addresses, unless
ONRR publishes notice in theFederal Registergiving a different address:

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(i) For U.S. Postal Service regular mail or Express Mail: Office of Natural Resources Revenue, Solid
Minerals and Geothermal Compliance and Asset Management, P.O. Box 25165, MS 390G1, Denver,
Colorado 80225–0165.
(ii) For courier service or overnight mail (excluding Express Mail): Office of Natural Resources Revenue,
Solid Minerals and Geothermal Compliance and Asset Management, 12600 West Colfax Avenue, Suite
C–100, Lakewood, Colorado 80215.

§ 1210.203 How do I submit sales contracts?
(a) What to submit. You must submit sales contracts, agreements, and contract amendments for the
sale of all coal and other solid minerals produced from Federal and Indian leases with ad valorem royalty
terms.
(b) When to submit. (1) For coal and metal production, you must submit the required documents semiannually, no later than March 30 and September 30 of each year.
(2) For sodium, potassium, and phosphate production, and production from any other lease with ad
valorem royalty terms, you must submit the required documents only if you are specifically requested to
do so.
(c) How to submit. You must submit complete copies of the sales contracts and amendments to us at the
applicable address given in §1210.202(c)(2), unless ONRR publishes notice in theFederal
Registergiving a different address.

§ 1210.204 How do I submit facility data?
(a) What to submit. (1) You must submit facility data if you operate a wash plant, refining, ore
concentration, or other processing facility for any coal, sodium, potassium, metals, or other solid
minerals produced from Federal or Indian leases with ad valorem royalty terms, regardless of whether
the facility is located on or off the lease.
(2) You do not have to submit facility data for those months in which you do not process solid minerals
produced from Federal or Indian leases and do not have any such minerals in stockpile inventory.
(3) You must include in your facility data all production processed in the facility from all properties, not
just production from Federal and Indian leases.
(4) Facility data submissions must include the following minimum information:
(i) Identification of your facility;
(ii) Mines served;
(iii) Input quantity;
(iv) Input quality or ore grade (except for coal);
(v) Output quantity; and
(vi) Output quality or product grades.
(5) Your submitted facility data may be internally generated documents from your own records. You do
not need to re-format them before submitting them to us.
(b) When to submit. You must submit your facility data monthly at the same time you submit your Form
MMS–4430.
(c) How to submit. (1) You should provide the facility data via electronic mail where possible. We will
provide instructions and the proper email address for these submissions before you begin reporting.

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(2) If you submit facility data by paper copy, send it to the applicable address given in §1210.202(c)(2).

§ 1210.205 What reports must I submit to claim allowances on Indian coal leases?
General. You must submit the following ONRR forms to claim a transportation or washing allowance, as
applicable, on Indian coal leases:
(1) Form MMS–4292, Coal Washing Allowance Report, to claim an allowance for the reasonable, actual
costs incurred to wash coal under §1206.458 of this chapter.
(2) Form MMS–4293, Coal Transportation Allowance Report, to claim an allowance for the reasonable,
actual costs of transporting coal to a sales point or a washing facility remote from the mine or lease
under §1206.461 of this chapter.
(b) Reporting options. You must submit the forms manually. You may find the forms on our Internet Web
site at http://www.mrm.mms.gov/ReportingServices/Forms/AFSSol_Min.htm or request forms from
ONRR at P.O. Box 25165, MS 390B2, Denver, Colorado 80217–0165.
(c) Reporting address. You must submit completed Forms MMS–4292 and MMS–4293 by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources Revenue, P.O.
Box 25165, MS 390B2, Denver, Colorado 80217–0165; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue, Building 85,
Room A–614, MS 390B2, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver, Colorado
80225.
[73 FR 15897, Mar. 26, 2008]

§ 1210.206 Will I need to submit additional documents or evidence to ONRR?
(a) Federal and Indian lease terms allow us to request detailed statements, documents, or other
evidence necessary to verify compliance with lease terms and conditions and applicable rules.
(b) We will request this additional information as we need it, not as a regular submission.
[66 FR 45771, Aug. 30, 2001. Redesignated at 73 FR 15897, Mar. 26, 2008]

§ 1210.207 How will information submissions be kept confidential?
Information submitted under this part that constitutes trade secrets or commercial and financial
information that is identified as privileged or confidential, or that is exempt from disclosure under the
Freedom of Information Act, 5 U.S.C. 552, shall not be available for public inspection or made public or
disclosed without the consent of the lessee, except as otherwise provided by law or regulation.
[66 FR 45771, Aug. 30, 2001. Redesignated at 73 FR 15897, Mar. 26, 2008]
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§ 1210.351 Required recordkeeping.
Information required by ONRR shall be filed using the forms prescribed in this subpart, which are
available from ONRR. Records may be maintained on microfilm, microfiche, or other recorded media
that are easily reproducible and readable. See subpart H of 30 CFR part 1212.
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PART 1212—RECORDS AND FILES MAINTENANCE

Section Contents

Subpart A—General Provisions [Reserved]
Subpart B—Oil, Gas, and OCS Sulphur—General
§ 1212.50 Required recordkeeping and reports.
§ 1212.51 Records and files maintenance.
§ 1212.52 Definitions.
Subpart C—Federal and Indian Oil [Reserved]
Subpart D—Federal and Indian Gas [Reserved]
Subpart E—Solid Minerals—General
§ 1212.200 Maintenance of and access to records.
Subpart F—Coal [Reserved]
Subpart G—Other Solid Minerals [Reserved]
Subpart H—Geothermal Resources
§ 1212.350 Definitions.
§ 1212.351 Required recordkeeping and reports.
Subpart I—OCS Sulfur [Reserved]

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

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Source: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61084,
Oct. 4, 2010.
Subpart A—General Provisions [Reserved]
top

Subpart B—Oil, Gas, and OCS Sulphur—General
top

§ 1212.50 Required recordkeeping and reports.
top
All records pertaining to offshore and onshore Federal and Indian oil and gas leases shall be maintained
by a lessee, operator, revenue payor, or other person for 6 years after the records are generated unless
the recordholder is notified, in writing, that records must be maintained for a longer period. When an
audit or investigation is underway, records shall be maintained until the recordholder is released by
written notice of the obligation to maintain records.
[49 FR 37345, Sept. 21, 1984]

§ 1212.51 Records and files maintenance.
top
(a) Records. Each lessee, operator, revenue payor, or other person shall make and retain accurate and
complete records necessary to demonstrate that payments of rentals, royalties, net profit shares, and
other payments related to offshore and onshore Federal and Indian oil and gas leases are in compliance
with lease terms, regulations, and orders. Records covered by this section include those specified by
lease terms, notices and orders, and by the various parts of this chapter. Records also include computer
programs, automated files, and supporting systems documentation used to produce automated reports
or magnetic tape submitted to the Office of Natural Resources Revenue (ONRR).
(b) Period for keeping records. Lessees, operators, revenue payors, or other persons required to keep
records under this section shall maintain and preserve them for 6 years from the day on which the
relevant transaction recorded occurred unless the Secretary notifies the record holder of an audit or
investigation involving the records and that they must be maintained for a longer period. When an audit
or investigation is underway, records shall be maintained until the recordholder is released in writing
from the obligation to maintain the records. Lessees, operators, revenue payors, or other persons shall
maintain the records generated during the period for which they have paying or operating responsibility
on the lease for a period of 6 years.
(c) Inspection of records. The lessee, operator, revenue payor, or other person required to keep records
shall be responsible for making the records available for inspection. Records shall be provided at a
business location of the lessee, operator, revenue payor, or other person during normal business hours
upon the request of any officer, employee or other party authorized by the Secretary. Lessees,
operators, revenue payors, and other persons will be given a reasonable period of time to produce
historical records.
[49 FR 37345, Sept. 21, 1984; 49 FR 40576, Oct. 17, 1984, as amended at 67 FR 19111, Apr. 18, 2002]

§ 1212.52 Definitions.
top
Terms used in this subpart shall have the same meaning as in 30 U.S.C. 1702.

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[49 FR 37345, Sept. 21, 1984]

Subpart C—Federal and Indian Oil [Reserved]
top

Subpart D—Federal and Indian Gas [Reserved]
top

Subpart E—Solid Minerals—General
top

§ 1212.200 Maintenance of and access to records.
top
(a) All records pertaining to Federal and Indian solid minerals leases shall be maintained by a lessee,
operator, revenue payor, or other person for 6 years after the records are generated unless the record
holder is notified, in writing, that records must be maintained for a longer period. When an audit or
investigation is underway, records shall be maintained until the record holder is released by written
notice of the obligation to maintain records.
(b) The ONRR shall have access to all records of the operator/lessee pertaining to compliance to
Federal royalties, including, but not limited to:
(1) Qualities and quantities of all products mined, processed, sold, delivered, or used by the
operator/lessee.
(2) Prices received for mined or processed products, prices paid for like or similar products, and internal
transfer prices.
(3) Costs of mining, processing, handling, and transportation.
[47 FR 33193, July 30, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and amended at 51 FR
15767, Apr. 28, 1986; 54 FR 1532, Jan. 13, 1989]

Subpart F—Coal [Reserved]
top

Subpart G—Other Solid Minerals [Reserved]
top

Subpart H—Geothermal Resources
top

Source: 56 FR 57286, Nov. 8, 1991, unless otherwise noted.
§ 1212.350 Definitions.

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top
Terms used in this subpart shall have the same meaning as in §1206.351.

§ 1212.351 Required recordkeeping and reports.
top
(a) Records. Each lessee, operator, revenue payor, or other person shall make and retain accurate and
complete records necessary to demonstrate that payments of royalties, rentals, and other amounts due
under Federal geothermal leases are in compliance with laws, lease terms, regulations, and orders.
Records covered by this section include those specified by lease terms, notices, and orders, and those
identified in paragraph (c) of this section. Records also include computer programs, automated files, and
supporting systems documentation used to produce automated reports or magnetic tapes submitted to
ONRR.
(b) Period for keeping records. All records pertaining to Federal geothermal leases shall be maintained
by a lessee, operator, revenue payor, or other person for 6 years after the records are generated unless
the recordholder is notified, in writing, before the expiration of that 6-year period that records must be
maintained for a longer period for purposes of audit or investigation. When an audit or investigation is
underway, records shall be maintained until the recordholder is released by written notice of the
obligation to maintain records.
(c) Access to records. The Director for Office of Natural Resources Revenue shall have access to all
records in the possession of the lessee, operator, revenue payor, or other person pertaining to
compliance with royalty obligations under Federal geothermal leases (regardless of whether such
records were generated more than 6 years before a request or order to produce them and they
otherwise were not disposed of), including, but not limited to:
(1) Qualities and quantities of all products extracted, processed, sold, delivered, or used by the
operator/lessee;
(2) Prices received for products, prices paid for like or similar products, and internal transfer prices; and
(3) Costs of extraction, power generation, electrical transmission, and byproduct transportation.
(d) Inspection of Records. The lessee, operator, revenue payor, or other person required to keep
records shall be responsible for making the records available for inspection. Records shall be made
available at a business location of the lessee, operator, revenue payor, or other person during normal
business hours upon the request of any officer, employee, or other party authorized by the Secretary.
Lessees, operators, revenue payors, and other persons will be given a reasonable period of time to
produce records.
[56 FR 57286, Nov. 8, 1991, as amended at 67 FR 19111, Apr. 18, 2002]

Subpart I—OCS Sulfur [Reserved]
top
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PART 1217—AUDITS AND INSPECTIONS

Section Contents

Subpart A—General Provisions [Reserved]
Subpart B—Oil and Gas, General
§ 1217.50 Audits of records.
§ 1217.51 Lease account reconciliation.
§ 1217.52 Definitions.
Subpart C—Oil and Gas, Onshore [Reserved]
Subpart D—Oil, Gas and Sulfur, Offshore [Reserved]
Subpart E—Coal
§ 1217.200 Audits.
Subpart F—Other Solid Minerals
§ 1217.250 Audits.
Subpart G—Geothermal Resources
§ 1217.300 Audit or review of records.
§ 1217.301 Lease account reconciliations.
§ 1217.302 Definitions.
Subpart H—Indian Lands [Reserved]

Authority: 35 Stat. 312; 35 Stat. 781, as amended; secs. 32, 6, 26, 41 Stat. 450, 753, 1248;
secs. 1, 2, 3, 44 Stat. 301, as amended; secs. 6, 3, 44 Stat. 659, 710; secs. 1, 2, 3, 44 Stat.
1057; 47 Stat. 1487; 49 Stat. 1482, 1250, 1967, 2026; 52 Stat. 347; sec. 10, 53 Stat. 1196, as
amended; 56 Stat. 273; sec. 10, 61 Stat. 915; sec. 3, 63 Stat. 683; 64 Stat. 311; 25 U.S.C.
396, 396a–f, 30 U.S.C. 189, 271, 281, 293, 359. Interpret or apply secs. 5, 5, 44 Stat. 302,

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1058, as amended; 58 Stat. 483–485; 5 U.S.C. 301, 16 U.S.C. 508b, 30 U.S.C. 189, 192c,
271, 281, 293, 359, 43 U.S.C. 387, unless otherwise noted.
Source: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61084,
Oct. 4, 2010.
Subpart A—General Provisions [Reserved]
top

Subpart B—Oil and Gas, General
top

Authority: The Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701 et
seq.).
Source: 49 FR 37345, Sept. 21, 1984, unless otherwise noted.
§ 1217.50 Audits of records.
top
The Secretary, or his/her authorized representative, shall initiate and conduct audits relating to the
scope, nature and extent of compliance by lessees, operators, revenue payors, and other persons with
rental, royalty, net profit share and other payment requirements on a Federal or Indian oil and gas lease.
Audits also will relate to compliance with applicable regulations and orders. All audits will be conducted
in accordance with the notice and other requirements of 30 U.S.C. 1717.

§ 1217.51 Lease account reconciliation.
top
Specific lease account reconciliations shall be performed with priority being given to reconciling those
lease accounts specifically identified by a State or Indian tribe as having significant potential for
underpayment.

§ 1217.52 Definitions.
top
Terms used in this subpart shall have the same meaning as in 30 U.S.C. 1702.

Subpart C—Oil and Gas, Onshore [Reserved]
top

Subpart D—Oil, Gas and Sulfur, Offshore [Reserved]
top

Subpart E—Coal

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top

§ 1217.200 Audits.
top
An audit of the accounts and books of operators/lessees for the purpose of determining compliance with
Federal lease terms relating to Federal royalties may be required annually or at other times as directed
by the Director for Office of Natural Resources Revenue. The audit shall be performed by a qualified
independent certified public accountant or by an independent public accountant licensed by a State,
territory, or insular possession of the United States or the District of Columbia, and at the expense of the
operator/lessee. The operator/lessee shall furnish, free of charge, duplicate copies of audit reports that
express opinions on such compliance to the Director for Office of Natural Resources Revenue within 30
days after the completion of each audit. Where such audits are required, the Director for Office of
Natural Resources Revenue will specify the purpose and scope of the audit and the information which is
to be verified or obtained.
[47 FR 33195, July 30, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, as amended at 67 FR 19112,
Apr. 18, 2002]

Subpart F—Other Solid Minerals
top

§ 1217.250 Audits.
top
An audit of the lessee's accounts and books may be made annually or at such other times as may be
directed by the mining supervisor, by certified public accountants, and at the expense of the lessee. The
lessee shall furnish free of cost duplicate copies of such annual or other audits to the mining supervisor,
within 30 days after the completion of each auditing.
[37 FR 11041, June 1, 1972. Redesignated at 48 FR 35641, Aug. 5, 1983]

Subpart G—Geothermal Resources
top

Source: 72 FR 24468, May 2, 2007, unless otherwise noted.
§ 1217.300 Audit or review of records.
top
The Secretary, or his/her authorized representative, will initiate and conduct audits or reviews relating to
the scope, nature, and extent of compliance by lessees, operators, revenue payors, and other persons
with rental, royalty, fees, and other payment requirements on a Federal geothermal lease. Audits or
reviews will also relate to compliance with applicable regulations and orders. All audits or reviews will be
conducted in accordance with this part.

§ 1217.301 Lease account reconciliations.
top
Specific lease account reconciliations will be performed with priority being given to reconciling those

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lease accounts specifically identified by a State as having significant potential for underpayment.

§ 1217.302 Definitions.
top
Terms used in this subpart will have the same meaning as in 30 U.S.C. 1702.

Subpart H—Indian Lands [Reserved]
top
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PART 1218—COLLECTION OF MONIES AND PROVISION FOR GEOTHERMAL CREDITS
AND INCENTIVES

Section Contents

Subpart A—General Provisions
§ 1218.10 Information collection.
§ 1218.40 Assessments for incorrect or late reports and failure to report.
§ 1218.41 Assessments for failure to submit payment of same amount as Form MMS–2014
or bill document or to provide adequate information.
§ 1218.42 Cross-lease netting in calculation of late-payment interest.
Subpart B—Oil and Gas, General
§ 1218.50
§ 1218.51
§ 1218.52
§ 1218.53
§ 1218.54
§ 1218.55
§ 1218.56

Timing of payment.
How to make payments.
How does a lessee designate a Designee?
Recoupment of overpayments on Indian mineral leases.
Late payments.
Interest payments to Indians.
Definitions.
Subpart C—Oil and Gas, Onshore

§ 1218.100
§ 1218.101
§ 1218.102
§ 1218.103
§ 1218.104
§ 1218.105

Royalty and rental payments.
Royalty and rental remittance (naval petroleum reserves).
Late payment or underpayment charges.
Payments to States.
Exemption of States from certain interest and penalties.
Definitions.
Subpart D—Oil, Gas and Sulfur, Offshore

§ 1218.150 Royalties, net profit shares, and rental payments.
§ 1218.151 Rental fees.
§ 1218.152 Fishermen's Contingency Fund.
§ 218.153 [Reserved]
§ 1218.154 Effect of suspensions on royalty and rental.
§ 1218.155 Method of payment.
§ 1218.156 Definitions.
Subpart E—Solid Minerals—General

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§ 1218.200
§ 1218.201
§ 1218.202
§ 1218.203

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Payment of royalties, rentals, and deferred bonuses.
Method of payment.
Late payment or underpayment charges.
Recoupment of overpayments on Indian mineral leases.
Subpart F—Geothermal Resources

§ 1218.300 Payment of royalties, rentals, and deferred bonuses.
§ 1218.301 Method of payment.
§ 1218.302 Late payment or underpayment charges.
§ 1218.303 May I credit rental towards royalty?
§ 1218.304 May I credit rental towards direct use fees?
§ 1218.305 How do I pay advanced royalties I owe under BLM regulations?
§ 1218.306 May I receive a credit against production royalties for in-kind deliveries of
electricity I provide under contract to a State or county government?
§ 1218.307 How do I pay royalties due for my existing leases that qualify for near-term
production incentives under BLM regulations?
Subpart G—Indian Lands [Reserved]
Subpart H—Service of Official Correspondence
§ 2218.500
§ 1218.520
§ 1218.540
§ 1218.560
§ 1218.580

What is the purpose of this subpart?
What definitions apply to this subpart?
How does ONRR serve official correspondence?
How do I submit Form MMS–4444?
When do I submit Form MMS–4444?

Authority: 25 U.S.C. 396 et seq., 396a et seq., 2101 et seq. ; 30 U.S.C. 181 et seq., 351 et
seq., 1001 et seq., 1701 et seq. ; 31 U.S.C. 3335; 43 U.S.C. 1301 et seq., 1331 et seq., and
1801 et seq.
Source: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61084,
Oct. 4, 2010.
Subpart A—General Provisions
top

§ 1218.10 Information collection.
top
The information collection requirements contained in this part have been approved by OMB under 44
U.S.C. 3501 et seq. The forms, filing date, and approved OMB clearance numbers are identified in
§1210.10 of this chapter.
[57 FR 41867, Sept. 14, 1992]

§ 1218.40 Assessments for incorrect or late reports and failure to report.
top
(a) An assessment of an amount not to exceed $10 per day may be charged for each report not received
by Office of Natural Resources Revenue (ONRR) by the designated due date for geothermal, solid

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minerals, and Indian oil and gas leases.
(b) An assessment of an amount not to exceed $10 per day may be charged for each incorrectly
completed report for geothermal, solid minerals, and Indian oil and gas leases.
(c) For purpose of assessments discussed in this section, a report is defined as follows:
(1) For coal and other solid minerals leases, a report is each line on Form MMS–4430, Solid Minerals
Production and Royalty Report; or on Form MMS–2014, Report of Sales and Royalty Remittance, as
appropriate.
(2) For Indian oil and gas and all geothermal leases, a report is each line on Form MMS–2014.
(d) An assessment under this section shall not be shared with a State, Indian tribe, or Indian allottee.
(e) The amount of the assessment to be imposed pursuant to paragraphs (a) and (b) of this section shall
be established periodically by ONRR. The assessment amount for each violation will be based on
ONRR's experience with costs and improper reporting. The ONRR will publish a Notice of the
assessment amount to be applied in theFederal Register.
[49 FR 37346, Sept. 21, 1984. Redesignated and amended at 51 FR 15767, Apr. 28, 1986; 52 FR
27546, July 22, 1987; 52 FR 37452, Oct. 7, 1987; 57 FR 52720, Nov. 5, 1992; 59 FR 38906, Aug. 1,
1994; 66 FR 45773, Aug. 30, 2001; 73 FR 15897, Mar. 26, 2008]

§ 1218.41 Assessments for failure to submit payment of same amount as Form MMS–
2014 or bill document or to provide adequate information.
top
(a) The ONRR may assess an amount not to exceed $250 when the amount of a payment submitted by
a reporter/payor for geothermal, solid minerals, and Indian oil and gas leases is not equivalent in amount
to the total of individual line items on the associated Form MMS–2014, Form MMS–4430, or a bill
document, unless ONRR has authorized the difference in amount.
(b) The ONRR may assess an amount not to exceed $250 for each payment for geothermal, solid
minerals, and Indian oil and gas leases submitted by a reporter/payor that cannot be automatically
applied to the associated Form MMS–2014, Form MMS–4430, or a bill document because of inadequate
or erroneous information submitted by the reporter/payor.
(c) For purposes of this section, inadequate or erroneous information is defined as:
(1) Absent or incorrect payor-assigned document number, required to be identified by the reporter/payor
in Block 4 on Form MMS–2014 (document 4 number), or the reuse of the same incorrect payor-assigned
document 4 number in a subsequent reporting period.
(2) Absent or incorrect bill document invoice number (to include the three-character alpha prefix and the
nine-digit number) or the payor-assigned document 4 number required to be identified by the
reporter/payor on the associated payment document, or the reuse of the same incorrect payor-assigned
document 4 number in a subsequent reporting period.
(3) Absent or incorrect name of the administering Bureau of Indian Affairs Agency/Area office; or the
word “allotted” or the tribe name on payment documents remitted to ONRR for an Indian tribe or allottee.
If the payment is made by EFT, the reporter/payor must identify the tribe/allottee on the EFT message
by a pre-established five-digit code.
(4) Absent or incorrect ONRR-assigned payor code on a payment document.
(5) Absent or incorrect identification on a payment document.
(d) For purposes of this section, the term “Form MMS–2014” includes submission of reports of royalty
information, such as Form MMS–4430.

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(e) For purposes of this section, a bill document is defined as any invoice that ONRR has issued for
assessments, late-payment interest charges, or other amount owed. A payment document is defined as
a check or wire transfer message.
(f) The amount of the assessment to be imposed pursuant to paragraphs (a) and (b) of this section shall
be established periodically by ONRR. The assessment amount will be based on ONRR's experience
with costs and improper reporting and/or payment as specified in this section. The ONRR will publish a
Notice in theFederal Registerof the assessment amount to be applied with the effective date.
[58 FR 45438, Aug. 30, 1993, as amended at 73 FR 15897, Mar. 26, 2008]

§ 1218.42 Cross-lease netting in calculation of late-payment interest.
top
(a) Interest due from a payor on any underpayment for any Federal mineral lease or leases (onshore or
offshore) and on any Indian tribal mineral lease or leases for any production month shall not be reduced
by offsetting against that underpayment any overpayment made by the payor on any other lease or
leases, except as provided in paragraph (b) of this section. Interest due from a payor or any
underpayment on any Indian allotted lease shall not be reduced by offsetting against any overpayment
on any other Indian allotted lease under any circumstances.
(b) Royalties attributed to production from a lease or leases which should have been attributed to
production from a different lease or leases may be offset to determine whether and to what extent an
underpayment exists on which interest is due if the following conditions are met:
(1) The error results from attributing and reporting an equal volume of production, produced from a lease
or leases during a particular production month, to a different lease or leases from which it was not
produced for the same or another production month;
(2) The payor is the same for the lease or leases to which production was attributed and the lease or
leases to which it should have been attributed;
(3) The payor submits production reports, pipeline allocation reports, or other similar documentary
evidence pertaining to the specific production involved which verifies the correct production information;
(4) The lessor is the same for the leases involved (in the case of Indian tribal leases, the same tribe is
the lessor); and
(5) The ultimate recipients of any royalty or other lease revenues under any applicable permanent
indefinite appropriations are the same for, and receive the same percentage of revenue from, the leases.
(c) If ONRR assesses late-payment interest and the payor asserts that some or all of the interest
assessed is not owed pursuant to the exception set forth in paragraph (b) of this section, the burden is
on the payor to demonstrate that the exception applies in the specific circumstances of the case.
(d) The exception set forth in paragraph (b) of this section shall not operate to relieve any payor of
liability imposed by statute or regulation for erroneous reporting.
[57 FR 62206, Dec. 30, 1992]

Subpart B—Oil and Gas, General
top

Source: 49 FR 37346, Sept. 21, 1984, unless otherwise noted.
§ 1218.50 Timing of payment.

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top
(a) Royalty payments are due at the end of the month following the month during which the oil and gas is
produced and sold except when the last day of the month falls on a weekend or holiday. In such cases,
payments are due on the first business day of the succeeding month. Rental payments are due as
specified by the lease terms.
(b) Invoices will be issued and payable as final collection actions. Payments made on an invoice are due
as specified by the invoice.
(c) All payments to ONRR are due as specified and are not deferred or suspended by reason of an
appeal having been filed unless such deferral or suspension is approved in writing by an authorized
ONRR official.
(d)(1) Notwithstanding the provisions of paragraph (a) of this section and corresponding lease terms and
§1210.52 of this chapter, the due date for submittal of royalty payments and Reports of Sales and
Royalty Remittance (Form MMS–2014) for the production months of July, August, September, and
October 2005 for Federal offshore and onshore oil and gas leases by oil and gas lessees or royalty
payors who make the certification required under paragraph (d)(2) of this section is extended until
January 3, 2006.
(2) The extended due dates in paragraph (d)(1) of this section will apply to royalty payments and
Reports of Sales and Royalty Remittance (Form MMS–2014) by any lessee or royalty payor who
certifies that a hurricane that struck the Gulf of Mexico coast of the United States in August or
September 2005 disrupted the lessee's or payor's operations to the extent that it prevented the lessee or
royalty payor from making an accurate royalty payment or submitting an accurate Form MMS–2014.
(3) A lessee's or royalty payor's certification under paragraph (d)(2) of this section that it is unable to
generate and submit either an accurate royalty report or an accurate royalty payment will extend the due
date for both royalty reporting and royalty payment.
(4) Paragraphs (d)(1) through (d)(3) of this section do not apply to Indian leases or to Federal leases for
minerals other than oil and gas.
(5) Certifications under paragraph (d)(2) of this section should be submitted either:
(i) By mail to: Robert Prael, Financial Manager, Office of Natural Resources Revenue, P.O. Box 25165,
MS 350B1, Denver, CO 80225–0165, or
(ii) By e-mail to [email protected] .
(e)(1) A lessee or royalty payor who submits a certification required under paragraph (d)(2) of this
section may rely on the extended due dates prescribed in paragraph (d)(1) of this section unless and
until ONRR notifies the lessee or royalty payor or operator that ONRR does not accept the certification.
(2) If ONRR notifies the lessee or royalty payor that ONRR does not accept the lessee's or royalty
payor's certification under paragraph (d)(2) of this section, the due date for royalty payments and
Reports of Sales and Royalty Remittance will be the date specified in the notice.
[49 FR 37346, Sept. 21, 1984, as amended at 70 FR 56853, Sept. 29, 2005; 73 FR 15898, Mar. 26,
2008]

§ 1218.51 How to make payments.
top
(a) Definitions.
ACH —Automated Clearing House. A type of EFT using the ACH network.

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Courtesy Notice —An ONRR-issued notice of rental or bonus due.
Deferred Bonus Payment —Lease bonus paid in equal annual installments over a specified number of
years.
EFT —Electronic Funds Transfer. Any paperless transfer of funds a bank initiates through an electronic
terminal. For ONRR purposes, EFT is limited to FEDWIRE and ACH transfers.
FEDWIRE —A type of EFT using the Federal Reserve Wire network.
Invoice document identification —The ONRR-assigned invoice document identification (three-alpha and
nine-numeric characters).
Payment —Any monies for royalty, bonus, rental, late payment charge, assessment, penalty, or other
money sent to ONRR.
Person —Any individual, firm, corporation, association, partnership, consortium, or joint venture (when
established as a separate entity). The term does not include Federal agencies.
Report —Form MMS–2014, Report of Sales and Royalty Remittance.
RIK —Royalty in kind.
(b) General instructions. You must make all payments to ONRR electronically to the extent it is cost
effective and practical. If you pay money to ONRR or to an Indian tribe or allottee, you must follow these
procedures:
(1) If ONRR instructs you to use EFT, you must use EFT for all payments to ONRR and/or a tribe.
(2) Contact ONRR before using EFT. ONRR will provide you with EFT payment instructions.
(3) Separate any payments on a Federal lease from any payments on an Indian lease.
(4) If you are not required to use EFT, use one of the following types of payment documents. ONRR
prefers that you use these payment documents in the order presented:
(i) Commercial check drawn on a solvent bank;
(ii) Certified check;
(iii) Cashier's check;
(iv) Money order;
(v) Bank draft drawn on a solvent bank; or
(vi) Federal Reserve check.
(5) You must include your payor code on all payments.
(6) You must pay in U.S. dollars.
(c) How to complete a non-EFT payment. (1) Make any payment on a Federal lease payable to:
“Department of the Interior—Office of Natural Resources Revenue” or “DOI-ONRR.”
(2) For an Indian allottee payment, send a separate payment for each Bureau of Indian Affairs (BIA)
agency or area office represented by the leases on your report or invoice document. You must include
the name of the applicable BIA agency or area office on your payment. Make your payment document
payable to: “Department of the Interior—Office of Natural Resources Revenue for BIA [Name] Agency
(allotted)” or “DOI-ONRR for BIA [Name] Agency (allotted).”

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(3) For an Indian tribal payment other than a lockbox payment, send a separate payment for each tribe
represented by the leases on your report or invoice document. You must include the name of the Indian
tribe on your payment. Make it payable to: “Department of the Interior—Office of Natural Resources
Revenue for BIA [Name of Tribe]” or “DOI-ONRR for BIA [Name of Tribe].”
(4) For an Indian tribal lockbox payment, follow the instructions ONRR provides you on how to report
and make the lockbox payment. These instructions are specific to each tribe's lockbox written
agreement with the bank authorized to receive payments on the tribe's mineral leases. You will receive
these instructions from ONRR when you are required to use a tribal lockbox for reports and payments.
(d) Where to send a non-EFT payment when you use the U.S. Postal Service. (1) For a payment to an
Indian tribal lockbox, send your payment to the appropriate tribal lockbox address.
(2) For a Federal nonproducing lease rental or deferred bonus payment, send it to:

Office of Natural Resources Revenue, P.O. Box 5640, Denver, CO 80217–5640.
(3) For all other Federal and Indian lease payments other than those going to an Indian tribal lockbox,
send them to:

Office of Natural Resources Revenue, P.O. Box 5810, Denver, CO 80217–5810.
(e) Where to send a non-EFT payment when you use a courier or overnight delivery service. You should
send this type of payment to:

Office of Natural Resources Revenue, Building 85, Denver Federal Center, Room A–614,
Denver, CO 80225–0165.
(f) How to prepare and what to include on your payment document. (1) For Form MMS–2014 payments,
you must include both your payor code and your payor-assigned document number.
(2) For invoice payments, including RIK invoice payments, you must include both your payor code and
invoice document identification.
(3) For bonus payments:
(i) For one-fifth bonus payments for offshore oil, gas, and sulphur leases, follow the instructions in the
Notice of Lease Offering.
(ii) For payment of the four-fifths bonus for an offshore lease, use EFT and follow the instructions in
§1218.155(c).
(iii) For the successful bidder's bonus in the competitive sale of a coal, geothermal, or offshore mineral
(other than oil, gas or sulfur) lease, follow the instructions and terms of the Notice of Competitive Lease
Sale.
(iv) For installment payments of deferred bonuses, you must use EFT.
(4) If you are paying a lease rental you must:
(i) See §1218.155(c) for instructions on how to pay first-year rentals of an offshore oil, gas, or sulfur
lease;
(ii) See the Notice of Lease Offering for instructions on how to pay first-year rentals other than those
covered in paragraph (f)(4)(i) of this section.
(iii) Include the ONRR Courtesy Notice, when provided, or write your payor code and governmentassigned lease number on the payment document when paying a rental that is not reported on Form
MMS–2014 and not paid by EFT.

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(g) When is a payment to ONRR due? (1) All payments are due to ONRR at the time law, regulation, or
lease terms require unless ONRR approves a change according to part 1243 of this chapter. If you file
an appeal, and the requirement to submit payment is suspended, the original payment due date for
purposes such as calculating late payment interest is not changed.
(2) If you use the U.S. Postal Service, courier, or overnight mail to send your payment, it is due at the
ONRR addresses in paragraphs (d) and (e) of this section before 4 p.m. Mountain Time on the due date,
regardless of when you sent it.
(3) If you use EFT to send your payment, it is due in the ONRR account by the payment due date. You
are responsible for your actions or your bank's actions that cause a late or incorrect payment. You will
not be held responsible for mechanical or system failures of EFT payments.
(h) What happens if payments are late or overdue? (1) If ONRR receives your payment late, ONRR will
impose a late-payment interest charge under §1218.54.
(2) If you do not pay an amount you owe, ONRR may assess civil penalties under part 1241 of this
chapter or other applicable regulations.
[62 FR 19498, Apr. 22, 1997, as amended at 66 FR 45773, Aug. 30, 2001; 67 FR 19112, Apr. 18, 2002;
73 FR 15898, Mar. 26, 2008]

§ 1218.52 How does a lessee designate a Designee?
top
(a) If you are a lessee under 30 U.S.C. 1702(7), and you want to designate a person to make all or part
of the payments due under a lease on your behalf under 30 U.S.C. 1712(a), you must notify ONRR or
the applicable delegated state in writing of such designation by submitting Form MMS–4425,
Designation Form for Royalty Payment Responsibility. Your notification for each lease must include the
following:
(1) The lease number for the lease;
(2) The type of products you make payments for e.g., oil, gas.
(3) The type of payments you are responsible for e.g., royalty, minimum royalty, rental.
(4) Whether you are:
(i) A lessee of record (record title owner) in the lease; or
(ii) An operating rights owner (working interest owner) in the lease, and the percentage of your operating
rights ownership in the lease;
(5) The name, address, Taxpayer Identification Number (TIN), and phone number of your Designee;
(6) The name, address, and phone number of the individual to contact for the person you named in
paragraph (a)(5) of this section;
(7) Your TIN;
(8) The date the designation is effective;
(9) The date the designation terminates, if applicable, and
(10) A copy of the written designation;
(b) The person you designate under paragraph (a) of this section is your Designee under 30 U.S.C.
1701(24) and 30 U.S.C. 1712(a).

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(c) If you want to terminate a designation you made under paragraph (a) of this section, you must submit
a revised Form MMS–4425 before the termination stating:
(1) The date the designation is due to terminate; and
(2) If you are not reporting and paying royalties and making other payments to ONRR, a new
designation under paragraph (a) of this section.
(d) ONRR may require you to provide notice when there is a change in the percentage of your record
title or operating rights ownership.
[62 FR 42066, Aug. 5, 1997, as amended at 73 FR 15898, Mar. 26, 2008]

§ 1218.53 Recoupment of overpayments on Indian mineral leases.
top
(a) Whenever an overpayment is made under an Indian oil and gas lease, a payor may recoup the
overpayment through a recoupment on Form MMS–2014 against the current month's royalties or other
revenues owed on the same lease. However, for any month a payor may not recoup more than 50
percent of the royalties or other revenues owed in that month under an individual allotted lease or more
than 100 percent of the royalties or other revenues owed in that month under a tribal lease.
(b) With written permission authorized by tribal statute or resolution, a payor may recoup an
overpayment against royalties or other revenues owed in that month under other leases for which that
tribe is the lessor. A copy of the tribe's written permission must be furnished to ONRR pursuant to
instructions for reporting recoupments in the ONRR revenue reporter handbook. See part 1210 of this
chapter. Recouping overpayments on one allotted lease from royalties paid to another allotted lease is
specifically prohibited.
(c) Overpayments subject to recoupment under this section include all payments made in excess of the
required payment for royalty, rental, bonus, or other amounts owed as specified by statute, regulation,
order, or terms of an Indian mineral lease.
(d) The ONRR Director or his/her designee may order any payor to not recoup any amount for such
reasonable period of time as may be necessary for ONRR to review the nature and amount of any
claimed overpayment.
[60 FR 3087, Jan. 13, 1995, as amended at 67 FR 19112, Apr. 18, 2002]

§ 1218.54 Late payments.
top
(a) An interest charge shall be assessed on unpaid and underpaid amounts from the date the amounts
are due.
(b) The interest charge on late payments shall be at the underpayment rate established by the Internal
Revenue Code, 26 U.S.C. 6621(a)(2) (Supp. 1987).
(c) Interest will be charged only on the amount of the payment not received. Interest will be charged only
for the number of days the payment is late.
(d) A portion of the interest collected will be paid to a State where the State shares in mineral revenues
from Federal leases.
(e) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.

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[49 FR 37346, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990; 57 FR 62206, Dec. 30,
1992]

§ 1218.55 Interest payments to Indians.
top
(a) All interest collected from unpaid or underpayments on Indian tribal or allotted leases will be paid to
the tribe or allottee.
(b) Any disbursement of Indian mineral revenues not made by the due date as required in §1219.103 of
this chapter shall accrue interest.
(c) Interest shall be computed at the underpayment rate established by the Internal Revenue Code, 26
U.S.C. 6621(a)(2) (Supp. 1987).
(d) The interest shall be payable only for the number of days the disbursement is late.
[49 FR 37346, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990]

§ 1218.56 Definitions.
top
Terms used in this subpart shall have the same meaning as in 30 U.S.C. 1702.
[49 FR 37346, Sept. 21, 1984. Redesignated at 51 FR 15767, Apr. 28, 1986]

Subpart C—Oil and Gas, Onshore
top

§ 1218.100 Royalty and rental payments.
top
(a) Payment of royalties and rentals. As specified under the provisions of the lease, the lessee shall
submit all rental payments when due and shall pay in value or deliver in production all royalties in the
amounts of value or production determined by ONRR to be due.
(b) If the lessor elects to take royalty in oil or gas, unless otherwise agreed upon, such royalty shall be
delivered on the leasehold, by the lessee to the order of and without cost to the lessor, as instructed by
the Director.
(c) Method of payment. The payor shall tender all payments in accordance with §1218.51.
[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and amended at 52 FR
23815, June 25, 1987]

§ 1218.101 Royalty and rental remittance (naval petroleum reserves).
top
Remittance covering payments of royalty or rental on naval petroleum reserves must be accomplished
by necessary identification information and sent direct to the Director, Naval Petroleum Reserves in
California.

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[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983]

§ 1218.102 Late payment or underpayment charges.
top
(a) The failure to make timely or proper payments of any monies due pursuant to leases, permits, and
contracts subject to these regulations will result in the collection by the ONRR of the full amount past
due plus a late payment charge. Exceptions to this late payment charge may be granted when estimated
payments on minerals production have already been made timely and otherwise in accordance with
instructions provided by ONRR to the payor. However, late payment charges assessed with respect to
any Indian lease, permit, or contract shall be collected and paid to the Indian or tribe to which the
amount overdue is owed.
(b) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. mountain time are
considered received the following business day.
(c) Late payment charges apply to all underpayments and payments received after the date due. The
charges include production and minimum royalties; assessments for liquidated damages; administrative
fees and payments by purchasers of royalty taken-in-kind; or any other payments, fees, or assessments
that a lessee/operator/permittee/payor/royalty taken-in-kind purchaser is required to pay by a specified
date. The failure to pay past due amounts, including late-payment charges, will result in the initiation of
other enforcement proceedings.
(d) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.
[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and amended at 49 FR
37347, Sept. 21, 1984; 57 FR 41868, Sept. 14, 1992; 57 FR 62206, Dec. 30, 1992; 67 FR 19112, Apr.
18, 2002]

§ 1218.103 Payments to States.
top
(a) Any amount that is payable by ONRR to a State but is not paid on the due date, as specified in
§1219.100 of this chapter, or that is held in a suspense account pending resolution of a dispute as
specified in §1219.101 of this chapter, shall accrue interest payable to the State.
(b) Interest shall be computed at the underpayment rate established by the Internal Revenue Code, 26
U.S.C. 6621(a)(2) (Supp. 1987).
(c) Interest shall be computed only for the number of days the disbursement is late. In the case of
suspended amounts subject to interest, it shall be computed beginning with the calendar day following
the day that the monies normally would have been paid to the State had they not been in suspense.
[49 FR 37347, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990]

§ 1218.104 Exemption of States from certain interest and penalties.
top
(a) States are exempt from being assessed for any interest or penalties found to be due against the
Department of the Interior for failure to comply with the Emergency Petroleum Allocation Act of 1973, as
amended, or any regulation issued by the Secretary of Energy thereunder concerning the certification or
processing of crude oil taken in-kind as royalty by the Secretary.

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(b) Any State shall be assessed for its share of any overcharge resulting from a determination that DOI
failed to comply with the Emergency Petroleum Allocation Act of 1973, as amended. Each State's share
shall be assessed against monies owed to the State. Such assessment shall be first against monies
owed to such State as a result of royalty audits prior to January 12, 1983, the enactment date of the
Federal Oil and Gas Royalty Management Act of 1982, then against other monies owed. The State shall
be liable for any balance.
(c) A State's liability for repayment of an overcharge under this section shall exist for any amounts
resulting from a judgment in a civil suit or as the result of settlement of a claim through a negotiated
agreement. State liability would be offset against future mineral revenue distributions to the State.
[49 FR 37347, Sept. 21, 1984]

§ 1218.105 Definitions.
top
Terms used in this subpart have the same meaning as in 30 U.S.C. 1702.
[49 FR 37347, Sept. 21, 1984]

Subpart D—Oil, Gas and Sulfur, Offshore
top

§ 1218.150 Royalties, net profit shares, and rental payments.
top
(a) As specified under the provisions of the lease, the lessee shall submit all rental payments when due
and shall pay in value or deliver in production all royalties and net profit shares in the amounts of value
or production determined by ONRR to be due.
(b) The failure to make timely or proper payments of any monies due pursuant to leases, permits, and
contracts subject to these regulations will result in the collection of the amount past due plus a late
payment charge. Exceptions to this late payment charge may be granted when estimated payments on
minerals production have already been made timely and otherwise in accordance with instructions
provided by ONRR to the payor.
(c) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. mountain time are
considered received the following business day.
(d) Late payment charges apply to all underpayments and payments received after the date due. These
charges include production and minimum royalties; assessments for liquidated damages; administrative
fees and payments by purchasers of royalty taken-in-kind; or any other payments, fees, or assessments
that a lessee/operator/payor/permittee/royalty taken-in-kind purchaser is required to pay by a specified
date. The failure to pay past due amounts, including late payment charges, will result in the initiation of
other enforcement proceedings.
(e) An overpayment on a lease or leases, excluding rental payments, may be offset against an
underpayment on a different lease or leases to determine a net underpayment on which interest is due
pursuant to conditions specified in §1218.42.
[47 FR 22528, May 25, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and amended at 49 FR
37347, Sept. 21, 1984; 52 FR 23815, June 25, 1987; 57 FR 41868, Sept. 14, 1992; 57 FR 62206, Dec.
30, 1992; 67 FR 19112, Apr. 18, 2002]

§ 1218.151 Rental fees.

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top
The annual rental paid in any year is in addition to, and is not credited against, any royalties due from
production. The lessee must pay an annual rental as shown in paragraphs (a), (b), and (c) of this
section. Discovery means one or more wells on the lease that meet the requirements in part 250,
subpart A of this title.
(a) This paragraph applies to any lease not covered by paragraph (b) or paragraph (c) of this section.

Issued as a
result of a
For—
sale held—
(1) An oil and Before
gas lease
March 26,
2001
(2) An oil and After March
gas lease
26, 2001

(3) A mineral
lease for
other than oil
or gas
(4) A mineral
lease for
other than oil
or gas

Before
March 26,
2001

The lessee must pay rental—
On or before the first day of each lease year
before the discovery of oil or gas on the lease.
On or before the first day of each lease year
before the discovery of oil or gas on the lease,
then on or before the last day of each lease year
in any full year in which royalties on production
are not due.
On or before the first day of each lease year
before the discovery of paying quantities.

After March On or before the first day of each lease year
26, 2001
before the date the first royalty payment is due
on the lease, then on or before the last day of
each lease year in any full year in which royalties
on production are not due.

(b) This paragraph applies to any lease created by segregating a portion of a producing lease when
there is no actual or allocated production on the segregated portion. The lessee must pay an annual
rental for the segregated portion at the rate specified in the lease. The lessee must pay the rental as
shown in the following table.

If the lease results
from a
segregation—
(1) Before March 26,
2001
(2) After March 26,
2001

The lessee must pay rental—
On or before the first day of each lease year before the
discovery of oil or gas on the segregated portion.
On or before the first day of each lease year before the
discovery of oil or gas on the lease, then on or before
the last day of each lease year in any full year in which
royalties on production are not due.

(c) For leases issued subject to the net profit sharing provisions, annual rental payments shall be due
and payable in advance, on the first day of each lease year which commences prior to the date the first
profit share payment becomes due. The owner of any lease created by the segregation of a portion of a
lease subject to net profit sharing provisions, shall pay an annual rental for such segregated portion at
the rate per acre or hectare specified in the lease. This rental shall be payable each year following the
year in which the segregation becomes effective and shall continue to be due and payable, in advance,
on the first day of each year which commences prior to the date the first profit share payment becomes
due.

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[44 FR 38276, June 29, 1979, as amended at 45 FR 69175, Oct. 17, 1980; 47 FR 25972, June 16,
1982. Redesignated at 47 FR 47006, Oct. 22, 1982, and at 48 FR 35641, Aug. 5, 1983; 66 FR 11518,
Feb. 23, 2001; 67 FR 19112, Apr. 18, 2002]

§ 1218.152 Fishermen's Contingency Fund.
top
Upon the establishment of the Fishermen's Contingency Fund, any holder of a lease issued or
maintained under the Outer Continental Shelf Lands Act and any holder of an exploration permit or of an
easement or right-of-way for the construction of a pipeline, shall pay an amount specified by the
Director, ONRR, who shall assess and collect the specified amount from each holder and deposit it into
the Fund. With respect to prelease exploratory drilling permits, the amount will be collected at the time of
issuance of the permit.
[52 FR 5458, Feb. 23, 1987]

§ 218.153 [Reserved]
top

§ 1218.154 Effect of suspensions on royalty and rental.
top
(a) ONRR will not relieve the lessee of the obligation to pay rental or minimum royalty for or during the
suspension if the Regional Supervisor:
(1) Grants a suspension of operations or production, or both, at the request of the lessee; or
(2) Directs a suspension of operations or production, or both, under 30 CFR 250.173(a).
(b) ONRR will not require a lessee to pay rental or minimum royalty for or during the suspension if the
Regional Supervisor directs a suspension of operations or production, or both, except as provided in (a)
(2) of this section.
(c) If the lease anniversary date falls within a period of suspension for which no rental or minimum
royalty payments are required under paragraph (b) of this section, the prorated rentals or minimum
royalties are due and payable as of the date the suspension period terminates. These amounts shall be
computed and notice thereof given the lessee. The lessee shall pay the amount due within 30 days after
receipt of such notice. The anniversary date of a lease shall not change by reason of any period of lease
suspension or rental or royalty relief resulting therefrom.
[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated and amended at 47 FR
47006, 47007, Oct. 22, 1982. Further redesignated at 48 FR 35641, Aug. 5, 1983 and amended at 51
FR 19063, May 27, 1986; 54 FR 50616, Dec. 8, 1989; 64 FR 72775, Dec. 28, 1999; 73 FR 15898, Mar.
26, 2008]

§ 1218.155 Method of payment.
top
(a) Payment of royalties and rentals. With the exception of first-year rental, the payor shall tender all
payments in accordance with §1218.51. First-year rental shall be paid in accordance with paragraph (c)
of this section.
(b) Payment of the one-fifth bonus bid amount. (1) Each lease bid must include a payment for the onefifth bonus bid deposit amount unless the bidder is otherwise directed by the Secretary. Further
instructions on how to make payment with the bid will be included in the notice of each lease offering.

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EFT may be used as a method of payment for the one-fifth bonus bid amount.
(2) Beginning with lease offerings held after February 1, 1984, the one-fifth bonus amount received from
a high bidder shall be deposited into an escrow account created pursuant to an agreement between the
Departments of the Interior and Treasury, pending acceptance or rejection of the bid. The one-fifth
bonus funds will be invested in public debt securities. Investment of this amount by the U.S. Government
does not indicate acceptance of the bid. The one-fifth bonus amounts submitted with bids other than the
highest valid bid will be returned to respective bidders after bids are opened, recorded, and ranked.
Return of such amounts will not affect the status, validity, or ranking of bids. The one-fifth bonus bid
amount received from any high bidder and held by the Government pending acceptance or rejection, will
be returned with actual interest earned, if the bid is subsequently rejected. The interest accrued during
the period held in the account pending acceptance or rejection of the bid will accrue to the Government
when the bid is accepted.
(c) Payment of the four-fifths bonus bid amount and the first year's rental. Payment shall be made to
ONRR by EFT unless otherwise directed by the Secretary. The payment by EFT via the FRCS must be
received by the Federal Reserve Bank of New York no later than noon, eastern standard time, on the
11th business day after receipt of the lease forms by the successful bidder. A “business day” is
considered to be a day on which the OCS regional office issuing the lease is open for business. The
lease will not be executed by the appropriate ONRR official until payment is received. Failure to remit by
EFT or as directed by the Secretary within the time specified above will result in forfeiture of the one-fifth
bonus bid amount and the lease will not be executed by the appropriate ONRR official. Payors will not
be held responsible for late payment due to actions beyond their control, such as mechanical or systems
failure of FRCS or FDS. Payors will be held responsible for incorrect actions of their bank which result in
late payments. A 2-day grace period will be allowed to make up a deficient payment, but a late payment
charge will be assessed for this late payment and a penalty will also be assessed if appropriate. Late
payment charges will be assessed in accordance with subpart B of this part.
(d) General. (1) Payors using the appropriate means of payment (EFT, check, etc.) may pay for multiple
lease obligations with a single remittance but must ensure that the payment complies with subpart B of
this part and the remittance advice adequately identifies the single payment. The format to be used for
such identification will be provided by the ONRR Accounting Center.
(2) Where to pay.
(3) The ONRR mailing addresses for payments to ONRR are specified in §1218.51.
(4) Payments received at the ONRR addresses after 4 p.m. mountain time are considered received the
following business day.
(e) Miscellaneous payments. Payments shall be made to the manager of the appropriate Outer
Continental Shelf field office by cash, check or bank draft payable to “Department of the Interior—
ONRR” for miscellaneous payments such as:
(1) Pipeline rights-of-way application filing fees and rentals, pipeline accessory site rentals and
application fees, and other related costs.
(2) Filing and approval fees for transfers of interest in leases.
[49 FR 8605, Mar. 8, 1984, as amended at 52 FR 23815, June 25, 1987; 53 FR 43201, Oct. 26, 1988;
57 FR 41868, Sept. 14, 1992; 62 FR 19499, Apr. 22, 1997; 67 FR 19112, Apr. 18, 2002; 73 FR 15898,
Mar. 26, 2008]

§ 1218.156 Definitions.
top
Terms used in this subpart have the same meaning as in 30 U.S.C. 1702.
[52 FR 23815, June 25, 1987]

Subpart E—Solid Minerals—General

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top

§ 1218.200 Payment of royalties, rentals, and deferred bonuses.
top
As specified under the provisions of the lease, the lessee shall submit all rental and deferred bonus
payments when due and shall pay in value all royalties in the amount determined by ONRR to be due.
[52 FR 23815, June 25, 1987]

§ 1218.201 Method of payment.
top
You must tender all payments in accordance with §1218.51, except as follows:
(a) For purposes of this section, report means the Solid Minerals Production and Royalty Report, Form
MMS–4430, rather than the Form MMS–2014.
(b) For Form MMS–4430 payments, include both your customer identification and your customer
document identification numbers on your payment document, rather than the information required under
§1218.51(f)(1).
(c) For a rental payment that is not reported on Form MMS–4430, include the ONRR Courtesy Notice
when provided or write your customer identification number and Government-assigned lease number on
the payment document, rather than the information required under §1218.51(f)(4)(iii).
[66 FR 45773, Aug. 30, 2001]

§ 1218.202 Late payment or underpayment charges.
top
(a) The failure to make timely or proper payment of any monies due pursuant to leases and contracts
subject to these rules will result in the collection by ONRR of the full amount past due plus a late
payment charge. Exceptions to this late payment charge may be granted when estimated payments on
minerals production have already been made timely and otherwise in accordance with instructions
provided by ONRR to the operator/lessee. However, late payment charges assessed with respect to any
Indian lease, permit, or contract shall be collected and paid to the Indian or tribe to which the amount
overdue is owed.
(b) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. mountain time are
considered received the following business day.
(c) Late payment charges are calculated on the basis of a percentage assessment rate. In the absence
of a specific lease, permit, license or contract provision prescribing a different rate, this percentage
assessment rate is prescribed by the Department of the Treasury as the “Treasury Current Value of
Funds Rate.”
(d) This rate is available in the Treasury Fiscal Requirements Manual Bulletins that are published prior to
the first day of each calendar quarter for application to overdue payments or underpayments in the new
calendar quarter. The rate is also published in the Notices section of theFederal Registerand indexed
under “Fiscal Service/Notices/Funds Rate; Treasury Current Value.”
(e) Late payment charges apply to all underpayments and payments received after the date due. These
charges include production, minimum, or advance royalties; assessments for liquidated damages; or any

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other payments, fees, or assessments that an operator/lessee is required to pay by a specified date. The
failure to pay past due payments, including late payment charges, will result in the initiation of other
enforcement proceedings.
(f) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.
[47 FR 33195, July 30, 1982; 47 FR 53366, Nov. 26, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983,
and further redesignated at 52 FR 23815, June 25, 1987, as amended at 57 FR 41868, Sept. 14, 1992;
57 FR 62207, Dec. 30, 1992; 59 FR 14559, Mar. 29, 1994; 65 FR 55189, Sept. 13, 2000; 67 FR 19112,
Apr. 18, 2002]

§ 1218.203 Recoupment of overpayments on Indian mineral leases.
top
(a) Whenever an overpayment is made under an Indian solid mineral lease, a payor may recoup the
overpayment through a recoupment on Form MMS–4430 against the current month's royalties or other
revenues owed on the same lease. However, for any month a payor may not recoup more than 50
percent of the royalties or other revenues owed in that month under an individual allotted lease or more
than 100 percent of the royalties or other revenues owed in that month under a tribal lease.
(b) With written permission authorized by tribal statute or resolution, a payor may recoup an
overpayment against royalties or other revenues owed in that month under other leases for which that
tribe is the lessor. A copy of the tribe's written permission must be furnished to ONRR for reporting
recoupments. Call 1–888–201–6416 for instructions. Recouping overpayments on one allotted lease
from royalties paid to another allotted lease is specifically prohibited.
(c) Overpayments subject to recoupment under this section include all payments made in excess of the
required payment for royalty, rental, bonus, or other amounts owed as specified by statute, regulation,
order, or terms of an Indian mineral lease.
(d) The ONRR Director or his/her designee may order any payor to not recoup any amount for such
reasonable period of time as may be necessary for ONRR to review the nature and amount of any
claimed overpayment.
[60 FR 3087, Jan. 13, 1995, as amended at 66 FR 45773, Aug. 30, 2001; 66 FR 50827, Oct. 5, 2001]

Subpart F—Geothermal Resources
top

§ 1218.300 Payment of royalties, rentals, and deferred bonuses.
top
As specified under the provisions of the lease, the lessee shall submit all rental and deferred bonus
payments when due and shall pay in value all royalties in the amount determined by ONRR to be due.
[52 FR 23815, June 25, 1987]

§ 1218.301 Method of payment.
top
The payor shall tender all payments in accordance with §1218.51.

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[52 FR 23815, June 25, 1987]

§ 1218.302 Late payment or underpayment charges.
top
(a) The failure to make timely or proper payment of any monies due pursuant to leases and contracts
subject to these regulations will result in the collection by the ONRR of the full amount past due plus a
late payment charge. Exceptions to this late payment charge may be granted when estimated payments
on minerals production have already been made timely and otherwise in accordance with the
instructions provided by the ONRR to the payor.
(b) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. Mountain Time are
considered received the following business day.
(c) Late payment charges are calculated on the basis of a percentage assessment rate. In the absence
of a specific lease, permit, license or contract provision prescribing a different rate, this percentage
assessment rate is prescribed by the Department of the Treasury as the “Treasury Current Value of
Funds Rate.”
(d) This rate is available in the Treasury Fiscal Requirements Manual Bulletins that are published prior to
the first day of each calendar quarter for application to overdue payments or underpayments in the new
calendar quarter. The rate is also published in the Notices section of theFederal Registerand indexed
under “Fiscal Service/Notices/Funds Rate; Treasury Current Value.”
(e) Late payment charges apply to all underpayments and payments received after the date due. These
charges include production, minimum, and compensatory royalties; assessments for liquidated
damages; administrative fees and payments by purchasers of royalty taken-in-kind; or any other
payments, fees, or assessments that a lessee/operator/payor/royalty taken-in-kind purchaser is required
to pay by a specified date. The failure to pay past due payments, including late payment charges, will
result in the initiation of other enforcement proceedings.
(f) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.
[47 FR 22528, May 25, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and further redesignated at
51 FR 15767, Apr. 28, 1986 and 52 FR 23815, June 25, 1987, as amended at 57 FR 41868, Sept. 14,
1992; 57 FR 62207, Dec. 30, 1992; 59 FR 14559, Mar. 29, 1994; 65 FR 55189, Sept. 13, 2000; 67 FR
19112, Apr. 18, 2002]

§ 1218.303 May I credit rental towards royalty?
top
(a)(1) For Class II leases as defined in §1206.351 of this chapter, and for Class III leases as defined in
that section that elect under 43 CFR 3200.7(a)(2) to be subject to all of the BLM regulations promulgated
for leases issued after August 8, 2005 you may credit the annual rental that you paid before the first day
of the year for which the annual rental is owed against the royalty due for the lease year for which the
rental was paid. You may not apply any annual rental paid in excess of the royalty due for a particular
lease year as a credit against any royalty due in any subsequent lease year.
(2) For purposes of this section, the term “royalty” includes any advanced royalty payable under 30
U.S.C. 1004(f) for a cessation of production.
(b) If portions of your lease are located both within and outside of a participating area, you may credit
against royalty under paragraph (a) only that percentage of the rental you paid that corresponds to the
percentage of the lease within the participating area on a per-acre basis.

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[72 FR 24468, May 2, 2007]

§ 1218.304 May I credit rental towards direct use fees?
top
You may not credit annual rental toward direct use fees you are required to pay that year under
§1206.356 of this chapter. You must pay the direct use fees in addition to the annual rental due.
[72 FR 24468, May 2, 2007]

§ 1218.305 How do I pay advanced royalties I owe under BLM regulations?
top
If you pay advanced royalties under 43 CFR 3212.15(a)(1) to retain your lease:
(a) You must pay an advanced royalty monthly equal to the average monthly royalty you paid under 30
CFR part 1206, subpart H (including the amount against which you applied the annual rental as a credit)
for the last 3 years the lease was producing. If your lease has been producing for less than 3 years, then
use the average monthly royalty payment for the entire period your lease has been producing
continuously;
(b) The ONRR must receive your advanced royalty payment before the end of each full calendar month
in which no production occurs;
(c) You may credit any advanced royalty you pay against production royalties you owe after your lease
resumes production. You may not reduce the amount of any production royalty paid for any year below
zero.
[72 FR 24468, May 2, 2007]

§ 1218.306 May I receive a credit against production royalties for in-kind deliveries of
electricity I provide under contract to a State or county government?
top
(a) You may receive a credit against royalties for in-kind deliveries of electricity you provide under
contract to a State or county government if:
(1) The State or county to which you provide electricity would receive a portion of the royalties you paid
in money for the lease under 30 U.S.C. 191 or 30 U.S.C. 1019, except as otherwise provided under the
Mineral Leasing Act for Acquired Lands, 30 U.S.C. 355, because your lease is located in that State or
county. If your lease is located in more than one State or county, the revenues are paid to the respective
States or counties based on their proportionate shares of the total acres in the lease;
(2) The ONRR approves in advance your contract with the State or county to which you are providing inkind electricity; and
(3) Your contract provides that you will use the wholesale value of the electricity for the area where your
lease is located to establish the specific methodology to determine the amount of the credit; and
(b) The maximum credit you may take under this section is equal to the portion of the royalty revenue
that ONRR would have paid to the State or county that is a party to the contract had you paid royalty in
money on all of the electricity you delivered to the State or county based on the wholesale value of the
electricity. You must pay in money any royalty amount that is not offset by the credit allowed under this
section, calculated based on the wholesale value of the electricity.
(c) The electricity the State or county government receives from you satisfies the Secretary's payment

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obligation to the State or county under 30 U.S.C. 191 or 30 U.S.C. 1019.
[72 FR 24468, May 2, 2007]

§ 1218.307 How do I pay royalties due for my existing leases that qualify for near-term
production incentives under BLM regulations?
top
If you qualify for a production incentive under BLM regulations at 43 CFR subpart 3212, your royalty due
on the production BLM determines to be qualified for a production incentive under 43 CFR 3212.23 and
3212.24 is 50 percent of the amount of the total royalty that would otherwise be due under 30 CFR part
1206, subpart H.
[72 FR 24468, May 2, 2007]

Subpart G—Indian Lands [Reserved]
top

Subpart H—Service of Official Correspondence
top

Source: 71 FR 51751, Aug. 31, 2006, unless otherwise noted.
§ 2218.500 What is the purpose of this subpart?
top
This subpart contains instructions for designating a specific addressee of record for service of official
correspondence using Form MMS–4444, Addressee of Record Designation for Service of Official
Correspondence.

§ 1218.520 What definitions apply to this subpart?
top
Address of record is the address to which official correspondence is served.
Addressee of record for service of official correspondence is the person or position to whom official
correspondence is served, as specified on Form MMS–4444, or in the absence of such a form, as
established in §1218.540(b)(2). The addressee of record in a part 1290, appeal will be the person or
representative making the appeal.
Official correspondence is all correspondence from ONRR or our delegates, served on companies
related to matters such as: forms reporting, audit and compliance, enforcement notices, rental courtesy
notices, and invoices.

§ 1218.540 How does ONRR serve official correspondence?
top
ONRR will serve all Notices of Noncompliance or Civil Penalty following the procedures in part 1241. We
will serve all other documents following the procedures in this section.

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(a) Method of service. ONRR will serve all official correspondence to the addressee of record by one of
the following methods:
(1) U.S. Postal Service mail;
(2) Personal delivery made pursuant to the law of the State in which the service is effected; or
(3) Private mailing service (e.g., United Parcel Service, or Federal Express), with signature and date
upon delivery, acknowledging the addressee of record's receipt of the official correspondence document.
(b) Selection of addressee of record information. (1) We will address official correspondence to the party
shown on the most recently received Form MMS–4444 for the type of correspondence at issue. The
company or reporting entity is responsible for notifying ONRR of any name or address changes on Form
MMS–4444. The addressee of record in a part 1290, appeal will be the person or representative making
the appeal.
(2) If we do not receive addressee of record information from you on Form MMS–4444, we may use the
individual name and address, position title, or department name and address in our database, based on
previous formal or informal communications or correspondence for the type of official correspondence at
issue. Alternately, we may obtain contact information from public records and send correspondence to:
(i) The registered agent;
(ii) Any corporate officer; or
(iii) The addressee of record shown in the files of any State Secretary; Corporate Commission; Federal
or state agency that keeps official records of business entities or corporations; or other appropriate
public records for individuals, business entities, or corporations.
(c) Dates of service. Except as provided in paragraph (d) of this section, ONRR considers official
correspondence as served on the date that it is received at the address of record. A receipt, signed and
dated by any person at that address, is evidence of service and of the date of service. If official
correspondence is served in more than one manner and the dates differ, the date of the earliest service
is used[smc1].
(d) Constructive service. If we cannot make delivery to the addressee of record after making a
reasonable effort, we deem official correspondence as constructively served 7 days after the date that
we mail the document. This provision covers situations such as those where no delivery occurs
because:
(1) The addressee of record has moved without filing a forwarding address;
(2) The forwarding order has expired;
(3) Delivery was expressly refused; or
(4) The document was unclaimed and the attempt to deliver is substantiated by either:
(i) The U.S. Postal Service;
(ii) A private mailing service, as described in this section; or
(iii) The person who attempted to make delivery using some other method of service.

§ 1218.560 How do I submit Form MMS–4444?
top
A copy of Form MMS–4444 and instructions may be obtained from ONRR. It will also be posted on the
ONRR Web site. Submit the completed, signed form to the address designated on the Form MMS–4444

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instructions.

§ 1218.580 When do I submit Form MMS–4444?
top
Initially, you must submit Form MMS–4444 by November 29, 2006, and subsequently, within 2 weeks of
any change of your address.
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e-CFR Data is current as of October 15, 2010
Title 30: Mineral Resources
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PART 1218—COLLECTION OF MONIES AND PROVISION FOR GEOTHERMAL CREDITS
AND INCENTIVES

Section Contents

Subpart A—General Provisions
§ 1218.10 Information collection.
§ 1218.40 Assessments for incorrect or late reports and failure to report.
§ 1218.41 Assessments for failure to submit payment of same amount as Form MMS–2014
or bill document or to provide adequate information.
§ 1218.42 Cross-lease netting in calculation of late-payment interest.
Subpart B—Oil and Gas, General
§ 1218.50
§ 1218.51
§ 1218.52
§ 1218.53
§ 1218.54
§ 1218.55
§ 1218.56

Timing of payment.
How to make payments.
How does a lessee designate a Designee?
Recoupment of overpayments on Indian mineral leases.
Late payments.
Interest payments to Indians.
Definitions.
Subpart C—Oil and Gas, Onshore

§ 1218.100
§ 1218.101
§ 1218.102
§ 1218.103
§ 1218.104
§ 1218.105

Royalty and rental payments.
Royalty and rental remittance (naval petroleum reserves).
Late payment or underpayment charges.
Payments to States.
Exemption of States from certain interest and penalties.
Definitions.
Subpart D—Oil, Gas and Sulfur, Offshore

§ 1218.150 Royalties, net profit shares, and rental payments.
§ 1218.151 Rental fees.
§ 1218.152 Fishermen's Contingency Fund.
§ 218.153 [Reserved]
§ 1218.154 Effect of suspensions on royalty and rental.
§ 1218.155 Method of payment.
§ 1218.156 Definitions.
Subpart E—Solid Minerals—General

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§ 1218.200
§ 1218.201
§ 1218.202
§ 1218.203

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Payment of royalties, rentals, and deferred bonuses.
Method of payment.
Late payment or underpayment charges.
Recoupment of overpayments on Indian mineral leases.
Subpart F—Geothermal Resources

§ 1218.300 Payment of royalties, rentals, and deferred bonuses.
§ 1218.301 Method of payment.
§ 1218.302 Late payment or underpayment charges.
§ 1218.303 May I credit rental towards royalty?
§ 1218.304 May I credit rental towards direct use fees?
§ 1218.305 How do I pay advanced royalties I owe under BLM regulations?
§ 1218.306 May I receive a credit against production royalties for in-kind deliveries of
electricity I provide under contract to a State or county government?
§ 1218.307 How do I pay royalties due for my existing leases that qualify for near-term
production incentives under BLM regulations?
Subpart G—Indian Lands [Reserved]
Subpart H—Service of Official Correspondence
§ 2218.500
§ 1218.520
§ 1218.540
§ 1218.560
§ 1218.580

What is the purpose of this subpart?
What definitions apply to this subpart?
How does ONRR serve official correspondence?
How do I submit Form MMS–4444?
When do I submit Form MMS–4444?

Authority: 25 U.S.C. 396 et seq., 396a et seq., 2101 et seq. ; 30 U.S.C. 181 et seq., 351 et
seq., 1001 et seq., 1701 et seq. ; 31 U.S.C. 3335; 43 U.S.C. 1301 et seq., 1331 et seq., and
1801 et seq.
Source: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61084,
Oct. 4, 2010.
Subpart A—General Provisions
top

§ 1218.10 Information collection.
top
The information collection requirements contained in this part have been approved by OMB under 44
U.S.C. 3501 et seq. The forms, filing date, and approved OMB clearance numbers are identified in
§1210.10 of this chapter.
[57 FR 41867, Sept. 14, 1992]

§ 1218.40 Assessments for incorrect or late reports and failure to report.
top
(a) An assessment of an amount not to exceed $10 per day may be charged for each report not received
by Office of Natural Resources Revenue (ONRR) by the designated due date for geothermal, solid

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minerals, and Indian oil and gas leases.
(b) An assessment of an amount not to exceed $10 per day may be charged for each incorrectly
completed report for geothermal, solid minerals, and Indian oil and gas leases.
(c) For purpose of assessments discussed in this section, a report is defined as follows:
(1) For coal and other solid minerals leases, a report is each line on Form MMS–4430, Solid Minerals
Production and Royalty Report; or on Form MMS–2014, Report of Sales and Royalty Remittance, as
appropriate.
(2) For Indian oil and gas and all geothermal leases, a report is each line on Form MMS–2014.
(d) An assessment under this section shall not be shared with a State, Indian tribe, or Indian allottee.
(e) The amount of the assessment to be imposed pursuant to paragraphs (a) and (b) of this section shall
be established periodically by ONRR. The assessment amount for each violation will be based on
ONRR's experience with costs and improper reporting. The ONRR will publish a Notice of the
assessment amount to be applied in theFederal Register.
[49 FR 37346, Sept. 21, 1984. Redesignated and amended at 51 FR 15767, Apr. 28, 1986; 52 FR
27546, July 22, 1987; 52 FR 37452, Oct. 7, 1987; 57 FR 52720, Nov. 5, 1992; 59 FR 38906, Aug. 1,
1994; 66 FR 45773, Aug. 30, 2001; 73 FR 15897, Mar. 26, 2008]

§ 1218.41 Assessments for failure to submit payment of same amount as Form MMS–
2014 or bill document or to provide adequate information.
top
(a) The ONRR may assess an amount not to exceed $250 when the amount of a payment submitted by
a reporter/payor for geothermal, solid minerals, and Indian oil and gas leases is not equivalent in amount
to the total of individual line items on the associated Form MMS–2014, Form MMS–4430, or a bill
document, unless ONRR has authorized the difference in amount.
(b) The ONRR may assess an amount not to exceed $250 for each payment for geothermal, solid
minerals, and Indian oil and gas leases submitted by a reporter/payor that cannot be automatically
applied to the associated Form MMS–2014, Form MMS–4430, or a bill document because of inadequate
or erroneous information submitted by the reporter/payor.
(c) For purposes of this section, inadequate or erroneous information is defined as:
(1) Absent or incorrect payor-assigned document number, required to be identified by the reporter/payor
in Block 4 on Form MMS–2014 (document 4 number), or the reuse of the same incorrect payor-assigned
document 4 number in a subsequent reporting period.
(2) Absent or incorrect bill document invoice number (to include the three-character alpha prefix and the
nine-digit number) or the payor-assigned document 4 number required to be identified by the
reporter/payor on the associated payment document, or the reuse of the same incorrect payor-assigned
document 4 number in a subsequent reporting period.
(3) Absent or incorrect name of the administering Bureau of Indian Affairs Agency/Area office; or the
word “allotted” or the tribe name on payment documents remitted to ONRR for an Indian tribe or allottee.
If the payment is made by EFT, the reporter/payor must identify the tribe/allottee on the EFT message
by a pre-established five-digit code.
(4) Absent or incorrect ONRR-assigned payor code on a payment document.
(5) Absent or incorrect identification on a payment document.
(d) For purposes of this section, the term “Form MMS–2014” includes submission of reports of royalty
information, such as Form MMS–4430.

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(e) For purposes of this section, a bill document is defined as any invoice that ONRR has issued for
assessments, late-payment interest charges, or other amount owed. A payment document is defined as
a check or wire transfer message.
(f) The amount of the assessment to be imposed pursuant to paragraphs (a) and (b) of this section shall
be established periodically by ONRR. The assessment amount will be based on ONRR's experience
with costs and improper reporting and/or payment as specified in this section. The ONRR will publish a
Notice in theFederal Registerof the assessment amount to be applied with the effective date.
[58 FR 45438, Aug. 30, 1993, as amended at 73 FR 15897, Mar. 26, 2008]

§ 1218.42 Cross-lease netting in calculation of late-payment interest.
top
(a) Interest due from a payor on any underpayment for any Federal mineral lease or leases (onshore or
offshore) and on any Indian tribal mineral lease or leases for any production month shall not be reduced
by offsetting against that underpayment any overpayment made by the payor on any other lease or
leases, except as provided in paragraph (b) of this section. Interest due from a payor or any
underpayment on any Indian allotted lease shall not be reduced by offsetting against any overpayment
on any other Indian allotted lease under any circumstances.
(b) Royalties attributed to production from a lease or leases which should have been attributed to
production from a different lease or leases may be offset to determine whether and to what extent an
underpayment exists on which interest is due if the following conditions are met:
(1) The error results from attributing and reporting an equal volume of production, produced from a lease
or leases during a particular production month, to a different lease or leases from which it was not
produced for the same or another production month;
(2) The payor is the same for the lease or leases to which production was attributed and the lease or
leases to which it should have been attributed;
(3) The payor submits production reports, pipeline allocation reports, or other similar documentary
evidence pertaining to the specific production involved which verifies the correct production information;
(4) The lessor is the same for the leases involved (in the case of Indian tribal leases, the same tribe is
the lessor); and
(5) The ultimate recipients of any royalty or other lease revenues under any applicable permanent
indefinite appropriations are the same for, and receive the same percentage of revenue from, the leases.
(c) If ONRR assesses late-payment interest and the payor asserts that some or all of the interest
assessed is not owed pursuant to the exception set forth in paragraph (b) of this section, the burden is
on the payor to demonstrate that the exception applies in the specific circumstances of the case.
(d) The exception set forth in paragraph (b) of this section shall not operate to relieve any payor of
liability imposed by statute or regulation for erroneous reporting.
[57 FR 62206, Dec. 30, 1992]

Subpart B—Oil and Gas, General
top

Source: 49 FR 37346, Sept. 21, 1984, unless otherwise noted.
§ 1218.50 Timing of payment.

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top
(a) Royalty payments are due at the end of the month following the month during which the oil and gas is
produced and sold except when the last day of the month falls on a weekend or holiday. In such cases,
payments are due on the first business day of the succeeding month. Rental payments are due as
specified by the lease terms.
(b) Invoices will be issued and payable as final collection actions. Payments made on an invoice are due
as specified by the invoice.
(c) All payments to ONRR are due as specified and are not deferred or suspended by reason of an
appeal having been filed unless such deferral or suspension is approved in writing by an authorized
ONRR official.
(d)(1) Notwithstanding the provisions of paragraph (a) of this section and corresponding lease terms and
§1210.52 of this chapter, the due date for submittal of royalty payments and Reports of Sales and
Royalty Remittance (Form MMS–2014) for the production months of July, August, September, and
October 2005 for Federal offshore and onshore oil and gas leases by oil and gas lessees or royalty
payors who make the certification required under paragraph (d)(2) of this section is extended until
January 3, 2006.
(2) The extended due dates in paragraph (d)(1) of this section will apply to royalty payments and
Reports of Sales and Royalty Remittance (Form MMS–2014) by any lessee or royalty payor who
certifies that a hurricane that struck the Gulf of Mexico coast of the United States in August or
September 2005 disrupted the lessee's or payor's operations to the extent that it prevented the lessee or
royalty payor from making an accurate royalty payment or submitting an accurate Form MMS–2014.
(3) A lessee's or royalty payor's certification under paragraph (d)(2) of this section that it is unable to
generate and submit either an accurate royalty report or an accurate royalty payment will extend the due
date for both royalty reporting and royalty payment.
(4) Paragraphs (d)(1) through (d)(3) of this section do not apply to Indian leases or to Federal leases for
minerals other than oil and gas.
(5) Certifications under paragraph (d)(2) of this section should be submitted either:
(i) By mail to: Robert Prael, Financial Manager, Office of Natural Resources Revenue, P.O. Box 25165,
MS 350B1, Denver, CO 80225–0165, or
(ii) By e-mail to [email protected] .
(e)(1) A lessee or royalty payor who submits a certification required under paragraph (d)(2) of this
section may rely on the extended due dates prescribed in paragraph (d)(1) of this section unless and
until ONRR notifies the lessee or royalty payor or operator that ONRR does not accept the certification.
(2) If ONRR notifies the lessee or royalty payor that ONRR does not accept the lessee's or royalty
payor's certification under paragraph (d)(2) of this section, the due date for royalty payments and
Reports of Sales and Royalty Remittance will be the date specified in the notice.
[49 FR 37346, Sept. 21, 1984, as amended at 70 FR 56853, Sept. 29, 2005; 73 FR 15898, Mar. 26,
2008]

§ 1218.51 How to make payments.
top
(a) Definitions.
ACH —Automated Clearing House. A type of EFT using the ACH network.

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Courtesy Notice —An ONRR-issued notice of rental or bonus due.
Deferred Bonus Payment —Lease bonus paid in equal annual installments over a specified number of
years.
EFT —Electronic Funds Transfer. Any paperless transfer of funds a bank initiates through an electronic
terminal. For ONRR purposes, EFT is limited to FEDWIRE and ACH transfers.
FEDWIRE —A type of EFT using the Federal Reserve Wire network.
Invoice document identification —The ONRR-assigned invoice document identification (three-alpha and
nine-numeric characters).
Payment —Any monies for royalty, bonus, rental, late payment charge, assessment, penalty, or other
money sent to ONRR.
Person —Any individual, firm, corporation, association, partnership, consortium, or joint venture (when
established as a separate entity). The term does not include Federal agencies.
Report —Form MMS–2014, Report of Sales and Royalty Remittance.
RIK —Royalty in kind.
(b) General instructions. You must make all payments to ONRR electronically to the extent it is cost
effective and practical. If you pay money to ONRR or to an Indian tribe or allottee, you must follow these
procedures:
(1) If ONRR instructs you to use EFT, you must use EFT for all payments to ONRR and/or a tribe.
(2) Contact ONRR before using EFT. ONRR will provide you with EFT payment instructions.
(3) Separate any payments on a Federal lease from any payments on an Indian lease.
(4) If you are not required to use EFT, use one of the following types of payment documents. ONRR
prefers that you use these payment documents in the order presented:
(i) Commercial check drawn on a solvent bank;
(ii) Certified check;
(iii) Cashier's check;
(iv) Money order;
(v) Bank draft drawn on a solvent bank; or
(vi) Federal Reserve check.
(5) You must include your payor code on all payments.
(6) You must pay in U.S. dollars.
(c) How to complete a non-EFT payment. (1) Make any payment on a Federal lease payable to:
“Department of the Interior—Office of Natural Resources Revenue” or “DOI-ONRR.”
(2) For an Indian allottee payment, send a separate payment for each Bureau of Indian Affairs (BIA)
agency or area office represented by the leases on your report or invoice document. You must include
the name of the applicable BIA agency or area office on your payment. Make your payment document
payable to: “Department of the Interior—Office of Natural Resources Revenue for BIA [Name] Agency
(allotted)” or “DOI-ONRR for BIA [Name] Agency (allotted).”

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(3) For an Indian tribal payment other than a lockbox payment, send a separate payment for each tribe
represented by the leases on your report or invoice document. You must include the name of the Indian
tribe on your payment. Make it payable to: “Department of the Interior—Office of Natural Resources
Revenue for BIA [Name of Tribe]” or “DOI-ONRR for BIA [Name of Tribe].”
(4) For an Indian tribal lockbox payment, follow the instructions ONRR provides you on how to report
and make the lockbox payment. These instructions are specific to each tribe's lockbox written
agreement with the bank authorized to receive payments on the tribe's mineral leases. You will receive
these instructions from ONRR when you are required to use a tribal lockbox for reports and payments.
(d) Where to send a non-EFT payment when you use the U.S. Postal Service. (1) For a payment to an
Indian tribal lockbox, send your payment to the appropriate tribal lockbox address.
(2) For a Federal nonproducing lease rental or deferred bonus payment, send it to:

Office of Natural Resources Revenue, P.O. Box 5640, Denver, CO 80217–5640.
(3) For all other Federal and Indian lease payments other than those going to an Indian tribal lockbox,
send them to:

Office of Natural Resources Revenue, P.O. Box 5810, Denver, CO 80217–5810.
(e) Where to send a non-EFT payment when you use a courier or overnight delivery service. You should
send this type of payment to:

Office of Natural Resources Revenue, Building 85, Denver Federal Center, Room A–614,
Denver, CO 80225–0165.
(f) How to prepare and what to include on your payment document. (1) For Form MMS–2014 payments,
you must include both your payor code and your payor-assigned document number.
(2) For invoice payments, including RIK invoice payments, you must include both your payor code and
invoice document identification.
(3) For bonus payments:
(i) For one-fifth bonus payments for offshore oil, gas, and sulphur leases, follow the instructions in the
Notice of Lease Offering.
(ii) For payment of the four-fifths bonus for an offshore lease, use EFT and follow the instructions in
§1218.155(c).
(iii) For the successful bidder's bonus in the competitive sale of a coal, geothermal, or offshore mineral
(other than oil, gas or sulfur) lease, follow the instructions and terms of the Notice of Competitive Lease
Sale.
(iv) For installment payments of deferred bonuses, you must use EFT.
(4) If you are paying a lease rental you must:
(i) See §1218.155(c) for instructions on how to pay first-year rentals of an offshore oil, gas, or sulfur
lease;
(ii) See the Notice of Lease Offering for instructions on how to pay first-year rentals other than those
covered in paragraph (f)(4)(i) of this section.
(iii) Include the ONRR Courtesy Notice, when provided, or write your payor code and governmentassigned lease number on the payment document when paying a rental that is not reported on Form
MMS–2014 and not paid by EFT.

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(g) When is a payment to ONRR due? (1) All payments are due to ONRR at the time law, regulation, or
lease terms require unless ONRR approves a change according to part 1243 of this chapter. If you file
an appeal, and the requirement to submit payment is suspended, the original payment due date for
purposes such as calculating late payment interest is not changed.
(2) If you use the U.S. Postal Service, courier, or overnight mail to send your payment, it is due at the
ONRR addresses in paragraphs (d) and (e) of this section before 4 p.m. Mountain Time on the due date,
regardless of when you sent it.
(3) If you use EFT to send your payment, it is due in the ONRR account by the payment due date. You
are responsible for your actions or your bank's actions that cause a late or incorrect payment. You will
not be held responsible for mechanical or system failures of EFT payments.
(h) What happens if payments are late or overdue? (1) If ONRR receives your payment late, ONRR will
impose a late-payment interest charge under §1218.54.
(2) If you do not pay an amount you owe, ONRR may assess civil penalties under part 1241 of this
chapter or other applicable regulations.
[62 FR 19498, Apr. 22, 1997, as amended at 66 FR 45773, Aug. 30, 2001; 67 FR 19112, Apr. 18, 2002;
73 FR 15898, Mar. 26, 2008]

§ 1218.52 How does a lessee designate a Designee?
top
(a) If you are a lessee under 30 U.S.C. 1702(7), and you want to designate a person to make all or part
of the payments due under a lease on your behalf under 30 U.S.C. 1712(a), you must notify ONRR or
the applicable delegated state in writing of such designation by submitting Form MMS–4425,
Designation Form for Royalty Payment Responsibility. Your notification for each lease must include the
following:
(1) The lease number for the lease;
(2) The type of products you make payments for e.g., oil, gas.
(3) The type of payments you are responsible for e.g., royalty, minimum royalty, rental.
(4) Whether you are:
(i) A lessee of record (record title owner) in the lease; or
(ii) An operating rights owner (working interest owner) in the lease, and the percentage of your operating
rights ownership in the lease;
(5) The name, address, Taxpayer Identification Number (TIN), and phone number of your Designee;
(6) The name, address, and phone number of the individual to contact for the person you named in
paragraph (a)(5) of this section;
(7) Your TIN;
(8) The date the designation is effective;
(9) The date the designation terminates, if applicable, and
(10) A copy of the written designation;
(b) The person you designate under paragraph (a) of this section is your Designee under 30 U.S.C.
1701(24) and 30 U.S.C. 1712(a).

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(c) If you want to terminate a designation you made under paragraph (a) of this section, you must submit
a revised Form MMS–4425 before the termination stating:
(1) The date the designation is due to terminate; and
(2) If you are not reporting and paying royalties and making other payments to ONRR, a new
designation under paragraph (a) of this section.
(d) ONRR may require you to provide notice when there is a change in the percentage of your record
title or operating rights ownership.
[62 FR 42066, Aug. 5, 1997, as amended at 73 FR 15898, Mar. 26, 2008]

§ 1218.53 Recoupment of overpayments on Indian mineral leases.
top
(a) Whenever an overpayment is made under an Indian oil and gas lease, a payor may recoup the
overpayment through a recoupment on Form MMS–2014 against the current month's royalties or other
revenues owed on the same lease. However, for any month a payor may not recoup more than 50
percent of the royalties or other revenues owed in that month under an individual allotted lease or more
than 100 percent of the royalties or other revenues owed in that month under a tribal lease.
(b) With written permission authorized by tribal statute or resolution, a payor may recoup an
overpayment against royalties or other revenues owed in that month under other leases for which that
tribe is the lessor. A copy of the tribe's written permission must be furnished to ONRR pursuant to
instructions for reporting recoupments in the ONRR revenue reporter handbook. See part 1210 of this
chapter. Recouping overpayments on one allotted lease from royalties paid to another allotted lease is
specifically prohibited.
(c) Overpayments subject to recoupment under this section include all payments made in excess of the
required payment for royalty, rental, bonus, or other amounts owed as specified by statute, regulation,
order, or terms of an Indian mineral lease.
(d) The ONRR Director or his/her designee may order any payor to not recoup any amount for such
reasonable period of time as may be necessary for ONRR to review the nature and amount of any
claimed overpayment.
[60 FR 3087, Jan. 13, 1995, as amended at 67 FR 19112, Apr. 18, 2002]

§ 1218.54 Late payments.
top
(a) An interest charge shall be assessed on unpaid and underpaid amounts from the date the amounts
are due.
(b) The interest charge on late payments shall be at the underpayment rate established by the Internal
Revenue Code, 26 U.S.C. 6621(a)(2) (Supp. 1987).
(c) Interest will be charged only on the amount of the payment not received. Interest will be charged only
for the number of days the payment is late.
(d) A portion of the interest collected will be paid to a State where the State shares in mineral revenues
from Federal leases.
(e) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.

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[49 FR 37346, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990; 57 FR 62206, Dec. 30,
1992]

§ 1218.55 Interest payments to Indians.
top
(a) All interest collected from unpaid or underpayments on Indian tribal or allotted leases will be paid to
the tribe or allottee.
(b) Any disbursement of Indian mineral revenues not made by the due date as required in §1219.103 of
this chapter shall accrue interest.
(c) Interest shall be computed at the underpayment rate established by the Internal Revenue Code, 26
U.S.C. 6621(a)(2) (Supp. 1987).
(d) The interest shall be payable only for the number of days the disbursement is late.
[49 FR 37346, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990]

§ 1218.56 Definitions.
top
Terms used in this subpart shall have the same meaning as in 30 U.S.C. 1702.
[49 FR 37346, Sept. 21, 1984. Redesignated at 51 FR 15767, Apr. 28, 1986]

Subpart C—Oil and Gas, Onshore
top

§ 1218.100 Royalty and rental payments.
top
(a) Payment of royalties and rentals. As specified under the provisions of the lease, the lessee shall
submit all rental payments when due and shall pay in value or deliver in production all royalties in the
amounts of value or production determined by ONRR to be due.
(b) If the lessor elects to take royalty in oil or gas, unless otherwise agreed upon, such royalty shall be
delivered on the leasehold, by the lessee to the order of and without cost to the lessor, as instructed by
the Director.
(c) Method of payment. The payor shall tender all payments in accordance with §1218.51.
[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and amended at 52 FR
23815, June 25, 1987]

§ 1218.101 Royalty and rental remittance (naval petroleum reserves).
top
Remittance covering payments of royalty or rental on naval petroleum reserves must be accomplished
by necessary identification information and sent direct to the Director, Naval Petroleum Reserves in
California.

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[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983]

§ 1218.102 Late payment or underpayment charges.
top
(a) The failure to make timely or proper payments of any monies due pursuant to leases, permits, and
contracts subject to these regulations will result in the collection by the ONRR of the full amount past
due plus a late payment charge. Exceptions to this late payment charge may be granted when estimated
payments on minerals production have already been made timely and otherwise in accordance with
instructions provided by ONRR to the payor. However, late payment charges assessed with respect to
any Indian lease, permit, or contract shall be collected and paid to the Indian or tribe to which the
amount overdue is owed.
(b) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. mountain time are
considered received the following business day.
(c) Late payment charges apply to all underpayments and payments received after the date due. The
charges include production and minimum royalties; assessments for liquidated damages; administrative
fees and payments by purchasers of royalty taken-in-kind; or any other payments, fees, or assessments
that a lessee/operator/permittee/payor/royalty taken-in-kind purchaser is required to pay by a specified
date. The failure to pay past due amounts, including late-payment charges, will result in the initiation of
other enforcement proceedings.
(d) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.
[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and amended at 49 FR
37347, Sept. 21, 1984; 57 FR 41868, Sept. 14, 1992; 57 FR 62206, Dec. 30, 1992; 67 FR 19112, Apr.
18, 2002]

§ 1218.103 Payments to States.
top
(a) Any amount that is payable by ONRR to a State but is not paid on the due date, as specified in
§1219.100 of this chapter, or that is held in a suspense account pending resolution of a dispute as
specified in §1219.101 of this chapter, shall accrue interest payable to the State.
(b) Interest shall be computed at the underpayment rate established by the Internal Revenue Code, 26
U.S.C. 6621(a)(2) (Supp. 1987).
(c) Interest shall be computed only for the number of days the disbursement is late. In the case of
suspended amounts subject to interest, it shall be computed beginning with the calendar day following
the day that the monies normally would have been paid to the State had they not been in suspense.
[49 FR 37347, Sept. 21, 1984, as amended at 55 FR 37230, Sept. 10, 1990]

§ 1218.104 Exemption of States from certain interest and penalties.
top
(a) States are exempt from being assessed for any interest or penalties found to be due against the
Department of the Interior for failure to comply with the Emergency Petroleum Allocation Act of 1973, as
amended, or any regulation issued by the Secretary of Energy thereunder concerning the certification or
processing of crude oil taken in-kind as royalty by the Secretary.

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(b) Any State shall be assessed for its share of any overcharge resulting from a determination that DOI
failed to comply with the Emergency Petroleum Allocation Act of 1973, as amended. Each State's share
shall be assessed against monies owed to the State. Such assessment shall be first against monies
owed to such State as a result of royalty audits prior to January 12, 1983, the enactment date of the
Federal Oil and Gas Royalty Management Act of 1982, then against other monies owed. The State shall
be liable for any balance.
(c) A State's liability for repayment of an overcharge under this section shall exist for any amounts
resulting from a judgment in a civil suit or as the result of settlement of a claim through a negotiated
agreement. State liability would be offset against future mineral revenue distributions to the State.
[49 FR 37347, Sept. 21, 1984]

§ 1218.105 Definitions.
top
Terms used in this subpart have the same meaning as in 30 U.S.C. 1702.
[49 FR 37347, Sept. 21, 1984]

Subpart D—Oil, Gas and Sulfur, Offshore
top

§ 1218.150 Royalties, net profit shares, and rental payments.
top
(a) As specified under the provisions of the lease, the lessee shall submit all rental payments when due
and shall pay in value or deliver in production all royalties and net profit shares in the amounts of value
or production determined by ONRR to be due.
(b) The failure to make timely or proper payments of any monies due pursuant to leases, permits, and
contracts subject to these regulations will result in the collection of the amount past due plus a late
payment charge. Exceptions to this late payment charge may be granted when estimated payments on
minerals production have already been made timely and otherwise in accordance with instructions
provided by ONRR to the payor.
(c) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. mountain time are
considered received the following business day.
(d) Late payment charges apply to all underpayments and payments received after the date due. These
charges include production and minimum royalties; assessments for liquidated damages; administrative
fees and payments by purchasers of royalty taken-in-kind; or any other payments, fees, or assessments
that a lessee/operator/payor/permittee/royalty taken-in-kind purchaser is required to pay by a specified
date. The failure to pay past due amounts, including late payment charges, will result in the initiation of
other enforcement proceedings.
(e) An overpayment on a lease or leases, excluding rental payments, may be offset against an
underpayment on a different lease or leases to determine a net underpayment on which interest is due
pursuant to conditions specified in §1218.42.
[47 FR 22528, May 25, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and amended at 49 FR
37347, Sept. 21, 1984; 52 FR 23815, June 25, 1987; 57 FR 41868, Sept. 14, 1992; 57 FR 62206, Dec.
30, 1992; 67 FR 19112, Apr. 18, 2002]

§ 1218.151 Rental fees.

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top
The annual rental paid in any year is in addition to, and is not credited against, any royalties due from
production. The lessee must pay an annual rental as shown in paragraphs (a), (b), and (c) of this
section. Discovery means one or more wells on the lease that meet the requirements in part 250,
subpart A of this title.
(a) This paragraph applies to any lease not covered by paragraph (b) or paragraph (c) of this section.

Issued as a
result of a
For—
sale held—
(1) An oil and Before
gas lease
March 26,
2001
(2) An oil and After March
gas lease
26, 2001

(3) A mineral
lease for
other than oil
or gas
(4) A mineral
lease for
other than oil
or gas

Before
March 26,
2001

The lessee must pay rental—
On or before the first day of each lease year
before the discovery of oil or gas on the lease.
On or before the first day of each lease year
before the discovery of oil or gas on the lease,
then on or before the last day of each lease year
in any full year in which royalties on production
are not due.
On or before the first day of each lease year
before the discovery of paying quantities.

After March On or before the first day of each lease year
26, 2001
before the date the first royalty payment is due
on the lease, then on or before the last day of
each lease year in any full year in which royalties
on production are not due.

(b) This paragraph applies to any lease created by segregating a portion of a producing lease when
there is no actual or allocated production on the segregated portion. The lessee must pay an annual
rental for the segregated portion at the rate specified in the lease. The lessee must pay the rental as
shown in the following table.

If the lease results
from a
segregation—
(1) Before March 26,
2001
(2) After March 26,
2001

The lessee must pay rental—
On or before the first day of each lease year before the
discovery of oil or gas on the segregated portion.
On or before the first day of each lease year before the
discovery of oil or gas on the lease, then on or before
the last day of each lease year in any full year in which
royalties on production are not due.

(c) For leases issued subject to the net profit sharing provisions, annual rental payments shall be due
and payable in advance, on the first day of each lease year which commences prior to the date the first
profit share payment becomes due. The owner of any lease created by the segregation of a portion of a
lease subject to net profit sharing provisions, shall pay an annual rental for such segregated portion at
the rate per acre or hectare specified in the lease. This rental shall be payable each year following the
year in which the segregation becomes effective and shall continue to be due and payable, in advance,
on the first day of each year which commences prior to the date the first profit share payment becomes
due.

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[44 FR 38276, June 29, 1979, as amended at 45 FR 69175, Oct. 17, 1980; 47 FR 25972, June 16,
1982. Redesignated at 47 FR 47006, Oct. 22, 1982, and at 48 FR 35641, Aug. 5, 1983; 66 FR 11518,
Feb. 23, 2001; 67 FR 19112, Apr. 18, 2002]

§ 1218.152 Fishermen's Contingency Fund.
top
Upon the establishment of the Fishermen's Contingency Fund, any holder of a lease issued or
maintained under the Outer Continental Shelf Lands Act and any holder of an exploration permit or of an
easement or right-of-way for the construction of a pipeline, shall pay an amount specified by the
Director, ONRR, who shall assess and collect the specified amount from each holder and deposit it into
the Fund. With respect to prelease exploratory drilling permits, the amount will be collected at the time of
issuance of the permit.
[52 FR 5458, Feb. 23, 1987]

§ 218.153 [Reserved]
top

§ 1218.154 Effect of suspensions on royalty and rental.
top
(a) ONRR will not relieve the lessee of the obligation to pay rental or minimum royalty for or during the
suspension if the Regional Supervisor:
(1) Grants a suspension of operations or production, or both, at the request of the lessee; or
(2) Directs a suspension of operations or production, or both, under 30 CFR 250.173(a).
(b) ONRR will not require a lessee to pay rental or minimum royalty for or during the suspension if the
Regional Supervisor directs a suspension of operations or production, or both, except as provided in (a)
(2) of this section.
(c) If the lease anniversary date falls within a period of suspension for which no rental or minimum
royalty payments are required under paragraph (b) of this section, the prorated rentals or minimum
royalties are due and payable as of the date the suspension period terminates. These amounts shall be
computed and notice thereof given the lessee. The lessee shall pay the amount due within 30 days after
receipt of such notice. The anniversary date of a lease shall not change by reason of any period of lease
suspension or rental or royalty relief resulting therefrom.
[44 FR 38276, June 29, 1979; 44 FR 55380, Sept. 26, 1979. Redesignated and amended at 47 FR
47006, 47007, Oct. 22, 1982. Further redesignated at 48 FR 35641, Aug. 5, 1983 and amended at 51
FR 19063, May 27, 1986; 54 FR 50616, Dec. 8, 1989; 64 FR 72775, Dec. 28, 1999; 73 FR 15898, Mar.
26, 2008]

§ 1218.155 Method of payment.
top
(a) Payment of royalties and rentals. With the exception of first-year rental, the payor shall tender all
payments in accordance with §1218.51. First-year rental shall be paid in accordance with paragraph (c)
of this section.
(b) Payment of the one-fifth bonus bid amount. (1) Each lease bid must include a payment for the onefifth bonus bid deposit amount unless the bidder is otherwise directed by the Secretary. Further
instructions on how to make payment with the bid will be included in the notice of each lease offering.

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EFT may be used as a method of payment for the one-fifth bonus bid amount.
(2) Beginning with lease offerings held after February 1, 1984, the one-fifth bonus amount received from
a high bidder shall be deposited into an escrow account created pursuant to an agreement between the
Departments of the Interior and Treasury, pending acceptance or rejection of the bid. The one-fifth
bonus funds will be invested in public debt securities. Investment of this amount by the U.S. Government
does not indicate acceptance of the bid. The one-fifth bonus amounts submitted with bids other than the
highest valid bid will be returned to respective bidders after bids are opened, recorded, and ranked.
Return of such amounts will not affect the status, validity, or ranking of bids. The one-fifth bonus bid
amount received from any high bidder and held by the Government pending acceptance or rejection, will
be returned with actual interest earned, if the bid is subsequently rejected. The interest accrued during
the period held in the account pending acceptance or rejection of the bid will accrue to the Government
when the bid is accepted.
(c) Payment of the four-fifths bonus bid amount and the first year's rental. Payment shall be made to
ONRR by EFT unless otherwise directed by the Secretary. The payment by EFT via the FRCS must be
received by the Federal Reserve Bank of New York no later than noon, eastern standard time, on the
11th business day after receipt of the lease forms by the successful bidder. A “business day” is
considered to be a day on which the OCS regional office issuing the lease is open for business. The
lease will not be executed by the appropriate ONRR official until payment is received. Failure to remit by
EFT or as directed by the Secretary within the time specified above will result in forfeiture of the one-fifth
bonus bid amount and the lease will not be executed by the appropriate ONRR official. Payors will not
be held responsible for late payment due to actions beyond their control, such as mechanical or systems
failure of FRCS or FDS. Payors will be held responsible for incorrect actions of their bank which result in
late payments. A 2-day grace period will be allowed to make up a deficient payment, but a late payment
charge will be assessed for this late payment and a penalty will also be assessed if appropriate. Late
payment charges will be assessed in accordance with subpart B of this part.
(d) General. (1) Payors using the appropriate means of payment (EFT, check, etc.) may pay for multiple
lease obligations with a single remittance but must ensure that the payment complies with subpart B of
this part and the remittance advice adequately identifies the single payment. The format to be used for
such identification will be provided by the ONRR Accounting Center.
(2) Where to pay.
(3) The ONRR mailing addresses for payments to ONRR are specified in §1218.51.
(4) Payments received at the ONRR addresses after 4 p.m. mountain time are considered received the
following business day.
(e) Miscellaneous payments. Payments shall be made to the manager of the appropriate Outer
Continental Shelf field office by cash, check or bank draft payable to “Department of the Interior—
ONRR” for miscellaneous payments such as:
(1) Pipeline rights-of-way application filing fees and rentals, pipeline accessory site rentals and
application fees, and other related costs.
(2) Filing and approval fees for transfers of interest in leases.
[49 FR 8605, Mar. 8, 1984, as amended at 52 FR 23815, June 25, 1987; 53 FR 43201, Oct. 26, 1988;
57 FR 41868, Sept. 14, 1992; 62 FR 19499, Apr. 22, 1997; 67 FR 19112, Apr. 18, 2002; 73 FR 15898,
Mar. 26, 2008]

§ 1218.156 Definitions.
top
Terms used in this subpart have the same meaning as in 30 U.S.C. 1702.
[52 FR 23815, June 25, 1987]

Subpart E—Solid Minerals—General

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top

§ 1218.200 Payment of royalties, rentals, and deferred bonuses.
top
As specified under the provisions of the lease, the lessee shall submit all rental and deferred bonus
payments when due and shall pay in value all royalties in the amount determined by ONRR to be due.
[52 FR 23815, June 25, 1987]

§ 1218.201 Method of payment.
top
You must tender all payments in accordance with §1218.51, except as follows:
(a) For purposes of this section, report means the Solid Minerals Production and Royalty Report, Form
MMS–4430, rather than the Form MMS–2014.
(b) For Form MMS–4430 payments, include both your customer identification and your customer
document identification numbers on your payment document, rather than the information required under
§1218.51(f)(1).
(c) For a rental payment that is not reported on Form MMS–4430, include the ONRR Courtesy Notice
when provided or write your customer identification number and Government-assigned lease number on
the payment document, rather than the information required under §1218.51(f)(4)(iii).
[66 FR 45773, Aug. 30, 2001]

§ 1218.202 Late payment or underpayment charges.
top
(a) The failure to make timely or proper payment of any monies due pursuant to leases and contracts
subject to these rules will result in the collection by ONRR of the full amount past due plus a late
payment charge. Exceptions to this late payment charge may be granted when estimated payments on
minerals production have already been made timely and otherwise in accordance with instructions
provided by ONRR to the operator/lessee. However, late payment charges assessed with respect to any
Indian lease, permit, or contract shall be collected and paid to the Indian or tribe to which the amount
overdue is owed.
(b) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. mountain time are
considered received the following business day.
(c) Late payment charges are calculated on the basis of a percentage assessment rate. In the absence
of a specific lease, permit, license or contract provision prescribing a different rate, this percentage
assessment rate is prescribed by the Department of the Treasury as the “Treasury Current Value of
Funds Rate.”
(d) This rate is available in the Treasury Fiscal Requirements Manual Bulletins that are published prior to
the first day of each calendar quarter for application to overdue payments or underpayments in the new
calendar quarter. The rate is also published in the Notices section of theFederal Registerand indexed
under “Fiscal Service/Notices/Funds Rate; Treasury Current Value.”
(e) Late payment charges apply to all underpayments and payments received after the date due. These
charges include production, minimum, or advance royalties; assessments for liquidated damages; or any

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other payments, fees, or assessments that an operator/lessee is required to pay by a specified date. The
failure to pay past due payments, including late payment charges, will result in the initiation of other
enforcement proceedings.
(f) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.
[47 FR 33195, July 30, 1982; 47 FR 53366, Nov. 26, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983,
and further redesignated at 52 FR 23815, June 25, 1987, as amended at 57 FR 41868, Sept. 14, 1992;
57 FR 62207, Dec. 30, 1992; 59 FR 14559, Mar. 29, 1994; 65 FR 55189, Sept. 13, 2000; 67 FR 19112,
Apr. 18, 2002]

§ 1218.203 Recoupment of overpayments on Indian mineral leases.
top
(a) Whenever an overpayment is made under an Indian solid mineral lease, a payor may recoup the
overpayment through a recoupment on Form MMS–4430 against the current month's royalties or other
revenues owed on the same lease. However, for any month a payor may not recoup more than 50
percent of the royalties or other revenues owed in that month under an individual allotted lease or more
than 100 percent of the royalties or other revenues owed in that month under a tribal lease.
(b) With written permission authorized by tribal statute or resolution, a payor may recoup an
overpayment against royalties or other revenues owed in that month under other leases for which that
tribe is the lessor. A copy of the tribe's written permission must be furnished to ONRR for reporting
recoupments. Call 1–888–201–6416 for instructions. Recouping overpayments on one allotted lease
from royalties paid to another allotted lease is specifically prohibited.
(c) Overpayments subject to recoupment under this section include all payments made in excess of the
required payment for royalty, rental, bonus, or other amounts owed as specified by statute, regulation,
order, or terms of an Indian mineral lease.
(d) The ONRR Director or his/her designee may order any payor to not recoup any amount for such
reasonable period of time as may be necessary for ONRR to review the nature and amount of any
claimed overpayment.
[60 FR 3087, Jan. 13, 1995, as amended at 66 FR 45773, Aug. 30, 2001; 66 FR 50827, Oct. 5, 2001]

Subpart F—Geothermal Resources
top

§ 1218.300 Payment of royalties, rentals, and deferred bonuses.
top
As specified under the provisions of the lease, the lessee shall submit all rental and deferred bonus
payments when due and shall pay in value all royalties in the amount determined by ONRR to be due.
[52 FR 23815, June 25, 1987]

§ 1218.301 Method of payment.
top
The payor shall tender all payments in accordance with §1218.51.

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[52 FR 23815, June 25, 1987]

§ 1218.302 Late payment or underpayment charges.
top
(a) The failure to make timely or proper payment of any monies due pursuant to leases and contracts
subject to these regulations will result in the collection by the ONRR of the full amount past due plus a
late payment charge. Exceptions to this late payment charge may be granted when estimated payments
on minerals production have already been made timely and otherwise in accordance with the
instructions provided by the ONRR to the payor.
(b) Late payment charges will be assessed on any late payment or underpayment from the date that the
payment was due until the date that the payment was received at the ONRR addresses specified in
§1218.51. Payments received at the specified ONRR addresses after 4 p.m. Mountain Time are
considered received the following business day.
(c) Late payment charges are calculated on the basis of a percentage assessment rate. In the absence
of a specific lease, permit, license or contract provision prescribing a different rate, this percentage
assessment rate is prescribed by the Department of the Treasury as the “Treasury Current Value of
Funds Rate.”
(d) This rate is available in the Treasury Fiscal Requirements Manual Bulletins that are published prior to
the first day of each calendar quarter for application to overdue payments or underpayments in the new
calendar quarter. The rate is also published in the Notices section of theFederal Registerand indexed
under “Fiscal Service/Notices/Funds Rate; Treasury Current Value.”
(e) Late payment charges apply to all underpayments and payments received after the date due. These
charges include production, minimum, and compensatory royalties; assessments for liquidated
damages; administrative fees and payments by purchasers of royalty taken-in-kind; or any other
payments, fees, or assessments that a lessee/operator/payor/royalty taken-in-kind purchaser is required
to pay by a specified date. The failure to pay past due payments, including late payment charges, will
result in the initiation of other enforcement proceedings.
(f) An overpayment on a lease or leases may be offset against an underpayment on a different lease or
leases to determine a net underpayment on which interest is due pursuant to conditions specified in
§1218.42.
[47 FR 22528, May 25, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983, and further redesignated at
51 FR 15767, Apr. 28, 1986 and 52 FR 23815, June 25, 1987, as amended at 57 FR 41868, Sept. 14,
1992; 57 FR 62207, Dec. 30, 1992; 59 FR 14559, Mar. 29, 1994; 65 FR 55189, Sept. 13, 2000; 67 FR
19112, Apr. 18, 2002]

§ 1218.303 May I credit rental towards royalty?
top
(a)(1) For Class II leases as defined in §1206.351 of this chapter, and for Class III leases as defined in
that section that elect under 43 CFR 3200.7(a)(2) to be subject to all of the BLM regulations promulgated
for leases issued after August 8, 2005 you may credit the annual rental that you paid before the first day
of the year for which the annual rental is owed against the royalty due for the lease year for which the
rental was paid. You may not apply any annual rental paid in excess of the royalty due for a particular
lease year as a credit against any royalty due in any subsequent lease year.
(2) For purposes of this section, the term “royalty” includes any advanced royalty payable under 30
U.S.C. 1004(f) for a cessation of production.
(b) If portions of your lease are located both within and outside of a participating area, you may credit
against royalty under paragraph (a) only that percentage of the rental you paid that corresponds to the
percentage of the lease within the participating area on a per-acre basis.

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[72 FR 24468, May 2, 2007]

§ 1218.304 May I credit rental towards direct use fees?
top
You may not credit annual rental toward direct use fees you are required to pay that year under
§1206.356 of this chapter. You must pay the direct use fees in addition to the annual rental due.
[72 FR 24468, May 2, 2007]

§ 1218.305 How do I pay advanced royalties I owe under BLM regulations?
top
If you pay advanced royalties under 43 CFR 3212.15(a)(1) to retain your lease:
(a) You must pay an advanced royalty monthly equal to the average monthly royalty you paid under 30
CFR part 1206, subpart H (including the amount against which you applied the annual rental as a credit)
for the last 3 years the lease was producing. If your lease has been producing for less than 3 years, then
use the average monthly royalty payment for the entire period your lease has been producing
continuously;
(b) The ONRR must receive your advanced royalty payment before the end of each full calendar month
in which no production occurs;
(c) You may credit any advanced royalty you pay against production royalties you owe after your lease
resumes production. You may not reduce the amount of any production royalty paid for any year below
zero.
[72 FR 24468, May 2, 2007]

§ 1218.306 May I receive a credit against production royalties for in-kind deliveries of
electricity I provide under contract to a State or county government?
top
(a) You may receive a credit against royalties for in-kind deliveries of electricity you provide under
contract to a State or county government if:
(1) The State or county to which you provide electricity would receive a portion of the royalties you paid
in money for the lease under 30 U.S.C. 191 or 30 U.S.C. 1019, except as otherwise provided under the
Mineral Leasing Act for Acquired Lands, 30 U.S.C. 355, because your lease is located in that State or
county. If your lease is located in more than one State or county, the revenues are paid to the respective
States or counties based on their proportionate shares of the total acres in the lease;
(2) The ONRR approves in advance your contract with the State or county to which you are providing inkind electricity; and
(3) Your contract provides that you will use the wholesale value of the electricity for the area where your
lease is located to establish the specific methodology to determine the amount of the credit; and
(b) The maximum credit you may take under this section is equal to the portion of the royalty revenue
that ONRR would have paid to the State or county that is a party to the contract had you paid royalty in
money on all of the electricity you delivered to the State or county based on the wholesale value of the
electricity. You must pay in money any royalty amount that is not offset by the credit allowed under this
section, calculated based on the wholesale value of the electricity.
(c) The electricity the State or county government receives from you satisfies the Secretary's payment

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obligation to the State or county under 30 U.S.C. 191 or 30 U.S.C. 1019.
[72 FR 24468, May 2, 2007]

§ 1218.307 How do I pay royalties due for my existing leases that qualify for near-term
production incentives under BLM regulations?
top
If you qualify for a production incentive under BLM regulations at 43 CFR subpart 3212, your royalty due
on the production BLM determines to be qualified for a production incentive under 43 CFR 3212.23 and
3212.24 is 50 percent of the amount of the total royalty that would otherwise be due under 30 CFR part
1206, subpart H.
[72 FR 24468, May 2, 2007]

Subpart G—Indian Lands [Reserved]
top

Subpart H—Service of Official Correspondence
top

Source: 71 FR 51751, Aug. 31, 2006, unless otherwise noted.
§ 2218.500 What is the purpose of this subpart?
top
This subpart contains instructions for designating a specific addressee of record for service of official
correspondence using Form MMS–4444, Addressee of Record Designation for Service of Official
Correspondence.

§ 1218.520 What definitions apply to this subpart?
top
Address of record is the address to which official correspondence is served.
Addressee of record for service of official correspondence is the person or position to whom official
correspondence is served, as specified on Form MMS–4444, or in the absence of such a form, as
established in §1218.540(b)(2). The addressee of record in a part 1290, appeal will be the person or
representative making the appeal.
Official correspondence is all correspondence from ONRR or our delegates, served on companies
related to matters such as: forms reporting, audit and compliance, enforcement notices, rental courtesy
notices, and invoices.

§ 1218.540 How does ONRR serve official correspondence?
top
ONRR will serve all Notices of Noncompliance or Civil Penalty following the procedures in part 1241. We
will serve all other documents following the procedures in this section.

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(a) Method of service. ONRR will serve all official correspondence to the addressee of record by one of
the following methods:
(1) U.S. Postal Service mail;
(2) Personal delivery made pursuant to the law of the State in which the service is effected; or
(3) Private mailing service (e.g., United Parcel Service, or Federal Express), with signature and date
upon delivery, acknowledging the addressee of record's receipt of the official correspondence document.
(b) Selection of addressee of record information. (1) We will address official correspondence to the party
shown on the most recently received Form MMS–4444 for the type of correspondence at issue. The
company or reporting entity is responsible for notifying ONRR of any name or address changes on Form
MMS–4444. The addressee of record in a part 1290, appeal will be the person or representative making
the appeal.
(2) If we do not receive addressee of record information from you on Form MMS–4444, we may use the
individual name and address, position title, or department name and address in our database, based on
previous formal or informal communications or correspondence for the type of official correspondence at
issue. Alternately, we may obtain contact information from public records and send correspondence to:
(i) The registered agent;
(ii) Any corporate officer; or
(iii) The addressee of record shown in the files of any State Secretary; Corporate Commission; Federal
or state agency that keeps official records of business entities or corporations; or other appropriate
public records for individuals, business entities, or corporations.
(c) Dates of service. Except as provided in paragraph (d) of this section, ONRR considers official
correspondence as served on the date that it is received at the address of record. A receipt, signed and
dated by any person at that address, is evidence of service and of the date of service. If official
correspondence is served in more than one manner and the dates differ, the date of the earliest service
is used[smc1].
(d) Constructive service. If we cannot make delivery to the addressee of record after making a
reasonable effort, we deem official correspondence as constructively served 7 days after the date that
we mail the document. This provision covers situations such as those where no delivery occurs
because:
(1) The addressee of record has moved without filing a forwarding address;
(2) The forwarding order has expired;
(3) Delivery was expressly refused; or
(4) The document was unclaimed and the attempt to deliver is substantiated by either:
(i) The U.S. Postal Service;
(ii) A private mailing service, as described in this section; or
(iii) The person who attempted to make delivery using some other method of service.

§ 1218.560 How do I submit Form MMS–4444?
top
A copy of Form MMS–4444 and instructions may be obtained from ONRR. It will also be posted on the
ONRR Web site. Submit the completed, signed form to the address designated on the Form MMS–4444

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instructions.

§ 1218.580 When do I submit Form MMS–4444?
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Initially, you must submit Form MMS–4444 by November 29, 2006, and subsequently, within 2 weeks of
any change of your address.
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