Title 30 CFR Ch. XII Citations

Electronic Code of Federal Regulations
e-CFR data is current as of May 9, 2019
Title 30 → Chapter XII → Subchapter A

Title 30: Mineral Resources

PART 1202—ROYALTIES
Contents
Subpart H—Geothermal Resources
§1202.350
§1202.351
§1202.352
§1202.353

Scope and definitions.
Royalties on geothermal resources.
Minimum royalty.
Measurement standards for reporting and paying royalties and direct use fees.

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., 1801 et seq.
SOURCE: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61066, Oct. 4, 2010.

Subpart H—Geothermal Resources
SOURCE: 56 FR 57275, Nov. 8, 1991, unless otherwise noted.

§1202.350 Scope and definitions.
(a) This subpart is applicable to all geothermal resources produced from Federal geothermal
leases issued pursuant to the Geothermal Steam Act of 1970, as amended (30 U.S.C. 1001 et seq.).
(b) The definitions in §1206.351 are applicable to this subpart.
[56 FR 57275, Nov. 8, 1991, as amended at 78 FR 30200, May 22, 2013]

§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
(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]

§1202.352 Minimum royalty.
In no event shall the lessee's annual royalty payments for any producing lease be less than the
minimum royalty established by the lease.
§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 ONRR-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 ONRR-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 ONRR-2014
consistent with ONRR-established reporting standards.

(d) For commercially demineralized water, you must report the quantity on which royalty is due
on Form ONRR-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:
(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, as amended at 78 FR 30200, May 22, 2013]

PART 1206—PRODUCT VALUATION
Contents

Subpart F—Federal Coal
§1206.250 Purpose and scope.
§1206.251 Definitions.
§1206.252 Information collection.
§1206.253 Coal subject to royalties—general provisions.
§1206.254 Quality and quantity measurement standards for reporting and paying royalties.
§1206.255 Point of royalty determination.
§1206.256 Valuation standards for cents-per-ton leases.
§1206.257 Valuation standards for ad valorem leases.
§1206.258 Washing allowances—general.
§1206.259 Determination of washing allowances.
§1206.260 Allocation of washed coal.
§1206.261 Transportation allowances—general.
§1206.262 Determination of transportation allowances.
§1206.263 [Reserved]
§1206.264 In-situ and surface gasification and liquefaction operations.
§1206.265 Value enhancement of marketable coal.
Subpart G—Other Solid Minerals
§1206.301 Value basis for royalty computation.

Subpart H—Geothermal Resources
§1206.350 What is the purpose of this subpart?
§1206.351 What definitions apply to this subpart?
§1206.352 How do I calculate the royalty due on geothermal resources used for commercial
production or generation of electricity?
§1206.353 How do I determine transmission deductions?
§1206.354 How do I determine generating deductions?
§1206.355 How do I calculate royalty due on geothermal resources I sell at arm's length to a
purchaser for direct use?
§1206.356 How do I calculate royalty or fees due on geothermal resources I use for direct use
purposes?
§1206.357 How do I calculate royalty due on byproducts?
§1206.358 What are byproduct transportation allowances?
§1206.359 How do I determine byproduct transportation allowances?
§1206.360 What records must I keep to support my calculations of royalty or fees under this
subpart?

§1206.361 How will ONRR determine whether my royalty or direct use fee payments are correct?
§1206.362 What are my responsibilities to place production into marketable condition and to
market production?
§1206.363 When is an ONRR audit, review, reconciliation, monitoring, or other like process
considered final?
§1206.364 How do I request a value or gross proceeds determination?
§1206.365 Does ONRR protect information I provide?
§1206.366 What is the nominal fee that a State, tribal, or local government lessee must pay for the
use of geothermal resources?
Subpart I—OCS Sulfur [Reserved]
Subpart J—Indian Coal
§1206.450 Purpose and scope.
§1206.451 Definitions.
§1206.452 Coal subject to royalties—general provisions.
§1206.453 Quality and quantity measurement standards for reporting and paying royalties.
§1206.454 Point of royalty determination.
§1206.455 Valuation standards for cents-per-ton leases.
§1206.456 Valuation standards for ad valorem leases.
§1206.457 Washing allowances—general.
§1206.458 Determination of washing allowances.
§1206.459 Allocation of washed coal.
§1206.460 Transportation allowances—general.
§1206.461 Determination of transportation allowances.
§1206.462 [Reserved]
§1206.463 In-situ and surface gasification and liquefaction operations.
§1206.464 Value enhancement of marketable coal.

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.
SOURCE: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61069, Oct. 4, 2010.
EDITORIAL NOTE: Nomenclature changes to part 1206 (formerly part 206) appear at 67 FR 19111, Apr. 18, 2002.

Subpart F—Federal Coal
SOURCE: 82 FR 36975, Aug. 7, 2017, 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.
§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
(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, instead of correctly reporting the deduction as a separate line item on the form ONRR-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 nonarm'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.
§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.
§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.
§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 1210—Forms and
Reports.
§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 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.
§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.
§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), (3), and (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'slength 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.
(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's-length 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's-length 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 likequality 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 ONRR-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 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.
§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.
§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's prior approval is not required before a lessee may deduct costs incurred under an arm'slength contract. The lessee must claim a washing allowance by reporting it as a separate line entry
on the form ONRR-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 dollar-per-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's-length 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 ONRR-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 royalties, 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.
(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 ONRR-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 ONRR-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 ONRR4430, 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 ONRR-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 washing allowance is greater than the amount the lessee has taken on form ONRR-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 ONRR-4430 to reflect actual costs, together with
any payment, in accordance with instructions provided by ONRR.
(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.
§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.
(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.
§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 ONRR-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 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 ONRR-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 (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 (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 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 ONRR-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 ONRR-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 ONRR4430, 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 ONRR-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
ONRR-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 ONRR-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.

§1206.263 [Reserved]
§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.
§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) through (iv) of this subpart; or,
(b) In the event that a value cannot be established in accordance with paragraph (a) of this
section, 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.

Subpart G—Other Solid Minerals
§1206.301 Value basis for royalty computation.
(a) The gross value for royalty purposes shall be the sale or contract unit price times the
number of units sold, Provided, however, That where the authorized officer determines:
(1) That a contract of sale or other business arrangement between the lessee and a purchaser
of some or all of the commodities produced from the lease is not a bona fide transaction between
independent parties because it is based in whole or in part upon considerations other than the value
of the commodities, or
(2) That no bona fide sales price is received for some or all of such commodities because the
lessee is consuming them, the authorized officer shall determine their gross value, taking into
account: (i) All prices received by the lessee in all bona fide transactions, (ii) Prices paid for
commodities of like quality produced from the same general area, and (iii) Such other relevant
factors as the authorized officer may deem appropriate; and Provided further, That in a situation
where an estimated value is used, the authorized officer shall require the payment of such additional
royalties, or allow such credits or refunds as may be necessary to adjust royalty payment to reflect
the actual gross value.
(b) The lessee is required to certify that the values reported for royalty purposes are bona fide
sales not involving considerations other than the sale of the mineral, and he may be required by the
authorized officer to supply supporting information.

[43 FR 10341, Mar. 13, 1978. Redesignated at 48 FR 36588, Aug. 12, 1983, and amended at 48 FR 44795, Sept. 30,
1983. Further redesignated at 51 FR 15212, Apr. 22, 1986. Redesignated at 53 FR 39461, Oct. 7, 1988]

Subpart H—Geothermal Resources
SOURCE: 72 FR 24459, May 2, 2007, unless otherwise noted.

§1206.350 What is the purpose of this subpart?
(a) This subpart applies to all geothermal resources produced from Federal geothermal leases
issued pursuant to the Geothermal Steam Act of 1970 (GSA), as amended by the Energy Policy Act
of 2005 (EPAct) (30 U.S.C. 1001 et seq.). The purpose of this subpart is to prescribe how to
calculate royalties and direct use fees for geothermal production.
(b) The ONRR may audit and adjust all royalty and fee payments.
(c) In some cases, the regulations in this subpart may be inconsistent with a statute, settlement
agreement, written agreement, or lease provision. If this happens, the statute, settlement agreement,
written agreement, or lease provision will govern to the extent of the inconsistency. For purposes of
this paragraph, the following definitions apply:
(1) “Settlement agreement” means a settlement agreement between the United States and a
lessee resulting from administrative or judicial litigation.
(2) “Written agreement” means a written agreement between the lessee and the ONRR
Director or Assistant Secretary, Policy, Management and Budget of the Department of the Interior
that:
(i) Establishes a method to determine the royalty from any lease that ONRR expects at least
would approximate the value or royalty established under this subpart; and
(ii) Includes a value or gross proceeds determination under §1206.364 of this subpart.
§1206.351 What definitions apply to this subpart?
For purposes of this subpart, the following terms have the meanings indicated.
Affiliate means a person who controls, is controlled by, or is under common control with another
person. For purposes of this subpart:
(1) Ownership or common ownership of more than 50 percent of the voting securities, or
instruments of ownership, or other forms of ownership, of another person constitutes control.
Ownership of less than 10 percent constitutes a presumption of noncontrol that ONRR may rebut.
(2) If there is ownership or common ownership of 10 through 50 percent of the voting securities,
or instruments of ownership, or other forms of ownership of another person, ONRR will consider the
following factors in determining whether there is control under the circumstances of a particular
case:
(i) The extent to which there are common officers or directors;

(ii) With respect to the voting securities, or instruments of ownership, or other forms of
ownership: the percentage of ownership or common ownership, the relative percentage of ownership
or common ownership compared to the percentage(s) of ownership by other persons, whether a
person is the greatest single owner, or whether there is an opposing voting bloc of greater
ownership;
(iii) Operation of a lease, plant, pipeline, or other facility;
(iv) The extent of participation by other owners in operations and day-to-day management of a
lease, plant, pipeline, or other facility; and
(v) Other evidence of power to exercise control over or common control with another person.
(3) Regardless of any percentage of ownership or common ownership, relatives, either by
blood or marriage, are affiliates.
Allowance means a deduction in determining value for royalty purposes.
Arm's-length contract means a contract or agreement between independent persons who are
not affiliates and who have opposing economic interests regarding that contract. To be considered
arm's length for any production month, a contract must satisfy this definition for that 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 or fee payment compliance activities of lessees or other interest
holders who pay royalties, fees, rents, or bonuses on Federal geothermal leases.
Byproducts means minerals (exclusive of oil, hydrocarbon gas, and helium), found in solution or
in association with geothermal steam, that no person would extract and produce by themselves
because they are worth less than 75 percent of the value of the geothermal steam or because
extraction and production would be too difficult.
Byproduct recovery facility means a facility where byproducts are placed in marketable
condition.
Byproduct transportation allowance means an allowance for the reasonable, actual costs of
moving byproducts to a point of sale or delivery off the lease, unit area, or communitized area, or
away from a byproduct recovery facility. The byproduct transportation allowance does not include
gathering costs. You must report a byproduct transportation allowance as a separate discrete field
on the Form ONRR-2014.
Class I lease means:
(1) A lease that BLM issued before August 8, 2005, for which the lessee has not converted the
royalty rate terms under 43 CFR 3212.25; or
(2) A lease that BLM issued in response to an application that was pending on August 8, 2005,
for which the lessee has not made an election under 43 CFR 3200.8(b).
Class II lease means:

A lease that BLM issued after August 8, 2005, except for a lease issued in response to an
application that was pending on August 8, 2005, for which the lessee does not make an election
under 43 CFR 3200.8(b).
Class III lease means:
A lease that BLM issued before August 8, 2005, for which the lessee has converted to the
royalty rate or direct use fee terms under 43 CFR 3212.25.
Commercial production or generation of electricity means generation of electricity that is sold or
is subject to sale, including the electricity or energy that is reasonably required to produce the
resource used in production of electricity for sale or to convert geothermal energy into electrical
energy for sale.
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.
Deduction means a subtraction the lessee uses to determine the value of geothermal resources
produced from a Class I lease that the lessee uses to generate electricity.
Delivered electricity means the amount of electricity in kilowatt-hours delivered to the
purchaser.
Direct use means the utilization of geothermal resources for commercial, residential,
agricultural, public facilities, or other energy needs, other than the commercial production or
generation of electricity.
Direct use facility means a facility that uses the heat or other energy of the geothermal resource
for direct use purposes.
Electrical facility means a power plant or other facility that uses a geothermal resource to
generate electricity.
Field means the land surface vertically projected over a subsurface geothermal reservoir
encompassing at least the outermost boundaries of all geothermal accumulations known to be within
that reservoir. Geothermal fields are usually given names and their official boundaries are often
designated by regulatory agencies in the respective States in which the fields are located.
Gathering means the movement of lease production from the wellhead to the point of utilization.
Generating deduction means a deduction for the lessee's reasonable, actual costs of
generating plant tailgate electricity.
Geothermal resources means:
(1) All products of geothermal processes, including indigenous steam, hot water, and hot
brines;
(2) Steam and other gases, hot water, and hot brines resulting from water, gas, or other fluids
artificially introduced into geothermal formations;

(3) Heat or other associated energy found in geothermal formations; and
(4) Any byproducts.
Gross proceeds (for royalty payment purposes) means the total monies and other consideration
accruing to a geothermal lessee for the sale of electricity or geothermal resource. Gross proceeds
includes, but is not limited to:
(1) Payments to the lessee for certain services such as effluent injection, field operation and
maintenance, drilling or workover of wells, or field gathering to the extent that the lessee is obligated
to perform such functions at no cost to the Federal Government;
(2) Reimbursements for production taxes and other taxes. Tax reimbursements are part of
gross proceeds accruing to a lessee even though the Federal royalty interest may be exempt from
taxation; and
(3) Any 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.
Lease means a geothermal lease issued under the authority of the GSA, unless the context
indicates otherwise.
Lessee (you) means any person to whom the United States issues a geothermal lease, and
any person who has been assigned an obligation to make royalty, fee, or other payments required
by the lease. This includes any person who has an interest in a geothermal lease as well as an
operator or payor who has no interest in the lease but who has assumed the royalty, fee, or other
payment responsibility. This also includes any affiliate of the lessee that uses the geothermal
resource to generate electricity, in a direct use process, or to recover byproducts, or any affiliate that
sells or transports lease production.
Marketable condition means lease products that are sufficiently free from impurities and
otherwise in a condition that they will be accepted by a purchaser under a sales contract typical for
the disposition from the field or area of such lease products.
Person means any individual, firm, corporation, association, partnership, consortium, or joint
venture (when established as a separate entity).
Plant parasitic electricity means electricity used to operate a power plant that is used for
commercial production or generation of electricity.
Plant tailgate electricity means the amount of electricity in kilowatt-hours generated by a power
plant exclusive of plant parasitic electricity, but inclusive of any electricity generated by the power
plant and returned to the lease for lease operations. Plant tailgate electricity should be measured at,
or calculated for, the high voltage side of the transformer in the plant switchyard.
Point of utilization means the power plant or direct use facility in which the geothermal resource
is utilized.
Public purpose means a program carried out by a State, tribal, or local government for the
purpose of providing facilities or services for the benefit of the public in connection with, but not

limited to, public health, safety or welfare, other than the commercial generation of electricity. Use of
lands or facilities for habitation, cultivation, trade or manufacturing is permissible only when
necessary for and integral to (i.e., an essential part of) the public purpose.
Public safety or welfare means a program carried out or promoted by a public agency for public
purposes involving, directly or indirectly, protection, safety, and law enforcement activities, and the
criminal justice system of a given political area. Public safety or welfare may include, but is not
limited to, programs carried out by:
(1) Public police departments;
(2) Sheriffs' offices;
(3) The courts;
(4) Penal and correctional institutions (including juvenile facilities);
(5) State and local civil defense organizations; and
(6) Fire departments and rescue squads (including volunteer fire departments and rescue
squads supported in whole or in part with public funds).
Reasonable alternative fuel means a conventional fuel (such as coal, oil, gas, or wood) that
would normally be used as a source of heat in direct use operations.
Secretary means the Secretary of the Interior or any person duly authorized to exercise the
powers vested in that office.
Transmission deduction means a deduction for the lessee's reasonable actual costs incurred to
wheel or transmit the electricity from the lessee's power plant to the purchaser's delivery point.
Wheeling means the transmission of electricity from a power plant to the point of delivery.
§1206.352 How do I calculate the royalty due on geothermal resources used for commercial
production or generation of electricity?
(a) If you sold geothermal resources produced from a Class I, II, or III lease at arm's length that
the purchaser uses to generate electricity, then the royalty on the geothermal resources is the gross
proceeds accruing to you from the sale of the geothermal resource to the arm's-length purchaser
multiplied by either:
(1) The royalty rate in your lease; or
(2) The royalty rate that BLM prescribes or calculates under 43 CFR 3211.17. See §1206.361
for additional provisions applicable to determining gross proceeds under arm's-length sales.
(b) If you use the geothermal resource in your own power plant for the generation and sale of
electricity, the following provisions apply

(1) For Class I leases, you must determine the royalty on produced geothermal resources in
accordance with the first applicable of the following paragraphs:
(i) The gross proceeds accruing to you from the arm's-length sale of the electricity less
applicable deductions determined under §§1206.353 and 1206.354 of this part, multiplied by the
royalty rate in your lease. See §1206.361 for additional provisions applicable to determining gross
proceeds under arm's-length sales. Under no circumstances may the deductions reduce the royalty
value of the geothermal resource to zero; or
(ii) A royalty determined by any other reasonable method approved by ONRR under §1206.364
of this subpart.
(2) For Class II and Class III leases, the royalty on geothermal resources produced is your
gross proceeds from the sale of electricity multiplied by the royalty rate BLM prescribed for your
lease under 43 CFR 3211.17. See §1206.361 for additional provisions applicable to determining
gross proceeds under arm's-length sales. You may not reduce gross proceeds by any deductions.
§1206.353 How do I determine transmission deductions?
(a) If you determine the value of your geothermal resources under §1206.352(b)(1)(i) of this
subpart, you may subtract a transmission deduction from the gross proceeds you received for the
sale of electricity to determine the plant tailgate value of the electricity.
(1) The transmission deduction consists of either or both of two components:
(i) Transmission line costs as determined under paragraph (b) of this section; and
(ii) Wheeling costs if the electricity is transmitted across a third party's transmission line under
an arm's-length wheeling agreement.
(2) You may deduct the actual costs you (including your affiliate(s)) incur for transmitting
electricity under your arm's-length wheeling contract.
(b) To determine your transmission line cost, you must follow the requirements of paragraphs
(b)(1) and (b)(2) of this section.
(1) Your transmission line costs are your actual costs associated with the construction and
operation of a transmission line for the purpose of transmitting electricity attributable and allocable to
your power plant utilizing Federal geothermal resources.
(i) You must determine the monthly transmission line cost component of the transmission
deduction by multiplying the annual transmission line cost rate (in dollars per kilowatt-hour) by the
amount of electricity delivered for the reporting month.
(ii) You must redetermine the transmission line cost rate annually either at the beginning of the
same month of the year in which the power plant was placed into service or at a time concurrent with
the beginning of your annual corporate accounting period. The period you select must coincide with
the same period you chose for the generating deduction under §1206.354(b)(1). After you choose a
deduction period, you may not later elect to use a different deduction period without ONRR approval.
(2) Your actual transmission line costs during the reporting period include:

(i) Operating and maintenance expenses under paragraphs (d) and (e) of this section;
(ii) Overhead under paragraph (f) of this section; and either
(iii) Depreciation under paragraphs (g) and (h) of this section and a return on undepreciated
capital investment under paragraphs (g) and (i) of this section or
(iv) A return on the capital investment in the transmission line under paragraphs (g) and (j) of
this section.
(c)(1) Allowable capital costs under paragraph (b) of this section are generally those for
depreciable fixed assets (including costs of delivery and installation of capital equipment) that are an
integral part of the transmission line.
(2)(i) You may include a return on capital you invested in the purchase of real estate for
transmission facilities if:
(A) Such purchase is necessary; and
(B) The surface is not part of the Federal lease.
(ii) The rate of return will be the same rate determined under paragraph (k) of this section.
(d) Allowable operating expenses include:
(1) Operations supervision and engineering;
(2) Operations labor;
(3) Fuel;
(4) Utilities;
(5) Materials;
(6) Ad valorem property taxes;
(7) Rent;
(8) Supplies; and
(9) Any other directly allocable and attributable operating or maintenance expense that you can
document.
(e) Allowable maintenance expenses include:
(1) Maintenance of the transmission line;
(2) Maintenance of equipment;

(3) Maintenance labor; and
(4) Other directly allocable and attributable maintenance expenses that you can document.
(f) Overhead directly attributable and allocable to the operation and maintenance of the
transmission line is an allowable expense. State and Federal income taxes and severance taxes and
other fees, including royalties, are not allowable expenses.
(g) To compute costs associated with capital investment, a lessee may use either depreciation
with a return on undepreciated capital investment, or a return on capital investment in the
transmission line. After a lessee has elected to use either method, the lessee may not later elect to
change to the other alternative without ONRR approval.
(h)(1) To compute depreciation, you must use a straight-line depreciation method based on the
life of the geothermal project, usually the term of the electricity sales contract, or other depreciation
period acceptable to ONRR. You may not depreciate equipment below a reasonable salvage value.
(2) A change in ownership of a transmission line does not alter the depreciation schedule
established by the original lessee-owner for purposes of computing transmission line costs.
(3) With or without a change in ownership, you may depreciate a transmission line only once.
(i) To calculate a return on undepreciated capital investment, multiply the remaining
undepreciated capital balance as of the beginning of the period for which you are calculating the
transmission deduction by the rate of return provided in paragraph (k) of this section.
(j) To compute a return on capital investment in the transmission line, multiply the allowable
capital investment in the transmission line by the rate of return determined pursuant to paragraph (k)
of this section. There is no allowance for depreciation.
(k) The rate of return must be 2.0 multiplied by the industrial rate associated with Standard &
Poor's BBB rating. The BBB rate must be the monthly average rate as published in Standard &
Poor's Bond Guide for the first month for which the allowance is applicable. Redetermine the rate at
the beginning of each subsequent calendar year.
(l) Calculate the deduction for transmission costs based on your cost of transmitting electricity
through each individual transmission line.
(m)(1) For new transmission facilities or arrangements, base your initial deduction on estimates
of allowable electricity transmission costs for the applicable period. Use the most recently available
operations data for the transmission line or, if such data are not available, use estimates based on
data for similar transmission lines.
(2) When actual cost information is available, you must amend your prior Form ONRR-2014
reports to reflect actual transmission costs deductions for each month for which you reported and
paid based on estimated transmission costs. You must pay any additional royalties due (together
with interest computed under §1218.302 of this chapter). You are entitled to a credit for or refund of
any overpaid royalties.
(n) In conducting reviews and audits, ONRR may require you to submit arm's-length
transmission contracts, production agreements, operating agreements, and related documents and

all other data used to calculate the deduction. You must comply with any such requirements within
the time ONRR specifies. Recordkeeping requirements are found at part 1212 of this chapter.
(o) At the completion of transmission line dismantlement and salvage operations, you may
report a credit for or request a refund of royalties in an amount equal to the royalty rate times the
amount by which actual transmission line dismantlement costs exceed actual income attributable to
salvage of the transmission line.
§1206.354 How do I determine generating deductions?
(a) If you determine the value of your geothermal resources under §1206.352(b)(1)(i) of this
subpart, you may deduct your reasonable actual costs incurred to generate electricity from the plant
tailgate value of the electricity (usually the transmission-reduced value of the delivered electricity).
You may deduct the actual costs you incur for generating electricity under your arm's-length power
plant contract.
(b)(1) You must base your generating costs deduction on your actual annual costs associated
with the construction and operation of a geothermal power plant.
(i) You must determine your monthly generating deduction by multiplying the annual generating
cost rate (in dollars per kilowatt-hour) by the amount of plant tailgate electricity measured (or
computed) for the reporting month. The generating cost rate is determined from the annual amount
of your plant tailgate electricity.
(ii) You must redetermine your generating cost rate annually either at the beginning of the same
month of the year in which the power plant was placed into service or at a time concurrent with the
beginning of your annual corporate accounting period. The period you select must coincide with the
same period chosen for the transmission deduction under §1206.353(b)(1). After you choose a
deduction period, you may not later elect to use a different deduction period without ONRR approval.
(2) Your generating costs are your actual power plant costs during the reporting period,
including:
(i) Operating and maintenance expenses under paragraphs (d) and (e) of this section;
(ii) Overhead under paragraph (f) of this section; and either
(iii) Depreciation under paragraphs (g) and (h) of this section and a return on undepreciated
capital investment under paragraphs (g) and (i) of this section; or
(iv) A return on capital investment in the power plant under paragraphs (g) and (j) of this
section.
(c)(1) Allowable capital costs under paragraph (b) of this section are generally those for
depreciable fixed assets (including costs of delivery and installation of capital equipment) that are an
integral part of the power plant or are required by the design specifications of the power conversion
cycle.
(2)(i) You may include a return on capital you invested in the purchase of real estate for a
power plant site if:

(A) The purchase is necessary; and,
(B) The surface is not part of the Federal lease.
(ii) The rate of return will be the same rate determined under paragraph (k) of this section.
(3) You may not deduct the costs of gathering systems and other production-related facilities.
(d) Allowable operating expenses include:
(1) Operations supervision and engineering;
(2) Operations labor;
(3) Auxiliary fuel and/or utilities used to operate the power plant during down time;
(4) Utilities;
(5) Materials;
(6) Ad valorem property taxes;
(7) Rent;
(8) Supplies; and
(9) Any other directly allocable and attributable operating expense.
(e) Allowable maintenance expenses include:
(1) Maintenance of the power plant;
(2) Maintenance of equipment;
(3) Maintenance labor; and
(4) Other directly allocable and attributable maintenance expenses that you can document.
(f) Overhead directly attributable and allocable to the operation and maintenance of the power
plant is an allowable expense. State and Federal income taxes and severance taxes and other fees,
including royalties, are not allowable expenses.
(g) To compute costs associated with capital investment, a lessee may use either depreciation
with a return on undepreciated capital investment, or a return on capital investment in the power
plant. After a lessee has elected to use either method, the lessee may not later elect to change to
the other alternative without ONRR approval.
(h)(1) To compute depreciation, you must use a straight-line depreciation method based on the
life of the geothermal project, usually the term of the electricity sales contract, or other depreciation
period acceptable to ONRR. You may not depreciate equipment below a reasonable salvage value.

(2) A change in ownership of the power plant does not alter the depreciation schedule
established by the original lessee-owner for purposes of computing generating costs.
(3) With or without a change in ownership, you may depreciate a power plant only once.
(i) To calculate a return on undepreciated capital investment, multiply the remaining
undepreciated capital balance as of the beginning of the period for which you are calculating the
generating deduction allowance by the rate of return provided in paragraph (k) of this section.
(j) To compute a return on capital investment in the power plant, multiply the allowable capital
investment in the power plant by the rate of return determined pursuant to paragraph (k) of this
section. There is no allowance for depreciation.
(k) The rate of return must be 2.0 multiplied by the industrial rate associated with Standard &
Poor's BBB rating. The BBB rate must be the monthly average rate as published in Standard &
Poor's Bond Guide for the first month for which the allowance is applicable. You must redetermine
the rate at the beginning of each subsequent calendar year.
(l) Calculate the deduction for generating costs based on your cost of generating electricity
through each individual power plant.
(m)(1) For new power plants or arrangements, base your initial deduction on estimates of
allowable electricity generation costs for the applicable period. Use the most recently available
operations data for the power plant or, if such data are not available, use estimates based on data
for similar power plants.
(2) When actual cost information is available, you must amend your prior Form ONRR-2014
reports to reflect actual generating cost deductions for each month for which you reported and paid
based on estimated generating costs. You must pay any additional royalties due (together with
interest computed under §1218.302 of this chapter). You are entitled to a credit for or refund of any
overpaid royalties.
(n) In conducting reviews and audits, ONRR may require you to submit arm's-length power
plant contracts, production agreements, operating agreements, related documents and all other data
used to calculate the deduction. You must comply with any such requirements within the time ONRR
specifies. Recordkeeping requirements are found at part 1212 of this chapter.
(o) At the completion of power plant dismantlement and salvage operations, you may report a
credit for or request a refund of royalty in an amount equal to the royalty rate times the amount by
which actual power plant dismantlement costs exceed actual income attributable to salvage of the
power plant.
§1206.355 How do I calculate royalty due on geothermal resources I sell at arm's length to a
purchaser for direct use?
If you sell geothermal resources produced from Class I, II, or III leases at arm's length to a
purchaser for direct use, then the royalty on the geothermal resource is the gross proceeds accruing
to you from the sale of the geothermal resource to the arm's-length purchaser multiplied by the
royalty rate in your lease or that BLM prescribes under 43 CFR 3211.18. See §1206.361 for
additional provisions applicable to determining gross proceeds under arm's-length sales.

§1206.356 How do I calculate royalty or fees due on geothermal resources I use for direct
use purposes?
If you use the geothermal resource for direct use:
(a) For Class I leases, you must determine the royalty due on geothermal resources in
accordance with the first applicable of the following three paragraphs.
(1) The weighted average of the gross proceeds established in arm's-length contracts for the
purchase of significant quantities of geothermal resources to operate the lessee's same direct-use
facility multiplied by the royalty rate in your lease. In evaluating the acceptability of arm's-length
contracts, the following factors will be considered: time of execution, duration, terms, volume, quality
of resource, and such other factors as may be appropriate to reflect the value of the resource.
(2) The equivalent value of the least expensive, reasonable alternative energy source (fuel)
multiplied by the royalty rate in your lease. The equivalent value of the least expensive, reasonable
alternative energy source will be based on the amount of thermal energy that would otherwise be
used by the direct use facility in place of the geothermal resource. That amount of thermal energy (in
Btu) displaced by the geothermal resource will be determined by the equation:

Where hin is the enthalpy in Btu/lb at the direct use facility inlet (based on measured inlet
temperature), hout is the enthalpy in Btu/lb at the facility outlet (based on measured outlet
temperature), density is in lbs/cu ft based on inlet temperature, the factor 0.133681 (cu ft/gal)
converts gallons to cubic feet, and volume is the quantity of geothermal fluid in gallons produced at
the wellhead or measured at an approved point. The efficiency factor of the alternative energy
source will be 0.7 for coal and 0.8 for oil, natural gas, and other fuels derived from oil and natural
gas, or an efficiency factor proposed by the lessee and approved by ONRR. The methods of
measuring resource parameters (temperature, volume, etc.) and the frequency of computing and
accumulating the amount of thermal energy displaced will be determined and approved by BLM
under 43 CFR 3275.13-3275.17.
(3) A royalty determined by any other reasonable method approved by ONRR or the Assistant
Secretary, Policy, Management and Budget of the Department of the Interior, under §1206.364 of
this part.
(b) For geothermal resources produced from Class II and Class III leases, you must multiply the
appropriate fee from the schedule in subparagraph (b)(1) of this section by the number of gallons or
pounds you produce from the direct use lease each month.
(1) You must use the following fee schedule to calculate fees due under this section:
DIRECT USE FEE SCHEDULE
[Hot water]

If your average monthly inlet temperature (°F) is
At least . . .
130

Your fees are . . .

But less than . . .

($/million gallons)
140

2.524

($/million pounds)
0.307

140

150

7.549

0.921

150

160

12.543

1.536

160

170

17.503

2.150

170

180

22.426

2.764

180

190

27.310

3.379

190

200

32.153

3.993

200

210

36.955

4.607

210

220

41.710

5.221

220

230

46.417

5.836

230

240

51.075

6.450

240

250

55.682

7.064

250

260

60.236

7.679

260

270

64.736

8.293

270

280

69.176

8.907

280

290

73.558

9.521

290

300

77.876

10.136

300

310

82.133

10.750

310

320

86.328

11.364

320

330

90.445

11.979

330

340

94.501

12.593

340

350

98.481

13.207

350

360

102.387

13.821

(i) For direct use geothermal resources with an average monthly inlet temperature of 130 °F or
less, you must pay only the lease rental.
(ii) The ONRR, in consultation with BLM, will develop and publish a revised fee schedule in
the FEDERAL REGISTER, as needed.
(iii) ONRR, in consultation with BLM, will calculate revised fees schedules using the following
formulas:

Where:
RV = Royalty due as a function of produced volume in the fee schedule, expressed as dollars per million (106) gallons;
Rm = Royalty due as a function of produced mass in the fee schedule, expressed as dollars per million (106) pounds;
ρ[rho] = Water density at inlet temperature expressed as lbs per gallon;
Tin = Measured inlet temperature in °F (as required by BLM under 43 CFR part 3275);
Tout = Established assumed outlet temperature of 130 °F;
e = Boiler Efficiency Factor for coal of 70 percent;
Pprbc = The 3-year historical average of Powder River Basin spot coal prices, as published by the Energy Information
Administration, or other recognized authoritative reference source of coal prices, in dollars (per MMBtu);
Frr = The assumed Lease Royalty Rate of 10 percent.

(2) The fee that you report is subject to monitoring, review, and audit.
(3) The schedule of fees established under this paragraph will apply to any Class III lease with
respect to any royalty payments previously made when the lease was a Class I lease that were due
and owing, and were paid, on or after July 16, 2003. To use this provision, you must provide ONRR
data showing the amount of geothermal production in pounds or gallons of geothermal fluid to input
into the fee schedule (see 43 CFR part 3276).
(i) If the royalties you previously paid are less than the fees due under this section, you must
pay the difference plus interest on that difference computed under §1218.302 of this chapter.
(ii) If the royalties you previously paid are more than the fees due under this section, then you
are entitled to a refund or credit from ONRR of 50 percent of the overpaid royalties. You are also
entitled to a refund or credit of any interest that you paid on the overpaid royalties.
(c) For geothermal resources other than hot water, ONRR will determine fees on a case-bycase basis.
[48 FR 35641, Aug. 5, 1983; 76 FR 76615, Dec. 8, 2011]
EDITORIAL NOTE: At 76 FR 76615, Dec. 8, 2011, §1206.356 was amended in the thermal energy displaced
equation in paragraph (a)(2) by removing “0.113681” and adding in its place “0.133681”. The rule document does not
include a revised illustration to be used for publication.

§1206.357 How do I calculate royalty due on byproducts?
(a) If you sell byproducts, you must determine the royalty due on the byproducts that are
royalty-bearing under:
(1) Applicable lease terms of Class I leases and of Class III leases that do not elect to be
subject to all of the BLM regulations promulgated for leases issued after August 8, 2005, under 43
CFR 3200.7(a)(2), or

(2) Applicable statutory provisions at 30 U.S.C. 1004(a)(2) for Class II leases and for Class III
leases that do elect to be subject to all of the BLM regulations promulgated for leases issued after
August 8, 2005, under 43 CFR 3200.7(a)(2).
(b) You must determine the royalty due on the byproducts by multiplying the royalty rate in your
lease or that BLM prescribes under 43 CFR 3211.19 by a value of the byproducts determined in
accordance with the first applicable of the following subparagraphs:
(1) The gross proceeds accruing to you from the arm's-length sale of the byproducts, less any
applicable byproduct transportation allowances determined under §§1206.358 and 1206.359. See
§1206.361 for additional provisions applicable to determining gross proceeds;
(2) Other relevant matters including, but not limited to, published or publicly available spotmarket prices, or information submitted by the lessee concerning circumstances unique to a
particular lease operation or the saleability of certain byproducts; or
(3) Any other reasonable valuation method approved by ONRR.
§1206.358 What are byproduct transportation allowances?
(a) When you determine the value of byproducts at a point off the geothermal lease, unit, or
participating area, you are allowed a deduction in determining value, for royalty purposes, for your
reasonable, actual costs incurred to:
(1) Transport the byproducts from a Federal lease, unit, or participating area to a sales point or
point of delivery that is off the lease, unit, or participating area; or
(2) Transport the byproducts from a Federal lease, unit, or participating area, or from a
geothermal use facility to a byproduct recovery facility when that byproduct recovery facility is off the
lease, unit, or participating area and, if applicable, from the recovery facility to a sales point or point
of delivery off the lease, unit, or participating area.
(b) Costs for transporting geothermal fluids from the lease to the geothermal use facility,
whether on or off the lease, are not includible in the byproduct transportation allowance.
(c)(1) When you transport byproducts from a lease, unit, participating area, or geothermal use
facility to a byproduct recovery facility, you are not required to allocate transportation costs between
the quantity of marketable byproducts and the rejected waste material. The byproduct transportation
allowance is authorized for the total production that is transported. You must express byproduct
transportation allowances as a cost per unit of marketable byproducts transported.
(2) For byproducts that are extracted on the lease, unit, participating area, or at the geothermal
use facility, the byproduct transportation allowance is authorized for the total byproduct that is
transported to a point of sale off the lease, unit, or participating area. You must express byproduct
transportation allowances as a cost per unit of byproduct transported.
(3) You may deduct transportation costs only when you sell, deliver, or otherwise utilize the
transported byproduct and report and pay royalties on the byproduct.
(d) Reporting requirements. (1) You must use a discrete field on Form ONRR-2014 to notify
ONRR of a transportation allowance.

(2) In conducting reviews and audits, ONRR may require you to submit arm's-length
transportation contracts, production agreements, operating agreements, and related documents.
You must comply with any such requirements within the time ONRR specifies. Recordkeeping
requirements are found at part 1212 of this chapter.
(e) Byproduct transportation allowances are subject to monitoring, review, and audit. If, after a
review or audit, ONRR determines that you have improperly determined a byproduct transportation
allowance, you must pay any additional royalties due (plus interest computed under §1218.302 of
this chapter). You are entitled to a credit for or refund of any overpaid royalties.
(f) If you commingled byproducts produced from Federal and non-Federal leases for
transportation, you may not disproportionately allocate transportation costs to Federal lease
production.
§1206.359 How do I determine byproduct transportation allowances?
(a) For transportation costs you incur under an arm's-length contract, the transportation
allowance will be the reasonable, actual costs you incurred for transporting the byproducts under
that contract.
(1) In conducting reviews and audits, ONRR will examine whether the contract reflects more
than the consideration actually transferred either directly or indirectly from you to the transporter for
the transportation. If the contract reflects more than the total consideration you paid, ONRR may
require you to determine the byproduct transportation allowance under paragraph (b) of this section.
(2) If ONRR determines that the consideration you paid under an arm's-length byproduct
transportation contract does not reflect the reasonable value of the transportation because of
misconduct by or between the contracting parties, or because you otherwise have breached your
duty to the lessor to market the production for the mutual benefit of the lessee and the lessor, ONRR
will require you to determine the byproduct transportation allowance under paragraph (b) of this
section. When ONRR determines that the value of the transportation may be unreasonable, ONRR
will notify you and give you an opportunity to provide written information justifying your transportation
costs.
(3) Where your payments for transportation under an arm's-length contract are not established
on a dollars-per-unit basis, you must convert whatever consideration you paid to a dollar value
equivalent for the purposes of this section.
(b) If you transport the byproduct yourself or under a non-arm's-length transportation
arrangement, the byproduct transportation allowance is your reasonable actual costs for
transportation during the reporting period, including:
(1) Operating and maintenance expenses under paragraphs (d) and (e) of this section;
(2) Overhead under paragraph (f) of this section; and either
(3) Depreciation under paragraphs (g) and (h) of this section and a return on undepreciated
capital investment under paragraphs (g) and (i) of this section; or
(4) A return on capital investment in the transportation system under paragraphs (g) and (j) of
this section.

(c)(1) Allowable capital costs under paragraph (b) of this section are generally those for
depreciable fixed assets (including costs of delivery and installation of capital equipment) that are an
integral part of the transportation system.
(2)(i) You may include a return on capital you invested in the purchase of real estate to locate
the byproduct transportation facilities if:
(A) The purchase is necessary; and
(B) The surface is not part of a Federal lease.
(ii) The rate of return will be the same rate determined in paragraph (k) of this section.
(3) You may not deduct the costs of gathering systems and other production-related facilities.
(d) Allowable operating expenses include:
(1) Operations supervision and engineering;
(2) Operations labor;
(3) Fuel;
(4) Utilities;
(5) Materials;
(6) Ad valorem property taxes;
(7) Rent;
(8) Supplies; and
(9) Any other directly allocable and attributable operating expense that you can document.
(e) Allowable maintenance expenses include:
(1) Maintenance of the transportation system;
(2) Maintenance of equipment;
(3) Maintenance labor; and
(4) Other directly allocable and attributable maintenance expenses that you can document.
(f) Overhead directly 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.

(g) To compute costs associated with capital investment, a lessee may use either paragraphs
(h) and (i) or paragraph (j) 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
ONRR approval.
(h)(1) To compute depreciation, you must use a straight-line depreciation method based on
either the life of the equipment or the life of the geothermal project which the transportation system
services. After you choose the basis for depreciation, you may not change that basis without ONRR
approval. You may not depreciate equipment below a reasonable salvage value.
(2) A change in ownership of a transportation system does not alter the depreciation schedule
established by the original lessee-owner for purposes of computing transportation costs.
(3) With or without a change in ownership, you may depreciate a transportation system only
once.
(i) To calculate a return on undepreciated capital investment, multiply the remaining
undepreciated capital balance as of the beginning of the period for which you are calculating the
transportation allowance by the rate of return provided in paragraph (k) of this section.
(j) To compute a return on capital investment in the transportation system, the allowed cost will
be the amount equal to the allowable capital investment in the transportation system multiplied by
the rate of return determined pursuant to paragraph (k) of this section. There is no allowance for
depreciation.
(k) The rate of return must be the industrial rate associated with Standard & Poor's BBB rating.
The BBB rate must be the monthly average rate as published in Standard & Poor's Bond Guide for
the first month for which the allowance is applicable. You must redetermine the rate at the beginning
of each subsequent calendar year.
(l)(1) For new transportation facilities or arrangements, base your initial deduction on estimates
of allowable byproduct transportation costs for the applicable period. Use the most recently available
operations data for the transportation system or, if such data are not available, use estimates based
on data for similar transportation systems.
(2) When actual cost information is available, you must amend your prior Form ONRR-2014
reports to reflect actual byproduct transportation cost deductions for each month for which you
reported and paid based on estimated byproduct transportation costs. You must pay any additional
royalties due (together with interest computed under §1218.302 of this chapter). You are entitled to a
credit for or a refund of any overpaid royalties.
§1206.360 What records must I keep to support my calculations of royalty or fees under this
subpart?
If you determine royalties or direct use fees for your geothermal resource under this subpart,
you must retain all data relevant to the determination of the royalty value or the fee you paid.
Recordkeeping requirements are found at part 1212 of this chapter.
(a) You must be able to show:

(1) How you calculated the royalty value or fee you reported, including all allowable deductions;
and
(2) How you complied with this subpart.
(b) Upon request, you must submit all data to ONRR. You must comply with any such
requirement within the time ONRR specifies.
§1206.361 How will ONRR determine whether my royalty or direct use fee payments are
correct?
(a)(1) The royalties or direct use fees that you report are subject to monitoring, review, and
audit. The ONRR may review and audit your data, and ONRR will direct you to use a different
measure of royalty value, gross proceeds, or fee, whichever is applicable, if it determines that the
reported value, gross proceeds, or fee is inconsistent with the requirements of this subpart.
(2) If ONRR directs you to use a different royalty value, measure of gross proceeds, or fee, you
must either pay any royalties or fees due (together with interest computed under §1218.302 of this
chapter) or report a credit for or request a refund of any overpaid royalties or fees.
(b) When the provisions in this subpart refer to gross proceeds either for the sale of electricity
or the sale of a geothermal resource, in conducting reviews and audits ONRR will examine whether
your sales contract reflects the total consideration actually transferred, either directly or indirectly,
from the buyer to you for the geothermal resource or electricity. If ONRR determines that a contract
does not reflect the total consideration, or the gross proceeds accruing to you under a contract do
not reflect reasonable consideration because of misconduct by or between the contracting parties, or
because you otherwise have breached your duty to the lessor to market the production for the
mutual benefit of the lessee and the lessor, ONRR may require you to increase the gross proceeds
to reflect any additional consideration. Alternatively, for Class I leases, ONRR may require you to
use another valuation method in the regulations applicable to dispositions other than under an arm'slength contract. ONRR will notify you to give you an opportunity to provide written information
justifying your gross proceeds.
(c) For arm's-length sales, you have the burden of demonstrating that your contract is arm's
length.
(d) ONRR may require you to certify that the provisions in your sales contract include all of the
consideration the buyer paid you, either directly or indirectly, for the electricity or geothermal
resource.
(e) Notwithstanding any other provision of this subpart, under no circumstances will the value of
production for royalty purposes under a Class I lease where the geothermal resources are sold
before use be less than the gross proceeds accruing to you.
(f) Gross proceeds for the sale of electricity or for the sale of the geothermal resource will be
based on the highest price a prudent lessee can receive through legally enforceable claims under its
contract.
(1) Absent contract revision or amendment, if you fail to take proper or timely action to receive
prices or benefits to which you are entitled, you must pay royalty based upon that obtainable price or
benefit.

(2) Contract revisions or amendments you make must be in writing and signed by all parties to
the contract.
(3) If you make timely application for a price increase or benefit allowed under your contract,
but the purchaser refuses and you take reasonable measures, which are documented, to force
purchaser compliance, you will owe no additional royalties unless or until you receive additional
monies or consideration resulting from the price increase. This paragraph (f)(3) will not be construed
to permit you to avoid your royalty payment obligation in situations where a purchaser fails to pay, in
whole or in part or timely, for a quantity of geothermal resources or electricity.
§1206.362 What are my responsibilities to place production into marketable condition and to
market production?
You must place geothermal resources and byproducts in marketable condition and market the
geothermal resources or byproducts for the mutual benefit of the lessee and the lessor at no cost to
the Federal Government. If you use gross proceeds under an arm's-length contract in determining
royalty, you must increase those gross proceeds to the extent that the purchaser, or any other
person, provides certain services that the seller normally would be responsible to perform to place
the geothermal resources or byproducts in marketable condition or to market the geothermal
resources or byproducts.
§1206.363 When is an ONRR audit, review, reconciliation, monitoring, or other like process
considered final?
Notwithstanding any provision in these regulations to the contrary, no audit, review,
reconciliation, monitoring, or other like process that results in a redetermination by ONRR of royalty
or fees due under this subpart is considered final or binding as against the Federal Government or
its beneficiaries until ONRR formally closes the audit period in writing.
§1206.364 How do I request a value or gross proceeds determination?
(a) You may request a value determination from ONRR regarding any geothermal resources
produced from a Class I lease or for byproducts produced from a Class I, Class II, or Class III lease.
You may also request a gross proceeds determination for a Class II or Class III lease. Your request
must:
(1) Be in writing;
(2) Identify specifically all leases involved, all owners of interests in those leases, and the
operator(s) for those leases;
(3) Completely explain all relevant facts. You must inform ONRR of any changes to relevant
facts that occur before we respond to your request;
(4) Include copies of all relevant documents;
(5) Provide your analysis of the issue(s), including citations to all relevant precedents (including
adverse precedents); and
(6) Suggest your proposed gross proceeds calculation or valuation method.

(b) In response to your request:
(1) The Assistant Secretary, Policy, Management and Budget, may issue a determination; or
(2) ONRR may issue a determination; or
(3) ONRR may inform you in writing that ONRR will not provide a determination. Situations in
which ONRR typically will not provide any determination include, but are not limited to:
(i) Requests for guidance on hypothetical situations; and
(ii) Matters that are the subject of pending litigation or administrative appeals.
(c)(1) A determination signed by the Assistant Secretary, Policy, Management and Budget, is
binding on both you and ONRR until the Assistant Secretary modifies or rescinds it.
(2) After the Assistant Secretary issues a determination, you must make any adjustments in
royalty payments that follow from the determination and, if you owe additional royalties, pay the
royalties owed together with late payment interest computed under §1218.302 of this chapter.
(3) A determination signed by the Assistant Secretary is the final action of the Department and
is subject to judicial review under 5 U.S.C. 701-706.
(d) A determination issued by ONRR is binding on ONRR and delegated States, but not on you,
with respect to the specific situation addressed in the determination unless ONRR (for ONRR-issued
determinations) or the Assistant Secretary modifies or rescinds it.
(1) A determination by ONRR is not an appealable decision or order under 30 CFR part 1290.
(2) If you receive an order requiring you to pay royalty on the same basis as the determination,
you may appeal that order under 30 CFR part 1290.
(e) In making a determination, ONRR or the Assistant Secretary may use any of the applicable
criteria in this subpart.
(f) A change in an applicable statute or regulation on which any determination is based takes
precedence over the determination after the effective date of the statute or regulation, regardless of
whether ONRR or the Assistant Secretary modifies or rescinds the determination.
(g) ONRR or the Assistant Secretary generally will not retroactively modify or rescind a
determination issued under paragraph (d) of this section, unless:
(1) There was a misstatement or omission of material facts; or
(2) The facts subsequently developed are materially different from the facts on which the
guidance was based.
(h) ONRR may make requests and replies under this section available to the public, subject to
the confidentiality requirements under §1206.365.

[72 FR 24459, May 2, 2007, as amended at 78 FR 30204, May 22, 2013]

§1206.365 Does ONRR protect information I provide?
Certain information you submit to ONRR regarding royalties or fees on geothermal resources or
byproducts, including deductions and allowances, may be exempt from disclosure. To the extent
applicable laws and regulations permit, ONRR will keep confidential any data you submit that is
privileged, confidential, or otherwise exempt from disclosure. All requests for information must be
submitted under the Freedom of Information Act regulations of the Department of the Interior at 43
CFR part 2.
§1206.366 What is the nominal fee that a State, tribal, or local government lessee must pay
for the use of geothermal resources?
If a State, tribal, or local government lessee uses a geothermal resource without sale and for
public purposes—other than commercial production or generation of electricity—the State, tribal, or
local government lessee must pay a nominal fee. A nominal fee means a slight or de minimis fee.
ONRR will determine the fee on a case-by-case basis.

Subpart I—OCS Sulfur [Reserved]
Subpart J—Indian Coal
SOURCE: 82 FR 36981, Aug. 7, 2017, unless otherwise noted.

§1206.450 Purpose and scope.
(a) This subpart prescribes the procedures to establish the value, for royalty purposes, of all
coal from Indian Tribal and allotted leases (except leases on the Osage Indian Reservation, Osage
County, Oklahoma).
(b) If the specific provisions of any statute, treaty, or settlement agreement between the Indian
lessor 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,
treaty, lease provision, or settlement shall govern to the extent of that inconsistency.
(c) All royalty payments are subject to later audit and adjustment.
(d) The regulations in this subpart are intended to ensure that the trust responsibilities of the
United States with respect to the administration of Indian coal leases are discharged in accordance
with the requirements of the governing mineral leasing laws, treaties, and lease terms.
§1206.451 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 an approved, or an ONRR-initially accepted deduction in determining value
for royalty purposes. Coal washing allowance means an allowance for the reasonable, actual costs
incurred by the lessee for coal washing, or an approved or ONRR-initially accepted deduction for the
costs of washing coal, determined pursuant to this subpart. 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, or an approved ONRR-initially
accepted deduction for costs of such transportation, determined pursuant to this subpart.
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: Ownership in excess of 50 percent constitutes control; ownership of 10
through 50 percent creates a presumption of control; and 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.
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 Indian leases.
BIA means the Bureau of Indian Affairs of the Department of the Interior.
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
Indian lessor. 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 Indian 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.

Indian allottee means any Indian for whom land or an interest in land is held in trust by the
United States or who holds title subject to Federal restriction against alienation.
Indian Tribe means any Indian Tribe, band, nation, pueblo, community, rancheria, colony, or
other group of Indians for which any land or interest in land is held in trust by the United States or
which is subject to Federal restriction against alienation.
Lease means any contract, profit-share arrangement, joint venture, or other agreement issued
or approved by the United States for an Indian 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 Indian Tribe or an Indian allottee 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.
ONRR means the Office of Natural Resources Revenue of the Department of the Interior.
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 nonarm'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.

§1206.452 Coal subject to royalties—general provisions.
(a) All coal (except coal unavoidably lost as determined by BLM pursuant to 43 CFR group
3400) from an Indian 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 Indian leases shall be allocated to
such leases regardless of whether it is stored on Indian lands. The lessee shall maintain accurate
records to determine to which individual Indian 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.
§1206.453 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 1210—Forms and
Reports.
§1206.454 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 Indian 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 coal is later used, sold, or otherwise finally disposed of. ONRR may ask BLM or BIA 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 §1206.455(d) of this subpart.
§1206.455 Valuation standards for cents-per-ton leases.
(a) This section is applicable to coal leases on Indian Tribal and allotted Indian lands (except
leases on the Osage Indian Reservation, Osage County, Oklahoma) 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 determined 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 §1206.456 of this subpart, and royalties shall be paid at the royalty rate specified in
the readjusted lease.
§1206.456 Valuation standards for ad valorem leases.
(a) This section is applicable to coal leases on Indian Tribal and allotted Indian lands (except
leases on the Osage Indian Reservation, Osage County, Oklahoma) 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 pursuant to this
section, less applicable coal washing allowances and transportation allowances determined
pursuant to §§1206.457 through 1206.461 of this subpart, or any allowance authorized by
§1206.464 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), (3), and (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 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'slength 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 paragraphs (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.
(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's-length 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's-length 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 salability 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) An Indian lessee will make available upon request to the authorized ONRR or Indian
representatives, or to the Inspector General of the Department of the Interior or other persons
authorized to receive such information, arm's-length sales 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 or 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 ONRR-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 30 CFR 1218.202. 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. 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 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 §§1206.457 through 1206.461 and 1206.464 of this subpart.
(h) The lessee is required to place coal in marketable condition at no cost to the Indian lessor.
Where the value established pursuant to 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 Indian Tribes or allottees until the audit
period is formally closed.
(k) Certain information submitted to ONRR to support valuation proposals, including
transportation, coal washing, or other allowances pursuant to §§1206.457 through 1206.461 and
1206.464 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. Nothing in
this section is intended to limit or diminish in any manner whatsoever the right of an Indian lessor to

obtain any and all information as such lessor may be lawfully entitled from ONRR or such lessor's
lessee directly under the terms of the lease or applicable law.
§1206.457 Washing allowances—general.
(a) For ad valorem leases subject to §1206.456 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 §1206.456 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 Indian 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.
§1206.458 Determination of washing allowances.
(a) Arm's-length contracts. (1) For washing costs incurred by a lessee pursuant to an arm'slength 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. ONRR's prior approval is not required before a lessee may deduct costs incurred under
an arm's-length contract. However, before any deduction may be taken, the lessee must submit a
completed page one of form ONRR-4292, Coal Washing Allowance Report, in accordance with
paragraph (c)(1) of this section. A washing allowance may be claimed retroactively for a period of
not more than 3 months prior to the first day of the month that form ONRR-4292 is filed with ONRR,
unless ONRR approves a longer period upon a showing of good cause by the lessee.
(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 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 dollar-per-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's-length or no contract situation are subject to monitoring, review, audit, and
possible future adjustment. Prior ONRR approval of washing allowances is not required for nonarm's-length or no contract situations. However, before any estimated or actual deduction may be
taken, the lessee must submit a completed form ONRR-4292 in accordance with paragraph (c)(2) of
this section. A washing allowance may be claimed retroactively for a period of not more than 3
months prior to the first day of the month that form ONRR-4292 is filed with ONRR, unless ONRR
approves a longer period upon a showing of good cause by the lessee. ONRR will monitor the
allowance deduction to ensure that deductions are reasonable and allowable. When necessary or
appropriate, ONRR may direct a lessee to modify its 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 royalties, 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 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.
(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 shall be the industrial rate associated with Standard and Poor's BBB
rating. The rate of return shall be the monthly average rate as published in Standard and Poor's
Bond Guide for the first month of the reporting period for which the allowance is applicable and shall
be effective during the reporting period. The rate shall be redetermined at the beginning of each
subsequent washing allowance reporting period (which is determined pursuant to paragraph (c)(2) of
this section).
(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) With the exception of those washing
allowances specified in paragraphs (c)(1)(v) and (vi) of this section, the lessee shall submit page one
of the initial form ONRR-4292 prior to, or at the same time, as the washing allowance determined
pursuant to an arm's-length contract is reported on form ONRR-4430, Solid Minerals Production and
Royalty Report. A form ONRR-4292 received by the end of the month that the form ONRR-4430 is
due shall be considered to be received timely.
(ii) The initial form ONRR-4292 shall be effective for a reporting period beginning the month
that the lessee is first authorized to deduct a washing allowance and shall continue until the end of
the calendar year, or until the applicable contract or rate terminates or is modified or amended,
whichever is earlier.
(iii) After the initial reporting period and for succeeding reporting periods, lessees must submit
page one of form ONRR-4292 within 3 months after the end of the calendar year, or after the
applicable contract or rate terminates or is modified or amended, whichever is earlier, unless ONRR
approves a longer period (during which period the lessee shall continue to use the allowance from
the previous reporting period).
(iv) 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.
(v) Washing allowances which are based on arm's-length contracts and which are in effect at
the time these regulations become effective will be allowed to continue until such allowances
terminate. For the purposes of this section, only those allowances that have been approved by
ONRR in writing shall qualify as being in effect at the time these regulations become effective.
(vi) ONRR may establish, in appropriate circumstances, reporting requirements that are
different from the requirements of this section.
(2) Non-arm's-length or no contract. (i) With the exception of those washing allowances
specified in paragraphs (c)(2)(v) and (vii) of this section, the lessee shall submit an initial form
ONRR-4292 prior to, or at the same time as, the washing allowance determined pursuant to a nonarm's-length contract or no contract situation is reported on form ONRR-4430, Solid Minerals
Production and Royalty Report. A form ONRR-4292 received by the end of the month that the form
ONRR-4430 is due shall be considered to be timely received. The initial reporting may be based on
estimated costs.

(ii) The initial form ONRR-4292 shall be effective for a reporting period beginning the month
that the lessee first is authorized to deduct a washing allowance and shall continue until the end of
the calendar year, or until the washing under the non-arm's-length contract or the no contract
situation terminates, whichever is earlier.
(iii) For calendar-year reporting periods succeeding the initial reporting period, the lessee shall
submit a completed form ONRR-4292 containing the actual costs for the previous reporting period. If
coal washing is continuing, the lessee shall include on form ONRR-4292 its estimated costs for the
next calendar year. The estimated coal washing allowance shall be based on the actual costs for the
previous period plus or minus any adjustments which are based on the lessee's knowledge of
decreases or increases which will affect the allowance. Form ONRR-4292 must be received by
ONRR within 3 months after the end of the previous reporting period, unless ONRR approves a
longer period (during which period the lessee shall continue to use the allowance from the previous
reporting period).
(iv) For new wash plants, the lessee's initial form ONRR-4292 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 plant, or if such data are not available, the lessee shall use
estimates based upon industry data for similar coal wash plants.
(v) Washing allowances based on non-arm's-length or no contract situations which are in effect
at the time these regulations become effective will be allowed to continue until such allowances
terminate. For the purposes of this section, only those allowances that have been approved by
ONRR in writing shall qualify as being in effect at the time these regulations become effective.
(vi) Upon request by ONRR, the lessee shall submit all data used by the lessee to prepare its
forms ONRR-4292. The data shall be provided within a reasonable period of time, as determined by
ONRR.
(vii) ONRR may establish, in appropriate circumstances, reporting requirements which are
different from the requirements of this section.
(3) ONRR may establish coal washing allowance reporting dates for individual leases different
from those specified in this subpart in order to provide more effective administration. Lessees will be
notified of any change in their reporting period.
(4) Washing allowances must be reported as a separate line on the form ONRR-4430, unless
ONRR approves a different reporting procedure.
(d) Interest assessments for incorrect or late reports and failure to report. (1) If a lessee
deducts a washing allowance on its form ONRR-4430 without complying with the requirements of
this section, the lessee shall be liable for interest on the amount of such deduction until the
requirements of this section are complied with. The lessee also shall repay the amount of any
allowance which is disallowed by this section.
(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 ONRR-4430 for each month during the allowance form reporting period, the
lessee shall be required to pay additional royalties due plus interest computed pursuant to
§1218.202, retroactive to the first month the lessee is authorized to deduct a washing allowance. If
the actual washing allowance is greater than the amount the lessee has estimated and taken during
the reporting period, the lessee shall be entitled to a credit, without interest.
(2) The lessee must submit a corrected form ONRR-4430 to reflect actual costs, together with
any payment, in accordance with instructions provided by ONRR.
(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.
§1206.459 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.
(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.
§1206.460 Transportation allowances—general.
(a) For ad valorem leases subject to §1206.456 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 an Indian lease to a sales point which is remote from both the lease
and mine; or
(2) Transport the coal from an Indian 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 Indian leases.
§1206.461 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. ONRR's prior approval is not required before a lessee may deduct costs
incurred under an arm's-length contract. However, before any deduction may be taken, the lessee
must submit a completed page one of form ONRR-4293, Coal Transportation Allowance Report, in
accordance with paragraph (c)(1) of this section. A transportation allowance may be claimed
retroactively for a period of not more than 3 months prior to the first day of the month that form
ONRR-4293 is filed with ONRR, unless ONRR approves a longer period upon a showing of good
cause by the lessee.
(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
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 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. Prior ONRR approval of transportation allowances is
not required for non-arm's-length or no contract situations. However, before any estimated or actual

deduction may be taken, the lessee must submit a completed form ONRR-4293 in accordance with
paragraph (c)(2) of this section. A transportation allowance may be claimed retroactively for a period
of not more than 3 months prior to the first day of the month that form ONRR-4293 is filed with
ONRR, unless ONRR approves a longer period upon a showing of good cause by the lessee. ONRR
will monitor the allowance deductions to ensure that deductions are reasonable and allowable. 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 (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 shall be the industrial rate associated with Standard and Poor's BBB
rating. The rate of return shall be the monthly average as published in Standard and Poor's Bond
Guide for the first month of the reporting period of which the allowance is applicable and shall be
effective during the reporting period. The rate shall be redetermined at the beginning of each

subsequent transportation allowance reporting period (which is determined pursuant to paragraph
(c)(2) of this section).
(3) A lessee may apply to ONRR for exception from the requirement that it compute actual
costs in accordance with paragraphs (b)(1) and (2) of this section. ONRR will grant the exception
only if the lessee has a rate for the transportation approved by a Federal agency for Indian leases.
ONRR shall deny the exception request if it determines that the rate is excessive as 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 regulatory agency cost analysis exists and the Federal regulatory agency has
declined to investigate pursuant to 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) With the exception of those
transportation allowances specified in paragraphs (c)(1)(v) and (vi) of this section, the lessee shall
submit page one of the initial form ONRR-4293 prior to, or at the same time as, the transportation
allowance determined pursuant to an arm's-length contract is reported on form ONRR-4430, Solid
Minerals Production and Royalty Report.
(ii) The initial form ONRR-4293 shall be effective for a reporting period beginning the month
that the lessee is first authorized to deduct a transportation allowance and shall continue until the
end of the calendar year, or until the applicable contract or rate terminates or is modified or
amended, whichever is earlier.
(iii) After the initial reporting period and for succeeding reporting periods, lessees must submit
page one of form ONRR-4293 within 3 months after the end of the calendar year, or after the
applicable contract or rate terminates or is modified or amended, whichever is earlier, unless ONRR
approves a longer period (during which period the lessee shall continue to use the allowance from
the previous reporting period). Lessees may request special reporting procedures in unique
allowance reporting situations, such as those related to spot sales.
(iv) 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.
(v) Transportation allowances that are based on arm's-length contracts and which are in effect
at the time these regulations become effective will be allowed to continue until such allowances
terminate. For the purposes of this section, only those allowances that have been approved by
ONRR in writing shall qualify as being in effect at the time these regulations become effective.
(vi) ONRR may establish, in appropriate circumstances, reporting requirements that are
different from the requirements of this section.
(2) Non-arm's-length or no contract. (i) With the exception of those transportation allowances
specified in paragraphs (c)(2)(v) and (vii) of this section, the lessee shall submit an initial form
ONRR-4293 prior to, or at the same time as, the transportation allowance determined pursuant to a
non-arm's-length contract or no contract situation is reported on form ONRR-4430, Solid Minerals
Production and Royalty Report. The initial report may be based on estimated costs.

(ii) The initial form ONRR-4293 shall be effective for a reporting period beginning the month
that the lessee first is authorized to deduct a transportation allowance and shall continue until the
end of the calendar year, or until the transportation under the non-arm's-length contract or the no
contract situation terminates, whichever is earlier.
(iii) For calendar-year reporting periods succeeding the initial reporting period, the lessee shall
submit a completed form ONRR-4293 containing the actual costs for the previous reporting period. If
the transportation is continuing, the lessee shall include on form ONRR-4293 its estimated costs for
the next calendar year. The estimated transportation allowance shall be based on the actual costs
for the previous reporting period plus or minus any adjustments that are based on the lessee's
knowledge of decreases or increases that will affect the allowance. form ONRR-4293 must be
received by ONRR within 3 months after the end of the previous reporting period, unless ONRR
approves a longer period (during which period the lessee shall continue to use the allowance from
the previous reporting period).
(iv) For new transportation facilities or arrangements, the lessee's initial form ONRR-4293 shall
include estimates of the allowable 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.
(v) Non-arm's-length contract or no contract-based transportation allowances that are in effect
at the time these regulations become effective will be allowed to continue until such allowances
terminate. For purposes of this section, only those allowances that have been approved by ONRR in
writing shall qualify as being in effect at the time these regulations become effective.
(vi) Upon request by ONRR, the lessee shall submit all data used to prepare its form ONRR4293. The data shall be provided within a reasonable period of time, as determined by ONRR.
(vii) ONRR may establish, in appropriate circumstances, reporting requirements that are
different from the requirements of this section.
(viii) If the lessee is authorized to use its Federal-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.
(3) ONRR may establish reporting dates for individual lessees different than those specified in
this paragraph in order to provide more effective administration. Lessees will be notified as to any
change in their reporting period.
(4) Transportation allowances must be reported as a separate line item on form ONRR-4430,
unless ONRR approves a different reporting procedure.
(d) Interest assessments for incorrect or late reports and failure to report. (1) If a lessee
deducts a transportation allowance on its form ONRR-4430 without complying with the requirements
of this section, the lessee shall be liable for interest on the amount of such deduction until the
requirements of this section are complied with. The lessee also shall repay the amount of any
allowance which is disallowed by this section.
(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 transportation allowance is less than the amount the lessee
has taken on form ONRR-4430 for each month during the allowance form reporting period, the
lessee shall be required to pay additional royalties due plus interest, computed pursuant to
§1218.202 of this chapter, retroactive to the first month the lessee is authorized to deduct a
transportation allowance. If the actual transportation allowance is greater than the amount the lessee
has estimated and taken during the reporting period, the lessee shall be entitled to a credit, without
interest.
(2) The lessee must submit a corrected form ONRR-4430 to reflect actual costs, together with
any payment, 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.
§1206.462 [Reserved]
§1206.463 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.
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.
§1206.464 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 §1206.456(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 §1206.456(c)(2)(i) through (iv) of this subpart; or,
(b) In the event that a value cannot be established in accordance with paragraph (a) of this
section, then the value of production will be determined in accordance with §1206.456(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
§1206.458(b)(2)(v) of this subpart.

PART 1210—FORMS AND REPORTS
Contents

Subpart A—General Provisions
§1210.01 What is the purpose of this subpart?
§1210.02 To whom do these regulations apply?
§1210.10 What are the OMB-approved information collections?
§1210.20 What if I disagree with the burden hour estimates?
§1210.21 How do I report my taxpayer identification number?
§1210.30 What are my responsibilities as a reporter/payor?
§1210.40 Will ONRR keep the information I provide confidential?
Subpart B—Royalty Reports—Oil, Gas, and Geothermal Resources
§1210.50 What is the purpose of this subpart?
§1210.51 Who must submit royalty reports?
§1210.52 What royalty reports must I submit?
§1210.53 When are my royalty reports and payments due?
§1210.54 Must I submit this royalty report electronically?
§1210.55 May I submit this royalty report manually?
§1210.56 Where can I find more information on how to complete the royalty report?
§1210.60 What definitions apply to this subpart?
§1210.61 What additional reporting requirements must I meet for Indian oil valuation purposes?

Subpart C—Production Reports—Oil and Gas
§1210.100 What is the purpose of this subpart?
§1210.101 Who must submit production reports?
§1210.102 What production reports must I submit?
§1210.103 When are my production reports due?
§1210.104 Must I submit these production reports electronically?
§1210.105 May I submit these production reports manually?
§1210.106 Where can I find more information on how to complete these production reports?

Subpart D—Special-Purpose Forms and Reports—Oil, Gas, and Geothermal Resources
§1210.150 What is the purpose of this subpart?
§1210.151 What reports must I submit to claim an excess allowance?
§1210.152 What reports must I submit to claim allowances on an Indian lease?
§1210.153 What reports must I submit for Indian gas valuation purposes?
§1210.154 What documents or other information must I submit for Federal oil valuation purposes?
§1210.155 What reports must I submit for Federal onshore stripper oil properties?

§1210.156 What reports must I submit for net profit share leases?
§1210.157 What reports must I submit to suspend an ONRR order under appeal?
§1210.158 What reports must I submit to designate someone to make my royalty payments?

Subpart E—Production and Royalty Reports—Solid Minerals
§1210.200 What is the purpose of this subpart?
§1210.201 How do I submit Form ONRR-4430, Solid Minerals Production and Royalty Report?
§1210.202 How do I submit sales summaries?
§1210.203 How do I submit sales contracts?
§1210.204 How do I submit facility data?
§1210.205 What reports must I submit to claim allowances on Indian coal leases?
§1210.206 Will I need to submit additional documents or evidence to ONRR?
§1210.207 How will information submissions be kept confidential?

Subpart F—Coal [Reserved]
Subpart G—Other Solid Minerals [Reserved]
Subpart H—Geothermal Resources
§1210.350 Definitions.
§1210.351 Required recordkeeping.
§1210.352 Special forms and reports.
§1210.353 Monthly report of sales and royalty.
§1210.354 Reporting instructions.

Subpart I—OCS Sulfur [Reserved]

AUTHORITY: 5 U.S.C. 301 et seq.; 25 U.S.C. 396, 2107; 30 U.S.C. 189, 190, 359, 1023, 1751(a); 31 U.S.C.
3716, 9701; 43 U.S.C. 1334, 1801 et seq.; and 44 U.S.C. 3506(a).
SOURCE: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61081, Oct. 4, 2010.

Subpart A—General Provisions
SOURCE: 73 FR 15892, Mar. 26, 2008, unless otherwise noted.

§1210.01 What is the purpose of this subpart?
This subpart identifies information collections required by the Office of Natural Resources
Revenue (ONRR), in the normal course of operations. This information is submitted by various
parties associated with Federal and Indian leases such as lessees, designees, and operators. The
information collected meets the ONRR congressionally mandated accounting and auditing
responsibilities relating to Federal and Indian minerals revenue management. Information collected
regarding production, royalties, and other payments due the Government from activities on leased

Federal or Indian land is authorized by the Federal Oil and Gas Royalty Management Act of 1982,
as amended (30 U.S.C. 1701 et seq.), as well as 43 U.S.C. 1334 and 30 U.S.C. 189, 359, 396, and
396d for oil and gas production; and by 30 U.S.C. 189, 359, 396, and 396d for solid minerals
production.
§1210.02 To whom do these regulations apply?
The regulations apply to any person, referred to in this subpart as “you,” “your,” or
“reporter/payor,” who is a lessee under any Federal or Indian lease for any mineral or who is
assigned or assumes an obligation to report data or make payment to ONRR. The term
reporter/payor may include lessees, designees, operators, purchasers, reporters, other payors, and
working interest owners, but is not restricted to these parties. This section does not affect the liability
to pay and report royalties as established by other regulations, laws, and the lease terms.
§1210.10 What are the OMB-approved information collections?
The information collection requirements identified in this subpart have been approved by the
Office of Management and Budget (OMB) under 44 U.S.C. 3501 et seq. Detailed information about
each information collection request (ICR), including CFR citations, is included on the ONRR Web
site at http://www.onrr.gov/Laws_R_D/FRNotices/FRInfColl.htm-. The ICRs and associated ONRR
form numbers, if applicable, are listed below:

OMB Control number and short title

Form or information collected

1012-0001, CFO Act of 1992, Accounts Receivable
Confirmations

No form for the following collection:
• Accounts receivable confirmations

1012-0002, 30 CFR Parts 1202, 1206, and 1207, Indian Oil
and Gas Valuation

Form ONRR-4109, Gas Processing
Allowance Summary Report
Form ONRR-4110, Oil Transportation
Allowance Report
Form ONRR-4295, Gas Transportation
Allowance Report
Form ONRR-4393, Request to Exceed
Regulatory Allowance Limitation1
Form ONRR-4410, Accounting for
Comparison [Dual Accounting]
Form ONRR-4411, Safety Net Report

1012-0003, 30 CFR Parts 1227, 1228, and 1229, Delegated
and Cooperative Activities with States and Indian Tribes

No forms for the following collections:
• Written delegation proposal to perform
auditing and investigative activities
• Request for cooperative agreement and
subsequent requirements

1012-0004, 30 CFR Parts 1210 and 1212, Royalty and
Production Reporting

Form ONRR-2014, Report of Sales and
Royalty Remittance
Form ONRR-4054 (Parts A, B, and C), Oil
and Gas Operations Report

Form ONRR-4058, Production Allocation
Schedule Report
1012-0005, 30 CFR Parts 1202, 1204, 1206, and 1210,
Federal Oil and Gas Valuation

Form ONRR-4377, Stripper Royalty Rate
Reduction Notification
Form ONRR-4393, Request to Exceed
Regulatory Allowance Limitation1
No form for the following collection:
• Federal oil valuation support
information

1012-0006, 30 CFR Part 1243, Suspensions Pending Appeal
and Bonding

Form ONRR-4435, Administrative Appeal
Bond
Form ONRR-4436, Letter of Credit
Form ONRR-4437, Assignment of
Certificate of Deposit
No forms for the following collections:
• Self bonding
• U.S. Treasury securities

1012-0008, 30 CFR Part 1218, Collection of Monies Due the Form ONRR-4425, Designation Form for
Federal Government
Royalty Payment Responsibility
No forms for the following collections:
• Cross-lease netting documentation
• Indian recoupment approval
1012-0009, 30 CFR Part 1220, OCS Net Profit Share Payment No form for the following collection:
Reporting
• Net profit share payment information
1012-0010, 30 CFR Parts 1202, 1206, 1210, 1212, 1217, and Form ONRR-4430, Solid Minerals
1218, Solid Minerals and Geothermal Resources Collections Production and Royalty Report
Form ONRR-4292, Coal Washing
Allowance Report
Form ONRR-4293, Coal Transportation
Allowance Report
No forms for the following collections:
• Facility data—solid minerals
• Sales contracts—solid minerals
• Sales summaries—solid minerals
1Lessees

use Form ONRR-4393 for both Federal and Indian oil and gas leases. The form
resides with ICR 1012-0005, but ONRR includes the burden hours for Indian leases in ICR 10120002.
[73 FR 15892, Mar. 26, 2008, as amended at 73 FR 58875, Oct. 8, 2008; 76 FR 76615, Dec. 8, 2011; 78 FR 30204,
May 22, 2013]

§1210.20 What if I disagree with the burden hour estimates?
Burden hour estimates are included on the ONRR Web site
at http://www.onrr.gov/Laws_R_D/FRNotices/FRInfColl.htm-. Send comments on the accuracy of
these burden estimates or suggestions on reducing the burden to the Office of Natural Resources
Revenue, Attention: Rules & Regs Team. 1012-XXXX P.O. Box 25165, Denver, CO 80225-0165. An
agency may not conduct or sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid OMB control number.
[73 FR 15892, Mar. 26, 2008, as amended at 74 FR 46907, Sept. 14, 2009; 76 FR 76615, Dec. 8, 2011]

§1210.21 How do I report my taxpayer identification number?
(a) Before paying or reporting to ONRR, you must obtain a payor code (see the ONRR Minerals
Revenue Reporter Handbook, which is available on the Internet
at http://www.onrr.gov/FM/Handbooks/default.htm; also see §1210.56 for further information on how
to obtain a handbook). At the time you request a payor code, you must provide your Employer
Identification Number (EIN) by submitting:
(1) An IRS Form W-9; or
(2) An equivalent certification containing:
(i) Your name;
(ii) The name of your business, if different from your name;
(iii) The form of your business entity; for example, a sole proprietorship, corporation, or
partnership;
(iv) The address of your business;
(v) The EIN of your business; and
(vi) A signed and dated certification that you are a U.S. citizen or resident alien and that the EIN
number provided is correct.
(b) If you are already paying or reporting to ONRR but do not have an EIN, ONRR may request
that you submit an IRS Form W-9 or equivalent certification containing the information required
under paragraph (a)(2) of this section.
(c) The collection of this data is not subject to the provisions of the Paperwork Reduction Act
because only information necessary to identify the respondent [5 CFR 1320.3(h)] is required.
(d) The EIN you provide to ONRR under paragraph (a) of this section:
(1) Means the taxpayer identification number (TIN) of an individual or other person (whether or
not an employer), which is assigned under 26 U.S.C. 6011(b), or a corresponding version of prior
law, or under 26 U.S.C. 6109;
(2) Must contain nine digits separated by a hyphen as follows: 00-0000000; and

(3) May not be a Social Security Number.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011]

§1210.30 What are my responsibilities as a reporter/payor?
Each reporter/payor must submit accurate, complete, and timely information to ONRR
according to the requirements in this part. If you discover an error in a previous report, you must file
an accurate and complete amended report within 30 days of your discovery of the error. If you do not
comply, ONRR may assess civil penalties under 30 CFR part 1241.
§1210.40 Will ONRR keep the information I provide confidential?
The ONRR will treat information obtained under this part as confidential to the extent permitted
by law as specified at 43 CFR part 2.

Subpart B—Royalty Reports—Oil, Gas, and Geothermal Resources
SOURCE: 73 FR 15892, Mar. 26, 2008, unless otherwise noted.

§1210.50 What is the purpose of this subpart?
The purpose of this subpart is to explain royalty reporting requirements when energy and
mineral resources are removed from Federal and Indian oil and gas and geothermal leases and
federally approved agreements. This includes leases and agreements located onshore and on the
Outer Continental Shelf (OCS).
§1210.51 Who must submit royalty reports?
(a) Any person who pays royalty to ONRR must submit royalty reports to ONRR.
(b) Before you pay or report to ONRR, you must obtain a payor code. To obtain a payor code,
refer to the ONRR Minerals Revenue Reporter Handbook for instructions and ONRR contact
information (also see §1210.56 for information on how to obtain a handbook).
§1210.52 What royalty reports must I submit?
You must submit a completed Form ONRR-2014, Report of Sales and Royalty Remittance, to
ONRR with:
(a) All royalty payments; and
(b) Rents on nonproducing leases, where specified in the lease.
§1210.53 When are my royalty reports and payments due?
(a) Completed Forms ONRR-2014 for royalty payments and the associated payments are due
by the end of the month following the production month (see also §1218.50 of this chapter).

(b) Completed Forms ONRR-2014 for rental payments, where applicable, and the associated
payments are due as specified by the lease terms (see also §1218.50 of this chapter).
(c) You may submit reports and payments early.
§1210.54 Must I submit this royalty report electronically?
(a) You must submit Form ONRR-2014 electronically unless you qualify for an exception under
§1210.55(a).
(b) As of December 31, 2011, all reporters/payors must report to ONRR electronically via the
eCommerce Reporting Web site. All reporters/payors also must report royalty data directly or upload
files using the ONRR electronic web form located at https://onrrreporting.onrr.gov. You must upload
your files in one of the following formats: The American Standard Code for information interchange
(ASCII) or Comma Separated Values (CSV) formats. You must create your external files in the
proprietary ASCII and CSV file layout formats defined by ONRR. You can generate these external
files from your system application. Reporters/payors also can access detailed information and
instructions regarding how to use the eCommerce Reporting Web site
at http://www.onrr.gov/FM/PDFDocs/eCommerce_FAQ.pdf.
(c) Refer to our electronic reporting guidelines in the ONRR Minerals Revenue Reporter
Handbook, for the most current reporting options, instructions, and security measures. The
handbook may be found on our Internet Web site or you may call your ONRR customer service
representative (see §1210.56 for further information on how to obtain a handbook).
[73 FR 15892, Mar. 26, 2008, as amended at 77 FR 25879, May 2, 2012]

§1210.55 May I submit this royalty report manually?
(a) The ONRR will allow you to submit Form ONRR-2014 manually if:
(1) You have never reported to ONRR before. You have 3 months from the date your first
report is due to begin reporting electronically;
(2) You report only rent, minimum royalty, or other annual obligations on Form ONRR-2014; or
(3) You are a small business, as defined by the U.S. Small Business Administration, and you
have no computer.
(b) If you meet the qualifications under paragraph (a) of this section, you may submit your form
manually to ONRR by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25627, Denver, CO 80225-0627; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver,
Colorado 80225.
[73 FR 15892, Mar. 26, 2008, as amended at 77 FR 25879, May 2, 2012]

§1210.56 Where can I find more information on how to complete the royalty report?
(a) Refer to the ONRR Minerals Revenue Reporter Handbook for specific guidance on how to
prepare and submit Form ONRR-2014. You may find the handbook
at http://www.onrr.gov/FM/Handbooks/default.htm or from the contacts on that Web page.
(b) Reporters/payors should refer to the handbook for specific guidance on royalty reporting
requirements. If you require additional information, you should contact ONRR at the above address.
A customer service telephone number is also listed in our handbook.
(c) You may find Form ONRR-2014 at http://www.onrr.gov/FM/Forms/AFSOil_Gas.htm or from
contacts listed on that Web page.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25879, May 2, 2012]

§1210.60 What definitions apply to this subpart?
Terms used in this subpart have the same meaning as in 30 U.S.C. 1702.
§1210.61 What additional reporting requirements must I meet for Indian oil valuation
purposes?
(a) If you must report and pay under §1206.52 of this chapter, you must use Sales Type Code
ARMS on Form ONRR-2014.
(b) If you must report and pay under §1206.53 of this chapter, you must use Sales Type Code
NARM on Form ONRR-2014.
(c) If you must report and pay under §1206.54 of this chapter, you must use Sales Type Code
OINX on Form ONRR-2014.
(d) You must report one of the following crude oil types in the product code field of Form
ONRR-2014:
(1) Sweet (code 61);
(2) Sour (code 62);
(3) Asphaltic (code 63);
(4) Black Wax (code 64); or
(5) Yellow Wax (code 65).
(e) All of the remaining requirements of this subpart apply.
[80 FR 24814, May 1, 2015]

Subpart C—Production Reports—Oil and Gas
SOURCE: 73 FR 15892, Mar. 26, 2008, unless otherwise noted.

§1210.100 What is the purpose of this subpart?
The purpose of this subpart is to explain production reporting requirements when energy and
mineral resources are removed from Federal and Indian oil and gas leases and federally approved
agreements. This includes leases and unit and communitization agreements located onshore and on
the Outer Continental Shelf (OCS).
§1210.101 Who must submit production reports?
(a) If you operate a Federal or Indian oil and gas lease or federally approved unit or
communitization agreement, you must submit production reports.
(b) Before reporting production to ONRR, you must obtain an operator number. To obtain an
operator number, refer to the ONRR Minerals Production Reporter Handbook for instructions and
ONRR contact information (also see §1210.106 for information on how to obtain a handbook).
§1210.102 What production reports must I submit?
(a) Form ONRR-4054, Oil and Gas Operations Report. If you operate a Federal or Indian
onshore or OCS oil and gas lease or federally approved unit or communitization agreement that
contains one or more wells that are not permanently plugged or abandoned, you must submit Form
ONRR-4054 to ONRR:
(1) You must submit Form ONRR-4054 for each well for each calendar month, beginning with
the month in which you complete drilling, unless:
(i) You have only test production from a drilling well; or
(ii) The ONRR tells you in writing to report differently.
(2) You must continue reporting until:
(i) The Bureau of Land Management (BLM) or ONRR approves all wells as permanently
plugged or abandoned or the lease or unit or communitization agreement is terminated; and
(ii) You dispose of all inventory.
(b) Form ONRR-4058, Production Allocation Schedule Report. If you operate an offshore
facility measurement point (FMP) handling production from a Federal oil and gas lease or federally
approved unit agreement that is commingled (with approval) with production from any other source
prior to measurement for royalty determination, you must file Form ONRR-4058.
(1) You must submit Form ONRR-4058 for each calendar month beginning with the month in
which you first handle production covered by this section.
(2) Form ONRR-4058 is not required whenever all of the following conditions are met:

(i) All leases involved are Federal leases;
(ii) All leases have the same fixed royalty rate;
(iii) All leases are operated by the same operator;
(iv) The facility measurement device is operated by the same person as the
leases/agreements;
(v) Production has not been previously measured for royalty determination; and
(vi) The production is not subsequently commingled and measured for royalty determination at
an FMP for which Form ONRR-4058 is required under this part.
Back to Top
§1210.103 When are my production reports due?
(a) The ONRR must receive your completed Forms ONRR-4054 and ONRR-4058 by the 15th
day of the second month following the month for which you are reporting.
(b) A report is considered received when it is delivered to ONRR by 4 p.m. mountain time at the
addresses specified in §1210.105. Reports received after 4 p.m. mountain time are considered
received the following business day.
Back to Top
§1210.104 Must I submit these production reports electronically?
(a) You must submit Forms ONRR-4054 and ONRR-4058 electronically unless you qualify for
an exception under §1210.105.
(b) As of December 31, 2011, all reporters/payors must report to ONRR electronically via the
eCommerce Reporting Web site. All reporters/payors also must report production data directly or
upload files using the ONRR electronic web form located at https://onrrreporting.onrr.gov. You must
upload your files in one of the following formats: The American Standard Code for information
interchange (ASCII) or Comma Separated Values (CSV) formats. You must create your external files
in the proprietary ASCII and CSV file layout formats defined by ONRR. You can generate these
external files from your system application. Reporters/payors also can access detailed information
and instructions regarding how to use the eCommerce Reporting Web site
at http://www.onrr.gov/FM/PDFDocs/eCommerce_FAQ.pdf.
(c) Refer to our electronic reporting guidelines in the ONRR Minerals Production Reporter
Handbook for the most current reporting options, instructions, and security measures. The handbook
may be found on our Internet Web site or you may call your ONRR customer service representative
(see §1210.106 for further information on how to obtain a handbook).
[73 FR 15892, Mar. 26, 2008, as amended at 77 FR 25880, May 2, 2012]

§1210.105 May I submit these production reports manually?
(a) The ONRR will allow you to submit Forms ONRR-4054 and ONRR-4058 manually if:
(1) You have never reported to ONRR before. You have 3 months from the day your first report
is due to begin reporting electronically; and
(2) You are a small business, as defined by the U.S. Small Business Administration, and you
have no computer.
(b) If you meet the qualifications under paragraph (a) of this section, you may submit your
forms manually to ONRR by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25627, Denver, CO 80225-0627; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver,
Colorado 80225.
[73 FR 15892, Mar. 26, 2008, as amended at 77 FR 25879, May 2, 2012]

§1210.106 Where can I find more information on how to complete these production reports?
(a) Refer to the ONRR Minerals Production Reporter Handbook for specific guidance on how to
prepare and submit Forms ONRR-4054 and ONRR-4058. You may find the handbook
at http://www.onrr.gov/FM/Handbooks/default.htm or from contacts listed on that Web page.
(b) Production reporters should refer to the handbook for specific guidance on production
reporting requirements. If you require additional information, you should contact ONRR at the above
address. A customer service telephone number is also listed in our handbook.
(c) You may find Forms ONRR-4054 and ONRR-4058
at http://www.onrr.gov/FM/Forms/AFSOil_Gas.htm or from contacts listed on that Web page.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25880, May 2, 2012]

Subpart D—Special-Purpose Forms and Reports—Oil, Gas, and
Geothermal Resources
SOURCE: 73 FR 15892, Mar. 26, 2008, unless otherwise noted.

§1210.150 What is the purpose of this subpart?
This subpart identifies specific special-purpose reports and provides general information,
reporting options, and reporting addresses. See §1210.10 for a complete listing of all information
collections, including forms and references for specific information collections.

§1210.151 What reports must I submit to claim an excess allowance?
(a) General. If you are a lessee, you must submit Form ONRR-4393, Request to Exceed
Regulatory Allowance Limitation, to request approval from ONRR to exceed prescribed
transportation and processing allowance limits on Federal oil and gas leases and prescribed
transportation allowance limits on Indian oil and gas leases under part 1206 of this chapter.
(b) Reporting options. You may find Form ONRR-4393
at http://www.onrr.gov/FM/Forms/AFSOil_Gas.htm or from contacts listed on that Web page.
(c) Reporting address. Submit completed Form ONRR-4393 as follows:
(1) Complete and submit the form electronically as an e-mail attachment;
(2) Send the form by U.S. Postal Service regular or express mail addressed to Office of Natural
Resources Revenue, P.O. Box 25165, Denver, CO 80225-0165; or
(3) Deliver the form to ONRR by special courier or overnight mail addressed to Office of Natural
Resources Revenue, Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling
Blvd., Denver, Colorado 80225.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25879, 25880, May 2, 2012]

§1210.152 What reports must I submit to claim allowances on an Indian lease?
(a) General. You must submit three additional forms to ONRR to claim transportation or
processing allowances on Indian oil and gas leases:
(1) You must submit Form ONRR-4110, Oil Transportation Allowance Report, to claim an
allowance for expenses incurred by a reporter/payor to transport oil from the lease site to a point
remote from the lease where value is determined under §1206.55 of this chapter.
(2) You must submit Form ONRR-4109, Gas Processing Allowance Summary Report, to claim
an allowance for the reasonable, actual costs of removing hydrocarbon and nonhydrocarbon
elements or compounds from a gas stream under §1206.180 of this chapter.
(3) You must submit Form ONRR-4295, Gas Transportation Allowance Report, to claim an
allowance for the reasonable, actual costs of transporting gas from the lease to the point of first sale
under §1206.178 of this chapter.
(b) Reporting options. You must submit Forms ONRR-4110, ONRR-4109, and ONRR-4295
manually. You may find the forms at http://www.onrr.gov/FM/Forms/AFSOil_Gas.htm or from
contacts listed on that Web page.
(c) Reporting address. You may submit completed Forms ONRR-4110, ONRR-4109, and
ONRR-4295 by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25165, Denver, CO 80225-0165; or

(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver,
Colorado 80225.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25879, 25880, May 2, 2012]

§1210.153 What reports must I submit for Indian gas valuation purposes?
(a) General. For Indian gas valuation, under certain conditions under §1206.172 of this chapter,
lessees must submit the following forms:
(1) Form ONRR-4410, Accounting for Comparison (Dual Accounting), Part A or part B; and/or
(2) Form ONRR-4411, Safety Net Report.
(b) Reporting options. You must submit Forms ONRR-4410 and ONRR-4411 manually. You
may find the forms at http://www.onrr.gov/FM/Forms/AFSOil_Gas.htm or from contacts listed on that
Web page.
(c) Reporting address. You must submit completed Forms ONRR-4410 and ONRR-4411 by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25165, Denver, CO 80225-0165; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver,
Colorado 80225.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25879, 25880, May 2, 2012]

§1210.154 What documents or other information must I submit for Federal oil valuation
purposes?
(a) General. The ONRR may require you to submit documents or other information to ONRR to
support your valuation of Federal oil under part 1206 as part of audit compliance.
(b) Reporting options. You must submit the documents or other information manually.
(c) Reporting address. You must submit required documents or other information by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25165, Denver, CO 80225-0165; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, MS 392B2, Denver Federal Center, West 6th Ave. and Kipling Blvd.,
Denver, Colorado 80225.
[73 FR 15892, Mar. 26, 2008, as amended at 77 FR 25879, May 2, 2012]

§1210.155 What reports must I submit for Federal onshore stripper oil properties?
(a) General. Operators who have been granted a reduced royalty rate by the Bureau of Land
Management (BLM) under 43 CFR 3103.4-2 must submit Form ONRR-4377, Stripper Royalty Rate
Reduction Notification, under 43 CFR 3103.4-2(b)(3).
(b) Reporting options. You may find Form ONRR-4377
at http://www.onrr.gov/FM/Forms/AFSOil_Gas.htm.You may file the form:
(1) Electronically by filling the form out in electronic format and submitting it to ONRR as an email attachment; or
(2) Manually by filling out the form and submitting it by:
(i) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue (ONRR), P.O. Box 25165, Denver, CO 80225-0165; or
(ii) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver,
Colorado 80225.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25879, 25880, May 2, 2012]

§1210.156 What reports must I submit for net profit share leases?
(a) General. After entering into a net profit share lease (NPSL) agreement, a lessee must report
under part 1220 of this chapter.
(b) Reporting options. You must submit the required report manually.
(c) Reporting address. You must submit the required documents by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25165, Denver, CO 80225-0165; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, MS 382B2, Denver Federal Center, West 6th Ave. and Kipling Blvd.,
Denver, Colorado 80225.
[73 FR 15892, Mar. 26, 2008, as amended at 77 FR 25879, May 2, 2012]

§1210.157 What reports must I submit to suspend an ONRR order under appeal?
(a) General. Reporters/payors or other recipients of ONRR Office of Natural Resources (MRM)
Revenue orders who appeal an order may be required to post a bond or other surety, under part
1243 of this chapter. The ONRR accepts the following surety types: Form ONRR-4435,
Administrative Appeal Bond; Form ONRR-4436, Letter of Credit; Form ONRR-4437, Assignment of
Certificate of Deposit; Self-bonding; and U.S. Treasury Securities.

(b) Reporting options. You must submit these forms and other documents manually. You may
find the forms and other documents under Surety Instrument Posting Instructions on our Internet
Web site at http://www.onrr.gov/Laws_R_D/FRNotices/ICR0122.htm.
(c) Reporting address. You may submit the required forms and other documents as specified in
the Surety Instrument Posting Instructions or by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25165, Denver, CO 80225-0165;
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, MS 64220, Denver Federal Center, West 6th Ave. and Kipling Blvd.,
Denver, Colorado 80225.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25879, May 2, 2012]

§1210.158 What reports must I submit to designate someone to make my royalty payments?
(a) General. You must submit Form ONRR-4425, Designation Form for Royalty Payment
Responsibility, if you want to designate a person to make royalty payments on your behalf under
§1218.52 of this chapter.
(b) Reporting options. You must submit Form ONRR-4425 manually. You may find the form
at http://www.onrr.gov/FM/Forms/AFSOil_Gas.htm.
(c) Reporting address. You must submit completed Form ONRR-4425 by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25165, Denver, CO 80225-0165; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver,
Colorado 80225.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011; 77 FR 25879, 25880, May 2, 2012]

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 ONRR-4430, Solid Minerals Production and Royalty
Report?
(a) What to submit. (1) You must submit a completed Form ONRR-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 ONRR-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 ONRR-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 ONRR-4430.
(3) Instructions for completing and submitting Form ONRR-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 ONRR-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 ONRR-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 ONRR-4430 on or before the date on which you must pay royalty under the terms of the
lease.
(3) You must submit your Form ONRR-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 ONRR-4430 is no longer correct, you must
submit a revised Form ONRR-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
ONRR-4430 is due on the first business day of the following month.
(c) How to submit. (1) You must submit Form ONRR-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 ONRR-4430 to us
at one of the following addresses, unless ONRR publishes notice in the FEDERAL REGISTER giving a
different address:
(i) For U.S. Postal Service regular mail or Express Mail: Office of Natural Resources Revenue
(ONRR), P.O. Box 25627, Denver, CO 80225-0627; 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; 77 FR 25879, May 2, 2012]

§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 ONRR-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

Western
Sodium/potassium phosphate

Metals

All other
All other
leases with ad leases with no
ad valorem
valorem
royalty terms royalty terms

(i) Purchaser
Name or Unique
Identification

Monthly

Monthly

Monthly

Monthly

Monthly

As Requested

(ii) Sales Units

Monthly

Monthly

Monthly

Monthly

Monthly

Monthly

(iii) Gross
Proceeds

Monthly

Monthly

Not
Monthly
Required

Monthly

Not Required

(iv) Processing or Monthly
washing costs

Monthly

Not
Monthly
Required

Monthly

Not Required

(v) Transportation Monthly
costs

Monthly

Not
Monthly
Required

Monthly

Not Required

(vi) Name of
Not
Monthly
product type sold Required

Not
Monthly
Required

Monthly

As Requested

(vii) Btu/lb

Monthly

Not Required

Not
Not
Not Required Not Required
Required Required

(viii) Ash %

Monthly

Not Required

Not
Not
Not Required Not Required
Required Required

(ix) Sulfur %

Monthly

Not Required

Not
Not
Not Required Not Required
Required Required

(x) lbs SO2

Monthly

Not Required

Not
Not
Not Required Not Required
Required Required

(xi) Moisture %

Monthly

Not Required

Monthly

Not
Not Required Not Required
Required

(xii) By-product
Units

Not
As Requested
Required

Monthly

As
As Requested Not Required
Requested

(xiii) P2O5 %

Not
Not Required
Required

Monthly

Not
Not Required Not Required
Required

(xiv) Size

Not
Not Required
Required

Not
Not
As Requested Not Required
Required Required

(xv) Net Smelter
Return data

Not
Not Required
Required

Not
Monthly
Required

(xvi) Other Data
e.g., Royalty
Calculation
Worksheet

As
Monthly
Requested

As
As
As Requested As Requested.
Requested Requested

Not Required Not Required

(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 ONRR-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 the FEDERAL REGISTER giving a different address:
(i) For U.S. Postal Service regular mail or Express Mail: Office of Natural Resources Revenue,
Solid Minerals and Geothermal (A&C), MS 62530B., Denver, Colorado 80225-0165.

(ii) For courier service or overnight mail (excluding Express Mail): Office of Natural Resources
Revenue, Solid Minerals and Geothermal (A&C), MS 62530B, Room A-614, Bldg 85, DFC, Denver,
Colorado 80225.
[48 FR 35641, Aug. 5, 1983, 76 FR 76615, Dec. 8, 2011]

§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 semi-annually, 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 the FEDERAL
REGISTER giving 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 ONRR-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.
(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?
(a) General. You must submit the following ONRR forms to claim a transportation or washing
allowance, as applicable, on Indian coal leases:
(1) Form ONRR-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 ONRR-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
at http://www.onrr.gov/FM/Forms/AFSSol_Min.htm.
(c) Reporting address. You must submit completed Forms ONRR-4292 and ONRR-4293 by:
(1) U.S. Postal Service regular or express mail addressed to Office of Natural Resources
Revenue, P.O. Box 25165, Denver, CO 80225-0165; or
(2) Special courier or overnight mail addressed to Office of Natural Resources Revenue,
Building 85, Room A-614, Denver Federal Center, West 6th Ave. and Kipling Blvd., Denver,
Colorado 80225.
[73 FR 15897, Mar. 26, 2008, as amended at 76 FR 76615, Dec. 8, 2011; 77 FR 25879, 25880, May 2, 2012; 78 FR
30205, May 22, 2013]

§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]

Subpart F—Coal [Reserved]
Subpart G—Other Solid Minerals [Reserved]
Subpart H—Geothermal Resources
SOURCE: 56 FR 57286, Nov. 8, 1991, unless otherwise noted.

§1210.350 Definitions.
Terms used in this subpart shall have the same meaning as in §1206.351 of this chapter.
§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.
§1210.352 Special forms and reports.
The ONRR may require submission of additional information on special forms or reports. When
special forms or reports other than those referred to in this subpart are necessary, ONRR will give
instructions for the filing of such forms or reports. Requests for the submission of such forms will be
made in conformity with the requirements of the Paperwork Reduction Act of 1980 and other
applicable laws.
[56 FR 57286, Nov. 8, 1991. Redesignated at 72 FR 24467, May 2, 2007]

§1210.353 Monthly report of sales and royalty.
You must submit a completed Report of Sales and Royalty Remittance (Form ONRR-2014)
each month once sales or use of production occur, even though sales may be intermittent, unless
ONRR otherwise authorizes. This report is due on or before the last day of the month following the
month in which production was sold or used, together with the royalties due to the United States.
[78 FR 30206, May 22, 2013]

§1210.354 Reporting instructions.
Refer to ONRR's Minerals Revenue Reporter Handbook—Oil, Gas, and Geothermal
Resources for specific guidance on how to prepare and submit required information collection
reports and forms to ONRR. You may find the handbook
at http://www.onrr.gov/FM/Handbooks/default.htm or from contacts listed on that Web page.

[77 FR 25880, May 2, 2012]

PART 1212—RECORDS AND FILES MAINTENANCE
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.
SOURCE: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61084, Oct. 4, 2010.

Subpart A—General Provisions [Reserved]

Subpart B—Oil, Gas, and OCS Sulphur—General
§1212.50 Required recordkeeping and reports.
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.
(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.
Terms used in this subpart shall have the same meaning as in 30 U.S.C. 1702.
[49 FR 37345, Sept. 21, 1984]

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.
(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]
Subpart G—Other Solid Minerals [Reserved]
Subpart H—Geothermal Resources
SOURCE: 56 FR 57286, Nov. 8, 1991, unless otherwise noted.

§1212.350 Definitions.
Terms used in this subpart shall have the same meaning as in §1206.351.
§1212.351 Required recordkeeping and reports.
(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]

PART 1217—AUDITS AND INSPECTIONS
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, 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]

Subpart B—Oil and Gas, General
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.
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.
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.
Terms used in this subpart shall have the same meaning as in 30 U.S.C. 1702.

Subpart C—Oil and Gas, Onshore [Reserved]
Subpart D—Oil, Gas and Sulfur, Offshore [Reserved]
Subpart E—Coal
§1217.200 Audits.
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
§1217.250 Audits.
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
SOURCE: 72 FR 24468, May 2, 2007, unless otherwise noted.

§1217.300 Audit or review of records.
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.
Specific lease account reconciliations will be performed with priority being given to reconciling
those lease accounts specifically identified by a State as having significant potential for
underpayment.
§1217.302 Definitions.
Terms used in this subpart will have the same meaning as in 30 U.S.C. 1702.

Subpart H—Indian Lands [Reserved]
Title 30: Mineral Resources

PART 1218—COLLECTION OF ROYALTIES, RENTALS,
BONUSES, AND OTHER MONIES DUE THE FEDERAL
GOVERNMENT
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 ONRR-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 Timing of payment.
§1218.51 How to make payments.
§1218.52 How does a lessee designate a Designee?
§1218.53 Recoupment of overpayments on Indian mineral leases.
§1218.54 Late payments.
§1218.55 Interest payments to Indians.
§1218.56 Definitions.
Subpart C—Oil and Gas, Onshore
§1218.100 Royalty and rental payments.
§1218.101 Royalty and rental remittance (naval petroleum reserves).
§1218.102 Late payment or underpayment charges.
§1218.103 Payments to States.
§1218.104 Exemption of States from certain interest and penalties.
§1218.105 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.
§1218.153 [Reserved]
§1218.154 Effect of suspensions on royalty and rental.
§1218.155 Method of payment.
§1218.156 Definitions.

Subpart E—Solid Minerals—General
§1218.200 Payment of royalties, rentals, and deferred bonuses.
§1218.201 Method of payment.
§1218.202 Late payment or underpayment charges.
§1218.203 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
§1218.500 What is the purpose of this subpart?
§1218.520 What definitions apply to this subpart?
§1218.540 How does ONRR serve official correspondence?
§1218.560 How do I submit Form ONRR-4444?
§1218.580 When do I submit Form ONRR-4444?
Subpart I [Reserved]
Subpart J—Debt Collection and Administrative Offset
§1218.700 What definitions apply to the regulations in this subpart?
§1218.701 What is ONRR's authority to issue these regulations?
§1218.702 What happens to delinquent debts you owe ONRR?
§1218.703 What notice will ONRR give you of our intent to refer a matter to Treasury to collect a
debt?
§1218.704 What is ONRR's policy on interest and administrative costs?
§1218.705 What is ONRR's policy on recommending revocation of your ability to engage in Federal
or Indian leasing, licensing, or granting of easements, permits, or rights-of-way?
§1218.706 What debts may ONRR refer to Treasury to collect by administrative offset or tax refund
offset?

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. 3335, 3711, 3716-18, 3720A, 9701; 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
§1218.10 Information collection.
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.
(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 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 ONRR-4430, Solid
Minerals Production and Royalty Report; or on Form ONRR-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 ONRR-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 the FEDERAL 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 ONRR-2014
or bill document or to provide adequate information.
(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 ONRR-2014, Form
ONRR-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 ONRR-2014, Form ONRR-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 ONRR-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 payorassigned 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 ONRR-2014” includes submission of reports of
royalty information, such as Form ONRR-4430.
(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 the FEDERAL REGISTER of 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.
(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
SOURCE: 49 FR 37346, Sept. 21, 1984, unless otherwise noted.

§1218.50 Timing of payment.
(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 ONRR-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 ONRR-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
ONRR-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) You should submit your certifications under paragraph (d)(2) of this section to Financial
Management, Office of Natural Resources Revenue, P.O. Box 25627, Denver, CO 80225-0627.
(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; 77 FR
25880, May 2, 2012]

§1218.51 How to make payments.
(a) Definitions.
ACH—Automated Clearing House. A type of EFT using the ACH bank-to-bank network.
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 initiated through an electronic
terminal. For ONRR purposes, EFT includes Fedwire and ACH transfers, such as Pay.gov.
Fedwire—A type of EFT using the Federal Reserve Wire network.
Invoice document identification—The ONRR-assigned invoice document identification (threealpha and nine-numeric characters).
Pay.gov—A type of EFT using the ACH network that is initiated by a payor on the Pay.gov Web
site.
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 ONRR-2014, Report of Sales and Royalty Remittance.
(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).”
(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 25627, Denver, CO 80225-0627.
(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, 6th Avenue and Kipling Street, Room A614, Denver, CO 80225.

(f) How to prepare and what to include on your payment document. (1) For Form ONRR-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
government-assigned lease number on the payment document when paying a rental that is not
reported on Form ONRR-2014 and not paid by EFT.

(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; 77 FR 25880, May 2, 2012]

§1218.52 How does a lessee designate a Designee?
(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
ONRR-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).
(c) If you want to terminate a designation you made under paragraph (a) of this section, you
must submit a revised Form ONRR-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.
(a) Whenever an overpayment is made under an Indian oil and gas lease, a payor may recoup
the overpayment through a recoupment on Form ONRR-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.
(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.
[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.
(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.
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
§1218.100 Royalty and rental payments.
(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).
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.
[47 FR 47773, Oct. 27, 1982. Redesignated at 48 FR 35641, Aug. 5, 1983]

§1218.102 Late payment or underpayment charges.
(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.
(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.
(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.
(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.
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
§1218.150 Royalties, net profit shares, and rental payments.
(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.
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.

For—

Issued as a
result of a
sale held—

The lessee must pay rental—

(1) An oil and gas Before March On or before the first day of each lease year before the discovery of oil
lease
26, 2001
or gas on the lease.
(2) An oil and gas After March
lease
26, 2001

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.

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

Before March On or before the first day of each lease year before the discovery of
26, 2001
paying quantities.

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

After March
26, 2001

On or before the first day of each lease year 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—

The lessee must pay rental—

(1) Before March 26,
2001

On or before the first day of each lease year before the discovery of oil or gas
on the segregated portion.

(2) After March 26,
2001

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.
[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.
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]

§1218.153 [Reserved]
§1218.154 Effect of suspensions on royalty and rental.
(a) ONRR will not relieve the lessee of the obligation to pay rental or minimum royalty for or
during the suspension if the Bureau of Safety and Environmental Enforcement (BSEE) 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 BSEE 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; 76 FR 38561, July 1, 2011; 78
FR 30206, May 22, 2013]

§1218.155 Method of payment.
(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 one-fifth 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. 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.
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
§1218.200 Payment of royalties, rentals, and deferred bonuses.
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.
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 ONRR-4430, rather than the Form ONRR-2014.
(b) For Form ONRR-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 ONRR-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.
(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
the FEDERAL REGISTER and 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 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.
(a) Whenever an overpayment is made under an Indian solid mineral lease, a payor may
recoup the overpayment through a recoupment on Form ONRR-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
§1218.300 Payment of royalties, rentals, and deferred bonuses.
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.
The payor shall tender all payments in accordance with §1218.51.
[52 FR 23815, June 25, 1987]

§1218.302 Late payment or underpayment charges.
(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
the FEDERAL REGISTER and 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?
(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.
[72 FR 24468, May 2, 2007]

§1218.304 May I credit rental towards direct use fees?
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?
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?
(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 in-kind 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 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?
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]
Subpart H—Service of Official Correspondence
SOURCE: 71 FR 51751, Aug. 31, 2006, unless otherwise noted.

§1218.500 What is the purpose of this subpart?
This subpart contains instructions for designating a specific addressee of record for service of
official correspondence using Form ONRR-4444, Addressee of Record Designation for Service of
Official Correspondence.
§1218.520 What definitions apply to this subpart?
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 ONRR-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?
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.
(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 (such as the 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 ONRR-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 ONRR-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 ONRR-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 seven days after the
date when 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 it is substantiated by:
(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.
[71 FR 51751, Aug. 31, 2006, as amended at 78 FR 52433, Aug. 23, 2013; 83 FR 3077, Jan. 23, 2018]

§1218.560 How do I submit Form ONRR-4444?
You may obtain a copy of Form ONRR-4444 and instructions from ONRR. This form is posted
at http://www.onrr.gov/FM/Forms/default.htm. Submit the completed, signed form to the address
designated on Form ONRR-4444 instructions.
[77 FR 25881, May 2, 2012]

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

Subpart I [Reserved]
Subpart J—Debt Collection and Administrative Offset
SOURCE: 77 FR 25887, May 2, 2012, unless otherwise noted.

§1218.700 What definitions apply to the regulations in this subpart?
As used in this subpart:
Administrative offset means the withholding of funds payable by the United States (including
funds payable by the United States on behalf of a state government) to any person, or the
withholding of funds held by the United States for any person, in order to satisfy a debt owed to the
United States.
Agency means a department, agency, court, court administrative office, or instrumentality in the
executive, judicial, or legislative branch of government, including a government corporation.
Day means calendar day. To count days, include the last day of the period unless it is a
Saturday, Sunday, or Federal legal holiday.
Debt and claim are synonymous and interchangeable. They refer to, among other things,
royalties, rentals, and any other monies due to, or collectible by, the United States as well as fines,
fees, assessments, penalties, and any other monies that have been determined to be legally
enforceable and due to the United States from any person, organization, or entity, except another
Federal agency. For the purposes of administrative offset under 31 U.S.C. 3716 and this subpart,
the terms “debt” and “claims” include money, funds, or property owed to, or collectible by, the United
States.
Debtor means a lessee, payor, or other person that owes a debt to the United States or ONRR,
or from whom ONRR collects debts on behalf of the United States, the Department, or an Indian
lessor.
Delinquent or past due refers to the status of a debt and means a debt that is legally
enforceable and has not been paid within the time limit prescribed by the applicable act, law,
regulation, lease, order, demand, notice of noncompliance, and/or assessment of civil penalties,
contract, decision, or any other agreement.

Department means the Department of the Interior, and any of its bureaus or offices.
Director means the Director of the Office of Natural Resources Revenue, or his or her
designee.
DOJ means the U.S. Department of Justice.
FCCS means the Federal Claims Collection Standards, which are published at 31 CFR parts
900 through 904.
FMS means the Financial Management Service, a bureau of the U.S. Department of the
Treasury.
Lease means any contract, profit-share arrangement, joint venture, or other agreement issued
or approved by the United States under any statutory authority including, but not limited to, a mineral
leasing law that authorizes exploration for and development or extraction of oil, gas, coal, any other
mineral or geothermal resources, or power generation from renewable energy sources, on Federal
or Indian tribal or allotted lands or the Outer Continental Shelf. Depending on the context, lease may
also refer to the land area covered by that authorization.
Legally enforceable means that there has been a final non-appealable agency determination
that the debt, in the amount stated, is due, and there are no legal bars to collection by offset.
Lessee means any person to whom the United States or an Indian tribe or individual Indian
mineral owner issues a Federal or Indian mineral or other resource lease, easement, right-of-way, or
other agreement, an assignee of all or a part of the record title interest, or any person to whom
operating rights have been assigned.
ONRR means the Office of Natural Resources Revenue, an office of the Department.
Other agreement means any agreement other than a lease and includes, but is not limited to,
any agreement between you and the Department to pay the Department money, funds, or property,
regardless of form.
Past due has the same meaning as “delinquent” as defined above.
Payor means any person who reports and pays royalties under a lease, regardless of whether
that person is also a lessee.
Person includes a natural person or persons, profit or nonprofit corporation, partnership,
association, limited liability company, trust, estate, consortium, or other entity that owes a debt to the
United States.
Tax refund offset means the reduction of a tax refund by the amount of a past-due, legally
enforceable debt.
You and your refer to the debtor.

§1218.701 What is ONRR's authority to issue these regulations?
(a) The ONRR is issuing the regulations in this subpart under the authority of the FCCS, the
Debt Collection Act of 1982, and the Debt Collection Improvement Act of 1996, 31 U.S.C. 3711,
3716-3718, and 3720A.
(b) The regulations in this subpart adopt and supplement the FCCS as necessary.
§1218.702 What happens to delinquent debts you owe ONRR?
(a) The ONRR will collect debts from you under the regulations in this subpart in addition to
other applicable statutory and regulatory authorities.
(b) The ONRR will transfer to the U.S. Department of the Treasury any past due, legally
enforceable nontax debt that is delinquent within 180 days from the date the debt becomes
delinquent so that Treasury may take appropriate action to collect the debt or terminate the
collection action under 26 U.S.C. 6402(d)(1) and (2); 31 U.S.C. 3711, 3716, and 3720A; the FCCS;
and 31 CFR 285.2 and 285.5.
§1218.703 What notice will ONRR give you of our intent to refer a matter to Treasury to
collect a debt?
(a) When the Director determines that you owe, or may owe, a legally enforceable debt to
ONRR, the Director will send a written notice to you informing you that ONRR intends to refer the
debt to Treasury. We will send the notice by facsimile or mail to the most current address known to
us. The notice will inform you of the following:
(1) The amount, nature, and basis of the debt.
(2) The methods of offset that ONRR or Treasury may use.
(3) Your opportunity to inspect and copy agency records related to the debt.
(4) Your opportunity to enter into a written agreement with us to repay the debt.
(5) Our policy concerning interest and administrative costs under §1218.704, including a
statement that we will make such assessments against you unless we determine otherwise under
the criteria of the FCCS and this part.
(6) The date by which you must remit payment to avoid additional late charges and enforced
collection.
(7) The name, address, and telephone number of a contact person (or office) at ONRR who is
available to discuss your debt.
(b)(1) You may not appeal the notice issued under this section unless the notice specifically
provides you with the opportunity for review under 30 CFR parts 1290 or 1241 because you did not
previously receive a notice of the order, decision on appeal, or any other notice or decision that is
the basis of the debt that ONRR intends to refer to Treasury, and for which you may be liable in
whole or in part under applicable law. You may not dispute matters related to your delinquent debt

that were the subject of a final order or appeal decision of which you were the recipient, or to which
you were a party that is the basis of your delinquent debt.
(2) This section applies whether or not you appealed the order, demand, notice of
noncompliance, or assessment of civil penalties under 30 CFR parts 1290 or 1241.
§1218.704 What is ONRR's policy on interest and administrative costs?
(a) Interest. (1) The ONRR will assess interest on all delinquent debts as prescribed by
applicable statutes and regulations.
(i) Interest will accrue on debts involving Federal and Indian oil and gas leases under 30 CFR
1218.54, 1218.102, and 1218.150.
(ii) Interest will accrue on debts involving Federal and Indian solid mineral and geothermal
resource leases under 30 CFR 1218.202 and 1218.302.
(iii) Interest will accrue on civil penalties ONRR assesses under 30 CFR part 1241.
(2) Interest begins to accrue on all debts from the date that the payment was due unless
otherwise specified by law or lease terms.
(b) Penalties. The ONRR will assess penalties under our authority in 30 U.S.C. 1719 and
1720a, and implementing regulations at 30 CFR part 1241.
(c) Administrative costs. The ONRR initially will assess $436 for administrative costs incurred
as a result of your failure to pay a delinquent debt. We will publish a notice of any increase in
administrative costs assessed under this section in the FEDERAL REGISTER. The ONRR also may
assess $436 for administrative costs that continue to accrue during any appeal process if:
(1) The notice we provide you under 30 CFR 1218.703 grants you the right to appeal and you
exercise that right; and
(2) Your appeal is denied and we refer the delinquent debt to Treasury under this subpart.
(d) Allocation of payments. The ONRR will apply a partial or installment payment you make on
a delinquent debt sent to Treasury, first to outstanding penalty assessments, second to
administrative costs, third to accrued interest, and fourth to the outstanding debt principal.
(e) Additional authority. The ONRR may assess interest, penalty charges, and administrative
costs on debts that are not subject to 31 U.S.C. 3717 to the extent authorized under common law or
other applicable statutory or regulatory authority.
(f) Waiver. The Director may decide to waive collection of all or part of the administrative costs
under paragraph (c) of this section either in compromise of the delinquent debt or if the Director
determines collection of this charge would be against equity and good conscience or not in the
Government's best interest.
(g) The ONRR's decision whether to collect or waive collection of administrative costs under
paragraph (f) of this section is the final decision for the Department and is not subject to
administrative review.

§1218.705 What is ONRR's policy on recommending revocation of your ability to engage in
Federal or Indian leasing, licensing, or granting of easements, permits, or rights-of-way?
The Director may recommend that the leasing or issuing agency, under statutory or regulatory
authority applicable to that agency, revoke your ability to engage in Federal or Indian leasing,
licensing, or granting of easements, permits, or rights-of-way if you inexcusably or willfully fail to pay
a debt. The Director will recommend that any revocation of your ability to engage in Federal or
Indian leasing, licensing, or granting of easements, permits, or rights-of-way should last only as long
as your debt remains unpaid or unresolved.
§1218.706 What debts may ONRR refer to Treasury to collect by administrative offset or tax
refund offset?
(a) The ONRR may refer any past due, legally enforceable debt you owe to ONRR to Treasury
to collect through administrative offset or tax refund offset at least 60 days after we give you notice
under 30 CFR 1218.703 if the debt:
(1) Is at least $25.00 or another amount established by Treasury; and
(2) Does not involve Federal oil and gas lease obligations for which offset is precluded under
30 U.S.C. 1724(b)(3).
(b) The ONRR may refer debts reduced to judgment to Treasury for tax refund offset at any
time.