§ 1721. — Royalty terms and conditions, interest, and penalties.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 30USC1721]
TITLE 30--MINERAL LANDS AND MINING
CHAPTER 29--OIL AND GAS ROYALTY MANAGEMENT
SUBCHAPTER I--FEDERAL ROYALTY MANAGEMENT AND ENFORCEMENT
Sec. 1721. Royalty terms and conditions, interest, and penalties
(a) Charge on late royalty payment or royalty payment deficiency
In the case of oil and gas leases where royalty payments are not
received by the Secretary on the date that such payments are due, or are
less than the amount due, the Secretary shall charge interest on such
late payments or underpayments at the rate applicable under section 6621
of title 26. In the case of an underpayment or partial payment, interest
shall be computed and charged only on the amount of the deficiency and
not on the total amount due.
(b) Charge on late payment made by Secretary to States
Any payment made by the Secretary to a State under section 191 of
this title and any other payment made by the Secretary to a State from
any oil or gas royalty received by the Secretary which is not paid on
the date required under section 191 of this title shall include an
interest charge computed at the rate applicable under section 6621 of
title 26.
(c) Deposit in royalty accounts of charges on royalties due and owing
Indians
All interest charges collected under this chapter or under other
applicable laws because of nonpayment, late payment or underpayment of
royalties due and owing an Indian tribe or an Indian allottee shall be
deposited to the same account as the royalty with respect to which such
interest is paid.
(d) Charge on late deposit of royalty fund to an Indian account
Any deposit of royalty funds made by the Secretary to an Indian
account which is not made by the date required under section 1714 of
this title shall include an interest charge computed at the rate
applicable under section 6621 of title 26.
(e) Nonliability of States for Secretary's failure to comply with the
Emergency Petroleum Allocation Act of 1973 or regulations
thereunder
Notwithstanding any other provision of law, no State will be
assessed for any interest or penalties found to be due against the
Secretary for failure to comply with the Emergency Petroleum Allocation
Act of 1973 [15 U.S.C. 751 et seq.] or regulation of the Secretary of
Energy thereunder concerning crude oil certification or pricing with
respect to crude oil taken by the Secretary in kind as royalty. Any
State share of an overcharge, resulting from such failure to comply,
shall be assessed against moneys found to be due and owing to such State
as a result of audits of royalty accounts for transactions which took
place prior to January 12, 1983, except that if after the completion of
such audits, sufficient moneys have not been found due and owing to any
State, the State shall be assessed the balance of that State's share of
the overcharge.
(f) Limitation on interest charged
Interest shall be charged under this section only for the number of
days a payment is late.
(g) Omitted
(h) Lessee or designee interest
Interest shall be allowed and paid or credited on any overpayment,
with such interest to accrue from the date such overpayment was made, at
the rate obtained by applying the provisions of subparagraphs (A) and
(B) of section 6621(a)(1) of title 26, but determined without regard to
the sentence following subparagraph (B) of section 6621(a)(1). Interest
which has accrued on any overpayment may be applied to reduce an
underpayment. This subsection applies to overpayments made later than
six months after August 13, 1996, or September 1, 1996, whichever is
later. Such interest shall be paid from amounts received as current
receipts from sales, bonuses, royalties (including interest charges
collected under this section) and rentals of the public lands and the
Outer Continental Shelf under the provisions of the Mineral Leasing Act
[30 U.S.C. 181 et seq.], and the Outer Continental Shelf Lands Act [43
U.S.C. 1331 et seq.], which are not payable to a State or the
Reclamation Fund. The portion of any such interest payment attributable
to any amounts previously disbursed to a State, the Reclamation Fund, or
any other recipient designated by law shall be deducted from the next
disbursements to that recipient made under the applicable law. Such
amounts deducted from subsequent disbursements shall be credited to
miscellaneous receipts in the Treasury.
(i) Limitation on interest
Upon a determination by the Secretary that an excessive overpayment
(based upon all obligations of a lessee or its designee for a given
reporting month) was made for the sole purpose of receiving interest,
interest shall not be paid on the excessive amount of such overpayment.
For purposes of this chapter, an ``excessive overpayment'' shall be the
amount that any overpayment a lessee or its designee pays for a given
reporting month (excluding payments for demands for obligations
determined to be due as a result of judicial or administrative
proceedings or agreed to be paid pursuant to settlement agreements) for
the aggregate of all of its Federal leases exceeds 10 percent of the
total royalties paid that month for those leases.
(j) Estimated payment
A lessee or its designee may make a payment for the approximate
amount of royalties (hereinafter in this subsection ``estimated
payment'') that would otherwise be due for such lease by the date
royalties are due for that lease. When an estimated payment is made,
actual royalties are payable at the end of the month following the month
in which the estimated payment is made. If the estimated payment was
less than the amount of actual royalties due, interest is owed on the
underpaid amount. If the estimated payment exceeds the actual royalties
due, interest is owed on the overpayment. If the lessee or its designee
makes a payment for such actual royalties, the lessee or its designee
may apply the estimated payment to future royalties. Any estimated
payment may be adjusted, recouped, or reinstated at any time by the
lessee or its designee.
(k) Volume allocation of oil and gas production
(1) Except as otherwise provided by this subsection--
(A) a lessee or its designee of a lease in a unit or
communitization agreement which contains only Federal leases with
the same royalty rate and funds distribution shall report and pay
royalties on oil and gas production for each production month based
on the actual volume of production sold by or on behalf of that
lessee;
(B) a lessee or its designee of a lease in any other unit or
communitization agreement shall report and pay royalties on oil and
gas production for each production month based on the volume of oil
and gas produced from such agreement and allocated to the lease in
accordance with the terms of the agreement; and
(C) a lessee or its designee of a lease that is not contained in
a unit or communitization agreement shall report and pay royalties
on oil and gas production for each production month based on the
actual volume of production sold by or on behalf of that lessee.
(2) This subsection applies only to requirements for reporting and
paying royalties. Nothing in this subsection is intended to alter a
lessee's liability for royalties on oil or gas production based on the
share of production allocated to the lease in accordance with the terms
of the lease, a unit or communitization agreement, or any other
agreement.
(3) For any unit or communitization agreement if all lessees
contractually agree to an alternative method of royalty reporting and
payment, the lessees may submit such alternative method to the Secretary
or the delegated State for approval and make payments in accordance with
such approved alternative method so long as such alternative method does
not reduce the amount of the royalty obligation.
(4) The Secretary or the delegated State shall grant an exception
from the reporting and payment requirements for marginal properties by
allowing for any calendar year or portion thereof royalties to be paid
each month based on the volume of production sold. Interest shall not
accrue on the difference for the entire calendar year or portion thereof
between the amount of oil and gas actually sold and the share of
production allocated to the lease until the beginning of the month
following such calendar year or portion thereof. Any additional
royalties due or overpaid royalties and associated interest shall be
paid, refunded, or credited within six months after the end of each
calendar year in which royalties are paid based on volumes of production
sold. For the purpose of this subsection, the term ``marginal property''
means a lease that produces on average the combined equivalent of less
than 15 barrels of oil per well per day or 90 thousand cubic feet of gas
per well per day, or a combination thereof, determined by dividing the
average daily production of crude oil and natural gas from producing
wells on such lease by the number of such wells, unless the Secretary,
together with the State concerned, determines that a different
production is more appropriate.
(5) Not later than two years after August 13, 1996, the Secretary
shall issue any appropriate demand for all outstanding royalty payment
disputes regarding who is required to report and pay royalties on
production from units and communitization agreements outstanding on
August 13, 1996, and collect royalty amounts owed on such production.
(l) Production allocation
The Secretary shall issue all determinations of allocations of
production for units and communitization agreements within 120 days of a
request for determination. If the Secretary fails to issue a
determination within such 120-day period, the Secretary shall waive
interest due on obligations subject to the determination until the end
of the month following the month in which the determination is made.
(Pub. L. 97-451, title I, Sec. 111, Jan. 12, 1983, 96 Stat. 2455; Pub.
L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 104-185,
Sec. 6(a)-(e), (h)(1), Aug. 13, 1996, 110 Stat. 1712-1715; Pub. L. 104-
200, Sec. 1(3)-(6), Sept. 22, 1996, 110 Stat. 2421.)
References in Text
The Emergency Petroleum Allocation Act of 1973, referred to in
subsec. (e), is Pub. L. 93-159, Nov. 27, 1973, 87 Stat. 628, as amended,
which was classified generally to chapter 16A (Sec. 751 et seq.) of
Title 15, Commerce and Trade, and was omitted from the Code pursuant to
section 760g of Title 15, which provided for the expiration of the
President's authority under that chapter on Sept. 30, 1981.
The Mineral Leasing Act, referred to in subsec. (h), is act Feb. 25,
1920, ch. 85, 41 Stat. 437, as amended, which is classified generally to
chapter 3A (Sec. 181 et seq.) of this title. For complete classification
of this Act to the Code, see Short Title note set out under section 181
of this title and Tables.
The Outer Continental Shelf Lands Act, referred to in subsec. (h),
is act Aug. 7, 1953, ch. 345, 67 Stat. 462, as amended, which is
classified generally to subchapter III (Sec. 1331 et seq.) of chapter 29
of Title 43, Public Lands. For complete classification of this Act to
the Code, see Short Title note set out under section 1301 of Title 43
and Tables.
Codification
Section is comprised of section 111 of Pub. L. 97-451. Subsec. (g)
of section 111 of Pub. L. 97-451 amended section 191(a) of this title.
Amendments
1996--Pub. L. 104-185, Sec. 6(h)(1), substituted ``Royalty terms and
conditions, interest, and penalties'' for ``Royalty interest, penalties
and payments'' in section catchline.
Subsec. (h). Pub. L. 104-185, Sec. 6(a), added subsec. (h).
Subsec. (i). Pub. L. 104-200, Sec. 1(3), inserted ``not'' after
``receiving interest, interest shall''.
Pub. L. 104-185, Sec. 6(b), added subsec. (i).
Subsec. (j). Pub. L. 104-200, Sec. 1(4), (5), substituted ``date
royalties are due'' for ``rate royalties are due'', ``interest is owed
on the underpaid amount'' for ``interest is owned on the underpaid
amount'', and ``interest is owed on the overpayment'' for ``interest is
owned on the overpayment''.
Pub. L. 104-185, Sec. 6(c), added subsec. (j).
Subsec. (k). Pub. L. 104-185, Sec. 6(d), added subsec. (k).
Subsec. (k)(4). Pub. L. 104-200, Sec. 1(6), substituted ``additional
royalties due'' for ``additional royalties dues''.
Subsec. (l). Pub. L. 104-185, Sec. 6(e), added subsec. (l).
1986--Subsecs. (a), (b), (d). Pub. L. 99-514 substituted ``Internal
Revenue Code of 1986'' for ``Internal Revenue Code of 1954'', which for
purposes of codification was translated as ``title 26'' thus requiring
no change in text.
Effective Date of 1996 Amendment
Amendment by Pub. L. 104-185 applicable with respect to production
of oil and gas after the first day of the month following Aug. 13, 1996,
except as provided by subsecs. (h) and (k)(5) of this section, see
section 11 of Pub. L. 104-185, set out as a note under section 1701 of
this title.
Applicability of 1996 Amendment
Amendment by Pub. L. 104-185 not applicable to any privately owned
minerals or with respect to Indian lands, see sections 9 and 10 of Pub.
L. 104-185, set out as a note under section 1701 of this title.
Section Referred to in Other Sections
This section is referred to in section 355 of this title.
