Federal and Indian Oil and Gas Royalty Management

INTRODUCTION

A.Nonproducing Federal and all Indian oil and gas leases require that rentals must be paid once per year on or before the anniversary date of the lease.

B.Producing Federal and Indian oil and gas leases require a royalty to be paid by the end of the month following the month of production. If minimum royalty requirements are not satisfied by royalty payments, minimum royalties due are payable at the expiration of the lease year.

C.The amount of royalty is equal to the volume of production saved, removed, or sold times the value of production times the royalty rate.

D.Each of the elements (volume, value, and royalty rate) have certain complicating factors.

II. DIVISION OF ROYALTY ACCOUNTABILITY RESPONSIBILITIES

A.The Department of the Interior has been collecting bonuses, rents, royalties, and other receipts from Federal and Indian mineral leases since 1921. Under the U.S. Geological Survey (USGS), rental and royalty management responsibilities began centralizing in 1981 in Lakewood, Colorado. The Royalty Management Program (RMP) was removed from USGS and placed in the Minerals Management Service (MMS) effective January 21, 1982.

The MMS has remained responsible for this function since its establishment in 1982. More specifically, RMP is responsible for the collection and disbursement of mineral revenues