§1721 — Title 30 Mineral Lands and Mining | U.S. Code

Summary

Requires interest be charged when oil and gas royalty money is late or too small. The interest rate used is the one in 26 U.S.C. 6621. Interest is charged only on the shortfall, and only for the days the payment is late. If the Secretary pays a State late from royalty money, that payment must include interest at the same rate. Interest collected for late Indian royalties must be put into the same account as the related royalty. If the Secretary deposits royalty money to an Indian account late, that deposit must include interest at the same rate. States will not be charged for interest or penalties that the Secretary owes for certain crude oil certification or pricing rules; any State share of an overcharge tied to actions before January 12, 1983, will be taken from amounts found due to that State from audits, and if audits do not find enough money the State will be charged the remaining balance. People can make an estimated royalty payment by the due date; the actual royalty is due at the end of the next month. If the estimate is too low, interest is owed on the difference. Estimated payments can be applied to future royalties and can be changed by the payer. Who reports and pays royalties depends on the lease arrangement. If a unit has only Federal leases with the same royalty rules, the lessee reports and pays based on what they actually sell. If a unit has different leases, reporting is based on the production allocated to each lease. Leases not in a unit are reported based on what is sold. Lessees may agree on another approved reporting method if it does not lower royalties. The Secretary can allow marginal properties to report and pay monthly based on sold volumes and delay interest until after the year; adjustments must be made within six months after year end. Marginal property means a lease averaging under 15 barrels of oil per well per day or under 90,000 cubic feet of gas per well per day (or a combination). The Secretary must issue allocation decisions within 120 days of a request, and lessees must correct reports and payments within three months after getting the decision; interest tied to that decision can be waived until the end of that three-month correction period. The Secretary had to issue demands for outstanding unit reporting disputes and collect amounts owed no later than two years after August 13, 1996.

Title 30, §1721

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(a)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)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)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)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)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)Interest shall be charged under this section only for the number of days a payment is late.

(g)

(h)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 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.

(i)(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.

(j)The Secretary shall issue all determinations of allocations of production for units and communitization agreements within 120 days of a request for determination. Until the Secretary issues the determination, the lessee or its designee of a lease in a unit or communitization agreement shall report and pay royalties on oil and gas production for each production month in accordance with the terms of the proposed allocation of production for the unit or communitization agreement. After the Secretary issues the determination, the lessee or its designee shall, as necessary, correct such reports and the amount of royalties paid on oil and gas production under the unit or communitization agreement by not later than the end of the third month following the month in which the lessee or its designee receives the determination from the Secretary. Subject to the full and timely monthly payment of royalties to all parties in accordance with the terms of the proposed allocation of production for the unit or communitization agreement, the Secretary shall waive interest due on obligations subject to the determination until the end of the third month following the month in which the lessee or its designee receives the determination from the Secretary. This subsection shall not apply to unit or communization agreements containing Indian lands.

Notes & Related Subsidiaries

Editorial Notes

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, which was classified generally to chapter 16A (§ 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. 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

2024—Subsec. (j). Pub. L. 118–81 amended subsec. (j) generally. Prior to amendment, text read as follows: “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.” 2015—Subsec. (h). Pub. L. 114–94 redesignated subsec. (j) as (h), struck out “If the estimated payment exceeds the actual royalties due, interest is owed on the overpayment.” after “underpaid amount.”, and struck out former subsec. (h) which related to lessee or designee interest. Subsec. (i). Pub. L. 114–94, § 32301(1), (2), redesignated subsec. (k) as (i) and struck out former subsec. (i) which related to limitation on interest. Subsec. (j). Pub. L. 114–94, § 32301(2), redesignated subsec. (l) as (j). Former subsec. (j) redesignated (h). Subsecs. (k), (l). Pub. L. 114–94, § 32301(2), redesignated subsecs. (k) and (l) as (i) and (j), respectively. 2014—Subsec. (h). Pub. L. 113–291 substituted “a rate equal to the sum of the Federal short-term rate determined under section 6621(b) of title 26 plus 1 percentage point.” for “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).” 2013—Subsec. (i). Pub. L. 113–67 inserted subsec. heading; designated first sentence as par. (1), inserted heading, and substituted “Interest shall not be paid on any excessive overpayment.” for “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.”; and designated second sentence as par. (2) and inserted heading. 1996—Pub. L. 104–185, § 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, § 6(a), added subsec. (h). Subsec. (i). Pub. L. 104–200, § 1(3), inserted “not” after “receiving interest, interest shall”. Pub. L. 104–185, § 6(b), added subsec. (i). Subsec. (j). Pub. L. 104–200, § 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, § 6(c), added subsec. (j). Subsec. (k). Pub. L. 104–185, § 6(d), added subsec. (k). Subsec. (k)(4). Pub. L. 104–200, § 1(6), substituted “additional royalties due” for “additional royalties dues”. Subsec. (l). Pub. L. 104–185, § 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.

Statutory Notes and Related Subsidiaries

Effective Date

of 2013 Amendment Pub. L. 113–67, div. A, title III, § 305(b), Dec. 26, 2013, 127 Stat. 1183, provided that: “The amendment made by subsection (a) [amending this section] shall take effect on July 1, 2014.”

Effective Date

of 1996 AmendmentAmendment 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 AmendmentAmendment by Pub. L. 104–185 not applicable to any privately owned minerals or with respect to Indian lands, see section 9 and 10 of Pub. L. 104–185, set out as a note under section 1701 of this title. Payment of Interest Charges From Current Receipts Pub. L. 108–447, div. E, title I, Dec. 8, 2004, 118 Stat. 3053, as amended by Pub. L. 110–161, div. F, title I, Dec. 26, 2007, 121 Stat. 2109, provided in part: “That in fiscal year 2005 and thereafter, notwithstanding 30 U.S.C. 191(a) and 43 U.S.C. 1338, the Secretary shall pay amounts owed to States and Indian accounts under the provisions of 30 U.S.C. 1721(b) and (d) from amounts received as current receipts from bonuses, royalties, interest collected from lessees and designees, and rentals of the public lands and the outer continental shelf under 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.”

§1721 Royalty Terms and Conditions, Interest, and Penalties

Summary

Title 30, §1721

Notes & Related Subsidiaries

Editorial Notes

References in Text

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata