Leaseholders told to recalculate royalties under 2016 rule

A federal court’s March decision that vacated the US Office of Natural Resources Revenue’s repeal of its consolidated federal oil and gas and federal and Indian oil and gas effectively reinstated the 2016 requirements, ONRR advised federal leaseholders.

Jun 19th, 2019

A federal court’s March decision that vacated the US Office of Natural Resources Revenue’s (ONRR) repeal of its consolidated federal oil and gas and federal and Indian oil and gas effectively reinstated the 2016 requirements, ONRR advised federal leaseholders. Accordingly, the leaseholders should recalculate royalties under the 2016 rule for production since Jan. 1, 2017, it said in a June 13 notice.

US District Court for Northern California vacated ONRR’s repeal of the rule on Mar. 29. “Lessees should resubmit amended royalty reports, pay any underpaid royalties (or take a credit for overpaid royalties), and then prospectively report and pay under the provisions outlined in the 2016 Rule,” the US Department of the Interior agency instructed.

Because lessees may need time to modify their royalty reporting systems and submit amended royalty reports, ONRR expects them to submit corrected reporting and royalty payments for all production from January 2017 on no later than Jan. 1, 2020, the notice said.

ONRR also is evaluating additional rulemaking options because of the 2016 rule’s reinstatement, it said. “This includes ONRR’s ongoing commitment to offer greater simplicity, certainty, clarity, and consistency in product valuation for mineral lessees and mineral revenue recipients,” the agency said.

It also will continue, in furtherance of the Interior secretary’s trust responsibilities and in alignment with applicable lease terms, to ensure that Indian mineral lessors receive every dollar due, it said.

“Additionally, ONRR endeavors to decrease industry’s cost of compliance and ONRR’s cost to ensure industry compliance, as well as providing early certainty to industry and to ONRR that royalties are paid correctly,” the agency said.

Contact Nick Snow at nicks@endeavorb2b.com.

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