The U.S. Minerals Management Service plans to change the way it assesses charges on late and erroneous royalty and production reports on federal and Indian land.
Under the new policy, to take effect Oct. 1, MMS will no longer charge companies for filing royalty and production reports late. It also no longer will charge them for erroneous reports unless their overall monthly error rate exceeds the average fiscal year 1995 level.
The agency announced the new policy in Denver at the first meeting of its Royalty Policy Committee, an industry advisory group.
MMS Director Cynthia Quarterman pointed out that companies holding mineral leases on federal and Indian lands must submit reports and pay royalties for the minerals and geothermal energy they produce and sell.
She said, "In order for MMS to distribute royalties due the states and Indian tribes and allottees accurately and timely, the information reported to it must also be accurate and timely. Therefore, MMS has historically assessed companies for the costs associated with correcting inaccurate and untimely reporting.
"In 1990, the average error rate for royalty reporting was 5.4% with a 3% tolerance before we charged assessments. For the past year we have lowered our billing tolerance to zero, and now the error rate is less than 3%.
"Assessments were meant to encourage timely and accurate reporting, not to punish or penalize. We recognize there are diminishing returns at some point.
"If companies can maintain the accuracy of their reporting at the current level without assessments, we would have achieved our goal of having companies report right the first time. Since companies making late payments are already required to pay interest, further late payment assessment are unnecessary."
Quarterman cautioned that al-though assessments on late reporting are being relaxed, MMS will continue to impose interest charges and civil penalties for payments that are late. Copyright 1995 Oil & Gas Journal. All Rights Reserved.