Title 30:
Mineral Resources
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PART 202—ROYALTIES
Section Contents
Subpart
A—General Provisions [Reserved]
Subpart
B—Oil, Gas, and OCS Sulfur, General
§ 202.51 Scope
and definitions.
§ 202.52 Royalties.
§ 202.53 Minimum
royalty.
Subpart
C—Federal and Indian Oil
§ 202.100 Royalty
on oil.
§ 202.101 Standards
for reporting and paying royalties.
Subpart
D—Federal Gas
§ 202.150 Royalty
on gas.
§ 202.151 Royalty
on processed gas.
§ 202.152 Standards
for reporting and paying royalties on gas.
Subpart
E—Solid Minerals, General [Reserved]
Subpart
F—Coal
§ 202.250 Overriding
royalty interest.
Subpart
G—Other Solid Minerals [Reserved]
Subpart
H—Geothermal Resources
§ 202.350 Scope
and definitions.
§ 202.351 Royalties
on geothermal resources.
§ 202.352 Minimum
royalty.
§ 202.353 Measurement
standards for reporting and paying royalties and direct use
fees.
Subpart
I—OCS Sulfur [Reserved]
Subpart
J—Gas Production From Indian Leases
§ 202.550 How
do I determine the royalty due on gas production?
§ 202.551 How
do I determine the volume of production for which I must pay royalty if my
lease is not in an approved Federal unit or communitization agreement
(AFA)?
§ 202.552 How
do I determine how much royalty I must pay if my lease is in an approved
Federal unit or communitization agreement (AFA)?
§ 202.553 How
do I value my production if I take more than my entitled
share?
§ 202.554 How
do I value my production that I do not take if I take less than my
entitled share?
§ 202.555 What
portion of the gas that I produce is subject to
royalty?
§ 202.556 How
do I determine the value of avoidably lost, wasted, or drained
gas?
§ 202.557 Must
I pay royalty on insurance compensation for unavoidably lost
gas?
§ 202.558 What
standards do I use to report and pay royalties on gas?
Authority: 5 U.S.C. 301 et seq.
; 25 U.S.C. 396 et seq., 396a et seq., 2101 et seq.
; 30 U.S.C. 181 et seq., 351 et seq., 1001 et seq.
; 1701 et seq. ; 31 U.S.C. 9701; 43 U.S.C. 1301 et seq.
; 1331 et seq., 1801 et seq.
Subpart A—General Provisions [Reserved]
top
Subpart B—Oil, Gas, and OCS Sulfur, General
top
Source: 53 FR 1217, Jan. 15, 1988,
unless otherwise noted.
§ 202.51 Scope and definitions.
top
(a) This subpart is applicable to Federal and Indian (Tribal and
allotted) oil and gas leases (except leases on the Osage Indian
Reservation, Osage County, Oklahoma) and OCS sulfur leases.
(b) The definitions in subparts B, C, D, and E, of part 206 of this
title are applicable to subparts B, C, D, and J of this part.
[53 FR 1217, Jan. 15, 1988, as amended at 64 FR 43513, Aug. 10,
1999]
§ 202.52 Royalties.
top
(a) Royalties on oil, gas, and OCS sulfur shall be at the royalty rate
specified in the lease, unless the Secretary, pursuant to the provisions
of the applicable mineral leasing laws, reduces, or in the case of OCS
leases, reduces or eliminates, the royalty rate or net profit share set
forth in the lease.
(b) For purposes of this subpart, the use of the term royalty(ies)
includes the term net profit share(s) .
§ 202.53 Minimum royalty.
top
For leases that provide for minimum royalty payments, the lessee shall
pay the minimum royalty as specified in the lease.
Subpart C—Federal and Indian Oil
top
§ 202.100 Royalty on oil.
top
(a) Royalties due on oil production from leases subject to the
requirements of this part, including condensate separated from gas without
processing, shall be at the royalty rate established by the terms of the
lease. Royalty shall be paid in value unless MMS requires payment in-kind.
When paid in value, the royalty due shall be the value, for royalty
purposes, determined pursuant to part 206 of this title multiplied by the
royalty rate in the lease.
(b)(1) All oil (except oil unavoidably lost or used on, or for the
benefit of, the lease, including that oil used off-lease for the benefit
of the lease when such off-lease use is permitted by the MMS or BLM, as
appropriate) produced from a Federal or Indian lease to which this part
applies is subject to royalty.
(2) When oil is used on, or for the benefit of, the lease at a
production facility handling production from more than one lease with the
approval of the MMS or BLM, as appropriate, or at a production facility
handling unitized or communitized production, only that proportionate
share of each lease's production (actual or allocated) necessary to
operate the production facility may be used royalty-free.
(3) Where the terms of any lease are inconsistent with this section,
the lease terms shall govern to the extent of that inconsistency.
(c) If BLM determines that oil was avoidably lost or wasted from an
onshore lease, or that oil was drained from an onshore lease for which
compensatory royalty is due, or if MMS determines that oil was avoidably
lost or wasted from an offshore lease, then the value of that oil shall be
determined in accordance with 30 CFR part 206.
(d) If a lessee receives insurance compensation for unavoidably lost
oil, royalties are due on the amount of that compensation. This paragraph
shall not apply to compensation through self-insurance.
(e)(1) In those instances where the lessee of any lease committed to a
federally approved unitization or communitization agreement does not
actually take the proportionate share of the agreement production
attributable to its lease under the terms of the agreement, the full share
of production attributable to the lease under the terms of the agreement
nonetheless is subject to the royalty payment and reporting requirements
of this title. Except as provided in paragraph (e)(2) of this section, the
value, for royalty purposes, of production attributable to unitized or
communitized leases will be determined in accordance with 30 CFR part 206.
In applying the requirements of 30 CFR part 206, the circumstances
involved in the actual disposition of the portion of the production to
which the lessee was entitled but did not take shall be considered as
controlling in arriving at the value, for royalty purposes, of that
portion as though the person actually selling or disposing of the
production were the lessee of the Federal or Indian lease.
(2) If a Federal or Indian lessee takes less than its proportionate
share of agreement production, upon request of the lessee MMS may
authorize a royalty valuation method different from that required by
paragraph (e)(1) of this section, but consistent with the purposes of
these regulations, for any volumes not taken by the lessee but for which
royalties are due.
(3) For purposes of this subchapter, all persons actually taking
volumes in excess of their proportionate share of production in any month
under a unitization or communitization agreement shall be deemed to have
taken ratably from all persons actually taking less than their
proportionate share of the agreement production for that month.
(4) If a lessee takes less than its proportionate share of agreement
production for any month but royalties are paid on the full volume of its
proportionate share in accordance with the provisions of this section, no
additional royalty will be owed for that lease for prior periods when the
lessee subsequently takes more than its proportionate share to balance its
account or when the lessee is paid a sum of money by the other agreement
participants to balance its account.
(f) For production from Federal and Indian leases which are committed
to federally-approved unitization or communitization agreements, upon
request of a lessee MMS may establish the value of production pursuant to
a method other than the method required by the regulations in this title
if: (1) The proposed method for establishing value is consistent with the
requirements of the applicable statutes, lease terms, and agreement terms;
(2) persons with an interest in the agreement, including, to the extent
practical, royalty interests, are given notice and an opportunity to
comment on the proposed valuation method before it is authorized; and (3)
to the extent practical, persons with an interest in a Federal or Indian
lease committed to the agreement, including royalty interests, must agree
to use the proposed method for valuing production from the agreement for
royalty purposes.
[53 FR 1217, Jan. 15, 1988]
§ 202.101 Standards for reporting and paying
royalties.
top
Oil volumes are to be reported in barrels of clean oil of 42 standard
U.S. gallons (231 cubic inches each) at 60 °F. When reporting oil volumes
for royalty purposes, corrections must have been made for Basic Sediment
and Water (BS&W) and other impurities. Reported American Petroleum
Institute (API) oil gravities are to be those determined in accordance
with standard industry procedures after correction to 60 °F.
[53 FR 1217, Jan. 15, 1988]
Subpart D—Federal Gas
top
Source: 53 FR 1271, Jan. 15, 1988,
unless otherwise noted.
§ 202.150 Royalty on gas.
top
(a) Royalties due on gas production from leases subject to the
requirements of this subpart, except helium produced from Federal leases,
shall be at the rate established by the terms of the lease. Royalty shall
be paid in value unless MMS requires payment in kind. When paid in value,
the royalty due shall be the value, for royalty purposes, determined
pursuant to 30 CFR part 206 of this title multiplied by the royalty rate
in the lease.
(b)(1) All gas (except gas unavoidably lost or used on, or for the
benefit of, the lease, including that gas used off-lease for the benefit
of the lease when such off-lease use is permitted by the MMS or BLM, as
appropriate) produced from a Federal lease to which this subpart applies
is subject to royalty.
(2) When gas is used on, or for the benefit of, the lease at a
production facility handling production from more than one lease with the
approval of MMS or BLM, as appropriate, or at a production facility
handling unitized or communitized production, only that proportionate
share of each lease's production (actual or allocated) necessary to
operate the production facility may be used royalty free.
(3) Where the terms of any lease are inconsistent with this subpart,
the lease terms shall govern to the extent of that inconsistency.
(c) If BLM determines that gas was avoidably lost or wasted from an
onshore lease, or that gas was drained from an onshore lease for which
compensatory royalty is due, or if MMS determines that gas was avoidably
lost or wasted from an OCS lease, then the value of that gas shall be
determined in accordance with 30 CFR part 206.
(d) If a lessee receives insurance compensation for unavoidably lost
gas, royalties are due on the amount of that compensation. This paragraph
shall not apply to compensation through self-insurance.
(e)(1) In those instances where the lessee of any lease committed to a
Federally approved unitization or communitization agreement does not
actually take the proportionate share of the production attributable to
its Federal lease under the terms of the agreement, the full share of
production attributable to the lease under the terms of the agreement
nonetheless is subject to the royalty payment and reporting requirements
of this title. Except as provided in paragraph (e)(2) of this section, the
value for royalty purposes of production attributable to unitized or
communitized leases will be determined in accordance with 30 CFR part 206.
In applying the requirements of 30 CFR part 206, the circumstances
involved in the actual disposition of the portion of the production to
which the lessee was entitled but did not take shall be considered as
controlling in arriving at the value for royalty purposes of that portion,
as if the person actually selling or disposing of the production were the
lessee of the Federal lease.
(2) If a Federal lessee takes less than its proportionate share of
agreement production, upon request of the lessee MMS may authorize a
royalty valuation method different from that required by paragraph (e)(1)
of this section, but consistent with the purpose of these regulations, for
any volumes not taken by the lessee but for which royalties are due.
(3) For purposes of this subchapter, all persons actually taking
volumes in excess of their proportionate share of production in any month
under a unitization or communitization agreement shall be deemed to have
taken ratably from all persons actually taking less than their
proportionate share of the agreement production for that month.
(4) If a lessee takes less than its proportionate share of agreement
production for any month but royalties are paid on the full volume of its
proportionate share in accordance with the provisions of this section, no
additional royalty will be owed for that lease for prior periods at the
time the lessee subsequently takes more than its proportionate share to
balance its account or when the lessee is paid a sum of money by the other
agreement participants to balance its account.
(f) For production from Federal leases which are committed to
federally-approved unitization or communitization agreements, upon request
of a lessee MMS may establish the value of production pursuant to a method
other than the method required by the regulations in this title if: (1)
The proposed method for establishing value is consistent with the
requirements of the applicable statutes, lease terms and agreement terms;
(2) to the extent practical, persons with an interest in the agreement,
including royalty interests, are given notice and an opportunity to
comment on the proposed valuation method before it is authorized; and (3)
to the extent practical, persons with an interest in a Federal lease
committed to the agreement, including royalty interests, must agree to use
the proposed method for valuing production from the agreement for royalty
purposes.
[53 FR 1271, Jan. 15, 1988, as amended at 64 FR 43513, Aug. 10,
1999]
§ 202.151 Royalty on processed gas.
top
(a)(1) A royalty, as provided in the lease, shall be paid on the value
of:
(i) Any condensate recovered downstream of the point of royalty
settlement without resorting to processing; and
(ii) Residue gas and all gas plant products resulting from processing
the gas produced from a lease subject to this subpart.
(2) MMS shall authorize a processing allowance for the reasonable,
actual costs of processing the gas produced from Federal leases.
Processing allowances shall be determined in accordance with 30 CFR part
206 subpart D for gas production from Federal leases and 30 CFR part 206
subpart E for gas production from Indian leases.
(b) A reasonable amount of residue gas shall be allowed royalty free
for operation of the processing plant, but no allowance shall be made for
boosting residue gas or other expenses incidental to marketing, except as
provided in 30 CFR part 206. In those situations where a processing plant
processes gas from more than one lease, only that proportionate share of
each lease's residue gas necessary for the operation of the processing
plant shall be allowed royalty free.
(c) No royalty is due on residue gas, or any gas plant product
resulting from processing gas, which is reinjected into a reservoir within
the same lease, unit area, or communitized area, when the reinjection is
included in a plan of development or operations and the plan has received
BLM or MMS approval for onshore or offshore operations, respectively,
until such time as they are finally produced from the reservoir for sale
or other disposition off-lease.
[53 FR 1217, Jan. 15, 1988, as amended at 61 FR 5490, Feb. 12, 1996; 64
FR 43513, Aug. 10, 1999]
§ 202.152 Standards for reporting and paying
royalties on gas.
top
(a)(1) If you are responsible for reporting production or royalties,
you must:
(i) Report gas volumes and British thermal unit (Btu) heating values,
if applicable, under the same degree of water saturation;
(ii) Report gas volumes in units of 1,000 cubic feet (mcf); and
(iii) Report gas volumes and Btu heating value at a standard pressure
base of 14.73 pounds per square inch absolute (psia) and a standard
temperature base of 60 °F.
(2) The frequency and method of Btu measurement as set forth in the
lessee's contract shall be used to determine Btu heating values for
reporting purposes. However, the lessee shall measure the Btu value at
least semiannually by recognized standard industry testing methods even if
the lessee's contract provides for less frequent measurement.
(b)(1) Residue gas and gas plant product volumes shall be reported as
specified in this paragraph.
(2) Carbon dioxide (CO2), nitrogen (N2), helium
(He), residue gas, and any other gas marketed as a separate product shall
be reported by using the same standards specified in paragraph (a) of this
section.
(3) Natural gas liquids (NGL) volumes shall be reported in standard
U.S. gallons (231 cubic inches) at 60 °F.
(4) Sulfur (S) volumes shall be reported in long tons (2,240
pounds).
[53 FR 1271, Jan. 15, 1988, as amended at 63 FR 26367, May 12,
1998]
Subpart E—Solid Minerals, General [Reserved]
top
Subpart F—Coal
top
§ 202.250 Overriding royalty
interest.
top
The regulations governing overriding royalty interests, production
payments, or similar interests created under Federal coal leases are in 43
CFR group 3400.
[54 FR 1522, Jan. 13, 1989]
Subpart G—Other Solid Minerals [Reserved]
top
Subpart H—Geothermal Resources
top
Source: 56 FR 57275, Nov. 8, 1991,
unless otherwise noted.
§ 202.350 Scope and definitions.
top
(a) This subpart is applicable to all geothermal resources produced
from Federal geothermal leases issued pursuant to the Geothermal Steam Act
of 1970, as amended (30 U.S.C. 1001 et seq.).
(b) The definitions in 30 CFR 206.351 are applicable to this
subpart.
§ 202.351 Royalties on geothermal
resources.
top
(a)(1) Royalties on geothermal resources, including byproducts, or on
electricity produced using geothermal resources, will be at the royalty
rate(s) specified in the lease, unless the Secretary of the Interior
temporarily waives, suspends, or reduces that rate(s). Royalties are
determined under 30 CFR part 206, subpart H.
(2) Fees in lieu of royalties on geothermal resources are prescribed in
30 CFR part 206, subpart H.
(3) Except for the amount credited against royalties for in-kind
deliveries of electricity to a State or county under §218.306, you must
pay royalties and direct use fees in money.
(b)(1) Except as specified in paragraph (b)(2) of this section,
royalties or fees are due on—
(i) All geothermal resources produced from a lease and that are sold or
used by the lessee or are reasonably susceptible to sale or use by the
lessee, or
(ii) All proceeds derived from the sale of electricity produced using
geothermal resources produced from a lease.
(2) For purposes of this subparagraph, the terms “Class I lease,”
“Class II lease,” and “Class III lease” have the same meanings prescribed
in 30 CFR 206.351.
(i) For Class I leases, MMS will allow free of royalty—
(A) Geothermal resources that are unavoidably lost or reinjected before
use on or off the lease, as determined by the Bureau of Land Management
(BLM), or that are reasonably necessary to generate plant parasitic
electricity or electricity for Federal lease operations; and
(B) A reasonable amount of commercially demineralized water necessary
for power plant operations or otherwise used on or for the benefit of the
lease.
(ii) For Class II and Class III leases where the lessee uses geothermal
resources for commercial production or generation of electricity, or where
geothermal resources are sold at arm's length for the commercial
production or generation of electricity, MMS will allow free of royalty or
direct use fees geothermal resources that are:
(A) Unavoidably lost or reinjected before use on or off the lease, as
determined by BLM;
(B) Reasonably necessary for the lessee to generate plant parasitic
electricity or electricity for Federal lease operations, as approved by
BLM; or
(C) Otherwise used for Federal lease operations related to commercial
production or generation of electricity, as approved by BLM.
(iii) For Class II and Class III leases where the lessee uses the
geothermal resources for a direct use or in a direct use facility, as
defined in 30 CFR 206.351, resources that are used to generate electricity
for Federal lease operations or that are otherwise used for Federal lease
operations are subject to direct use fees, except for geothermal resources
that are unavoidably lost or reinjected before use on or off the lease, as
determined by BLM.
(3) Royalties on byproducts are due at the time the recovered byproduct
is used, sold, or otherwise finally disposed of. Byproducts produced and
added to stockpiles or inventory do not require payment of royalty until
the byproducts are sold, utilized, or otherwise finally disposed of. The
MMS may ask BLM to increase the lease bond to protect the lessor's
interest when BLM determines that stockpiles or inventories become
excessive.
(c) If BLM determines that geothermal resources (including byproducts)
were avoidably lost or wasted from the lease, or that geothermal resources
(including byproducts) were drained from the lease for which compensatory
royalty (or compensatory fees in lieu of compensatory royalty) are due,
the value of those geothermal resources, or the royalty or fees owed, will
be determined under 30 CFR part 206, subpart H.
(d) If a lessee receives insurance or other compensation for
unavoidably lost geothermal resources (including byproducts), royalties at
the rates specified in the lease (or fees in lieu of royalties) are due on
the amount of, or as a result of, that compensation. This paragraph will
not apply to compensation through self-insurance.
[72 FR 24458, May 2, 2007]
§ 202.352 Minimum royalty.
top
In no event shall the lessee's annual royalty payments for any
producing lease be less than the minimum royalty established by the
lease.
§ 202.353 Measurement standards for reporting
and paying royalties and direct use fees.
top
(a) For geothermal resources used to generate electricity, you must
report the quantity on which royalty is due on Form MMS–2014 (Report of
Sales and Royalty Remittance) as follows:
(1) For geothermal resources for which royalty is calculated under
§206.352(a), you must report quantities in:
(i) Thousands of pounds to the nearest whole thousand pounds if the
contract for the geothermal resources specifies delivery in terms of
weight; or
(ii) Millions of Btu to the nearest whole million Btu if the sales
contract for the geothermal resources specifies delivery in terms of heat
or thermal energy.
(2) For geothermal resources for which royalty is calculated under
§206.352(b), you must report the quantities in kilowatt-hours to the
nearest whole kilowatt-hour.
(b) For geothermal resources used in direct use processes, you must
report the quantity on which a royalty or direct use fee is due on Form
MMS–2014 in:
(1) Millions of Btu to the nearest whole million Btu if valuation is in
terms of heat or thermal energy used or displaced;
(2) Millions of gallons to the nearest million gallons of geothermal
fluid produced if valuation or fee calculation is in terms of volume;
(3) Millions of pounds to the nearest million pounds of geothermal
fluid produced if valuation or fee calculation is in terms of mass; or
(4) Any other measurement unit MMS approves for valuation and reporting
purposes.
(c) For byproducts, you must report the quantity on which royalty is
due on Form MMS–2014 consistent with MMS-established reporting
standards.
(d) For commercially demineralized water, you must report the quantity
on which royalty is due on Form MMS–2014 in hundreds of gallons to the
nearest hundred gallons.
(e) You need not report the quality of geothermal resources, including
byproducts, to MMS. However, you must maintain quality measurements for
audit purposes. Quality measurements include, but are not limited to:
(1) Temperatures and chemical analyses for fluid geothermal resources;
and
(2) Chemical analyses, weight percent, or other purity measurements for
byproducts.
[72 FR 24458, May 2, 2007]
Subpart I—OCS Sulfur [Reserved]
top
Subpart J—Gas Production From Indian Leases
top
Source: 64 FR 43514, Aug. 10, 1999,
unless otherwise noted.
§ 202.550 How do I determine the royalty due on
gas production?
top
If you produce gas from an Indian lease subject to this subpart, you
must determine and pay royalties on gas production as specified in this
section.
(a) Royalty rate. You must calculate your royalty using the
royalty rate in the lease.
(b) Payment in value or in kind. You must pay royalty in value
unless:
(1) The Tribal lessor requires payment in kind; or
(2) You have a lease on allotted lands and MMS requires payment in
kind.
(c) Royalty calculation. You must use the following calculations
to determine royalty due on the production from or attributable to your
lease.
(1) When paid in value, the royalty due is the unit value of production
for royalty purposes, determined under 30 CFR part 206, multiplied by the
volume of production multiplied by the royalty rate in the lease.
(2) When paid in kind, the royalty due is the volume of production
multiplied by the royalty rate.
(d) Reduced royalty rate. The Indian lessor and the Secretary
may approve a request for a royalty rate reduction. In your request you
must demonstrate economic hardship.
(e) Reporting and paying. You must report and pay royalties as
provided in part 218 of this title.
§ 202.551 How do I determine the volume of
production for which I must pay royalty if my lease is not in an approved
Federal unit or communitization agreement (AFA)?
top
(a) You are liable for royalty on your entitled share of gas production
from your Indian lease, except as provided in §§202.555, 202.556, and
202.557.
(b) You and all other persons paying royalties on the lease must report
and pay royalties based on your takes. If another person takes some of
your entitled share but does not pay the royalties owed, you are liable
for those royalties.
(c) You and all other persons paying royalties on the lease may ask MMS
for permission to report and pay royalties based on your entitlements. In
that event, MMS will provide valuation instructions consistent with this
part and part 206 of this title.
§ 202.552 How do I determine how much royalty I
must pay if my lease is in an approved Federal unit or communitization
agreement (AFA)?
top
You must pay royalties each month on production allocated to your lease
under the terms of an AFA. To determine the volume and the value of your
production, you must follow these three steps:
(a) You must determine the volume of your entitled share of production
allocated to your lease under the terms of an AFA. This may include
production from more than one AFA.
(b) You must value the production you take using 30 CFR part 206. If
you take more than your entitled share of production, see §202.553 for
information on how to value this production. If you take less than your
entitled share of production, see §202.554 for information on how to value
production you are entitled to but do not take.
§ 202.553 How do I value my production if I take
more than my entitled share?
top
If you take more than your entitled share of production from a lease in
an AFA for any month, you must determine the weighted-average value of all
of the production that you take using the procedures in 30 CFR part 206,
and use that value for your entitled share of production.
§ 202.554 How do I value my production that I do
not take if I take less than my entitled share?
top
If you take none or only part of your entitled production from a lease
in an AFA for any month, use this section to value the production that you
are entitled to but do not take.
(a) If you take a significant volume of production from your lease
during the month, you must determine the weighted average value of the
production that you take using 30 CFR part 206, and use that value for the
production that you do not take.
(b) If you do not take a significant volume of production from your
lease during the month, you must use paragraph (c) or (d) of this section,
whichever applies.
(c) In a month where you do not take production or take an
insignificant volume, and if you would have used §206.172(b) to value the
production if you had taken it, you must determine the value of production
not taken for that month under §206.172(b) as if you had taken it.
(d) If you take none of your entitled share of production from a lease
in an AFA, and if that production cannot be valued under §206.172(b), then
you must determine the value of the production that you do not take using
the first of the following methods that applies:
(1) The weighted average of the value of your production (under 30 CFR
part 206) in that month from other leases in the same AFA.
(2) The weighted average of the value of your production (under 30 CFR
part 206) in that month from other leases in the same field or area.
(3) The weighted average of the value of your production (under 30 CFR
part 206) during the previous month for production from leases in the same
AFA.
(4) The weighted average of the value of your production (under 30 CFR
part 206) during the previous month for production from other leases in
the same field or area.
(5) The latest major portion value that you received from MMS
calculated under 30 CFR 206.174 for the same MMS-designated area.
(e) You may take less than your entitled share of AFA production for
any month, but pay royalties on the full volume of your entitled share
under this section. If you do, you will owe no additional royalty for that
lease for that month when you later take more than your entitled share to
balance your account. The provisions of this paragraph (e) also apply when
the other AFA participants pay you money to balance your account.
§ 202.555 What portion of the gas that I produce
is subject to royalty?
top
(a) All gas produced from or allocated to your Indian lease is subject
to royalty except the following:
(1) Gas that is unavoidably lost.
(2) Gas that is used on, or for the benefit of, the lease.
(3) Gas that is used off-lease for the benefit of the lease when the
Bureau of Land Management (BLM) approves such off-lease use.
(4) Gas used as plant fuel as provided in 30 CFR 206.179(e).
(b) You may use royalty-free only that proportionate share of each
lease's production (actual or allocated) necessary to operate the
production facility when you use gas for one of the following
purposes:
(1) On, or for the benefit of, the lease at a production facility
handling production from more than one lease with BLM's approval.
(2) At a production facility handling unitized or communitized
production.
(c) If the terms of your lease are inconsistent with this subpart, your
lease terms will govern to the extent of that inconsistency.
§ 202.556 How do I determine the value of
avoidably lost, wasted, or drained gas?
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If BLM determines that a volume of gas was avoidably lost or wasted, or
a volume of gas was drained from your Indian lease for which compensatory
royalty is due, then you must determine the value of that volume of gas
under 30 CFR part 206.
§ 202.557 Must I pay royalty on insurance
compensation for unavoidably lost gas?
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If you receive insurance compensation for unavoidably lost gas, you
must pay royalties on the amount of that compensation. This paragraph does
not apply to compensation through self-insurance.
§ 202.558 What standards do I use to report and
pay royalties on gas?
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(a) You must report gas volumes as follows:
(1) Report gas volumes and Btu heating values, if applicable, under the
same degree of water saturation. Report gas volumes and Btu heating value
at a standard pressure base of 14.73 psia and a standard temperature of 60
degrees Fahrenheit. Report gas volumes in units of 1,000 cubic feet
(Mcf).
(2) You must use the frequency and method of Btu measurement stated in
your contract to determine Btu heating values for reporting purposes.
However, you must measure the Btu value at least semi-annually by
recognized standard industry testing methods even if your contract
provides for less frequent measurement.
(b) You must report residue gas and gas plant product volumes as
follows:
(1) Report carbon dioxide (CO2), nitrogen (N2),
helium (He), residue gas, and any gas marketed as a separate product by
using the same standards specified in paragraph (a) of this section.
(2) Report natural gas liquid (NGL) volumes in standard U.S. gallons
(231 cubic inches) at 60 degrees F.
(3) Report sulfur (S) volumes in long tons (2,240 pounds).
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