0008 Ss 110111

Supporting Statement for Paperwork Reduction Act Submissions
30 CFR Part 1218, Collection of Monies Due the Federal Government
(Form ONRR-4425, Designation Form for Royalty Payment Responsibility)
OMB Control Number 1012-0008
Current Expiration Date: November 30, 2011
Terms of Clearance: None.
General Instructions

The Supporting Statement, including the text of the notice to the public required by 5 CFR
1320.5(a)(i)(iv) and its actual or estimated date of publication in the Federal Register, must
accompany each request for approval of a collection of information. The Supporting Statement
must be prepared in the format described below, and must contain the information specified in
Section A below. If an item is not applicable, provide a brief explanation. When statistical
methods are employed, Section B of the Supporting Statement must be completed. The Office of
Management and Budget (OMB) reserves the right to require the submission of additional
information with respect to any request for approval.
Specific Instructions

A. Justification
1. Explain the circumstances that make the collection of information necessary. Identify any
legal or administrative requirements that necessitate the collection. Attach a copy of the
appropriate section of each statute and regulation mandating or authorizing the collection of
information.
The Secretary of the U.S. Department of the Interior is responsible for collecting royalties from
lessees who produce minerals from leased Federal and Indian lands. The Secretary is required
by various laws (see below) to manage mineral resources production on Federal and Indian
lands, collect the royalties due, and distribute the funds in accordance with those laws. The
Secretary also has a trust responsibility to manage Indian lands and seek advice and information
from Indian beneficiaries. The Office of Natural Resources Revenue (ONRR), formerly the
Minerals Revenue Management (MRM), a program of the former Minerals Management Service
(MMS), performs the minerals revenue management functions for the Secretary and assists the
Secretary in carrying out the Department’s trust responsibility for Indian lands.
When a company or an individual enters into a lease to explore, develop, produce, and dispose of
minerals from Federal or Indian lands, that company or individual agrees to pay the lessor a
share in an amount or value of production from the leased lands. The lessee is required to report
various kinds of information to the lessor relative to the disposition of the leased minerals. Such
information is generally available within the records of the lessee or others involved in
developing, transporting, processing, purchasing, or selling of such minerals. The information
collected includes data necessary to ensure that the royalties are accurately valued and
appropriately paid.

1

Applicable citations of the laws pertaining to mineral leases include the following:




Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA) (Pub. L. 97-451—
Jan. 12, 1983)
Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (RSFA) (Pub. L. 104185—Aug. 13, 1996, as corrected by Pub. L. 104-200—Sept. 22, 1996)
Indian Mineral Development Act of 1982 (Pub. L. 97-382—Dec. 22, 1982)

Public laws pertaining to mineral revenues are on our website at
http://www.onrr.gov/Laws_R_D/PublicLawsAMR.htm.
This ICR covers the following unique reporting circumstances:




Cross-lease netting in calculation of late-payment interest
Designation of a designee
Tribal permission for recoupment on Indian oil and gas leases

2. Indicate how, by whom, and for what purpose the information is to be used. Except for a
new collection, indicate the actual use the agency has made of the information received from
the current collection. [Be specific. If this collection is a form or a questionnaire, every
question needs to be justified.]


Cross-Lease Netting in Calculation of Late-Payment Interest
Regulations at 30 CFR 1218.54 require ONRR to assess interest on unpaid or underpaid
amounts. We distribute these interest revenues to states, Indian tribes, and the U.S. Treasury,
based on financial lease distribution information. Current regulations at 30 CFR 1218.42
provide that an overpayment on a lease or leases may be offset against an underpayment on a
different lease or leases to determine the net payment subject to interest, when certain
conditions are met. This is called cross-lease netting. However, RSFA sections 6(a), (b),
and (c) require ONRR to pay interest on lessees’ Federal oil and gas overpayments made on
or after February 13, 1997 (6 months after the August 13, 1996, enactment of RSFA). We
implemented this RSFA provision in 1997 and began calculating interest on both
underpayments and overpayments for Federal oil and gas leases, making the cross-lease
netting provisions at 30 CFR 1218.42 no longer applicable for these leases. Lessees must
comply with the provisions at 30 CFR 1218.42(b) and (c) for Indian tribal leases or Federal
leases other than oil and gas. They must demonstrate that cross-lease netting is correct by
submitting production reports, pipeline allocation reports, or other similar documentary
evidence. This information is necessary for ONRR to determine the correct amount of
interest the lessee owes and to ensure that we collect in full all monies owed the Federal
Government.

2



Designation of a Designee
Requirements of RSFA established that owners of, primarily, operating rights or,
secondarily, lease record title (both referred to as “lessees”) are responsible for making
royalty and related payments on Federal oil and gas leases (see 30 CFR 1218.52). It is
common, however, for a payor rather than a lessee to make these payments. When a payor
makes payments on behalf of a lessee, RSFA section 6(g) requires that the lessee designate
the payor as its designee and notify ONRR of this arrangement in writing. We designed
Form ONRR-4425, Designation Form for Royalty Payment Responsibility, to request all the
information necessary for lessees to comply with these RSFA requirements when choosing to
designate an agent to pay for them. We require this information to ensure proper mineral
revenue collection.



Tribal Permission for Recoupment on Indian Oil and Gas Leases
In order to report cross-lease netting on Indian oil and gas leases, lessees must also comply
with regulations at 30 CFR 12l8.53(b), allowing only lessees with written permission from
the tribe to recoup overpayments on one lease against a different lease for which the tribe is
the lessor. The payor must provide ONRR with a copy of the tribe’s written permission.
Generally, a payor may recoup an overpayment against the current month’s royalties or other
revenues owed on the same tribal lease. For any month, a payor may not recoup more than
50 percent of the royalties or other revenues owed in that month, under an individual allotted
lease, or more than 100 percent of the royalties or other revenues owed in that month, under
a tribal lease. Lessees report oil and gas lease recoupments on Form MMS-2014, Report of
Sales and Royalty Remittance (which will be renumbered as Form ONRR-2014, as we
update our forms and form numbers in the regulations). The burden hours are covered under
ICR 1012-0004.

3. Describe whether, and to what extent, the collection of information involves the use of
automated, electronic, mechanical, or other technological collection techniques or other forms
of information technology, e.g., permitting electronic submission of responses, and the basis
for the decision for adopting this means of collection. Also describe any consideration of
using information technology to reduce burden [and specifically how this collection meets
GPEA requirements].


Cross-Lease Netting in Calculation of Late-Payment Interest
Lessees may submit by e-mail documentation required to support allowance of cross-lease
netting. We have a reasonable expectation that 5 percent of respondents may use the e-mail
option.



Designation of a Designee
The ONRR continues to strive for full implementation of the Government Paperwork
Elimination Act. We offer electronic copies of Form ONRR-4425 on our website for
respondents to print and complete. They may also submit the form electronically as an e3

mail attachment. During the current renewal period, no companies have used the e-mail
attachment option to request to designate a designee; however, we have a reasonable
expectation that 5 percent may use the e-mail option.


Tribal Permission for Recoupment on Indian Oil and Gas Leases
Submission of written tribal permission to recoup overpayments varies in format according
to each tribe. However, a copy can be sent electronically as an attachment via e-mail.
During the current renewal period, no companies have used the e-mail attachment option to
recoup overpayments; however, we have a reasonable expectation that 5 percent may use the
e-mail option.

4. Describe efforts to identify duplication. Show specifically why any similar information
already available cannot be used or modified for use for the purposes described in Item 2
above.


Cross-Lease Netting in Calculation of Late-Payment Interest
The documentation required to support ONRR’s allowance of cross-lease netting is unique to
each situation and is not available through other sources.



Designation of a Designee
The Bureau of Land Management (BLM) and the Bureau of Ocean Energy Management,
Regulation and Enforcement (BOEMRE) for Federal onshore and offshore leases
respectively, maintain information on operating rights owners and lease record title owners.
However, the information maintained by BLM and BOEMRE does not provide the specific
information required by RSFA—designation of payment responsibility. Therefore, the
information submitted on Form ONRR-4425 is unique.



Tribal Permission for Recoupment on Indian Oil and Gas Leases
Tribal written permission allowing payors to recoup overpayments on a lease is a situation
unique to ONRR. Each submission requires a letter from the tribe related to the specific
lease and production month.

5. If the collection of information impacts small businesses or other small entities, describe
any methods used to minimize burden.
Small businesses are among potential respondents, and as such, ONRR carefully analyzed its
requirements to ensure the information requested is the minimum necessary to accomplish our
mission and to place the least burden on industry. Training is offered on a regular basis, and tollfree telephone assistance is available during business hours. Additionally, the Secretary
established the Royalty Policy Committee (RPC), made up of state, tribal, and industry
representatives, to advise ONRR on ways to decrease the burden on industry.

4

Situations requiring written permission from the tribes to allow payors to recoup overpayments
on a different lease rarely, if ever, impact small businesses.
6. Describe the consequence to Federal program or policy activities if the collection is not
conducted or is conducted less frequently, as well as any technical or legal obstacles to
reducing burden.


Cross-Lease Netting in Calculation of Late-Payment Interest
By delegation of the Secretary's trust responsibilities under Indian lease terms, ONRR is
responsible for ensuring the proper valuation of production from Indian leases. Not
collecting the information would limit the Secretary's ability to discharge the fiduciary duties
of the office and also may result in loss of royalty payments to Indian lessors if ONRR does
not collect royalties on prices received under higher priced sales contracts.



Designation of a Designee
The information requested on Form ONRR-4425 is necessary for ONRR and the oil and gas
industry to comply with RSFA, which clearly establishes the lessee as responsible for
making royalty and related payments on Federal leases. Under RSFA, the operating rights
owners are primarily liable for payments to ONRR, and the owners of lease record title are
secondarily liable.



Tribal Permission for Recoupment on Indian Oil and Gas Leases
Situations requiring written permission from the tribes to allow payors to recoup
overpayments against a different lease are infrequent. Payors could not always recoup
overpayments if this exception were not allowed.

7. Explain any special circumstances that would cause an information collection to be
conducted in a manner:
(a) requiring respondents to report information to the agency more often than quarterly.
Form ONRR-4425 respondents may be required to report information to us more often than
quarterly. For example, if a lessee designates a new/different payor for a given lease, then the
lessee must immediately complete and submit a designation form.
(b) requiring respondents to prepare a written response to a collection of information in
fewer than 30 days after receipt of it.
Not applicable in this collection.

5

(c) requiring respondents to submit more than an original and two copies of any
document.
Not applicable in this collection.
(d) requiring respondents to retain records, other than health, medical, government
contract, grant-in-aid, or tax records, for more than 3 years.
Indian Oil and Gas Records—In accordance with 30 U.S.C. 1713(b), Indian oil and gas
records must be maintained for 6 years after the records are generated unless the Secretary
notifies the record holder that such records must be maintained for a longer period due to an
ongoing audit or investigation.
Federal Records—RSFA section 4(f) requires that Federal lessees maintain records for
7 years after the obligation becomes due.
(e) in connection with a statistical survey, that is not designed to produce valid and reliable
results that can be generalized to the universe of study.
Not applicable in this collection.
(f) requiring the use of statistical data classification that has been reviewed and approved
by OMB.
There are no special circumstances with respect to 5 CFR 1320.5(d)(2)(v) through (viii) because
the collection is not a statistical survey and does not use statistical data classification.
(g) that includes a pledge of confidentiality that is not supported by authority established
in statute or regulation, that is not supported by disclosure and data security policies that are
consistent with the pledge, or which unnecessarily impedes sharing of data with other
agencies for compatible confidential use.
This collection does not include a pledge of confidentiality not supported by statute or
regulation.
(h) requiring respondents to submit proprietary trade secrets or other confidential
information unless the agency can demonstrate that it has instituted procedures to protect the
information’s confidentiality to the extent permitted by law.
This collection does not require proprietary, trade secret, or other confidential information not
protected by agency procedures.
8. If applicable, provide a copy and identify the date and page number of publication in the
Federal Register of the agency’s notice, required by 5 CFR 1320.8(d), soliciting comments on
the information collection prior to submission to OMB. Summarize public comments received
in response to that notice [and in response to the PRA statement associated with the collection

6

over the past 3 years] and describe actions taken by the agency in response to these comments.
Specifically address comments received on cost and hour burden.
Describe efforts to consult with persons outside the agency to obtain their views on the
availability of data, frequency of collection, the clarity of instructions and recordkeeping,
disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or
reported. [Please list the names, titles, addresses, and phone numbers of persons contacted.]
Consultation with representatives of those from whom information is to be obtained or those
who must compile records should occur at least once every 3 years – even if the collection of
information activity is the same as in prior periods. There may be circumstances that may
preclude consultation in a specific situation. These circumstances should be explained.
As required in 5 CFR 1320.8(d), ONRR published a 60-day review and comment notice in the
Federal Register. We did not receive any comments in response to this notice, published on
May 4, 2011 (76 FR 25370).
We also contacted the companies (listed below) regarding the burden hour estimates and the
clarity of the regulations requiring this collection of information. Program staff reported the
following:
Contacts made / comments received:
1. Robert Wilkinson, ConocoPhillips 918-661-4381
Oral comment provided 10/5/2011: We spoke about the referenced Federal Register notice.
Bob did not submit comments because cross lease netting and tribal recoupment requests are
rarely granted so didn't want to spend time on items with little value. I asked about hour burden
associated with Form MMS-4425. Bob indicated that he has no dispute with the estimate, has
no information to counter that the time estimate is unrealistic.
2. Marvinette Ponder, Devon Energy 405-552-4722
Left Message 10/5/2011, Sent email request 10/6/2011, email response received 10/10/2011:
40 minutes appears to be a sufficient time estimate to gather information, specially the
designee's payor code and tax identification number, and to complete the form.  

3. Pamela Williams, Shell Exploration & Production Company 832-337-2592
Telephone number not good.
4. George Edwards, ExxonMobil 713-680-7450
Left message 10/5/2011, Sent email request 10/5/2011, email response received 10/10/2011:
Based on a review of the attached MMS Form 4425, we concurred with the data burden hour
estimate of .72 hours for Form MMS-4425 preparation.
5. Renee Crosby, Chevron USA Inc 713-432-6887
Left Message 10/5/2011, Sent email request 10/6/2011, email response received 10/10/2011:
I have reviewed the information collection request regarding cross lease netting, designation of
a designee and tribal recoupment and have no information that would indicate the time
estimates as stated to be unrealistic.

7

We accept comments at any time on the information collection and the burden hour estimates, as
explained in the PRA statement at the bottom of Form ONRR-4425. We have not received any
comments on the form or the burden hour estimates. The ONRR also maintains regular, ongoing
contact with companies. We provide toll-free telephone assistance and encourage customer
feedback as we respond to questions regarding requirements. We address issues as they come up
and continually improve our processes.
9. Explain any decision to provide any payment or gift to respondents, other than
remuneration of contractors or grantees.
We will not provide any payment or gift to respondents in this collection.
10. Describe any assurance of confidentiality provided to respondents and the basis for the
assurance in statute, regulation, or agency policy.
Commercial or financial information provided to ONRR, relative to minerals removed from
Federal and Indian leases, may be proprietary. Trade secrets and proprietary and other
information are protected in accordance with standards established by the Federal Oil and Gas
Royalty Management Act of 1982, as amended (30 U.S.C. 1733), and the Freedom of
Information Act (5 U.S.C. 552(b)(4)) and its implementing regulations (43 CFR 2).
In addition, the Indian Mineral Development Act of 1982 (25 U.S.C. 2103) provides that all
information related to any Indian minerals agreement covered by the Act, in the possession of
the Department, shall be held as privileged proprietary information. Storage of proprietary
information and access to it are controlled by strict security measures.
11. Provide additional justification for any questions of a sensitive nature, such as sexual
behavior and attitudes, religious beliefs, and other matters that are commonly considered
private. This justification should include the reasons why the agency considers the questions
necessary, the specific uses to be made of the information, the explanation to be given to
persons from whom the information is requested, and any steps to be taken to obtain their
consent.
The collection does not include sensitive or private questions.

8

12. Provide estimates of the hour burden of the collection of information. The statement
should:
(a) Indicate the number of respondents, frequency of response, annual hour burden, and
an explanation of how the burden was estimated. Unless directed to do so, agencies should
not conduct special surveys to obtain information on which to base hour burden estimates.
Consultation with a sample (fewer than 10) of potential respondents is desirable. If the hour
burden on respondents is expected to vary widely because of differences in activity, size, or
complexity, show the range of estimated hour burden, and explain the reasons for the
variance. Generally, estimates should not include burden hours for customary and usual
business practices.
(b) If this request for approval covers more than one form, provide separate hour burden
estimates for each form and aggregate the hour burdens.
(c) Provide estimates of annualized cost to respondents for the hour burdens for
collections of information, identifying and using appropriate wage rate categories. The cost of
contracting out or paying outside parties for information collection activities should not be
included here. Instead, this cost should be included in Item 14.
Summary of Information Collections
Information Collections
(and 30 CFR Reference*)
Cross-Lease Netting in Calculation of
Late-Payment Interest

Requirement
to
Respond
Required to
obtain a benefit

Frequency
of
Response
On occasion

Number
of Annual
Responses
25

Required to
obtain a benefit
Required to
obtain a benefit

On occasion

1,600

1,200

On occasion

5

5

TOTAL

1,630

1,255

Annual
Burden
Hours
50

1218.42(b) and (c)
Designation of a Designee

1218.52(a), (c), and (d)
Tribal Permission for Recoupment on
Indian Oil and Gas Leases

1218.53(b)

There are approximately 1,630 respondents (Federal and Indian lessees). We receive responses
on occasion. We estimate the total annual burden is 1,255 reporting hours (there are no
recordkeeping hours). We used tables from the Bureau of Labor Statistics (BLS) to estimate the
hourly cost for industry accountants in a metropolitan area. We used a multiplier of 1.4 for
benefits. Based on this information, we estimate the hourly cost for an industry accountant
would be $46, calculated as follows:
$32.83 [mean hourly wage] x 1.4 [benefits cost factor] = $45.96 [rounded to $46/hr]
The estimated annual cost to industry would be $57,730, calculated as follows:
1,255 [reporting hours] x $46/hr [for industry accountants] = $57,730

9

The burden estimates include the time for reviewing instructions; searching existing data
sources; gathering and maintaining the data needed; and completing and reviewing the collection
of information. The following chart shows the estimated burden hours by CFR section and
paragraph:
SECTION A.12 BURDEN BREAKDOWN
Citation
30 CFR
1218

1218.42(b)
and (c)

Reporting and Recordkeeping
Requirement

Hour
Burden

Average
Number of
Annual
Responses

Subpart A—General Provisions—
Cross-lease netting in calculation of late-payment interest.
2
Cross-lease netting in calculation of latepayment interest. (b) Royalties attributed to
production from a lease or leases which
should have been attributed to production
from a different lease or leases may be offset
* * * if
* * * the payor submits production reports,
pipeline allocation reports, or other similar
documentary evidence pertaining to the
specific production involved which verifies
the correct production information * * *.
(c) If ONRR assesses late-payment interest
and the payor asserts that some or all of the
interest is not owed * * * the burden is on the
payor to demonstrate that the exception
applies * * *.

10

25

Annual
Burden
Hours

50

Citation
30 CFR
1218

Reporting and Recordkeeping
Requirement

Hour
Burden

Average
Number of
Annual
Responses

Annual
Burden
Hours

Subpart B—Oil and Gas, General—How does a lessee designate a Designee?
1218.52(a),
(c), and (d)

How does a lessee designate a Designee?
(a) If you are a lessee under 30 U.S.C.
1701(7), and you want to designate a person
to make all or part of the payments due
under a lease on your behalf
* * * you must notify ONRR * * * in writing of
such designation. * * *
(c) If you want to terminate a designation * * *
you must provide [the following] to ONRR in
writing * * *.
(d) ONRR may require you to provide notice
when there is a change in the percentage of
your record title or operating rights
ownership.

0.75

1,600

1,200

The ONRR currently uses Form ONRR4425, Designation Form for Royalty Payment
Responsibility to collect this information.
Subpart B—Oil and Gas, General—Recoupment of overpayments on Indian mineral leases.
1218.53(b)

1

5

5

TOTAL BURDEN

1,630

1,255

Recoupment of overpayments on Indian
mineral leases. (b) With written permission
authorized by tribal statute or resolution, a
payor may recoup an overpayment against
royalties or other revenues owed * * * under
other leases
* * *. A copy of the tribe’s written permission
must be furnished to ONRR * * *.

13. Provide an estimate of the total annual [non-hour] cost burden to respondents or
recordkeepers resulting from the collection of information. (Do not include the cost of any
hour burden shown in Items 12 and 14).
(a) The cost estimate should be split into two components: (1) a total capital and start-up
cost component (annualized over its expected useful life) and (2) a total operation and
maintenance and purchase of services component. The estimates should take into account
costs associated with generating, maintaining, and disclosing or providing the information
[including filing fees paid]. Include descriptions of methods used to estimate major cost
factors including system and technology acquisition, expected useful life of capital equipment,
the discount rate(s), and the time period over which costs will be incurred. Capital and startup costs include, among other items, preparations for collecting information such as
purchasing computers and software; monitoring, sampling, drilling and testing equipment;
and record storage facilities.

11

(b) If cost estimates are expected to vary widely, agencies should present ranges of cost
burden and explain the reasons for the variance. The cost of purchasing or contracting out
information collection services should be a part of this cost burden estimate. In developing
cost burden estimates, agencies may consult with a sample of respondents (fewer than 10),
utilize the 60-day pre-OMB submission public comment process and use existing economic or
regulatory impact analysis associated with the rulemaking containing the information
collection, as appropriate.
(c) Generally, estimates should not include purchases of equipment or services, or portions
thereof, made: (1) prior to October 1, 1995, (2) to achieve regulatory compliance with
requirements not associated with the information collection, (3) for reasons other than to
provide information or keep records for the government, or (4) as part of customary and usual
business or private practices.
We have identified no “non-hour” cost burdens for this collection of information.
14. Provide estimates of annualized cost to the Federal Government. Also, provide a
description of the method used to estimate cost, which should include quantification of hours,
operational expenses (such as equipment, overhead, printing, and support staff), and any
other expense that would not have been incurred without this collection of information.
Agencies also may aggregate cost estimates from Items 12, 13, and 14 in a single table.
We estimate that a Federal employee will spend approximately 5.5 hours per year to process the
information collected. This task requires only filing. An employee paid at the United States
2011 General Schedule, Grade 7/Step 5 pay-scale level currently performs the work. The 2011
salary tables for the Denver, Colorado, area are located at
http://www.opm.gov/oca/11tables/html/den_h.asp. We used a multiplier of 1.5 for benefits.
Based on this information, we estimate the hourly cost for a Federal employee to perform the
work would be $34, calculated as follows:
$22.61 [GS-7/5] x 1.5 [benefits cost factor] = $33.92 [rounded to $34/hr]
The estimated annual cost to the Federal Government is $187, calculated as follows:
5.5 hrs/year [estimated time] x $34/hr [for Federal employee] = $187

12

15. Explain the reasons for any program changes or adjustments.
There are no program changes.
The current OMB inventory is 1,219 burden hours. We are requesting OMB’s approval of 1,255
burden hours. Therefore, we have an adjustment increase of 36 hours.
We averaged our responses over the 3-year period since the last renewal to obtain an annual
estimate of the burden hours. Actual inspection of our files shows that the number of responses
has increased, and, correspondingly, the burden hours also have increased.
There is no annual cost burden associated with this information collection.
16. For collections of information whose results will be published, outline plans for tabulation
and publication. Address any complex analytical techniques that will be used. Provide the
time schedule for the entire project, including beginning and ending dates of the collection of
information, completion of report, publication dates, and other actions.
The ONRR will not publish the data.
17. If seeking approval to not display the expiration date for OMB approval of the information
collection, explain the reasons that display would be inappropriate.
The ONRR will display the OMB approval expiration date on Form ONRR-4425. The
remainder of this collection concerns regulatory requirements.
18. Explain each exception to the certification statement identified in Item 19, “Certification
for Paperwork Reduction Act Submission.”
To the extent that the topics apply to this collection of information, we are not making any
exceptions to the “Certification for Paperwork Reduction Act Submissions.”
B. Collection of Information Employing Statistical Methods
This section is not applicable for this collection. We will not employ statistical methods in this
information collection.

13