30 CFR Part 1202

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Title 30: Mineral Resources
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PART 1202—ROYALTIES

Section Contents

Subpart A—General Provisions [Reserved]
Subpart B—Oil, Gas, and OCS Sulfur, General
§ 1202.51 Scope and definitions.
§ 1202.52 Royalties.
§ 1202.53 Minimum royalty.
Subpart C—Federal and Indian Oil
§ 1202.100 Royalty on oil.
§ 1202.101 Standards for reporting and paying royalties.
Subpart D—Federal Gas
§ 1202.150 Royalty on gas.
§ 1202.151 Royalty on processed gas.
§ 1202.152 Standards for reporting and paying royalties on gas.
Subpart E—Solid Minerals, General [Reserved]
Subpart F—Coal
§ 1202.250 Overriding royalty interest.
Subpart G—Other Solid Minerals [Reserved]
Subpart H—Geothermal Resources
§ 202.350 Scope and definitions.
§ 1202.351 Royalties on geothermal resources.
§ 1202.352 Minimum royalty.
§ 1202.353 Measurement standards for reporting and paying royalties and direct use fees.
Subpart I—OCS Sulfur [Reserved]

Subpart J—Gas Production From Indian Leases
§ 1202.550 How do I determine the royalty due on gas production?
§ 1202.551 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)?
§ 1202.552 How do I determine how much royalty I must pay if my lease is in an approved
Federal unit or communitization agreement (AFA)?
§ 1202.553 How do I value my production if I take more than my entitled share?
§ 1202.554 How do I value my production that I do not take if I take less than my entitled
share?
§ 1202.555 What portion of the gas that I produce is subject to royalty?
§ 1202.556 How do I determine the value of avoidably lost, wasted, or drained gas?
§ 1202.557 Must I pay royalty on insurance compensation for unavoidably lost gas?
§ 1202.558 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.
Source: 48 CFR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR
61066, Oct. 4, 2010.
Subpart A—General Provisions [Reserved]
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Subpart B—Oil, Gas, and OCS Sulfur, General
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Source: 53 FR 1217, Jan. 15, 1988, unless otherwise noted.
§ 1202.51 Scope and definitions.
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(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 1206 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]

§ 1202.52 Royalties.
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(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) .

§ 1202.53 Minimum royalty.
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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
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§ 1202.100 Royalty on oil.
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(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 the Office of Natural Resources Revenue (ONRR)
requires payment in-kind. When paid in value, the royalty due shall be the value, for royalty purposes,
determined pursuant to part 1206 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 Bureau of Ocean
Energy Management, Regulation, and Enforcement (BOEMRE) 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 BOEMRE 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 BOEMRE 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 1206.
(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 1206. In applying the requirements of 30 CFR part 1206, 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 ONRR 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 ONRR 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]

§ 1202.101 Standards for reporting and paying royalties.
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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
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Source: 53 FR 1271, Jan. 15, 1988, unless otherwise noted.
§ 1202.150 Royalty on gas.
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(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 ONRR requires payment in kind. When paid in value, the royalty due shall
be the value, for royalty purposes, determined pursuant to 30 CFR part 1206 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 BOEMRE 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 BOEMRE 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 BOEMRE 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 1206.
(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 1206. In applying the requirements of 30 CFR part 1206, 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 ONRR 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 ONRR 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]

§ 1202.151 Royalty on processed gas.
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(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) ONRR 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 1206 subpart D for gas production from Federal leases and 30 CFR part 1206 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 1206. 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 BOEMRE 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]

§ 1202.152 Standards for reporting and paying royalties on gas.
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(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]
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Subpart F—Coal

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§ 1202.250 Overriding royalty interest.
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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]
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Subpart H—Geothermal Resources
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Source: 56 FR 57275, Nov. 8, 1991, unless otherwise noted.
§ 202.350 Scope and definitions.
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(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 §1206.351 are applicable to this subpart.

§ 1202.351 Royalties on geothermal resources.
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(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 1206, subpart H.
(2) Fees in lieu of royalties on geothermal resources are prescribed in 30 CFR part 1206, subpart H.
(3) Except for the amount credited against royalties for in-kind deliveries of electricity to a State or
county under §1218.306, 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 §1206.351.
(i) For Class I leases, ONRR 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, ONRR 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 §1206.351, 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 ONRR 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 1206,
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]

§ 1202.352 Minimum royalty.
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In no event shall the lessee's annual royalty payments for any producing lease be less than the
minimum royalty established by the lease.

§ 1202.353 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 §1206.352(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 §1206.352(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 ONRR 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 ONRR-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 ONRR. 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]
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Subpart J—Gas Production From Indian Leases
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Source: 64 FR 43514, Aug. 10, 1999, unless otherwise noted.

§ 1202.550 How do I determine the royalty due on gas production?
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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 ONRR 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 1206, 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 1218 of this title.

§ 1202.551 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)?
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(a) You are liable for royalty on your entitled share of gas production from your Indian lease, except as
provided in §§1202.555, 1202.556, and 1202.557.
(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 ONRR for permission to report and
pay royalties based on your entitlements. In that event, ONRR will provide valuation instructions
consistent with this part and part 1206 of this title.

§ 1202.552 How do I determine how much royalty I must pay if my lease is in an
approved Federal unit or communitization agreement (AFA)?
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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 1206. If you take more than your entitled
share of production, see §1202.553 for information on how to value this production. If you take less than
your entitled share of production, see §1202.554 for information on how to value production you are
entitled to but do not take.

§ 1202.553 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 1206, and use that value for your entitled share of production.

§ 1202.554 How do I value my production that I do not take if I take less than my
entitled share?
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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 1206, 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 §1206.172(b) to value the production if you had taken it, you must determine the value of
production not taken for that month under §1206.172(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 §1206.172(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 1206) in that month from
other leases in the same AFA.
(2) The weighted average of the value of your production (under 30 CFR part 1206) 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 1206) 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 1206) 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 ONRR calculated under §1206.174 for the
same ONRR-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.

§ 1202.555 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 §1206.179(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.

§ 1202.556 How do I determine the value of avoidably lost, wasted, or drained gas?
top
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 1206.

§ 1202.557 Must I pay royalty on insurance compensation for unavoidably lost gas?
top
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.

§ 1202.558 What standards do I use to report and pay royalties on gas?
top
(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 semiannually 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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