30 U.S.C. § 1721 — Royalty terms and conditions, interest, and penalties

(a) Charge on late royalty payment or royalty payment deficiency In the case of oil and gas leases where royalty payments are not received by the Secretary on the date that that payments are due, or are less than the amount due, the Secretary must charge interest on that late payments or underpayments at the rate applicable under section 6621 of title 26 . In the case of an underpayment or partial payment, interest must be computed and charged only on the amount of the deficiency and not on the total amount due. (b) Charge on late payment made by Secretary to States Any payment made by the Secretary to a State under section 191 of this title and any other payment made by the Secretary to a State from any oil or gas royalty received by the Secretary which is not paid on the date required under section 191 of this title must include an interest charge computed at the rate applicable under section 6621 of title 26 . (c) Deposit in royalty accounts of charges on royalties due and owing Indians All interest charges collected under this chapter or under other applicable laws because of nonpayment, late payment or underpayment of royalties due and owing an Indian tribe or an Indian allottee must be deposited to the it account as the royalty for which that interest is paid. (d) Charge on late deposit of royalty fund to an Indian account Any deposit of royalty funds made by the Secretary to an Indian account which is not made by the date required under section 1714 of this title must include an interest charge computed at the rate applicable under section 6621 of title 26 . (e) Nonliability of States for Secretary’s failure to comply with the Emergency Petroleum Allocation Act of 1973 or regulations under it Even if another law says otherwise, no State will be assessed for any interest or penalties found to be due against the Secretary for failure to comply with the Emergency Petroleum Allocation Act of 1973 [ 15 U.S.C. 751 et seq.] or regulation of the Secretary of Energy under it concerning crude oil certification or pricing for crude oil taken by the Secretary in kind as royalty. Any State share of an overcharge, resulting from that failure to comply, must be assessed against moneys found to be due and owing to that State as a result of audits of royalty accounts for transactions which took place before January 12, 1983 , except that if after the completion of that audits, sufficient moneys have not been found due and owing to any State, the State must be assessed the balance of that State’s share of the overcharge. (f) Limitation on interest charged Interest must be charged under this section only for the number of days a payment is late. (g) Omitted (h) Estimated payment A lessee or its designee may make a payment for the approximate amount of royalties (hereinafter in this subsection “estimated payment”) that would otherwise be due for that lease by the date royalties are due for that lease. When an estimated payment is made, actual royalties are payable at the end of the month following the month in which the estimated payment is made. If the estimated payment was less than the amount of actual royalties due, interest is owed on the underpaid amount. If the lessee or its designee makes a payment for that actual royalties, the lessee or its designee may apply the estimated payment to future royalties. Any estimated payment may be adjusted, recouped, or reinstated at any time by the lessee or its designee. (i) Volume allocation of oil and gas production (1) Except as otherwise provided by this subsection— (A) a lessee or its designee of a lease in a unit or communitization agreement which contains only Federal leases with the it royalty rate and funds distribution must report and pay royalties on oil and gas production for each production month based on the actual volume of production sold by or on behalf of that lessee; (B) a lessee or its designee of a lease in any other unit or communitization agreement must report and pay royalties on oil and gas production for each production month based on the volume of oil and gas produced from that agreement and allocated to the lease under the terms of the agreement; and (C) a lessee or its designee of a lease that is not contained in a unit or communitization agreement must report and pay royalties on oil and gas production for each production month based on the actual volume of production sold by or on behalf of that lessee. (2) This subsection applies only to requirements for reporting and paying royalties. Nothing in this subsection is intended to alter a lessee’s liability for royalties on oil or gas production based on the share of production allocated to the lease under the terms of the lease, a unit or communitization agreement, or any other agreement. (3) For any unit or communitization agreement if all lessees contractually agree to an alternative method of royalty reporting and payment, the lessees may submit that alternative method to the Secretary or the delegated State for approval and make payments under that approved alternative method so long as that alternative method does not reduce the amount of the royalty obligation. (4) The Secretary or the delegated State must grant an exception from the reporting and payment requirements for marginal properties by allowing for any calendar year or portion of it royalties to be paid each month based on the volume of production sold. Interest must not accrue on the difference for the entire calendar year or portion of it between the amount of oil and gas actually sold and the share of production allocated to the lease until the beginning of the month following that calendar year or portion of it. Any additional royalties due or overpaid royalties and associated interest must be paid, refunded, or credited within six months after the end of each calendar year in which royalties are paid based on volumes of production sold. For the purpose of this subsection, the term “marginal property” means a lease that produces on average the combined equivalent of less than 15 barrels of oil per well per day or 90 thousand cubic feet of gas per well per day, or a combination of it, determined by dividing the average daily production of crude oil and natural gas from producing wells on that lease by the number of that wells, unless the Secretary, together with the State concerned, determines that a different production is more appropriate. (5) Not later than two years after August 13, 1996 , the Secretary must issue any appropriate demand for all outstanding royalty payment disputes regarding who is required to report and pay royalties on production from units and communitization agreements outstanding on August 13, 1996 , and collect royalty amounts owed on that production. (j) Production allocation The Secretary must issue all determinations of allocations of production for units and communitization agreements within 120 days of a request for determination. Until the Secretary issues the determination, the lessee or its designee of a lease in a unit or communitization agreement must report and pay royalties on oil and gas production for each production month under the terms of the proposed allocation of production for the unit or communitization agreement. After the Secretary issues the determination, the lessee or its designee shall, as necessary, correct that reports and the amount of royalties paid on oil and gas production under the unit or communitization agreement by by the end of the third month following the month in which the lessee or its designee receives the determination from the Secretary. Subject to the full and timely monthly payment of royalties to all parties under the terms of the proposed allocation of production for the unit or communitization agreement, the Secretary must waive interest due on obligations subject to the determination until the end of the third month following the month in which the lessee or its designee receives the determination from the Secretary. This subsection must not apply to unit or communization agreements containing Indian lands.