30 U.S.C. § 188 — Failure to comply with provisions of lease

(a) Forfeiture: A federal court can cancel a lease if the lessee breaks any rule in this chapter, the lease itself, or the general regulations that were in effect when the lease was issued. The government does this through a formal case in the U.S. district court where the leased land sits. The lease can also include its own ways to settle disputes or fix a broken promise about specific conditions. (b) Cancellation: For leases issued after August 21, 1935, under section 226, the Secretary of the Interior can cancel the lease by giving 30 days' notice, if the lessee breaks any lease rule — unless the lease already has a well that can produce oil or gas in paying amounts, or unless it's part of an approved unit or cooperative plan with such a well. The Secretary sends the notice by registered mail to the lessee's address on file. If that letter comes back undelivered, the Secretary must also post the notice for 30 days at the local land office (or the nearest post office if there is no land office). But there's also an automatic rule: if a lessee misses paying rent by the lease's anniversary date, and there's no well producing oil or gas in paying amounts, the lease ends automatically — no court case or cancellation notice needed. Exception: if the payment deadline falls on a day the payment office is closed, paying on the next business day still counts as on time. Also, the lease will not automatically end over a rent shortfall if: (1) the shortfall is small ("nominal," as defined by Secretary regulation), or (2) the payment matched the acreage figure stated in the lease or in an official decision, and that figure turns out to be wrong — unless (i) a new lease had already been issued before May 12, 1970, or (ii) the lessee fails to pay the shortfall after being sent a deficiency notice. (c) Reinstatement: If a lease ended automatically because rent wasn't paid by the anniversary date, but the lessee paid or offered to pay within 20 days after that, the Secretary of the Interior may reinstate the lease — if satisfied the missed payment was excusable or wasn't due to the lessee's carelessness. To reinstate: (1) the lessee must file a petition and pay all rent owed, including back rent since termination; and (2) no valid new lease can already have been issued for that land before the petition was filed. The Secretary must hold off issuing any new lease for the land for a reasonable time set by regulation. If reinstating the lease wouldn't give the lessee a fair chance to keep operating, the Secretary may extend the lease term, but: (A) the extension can't be longer than the time between when the lessee knew (or should have known) about the termination and when the Secretary grants the petition; (B) it can't be longer than what was left on the original lease term when it ended; and (C) if reinstatement happens after the original term already expired, the lease can be extended starting from the date the Secretary grants the petition. (d) Additional grounds for reinstatement: (1) For oil and gas leases issued under section 226(b) or (c), or under the Mineral Leasing Act for Acquired Lands, if the lease ended automatically for missed rent, and the rent wasn't paid within 20 days, the Secretary may still reinstate it — either because the missed payment was excusable or not careless, or (no matter how late the payment came) because the Secretary finds the failure was simply an accident ("inadvertent"). If reinstated, the lease resumes for whatever time was left in its term, and continues as long as oil or gas keeps being produced in paying amounts. If reinstatement happens after the term expired, or won't give the lessee a fair chance to operate, the Secretary may extend the lease — but never more than two years from when reinstatement is granted, plus however long oil or gas keeps being produced in paying amounts after that. (2) A lease can only be reinstated under this subsection if a reinstatement petition (with back rent and royalty) is filed in time: (A) for leases that ended on or before August 8, 2005, the deadline is the earlier of 60 days after the lessee got notice of termination, or 15 months after termination; (B) for leases that end after August 8, 2005, the deadline is the earlier of 60 days after receiving the Secretary's certified-mail notice, or 24 months after termination. (e) Conditions for reinstatement: Reinstating a lease under (d) requires: (1) no valid lease already issued for the land before the petition was filed — though after getting a petition, the Secretary must hold off issuing a new lease for a reasonable time; (2) the lessee pays back rent, and the reinstated lease must require future rent of at least $20 per acre per year (for section 226(b) leases) or at least $5 per acre per year (for section 226(c) leases); (3)(A) for 226(b) leases, the lessee pays back royalties and the reinstated lease requires future royalty of at least 16⅔ percent, on a sliding scale by average well production, set at least 4 percentage points above the going competitive-lease royalty rate — and royalty must be paid on everything produced or sold since the original lease ended; (B) for 226(c) leases, the lessee pays back royalties and the reinstated lease requires future royalty of at least 16⅔ percent, again covering everything produced or sold since termination; and (4) the Secretary must publish notice of the planned reinstatement — its terms and conditions — in the Federal Register at least 30 days before it happens, and send a copy plus details on rental, royalty, and production to the House Natural Resources Committee and Senate Energy and Natural Resources Committee at least 30 days before, too. The lessee must reimburse the Secretary up to $500 for administrative costs, plus the cost of the Federal Register notice. (f) Issuance of noncompetitive oil and gas lease; conditions: If someone had an unpatented oil placer mining claim, validly located before February 24, 1920, that is or was capable of producing oil or gas, and it was deemed abandoned because required filings under 43 U.S.C. § 1744 weren't made on time, and the Secretary is satisfied the failure was accidental, excusable, or not due to carelessness, the Secretary may issue a noncompetitive oil and gas lease for that land, effective from the date the claim was deemed abandoned. This is conditioned on: (1) a petition, with required rent and royalty including back amounts since abandonment, filed within 120 days after January 12, 1983 (for claims already abandoned by then) or within 120 days after the final ruling on abandonment (for later claims); (2) no valid lease already existing for that land when the petition is filed — the Secretary must hold new leases for a reasonable time after a petition is filed; (3) the lease requiring rent, including back rent since abandonment, of at least $5 per acre per year; (4) the lease requiring royalty on everything produced or sold, including since the abandonment date, of at least 12½ percent; and (5) the same notice-and-cost-reimbursement rules from (e)(4). (g) Treatment of leases: (1) Unless stated otherwise, a reinstated lease is treated the same way — competitive or noncompetitive — as the original lease issued under section 226(b) or (c). (2) A lease issued to replace an abandoned patented oil placer mining claim is treated as a noncompetitive lease under section 226(c). (3) Any lease issued under section 223 can be reinstated under the same rules as section 226(c) leases, except that once reinstated it lasts 20 years and continues as long as oil or gas is produced in paying amounts. (4) Any lease issued under section 223 that is renewed on or after November 15, 1990, automatically lasts 20 years and continues as long as oil or gas is produced in paying amounts. (h) Statutory provisions applicable to leases: The minimum-royalty rule in section 226(m) and the rules in section 209 also apply to leases issued under subsections (d) and (f). (i) Royalty reductions: (1) When deciding a petition for a noncompetitive lease under (f), or a later request, the Secretary may lower the royalty rate if that's fair, or if economic or other hardship could otherwise cause production to end early. (2) When deciding a reinstatement petition under (d), or a later request, the Secretary may lower the royalty on all or part of the reinstated lease if: hardship could end production early; or a written government action was a major reason the lessee spent money developing the property after rent was already overdue; or the Secretary otherwise finds it fair. (j) Discretion of Secretary: If, in the Secretary's judgment, drilling was actively underway on the last day of the lease's primary term, and the lessee would have qualified for an extension under section 226-1(d) except for not paying rent, the Secretary may reinstate the lease anyway — as long as the conditions referred to in the statute's subparagraphs (1) and (2) are met.