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NTL
No. 98-5N |
Effective Date: April 1, 1998
|
Notice
to Lessees and Operators (NTL) of Federal Oil, Gas,
and Sulphur Leases in the Outer Continental Shelf
Application and
Audit Fees for Requests
Royalty Relief or Adjustment Under 30 CFR Part 203
(NOTE: NTL 98-5N
is also available for download in Adobe's Portable Document Format (PDF)
.)
This Notice to Lessees (NTL) replaces NTL No. 96-3N and
details information on fees for royalty relief or adjustment applications and possible
audits, as well as when and how you make payments to the Minerals Management Service
(MMS). We will periodically update the fees to reflect changes in costs as well as provide
information needed for administering the royalty relief program.
Operators on the Federal Outer Continental Shelf (OCS) who
apply for reductions, suspensions, or change of royalty or net profit share on their oil
and gas leases must obtain approval from the MMS (30 CFR part 203). The OCS Deep Water
Royalty Relief Act (Public Law 104-58 (DWRRA)) clarified and expanded the Secretary of the
Interior's authority in 43 U.S.C. 1337(a)(3) to reduce royalty rates on existing leases in
order to promote development, increase production, and encourage production of marginal
resources on producing or nonproducing leases. The DWRRA provision applies only to leases
in water at least 200 meters deep in the Gulf of Mexico west of 87 degrees, 30 minutes
west longitude.
The omnibus Appropriations Bill (PL. 104-134, 110 Stat.
13221, April 26, 1996) specifically authorized collection of fees. It provides:
That beginning in fiscal year 1996 and thereafter, fees for
royalty rate relief applications shall be established (and revised as needed) in Notices
to Lessees, and shall be credited to this account in the program areas performing the
function, and remain available until expended for the costs of administering the royalty
rate relief authorized by 43 U.S.C. 1337(a)(3).
There are six types of applications/assessment requests.
Different fees apply to the various categories initially. Some applicants will be eligible
for significant refunds if we reject their deepwater relief applications as incomplete
within the first 20 business days after receipt. A supplemental fee will be charged if,
during the review period, we either initiate an audit or identify the need for an audit.
Those applicants who choose to submit a draft application for deepwater royalty relief
(i.e., a nonbinding assessment request) will pay less than those submitting a complete
application, because we will not perform a completeness review.
Paperwork Reduction Act Statement : Any collection
of information that we mention in this NTL provides clarification, description, or
interpretation of requirements contained in 30 CFR part 203. The Office of Management and
Budget has approved our collection of information required by these regulations and
assigned OMB Control Number 1010-0071. This NTL does not impose additional information
collection requirements that would be subject to the Paperwork Reduction Act of 1995.
The following instructions do not supersede, but are
supplemental to, the procedures for royalty relief to increase production and for
pre-enactment deepwater leases specified in regulations at 30 CFR part 203 (63 FR 2605,
dated January 16, 1998).
I. TYPES OF APPLICATIONS
Q. What types of royalty relief
applications are available under the DWRRA?
A. There are five different categories:
(1) pre-Act relief -- an initial request for a volume
suspension on a deepwater lease or unit on a field that did not produce before November
28, 1995;
(2) redetermination of royalty relief -- a
request for a redetermination of our findings before start of new production if one of
three changes specified in the rule occurs;
(3) expansion project -- a request for a volume suspension
on a producing deepwater lease or unit proposing development in a supplemental Development
Operations Coordination Document (DOCD) approved after November 28, 1995, that will expand
production significantly beyond the level anticipated in an earlier DOCD;
(4) nonbinding assessment for pre-Act relief -- a draft
request for a nonbinding assessment for a volume suspension on a deepwater lease or unit
on a field that did not produce before November 25, 1995; and
(5) abbreviated application -- a request to add a pre-Act
lease to a field with an approved volume suspension.
Q. What other type of royalty relief is available
under the regulations?
A. MMS provides end-of-life relief to marginal
producing leases anywhere on the OCS. Royalties are halved when lessees can show they have
inadequate revenues to continue production. Special case requests to adjust royalty terms
to increase ultimate recovery of the resources on the lease may also be considered.
II. FEES
Q. How much do I have to pay to
apply for MMS to evaluate my royalty relief request?
A. It depends on the type of
application. The following table lists the application fees by category of relief:
Fees to Cover Cost of Processing Royalty Relief Requests * |
Type of
Request/Audit |
Request
Fee |
Audit Fee |
Pre-Act relief -- No audit |
$34,000 |
$37,500 |
Redetermination of relief finding |
$16,000 |
$37,500 |
Expansion project |
$19,500 |
$18,750 |
Assessment for pre-Act relief |
$28,500 |
0 |
A Nonbinding abbreviated
application to add a lease to a field with an approved volume suspension |
$1,000 |
0 |
End-of-life relief for marginal
leases |
$8,000 |
$12,500 |
* MMS will periodically
update these fees to reflect changes in costs for processing requests.
Q. Under what conditions do I pay a
fee?
A. You must pay an application fee
when you file for royalty relief or request a nonbinding assessment or royalty adjustment.
You will also pay an audit fee if we notify you that we will conduct an audit during the
application evaluation process or if we notify you at approval of relief that we will
conduct a later audit.
Q. How do I pay an application fee?
A. You must submit the appropriate
fee by an Automated Clearing House (ACH) payment to MMS for settlement on or before the
day you file your application for royalty relief or your request for a nonbinding
assessment. You must file your royalty relief application or your nonbinding assessment
request with the MMS Regional Director of the OCS Region where the lease(s) are located.
Contact the OCS Regional Office for wiring instructions.
Q. If my application is rejected,
do I get a refund?
A. Ordinarily, no refund is given when we reject an
application. The one exception applies to the first three categories of deepwater royalty
relief listed above. If we reject these applications for incompleteness during the first
20 business days after receiving the application, then we will refund all but $5,500 of
the initial application fee. We will attempt to get any missing information from the
applicants before rejecting an application as incomplete.
Q. What circumstances would trigger the need to
perform an audit?
A. We may initiate an audit or identify the need to
conduct an audit during the evaluation period, if we determine that additional
information, clarification, or interpretation could materially affect our decision to
grant royalty relief. We expect that, in most cases, audits will be completed during the
evaluation period. Applications may be audited when: significant historical costs are
claimed, there appear to be inconsistencies in the data, or the economic viability of the
field approaches the qualification threshold.
Q. How do I pay an audit fee?
A. When we notify you that an audit will be
performed, you will be sent an invoice. You must pay the invoice on or before the due date
by an ACH payment to MMS.
This NTL is also on the MMS worldwide website at
http://www.mms. gov.
Carolita U. Kallaur
Associate Director for Offshore Energy and Minerals Management
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