[Code of Federal Regulations]
[Title 25, Volume 1]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 25CFR226]

[Page 714-715]
 
                            TITLE 25--INDIANS
 
     CHAPTER I--BUREAU OF INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR
 
PART 226_LEASING OF OSAGE RESERVATION LANDS FOR OIL AND GAS MINING
--Table of Contents
 
Sec.  226.11  Royalty payments.

    (a) Royalty on oil--(1) Royalty rate. Lessee shall pay or cause to 
be paid to the Superintendent, as royalty, the sum of not less than 
16\2/3\ percent of the gross proceeds from sales after deducting the oil 
used by Lessee for development and operation purposes on the lease: 
Provided, That when the quantity of oil taken from all the producing 
wells on any quarter-section or fraction thereof, according to the 
public survey, during any calendar month is sufficient to average one 
hundred or more barrels per active producing well per day the royalty on 
such oil shall be not less than 20 percent. The Osage Tribal Council 
may, upon presentation of justifiable economic evidence by Lessee, agree 
to a revised royalty rate subject to approval by the Superintendent, 
applicable to additional oil produced from a lease or leases by enhanced 
recovery methods, which rate shall not be less than 12\1/2\ percent of 
the gross proceeds from sale of oil produced by enhanced recovery 
processes, other than gas injection, after deducting the oil used by 
Lessee for development and operating purposes on the lease or leases.
    (2) Unless the Osage Tribal Council, with approval of the Secretary, 
shall elect to take the royalty in kind, payment is owing at the time of 
sale or removal of the oil, except where payments are made on division 
orders, and settlement shall be based on the actual selling price, but 
at not less than the highest posted price by a major purchaser (as 
defined in Sec.  226.1(h)) in Osage County, Oklahoma, who purchases 
production from Osage oil leases.
    (3) Royalty in kind. Should Lessor, with approval of the Secretary, 
elect to take the royalty in kind, Lessee shall furnish free storage for 
royalty oil for a period not to exceed 60 days from date of production 
after notice of such election.
    (b) Royalty on gas--(1) Oil lease. All casinghead gas shall belong 
to the oil Lessee subject to any rights under existing gas leases. All 
casinghead gas removed from the lease from which it is produced shall be 
metered unless otherwise approved by the Superintendent and be subject 
to a royalty of not less than 16\2/3\ percent of the market value of the 
gas and all products extracted therefrom, less a reasonable allowance 
for manufacture or processing. If an oil Lessee supplies casinghead gas 
produced from one lease for operation and/or development of other 
leases, either his/hers or others, a royalty of not less than 16\2/3\ 
percent shall be paid on the market value of all casinghead gas so used. 
All casinghead gas not utilized by the oil Lessee may, with the approval 
of the Superintendent, be utilized or sold by the gas Lessee, subject to 
the prescribed royalty of not less than 16\2/3\ percent of the market 
value.
    (2) Gas lease. Lessee shall pay a royalty of not less than 16\2/3\ 
percent of the market value value of all natural gas and products 
extracted therefrom produced and sold from his lease. Natural gas used 
in the reasonable and prudent operation and development of said lease 
shall be exempted from royalty payment.
    (3) Combination oil and gas lease. Lessee shall pay royalty as 
provided in paragraphs (b)(1) and (2) of this section.
    (c) Minimum royalty. In no event shall the royalty paid from 
producing leases during any year be less than an amount equal to the 
annual rental specified for the lease. Any underpayment of minimum 
royalty shall be due and payable within 45 days following the end of the 
lease year. After the primary term, Lessee shall submit with his payment 
evidence that the lease is producing in paying quantities. The 
Superintendent is authorized to determine whether the lease is actually 
producing in paying quantities or has terminated for lack of such 
production. Payment for any underpayment not made within the time 
specified shall be subject to a late charge at the rate of not less than 
1\1/2\

[[Page 715]]

percent per month for each month or fraction thereof until paid.

[39 FR 22254, June 21, 1974, as amended at 43 FR 8136, Feb. 28, 1978; 43 
FR 11815, Mar. 22, 1978. Redesignated at 47 FR 13327, Mar. 30, 1982, as 
amended at 55 FR 33114, Aug. 14, 1990; 59 FR 22104, Apr. 28, 1994]