[Federal Register Volume 60, Number 9 (Friday, January 13, 1995)]
[Rules and Regulations]
[Pages 3085-3087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-854]



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DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Part 218

RIN 1010-AB40


Regulations Governing Recoupment of Overpayments on Indian 
Mineral Leases

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule.

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SUMMARY: The Minerals Management Service (MMS) is amending its Royalty 
Management Program regulations to codify longstanding policy with 
respect to recoupment of overpayments made by lessees and other payors 
on Indian mineral leases. The established policy is that recoupments 
cannot exceed 50 percent of the reported revenues in the current month 
on an allotted lease or 100 percent of the reported revenues in the 
current month on a tribal lease.

EFFECTIVE DATE: February 13, 1995.

FOR FURTHER INFORMATION CONTACT:
David S. Guzy, Chief, Rules and Procedures Staff at (303) 231-3432, FAX 
(303) 231-3194.

SUPPLEMENTARY INFORMATION: The principal author of this final rule is 
Marvin D. Shaver of the Royalty Management Program, Rules and 
Procedures Staff, Lakewood, Colorado.

I. Background

    In the Notice of Proposed Rulemaking (55 FR 3232, January 31, 
1990), MMS described the current policy regarding recoupment of 
overpayments made by lessees and other payors on Indian mineral leases. 
As stated in the proposed rule, royalty payments on production from 
mineral leases are a major source of income to many Indian allottees 
and tribes and, for some allottees, the only source.
    The current policy permits lessees and payors to recoup 
overpayments as a credit against future rental or royalty accruals due 
to Indian tribes or allottees. Lessees and operators were instructed to 
follow the recoupment policy in ``Notice to Lessees and Operators of 
Indian Oil and Gas Leases No. 1A'' (NTL-1A), issued by the Conservation 
Division of the U.S. Geological Survey in 1977. Section IX of NTL-1A 
provided that in the case of tribal leases the credit must be against 
the same lease or, with approval of the tribe, against amounts due 
under other tribal leases. In the case of allotted leases, such credits 
were limited to the lease on which the overpayments were made with 
recovery of the overpayment prorated over a period of time necessary to 
prevent an allottee's current monthly revenue being reduced by more 
than 50 percent. This recoupment policy was adopted by MMS and 
instructions were included in Volume II of the MMS ``Oil and Gas Payor 
Handbook'' by Addendum No. 12, effective December 1, 1983. Also, 
instructions were included in the revised MMS ``Oil and Gas Payor 
Handbook'' issued in December 1986 (Section 3.7, ``Reporting Indian 
Overpayment Recoupments''). The instructions are also included in the 
MMS ``AFS Payor Handbook--Solid Minerals'' issued in September 1984 
(Chapter 5, ``Recoupments on Indian Leases''). These payor handbooks 
have been provided to all royalty payors on Federal and Indian leases 
for specific guidance with respect to reporting requirements on oil and 
gas and solid mineral leases.
    MMS published in the Federal Register revised final oil and gas 
product valuation regulations at 30 CFR Part 206 on January 15, 1988, 
effective March 1, 1988 (53 FR 1184 and 53 FR 1230). Paragraph 
206.150(e)(2) of the revised regulations terminated NTL-1A. However, 
MMS' policy and procedure remained in the payor handbooks.
    Although the Indian lease overpayment recoupment policy has been 
the same for many years, MMS has determined that its regulations should 
state the policy. Consequently, MMS published the January 31, 1990, 
proposed rulemaking to codify the policy and procedure. In response to 
the proposed rule, MMS received comments from four lessees/payors and 
other interested parties. All of these comments were considered in the 
final rule and are discussed in Section II below. The final rule is 
summarized in Section III below.
[[Page 3086]]

II. Comments Received on Proposed Rule

    The proposed rule provided for a 30-day public comment period, 
which ended March 2, 1990. Four commenters (three industry and one 
Indian representative) submitted comments during the comment period 
which are addressed in this section.
    Comment: The Indian representative objected to the proposed 
requirement that BIA approval be obtained before lessees and payors 
could recoup more than 50 percent of the monthly reported revenues on 
an individual allotted lease. This objection was based on the 
commenter's opinion that BIA is ill-equipped to make an independent 
determination of the propriety of any claimed overpayment. Because 
there is an obvious adverse impact on allottees subject to recoupment, 
this commenter recommended that the final rule require prior 
consultation and concurrence of the affected allottee regarding 
requests from lessees and payors to recoup more than 50 percent of 
reported revenues in an individual month.
    Response: MMS agrees with the commenter's recommendation with 
respect to affected Indian allottees. However, in many situations, it 
may be impractical to obtain concurrence for more than a 50 percent 
recoupment from all affected Indians in a timely manner. Therefore, the 
final regulation was changed and no longer provides for such an 
exception to the 50 percent recoupment limitation on allotted leases.
    Comment: One industry commenter agreed with the proposed recoupment 
procedure and in general with the proposed limitation. However, the 
commenter expressed concern regarding the need for expeditious handling 
of requests for recoupments in excess of the limitation. The commenter 
emphasized that it was important that the request for any recoupment 
above the limitation be processed timely, unless interest could be 
recovered by the lessee on the overpayment.
    Response: Since the final regulation no longer provides for 
recoupments in excess of the limitations, expeditious handling of such 
requests is a moot point. In regard to interest on overpayments, MMS 
does not have legal authority to pay interest on overpayments made by 
lessees and payors.
    Comment: Another industry commenter agreed that MMS regulations 
should establish the recoupment policy. However, this commenter 
questioned the necessity for the requirement that written permission be 
obtained from a tribe before overpayments made on one lease could be 
recouped from a different tribal lease. In this commenter's opinion, a 
lessee or payor should be able to take a credit and recoup any 
overpayment against any and all of its producing leases with that tribe 
without requiring that tribe's approval, because the tribe's revenue is 
generally not limited to a single lease.
    Response: Royalty payments on production from mineral leases are a 
major source of income to many tribes. When a lessee or payor can 
recoup an overpayment against payments due on all producing tribal 
leases without permission, the tribe cannot plan the distribution of 
royalty revenues with reasonable accuracy.
    In order that the tribe may plan for decreases in royalty revenues, 
MMS has determined that a payor must obtain written permission from the 
tribe to recoup overpayments made on one tribal lease from a different 
tribal lease. Paragraphs 218.53(b) and 218.203(b) of the final rule 
require that the payor provide MMS with a copy of the tribe's written 
permission in accordance with instructions provided in the ``Oil and 
Gas Payor Handbook'' and the ``AFS Payor Handbook--Solid Minerals''.
    Comment: A different industry commenter who was in general support 
of the proposed rule stated that a strict application of the policy 
may, in some cases, be inequitable. For example, if a lessee or payor 
is required to make a payment to an Indian allottee on a Bill for 
Collection that is under appeal and the lessee or payor prevails on the 
appeal, the lessee/payor may not be able to recoup if the company is no 
longer the payor on the lease or the level of production on the lease 
has declined to a point where recoupment is not an adequate remedy. In 
this commenter's opinion, it would not be good policy in these 
situations to allow an allottee to keep the payment and prevent the 
lessee from otherwise obtaining a refund. The commenter recommended 
that the final rule allow lessees to obtain a cash refund when 
recoupment is an inadequate remedy.
    Response: MMS recognizes the merit of this commenter's concerns. 
However, this situation can be avoided if the payor, in accordance with 
30 CFR 243.2, elects to post a surety pending a decision on the appeal 
rather than submitting payment. If the appellant prevails on its 
appeal, the surety would be returned and recoupment or refund of a 
payment would not be necessary. If the payor elects to submit payment 
and is not able to recoup the payment, MMS does not have legal 
authority to refund the payment from general funds, but can seek a 
special congressional appropriation for the amount of any refund due to 
the payor.
    Comment: One industry commenter state that any rulemaking that 
would deny or delay recovery of any overpayment, other than under a 
strict statute of limitations imposed equitably on both the Indian(s) 
and lessee, would be a violation of Executive Order 12630, ``Government 
Actions and Interference with Constitutionally Protected Property 
Rights.''
    Response: A continuing payor with sufficient recoupable balances 
would not be denied recoupment of any overpayment under the proposed or 
final rule. MMS has determined that the procedures set forth in the 
proposed or final rule do not violate E.O. 12630.

III. Summary of Final Rule

    This final rulemaking codifies MMS' longstanding policy with 
respect to recoupment of overpayments made by lessees and other royalty 
payors on Indian mineral leases by the addition of new sections at 30 
CFR 218.53 (previously reserved) and 30 CFR 218.203. Overpayments 
subject to recoupment under the adopted rule include all payments made 
in excess of the required payment for royalty, rental, bonus, or other 
amounts owed as specified by statute, regulation, order, or terms of an 
Indian mineral lease.
    The final rule permits lessees and payors to recoup overpayments as 
credits against reported revenues due to Indian tribes or allottees in 
the current month on the same lease. Specifically, the final rule 
allows recoupment of overpayments not to exceed 50 percent of reported 
revenues in that month on an allotted lease or 100 percent of the 
reported revenues in that month on a tribal lease. A payor may recoup 
an overpayment made on one tribal lease from a different tribal lease 
only if written permission is authorized by tribal statute or 
resolution.
    The final rule also provides that MMS may issue an order to a payor 
prohibiting recoupment of any amount for a reasonable period of time as 
MMS may need to review the nature and amount of any overpayment. 
Situations may arise in which a payor believes it has made an 
overpayment and is entitled to recoup the overpaid amount. However, the 
payor in fact may not have overpaid, and should not be allowed to 
recoup since recoupments reduce the Indian lessor's expected revenues. 
The authority in paragraph (d) of both Sec. 218.53 and Sec. 218.203 
allows MMS to prevent the payor from taking the recoupment until the 
fact that the payor has overpaid and the amount of the 
[[Page 3087]] overpayment have been reviewed. MMS expects to use this 
authority only in limited circumstances, such as when there is 
information suggesting there has been no overpayment, or where the 
proposed recoupment would be extraordinarily large and result in 
reduced revenues for a long period of time to the Indian lessor.

IV. Procedural Matters

The Regulatory Flexibility Act

    The Department certifies that this rule will not have a significant 
economic effect on a substantial number of small entities under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
    The rule is needed to conform regulations to existing policy and 
practice.

Executive Order 12630

    The Department certifies that the rule does not represent a 
governmental action capable of interference with constitutionally 
protected property rights. Thus, a Takings Implication Assessment need 
not be prepared under Executive Order 12630, ``Government Action and 
Interference with Constitutionally protected Property Rights.''

Executive Order 12778

    The Department has certified to the Office of Management and Budget 
that these final regulations meet the applicable standards provided in 
sections 2(a) and 2(b)(2) of Executive Order 12778.

Executive Order 12866

    This document has been reviewed under Executive Order 12866 and is 
not a significant regulatory action.

Paperwork Reduction Act of 1980

    The collections of information contained in this rule have been 
approved by the Office of Management and Budget under 44 U.S.C. 3501 et 
seq. and assigned clearance number 1010-0022.

National Environmental Policy Act of 1969

    We have determined that this rulemaking is not a major Federal 
action significantly affecting the quality of the human environment, 
and a detailed statement under section 102(2)(C) of the National 
Environmental Policy Act of 1969 [42 U.S.C. 4332(2)(C)] is not 
required.

List of Subjects in 30 CFR Part 218

    Coal, Continental shelf, Electronic funds transfers, Geothermal 
energy, Government contracts, Indian lands, Mineral royalties, Natural 
gas, Penalties, Petroleum, Public lands-mineral resources, Reporting 
and recordkeeping requirements.

    Dated: November 28, 1994.
Bob Armstrong,
Assistant Secretary--Land and Minerals Management.

    For the reasons set out in the preamble, 30 CFR part 218 is amended 
as set forth below:

PART 218--COLLECTION OF ROYALTIES, RENTALS, BONUSES AND OTHER 
MONIES DUE THE FEDERAL GOVERNMENT

    1. The authority citation for Part 218 continues to read as 
follows:

    Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq., 396a et 
seq., 25 U.S.C. 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., and 1801 et seq.

    2. Section 218.53 (previously reserved) under Subpart B (Oil and 
Gas, General) is added to read as follows:


Sec. 218.53  Recoupment of overpayments on Indian mineral leases.

    (a) Whenever an overpayment is made under an Indian oil and gas 
lease, a payor may recoup the overpayment through a recoupment on Form 
MMS-2014 against the current month's royalties or other revenues owed 
on the same lease. However, for any month a payor may not recoup more 
than 50 percent of the royalties or other revenues owed in that month 
under an individual allotted lease or more than 100 percent of the 
royalties or other revenues owed in that month under a tribal lease.
    (b) With written permission authorized by tribal statute or 
resolution, a payor may recoup an overpayment against royalties or 
other revenues owed in that month under other leases for which that 
tribe is the lessor. A copy of the tribe's written permission must be 
furnished to MMS pursuant to instructions for reporting recoupments in 
the MMS ``Oil and Gas Payor Handbook.'' See 30 CFR 210.53. Recouping 
overpayments on one allotted lease from royalties paid to another 
allotted lease is specifically prohibited.
    (c) Overpayments subject to recoupment under this section include 
all payments made in excess of the required payment for royalty, 
rental, bonus, or other amounts owed as specified by statute, 
regulation, order, or terms of an Indian mineral lease.
    (d) The MMS Director or his/her designee may order any payor to not 
recoup any amount for such reasonable period of time as may be 
necessary for MMS to review the nature and amount of any claimed 
overpayment.
    3. A new Sec. 218.203 under Subpart E (Solid Minerals, General) is 
added to read as follows:


Sec. 218.203  Recoupment of overpayments on Indian mineral leases.

    (a) Whenever an overpayment is made under an Indian solid mineral 
lease, a payor may recoup the overpayment through a recoupment on Form 
MMS-2014 against the current month's royalties or other revenues owed 
on the same lease. However, for any month a payor may not recoup more 
than 50 percent of the royalties or other revenues owed in that month 
under an individual allotted lease or more than 100 percent of the 
royalties or other revenues owed in that month under a tribal lease.
    (b) With written permission authorized by tribal statute or 
resolution, a payor may recoup an overpayment against royalties or 
other revenues owed in that month under other leases for which that 
tribe is the lessor. A copy of the tribe's written permission must be 
furnished to MMS pursuant to instructions for reporting recoupments in 
the ``AFS Payor Handbook--Solid Minerals.'' See 30 CFR 210.204. 
Recouping overpayments on one allotted lease from royalties paid to 
another allotted lease is specifically prohibited.
    (c) Overpayments subject to recoupment under this section include 
all payments made in excess of the required payment for royalty, 
rental, bonus, or other amounts owed as specified by statute, 
regulation, order, or terms of an Indian mineral lease.
    (d) The MMS Director or his/her designee may order any payor to not 
recoup any amount for such reasonable period of time as may be 
necessary for MMS to review the nature and amount of any claimed 
overpayment.

[FR Doc. 95-854 Filed 1-12-95; 8:45 am]
BILLING CODE 4310-MR-M