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Around the Regulations in 50 Minutes - a Practical Application of the Federal and Indian Oil & Gas Valuation Regulations

Judith M. Matlock, Deborah Gibbs Tschudy, Federal and Indian Oil & Gas Royalty Valuation and Management

A. For over 80 years, the Department of the Interior has administered an oil and gas leasing program for Federal and Indian lands. Responsibilities are divided among Department agencies between lease and revenue collection management. States and local governments in most cases share 50 percent of the leasing revenue, depending on land category and location. Indian Tribes and individual Indian mineral owners (allottees) receive 100 percent of revenues derived from their lands.

B. Royalty payments are based on production volume, the value of the product, and the lease royalty rate. Certain factors can complicate royalty calculations. Nonproducing Federal and all Indian oil and gas leases require that rentals be paid once a year on or before the anniversary date of the lease.

C. The Minerals Management Service (MMS) is the Federal Agency within the Department of the Interior that is responsible for: (1) offshore leasing and operations and (2) collection and disbursement of mineral revenues paid on Federal and Indian oil and gas, coal, and other mineral leases onshore and for leases on the Outer Continental Shelf (OCS).

1. The Offshore Minerals Management (OMM) Program is responsible for offshore leasing and associated operational functions such as approving permits for drilling and production operations, production verification, and onsite inspection and