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Current Mms Royalty Valuation Issues and Trends

J. Berry St. John, Jr., Oil and Gas Operations in Federal and Coastal Waters (1989)

This paper discusses the Minerals Management Service's (“MMS”) 1988 royalty valuation guidelines and amendments, beginning with a history of the federal government's royalty collection efforts and ending with an analysis of various aspects of the MMS' new gas royalty valuation regulations.1 It also addresses other significant royalty related issues, including jurisdiction over appeals from final decisions of the Department of the Interior and the limitations period on royalty refund claims imposed in Section 10 of the Outer Continental Shelf Lands Act (“OCSLA”).2

II. Historical overview.

The Minerals Management Service (“MMS”) was established as a sub-agency of the United States Department of the Interior by a Secretarial Order issued in January 1982.3 Simultaneously, the Conservation Division of the United States Geological Survey (“USGS”) — another agency of the Department of the Interior — was abolished, and all of its functions were transferred to the newly created MMS. Included among these functions was the responsibility for collecting mineral revenues from federal and Indian lands and disbursing those revenues either to the federal treasury, to certain onshore states because of their entitlement to a portion of the revenues generated from federal lands within their jurisdictions, or to Indian lessors, depending on the nature of the lands involved.4