Determination, Calculation and Audit of Federal Royalties: Standards, Procedures and Practice

Statutory Authority to Conduct Audits.

The United States Department of the Interior has the legal authority (and the legal obligation) to audit the lease accounts for federal oil and gas and coal leases issued pursuant to the Mineral Leasing Act of 1920 and the Minerals Leasing Act for Acquired Lands in order to ensure that all royalties due and payable to the United States have been properly and timely paid.1

The United States Department of the Interior also has the legal authority (and the legal obligation) to audit the lease accounts for oil and gas and coal leases issued pursuant to the Allotted Indian Lands Leasing Act of 1909 and the Unallotted Indian Lands Leasing Act of 1938 in order to ensure that all royalties due and payable to Indian allottees or Indian tribes have been properly and timely paid.2 The Department of the Interior also has the authority to audit Indian oil and gas and coal leases issued pursuant to statutes other than the 1909 and 1938 Acts in order to ensure that royalties on such leases have been properly and timely paid.3

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Where federal or Indian oil and gas leases (as opposed to federal or Indian coal leases) are involved, the Department of the Interior has the independent authority, pursuant to the Federal Oil and Gas Royalty Management Act of 1982 (“FOGRMA”), to audit federal, tribal and allotted oil and