[Federal Register Volume 64, Number 35 (Tuesday, February 23, 1999)]
[Notices]
[Pages 8835-8843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4371]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
Agency Information Collection Activities: Submitted for Office of
Management and Budget Review; Comment Request
AGENCY: Minerals Management Service, DOI.
ACTION: Notice of information collection solicitation and public
meetings.
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SUMMARY: Under the Paperwork Reduction Act of 1995, the Minerals
Management Service (MMS) is soliciting comments on revising an existing
information collection, Report of Sales and Royalty Remittance, the
Office of Management and Budget (OMB) Control Number 1010-0022, which
expires on August 31, 2001.
FORM: MMS-2014.
DATES: Written comments should be received on or before April 26, 1999.
MMS will hold two public meetings about the proposed royalty reporting
changes on March 11, 1999, in Houston, Texas, and on March 17, 1999, in
Lakewood, Colorado.
ADDRESSES: Comments sent via the U.S. Postal Service should be sent to
Minerals Management Service, Royalty Management Program, Rules and
Publications Staff, P.O. Box 25165, MS 3021, Denver, Colorado 80225-
0165; courier address is Building 85, Room A613, Denver Federal Center,
Denver, Colorado 80225; e-mail address is RMP.comments@mms.gov. The
time and location for each public meeting is:
Houston--March 11, 1999, 8:30-11:30 a.m. Central Standard Time, Houston
Compliance Division Office, 4141 North Sam Houston Parkway East,
Houston, Texas 77032, Telephone Number (281) 987-6802
Denver--March 17, 1999, 8:30-11:30 a.m. Mountain Standard Time,
Minerals Management Service, Denver Federal Center, Building 85, West
6th Avenue and Kipling Street, Lakewood, Colorado 80215, Telephone
Number (303) 231-3585
[[Page 8836]]
(Access to the Denver Federal Center will require the presentation of a
picture identification.)
FOR FURTHER INFORMATION CONTACT: Paula Neuroth, Reports Branch, at
phone number (303) 231-3287, FAX number (303) 231-3700, or e-mail at
Paula.Neuroth@mms.gov.
SUPPLEMENTARY INFORMATION: We are seeking your comments, both positive
and negative, on our proposed changes to Form MMS-2014. Do you have, or
are you able to obtain access to, the information needed to report the
data element (all data elements are described below)? If not, from what
other source could the Royalty Management Program (RMP) obtain the
data? Is it appropriate to collect the proposed data via the revised
Form MMS-2014, or should we collect by other means (realizing that this
may mean a new information collection)? Are there other data elements
that RMP should collect in lieu of the proposed data elements? Will
collecting other data elements better enable us to meet our three goals
stated in this Notice? Is this information collection necessary for us
to properly do our job? Can we enhance the quality, utility, and
clarity of the information we collect? Can we lessen the information
collection burden on the respondents by using automated collection
techniques or other forms of information technology?
The public meetings will be open to the public to discuss the
proposed reporting changes. We encourage members of the public to
attend these meetings. Those wishing to make formal presentations
should sign up upon arrival. The sign-up sheet will determine the order
of speakers. For building security measures, each person will be
required to sign in and may be required to present a picture
identification.
Comments, including names and home addresses of respondents, are
available for public review during regular business hours and are
placed on our web site at http://www.rmp.mms.gov/library/readroom/
readrm.htm. Individual respondents may request that we withhold their
home address from the rulemaking record, which we will honor to the
extent allowable by law. There may be circumstances in which we would
withhold from the rulemaking record a respondent's identity, as
allowable by the law. If you wish us to withhold your name and/or
address, you must state this prominently at the beginning of your
comment. However, we will not consider anonymous comments. We will make
all submissions from organizations or businesses, and from individuals
identifying themselves as representatives or officials of organizations
or businesses, available for public inspection in their entirety.
In April 1996, RMP undertook a compliance reengineering initiative
to examine the current compliance strategy and determine the best
approach for accomplishing future goals and objectives. The principal
reengineering objective was to define and implement a new compliance
strategy that satisfied, in the most cost-effective manner possible,
the compliance program's primary purpose of ensuring that Federal and
Indian mineral lease revenues were accurately and timely paid.
The Royalty Policy Committee (RPC), which includes representatives
from industry, States, Indian Tribal and allottee groups, and MMS,
issued recommendations in June 1996 to streamline both royalty and
production reporting. An action plan was developed to implement many of
the recommendations; however, in August 1996, the Federal Oil and Gas
Royalty Simplification and Fairness Act of 1996 (RSFA), was enacted
into law. RSFA significantly changed many of RMP's historical operating
assumptions as well as some fundamental Federal oil and gas mineral
revenue financial activities. Although near-term changes in processes
and systems were made to implement the law, long-term strategies,
business processes and aging systems needed to be addressed for RMP to
be cost-effective and responsive to customer needs. The decision was
made April 1, 1997, to expand reengineering to all RMP core business
processes. This is the most comprehensive review of the RMP's business
processes and organization since its creation in 1982. As part of its
reengineering effort, RMP analyzed current information collection
requirements of the Form MMS-2014, and built upon the RPC's earlier
recommendations. Is the information we collect necessary and how do we
use it? Will it support reengineered business processes? Can we obtain
or utilize the information we collect more efficiently? Are changes
necessary to better support reengineered business processes?
There are several reasons why we conduct information collections:
To fulfill our obligation of disbursement and
distribution of funds to the ultimate recipients as quickly as
possible;
To comply with FOGRMA, Explanation of Payments (EOP)
requirements. FOGRMA, Section 105(a) requires RMP to provide to
revenue recipients along with payments: a description of the type of
payment being made, the period covered by such payment, the source
of such payment, production amounts, the royalty rate, unit value
and such other information as may be agreed upon by the Secretary
and the recipient State, Indian tribe, or Indian allottee. The Form
MMS-2014 is the source of the information; and
To collect sufficient and appropriate information to
assist RMP in the compliance and asset management process which is
dependent upon the accuracy and usefulness of the Form MMS-2014
data. The compliance and asset management process will ensure that
all revenues, whether they are received through in-kind or in-value
royalties, are accurately reported and paid and that the compliance
status of all leases is known within a reasonable time.
As a result of our analysis, we developed and incorporated revised
reporting requirements in the proposed Form MMS-2014 which will reduce
the volume of lines reported and processed, minimize errors and related
error correction workloads, simplify reporting and lower costs for both
industry and RMP. The proposal incorporates RPC recommendations, and
input received from States, Indian Tribes, and other industry groups.
We plan to implement this proposal, or, a modified proposal based upon
your comments, by September 2001.
We are seeking your comments on the proposed revisions presented
and described below related to reporting for Federal and Indian oil,
gas, and geothermal leases. These include revisions to reporting
concepts, specific proposed Form MMS-2014 data elements, agreement
level reporting, report format and presentation, paperless reporting,
and reporting burden.
Reporting Concepts
1. Elimination of the Form MMS-4025, Payor Information Form (PIF), OMB
Control Number 1010-0033
The RPC recommended that RMP simplify the current form, reduce the
frequency of submissions, and explore alternatives to the PIF. RMP has
performed extensive analysis of the alternatives and believes that in a
reengineered system the PIF can be eliminated.
Each year, industry prepares and submits over 23,000 PIF's which
identify the type of payment to be reported (rent, minimum royalty,
royalty, etc.) and establish the specific lease, revenue source,
product(s), and selling arrangements a payor will report on the Form
MMS-2014.
PIFs are frequently not submitted timely or are prepared
incorrectly. Additionally, the data actually reported on the Form MMS-
2014 does not always correspond to the PIF
[[Page 8837]]
information, causing lines to reject. In fact, this is the principal
reason for rejected Form MMS-2014 lines. Industry and RMP personnel
spend many hours researching and correcting these rejected lines.
RMP is proposing that in lieu of the PIF, payors report the MMS
converted lease and agreement number on the Form MMS-2014. The MMS has
an existing unique numbering system to accommodate the Bureau of Land
Management (BLM) and the Bureau of Indian Affairs (BIA) assigned
numbers. Reporting of the MMS lease and agreement number eliminates the
need for a PIF to establish the relationship of the payor to a revenue
source. Payors will obtain the converted lease and agreement numbers
via the Internet or by contacting RMP.
All other data that was established via the PIF, including product
code(s), start and end dates, and rent and minimum royalty
responsibility will now be established via the Form MMS-2014. RMP will
use the reported sales month, payment type (royalty, rent, minimum
royalty, etc), and product code to populate our data base.
This change allows RMP to eliminate a major industry reporting
burden, reduces costs for RMP and industry, and significantly reduces
the number of rejected Form MMS-2014 lines while enabling RMP to
disburse and distribute funds to the recipients more efficiently.
2. Product Valuation
RMP believes automating product valuation monitoring, i.e.,
identifying reporting that appears to be outside RMP established
tolerances, is the best way to efficiently and effectively improve the
compliance and asset management process. We need sales data reported at
a level of detail that does not mix volumes and values to mask true
exceptions or generate erroneous exceptions. All MMS valuation
regulations are based on the principle that arm's-length sales
represent value. Arm's length is defined in 30 CFR 201.101 and 30 CFR
206.151 as a contract or agreement that has been arrived at in the
market place between independent, nonaffiliated persons with opposing
economic interests regarding that contract. Therefore, RMP must be
able, at a minimum, to distinguish arm's-length sales from sales that
are not arm's length.
Additionally, combining different types of contracts, such as
percentage-of-proceeds, with other sales occurring during the month
would skew the product value. Therefore, RMP will require payors to
report separate lines of royalty detail based upon the nature of the
sale (arm's length/non-arm's length) and the contract type. RMP will
establish a code for each criteria. We will publish these codes in the
appropriate payor handbooks. Multiple sales occurring during a month,
but within a single criteria, will be reported as one line on the Form
MMS-2014. We do not believe this requirement will increase the number
of lines a payors must report. Most payors will not have sales from
more than one contract type occurring in the same sales month on a
lease. The proposed criteria are:
Arm's-length spot contract
Non-arm's-length spot contract
RMP defines a spot contract as a contract where the price under
the contract is tied to a 30 day spot market price such as a bid-
week index price, bid-week spot price or an after bid-week (after
market) spot price. Normally, a spot contract is for a period of 30
days or less.
Arm's-length long term contract
Non-arm's-length long term contract
RMP defines a long term contract as a contract where the price
under the contract is tied to something other than a 30-day spot
market price or a negotiated fixed price such as a NYMEX futures
forward month price. Normally, a long term contract is for a period
greater than 30 days.
Arm's-length percentage-of-proceeds (POP) contract
Non arm's-length percentage-of-proceeds contract
RMP defines a POP contract as a contract for the sales of gas
prior to processing in which the value of the wet, unprocessed gas
is based on a percentage of the proceeds the purchaser receives for
the sale of residue gas and gas plant products attributable to
processing the lessee's gas.
Obtaining data at this level of detail will enable RMP to focus our
efforts on true valuation problems and avoid unnecessary requests to
industry for additional data.
3. Reporting Adjustments.
Between 40 and 60 percent of the total monthly lines reported by
industry are adjustments to previously reported data. Currently, when a
payor submits amended data, they must reverse the entire original line
and report a new line incorporating the amended data. This practice
requires both RMP and industry to maintain detail monitoring of the
``last line'' reported and accounts for a large number of the lines
reported by industry and processed by RMP.
As recommended by RPC, RMP is proposing that the reporting of prior
period adjustments be on a ``net'' basis. Net basis is defined as the
incremental positive or negative volume/value change for a line of
reporting. The original line would not be reversed. Only a single line
entry to report the change in volume/value would be required. However,
a two-line adjustment would be required if any of the original key data
elements such as lease number, agreement number, product code, or sales
month were incorrect. RMP estimates that this change will reduce the
number of Form MMS-2014 lines by 700,000 to 1.0 million lines annually.
4. Transportation and Processing Allowance Deductions
The current process requires reporting of volumes and values on one
line, transportation allowance deductions on a second line, and
processing allowance deductions on a third line of the Form MMS-2014.
This doubles and triples reporting of key data elements.
As recommended by the RPC, RMP is proposing that transportation and
processing allowance deductions be reported on the same line as volumes
and values. Reporting of key data elements only once for all related
transactions can be accomplished by adding fields to the Form MMS-2014.
RMP anticipates that this will reduce the number of Form MMS-2014 lines
reported, processed, and verified by approximately 875,000 a year. It
will also streamline and improve the accuracy of the payor's initial
reporting of allowances by automatically assigning the deductions to
the associated royalty value.
Form MMS-2014 Data Elements
RMP is seeking your comments on the proposed Form MMS-2014 data
elements. Each of the proposed Form MMS-2014 data elements is explained
below and is identified as required or not required. A brief
explanation of the data and how it will be used is also provided.
1. Payor Name
Required. This identifies company/individual submitting the report.
MMS uses the payor name to match to an existing payor code or to
contact the company if the payor code is blank or invalid.
2. Payor Code
Required. This uniquely identifies the entity submitting the
report. It also links to the payor address and company contact
information in RMP's system.
3. Indian Report Indicator
Required. Is used to indicate that all lines on the report are for
Indian leases. If not checked, report is assumed to be Federal. Indian
and Federal leases cannot be reported on the same Form MMS-2014.
[[Page 8838]]
4. Payor Assigned Document Number
Required. A unique identifier assigned by the payor to both the
report and the associated payment. Used by RMP system to automatically
match a receivable (Form MMS-2014 or Bill/Order) to the associated
payment. This data element has been expanded to an 8 place alpha/
numeric field (no slashes, dashes, or special characters).
5. Line Number
Required. Used to sequentially number each line on the report.
6. Reserved for Payor's Use
Not Required. Can be used by the payor to enter their property
identifier. RMP will process this data and store it in our system as
part of the royalty line. It serves as a communication tool with the
payor.
7. MMS Lease Number
Required. This is the MMS-assigned lease number, not the Agency
Assigned (BLM, BIA, MMS's Offshore Minerals Management) lease number.
RMP is required by FOGRMA to display the ``source of the payment''
(lease number) on the EOP which is provided to States and Indians. The
lease number will be used in conjunction with the agreement number in
Column 9 as a replacement for the current revenue source code. The
lease number also drives the disbursement process.
8. API Well Number
Not Required. RMP is not requiring monthly well level reporting.
The API well number will only be reported in two specific cases, but
only if MMS instructs the payor to do so. These cases are:
When Indian Tribes elect to opt out of an index zone as
proposed in the new Indian gas valuation rule; and
When certain Outer Continental Shelf royalty rate
relief initiatives are implemented.
9. MMS Agreement Number
Required in those cases where royalties are being reported for
sales attributable to unit or communitization agreement production.
Must be blank if sales are being reported for lease level production.
This eliminates the need to report a revenue source code. Instead, RMP
will use the reported lease or lease and agreement number to compare
sales volumes reported on the Form MMS-2014 to sold or transferred
volumes reported on the monthly Oil and Gas Operations Report (OGOR).
10. Product Code
Required. Identifies the product on which royalties are calculated.
RMP is required to provide this on the EOP. This information is used in
many aspects of the royalty management process. RMP anticipates adding
new product codes for the following:
Geothermal--electrical generation, kilowatthours
Geothermal--electrical generation, thousands of pounds
Geothermal--electrical generation, millions of Btu's
Geothermal--electrical generation, other
Geothermal--direct utilization, millions of Btu's
Geothermal--direct utilization, hundreds of gallons
Geothermal--direct utilization, other
Coalbed methane
11. API Gravity
Required if reported product code is 01-oil; 02-condensate; 13-fuel
oil; 14-oil lost. Used in valuation monitoring.
12. Valuation Code
Required. This data field will be used to identify contract type
and nature of disposition (arm's-length or non arm's-length) for
Federal and Indian oil, gas, and geothermal leases. RMP has determined
that this information is needed to effectively and timely identify and
resolve product valuation issues. Payors will be able to roll up sales
within each Valuation Code criteria on a lease and report a single
line. Sales occurring across criteria will require separate lines of
reporting.
13. Sales Month/Year
Required. RMP must collect this information for the EOP and it is
used in all RMP downstream verification processes.
14. Transaction Code
Required. RMP must collect this information for use on the EOP. It
is a key element in the royalty edit process, identifying for the MMS
system what data elements and relationships to expect on the line and
what activity is being reported (rent/ royalty/ recoupment/ etc.).
15. Adjustment Reason Code
Used to report a variety of adjustments and, in some cases,
original line entries. Required field if:
A line is an adjustment to data previously reported or,
A line is a RSFA marginal property ``true-up'' line or,
The payor is self-reporting interest or,
The payor is reporting Indian major portion.
It also is used in the calculation of interest as it relates to the
above items. RMP will reduce the number of adjustment reason codes, but
has determined that maintaining a separate adjustment reason code
provides needed functionality and flexibility.
16. Sales Volume
Required. The volume reported in this field is the MCF, barrels,
gallons, long tons, kilowatt-hours, thousands of pounds, and hundreds
of gallons on which the Indian/Federal royalty is calculated. Gas sales
are reported at a standard temperature of 60 degrees Fahrenheit and
14.73 psia. Calculation of Sales Volume will be determined differently
for entitlement versus takes reporting and for sales attributable to
agreement production versus sales attributable to lease level
production. RSFA provides the foundation for entitlements and takes
requirements.
Entitlement Calculation
Sales attributable to agreement production:
Total agreement sales volume x Lease allocation percentage x Lease
Federal or Indian mineral interest x Working interest owner
percentage x Indian direct pay percentage (if applicable).
Sales attributable to lease production:
Lease sales x Lease Federal or Indian mineral interest x Working
interest owner percentage x Indian direct pay percentage (if
applicable).
Takes Calculation
Calculation for takes reporting will be defined by RMP through
reporting instruction.
RMP must collect this information for use on the EOP. RMP will use
this field to compare sales volumes reported on the Form MMS-2014 to
sold or transferred volumes reported on the OGOR. It will also be used
in conjunction with column 17 to calculate the Btu content for gas
products.
17. Gas MMBtu Sales Volume
Required if the reported product code is:
03--processed (residue) gas,
04--unprocessed (wet) gas,
12--flash gas,
15--fuel gas, or
16--gas lost (flared or vented).
The MMBtu sales volume is calculated using the same formula as
Column 16. RMP will use columns 16 and 17 to calculate the Btu content
on gas products. MMBtu (MCF x 1000) = Btu/cf.
[[Page 8839]]
18. Royalty Rate
Required. Payors will report the royalty rate they used to
calculate the Federal/Indian royalty due. RMP must collect this
information for use on the EOP.
19. Unit Price
Required. This is the sales value divided by sales volume (MCF or
MMBtu depending on the terms of the sales contract, tons, barrels,
gallons, pounds, or kilowatt-hours). RMP must collect this information
for use on the EOP. The MMS understands that this price will not
directly relate to a specific contract because in most cases it will
represent a weighted average price of many sales occurring during the
sales month. Additionally, MMS has no plans or legal authority to force
arm's-length payors with lower reported unit prices, paying on Federal
leases to ``true-up'' to higher reported unit prices by other lessees
in the field or area.
20. Royalty Value Prior to Allowances
Required. This is the royalty amount due prior to any allowable
deductions for transportation or processing. Depending on the product
reported, this value will be calculated using the following formula.
Oil, condensate, CO2, gas plant products, helium,
sulfur, nitrogen, and geothermal products:
Column 16 x Column 18 x Column 19 = Column 20
Processed gas, unprocessed gas, flash gas, fuel gas, gas lost:
Column 17 x Column 18 x Column 19 = Column 20
Column 20 will be in $/Mcf of $/MMBtu depending on whether column
16 or 17 is used.
21. Transportation Deduction
Required if the payor is reducing the Royalty Value Prior to
Allowances for the actual costs of transporting the product from the
lease to a sales point or processing plant off the lease. This amount
is deducted from Column 20 to determine the Royalty Value Less
Allowances due on the line.
22. Processing Deduction
Required if the payor is reducing the Royalty Value Prior to
Allowances for the actual costs of processing the product. This is the
amount claimed for processing gas prior to the royalty sales point.
This amount is deducted from Column 20 to determine the Royalty Value
Less Allowances due on the line.
23. Royalty Value Less Allowances
Required. This is the net payment applicable to the line. Royalty
Value Prior to Allowances (Column 20) less amounts deducted for
transportation (Column 21) and processing (Column 22), if any, equals
Royalty Value Less Allowances.
24. Payment Method
Required. A unique payment method will identify royalty-in-kind
transactions, as well as payments made directly to an Indian allottee,
Indian lockbox, or MMS.
Report Control Block
This block is used to identify the payor's net payment. The payor
will show the report total less Royalty In-Kind, Indian Direct Pay, and
Indian Lockbox amounts. If applicable, the payor will also be able to
identify and use credits that reside in RMP's system to offset the
payment amount due on the current Form MMS-2014. Credits are created in
RMP's system through a variety of actions such as interest exception
processing which calculates interest owed to a payor. RMP has
determined that it is more efficient to authorize the use of these
credits to pay current obligations than to process refunds to the
payor.
Agreement Level Reporting
Is it advantageous to require royalty reporting at the
communitization or unitization participating area (agreement) level?
Payors would report one line for the agreement showing total volumes,
allowances and values applicable to the Federal/Indian leases. RMP
would allocate each payor's reported volumes, allowances, and values to
all leases in the agreement based on the allocation schedule in our
system. Agreement level reporting:
Results in fewer reporting lines from industry,
Eliminates the need for RMP to roll-up Form MMS-2014
reported volumes for comparison to sold/transferred volumes reported
on the Oil and Gas Operations Report,
Supports and simplifies marginal property RSFA
requirements,
Requires RMP to roll-down reported information to the
lease for distribution to the States and Indians,
Results in RMP allocating each payor's volumes,
allowances, and values to all leases in the agreement even though
the payor may not have an interest in all leases in the agreement,
Does not support designee/designor requirements of
RSFA,
Eliminates lease level sales and allowance detail
information that might be useful in the compliance verification
processes,
Requires RMP to maintain and store data at the original
Form MMS-2014 agreement level and at the lease level,
Complicates monitoring of Indian over-payments and
recoupments (recoupments can only be taken against the specific
Indian lease where the overpayment occurred).
Report Format and Presentation
Included in this Notice are two proposed Form MMS-2014 formats.
Attachment A is an 8\1/2\ x 11 inch portrait form. Attachment B is an
8\1/2\ x 14 inch landscape form. The data elements on both versions
are the same. We are seeking your comments on which version you prefer
and why.
Paperless Reporting
To assist industry in reporting, RMP offers a wide range of
electronic reporting options including:
Electronic Data Interchange (EDI) (ANSIX12)
Form MMS-2014 Template Software
Comma Separated Values (CSV)
ASCII
The reports can be transmitted using EDI, e-Mail, tape or diskette.
Specifics including edit specifications, template software, record
layouts, and implementation information are all provided at no cost to
industry. The time required for a company to draw data from its own
files, enter a line of data, and generate the electronic report is
significantly less that the time needed for a company to manually
complete the line on a paper Form MMS-2014. Additionally the report
does not require re-keying when received by RMP. We require most payors
to report electronically.
Reporting Burden
RMP believes the overall reporting burden will be decreased by
these proposed reporting changes, and we specifically invite your
comments regarding this expected decrease in reporting burden. The
current estimated time to manually complete one line on the Form MMS-
2014 is 7 minutes. This time includes data assembly, value and royalty
calculations, entering data on the form, and mailing. The total time
involved varies considerably from a small company reporting only one or
two leases to a large company reporting many leases. For those
companies who report electronically, the time to generate and submit
the data is estimated to be 2 minutes per line. MMS estimates that the
proposed changes in reporting requirements will reduce the total number
of lines currently reported on the Form MMS-2014, however, the
reporting burden per line, either manually or electronically reported,
[[Page 8840]]
may increase. Furthermore, elimination of the PIF eliminates industry's
burden for preparing this form which is currently estimated at 50
minutes per submission for approximately 23,000 submissions a year.
Dated: February 12, 1999.
Lucy Querques Denett,
Associate Director for Royalty Management.
BILLING CODE 4310-MR-P
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[FR Doc. 99-4371 Filed 2-22-99; 8:45 am]
BILLING CODE 4310-MR-C
