[Federal Register Volume 59, Number 144 (Thursday, July 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18395]
[Federal Register: July 28, 1994]
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DEPARTMENT OF THE INTERIOR
Minerals Management Service
30 CFR Part 230
RIN 1010-AB90
Offsets, Recoupments and Refunds of Excess Payments of Royalties,
Rentals, Bonuses, or Other Amounts Under Federal Offshore Mineral
Leases
AGENCY: Minerals Management Service, Interior.
ACTION: Final rule.
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SUMMARY: The Royalty Management Program of the Minerals Management
Service (MMS) is amending its regulations establishing procedures for
obtaining refunds and credits of excess payments made under Federal
mineral leases on the Outer Continental Shelf (OCS) which are subject
to section 10 of the Outer Continental Shelf Lands Act of 1953 (OCSLA
section 10). The rules also describe the circumstances in which a
person may recover certain payments that are not subject to section
10's requirements.
EFFECTIVE DATE: August 29, 1994.
FOR FURTHER INFORMATION CONTACT:
David S. Guzy, Chief, Rules and Procedures Staff, at (303) 231-3432.
SUPPLEMENTARY INFORMATION: The principal authors of this proposed rule
are Paul A. Knueven, Technical Compliance Branch, Division of
Verification, Royalty Management Program, MMS, Lakewood, Colorado, and
Peter J. Schaumberg, Office of the Solicitor, Washington, DC.
I. Background
Excess payments of royalties, rentals, bonuses, or other amounts
made under OCS mineral leases result from a variety of reasons
(discussed in detail in the preamble to the Notice of Proposed
Rulemaking (NOPR) at 58 FR 53470-53471, October 15, 1993). Section
10(a) requires that a request for refund or credit of an excess payment
made in connection with any lease issued under that Act be filed with
the Secretary of the Interior (Secretary) within 2 years after making
the payment. Section 10(b) requires that all refunds or credits which
the Secretary proposes to approve be reported to Congress, and that the
Secretary wait at least 30 days while Congress is in continuous session
before making a refund payment or authorizing a credit. Any repayment
made pursuant to the Act must be without interest.
The purpose of these regulations is to codify the Department's
interpretation and application of section 10, incorporating the
policies and decisions from the various legal opinions, administrative
decisions, and administrative practice which are discussed in detail in
the preamble to the NOPR.
II. Comments on Proposed Rule
The proposed rulemaking (58 FR 53470, October 15, 1993) provided
for a 60-day public comment period, which ended December 14, 1993.
Eleven commenters submitted written comments during this period. The
principal comments are addressed in this section.
General Comments
(a) Several commenters requested that MMS revisit the reasoning and
legal arguments contained in the 1981 M-opinion Refunds and Credits
Under the Outer Continental Shelf Lands Act M-36942, 88 I.D. 1091
(December 15, 1981) (``1981 M-Opinion''). One commenter proposed that
MMS not permit offsetting as a means to recover an overpayment for one
production month to the extent underpayments exist on the same lease
for another month. Another commenter requested MMS to reconsider the
operation of the 2-year period for requesting refund or credit,
suggesting it could start later than the date of payment in specific
circumstances. This same commenter also suggested that section 10
should be construed to apply only to refunds, with credit adjustments
not subject to section 10's limitation.
Response: MMS disagrees with these comments. The 1981 M-Opinion,
and a second M-Opinion, Applicability of section 10 of the Outer
Continental Shelf Lands Act, M-36977 (Jan. 15, 1993) (``1993 M-
Opinion''), reflect the Department's interpretation of section 10's
requirements. The Department is not convinced that its legal view is
wrong. Therefore, the purpose of the rulemaking is to codify the
Department's existing interpretation and application of section 10.
(b) A commenter suggested that the regulations should require the
Government to act on a refund request within 90 days. Absent such
action the lessee should automatically be authorized to process a
credit adjustment.
Response: Section 10 is specific in the procedures that must be
followed for approval of a refund or credit. Unless those preconditions
are satisfied, MMS does not have the legal authority to allow a refund
or credit to be processed. The MMS has recognized the obvious
importance of approving refund requests quickly by changing procedures
to expedite the process. For example, the purpose of approval subject
to audit at Sec. 230.455 is to eliminate the audit time delay required
for recoupment authorizations. Such audits will still be required for
certain cash refunds.
(c) Several commenters stated that MMS should make any new rules
prospective, with an effective date on or after the date of
publication.
Response: With one exception, the rulemaking codifies the
Department's current interpretation and application of section 10. That
exception is Sec. 230.458(b), which imposes an assessment of $500 for
each unauthorized credit adjustment. This assessment will apply only to
transactions filed after the effective date of the regulations.
Specific Comments
(a) Most of the commenters objected to the inclusion of the
definition of audit in Sec. 230.452. These comments questioned the need
to define a term that is used so little in the body of the regulations.
One commenter pointed out that the word ``audit'' appears only three
times in the rule (except in a section heading), and then only in
conjunction with the word ``review.'' Accordingly, it is suggested that
the definition adds nothing to the comprehension of the regulations.
Response: MMS agrees with the comments and the definition of audit
has been removed from the final regulations.
(b) Several commenters objected to the provisions of
Sec. 230.453(a)(3) which require MMS notification to the lessee that
its request for refund or credit is authorized before a recoupment can
be filed. Once MMS reviews the request, transmits it to Congress and
the Congressional review period is satisfied, these commenters argue
that they should be permitted to recoup. These commenters claim MMS is
exceeding its authority by conditioning the lessee's right to a timely
filed legitimate credit or refund on the receipt of a notice from the
MMS.
Response: MMS disagrees with these comments. First, it is the
Government's responsibility to assure that the technical requirements
of section 10, including the 30-day congressional review period, have
been satisfied before a recoupment is effected. Second, the requirement
for MMS to give final approval allows for proper control. After MMS
approves a recoupment, then it will know that when a credit adjustment
appears on a Form MMS-2014, that credit adjustment is authorized.
Further, there may be circumstances where a request for refund or
credit is approved, but MMS may not allow the recoupment to be
effected. MMS recently proposed rules related to administrative offset
and to credit adjustments generally (58 FR 43582, August 17, 1993).
There may be circumstances where a lessee owes money to MMS and MMS
would want to retain the otherwise approved request for refund or
credit as an offset. Thus, recoupments will not be permitted until MMS
provides approval.
(c) Several commenters objected to the requirements of
Sec. 230.453(b)(5) that lessees certify the accuracy of the data
submitted in the refund request. One commenter noted that there is no
necessity for the certification since the provisions of the Federal Oil
and Gas Royalty Management Act of 1982 (FOGRMA) already contain
adequate protection of the Federal lessor. According to this commenter,
the certification adds nothing but additional paperwork to the process.
Response: MMS disagrees with these comments. It has been a long
standing practice of MMS to require the certification as a condition of
processing the refund. This is not a new requirement. Most lessees have
long made the certification part of their refund request form letter,
so no additional burden will be imposed by this requirement.
(d) The provisions of Sec. 230.453(c) specifically state that the
submission of a credit adjustment on a Report of Sales and Royalty
Remittance, Form MMS-2014, will not constitute a refund request, or a
partially completed refund request as discussed in Sec. 230.453(c).
Additionally, Sec. 230.459 does not include the filing of a Form MMS-
2014 as a reason the 2-year period of section 10 will be tolled. MMS
requested comment on this issue.
Eight responders offered comments on the status of a Form MMS-2014
as a section 10 refund request and if such filing should toll the 2-
year limit. Four commenters stated that the Form MMS-2014 should toll
the 2-year period since it includes nearly all elements of a properly
completed refund request. Another commenter proposed that the Form MMS-
2014 should serve as a conditional refund request. If during later
audit it was judged valid, MMS should process the request for
congressional review. If invalid, the lessee would be required to repay
the amount of the credit with interest and apply for a refund. When
more than 2 years had passed since making payment, the lessee would be
time-barred from recovering the funds. It was urged that these
procedures would serve as an incentive for lessees to only file credits
in which they had a high level of confidence in their validity.
While noting that tolling the 2-year period by filing a Form MMS-
2014 would not benefit them, the sixth commenter observed that it would
encourage lessees to file unauthorized recoupments on questionable
properties ``just in case.''
The last two commenters noted that most of the unauthorized
recoupments filed in the past resulted from MMS' failure to issue
formal guidance on the application of section 10. They recognized that
this rulemaking resolves that problem, and they see no value to lessees
in the future to toll the 2-year period by filing an unauthorized
credit adjustment. With the publication of these rules, the commenters
stated that lessees will know what adjustments are and are not subject
to section 10.
Response: MMS disagrees with the first four commenters. While Form
MMS-2014 filings contain most of the information required for a refund
request, they do not include the information necessary to constitute a
proper request for refund or credit. Moreover, these credit adjustments
do not request recoupments, instead they effect recoupments and thereby
reduce Government receipts. Section 10 requires MMS and congressional
review before the funds are recovered. The conditional refund request
suggestion also would not meet this requirement.
MMS agrees with the last three commenters. Accepting Form MMS-2014
filing as tolling the 2-year period could increase the submission of
unauthorized credit adjustments and increase review costs.
Additionally, there is no logical reason to toll the section 10 2-year
period by filing a Form MMS-2014 credit adjustment after the rules have
been published.
(e) One commenter questioned the limited refund amendment rights
provided by Sec. 230.453(e)(1). This commenter stated that inadvertent
errors of notation related to the lease or any particular month should
be amendable.
Response: MMS disagrees with this commenter. Permitting exceptions
to the rule in an effort to be fair usually has the opposite effect. In
this case, MMS would be required to judge an ``inadvertent error''
exactly the same in every case, an impossible task. To assure clear
understanding and equal application to all lessees, the rule provides
for no exceptions and will be strictly applied.
(f) Several commenters questioned the approval of refund requests
subject to later audit contained in Sec. 230.455.
Reponse: The purpose of this section is to eliminate the time delay
required to complete an audit prior to the lessee's recovery of the
overpayment (see discussion of general comment (b) above). Without an
analysis of the lessee's records, MMS cannot determine the validity of
the refund request. Accepting refund requests as valid subject to audit
provides the lessees more timely use of funds, and provides for MMS'
recovery in the event the requests were improper.
(g) One commenter stated that MMS should clearly indicate that the
2-year requirement of section 10 does not apply to offsets described at
Sec. 230.456.
Response: Since section 10 does not apply to offsets, the 2-year
requirement of section 10 does not apply.
(h) One commenter stated that MMS should clearly define the word
``intentional'' within the meaning of Sec. 230.456, to protect lessees.
This commenter expressed concern that if this determination were based
upon the subjective judgment of the auditor, offsets would almost
certainly be applied inequitably.
Response: MMS disagrees with this comment. To develop a finding of
intentional underpayment for the purpose of Sec. 230.456, an auditor
would have to demonstrate that the lessee's policy is to recover
overpayments by filing subsequent underpayments. This finding would not
be a subjective audit determination.
(i) Three commenters objected to the provisions of Sec. 230.458(b)
which impose an assessment of $500 for each unauthorized credit
adjustment. Because MMS often discovers the unauthorized recoupment
more than 2 years after payment, one commenter stated that the recovery
of the improperly taken credit with interest already exceeds the actual
amounts required by lease terms. An additional penalty appears harsh to
this commenter. Another commenter argued that if it costs MMS $500 to
research and approve refunds, then all amounts less than that should be
allowed without following Sec. 230.453 procedures. The third commenter
stated that the amount is arbitrary and excessive because unauthorized
recoupments are generally unintentional and are incurred when
attempting to make internal accounting adjustments. Since proposed Form
MMS-2014 line entries must be submitted with a refund request, it is
often necessary and more expedient to process accounting corrections,
allow the MMS-2014 credit lines to be generated, and then eliminate
those credit entries prior to the normal monthly royalty payment. If
the adjustments are numerous or complex, a credit entry may fail to be
pulled, resulting in an inadvertent unauthorized adjustment. This
commenter further argued that the time delays in the process, both
before the overpayment is discovered and after the refund request is
filed and authorization issued, result in the Government receiving the
time value of the funds at the expense of the lessees.
Response: MMS disagrees with these comments. First, the review of
unauthorized recoupments within MMS is now an automated process. Once
these regulations are effective MMS will begin reviewing for such
recoupments on a current basis. The MMS plans to discover unauthorized
recoupments in time for the lessee to file a refund request before the
2-year period after payment has expired. Without the penalty, lessees
will incur no material costs as a consequence of filing an unauthorized
recoupment. In such an environment, some lessees may decide not to
establish internal controls to prevent unauthorized recoupments, but
rely instead on the Government. This reliance would shift the costs
from the lessees and provide protection from the effects of missing the
2-year limit. The MMS would not be properly enforcing section 10 if it
allowed such a result. Moreover, even with the penalty, many lessees
will incur less costs than with the less timely Government review that
has occurred in the past.
The penalty is not established to recover the costs of refund
request processing. Rather, MMS is recovering the costs of review
recoupments and comparing them with approved refunds. Since MMS cannot
determine the effect publishing these rules will have on the rate of
unauthorized recoupments, the cost per incident is not quantifiable.
The concerns of the third commenter related to production and
filing of proposed Forms MMS-2014 being eliminated when the regulations
are effective, since the forms are not required by Sec. 230.453.
(j) One commenter noted that the purpose of Sec. 230.459(a)(3) as
explained in the section-by-section analysis would be better served by
changing the date of tolling from the date of ``application'' for
unitization to the effective date of the unit. The commenter also noted
that unit revisions should be added as covered by this section.
Response: MMS disagrees that the date of tolling should be changed
to the effective date of the unit. As noted in the discussion of this
commenter, the effective date is subject to the judgment of the
Regional Supervisor. In contrast, the date of application is a fixed
event. Unit revisions are included in the operation of
Sec. 230.459(a)(3), as discussed in the proposed rule preamble.
(k) One commenter expressed concern that it may be impossible to
comply with the requirements of Sec. 230.459(a)(4). This section
provides that to toll the 2-year period, lessees must specifically
identify an action or proceeding that could result in payments becoming
excess, the lease(s) and sales months affected, and an estimated of the
amount that could be subject to refund or credit.
Response: When a person becomes aware of a pending administrative
or judicial action, or other action that may affect its royalty
obligation, prudence would require a complete analysis. While MMS
realizes the exact impact may not be determinable, a list of all leases
and sales months within those lease accounts which could possibly be
affected can be compiled. Paragraph (a)(4) of Sec. 230.459 requires
only an estimated dollar impact. The 2-year period for leases and/or
sales months not included in the tolling request will not be tolled.
The purpose of this strict construction is to minimize subjective
judgments in applying section 10 requirements.
(l) Two commenters objected to the provisions of Sec. 230.460 which
repeal the special treatment of advanced rental payments when leases
are later subject to suspensions.
Response: The IBLA rulings discussed with the preamble (58 FR
53474) were issued prior to any regulations governing section 10. These
cases concluded that under the unique fact situations presented, excess
rental payments which otherwise were not subject to refund or credit
under section 10 could be credited against future rentals. Upon review,
MMS still concludes that IBLA's conclusion is not consistent with the
Department's interpretation of section 10. Thus, after this rule is
effective, the IBLA decision will not be followed. However, these cases
are exactly the type of situation envisioned for tolling the 2-year
limit by filing a request pursuant to Sec. 230.459(a)(4).
(m) One commenter questioned the requirement of Sec. 230.461(d)
which disallows the recoupment of a payment amount that exceeds the
reported amount. This commenter stated that if the overpayment is not
subject to section 10, then the payor should not be required to file a
refund request.
Response: In those cases to which Sec. 230.461(d) applies, the
payor may recover its funds without a section 10 refund request. A
payment amount exceeding the total reported for more than one lease is
not a payment ``in connection with any lease.'' (See the detailed
discussion in the 1993 M-Opinion). Such an amount cannot be recouped by
reporting a credit entry for a specific lease since the funds were not
applied to any lease. After the Form MMS-2014 lines are processed,
amounts in excess of the total reported remain as an unapplied credit
in the payor's account. The MMS accountants would then contact the
payor for direction as to how the funds should be applied. In most
cases, the payor could reduce the next payment by an equal amount to
balance its payor account. In other situations, the funds could be
applied to an underpaid invoice or other Forms MMS-2014. If these
situations did not apply, the payor could request a non-section 10 cash
refund as outlined in the MMS ``Oil and Gas Payor Handbook'' (1986),
Volume II, page 4-25.
(n) One commenter stated that the provisions of Sec. 230.461(g),
which would not require a section 10 refund request after a successful
challenge of an MMS order to pay, would be more useful if MMS specifies
how such funds would be recovered.
Response: The overpayments may be recovered as explained in the
response to comment (m).
(o) Seven commenters submitted responses to the proposed de minimis
exception of Sec. 230.461(h). One commenter stated that MMS does not
have authority under the interpretations contained in the 1981 M-
Opinion to establish such a provision. Another commenter stated that
the amount should be set at \1/2\ percent of the normal monthly payment
to be meaningful. No support was received for the alternative of
limiting section 10 refund requests to $100 or more.
The other five commenters supported the de minimis idea, but
suggested the limit be increased from $25 to $100 per payor code per
month.
Response: After considering the comments, MMS has concluded that
instead of a fixed amount for the de minimis exception, MMS will
periodically review the matter and establish a de minimis amount.
Accordingly, the final regulations provide that a limit will be
published periodically in the Federal Register. This limit will be
based on the cost incurred to process a section 10 refund request.
Based on the cost experience for fiscal year 1993, the initial limit is
established at $250. Under these procedures, payors will be able to
file credits for OCS leases totalling less than $250 for each reporting
month, provided the payments subject to adjustment were made within 2
years of the date of the adjustments. Thus, even if a payor used this
exception to avoid section 10's reporting requirements, the most it
could recover for any lease is $6,000 (24 months x $250).
III. Summary of Final Rule
The MMS is adding new regulations at 30 CFR 230.451 through
230.461, which codify MMS' policy regarding the requirements of OCSLA
section 10, 43 U.S.C. 1339. Except for the changes to the rules
discussed above in response to the comments, MMS is adopting the rule
as proposed with some minor working changes. A detailed discussion of
each section is included in the preamble to the proposed rules, 58 FR
53470, explaining the purpose and effect of each section.
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.). There are not many
small entities involved in offshore oil and gas operations.
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.''
Excutive Order 12778
The Department has certified to the Office of Management and Budget
that the rule meets the applicable standards provided in sections 2(a)
and 2(b)(2) of Executive Oder 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
This rule does contain information collection requirements which
have been approved by the Office of Management and Budget as required
by 44 U.S.C. 3501 et seq., and assigned approval number 1010-0094.
National Environment Policy Act of 1969
It is hereby determined that this rulemaking does not constitute a
major Federal action significantly affecting the quality of the human
environment and a detailed statement pursuant to paragraph (2)(C) of
section 102 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 230
Coal, Continental shelf, Electronic Funds transfers, Geothermal
energy, Government contracts, Indian lands, Mineral royalties, Natural
gas, Penalties, Petroleum, Public land--mineral resources, Reporting
and recordkeeping requirements.
Dated: June 24, 1994.
Bob Armstrong,
Assistant Secretary--Land and Minerals Management.
For the reasons set out in the preamble, 30 CFR part 230 is amended
as follows:
PART 230--ROYALTY REFUNDS
1. The authority citation for part 230 is revised to read as
follows:
Authority: 5 U.S.C. 301 et seq.; 25 U.S.C. 396 et seq.; 25
U.S.C. 396a et seq.; 25 U.S.C. 2101 et seq.; 30 U.S.C. 181 et seq.;
30 U.S.C. 351 et seq.; 30 U.S.C. 1001 et seq.; 30 U.S.C. 1701 et
seq.; 31 U.S.C. 3716; 31 U.S.C. 3720A; 31 U.S.C. 9701; 43 U.S.C.
1301 et seq.; 43 U.S.C. 1331 et seq.; and 43 U.S.C. 1801 et seq.
2. A new subpart J is added under part 230 to read as follows:
Subpart J--Refunds and Recoupments of Overpayments Under Federal Leases
on the Outer Continental Shelf; Impementation of Section 10 of the
Outer Continental Shelf Lands Act
Sec.
230.451 Scope.
230.452 Definitions.
230.453 Request for refund or credit.
230.454 Interest on excess payments.
230.455 Authorization of refund or credit and subsequent audit.
230.456 Offsets of overpayment and underpayments on the lease (or
unit) by the same person.
230.457 Offsets among different persons who reported and paid
royalties on a lease for the same prior sales month.
450.458 Unauthorized credit adjustments.
230.549 Stopping or tolling of the section 10(a) 2-year period.
230.460 Lease suspension.
230.461 Transactions not subject to section 10.
Subpart J--Refunds and Recoupments of Overpayments Under Federal
Leases on the Outer Continental Shelf; Implementation of Section 10
of the Outer Continental Shelf Lands Act
Sec. 230.451 Scope.
This subpart establishes the procedures that lessees and other
persons who make royalty and other payments on Federal oil and gas
leases on the Outer Continental Shelf (OCS) must follow to recover
certain excess payments made in connection with their leases in
accordance with section 10 of the Outer Continental Shelf Lands Act
(section 10), 43 U.S.C. 1339. The requirements of this subpart apply to
both requests for refund from the Treasury of excess payments and
requests to recover excess payments by recouping the amount through a
credit adjustment. This subpart applies only to Federal leases on the
OCS.
Sec. 230.452 Definitions.
Terms used in this subpart shall have the same meaning as in 30
U.S.C. 1702. In addition, the following definitions apply to this
subpart:
Credit or crediting means reduction of a current or future royalty
or other payment made in connection with a lease as a result of
reporting a credit adjustment.
Credit Adjustment means any adjustment reported on a Report of
Sales and Royalty Remittance (Form MMS-2014) or any other royalty
report form which reduces any royalty or other payment made in
connection with a lease which was reported and paid in any previous
period.
Offset means to net or cancel previous overpayments against
previous underpayments on the same OCS lease or across lease boundaries
if all the individual leases are part of an approved unit agreement.
Overpayment means any payment made in excess of the amount that the
lessee was lawfully required to pay.
Payment means money MMS receives in satisfaction of a lessee's
royalty, rental, bonus, net profit share, or late payment interest
obligation as established by statute, regulation, or the terms of a
lease.
Recoup or recoupment means to recover a previous overpayment
through a credit against a current or future royalty or other payment
or liability under an OCS lease. A recoupment occurs whenever a payor
reports a credit adjustment on a Form MMS-2014 or other royalty report
form resulting in a net negative dollar value for the transaction and
the credit is taken against the royalty or other payment or liability
shown in the balance of the report.
Refund means a repayment by the United States Treasury to a person
of any overpayment.
Unit means an area of 2 or more leases subject to an agreement for
the consolidated development and recovery of oil and gas contained on
the leases which are part of the agreement approved by MMS.
Sec. 230.453 Request for refund or credit.
(a) Except as otherwise provided in this subpart, no person may
recover an excess payment it has made in connection with an OCS lease
unless:
(1) That person has made a request for refund or credit in
accordance with the provisions of this subpart;
(2) MMS has transmitted a report on the request for refund or
credit to the President of the Senate and the Speaker of the House of
Representatives and 30 days have expired since the submission in
accordance with section 10(b), 43 U.S.C. 1339(b); and
(3) MMS notifies the person that its request for refund or credit
is authorized and that the person may receive its refund for, or may
report a credit adjustment to recoup, the excess payment.
(b) A request for refund or credit must:
(1) Be in writing;
(2) Provide the person's MMS-established payor code;
(3) Identify the leases and sales months with respect to which the
excess payments occurred;
(4) Identify the amount of the excess payment or, with specificity,
describe a class of payments that are, or as a result of an
administrative or judicial decision or other identified contingency,
may become, excess payments;
(5) Provide the reasons why a refund or credit is due;
(6) Include a certification that, to the best of the person's
knowledge or belief, the information provided in response to paragraphs
(b)(2) through (b)(5) of this section is accurate and complete.
(c) If MMS determines that a request for refund or credit is
incomplete, the person who submitted the request will have 30 days, or
such time as MMS may specify, following notice from MMS, to supplement
the request for refund or credit.
(d) A credit adjustment reported on a Form MMS-2014 does not
constitute a request for refund or credit for purposes of this section,
and does not constitute an incomplete request for refund or credit for
purposes of paragraph (c) of this section.
(e) A person who has filed a request for refund or credit pursuant
to this section may amend that request to add an additional amount if:
(1) The additional amount is for the same lease and sales month;
and
(2) The reason for the excess payment for the additional amount is
the same as for the originally requested amount.
(f) Except as otherwise provided in this subpart, no request for a
refund or credit will be approved unless the request is received at MMS
at the address provided below within 2 years of the date that MMS
received the excess payment.
(1) The request for refund or credit must be received at the
following address:
(i) By mail: Minerals Management Service, Section 10 Refund
Requests, P.O. Box 173702, Denver, CO 80217-3702.
(ii) By express delivery or courier: Minerals Management Service,
Section 10 Refund Requests, Building 85, Denver Federal Center, Room A-
212, Denver, CO 80225.
(2) If the last day of the 2-year period from the date MMS received
the excess payment falls on a Saturday, Sunday, holiday or any other
day that MMS is not open for business at the address specified in
paragraph (f)(1) of this section, then the last day of the 2-year
period will be the next regular business day. Requests received at the
specified MMS address after 4 p.m. Mountain Time are considered
received the following business day.
Sec. 230.454 Interest on excess payments.
No person is entitled to interest on any excess payment made in
connection with a lease that is refunded or recouped pursuant to this
subpart.
Sec. 230.455 Authorization of refund or credit and subsequent audit.
MMS may grant a refund or authorize a credit based upon
satisfactory evidence that the payment for which a refund or credit is
requested was made, and upon a determination that the payment was
excess. An approved request for refund or credit may be subject to
later review or audit by MMS. If, based upon later review or audit, MMS
determines that the refund or credit should not have been granted or
authorized, the person who requested the refund or credit must repay
the amount refunded or recouped plus interest determined pursuant to 30
U.S.C. 1721(a) and 30 CFR 218.150 from the date the refund was made or
the recoupment taken until the date it is repaid.
Sec. 230.456 Offsets of overpayments and underpayments on the same
lease (or unit) by the same person.
If a person makes an overpayment on any OCS lease or unit in a
prior month, it may offset that overpayment against an underpayment
that same person made in any prior month on that same lease or unit for
the same or a different product without submitting a request for refund
or credit. This offset is permitted only if the underpayment was not
created as a result of a credit adjustment to recoup the amount of the
overpayment or was not otherwise created intentionally to provide an
underpayment against which to offset the overpayment. This offset also
is subject to any limitations imposed by other applicable law or
regulations.
Sec. 230.457 Offsets among different persons who reported and paid
royalties on a lease for the same prior sales month.
(a) This section applies to any reallocation of production for a
prior sales month among different persons who reported and paid royalty
for that month on a lease or unit, except for reallocations of
production that result from the approval or amendment of a unit
agreement subject to Sec. 230.461(b).
(b) In the event of a reallocation of production as described in
paragraph (a) of this section, the respective persons who reported and
paid royalty may reconcile any resulting differences in royalty payment
obligations between themselves without submitting revised royalty
reports or requests for refund or credit to MMS under this subpart,
except that:
(1) Any person who paid any amount which remains as a net
overpayment after such reconciliation must file a request for refund or
credit in accordance with the requirements of this subpart to recover
the excess payment;
(2) Any person whose royalty obligation remains underpaid after
such reconciliation must report the additional royalties due for the
prior sales month on a Form MMS-2014 and pay interest on the
underpayment from the last day of the month following the sales month
until the date the additional royalties are paid; and
(3) All persons involved in such reconciliation must retain all
documents pertaining to the reallocation of production, calculation of
royalties due, and the subsequent reconciliation among the persons
involved together with other records pertaining to production from that
lease during the prior sales month and the royalty due and paid
thereon, and make such documents available for review and audit in the
same manner as other records pertaining to the lease.
(c) If persons who reported and paid royalty do not reconcile
between themselves any differences in royalty payment obligations
arising as a result of a reallocation as provided in paragraph (b) of
this section, each person who pays royalties for the lease must report
and pay any additional royalties due, or file a request for refund or
credit in accordance with the requirements of this subpart to recover
the excess payment, as applicable. Any person who reports additional
royalties due for the prior sales month must pay interest pursuant to
30 CFR 218.54 on the underpayment from the last day of the month
following the sales month until the date the additional royalties are
paid.
Sec. 230.458 Unauthorized credit adjustments.
(a) If a person reports a credit adjustment on Form MMS-2014 that
results in a credit before MMS approves the recoupment pursuant to
Sec. 230.455, and if the credit adjustment does not qualify as one of
the transactions not subject to section 10 as provided in Sec. 230.461,
then that person has taken an unauthorized credit adjustment.
(1) If the unauthorized credit adjustment recouped a payment that
MMS received more than 2 years before the date MMS received the Form
MMS-2014 which includes the unauthorized credit adjustment, the person
must repay the amount recouped plus late payment interest determined
pursuant to 30 U.S.C. 1721(a) and 30 CFR 218.150 from the date the
unauthorized recoupment was taken until the date it is repaid. Unless
the person filed a request for refund or credit pursuant to
Sec. 230.453 within 2 years of the making of the excess payment for
which the unauthorized credit adjustment was reported, the excess
payment is not subject to refund or recoupment.
(2) If the unauthorized credit adjustment recouped a payment that
MMS received less than 2 years before the date MMS received the Form
MMS-2014 with the unauthorized credit adjustment, the person must repay
the amount recouped plus late payment interest determined pursuant to
30 U.S.C. 1721(a) and 30 CFR 218.150 from the date the unauthorized
recoupment was taken until the date it is repaid. The report of the
unauthorized credit adjustment on the Form MMS-2014 does not constitute
a request for refund or credit that tolls the 2-year period in section
10(a), 43 U.S.C. 1339(a). The person may file a request for refund or
credit pursuant to section 230.453 for the payment for which the
unauthorized credit adjustment was reported. MMS will review the
request pursuant to the requirements of this subpart only if the
request for refund or credit is received within 2 years of the making
of the original payment for which the unauthorized credit adjustment
was reported.
(b) A person who reports an unauthorized credit adjustment to MMS
on a Form MMS-2014 will be assessed $500 for each unauthorized credit
adjustment reported.
Sec. 230.459 Stopping or tolling of the section 10(a) 2-year period.
(a) The period of 2 years from the making of the excess payment,
within which a request for refund or credit must be filed under section
10(a), 43 U.S.C. 1339(a), will be:
(1) Tolled by MMS's receipt of a substantially complete request for
refund or credit pursuant to Sec. 230.453; or
(2) Tolled by a general tolling notice issued by MMS and published
in the Federal Register in circumstances where MMS believes a
substantial number of requests for refund or credit could result as a
consequence of a pending administrative or judicial proceeding or other
action. The running of the 2-year period will be tolled for the time
period specified in the notice; or
(3) Stopped by an application for unitization of OCS leases with
respect to any excess payment that may result from the reallocation of
production among leases after the unit or revision is approved; or
(4) Tolled by a notice filed by a person at the address stated in
Sec. 230.453(f) stating that a specifically identified action or
proceeding may result in payments made on an OCS lease becoming excess
payments. The notice must include:
(i) A list of affected leases and sales months;
(ii) The specific action or proceeding that could result in
payments becoming excess;
(iii) An estimate of the amount that could be subject to a request
for refund or credit; and
(iv) The person's MMS-established payor code.
(b) A request for refund or credit that is filed timely by a person
who made an excess payment on an OCS lease does not stop or toll the
running of the 2-year period with respect to any excess payment made by
any other person on that lease.
Sec. 230.460 Lease suspension.
If MMS suspends an OCS lease pursuant to 30 CFR 250.10(b)(6), a
person who has made excess rental payments for the period of suspension
may request a refund or credit of any excess payments pursuant to this
subpart. If the request for refund or credit is filed more than 2 years
after MMS received the excess rentals, the excess payment will not be
refunded, recouped, or credited against future rentals due on the same
lease.
Sec. 230.461 Transactions not subject to section 10.
(a) A request for refund of, or any other action to recover, excess
payments made by a refiner/purchaser under a royalty-in-kind contract
for royalty oil produced from an OCS lease is not subject to section
10.
(b) If MMS approves a unit agreement on the OCS, or a revision to a
unit, a person may file amended Forms MMS-2014 within the time period
MMS prescribes, reallocating production among its affected leases. A
person must file a request for refund or credit pursuant to this
subpart only if, and to the extent that, there is a net reduction in
the royalty that person previously paid for the leases committed to the
unit as a result of the amendments.
(c) A person may amend Form MMS-2014 to adjust volume and royalty
reports among OCS leases within a unit within the same sales month
without filing a request for refund or credit pursuant to this subpart,
except that a request for refund or credit must be filed to the extent
that there is a net reduction in the royalty previously paid for the
leases committed to the unit as a result of the amendments.
(d) A person who pays more money than the total royalty due as
reported on the Form MMS-2014 accompanying the payment, where all
amounts reported on the Form MMS-2014 are correct, may submit a request
for refund of the overpaid amounts. The request for refund is not
subject to section 10's requirements unless the Form MMS-2014 includes
reports for only one OCS lease. Any overpayment subject to this
paragraph may not be recovered by recoupment.
(e) A person may reduce an estimate balance, established for any
lease product pursuant to MMS instructions, by submitting a credit
adjustment on a Form MMS-2014, or a request for refund, for all or part
of the established estimate balance. A credit adjustment or request for
refund to recover all or part of an estimate balance authorized by this
paragraph is not subject to the requirements of section 10.
(f) (1) If adjustment of an estimated oil transportation allowance
or estimated gas transportation allowance pursuant to 30 CFR 206.105(e)
and 206.157(e), respectively, results in an overpayment for any sales
month because the estimated transportation costs were less than the
actual costs, a person may submit a credit adjustment on a Form MMS-
2014 to recoup, or may request a refund of, the overpayment. The credit
adjustment or request for refund authorized by this paragraph is not
subject to the requirements of section 10, and MMS approval is not
required before reporting the credit adjustment.
(2) If adjustment of an estimated gas processing allowance pursuant
to 30 CFR 206.159(e) results in an overpayment for any sales month
because the estimated processing costs were less than the actual costs,
a person may submit a credit adjustment on a Form MMS-2014 to recoup,
or may request a refund of, the overpayment. The credit adjustment or
request for refund authorized by this paragraph is not subject to the
requirements of section 10, and MMS approval is not required before
reporting the credit adjustment.
(3) If a person makes an error in the report of actual
transportation or processing costs pursuant to paragraphs (f)(1) or
(f)(2) of this section, any subsequent adjustment to the report that
results in a credit is subject to section 10 and the requirements of
this subpart.
(g) If a person pays pursuant to an MMS order and challenges the
obligation to pay in an administrative appeal or judicial action, and
if the person is successful in a challenge to all or part of the MMS
order to pay, section 10 does not apply to the refund or recoupment of
the disputed payment or portion thereof.
(h) MMS approval is not required for an adjustment by any person to
the amount reported for a report month that results in a credit of not
more than an amount established periodically by MMS and published in
the Federal Register. However, no adjustment may be reported more than
2 years after the date MMS received the Form MMS-2014 including the
excess payment.
[FR Doc. 94-18395 Filed 7-27-94; 8:45 am]
BILLING CODE 4310-MR-M
