Effective Date: July 1, 1996

Notice to Lessees and Operators (NTL) of Federal Oil, Gas,
and Sulphur Leases in the Outer Continental Shelf

Federal Oil and Gas Leases on the Outer Continental Shelf Application Fees for Royalty Relief Requests under 30 CFR 203

This Notice to Lessees (NTL) details information on royalty relief application fees, as well as when and how you make payments to the MMS. The MMS will revise the NTL periodically to reflect MMS cost experience and provide information needed for administering the royalty relief program.

Authority to Charge for Cost of Processing Applications

The Omnibus Appropriations Bill (PL. 104-134, 110 Stat. 13221, April 26, 1996) specifically authorized collection of fees. It provides:

"That beginning in fiscal year 1996 and thereafter, fees for royalty rate relief applications shall be established (and revised as needed) in Notices to Lessees, and shall be credited to this account in the program areas performing the function, and remain available until expended for the costs of administering the royalty rate relief authorized by 43 U.S.C. 1337(a)(3) . . . "

There are six types of applications. Different fees apply to the various categories initially. Some applicants will be eligible for significant refunds if MMS rejects their applications as incomplete within the first 20 business days after receipt. A supplemental fee will be charged if, during the review period, MMS either initiates an audit or identifies the need to perform an audit. The following guidelines do not supersede, but are supplemental to, the procedures for royalty/net revenue share relief specified in regulations at 30 CFR 203 (61 FR 27263, dated May 31, 1996).

I. TYPES OF APPLICATIONS

Q.  What types of royalty relief applications are available under the DWRRA?

A.  There are four different categories:

1. initial deep water—an initial request for a volume suspension on a DWRRA lease or unit on a field that did not produce before November 28, 1996;
2. redetermination of deep water—a request for a redetermination of the Secretary's findings before start of new production if a significant change occurs in the factors upon which we based the original determination;
3. significant change in Development Operations Coordination Document (DOCD)—a request for a volume suspension on a DWRRA lease or unit proposing development in a supplemental DOCD approved after November 28, 1995, that will expand production significantly beyond the level anticipated in a prior DOCD; and
4. abbreviated application—a request to add a lease to a field with an approved volume suspension.

Q.  What other types of royalty relief are available under the regulations?

A.  There are two other categories of royalty relief available. They convert royalty/net profit share leases to net revenue share for marginal leases with inadequate revenues to sustain continued production and net revenue share for expansion of production through capital investment projects, that would be uneconomic absent relief.

II. FEES

Q.  How much do I have to pay to apply for royalty relief?

A.  It depends on the type of application. The following table lists the fees by category:

Q. Under what conditions do I pay a fee?

A.  You must pay an application fee when you file for royalty relief. You will also pay an audit fee if MMS notifies you that it will perform an audit during the application evaluation process or if MMS notifies you at approval of relief that it will perform a subsequent audit.

Q. How do I pay an application fee?

A. You must submit the appropriate fee by an Automated Clearing House (ACH) payment to MMS for settlement on or before the day you file your application for royalty relief. You must file the royalty relief application with the MMS Regional Director of the OCS Region where the lease(s) are located. Contact the OCS Regional Office for wiring instructions.

Q. If my application is rejected, do I get a refund?

A. Ordinarily, no refund is given when MMS rejects an application. The one exception applies to the first three categories of DWRRA relief listed above. For them, if MMS rejects the application for incompleteness during the first 20 business days after receiving the application, then we will refund all but $5,500 of the initial application fee. The MMS will attempt to get any missing information from the applicant(s) before rejecting an application as incomplete.

Q. What circumstances would trigger the need to perform an audit?

A. The MMS may initiate an audit or identify the need to perform an audit during the review period, if it determines that additional information, clarification or interpretation could materially affect the decision to grant royalty relief. MMS expects that, in most cases, audits will be completed during the review period. Applications may be audited when: significant historical costs are claimed, there appear to be inconsistencies in the data, or the economic viability of the field approaches the qualification threshold.

Q.  How do I pay an audit fee?

A.  When MMS notifies you that an audit will be performed, you will be sent an invoice. You must pay the invoice on or before the due date by an ACH payment to MMS.

This NTL is also on the Minerals Management Service worldwide website at http://www.mms.gov.

(Original Signed) Thomas A. Readinger
Acting Associate Director for Offshore Minerals Management
Dated: June 21, 1996

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