Royalty Resiliency Act Implementation

Congress enacted the Royalty Resiliency Act on September 20, 2024. The Act updated the Federal Oil and Gas Royalty Management Act of 1982 at 30 U.S.C. 1721(j) to state:  

The Secretary shall issue all determinations of allocations of production for units and communitization agreements within 120 days of a request for determination. Until the Secretary issues the determination, the lessee or its designee of a lease in a unit or communitization agreement shall report and pay royalties on oil and gas production for each production month in accordance with the terms of the proposed allocation of production for the unit or communitization agreement. After the Secretary issues the determination, the lessee or its designee shall, as necessary, correct such reports and the amount of royalties paid on oil and gas production under the unit or communitization agreement by not later than the end of the third month following the month in which the lessee or its designee receives the determination from the Secretary. Subject to the full and timely monthly payment of royalties to all parties in accordance with the terms of the proposed allocation of production for the unit or communitization agreement, the Secretary shall waive interest due on obligations subject to the determination until the end of the third month following the month in which the lessee or its designee receives the determination from the Secretary. This subsection shall not apply to unit or communization agreements containing Indian lands.

Prior to September 20, 2024, 30 U.S.C. 1721(j) stated, “The Secretary shall issue all determinations of allocations of production for units and communitization agreements within 120 days of a request for determination. If the Secretary fails to issue a determination within such 120-day period, the Secretary shall waive interest due on obligations subject to the determination until the end of the month following the month in which the determination is made.”  

In short, Congress updated the law to direct the Federal government to require reporting and payment for production and royalty based on the pending Federal oil and gas agreement until the BLM issues a final decision on the agreement.  

Pursuant to Congress’ direction, the BLM must complete the following process for applications for Federal oil and gas agreements with allocation schedules (communitization agreements and participating areas), including those that BLM received prior to enactment of the law:  

1. The BLM reservoir management group/Field Office (FO) Fluid Minerals Operations staff will enter any new application for an oil and gas agreement into the Mineral & Land Record System (MLRS) within five business days of receipt of the application. If the application has significant errors, e.g., expired leases in the allocation schedule or incomplete legal land descriptions, identified in a cursory review, the BLM should return the application and request corrections. Refer to Attachment 1, MLRS Data Entry for Pending Agreements, for directions on entering information relating to the application.  

2. The BLM reservoir management group/State Office (SO) leasing staff will create any unleased lands accounts that may be needed for the unleased Federal minerals covered by the pending application.  

3. The BLM reservoir management group/FO Fluid Minerals Operations staff will notify both the operator and the Office of Natural Resources Revenue (ONRR) of the serial number for the pending application and instruct the operator to report production and to report and pay royalties under the terms of the application while it is pending BLM action on the application. Refer to Attachment 2, Preliminary Federal Oil and Gas Agreement Royalty Allocation Notice, for an example notice.  

4. The BLM reservoir management group/FO fluid minerals operations staff will create the pending application in Automated Fluid Mineral Support System (AFMSS) based upon the preliminary notice. 

5. The BLM SO will process any unleased lands for an upcoming oil and gas lease sale. The BLM office processing the pending application will request that the operator submit an expression of interest for the unleased Federal minerals.  

6. The BLM FO will update AFMSS and tie the producing wells to the pending application based on the BLM’s records or a letter from the operator listing the wells that the BLM should associate with the pending application. Refer to Attachment 3, Quick Guide to Enter an Application for a Federal Oil and Gas Agreement into AFMSS, for directions on updating AFMSS based upon the notice. 

7. If the wells associated with the pending application are producing, the BLM FO will issue a preliminary First Production Memorandum for the pending application after tying the wells to the pending application in AFMSS. The BLM FO will not issue a First Production Memorandum for the pending application until the wells begin producing. Refer to Attachment 4, Preliminary First Production Memorandum Template, for a template memorandum.  

8. The BLM FO/SO will update the production status of all Federal leases tied to the pending application to reflect actual or allocated production tied to the pending application in the MLRS. 

The BLM will issue a final decision on the pending application and identify whether the lessee, or its designees, must adjust the production reporting or royalty paid. The lessee will have until the end of the third month following the month in which the lessee or its designee receives the BLM’s final decision to adjust the production reporting or royalty paid, if needed. The BLM must send all final decisions by certified mail, return receipt requested, and include the right to appeal. The ONRR needs to know when the agreement operator receives the BLM’s final decision for royalty interest calculations. The BLM must maintain the certified mail receipt within the file and can record the date of receipt in MLRS. Refer to Attachment 5, Template Federal Oil and Gas Agreement Decisions, for example decisions.  

There is no change to how the BLM manages oil and gas agreements containing Indian lands. The Royalty Resiliency Act does “not apply to unit or communization agreements containing Indian lands.” Therefore, the BLM will continue with its current process for Indian oil and gas agreements and mixed Federal and Indian oil and gas agreements.