The Minerals Management Service (MMS) granted Gulf producers some temporary relief Thursday, publishing a final rule and a notice in the Federal Register that give producers who were impacted by the hurricanes an extension of time for reporting and payment of royalties.
“The devastation caused by Hurricanes Katrina and Rita resulted in many oil and gas operators losing the use of their offices and associated records,” said MMS Director Johnnie Burton. “Until access to buildings, records, data and communication lines are restored, these companies are simply unable to generate or transmit royalty reports and royalty payments.”
As a result, Burton said, MMS believes it is equitable to provide an extension of time for relief from royalty payments and report due dates for lessees whose operations have been disrupted by the hurricanes. “This rule is intended to give payors a reasonable period of time to restore normal operations,” she said.
The rule extends the due dates for monthly royalty payments and reports, and monthly operations reports for lessees, for royalty payors and operators who was impacted by one or both hurricanes. Extending the due date for royalty payments means that late payment interest will not accrue for the period between the original due date and the new due date established by the new rule.
The relief does not extend to reporting or payments due on Indian leases, to federal leases for minerals other than oil and gas, nor to annual rental payments. Burton also said that the new rule may cause a potential delay in royalty disbursements to a few states.
For those who meet the required certification, the new due date for royalties and corresponding royalty reports for the production months of July, August, September and October 2005 will be Jan. 3, 2006. In the absence of the new rule, the royalty payments and reports for the production months of July, August, September and October would have been Aug. 31, Sept. 30, Oct. 31 and Nov. 30, respectively.
The new date for the production reports or the Monthly Report of Operations for onshore leases for the production months of July, August and September 2005 will be Dec. 15 if operators do not file electronically, or Dec. 27 if they do file electronically.
Eligible companies may email their certification to Robert Prael, MMS financial manager, at Robert.Prael@mms.gov, or by mail to Robert Prael, MMS financial manager, Minerals Revenue Management, P.O. Box 25165, MS350B1, Denver, CO., 80225-0165.
The MMS said it also published a notice Thursday stating that it is delaying until Jan. 1, 2006, the effective date of a rule that regulates plans and information that lessees and operators must submit in connection with oil and gas exploration, development and production in the Outer Continental Shelf. The rule originally was slated to become effective Thursday.
It requires MMS to publish a Notice to Lessees to provide further guidance. However the primary office responsible for developing those procedures, the MMS Gulf of Mexico regional office in New Orleans, has been closed since Hurricane Katrina hit on Aug. 29. The delay in implementation will provide relief to the government and the oil and gas industry as they recover from this disaster.
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