CHAPTER 11 DEAR PAYOR LETTERS|GUIDANCE PAPERS
| Jurisdiction | United States |
(Feb 1998)
DEAR PAYOR LETTERS/GUIDANCE PAPERS
ATTACHMENT 6
United States Department of the Interior
MINERALS MANAGEMENT SERVICE
Royalty Management Program
P.O. Box 25165
Denver, Colorado 80225-0165
NOV 25 1996
Dear Payor:
This letter pertains to written refund requests as defined in Section 5 of the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (RSFA). It identifies the information the Minerals Management Service (MMS) requires if you send a written refund request for:
• an overpayment made on an onshore Federal lease after August 31, 1996, or
• an overpayment made on an offshore Federal lease after August 12, 1996.
The MMS Oil and Gas Payor Handbook, Volume II (Handbook) currently contains guidance for refund requests in Chapter 4, "Adjustments, Recoupments, and Refunds." Section 4.4.2 pertains to refunds and recoupments on outer continental shelf leases. Section 4.4.5 pertains to Federal onshore refund and recoupment procedures.
To comply with RSFA, Chapter 4 of the Handbook is being rewritten and will be sent to you upon completion. In the meantime, this letter amends the associated sections of the Handbook.
Please note, the RSFA does not change refund procedures for outer continental shelf section 10 refunds for payments received by MMS prior to August 13, 1996. Guidance for such refunds is contained in 30 CFR Part 230 and the Handbook, Chapter 4, Section 4.4.2.
The RSFA does not change procedures for making adjustments or taking recoupments on the Report of Sales and Royalty Remittance (Form MMS-2014). Recoupments taken on the Form MMS-2014 continue to be the fastest and most cost effective way for you to correct an overpayment. Chapter 4 of the Handbook includes instructions for making adjustments and recoupments.
KEY REFUND PROVISIONS IN THE ROYALTY
SIMPLIFICATION AND FAIRNESS ACT
Section 5 of the RSFA amends Section 111 (a) of the Federal Oil and Gas Royalty Management Act of 1982 adding a section entitled "Adjustments and Refunds." The amendment has two parts: Part (a) and Part (b).
Part (a) describes and defines the period during which a lessee or its designee may request a refund. This is termed the adjustment period. This part states:
(a) ADJUSTMENTS TO ROYALTIES PAID TO THE SECRETARY OR A DELEGATED STATE.—
(1) If, during the adjustment period, a lessee or its designee determines that an adjustment or refund request is necessary to correct an underpayment or overpayment of an obligation, the lessee or its designee shall make such adjustment or request a refund within a reasonable period of time and only during the adjustment period." [Emphasis added]
RSFA Section 5(a)(4) defines "adjustment period" as follows:
For purposes of this section, the adjustment period for any obligation shall be the six-year period following the date on which an obligation became due. [Emphasis added]
RSFA Section 5(a)(3) provides for extension of this adjustment period as follows:
An adjustment or a request for a refund for an obligation may be made after the adjustment period only upon written notice to and approval by the Secretary or the applicable delegated State, as appropriate, during an audit of the period which includes the production month for which the adjustment is being made. If an overpayment is identified during an audit, then the Secretary or the applicable delegated State, as appropriate, shall allow a credit or refund in the amount of the overpayment. [Emphasis added]
Part (b) describes how a lessee or its designee makes a written refund request to recover overpayment of an obligation. This section states:
(1) IN GENERAL.—A request for refund is sufficient if it—
(A) is made in writing to the Secretary and, for purposes of section 115, is specifically identified as a demand;
(B) identifies the person entitled to such refund;
(C) provides the Secretary information that reasonably enables the Secretary to identify the overpayment for which such refund is sought; and
(D) provides the reasons why the payment was an overpayment.
Part (b) further requires MMS to approve or deny the refund request within 120 days of its receipt. This part states:
(3) PAYMENT PERIOD
A refund under this subsection shall be paid or denied (with an explanation of the reasons for the denial) within 120 days of the date on which the request for refund is received by the Secretary. Such refund shall be subject to later audit by the Secretary or the applicable delegated State and subject to the provisions of this Act.
NEW REFUND REQUIREMENTS
EFFECTIVE WITH THIS LETTER
The following requirements apply when you initiate a written refund request for (1) an onshore Federal lease overpayment made after August 31, 1996, or (2) an offshore Federal lease overpayment made after August 12, 1996.
1) Your request must be made within 6 years of the due date of the lease obligation. If it is made after this period, the reason must be based on the audit extension reason stipulated by the RSFA.
2) Your request must be in writing and include:
— an explanation of why the overpayment occurred.
— your Taxpayer Identification Number or Social Security Number if you are an individual. The Debt Collection Improvement Act of 1996 requires that MMS include this number on all check or wire payments made by the U.S. Treasury.
— the specific amount of the refund.
— a properly completed Form MMS-2014 which reverses the originally reported overpayment and then reports the correct data. The net difference reported will represent the amount of your refund request.
If your overpayment was not reported on a Form MMS-2014, provide a copy of the check or wire transfer information that will allow us to identify the overpayment.
The Debt Collection Improvement Act of 1996 also requires that recipients of Federal payments receive all payments electronically unless the recipient certifies they do not have an account at a financial institution. In order to process your refund electronically we will need:
— your bank name.
— your nine digit bank routing transit number.
— your account number at the bank and designation of account — checking or savings.
If you do not have an account at a financial institution that can receive electronic payments, please indicate so in your written refund request.
Send your written refund request satisfying the above information requirements to:
Chief, Cash Applications Section
Minerals Management Service
P.O. Box 5760, Mail Stop 3130
Denver, Colorado 80217-5760
The MMS will refund or deny written refund requests within 120 days of the date of receipt by MMS.
If you have any questions, please contact your Cash Applications Representative at 1-800-525-2356 or the Chief of the Cash Applications Section, John Gansert, at (303) 231-3334.Sincerely,James W. ShawAssociate Director for Royalty Management
ATTACHMENT 4
United States Department of the Interior
MINERALS MANAGEMENT SERVICE
Royalty Management Program
P.O. Box 5760
Denver, Colorado 80217-5760
JAN -9 1997
Dear Payor:
On August 13, 1996, President Clinton signed into law the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (RSFA), amending the Federal Oil and Gas Royalty Management Act of 1982 in several important ways. One of the most notable changes concerns who is responsible for making royalty and related payments on Federal leases. We are asking you to help implement RSFA by providing important required data by March 15, 1997.
RSFA clearly establishes the owners of operating rights and/or lease record title (who are jointly defined as "lessees" under RSFA) as responsible for making royalty and related payments on a Federal lease. Currently, it is common for the payor, as agent for the lessee, rather than the lessee, to make these reports and payments. When you, as payor, pay royalties on behalf of that lessee, RSFA requires that the lessee designate you as their designee for each lease. We need to know who those lessees are to inform them of their obligation to designate you to be their lawful designee.
What information is being requested? Tell us which lessees, as defined under RSFA, for whom you pay royalty, rent, and minimum royalty. Lessees, under RSFA, are defined as:
• owners of lease record title, and/or
• owners of operating rights (person to whom operating rights have been transferred).
RSFA made this payor designation requirement effective for lease production beginning September 1, 1996.
What data must be provided? We are asking you to provide some payor data and lessee(s) data. The details of each are listed in the next two questions and their responses.
What payor data must be provided? First, using the enclosed computer lease/revenue source/product code listing, you must provide your Taxpayer Identification Number (TIN) as required by the Debt Collection Improvement Act of 1996. Enter your TIN only on the first listed lease/revenue source/product code. Use an "E" for employer identification number, or "S" for a social
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security number, whichever is applicable to you. Follow this 1-character alpha field with your 9-digit TIN.
Second, verify the enclosed computer lease/revenue source/product code listing. Be sure that it is accurate and complete. If not, add additional lease/revenue sources/product codes at the end of the listing or use additional sheets, including information in the requested data fields. Correct errors by lining through them and writing in the correct information. For example, if the responsibility type code (advanced royalty, minimum royalty, royalty, rent, etc.) is not correct, please put in the correct type.
What lessee data is being requested? Under RSFA, the operating rights owners (lessees) on whose behalf you pay are primarily liable for payments to MMS. The owners of lease record title are secondarily liable.
Because the operating rights owners...
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