Federal & Tribal Royalty Compliance

Davis Graham & Stubbs attorneys have significant experience assisting clients through every phase of federal and Indian royalty management. We advise clients on how to comply with Office of Natural Resources Revenue (ONRR) royalty reporting and valuation rules. We assist clients with:

• the interpretation of the marketable condition rule and its application to each of a client’s gathering and processing contracts;
• the application of ONRR calculated unbundling cost allocations (“UCAs”);
• the identification of portions of gathering and processing costs for which allowances may be taken using alternatives to ONRR’s UCAs, a process known as “unbundling”;
• converting to processed gas reporting under the 2016 reinstated rules;
• the application and interpretation of Bureau of Land Management (BLM) rules that have royalty consequences, including rules related to flared gas and royalty-free use of gas;
• interfacing with ONRR on behalf of clients with questions on unbundling, processed gas reporting, and other royalty compliance issues, filing of Oil & Gas Operations Reports on Form ONRR-4054, and Reports of Sales and Royalty Remittance on Form ONRR-2014 (“OGOR Reports”);
• override requests due to ONRR up front edits (i.e., “fatal errors”);
• responding to data mining requests, demands for payment, orders to pay, orders to report, orders for restructured accounting, and notices of non-compliance issued by ONRR;
• training of in-house marketing, land, production reporting, and revenue reporting groups;
• performing internal self-audits;
• curing existing defaults asserted by ONRR in bankruptcy proofs of claim so that leases can be either assumed or sold.

We represent clients seeking review of ONRR orders through the administrative appeals processes before the ONRR Director and Interior Board of Land Appeals and, if necessary, in the federal courts. We also counsel clients facing civil penalties or administrative investigations. Finally, we advise clients on the royalty implications of new marketing contracts and acquisitions.

The ONRR royalty reporting and valuation rules are technical and complex, and we strive to make the compliance process straightforward and accessible. We work closely with both revenue accountants and in-house counsel to facilitate producers’ compliance with the rules, and we tailor our role to the needs of individual producers and their particular gathering and processing agreements and marketing agreements. Our clients range from small producers with a handful of federal or Indian wells to producers with thousands of wells.