Completing Reviews and Audits of Royalty Payments

The extent of the time periods covered by audits of royalty payments has been a matter of considerable controversy between the Minerals Management Service (MMS) and the minerals industry for several years. During the 1980's, MMS increased audit activities in compliance with the Federal Oil and Gas Royalty Management Act (30 U.S.C. 1711). The resulting orders issued to companies for royalty underpayments often covered periods more than six years old. Many companies have challenged MMS orders on statute of limitations grounds and their theories have been asserted in Federal court cases and in a large number of administrative appeals. In order to be more responsive to the public we serve, the MMS, in consultation with affected states, Indian tribes, and the minerals industry, has developed guidance regarding the extent of the time periods to be covered when reviewing and auditing royalty payments. Copies of this guidance may be obtained by contacting the Office of the Deputy Associate Director for Compliance at (303) 231-3641.