The MMS instituted a royalty reduction program in 1992 to encourage production of marginal oil wells for a longer period of time. A property was eligible for the royalty reduction if, during the twelve month qualifying period (August 1, 1990 through July 31, 1991) or for any subsequent 12-month period, the property produced an average of less than 15 barrels of oil per eligible well per well-day. An eligible well is defined as an oil well that produces, or an injection well that injects and is integral to production for any period of time during the qualifying or subsequent 12 month period.
The formula for calculating the reduced royalty is 0.5 + (0.8 x AVERAGE DAILY PRODUCTION "rounded down") = % Royalty Rate. Using this formula, there are only 15 levels of royalty which can be obtained. These rates are :
The property, or well on the property, did not exist during the initial qualifying period. In this case, the qualifying period will be the 12-month period from the date the first well was completed on the lease or agreement. You must have a complete 12 month history in order to claim a reduced royalty rate, although the wells do not need to produce every month., or
All wells on the lease or agreement were shut-in during the entire initial qualifying period. In this case, the qualifying period will be the 12 months immediately prior to the lst well shut-in date.
The property produced 15 or more barrels of oil per well/day for all eligible wells during the initial qualifying period. In this case, the operator should calculate a new 12 month average by moving forward one month at a time until the property qualifies.
If the current operator of the property was not the operator during the qualifying period, the current operator must obtain production records for the qualifying period. Requests for production data from the MMS should be addressed to:
Chief, Production Accountability Branch
Compliance Verification Division
Minerals Management Service
P. O. Box 173702, MS - 3671
Denver CO 80217-3702
Production data for periods before production reporting was transferred from the BLM to the MMS can be obtained in the appropriate BLM District Office.
At the end of each claim year, the operator may recalculate their royalty rate reduction to determine if they qualify for a lower rate than was initially approved. The operator will have 60 calendar days after the end of the first claim year to submit the second year's notification form if the rate is calculated to be lower than the first year. Subsequent royalty rate reductions after the initial qualifying period are good for only one year. Failure to submit a notification form based on subsequently approved royalty reductions will result in the reduced rate reverting back to the initial qualifying rate..
The Stripper Royalty Rate Reduction Notification form should be submitted to:
Minerals management Service
Royalty Management Program
Compliance Verification Division
Production Accountability Branch
P. O. Box 173702, MS-3671
Denver, CO 80217-3702
Fax Number 303-236-4222 or 303-231-3189
For questions regarding Stripper Royalty Reduction, contact one of the following MMS employees:
Nichelle Dixon 800-634-6423, Ext. 3163 or 303-231-3163
Verlene Butts 800-634-6423, Ext. 3159 or 303-231-3159
Janet Guinn 800-634-6423, Ext. 3618 or 303-231-3618
Regina Tripp 800-634-6423, Ext. 3106 or 303-231-3106