---
kind: "section"
citation: "30 U.S.C. § 1721"
title: "30"
title_heading: "Mineral Lands and Mining"
number: "1721"
heading: "Royalty terms and conditions, interest, and penalties"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/30/1721"
units:
  - "Chapter 29 — Oil and Gas Royalty Management"
  - "Subchapter I — Federal Royalty Management and Enforcement"
---

# §1721. Royalty terms and conditions, interest, and penalties

- (a) **Charge on late royalty payment or royalty payment deficiency—** In the case of oil and gas [leases](/usc/30/1702.md?p=5) where [royalty](/usc/30/1702.md?p=14) [payments](/usc/30/1702.md?p=28) are not received by the [Secretary](/usc/30/1702.md?p=15) on the date that such [payments](/usc/30/1702.md?p=28) are due, or are less than the amount due, the [Secretary](/usc/30/1702.md?p=15) shall charge interest on such late [payments](/usc/30/1702.md?p=28) or [underpayments](/usc/30/1702.md?p=32) at the rate applicable under [section 6621 of title 26](/usc/26/6621.md). In the case of an [underpayment](/usc/30/1702.md?p=32) or partial [payment](/usc/30/1702.md?p=28), interest shall be computed and charged only on the amount of the deficiency and not on the total amount due.
- (b) **Charge on late payment made by Secretary to States—** Any [payment](/usc/30/1702.md?p=28) made by the [Secretary](/usc/30/1702.md?p=15) to a [State](/usc/30/1702.md?p=16) under [section 191 of this title](/usc/30/191.md) and any other [payment](/usc/30/1702.md?p=28) made by the [Secretary](/usc/30/1702.md?p=15) to a [State](/usc/30/1702.md?p=16) from any [oil or gas](/usc/30/1702.md?p=9) [royalty](/usc/30/1702.md?p=14) received by the [Secretary](/usc/30/1702.md?p=15) which is not paid on the date required under [section 191 of this title](/usc/30/191.md) shall include an interest charge computed at the rate applicable under [section 6621 of title 26](/usc/26/6621.md).
- (c) **Deposit in royalty accounts of charges on royalties due and owing Indians—** All interest charges collected under this chapter or under other applicable laws because of nonpayment, late [payment](/usc/30/1702.md?p=28) or [underpayment](/usc/30/1702.md?p=32) of [royalties](/usc/30/1702.md?p=14) due and owing an [Indian tribe](/usc/30/1702.md?p=4) or an [Indian allottee](/usc/30/1702.md?p=2) shall be deposited to the same account as the [royalty](/usc/30/1702.md?p=14) with respect to which such interest is paid.
- (d) **Charge on late deposit of royalty fund to an Indian account—** Any deposit of [royalty](/usc/30/1702.md?p=14) funds made by the [Secretary](/usc/30/1702.md?p=15) to an Indian account which is not made by the date required under [section 1714 of this title](/usc/30/1714.md) shall include an interest charge computed at the rate applicable under [section 6621 of title 26](/usc/26/6621.md).
- (e) **Nonliability of States for Secretary’s failure to comply with the Emergency Petroleum Allocation Act of 1973 or regulations thereunder—** Notwithstanding any other provision of law, no [State](/usc/30/1702.md?p=16) will be assessed for any interest or [penalties](/usc/30/1702.md?p=29) found to be due against the [Secretary](/usc/30/1702.md?p=15) for failure to comply with the Emergency Petroleum Allocation Act of 1973 [[15 U.S.C. 751](https://uscode.house.gov/view.xhtml?req=(/us/usc/t15/s751)) et seq.] or regulation of the [Secretary](/usc/30/1702.md?p=15) of Energy thereunder concerning crude oil certification or pricing with respect to crude oil taken by the [Secretary](/usc/30/1702.md?p=15) in kind as [royalty](/usc/30/1702.md?p=14). Any [State](/usc/30/1702.md?p=16) share of an overcharge, resulting from such failure to comply, shall be assessed against moneys found to be due and owing to such [State](/usc/30/1702.md?p=16) as a result of audits of [royalty](/usc/30/1702.md?p=14) accounts for transactions which took place prior to January 12, 1983, except that if after the completion of such audits, sufficient moneys have not been found due and owing to any [State](/usc/30/1702.md?p=16), the [State](/usc/30/1702.md?p=16) shall be assessed the balance of that [State](/usc/30/1702.md?p=16)’s share of the overcharge.
- (f) **Limitation on interest charged—** Interest shall be charged under this section only for the number of days a [payment](/usc/30/1702.md?p=28) is late.
- (g) **Omitted—**
- (h) **Estimated payment—** A [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) may make a [payment](/usc/30/1702.md?p=28) for the approximate amount of [royalties](/usc/30/1702.md?p=14) (hereinafter in this subsection “estimated [payment](/usc/30/1702.md?p=28)”) that would otherwise be due for such [lease](/usc/30/1702.md?p=5) by the date [royalties](/usc/30/1702.md?p=14) are due for that [lease](/usc/30/1702.md?p=5). When an estimated [payment](/usc/30/1702.md?p=28) is made, actual [royalties](/usc/30/1702.md?p=14) are payable at the end of the month following the month in which the estimated [payment](/usc/30/1702.md?p=28) is made. If the estimated [payment](/usc/30/1702.md?p=28) was less than the amount of actual [royalties](/usc/30/1702.md?p=14) due, interest is owed on the underpaid amount. If the [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) makes a [payment](/usc/30/1702.md?p=28) for such actual [royalties](/usc/30/1702.md?p=14), the [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) may apply the estimated [payment](/usc/30/1702.md?p=28) to future [royalties](/usc/30/1702.md?p=14). Any estimated [payment](/usc/30/1702.md?p=28) may be adjusted, recouped, or reinstated at any time by the [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24).
- (i) **Volume allocation of oil and gas production—**
  - (1) Except as otherwise provided by this subsection—
    - (A) a [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) of a [lease](/usc/30/1702.md?p=5) in a unit or communitization agreement which contains only Federal [leases](/usc/30/1702.md?p=5) with the same [royalty](/usc/30/1702.md?p=14) rate and funds distribution shall report and pay [royalties](/usc/30/1702.md?p=14) on oil and gas [production](/usc/30/1702.md?p=13) for each [production](/usc/30/1702.md?p=13) month based on the actual volume of [production](/usc/30/1702.md?p=13) sold by or on behalf of that [lessee](/usc/30/1702.md?p=7);
    - (B) a [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) of a [lease](/usc/30/1702.md?p=5) in any other unit or communitization agreement shall report and pay [royalties](/usc/30/1702.md?p=14) on oil and gas [production](/usc/30/1702.md?p=13) for each [production](/usc/30/1702.md?p=13) month based on the volume of oil and gas produced from such agreement and allocated to the [lease](/usc/30/1702.md?p=5) in accordance with the terms of the agreement; and
    - (C) a [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) of a [lease](/usc/30/1702.md?p=5) that is not contained in a unit or communitization agreement shall report and pay [royalties](/usc/30/1702.md?p=14) on oil and gas [production](/usc/30/1702.md?p=13) for each [production](/usc/30/1702.md?p=13) month based on the actual volume of [production](/usc/30/1702.md?p=13) sold by or on behalf of that [lessee](/usc/30/1702.md?p=7).
  - (2) This subsection applies only to requirements for reporting and paying [royalties](/usc/30/1702.md?p=14). Nothing in this subsection is intended to alter a [lessee](/usc/30/1702.md?p=7)’s liability for [royalties](/usc/30/1702.md?p=14) on [oil or gas](/usc/30/1702.md?p=9) [production](/usc/30/1702.md?p=13) based on the share of [production](/usc/30/1702.md?p=13) allocated to the [lease](/usc/30/1702.md?p=5) in accordance with the terms of the [lease](/usc/30/1702.md?p=5), a unit or communitization agreement, or any other agreement.
  - (3) For any unit or communitization agreement if all [lessees](/usc/30/1702.md?p=7) contractually agree to an alternative method of [royalty](/usc/30/1702.md?p=14) reporting and [payment](/usc/30/1702.md?p=28), the [lessees](/usc/30/1702.md?p=7) may submit such alternative method to the [Secretary](/usc/30/1702.md?p=15) or the [delegated State](/usc/30/1702.md?p=22) for approval and make [payments](/usc/30/1702.md?p=28) in accordance with such approved alternative method so long as such alternative method does not reduce the amount of the [royalty](/usc/30/1702.md?p=14) [obligation](/usc/30/1702.md?p=25).
  - (4) The [Secretary](/usc/30/1702.md?p=15) or the [delegated State](/usc/30/1702.md?p=22) shall grant an exception from the reporting and [payment](/usc/30/1702.md?p=28) requirements for marginal properties by allowing for any calendar year or portion thereof [royalties](/usc/30/1702.md?p=14) to be paid each month based on the volume of [production](/usc/30/1702.md?p=13) sold. Interest shall not accrue on the difference for the entire calendar year or portion thereof between the amount of oil and gas actually sold and the share of [production](/usc/30/1702.md?p=13) allocated to the [lease](/usc/30/1702.md?p=5) until the beginning of the month following such calendar year or portion thereof. Any additional [royalties](/usc/30/1702.md?p=14) due or overpaid [royalties](/usc/30/1702.md?p=14) and associated interest shall be paid, refunded, or credited within six months after the end of each calendar year in which [royalties](/usc/30/1702.md?p=14) are paid based on volumes of [production](/usc/30/1702.md?p=13) sold. For the purpose of this subsection, the term “marginal property” means a [lease](/usc/30/1702.md?p=5) that produces on average the combined equivalent of less than 15 barrels of oil per well per day or 90 thousand cubic feet of gas per well per day, or a combination thereof, determined by dividing the average daily [production](/usc/30/1702.md?p=13) of crude oil and natural gas from producing wells on such [lease](/usc/30/1702.md?p=5) by the number of such wells, unless the [Secretary](/usc/30/1702.md?p=15), together with the [State concerned](/usc/30/1702.md?p=31), determines that a different [production](/usc/30/1702.md?p=13) is more appropriate.
  - (5) Not later than two years after August 13, 1996, the [Secretary](/usc/30/1702.md?p=15) shall issue any appropriate [demand](/usc/30/1702.md?p=23) for all outstanding [royalty](/usc/30/1702.md?p=14) [payment](/usc/30/1702.md?p=28) disputes regarding who is required to report and pay [royalties](/usc/30/1702.md?p=14) on [production](/usc/30/1702.md?p=13) from units and communitization agreements outstanding on August 13, 1996, and collect [royalty](/usc/30/1702.md?p=14) amounts owed on such [production](/usc/30/1702.md?p=13).
- (j) **Production allocation—** The [Secretary](/usc/30/1702.md?p=15) shall issue all determinations of allocations of [production](/usc/30/1702.md?p=13) for units and communitization agreements within 120 days of a request for determination. Until the [Secretary](/usc/30/1702.md?p=15) issues the determination, the [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) of a [lease](/usc/30/1702.md?p=5) in a unit or communitization agreement shall report and pay [royalties](/usc/30/1702.md?p=14) on oil and gas [production](/usc/30/1702.md?p=13) for each [production](/usc/30/1702.md?p=13) month in accordance with the terms of the proposed allocation of [production](/usc/30/1702.md?p=13) for the unit or communitization agreement. After the [Secretary](/usc/30/1702.md?p=15) issues the determination, the [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) shall, as necessary, correct such reports and the amount of [royalties](/usc/30/1702.md?p=14) paid on oil and gas [production](/usc/30/1702.md?p=13) under the unit or communitization agreement by not later than the end of the third month following the month in which the [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) receives the determination from the [Secretary](/usc/30/1702.md?p=15). Subject to the full and timely monthly [payment](/usc/30/1702.md?p=28) of [royalties](/usc/30/1702.md?p=14) to all parties in accordance with the terms of the proposed allocation of [production](/usc/30/1702.md?p=13) for the unit or communitization agreement, the [Secretary](/usc/30/1702.md?p=15) shall waive interest due on [obligations](/usc/30/1702.md?p=25) subject to the determination until the end of the third month following the month in which the [lessee](/usc/30/1702.md?p=7) or its [designee](/usc/30/1702.md?p=24) receives the determination from the [Secretary](/usc/30/1702.md?p=15). This subsection shall not apply to unit or communization agreements containing [Indian lands](/usc/30/1702.md?p=3).

## Source credit

(Pub. L. 97–451, title I, § 111, Jan. 12, 1983, 96 Stat. 2455; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 104–185, § 6(a)–(e), (h)(1), Aug. 13, 1996, 110 Stat. 1712–1715; Pub. L. 104–200, § 1(3)–(6), Sept. 22, 1996, 110 Stat. 2421; Pub. L. 113–67, div. A, title III, § 305(a), Dec. 26, 2013, 127 Stat. 1183; Pub. L. 113–291, div. B, title XXX, § 3021(c)(2), Dec. 19, 2014, 128 Stat. 3761; Pub. L. 114–94, div. C, title XXXII, § 32301, Dec. 4, 2015, 129 Stat. 1741; Pub. L. 118–81, § 2, Sept. 20, 2024, 138 Stat. 1520.)

## Notes

### Editorial Notes

### References in Text

The Emergency Petroleum Allocation Act of 1973, referred to in subsec. (e), is Pub. L. 93–159, Nov. 27, 1973, 87 Stat. 628, which was classified generally to chapter 16A (§ 751 et seq.) of Title 15, Commerce and Trade, and was omitted from the Code pursuant to section 760g of Title 15, which provided for the expiration of the President’s authority under that chapter on Sept. 30, 1981.

### Codification

Section is comprised of section 111 of Pub. L. 97–451. Subsec. (g) of section 111 of Pub. L. 97–451 amended section 191(a) of this title.

### Amendments

2024—Subsec. (j). Pub. L. 118–81 amended subsec. (j) generally. Prior to amendment, text read as follows: “The Secretary shall issue all determinations of allocations of production for units and communitization agreements within 120 days of a request for determination. If the Secretary fails to issue a determination within such 120-day period, the Secretary shall waive interest due on obligations subject to the determination until the end of the month following the month in which the determination is made.”

2015—Subsec. (h). Pub. L. 114–94 redesignated subsec. (j) as (h), struck out “If the estimated payment exceeds the actual royalties due, interest is owed on the overpayment.” after “underpaid amount.”, and struck out former subsec. (h) which related to lessee or designee interest.

Subsec. (i). Pub. L. 114–94, § 32301(1), (2), redesignated subsec. (k) as (i) and struck out former subsec. (i) which related to limitation on interest.

Subsec. (j). Pub. L. 114–94, § 32301(2), redesignated subsec. (l) as (j). Former subsec. (j) redesignated (h).

Subsecs. (k), (l). Pub. L. 114–94, § 32301(2), redesignated subsecs. (k) and (l) as (i) and (j), respectively.

2014—Subsec. (h). Pub. L. 113–291 substituted “a rate equal to the sum of the Federal short-term rate determined under section 6621(b) of title 26 plus 1 percentage point.” for “the rate obtained by applying the provisions of subparagraphs (A) and (B) of section 6621(a)(1) of title 26, but determined without regard to the sentence following subparagraph (B) of section 6621(a)(1).”

2013—Subsec. (i). Pub. L. 113–67 inserted subsec. heading; designated first sentence as par. (1), inserted heading, and substituted “Interest shall not be paid on any excessive overpayment.” for “Upon a determination by the Secretary that an excessive overpayment (based upon all obligations of a lessee or its designee for a given reporting month) was made for the sole purpose of receiving interest, interest shall not be paid on the excessive amount of such overpayment.”; and designated second sentence as par. (2) and inserted heading.

1996—Pub. L. 104–185, § 6(h)(1), substituted “Royalty terms and conditions, interest, and penalties” for “Royalty interest, penalties and payments” in section catchline.

Subsec. (h). Pub. L. 104–185, § 6(a), added subsec. (h).

Subsec. (i). Pub. L. 104–200, § 1(3), inserted “not” after “receiving interest, interest shall”.

Pub. L. 104–185, § 6(b), added subsec. (i).

Subsec. (j). Pub. L. 104–200, § 1(4), (5), substituted “date royalties are due” for “rate royalties are due”, “interest is owed on the underpaid amount” for “interest is owned on the underpaid amount”, and “interest is owed on the overpayment” for “interest is owned on the overpayment”.

Pub. L. 104–185, § 6(c), added subsec. (j).

Subsec. (k). Pub. L. 104–185, § 6(d), added subsec. (k).

Subsec. (k)(4). Pub. L. 104–200, § 1(6), substituted “additional royalties due” for “additional royalties dues”.

Subsec. (l). Pub. L. 104–185, § 6(e), added subsec. (l).

1986—Subsecs. (a), (b), (d). Pub. L. 99–514 substituted “Internal Revenue Code of 1986” for “Internal Revenue Code of 1954”, which for purposes of codification was translated as “title 26” thus requiring no change in text.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2013 Amendment

Pub. L. 113–67, div. A, title III, § 305(b), Dec. 26, 2013, 127 Stat. 1183, provided that: “The amendment made by subsection (a) [amending this section] shall take effect on July 1, 2014.”

### Effective Date of 1996 Amendment

Amendment by Pub. L. 104–185 applicable with respect to production of oil and gas after the first day of the month following Aug. 13, 1996, except as provided by subsecs. (h) and (k)(5) of this section, see section 11 of Pub. L. 104–185, set out as a note under section 1701 of this title.

### Applicability of 1996 Amendment

Amendment by Pub. L. 104–185 not applicable to any privately owned minerals or with respect to Indian lands, see sections 9 and 10 of Pub. L. 104–185, set out as a note under section 1701 of this title.

### Payment of Interest Charges From Current Receipts

Pub. L. 108–447, div. E, title I, Dec. 8, 2004, 118 Stat. 3053, as amended by Pub. L. 110–161, div. F, title I, Dec. 26, 2007, 121 Stat. 2109, provided in part: “That in fiscal year 2005 and thereafter, notwithstanding 30 U.S.C. 191(a) and 43 U.S.C. 1338, the Secretary shall pay amounts owed to States and Indian accounts under the provisions of 30 U.S.C. 1721(b) and (d) from amounts received as current receipts from bonuses, royalties, interest collected from lessees and designees, and rentals of the public lands and the outer continental shelf under provisions of the Mineral Leasing Act (30 U.S.C. 181 et seq.), and the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.), which are not payable to a State or the Reclamation Fund.”