Late Payment Interest

Overview

Federal Oil and Gas Overpayments

The Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (RSFA) required ONRR to pay interest on federal oil and gas royalty overpayments. On December 4, 2015, the Fixing America’s Surface Transportation (FAST) Act became law. The FAST Act removed ONRR’s authority to pay interest on federal oil and gas overpayments. The interpretation of these acts is that ONRR has authority to pay interest accrued before December 4, 2015, but not after. Both acts apply only to federal oil and gas payments, not to payments for Indian, solid mineral, and geothermal obligations.

We calculate overpayment interest on oil and gas leases as compound interest. We use the federal short-term rate plus 2 percentage points. 

Underpayments

The Federal Oil and Gas Royalty Management Act of 1982 requires us to charge underpayment interest. This applies to late payments and any underpayment due.

We calculate underpayment interest on oil and gas leases as compound interest. We use the Internal Revenue Service underpayment rate for corporate tax payers.

We calculate underpayment interest on solid mineral and geothermal leases as simple interest. We use the United States Treasury Current Value of Funds Rate.

Rates

We calculate interest using the rates below.

Interest Calculator

The formula for calculating interest as used by ONRR is provided below, along with an example for better understanding.

Example: Computing Interest for Two Interest Periods

Please note that the calculated interest for each period is added to the assessment amount and becomes the new assessment amount for each additional interest period.

In this example the $20.60 interest calculated for the first 60 days at a 9% interest rate is added to the $1,382.62 assessment base and the result, $1,403.22, becomes the new assessment base for the 11% interest rate for the next 90 days.