No. 29904 (Amendment): R850-5. Payments, Royalties, Audits, and Reinstatements

DAR File No.: 29904
Filed: 05/01/2007, 09:21
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

It has been determined through a review of this rule that certain portions are outdated and no longer necessary and some additions were warranted to facilitate the processing of royalty payments and to address electronic fund and data transfers. There is also an increase in certain fees to align with the cost of the added tasks in completion of the transaction.

Summary of the rule or change:

Changes to this rule address the additional availability for the obligee to make required payments by means of electronic fund transfer and to submit required data electronically. The timely receipt of funds and data have been more clearly defined, as well as the penalties assessed in the event of the obligee's failure to make timely payment. The penalty for late payments and returned checks has been increased to be more in alignment with the costs associated with processing late payments and returned checks. The amendment of royalty reports and interest incurred for delinquent royalties has also been revised for greater clarity and ease of implementation. A portion of the previous rule addressing payments subject to division orders has been removed because the agency no longer approves and signs division orders.

State statutory or constitutional authorization for this rule:

Sections 6, 8, 10, and 12 of the Utah Enabling Act; Articles X and XX of the Utah Constitution; and Subsection 53C-1-302(1)(a)(ii)

Anticipated cost or savings to:

the state budget:

It is anticipated that there could be a small savings to the agency because of the increase of certain fees that were below the actual cost incurred to process late payments and royalties. There could also be a potentially small savings due to the reduction of required correspondence to the obligee concerning late payments and reports.

local governments:

It is anticipated that this rule amendment will create neither an additional cost or savings to local government except in the case where local government is the obligee.

other persons:

There is a potential cost to other persons because of the increase in fees charged for payments not received by the agency in a timely manner. However, there is also a potential savings to other persons because of the greater clarity given in this amendment so there is less misunderstanding of what is considered timely.

Compliance costs for affected persons:

There are potential compliance costs for affected persons if their obligations are not received by the agency in a timely manner. However, if the affected persons makes timely payments, there should be no additional compliance costs associated with this rule amendment.

Comments by the department head on the fiscal impact the rule may have on businesses:

The intention of this rule amendment is to bring payment and fee practices in line with current business practices. Other than minor cosmetic changes, the primary modifications deal with increasing late payment penalties and returned check fees to amounts common in the business market in order to cover agency overhead and collection costs. Kevin S. Carter, Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

School and Institutional Trust Lands
Administration
675 E 500 S
SALT LAKE CITY UT 84102-2818

Direct questions regarding this rule to:

Ron Carlson at the above address, by phone at 801-538-5131, by FAX at 801-538-5118, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/14/2007

This rule may become effective on:

06/21/2007

Authorized by:

Kevin S. Carter, Director

RULE TEXT

R850. School and Institutional Trust Lands, Administration.

R850-5. Payments, Royalties, Audits, and Reinstatements.

R850-5-100. Authorities.

This rule [implements]is authorized by Sections 6, 8, 10, and 12 of the Utah Enabling Act, Articles X and XX of the Utah Constitution[,] and Section 53C-1-302(1)(a)(ii) of the Utah Code entitling[which authorize] the Director of the School and Institutional Trust Lands Administration to [prescribe]establish fees, procedures and [requirements for payments, royalties and audits.]rules for management of the agency.

 

R850-5-200. Payments.

Payments include rentals, royalties or any other financial obligation owed under the terms of a lease, permit or any other agreement.

1. As a matter of convenience, the agency allows parties other than the obligee to remit payments on the obligee's behalf; however, this practice in no way relieves the obligee of any statutory or contractual obligations concerning the proper and timely payments or the proper and timely filing of reports. For practical reasons, the agency often makes direct requests for reports and other records from parties other than the obligees. Payors should be aware that their actions subject leases to cancellation or subject delinquent royalties to interest charges. It is, therefore, in the best interest of all parties to cooperate in responsibly discharging their obligations to each other and to the Trust Lands Administration.

2. The obligee bears final responsibility for payments. Payments must be for the full amount owed. Partial payments will only be accepted if approved in writing by the agency before submission. In order to [meet]fulfill payment obligations of a lease, permit, or other financial contract with the agency, payments must be received as defined in subsection [4]3 of this rule by the appropriate due dates and must be accompanied by the appropriate report. If the obligee submits payment by electronic fund transfer then appropriate supporting documentation must be submitted by electronic data transfer on the same day.

[3. When a change of payor(s) on a property is to occur, the most recent payor of record shall notify the agency by letter prior to the change. This shall not be construed, however, to relieve the obligee of the ultimate responsibility.

4]3. Payments will be considered received if [it is either]sent by electronic fund transfer, delivered to the agency, or if the postmark stamped on the envelope [or other appropriate wrapper containing it, ]is dated on or before the due date. If the post office cancellation mark is illegible, erroneous, or omitted, the payment will be considered timely if the sender can establish by competent evidence that the payment was deposited in the United States mail on or before the date for filing or paying. If the due date or cancellation date falls upon a Saturday, Sunday, or legal holiday, the payment shall be considered timely if received as defined herein by the next business day.

[5. Payments will be enforced even though an agency order is incomplete or because of other irregularities.

6]4. A 6% penalty and [$15]$30 return check charge will be assessed on all checks returned by the bank. The check must be replaced by cash, certified funds, or immediately available funds. The Director may require future payments with certified funds when notified in writing.

[7]5. Any financial obligation not received by its contractual due date will initiate a written cancellation notice by certified mail, return receipt requested. The cancellation date for any lease/permit or other contractual agreement unless otherwise specified [in this rule]by the contract, is defined as 30 days after the postmark date stamped on [Post Office Form 3800,]the U.S. Postal Service Receipt for Certified Mail of the cancellation notice. In the event payment is not received by the agency on or before the cancellation date, the lease, permit or other contractual agreement will be subject to cancellation, forfeiture or termination without further notice.

A default in the payment of any installment of principal or interest due under the terms of any land purchase agreement not received by the agency more than 30 days after the due date shall initiate a certified billing, return receipt requested. If all sums then due and payable are not received within 30 days after the mailing of the U.S. Postal Service certified notice[ on Post Office Form 3800], the agency may elect any of the remedies as outlined in R850-80-700(8). If the cancellation date falls on a weekend or holiday, payment will be accepted the next business day until 5 p.m.

[8]6. A late penalty of 6% or [$10]$30, whichever is greater, shall be charged after failure to pay any financial obligation, excluding royalties as provided in R850-5-300(2), within the time limit under which such payment is due.

[9]7. Subject to R850-4-300, rental payments received after the due date which do not include a late fee will be returned to the lessee by certified mail, return receipt requested. Payment will only be accepted for the full amount due.

 

R850-5-300. Royalties.

1. Royalty Reports and Reporting Periods

(a) All royalty payments shall be made payable to the School and Institutional Trust Lands Administration and shall be accompanied by a [certified ]royalty report on a form specified by the agency. Check stubs or other report forms are unacceptable and do not satisfy the reporting requirement of this section.

(b) Any report not sufficiently complete and accurate to enable the agency to deposit the royalty to the correct institutional fund must be promptly corrected or amended by the payor. Failure to provide such a report may, after proper notification, subject the lease to cancellation.

(c) Any report submitted which includes entries as described below, may be returned and may be made subject to the penalty provisions of this rule.

i) Any report including adjustments to reporting periods more than 24 months prior to the current report period.

ii) Amendments to prior report periods creating a net adjustment of less than $10.

iii) Any oil and gas royalty report line of original entry submitted after the first 180 days following the month of first production with a volume entry of zero which is subsequently amended with the actual volume.

2. Interest on Delinquent Royalties

Interest shall be [compounded semiannually ]based on the [average adjusted prime rate, rounded to the nearest full percent, for each six-month period computed from April to September and October to March,]prime rate of interest at the beginning of each month as approved by the Director and documented in the agency's Director's Minutes, plus 4%. [The interest rate will be subject to change at six month intervals every July 1st and January 1st. This interest rate will be applied to any delinquent royalties and will be in effect until payment is received. ]However, interest will not be assessed for prior period adjustments or amendments except as provided in R850-5-300(1)(c) and for amounts of additional royalties due discovered during any audit action. Also, interest will not be accrued or billed for amounts less than [$10]$30.

 

KEY: administrative procedures

Date of Enactment or Last Substantive Amendment: [May 16, 2006]June 21, 2007

Notice of Continuation: June 27, 2002

Authorizing, and Implemented or Interpreted Law: 53C-1-302(1)(a)(ii)