for further service - new mexico state land officenmstatelands.org/uploads/royaltymgt/rmd filers...

FOR FURTHER SERVICE Forms: To order New Mexico oil and gas royalty forms, please contact:

Revenue Processing Bureau Royalty Management Division New Mexico State Land Office P O Box 1148 Santa Fe, NM 87504-1148 (505) 827-5736

SLO Rulings: For information concerning oil and gas royalty rulings, statutes and rules and regulations administered by the New Mexico State Land Office, please contact: Director Royalty Management Division New Mexico State Land Office P O Box 1148 Santa Fe, NM 87504-1148 (505) 827-5735 Publications: To order copies of informational publications, please contact: Royalty Management Division New Mexico State Land Office P O Box 1148 Santa Fe, NM 87504-1148 (505) 827-5772 Oil and Gas Royalty Account Matters: The Revenue Processing Bureau provides assistance with forms completion, accounts in suspense, assessment and credit notices, advance payments and questions pertaining to oil and gas royalty returns. Please address your correspondence to: Revenue Processing Bureau Royalty Management Division

New Mexico State Land Office P O Box 1148 Santa Fe, NM 87504-1148 (505) 827- 5747 FAX: (505) 476-0480

Royalty Refunds: For information regarding the New Mexico oil and gas royalty refund process, please contact: Revenue Processing Bureau Royalty Management Division New Mexico State Land Office P O Box 1148 Santa Fe, NM 87504-1148 (505) 827-1276

PUN and Lease Numbers: If you may need assistance obtaining, reviewing or correcting production unit numbers (PUNs) and related base leases, please contact: Audit & Compliance Bureau Royalty Management Division New Mexico State Land Office P O Box 1148 Santa Fe, NM 87504-1148 (505) 827-5871 Oil and Gas Royalty Audit & Compliance: If you need assistance with issues relating to oil and gas royalty audits, collections and compliance, please contact

New Mexico State Land Office Audit & Compliance Bureau

Royalty Management Division P O Box 1148

Santa Fe, NM 87504-1148 (505) 827- 5757 Other Agencies: New Mexico oil and gas royalty reporters may also need to contact:

Oil and Gas Tax Bureau Audit & Compliance Division NM Taxation and Revenue Department

P O Box 2308 Santa Fe, NM 87504-2308 (505) 827-0811 ONGARD Service Center P O Box 1148 Santa Fe, NM 87504-1148 (505) 827-5855

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Oil Conservation Division New Mexico Energy, Minerals and Natural Resources Department

P O Box 6269 Santa Fe, NM 87505

(505) 476-3440

ONGARD

ONGARD, the Oil and Natural Gas Administration and Revenue Database is an automated system that supports the oil and gas activities of the New Mexico State Land Office (SLO), the New Mexico Taxation and Revenue Department (TRD) and the Oil Conservation Division of the New Mexico Energy, Minerals and Natural Resources Department. ONGARD provides a computerized environment where the SLO, TRD and OCD can share oil and gas related information. It provides a foundation for processing the large number of transactions handled by the three agencies and reduces the need for duplicate reporting of information by the oil and natural gas industry. ONGARD’s use of common bases; i.e. oil and gas reporting identification numbers (OGRIDs), production unit numbers (PUNs) lease numbers, etc. help simplify the reporting requirements imposed on the oil and gas industry.

ONGARD functions include: Land & lease management: ONGARD manages the inventory of state public lands and tracks land leases. Well and resource management: ONGARD identifies oil and gas wells and their spacing units, monitors use and sharing of oil and gas resources and tracks activities such as drilling and production operations.

State royalty management and production tax: ONGARD processes production tax and state royalty reports and payments, generates notices of assessment, credit and suspended items, monitors compliance with state production tax and state royalty statutes and regulations and supports audit and compliance activities.

TERMS and DEFINITIONS ACCELERATED ROYALTY DEPOSIT: A payment for oil and gas royalty. ADVANCE ROYALTY ASSESSMENT: A notice resulting from underpayment of Advance Royalty. ADVANCE ROYALTY DEPOSIT: A deposit that is equal to the royalty reporter’s average monthly royalty payment. Any royalty reporter whose average monthly royalty exceeds $25,000 must maintain an Advance Royalty Deposit with the SLO or must submit royalty payments pursuant to the Accelerated Royalty provisions. AUDIT AND COMPLIANCE ASSESSMENT: A notice issued as a result of an audit or a compliance review of volume or value.

COMPUTATION ASSESSMENT: An invoice for underpaid royalty differences based on ONGARD’s re-computation of the data submitted by the royalty reporter. COMPUTATION CREDIT: A notice for overpaid royalty differences based on ONGARD’s re-computation of the data submitted by the royalty reporter. CSV: (Comma Separated Value Reporting) A reporting format for electronic oil and gas royalty returns. EDI RETURN: An electronically submitted royalty return using Electronic Data Interchange X12 formats and standards published by the American Standards Committee of the American National Standards Institute.

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INTEREST ASSESSMENT: An invoice for interest assessed for late payment of oil and gas royalty. Interest is calculated at the rate of 1.25% per month or portion of a month beginning when payment is due until payment is made. (See 56-8-3 NMSA, 1978) LEASE: (Base Lease Number) A six-digit alphanumeric code used to designate a specific lease property. The amount of state royalty is determined by the royalty rate assigned to the lease property. The lease number is part of the royalty reporting detail record. LEASE CREDIT: A notice of overpayment of royalty of distributed funds that may be recouped against future royalty liability. LEASE CREDIT VALUE: The net value of all credit detail lines on a return with the same Lease and sales month/year. OGRID: The Oil and Gas reporter’s identification number. This number is generated by ONGARD when the oil and gas account is created. OGR-1: The Oil and Gas Royalty Summary Return. OGR-2: The Oil and Gas Royalty Detail line return.

ONGARD: The Oil and Natural Gas Administration and Revenue Database. OUTSTANDING SUSPENDED DETAIL REPORT: A notice of all detail lines in suspense for the OGRID. PUN: (Production Unit Number) A unique identifier for one or more well completions. The number is assigned by the New Mexico Taxation and Revenue Department based on master operator, property name identification and pool, including Unitization and Communitization matters. The PUN is part of the royalty reporting detail record. REMITTANCE: A payment posted to the ONGARD system. ROYALTY REMITTANCE ASSESSMENT: An invoice for underpayment of the royalty due on an oil and gas royalty return. ROYALTY REMITTANCE CREDIT: A notice of overpayment of royalty on an oil and gas royalty return. SUSPENDED DETAIL LINE: A detail line from the OGR-2 that has been suspended due to an invalid PUN, Lease, or other critical error. The royalty associated with the line cannot be distributed until the line is removed from suspense.

REPORT & PAYMENT DUE DATES

Royalty returns must be mailed, delivered, or electronically transmitted, on or before the twenty-fifth (25th) day of the second month after the production month. For example, a return for the 04/2002 sales period must be sent or transmitted before 06/25/2002. Royalty payment due dates are established by rule and vary according to the reporter’s status as a SMALL (average monthly payments less than $25,000) or LARGE (average monthly payments greater than $25,000) royalty payer. Small royalty payers must submit their royalty payment by the 25th day of the second month following the production month for which the report is required. Large royalty payers must submit their royalty payment by the 20th day of the month

following the production month. Royalty reporters who fail to make timely payments will be assessed interest. Interest is charged at the rate of 1.25% per month beginning the day after the royalty due date and continuing until the date the royalty is paid. (Section 56-8-3 NMSA, 1978) Two payment methods are available to LARGE royalty payers. 1. Accelerated Royalty Payment: The royalty reporter must submit a payment amount equal to the state royalty due for the reporting period. The payment is submitted without the royalty return. The return is not due until the 25th day of the following month.

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2. Advance Royalty Payment: The payment due date is the 25th day of the second month following the production month provided the royalty reporter maintains an Advance Royalty deposit account with the SLO. The deposit amount must be equal to the reporter’s average monthly royalty payment based on the twelve monthly payments through the latest March 31st. For example, if a reporter’s monthly payment average for the previous twelve months through the latest March

31st is 30,000, the Advance Royalty payment would be $30,000. The Advance Royalty payment amount must be re-calculated annually and increases, if needed, must be submitted with the July royalty return. The SLO will provide payment information from the ONGARD database to each royalty reporter. This information is to be used to determine the minimum Advance Royalty amount required.

OIL AND GAS ROYALTY PROGRAM The New Mexico State Land Office (SLO) administers the royalty program on the production and disposition of oil and gas products derived from New Mexico state lands. This includes the processing of hardcopy (paper) and electronic royalty returns and management and maintenance of associated files and records. The SLO administers a comprehensive audit and compliance program that examines royalty data for reporting accuracy and compliance with lease terms, statutes, rules and regulations. The SLO coordinates the processing of hardcopy returns with the New Mexico Taxation and

Revenue Department (TRD). The TRD receives the return from the royalty reporter, inputs the return data into ONGARD and processes the return’s royalty payment. The inputted returns are batched, microfilmed and transferred to the SLO for editing, error correction and final posting to the ONGARD database. Electronic returns are directly transmitted to the SLO by the royalty reporter. The associated royalty payment is also electronically transmitted to the state using EFT (Electronic Funds Transfer) procedures.

OIL AND GAS ROYALTY RETURNS

Oil and natural gas producers operating in New Mexico are required to file monthly royalty returns. The oil and gas activities that occurred during the production month must be reported at the PUN/Lease level for each property for which the reporter is responsible as long as the property (lease, communitization or unitization) continues to produce. The return must include detailed production and sales information for each PUN/Lease. Every transaction reported on a detail line must include all applicable information as requested on the OGR-2 Detail Return Form. Reported detail line royalty due information must be summarized and reported on the OGR-1 Summary Return. The OGR-1 Summary Return must also include information on all credits applied and all assessments paid on the return.

A royalty return consists of an OGR-1 Summary Return form, an OGR-2 Detail Report form(s), an OGR2-C Continuation form if necessary, the remittance document and the royalty payment. A remittance document is not required if the payment is electronically submitted i.e. EFT. OGR-1 Oil and Gas Remittance Report. This form is used to summarize the monthly activity by the reporter for all properties being reported.

OGR-2 Oil and Gas Royalty Detail Report: This form is used to report line item detail for each transaction OGR-2 C Continuation Form: is used to report additional information on interest paid, NGL credit added to proceeds and Lease Credits being applied on the royalty return.

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OGR-1 Remittance Document: The remittance document must accompany the royalty payment. It is used to correctly post the payment to the specific OGRID account and royalty return. Photocopies of the remittance document cannot be used. (A remittance document is not used if the payment is electronically submitted i.e. EFT.)

Royalty Payment. A payment for the total amount due on the royalty return. Electronically transmitted payments must meet SLO/TRD requirements. A payment is not required if the total amount due on a return is less than $1.00 (one dollar). Contact the New Mexico State Land

Office, Office of Administrative Management at 505-827-5704 for additional information.

Copies of the OGR-1, OGR-2, OGR-2C and remittance document are included in this kit. The OGR-1, OGR-2 and OGR-2C can be photocopied and used as needed. The OGR-1 Remittance document cannot be photocopied. Additional forms are available by contacting the Royalty Management Division of the SLO. Forms are also available through our website:

www.nmstatelands.org

Electronic Oil and Gas Returns Royalty reporters are encouraged to file electronically. There are two options for electronic reporting. EDI reporting, created in 1993 and Comma Separated Value (CSV) reporting, created in 2001. Electronic filing using CSV requires internet access and software capable of producing a CSV file. Electronic returns have the same due dates as hardcopy returns. They must be transmitted to the New Mexico State Land Office (SLO) no later than the 2nd workday of each month. All forms and instructions for electronic reporting can be obtained by contacting the New Mexico State Land Office at (505) 827-5747, the ONGARD Service Center at (505) 827-5866 or by accessing our website:

www.nmstatelands.org/landoffice/minres/royal.asp Royalty reporters wishing to file electronic oil and gas reports must:

1. Obtain an electronic filing agreement. NOTE: The royalty reporting Electronic Filing Agreement serves both the EDI and CSV filer. The completed form must be returned to the following address.

Royalty Management Division New Mexico State Land Office

P. O. Box 1148 Santa Fe, New Mexico 87504-1148

2. EDI filers must obtain a “Transaction Set 185

Implementation Guide”. This guide details the EDI reporting requirements for oil and gas royalty returns.

3. Electronic reporters must complete the

Contact Information Form as detailed by the ONGARD Service Center.

4. Each filer must submit a royalty return test

file. Filers must send an error-free test file before any production data will be accepted electronically.

Paper (Hardcopy) Oil and Gas Returns The OGR-1 Summary Report and OGR-2 Detail Report (and OGR-2C if necessary) are used to report monthly production activity. The OGR-1 is also used when applying credits or paying assessments and to record specific payment categories such as accelerated royalty, advance royalty or self-assessed interest. The OGR-2 Detail Report is used to report new production detail information and to amend previously reported detail information. A payment for the total amount due and a completed Remittance Document must accompany the hardcopy report. Payments submitted

after the due date will be assessed interest at the rate of 1.25% per month or any fraction thereof. The hardcopy report, payment and remittance document are mailed to the:

New Mexico State Land Office C/O New Mexico Taxation and Revenue Department P O Box 2308 Santa Fe, NM 87504-2308

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http://www.nmstatelands.org/landoffice/minres/royal.asp

OGR-1 Summary Report

New Mexico State Land Office

SLO Form OGR-1 Rev. 01/99 OIL & GAS ROYALTY REMITTANCE REPORT (OGR-1)

1. Date Submitted (Month/Day/Year):……………………………………………….. __________

2. OGRID Number (in box)………………………………………………………….… __________

3. Final Return (“Y” or “N” in box):…………………………………………………. __________ 4. Remitted Return (“Y” or “N” in box):…………………………………………….. __________ Sales month/year _____/_____ 5. Accelerated Royalty Payment: Amount (in box):……………… __________ 6. Total Oil/Gas Royalties: (Total of “State Royalty” Column on OGR-2)………. __________ 7. Total Oil/Gas Interest: (Total of “Interest” Column in oGR-2C)…………….. __________ 8. Total Assessments Paid: (Attach assessment remittance documents) …… __________ 9. Total Royalty, Interest and Assessments Reported:………………………. __________ 10. Total Regular Credit Taken: (Attach credit notices):…………………………… __________ 11. Total Lease Credit Taken: (Total of “Lease Credit Amount Used” Column on OGR-2C): __________

Sales month/year _____/_____ 12. Use Accelerated Royalty: Payment previously submitted: Amount (in box) … __________ 13. Total Credit Taken:………………………………………………………………… __________

14. Net Advance Royalty Payment (or credit): See instructions :……………. __________

15. Total Remittance:…………………………………………………………………. __________

16. Type of Payment: (Check below)

(1)_____Fedwire (2)____ ACH credit (3)____ ACH debit (4) ____ Check FOR OFFICE USE ONLY

Postmark Date: _____/_____/_____ Validated Remittance Amt:______________ Receipt Date: _____/_____/_____ In/Out Check

THIS REPORT SUBMITTED BY: Company Name:___________________________________________ Telephone No: ________________________ Address: ____________________________________ City:______________________ State:________ Zip:_____________

This report for the month(s) of ________20_____ through _________20_____ consisting of _____OGR-2 pages has been examined by me and to the best of my knowledge and belief it is true, complete and pursuant to law and regulation.

Name:___________________________ Title:______________________ Date:________________________ Signature:______________________________________

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The following information is entered on the OGR-1 Summary Report. Line Line Heading Enter the following: 1. Date Submitted: The month, day and year that the report is being submitted. 2. OGRID Number: Your assigned oil and gas identification number. 3. Final Return: Yes or No. Enter Yes if a final report. Enter No if not a final report. 4. Remitted Return: Enter Yes if remittance is due and payment is being submitted.

Enter No if remittance is not due. 5. Accelerated Royalty: Enter the sales/month/year and payment amount for the product that was produced and sold/entitled. (See Report and Payment Due Dates to determine if you are subject to Accelerated Royalty requirements.) 6. Total Oil/Gas Royalties: Enter the total of the State Royalty Due column of all OGR-2s that

are part of the return. 7. Total Oil/Gas Interest: Enter the total self-assessed interest amount from the Interest

Column in the OGR-2C forms that are part of the return. 8. Total Assessments Paid: Enter the total of all assessments being paid on the report. Attach the “Tear Off” portion of the assessment notice to the report. 9. Royalty and Interest Reported: Enter the total of lines 6, 7 and 8. 10. Total Regular Credit Taken: Enter the total of all regular credits being applied on the report. Do not enter lease credits on this line. Attach the “Tear Off” portion of the applied credit notice to the report. 11. Total Lease Credit Taken: Enter the total of all lease credit amounts applied to OGR-2 detail

lines of the report. Complete and attach the OGR2-C Continuation Form. The total amount on the OGR-2 Continuation form should match the amount entered in line 11 of the OGR-1.

12. Use Accelerated Royalty: Enter the sales/month/year and amount of a previously submitted accelerated royalty payment. (See Report and Payment Due Dates to determine if you are subject to Accelerated Royalty.) 13. Total Credit Taken: Enter the sum of lines 10, 11 and 12. 14. Net Advance Payment or credit: Enter the amount to be posted to your Advance Royalty deposit account with the SLO. (See Report and Payment Due Dates to determine if you are subject to Advance Royalty requirements.) If you are applying previously submitted Advance Royalty deposit monies to this report, enter the amount as a credit. 15. Total Remittance: Enter the sum of line 9 less lines 13 and 14. Your payment must match the amount entered on line 15. 16. Type of Payment: Enter a check in the appropriate block to designate payment type. FOR OFFICE USE SECTION: Leave blank. This Report Submitted by: Enter you company name, telephone number and complete mailing

address. Enter information requested in “authentication” paragraph. Enter you name, title, signature and date report is being submitted.

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OGR-2 Detail Report

SLO FORM: OGR-2 REV: 02/95

NEW MEXICO STATE LAND OFFICE OIL & GAS ROYALTY DETAIL REPORT: (OGR-2) SLO FORM OGR-2

Company Name Page of

OGRID Number Sales Mo/Yr

BTU Gas Gas

Line PUN Lease Product TXN ARMS Volume NGL Content GROSS Transportation Marketing Processing STATE

Number Code Code Length BBL/MCF Gallons of GAS PROCEEDS Deduction Prep/Other Deductions ROYALTY

1 2 3 456789

1011 12

PAGE TOTAL: GRAND TOTAL:

Note: Round the dollar amounts to the nearest dollar. DO NOT use commas to designate thousands. Oil/Condensate to nearest barrel. NGL to the nearest Gallon.Gas/Gas Products to the nearest MCF (15.025 P.S.I.A.)

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The following information is entered on the OGR-2 Detail Report. Line or Column Heading Enter the following: Company Name: Enter your company name. Page ____ of _____: Enter the page number in sequence. OGRID Number: Enter your OGRID account identification number. Sales Mo/Yr: Enter the sales month and year the product is produced and sold/entitled. A separate OGR-2 page is required for each sales month/year. Do not combine sales months/years on the same OGR-2. PUN: Enter the PUN number as assigned by the State of New Mexico. The PUN number must be entered for each line entry. Lease Number: Enter the Lease number as assigned by the State of New Mexico. The lease number must be entered for each line entry. Product Code: Enter the product code assigned by the State of New Mexico for the product being sold. The acceptable codes are: 01 for Oil (BBLS)

02 for Oil condensate (BBLS)

03 for Gas, processed (residue) gas (MCF/ BTU)

04 for Gas, (wet) (MCF/BTU) 05 for Oil, other liquid hydrocarbons (BBLS) 07 for Gas Plants Products (NGL Gallons) (W/H (MCF) – Res (MCF)

14 for Oil, lost (BBLS)

16 for Gas, lost, flared or vented (MCF)

17 for CO2, Carbon Dioxide gas (MCF) Txn Code: Transaction Code. Enter the transaction assigned by the State of New

Mexico. The acceptable codes are: 51 for Regular payment 52 for Estimated payment 53 for Correction of estimated payment

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54 for Appeal/Court Action payment 55 for Audit & Compliance exception payment 59 for Settlement payment 60 for Transfer of royalty payment 63 for Compensatory royalty payment 65 for Stripper well payment Code 51 is the most commonly used transaction code. Arms Length: Enter Y if the reported sale is an Arm’s Length transaction. Enter N if the

reported sale is a Non-Arm’s Length transaction. (If left blank, the t r a n s- action will default to Y.)

Volume BBL/MCF: Report oil and condensate to the nearest whole barrel.

Report Natural Gas to the nearest MCF metered at the wellhead at 15.025 PSIA at 60 degrees Fahrenheit for unprocessed gas. For processed gas, report to the nearest MCF for Residue Gas and the equivalent MCF of the reported Natural Gas liquids.

NGL Gallons: Report the Natural Gas liquids (all component products in total) to the

nearest gallon. BTU: Report the BTU (settled basis – 15.025PSIA) content of processed Natural

Gas for Non-Arms Length transactions only. Report BTU for Arms Length transactions that are other than percent of proceeds (POP) contracts.

Gross Proceeds: Enter to the nearest whole dollar the value/actual price received for the

products on an entitlement or take basis for the production unit property before deductions.

Transport Deductions: Enter to the nearest whole dollar allowable transportation costs.

Gas Marketing Preparation/ Enter to the nearest whole dollar other allowable costs. Other: Gas Processing Deductions: Enter to the nearest whole dollar allowable processing costs. State Royalty: Calculate and enter the state royalty due for each detail line by multiplying

the Gross Proceeds column (less all deductions noted in the Deductions columns) by the applicable royalty rate.

Page Total: Enter the column totals for the last five columns of each OGR-2. Grand Total: Enter the grand total for all OGR-2 pages on the last OGR-2. Transfer

the total royalty due amount to line 6 of the OGR-1 Summary Report.

Points to remember: I. A separate OGR-2 form is required for each sales/month/year being reported. II. Do not enter more than twelve lines of information per OGR-2 form. Each transaction reported on

the OGR-2 is identified by page and line number. III. Be sure to distinguish between numeric zero and 1 and alphabetic O and I when entering the lease

number. IV. Be sure that the correct royalty rate is used to compute the royalty due amount for each reported

transaction. V. Contact the SLO at 505-827-5871 for assistance if the lease number or PUN number is not known

or if the PUN or lease is inactive. In addition, the SLO has a website available with PUN/lease information. This site can be accessed through the Royalty Management Section of www.nmstatelands.org Use the default PUN or lease number to report the transaction if the correct PUN or lease number cannot be provided by the SLO (because issuance or reactivation of the number is pending). The default code for an unknown PUN is 9999999; the default code for an unknown lease number is 999999. If a transaction is reported with the default PUN or Lease code, a correction must be submitted in a subsequent report as soon as the correct PUN or lease number is obtained.

VI. Transactions reported with default PUN code “9999999” or default lease code “999999” will

suspend. These transactions will appear on the Suspended Detail Line Report that is sent each month to the reporter. The royalty reporter should contact the Revenue Processing Bureau at 505-827- 5747 for assistance in clearing the suspended transactions.

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OGR-2C Continuation Sheet

SLO FORM: OGR-2C

NEW MEXICO STATE LAND OFFICEOIL & GAS ROYALTY DETAIL REPORTCONTINUATION SHEET (OGR-2C)

COMPANY Name: PAGE ______ OF OGR-2

OGRID Number: SALE MO/YR__________

OGR-2 Interest NGL Credit Lease Lease Credit Reporter's Use OnlyLine no. Additions Credit No. Amount Used

Page Total

Grand

Total NOTE: Round the dollar amounts to the nearest whole dollar. Do not use commas to designate thousands

The OGR-2C Continuation Sheet is used to report additional information for transactions reported on the OGR-2 Detail Report. The following information is reported on the OGR-2C. Self assessed interest: The reporter can report self-assessed interest for any late reported OGR-2 detail line. The total of all self-assessed interest per all OGR-2C forms is also recorded on line 7 of the OGR-1 Summary Report. The remittance payment submitted for the return must include the total due for self- assessed interest. NGL credit additions: This column is no longer applicable. Add all proceeds received for liquids to gross

proceeds column of the OGR-2.

Lease credit application: The reporter can apply lease credits to detail line transactions reported on an OGR-2 if the detail line and the lease credit have the same beneficiary. The lease credit amount applied to the detail line cannot exceed the total royalty due for the line. A lease credit can be applied to multiple detail lines up to the total lease credit amount. Only one lease credit can be applied per detail line.

The following information is entered on the OGR-2C Continuation form. Line or Column Heading Enter the following: Company Name: Enter you company name. Page ___ of OGR-2: Enter the page number of the OGR-2 that contains the detail line for which this information is being reported. OGRID number: Enter your assigned OGRID account identification number. Sale Mo/Yr_____: Enter the sales mo/year of the transaction for which the additional information is being reported. Line No. from OGR-2: Enter the line number of the transaction for which the additional information is being reported. Interest: If self-assessed interest is being reported, enter the amount. NGL Credit Additions: If applicable, enter the Natural Gas Liquid Credit amount issued to your company for the detail line being reported on the OGR-2. Lease Credit No Enter the lease credit number if a lease credit is being applied. Lease Credit Amount Used: Enter the lease credit amount being applied to the detail line reported on

the OGR-2. The amount applied cannot exceed the royalty due for the detail line. The lease credit and the detail line must have the same beneficiary.

Reporter’s Use Only: Leave blank. Page Total: Enter the required column totals. Grand Total: Enter the grand total of all OGR-2C Continuation Form on the last OGR-2

form and transfer the appropriate totals to the applicable lines on the OGR-1 Summary Report.

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OGR-1 Remittance Document The OGR-1 Remittance Document must accompany the royalty payment. The OGR-1 Remittance Document is read by an optical scanner that electronically posts the payment to the respective OGRID account. Photocopies of the remittance document are not allowed because a misread can occur and the payment may be posted to the wrong account. You will be sent OGR-1 Remittance Documents approximately every six months. You can also request additional remittance documents at any time by contacting the Royalty Management Division, Revenue Processing Bureau at 505-827-5736. The following information is entered on the OGR-1 Remittance Document.

1. The OGR-1 Remittance Document should already reflect your company name and OGRID identification number. If not, contact the telephone number noted above.

2. Enter the payment amount in the Amount Paid blocks. This amount must match the royalty amount due per the royalty return.

3. Mail the payment, remittance document, and the royalty return to the address noted on the bottom

of the remittance document.

NEW MEXICO NEW MEXICO NEW MEXICO 0000000000 999999 18 TAXPAYER ID: 999999 Your OGRID will appear here AMOUNT PAID: ___ ___ ___ ___ ___ ___ ___ . ___ ___ SLO DUMMY REMITTANCE DOCUMENT : (Your account name and address : : will appear in this area.) : : : Mail To: Taxation & Revenue Department P.O. Box 2308 Santa Fe, New Mexico 87504-2308 NEW MEXICO NEW MEXICO NEW MEXICO

ACCOUNT NOTICES The New Mexico State Land Office generates oil and gas royalty account notices. The notices are classified into five categories:

A. Notice of Assessment of Royalty or Interest

B. Notice of Royalty Credit C. Notice of Edit Errors D. Notice of Suspended Items

Account notices require your immediate attention. All notices include a summary page that details the invoice type, the reason for the invoice, the dollars involved, instructions for payment or resolution, statutory references and turnaround document. Some notices also include a detail sheet requiring other review or action by the royalty reporter.

A) Notices of Assessment of Royalty or Interest

Royalty Remittance Assessment: A notice of underpayment of the royalty due on a return. Royalty Interest Assessment: A notice of interest assessed for late payment of oil and gas royalty. Interest is calculated at the rate of 1.25% per month beginning when payment is due until payment is made. Computation Assessment: A notice for underpaid royalty differences based on ONGARD’s re-computation of the data submitted by the royalty reporter. The notice includes a detail sheet with a summary of the line entries that contain the computational difference. Advance Royalty Assessment: A notice for underpayment of Advance Royalty. Audit and Compliance Assessment: A notice issued as a result of an audit or compliance review of volume or values.

B) Notices of Royalty Credit

Remittance Credit: A notice of overpayment of royalty on an oil and gas royalty return. Computation Credit: A notice for overpaid royalty differences based on ONGARD’s re-computation of the data submitted by the royalty reporter. The notice includes a detail sheet with a summary of the line entries that contain the computational difference. Lease Credit: A notice of overpayment of royalty of distributed funds that may be recouped against future royalty liability. The lease credit must be applied to detail entries with the same beneficiary.

C) Notice of Edit Errors

Rejected Line Report: A notice that a detail line in the OGR-2 Detail Report has not been accepted.

D) Notice of Suspended Items

Royalty Detail Suspense: A notice of line items in a return that have been placed in suspense. The most common cause for placing a detail line in suspense is an invalid PUN or Lease number.

FILING A CLAIM FOR REFUND A claim for refund must be made on a form provided by the State Land office. A copy of the “Claim for Refund” form is included in the SAMPLE REPORTING FORMS section of this kit. The claim form must contain the following information: If the claim is for distributed funds:

A. The amount of the erroneous payment.

B. The OGRID number, lease number and PUN.

C. Knowledge that the payment is not in any suspense fund.

D. Reasons why such payment was erroneous.

E. Signature.

If the claim is for non-distributed funds: A. The erroneous payment amount. B. OGRID number, lease number and

PUN.

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C. Knowledge that the payment is in a suspense fund.

D. Reasons why such payment was erroneous.

E. Signature. In addition, every request for refund must also include (a) an amended return if any information for prior reporting periods is being changed. The amended return must include detail line entries for all affected PUN/Lease combinations AND (b) a letter should be attached if the space provided on the claim form for the reason for the erroneous payment is insufficient. If a refund claim lacks any required information, the State Land Office may return it to the royalty

reporter requesting the additional information. The State Land Office will not consider a claim to be filed until all requirements are met. Statute of Limitations: A royalty reporter can apply for a refund up to two years after the erroneous payment was made. For example, if a reporter makes an erroneous payment on the December 2000 report, filed on or before February 25, 2001, the claim for refund must be filed before March 2003. The 2-year statute of limitations does not apply to a previously established credit.

COMMISSIONER RULINGS

The Commissioner of Public Lands is empowered by statute to issue rulings necessary for the

implementation or enforcement of any laws applicable to the oil and gas royalty program.

FREQUENTLY ASKED QUESTIONS

The New Mexico State Land Office is committed to providing the best possible customer service. SLO staff will promptly reply to questions or requests for assistance. Answers to some of the more commonly asked questions are provided. Please contact us if the provided responses do not adequately answer your questions. Question: If I file my oil and gas royalty report electronically, do I still need to submit a paper copy of my return? Answer: No, you do not, however the electronic report must comply with the filing requirements as detailed in the ELECTRONIC OIL and GAS RETURNS section of this filer’s kit. You must also have obtained prior approval from the SLO to file electronic returns. Please refer to the “Oil and Gas Electronic Reports” section for further details. Question: Can I photocopy OGR-1, OGR-2 and OGR-2C oil and gas royalty reporting forms? Answer: Yes, the OGR-1 Summary Report, OGR-2 Detail Report and the OGR-2C Continuation Report may be photocopied. The top margin of portrait forms and the left margin of landscape forms must be at lease three-quarters (.75) of an inch to meet TRD microfilming requirements. The remittance document cannot be photocopied. Remittance documents are sent to the reporter every six months or upon request.

16

17

Question: Can I use my personal computer to create my own OGR-1, OGR-2 and OGR-2C forms? Answer: Yes, you may use forms generated by your personal computer if they are pre-approved by the SLO and meet the requirements established by the New Mexico Taxation and Revenue Department. (The TRD processes the oil and gas returns for the SLO.) Send a copy of the proposed computer generated form(s) to the New Mexico State Land Office for approval. See the “For Further Service (Forms) section for additional details. Question: May the New Mexico State Land Office (SLO) compromise a liability if I am unable to pay? Answer: No, by law, the State Land Office cannot compromise an outstanding royalty liability because of the royalty reporter’s inability to pay. (Article 4, Section 32 of the NM Constitution.) Question: Can interest be forgiven by the State Land Office for late payment of royalties? Answer: No, interest must be paid on late payment of royalties. Abatements can be considered in very unusual circumstances. Question: What if I receive an assessment that I feel is incorrect? Do I still have to remit payment? Answer: No, but you must immediately contact the SLO and provide a detailed explanation why you feel the assessment is invalid. You must also submit documentation and if necessary, an amended return to correct the data that created the incorrect notice. See “For Further Service (Oil and Gas Royalty Report Matters) section for additional information. Question: I received a lease credit notice and I’m not sure what it’s for? How do I use it? Answer: ONGARD issues a lease credit when you submit credit detail lines intended to reverse previously submitted debit detail lines and the funds allocated to the debit lines have been distributed to the beneficiary. A lease credit can only be applied to new detail lines with the same beneficiary. You must complete and submit an OGR-2C if you intend to apply a lease credit to a current royalty report. NOTE: Check to see if you also received a remittance assessment that offsets the lease credit. If so, the remittance assessment resulted because you were attempting to use previously allocated royalty (the value of the credit line entries) toward newly reported royalty. Since the lease credit was issued, the remittance assessment must be paid. Question: I received a remittance assessment and I don’t understand why. I also received a Rejected Line Report but the lines on the report don’t seem to match the lines on the remittance assessment amount. What do I do? Answer: The remittance assessment resulted because you included credit detail line entries on your royalty return and they were rejected. The Rejected line report lists all rejected lines. If you included debit lines with dates beyond two years, these were also rejected. The remittance assessment is valid and due.

18

Question: I received a remittance assessment and I don’t understand why. I’ve checked my copy of the return and it indicates that I paid everything that was due. Answer: First check to see if you also received an offsetting lease credit. If so, the assessment is valid (see previous question and answer.) If you did not receive a lease credit, check your files to see if you submitted the correct payment amount. It’s possible that your payment was less then the royalty amount due on the return. (The royalty amount due is noted on line 9 of the OGR-1 Summary Report form.) If you still can’t determine the reason for the assessment, please contact the Revenue Processing Bureau at 505-827-5747. Question: I received a computation assessment and I don’t know why. I received a computation credit and I don’t know why. Answer: First look at the detail page(s) of the notice. You’ll note that the detail page refers to specific page and line numbers of your OGR-2 Detail Report. ONGARD has determined that the royalty due amount you computed for these detail lines is incorrect. Compare your copy of the report to the page and line numbers noted on the detail page of the notice. Check your computations; it’s possible that you used the incorrect royalty rate. (The lease number determines the royalty rate.) If you need help to ascertain the correct royalty rate, review your lease documents or call the Royalty Management Division at 505-827-5871. If you still cannot determine the reason for the notice, check the SLO website or contact the Revenue Processing Bureau at 505-827-5747. NOTE: If you used the wrong royalty rate and received a computation assessment, you can either pay the assessment or submit an amended return to reverse the incorrect detail lines and re-post the correct information. If you used the wrong royalty rate and received a computation credit, you can use the credit on a future royalty return or submit an amended return to reverse the incorrect detail lines and re-post the correct information. (See Example # 5) Contact the Revenue Processing Bureau at 505-827-5747 if you have questions regarding amended returns. Question: I received a Royalty Detail Suspense Report. What do I do? Answer: The Royalty Detail Suspense Report advises you that some of the detail line entries reported on previously filed OGR-2 Detail Reports have been suspended. You’ll note that the report lists the detail lines that have been suspended and the cause of the suspension. Compare the suspended lines to your copies of the royalty reports. Determine if the line was incorrectly processed by the SLO. If you detect any such lines, contact the Royalty Management Division at 505-827-5747. If you determine that the suspended line was “as reported”, (posted to ONGARD exactly as reported on your royalty report) you must initiate corrective action as follows: I. If the PUN and/or Lease number is incorrect and no other adjustment to the line is necessary, enter

the correct information in the respective column and return the Royalty Detail Suspense Report to the SLO. The Revenue Processing Bureau will post your corrections to ONGARD using the suspense report as the source document. Retain a copy of the report for your records. Be sure to make the needed corrections to you internal systems and records to prevent future incorrect reporting.

II. If the PUN and/or lease number is incorrect and other adjustments are also needed, you must

submit an amended return to reverse the incorrect line and re-post the correct information.

III. If your records indicate that the PUN and/or Lease number you reported is correct or you do not

have the correct PUN or lease number in your records, contact the PUN/Lease desk at 505-827-5871. It is possible that the PUN and/or lease number has been deactivated or has not yet been issued.

Question: Does the New Mexico State Land Office have a website? Answer: Yes, you can access the SLO website at: www.nmstatelands.org

SAMPLE REPORTING FORMS Several examples are included in this package for illustrative purposes. Example # 1: Oil sale at wellhead with no transport deductions. Example # 2: Oil sale at well head with multiple properties (PUNs) some that have transport deductions. Example # 3: Paying an assessment in full with a royalty report containing a late reported transaction. Example # 4: Making a partial payment of an assessment and applying a credit independent of a monthly

report. Example # 5: Amended return to correct previously reported detail lines that caused a computation

assessment. Example # 6: Advance Royalty Payment. Example # 7: Advance Royalty Payment and OGR-2 detail lines. Example # 8: Making an Accelerated Royalty Payment Example # 9: Applying an Accelerated Royalty Payment.

19

20

4. Remitted Return? ( "Y" or "N") Y

5. Accelerated Royalty Payment: Sales month/Year……_______/______ Amount: (in box)__________________

6. Total Oil/Gas Royalties: 206

7. Total Oil/Gas Interest:

8. Total Assessments Paid: (Attach assessment notices)

9. Total Royalty, Interest and Assessments Paid: 206

10. Total Regular Credit Taken: (Attach credit notices)

11. Total Lease Credit Taken: (Total of Lease Credits noted on OGR-2C)

12. Use Accelerated Royalty Sales month/Year……_______/_______Payment Previously Submitted: Amount: (in box)__________________

13. Total Credit Taken:

14. Net Advance Royalty Payment (or credit):

15. Total Remittance: 206

16. Type of Payment: (Check box below) : (1) Fedwire (2) ACH credit (3) ACH debit (4) check

FOR OFFICE USE ONLYPostmark Date: ______/______/______ Validated Remittance Amoun$Receipt Date: ______/______/______ In.Out Check: THIS REPORT SUBMITTED BY:Company Name: DRILLEMDEEP INC. Telephone Number 901-555-5555Address: P. O. BOX 11111 City: ANYTOW N State: TX Zip Code: 12345 This report, for the month(s) of __10 / 2000_ through _10 / 2000__ consisting of ___1___OGR-2 pages, has been examined

by me and to the best of my knowledge and belief it is true, complete and pursuant to law and regulation.

Name John C Owner Title Boss 12/25/2000

EXAMPLE # 1:"OIL SALE AT WELLHEAD WITH NO TRANSPORT DEDUCTIONS:"

Arms length: YES Transaction Code: 51 Oil (BBL) 100Unit Price: $16.50 BBL Transport Deductions: N/A Report Date: 10/2000Lease Royalty Rate: 12.5%

New Mexico State Land OfficeSLO Form OGR-1 Rev. 01/99

OIL & GAS ROYALTY REMITTANCE REPORT (OGR-1)

1. Date Submitted: (Month/Day/Year) 12/25/2000

2. OGRID Number (in box) OGRID NAME: 4752

3. Final Return? ("Y" or 'N") N

Signature:

21

NEW MEXICO STATE LAND OFFICEEXAMPLE # 1 OIL & GAS ROYALTY DETAIL REPORT (OGR-2)

(Rev. 02/95)

COMPANY NAME: DRILLEMDEEP INC. PAGE 1 OF 1

OGRID NUMBER: 4752 SALE MO/YR: 10/2000

LN. PUN LEASE PRO. TXN ARMS VOLUME NGL BTU/GAS GROSS TRANS GAS/MKTG GAS PROC. STATENO. CODE CDE LNGH BBL/MCF GALLONS CONTENT PROCEEDS DEDUCT. PREP/DED. DEDUCT. ROYALTY

1 1234567 B01111 01 51 Y 100 1650 206

2

3

4

56789

101112 PAGE TOTAL 100 0 0 1650 0 0 0 206 GRAND TOTAL 100 0 0 1650 0 0 0 206

3. F inal Return? ("Y" or 'N ") N

4. Rem itted Return? ( "Y" or "N ") Y

5. Accelerated Royalty Paym ent: Sales m onth/Year… … _______/______ Am ount: (in box)__________________

6. Tota l O il/G as Royalties: 2568

7. Tota l O il/G as In terest:

8. Tota l Assessm ents Paid : (A ttach assessm ent notices)

9. Tota l Royalty, In terest and Assessm ents Paid: 2568

10. Tota l Regular C redit Taken: (A ttach credit notices)

11. Tota l Lease C redit Taken: (Tota l o f Lease C redits noted on O G R-2C)

12. Use Accelerated Royalty Sales m onth/Year… … _______/_______Paym ent P reviously Subm itted: Am ount: (in box)__________________

13. Tota l C redit Taken:

14. Net Advance Roya lty Paym ent (or credit):

15. Tota l Rem ittance: 2568

16. Type of Paym ent: (Check box below) : (1 ) Fedwire (2) ACH credit (3) ACH debit (4) check

FO R O FFICE USE O NLYPostm ark Date: ______/______/______ Validated Rem ittance Am oun$Receipt Date: ______/______/______ In .O ut Check : TH IS REPO RT SUBM ITTED BY:Com pany Nam e: DR ILLEM DEEP INC . Telephone Num ber 901-555-5555Address: P . O . BO X 11111 City: ANYT O W N S tate: T X Z ip Code: 12345 This report, for the m onth(s) of __11/ 2000_ through _11 / 2000__ consisting of ___1___O G R-2 pages, has been exam ined

by m e and to the best of m y knowledge and belief it is true, com plete and pursuant to law and regulation.

Nam e John C O wner T itle Boss 01/25/2001

S ignature:

22

EXAM PLE # 2:"O IL SALE AT W ELLH EAD W ITH M ULT IPLE PUNs, SO M E W ITH TR ANSPO RT DEDUCTIO NS:"Arm s length: YES T ransaction Code: 51 O IL BBLS: 1268 (TO T AL) Unit Price: $16.50 BBL T ransport Deductions: (2) $250, (4) $125 Report Date: 11-2000Lease Royalty Rate: 12.5% O G R-2 consists of 5 detail lines

New M exico S tate Land O fficeSLO Form O G R-1 Rev. 01/99

O IL & G AS RO YALTY REM ITTANCE REPO RT (O G R-1)

1. Date Subm itted: (M onth/Day/Year) 01/25/2001

2. O G RID Num ber (in box) O G RID NAM E: 4752

23


(Rev. 02/95)




1 1234567 B01111 01 51 Y 100 1650 206

2 3456789 A02222 01 51 Y 450 7425 250 897

3 1234567 B02222 01 51 Y 175 2888 361

4 2345678 L03333 01 51 Y 300 4950 125 603

5 4567891 E04444 01 51 Y 243 4010 501

67

89


24

EXAM PLE # 3:PAY IN G AN ASSESSM EN T IN FU LL W IT H A R O Y ALTY R ET U R N ; 1 transaction reported lateArm s length: YES T ransaction C ode: 51 P roduct C ode 04 U n it P rice: (1) $ 2.18, (2) $2.26 T ransport D eductions: (1) $76 R eport D ate: 1-2001Lease R oyalty R ate: 12.5% R em ittance Assessm ent no. A0012345 for $ 1,923.

N ew M exico S tate Land O fficeSLO Form O G R -1 R ev. 01/99

O IL & G A S R O YA LTY R EM ITTA N C E R EP O R T (O G R -1)

1. D ate S ubm itted: (M onth /D ay/Year) 03/25/2001

2. O G R ID N um ber (in box) O G R ID N AM E: 4752

3. F ina l R eturn? ("Y" or 'N ") N

4. R em itted R eturn? ( "Y" or "N ") Y

5. Acce lerated R oya lty Paym ent: Sa les m onth /Year… … _______/______ Am ount: (in box)__________________

706. Tota l O il/G as R oyalties:

7 . Tota l O il/G as In terest: R em ittance Asm t: A0012345

8. Tota l Assessm ents P aid: (A ttach assessm ent notices) 1923

9. Tota l R oya lty, In terest and Assessm ents Pa id : 1993

10. Tota l R egular C redit Taken: (A ttach cred it no tices)

11. Tota l Lease C redit Taken: (Tota l o f Lease C red its noted on O G R -2C )

12. U se Acce lera ted R oya lty Sa les m onth /Year… … _______/_______Paym ent P reviously Subm itted: Am ount: (in box)__________________

13. Tota l C red it Taken:

14. N et A dvance R oya lty Paym ent (or cred it):

15. Tota l R em ittance: 1993

16. Type o f P aym ent: (C heck box below) : 4 (1 ) Fedw ire (2) AC H cred it (3 ) AC H deb it (4 ) check

FO R O FFIC E U SE O N LYPostm ark D ate: ______/______/______ Validated R em ittance Am oun $R eceip t D ate: ______/______/______ In .O ut C heck: TH IS R EP O R T S U B M ITTED B Y:C om pany N am e: D R ILLEM D EEP IN C . T elephone N um ber 901-555-5555Address: P . O . BO X 11111 C ity: AN YT O W N S tate: T X Z ip C ode: 12345 Th is report, for the m onth(s) o f __12/ 2000_ through _01 / 2001__ cons is ting of ___2___O G R-2 pages, has been exam ined



S ignature:

25

EXAMPLE # 3, PAGE 1 OF THE OGR-2 DETAIL REPORT:This transaction is being timely reported.

OIL & GAS ROYALTY DETAIL REPORT: OGR-2 SL0 FORM: OGR-2 (Rev. 02/95)


OGRID NUMBER: 4752 SALE MO/YR: 01 2001


1 1095395 E09707 04 51 Y 227 1.05 495 76 52

2

3

4

56789

101112 PAGE TOTAL 227 0 1.05 495 76 0 0 52 GRAND TOTAL 227 0 1.05 495 76 0 0 52

26

EXAMPLE # 3; PAGE 2 OF THE OGR-2 DETAIL REPORT:This transaction is being reported late. An interest assessment may result from the return.


COMPANY NAME: DRILLEMDEEP INC PAGE 2 OF 2



1 1057666 K04844 04 51 Y 65 1.05 147 18

2

3

4

56789

101112 PAGE TOTAL 65 0 1.05 147 0 0 0 18 GRAND TOTAL 65 0 1.05 147 0 0 0 18

EXAM PLE # 4C LEAR IN G PAR TIAL ASSESSM EN T B Y APPLYIN G A C R ED IT AN D PAYM EN TAssessm ent no. A0034567 for $ 3,975 R eturn date: 04/25/2001C redit no. C 0056789 for $ 385Paym ent for $ 2590 Assessm ent w ill be re-issued for rem ain ing balance of $1,000





3. F ina l Return? ("Y" or 'N ") N


5. Accelerated Royalty Paym ent: Sa les m onth/Year… … _______/______ Am ount: (in box)__________________

6. Tota l O il/G as Royalties:

7 . Tota l O il/G as In terest: Rem ittance Asm t: A0034567

8. Tota l Assessm ents Paid : (A ttach assessm ent notices) 2975

9. Tota l Royalty, In terest and Assessm ents Paid : 2975 Rem ittance Credit: A0056789

10. Tota l Regular C red it Taken: (A ttach cred it notices) 385

11. Tota l Lease C red it Taken: (Tota l o f Lease C red its noted on O G R-2C)

12. Use Accelerated Royalty Sa les m onth/Year… … _______/_______Paym ent P reviously Subm itted: Am ount: (in box)__________________

13. Tota l C red it Taken: 385

14. Net Advance Royalty Paym ent (or cred it):


16. Type of Paym ent: (Check box be low) : (1) Fedwire (2) ACH cred it (3) ACH debit (4) check

FO R O FFICE USE O NLYPostm ark D ate: ______/______/______ Validated R em ittance Am oun$R eceipt D ate: ______/______/______ In .O ut C heck : TH IS REPO RT SUBM ITTED BY:C om pany N am e: D R ILLEM D EEP IN C . Telephone N um ber 901-555-5555Address: P . O . BO X 11111 C ity: AN YTO W N S tate: TX Z ip C ode: 12345 This report, for the m onth(s) of ___ through ___ consisting of ___0___O G R-2 pages, has been exam ined



S ignature:

27

EXAM PLE # 5AM ENDED RETURN; CORRECTING LEASE ERROR THAT CAUSED COM PUTATION ASSESSM ENTThe reporter's 03/2001 return contained an error in the Lease num ber field. The error resulted in a m iscalculationof the royalty due for the detail line. The error created com putation assessm ent no. A0055555 for $362.The reporter is correcting the error on this am ended return to clear the assessm ent from the ONGARD system .

New Mexico State Land OfficeSLO Form OGR-1 Rev. 01/99


1. Date Submitted: (Month/Day/Year) 05/25/01

2. OGRID Number (in box) OGRID NAME: 4752


4. Remitted Return? ( "Y" or "N") Y

5. Accelerated Royalty Payment: Sales month/Year… … _______/______ Amount: (in box)__________________

6. Total O il/Gas Royalties: 0

7. Total O il/Gas Interest:


9. Total Royalty, Interest and Assessments Paid:



12. Use Accelerated Royalty Sales month/Year… … _______/_______Payment Previously Submitted: Amount: (in box)__________________



15. Total Remittance: 0

16. Type of Payment: (Check box below) : (1) Fedwire (2) ACH credit (3) ACH debit (4) check

FOR OFFICE USE ONLYPostm ark Date: ______/______/______ Validated Rem ittance Am oun$Receipt Date: ______/______/______ In.Out Check: THIS REPORT SUBMITTED BY:Com pany Nam e: DRILLEMDEEP INC. Telephone Num ber 901-555-5555Address: P. O . BOX 11111 City: ANYTOW N State: TX Zip Code: 12345 This report, for the m onth(s) of _03/2001_ through _03/2001_ consisting of ___1___OGR-2 pages, has been exam ined


Nam e John C Owner Title Boss 05/25/2001

Signature:

28

29

EXAMPLE # 5:Wrong lease number entered on original return, causing miscalculation of royalty due amount.Incorrect line is being reversed and correct line is being entered. No additional royalty is dueCorrecting entry intended to clear computation assessment from ONGARD system.





1 1056009 V03630 04 51 Y -3983 -8679 -1085

2 1056009 B01867 04 51 Y 3983 8679 1085

3

4

56789

101112 PAGE TOTAL 0 0 0 0 0 0 0 0.00 GRAND TOTAL 0 0 0 0 0 0 0 0.00

EXAM PLE # 6ADVANCE RO YALTY PAYM ENT

New M exico State Land O fficeSLO Form O G R-1 Rev. 01/99





4. Rem itted Return? ( "Y" or "N") Y

5. Accelerated Royalty Paym ent: Sales m onth/Year… … _______/______ Am ount: (in box)__________________

6. Total O il/G as Royalties:

7. Total O il/G as Interest:

8. Total Assessm ents Paid: (A ttach assessm ent notices)

9. Total Royalty, Interest and Assessm ents Paid:

10. Total Regular Credit Taken: (A ttach credit notices)

11. Total Lease Credit Taken: (Total of Lease Credits noted on O G R-2C)

12. Use Accelerated Royalty Sales m onth/Year… … _______/_______Paym ent Previously Subm itted: Am ount: (in box)__________________


14. Net Advance Royalty Paym ent (or credit): 33500

15. Total Rem ittance: 33500

16. Type of Paym ent: (Check box below) : 1 (1) Fedwire (2) ACH credit (3) ACH debit (4) check

FO R O FFICE USE O NLYPostm ark Date: ______/______/______ Validated Rem ittance Am oun$Receipt Date: ______/______/______ In.O ut Check: THIS REPO RT SUBM ITTED BY:Com pany Nam e: DRILLEM DEEP INC. Telephone Num ber 901-555-5555Address: P . O . BO X 11111 City: ANYTO W N S tate: TX Z ip Code: 12345 This report, for the m onth(s) of ___ through ___ consisting of ___0___OGR-2 pages, has been exam ined


Nam e John C Owner T itle Boss 07/25/2001

S ignature:

30

EXAM PLE # 7AD VAN C E R O Y ALTY PAY M EN T W IT H O G R -2 D ET AIL L IN ES





3. F ina l Return? ("Y" or 'N ") N


5. Accelerated Royalty Paym ent: Sa les m onth/Year… … _______/______ Am ount: (in box)__________________

6. Tota l O il/G as Royalties: 38184

7. Tota l O il/G as In terest:

8. Tota l Assessm ents Paid : (A ttach assessm ent notices) 38184

9. Tota l Royalty, In terest and Assessm ents Paid :

10. Tota l Regular C red it Taken: (A ttach cred it notices)

11. Tota l Lease C red it Taken: (Tota l o f Lease C red its noted on O G R-2C)

12. Use Accelerated Royalty Sa les m onth/Year… … _______/_______Paym ent P reviously Subm itted: Am ount: (in box)__________________

13. Tota l C red it Taken:

14. Net Advance Royalty Paym ent (or cred it): 38000


16. Type of Paym ent: (Check box be low) : 1 (1) Fedwire (2) ACH cred it (3) ACH debit (4) check

FO R O FFICE USE O NLYPostm ark D ate: ______/______/______ Validated R em ittance Am oun$R eceipt D ate: ______/______/______ In .O ut C heck : TH IS REPO RT SUBM ITTED BY:C om pany N am e: D R ILLEM D EEP IN C . Telephone N um ber 901-555-5555Address: P . O . BO X 11111 C ity: AN YTO W N S tate: TX Z ip C ode: 12345 This report, for the m onth(s) of _06/2001_ through _06/2001_ consisting of ___1___O G R-2 pages, has been exam ined



S ignature:

31

32


(Rev. 02/95)




1 1234567 B01111 01 51 Y 7061 116507 14563

2 3456789 A02222 01 51 Y 4500 74250 2500 8969

3 1234567 B02222 01 51 Y 1750 28875 3609

4 2345678 L03333 01 51 Y 3000 49500 1250 6031

5 4567891 E04444 01 51 Y 2430 40096 5012

67

89


EXAM PLE # 8ACCELERATED RO YALTY PAYM ENT

New M exico State Land O fficeSLO Form O G R-1 Rev. 01/99





4. Rem itted Return? ( "Y" or "N") Y

5. Accelerated Royalty Paym ent: Sales m onth/Year… … 08/2001 Am ount: (in box)__________________ 9156

6. Total O il/G as Royalties:

7. Total O il/G as Interest:

8. Total Assessm ents Paid: (A ttach assessm ent notices)

9. Total Royalty, Interest and Assessm ents Paid:

10. Total Regular Credit Taken: (A ttach credit notices)

11. Total Lease Credit Taken: (Total of Lease Credits noted on O G R-2C)

12. Use Accelerated Royalty Sales m onth/Year… … _______/_______Paym ent Previously Subm itted: Am ount: (in box)__________________


14. Net Advance Royalty Paym ent (or credit):

15. Total Rem ittance: 9156

16. Type of Paym ent: (Check box below) : 1 (1) Fedwire (2) ACH credit (3) ACH debit (4) check

FO R O FFICE USE O NLYPostm ark Date: ______/______/______ Validated Rem ittance Am oun$Receipt Date: ______/______/______ In.O ut Check: THIS REPO RT SUBM ITTED BY:Com pany Nam e: DRILLEM DEEP INC. Telephone Num ber 901-555-5555Address: P . O . BO X 11111 City: ANYTO W N S tate: TX Z ip Code: 12345 This report, for the m onth(s) of _06/2001_ through _06/2001_ consisting of ___1___OGR-2 pages, has been exam ined



S ignature:

33

EXAM PLE # 9APPLYING A PREVIO US ACCELERATED RO YALTY PAYM ENT

New M exico State Land O fficeSLO Form O G R-1 Rev.01/99 O IL & G AS RO YALTY REM ITTANCE REPO RT (O G R-1)

Date Subm itted: (M onth/Day/Year) 10/25/011.

O G RID Num ber (in box) O G RID NAM E: 47522.

Final Return? ("Y" or 'N") N3.

Rem itted Return? ( "Y" or "N") Y4.

Accelerated Royalty Paym ent: Sales m onth/Year… … ______/_______5. Am ount: (in box)__________________

Total O il/G as Royalties: 91566.

Total O il/G as Interest:7.

Total Assessm ents Paid: (A ttach assessm ent notices) 8.

Total Royalty, Interest and Assessm ents Paid: 91569.

Total Regular Credit Taken: (A ttach credit notices)10.

Total Lease Credit Taken: (Total of Lease Credits noted on O G R-2C)11.

Use Accelerated Royalty Sales m onth/Year… … __08__/_200112. Paym ent Previously Subm itted: Am ount: (in box)__________________ 9156

Total Credit Taken:13.

Net Advance Royalty Paym ent (or credit):14.

Total Rem ittance:15.

Type of Paym ent: (Check box below) : 16. (1) Fedwire (2) ACH credit (3) ACH debit (4) check

FO R O FFICE USE O NLYPostm ark Date: ______/______/______ Validated Rem ittance Am oun$Receipt Date: ______/______/______ In.O ut Check: THIS REPO RT SUBM ITTED BY:Com pany Nam e: DRILLEM DEEP INC. Telephone Num ber 901-555-5555Address: P . O . BO X 11111 City: ANYTO W N S tate: TX Z ip Code: 12345 This report, for the m onth(s) of _06/2001_ through _06/2001_ consisting of ___1___OGR-2 pages, has been exam ined



S ignature:

34

35

EXAMPLE # 9: APPLYING A PREVIOUS ACCELERATED ROYALTY PAYMENT.

NEW MEXICO STATE LAND OFFICEOIL & GAS ROYALTY DETAIL REPORT (OGR-2)

(Rev. 02/95)




1 1063390 E03277 01 51 Y 1212 30153 3769

2 1151681 E06078 01 51 Y 1687 43095 5387

3

4

5

67

89


36

REPORTING FORMS The following reporting forms are attached. Additional forms are available by contacting:

FORMS Revenue Processing Bureau Royalty Management Division New Mexico State Land Office P. O. Box 1148 Santa Fe, New Mexico 87504-1148 (505) 827-5736

In addition, you may download these forms from our website:

www.nmstatelands.org/landoffice/minres/royal.asp

I. New Mexico Oil and Gas Royalty Remittance Report (OGR-1)

II. New Mexico Oil and Gas Royalty Detail Report (OGR-2)

III. New Mexico Oil and Gas Royalty Detail Report Continuation Sheet (OGR-2C)

IV. Claim for Refund; Distributed Funds

V. Claim for Refund; Undistributed Funds

http://www.nmstatelands.org/landoffice/minres/royal.asp

New Mexico State Land OfficeSLO Form OGR-1 Rev.01/99


1. Date Submitted: (Month/Day/Year)

2. OGRID Number (in box) OGRID NAME:

3. Final Return? ("Y" or 'N")

4. Remitted Return? ( "Y" or "N")

5. Accelerated Royalty Payment: Sales month/Year……_______/______ Amount: (in box)__________________

6. Total Oil/Gas Royalties:

7. Total Oil/Gas Interest:


9. Total Royalty, Interest and Assessments Paid:



12. Use Accelerated Royalty Sales month/Year……_______/_______Payment Previously Submitted: Amount: (in box)__________________



15. Total Remittance:

16. Type of Payment: (Check box below) : (1)___ Fedwire (2) ___ACH credit (3) ___ACH debit (4) ___check

FOR OFFICE USE ONLYPostmark Date: ______/______/______ Validated Remittance Amount: $Receipt Date: ______/______/______ In.Out Check: THIS REPORT SUBMITTED BY:Company Name: _____________________________________________ Telephone Number ____________________Address: ____________________________________________________________________________________________City: ______________________________ State: _____________________ Zip Code: ____________________ This report, for the month(s) of ______ 20_____ through ______20_____ consisting of _______OGR-2 pages, has been examined

by me and to the best of my knowledge and belief it is true, complete and pursuant to law and regulation.

Name ____________________________________ Title _____________________ Date ____________________

Signature:

SLO FORM: OGR-2 REV: 02/95

NEW MEXICO STATE LAND OFFICE OIL & GAS ROYALTY DETAIL REPORT: (OGR-2) SLO FORM OGR-2

Company Name Page of

OGRID Number Sales Mo/Yr

BTU Gas Gas

Line PUN Lease Product TXN ARMS Volume NGL Content GROSS Transportation Marketing Processing STATE

Number Code Code Length BBL/MCF Gallons of GAS PROCEEDS Deduction Prep/Other Deductions ROYALTY

1 2 3 456789

1011 12

PAGE TOTAL: GRAND TOTAL:

Note: Round the dollar amounts to the nearest dollar. DO NOT use commas to designate thousands. Oil/Condensate to nearest barrel. NGL to the nearest Gallon.Gas/Gas Products to the nearest MCF (15.025 P.S.I.A.)

SLO FORM: OGR-2C

NEW MEXICO STATE LAND OFFICEOIL AND GAS ROYALTY DETAIL REPORT CONTINUATION SHEET (0GR-2C)

COMPANY Name: PAGE ____ OF OGR-2

OGRID Number: SALE MO/YR____

OGR-2 Interest NGL Credit Lease Lease Credit Reporter's Use OnlyLine no. Additions Credit No. Amount Used

Page

Total

Grand

Total

NOTE: Round the dollar am ounts to the nearest whole dollar. Do not use commas to designate thousands

OGRCR-1 08/94

NEW MEXICO STATE LAND OFFICE ROYALTY MANAGEMENT DIVISION

CLAIM FOR REFUND

Oil and Gas Royalties – Erroneous Payment Distributed Funds

Purpose: This form is used to apply for a refund from the New Mexico State Land Office for oil and gas royalties that have been paid and distributed to the permanent fund. Amended Data: If you are changing any information for prior reporting periods (sales months, by product), you must submit an amended report for each period affected. Failure to submit the required amended report(s) will prevent or delay the processing of your oil and gas royalty claim for refund. Letter of Explanation: Attach a letter of explanation if the Reason for an Erroneous Payment section of the claim form is insufficient to fully explain why you are submitting your claim request. Signature: The oil and gas royalty payor or an authorized agent must sign the claim form. State District Court Involvement: If the claim for refund exceeds $2,000, approval or disapproval must also be obtained from the State District Court for Santa Fe County by the Commissioner of Public Lands prior to any disbursement of state funds. Authority – Claimant Time Limitations: Section 37-1-23 (NMSA, 1978, as amended) Contractual Liability; statute of limitations provides that an action must be based on a valid written contract (e.g., oil and gas lease) and each claim permitted by this section shall be forever barred unless brought within two years from the time of accrual. Such accrual time relates to the time the erroneous payment was made. The two-year statute of limitations does not apply to previously established Lease credits. Presumption of Distribution: If the reporter has not received notification from the SLO of suspended funds within one month of the payment for which the claim is requested, the applicant can assume such payment(s) is/are not carried in the suspense account. Subject to Audit: Refunds are subject to audit at the discretion of the Commissioner of Public Lands. Registered Notification – Time Limitation: If the Commissioner of Public Lands discovers an erroneous payment, notice is to be given, by registered mail, to the last recorded address of the person making such erroneous payment. All claims for refund of money shall be filed within ninety days after notice. All claims for refund not filed with the Commissioner of Public Lands within the time prescribed shall be forever barred. (Section 19-7-60) PUN/Lease – Report Line Entries: The applicant should submit an amended report(s) for the separate PUN/Lease –Report Line entries. The line entries will be validated by the ONGARD system and reviewed and verified by the Royalty Management Division as part of the refund approval process.

OGRCR-1 07/98


CLAIM FOR REFUND

OIL AND GAS ROYALTIES – ERRONEOUS PAYMENT DISTRIBUTED FUNDS

Commissioner of Public Lands New Mexico State Land Office P. O. Box 1148 Santa Fe, New Mexico 87504-1148 Dear Sir:

Whereas,____________________________________________Dollars ($____________) were erroneously paid for oil and/or gas royalties by: OGRID NAME: _______________________________OGRID ID No: ___________________ to the Commissioner of Public Lands on account of Lease number: ______________ and PUN: ___________________; and Whereas, to the best of the knowledge of such applicant, such payment is not carried in any suspense fund by the State Land Office or its agent (if any) but has been distributed to the state permanent fund; and the Applicant states that the reasons why such payment was erroneously made are as follows: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Now, therefore the undersigned makes a claim for refund of said payment(s) from that part of the State Lands Maintenance Fund distributable to the fund into which such payment(s) was (were) erroneously made. Claimant petitions the Commissioner of Public Lands to investigate the facts herein and endorse his approval of this claim and take action thereon, as provided by Section 19-7-59 et. seq, NMSA 1978, as amended.

__________________________________________

Signature of Applicant/Claimant

OGRCR-2 07/98


Oil and Gas Royalties – Erroneous Payment

Non-distributed Funds

Instructions Purpose:

This form is used for applying for a refund from the New Mexico State Land Office for oil and gas royalties that have been paid but not distributed to a permanent fund. State notifications of such suspense fund payments should be in the possession of the applicant.

Amended Data:

If you are changing any information for prior reporting periods (sales months, by product), you must submit an amended report for each period affected. Failure to submit the required amended report(s) will prevent or delay the processing of your oil and gas royalty claim for refund.

Letter of Explanation:

Attach a letter of explanation if the Reason for an Erroneous Payment section of the claim form is insufficient to fully explain why you are submitting your claim request.

Signature:

The oil and gas royalty payor or an authorized agent must sign the claim form.

Authority – Claimant Time Limitation:

Section 37-1-23 (NMSA, 1978, as amended) Contractual Liability statute of limitations provides that an action must be based on a valid written contract (e.g. oil and gas lease) and each claim permitted by this section shall be forever barred unless brought within two years from the time of accrual. Such accrual time relates to the time the erroneous payment was made.

Subject to Audit:

Refunds are subject to audit at the discretion of the Commissioner of Public Lands.

Registered Notification – Time Limitation:

If the Commissioner of Public Lands discovers an erroneous payment, notice is to be given, by registered mail, to the last recorded address of the person making such erroneous payment. All claims for refunds of money shall be filed within ninety days after notice. All claims for refund not filed with the Commissioner of Public Lands within the time prescribed shall be forever barred. (Section 19-7-60).

OGRCR-2 07/98 NEW MEXICO STATE LAND OFFICE

ROYALTY MANAGEMENT DIVISION

Claim for Refund Oil and Gas Royalties – Erroneous Payment – Non-distributed Funds

Commissioner of Public Lands New Mexico State Land Office P. O. Box 1148 Santa Fe, New Mexico 87504-1148 Dear Sir:

Whereas, ___________________________________Dollars ($_____________) were erroneously paid

for oil and/or gas royalties by (OGRID NAME): __________________________________________ (OGRID

ID No): ___________________ to the Commissioner of Public Lands on account of Lease number:

____________ and PUN: _________________ or such amounts are represented by Credit Invoice No.

_______________ for suspended cash ____________, suspended detail ____________, or other (describe)

__________________________________________ and; Whereas, such payment is carried in an oil and gas royalty suspense fund by the State Land Office or its

agent (if any) but has not been distributed to the state permanent fund; Claimant states that the reason(s) why such payment was/were erroneously made are as follows:

_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________

Therefore, the undersigned makes a claim for refund of said payment from the oil and gas royalty suspense fund into which such payment was erroneously made.

Claimant petitions the Commissioner of Public Lands to investigate the facts herein and endorse his approval of this application and take action thereon, as provided by Section 19-7-59 et. seq, NMSA 1978, as amended.

__________________________________________ Signature of Applicant/Claimant

Notary Statement: (Applicant)______________________________________ being duly sworn states that the foregoing claim is made in good faith and the facts stated herein are true. Subscribed and sworn to before me this ___________day of _______________, 20__________.

My commission expires: ______________________________________

Notary Public:______________________________________________

Seal: _____________________________________________________

Approved ( ) Disapproved ( ) this the ___________________________day of ________________, 20_______.

___________________________________ Commissioner of Public Lands