(a)(1) A lease shall require payment of a royalty of not less than 12
1/2 percent of the value of the coal removed from a surface mine, except that such royalty rate shall be not more than 7 percent during the period beginning on July 4, 2025, and ending on September 30, 2034.
(2) A lease shall require payment of a royalty of 8 percent of the value of the coal removed from an underground mine, except that such royalty rate shall be not more than 7 percent during the period beginning on July 4, 2025, and ending on September 30, 2034.
(3) The value of coal removed from a mine is defined for royalty purposes in § 3483.4 of this title.
(b) The temporary royalty rate of not more than 7 percent during the period beginning on July 4, 2025, and ending on September 30, 2034, is applicable to all existing Federal coal leases that have not been terminated.
(c) The authorized officer shall have the discretion, upon the request of the lessee, to authorize the payment of an advance royalty in lieu of continued operation for any particular year in accordance with § 3485.2 of this title.
(d) An overriding royalty interest, production payment or similar interest that exceeds 50 percent of royalty first payable to the United States under the Federal lease, or when added to any other overriding royalty interest exceeds that percentage, except those created in order to finance a mine, shall not be created by a Federal lease transfer or surface owner consent. However, when an interest in a Federal lease or operating agreement is transferred, the transferor may retain an overriding royalty in excess of the above limitation if he/she shows that he/she has made substantial investments for improvements directly related to exploration, development and mining on the lands covered by the transfer that would justify a higher payment.
(e) The Secretary, whenever he/she determines it necessary to promote development or finds that the lease cannot be successfully operated under its terms, may waive, suspend or reduce the rental, or reduce the royalty but not advance royalty, on an entire leasehold, or on any deposit, tract or portion thereof, except that in no case shall the royalty be reduced to zero percent. An application for any of these benefits shall be filed with the authorized officer in accordance with part 3480 of this title.
[44 FR 42643, July 19, 1979, as amended at 47 FR 33151, July 30, 1982; 50 FR 8627, Mar. 4, 1985; 55 FR 2664, Jan. 26, 1990; 90 FR 36124, Aug. 1, 2025]
Notes of Decisions
Coastal States Energy Co. v. Watt, 629 F. Supp. 9 (D. Utah 1986).
· cites it 8× “The regulations further provided that any lease that, at the time of readjustment, has a royalty rate of less than the minimum royalty prescribed in 43 C.F.R. § 3473.3-2 “shall be readjusted to conform to the minimum prescribed in that section.”
Trail Mountain Coal Co. v. Utah Div. of State Lands & Forestry, 884 P.2d 1265 (Utah Ct. App. 1994).
· cites it 2× “Thus, we believe the Supreme Court has already decided the issues of contract ambiguity, the parties’ intent regarding the alternative payment schedule, and the establishment of the federal royalty rate.”
Valley Camp Of Utah, Inc. v. Babbitt, 24 F.3d 1263 (10th Cir. 1994).
“Subsequently, in an unrelated case, the Tenth Circuit held that the BLM could not automatically readjust production royalty rates to 8% without regard to specific production capacities of the leased land, as required by 43 C.F.R. 3473.3-2(a)(3) (1979). Coastal States Energy Co.”
Coastal States Energy Co. v. Hodel, 816 F.2d 502 (10th Cir. 1987).
· cites it 2× “43 C.F.R. § 3473.3-2 (a)(3) (1979). The BLM interpreted the foregoing regulation as meaning that on the anniversary dates of Coastal’s underground coal leases the Minerals Management Service had no authority to recommend a royalty rate less than 8% of the value of the coal…”
Valley Camp of Utah, Inc. v. Babbitt, 24 F.3d 1263 (10th Cir. 1994).
“Subsequently, in an unrelated case, the Tenth Circuit held that the BLM could not automatically readjust production royalty rates to 8% without regard to specific production capacities of the leased land, as required by 43 C.F.R. 3473.3-2(a)(3) (1979). Coastal States Energy Co.”
Coastal States Energy Co. v. Hodel, 816 F.2d 502 (10th Cir. 1987).
· cites it 2× “17 The IBLA, upholding, on appeal, the ruling of the BLM that under the applicable regulations Coastal's royalty rate must be initially readjusted to 8% of the value of the removed coal, rather than a lesser figure, quoted the following language with approval: 18 Departmental…”
— 43 C.F.R. § 3473.3-2(a) — 1 case
— 43 C.F.R. § 3473.3-2(a)(3) — 3 cases
Valley Camp Of Utah, Inc. v. Babbitt, 24 F.3d 1263 (10th Cir. 1994).
“Subsequently, in an unrelated case, the Tenth Circuit held that the BLM could not automatically readjust production royalty rates to 8% without regard to specific production capacities of the leased land, as required by 43 C.F.R. 3473.3-2(a)(3) (1979). Coastal States Energy Co.”
Valley Camp of Utah, Inc. v. Babbitt, 24 F.3d 1263 (10th Cir. 1994).
“Subsequently, in an unrelated case, the Tenth Circuit held that the BLM could not automatically readjust production royalty rates to 8% without regard to specific production capacities of the leased land, as required by 43 C.F.R. 3473.3-2(a)(3) (1979). Coastal States Energy Co.”
— 43 C.F.R. § 3473.3-2(d) — 3 cases
Coastal States Energy Co. v. Hodel, 816 F.2d 502 (10th Cir. 1987).
“43 C.F.R. § 3473.3-2 (a)(3) (1979). The BLM interpreted the foregoing regulation as meaning that on the anniversary dates of Coastal’s underground coal leases the Minerals Management Service had no authority to recommend a royalty rate less than 8% of the value of the coal…”
Coastal States Energy Co. v. Hodel, 816 F.2d 502 (10th Cir. 1987).
“17 The IBLA, upholding, on appeal, the ruling of the BLM that under the applicable regulations Coastal's royalty rate must be initially readjusted to 8% of the value of the removed coal, rather than a lesser figure, quoted the following language with approval: 18 Departmental…”
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