30 CFR § 1206.110 - What general transportation allowance requirements apply to me?
(a) ONRR will allow a deduction for the reasonable, actual costs to transport oil from the lease to the point off of the lease under § 1206.110, § 1206.111, or § 1206.112, as applicable. You may not deduct transportation costs that you incur to move a particular volume of production to reduce royalties that you owe on production for which you did not incur those costs. This paragraph applies when:
(1)
(i) The movement to the sales point is not gathering;
(ii) For oil produced on the OCS, the movement of oil from the wellhead to the first platform is not transportation; and
(2) You value oil under § 1206.101 based on a sale at a point off of the lease, unit, or communitized area where the oil is produced; or
(3) You do not value your oil under § 1206.102(a)(3) or (b)(3).
(b) You must calculate the deduction for transportation costs based on your or your affiliate's cost of transporting each product through each individual transportation system. If your or your affiliate's transportation contract includes more than one liquid product, you must allocate costs consistently and equitably to each of the liquid products that are transported. Your allocation must use the same proportion as the ratio of the volume of each liquid product (excluding waste products with no value) to the volume of all liquid products (excluding waste products with no value).
(1) You may not take an allowance for transporting lease production that is not royalty-bearing.
(2) You may propose to ONRR a prospective cost allocation method based on the values of the liquid products transported. ONRR will approve the method if it is consistent with the purposes of the regulations in this subpart.
(3) You may use your proposed procedure to calculate a transportation allowance beginning with the production month following the month when ONRR received your proposed procedure until ONRR accepts or rejects your cost allocation. If ONRR rejects your cost allocation, you must amend your form ONRR–2014 for the months that you used the rejected method and pay any additional royalty due, plus late payment interest.
(c)
(1) Where you or your affiliate transport(s) both gaseous and liquid products through the same transportation system, you must propose a cost allocation procedure to ONRR.
(2) You may use your proposed procedure to calculate a transportation allowance until ONRR accepts or rejects your cost allocation. If ONRR rejects your cost allocation, you must amend your form ONRR–2014 for the months when you used the rejected method and pay any additional royalty and interest due.
(3) You must submit your initial proposal, including all available data, within three months after you first claim the allocated deductions on form ONRR–2014.
(d)
(1) Your transportation allowance may not exceed 50 percent of the value of the oil, as determined under § 1206.101 of this subpart.
(2) If ONRR approved your request to take a transportation allowance in excess of the 50-percent limitation under former § 1206.109(c), that approval is terminated as of January 1, 2017.
(e) You must express transportation allowances for oil as a dollar-value equivalent. If your or your affiliate's payments for transportation under a contract are not on a dollar-per-unit basis, you must convert whatever consideration you or your affiliate are paid to a dollar-value equivalent.
(f) ONRR may determine your transportation allowance under § 1206.105 because:
(1) There is misconduct by or between the contracting parties;
(2) ONRR determines that the consideration that you or your affiliate paid under an arm's-length transportation contract does not reflect the reasonable cost of the transportation because you breached your duty to market the oil for the mutual benefit of yourself and the lessor by transporting your oil at a cost that is unreasonably high. We may consider a transportation allowance to be unreasonably high if it is 10 percent higher than the highest reasonable measures of transportation costs including, but not limited to, transportation allowances reported to ONRR and tariffs for gas, residue gas, or gas plant product transported through the same system; or
(3) ONRR cannot determine if you properly calculated a transportation allowance under § 1206.111 or § 1206.112 for any reason, including, but not limited to, your or your affiliate's failure to provide documents that ONRR requests under 30 CFR part 1212, subpart B.
(g) You do not need ONRR's approval before reporting a transportation allowance.