30 CFR 1206.354 - How do I determine generating deductions?

§ 1206.354 How do I determine generating deductions?

(a) If you determine the value of your geothermal resources under § 1206.352(b)(1)(i) of this subpart, you may deduct your reasonable actual costs incurred to generate electricity from the plant tailgate value of the electricity (usually the transmission-reduced value of the delivered electricity). You may deduct the actual costs you incur for generating electricity under your arm's-length power plant contract.


(1) You must base your generating costs deduction on your actual annual costs associated with the construction and operation of a geothermal power plant.

(i) You must determine your monthly generating deduction by multiplying the annual generating cost rate (in dollars per kilowatt-hour) by the amount of plant tailgate electricity measured (or computed) for the reporting month. The generating cost rate is determined from the annual amount of your plant tailgate electricity.

(ii) You must redetermine your generating cost rate annually either at the beginning of the same month of the year in which the power plant was placed into service or at a time concurrent with the beginning of your annual corporate accounting period. The period you select must coincide with the same period chosen for the transmission deduction under § 1206.353(b)(1). After you choose a deduction period, you may not later elect to use a different deduction period without ONRR approval.

(2) Your generating costs are your actual power plant costs during the reporting period, including:

(i) Operating and maintenance expenses under paragraphs (d) and (e) of this section;

(ii) Overhead under paragraph (f) of this section; and either

(iii) Depreciation under paragraphs (g) and (h) of this section and a return on undepreciated capital investment under paragraphs (g) and (i) of this section; or

(iv) A return on capital investment in the power plant under paragraphs (g) and (j) of this section.


(1) Allowable capital costs under paragraph (b) of this section are generally those for depreciable fixed assets (including costs of delivery and installation of capital equipment) that are an integral part of the power plant or are required by the design specifications of the power conversion cycle.


(i) You may include a return on capital you invested in the purchase of real estate for a power plant site if:

(A) The purchase is necessary; and,

(B) The surface is not part of the Federal lease.

(ii) The rate of return will be the same rate determined under paragraph (k) of this section.

(3) You may not deduct the costs of gathering systems and other production-related facilities.

(d) Allowable operating expenses include:

(1) Operations supervision and engineering;

(2) Operations labor;

(3) Auxiliary fuel and/or utilities used to operate the power plant during down time;

(4) Utilities;

(5) Materials;

(6) Ad valorem property taxes;

(7) Rent;

(8) Supplies; and

(9) Any other directly allocable and attributable operating expense.

(e) Allowable maintenance expenses include:

(1) Maintenance of the power plant;

(2) Maintenance of equipment;

(3) Maintenance labor; and

(4) Other directly allocable and attributable maintenance expenses that you can document.

(f) Overhead directly attributable and allocable to the operation and maintenance of the power plant is an allowable expense. State and Federal income taxes and severance taxes and other fees, including royalties, are not allowable expenses.

(g) To compute costs associated with capital investment, a lessee may use either depreciation with a return on undepreciated capital investment, or a return on capital investment in the power plant. After a lessee has elected to use either method, the lessee may not later elect to change to the other alternative without ONRR approval.


(1) To compute depreciation, you must use a straight-line depreciation method based on the life of the geothermal project, usually the term of the electricity sales contract, or other depreciation period acceptable to ONRR. You may not depreciate equipment below a reasonable salvage value.

(2) A change in ownership of the power plant does not alter the depreciation schedule established by the original lessee-owner for purposes of computing generating costs.

(3) With or without a change in ownership, you may depreciate a power plant only once.

(i) To calculate a return on undepreciated capital investment, multiply the remaining undepreciated capital balance as of the beginning of the period for which you are calculating the generating deduction allowance by the rate of return provided in paragraph (k) of this section.

(j) To compute a return on capital investment in the power plant, multiply the allowable capital investment in the power plant by the rate of return determined pursuant to paragraph (k) of this section. There is no allowance for depreciation.

(k) The rate of return must be 2.0 multiplied by the industrial rate associated with Standard & Poor's BBB rating. The BBB rate must be the monthly average rate as published in Standard & Poor's Bond Guide for the first month for which the allowance is applicable. You must redetermine the rate at the beginning of each subsequent calendar year.

(l) Calculate the deduction for generating costs based on your cost of generating electricity through each individual power plant.


(1) For new power plants or arrangements, base your initial deduction on estimates of allowable electricity generation costs for the applicable period. Use the most recently available operations data for the power plant or, if such data are not available, use estimates based on data for similar power plants.

(2) When actual cost information is available, you must amend your prior Form ONRR-2014 reports to reflect actual generating cost deductions for each month for which you reported and paid based on estimated generating costs. You must pay any additional royalties due (together with interest computed under § 1218.302 of this chapter). You are entitled to a credit for or refund of any overpaid royalties.

(n) In conducting reviews and audits, ONRR may require you to submit arm's-length power plant contracts, production agreements, operating agreements, related documents and all other data used to calculate the deduction. You must comply with any such requirements within the time ONRR specifies. Recordkeeping requirements are found at part 1212 of this chapter.

(o) At the completion of power plant dismantlement and salvage operations, you may report a credit for or request a refund of royalty in an amount equal to the royalty rate times the amount by which actual power plant dismantlement costs exceed actual income attributable to salvage of the power plant.

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.

United States Code
U.S. Code: Title 25 - INDIANS

§ 396 - Leases of allotted lands for mining purposes

§ 396a - Leases of unallotted lands for mining purposes; duration of leases

§ 396b - Public auction of oil and gas leases; requirements

§ 396c - Lessees of restricted lands to furnish bonds for performance

§ 396d - Rules and regulations governing operations; limitations on oil or gas leases

§ 396e - Officials authorized to approve leases

§ 396f - Lands excepted from leasing provisions

§ 396g - Subsurface storage of oil or gas

§ 397 - Leases of lands for grazing or mining

§ 398 - Leases of unallotted lands for oil and gas mining purposes

§ 398a - Leases of unallotted lands for oil and gas mining purposes within Executive order Indian reservations

§ 398b - Proceeds from rentals, royalties, and bonuses; disposition

§ 398c - Taxes

§ 398d - Changes in boundaries of Executive order reservations

§ 398e - Applications for permits to prospect for oil and gas filed under other statutes; disposition

§ 399 - Leases of unallotted mineral lands withdrawn from entry under mining laws

§ 400 - Leases for mining purposes of reserved and unallotted lands in Fort Peck and Blackfeet Indian Reservations

§ 400a - Lease for mining purposes of land reserved for agency or school; disposition of proceeds; royalty

§ 401 - Leases for mining purposes of unallotted lands in Kaw Reservation

§ 402 - Leases of surplus lands

§ 402a - Lease of unallotted irrigable lands for farming purposes

§ 403 - Leases of lands held in trust

§ 403a - Lease of lands on Port Madison and Snohomish or Tulalip Indian Reservations in Washington

§ 403a-1

§ 403a-2

§ 403b - Lease of restricted lands in State of Washington

§ 403c - Identity of lessor; period of lease

§ 404 - Sale on petition of allottee or heirs

§ 405 - Sale of allotment of noncompetent Indian

§ 406 - Sale of timber on lands held under trust

§ 407 - Sale of timber on unallotted lands

§ 407a to 407c - Omitted

§ 407d - Charges for special services to purchasers of timber

§ 408 - Surrender of allotments by relinquishment for benefit of children

§ 409 - Sale of lands within reclamation projects

§ 409a - Sale of restricted lands; reinvestment in other restricted lands

§ 410 - Moneys from lease or sale of trust lands not liable for certain debts

§ 411 - Interest on moneys from proceeds of sale

§ 412 - Payment of taxes from share of allottee in tribal funds

§ 412a - Exemption from taxation of lands subject to restrictions against alienation; determination of homestead

§ 413 - Fees to cover cost of work performed for Indians

§ 414 - Reservation of minerals in sale of Choctaw-Chickasaw lands

§ 415 - Leases of restricted lands

§ 415a - Lease of lands of deceased Indians for benefit of heirs or devisees

§ 415b - Advance payment of rent or other consideration

§ 415c - Approval of leases

§ 415d - Lease of restricted lands under other laws unaffected

§ 416 - Leases of trust or restricted lands on San Xavier and Salt River Pima-Maricopa Indian Reservations for public, religious, educational, recreational, residential, business, farming or grazing purposes

§ 416a - Lease provisions

§ 416b - Development pursuant to lease

§ 416c - Lease of lands of deceased Indians for benefit of heirs or devisees

§ 416d - Advance payment of rent or other consideration

§ 416e - Approval of leases

§ 416f - Dedication of land for public purposes

§ 416g - Contract for water, sewerage, law enforcement, or other public services

§ 416h - Zoning, building, and sanitary regulations

§ 416i - Restrictions

§ 416j - Mission San Xavier del Bac

§ 2101 - Definitions

§ 2102 - Minerals Agreements

§ 2103 - Secretary’s determination on Minerals Agreements

§ 2104 - Secretary’s review of prior Minerals Agreements

§ 2105 - Effect of other provisions

§ 2106 - Assistance to tribes or individuals during Minerals Agreement negotiations

§ 2107 - Regulations; consultation with Indian organizations; pending agreements

§ 2108 - Tribal right to develop mineral resources


§ 181 - Lands subject to disposition; persons entitled to benefits; reciprocal privileges; helium rights reserved

§ 182 - Lands disposed of with reservation of deposits of coal, etc.

§ 183 - Cancellation of prospecting permits

§ 184 - Limitations on leases held, owned or controlled by persons, associations or corporations

§ 184a - Authorization of States to include in agreements for conservation of oil and gas resources lands acquired from United States

§ 185 - Rights-of-way for pipelines through Federal lands

§ 186 - Reservation of easements or rights-of-way for working purposes; reservation of right to dispose of surface of lands; determination before offering of lease; easement periods

§ 187 - Assignment or subletting of leases; relinquishment of rights under leases; conditions in leases for protection of diverse interests in operation of mines, wells, etc.; State laws not impaired

§ 187a - Oil or gas leases; partial assignments

§ 187b - Oil or gas leases; written relinquishment of rights; release of obligations

§ 188 - Failure to comply with provisions of lease

§ 188a - Surrender of leases

§ 189 - Rules and regulations; boundary lines; State rights unaffected; taxation

§ 190 - Oath; requirement; form; blanks

§ 191 - Disposition of moneys received

§ 191a - Late payment charges under Federal mineral leases

§ 191b - Collection of unpaid and underpaid royalties and late payment interest owed by lessees

§ 192 - Payment of royalties in oil or gas; sale of such oil or gas

§ 192a - Cancellation or modification of contracts

§ 192b - Application to contracts

§ 192c - Rules and regulations governing issuance of certain leases; disposition of receipts

§ 193 - Disposition of deposits of coal, and so forth

§ 193a - Preference right of United States to purchase coal for Army and Navy; price for coal; civil actions; jurisdiction

§ 194 - Repealed. Pub. L. 89–554, § 8(a), Sept. 6, 1966, 80 Stat. 644

§ 195 - Enforcement

§ 196 - Cooperative agreements; delegation of authority

§ 351 - Definitions

§ 352 - Deposits subject to lease; consent of department heads; lands excluded

§ 353 - Sale of lands unaffected; reservation of mineral rights; sale subject to prior lease; naval petroleum reserves unaffected

§ 354 - Lease of partial or future interests in deposits

§ 355 - Disposition of receipts

§ 356 - Furnishing description of lands and title documents; recordation of documents; authenticated copies

§ 357 - State or local government rights; taxation

§ 358 - Rights under prior leases; priority of pending applications; exchange of leases

§ 359 - Rules and regulations

§ 360 - Authority to manage certain mineral leases

§ 1001 - Definitions

§ 1002 - Lands subject to geothermal leasing

§ 1002a - Repealed. Pub. L. 97–214, § 7(16), July 12, 1982, 96 Stat. 174

§ 1003 - Leasing procedures

§ 1004 - Rents and royalties

§ 1005 - Lease term and work commitment requirements

§ 1006 - Acreage limitations

§ 1007 - Readjustment of lease terms and conditions

§ 1008 - Byproducts

§ 1009 - Relinquishment of geothermal rights

§ 1010 - Suspension of operations and production

§ 1011 - Termination of leases

§ 1012 - Waiver, suspension, or reduction of rental or royalty

§ 1013 - Surface land use

§ 1014 - Lands subject to geothermal leasing

§ 1015 - Requirement for lessees

§ 1016 - Administration

§ 1017 - Unit and communitization agreements

§ 1018 - Data from Federal agencies

§ 1019 - Disposal of moneys from sales, bonuses, rentals, and royalties

§ 1020 - Publication in Federal Register; reservation of mineral rights

§ 1021 - Federal exemption from State water laws

§ 1022 - Prevention of waste; exclusivity

§ 1023 - Rules and regulations

§ 1024 - Inclusion of geothermal leasing under certain other laws

§ 1025 - Federal reservation of certain mineral rights

§ 1026 - Significant thermal features

§ 1027 - Land subject to prohibition on leasing

§ 1028 - Hot dry rock geothermal energy

§ 1701 - Congressional statement of findings and purposes

§ 1702 - Definitions

U.S. Code: Title 31 - MONEY AND FINANCE
U.S. Code: Title 43 - PUBLIC LANDS

§ 1301 - Definitions

§ 1302 - Resources seaward of Continental Shelf

§ 1303 - Amendment, modification, or repeal of other laws

§ 1331 - Definitions

§ 1332 - Congressional declaration of policy

§ 1333 - Laws and regulations governing lands

§ 1334 - Administration of leasing

§ 1335 - Validation and maintenance of prior leases

§ 1336 - Controversies over jurisdiction; agreements; payments; final settlement or adjudication; approval of notice concerning oil and gas operations in Gulf of Mexico

§ 1337 - Leases, easements, and rights-of-way on the outer Continental Shelf

§ 1338 - Disposition of revenues

§ 1338a - Moneys received as a result of forfeiture by Outer Continental Shelf permittee, lessee, or right-of-way holder; return of excess amounts

§ 1339 - Repealed. Pub. L. 104–185, § 8(b), Aug. 13, 1996, 110 Stat. 1717

§ 1340 - Geological and geophysical explorations

§ 1341 - Reservation of lands and rights

§ 1342 - Prior claims as unaffected

§ 1343 - Repealed. Pub. L. 105–362, title IX, § 901(l)(1), Nov. 10, 1998, 112 Stat. 3290

§ 1344 - Outer Continental Shelf leasing program

§ 1345 - Coordination and consultation with affected State and local governments

§ 1346 - Environmental studies

§ 1347 - Safety and health regulations

§ 1348 - Enforcement of safety and environmental regulations

§ 1349 - Citizens suits, jurisdiction and judicial review

§ 1350 - Remedies and penalties

§ 1351 - Oil and gas development and production

§ 1352 - Oil and gas information program

§ 1353 - Federal purchase and disposition of oil and gas

§ 1354 - Limitations on export of oil or gas

§ 1355 - Restrictions on employment of former officers or employees of Department of the Interior

§ 1356 - Documentary, registry and manning requirements

§ 1356a - Coastal impact assistance program

§ 1801 - Congressional findings

§ 1802 - Congressional declaration of purposes

Title 30 published on 20-Dec-2017 04:15

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 30 CFR Part 1206 after this date.

  • 2017-08-07; vol. 82 # 150 - Monday, August 7, 2017
    1. 82 FR 36934 - Repeal of Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform
      GPO FDSys XML | Text
      DEPARTMENT OF THE INTERIOR, Office of Natural Resources Revenue
      Final rule.
      This rule is effective on September 6, 2017.
      30 CFR Parts 1202 and 1206