§ 1206.154. How do I determine a transportation allowance if I have a non-arm's-length transportation contract?
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/us/cfr/t30/s§ 1206.154·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
(a)This section applies if you or your affiliate do(es) not have an arm's-length transportation contract, including situations where you or your affiliate provide your own transportation services. You must calculate your transportation allowance based on your or your affiliate's reasonable, actual costs for transportation during the reporting period using the procedures prescribed in this section.
(b)Your or your affiliate's actual costs may include:
(1)Capital costs and operating and maintenance expenses under paragraphs (e), (f), and
(g)of this section.
(2)Overhead under paragraph
(h)of this section.
(3)Depreciation and a return on undepreciated capital investment under paragraph (i)(1) of this section, or you may elect to use a cost equal to a return on the initial depreciable capital investment in the transportation system under paragraph (i)(2) of this section. After you have elected to use either method for a transportation system, you may not later elect to change to the other alternative without ONRR's approval. If ONRR accepts your request to change methods, you may use your changed method beginning with the production month following the month when ONRR received your change request.
(4)A return on the reasonable salvage value under paragraph (i)(1)(iii) of this section, after you have depreciated the transportation system to its reasonable salvage value. (c)(1) To the extent not included in costs identified in paragraphs
(e)through
(g)of this section, if you or your affiliate incur(s) the actual transportation costs listed under § 1206.153(b)(2), (5), and
(6)of this subpart under your or your affiliate's non-arm's-length contract, you may include those costs in your calculations under this section. You may not include any of the other costs identified under § 1206.153(b).
(2)You may not include in your calculations under this section any of the non-allowable costs listed under § 1206.153(c).
(d)You may not use any cost as a deduction that duplicates all or part of any other cost that you use under this section.
(e)Allowable capital investment costs are generally those for depreciable fixed assets (including costs of delivery and installation of capital equipment) that are an integral part of the transportation system.
(f)Allowable operating expenses include the following:
(1)Operations supervision and engineering
(2)Operations labor
(3)Fuel
(4)Utilities
(5)Materials
(6)Ad valorem property taxes
(7)Rent
(8)Supplies
(9)Any other directly allocable and attributable operating expense that you can document
(g)Allowable maintenance expenses include the following:
(i)Maintenance of the transportation system
(ii)Maintenance of equipment
(iii)Maintenance labor
(iv)Other directly allocable and attributable maintenance expenses that you can document
(h)Overhead, directly attributable and allocable to the operation and maintenance of the transportation system, is an allowable expense. State and Federal income taxes and severance taxes and other fees, including royalties, are not allowable expenses. (i)(1) To calculate depreciation and a return on undepreciated capital investment, you may elect to use either a straight-line depreciation method based on the life of equipment or on the life of the reserves that the transportation system services, or you may elect to use a unit-of-production method. After you make an election, you may not change methods without ONRR's approval. If ONRR accepts your request to change methods, you may use your changed method beginning with the production month following the month when ONRR received your change request.
(i)A change in ownership of a transportation system will not alter the depreciation schedule that the original transporter/lessee established for the purposes of the allowance calculation.
(ii)You may depreciate a transportation system only once with or without a change in ownership. (iii)(A) To calculate the return on undepreciated capital investment, you may use an amount equal to the undepreciated capital investment in the transportation system multiplied by the rate of return that you determine under paragraph (i)(3) of this section.
(B)After you have depreciated a transportation system to the reasonable salvage value, you may continue to include in the allowance calculation a cost equal to the reasonable salvage value multiplied by a rate of return under paragraph (i)(3) of this section.
(2)As an alternative to using depreciation and a return on undepreciated capital investment, as provided under paragraph (b)(3) of this section, you may use as a cost an amount equal to the allowable initial capital investment in the transportation system multiplied by the rate of return determined under paragraph (i)(3) of this section. You may not include depreciation in your allowance.
(3)The rate of return is the industrial rate associated with Standard Poor's BBB rating.
(i)You must use the monthly average BBB rate that Standard Poor's publishes for the first month for which the allowance is applicable.
(ii)You must re-determine the rate at the beginning of each subsequent calendar year.
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§ 1206.154
How do I determine a transportation allowance if I have a non-arm's-length transportation contract?
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