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Code of Federal Regulations Title 30. Mineral Resources § 30.1206.160 How do I determine a processing allowance if I have an arm's-length processing contract?

Current as of January 02, 2025 | Updated by Findlaw Staff

<For compliance date(s) of amendment(s) to subsections (a)(1) and (c), see 86 FR 4612;  86 FR 20032.>
<Text of subsection (a)(1) effective until Nov. 1, 2021, as delayed by 86 FR 9286;  86 FR 20032.>

(a)(1) If you or your affiliate incur processing costs under an arm's-length processing contract, you may claim a processing allowance for the reasonable, actual costs incurred, as more fully explained in paragraph (b) of this section, except as provided in paragraphs (a)(3)(i) and (a)(3)(ii) of this section and subject to the limitation in § 1206.159(c)(2).

<Text of subsection (a)(1) effective Nov. 1, 2021, as delayed by 86 FR 9286;  86 FR 20032.>

(a)(1) If you or your affiliate incur processing costs under an arm's-length processing contract, you may claim a processing allowance for the reasonable, actual costs incurred, as more fully explained in paragraph (b) of this section, except as provided in § 1206.159(e) and subject to the limitation in § 1206.159(c)(2).

(2) You must be able to demonstrate that your or your affiliate's contract is arm's-length.

(b)(1) If your or your affiliate's arm's-length processing contract includes more than one gas plant product, and you can determine the processing costs for each product based on the contract, then you must determine the processing costs for each gas plant product under the contract.

(2) If your or your affiliate's arm's-length processing contract includes more than one gas plant product, and you cannot determine the processing costs attributable to each product from the contract, you must propose an allocation procedure to ONRR.

(i) You may use your proposed allocation procedure until ONRR issues its determination.

(ii) You must submit all relevant data to support your proposal.

(iii) ONRR will determine the processing allowance based upon your proposal and any additional information that ONRR deems necessary.

(iv) You must submit the allocation proposal within three months of claiming the allocated deduction on form ONRR–2014.

(3) You may not take an allowance for the costs of processing lease production that is not royalty-bearing.

(4) If your or your affiliate's payments for processing under an arm's-length contract are not based on a dollar-per-unit basis, you must convert whatever consideration that you or your affiliate paid to a dollar-value equivalent.

<Text of subsection (c) effective until Nov. 1, 2021, as delayed by 86 FR 9286;  86 FR 20032.>

(c) If you have no written contract for the arm's-length processing of gas, then ONRR will determine your processing allowance under § 1206.144. You may not use this paragraph (c) if you or your affiliate perform(s) your own processing.

(1) You must propose to ONRR a method to determine the allowance using the procedures in § 1206.148(a).

(2) You may use that method to determine your allowance until ONRR issues a determination.

<Text of subsection (c) effective Nov. 1, 2021, as delayed by 86 FR 9286;  86 FR 20032.>

(c) If you have no written contract for the arm's-length processing of gas, and neither you nor your affiliate perform your own processing, you must propose to ONRR a method to determine the processing allowance using the procedures in § 1206.148(a).

(1) You must use that method to determine your allowance until ONRR issues a determination.

(2) [Reserved]

1  The reference to September 7, 2017, in this paragraph, should be to September 6, 2017, the published effective date of 81 FR 43338, and the corresponding date of the Court vacation.
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Cite this article: FindLaw.com - Code of Federal Regulations Title 30. Mineral Resources § 30.1206.160 How do I determine a processing allowance if I have an arm's-length processing contract? - last updated January 02, 2025 | https://codes.findlaw.com/cfr/title-30-mineral-resources/cfr-sect-30-1206-160/

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