(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 Sec. 1206.52 or Sec. 1206.53, as applicable. You may not deduct transportation costs to reduce royalties where you did not incur any costs to move a particular volume of oil. ONRR will not grant a transportation allowance for transporting oil taken as Royalty-In-Kind (RIK).
(b)(1) Except as provided in paragraph (b)(2) of this section, your transportation allowance deduction on the basis of a sales type code may not exceed 50 percent of the value of the oil at the point of sale, as determined under Sec. 1206.52. Transportation costs cannot be transferred between sales type codes or to other products.
(1) Except as provided in paragraph (b)(2) of this section, your transportation allowance deduction on the basis of a sales type code may not exceed 50 percent of the value of the oil at the point of sale, as determined under Sec. 1206.52. Transportation costs cannot be transferred between sales type codes or to other products.
(2) Upon your request, ONRR may approve a transportation allowance deduction in excess of the limitation prescribed by paragraph (b)(1) of this section. You must demonstrate that the transportation costs incurred in excess of the limitation prescribed in paragraph (b)(1) of this section were reasonable, actual, and necessary. An application for exception (using Form ONRR-4393, Request to Exceed Regulatory Allowance Limitation) must contain all relevant and supporting documentation necessary for ONRR to make a determination. Under no circumstances may the value, for royalty purposes, under any sales type code, be reduced to zero.
(c) You must express transportation allowances for oil in dollars per barrel. If you or your affiliate's payments for transportation under a contract are not on a dollar-per-barrel basis, you must convert whatever consideration you or your affiliate are paid to a dollar-per-barrel equivalent.
(d) You must allocate transportation costs among all products produced and transported as provided in Sec. 1206.57.
(e) All transportation allowances are subject to monitoring, review, audit, and adjustment.
(f) If, after a review or audit, ONRR determines you have improperly determined a transportation allowance authorized by this subpart, then you must pay any additional royalties due plus late payment interest calculated under Sec. 1218.54 of this chapter or report a credit for, or request a refund of, any overpaid royalties without interest under Sec. 1218.53 of this chapter.
(g) You may not deduct any costs of gathering as part of a transportation deduction or allowance.