N.M. Code R. § 3.18.6.9 - TRANSPORTATION ADJUSTMENTS
A.
The adjustments to actual price provided by Section 3.18.6.9 NMAC apply only in
cases where actual price is determined at a point other than at the production
unit. The adjustment provided by Section 3.18.6.9 NMAC may be referred to as
the "transportation adjustment". The transportation adjustment covers costs of
transportation from a production unit to the point at which the product is
sold. The transportation adjustment includes charges for gathering, mainline
transportation and fuel gas and also includes charges or costs associated with
compression incurred downstream of the production unit, as that term is defined
in Paragraph 3.18.1.7E(1) NMAC. No transportation adjustment may be claimed or
allowed unless the transportation with respect to which the adjustment is
claimed actually occurs. This version of Subsection 3.18.6.9A NMAC is
applicable to transportation occurring on or after July 15, 1998.
B. For the purposes of Section 3.18.6.9 NMAC:
(1) "producer" means the person or persons
owning the product or the operator of the well; and
(2) "transportation company" means the
pipeline, gathering company or other entity transporting product.
C. Nonmonetary payments. To secure
uniform reporting, when payment of transportation charges is made with product
rather than money, the value of the product shall be added to the amount
reported as proceeds from the sale as well as reported as a transportation
deduction. For purposes of determining the transportation deduction, the value
of the product paid shall be the contract price without deduction. In all 3
following cases the volume of production to be reported is 12,500 mcf.
(1) Example: Producer A moves natural gas
directly into P's pipeline from A's production unit. A contracts to deliver
natural gas to an out-of-state utility for $2.50 per delivered mcf. A inputs
12,500 mcf to the pipeline.
(a) Case 1: P
charges A $.50 per mcf to transport the gas from A's production unit to the
utility; P uses P's own gas for fuel. A's transportation adjustment is $6,250.
A's taxable value is $2.00 per mcf on 12,500 mcf severed and sold. ($31,250
received from the utility less $6,250 paid to the pipeline, divided by 12,500
mcf).
(b) Case 2: P charges A 10%
of the gas put into the pipeline plus 27.77¢ per mcf of the remaining gas.
A's transportation adjustment is $6,250 ($3,125 cash plus $3,125 in value of
product). A's taxable value is $2.00 per mcf on 12,500 mcf severed and sold
(although only 11,250 mcf delivered to the utility). ($28,125 received from the
utility plus $3,125 for value of product transferred to the pipeline less a
transportation deduction of $6,250, divided by 12,500 mcf).
(c) Case 3: P charges A 20% of the input gas
as a delivery charge. A's transportation adjustment is $6,250 (value of
product). A's taxable value is $2.00 per mcf on 12,500 mcf severed and sold
(though only 10,000 delivered to the utility). ($25,000 from the utility plus
$6,250 for value of product transferred to pipeline minus $6,250 transportation
deduction, divided by 12,500 mcf.)
D. Non-affiliated persons. When the producer
and the transportation company are not affiliated persons, actual price may be
reduced by the actual monetary charges paid in an arm's-length transaction
between the transportation company and the producer for transporting product,
provided that the charges do not exceed any applicable tariff set or approved
by any federal or state agency having jurisdiction.
E. Affiliated persons. When the producer and
the transportation company are affiliated persons or when the transporting of
product is not an arm's-length transaction, the transportation deduction shall
be determined in accordance with the first applicable benchmark.
F. Benchmark 1: If the transportation charge
is subject to regulatory approval, it may not exceed the tariff set or approved
by any federal or state agency having jurisdiction.
G. Benchmark 2: If at least fifty percent of
the product transported by the transportation company during the reporting
period is transported for non-affiliated persons in arm's-length transactions,
the transportation deduction for transporting products of an affiliate may be
determined as a charge not more than the highest charge nor less than the
lowest charge made in an arm's-length transaction by that transportation
company to non-affiliated persons for transporting similar product.
H. Benchmark 3: If the transportation
deduction is not determined under the preceding benchmarks, then it shall not
exceed the sum of actual allowable transportation costs during the previous
year on a per barrel or mcf basis, as appropriate. Allowable transportation
costs are:
(1) operating expenses, which
include operations supervision and engineering, operations labor, fuel,
utilities, materials and supplies, property taxes, rent and any other directly
attributable operating expense of the pipeline or gathering system;
(2) maintenance expenses, which include
maintenance of the pipeline or gathering system and associated equipment,
maintenance labor and any other directly attributable maintenance
expense;
(3) overhead expenses,
which include administrative and other overhead expenses directly attributable
to the operation or maintenance of the pipeline or gathering system but
excluding federal and state taxes (other than property taxes), payments for
product, royalties, trucking expenses and any expense which may be included in
a processing adjustment;
(4)
depreciation expense, which includes depreciation on the pipeline or gathering
system and associated equipment determined on the straight-line method based on
the class life of the pipeline or gathering system and equipment and an
appropriate salvage value for equipment; a successor in business or purchaser
of assets shall base depreciation expense for the purposes of Section 3.18.6.9
NMAC upon the depreciation schedules of the previous owner; and
(5) a reasonable rate of return on
depreciable capital assets used in the transportation operation.
I. Trucking expenses. An expense
of transporting product by truck may not be deducted from actual price both as
a "trucking expense" and a "transportation adjustment".
J. This version of Section 3.18.6.9 NMAC is
retroactively applicable to products severed on or after July 1,
1995.
Notes
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