Editorial Note on Part 1206
Editorial Note: Nomenclature changes to part 1206 (formerly part 206) appear at 67 FR 19111, Apr. 18, 2002.

§ 1206.111 How do I determine a transportation allowance if I have an arm's-length transportation contract? ( a ) ( 1 ) If you or your affiliate incur transportation costs under an arm's-length transportation contract, you may claim a transportation allowance for the reasonable, actual costs incurred, as more fully explained in paragraph (b) of this section, except as provided in § 1206.110(f) and subject to the limitation in § 1206.110(d).
( 2 ) You must be able to demonstrate that your or your affiliate's contract is at arm's-length.
( 3 ) You do not need ONRR's approval before reporting a transportation allowance for costs incurred under an arm's-length transportation contract.
( b ) Subject to the requirements of paragraph (c) of this section, you may include, but are not limited to, the following costs to determine your transportation allowance under paragraph (a) of this section; you may not use any cost as a deduction that duplicates all or part of any other cost that you use under this section including, but not limited to: ( 1 ) The amount that you pay under your arm's-length transportation contract or tariff.
( 2 ) Fees paid (either in volume or in value) for actual or theoretical line losses.
( 3 ) Fees paid for administration of a quality bank.
( 4 ) Fees paid to a terminal operator for loading and unloading of crude oil into or from a vessel, vehicle, pipeline, or other conveyance.
( 5 ) Fees paid for short-term storage (30 days or less) incidental to transportation as a transporter requires.
( 6 ) Fees paid to pump oil to another carrier's system or vehicles as required under a tariff.
( 7 ) Transfer fees paid to a hub operator associated with physical movement of crude oil through the hub when you do not sell the oil at the hub. These fees do not include title transfer fees.
( 8 ) Payments for a volumetric deduction to cover shrinkage when high-gravity petroleum (generally in excess of 51 degrees API) is mixed with lower gravity crude oil for transportation.
( 9 ) Costs of securing a letter of credit, or other surety, that the pipeline requires you, as a shipper, to maintain.
( 10 ) Hurricane surcharges that you or your affiliate actually pay(s).
( 11 ) The cost of carrying on your books as inventory a volume of oil that the pipeline operator requires you, as a shipper, to maintain and that you do maintain in the line as line fill. You must calculate this cost as follows: ( i ) First, multiply the volume that the pipeline requires you to maintain—and that you do maintain—in the pipeline by the value of that volume for the current month calculated under § 1206.101 or § 1206.102, as applicable.
( ii ) Second, multiply the value calculated under paragraph (b)(11)(i) of this section by the monthly rate of return, calculated by dividing the rate of return specified in § 1206.112(i)(3) by 12.
( c ) You may not include the following costs to determine your transportation allowance under paragraph (a) of this section: ( 1 ) Fees paid for long-term storage (more than 30 days)
( 2 ) Administrative, handling, and accounting fees associated with terminalling
( 3 ) Title and terminal transfer fees
( 4 ) Fees paid to track and match receipts and deliveries at a market center or to avoid paying title transfer fees
( 5 ) Fees paid to brokers
( 6 ) Fees paid to a scheduling service provider
( 7 ) Internal costs, including salaries and related costs, rent/space costs, office equipment costs, legal fees, and other costs to schedule, nominate, and account for sale or movement of production
( 8 ) Gauging fees
( d ) If you have no written contract for the arm's-length transportation of oil, then ONRR will determine your transportation allowance under § 1206.105. You may not use this paragraph (d) if you or your affiliate perform(s) your own transportation. ( 1 ) You must propose to ONRR a method to determine the allowance using the procedures in § 1206.108(a).
( 2 ) You may use that method to determine your allowance until ONRR issues its determination.