California Code of Regulations › Title 2 - Administration › Division 3 - State Property Operations › Chapter 1 - State Lands Commission › Article 3 - Oil and Gas Leases, Exploration Permits, and Operating Requirements › Section 2118 - Accounting for Royalty

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) No
				  allowance shall be made for cost of dehydration unless specifically authorized
				  in an existing lease, in which event the allowance shall be the actual cost of
				  dehydration not to exceed 5 cents per net barrel of oil so dehydrated, or the
				  allowance as specified in the lease, whichever is the lesser. Allowance for
				  dehydration will be granted only after lessee has filed with the Division of
				  State Lands an application in duplicate requesting the right to make deduction
				  for dehydration, setting forth the method proposed to be employed and listing
				  the equipment and value thereof installed exclusively for the dehydration of
				  the oil produced from state oil and gas leases. After approval of the
				  application, each operator shall file with the Division of State Lands before
				  the tenth of the month subsequent to that for which dehydration deduction is
				  requested, a detailed statement of the actual cost of dehydration proposed to
				  be deducted from the gross royalty payable for the preceding month.
(b) Tank bottoms and sump oil shipments are
				  to be reported on the following value basis:
Shipments of 0.0 percent to 3.0 percent cut--quoted market
					 price for applicable dry gravity.
Shipments of 3.1 percent to 15.0 percent cut--quoted market
					 price for applicable dry gravity less 5 cents per gross barrel at 60 degrees
					 F.
Shipments of 15.1 percent cut and up--quoted market price
					 for applicable dry gravity less 15 cents per gross barrel at 60 degrees
					 F.
(c) All transfers of dry
				  gas "Returned to Lease" or elsewhere, made by an operator for the use or
				  benefit of other leases or of third parties, will be considered as sales under
				  the terms of the lease.
(d)
				  Whenever under Section
				  2116 crude oil is used as a
				  circulating medium, the operator shall be allowed a credit of 25 percent of the
				  volume of any foreign circulating oil used. This credit shall be deducted from
				  the total number of barrels produced from the well during the 30-day period
				  immediately following the well's completion.
(e) Whenever the State shall require the
				  operator to use foreign oil to wash perforations of a producing well (Section
				  2117), the operator shall be
				  allowed credit of 50 percent of the volume of the oil used in such washing as a
				  deduction from the total number of barrel's produced from the well during the
				  period of 30 days immediately succeeding such operations.
(f) Subsection (d) and (e) shall not apply to
				  cases where the volume of circulating oil lost exceeds 5,000 barrels for any
				  one operation. Such cases will be the subject of specific determinations as to
				  periods and the amount of credit to be allowed.
(g) The value of oil used as a circulating
				  medium or for washing perforations shall be that fixed by the lease for the
				  quality and gravity of the oil so produced. Foreign oil is any oil not produced
				  from the specific lease of the affected lessee.