Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-8-6 - OIL AND GAS SEVERANCE TAX › Section 810-8-6-.01 - Determining Gross Value Or Market Price Of Oil Or Gas At The Point Of Production

Current through Register Vol. 42, No. 9, June 28, 2024
(1)
			 PURPOSE: Oil and gas severed from the soil or waters or from beneath the soil
			 or waters of Alabama are taxed on their gross value at the point of production.
			 This regulation establishes a regime for determining that value in non-market
			 transactions. §
								40-20-2(a)(1),
Code of Ala. 1975
.
(2) DEFINITIONS: The following terms shall
			 have the meaning ascribed to them for purposes of this regulation:
(a) Allowed costs. The costs incurred to
			 bring the oil or gas to the point of delivery or first market transaction
			 including, but not limited to, gathering (including gathering prior to
			 separation), transporting, dehydrating, compressing, treating, conditioning,
			 cleansing, stabilizing, processing and delivering. Allowed costs do not include
			 wellhead separation of hydrocarbons, nor any other production costs.
(b) Production costs. All costs incurred for
			 acquisition, exploration, development, maintenance, and abandonment of a
			 well.
(c) Market transaction. An
			 agreement or contract for the sale, treating, conditioning, cleansing,
			 processing, transporting, and/or compressing of oil or gas that has been
			 arrived at between a producer or his agent and a person or entity with opposing
			 economic interests. Transactions between the parent company and its
			 subsidiaries; subsidiaries of a common parent; a company and its principal
			 owners, management, or members of their immediate families or affiliated
			 companies are not market transactions unless the net proceeds received by the
			 producer are equal to or exceed the value determined by comparison to publicly
			 available indices or information published and used for a particular Alabama
			 area or other publicly available indices or information, adjusted by location
			 differential as appropriate, in which case the transaction in question shall be
			 deemed a market transaction.
(d)
			 Non-market transaction. A transaction between a producer or his agent and
			 another person or entity which is not a market transaction as defined in these
			 regulations.
(e) Gross value. The
			 sale price or market value at the point of production.
(f) Market value. The proceeds received by
			 the producer for oil or gas at the point of production under a market
			 transaction, or the sale price for cash received by a producer for like quality
			 oil or gas at the point of production under a market transaction.
(g) Point of production. The mouth of the
			 well as defined in (2)(h).
(h)
			 Mouth of the well. The point of production where the well production is severed
			 from the soil or the waters, or from beneath the soil or the waters. Such point
			 includes the wellhead separator or its functional equivalent, heater/treater
			 and/or storage tanks. Such point does not include a wellhead separator which is
			 used exclusively for separating water from a coalbed methane gas
			 stream.
(i) Plant. A facility for
			 treating, conditioning, cleansing or processing hydrocarbons, to extract,
			 stabilize or fractionate well production into its separate components or
			 gaseous sulphur compounds or sulphur from natural gas.
(j) Facility. An installation serving one or
			 more wells, providing one or more functions such as extraction, stabilization,
			 fractionation, compression, dehydration, treating, conditioning, cleansing,
			 gathering, transportation or delivery.
(k) Investment basis. The capitalized cost on
			 which depreciation is allowed. A return on this investment is also permitted
			 after deducting the allowable depreciation.
(l) Condensate. The liquid hydrocarbons
			 recovered or recoverable at the surface which result from
			 condensation.
(m) Natural gas
			 liquids (NGLs). Liquefiable hydrocarbon components of natural gas and natural
			 gasoline which can be extracted and are usually saved in liquid form. Such
			 components include: Ethane, propane, iso and normal butanes, and natural
			 gasoline sometimes referred to as pentane and heavier products.
(n) Treating, conditioning, cleansing, or
			 processing. The removal of hydrocarbons and nonhydrocarbons from a well stream.
(o) Workback price. The price from
			 which allowed costs are deducted in order to establish gross value.
(p) Affiliated companies. Companies owning or
			 controlling more than 40% of a given company, or being owned or controlled more
			 than 40% by another company.