New Mexico Administrative Code › Title 3 - TAXATION › Chapter 18 - OIL AND GAS TAXES (SEVERANCE TAX) › Part 5 - METHOD OF DETERMINING VALUE › Section 3.18.5.8 - REASONABLE EXPENSE OF TRUCKING

Current through Register Vol. 35, No. 13, July 16, 2024
A. When the person trucking product is not
				affiliated with the interest owner or operator, the reasonable expense of
				trucking means the cost paid in an arm's-length transaction by the interest
				owner or operator for trucking services performed from a point within the
				production unit, as that term is defined in Paragraph 3.18.1.7E(1) NMAC, to the
				first point of market. This version of Subsection 3.18.5.8A NMAC is applicable
				to trucking performed on or after July 15, 1998.
B. When trucking is performed by the interest
				owner or operator or by a person affiliated with the interest owner or operator
				or when trucking is performed by a non-affiliated person in a non-arm's-length
				transaction, the reasonable expense of trucking from a point within the
				production unit, as that term is defined in Paragraph 3.18.1.7E(1) NMAC, to the
				first place of market shall be determined in accordance with the first
				applicable benchmark. This version of Subsection 3.18.5.8B NMAC is applicable
				to trucking performed on or after July 15, 1998.
C. Benchmark 1: If trucking charges are
				subject to regulatory approval, the reasonable expense of trucking shall not
				exceed any applicable tariff set or approved by the federal energy regulatory
				commission or any other federal or state agency having jurisdiction.
D. Benchmark 2: If the amount of product
				trucked under arm's-length contracts during the reporting period is at least
				fifty percent of the total amount trucked during that reporting period by the
				person performing the trucking, the reasonable expense of trucking shall be not
				more than the highest charge nor less than the lowest charge made to
				non-affiliated persons by the person performing the trucking.
E. Benchmark 3: If the reasonable expense of
				trucking is not determined under the preceding benchmarks, then it shall not
				exceed the sum of actual allowable trucking costs. Allowable trucking costs
				are:
(1) operating expenses, which include
				operations supervision, operations labor, fuel, utilities, materials and
				supplies, property taxes, rent and any other directly attributable operating
				expense of the trucking operation;
(2) maintenance expenses, which include
				maintenance of the truck fleet 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 trucking operation but excluding federal and
				state taxes (other than property taxes), payments for product, royalties and
				any expense which may be included in a processing or transportation adjustment;
				and
(4) either depreciation
				expense, which includes depreciation on the truck fleet and associated
				equipment determined on the straight-line method based on the class life of the
				truck fleet and equipment and appropriate salvage values; a successor in
				business or purchaser of assets shall base depreciation expense for the
				purposes of Section 3.18.5.8 NMAC upon the depreciation schedules of the
				previous owner; or
(5) in lieu of
				item 4), a reasonable rate of return on depreciable capital assets used in the
				trucking operation.