West Virginia Code of State Rules › Agency 110 - Tax › Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT › Series 110-13A - Severance Tax › Section 110-13A-5 - Oil and Gas Operating Unit

Current through Register Vol. XLI, No. 28, July 12, 2024
5.1.
				Oil and Gas Operating Unit. -- For purposes of the production of oil
				classification and the production of natural gas classification, as set forth
				in the severance tax imposed pursuant to W. Va. Code '11-13A-1
				et seq., multiple co-owners of oil or natural gas in place, lessees thereof, or
				others being vested with title and ownership to part or all of the oil and gas,
				as personal property, immediately after its severance, extraction, reduction to
				possession and production (except royalty recipients in kind) shall be deemed
				to be a "group or combination acting as a unit" and one "person" as defined in
				Section 2 of these regulations, if not otherwise defined herein, whenever
				engaged in the producing of oil or natural gas through common use (by joint or
				separately executed contracts) of the same operator's services or independent
				contract driller's services, where the independent contract driller acts as the
				operator (herein after included as an operator); and notwithstanding provisions
				of private contracts for separate deposit of gross receipts in separate
				members' accounts or for members of such group or combination to take in kind
				any proportionate part of such natural resources, the "group or combination
				acting as a unit" shall report the entire gross value on a single severance tax
				return. The operator shall file the severance tax return for the "group or
				combination acting as a unit." The operator shall obtain a business
				registration certificate for each "group or combination acting as a unit" as
				provided in W. Va. Code '11-12-1 et seq. The
				application for business registration certificate must include a list
				identifying those persons comprising the "group or combination acting as a
				unit" and those persons shall not be required to obtain a separate business
				registration certificate unless they are engaging in business in West Virginia
				in any other capacity than as a participant in that "group or combination
				acting as a unit:" Provided, That nothing in this section shall relieve an
				operator from having to obtain a separate business registration certificate to
				engage in any other business in West Virginia.
For purposes of this section the term "operator" (including a
				  contract driller acting in the capacity of an operator) with respect to a
				  jointly owned oil or gas operating unit means the person charged with consent
				  of non-operating parties with the managerial responsibility for the overall
				  operation of the drilling operation which generally includes the provision and
				  advance payment of all necessary development and maintenance costs and
				  expenses, the keeping of all pertinent records, the billing of non-operating
				  parties for their proportionate share of all costs and expenses respective to
				  their ownership and the dispensing of income to the non-operating owners in
				  their proportionate share upon sale if such income is not directly paid to the
				  non-operating owners by the purchaser.
5.2. Lessees Considered Producers. --
				Lessees, sublessees or other denominated lessees are considered to be producers
				of all of the oil or natural gas produced, regardless of any payment, in kind,
				to lessors, sublessors or other denominated lessors of a part of such natural
				resources as rents or royalties.