Opinion ID: 541820
Heading Depth: 3
Heading Rank: 2

Heading: Unverified Costs in Overhead Allowance

Text: 27 The Conservation Division manual provides that deductions for overhead costs shall be limited to ten percent of the other permitted operating and maintenance costs. CDM, Part 647.7.3(E)(9). Further, the deductible administrative costs will generally be limited to those items which, in the judgment of the Supervisor, are an integral part of the extraction process. Such expenditures may be verified by requesting copies of the invoices. Id. at 647.3(E). 28 The MMS audit concluded that the overhead deduction can be as high as ten percent of the other permissible operating and maintenance costs, but that the overhead costs required verification. ARCO contends that this interpretation is in error because ARCO should be permitted to deduct the ten percent overhead allowance regardless of its ability to verify the costs. As its primary rationale, ARCO argues that for the past twenty years it has successfully deducted the ten percent without the need to verify costs and that, therefore, there is a long standing policy of allowing such deductions. However, as discussed above, this does not constitute a long standing policy. Furthermore, the MMS interpretation is consistent with the regulations. 29 Because the judgment of the MMS is not arbitrary, capricious, an abuse of discretion or contrary to law, we AFFIRM the judgment of the district court.