SECTION 385:15-1-24. Oil and gas royalty price computation  


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  • (a)   Oil royalty. Price Basis for computing oil royalty shall be: the total value received, adding premiums, bonuses, as well as adding gathering and dehydration or treating if absorbed or deducted in price; the highest posted field price, or the average published spot price, whichever is greater. The lessee may not recover any oil or other hydrocarbon that has been injected into a well from the State's royalty interest unless fully supported by purchase tickets setting forth the substance injected, volume, gravity or other quality properties suitable to a reliable basis to distinguish recovery from formation production. If the support is inadequate to distinguish recovery from production, all production shall bear royalty. In the event that the lessee or an affiliated party to the lessee is the purchaser of the oil, the price basis for computing oil royalty will be the greater of the value paid or the spot price for West Texas Intermediate at Cushing, Oklahoma less the actual cost of transportation to Cushing.
    (b)   Gas royalty. Price Basis for computing gas royalty shall be the greater of: the total value received under the sale contract adding premiums and bonuses, alternate performance or reservation payments, as well as adding gathering, compression and dehydration or treating if absorbed or deducted in price; the highest price any lessee enforces under similar sale contracts in the wellbore or the gross proceeds that would have been received if the gas had been sold at the average spot price in the pipeline - without deduction for taxes or for the cost of compressing, treating, metering, dehydrating, gathering or for other charges necessary or determined desirable to deliver gas into pipelines. In the event that the lessee or an affiliated party to the lessee is the purchaser of the gas, the basis for computing gas royalty will be the greater of: the without cost Price Basis received by the affiliated party's sale to a non-affiliated third party in the pipeline or the highest price being paid in the field by any purchaser for like kind and quality gas in the pipeline.
    (c)   Processed gas royalty. The price basis for computing processed gas royalty shall be the same as for gas royalty under (b) above. Processed liquid hydrocarbons basis for royalty shall be the greater of the value received for the liquid BTU's or the value the liquid BTU's would have brought if not rendered from the gas by processing and sold at the closest market for unprocessed gas without BTU ceilings. In the event that the lessee or an affiliated party to the lessee operates or owns an interest in the plant which is processing the gas, the State's royalty will be based on the greater of the value received by the affiliated party's first arms-length sale of the residue gas and liquid hydrocarbons; the highest price being paid by this plant or any other plant in the area for like kind and quality residue gas and liquid hydrocarbons; or the highest price being paid at the closest market for unprocessed gas; without deduction as set forth in (b) above.
    (d)   Allowance for processing. An allowance to compensate for the cost of processing gas may be allowed in an amount not to exceed one-half (1/2) of the value of the liquid hydrocarbons. Royalty shall be paid on no less than one-half (1/2) of the value of the liquid hydrocarbons and one-hundred percent (100%) of the value of the residue gas.
    (e)   Drip gasoline and condensate royalty. Price basis for computing royalties on drip gasoline or natural condensate recovered from gas produced from the leased land without resort to manufacturing process shall be the sale price, the posted field price, or the average spot price, whichever is greater.
[Source: Amended at 14 Ok Reg 3171, eff 7-25-97]