W. Va. Code R. § 110-1J-6

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-1J-6 - Gross proceeds

6.1. Gross proceeds shall be determined at the point of ultimate sale of the well output, or any part thereof, by the producer of that product. The transaction price and volumes used to determine the gross proceeds must be in connection with a bona fide arm's-length sale.

6.1.1. Where the lessee's contract for the sale of natural gas prior to processing provides for the sales price to be determined based upon a percentage of the purchaser's gross proceeds resulting from sales after processing the gas, the gross proceeds, for purposes of this section, shall never be less than a value equivalent to 100 percent of the sales price of the residue gas attributable to the processing of the lessee's raw gas plus the gross proceeds from sales of the natural gas liquids.

6.1.2. For purposes of this section, well output which is sold or otherwise transferred to the lessee's marketing affiliate and then sold by the marketing affiliate shall be valued based upon the gross proceeds derived from the sale by the marketing affiliate.

6.1.3. In transactions involving related parties, the gross value will be determined the same as in the Severance Tax under W.Va. Code § 11-13A-2(c)(6)(B).

6.1.4. If a purchaser, or any other person, is providing certain services, the cost of which ordinarily is the responsibility of the lessee to place the residue gas or gas plant products in marketable condition or to market the residue gas and gas plant products, then those costs are included in the gross proceeds.

6.2. The gross proceeds that the lessee reports under this section is subject to monitoring, review, and audit.

6.2.1. The producer shall retain all data relevant to the determination of gross value. Such data shall be subject to review and audit by the Tax Commissioner.

6.2.2. In conducting reviews and audits, the Tax Commissioner may examine whether the contract reflects the total consideration actually transferred either directly or indirectly from the buyer to the seller for the well output. If the contract does not reflect the total consideration, then the Tax Commissioner may require that the well output sold pursuant to that contract be valued in accordance with section heading 8 of this rule. Gross proceeds may not be less than the gross proceeds accruing to the lessee, including any additional consideration.

W. Va. Code R. § 110-1J-6