---
kind: "section"
citation: "30 C.F.R. § 1206.111"
title: "30"
number: "1206.111"
heading: "How do I determine a transportation allowance if I have an arm's-length transportation contract?"
url: "https://uscodex.org/cfr/30/1206.111"
---

# §1206.111. How do I determine a transportation allowance if I have an arm's-length transportation contract?

- (a)
  - (1) If you or your affiliate incur transportation costs under an arm's-length transportation contract, you may claim a transportation allowance for the reasonable, actual costs incurred, as more fully explained in [paragraph (b)](#b) of this section, except as provided in [§ 1206.110(f)](/cfr/30/1206.110.md?p=f) and subject to the limitation in [§ 1206.110(d)](/cfr/30/1206.110.md?p=d).
  - (2) You must be able to demonstrate that your or your affiliate's contract is at arm's-length.
  - (3) You do not need ONRR's approval before reporting a transportation allowance for costs incurred under an arm's-length transportation contract.
- (b) Subject to the requirements of [paragraph (c)](#c) of this section, you may include, but are not limited to, the following costs to determine your transportation allowance under [paragraph (a)](#a) of this section; you may not use any cost as a deduction that duplicates all or part of any other cost that you use under this section including, but not limited to:
  - (1) **The amount that you pay under your arm's-length transportation contract or tariff.**
  - (2) **Fees paid (either in volume or in value) for actual or theoretical line losses.**
  - (3) **Fees paid for administration of a quality bank.**
  - (4) Fees paid to a terminal operator for loading and unloading of crude oil into or from a vessel, vehicle, pipeline, or other conveyance.
  - (5) Fees paid for short-term storage (30 days or less) incidental to transportation as a transporter requires.
  - (6) **Fees paid to pump oil to another carrier's system or vehicles as required under a tariff.**
  - (7) Transfer fees paid to a hub operator associated with physical movement of crude oil through the hub when you do not sell the oil at the hub. These fees do not include title transfer fees.
  - (8) Payments for a volumetric deduction to cover shrinkage when high-gravity petroleum (generally in excess of 51 degrees API) is mixed with lower gravity crude oil for transportation.
  - (9) Costs of securing a letter of credit, or other surety, that the pipeline requires you, as a shipper, to maintain.
  - (10) **Hurricane surcharges that you or your affiliate actually pay(s).**
  - (11) The cost of carrying on your books as inventory a volume of oil that the pipeline operator requires you, as a shipper, to maintain and that you do maintain in the line as line fill. You must calculate this cost as follows:
    - (i) **First, multiply the volume that the pipeline requires you to maintain—** and that you do maintain—in the pipeline by the value of that volume for the current month calculated under [§ 1206.101](/cfr/30/1206.101.md) or [§ 1206.102](/cfr/30/1206.102.md), as applicable.
    - (ii) Second, multiply the value calculated under [paragraph (b)(11)(i)](#b-11-i) of this section by the monthly rate of return, calculated by dividing the rate of return specified in [§ 1206.112(i)(3)](/cfr/30/1206.112.md?p=i-3) by 12.
- (c) You may not include the following costs to determine your transportation allowance under [paragraph (a)](#a) of this section:
  - (1) Fees paid for long-term storage (more than 30 days)
  - (2) Administrative, handling, and accounting fees associated with terminalling
  - (3) Title and terminal transfer fees
  - (4) Fees paid to track and match receipts and deliveries at a market center or to avoid paying title transfer fees
  - (5) Fees paid to brokers
  - (6) Fees paid to a scheduling service provider
  - (7) Internal costs, including salaries and related costs, rent/space costs, office equipment costs, legal fees, and other costs to schedule, nominate, and account for sale or movement of production
  - (8) Gauging fees
- (d) If you have no written contract for the arm's-length transportation of oil, then ONRR will determine your transportation allowance under [§ 1206.105](/cfr/30/1206.105.md). You may not use this [paragraph (d)](#d) if you or your affiliate perform(s) your own transportation.
  - (1) You must propose to ONRR a method to determine the allowance using the procedures in [§ 1206.108(a)](/cfr/30/1206.108.md?p=a).
  - (2) You may use that method to determine your allowance until ONRR issues its determination.

## Notes

### Source

Source: 85 FR 62023, Oct. 1, 2020, unless otherwise noted.

### Authority

Authority: 5 U.S.C. 301 et seq., 25 U.S.C. 396, 396a et seq., 398, 398a et seq., 2101 et seq.; 30 U.S.C. 181 et seq., 351 et seq., 1001 et seq., 1701 et seq.; 43 U.S.C. 1301 et seq., 1331 et seq., and 1801 et seq.

### Source

Source: 48 FR 35641, Aug. 5, 1983, unless otherwise noted. Redesignated at 75 FR 61069, Oct. 4, 2010.