The Colorado Board of Land Commissioners, or State Land Board, has changed its accounting system and methodology for reporting oil and gas royalties. The new royalty reporting guidelines went into effect on July 1, and all payers are expected to use the new system by September 30, 2014, according to an update from CPA firm Hein & Associates.
Changes to the oil and gas royalty spreadsheet include identifying wells by API number, use of Natural Gas Liquids (NGL) and Residue Gas (RSG) breakouts for reporting Plant Products, and communitized wells will be allocated based on percentage of acreage. Royalty Accounting Unit “RAUs” will no longer be used, and signatures and notarizations are no longer required.
The royalty submission deadline is still the last business day of the month, but under the new rules, oil companies must pay royalties no later than 60 days after the first day of production. Gas companies and plant products have 90 days. Penalty and interest charges will be applied to companies who do not comply.
OAG360 spoke to William Mueldener, National Director of State and Local Tax at Hein & Associates. He said that it is possible that the changes might result in minor savings. “Administratively, it will be easier. It’s a definite burden every time you have to notarize the mail and gather all the signatures. That’s a practice that’s just not done much anymore. The change brings Colorado more into alignment with current standards.”
“Really I think what they’re trying to do is to make the process easier while retrieving some extra information that wouldn’t have been as identifiable through the old methods,” Mueldener said.
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