§ 15-76-315 - Valuation of brine. - Arkansas Statutes

15-76-315. Valuation of brine.

(a) (1) (A) The value of brine during any given year with respect to any unit established hereunder and for all purposes hereof shall be deemed to be the average price at which the operator of the unit has purchased or sold brine in Arkansas adjusted to reflect concentrations of ions, temperature, other relevant physical and chemical specifications, and delivery point.

(B) However, for purposes of this subchapter, the value shall not apply to any unit created hereunder until there shall have been actual bona fide sales or purchases of brine by the operator in sufficient volumes and under such circumstances as would establish a bona fide market value for brine from that unit.

(2) In any action by any owner against the operator of the unit for an appropriate accounting for royalty, the burden of proof that the value as determined hereunder constitutes a fair and reasonable market value of brine produced from the unit shall be upon the operator of the unit.

(3) However, no valuation of brine or any other alternate method of computing royalty or in lieu of royalty shall ever result in compensation which is less than thirty-two dollars ($32.00) per acre per year, as increased or decreased annually based on changes in the Producer Price Index for Intermediate Materials, Supplies and Components published by the United States Department of Labor, Bureau of Labor Statistics, or its successor.

(4) (A) The adjustment will be made effective as of June 1 of each year and will remain effective for payments made from June 1 of that year until May 31 of the following year.

(B) The adjustment made each year will be based on the change in the index from December of the previous year relative to the base index of March, 1995.

(C) The formula to make the adjustment is as follows:

New in-lieu royalty payment = Base in-lieu royalty payment multiplied times A divided by B

Where:

(i) Base in-lieu royalty payment = $32.00 per acre;

(ii) A = Index for the month of December prior to the year the adjustment is made. The index is the Producer Price Index for Intermediate Materials, Supplies and Components as published by the United States Department of Labor, Bureau of Labor Statistics, in Producer Price Indexes Table 2 for selected commodity groupings;

(iii) B = The March, 1995, Producer Price Index for Intermediate Materials, Supplies and Components as published by the United States Department of Labor, Bureau of Labor Statistics, in Producer Price Indexes Table 2 for selected commodity groupings.

(D) (i) The base price in lieu of royalty payment of thirty-two dollars ($32.00) per acre will remain effective from April 1, 1995, until May 31, 1996.

(ii) The first adjustment to the base payment will be made effective as of June 1, 1996, and will remain effective for the following year until May 31, 1997.

(iii) Successive adjustments will be made effective as of June 1 each year thereafter and shall remain in effect until May 31 of the following year.

(b) (1) In the event that, during a given year, an operator makes no sales or purchases of brine qualifying for use under subsection (a) of this section, the value of brine for that year for brine produced by the operator from a particular unit for all purposes hereof shall be determined by the Oil and Gas Commission by multiplying the number of acres in that particular unit by eight (8) times the weighted average of lease compensation per acre or other in lieu of royalty payment agreed to between the producer thereof and the owners of brine interests in that unit, divided by the total production of brine in barrels for the given year.

(2) (A) If there are no sales or purchases of brine for two (2) or more consecutive years, the value of brine for each consecutive year after the first year in which there are no such sales shall be the value initially determined above, increased or decreased annually using the Producer Price Index for Intermediate Materials, Supplies and Components published by the United States Department of Labor, Bureau of Labor Statistics, in Producer Price Indexes Table 2 for selected commodity groupings.

(B) The adjustment will be made prior to June 1 and the new price per acre will be effective on June 1 of each year using the value of the index for the previous December based on the change in the index from March, 1995, to the previous December.

(C) The formula to make the adjustment is as set forth in subdivision (a)(4)(C) of this section.

(3) For purposes of calculating the value of the royalty interest under 15-76-314(e), the value of brine as initially determined and as increased or decreased under this subsection shall not be less than the value of brine as initially determined under this subsection by utilizing an average annual lease compensation or payment in lieu of royalty equivalent to thirty-two dollars ($32.00) per acre.

(c) (1) In addition to any other amounts due and owing by the producer or producers of any unit to the owners therein, the producer or producers shall account separately and on a fair and equitable basis to each owner in the unit for all substances which are found by the commission to be profitably extracted from brine by a producer and which were not extracted by a producer on January 1, 1979.

(2) Whether or not any such substance is extracted profitably shall be determined by the Oil and Gas Commission on the basis of the value at the time of extraction, without interest, after deducting all costs of producing and recovering the same.

(3) The accounting by the producer shall be on a quarterly basis and shall begin on whichever comes first:

(A) The date of filing of a petition for an accounting; or

(B) The time of the profitable extraction of other substances.