(a) To determine the amount of production chargeable to you, add together:
- (1) Your average daily production in barrels of crude oil, natural gas liquids, and natural gas worldwide, all measured at 60 °F, using the equivalency or conversion factors for natural gas liquids and natural gas set out in 42 U.S.C. 6213(b)(2) and (3); and
- (2) Your proportionate share of the average daily production owned by any person that has an interest in you and/or in which you have an interest.
(b) For the purpose of paragraph (a)(1) of this section, your production includes 100 percent of production owned by:
- (1) You;
- (2) Every subsidiary of yours;
- (3) Every person of which you are a subsidiary; and
- (4) Every subsidiary of any person of which you are a subsidiary.
(c) For purposes of paragraph (a)(2) of this section, interest means at least a five percent ownership or control of you or the reporting person and includes any interest:
- (1) From ownership of securities or other evidence of ownership; or,
- (2) By participation in any contract, agreement, or understanding regarding control of the person or their production of crude oil, natural gas liquids, or natural gas.
- (d) For purposes of this section, subsidiary means a person, 50 percent or more of whose stock or other interest having power to vote for the election of a controlling body, such as directors or trustees, is directly or indirectly owned or controlled by another person.
- (e) For purposes of this section, production chargeable to you includes, but is not limited to, production obtained as a result of a production payment or a working, net profit, royalty, overriding royalty, or carried interest.
(f) For purposes of this section, production must be measured with appropriate adjustments for:
- (1) Basic sediment and water;
- (2) Removal of natural gas liquids and non-hydrocarbon gases; and
- (3) Volume of gas returned to natural reservoirs.