The department may determine the value of products severed from a production unit when:

A. the operator and purchaser are affiliated persons;

B. the sale and purchase of products is not an arm's length transaction; or when

C. products are severed and removed from a production unit and a value as defined in the Oil and Gas Severance Tax Act is not established for such products.

The value determined by the department shall be commensurate with the actual price received for products of like quality, character and use which are severed in the same field or area. If there are no sales of products of like quality, character and use severed in the same field or area, then the department shall establish a reasonable value.

History: 1978 Comp., § 7-29-4.2, enacted by Laws 1980, ch. 62, § 7; 1989, ch. 130, § 4.

Cross references. — For payments of royalties in oil, see 19-10-64 NMSA 1978 et seq.

The 1989 amendment, effective June 16, 1989, substituted "department" for "division" in the catchline, substituted "department" for "oil and gas accounting division" throughout the section, and made minor stylistic changes throughout the section.

Determination of value. — The statute does not mandate the way in which the department must calculate processing costs, whether by a comparable value or by some other method. Rather, the final value of natural gas calculated by the department must be commensurate with similar products. Chevron U.S.A., Inc. v. State ex rel. Taxation and Revenue Dep't, 2006-NMCA-050, 139 N.M. 498, 134 P.3d 785, cert. denied, 2006-NMCERT-005, 139 N.M. 567, 136 P.3d 568.

Burden to prove propriety of regulations. — An administrative agency does not have the burden to show that its regulations are proper. The department's regulation regarding the presumption of control was rational and valid. Chevron U.S.A., Inc. v. State ex rel. Taxation and Revenue Dep't, 2006-NMCA-050, 139 N.M. 498, 134 P.3d 785, cert. denied, 2006-NMCERT-005, 139 N.M. 567, 136 P.3d 568.