West Virginia Code of State Rules
Agency 110 - Tax
Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT
Series 110-13A - Severance Tax
Section 110-13A-5 - Oil and Gas Operating Unit

5.1. Oil and Gas Operating Unit. -- For purposes of the production of oil classification and the production of natural gas classification, as set forth in the severance tax imposed pursuant to W. Va. Code '11-13A-1 et seq., multiple co-owners of oil or natural gas in place, lessees thereof, or others being vested with title and ownership to part or all of the oil and gas, as personal property, immediately after its severance, extraction, reduction to possession and production (except royalty recipients in kind) shall be deemed to be a "group or combination acting as a unit" and one "person" as defined in Section 2 of these regulations, if not otherwise defined herein, whenever engaged in the producing of oil or natural gas through common use (by joint or separately executed contracts) of the same operator's services or independent contract driller's services, where the independent contract driller acts as the operator (herein after included as an operator); and notwithstanding provisions of private contracts for separate deposit of gross receipts in separate members' accounts or for members of such group or combination to take in kind any proportionate part of such natural resources, the "group or combination acting as a unit" shall report the entire gross value on a single severance tax return. The operator shall file the severance tax return for the "group or combination acting as a unit." The operator shall obtain a business registration certificate for each "group or combination acting as a unit" as provided in W. Va. Code '11-12-1 et seq. The application for business registration certificate must include a list identifying those persons comprising the "group or combination acting as a unit" and those persons shall not be required to obtain a separate business registration certificate unless they are engaging in business in West Virginia in any other capacity than as a participant in that "group or combination acting as a unit:" Provided, That nothing in this section shall relieve an operator from having to obtain a separate business registration certificate to engage in any other business in West Virginia.

For purposes of this section the term "operator" (including a contract driller acting in the capacity of an operator) with respect to a jointly owned oil or gas operating unit means the person charged with consent of non-operating parties with the managerial responsibility for the overall operation of the drilling operation which generally includes the provision and advance payment of all necessary development and maintenance costs and expenses, the keeping of all pertinent records, the billing of non-operating parties for their proportionate share of all costs and expenses respective to their ownership and the dispensing of income to the non-operating owners in their proportionate share upon sale if such income is not directly paid to the non-operating owners by the purchaser.

5.2. Lessees Considered Producers. -- Lessees, sublessees or other denominated lessees are considered to be producers of all of the oil or natural gas produced, regardless of any payment, in kind, to lessors, sublessors or other denominated lessors of a part of such natural resources as rents or royalties.