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Frequently Asked Questions
APA® Program (2)
Economic Factors and Accounting Procedures (2)
Commencing with the 1974 Accounting Procedure, COPAS revised its model forms to eliminate an overhead rate structure that is based on well depth. For producing wells, a shallow well incurs the same amount of overhead as a deep well. They generally require the same amount of accounting, regulatory reporting, and other overhead services. The Operator might incur more overhead costs for drilling or conducting downhole operations on a deep well. Because the drilling rate is prorated based on drilling days, a deep well will recover more overhead dollars, even though it has the same rate as a shallow well.
These concepts and others are discussed in COPAS Accounting Guideline (AG) 23, “Overhead Negotiation and Calculation.” AG-23 also describes methods an Operator may use to calculate its theoretical break-even cost for providing overhead services. Another resource is COPAS Model Form Interpretation (MFI) 21, “Overhead – Joint Operations.”
If you or anyone in your organization would like more information on our Model Form Accounting Procedures, Model Form Interpretations, or Accounting Guidelines, please do not hesitate to contact us.
COPAS does not publish overhead rates. In addition, COPAS does not endorse the use of “benchmark” rates for overhead.
The overhead fees are to compensate the Operator for the cost of providing overhead functions. In theory, the parties start from a “neutral” point, i.e., the Operator should neither gain nor lose money on the overhead fees. However, during the course of the negotiation, the parties may decide to increase or decrease the overhead fees in exchange for other commercial terms. Also, one Operator’s practice may be to charge the joint account for something that another Operator includes in its overhead services – e.g., technical labor. All other things being equal, the former Operator should have lower overhead rates than the latter.
General Questions (4)
Our forms and publications are copyrighted, and constitute a significant part of the funding to operate our organization. As such, we generally do not allow people to reproduce and distribute them.
You may quote brief excerpts, so long as you acknowledge the source. However, for longer or extensive excerpts or to reproduce an entire form, you must obtain written approval from the executive director. If the form is an essential part of the presentation/paper, we may be able to work out a solution that allows the content to be conveyed in a manner that will not encourage people to violate the copyright. We also recommend you explain to your audience that the forms/documents are copyrighted and provide information on how they can be purchased.
Historically, COPAS has not gotten involved in private disputes between companies. That is not the purpose of our organization. Also, our membership consists of both operators and non-operators, buyers and sellers, and entities of all sizes, so we do not specifically advocate for any one position. Finally, there is a practical aspect to this - i.e., we are a non-profit organization with limited resources. We would have to hire an attorney to prepare and file an amicus brief, and that is not an approved budget item. If a company were to fund this for COPAS, it might call into question the impartiality of the brief.
COPAS is a volunteer organization and does not have a staff of experts available to provide professional advice. The advice and official positions of COPAS are published in our Model Forms, Model Form Interpretations, Accounting Guidelines, and Training & Reference materials. If you are still in need of expert advice, refer to the Commercial Links section of the COPAS website, or advertisements in ACCOUNTS. Educational opportunities and networking with industry experts are some of the benefits of being a member of COPAS. COPAS members can contact other members having the expertise they are seeking, and non-members are encouraged to apply and participate. Refer to our membership/society page.
Whenever COPAS has issued a new model form, it has discontinued selling the form that was being replaced. This is a long-standing practice. In this case, the 2005 model form replaced the 1984 & 1986 forms.
We recognize that it may take a while for companies to adopt the 2005 and some may prefer to continue using the 1984/1986 forms for a while longer. But continuing to sell the old forms being replaced provides less incentive for companies to adopt the new form. Moreover, COPAS members who are active and knowledgeable in joint interest and audit issues generally prefer the 2005 form.
COPAS offers MFI-51, “2005 Accounting Procedure,” as a resource for those interested in learning more about the form. Also, COPAS members periodically make presentations in various industry forums and have written articles for a number of industry publications on key features of the form.