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What is a volume factor and how is it used in computing State royalty?

April 26, 2017computing Factor Royalty State Used volume

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What is a volume factor and how is it used in computing State royalty?

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Where a payor company reports and pays royalty on less than 100% of the total LUW production, the volume factor designates the percentage of the total (100%) property (LUW Code) volume to which the payor is entitled and on which the payor will report royalties paid to the state. Since the calculation of property decimal assumes that the payor will report 100% of the LUW volume, the volume factor is used to adjust the payor decimal to account for the difference between the LUW volume and the volume the payor will report. The payor company must inform the Office of Mineral Resources via the payor register the percentage of volume which will be reported on the State royalty report.