(a)   (1) If you determine the value of your coal under §1206.452, you may take a washing allowance for the reasonable, actual costs to wash coal. The allowance is a deduction when determining coal royalty value for the costs that you incur to wash coal.   (2) You do not need ONRR's approval before reporting a washing allowance.   (3) You may not use a washing allowance that was in effect before January 1, 2017. You must use the provisions of this subpart to determine your washing allowance.

(b) You may not:   (1) Take an allowance for the costs of washing lease production that is not royalty bearing.   (2) Disproportionately allocate washing costs to Indian leases. You must allocate washing costs to washed coal attributable to each Indian lease by multiplying the input ratio determined under §1206.451(e)(2)(i) by the total allowable costs.

(c)   (1) You must express washing allowances for coal as a dollar-value equivalent per short ton of coal washed.   (2) If you do not base your or your affiliate's payments for washing under an arm's-length contract on a dollar-per-unit basis, you must convert whatever consideration that you or your affiliate paid into a dollar-value equivalent.

(d) ONRR may direct you to modify your washing allowance if:   (1) There is misconduct by or between the contracting parties;   (2) ONRR determines that the consideration that you or your affiliate paid under an arm's-length washing contract does not reflect the reasonable cost of the washing because you breached your duty to market the coal for the mutual benefit of yourself and the lessor by washing your coal at a cost that is unreasonably high; or   (3) ONRR cannot determine if you properly calculated a washing allowance under §§1206.467 through 1206.469 for any reason, including, but not limited to, your or your affiliate's failure to provide documents that ONRR requests under 30 CFR part 1212, subpart E.

(e) You may only claim a washing allowance if you sell the washed coal and report and pay royalties.