Acquisition: The procurement of the legal right to explore for and produce discovered minerals, if any, within a specific area; that legal right may be obtained by mineral lease, concession, or purchase of land and mineral rights, or of mineral rights alone.

Acquisition Costs: Direct costs and indirect costs incurred to acquire legal rights to wasting natural resources. Direct costs include costs incurred to obtain options to lease or purchase general rights and costs incurred for the actual leasing (e.g., lease bonuses) or purchasing of the rights. Indirect costs include such costs as: brokers' commissions and expenses; abstract and recording fees; filing and patenting fees; and costs of legal examination of title and documents.

Acreage: An area, measured in acres, that is subject to ownership or control by those holding total or fractional shares of working interests. Acreage is considered developed when development has been completed. (See definition for Working Interest.) A distinction may be made between "gross" acreage and "net" acreage:

Affiliate: An "affiliate" of, or a person "affiliated" with, a specific person is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. The term "affiliate" includes any subsidiary or parent of the person specified.

Amortization: The depreciation, depletion, or charge-off to expense of intangible and tangible assets over a period of time. In the extractive industries, the term is most frequently applied to mean either (1) the periodic charge-off to expense of the costs associated with nonproducing mineral properties incurred prior to the time when they are developed and entered into production or (2) the systematic charge-off to expense of those costs of productive mineral properties (including tangible and intangible costs of prospecting, acquisition, exploration, and development) that had been initially capitalized (or deferred) prior to the time the properties entered into production, and thereafter are charged off as minerals are produced.

Black Lung Benefits: In the content of the coal operation statement of income, this term refers to all payments, including taxes, made by the company attributable to Black Lung.

Bottom-Hole Contribution: A payment (either in cash or in acreage) that is required by agreement when a test well is drilled to a specified depth regardless of the outcome of the well and that is made in exchange for well and evaluation data. (See definitions for Dry Hole Contribution and Test Well Contribution).

Branded Product: A refined petroleum product sold by a refiner with the understanding that the purchaser has the right to resell the product under a trademark, trade name, service mark, or other identifying symbol or names owned by such refiner.

Capacity, Coal: (Same as "practical potential" used on Form EIA-7). The highest level of output under realistic conditions. Assume availability of labor and materials sufficient to utilize machinery and equipment in place and ready to use during the year. Take into account the additional downtime for maintenance or repair which would be required. Do not consider added costs (additional personnel, overtime pay, materials, repairs, etc.) to be limiting factors on potential.

Capacity, Refining: The measure of capacity used on Schedule 5242 is adopted from the Form EIA-820, Annual Refinery Report.

Carrying Costs: Costs incurred in order to retain exploration and property rights after acquisition but before production has occurred. Such costs include legal costs for title defense, ad valorem taxes on nonproducing mineral properties, shut-in royalties, and delay rentals.

Chemical Operations: All chemical operations.

Christmas Tree: The valves and fittings installed at the top of a well to control and direct the flow of well fluids.

Coal Gasification: The process of converting coal into gas. The basic process involves crushing coal to a powder, which is then heated in the presence of steam and oxygen to produce a gas. The gas is then refined to reduce sulfur and other impurities. The gas can be used as a fuel or processed further and concentrated into chemical or liquid fuel.

Coal Liquefaction: A chemical process that converts coal into clean-burning liquid hydrocarbons, such as synthetic crude oil and methanol.

Company Automotive (Retail) Outlet: Any retail outlet, as defined below, selling motor fuel under a reporting company's brand name. (See definition for Branded Product.)

Contribution to Net Income: The FRS segment equivalent to net income. However, some consolidated items of revenue and expense are not allocated to the segments, and therefore they are not equivalent in a strict sense. The largest item not allocated to the segments is interest expense since this is regarded as a corporate-level item for FRS purposes.

Crude Oil: A mixture of hydrocarbons that existed in the liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface-separating facilities. For FRS reporting, volumes reported as crude include:

Where a State regulatory agency specifies a definition of crude oil which differs from that set forth above for statistical purposes, the State definition should be followed.

DD&A: Abbreviation for depreciation, depletion, and amortization.

Deferred Taxes: Taxes accrued and reflected as an expense in a company's income statement, but not payable to the taxing authority in that time period. These taxes are accrued to compensate for an understatement of income tax expense which would occur if only the tax currently due to taxing authority were reflected as the total income tax expense.

Delay Rental: A payment that commonly is required annually by the lease contract to be paid by a lessee if commercial production has not yet been obtained in lieu of the lessee's performing specified work on the leased property according to the terms of the mineral lease. Failure to pay the delay rental normally terminates the lease with no penalty to the lessee.

Depletion: A term for either (1) a periodic assignment to expense of recorded amounts or (2) an allowable income tax deduction that is related to the exhaustion of mineral reserves. Depletion is included as one of the elements of amortization. When used in that manner, depletion refers only to book depletion. (See definition for Amortization.)

Depreciation: See definition for Amortization.

Development: The preparation of a specific mineral deposit for commercial production; this preparation includes construction of access to the deposit and of facilities to extract the minerals. The development process is sometimes further distinguished between a preproduction stage and a current stage, with the distinction being made on the basis of whether the development work is performed before or after production from the mineral deposit has commenced on a commercial scale.

Development Costs: Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering, and storing the oil and gas. More specifically, development costs, and also depreciation and applicable operating costs of support equipment and facilities and other costs of development activities, are costs incurred to:

Distillate: A general classification for one of the petroleum fractions produced in conventional distillation operations. Included are kerosene and products known as heating oils and diesel fuels, specifically: No. 1, No. 2, and No. 4 Fuel Oils and No. 1, No. 2, and No. 4 Diesel Fuels.

Domestic Operations: Domestic operations are those operations located in the United States.

Drilling: The act of boring a hole (1) to determine whether minerals are present in commercially recoverable quantities and (2) to accomplish production of the minerals (including drilling to inject fluids).

Drilling Arrangement: A contractual agreement under which a working interest owner (the assignor) assigns a part of a working interest in a property to another party (the assignee) in exchange for which the assignee agrees to develop the property. The term may also be applied to an agreement under which an operator assigns fractional shares in production from a property to participants for cash considerations as a means of acquiring cash for developing the property. Under a "disproportionate cost" drilling arrangement, the participants normally pay a greater total share of costs than the total value of the fractional shares of the property received in the arrangement.

Drilling and Equipping of Wells: The drilling and equipping of wells through completion of the "Christmas tree."

Dry-Hole Charge: The charge-off to expense of a previously capitalized cost upon the conclusion of an unsuccessful drilling effort.

Dry-Hole Contribution: A payment (either in cash or in acreage) that is required by agreement only if a test well is unsuccessful and that is made in exchange for well test and evaluation data. (See definitions for Bottom Hole Contribution and Test Well Contribution.)

Eliminations: Revenues and expenses resulting from transactions between segments. Consolidated company accounts do not include intersegment revenues and expenses. Therefore, such intersegment transactions must be eliminated in consolidation.

Equity in Earnings of Unconsolidated Affiliates: A company's proportional share (based on ownership) of the net earnings or losses of an unconsolidated affiliate. For FRS reporting, cost-basis dividends are included.

Exploration: Exploration involves (1) identifying areas that may warrant examination and (2) examining specific areas that are considered to have prospects of containing oil and gas reserves, including drilling exploratory wells and exploratory-type stratigraphic test wells. Exploration costs may be incurred both before acquiring the related property (sometimes referred to in part as prospecting costs) and after acquiring the property.

Exploration Costs: Costs, including depreciation and applicable operating costs of support equipment and facilities and other costs directly identifiable with exploration activities, such as:

Extractive Industries: Industries involved in the activities of (1) prospecting and exploring for wasting (non-regenerative) natural resources, (2) acquiring them, (3) further exploring them, (4) developing them, and (5) producing (extracting) them from the earth. The term does not encompass the industries of forestry, fishing, agriculture, animal husbandry, or any others that might be involved with resources of a regenerative nature.

Extraordinary Item: Income and expense items associated with events and transactions that possess a high degree of abnormality and are of a type that would not reasonably be expected to recur in the foreseeable future. An example would be losses resulting from an earthquake, expropriation, or a prohibition under a newly enacted law.

Farm-out (-in) Arrangement: An arrangement, used primarily in the oil and gas industry, in which the owner or lessee of mineral rights (the first party) assigns a working interest to an operator (the second party), the consideration for which is specified exploration and/or development activities. The first party retains an overriding royalty or other type of economic interest in the mineral production. The arrangement from the viewpoint of the second party is termed a "farm-in arrangement."

Fee Interest: The absolute, legal possession and ownership of land, property, or rights, including mineral rights. A fee interest can be sold (in its entirety or in part) or passed on to heirs or successors.

Field: An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field which are separated vertically by intervening impervious strata, or laterally by local geologic barriers, or by both.

Footage Drilled: Total footage for wells in various categories, as reported for any specified period, includes (1) the deepest total depth (length of well bores) of all wells drilled from the surface, (2) the total of all bypassed footage drilled in connection with wells, and (3) all new footage drilled for directional "sidetrack" wells. Footage reported for directional "sidetrack" well does not include footage in the common bore which is reported as footage for the original well. In the case of old wells drilled deeper, the reported footage is that which was drilled below the total depth of the old well.

The redrill footage is included in the appropriate classification of total footage but is not reported as a separate classification.

Foreign Access: Refers to proved reserves of crude, condensate, and natural gas liquids applicable to long-term supply agreements with foreign governments or authorities in which the company or one of its affiliates acts as producer.

Foreign Currency Transaction Gains and Losses: Gains or losses resulting from the effect of exchange rate changes on transactions denominated in currencies other than the functional currency (for example, a U.S. enterprise may borrow Swiss francs or a French subsidiary may have a receivable denominated in kroner from a Danish customer). Gains and losses on those foreign currency transactions are generally included in determining net income for the period in which exchange rates change unless the transaction hedges a foreign currency commitment or a net investment in a foreign entity. Intercompany transactions of a long-term investment nature are considered part of a parent's net investment and hence do not give rise to gains or losses.

Foreign Currency Translation Effects: Gains or losses resulting from the process of expressing amounts denominated or measured in one currency in terms of another currency by use of the exchange rate between the two currencies. This process is generally required to consolidate the financial statements of foreign affiliates into the total company financial statements and to recognize the conversion of foreign currency or the settlement of a receivable or payable denominated in foreign currency at a rate different from that at which the item is recorded. Translation adjustments are not included in determining net income, but are disclosed as separate components of consolidated equity.

Foreign Operations: These are operations that are located outside the United States. (See definition for Domestic Operations.) Determination of whether an enterprise's mobile assets, such as offshore drilling rigs or ocean-going vessels, constitute foreign operations should depend on whether such assets are normally identified with operations located outside the United States.

Foreign operations are segregated into the following areas for FRS reporting purposes:

Geological and Geophysical (G&G) Costs: Costs incurred in making geological and geophysical studies, including, but not limited to, costs incurred for salaries, equipment, obtaining rights of access, and supplies for scouts, geologists, and geophysical crews.

Hydrocarbon: An organic chemical compound of hydrogen and carbon in either the gaseous, liquid, or solid phase. The molecular structure of hydrocarbon compounds varies from the simplest (e.g., methane, a constituent of natural gas) to the very heavy and very complex.

Improved Recovery: The operation whereby crude oil or natural gas is recovered using any method other than those that rely primarily on the use of natural reservoir pressure, gas lift, or the use of a pump.

Intangible Drilling and Development Costs (IDC): Costs incurred in preparing well locations, drilling and deepening wells, and preparing wells for initial production up through the point of installing control valves. None of these functions, because of their nature, have salvage value. Such costs would include labor, transportation, consumable supplies, drilling tool rentals, site clearance, and similar costs.

Investments and Advances to Unconsolidated Affiliates: The balance sheet account representing the cost of investments and advances to unconsolidated affiliates. Generally, affiliates which are less than 50 percent owned by a company may not be consolidated into the company's financial statements.

Lease Bonus: An amount paid by a lessee to a lessor as consideration for granting a lease, usually as a lump sum; this payment is in addition to any rental or royalty payments.

Lease Equipment: All equipment located on the lease except the well to the point of the "Christmas tree."

Lifting Costs: The costs associated with the extraction of a mineral reserve from a producing property. (See definition for Production Cost.)

Milling: The grinding or crushing of ore, concentration, and other benefication, including the removal of valueless or harmful constituents and preparation for market.

Milling Capacity: The maximum rate at which a mill is capable of treating ore or producing concentrate.

Mineral: Any of the various naturally occurring substances (such as coal, crude oil, metals, natural gas, salt, sand, stone, sulfur, and water) usually obtained from the earth. The term is used to include all wasting, i.e., nonregenerative, inorganic substances that are extracted from the earth.

Mineral Interests In Properties: (Hereinafter referred to as Properties). These include fee ownership or a lease, concession, or other contractual interest representing the right to extract minerals subject to such terms as may be imposed by the conveyance of these interests. Properties also include royalty interests, production payments payable in oil or gas, and other nonoperating interests in properties operated by others. Properties include those agreements with foreign governments or authorities under which an enterprise participates in the operation of the related properties or otherwise serves as "producer" of the underlying reserves, but properties do not include other supply agreements or contracts that represent the right to purchase (as opposed to extract) oil and gas.

Mineral Lease: An agreement wherein a mineral interest owner (lessor) conveys to another party (lessee) the rights to explore for, develop, and produce specified minerals. The lessee acquires a working interest and the lessor retains a nonoperating interest in the property, referred to as the royalty interest, each of proportions agreed upon.

Mineral Resource Assets: The costs shown on the balance sheet representing assets that are directly associated with and which derive value from mineral reserves. For the oil and gas industry these costs may include:

All costs that involve processing, transportation, refining, distribution, and marketing are not classified as mineral resource assets. Examples may include:

For the mining industry, these costs may include:

All costs that involve processing, manufacturing, and fabricating facilities that are not directly associated with, nor derive value from, a particular mineral deposit in which the company has an economic interest, e.g., smelters and refineries, which obtain their feed from outside shippers, are not mineral resource assets.

Mineral Rights: The ownership of the minerals beneath the earth's surface with the right to remove them. Mineral rights may be conveyed separately from surface rights.

Mining: Any activity directed to the extraction of ore and associated rock. Included are open pit work, quarrying, augering, alluvial dredging, and combined operations, including surface and underground operations.

Minority Interest in Income: The proportional share of the minority ownership's interest (less than 50 percent) in the earnings or losses of the consolidated subsidiary. Subsidiaries are generally fully consolidated when a share of ownership between 51 percent and 100 percent is held by the parent. In consolidation, 100 percent of revenues, expenses, assets, etc. are included in the financial statements even though, for example, the subsidiary is only 80 percent owned by the parent company. In such cases, the consolidated balance sheet must have a caption on the right-hand side titled something like "minority interests in consolidated affiliates," and the income statement must have a similar line to reduce net income to the pro rata (80 percent in this example) share of the consolidated subsidiary's net income.

Motor Gasoline (Finished): A complex mixture of relatively volatile hydrocarbons, with or without small quantities of additives, that has been blended to form a fuel suitable for use in spark-ignition engines. Motor gasoline, as given in ASTM Specification D439 or Federal Specification VV-G-1690B, includes a range in distillation temperatures from 122 to 158^o F at the 10-percent recovery point and from 365 to 374^o F at the 90-percent recovery point. Motor gasoline includes reformulated motor gasoline, oxygenated motor gasoline, and other finished motor gasoline. Blendstock is excluded until blending has been completed.

Motor Gasoline, Finished Gasohol. A blend of finished motor gasoline (leaded or unleaded) and alcohol (generally ethanol but sometimes methanol), limited to 10 percent by volume of alcohol.

Motor Gasoline, Finished Leaded. Contains more than 0.05 gram of lead per gallon or more than 0.005 gram of phosphorus per gallon. Premium and regular grades are included, depending on the octane rating. Includes leaded gasohol. Blendstock is excluded until blending has been completed. Alcohol that is to be used in the blending of gasohol is excluded.

Motor Gasoline, Finished Unleaded. Contains not more than 0.05 gram of lead per gallon and not more than 0.005 gram of phosphorus per gallon. Premium and regular grades are included, depending on the octane rating. Includes unleaded gasohol. Blend stock is excluded until blending has been completed. Alcohol that is to be used in the blending of gasohol is also excluded.

MTBE (Methyl tertiary butyl ether) (CH₃ )₃COCH₃. An ether intended for motor gasoline blending. See Oxygenates.

Natural Gas: A mixture of hydrocarbon compounds and small quantities of various nonhydrocarbons existing in the gaseous phase or in solution with crude oil in natural underground reservoirs at reservoir conditions. The principal hydrocarbons usually contained in the mixture are methane, ethane, propane, butanes, and pentanes. Typical nonhydrocarbon gases which may be present in reservoir natural gas are carbon dioxide, helium, hydrogen sulfide, and nitrogen. Under reservoir conditions, natural gas and the liquefiable portions thereof occur either in a single gaseous phase in the reservoir or in solution with crude oil and are not distinguishable at that time as separate substances.

Natural gas, based on the type of occurrence in the reservoir, is classified by two categories, as follows:

Associated gas is free natural gas, commonly known as gas cap gas, which overlies and is in contact with crude oil in the reservoir. Dissolved gas is natural gas that is in solution with crude oil in the reservoir at reservoir conditions.

Natural Gas Liquids (NGL): Natural gas liquids are those portions of reservoir gas which are liquefied at the surface in lease separators, field facilities, or gas processing plants. Natural gas liquids include but are not limited to: ethane, propane, butanes, pentanes, natural gasoline, and condensate.

Natural Reservoir Pressure: the energy within an oil or gas reservoir that causes the oil or gas to rise (unassisted by other forces) to the earth's surface when the reservoir is penetrated by an oil or gas well. The energy may be the result of "dissolved gas drive," "gas cap drive," or "water drive." Regardless of the type of drive, the principle is the same: the energy of the gas or water, creating a natural pressure, forces the oil or gas to the well bore.

Net Investment In Place: The sum of net property, plant, and equipment (PP&E) plus investment and advances to unconsolidated affiliates.

Net Investment In Place, Additions to: The current year's expenditures on additions to net investment in place. (See definition for Net Investment In Place.)

Net Ownership Interest Reserves: Includes all reserve quantities owned, regardless of the type of ownership, e.g., working interest or royalty.

Net Profits Interest: A contractual arrangement under which the beneficiary, in exchange for consideration paid, receives a stated percentage of the net profits from an extractive operation. The contract specifies the items to be taken into account in computing net profits. That type of arrangement is considered a nonoperating interest, as distinguished from a working interest, since it does not involve

the rights and obligations of operating a mineral property (costs of exploration, development, and operation). The net profits interest does not bear any part of net losses.

Nonbranded Product: Any refined petroleum product that is not a branded product.

Nonoperating Interest: Any mineral lease interest (e.g., royalty, production payment, net profits interest) that does not involve the rights and obligations of operating a mineral property.

Nonproducing: A term used in reference to a property, well, or mine from which production of commercially recoverable quantities of wasting natural resources has not yet commenced.

Nontraceable: Those revenues, costs, assets, and liabilities that cannot be directly attributed to a line of business or that cannot be assigned to a line of business by use of a reasonable allocation method developed on the basis of operating level realities.

Nuclear Fuel Operations: All nuclear fuel operations, excluding reactor and reactor component manufacturing or containment construction. Includes: exploration and development; mining; milling; conversion; enrichment; fabrication; reprocessing; and spent fuel storages.

Offshore: That geographic area that lies seaward of the coastline. In general, the coastline is the line of ordinary low water along with that portion of the coast that is in direct contact with the open sea or the line marking the seaward limit of inland water.

If a State agency uses a different basis for classifying onshore and offshore areas, the State classification should be used (e.g., Cook Inlet in Alaska is classified as offshore; for Louisiana, the coastline is defined as the Chapman Line, as modified by subsequent adjudication).

Oil Shale: A sedimentary rock containing kerogen, a solid organic material.

Operating Expenses: Segment expenses related both to revenue from sales to unaffiliated customers and revenue from intersegment sales or transfers, excluding loss on disposition of property, plant, and equipment; interest expenses and financial charges; foreign currency transaction effects; minority interest; and income taxes.

Operating Income: Operating revenues less operating expenses. Excludes items of other revenue and expense such as equity in earnings of unconsolidated affiliates, dividends, interest income and expense, income taxes, extraordinary items, and cumulative effect of accounting changes.

Operating Revenues: Segment revenues both from sales to unaffiliated customers (i.e., revenue from customers outside the enterprise as reported in the company's consolidated income statement) and from intersegment sales or transfers, if any, of products and services similar to those sold to unaffiliated customers, excluding equity in earnings of unconsolidated affiliates; dividend and interest income; gain on disposition of property, plant, and equipment; and foreign currency transaction effects.

Other Energy: Energy operations not included in Petroleum or Coal. Other Energy includes nuclear, oil shale, tar sands, coal liquefaction and gasification, geothermal, solar, and other forms of nonconventional energy.

Oxygenates. Any substance which when added to gasoline, increases the amount of oxygen in that gasoline blend. Through a series of waivers and interpretive rules, the Environmental Protection Agency (EPA) has determined the allowable limits for oxygenates in unleaded gasoline. The "Substantially Similar" Interpretive Rules (56 FR (February 11, 1991)) allows blends of aliphatic alcohols other than methanol and aliphatic ethers, provided the oxygen content does not exceed 2.7 percent by weight. The "Substantially Similar" Interpretive Rules also provide for blends of methanol up to 0.3 percent by volume exclusive of other oxygenates, and butanol or alcohols of a higher molecular weight up to 2.75 percent by weight. Individual waivers pertaining to the use of oxygenates in unleaded gasoline have been issued by the EPA. They include:

PP&E, Additions to: The current year's expenditures on property, plant, and equipment (PP&E). The amount is predicated upon each reporting company's accounting practice. That is, accounting

practices with regard to capitalization of certain items may differ across companies, and therefore this figure in FRS will be a function of each reporting company's policy.

PP&E, Net: The original cost of property, plant, and equipment (PP&E), less accumulated DD&A.

Permanent Differences: Differences between taxable income and pretax accounting income arising from transactions that, under applicable tax laws and regulations, will not be offset by corresponding differences or "turn around" in other periods. (See definition for Timing Differences.)

Petrochemicals: Organic and inorganic compounds and mixtures that include but are not limited to organic chemicals, cyclic intermediates, plastics and resins, synthetic fibers, elastomers, organic dyes, organic pigments, detergents, surface active agents, carbon black, and ammonia.

Petroleum: Hydrocarbon mixtures broadly defined to include crude oil, lease condensate, natural gas, products of natural gas processing plants (plant products), refined products, and unfinished products and blending materials.

Pipelines, Rate Regulated: FRS establishes three pipeline segments; crude/liquid (raw materials); natural gas; and refined products. The pipelines included in these segments are all Federally or State rate-regulated pipeline operations, which are included in the reporting company's consolidated financial statements. However, at the reporting company's option, intra-state pipeline operations may be included in the Domestic Refining/Marketing Segment if: they would comprise less than 5 percent of Domestic Refining/Marketing Segment net PP&E, revenues, and earnings in the aggregate; and if the inclusion of such pipelines in the consolidated financial statements adds less than $100 million to the net PP&E reported for the Domestic Refining/ Marketing Segment.

Plant Products: Natural gas liquids recovered from natural gas processing plants (and in some cases from field facilities), including ethane, propane, butane, butane-propane mixtures, natural gasoline, plant condensate, and lease condensate.

Pre-Discovery Costs: All costs incurred in an extractive industry operation prior to the actual discovery of minerals in commercially recoverable quantities; normally includes prospecting, acquisition, and exploration costs, and may include some development costs.

Pre-Production Costs: Costs of prospecting for, acquiring, exploring, and developing mineral reserves, incurred prior to the point when production of commercially recoverable quantities of minerals commences.

Primary Recovery: The crude oil or natural gas recovered by any method that may be employed to produce them where the fluid enters the well bore by the action of natural reservoir pressure (energy or gravity).

Primary Transportation: Conveyance of large shipments of petroleum raw materials and refined products usually by pipeline, barge, or ocean-going vessel. All crude oil transportation is primary, including the small amounts moved by truck. All refined product transportation by pipeline, barge, or ocean-going vessel is primary transportation.

Producing Property: A term often used in reference to a property, well, or mine that produces wasting natural resources. The term typically means a property that produces in paying quantities (that is, one for which proceeds from production exceed operating expenses).

Production, Natural Gas Liquids: Production of natural gas liquids is classified as follows:

Production, Oil and Gas: The lifting of the oil and gas to the surface and gathering, treating, field processing (as in the case of processing gas to extract liquid hydrocarbons), and field storage. The production function shall normally be regarded as terminating at the outlet valve on the lease or field production storage tank; if unusual physical or operational circumstances exist, it may be more appropriate to regard the production function as terminating at the first point at which oil, gas, or gas liquids are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal.

Production Costs: Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. They become part of the cost of oil and gas produced. The following are examples of production costs (sometimes called lifting costs):

Depreciation, depletion, and amortization (DD&A) of capitalized acquisition, exploration, and development costs are not production costs but also become part of the cost of oil and gas produced along with production (lifting) costs identified above.

Production costs include the following sub-categories of costs:

Production Payments: A contractual arrangement providing a mineral interest that gives the owner a right to receive a fraction of production or of proceeds from the sale of production, until a specified quantity of minerals (or a definite sum of money, including interest) has been received. It is considered a nonoperating interest, since the owner bears no part of exploration, development, and operating costs. Usually, there is no recourse if production is insufficient to satisfy the amount of the production payment.

Production payments are classified according to the manner in which the rights are created:

Proportional Interest in Investee Reserves: The reporting company's proportional interest at the end of the year in the reserves of investees that are accounted for by the equity method.

Prospecting: The search for an area of probable mineralization; the search normally includes topographical, geological, and geophysical studies of relatively large areas undertaken in an attempt to locate specific areas warranting detailed exploration. Prospecting usually occurs prior to the acquisition of mineral rights.

Prospecting Costs: Direct and indirect costs incurred to identify areas of interest that may warrant detailed exploration. Such costs include those incurred for: topographical, geological, and geophysical studies; rights of access to properties in order to conduct such studies; salaries, equipment, instruments, and supplies for geologists, geophysical crews, and others conducting such studies; and overhead that can be identified with those activities.

Reclamation Expenses: In the context of the coal operation statement of income, this term refers to all payments made by the company attributable to reclamation, including taxes.

Refined Petroleum Products: Refined petroleum products include but are not limited to gasolines, kerosene, distillates (including No. 2 fuel oil), liquefied petroleum gas, asphalt, lubricating oils, diesel fuels, and residual fuels.

Research and Development: Basic and applied research in the sciences and engineering and the design and development of prototypes and processes, excluding quality control, routine product testing, market research, sales promotion, sales service, research in the social sciences or psychology, and other non-technological activities or technical services.

Basic research, applied research, and development are distinguished as follows:

Reserves, Change In: For FRS reporting, the following definitions should be used for changes in reserves.

Reserves (Coal): Coal reserve estimates comprising the demonstrated coal reserve base include only proved (measured) and probable (indicated).

Reserves, Net: Includes all proved reserves associated with the company's net working interests. (See definition for Working Interest.)

Reserves, Proved (Oil and Gas): Proved reserves for oil and gas are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

Reservoirs are considered proved if economic producibility is supported by one or more of: actual production; conclusive formation test; core analysis; and/or electric or other log interpretations. The

area of a reservoir considered proved includes (1) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any; and (2) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limited of the reservoir.

Volumes of oil and gas placed in underground storage are not to be considered proved reserves, but should be classified as inventory.

Reserves that can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the "proved" classification when successful testing by a pilot project, or when the operation of an installed program in the reservoir provides support for the engineering analysis on which the project or program was based.

Estimates of proved reserves do not include the following: (1) oil that may become available from known reservoirs but is classified separately as "indicated additional reserves"; (2) crude oil, natural gas, and natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics, or economic factors; (3) crude oil, natural gas, and natural gas liquids that may occur in undrilled prospects; and (4) crude oil, natural gas, and natural gas liquids that may be recovered from oil shales, tar sands, coal, gilsonite, and other such sources.

It is not necessary that production, gathering, or transportation facilities be installed or operative for a reservoir to be considered proved.

For natural gas, an appropriate reduction in the reservoir gas volume is made to cover the removal of the liquefiable portions of the gas and the exclusion of nonhydrocarbon gases where they occur in sufficient quantity to render the gas unmarketable. If the liquefiable portions of the gas are not separately estimated, they need not be separately stated for FRS reporting purposes.

Reservoir: A porous and permeable underground formation containing an individual and separate accumulation of producible hydrocarbons (oil and/or gas) which is confined by impermeable rock or water barriers and is characterized by a single natural pressure system.

Residual Fuel Oil: The heavier oils that remain after the distillate fuel oils and lighter hydrocarbons are distilled away in refinery operations and that conform to ASTM Specifications D396 and 975. Included are No. 5, a residual fuel oil of medium viscosity; Navy Special, for use in steam-powered vessels in government service and in shore power plants; No. 6, which includes Bunker C fuel oil, and is used for commercial and industrial heating, electricity generation and to power ships.

Royalty: A contractual arrangement providing a mineral interest that gives the owner a right to a fractional share of production or proceeds therefrom, that does not contain rights and obligations of operating a mineral property, and that is normally free and clear of exploration, developmental, and operating costs, except production taxes. (See definition for Nonoperating Interest.)

Salt Dome: A domical arch (anticline) of sedimentary rock beneath the earth's surface, in which the layers bend downward in opposite directions from the crest, and that has a mass of rock salt as its core.

Shallow Pitting: Testing a potential mineral deposit by systematically sinking small shafts into the earth and by analyzing the material recovered.

Short Ton: A unit of weight that equals 2,000 pounds.

Shut In: Closed temporarily; wells and mines capable of production may be shut in for repair, cleaning, inaccessibility to a market, etc.

Support Equipment and Facilities: These include, but are not limited to, seismic equipment, drilling equipment, construction and grading equipment, vehicles, repair shops, warehouses, supply points, camps, and division, district, or field offices.

Surface Drilling Expenses (Uranium): These include drilling, drilling roads, site preparation, geological and other technical support, sampling, and drill hole logging.

Surface Rights: Fee ownership in surface areas of land. Also used to describe a lessee's right to use as much of the surface of the land as may be reasonably necessary for the conduct of operations under the lease.

Tangible Development Costs: Costs incurred during the development stage for access, mineral-handling, and support facilities having a physical nature. In mining, such costs would include tracks, lighting equipment, ventilation equipment, other equipment installed in the mine to facilitate the extraction of minerals, and supporting facilities for housing and care of work forces. In the oil and gas industry, tangible development costs would include well equipment (such as casing, tubing, pumping equipment, and well heads), as well as field storage tanks and gathering systems.

Tar Sands: Bitumen-impregnated sands that yield mixtures of liquid hydrocarbon and which require further processing other than mechanical blending before becoming finished petroleum products.

Test Well Contribution: A payment made to the owner of an adjacent or nearby tract who has drilled an exploratory well on that tract in exchange for information obtained from the drilling effort. (See definitions for Bottom Hole Contribution and Dry Hole Contribution.)

Timing Differences: Differences between the periods in which transactions affect taxable income and the periods in which they enter into the determination of pretax accounting income. Timing differences originate in one period and reverse or "turn around" in one or more subsequent periods. Some timing differences reduce income taxes that would otherwise be payable currently; others increase income taxes that would otherwise be payable currently. (See definition for Permanent Differences.)

Transfer Price: The monetary value assigned to products, services, or rights conveyed or exchanged between related parties, including those occurring between units of a consolidated entity.

Uncompleted Wells, Equipment, and Facilities Costs: The costs incurred to (1) drill and equip wells that are not yet completed, and (2) acquire or construct equipment and facilities that are not yet completed and installed.

Undeveloped Property: Refers to a mineral property on which development wells or mines have not been drilled or completed to a point that would permit the production of commercial quantities of mineral reserves.

Unfinished Oils: Includes all oils requiring further processing, except those requiring only mechanical blending. In most cases, these are produced by partial refining or purchased in an unfinished state for conversion to finished products by further refining.

Uranium Exploration, Land Held For: Types of land holdings and acquisitions include fee land, mineral fee, leases, patented and unpatented claims, and options to purchase mineral fee. Excludes land acquired or held for production of uranium from known commercial uranium deposits.

Vessels: The following vessel categories have been established for FRS reporting:

Wasting (non-regenerative) Natural Resources: Naturally occurring substances that are classified as minerals, are present in or on the earth's surface, and are extracted therefrom by man but are not susceptible to man's attempts to replace them in their original state or in a similar state (although they, in a sense, may be replaced by nature over the long term).

By that definition, these resources include, but are not limited to: (1) crude oil and natural gas; (2) metals, such as copper, gold, iron, nickel, platinum, silver, tin, titanium, tungsten, uranium, and zinc; (3) coal; (4) salt; (5) sulfur; and (6) gravel, sand, and stone.

The natural resources excluded by this definition, because they are susceptible to attempts to replace them in their original state or in a similar state (being characteristically replaced by nature as well), are those that provide the basis for products normally associated with the industries of forestry, fishing, agriculture, and animal husbandry.

Well: A hole drilled in the earth for the purpose of (1) finding or producing crude oil or natural gas; or (2) providing services related to the production of crude oil or natural gas.

Wells are classified as (1) oil wells; (2) gas wells; (3) dry holes; (4) stratigraphic test wells; or (5) service wells. The latter two types of wells are not counted for FRS reporting.

Oil wells, gas wells, and dry holes are classified as exploratory wells or development wells. Exploratory wells are subclassified as (1) new-pool wildcats; (2) deeper-pool tests; (3) shallow-pool tests; and (4) outpost (extension) tests. Well classifications reflect the status of wells after drilling has been completed.

Wellhead Price: The value at the mouth of the well. In general, the wellhead price is considered to be the sales price obtainable from a third party in an arm's length transaction. Posted prices, requested prices, or prices as defined by lease agreements, contracts or tax regulations should be used where applicable.

Wells and Related Equipment and Facilities: Include costs incurred to:

Working Interest: An interest in a mineral property that entitles the owner of that interest to all or a share of mineral production from the property, usually subject to a royalty.

A working interest permits the owner to explore, develop, and operate the property. The working interest owner bears the costs of exploration, development, and operation of the property, and in return is entitled to a share of the mineral production from the property, or to a share of the proceeds therefrom. It may be assigned to another party in whole or in part, or it may be divided into other special property interests.

Yellowcake (U₃O₈): The final precipitate formed in the milling process. U₃O₈, common form of triuranium oxide, is the powder obtained by evaporating an ammonia solution of the oxide.