 |
Alaska Administrative Code (Last Updated: January 12, 2017) |
 |
Title 11. Natural Resources. |
|
Part 11.1. Office of the Commissioner. |
|
Chapter 11.25. Royalty Election Under Alaska Gasline Inducement Act. |
Section 11.25.120. Destination value in absence of reliable published prices.
Latest version.
-
(a) If the destination for qualified gas is not a first destination market, and the commissioner has not designated an applicable location differential for that destination under 11 AAC 25.130 for purposes of adjusting a published price from a first destination market to the destination, destination value is determined under (b) or (c) of this section, as applicable. (b) The destination value of qualified gas sold by a lessee or an affiliate under an arm's length contract is the gross proceeds accruing to the lessee or affiliate, except as provided in this subsection. To claim the benefit of this section, the lessee shall demonstrate that its contract is arm's length. The commissioner may require a lessee to certify in writing that its arm's length contract provisions include all of the consideration to be paid by the buyer, either directly or indirectly. If an arm's length contract does not set out the consideration actually transferred either directly or indirectly from the buyer to the seller, the commissioner may require that the qualified gas sold under that contract be valued at destination under (c) of this section. If the commissioner determines that the gross proceeds accruing under an arm's length contract to the lessee or an affiliate of the lessee do not represent the reasonable value of the qualified gas because of misconduct by the contracting parties, or because the lessee breached its duty to the state to market the qualified gas for the mutual benefit of the lessee and the state, the commissioner may require the lessee to value the qualified gas under (c) of this section. (c) If qualified gas is not sold under an arm's length contract, or if the lessee is required under (b) of this section to determine destination value under this subsection, the destination value of qualified gas is the fair market value for the qualified gas as determined by the commissioner based on prices received in arm's length spot sales, other reliable sources of price or market information, and comparable arm's length contracts for purchases, sales, or other dispositions of like-quality gas. In evaluating the comparability of an arm's length contract for purposes of this subsection, the commissioner will consider (1) price; (2) the time of execution; (3) the contract's duration; (4) each market served; (5) the contract's terms; (6) the quality and volume of the gas; and (7) other factors appropriate to reflect the value of the qualified gas. (d) In this section, (1) "gross proceeds" means the money and other consideration accruing to an oil and gas lessee or its affiliate for the disposition of qualified gas; "gross proceeds" include (A) payments to the lessee or its affiliate for dehydration, measurement, gathering, or other services, to the extent that the lessee is obligated to perform those services at no cost to the state as lessor or otherwise; (B) tax reimbursements accruing to a lessee or its affiliate even though the state's royalty interest may be exempt from taxation; and (C) money and other consideration, including the forms of consideration identified in this paragraph, to which a lessee or its affiliate is contractually or legally entitled but that the lessee or affiliate does not seek to collect through reasonable efforts; (2) "spot sale" means a contract for the sale of gas that (A) requires a seller to sell to a buyer a specified amount of unprocessed gas, residue gas, or a gas plant product at a specified price over a fixed period, usually of short duration; (B) does not normally require a cancellation notice to terminate; and (C) does not contain an obligation to, or imply an intent to, continue in later periods.
Authorities
38.05.020;38.05.180;43.90.310