Section 11.25.220. Unused capacity deduction.

	(a)  A qualified person that elects under 11 AAC 25.040(b) to calculate royalties under this chapter may deduct a share of its actual and reasonable costs of unused capacity on the Alaska mainline and Canada mainline, if in the royalty reporting period the qualified person's total shipments on a mainline are less than the total of its firm transportation capacity held that month on that mainline. Any deduction for unused capacity may be allowed only as provided in this section.  
	(b)  In calculating unused capacity for purposes of this section, a qualified person shall combine quantities specific to that qualified person and any affiliates. A qualified person shall base calculations under this section on amounts specific to the qualified person and its affiliates, and may not base a calculation on the total amount of  
		(1) all shippers' firm transportation capacity for a mainline; or  
		(2) all shippers' production from leases, all shippers' gas from other sources, or all shippers' gas from all sources.  
	(c)  A qualified person's unused capacity for a mainline must be calculated using the same billing determinants used in calculating the applicable recourse rate for the appropriate mainline.  
	(d)  Except as provided in (e) of this section, a qualified person's unused capacity for a month equals AC - AS, where  
		(1) AC equals allocated capacity; allocated capacity is determined by multiplying FOSFT, as described in (3) of this subsection, by the fraction,  
			(A) the numerator of which is the shipments of production from leases on the Alaska mainline or Canada mainline, as applicable, on and after the date of commencement of commercial operations and before the month for which the calculation is made; and  
			(B) the denominator of which is the shipments from all sources on the Alaska mainline or Canada mainline, as applicable, on and after the date of commencement of commercial operations and before the month for which the calculation is made;  
		(2) AS equals allocated shipments; the figure for allocated shipments is the greater of  
			(A) shipments of production from leases during the month for which the calculation is made; or  
			(B) AC multiplied by a fraction, the numerator of which is total shipments from all sources during the month for which the calculation is made, and the denominator of which is TFT, as described in (4) of this subsection;  
		(3) FOSFT equals firm transportation capacity  
			(A) held in the royalty reporting period for which the calculation is made; and  
			(B) acquired through a commitment made in the first binding open season for the Alaska mainline or Canada mainline, as applicable;  
		(4) TFT equals total firm transportation capacity  
			(A) held in a royalty reporting period for which the calculation is made; and  
			(B) acquired through commitments made in the first and subsequent binding open seasons for the Alaska mainline or Canada mainline, as applicable.  
	(e)  Allocated capacity, as calculated under (d) of this section, becomes fixed at the value for the preceding royalty reporting period in the first month beginning after not less than five years of commercial operations of the Alaska mainline if, for that mainline, the qualified person's shipments from all sources for the month for which the calculation is made are less than 95 percent of total firm transportation capacity, as calculated under (d) of this section. The shortfall in shipments must be for reasons other than a temporary reduction in shipments caused by maintenance, pipeline expansion, or force majeure.  
	(f)  In determining a deduction for unused capacity under this section, a qualified person shall make appropriate adjustments to the calculations made under (d) and (e) of this section to account for commitments to firm transportation capacity for some but less than all segments of a mainline and for shipments on some but less than all segments of a mainline.  
	(g)  Actual and reasonable costs of unused capacity under this section do not include the cost of  
		(1) capacity other than capacity acquired through a commitment to firm transportation capacity made in the first binding open season for the project;  
		(2) capacity in excess of the volume or duration specified in a commitment to firm transportation capacity specified in a bid submitted under 11 AAC 25.020(a)(1) or its equivalent for the Canada mainline, excluding any option for extension of the term of years;  
		(3) capacity released to another shipper, except to the extent that the other shipper pays less for that capacity than the lessee or its affiliate is required to pay for that capacity, in which case the quantity released for purposes of this paragraph is calculated as the total quantity released multiplied by a fraction, the numerator of which is the amount the other shipper pays for the capacity, and the denominator of which is the amount the lessee or its affiliate would be allowed to claim as a transportation deduction under this chapter for the same capacity if it transported qualified gas in that capacity;  
		(4) capacity acquired from another shipper, except for capacity acquired in connection with the acquisition of substantially all of the releasing shipper's North Slope assets;  
		(5) unused capacity for which the person is entitled to a deduction in calculating royalties due any royalty owner other than the state;  
		(6) reservation charges for or attributable to pipeline, measurement, compression, and other permanent and temporary facilities existing before the date of sanction by the licensee for the Alaska mainline; or  
		(7) expenses other than a reservation charge paid for unused capacity, net of any proceeds, refund, credit, or compensation for the unused capacity.  
	(h)  Amounts deductible under this section for unused capacity are deducted proportionately from destination values calculated under 11 AAC 25.100 - 11 AAC 25.120 by applying the same principles for attributing used capacity to individual leases and to unprocessed gas, residue gas, gas plant products, and LNG.  
	(i)  Royalty payments due the state may be reduced only by the royalty-in-value share of the costs of unused capacity calculated under this section.  
	(j)  The lessee shall set out the unused capacity deductions calculated under this section as separate entries on royalty reports filed with the department and may not use these deductions to reduce the royalty value of unprocessed gas, residue gas, gas plant products, or LNG below zero.  
	(k)  In this section,  
		(1) "sanction" has the meaning given in AS 43.90.900;  
		(2) "shipments of production from leases" and "total shipments from all sources" on the Alaska mainline or Canada mainline, as applicable, include shipments of production on firm transportation capacity, interruptible capacity, authorized overrun service, or any other type or level of transportation service.  

Authorities

38.05.020;38.05.180;43.90.310

Notes

Reference

11 AAC 25.060
11 AAC 25.070
11 AAC 25.160
11 AAC 25.170

Authority

AS 38.05.020 AS 38.05.180 AS 43.90.310

History

Eff. 5/29/2010, Register 194