Section 15.55.151. Gross value of oil or gas at the point of production.

	(a)  Except as otherwise provided in 15 AAC 55.163, this section applies to all oil and gas produced in the state on a lease or property, regardless of whether the oil or gas is removed from the lease or property, less any oil or gas the ownership of or right to which is exempt from state taxation.  
	(b)  The gross value at the point of production for a producer's oil or gas must be calculated as follows:  
		(1) a destination value must be determined for the oil or gas; the destination value is the sales price under 15 AAC 55.161 unless (c) or (d) of this section applies, in which case the destination value is the prevailing value under 15 AAC 55.171 or 15 AAC 55.173, as applicable;  
		(2) for oil and gas produced  
			(A) before July 1, 2007, the producer's reasonable costs of transportation under 15 AAC 55.180 and 15 AAC 55.191 must be subtracted from the destination value determined under (1) of this subsection; reasonable costs of transportation are calculated from the point of production of the oil or gas to its sales delivery point, or if different, to a point where prevailing value is calculated under 15 AAC 55.171 or 15 AAC 55.173;  
			(B) after June 30, 2007, the producer's costs of transportation under AS 43.55.150 and 15 AAC 55.193 and, if applicable, the producer's processing cost deduction under 15 AAC 55.140 or 15 AAC 55.141 must be subtracted from the destination value determined under (1) of this subsection; costs of transportation are calculated from the point of production of the oil or gas to its sales delivery point or, if the destination value determined under (1) of this subsection is the prevailing value, to the point where prevailing value is determined under 15 AAC 55.171 or 15 AAC 55.173;  
		(3) if oils of different qualities are commingled, the value calculated under (2) of this subsection must be adjusted for  the cash value of the full consideration paid or received for quality differentials, regardless of whether prescribed by a filed tariff;  
		(4) if gas of different qualities is commingled, the value calculated under (2) of this subsection must be adjusted for the cash value of the full consideration paid or received for quality differentials, regardless of whether prescribed by a filed tariff, and including the value of any volumetric allocations or adjustments made on the basis of the relative BTU content, NGL content, or any other characteristic of the gas.  
	(c)  The prevailing value under 15 AAC 55.171 or 15 AAC 55.173 must be used in determining the gross value at the point of production for a producer's oil or gas if  
		(1) the producer's oil or gas is refined, used as fuel or petrochemical feedstock, or otherwise consumed at a refinery or plant owned by the producer, or the oil or gas is transferred from the producer in other than an arm's length, third party transaction;  
		(2) the prevailing value for the producer's gas under 15 AAC 55.173, plus the total of the actual or reasonable costs of transportation, as applicable, incurred to transport the gas from the point where prevailing value is calculated to the sales delivery point and, if the gas has been processed in a downstream gas plant, the gas processing cost deduction under 15 AAC 55.140 or 15 AAC 55.141, exceed the sales price for that gas under 15 AAC 55.161, by more than one percent of the sales price; or  
		(3) the prevailing value for the producer's oil under 15 AAC 55.171, plus the actual or reasonable costs of transportation, as applicable, incurred to transport the oil from the point where prevailing value is calculated to the sales delivery point, exceed the sales price under 15 AAC 55.161 by more than $.15 per barrel.  
	(d)  The department may apply prevailing value if the circumstances relating to the disposition of the producer's oil or gas show fraud or an intent to evade taxes.  
	(e)  For purposes of AS 43.55  and this chapter, production of oil or gas does not include  
		(1) oil or gas used in production operations on a lease or property in the state by the producer;  
		(2) gas flared, released, or allowed to escape in amounts authorized by the Alaska Oil and Gas Conservation Commission;  
		(3) oil or gas injected by the producer into a reservoir on a lease or property in the state in the course of operations for purposes of repressuring, including enhanced recovery, but not including storage;  
		(4) oil or gas on which production tax has been previously paid;  
		(5) oil or gas sold or otherwise transferred by the producer to another producer of oil or gas in the state for use in a manner described in (1) or (3) of this subsection, if  
			(A) the producer of the oil or gas  
				(i) obtains an affidavit from the purchaser or transferee certifying under penalty of perjury that the oil or gas was used in the past year for a purpose described in (1) or (3) of this subsection; and  
				(ii) on March 31 of each year files with the department the affidavit obtained under (i) of this subparagraph together with the producer's statement described in AS 43.55.030(a); and  
			(B) the oil or gas is actually used in a manner described in (1) or (3) of this subsection.  
	(f)  Oil or gas deemed not to be produced under (e)(3) or (5) of this section is subject to tax on the basis of prevailing conditions at the time, and for the lease or property from which, the oil or gas is ultimately produced.  
	(g)  If a producer transfers oil to a third party for purposes of operational necessity or convenience in what otherwise would be a bona fide, arm's-length exchange but for the fact that at the time of the particular transfer the producer expects to receive a like amount of similar quality oil produced in the state from that third party, the transfer to a third party and the transfer from the third party are disregarded and the oil is treated as if it had remained in the possession of the original transferring producer until final disposition of that oil. If the transfers under that exchange are made at different locations, the location differential paid by a producer is treated as a transportation cost and the location differential received by a producer is treated as a reimbursement of a transportation cost.   

Authorities

43.05.080;43.55.020;43.55.110;43.55.150;43.55.900

Notes

Reference

15 AAC 55.021
15 AAC 55.140
15 AAC 55.211
15 AAC 55.213
15 AAC 55.520
15 AAC 55.800
15 AAC 55.900

Authority

AS 43.05.080 AS 43.55.020 AS 43.55.110 AS 43.55.150 AS 43.55.900

History

Eff. 1/1/95, Register 132; am 1/1/2000, Register 152; am 1/1/2002, Register 160; am 1/1/2003, Register 164; am 5/3/2007, Register 182; am 4/30/2010, Register 194