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 Alaska Administrative Code (Last Updated: January 12, 2017)
 Title 15. Revenue.
 Chapter 15.55. Oil and Gas Production Tax and Oil Surcharge.
 Article 15.55.1. Gross Value at the Point of Production of Oil and Gas.

  Section 15.55.173. Prevailing value for gas.  

Latest version. 
  • 	(a)  For gas delivered in the Alaska North Slope area, the prevailing value is,  
		(1) for each Mcf of gas produced before October 1, 2008, 10 percent of the prevailing value per barrel that would be determined under 15 AAC 55.171(g) for oil that is produced from the lease or property from which the gas is produced and that is sold at the entrance to the regulated oil pipeline serving that lease or property; if during the month that the gas is delivered oil is not produced from that lease or property and delivered into a regulated oil pipeline serving that lease or property, the prevailing value calculation must be made with respect to the nearest lease or property from which oil is produced and delivered that month into a regulated oil pipeline;  
		(2) for gas produced on or after October 1, 2008 and before the commencement of commercial operation of a regulated pipeline facility that delivers gas outside of the Alaska North Slope area, the weighted average sales price of sales from producers of gas to regulated utilities in the Alaska North Slope area for the three-month period ending one month before the end of the previous calendar quarter; in the absence of sales from producers to regulated utilities in the Alaska North Slope area, the department will determine the prevailing value on another reasonable basis under AS 43.55.020(f); the department will publish on the 15th day of each calendar quarter the prevailing value for that quarter;  
		(3) for gas produced after the commencement of commercial operation of a regulated pipeline facility that delivers gas outside of the Alaska North Slope area, the prevailing value determined under (j) of this section, adjusted for differences, if any, in location, quality, or composition between unprocessed gas delivered into the pipeline facility and gas delivered in the Alaska North Slope area.  
	(b)  For gas delivered in the Cook Inlet area during a calendar quarter, the prevailing value is the weighted average price of significant sales of gas from producers of gas to publicly regulated utilities in the Cook Inlet area for the three month period ending one month before the end of the previous calendar quarter. The department will publish on the 15th day of each calendar quarter the prevailing value for that quarter. For purposes of this subsection, "significant sales" means sales of 10,000 Mcf per month or more.  
	(c)  For gas delivered by pipeline to a market in Canada or the Lower 48, the prevailing value for the month of production of that gas is determined as follows:  
		(1) except as provided in (3) of this subsection, for unprocessed gas delivered in, or downstream of, a first destination market with reasonable liquidity, the prevailing value is the total value of the component residue gas and component gas plant products, based on market price indices for residue gas and gas plant products determined by the department under (n) of this section, as adjusted for quality or location, for the first destination market with reasonable liquidity, after deduction of a downstream gas processing cost allowance;  
		(2) except as provided in (3) of this subsection, if gas has been processed in a downstream gas plant and delivered in, or downstream of, a first destination market with reasonable liquidity, the prevailing value is the total value of the residue gas and the gas plant products, based on market price indices for residue gas and gas plant products determined by the department under (n) of this section, for the first destination market with reasonable liquidity, after deduction of a downstream gas processing cost allowance;  
		(3) if unprocessed gas, residue gas, or gas plant products are not delivered in, or downstream of, a first destination market with reasonable liquidity and are not subject to (k) of this section, or if the department determines that a methodology set out in (1) and (2) of this subsection cannot practicably be applied, the department will determine the prevailing value using one of the following methods:  
			(A) the weighted average sales price of all gas produced in the state and sold in arm's length, third party transactions in the month of delivery in the same destination market;  
			(B) the weighted average sales price of all gas produced in the state and sold in arm's length, third party transactions in the month of delivery in the same regional market;  
			(C) the value of comparable gas delivered to the same regional market, as adjusted for quality and location and based on applicable reference prices published by government entities in Canada or the United States, or any other source of market price information identified by the department as reasonably reliable for purposes of determining the value of the gas.  
	(d)  For gas delivered in the United States outside the state or in a foreign market by means of an LNG transportation facility, the prevailing value for the month of production of that gas is determined as follows:  
		(1) except as provided in (2) of this subsection, for LNG delivered in or downstream of a first destination market with reasonable liquidity, prevailing value is the higher of  
			(A) the total value of the LNG based on the market price index determined by the department under (n) of this section for LNG of like kind, quality, and condition for that market;  
			(B) the total value of the LNG based on the market price index determined by the department under (n) of this section for regasified LNG or the market price indices determined by the department under (n) of this section for residue gas and gas plant products, after deduction of a regasification cost allowance and, if applicable, a downstream gas processing cost allowance, and after applying any location or quality differentials determined by the department;  
		(2) if the LNG or regasified LNG is not delivered in, or downstream of, a first destination market with reasonable liquidity, or if the department determines that the methodology set out in (1) of this subsection cannot practicably be applied, the department will determine the prevailing value using one of the following methods:  
			(A) the weighted average sales price of all gas produced in the state and sold in arm's length, third party transactions in the month of delivery in the same destination market;  
			(B) the weighted average sales price of all gas produced in the state and sold in arm's length, third party transactions in the month of delivery in the same regional market;  
			(C) the value of comparable gas delivered to the same regional market, as adjusted for quality and location, based on applicable reference prices published by government entities in the foreign market or the United States, or any other source of market price information identified by the department as reasonably reliable for purposes of determining the value of LNG, regasified LNG, residue gas, or gas plant products for that same regional market.  
	(e)  Repealed 5/3/2007.  
	(f)  Repealed 5/3/2007.  
	(g)  A producer that sells gas that has been produced from a lease or property in the state shall, as part of its monthly report under AS 43.55.030(f), file with the department a copy of the sales invoice for each sales transaction for the month covered by the report and a copy of any contract to sell gas produced from a lease or property in the state that the producer entered into during the month covered by the report.   
	(h)  Repealed 1/1/2000.  
	(i)  Notwithstanding (a)(2) of this section, for the July - September 2008 calendar quarter, the department will publish within 15 days after October 1, 2008 the prevailing value for that quarter for gas delivered in the Alaska North Slope area.  
	(j)  For gas sold at the inlet to a gas treatment plant or at the inlet to a regulated gas pipeline facility capable of transporting gas to areas of the state outside of the Alaska North Slope area, the prevailing value for the month of production of that gas is the prevailing value determined in (c) of this section for the first destination market with reasonable liquidity for residue gas and gas plant products, or if there is more than one first destination market with reasonable liquidity, the weighted average of the prevailing values determined under (c) of this section, minus the volume-weighted average of all applicable filed pipeline tariff rates for gas produced from the lease or property and transported to the destination market and, if applicable, minus the cost of gas treatment at the gas treatment plant.  In calculating a volume-weighted average of pipeline tariff rates under this subsection, the department may use data from an appropriate prior tax period as necessary to allow for a more contemporaneous determination of prevailing value.  For purposes of this subsection, the cost of gas treatment is  
		(1) if the gas treatment plant is regulated, the applicable tariff rate for the gas treatment plant or, if there is more than one applicable filed tariff rate, the weighted average of all of those rates;  
		(2) if the gas treatment plant is not regulated, the cost determined by the department using the methodology under 15 AAC 55.197 for current or prior tax periods.  
	(k)  For North Slope gas delivered at an offtake point or other point downstream from the inlet to a regulated gas pipeline facility in an area of the state outside of the Alaska North Slope area or in Canada or the Lower 48 but upstream from a first destination market with reasonable liquidity, the prevailing value for the month of production of that gas is the prevailing value determined in (c) of this section for the first destination market with reasonable liquidity for residue gas and gas plant products, or if there is more than one first destination market with reasonable liquidity, the weighted average of the prevailing values determined under (c) of this section, minus the volume-weighted average of all applicable filed pipeline tariff rates for gas transported from that offtake or other point to the first destination market.  In calculating a volume-weighted average of pipeline tariff rates under this subsection, the department may use data from an appropriate prior tax period as necessary to allow for a more contemporaneous determination of prevailing value.  
	(l)  For North Slope gas delivered to and sold at the inlet to the liquefaction plant of an LNG transportation facility located in or near Valdez, Alaska, by use of a pipeline facility that does not also deliver gas to Canada or the Lower 48, the prevailing value is the prevailing value determined by the department in (d) of this section for LNG deliveries to the destination market or if there is more than one destination market, the weighted average of the prevailing values determined under (d) of this section, minus the volume-weighted average costs of transportation, determined under 15 AAC 55.193, between the inlet of the liquefaction facility and the destination markets.  In calculating a volume-weighted average cost of transportation under this subsection, the department may use data from an appropriate prior tax period as necessary to allow for a more contemporaneous determination of prevailing value.  
	(m)  For gas delivered by pipeline to any location outside of the Alaska North Slope area other than those locations provided for in (c), (d), (k), and (l) of this section, the prevailing value of the gas is the higher of  
		(1) the prevailing value determined under (k) of this section at the applicable offtake point from the pipeline facility originating in the Alaska North Slope area, plus the volume-weighted average of all applicable filed pipeline tariff rates, if any, between the offtake point and the sales delivery point; or  
		(2) the weighted average sales price of all gas produced in the state and sold in arm's length, third party transactions in the month of delivery in the same regional market.  
	(n)  For purposes of determining prevailing value under this section,  
		(1) a first destination market with reasonable liquidity is a destination market that the department determines satisfies the following criteria:  
			(A) for residue gas,  
				(i) the average daily volume of residue gas sold in arm's length transactions exceeds 100,000 MMBTUs; and  
				(ii) there is sufficient market price information reasonably available in that market for the department to establish a market price index under (2) of this subsection and, if applicable, an adjustment under (3) of this subsection for residue gas for that market;  
			(B) for LNG,  
				(i) the average daily volume of LNG or regasified LNG sold in arm's length transactions is substantial; and  
				(ii) there is sufficient market price information reasonably available in that market for the department to establish a market price index under (2) of this subsection and, if applicable, an adjustment under (3) of this subsection for LNG for that market;  
			(C) for gas plant products,  
				(i) gas plant products are either extracted or fractionated in the market for purposes of sale;  
				(ii) the market is designated as a first destination market for residue gas under (A) of this paragraph; and  
				(iii) there is sufficient market price information reasonably available either in that destination market or in another market for gas plant products connected by pipeline to that destination market for the department to establish a market price index under (2) of this subsection and, if applicable, an adjustment under (3) of this subsection for gas plant products for that market;  
		(2) for residue gas, LNG, or gas plant products, the department will determine a market price index, if appropriate, based on information published on a regular basis in reliable and widely available industry trade publications, applicable reference prices published by government entities in Canada or the United States, or any other source of market price information identified by the department as reasonably reliable for purposes of determining a value of residue gas, LNG, or gas plant products for that location or area, as adjusted for quality and location differentials and if applicable, any adjustment under (3) of this subsection;  
		(3) for residue gas, LNG, or gas plant products, the department may determine an appropriate adjustment between component residue gas and component gas plant products, and among actual or potential component gas plant products, based on BTU content, NGL content, or any other characteristic of the producer's gas that is required to determine a prevailing value under this section.  
	(o)  The department will determine a reasonable downstream gas processing cost allowance, or in the case of LNG, a reasonable regasification cost allowance to be used in the calculation of prevailing value under this section, using one of the following methods as applicable:  
		(1) downstream gas processing costs or regasification costs published by an industry trade journal, a governmental entity, or any other reliable source of this information, adjusted for quality, location, and any service charges embedded in the published cost and not directly related to processing or regasification; for purposes of this paragraph, service charges include marketing allowances;  
		(2) for a gas processing cost allowance, a weighted average of downstream gas processing cost deductions determined by the department under 15 AAC 55.140(b)(2) and 15 AAC 55.141, for current or prior tax periods, as adjusted for quality or location;  
		(3) for a regasification cost allowance, a weighted average of actual transportation costs for regasification facilities determined under 15 AAC 55.193(b)(4)(B) and 15 AAC 55.196 for current or prior tax periods, as adjusted for quality or location;  
		(4) a weighted average of arm's length downstream gas processing costs or regasification costs for current or prior tax periods, as adjusted for quality or location.  
	(p)  In this section,  
		(1) "Alaska North Slope area" means that part of the state that lies north of 68 degrees North latitude;  
		(2) "offtake point" means a point of delivery along the length of a long-distance integrated pipeline facility that is capable of providing connections to other lateral pipelines for delivery to markets separate from the mainline or to local gas distribution lines for residential or commercial use, or to both;  
		(3) "unprocessed gas" means gas that has not been subject to downstream gas processing.

Authorities

43.05.080;43.55.020;43.55.030;43.55.040;43.55.110

Notes


Authority
AS 43.05.080 AS 43.55.020 AS 43.55.030 AS 43.55.040 AS 43.55.110
History
Eff. 1/1/95, Register 132; am 1/1/2000, Register 152; am 1/1/2003, Register 164; am 5/3/2007, Register 182; am 10/1/2008, Register 187; am 4/30/2010, Register 194