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Alaska Administrative Code (Last Updated: January 12, 2017) |
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Title 15. Revenue. |
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Chapter 15.55. Oil and Gas Production Tax and Oil Surcharge. |
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Article 15.55.2. Production Tax Value of Oil and Gas. |
Section 15.55.212. Procedures relating to gross value reductions.
Latest version.
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(a) At any time (1) a producer may request in writing the department's determination for purposes of (A) AS 43.55.160(f)(1), or for purposes of AS 43.55.160(f)(1) and (g), that a specified lease or property from which the producer produces or plans to produce oil or gas does not contain a lease that was within a unit on January I, 2003; (B) AS 43.55.160(f)(2), that a specified participating area from which the producer produces or plans to produce oil or gas was established after December 31, 2011, is within a unit formed under AS 38.05.180(p) before January I, 2003, and does not contain a reservoir or portion of a reservoir that had previously been in a participating area established before December 31, 2011; (C) AS 43.55.160(g), that a specified unit from which the producer produces or plans to produce oil or gas is made up solely of oil and gas leases issued by the Department of Natural Resources that have a royalty share of more than 12.5 percent in amount or value of the production removed or sold from the lease as determined under AS 38.05.180(f); (2) on or after the date an application has been submitted to the Department of Natural Resources for approval by the Department of Natural Resources of an expansion of an existing participating area after December 31, 2013, a producer with a working interest in the existing participating area or in the acreage added or proposed to be added to the existing participating area may request in writing the department's determination that the department will accept a specified methodology for purposes of demonstrating to the department under AS 43.55.160(f)(3) the volumes of oil and gas produced that are from the acreage added to the participating area after December 31, 2013. (b) A producer that makes a written request under (a) of this section shall give written notice to all interested persons, as provided under (c) of this section, other than producers that have already joined in the request. The notice must inform the interested persons that (1) they have the right to be heard by the department on the request, by written submission within 30 days after receipt of the notice or within a longer period if extended by the department in its discretion; and (2) they will be bound by the department's determination, subject to any appeal rights under law, whether or not they choose to be heard. The notice must be accompanied by a copy of the request. (c) For purposes of (b) of this section, interested persons are (1) in the case of a request under (a)(1)(A) of this section, producers that have a working interest in the lease or property to which the request applies; (2) in the case of a request under (a)(1)(B) of this section, producers that have a working interest in the participating area to which the request applies; (3) in the case of a request under (a)(1)(C) of this section, producers that have a working interest in the unit to which the request applies; (4) in the case of a request under (a)(2) of this section, producers that have a working interest in the existing participating area or the acreage added to which the request applies and, if not one of those producers, the operator of the unit containing the participating area. (d) A request under (a) of this section must include written documentation sufficient to support the requested determination and must be accompanied by proof that the notice required under (b) and (c) of this section has been provided. The department may require that a person making or joining in the request submit additional information the department considers necessary to make a determination. The department may consider information in addition to that submitted by persons that have made or joined in a request or that seek to be heard on the request. If a person that makes or joins in a request under (a)(2) of this section or seeks to be heard on the request asks to limit the disclosure to other producers or to the operator of specified information that the person shows to be proprietary to that person, the department will (1) provide that person a reasonable opportunity to be heard regarding the proposed disclosure and the conditions to be imposed under (2) of this subsection; and (2) impose appropriate conditions (A) limiting access to the information to those legal counsel, consultants, employees, officers, and agents of the other producers or the operator who have a need to know that information for the purpose of supporting or being heard on the request; and (B) providing that the information may be used only for the purpose of supporting or being heard on the request. (e) If the department receives a request under (a)(1) of this section that meets the requirements of (b) - (d) of this section, the department will issue a written determination in response to the request. In the determination, the department will either (1) confirm that the lease or property, participating area, or unit specified in the request meets the respective criteria under (a)(1)(A), (B), or (C) of this section; or (2) reject the request on the ground that the lease or property, participating area, or unit specified in the request fails to meet the respective criteria under (a)(1)(A), (B), or (C) of this section or on the ground that insufficient information is available to support a determination under (1) of this subsection. A determination applies only to the facts in existence at the time the determination is made and is subject to change if the relevant facts change. (f) If the department receives a request under (a)(2) of this section that meets the requirements of (b) - (d) of this section, the department will issue a written determination in response to the request, but not before the commissioner of natural resources has issued a written decision approving the expansion of the participating area to include the acreage to which the request applies. In the department's determination the department will either (1) accept the specified methodology, with or without adding conditions to the acceptance; or (2) reject the specified methodology (A) on the ground that it fails to comply with 15 AAC 55.213 or that it is otherwise inadequate to demonstrate the volume of oil or gas produced that is from the added acreage; (B) on the ground that the demonstration required under (g) of this subsection has not been made; or (C) on the ground that insufficient information is available to support a determination under (1) of this subsection. (g) The documentation required under (d) of this section for a request under (a)(2) of this section must include a demonstration that the plans for the development and operation of the participating area have not been designed to cause drainage by expansion area wells of oil or gas from the pre-expansion area that could be more efficiently produced by wells with a producing interval in the pre-expansion area. After a methodology has been accepted by the department under (f)(1) of this section, if the plans for the development and operation of the participating area are materially changed, producers that use the methodology to determine the volumes of oil and gas that qualify for a reduction in gross value at the point of production under AS 43.55.160(f)(3) shall submit to the department, not later than 60 days after the changes are made, a demonstration that the changes to the plans have not been designed to cause drainage by expansion area wells of oil or gas from the pre-expansion area that could be more efficiently produced by wells with a producing interval in the pre-expansion area. In this subsection, (1) "expansion area well" means a well with producing intervals that are all within the acreage added to the existing participating area; (2) "pre-expansion area" means the portion of the reservoir outside the acreage added to the existing participating area. (h) A determination under (f)(1) of this section is subject to change or revocation if justified by new information about metering performance or other facts relevant to the adequacy of the methodology accepted to demonstrate the volume of oil or gas produced that is from the added acreage, or if the producers responsible for making a demonstration required under (g) of this section after acceptance of a methodology fail or are unable to make the required demonstration. A change in or revocation of a determination under this subsection will be made prospectively only, unless the determination was made in reliance on a producer's or operator's material misrepresentation or failure to disclose a material fact. (i) A producer aggrieved by a determination under (e) or (f) of this section or by a change in or revocation of a determination under (h) of this section may appeal under 15 AAC 05.010. (j) A determination by the department under (e)(1) of this section is not required in order for a producer of oil or gas that otherwise meets the criteria in AS 43.55.160(f)(1), the criteria in AS 43.55.160(f)(2), or the criteria in AS 43.55.160(f)(1) and (g) to reduce the gross value at the point of production of the oil or gas in the calculation of an annual production tax value to the extent allowed under AS 43.55.160(f) and (g). Oil that meets the criteria in AS 43.55.160(f)(1), the criteria in AS 43.55.160(f)(2), or the criteria in AS 43.55.160(f)(1) and (g) does not qualify for a tax credit under AS 43.55.024(j) regardless of whether the department has issued a determination under (e)(1) of this section and regardless of whether the producer reduces the gross value at the point of production of the oil under AS 43.55.160(f) or under AS 43.55.160(f)(1) and (g) in the calculation of an annual production tax value. (k) A determination by the department under (f)(1) of this section is required for a producer of oil or gas to demonstrate under AS 43.55.160(f)(3) that the volume of oil or gas produced is from acreage added to an existing participating area. In order to reduce under AS 43.55.160(f)(3) the gross value at the point of production of oil or gas produced from acreage that was added to an existing participating area after December 31, 2013, a producer shall determine the volumes of oil and gas that qualify for the reduction using the methodology applicable to that acreage that is accepted by the department under (f)(l) of this section. For periods earlier than the date the department's determination is issued during which the facilities or equipment necessary to implement the methodology were operational and for which the data necessary to use the methodology to determine the volumes of oil and gas that qualify for the reduction are available, a producer may use the methodology to determine the volumes of oil and gas that qualify for the reduction that were produced before the determination is issued, but not for earlier than January 1 of the calendar year during which the request for determination was made under (a)(2) of this section. (l) Regardless of whether the department has accepted under (f)(1) of this section a methodology applicable to acreage that was added after December 31, 2013 to an existing participating area north of 68 degrees North latitude, a producer's oil taxable under AS 43.55.011(e) that does not meet the criteria in AS 43.55.160(f)(1) or (2) and that is produced during a month after December 31, 2013 from the participating area qualifies for a tax credit under AS 43.55.024(j) if the producer has not elected to reduce under AS 43.55.160(f)(3) the gross value at the point of production of any of the oil or gas produced from the participating area. However, if a producer elects for any month to reduce under AS 43.55.160(f)(3) the gross value at the point of production of any oil or gas produced during the month from the participating area, the producer shall use the methodology accepted by the department under (f)(1) of this section to determine the volumes of oil and gas produced during that month and every succeeding month from the participating area that qualify for a reduction in gross value at the point of production under AS 43.55.160(f)(3). That volume of oil does not qualify for a tax credit under AS 43.55.024(j). In this subsection, "the participating area" means the existing participating area after expansion to include the acreage added after December 31, 2013.
Authorities
43.05.080;43.55.110;43.55.160