Current through August 30, 2024
(a) The destination
value for qualified gas is the fair market value at destination as determined
under this section.
(b) For
purposes of this chapter, the destination for a lessee's unprocessed gas,
residue gas, gas plant products, or LNG is the point at which the gas exits a
pipeline, without then entering an interconnecting pipeline, processing plant,
liquefaction facility, LNG tanker, or regasification facility, except that
(1) the destination for qualified gas that
enters a first destination market must be within that first destination market
and may not be downstream of that first destination market; if qualified gas
enters an interconnecting pipeline for transportation downstream of a first
destination market, its destination for purposes of this chapter is the point
of interconnection;
(2) qualified
gas that has been processed to extract residue gas or a fractionated gas plant
product is at its destination; and
(3) the destination for qualified gas may not
be downstream of the point of an arm's length sale of the qualified
gas.
(c) The
commissioner will designate first destination markets. In designating first
destination markets, the commissioner will consider whether
(1) North Slope gas is physically
transported, bought, sold, processed, or, in the case of LNG, regasified in the
market;
(2) on average each day,
more than 100,000 MMBtus of residue gas are sold in arm's length transactions
in the market;
(3) a reliable and
widely available industry trade publication publishes a reliable price each
month for residue gas in the market, and the published price is based on at
least 10 unrelated arm's length sales in that market for the month;
(4) another first destination market is
upstream of the market being evaluated for designation under this section as a
first destination market; and
(5)
any other relevant factor is material to the designation of a first destination
market.
(d) The
commissioner will designate at least one first destination market to apply to
royalty reporting periods beginning after the commencement of commercial
operation of the project. Notice of the first destination markets designated by
the commissioner will be posted on the department's website. The commissioner
may designate other first destination markets by posting notice of the
designation on the department's website no later than 15 days before the first
day of a royalty reporting period affected by the designation.
(e) If the destination for qualified gas is a
first destination market designated by the commissioner, the destination value
is the published price for that destination from a source designated by the
commissioner, except that
(1) for residue gas
and the methane component of unprocessed gas, if the published price designated
by the commissioner is less than 95 percent of the value calculated under
11 AAC 25.110 for that royalty
reporting period, the destination value for that royalty reporting period is
the value calculated under
11 AAC 25.110; and
(2) for any gas plant product or any
component other than methane in unprocessed gas, if a published price is not
available for that first destination market or if the published price is not a
reliable price for that gas plant product or component in that market, the
commissioner may designate and require the use of a published price from a
different market, as adjusted for location differences under
11 AAC 25.130.
(f) The commissioner may add to,
replace, or remove entries on the list of designated published prices by
posting a revised list of published prices on the department's website at least
15 days before the first day of a royalty reporting period affected by the
revised list if the commissioner determines that
(1) a new market has developed for North
Slope gas or any component of or right to North Slope gas, a new gas pipeline
is built that transports North Slope gas, or a change in the first destination
markets has occurred;
(2) a
designated published price is not reliable;
(3) a designated published price is published
in a publication that is not reliable;
(4) a new publication is started, an existing
publication adds a new price, or a previously unreliable publication becomes
reliable;
(5) a person subject to
this chapter or the affiliate of that person attempts to influence the
publication of prices used under this chapter in a manner adverse to the
interests of the state; or
(6)
other factors relevant to the designation of first destination markets under
(c) of this section or to the reliability of published prices support the
addition, replacement, or removal of entries on the list of designated
published prices.
(g) If
the destination for qualified gas has not been designated by the commissioner
as a first destination market, destination value for the qualified gas is the
published price designated by the commissioner in the nearest first destination
market, with an adjustment for location differences under
11 AAC 25.130 and an adjustment
for quality to the extent allowed under
11 AAC 25.140, except that if the
destination and first destination market are not physically connected by
pipeline, the destination value will be determined under
11 AAC 25.120.
(h) If the commissioner adds to, revises, or
removes adjustments for location differences under
11 AAC 25.130, the commissioner
will post a change in location differentials on the department's website at
least 15 days before the first day of a royalty reporting period affected by
the change.
(i) To be arm's length
for a royalty reporting period, a contract or agreement must be considered
arm's length
(1) when the contract was
executed or the agreement was made; and
(2) during the entire time of the royalty
reporting period.
(j) If
a published price from a source designated by the commissioner under this
section is not available for a royalty reporting period, the destination value
is
(1) for residue gas, as determined by the
commissioner based on all other available published prices designated for use
under 11 AAC 25.110, with a location
differential, if any, determined by the commissioner; and
(2) for unprocessed gas, gas plant products,
and LNG, destination value as determined under
11 AAC 25.120.
(k) For purposes of this chapter,
the commissioner will determine whether a price or publication is reliable. In
determining whether a price is reliable, the commissioner will consider whether
the price is indicative of market transactions in the relevant market and
whether the price relies on a volume-weighted average of reported transactions.
In determining that a publication is reliable, the commissioner may consider
(1) whether buyers and sellers regularly and
customarily use the publication;
(2) whether the publication is regularly and
customarily referenced in purchase or sales contracts;
(3) whether the publication uses adequate
survey techniques, including the gathering of information from a substantial
number of sales;
(4) whether the
publication publishes the range of reported prices it uses to calculate its
index price;
(5) whether the
publication is independent from lessees and their affiliates; and
(6) other factors relevant to whether a
publication publishes prices that are accurate and representative for gas
purchases and sales.
Authority:AS
38.05.020
AS 38.05.180
AS
43.90.310
