Title 15 . Revenue

Chapter 21 . (Repealed)

Section 120. Value at the point of production

15 AAC 21.120. Value at the point of production

(a) The gross value at the point of production for a taxpayer's oil or gas equals the sales price under 15 AAC 21.122 for that oil or gas, less the taxpayer's reasonable costs of transportation under 15 AAC 21.128 and 15 AAC 21.130 for that oil or gas from its point of production to its sales delivery point, and less the taxpayer's reasonable costs (not otherwise deducted under this chapter) incurred downstream of the point of production for processing, conditioning, and preparing gas and gas plant liquids for sale; unless

(1) subsection (b) of this section applies, in which case the gross value at the point of production for that oil or gas is the prevailing value under 15 AAC 21.124 or 15 AAC 21.125 for that oil or gas, less the reasonable costs of transportation to its sales delivery point (or, if different, to the point where prevailing value is calculated under 15 AAC 21.124 or 15 AAC 21.125) and less the taxpayer's reasonable costs incurred downstream of the point of production for processing, conditioning, and preparing gas and gas plant liquids for sale; or

(2) the gross value at the point of production for the taxpayer's oil or gas would exceed the applicable maximum lawful price (if any) set by the U.S. Department of Energy, the Federal Energy Regulatory Commission, another governmental agency or a court of law (adjusted for any changes in value because of any processing, conditioning, preparation, and transportation of that oil or gas occurring between its point of production and the point at which the applicable maximum lawful price is effective) in which case the gross value at the point of production is that applicable maximum lawful price as adjusted for the changes in value.

(b) Prevailing value under 15 AAC 21.124 and 15 AAC 21.125 must be used in determining the gross value at the point of production for a taxpayer's oil or gas if

(1) the circumstances relating to the disposition of the taxpayer's oil or gas show fraud or an intent to evade taxes; or

(2) the sales price under 15 AAC 21.122 for that oil or gas is substantially lower (determined by analyzing the cash value of the consideration received for that oil or gas and the degree of difference between the prevailing value and the sales price for that oil or gas, the quantity of oil or gas involved in the transaction, and the duration of the transaction) than the prevailing value under 15 AAC 21.124 and 15 AAC 21.125 for that oil or gas, and one or more of the following conditions exist:

(A) the contract under which the taxpayer's oil or gas is sold or exchanged is executed or renegotiated after December 31, 1979, and either sets a price for that oil or gas without adjustments tied to market conditions, or does not provide for later renegotiation of prices at market rates;

(B) the contract sets a price which does not reasonably reflect market conditions for production from that field or area prevailing at the time the contract is executed or renegotiated; or

(C) the contract price under which the taxpayer's oil or gas is sold or exchanged reflects an unusually weak bargaining position on the taxpayer's part because of circumstances which the taxpayer could reasonably have foreseen and taken steps to ameliorate or avoid.

(c) As used in this section and 15 AAC 21.122, 15 AAC 21.124, 15 AAC 21.125 and 15 AAC 21.900, the terms "exchange" and "exchanged" do not include transactions where a taxpayer transfers oil to a third party at the Port of Valdez or at another port in Alaska 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 taxpayer expects subsequently to receive a like amount of similar quality oil from that third party at the same port. Such a transfer to a third party and the subsequent transfer from the third party, when they occur, will be disregarded and the oil subject to that transfer will be treated as if it had remained in the possession of the transferring taxpayer pending final disposition of that oil.

History: Eff. 2/22/79, Register 69; am 5/21/81, Register 78

Authority: AS 43.05.080

AS 43.19.010 ,

Art. IV, § 18

AS 43.21.020

AS 43.21.090

AS 43.21.120