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(a) The monthly production rate at the economic limit of 300 barrels per well day for oil production of a lease or property includes royalty and all other ownership interests in that production.
(b) For purposes of AS 43.55.011 (b), the first five years after the start of commercial oil production elapse when 43,830 total hours of commercial oil production from the lease or property have accumulated. "Commercial oil production" means oil production that either changes ownership or is removed from the lease or property. A producer shall keep a record of each hour in which there is any commercial oil production from a lease or property until 43,830 total hours of commercial oil production from the lease or property have accumulated.
(c) If a tax rate changes on or before the last day of a monthly reporting period due to the elapsing of the first five years after the start of commercial oil production, the department will apply the new tax rate only to that portion of production for the month that equals the number of days in the month that include and follow the day on which the five years elapsed, divided by the total number of days in that month.
(d) When the monthly production rate at the economic limit is being determined for gas produced from a lease or property by dividing the per-unit value of production into the average monthly direct operating costs, the monthly production rate at the economic limit equals the final quotient obtained by dividing, first, the per-unit value of production into the average monthly direct operating costs other than royalty, and then dividing the first quotient by the fraction of production corresponding to all nonroyalty interests in the lease or property. If some or all of a direct operating cost is borne by a royalty interest, then the royalty interest bearing that cost will be regarded as a nonroyalty interest, for purposes of the preceding sentence.
(e) The monthly production rate at the economic limit for gas production of a lease or property includes royalty and all other ownership interests in the production. The taxpayer may rebut the presumed monthly production rate at the economic limit of 3,000 Mcf per well day at a formal hearing under AS 43.05.240 by providing clear and convincing evidence that the value determined under AS 43.55.013 (i) for the lease or property, when divided into the average monthly direct operating cost determined under AS 43.55.013 (h) for the lease or property, produces a different amount for the monthly production rate at the economic limit under AS 43.55.013 (g) for the lease or property.
(f) The provisions of (b) of this section apply to a lease or property for which commercial oil production as defined in 15 AAC 55.010(c) did not start before five years before 1/1/95. Except as provided in the preceding sentence, this section applies only to oil or gas produced on or after 1/1/95.
History: Eff. 1/1/95, Register 132
Authority: AS 43.05.080
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Last modified 7/05/2006