Title 15 . Revenue

Chapter 55 . (Repealed)

Section 27. Use of common production facilities between leases or properties

15 AAC 55.027. Use of common production facilities between leases or properties

(a) For purposes of determining economic limit factors under AS 43.55.013 and their application to AS 43.55.011 or 43.55.016, the department will, in its discretion, under AS 43.55.013 (j), aggregate two or more leases or properties, or portions of them, or segregate a lease or property into two or more parts at any time, whether before or after the start of commercial production or upon departmental audit of a producer, except that the department will not aggregate leases or properties subject to an advance ruling under this section for the periods to which the advance ruling applies.

(b) Upon application of a producer that proposes use of common production facilities to produce oil or gas from two or more leases or properties, the department will, in its discretion, issue an advance ruling that the department will not aggregate specified leases or properties for purposes of determining economic limit factors under AS 43.55.013 , if the department determines that

(1) the use of the common production facilities will substantially reduce the cost of oil or gas production;

(2) the advance ruling will enhance the likelihood of developing a new pool;

(3) oil and gas produced through the common production facilities will be accurately allocated to the respective leases or properties covered by the advance ruling; and

(4) production operations on the respective leases or properties would not be economically interdependent in the absence of the proposed use of common production facilities.

(c) If an advance ruling is issued under (b) of this section, the department will specify whether that ruling applies only to oil production, only to gas production, or to production of both oil and gas from those leases or properties.

(d) A producer shall submit with the application for an advance ruling under (b) of this section a list of all producers affected by the advance ruling and any information requested by the department to support a departmental determination on the application. Additionally, the producer shall submit any additional information requested by the department at a later time that is necessary to make the determination on the application.

(e) If requested by the department, the applicant shall give notice to all producers to be affected by the advance ruling. The notice must describe the nature of and reasons for the application for an advance ruling. An affected producer receiving notice of the application for an advance ruling may, within 15 days after the date of receiving the notice, provide written comments to the department on the application for the advance ruling.

(f) The department will, in its discretion, issue an advance ruling under (b) of this section subject to terms and conditions as set out in the advance ruling. For purposes of determining amounts of gas considered not produced under 15 AAC 55.151(e) (1), an advance ruling will allocate gas used in common production facility operations to each lease or property covered by that ruling.

(g) If the department finds a material noncompliance with the terms and conditions set out in an advance ruling under this section, the department will, in its discretion, revoke the ruling or issue an order that the continued effectiveness of the ruling be conditioned on the affected producers' performance of specified action to cure the noncompliance. The department will provide notice of that proposed revocation or other order to the producer that received the advance ruling and other affected producers that the applicant specified under (d) of this section. This notice will specify the effective date of the proposed revocation, which will be the date, as determined by the department, that the material noncompliance began, unless the department finds good cause to select a later date; or the date by which the curative action must be completed. An affected producer may, within 15 days after the department issues the notice, make a written request for an informal meeting with the department and other affected producers to discuss the proposed revocation or other order. The producer requesting the meeting shall notify other affected producers of its request. In the absence of a timely request, upon the expiration of 15 days after the department issues notice a proposed revocation will become effective as of the date specified in the notice, or the continued effectiveness of the advance ruling will be conditioned on completion of the specified curative action by the date specified in the notice. After an advance ruling has been revoked or expires under this subsection, the department will, in its discretion, aggregate affected leases or properties under AS 43.55.013 (j) as of a date on or after the effective date of the revocation or expiration.

(h) When appropriate to address a change in leases or properties to be covered by an advance ruling, ownership interests, allocation method, production operations, composition of produced fluids, or other relevant circumstances, or when otherwise appropriate to ensure that the criteria set out in (b) of this section will be met, the department will, in its discretion, on request of a producer or on its own motion, modify an advance ruling under this section. The department will provide notice of a proposed modification to the affected producers that the applicant specified under (d) of this section. This notice will describe the nature of the modification being considered, the reasons for and purpose of the modification, and the expected effects and results of the modification, and will specify the effective date of the modification, which will be the date the notice is issued, unless the department finds good cause to select another date. An affected producer may, within 15 days after the department issues the notice, make a written request for an informal meeting with the department and other affected producers to discuss the proposed modification. That affected producer also shall notify other affected producers of its request. In the absence of a timely request, upon the expiration of 15 days after the department issues notice the proposed modification will become effective as of the date specified in the notice.

(i) A producer aggrieved by the department's action revoking an advance ruling, ordering that the continued effectiveness of the ruling be conditioned on the affected producers' performance of specified action to cure the noncompliance, or modifying an advance ruling may appeal that action under 15 AAC 05.001 - 15 AAC 05.050. During the pendency of an appeal, a producer affected by the department's action shall report and pay taxes in compliance with the department's action. If the department's action is modified or reversed as a result of the appeal, the producer shall amend its returns and pay tax for all tax periods to which the determination on appeal applies.

(j) The department's denial of an application for an advance ruling or the department's failure to issue an advance ruling does not affect the department's authority to act under AS 43.55.013 (j).

(k) If an agreement by the department not to aggregate leases or properties that are using common production facilities to produce oil or gas is in effect on 1/1/95, the agreement expires 90 days after 1/1/95, except that if a producer that is a party to the agreement applies on or before 90 days after 1/1/95 for an advance ruling covering the leases or properties subject to the agreement, the agreement expires on the date that the department acts on the producer's application. Nothing in this section or in the fact that the department previously agreed not to aggregate the leases or properties bars or otherwise limits the department, in acting on an application for an advance ruling under this subsection, from imposing terms and conditions different from those in the previous agreement.

History: Eff. 1/1/95, Register 132

Authority: AS 43.05.040

AS 43.05.080

AS 43.55.011

AS 43.55.013

AS 43.55.016

AS 43.55.020

AS 43.55.040

AS 43.55.110