Title 15 . Revenue

Chapter 55 . (Repealed)

Section 151. Valuation of oil or gas

15 AAC 55.151. Valuation of oil or gas

(a) Except as otherwise provided in 15 AAC 55.050 or 15 AAC 55.163, this section applies to all oil and gas produced in the state on a lease or property, regardless of whether the oil or gas is removed from the lease or property, less any oil or gas the ownership of or right to which is exempt from state taxation.

(b) The gross value at the point of production for a producer's oil or gas must be calculated as follows:

(1) a destination value must be determined for the oil or gas or, if oil and NGLs are commingled before being tendered to a common carrier or before being transported from the lease or property, for the commingled oil and NGLs; the destination value is the sales price under 15 AAC 55.161 unless (c) or (d) of this section applies, in which case the destination value is the prevailing value under 15 AAC 55.171 or 15 AAC 55.173, as applicable;

(2) except as otherwise provided under (i) of this section, the producer's reasonable costs of transportation under 15 AAC 55.180 and 15 AAC 55.191 must be subtracted from the destination value determined under (1) of this subsection; reasonable costs of transportation are calculated

(A) for oil or gas other than gas that has been run through a gas processing plant, from the point of production of the oil or gas to its sales delivery point or, if different, to the point where prevailing value is calculated under 15 AAC 55.171 or 15 AAC 55.173;

(B) for gas that has been run through a gas processing plant, from the plant to the sales delivery point or, if different, to the point where prevailing value is calculated under 15 AAC 55.171 or 15 AAC 55.173;

(3) if oils of different qualities or oil and NGLs are commingled, the value calculated under (2) of this subsection must be adjusted for any consideration paid or received for quality differentials, regardless of whether prescribed by a filed tariff;

(4) if gas has been run through a gas processing plant, a reasonable allowance under AS 43.55.900 (7)(B) or (C) and, as applicable, 15 AAC 55.052, must be subtracted from the sum of

(A) the value calculated under (2) of this subsection for the residue gas from the plant;

(B) the value calculated under (2) of this subsection, as adjusted under (3) of this subsection, for the NGLs extracted at the plant other than NGLs that are commingled with oil before being tendered to a common carrier or before being transported from the lease or property; and

(C) the value calculated under (i) of this section for the NGLs extracted at the plant that are commingled with oil before being tendered to a common carrier or before being transported from the lease or property.

(c) The prevailing value under 15 AAC 55.171 or 15 AAC 55.173 must be used in determining the gross value at the point of production for a producer's oil or gas if

(1) the producer's oil or gas is refined, used as fuel or petrochemical feedstock, or otherwise consumed at a refinery or plant owned by the producer, or the oil or gas is transferred from the producer in other than an arm's-length, third party transaction;

(2) the prevailing value for the producer's gas under 15 AAC 55.173, other than NGLs commingled with oil, exceeds the sales price for that gas under 15 AAC 55.161; or

(3) the prevailing value for the producer's oil, or commingled oil and NGLs, under 15 AAC 55.171, plus the actual costs incurred to transport the oil or commingled oil and NGLs from the point where prevailing value is calculated to the sales delivery point, exceeds the sales price under 15 AAC 55.161 by more than $.15 per barrel.

(d) The department will, in its discretion, apply prevailing value if the circumstances relating to the disposition of the producer's oil or gas show fraud or an intent to evade taxes.

(e) For purposes of AS 43.55 and this chapter, production of gas does not include gas

(1) used or unavoidably lost in production operations on a lease or property in the state by the producer;

(2) flared in amounts needed for safety purposes;

(3) injected by the producer into a reservoir on a lease or property in the state in the course of operations for purposes of repressuring or conservation, including enhanced recovery;

(4) on which production tax has been previously paid;

(5) vented in de minimis amounts incidental to normal oil field operations as authorized by the Alaska Oil and Gas Conservation Commission; or

(6) sold or otherwise transferred by the producer to another producer of oil or gas in the state for use in a manner described in (1) or (3) of this subsection, if

(A) the producer of the gas

(i) obtains an affidavit from the purchaser or transferee certifying under penalty of perjury that the gas was used in the past year for a purpose described in (1) or (3) of this subsection; and

(ii) once each year between January and March attaches the affidavit obtained under (i) of this subparagraph to the producer's monthly production tax return filed with the department; and

(B) the gas is actually used in a manner described in (1) or (3) of this subsection.

(f) Gas deemed not to be produced under (e)(3) or (e)(6) of this section is subject to tax on the basis of prevailing conditions, including the economic limit factor, at the time, and for the lease or property from which, the gas is ultimately produced.

(g) If a producer transfers oil, or commingled oil and NGLs, to a third party 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 producer expects to receive a like amount of similar quality oil, or commingled oil and NGLs, produced in the state from that third party, the transfer to a third party and the transfer from the third party are disregarded and the oil, or commingled oil and NGLs, is treated as if it had remained in the possession of the original transferring producer until final disposition of that oil, or commingled oil and NGLs. If the transfers under that exchange are made at different locations, the location differential paid by a producer is treated as a transportation cost and the location differential received by a producer is treated as a reimbursement of a transportation cost.

(h) Repealed 1/1/2000.

(i) If oil and NGLs are commingled before being tendered to a common carrier or before being transported from the lease or property, the costs of transportation under (b)(2) of this section must be calculated separately for transportation upstream and transportation downstream of the point where the oil and NGLs are commingled or the point of production for the oil, whichever point is farther downstream. The downstream portion of the costs of transportation calculated under this subsection must be subtracted from the destination value of the commingled oil and NGLs, and the remainder under this calculation must be adjusted for the quality differentials described under (b)(3) of this section. The resulting value is the "commingled-oil-and-NGLs netback value" and must be allocated between the oil and NGLs in accordance with 15 AAC 55.175. The applicable upstream portions of the costs of transportation, if any, calculated under this subsection must be subtracted from the respective values calculated for the oil (V OIL ) and NGLs (V NGL ) under 15 AAC 55.175.

History: Eff. 1/1/95, Register 132; am 1/1/2000, Register 152; am 1/1/2002, Register 160; am 1/1/2003, Register 164

Authority: AS 43.05.080

AS 43.55.020

AS 43.55.110

AS 43.55.150

AS 43.55.900