Title 15 . Revenue

Chapter 55 . (Repealed)

Section 175. Allocation of value between oil and NGLs

15 AAC 55.175. Allocation of value between oil and NGLs

(a) In calculating the gross value at the point of production for oil and for NGLs subject to 15 AAC 55.151(i) , a producer shall allocate the commingled-oil-and-NGLs netback value determined under that subsection between the oil and the NGLs by using the following equations:

V OIL = V BLEND + (VOL NGL * (QBV OIL - QBV NGL ) / (VOL NGL +

VOL OIL ))

V NGL = V OIL - (QBV OIL - QBV NGL )

where

VOL NGL = the quantity, as calculated under 15 AAC 55.115(a) (6) if applicable, of NGLs produced from the lease or property by the producer during the month and commingled with oil before being tendered to a common carrier or before being transported from the lease or property;

VOL OIL = the quantity, as calculated under 15 AAC 55.115(a) (7) if applicable, of oil produced from the lease or property by the producer during the month and commingled with NGLs before being tendered to a common carrier or before being transported from the lease or property;

V BLEND = the commingled-oil-and-NGLs netback value determined under 15 AAC 55.151(i) ;

QBV NGL = the value determined under (b) of this section;

QBV OIL = the value determined under (c) of this section;

V OIL = the value for the oil, from which is subtracted the upstream portion of the costs of transportation, if any, as calculated for the oil under 15 AAC 55.151(i) to obtain the gross value at the point of production; and

V NGL = the value for the NGLs, from which is subtracted the upstream portion of the costs of transportation, if any, as calculated for the NGLs under 15 AAC 55.151(i) to obtain the value used in 15 AAC 55.151(b) (4)(C).

(b) In this section, QBV NGL for the month of production is the sum, over all NGL components as reported for the month under (e) of this section, of the product of the average volume percentage of each component in the NGLs reported times the component's reference price prescribed for the month by the Quality Bank methodology.

(c) In this section, QBV OIL for the month of production is the sum, over all components specified in the Quality Bank methodology, of the product of the average volume percentage of each component in the oil produced from the lease or property and commingled with NGLs during the month times the component's reference price prescribed for the month by the Quality Bank methodology. If the Quality Bank administrator issues a report pertaining to the commingled oil and NGLs produced from the lease or property during the month, the average volume percentage of each component in the oil must be derived as follows:

(1) the reported volume percentage of each component in the commingled oil and NGLs must be multiplied by the total volume of commingled oil and NGLs produced from the lease or property by all producers during the month; that total volume is the metered post-blending volume if 15 AAC 55.115 applies; if the Quality Bank administrator separately reports volume percentages for two or more separate streams of the commingled oil and NGLs from the lease or property, the calculation set out in this paragraph must be performed separately for each stream and the results then summed over the streams for each component;

(2) the average volume percentage of each component in the NGLs as reported under (e) of this section must be multiplied by the total quantity, as calculated under 15 AAC 55.115 if applicable, of NGLs produced from the lease or property by all producers during the month and commingled with oil;

(3) the volume of each component calculated under (2) of this subsection must be subtracted from the volume of that component calculated under (1) of this subsection to obtain the volume of that component in the oil;

(4) the volume of each component in the oil must be divided by the total quantity, as calculated under 15 AAC 55.115 if applicable, of oil produced from the lease or property by all producers during the month and commingled with NGLs, to obtain the average volume percentage of that component in the oil.

(d) If the Quality Bank administrator issues a report pertaining to commingled oil and NGLs produced from a lease or property during a month, the component reference prices used in calculating QBV NGL under (b) of this section and QBV OIL under (c) of this section must be the pertinent reference prices reported by the Quality Bank administrator.

(e) A producer that is also the operator of a gas processing plant extracting NGLs that are commingled with oil before being tendered to a common carrier or before being transported from the lease or property shall accurately measure the NGLs' composition each month by performing gas chromatography analyses substantially in accordance with the Gas Processors Association standard GPA 2186-95, Tentative Method for the Extended Analysis of Hydrocarbon Liquid Mixtures Containing Nitrogen and Carbon Dioxide by Temperature Programmed Gas Chromatography, revised as of 1995 and adopted by reference. Based on the results of those analyses, the producer shall calculate, in accordance with (f) of this section, the average volume percentage of propane, isobutane, normal butane, light straight run (C5 - 175ΓΈ F.), and naphtha (175ΓΈ F. - 350ΓΈ F.). The producer shall

(1) submit to the department, as part of the statement filed under AS 43.55.030 , a report showing the results of the gas chromatography analyses and the average volume percentage of each component of the NGLs as calculated in accordance with (f) of this section; and

(2) within five days after submitting the report required in (1) of this subsection to the department, provide a copy of that report to each producer of

(A) oil with which NGLs extracted at the gas processing plant are commingled before being tendered to a common carrier or before being transported from the lease or property; and

(B) gas from which NGLs are extracted at the gas processing plant and commingled with oil before being tendered to a common carrier or before being transported from the lease or property.

(f) NGL composition must be determined from gas chromatography analyses according to the following classifications:

(1) a peak identified as C 3 or lighter is classified as propane;

(2) the peak identified as isobutane is classified as isobutane;

(3) a peak identified as normal butane or butylene is classified as normal butane;

(4) a peak identified as C5 or C6 is classified as light straight run (C5 - 175ΓΈ F.);

(5) forty percent of the volume for a peak identified as C7 is classified as light straight run (C5 - 175ΓΈ F.);

(6) sixty percent of the volume for a peak identified as C7 is classified as naphtha (175ΓΈ F. - 350ΓΈ F.);

(7) a peak identified as C8 or heavier is classified as naphtha (175ΓΈ F. - 350ΓΈ F.); and

(8) an unidentified peak is classified as naphtha (175ΓΈ F. - 350ΓΈ F.).

(g) In this section,

(1) "Quality Bank methodology" means the Trans Alaska Pipeline System (TAPS) Quality Bank settlement methodology for TAPS pump station number one as approved by the Alaska Public Utilities Commission in its "Order Adopting Federal Energy Regulatory Commission Order Approving Contested Settlement; Rejecting Contested Settlements Filed by Tesoro Alaska Petroleum Company and Exxon Company, U.S.A.; Requiring Filing of Tariff Revisions; and Severing Docket P-96-6 for Separate Consideration," In the Matter of the Formal Complaint of Tesoro Alaska Petroleum Company Against Amerada Hess Pipeline Corporation, et al., Docket Nos. P-89-1, et al., Orders Nos. 87, et al. (Jan 13, 1998), as modified by the Regulatory Commission of Alaska in its "Order Designating Replacement Price and Authorizing Concurrent Settlement Proceedings on Processing Adjustment," In the Matter of the Filing of a Notice of the Trans Alaska Pipeline System Quality Bank Administrator Concerning the Pricing of the Heavy Distillate Component on the West Coast, Docket No. P-99-12, Order No. 2 (Feb. 8, 2000), and as described in Local Pipeline Tariff F.E.R.C. No. 52 of Amerada Hess Pipeline Corporation (Aug. 30, 2000), as modified by Local Pipeline Tariff Supplement No. 2 to F.E.R.C. No. 52 of Amerada Hess Pipeline Corporation (Jan. 23, 2002); the Quality Bank methodology is adopted by reference in relevant part as an interim methodology; and

(2) "Quality Bank administrator" means the person that is designated and acts as Quality Bank administrator under the Quality Bank methodology.

(h) The Quality Bank methodology adopted by reference in relevant part in this section is an interim methodology only, pending the department's adoption by regulation of a permanent methodology in light of further proceedings before the Federal Energy Regulatory Commission on remand from the United States Court of Appeals in Exxon Co., U.S.A. v. Federal Energy Regulatory Commission, 182 F.3d 30 (D.C. Cir. 1999). A producer's allocation of commingled-oil-and-NGLs netback values between oil and NGLs under this section is subject to retroactive adjustment after the department adopts a permanent methodology.

(i) The following example illustrates (a), (b), and (c) of this section:

Step One from (c)(1) of this section:

Input 1: Production (number of barrels):

a. Oil (VOLOIL )* 567,000 576,000 1,143,000 b. NGLs (VOLNGL )** 90,000 34,000 124,000 c. Total 657,000 610,000 1,267,000

* From steps 9A and 9B of example in 15 AAC 55.115(d) .

** From steps 8A and 8B of example in 15 AAC 55.115(d) .

Input 2: Component Percentage of Oil/NGL Blend

(To be taken from Quality Bank report)

a. Propane 0.70% b. Isobutane 1.10% c. Normal Butane 3.30% d. Light Straight Run 7.80% e. Naphtha 20.30% f. Light Distillate 9.10% g. Heavy Distillate 18.30% h. Gas Oil 25.20% i. Resid 14.20% Total 100.00%

Calculation 1: Component Volumes for the Oil/NGL Blend

(Input 1c total times Input 2)

a. Propane 8,869.000000000 b. Isobutane 13,937.000000000 c. Normal Butane 41,811.000000000 d. Light Straight Run 98,826.000000000 e. Naphtha 257,201.000000000 f. Light Distillate 115,297.000000000 g. Heavy Distillate 231,861.000000000 h. Gas Oil 319,284.000000000 i. Resid 179,914.000000000 Total 1,267,000.000000000

Step Two from (c)(2) of this section:

Input 3: Component Percentages of NGLs

(To be supplied by operator of gas processing plant)

a. Propane 2.900% b. Isobutane 10.270% c. Normal Butane 31.220% d. Light Straight Run 46.400% e. Naphtha 9.210% Total 100.000%

Calculation 2: Component Volumes for the NGLs

(Input 1b total times Input 3)

a. Propane 3,596.000000000 b. Isobutane 12,734.800000000 c. Normal Butane 38,712.800000000 d. Light Straight Run 57,536.000000000 e. Naphtha 11,420.400000000 f. Light Distillate .000000000 g. Heavy Distillate .000000000 h. Gas Oil .000000000 i. Resid .000000000 Total 124,000.000000000

Step Three from (c)(3) of this section:

Calculation 3: Component Volumes for Oil

(Calculation 1 minus Calculation 2)

a. Propane 5,273.000000000 b. Isobutane 1,202.200000000 c. Normal Butane 3,098.200000000 d. Light Straight Run 41,290.000000000 e. Naphtha 245,780.600000000 f. Light Distillate 115,297.000000000 g. Heavy Distillate 231,861.000000000 h. Gas Oil 319,284.000000000 i. Resid 179,914.000000000 Total 1,143,000.000000000

Step Four from (c)(4) of this section:

Calculation 4: Component Percentage of Oil

(Calculation 3 divided by Input 1a total)

a. Propane 0.461329830% b. Isobutane 0.105179350% c. Normal Butane 0.271058620% d. Light Straight Run 3.612423450% e. Naphtha 21.503114610% f. Light Distillate 10.087226600% g. Heavy Distillate 20.285301840% h. Gas Oil 27.933858270% i. Resid 15.740507440% Total 100.000000000%

Step Five from (b) and (d) of this section:

Input 4: Component Prices

(To be taken from Quality Bank report)

a. Propane $12.45 b. Isobutane $18.47 c. Normal Butane $10.46 d. Light Straight Run $14.24 e. Naphtha $15.54 f. Light Distillate $18.85 g. Heavy Distillate $17.81 h. Gas Oil $15.63 i. Resid $9.67

Calculation 5: Component Values of the Oil Stream

(Input 4 times Calculation 4)

a. Propane $0.057435560 b. Isobutane $0.019426630 c. Normal Butane $0.028352730 d. Light Straight Run $0.514409100 e. Naphtha $3.341584010 f. Light Distillate $1.901442210 g. Heavy Distillate $3.612812260 h. Gas Oil $4.366062050 i. Resid $1.522107070 Total (QBVOIL ) $15.36

Step Six from (c) and (d) of this section:

Calculation 6: Component Values of the NGL Stream

(Input 4 times Imput 3)

a. Propane $ 0.361050000 b. Isobutane $ 1.896869000 c. Normal Butane $ 3.265612000 d. Light Straight Run $ 6.607360000 e. Naphtha $ 1.431234000 f. Light Distillate .000000000 g. Heavy Distillate .000000000 h. Gas Oil .000000000 i. Resid .000000000 Total (QBV NGL ) $ 13.56

Step Seven from (a) of this section:

Input 5: Average Producer Value

Average Producer Value (V BLEND) $10.18 $9.98

Solve the equations:

PRODUCER A

Equation 1

V OIL = V BLEND + (VOL NGL * (QBV OIL - QBV NGL ) / (VOL NGL +

VOL OIL ))

V OIL = $10.18 + (90,000 bbls * ($15.36 - $13.56) / (90,000 bbls +

567,000 bbls))

V OIL = $10.43

Equation 2

V NGL = V OIL - (QBV OIL - QBV NGL )

V NGL = $10.43 - ($15.36 - $13.56)

V NGL = $8.63

PRODUCER B

Equation 1

V OIL = V BLEND + (VOL NGL * (QBV OIL - QBV NGL ) / (VOL NGL +

VOL OIL ))

V OIL = $9.98 + (34,000 bbls * ($15.36 - $13.56) / (34,000 bbls +

576,000 bbls))

V OIL = $10.08

Equation 2

V NGL = V OIL - (QBV OIL - QBV NGL )

V NGL = $10.08 = ($15.36 - $13.56)

V NGL = $8.28

Note to example:

Components are those specified in the Quality Bank methodology.

History: Eff. 1/1/2000, Register 152; am 1/1/2003, Register 164

Authority: AS 43.05.080

AS 43.55.011

AS 43.55.016

AS 43.55.020

AS 43.55.030

AS 43.55.110

Editor's note: GPA 2186-95, adopted by reference in 15 AAC 55.175, may be reviewed during business hours at the Alaska Department of Revenue Oil and Gas Audit Division, 550 W. Seventh Avenue, Suite 500, Anchorage, AK 99501, and may be obtained from the Gas Processors Association, 6526 East 60th Street, Tulsa, Ok 74145. The Alaska Public Utilities Commission and Regulatory Commission of Alaska orders and the tariff documents that describe the "Quality Bank methodology" adopted in relevant part by reference in 15 AAC 55.175 may be reviewed during business hours at the Alaska Department of Revenue Oil and Gas Audit Division, 550 W. Seventh Avenue, Suite 500, Anchorage, AK 99501, and they may be reviewed and copies may be obtained at the Regulatory Commission of Alaska, 701 W. Eighth Avenue, Suite 300, Anchorage, AK 99501.