Title 11 . Natural Resources

Chapter 83 . (No Regulations Filed)

Section 219. Development costs

11 AAC 83.219. Development costs

(a) The development costs that are incurred by or for a lessee for a NPSL are a debit to the lessee's NPSL development account.

(b) The lessee's development costs for a NPSL equal direct charges, as defined in 11 AAC 83.243, that are not excluded under 11 AAC 83.217 and that are directly attributable to a NPSL for

(1) geological, geophysical, geotechnical and geochemical examinations and other investigations on or adjacent to the NPSL relating to pre and post drilling operations on the NPSL;

(2) cost of design of construction projects, as defined in the approved "Plan of Operation";

(3) accumulated cost of capital work in progress, on or adjacent to the NPSL or on a contractor's premises;

(4) rentals and other payments directly attributable to the NPSL such as lease rental, licenses or permits, renewal or extension fees, and other similar payments required and made to maintain the interest of the lessee in the NPSL;

(5) drilling costs for wells bottomed on the NPSL;

(6) costs to acquire, construct and/or install facilities and equipment on or in support of the NPSL that directly result in or are necessary for continued or enhanced production from the NPSL;

(7) that portion of the full consideration given by the lessee in acquiring a production interest in the NPSL that is properly attributable to the wells, facilities and equipment on or in support of the NPSL which directly result in or are necessary for continued or enhanced production from the NPSL, as opposed to the consideration given for the lease itself; the lessee transferring the production interest must credit his development account for a like amount;

(8) before the commencement of commercial production, ad valorem tax paid to the state (net of all credits and refunds for municipal ad valorem taxes on the same property) for property used in the drilling described in (5) of this subsection or for property described in (6) of this subsection, that is installed or constructed before the commencement of commercial production and ad valorem and other taxes paid to one or more municipalities that were incurred directly as the result of, and in the course of, the drilling described in (5) of this subsection and/or the acquisition, installation or construction of property described in (6) of this subsection before the commencement of commercial production but excluding any windfall profits, franchise or income taxes.

(c) Costs that are "directly attributable" within the meaning of this section are only those direct charges incurred for activities occurring on or in support of the NPSL premises which are necessary for production or support of production from the lease. For NPSL's included in a unit, "directly attributable" costs are direct charges incurred for activities occurring on or in support of the unit premises and allocated to that lease. Any costs debited as direct operating costs under 11 AAC 83.240 are specifically excluded from "directly attributable" costs.

(d) If the NPSL is subject to an operating agreement in which at least one working-interest owner is a third party to the operator, then a non-operator may include as a development cost for that NPSL the direct charges allowed in (b), (c), and (f) of this section that are incurred by the operator in developing that NPSL, if they are reimbursable to the operator by the non-operator under the terms of that operating agreement.

(e) Repealed 8/15/82.

(f) General overhead and administrative expenses for a month may be included as a direct development cost at the rate of three percent of the development costs as defined in (b)(1), (b)(2), (b)(3), (b)(5), and (b)(6) of this section. If the NPSL is subject to a unit operating agreement in which at least one working interest owner is a third party to the operator, the commissioner will, in his discretion, require use of the overhead rate applicable to development costs specified in the unit operating agreement.

History: Eff. 11/9/79, Register 72; am 8/15/82, Register 83

Authority: AS 38.05.020

AS 38.05.180