11 AAC 83.224. Valuation of oil or gas

(a) Except as provided in (e) of this section, this section applies to all oil and gas produced on a NPSL whether or not the oil or gas is removed from the NPSL.

(b) Except when (c) of this section applies, the gross value at the point of production for all oil and gas is the sales price under 11 AAC 83.226 less the reasonable costs of transportation under 11 AAC 83.228 and 11 AAC 83.229 from the point of production to the sales delivery point. When (c) of this section applies, the gross value at the point of production is the prevailing value as determined under 11 AAC 83.227 less the reasonable costs of transportation under 11 AAC 83.228 and 11 AAC 83.229 from the point of production to the sales delivery point.

(c) Prevailing value must be used if the oil or gas is sold or exchanged under circumstances where the sales price is substantially lower than the prevailing value for oil or gas of like kind, character and quality being sold at sales delivery points in the same market or in a comparable market if there are no sales of significant quantities in the same market; for the purposes of this subsection

(1) "circumstances" refers to instances where terms of a contract set a single price for oil or gas without adjustments tied to market conditions for periods of longer than six years, or where the terms of a contract set prices which do not reasonably reflect market conditions for that field or area prevailing at the time the contract is executed or renegotiated, or where fraud or an intent to evade the net profit share payment is demonstrated; and

(2) the determination of a "substantially lower" price is to be made by analyzing the cash value of consideration received for oil or gas and taking into account any asserted difference between sales price and prevailing value, the quantity of oil or gas involved in the transaction, and the duration of the contract giving rise to the claim.

(d) For valuation purposes, production of oil or gas does not include oil or gas

(1) used, flared, or unavoidably lost in production operations on the NPSL; or

(2) injected into a reservoir in the course of operations in the same field for purposes of repressuring or conservation.

(e) Notwithstanding anything to the contrary in (a) - (d) of this section, where a lessee's gas from a NPSL is run through a gas processing plant and part or all of the residue gas and extracted liquids are returned to that lessee, the "value at the point of production" for that gas is the total value of that residue gas and extracted liquids as they come out of the plant, less

(1) a reasonable allowance (either withheld in kind by the plant operator or paid in cash to the plant operator) for the cost of processing that gas through the plant;

(2) the reasonable cost of transportation, under 11 AAC 83.228 and 11 AAC 83.229, if any, from the point of production for that gas to the intake into the plant; and

(3) the value of any residue gas returned to the lessee that is used, flared or unavoidably lost in the production operations for the lease or property or is injected into a reservoir in the course of operations for the same field.

History: Eff. 11/9/79, Register 72; am 3/27/82, Register 81; am 8/15/82, Register 83

Authority: AS 38.05.020

AS 38.05.180

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