11 AAC 83.227. Prevailing value

(a) For a lessee's oil, the prevailing value is the arithmetic average acquisition cost CIF (at the refinery inlet in the same market in which the lessee's Alaska oil is refined) based on the sales price of like oil sold in up to three third-party, arm's-length transactions selected by the department, if disclosure of the sales price information is permitted by the parties to those transactions at the time of an audit of the lessee. In this subsection, "like oil" means an oil of substantially similar quality produced in the same general area of the state and subject to the same federal price controls, if any, as the oil for which the prevailing value is to be determined.

(b) If the information under (a) of this section may not be disclosed or is unavailable, then the prevailing value for purposes of this chapter equals the arithmetic average acquisition cost CIF, (at the refinery inlet in the same market in which the lessee's Alaska oil is refined) of up to six oils selected by the department, including

(1) up to three domestic oils of substantially similar quality which are sold in significant quantities in the same market or near the same market; and

(2) up to three imported oils of substantially similar quality which are sold in significant quantities in the same market or near the same market.

(c) The respective acquisition cost CIF at the refinery inlet in a market for each of the oils used in this section equals the sum of

(1) the respective official government sales price or posted price of the oil (with adjustments for differentials and surcharges) appearing in the latest Platt's Oilgram Price Report published on or before the last day of the month of sale; and

(2) the respective tanker transportation cost of the oil from its port of origin to ship's rail in the same market as that in which the lessee's Alaska oil is refined; this cost is calculated by

(A) multiplying the London Tanker Broker's average freight rate assessment ("AFRA") applicable to that voyage during that month for AFRA LR 2 (Long range 2) oil tankers, by the most recently published worldscale rate for that voyage; or

(B) applying another applicable freight rate if foreign flag vessels are prohibited from transporting that oil; and

(3) any canal tolls and expenses not included in the applicable freight rate for that voyage; and

(4) pipeline or other carrying charges.

(d) Prevailing value for gas is

(1) the volume-weighted average of the prices received by the lessee in arm's-length sales transactions which have been entered into or whose pricing provisions have been amended during the calendar year or the two preceding years for significant quantities at the sales delivery points within the same market for that production for Alaska gas of like kind, character and quality produced during the month of sale; or

(2) if the lessee makes no arm's-length sales of significant quantities at the sales delivery points within the same market for Alaska gas of like kind, character and quality produced during the month, the volume-weighted average of the prices being given and received under the terms of arm's-length sales contracts (whether between third parties or not) which have been entered into or whose pricing provisions have been amended during the calendar year or the two preceding years for significant quantities of gas from the same field as the lessee's gas (or if there are no such contracts for that field, the counterparts of those contracts in the nearest field), with appropriate adjustments for differences (if any) in kind, character, and quality between gas sold under the reference sales contracts and the lessee's gas.

(e) For purposes of this section, "same market" means

(1) with respect to a lessee's oil refined in Alaska, the Alaska market;

(2) with respect to a lessee's oil landed on the U.S. West Coast (including Hawaii), the West Coast market or, if appropriate, the submarkets on the West Coast (i.e., Puget Sound, San Francisco Bay, the Long Beach and Los Angeles area, and Hawaii);

(3) with respect to a lessee's oil landed on the U.S. Gulf Coast, the Gulf Coast market;

(4) with respect to a lessee's oil landed on the U.S. East Coast, the East Coast market;

(5) with respect to a lessee's oil landed in Puerto Rico or the U.S. Virgin Islands, the Puerto Rico and Virgin Islands market;

(6) with respect to a lessee's gas marketed in Alaska, the Alaskan market or portion of it served by gas from the same field or area as the lessee's gas;

(7) with respect to a lessee's gas marketed in the continental United States, the continental United States market;

(8) with respect to a lessee's gas marketed in a foreign country, the market in that foreign country.

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

Authority: AS 38.05.020

AS 38.05.180

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