Title 11 . Natural Resources

Chapter 83 . (No Regulations Filed)

Section 243. Direct charges

11 AAC 83.243. Direct charges

For the purposes of this chapter, direct charges are

(1) lease rentals paid by lessee to the state for the operations of the NPSL, but excluding net profit share payments to the state;

(2) labor, which includes (A) salaries and wages of lessee's employees including supervisors and technical employees such as geologists, geophysicists, engineers, and drilling and construction supervisors directly employed on, or in transit to or from, the NPSL in lease operations, including earned or compensatory time off; and (B) salaries and wages of technical employees including engineers, technologists, draftsmen, engineering clerks, landmen, and other personnel performing technical services within the technical organizations who are either temporarily or permanently assigned to, and directly employed in NPSL operations; charges for these technical personnel must be limited to that portion of the salaries and wages attributable to the time actually devoted to the NPSL operations; these charges may be made on a per diem basis as approved by the parties;

(3) lessee's cost of holiday, vacation, sickness, and disability benefits and other customary allowances paid to the employees whose salaries and wages are chargeable to the appropriate NPSL account under (2) of this section; costs under this paragraph may be charged on a "when and as-paid basis" or by "percentage assessment" on the amount of salaries and wages chargeable to the appropriate NPSL account under this paragraph; if percentage assessment is used, the rate must be based on the lessee's cost experience;

(4) expenditures or contributions made under assessments imposed by governmental authority which are applicable to the lessee's labor cost of salaries and wages chargeable to the appropriate NPSL account under (2) and (3) of this section;

(5) reasonable personal expenses of those employees whose salaries and wages are chargeable to the appropriate NPSL account under (2) and (3) of this section and for which expenses the employees are reimbursed under lessee's usual practice;

(6) the lessee's current costs for established plans for employee group life insurance, hospitalization, pension, retirement, stock purchase, thrift, bonus, and other similar benefit plans, applicable to the lessee's labor costs chargeable to the NPSL account under (2) and (3) of this section, provided that these costs do not exceed the percent most recently recommended by the Council of Petroleum Accountants Societies of North America;

(7) material purchased or furnished by lessee for use on the NPSL as provided under 11 AAC 83.244 so far as it is reasonably practical and consistent with efficient and economical operation; however, only such material as may be required for immediate use may be purchased for or transferred to the NPSL, and the accumulation of surplus stocks must be avoided;

(8) transportation of employees and material necessary for operations on the NPSL with the following limitations:

(A) if material is moved to the NPSL from the lessee's warehouse or other properties, no charge may be made to the appropriate NPSL account for a distance greater than the distance from the nearest reliable supply store, recognized barge terminal, railway or air cargo receiving point where like material is normally available, unless that charge is provided for by 11 AAC 83.244(3) ;

(B) if surplus material is moved to lessee's warehouse or other storage point, no charge may be made to the appropriate NPSL account for a distance greater than the distance to the nearest reliable supply store, recognized barge terminal, railway or air cargo receiving point; no charge may be made to the appropriate NPSL account for moving material to other properties belonging to lessee;

(C) however, under (A) and (B) of this paragraph there may be no equalization of actual gross trucking cost of $400 or less, excluding accessorial charges;

(9) the lessee's cost of contract services, equipment and utilities provided by outside sources, except the cost and expense of services provided by outside sources in connection with matters of taxation, traffic, accounting, or matters before or involving governmental agencies and those services excluded by (12) of this section; the cost of professional consultant services or contract services of technical personnel not directly engaged on the NPSL must be limited to that portion of the cost attributable to the time actually devoted to the NPSL;

(10) the lessee's cost of using lessee-owned equipment and facilities, including shore base and offshore facilities, based on rates commensurate with costs of ownership and operation; those rates may include labor, maintenance, repairs, other operating expenses, insurance, taxes, depreciation, and interest on depreciated investment not to exceed a percentage to be determined by the commissioner; in addition, the rate may include an element for the estimated cost of abandonment, reclamation, and restoration; these rates may not exceed average commercial rates currently prevailing in the immediate area of the NPSL; in place of charges in this paragraph, the lessee may elect to use average commercial rates prevailing in the immediate area of the NPSL less 20 percent; for automotive equipment, the lessee may elect to use rates published by the Petroleum Motor Transport Association;

(11) all costs or expenses necessary to repair or replace property due to damage or loss caused by fire, flood, storm, theft, accident, or other causes, less reimbursements and contributions made to a reserve account by a self-insurer, except those costs resulting from the lessee's gross negligence or willful misconduct; however, the lessee shall furnish the lessor written notice of damage or loss as soon as practicable after the lessee receives a report of them;

(12) expense of handling, investigating, and settling litigation or claims, discharging liens, paying judgments, and settling of claims incurred in or resulting from operations or necessary to protect or recover property, less any reimbursements and contributions made to a reserve account by a self-insurer; except that no charge for services of the lessee's legal staff or fees or expense of outside attorneys may be made;

(13) net premiums paid for insurance required to be carried for the operations for the protection of the parties; if operations are conducted at offshore locations in which lessee may act as self-insurer for workmen's compensation and employers' liability, lessee may include the risk under its self-insurance program in providing coverage under state and federal laws and charge the appropriate NPSL account at lessee's cost not to exceed manual rates;

(14) costs of acquiring, leasing, installing, operating, repairing, and maintaining communication systems including radio and microwave facilities between the NPSL and the lessee's nearest base facility; if communication facilities/systems serving the NPSL are lessee-owned, charges to the appropriate NPSL account must be made as provided in (10) of this section;

(15) costs incurred on the NPSL for archaeological and geophysical surveys relative to identification and protection of cultural resources and/or other environmental or ecological surveys as may be required by applicable laws and regulations plus costs to provide or have available pollution containment and removal equipment plus costs of actual control and cleanup and resulting responsibilities of oil spills as required by applicable laws and regulations, but excluding any civil and criminal penalties and civil punitive damages which may be assessed as a result of this loss or damage and excluding any costs under 11 AAC 83.229(g) (2);

(16) all proper costs and expenditures relative to the NPSL operations incurred under a contract other than the NPSL;

(17) costs of environmental impact statements and cleanup contingency plans;

(18) costs of preliminary platforms, feasibility, and design studies, or similar marine projects, incurred in compliance with applicable laws and regulations;

(19) contributions or advances to others if based on the lessee's working-interest participation;

(20) standby costs incurred while working-interest operations are deferred, suspended or curtailed by reason of force majeure;

(21) cost of compliance with applicable laws and regulations directly related to the lessee's working-interest participation in effect at the date of agreement or later enacted or adopted;

(22) dry or bottom hole contributions for information relative to the exploration or development of the working-interest participation;

(23) costs of permits and licenses for the operation of the area;

(24) costs of required well work commitment;

(25) costs of purchased substances, less cost recoveries, used as injection for repressuring, pressure maintenance, cycling or other secondary or tertiary recovery purposes;

(26) adjustments paid or received for investment costs and expenses resulting from changing participations, unitization, or equity adjustments in the operating area according to the applicable operating agreements;

(27) charges for cleaning, dehydration, desulphurization, etc., for making the production of the royalty, overriding royalty and other non-operating interest share of production marketable, offset by reimbursements (if any) from the royalty owner;

(28) charges for losses for lease fuel, vapor losses, drilling, etc., which are borne by working-interest participation according to applicable laws and regulations.

History: Eff. 11/9/79, Register 72; am 6/28/81, Register 78; am 3/27/82, Register 81; am 8/15/82, Register 83; am 4/14/84, Register 90

Authority: AS 38.05.020

AS 38.05.180