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(a) If the coal is sold in a bona fide arm's-length transaction between independent parties, adjusted gross value is the full consideration received by the lessee minus the following costs if those costs were borne by the lessee:
(1) reasonable beneficiation costs as defined in (e)(1) of this section; and
(2) reasonable transportation costs from the mine mouth to the point of sale, as defined in (e)(2) of this section.
(b) Notwithstanding (a) of this section, the commissioner will determine the adjusted gross value of the coal, taking into account the consideration being paid for coal in the same general area or other relevant areas including areas outside Alaska, reasonable transportation costs, beneficiation costs, composition and special characteristics of the deposit, the Btu content of the coal, and other relevant factors, if the commissioner determines that the coal produced from the leased area is
(1) sold or disposed of in other than a bona fide arm's-length transaction between independent parties;
(2) sold or disposed of under a contract which sets a single price for coal without adjustments tied to market conditions;
(3) sold or disposed of under a contract which does not reflect the value of the coal at the time the coal is produced; or
(4) consumed by the lessee.
(c) The commissioner will, in his discretion, and upon petition by the lessee, convert the percent-of-value royalty rate to a comparable cents-per-ton rate in a written determination that it is in the best interest of the state to make the conversion and that the commissioner has adequate information to make an adjustment which is equitable to the state and the lessee. This cents-per-ton rate will be readjusted as necessary to reflect changes in adjusted gross value.
(d) The commissioner will allow deductions under (a) of this section when, in his judgment, the lessee provides him with an accurate account and description of the reasonable costs. When requested by the commissioner, the lessee shall promptly file with the commissioner all information that relates to royalty value computation. All royalty value computations are subject to audit by the commissioner.
(e) In this section
(1) "reasonable beneficiation costs" means the reasonable costs of any processing performed before sale that adds value to the coal as compared to its run-of-mine value; these deductible processing costs include the costs of grinding, washing, drying, grading, sorting, briquetting, any other means of beneficiation, and any reasonable transportation costs necessitated solely by this beneficiation; primary crushing, loading, and storing costs are not included whether or not they are incurred on or away from the leased premises;
(2) "reasonable transportation costs" means actual costs of transportation occurring after the coal leaves the mine mouth, including the use of tankers, roads, conveyor belts, trucks, rail transportation and slurry pipelines; for any coal lease for which a coal royalty statement was timely filed for the month of July 1982, "reasonable transportation costs" also includes the actual costs of transportation from the point of extraction to the mine mouth; if the transportation facilities are owned by the lessee, then actual costs are limited to direct operating expenses and depreciation on capital equipment and do not include overhead or an internal rate of return on the capital investment; the commissioner will determine the reasonable transportation costs when any of the following conditions exist:
(A) the transportation contract is not an arm's-length transaction or is not representative of the market value of the transportation; or
(B) the method of transportation of coal is not reasonable in view of existing alternative methods of transportation;
(3) "mine mouth" means the tipple, railroad, or other loadout facility, where the coal is initially weighed or measured and loaded for transport to a buyer or user;
(4) "point of extraction" means that point where the coal first enters the lessee's coal transport system; and
(5) "point of sale" means the point of first transfer for value, if title also transfers, or the point of entry into a free market place.
History: Eff. 9/5/74, Register 51; am 6/18/82, Register 82; am 12/31/82, Register 84
Authority: AS 38.05.020
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Last modified 7/05/2006