00                             HOUSE BILL NO. 286                                                                          
01 "An Act amending the manner of determining the royalty received by the state on gas                                     
02 production by directing the commissioner of natural resources to accept, under certain                                  
03 circumstances, the transfer price of the gas if established by transfer price order of the                              
04 Regulatory Commission of Alaska; and providing for an effective date."                                                  
05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
06    * Section 1.  AS 38.05.180(aa) is amended to read:                                                                 
07            (aa)  Within 90 days after the written request of a lessee of a lease issued under                           
08       this section or of a lessee of federal land from which the state is entitled under                                
09       applicable federal law to receive a share of the royalty on gas production, the                                   
10       commissioner shall enter into an agreement with the lessee to use or accept, as the                           
11       value of the state's royalty share of gas production, the price for the gas established                       
12       in the contract between the lessee and a gas or electric utility [AS THE VALUE OF                                 
13       THE STATE'S ROYALTY SHARE OF GAS PRODUCTION] sold by the lessee                                                   
14       under the contract or the transfer price between the lessee and a gas or electric                             
01       utility for a transfer by the lessee under an order establishing the transfer price                           
02                 (1)  but only if the primary function of the utility with which the lessee                              
03       has entered into the contract or transfer is to provide, either directly or by selling at                     
04       wholesale to another utility, gas or electricity to the general public, including                                 
05       residential consumers, within the utilities' service areas, and the utility with which the                        
06       lessee has entered into                                                                                           
07                      (A)  the contract is not an affiliated interest, as that term is                               
08            defined in AS 42.05.990, with the lessee or with a subsequent purchaser of                                   
09            more than 10 percent of the utility's gas or electricity; or                                             
10                      (B)  the transfer is an affiliated interest, as that term is                                   
11            defined in AS 42.05.990, and the transfer price between the lessee and the                               
12            utility is established by an order of the Regulatory Commission of Alaska;                               
13            and                                                                                                          
14                 (2)  unless the commissioner makes a written finding, based on clear                                    
15       and convincing evidence, that                                                                                     
16                      (A)  the contract price or transfer price is unreasonably low;                                 
17                      (B)  the prospective reduction in royalty receipts would not be                                    
18            balanced by increased benefits to in-state gas and electric consumers;                                       
19                      (C)  the lessee and the utility are related in management,                                         
20            ownership, or other aspect and, in the case of a transfer price, that                                    
21            relationship is not regulated under AS 42.05; and                                                        
22                      (D)  the contract price or transfer price is not in the best                                   
23            interest of the state.                                                                                       
24    * Sec. 2.  This Act takes effect immediately under AS 01.10.070(c).