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HB 116: "An Act directing the commissioner of natural resources to accept, under certain circumstances, the contract price agreed to between a lessee of federal land and a gas or electric utility as the value of the federal government's royalty share from natural gas production when royalty is payable to the state under applicable federal law; and providing for an effective date."

00 HOUSE BILL NO. 116                                                                                                      
01 "An Act directing the commissioner of natural resources to accept, under certain                                        
02 circumstances, the contract price agreed to between a lessee of federal land and                                        
03 a gas or electric utility as the value of the federal government's royalty share                                        
04 from natural gas production when royalty is payable to the state under applicable                                       
05 federal law; and providing for an effective date."                                                                      
06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
07    * Section 1.  AS 38.05.180(aa) is amended to read:                                                                   
08  (aa)  Within 90 days after the written request of a lessee of a lease issued under                                    
09 this section or of a lessee of federal land for which state royalty share of gas                                       
10 production is payable under applicable federal law, the commissioner shall enter                                       
11 into an agreement with the lessee to use or accept the price for the gas established in                               
12 the contract between the lessee and a gas or electric utility as the value of the state's                               
13 royalty share of gas production sold by the lessee under the contract unless the                                        
14 commissioner makes a written finding, based on clear and convincing evidence, that                                      
01   (1)  the contract price is unreasonably low;                                                                         
02   (2)  the prospective reduction in royalty receipts would not be balanced                                             
03 by increased benefits to in-state gas and electric consumers;                                                           
04   (3)  the lessee and the utility are related in management, ownership, or                                             
05 other aspect; and                                                                                                       
06   (4)  the contract price is not in the best interest of the state.                                                    
07    * Sec. 2.  AS 38.05.180(bb) is amended to read:                                                                      
08  (bb)  In (aa) of this section,                                                                                      
09   (1)  "gas or electric utility" includes an electric cooperative organized                                            
10 under AS 10.25, a municipal utility, and a gas or electric utility regulated under                                      
11 AS 42.05; provided that if the contract gas is transmitted to consumers through a                                       
12 pipeline and the gas utility either owns the pipeline or is related in ownership to the                                 
13 owner of the pipeline, then the gas utility qualifies as a "gas or electric utility" within                             
14 the meaning of this paragraph only if it is bound or agrees to be bound by the                                          
15 covenants set out in AS 38.35.120;                                                                                      
16   (2)  "price for the gas established in the contract" includes tax                                                    
17 reimbursement amounts, deliverability and other charges, and other forms of                                             
18 consideration paid by the gas or electric utility under the contract;                                                   
19   (3)  "state's royalty share of gas production"                                                                       
20   (A)  includes payments on federal leases made to the state                                                         
21 under 30 U.S.C. 191;                                                                                                    
22   (B)  does not include the state's royalty share of gas production                                                  
23 from land patented to the state under                                                                                   
24   (i) [(A)]  P.L. 84-830, 70 Stat. 709 (Alaska Mental                                                              
25 Health Enabling Act);                                                                                                   
26   (ii) [(B)]  38 Stat. 1214 (Act of March 4, 1915); or                                                             
27   (iii) [(C)]  43 U.S.C. 1635 in settlement of the claims of                                                       
28 the state under 38 Stat. 1214.                                                                                          
29    * Sec. 3.  APPLICATION TO ROYALTY FROM EXISTING FEDERAL LEASES.  (a)                                                 
30 Notwithstanding AS 38.05.180(aa) and 38.05.180(bb), the provisions of this section apply to                             
31 the state's share of royalty production of gas produced after January 2, 1959, and before the                           
01 effective date of this section from a lease of oil or gas rights entered into under applicable                          
02 federal law.                                                                                                            
03  (b)  If a lessee of a lease for federal land for which state royalty share of gas                                      
04 production is payable under applicable federal law makes a written request within 90 days of                            
05 the effective date of this section, the commissioner shall enter into an agreement with the                             
06 lessee to accept the price for the gas established in the contract between the lessee and a gas                         
07 or electric utility as the value of the state's royalty share of gas production sold by the lessee                      
08 under the contract unless the commissioner makes a written finding, based on clear and                                  
09 convincing evidence, that                                                                                               
10  (1)  the contract price is unreasonably low;                                                                          
11   (2)  the reduction in royalty receipts is not balanced by increased benefits to                                       
12 in-state gas and electric consumers;                                                                                    
13   (3)  the lessee and the utility are related in management, ownership, or other                                        
14 aspect; and                                                                                                             
15   (4)  the contract price is not in the best interest of the state.                                                     
16  (c)  In this section,                                                                                                  
17   (1)  "gas or electric utility" includes an electric cooperative organized under                                       
18 AS 10.25, a municipal utility, and a gas or electric utility regulated under AS 42.05; however,                         
19 if the contract gas is transmitted to consumers through a pipeline and the gas utility either                           
20 owns the pipeline or is related in ownership to the owner of the pipeline, then the gas utility                         
21 qualifies as a "gas or electric utility" within the meaning of this paragraph only if the gas                           
22 utility is bound or agrees to be bound by the covenants set out in AS 38.35.120;                                        
23   (2)  "price for the gas established in the contract" includes tax reimbursement                                       
24 amounts, deliverability and other charges, and other forms of consideration paid by the gas                             
25 or electric utility under the contract;                                                                                 
26   (3)  "state's royalty share of gas production" includes payments on federal                                           
27 leases made to the state under 30 U.S.C. 191.                                                                           
28    * Sec. 4.  RETROSPECTIVE EFFECT OF SECTION 3.  Section 3 of this Act is                                              
29 retroactive to January 3, 1959, and applies to the federal government's royalty share from                              
30 natural gas production due the state after January 2, 1959.                                                             
31    * Sec. 5.  This Act takes effect immediately under AS 01.10.070(c).