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CSHB 116(RES): "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 on federal land from which the state is entitled under applicable federal law to receive a share of the royalty on gas production; and providing for an effective date."

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