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CSHB 116(FIN): "An Act relating to royalty gas contracts, amending the manner of determining the royalty received by the state on gas production, and 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(FIN)                                                                                          
01 "An Act relating to royalty gas contracts, amending the manner of determining                                           
02 the royalty received by the state on gas production, and directing the                                                  
03 commissioner of natural resources to accept, under certain circumstances, the                                           
04 contract price agreed to between a lessee of federal land and a gas or electric                                         
05 utility as the value of the federal government's royalty share from natural gas                                         
06 production on federal land from which the state is entitled under applicable                                            
07 federal law to receive a share of the royalty on gas production; and providing                                          
08 for an effective date."                                                                                                 
09 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
10    * Section 1.  AS 38.05.180(aa) is amended to read:                                                                   
11  (aa)  Within 90 days after the written request of a lessee of a lease issued under                                    
12 this section or of a lessee of federal land from which the state is entitled under                                     
13 applicable federal law to receive a share of the royalty on gas production, the                                        
14 commissioner shall enter into an agreement with the lessee to use or accept the price                                 
01 for the gas established in the contract between the lessee and a gas or electric utility                                
02 as the value of the state's royalty share of gas production sold by the lessee under the                                
03 contract                                                                                                                
04   (1)  but only if the primary function of the utility with which the                                                 
05 lessee has entered into the contract is to provide, either directly or by selling at                                    
06 wholesale to another utility, gas or electricity to the general public, including                                       
07 residential consumers, within the utilities' service areas, and the utility with which                                  
08 the lessee has entered into the contract is not an affiliated interest, as that term                                    
09 is defined in AS 42.05.990, with the lessee or with a subsequent purchaser of more                                      
10 than 10 percent of the utility's gas or electricity; and                                                                
11   (2)  unless the commissioner makes a written finding, based on clear                                                
12 and convincing evidence, that                                                                                           
13   (A) [(1)]  the contract price is unreasonably low;                                                                
14   (B) [(2)]  the prospective reduction in royalty receipts would not                                                
15 be balanced by increased benefits to in-state gas and electric consumers;                                               
16   (C) [(3)]  the lessee and the utility are related in management,                                                  
17 ownership, or other aspect; and                                                                                         
18   (D) [(4)]  the contract price is not in the best interest of the                                                  
19 state.                                                                                                                  
20    * Sec. 2.  AS 38.05.180(bb) is amended to read:                                                                      
21  (bb)  In (aa) of this section,                                                                                      
22   (1)  "gas or electric utility" includes an electric cooperative organized                                            
23 under AS 10.25, a municipal utility, and a gas or electric utility regulated under                                      
24 AS 42.05; provided that if the contract gas is transmitted to consumers through a                                       
25 pipeline and the gas utility either owns the pipeline or is related in ownership to the                                 
26 owner of the pipeline, then the gas utility qualifies as a "gas or electric utility" within                             
27 the meaning of this paragraph only if it is bound or agrees to be bound by the                                          
28 covenants set out in AS 38.35.120;                                                                                      
29   (2)  "price for the gas established in the contract" includes tax                                                    
30 reimbursement amounts, deliverability and other charges, and other forms of                                             
31 consideration paid by the gas or electric utility under the contract;                                                   
01   (3)  "state's royalty share of gas production"                                                                       
02   (A)  includes payments on federal leases made to the state                                                         
03 under 30 U.S.C. 191;                                                                                                    
04   (B)  does not include the state's royalty share of gas production                                                  
05 from land patented to the state under                                                                                   
06   (i) [(A)]  P.L. 84-830, 70 Stat. 709 (Alaska Mental                                                              
07 Health Enabling Act);                                                                                                   
08   (ii) [(B)]  38 Stat. 1214 (Act of March 4, 1915); or                                                             
09   (iii) [(C)]  43 U.S.C. 1635 in settlement of the claims of                                                       
10 the state under 38 Stat. 1214.                                                                                          
11    * Sec. 3.  AS 38.05.180 is amended by adding a new subsection to read:                                               
12  (cc)  The provisions of (aa) of this section do not prohibit the commissioner                                         
13 from accepting any payment on a federal lease tendered by the federal agency                                            
14 responsible for determination and transmittal of the payment to the state under 30                                      
15 U.S.C. 191 or otherwise due the state as the state's royalty share of gas production                                    
16 irrespective of the state's acceptance of the use of the contract price for purposes of                                 
17 determining royalty share on gas production under that subsection.                                                      
18    * Sec. 4.  APPLICATION TO ROYALTY FROM EXISTING FEDERAL LEASES.  (a)                                                 
19 Notwithstanding AS 38.05.180(aa) and 38.05.180(bb), the provisions of this section apply to                             
20 the state's share of royalty production of gas produced after January 2, 1959, and before the                           
21 effective date of this section from a lease of oil or gas rights entered into under applicable                          
22 federal law.                                                                                                            
23  (b)  If a lessee of a lease for federal land from which the state is entitled under                                    
24 applicable federal law to receive a share of the royalty on gas production makes a written                              
25 request within 90 days of the effective date of this section, the commissioner shall enter into                         
26 an agreement with the lessee to accept the price for the gas established in the contract between                        
27 the lessee and a gas or electric utility as the value of the state's royalty share of gas                               
28 production sold by the lessee under the contract                                                                        
29   (1)  but only if the primary function of the utility with which the lessee has                                        
30 entered into the contract is to provide, either directly or by selling at wholesale to another                          
31 utility, gas or electricity to the general public, including residential consumers, within the                          
01 utilities' service areas, and the utility with which the lessee has entered into the contract is not                    
02 an affiliated interest, as that term is defined in AS 42.05.990, with the lessee or with a                              
03 subsequent purchaser of more than 10 percent of the utility's gas or electricity; and                                   
04   (2)   unless the commissioner makes a written finding, based on clear and                                             
05 convincing evidence, that                                                                                               
06   (A)  the contract price is unreasonably low;                                                                         
07   (B)  the reduction in royalty receipts is not balanced by increased benefits to in-state gas and electric consumers 
08   (C)  the lessee and the utility are related in management, ownership, or                                             
09 other aspect; and                                                                                                       
10   (D)  the contract price is not in the best interest of the state.                                                    
11  (c)  The provisions of (a) and (b) of this section do not prohibit the commissioner from                               
12 accepting any payment on a federal lease tendered by the federal agency responsible for                                 
13 determination and transmittal of the payment to the state under 30 U.S.C. 191 or otherwise                              
14 due the state as the state's royalty share of gas production irrespective of the state's                                
15 acceptance of the use of the contract price for purposes of determining royalty share on gas                            
16 production under those subsections.                                                                                     
17  (d)  In this section,                                                                                                  
18   (1)  "gas or electric utility" includes an electric cooperative organized under                                       
19 AS 10.25, a municipal utility, and a gas or electric utility regulated under AS 42.05; however,                         
20 if the contract gas is transmitted to consumers through a pipeline and the gas utility either                           
21 owns the pipeline or is related in ownership to the owner of the pipeline, then the gas utility                         
22 qualifies as a "gas or electric utility" within the meaning of this paragraph only if it is bound                       
23 or agrees to be bound by the covenants set out in AS 38.35.120;                                                         
24   (2)  "price for the gas established in the contract" includes tax reimbursement                                       
25 amounts, deliverability and other charges, and other forms of consideration paid by the gas                             
26 or electric utility under the contract;                                                                                 
27   (3)  "state's royalty share of gas production" includes payments on federal                                           
28 leases made to the state under 30 U.S.C. 191.                                                                           
29    * Sec. 5.  RETROSPECTIVE EFFECT OF SECTION 4.  Section 4 of this Act is                                              
30 retroactive to January 3, 1959, and applies to the federal government's royalty share from                              
31 natural gas production due the state after January 2, 1959.                                                             
01    * Sec. 6.  This Act takes effect immediately under AS 01.10.070(c).