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