SB 112: "An Act establishing a discovery royalty credit for the lessees of state land drilling exploratory wells and making the first discovery of oil or gas in commercial quantities."
00SENATE BILL NO. 112 01 "An Act establishing a discovery royalty credit for the lessees of state land 02 drilling exploratory wells and making the first discovery of oil or gas in 03 commercial quantities." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 38.05.134 is amended to read: 06 Sec. 38.05.134. CONVERSION TO LEASE. If the licensee requests and the 07 commissioner determines that the work commitment obligation set out in an oil and 08 gas exploration license issued under AS 38.05.132 has been met, the commissioner 09 shall convert to one or more oil and gas leases all or part, as the licensee may indicate, 10 of the area described in the exploration license that remains after the relinquishments, 11 removals, or deletions required by AS 38.05.132(d)(2). A lease issued under this 12 section 13 (1) is subject to the acreage limitations imposed by AS 38.05.140(c); 14 (2) is subject to AS 38.05.180(j) - (m), (o) - (u), and (x) - (z);
01 (3) must be conditioned upon a royalty in amount or value of not less 02 than 12.5 percent of production. except that the lessee who, proceeding under 03 AS 38.05.131 - 38.05.134, makes the first discovery of oil or gas in commercial 04 quantities in a geologic structure shall pay a royalty on all production under the 05 lease of five percent for the first 10 years following the date of discovery and 06 thereafter the royalty shall be as determined under this paragraph; 07 (4) must include an annual rent of $3 per acre or fraction of an acre 08 initially paid to the state at inception of the lease and payable annually after that until 09 the income to the state from royalty under that lease exceeds the rental income to the 10 state under that lease for that year; and 11 (5) is subject to other conditions and obligations that are specified in 12 the lease. 13 * Sec. 2. AS 38.05.180(f) is amended to read: 14 (f) Except as provided by AS 38.05.131 - 38.05.134, the commissioner may 15 issue oil and gas leases on state land to the highest responsible qualified bidder as 16 follows: 17 (1) the commissioner shall issue an oil and gas lease to the 18 successful bidder determined by competitive bidding under regulations adopted by the 19 commissioner; bidding [. BIDDING] may be by sealed bid or according to any other 20 bidding procedure the commissioner determines is in the best interests of the state; 21 (2) whenever [. WHENEVER], under any of the leasing methods 22 listed in this subsection, a royalty share is reserved to the state, it shall be delivered 23 in pipeline quality and free of all lease or unit expenses, including but not limited to 24 separation, cleaning, dehydration, gathering, salt water disposal, and preparation for 25 transportation off the lease or unit area; 26 (3) following [. FOLLOWING] a pre-sale analysis, the commissioner 27 may choose at least one of the following leasing methods: 28 (A) [(1)] a cash bonus bid with a fixed royalty share reserved 29 to the state of not less than 12.5 percent in amount or value of the production 30 removed or sold from the lease; 31 (B) [(2)] a cash bonus bid with a fixed royalty share reserved
01 to the state of not less than 12.5 percent in amount or value of the production 02 removed or sold from the lease and a fixed share of the net profit derived from 03 the lease of not less than 30 percent reserved to the state; 04 (C) [(3)] a fixed cash bonus with a royalty share reserved to the 05 state as the bid variable but no less than 12.5 percent in amount or value of the 06 production removed or sold from the lease; 07 (D) [(4)] a fixed cash bonus with the share of the net profit 08 derived from the lease reserved to the state as the bid variable; 09 (E) [(5)] a fixed cash bonus with a fixed royalty share reserved 10 to the state of not less than 12.5 percent in amount or value of the production 11 removed or sold from the lease with the share of the net profit derived from 12 the lease reserved to the state as the bid variable; 13 (F) [(6)] a cash bonus bid with a fixed royalty share reserved 14 to the state based on a sliding scale according to the volume of production or 15 other factor but in no event less than 12.5 percent in amount or value of the 16 production removed or sold from the lease; 17 (G) [(7)] a fixed cash bonus with a royalty share reserved to the 18 state based on a sliding scale according to the volume of production or other 19 factor as the bid variable but not less than 12.5 percent in amount or value of 20 the production removed or sold from the lease; 21 (4) notwithstanding a requirement, in the leasing method chosen, 22 of a minimum fixed royalty share, the holder of a lease who makes the first 23 discovery of oil or gas in commercial quantities in a geologic structure shall pay 24 a royalty on all production under the lease of five percent for the first 10 years 25 following the date of discovery and thereafter the royalty shall be determined and 26 payable under (3) of this subsection.