CSHB 290(O&G): "An Act relating to oil and gas, to the sale and disposition of state royalty oil and gas, to pipeline carriers of natural gas produced from the North Slope of Alaska, and to the intrastate regulation by the Regulatory Commission of Alaska of pipelines and pipeline facilities of that natural gas."
00CS FOR HOUSE BILL NO. 290(O&G) 01 "An Act relating to oil and gas, to the sale and disposition of state royalty oil 02 and gas, to pipeline carriers of natural gas produced from the North Slope of 03 Alaska, and to the intrastate regulation by the Regulatory Commission of Alaska 04 of pipelines and pipeline facilities of that natural gas." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 38.05.182 is amended to read: 07 Sec. 38.05.182. Royalty on natural resources. (a) Any royalty provided for 08 in AS 38.05.135 - 38.05.181 may be taken in kind rather than in money if the 09 commissioner determines that the taking in kind would be in the best interest of the 10 state. However, royalties on oil and gas shall be taken in kind unless the 11 commissioner determines that the taking in money would be in the best interest of the 12 state. In making a determination under this subsection about whether to 13 recommend that royalties on oil and gas be taken in kind or in money, the 14 commissioner shall give specific consideration as to whether the royalty oil and
01 gas taken in kind may be necessary to meet the state's present and projected 02 intrastate domestic and industrial needs. 03 (b) Before taking any action with regard to the taking and disposition of 04 royalties on oil and gas, the [THE] commissioner shall submit a proposed 05 determination to take royalty [IN MONEY] to the legislature at the first opportunity 06 during a current session or, if the legislature is not in session, at the next regular 07 session. The legislature, [WITHIN 60 DAYS OR] by the adjournment of the session, 08 [WHICHEVER COMES SOONER,] may approve [REVOKE] the proposed 09 determination by law. If the legislature does not approve the proposed 10 determination, the commissioner may not implement the determination as 11 submitted [CONCURRENT RESOLUTION]. 12 * Sec. 2. AS 38.35.120(a) is amended to read: 13 (a) A noncompetitive lease of state land for a right-of-way for an oil or natural 14 gas pipeline valued at $1,000,000 or more may be granted only upon the condition that 15 the lessee expressly covenants in the lease, in consideration of the rights acquired by 16 it under the lease, that 17 (1) it assumes the status of and will perform all of its functions 18 undertaken under the lease as a common carrier and will accept, convey, and transport 19 without discrimination crude oil or natural gas, depending on the kind of pipeline 20 involved, delivered to it for transportation from fields in the vicinity of the pipeline 21 subject to the lease throughout its route both on state land obtained under the lease and 22 on the other land; however, a lessee that [WHO] owns or operates a natural gas 23 pipeline 24 (A) subject to regulation either [(A)] under the Natural Gas Act 25 (15 U.S.C. 717 et seq.) of the United States [,] or [(B)] by the state or political 26 subdivisions with respect to rates and charges for the sale of natural gas, is, to 27 the extent of that regulation, exempt from the common carrier requirement in 28 this paragraph; it will accept, convey, and transport crude oil or natural gas 29 without unjust or unreasonable discrimination in favor of one producer or 30 person, including itself, as against another but will take the crude oil or natural 31 gas, depending on the kind of pipeline involved, delivered or offered, without
01 unreasonable discrimination, that the Regulatory Commission of Alaska shall, 02 after a full hearing with due notice to the interested parties and a proper finding 03 of facts, determine to be reasonable in the performance of its duties as a 04 common carrier; 05 (B) as a North Slope natural gas pipeline carrier, as that 06 term is defined in AS 42.06.630, is required to operate as a common 07 carrier only with respect to the intrastate transportation of North Slope 08 natural gas and is not otherwise required to perform its functions under 09 the lease as a common carrier; 10 (2) it will interchange crude oil or natural gas, depending on the kind 11 of pipeline involved, with each like common carrier and provide connections and 12 facilities for the interchange of crude oil or natural gas at every locality reached by 13 both pipelines when the necessity exists, subject to rates and regulations made by the 14 appropriate state or federal regulatory agency; 15 (3) it will maintain and preserve books, accounts, and records and will 16 make those reports that the state may prescribe by regulation or law as necessary and 17 appropriate for purposes of administration of this chapter; 18 (4) it will accord at all reasonable times to the state and its authorized 19 agents and auditors the right of access to its property and records, of inspection of its 20 property, and of examination and copying of records; 21 (5) it will provide connections, as determined by the Regulatory 22 Commission of Alaska under AS 42.06.340, to facilities on the pipeline subject to the 23 lease, both on state land and other land in the state, for the purpose of delivering crude 24 oil or natural gas, depending on the kind of pipeline involved, to persons (including 25 the state and its political subdivisions) contracting for the purchase at wholesale of 26 crude oil or natural gas transported by the pipeline when required by the public 27 interest; 28 (6) it shall, notwithstanding any other provision, provide connections 29 and interchange facilities at state expense at such places the state considers necessary 30 if the state determines to take a portion of its royalty or taxes in oil or natural gas; 31 (7) it will construct and operate the pipeline in accordance with
01 applicable state laws and lawful regulations and orders of the Regulatory Commission 02 of Alaska; 03 (8) it will, at its own expense, during the term of the lease , 04 (A) maintain the leasehold and pipeline in good repair; 05 (B) promptly repair or remedy any damage to the leasehold; 06 (C) promptly compensate for any damage to or destruction of 07 property for which the lessee is liable resulting from damage to or destruction 08 of the leasehold or pipeline; 09 (9) it will not transfer, assign, or dispose of in any manner, directly or 10 indirectly, or by transfer of control of the carrier corporation, its interest in a right-of- 11 way lease, or any rights under the lease or any pipeline subject to the lease to any person 12 other than another owner of the pipeline (including subsidiaries, parents , and affiliates of the 13 owners), except to the extent that the commissioner, after consideration of the protection of 14 the public interest (including whether the proposed transferee is fit, willing , and able to 15 perform the transportation or other acts proposed in a manner that will reasonably protect the 16 lives, property , and general welfare of the people of Alaska), authorizes; the commissioner 17 shall not unreasonably withhold consent to the transfer, assignment , or disposal; 18 (10) it will file with the commissioner a written appointment of a 19 named permanent resident of the state to be its registered agent in the state and to 20 receive service of notices, regulations, decisions , and orders of the commissioner; if 21 it fails to appoint an agent for service, service may be made by posting a copy in the 22 office of the commissioner , [AND] filing a copy [OF IT] in the office of the lieutenant 23 governor , and [BY] mailing a copy to the lessee's last known address; 24 (11) the applicable law of this state will be used in resolving questions 25 of interpretation of the lease; 26 (12) the granting of the right-of-way lease is subject to the express 27 condition that the exercise of the rights and privileges granted under the lease will not 28 unduly interfere with the management, administration, or disposal by the state of the 29 land affected by the lease, and that the lessee agrees and consents to the occupancy 30 and use by the state, its grantees, permittees, or other lessees of any part of the right- 31 of-way not actually occupied or required by the pipeline for the full and safe utilization of the
01 pipeline, for necessary operations incident to land management, administration, or disposal; 02 (13) it will be liable to the state for damages or injury incurred by the 03 state caused by the construction, operation , or maintenance of the pipeline and it will 04 indemnify the state for the liabilities or damages; 05 (14) it will procure and furnish liability and property damage insurance 06 from a company licensed to do business in the state or furnish other security or 07 undertaking upon the terms and conditions the commissioner considers necessary if the 08 commissioner finds that the net assets of the lessee are insufficient to protect the 09 public from damage for which the lessee may be liable arising out of the construction 10 or operation of the pipeline. 11 * Sec. 3. AS 42.05.711 is amended by adding a new subsection to read: 12 (n) Except as provided in AS 42.06.370(c), the provisions of this chapter do 13 not apply to a person who owns or operates a natural gas pipeline as a North Slope 14 natural gas pipeline carrier, as that term is defined in AS 42.06.630. 15 * Sec. 4. AS 42.06.230(b) is amended to read: 16 (b) The commission's jurisdiction and authority extend to 17 (1) an oil or gas pipeline facility operating in a municipality, whether 18 home rule or otherwise ; if [. IF] a conflict between a certificate, order, decision, or 19 regulation of the commission and a charter, permit, franchise, ordinance, rule, or 20 regulation of such a local governmental entity occurs, the certificate, order, decision, 21 or regulation of the commission prevails ; and 22 (2) the intrastate transportation of North Slope natural gas through 23 a North Slope natural gas pipeline . 24 * Sec. 5. AS 42.06.240 is amended by adding a new subsection to read: 25 (f) In addition to other requirements of (a) - (e) of this section, the provisions 26 of this subsection apply to a certificate of public convenience and necessity for a North 27 Slope natural gas pipeline carrier or person that will be a North Slope natural gas 28 pipeline carrier under this chapter: 29 (1) the person making application shall dedicate a portion of the 30 pipeline's initial capacity sufficient to transport the total volume of North Slope natural 31 gas that has been committed by producers and shippers of North Slope natural gas to
01 tendering for intrastate firm transportation service at the time that the operation of the 02 North Slope natural gas pipeline commences; 03 (2) upon receipt of the certificate application under this subsection, the 04 commission shall issue a public notice inviting prospective intrastate shippers of North 05 Slope natural gas to file requests for service; a request for service submitted by a 06 shipper in response to a notice issued under this paragraph must include a proof of the 07 shipper's commitment to use the North Slope natural gas pipeline for intrastate firm 08 transportation service, specifying the volume of North Slope natural gas that the 09 shipper will tender for initial intrastate firm transportation service; 10 (3) in its review of an application submitted under this subsection, 11 (A) for purposes of evaluating the total volume of intrastate 12 transportation of North Slope natural gas to be accepted for initial intrastate 13 transportation, the commission shall determine total volume based upon written 14 commitments to tender North Slope natural gas for intrastate firm transportation 15 service continuously for a period of not less than three years after the operation 16 of the North Slope natural gas pipeline commences as follows: 17 (i) each request for service by an intrastate shipper that 18 is a public utility, as that term is defined in AS 42.05.990, for the 19 purpose of furnishing natural gas for ultimate consumption within the 20 state by its customers in which the consumption by customers is an 21 average annual volume of less than 20,000,000 standard cubic feet of 22 gas per day shall be supported by a written commitment by the public 23 utility that sets out the utility's best current estimate of the average 24 annual volume that the utility will require during the three-year period; 25 (ii) each request for service by an intrastate shipper that 26 is not a public utility, as that term is defined in AS 42.05.990, for the 27 purpose of furnishing natural gas for ultimate consumption within the 28 state by its customers in which the consumption by customers is an 29 average annual volume of 20,000,000 or more standard cubic feet of 30 gas per day, that purchases North Slope natural gas from a North Slope 31 natural gas producer, must be supported by one or more contracts for
01 the purchase of the North Slope natural gas on a take-or-pay basis that 02 extends for a period of not less than three years after the operation of 03 the North Slope natural gas pipeline commences; 04 (iii) the commission may consider peak volumes 05 specified in the written commitments of North Slope natural gas 06 producers and purchase contracts; and 07 (B) the commission shall set out in its order granting a 08 certificate of public convenience and necessity the total volume of intrastate 09 North Slope natural gas that the North Slope natural gas pipeline carrier shall 10 accept for intrastate transportation; the total volume may not exceed the volume 11 substantiated by written commitments and contracts that comply with the 12 requirements of this chapter; 13 (4) if the North Slope natural gas pipeline carrier wants to transport 14 North Slope natural gas within the state in excess of the amount set out in the 15 statement of total volume in the pipeline carrier's certificate of public convenience and 16 necessity, the pipeline carrier may apply for authority to transport a greater volume of 17 North Slope natural gas within the state than the carrier is required by the commission 18 to transport in its order entered under (3)(B) of this subsection; the commission shall 19 grant the authority requested by the pipeline carrier if the commission determines that 20 the pipeline carrier's transportation of a greater volume is consistent with public 21 convenience and necessity. 22 * Sec. 6. AS 42.06.310 is amended by adding a new subsection to read: 23 (d) The requirement of (c) of this section does not apply to a North Slope 24 natural gas pipeline carrier to the extent that the capacity of the carrier's North Slope 25 natural gas pipeline does not allow for expanded capacity, and does not apply to 26 require a North Slope natural gas pipeline carrier to enlarge or extend its North Slope 27 natural gas pipeline system. However, the commission may require a North Slope 28 natural gas pipeline carrier to expand, enlarge, or extend its North Slope natural gas 29 pipeline system if, after notice and opportunity for hearing, the commission determines 30 that 31 (1) a person making a request for expanded, enlarged, or extended
01 service by a North Slope natural gas pipeline carrier has made a firm contractual 02 commitment to the North Slope natural gas pipeline carrier to transport North Slope 03 natural gas; and 04 (2) the expansion, enlargement, or extension will not result in 05 (A) substantial injury, including economic injury, to the North 06 Slope natural gas pipeline facility or its customers; 07 (B) substantial detriment to the services furnished by the North 08 Slope natural gas pipeline facility; or 09 (C) the creation of safety hazards. 10 * Sec. 7. AS 42.06.350 is amended by adding a new subsection to read: 11 (c) In its tariff filed with the commission under (a) of this section, a North 12 Slope natural gas pipeline carrier may charge separate rates for firm transportation 13 service and for interruptible transportation service. A North Slope natural gas pipeline 14 carrier 15 (1) may, in addition, impose a reservation fee or similar charge for 16 reservation of capacity in a North Slope natural gas pipeline as a condition of 17 providing firm transportation service; the reservation fee or charge imposed by the 18 carrier may not include any variable costs or fixed costs that are not attributable to the 19 provision of firm transportation service; 20 (2) may not impose a reservation fee or similar charge for reservation 21 of capacity in a North Slope natural gas pipeline for interruptible transportation 22 service. 23 * Sec. 8. AS 42.06.370 is amended by adding a new subsection to read: 24 (c) Rates demanded, observed, charged, or collected by a North Slope natural 25 gas pipeline carrier for intrastate service shall be designed as if that portion of the 26 North Slope natural gas pipeline were a public utility regulated under the provisions 27 of AS 42.05. 28 * Sec. 9. AS 42.06.630 is amended by adding new paragraphs to read: 29 (11) "capacity" means, with reference to a North Slope natural gas 30 pipeline, the average daily volume throughput of the North Slope natural gas pipeline, 31 calculated at the normal operating pressure of the North Slope natural gas pipeline as
01 set out in the pipeline design; 02 (12) "firm transportation service" means service by a North Slope 03 natural gas pipeline carrier that is not subject to a prior claim by another shipper or 04 another class of service; service constitutes "firm transportation service" if the service 05 receives the same priority as any other class of firm transportation service; 06 (13) "interruptible transportation service" means service by a North 07 Slope natural gas pipeline carrier in which the carrier's pipeline system capacity may 08 be subject to a prior claim by another shipper or another class of service; a service 09 constitutes "interruptible transportation service" if the service is given a lower priority 10 than another class of service, resulting in noncontinuous service to a shipper of North 11 Slope natural gas; 12 (14) "intrastate," as applied to the transportation of North Slope natural 13 gas, means the transportation of North Slope natural gas between any point within the 14 state and another point within the state, for ultimate consumption of the North Slope 15 natural gas within the state; 16 (15) "North Slope natural gas" means gas that is produced from the 17 area of Alaska lying north of 68 degrees North latitude and that, but for a pipeline 18 subject to regulation under this chapter, had not been committed for sale and delivery 19 in a commercial market due to the prevailing costs or price conditions; 20 (16) "North Slope natural gas pipeline" or "North Slope natural gas 21 pipeline facility" means all the facilities of a total system of pipe, whether owned or 22 operated by a North Slope natural gas pipeline carrier under a contract, agreement, or 23 lease, in this state used by a North Slope natural gas pipeline carrier for transportation 24 of North Slope natural gas for delivery, storage, or further transportation, including all 25 pipe, pump, and compressor stations, station equipment, gas processing plants, treaters, 26 separators, and all other facilities used or necessary for an integral line of pipe to carry 27 out the transportation from point to point, but excluding marine terminal facilities and 28 the integrated plant, facilities, and equipment, including pollution control equipment, 29 used for conditioning, storage, handling, or processing of North Slope natural gas into 30 liquefied natural gas; 31 (17) "North Slope natural gas pipeline carrier" means the owner,
01 including a corporation, company, or other entity organized under the laws of the 02 United States or of a state, of a North Slope natural gas pipeline, or an interest in it, 03 or a person, including a corporation, company, or other entity, organized under the 04 laws of the United States or of a state, authorized to construct, operate, or extend 05 North Slope natural gas pipeline facilities under this chapter.