SB 194: "An Act relating to temporarily reduced royalty on oil and gas from pools without previous commercial sales in the Cook Inlet sedimentary basin; and providing for an effective date."
00 SENATE BILL NO. 194 01 "An Act relating to temporarily reduced royalty on oil and gas from pools without 02 previous commercial sales in the Cook Inlet sedimentary basin; and providing for an 03 effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 38.05.180(f) is amended to read: 06 (f) Except as provided by AS 38.05.131 - 38.05.134, the commissioner may 07 issue oil and gas leases or leases for gas only on state land to the highest responsible 08 qualified bidder as follows: 09 (1) the commissioner shall issue an oil and gas lease or a gas only 10 lease, as appropriate, to the successful bidder determined by competitive bidding 11 under regulations adopted by the commissioner; bidding may be by sealed bid or 12 according to any other bidding procedure the commissioner determines is in the best 13 interests of the state; 14 (2) whenever, under any of the leasing methods listed in this
01 subsection, a royalty share is reserved to the state, it shall be delivered in pipeline 02 quality and free of all lease or unit expenses, including but not limited to separation, 03 cleaning, dehydration, gathering, salt water disposal, and preparation for transportation 04 off the lease or unit area; 05 (3) following a pre-sale analysis, the commissioner may choose at least 06 one of the following leasing methods: 07 (A) a cash bonus bid with a fixed royalty share reserved to the 08 state of not less than 12.5 percent in amount or value of the production 09 removed or sold from the lease; 10 (B) a cash bonus bid with a fixed royalty share reserved to the 11 state of not less than 12.5 percent in amount or value of the production 12 removed or sold from the lease and a fixed share of the net profit derived from 13 the lease of not less than 30 percent reserved to the state; 14 (C) a fixed cash bonus with a royalty share reserved to the state 15 as the bid variable but no less than 12.5 percent in amount or value of the 16 production removed or sold from the lease; 17 (D) a fixed cash bonus with the share of the net profit derived 18 from the lease reserved to the state as the bid variable; 19 (E) a fixed cash bonus with a fixed royalty share reserved to the 20 state of not less than 12.5 percent in amount or value of the production 21 removed or sold from the lease with the share of the net profit derived from the 22 lease reserved to the state as the bid variable; 23 (F) a cash bonus bid with a fixed royalty share reserved to the 24 state based on a sliding scale according to the volume of production or other 25 factor but in no event less than 12.5 percent in amount or value of the 26 production removed or sold from the lease; 27 (G) a fixed cash bonus with a royalty share reserved to the state 28 based on a sliding scale according to the volume of production or other factor 29 as the bid variable but not less than 12.5 percent in amount or value of the 30 production removed or sold from the lease; 31 (4) notwithstanding a requirement in the leasing method chosen of a
01 minimum fixed royalty share, on and after March 3, 1997, the lessee under a lease 02 issued in the Cook Inlet sedimentary basin who is the first to file with the 03 commissioner a nonconfidential sworn statement claiming to be the first to have 04 drilled a well discovering oil or gas in a previously undiscovered oil or gas pool and 05 who is certified by the commissioner within one year of completion of that discovery 06 well to have drilled a well in that pool that is capable of producing in paying quantities 07 shall pay a royalty of five percent on all production of oil or gas from that pool 08 attributable to that lease for a period of 10 years following the date of discovery of that 09 pool, and thereafter the royalty payable on all production of oil or gas from the pool 10 attributable to that lease shall be determined and payable as specified in the lease; for 11 purposes of this paragraph, the reduced royalty authorized by this paragraph is subject 12 to the following: 13 (A) only one reduction of royalty authorized by this paragraph 14 may be allowed on each lease that qualifies for reduction of royalty under this 15 paragraph; 16 (B) if, under this paragraph, application is made for a royalty 17 reduction for a lease that was entered into before March 3, 1997, the 18 commissioner may approve the application only if, on that date, the lease was a 19 nonproducing lease that was not committed to a unit approved by the 20 commissioner under (m) of this section, that is not part of a unit under (p) or 21 (q) of this section, and that has not been made part of a unit under AS 31.05; 22 (C) if application for a royalty reduction is made under this 23 paragraph for a lease on which a discovery royalty was claimed or may be 24 claimed under the discovery royalty provisions of former AS 38.05.180(a) in 25 effect before May 6, 1969, the commissioner shall disallow the application 26 under this paragraph unless the applicant waives the right to claim the right to 27 a reduced royalty under the discovery royalty provisions of former 28 AS 38.05.180(a) in effect before May 6, 1969; and 29 (D) the commissioner shall adopt regulations setting out the 30 standards, criteria, and definitions of terms that apply to implement the filing 31 of applications for, and the review and certification of, discovery certifications
01 under this paragraph; 02 (5) notwithstanding and in lieu of a requirement in the leasing method 03 chosen of a minimum fixed royalty share, or the royalty provision of a lease, for leases 04 unitized as described in (p) of this section, leases subject to an agreement described in 05 (s) or (t) of this section, or interests unitized under AS 31.05, the lessee of all or part of 06 an oil or gas pool in the Cook Inlet sedimentary basin that, subject to 07 determination by the commissioner, has not previously produced for commercial 08 sale oil or gas [FIELD IDENTIFIED IN THIS SECTION THAT HAS BEEN 09 GRANTED APPROVAL OF A WRITTEN PLAN SUBMITTED TO THE ALASKA 10 OIL AND GAS CONSERVATION COMMISSION UNDER AS 31.05.030(i)] shall [, 11 SUBJECT TO (dd) OF THIS SECTION,] pay a royalty of five percent on [THE 12 FIRST 25,000,000 BARRELS OF] oil or [AND THE FIRST 35,000,000,000 CUBIC 13 FEET OF] gas produced for sale from that pool for [FIELD THAT OCCURS IN 14 THE] 10 years following the date on which the production for commercial sale 15 commences; for the purposes of this paragraph, the requirement to pay a royalty 16 of five percent may not apply to a lease without a royalty share reserved to the 17 state or a royalty rate payable of at least five percent in the amount or value of 18 production removed or sold from the lease [THE FIELDS ELIGIBLE FOR 19 ROYALTY REDUCTION UNDER THIS PARAGRAPH, ALL OF WHICH ARE 20 LOCATED WITHIN THE COOK INLET SEDIMENTARY BASIN, WERE 21 DISCOVERED BEFORE JANUARY 1, 1988, AND HAVE BEEN UNDEVELOPED 22 OR SHUT IN FROM AT LEAST JANUARY 1, 1988, THROUGH DECEMBER 31, 23 1997, ARE 24 (A) FALLS CREEK; 25 (B) NICOLAI CREEK; 26 (C) NORTH FORK; 27 (D) POINT STARICHKOF; 28 (E) REDOUBT SHOAL; AND 29 (F) WEST FORELAND]; 30 (6) notwithstanding and in lieu of a requirement in the leasing method 31 chosen of a minimum fixed royalty share, or the royalty provision of a lease, for leases
01 unitized as described in (p) of this section, leases subject to an agreement described in 02 (s) or (t) of this section, or interests unitized under AS 31.05, the lessee of all or part of 03 an oil field located offshore in Cook Inlet on which an oil production platform 04 specified in (A), (C), or (E) of this paragraph operates, or the lessee of all or part of the 05 field located offshore in Cook Inlet and described in (G) of this paragraph, 06 (A) shall pay a royalty of five percent on oil produced from the 07 platform if oil production that equaled or exceeded a volume of 1,200 barrels a 08 day declines to less than that amount for a period of at least one calendar 09 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 10 as long as the volume of oil produced from the platform remains less than 11 1,200 barrels a day; the provisions of this subparagraph apply to 12 (i) Dolly; 13 (ii) Grayling; 14 (iii) King Salmon; 15 (iv) Steelhead; and 16 (v) Monopod; 17 (B) shall pay a royalty calculated under this subparagraph if the 18 volume of oil produced from the platform that was certified by the Alaska Oil 19 and Gas Conservation Commission under (A) of this paragraph later increases 20 to 1,200 or more barrels a day and remains at 1,200 or more barrels a day for a 21 period of at least one calendar quarter; until the royalty rate determined under 22 this subparagraph applies, the royalty continues to be calculated under (A) of 23 this paragraph; on and after the first day of the month following the month the 24 increased production exceeds the period specified in this subparagraph, the 25 royalty payable under this subparagraph is 26 (i) for production of at least 1,200 barrels a day but not 27 more than 1,300 barrels a day - seven percent; 28 (ii) for production of more than 1,300 barrels a day but 29 not more than 1,400 barrels a day - 8.5 percent; 30 (iii) for production of more than 1,400 barrels a day but 31 not more than 1,500 barrels a day - 10 percent; and
01 (iv) for production of more than 1,500 barrels a day - 02 12.5 percent; 03 (C) shall pay a royalty of five percent on oil produced from the 04 platform if oil production that equaled or exceeded a volume of 975 barrels a 05 day declines to less than that amount for a period of at least one calendar 06 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 07 as long as the volume of oil produced from the platform remains less than 975 08 barrels a day; the provisions of this subparagraph apply to 09 (i) Baker; 10 (ii) Dillon; 11 (iii) XTO.A; and 12 (iv) XTO.C; 13 (D) shall pay a royalty calculated under this subparagraph if the 14 volume of oil produced from the platform that was certified by the Alaska Oil 15 and Gas Conservation Commission under (C) of this paragraph later increases 16 to 975 or more barrels a day and remains at 975 or more barrels a day for a 17 period of at least one calendar quarter; until the royalty rate determined under 18 this subparagraph applies, the royalty continues to be calculated under (C) of 19 this paragraph; on and after the first day of the month following the month the 20 increased production exceeds the period specified in this subparagraph, the 21 royalty payable under this subparagraph is 22 (i) for production of at least 975 barrels a day but not 23 more than 1,100 barrels a day - seven percent; 24 (ii) for production of more than 1,100 barrels a day but 25 not more than 1,200 barrels a day - 8.5 percent; 26 (iii) for production of more than 1,200 barrels a day but 27 not more than 1,350 barrels a day - 10 percent; and 28 (iv) for production of more than 1,350 barrels a day - 29 12.5 percent; 30 (E) shall pay a royalty of five percent on oil produced from the 31 platform if oil production that equaled or exceeded a volume of 750 barrels a
01 day declines to less than that amount for a period of at least one calendar 02 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 03 as long as the volume of oil produced from the platform remains less than 750 04 barrels a day; the provisions of this subparagraph apply to 05 (i) Granite Point; 06 (ii) Anna; and 07 (iii) Bruce; 08 (F) shall pay a royalty calculated under this subparagraph if the 09 volume of oil produced from the platform that was certified by the Alaska Oil 10 and Gas Conservation Commission under (E) of this paragraph later increases 11 to 750 or more barrels a day and remains at 750 or more barrels a day for a 12 period of at least one calendar quarter; until the royalty rate determined under 13 this subparagraph applies, the royalty continues to be calculated under (E) of 14 this paragraph; on and after the first day of the month following the month the 15 increased production exceeds the period specified in this subparagraph, the 16 royalty payable under this subparagraph is 17 (i) for production of at least 750 barrels a day but not 18 more than 850 barrels a day - seven percent; 19 (ii) for production of more than 850 barrels a day but 20 not more than 1,000 barrels a day - 8.5 percent; 21 (iii) for production of more than 1,000 barrels a day but 22 not more than 1,200 barrels a day - 10 percent; and 23 (iv) for production of more than 1,200 barrels a day - 24 12.5 percent; 25 (G) shall pay a royalty of five percent on oil produced from the 26 field if oil production that equaled or exceeded a volume of 750 barrels a day 27 declines to less than that amount for a period of at least one calendar quarter, 28 as certified by the Alaska Oil and Gas Conservation Commission, for as long 29 as the volume of oil produced from the field remains less than 750 barrels a 30 day; the provisions of this subparagraph apply to the West McArthur River 31 field;
01 (H) shall pay a royalty calculated under this subparagraph if the 02 volume of oil produced from the field that was certified by the Alaska Oil and 03 Gas Conservation Commission under (G) of this paragraph later increases to 04 750 or more barrels a day and remains at 750 or more barrels a day for a period 05 of at least one calendar quarter; until the royalty rate determined under this 06 subparagraph applies, the royalty continues to be calculated under (G) of this 07 paragraph; on and after the first day of the month following the month the 08 increased production exceeds the period specified in this subparagraph, the 09 royalty payable under this subparagraph is 10 (i) for production of at least 750 barrels a day but not 11 more than 850 barrels a day - seven percent; 12 (ii) for production of more than 850 barrels a day but 13 not more than 1,000 barrels a day - 8.5 percent; 14 (iii) for production of more than 1,000 barrels a day but 15 not more than 1,200 barrels a day - 10 percent; and 16 (iv) for production of more than 1,200 barrels a day - 17 12.5 percent; and 18 (I) may obtain the benefits of the royalty adjustments set out in 19 (A) - (H) of this paragraph only if the commissioner determines that the 20 reduction in production from the platform or the field is 21 (i) based on the average daily production during the 22 calendar quarter based on reservoir conditions; and 23 (ii) not the result of short-term production declines due 24 to mechanical or other choke-back factors, temporary shutdowns or 25 decreased production due to environmental or facility constraints, or 26 market conditions. 27 * Sec. 2. AS 31.05.030(i) and AS 38.05.180(dd) are repealed. 28 * Sec. 3. This Act takes effect immediately under AS 01.10.070(c).