00 CS FOR HOUSE BILL NO. 57(FIN) 01 "An Act amending the manner of determining the royalty received by the state on gas 02 production as it relates to the manufacture of certain value-added products." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 38.05.180(aa) is amended to read: 05 (aa) Within 90 days after the written request of a lessee of a lease issued under 06 this section or of a lessee of federal land from which the state is entitled under 07 applicable federal law to receive a share of the royalty on gas production, the 08 commissioner shall enter into an agreement with the lessee to use or accept the price 09 for the gas established in the contract between the lessee and a gas or electric utility, 10 or, for a contract that is entered into on or after the effective date of this Act, to 11 use or accept a price for the gas established in the contract between the lessee and 12 a manufacturer of agricultural chemicals, as appropriate, as the value of the state's 13 royalty share of gas production sold by the lessee under the contract 14 (1) but only if 01 (A) for a contract between the lessee and a gas or electric 02 utility, the primary function of the utility with which the lessee has entered 03 into the contract is to provide, either directly or by selling at wholesale to 04 another utility, gas or electricity to the general public, including residential 05 consumers, within the utilities' service areas, and the utility with which the 06 lessee has entered into the contract is not an affiliated interest, as that term is 07 defined in AS 42.05.990, with the lessee or with a subsequent purchaser of 08 more than 10 percent of the utility's gas or electricity; or 09 (B) for a contract between the lessee and a manufacturer of 10 agricultural chemicals, the primary function of the manufacturer is to 11 engage in the production of a value-added product, and the manufacturer 12 with which the lessee has entered into the contract is not affiliated with the 13 lessee or with a subsequent purchaser of more than 10 percent of the 14 manufacturer's value-added product; for purposes of this subparagraph, 15 the parties to a contract or purchase are affiliated if, in the judgment of 16 the commissioner, one of the parties to the contract or purchase exercises 17 substantial influence over the policies and actions of the other as 18 evidenced by relationship based on common ownership or family interest 19 or by action taken in concert without regard to whether that influence is 20 based upon stockholdings, stockholders, officers, or directors; and 21 (2) unless the commissioner makes a written finding, based on clear 22 and convincing evidence, that 23 (A) for a contract entered into for a circumstance described 24 in (1)(A) of this subsection 25 (i) the contract price is unreasonably low; 26 (ii) [(B)] the prospective reduction in royalty receipts 27 would not be balanced by increased benefits to in-state gas and electric 28 consumers; 29 (iii) [(C)] the lessee and the utility are related in 30 management, ownership, or other aspect; and 31 (iv) [(D)] the contract price is not in the best interest of 01 the state; 02 (B) for a contract entered into under (1)(B) of this 03 subsection between a lessee and a manufacturer of agricultural chemicals, 04 (i) the contract price is unreasonably low; 05 (ii) the prospective reduction in royalty receipts 06 would not be balanced by employment opportunities or other 07 tangible benefits to the state; 08 (iii) the lessee and the manufacturer are related in 09 management, ownership, or other aspect; or 10 (iv) the contract price is not in the best interest of 11 the state. 12 * Sec. 2. AS 38.05.180(bb)(2) is amended to read: 13 (2) "price for the gas established in the contract" includes tax 14 reimbursement amounts, deliverability and other charges, and other forms of 15 consideration paid by the gas or electric utility or by the manufacturer of 16 agricultural chemicals, as appropriate, under the contract; 17 * Sec. 3. AS 38.05.180(bb) is amended by adding a new paragraph to read: 18 (4) "manufacturer of agricultural chemicals" means a person that is a 19 business entity primarily engaging in the manufacturing of nitrogenous and phosphatic 20 based fertilizers, mixed fertilizers, pesticides, and similar chemicals for agricultural 21 purposes. 22 * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 APPLICABILITY. The provisions of this Act apply to determine the price received 25 by the state on royalty gas production as it relates to the sale of the gas to a manufacturer of 26 agricultural chemicals based on contracts under AS 38.05.180(aa) that are entered into on or 27 after the effective date of this Act.