SB 104: "An Act 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 when royalty is payable to the state under applicable federal law; and providing for an effective date."
00SENATE BILL NO. 104 01 "An Act directing the commissioner of natural resources to accept, under certain 02 circumstances, the contract price agreed to between a lessee of federal land and 03 a gas or electric utility as the value of the federal government's royalty share 04 from natural gas production when royalty is payable to the state under applicable 05 federal law; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. AS 38.05.180(aa) is amended to read: 08 (aa) Within 90 days after the written request of a lessee of a lease issued under 09 this section or of a lessee of federal land for which state royalty share of gas 10 production is payable under applicable federal law, the commissioner shall enter 11 into an agreement with the lessee to use or accept the price for the gas established in 12 the contract between the lessee and a gas or electric utility as the value of the state's 13 royalty share of gas production sold by the lessee under the contract unless the 14 commissioner makes a written finding, based on clear and convincing evidence, that
01 (1) the contract price is unreasonably low; 02 (2) the prospective reduction in royalty receipts would not be balanced 03 by increased benefits to in-state gas and electric consumers; 04 (3) the lessee and the utility are related in management, ownership, or 05 other aspect; and 06 (4) the contract price is not in the best interest of the state. 07 * Sec. 2. AS 38.05.180(bb) is amended to read: 08 (bb) In (aa) of this section, 09 (1) "gas or electric utility" includes an electric cooperative organized 10 under AS 10.25, a municipal utility, and a gas or electric utility regulated under 11 AS 42.05; provided that if the contract gas is transmitted to consumers through a 12 pipeline and the gas utility either owns the pipeline or is related in ownership to the 13 owner of the pipeline, then the gas utility qualifies as a "gas or electric utility" within 14 the meaning of this paragraph only if it is bound or agrees to be bound by the 15 covenants set out in AS 38.35.120; 16 (2) "price for the gas established in the contract" includes tax 17 reimbursement amounts, deliverability and other charges, and other forms of 18 consideration paid by the gas or electric utility under the contract; 19 (3) "state's royalty share of gas production" 20 (A) includes payments on federal leases made to the state 21 under 30 U.S.C. 191; 22 (B) does not include the state's royalty share of gas production 23 from land patented to the state under 24 (i) [(A)] P.L. 84-830, 70 Stat. 709 (Alaska Mental 25 Health Enabling Act); 26 (ii) [(B)] 38 Stat. 1214 (Act of March 4, 1915); or 27 (iii) [(C)] 43 U.S.C. 1635 in settlement of the claims of 28 the state under 38 Stat. 1214. 29 * Sec. 3. APPLICATION TO ROYALTY FROM EXISTING FEDERAL LEASES. (a) 30 Notwithstanding AS 38.05.180(aa) and 38.05.180(bb), the provisions of this section apply to 31 the state's share of royalty production of gas produced after January 2, 1959, and before the
01 effective date of this section from a lease of oil or gas rights entered into under applicable 02 federal law. 03 (b) If a lessee of a lease for federal land for which state royalty share of gas 04 production is payable under applicable federal law makes a written request within 90 days of 05 the effective date of this section, the commissioner shall enter into an agreement with the 06 lessee to accept the price for the gas established in the contract between the lessee and a gas 07 or electric utility as the value of the state's royalty share of gas production sold by the lessee 08 under the contract unless the commissioner makes a written finding, based on clear and 09 convincing evidence, that 10 (1) the contract price is unreasonably low; 11 (2) the reduction in royalty receipts is not balanced by increased benefits to 12 in-state gas and electric consumers; 13 (3) the lessee and the utility are related in management, ownership, or other 14 aspect; and 15 (4) the contract price is not in the best interest of the state. 16 (c) 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 the gas 22 utility is bound 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. 4. RETROSPECTIVE EFFECT OF SECTION 3. Section 3 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. 5. This Act takes effect immediately under AS 01.10.070(c).