CSHB 207(O&G): "An Act relating to adjustments to royalty reserved to the state to encourage otherwise uneconomic production of oil and gas; and providing for an effective date."
00CS FOR HOUSE BILL NO. 207(O&G) 01 "An Act relating to adjustments to royalty reserved to the state to encourage 02 otherwise uneconomic production of oil and gas; and providing for an effective 03 date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 38.05.180(j) is amended to read: 06 (j) The [TO PROLONG THE ECONOMIC LIFE OF AN OIL AND GAS 07 FIELD OR TO REESTABLISH COMMERCIAL PRODUCTION OF SHUT-IN OIL 08 OR GAS THAT WOULD NOT OTHERWISE BE ECONOMICALLY FEASIBLE, 09 THE] commissioner 10 (1) may [SHALL ADOPT REGULATIONS TO] allow reduction of 11 royalty on individual leases or leases unitized as described in (p) of this section 12 (A) to allow for production from an oil or gas field, pool, or 13 portion of a field or pool if 14 (i) the oil or gas field, pool, or portion of the field or
01 pool has been sufficiently delineated to the satisfaction of the 02 commissioner; 03 (ii) the field, pool, or portion of the field or pool has 04 not previously produced oil or gas; and 05 (iii) production from the field, pool, or portion of the 06 field or pool would not otherwise be economically feasible; 07 (B) to prolong the economic life of an oil or gas field, pool, 08 or portion of a field or pool, as per barrel or barrel equivalent costs 09 increase in the later stages of production decline; or 10 (C) to reestablish commercial production of shut-in oil or 11 gas that would not otherwise be economically feasible; 12 (2) [. THE COMMISSIONER] may not grant a reduction of royalty 13 unless the lessee or lessees requesting the reduction make [MAKES] a clear and 14 convincing showing that a reduction of royalty meets the requirements of this 15 subsection and is in the best interests of the state; 16 (3) shall, if the royalty reduction agreement is approved, in the 17 royalty reduction agreement, [THE REVENUE FROM THE LESSEE'S SHARE OF 18 ALL HYDROCARBONS PRODUCED FROM THE FIELD IS AND IS LIKELY TO 19 CONTINUE TO BE INSUFFICIENT TO PRODUCE A REASONABLE RATE OF 20 RETURN WITH RESPECT TO THE LESSEE'S TOTAL INVESTMENT IN THE 21 FIELD. THE COMMISSIONER MAY] condition a royalty reduction granted under 22 this subsection in any way necessary to protect the state's best interests; under this 23 subsection, the commissioner shall include provisions to increase or otherwise 24 modify the state's royalty share by a sliding scale royalty or other mechanism 25 upon the occurrence of a change [INTEREST, INCLUDING RESTORATION OF 26 THE STATE'S ROYALTY SHARE IN THE EVENT OF AN INCREASE] in the price 27 of oil or gas, and may consider other relevant factors, such as proved reserves, 28 well productivity, or capital investment in the oil or gas field, pool, or portion of 29 the field or pool; 30 (4) may not grant a royalty reduction for a field, pool, or portion 31 of a field or pool under (1)(A) of this subsection that exceeds 75 percent of the
01 royalty originally specified in a lease entered into under the provisions of (f) of 02 this section or AS 38.05.134; 03 (5) shall, as part of the royalty reduction application process, 04 require the lessee or lessees to submit, with the application for the royalty 05 reduction, financial and technical data that demonstrates that the requirements 06 of this subsection are met; the financial and technical data required by the 07 commissioner 08 (A) may not require disclosure of data relating to 09 production before the lessee or lessees obtained ownership of the lease if 10 the reduction application involves a lease described in (1)(B) or (C) of this 11 subsection; and 12 (B) shall be kept confidential under AS 38.05.035(a)(9) upon 13 the lessee's request; 14 (6) shall give notice of the written findings and determination to the 15 lessee and to any other person who has filed a written request for it; subject to 16 (8) of this subsection, the commissioner's determination is final and not appealable 17 to the court; 18 (7) may require the lessee or lessees making application for the 19 royalty reduction to retain and pay for the services of a contractor, selected by 20 the lessee or lessees from a list provided by the commissioner, to assist the 21 commissioner in evaluating the application and financial and technical data; when 22 the commissioner requires the lessee or lessees to retain the services of a 23 contractor under this paragraph, the commissioner shall determine the relevant 24 scope of the work to be performed by the contractor; 25 (8) may not make a determination that gives final approval to an 26 application for a royalty reduction under this subsection unless the commissioner 27 first 28 (A) submits the proposed royalty reduction decision to and 29 obtains the approval of at least three of the five members of the Alaska 30 Royalty Oil and Gas Development Advisory Board other than the 31 commissioner of natural resources; for purposes of this subparagraph,
01 after submission of the proposed royalty reduction under this 02 subparagraph, the Alaska Royalty Oil and Gas Development Advisory 03 Board has 30 days in which to evaluate the commissioner's submission and 04 to determine that the proposed royalty reduction meets the requirements 05 of this subsection and is in the best interests of the state; 06 (B) transmits copies of the determination made by the 07 Alaska Royalty Oil and Gas Development Advisory Board to 08 (i) the presiding officer of each house [. BEFORE 09 APPROVING A ROYALTY REDUCTION, THE COMMISSIONER 10 SHALL MAKE A WRITTEN FINDING THAT THE STATE HAS 11 OBTAINED THE MAXIMUM POSSIBLE ECONOMIC RETURN 12 THAT IS COMPATIBLE WITH ALLOWING A REASONABLE 13 RATE OF ECONOMIC RETURN FOR THE LESSEE, AND SEND 14 COPIES OF THE FINDING TO ALL MEMBERS] of the legislature; 15 (ii) the chairs of the legislature's standing committees 16 on resources; and 17 (iii) the chairs of the legislature's special committees 18 on oil and gas, if any; 19 (9) is not limited by the provisions of AS 38.05.134(3) or (f) of this 20 section in the commissioner's determination under this subsection. 21 * Sec. 2. AS 38.05.180(p) is amended to read: 22 (p) To conserve the natural resources of all or a part of an oil or gas pool, 23 field, or like area, the lessees and their representatives may unite with each other, or 24 jointly or separately with others, in collectively adopting or operating under a 25 cooperative or a unit plan of development or operation of the pool, field, or like area, 26 or a part of it, when determined and certified by the commissioner to be necessary or 27 advisable in the public interest. The commissioner may, with the consent of the 28 holders of leases involved, establish, change, or revoke drilling, producing, and royalty 29 requirements of the leases and adopt regulations with reference to the leases, with like 30 consent on the part of the lessees, in connection with the institution and operation of 31 a cooperative or unit plan as the commissioner determines necessary or proper to
01 secure the proper protection of the public interest. The commissioner may not 02 reduce royalty on leases in connection with a cooperative or unit plan except as 03 provided in (j) of this section. The commissioner may require oil and gas leases 04 issued under this section to contain a provision requiring the lessee to operate under 05 a reasonable cooperative or unit plan, and may prescribe a plan under which the lessee 06 must operate. The plan must adequately protect all parties in interest, including the 07 state. 08 * Sec. 3. This Act takes effect immediately under AS 01.10.070(c).