HB 209: "An Act relating to the authority of the commissioner of natural resources to allow reductions of royalty on oil and gas leases; and providing for an effective date."
00HOUSE BILL NO. 209 01 "An Act relating to the authority of the commissioner of natural resources to 02 allow reductions of royalty on oil and gas leases; 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) To prolong or enhance the economic life of an oil or [AND] gas field or 07 to reestablish commercial production of shut-in oil or gas that would not otherwise be 08 economically feasible, the commissioner 09 (1) shall adopt regulations that are applicable to all bidding methods 10 to allow reduction of royalty on leases; the regulations that are adopted under this 11 paragraph to prolong or enhance the economic life of an oil or gas field shall be 12 developed to compensate for increasing costs or decreasing value of production; 13 (2) [. THE COMMISSIONER] may not grant a reduction of royalty 14 (A) unless the lessee requesting the reduction makes a clear
01 showing that the revenue from the lessee's share of all oil and gas 02 [HYDROCARBONS] produced from the field is and is likely to continue to be 03 insufficient to produce a reasonable rate of return with respect to the lessee's 04 total investment in the field; and 05 (B) if the royalty reduction is requested to prolong or 06 enhance the economic life of a field, unless at least two years' initial 07 production from the field has occurred; 08 (3) [. THE COMMISSIONER] may condition a royalty reduction 09 granted under this subsection in any way necessary to protect the state's interest, 10 including restoration of the state's royalty share in the event of an increase in the price 11 of oil or gas; 12 (4) [. BEFORE APPROVING A ROYALTY REDUCTION, THE 13 COMMISSIONER] shall, before approving a royalty reduction under this 14 subsection, make a written finding that the state has obtained the maximum possible 15 economic return that is compatible with allowing a reasonable rate of economic return 16 for the lessee, and send copies of the finding to all members of the legislature. 17 * Sec. 2. APPLICABILITY. The provisions of AS 38.05.180(j), amended by sec. 1 of this 18 Act, apply to leases in production on the effective date of this Act. 19 * Sec. 3. This Act takes effect immediately under AS 01.10.070(c).