HCS CSSB 112(FIN): "An Act establishing a discovery royalty credit for the lessees of state land drilling exploratory wells and making the first discovery of oil or gas in an oil or gas pool in the Cook Inlet sedimentary basin."
00HOUSE CS FOR CS FOR SENATE BILL NO. 112(FIN) 01 "An Act establishing a discovery royalty credit for the lessees of state land 02 drilling exploratory wells and making the first discovery of oil or gas in an 03 oil or gas pool in the Cook Inlet sedimentary basin." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 38.05.134 is amended to read: 06 Sec. 38.05.134. CONVERSION TO LEASE. If the licensee requests and the 07 commissioner determines that the work commitment obligation set out in an oil and 08 gas exploration license issued under AS 38.05.132 has been met, the commissioner 09 shall convert to one or more oil and gas leases all or part, as the licensee may indicate, 10 of the area described in the exploration license that remains after the relinquishments, 11 removals, or deletions required by AS 38.05.132(d)(2). A lease issued under this 12 section 13 (1) is subject to the acreage limitations imposed by AS 38.05.140(c); 14 (2) is subject to AS 38.05.180(j) - (m), (o) - (u), and (x) - (z);
01 (3) must be conditioned upon a royalty in amount or value of not less 02 than 12.5 percent of production, except that the lessee who, proceeding under 03 AS 38.05.131 - 38.05.134, under a lease issued in the Cook Inlet sedimentary basin 04 who is the first to file with the commissioner a nonconfidential sworn statement 05 claiming to be the first to have drilled a well discovering oil or gas in a previously 06 undiscovered oil or gas pool and who is certified by the commissioner within one 07 year of completion of that discovery well to have drilled a well in that pool that 08 is capable of producing in paying quantities shall pay a royalty of five percent on 09 all production of oil or gas from that pool attributable to that lease for a period 10 of 10 years following the date of discovery of that pool, and thereafter the royalty 11 payable on all production of oil or gas from the pool attributable to that lease 12 shall be determined and payable as specified in the lease; the payment of the five 13 percent royalty under this paragraph is authorized only to a holder of a lease who 14 meets the requirements of AS 38.05.180(f)(4); 15 (4) must include an annual rent of $3 per acre or fraction of an acre 16 initially paid to the state at inception of the lease and payable annually after that until 17 the income to the state from royalty under that lease exceeds the rental income to the 18 state under that lease for that year; and 19 (5) is subject to other conditions and obligations that are specified in 20 the lease. 21 * Sec. 2. AS 38.05.180(f) is amended to read: 22 (f) Except as provided by AS 38.05.131 - 38.05.134, the commissioner may 23 issue oil and gas leases on state land to the highest responsible qualified bidder as 24 follows: 25 (1) the commissioner shall issue an oil and gas lease to the 26 successful bidder determined by competitive bidding under regulations adopted by the 27 commissioner; bidding [. BIDDING] may be by sealed bid or according to any other 28 bidding procedure the commissioner determines is in the best interests of the state; 29 (2) whenever [. WHENEVER], under any of the leasing methods 30 listed in this subsection, a royalty share is reserved to the state, it shall be delivered 31 in pipeline quality and free of all lease or unit expenses, including but not limited to
01 separation, cleaning, dehydration, gathering, salt water disposal, and preparation for 02 transportation off the lease or unit area; 03 (3) following [. FOLLOWING] a pre-sale analysis, the commissioner 04 may choose at least one of the following leasing methods: 05 (A) [(1)] a cash bonus bid with a fixed royalty share reserved 06 to the state of not less than 12.5 percent in amount or value of the production 07 removed or sold from the lease; 08 (B) [(2)] a cash bonus bid with a fixed royalty share reserved 09 to the state of not less than 12.5 percent in amount or value of the production 10 removed or sold from the lease and a fixed share of the net profit derived from 11 the lease of not less than 30 percent reserved to the state; 12 (C) [(3)] a fixed cash bonus with a royalty share reserved to the 13 state as the bid variable but no less than 12.5 percent in amount or value of the 14 production removed or sold from the lease; 15 (D) [(4)] a fixed cash bonus with the share of the net profit 16 derived from the lease reserved to the state as the bid variable; 17 (E) [(5)] a fixed cash bonus with a fixed royalty share reserved 18 to the state of not less than 12.5 percent in amount or value of the production 19 removed or sold from the lease with the share of the net profit derived from 20 the lease reserved to the state as the bid variable; 21 (F) [(6)] a cash bonus bid with a fixed royalty share reserved 22 to the state based on a sliding scale according to the volume of production or 23 other factor but in no event less than 12.5 percent in amount or value of the 24 production removed or sold from the lease; 25 (G) [(7)] a fixed cash bonus with a royalty share reserved to the 26 state based on a sliding scale according to the volume of production or other 27 factor as the bid variable but not less than 12.5 percent in amount or value of 28 the production removed or sold from the lease; 29 (4) notwithstanding a requirement in the leasing method chosen of 30 a minimum fixed royalty share, on and after a date that is 180 days following the 31 effective date of this Act, the lessee under a lease issued in the Cook Inlet
01 sedimentary basin who is the first to file with the commissioner a nonconfidential 02 sworn statement claiming to be the first to have drilled a well discovering oil or 03 gas in a previously undiscovered oil or gas pool and who is certified by the 04 commissioner within one year of completion of that discovery well to have drilled 05 a well in that pool that is capable of producing in paying quantities shall pay a 06 royalty of five percent on all production of oil or gas from that pool attributable 07 to that lease for a period of 10 years following the date of discovery of that pool, 08 and thereafter the royalty payable on all production of oil or gas from the pool 09 attributable to that lease shall be determined and payable as specified in the lease; 10 for purposes of this paragraph, the reduced royalty authorized by this paragraph 11 is subject to the following: 12 (A) only one reduction of royalty authorized by this 13 paragraph may be allowed on each lease that qualifies for reduction of 14 royalty under this paragraph; 15 (B) if, under this paragraph, application is made for a 16 royalty reduction for a lease that was entered into before the date that is 17 180 days following the effective date of this Act, the commissioner may 18 approve the application only if, on that date, the lease was a nonproducing 19 lease that was not committed to a unit approved by the commissioner 20 under (m) of this section, that is not part of a unit under (p) or (q) of this 21 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) 25 in effect before May 6, 1969, the commissioner shall disallow the 26 application under this paragraph unless the applicant waives the right to 27 claim the right to a reduced royalty under the discovery royalty provisions 28 of former 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 31 filing of applications for, and the review and certification of, discovery oil
01 and gas royalty certifications under this paragraph.