HB 57: "An Act amending the manner of determining the royalty received by the state on gas production as it relates to the manufacture of certain value-added products."
00 HOUSE BILL NO. 57 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 between the lessee and a manufacturer, as appropriate, as the value of the 11 state's royalty share of gas production sold by the lessee under the contract 12 (1) but only if 13 (A) for a contract between the lessee and a gas or electric 14 utility, the primary function of the utility with which the lessee has entered
01 into the contract is to provide, either directly or by selling at wholesale to 02 another utility, gas or electricity to the general public, including residential 03 consumers, within the utilities' service areas, and the utility with which the 04 lessee has entered into the contract is not an affiliated interest, as that term is 05 defined in AS 42.05.990, with the lessee or with a subsequent purchaser of 06 more than 10 percent of the utility's gas or electricity; or 07 (B) for a contract between the lessee and a manufacturer, 08 the primary function of the manufacturer is to engage in the production of 09 a value-added product, and the manufacturer with which the lessee has 10 entered into the contract is not affiliated with the lessee or with a 11 subsequent purchaser of more than 10 percent of the manufacturer's 12 value-added product; for purposes of this subparagraph, the parties to a 13 contract or purchase are affiliated if, in the judgment of the commissioner, 14 one of the parties to the contract or purchase exercises substantial 15 influence over the policies and actions of the other as evidenced by 16 relationship based on common ownership or family interest or by action 17 taken in concert without regard to whether that influence is based upon 18 stockholdings, stockholders, officers, or directors; and 19 (2) unless the commissioner makes a written finding, based on clear 20 and convincing evidence, that 21 (A) the contract price is unreasonably low; 22 (B) the prospective reduction in royalty receipts would not be 23 balanced in a contract entered into for a circumstance described 24 (i) in (1)(A) of this subsection by increased benefits to 25 in-state gas and electric consumers; or 26 (ii) in (1)(B) of this subsection by increased 27 employment opportunities or other tangible benefits to the state; 28 (C) the lessee and the utility or manufacturer, as 29 appropriate, are related in management, ownership, or other aspect; and 30 (D) the contract price is not in the best interest of the state. 31 * Sec. 2. AS 38.05.180(bb)(2) is amended to read:
01 (2) "price for the gas established in the contract" includes tax 02 reimbursement amounts, deliverability and other charges, and other forms of 03 consideration paid by the gas or electric utility or by the manufacturer, as 04 appropriate, under the contract; 05 * Sec. 3. AS 38.05.180(bb) is amended by adding a new paragraph to read: 06 (4) "manufacturer" means a person that is a business entity other than a 07 gas or electric utility primarily engaging in the manufacturing of a value-added 08 product using state royalty natural gas as a component raw material.