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