SCS CSHB 57(FIN): "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 SENATE CS FOR CS FOR HOUSE BILL NO. 57(FIN) 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(bb) is amended to read: 05 (bb) In (aa) and (ee) of this section, 06 (1) "gas or electric utility" includes an electric cooperative organized 07 under AS 10.25, a municipal utility, and a gas or electric utility regulated under 08 AS 42.05; provided that, if the contract gas is transmitted to consumers through a 09 pipeline and the gas utility either owns the pipeline or is related in ownership to the 10 owner of the pipeline, then the gas utility qualifies as a "gas or electric utility" within 11 the meaning of this paragraph only if it is bound or agrees to be bound by the 12 covenants set out in AS 38.35.120; 13 (2) "price for the gas established in the contract" includes tax 14 reimbursement amounts, deliverability and other charges, and other forms of
01 consideration paid by the gas or electric utility or by the manufacturer of 02 agricultural chemicals, as appropriate, under the contract; 03 (3) "state's royalty share of gas production" 04 (A) includes payments on federal leases made to the state under 05 30 U.S.C. 191; 06 (B) does not include the state's royalty share of gas production 07 from land patented to the state under 08 (i) P.L. 84-830, 70 Stat. 709 (Alaska Mental Health 09 Enabling Act); 10 (ii) 38 Stat. 1214 (Act of March 4, 1915); or 11 (iii) 43 U.S.C. 1635 in settlement of the claims of the 12 state under 38 Stat. 1214. 13 * Sec. 2. AS 38.05.180(bb) is amended by adding a new paragraph to read: 14 (4) "manufacturer of agricultural chemicals" means a person that is a 15 business entity primarily engaging in the manufacturing of nitrogenous and phosphatic 16 based fertilizers, mixed fertilizers, pesticides, and similar chemicals for agricultural 17 purposes. 18 * Sec. 3. AS 38.05.180(cc) is amended to read: 19 (cc) The provisions of (aa) and (ee) of this section do not prohibit the 20 commissioner from accepting any payment on a federal lease tendered by the federal 21 agency responsible for determination and transmittal of the payment to the state under 22 30 U.S.C. 191 or otherwise due the state as the state's royalty share of gas production 23 irrespective of the state's acceptance of an amount that is different than the amount 24 due under the lease [THE USE OF THE CONTRACT PRICE] for purposes of 25 determining royalty share on gas production under that subsection. 26 * Sec. 4. AS 38.05.180 is amended by adding a new subsection to read: 27 (ee) For a contract that is entered into on or after the effective date of this Act, 28 within 90 days after the written request of a lessee of a lease issued under this section 29 or of a lessee of federal land from which the state is entitled under applicable federal 30 law to receive a share of the royalty on gas production, in order to establish the value 31 of the state's royalty share of gas production sold by the lessee under the contract, the
01 commissioner may enter into an agreement with the lessee to use or accept as a price 02 for the gas an amount that is not less than the price established in the contract between 03 the lessee and a manufacturer of agricultural chemicals, not to exceed the amount that 04 would otherwise be due under the lease. The commissioner may enter into the 05 agreement if it is in the best interest of the state 06 (1) only if the primary function of the manufacturer is to engage in the 07 production of a value-added product, and the manufacturer with which the lessee has 08 entered into the contract is not affiliated with the lessee or with a subsequent purchaser 09 of more than 10 percent of the manufacturer's value-added product; for purposes of 10 this paragraph, the parties to a contract or purchase are affiliated if, in the judgment of 11 the commissioner, one of the parties to the contract or purchase exercises substantial 12 influence over the policies and actions of the other as evidenced by relationship based 13 on common ownership or family interest or by action taken in concert without regard 14 to whether that influence is based upon stockholdings, stockholders, officers, or 15 directors; 16 (2) unless the commissioner makes a written finding, based on clear 17 and convincing evidence, that 18 (A) the contract price is unreasonably low; or 19 (B) the prospective reduction in royalty receipts would not be 20 balanced by employment opportunities or other tangible benefits to the state. 21 * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 22 read: 23 APPLICABILITY. The provisions of this Act apply to determine the price received 24 by the state on royalty gas production as it relates to the sale of the gas to a manufacturer of 25 agricultural chemicals based on contracts under AS 38.05.180(ee) that are entered into on or 26 after the effective date of this Act.