CSSB 194(RES): "An Act relating to temporary reduced royalty on oil and gas from pools in the Cook Inlet sedimentary basin without previous commercial sales and to reports related to the royalty rates; requiring the Alaska Oil and Gas Conservation Commission to publish a report related to oil and gas waste; and providing for an effective date."
00 CS FOR SENATE BILL NO. 194(RES) 01 "An Act relating to temporary reduced royalty on oil and gas from pools in the Cook 02 Inlet sedimentary basin without previous commercial sales and to reports related to the 03 royalty rates; requiring the Alaska Oil and Gas Conservation Commission to publish a 04 report related to oil and gas waste; and providing for an effective date." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 31.05.030 is amended by adding a new subsection to read: 07 (o) Each year, the commission shall 08 (1) prepare a report documenting each case of oil and gas waste in the 09 state during the preceding calendar year and the actions taken by the commission in 10 response to the waste; and 11 (2) by the first day of each regular session of the legislature, deliver the 12 report prepared under this subsection to the senate secretary and the chief clerk of the 13 house of representatives and notify the legislature that the report is available. 14 * Sec. 2. AS 38.05.180(f) is amended to read:
01 (f) Except as provided by AS 38.05.131 - 38.05.134, the commissioner may 02 issue oil and gas leases or leases for gas only on state land to the highest responsible 03 qualified bidder as follows: 04 (1) the commissioner shall issue an oil and gas lease or a gas only 05 lease, as appropriate, to the successful bidder determined by competitive bidding 06 under regulations adopted by the commissioner; bidding may be by sealed bid or 07 according to any other bidding procedure the commissioner determines is in the best 08 interests of the state; 09 (2) whenever, under any of the leasing methods listed in this 10 subsection, a royalty share is reserved to the state, it shall be delivered in pipeline 11 quality and free of all lease or unit expenses, including but not limited to separation, 12 cleaning, dehydration, gathering, salt water disposal, and preparation for transportation 13 off the lease or unit area; 14 (3) following a pre-sale analysis, the commissioner may choose at least 15 one of the following leasing methods: 16 (A) a cash bonus bid with a fixed royalty share reserved to the 17 state of not less than 12.5 percent in amount or value of the production 18 removed or sold from the lease; 19 (B) a cash bonus bid with a fixed royalty share reserved to the 20 state of not less than 12.5 percent in amount or value of the production 21 removed or sold from the lease and a fixed share of the net profit derived from 22 the lease of not less than 30 percent reserved to the state; 23 (C) a fixed cash bonus with a royalty share reserved to the state 24 as the bid variable but not [NO] less than 12.5 percent in amount or value of 25 the production removed or sold from the lease; 26 (D) a fixed cash bonus with the share of the net profit derived 27 from the lease reserved to the state as the bid variable; 28 (E) a fixed cash bonus with a fixed royalty share reserved to the 29 state of not less than 12.5 percent in amount or value of the production 30 removed or sold from the lease with the share of the net profit derived from the 31 lease reserved to the state as the bid variable;
01 (F) a cash bonus bid with a fixed royalty share reserved to the 02 state based on a sliding scale according to the volume of production or other 03 factor but in no event less than 12.5 percent in amount or value of the 04 production removed or sold from the lease; 05 (G) a fixed cash bonus with a royalty share reserved to the state 06 based on a sliding scale according to the volume of production or other factor 07 as the bid variable but not less than 12.5 percent in amount or value of the 08 production removed or sold from the lease; 09 (4) notwithstanding a requirement in the leasing method chosen of a 10 minimum fixed royalty share, on and after March 3, 1997, the lessee under a lease 11 issued in the Cook Inlet sedimentary basin who is the first to file with the 12 commissioner a nonconfidential sworn statement claiming to be the first to have 13 drilled a well discovering oil or gas in a previously undiscovered oil or gas pool and 14 who is certified by the commissioner within one year of completion of that discovery 15 well to have drilled a well in that pool that is capable of producing in paying quantities 16 shall pay a royalty of five percent on all production of oil or gas from that pool 17 attributable to that lease for a period of 10 years following the date of discovery of that 18 pool, and thereafter the royalty payable on all production of oil or gas from the pool 19 attributable to that lease shall be determined and payable as specified in the lease; for 20 purposes of this paragraph, the reduced royalty authorized by this paragraph is subject 21 to the following: 22 (A) only one reduction of royalty authorized by this paragraph 23 may be allowed on each lease that qualifies for reduction of royalty under this 24 paragraph; 25 (B) if, under this paragraph, application is made for a royalty 26 reduction for a lease that was entered into before March 3, 1997, the 27 commissioner may approve the application only if, on that date, the lease was a 28 nonproducing lease that was not committed to a unit approved by the 29 commissioner under (m) of this section, that is not part of a unit under (p) or 30 (q) of this section, and that has not been made part of a unit under AS 31.05; 31 (C) if application for a royalty reduction is made under this
01 paragraph for a lease on which a discovery royalty was claimed or may be 02 claimed under the discovery royalty provisions of former AS 38.05.180(a) in 03 effect before May 6, 1969, the commissioner shall disallow the application 04 under this paragraph unless the applicant waives the right to claim the right to 05 a reduced royalty under the discovery royalty provisions of former 06 AS 38.05.180(a) in effect before May 6, 1969; and 07 (D) the commissioner shall adopt regulations setting out the 08 standards, criteria, and definitions of terms that apply to implement the filing 09 of applications for, and the review and certification of, discovery certifications 10 under this paragraph; 11 (5) notwithstanding and in lieu of a requirement in the leasing method 12 chosen of a minimum fixed royalty share, or the royalty provision of a lease, for leases 13 unitized as described in (p) of this section, leases subject to an agreement described in 14 (s) or (t) of this section, or interests unitized under AS 31.05, the lessee of all or part of 15 an oil or gas pool in the Cook Inlet sedimentary basin that, as determined by the 16 commissioner, has not previously produced oil or gas for commercial sale shall 17 [FIELD IDENTIFIED IN THIS SECTION THAT HAS BEEN GRANTED 18 APPROVAL OF A WRITTEN PLAN SUBMITTED TO THE ALASKA OIL AND 19 GAS CONSERVATION COMMISSION UNDER AS 31.05.030(i) SHALL, 20 SUBJECT TO (dd) OF THIS SECTION,] pay the [A] royalty percentage set out in 21 this paragraph on oil or [OF FIVE PERCENT ON THE FIRST 25,000,000 22 BARRELS OF OIL AND THE FIRST 35,000,000,000 CUBIC FEET OF] gas 23 produced for sale from that pool; for the purposes of this paragraph, the 24 requirement to pay a royalty percentage described in this paragraph does not 25 apply to a lease without a royalty share reserved to the state or a royalty rate 26 payable of at least the applicable percentage of the amount or value of 27 production removed or sold from the lease; a lessee may decline to accept the 28 royalty rate under this paragraph by notifying the commissioner in writing 29 before payment of a royalty to the state for oil or gas eligible for the royalty rate 30 under this paragraph; the royalty rate under this paragraph is 31 (A) 0.1 percent for gas produced and five percent for oil
01 produced on and after January 1, 2025, and before January 1, 2028; 02 (B) 0.1 percent for gas produced and 6.25 percent for oil 03 produced on and after January 1, 2028, and before January 1, 2031; 04 (C) five percent for gas produced and 6.25 percent for oil 05 produced on and after January 1, 2031, and before January 1, 2036 06 [FIELD THAT OCCURS IN THE 10 YEARS FOLLOWING THE DATE ON 07 WHICH THE PRODUCTION FOR SALE COMMENCES; THE FIELDS 08 ELIGIBLE FOR ROYALTY REDUCTION UNDER THIS PARAGRAPH, 09 ALL OF WHICH ARE LOCATED WITHIN THE COOK INLET 10 SEDIMENTARY BASIN, WERE DISCOVERED BEFORE JANUARY 1, 11 1988, AND HAVE BEEN UNDEVELOPED OR SHUT IN FROM AT 12 LEAST JANUARY 1, 1988, THROUGH DECEMBER 31, 1997, ARE 13 (A) FALLS CREEK; 14 (B) NICOLAI CREEK; 15 (C) NORTH FORK; 16 (D) POINT STARICHKOF; 17 (E) REDOUBT SHOAL; AND 18 (F) WEST FORELAND]; 19 (6) notwithstanding and in lieu of a requirement in the leasing method 20 chosen of a minimum fixed royalty share, or the royalty provision of a lease, for leases 21 unitized as described in (p) of this section, leases subject to an agreement described in 22 (s) or (t) of this section, or interests unitized under AS 31.05, the lessee of all or part of 23 an oil field located offshore in Cook Inlet on which an oil production platform 24 specified in (A), (C), or (E) of this paragraph operates, or the lessee of all or part of the 25 field located offshore in Cook Inlet and described in (G) of this paragraph, 26 (A) shall pay a royalty of five percent on oil produced from the 27 platform if oil production that equaled or exceeded a volume of 1,200 barrels a 28 day declines to less than that amount for a period of at least one calendar 29 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 30 as long as the volume of oil produced from the platform remains less than 31 1,200 barrels a day; the provisions of this subparagraph apply to
01 (i) Dolly; 02 (ii) Grayling; 03 (iii) King Salmon; 04 (iv) Steelhead; and 05 (v) Monopod; 06 (B) shall pay a royalty calculated under this subparagraph if the 07 volume of oil produced from the platform that was certified by the Alaska Oil 08 and Gas Conservation Commission under (A) of this paragraph later increases 09 to 1,200 or more barrels a day and remains at 1,200 or more barrels a day for a 10 period of at least one calendar quarter; until the royalty rate determined under 11 this subparagraph applies, the royalty continues to be calculated under (A) of 12 this paragraph; on and after the first day of the month following the month the 13 increased production exceeds the period specified in this subparagraph, the 14 royalty payable under this subparagraph is 15 (i) for production of at least 1,200 barrels a day but not 16 more than 1,300 barrels a day - seven percent; 17 (ii) for production of more than 1,300 barrels a day but 18 not more than 1,400 barrels a day - 8.5 percent; 19 (iii) for production of more than 1,400 barrels a day but 20 not more than 1,500 barrels a day - 10 percent; and 21 (iv) for production of more than 1,500 barrels a day - 22 12.5 percent; 23 (C) shall pay a royalty of five percent on oil produced from the 24 platform if oil production that equaled or exceeded a volume of 975 barrels a 25 day declines to less than that amount for a period of at least one calendar 26 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 27 as long as the volume of oil produced from the platform remains less than 975 28 barrels a day; the provisions of this subparagraph apply to 29 (i) Baker; 30 (ii) Dillon; 31 (iii) XTO.A; and
01 (iv) XTO.C; 02 (D) shall pay a royalty calculated under this subparagraph if the 03 volume of oil produced from the platform that was certified by the Alaska Oil 04 and Gas Conservation Commission under (C) of this paragraph later increases 05 to 975 or more barrels a day and remains at 975 or more barrels a day for a 06 period of at least one calendar quarter; until the royalty rate determined under 07 this subparagraph applies, the royalty continues to be calculated under (C) of 08 this paragraph; on and after the first day of the month following the month the 09 increased production exceeds the period specified in this subparagraph, the 10 royalty payable under this subparagraph is 11 (i) for production of at least 975 barrels a day but not 12 more than 1,100 barrels a day - seven percent; 13 (ii) for production of more than 1,100 barrels a day but 14 not more than 1,200 barrels a day - 8.5 percent; 15 (iii) for production of more than 1,200 barrels a day but 16 not more than 1,350 barrels a day - 10 percent; and 17 (iv) for production of more than 1,350 barrels a day - 18 12.5 percent; 19 (E) shall pay a royalty of five percent on oil produced from the 20 platform if oil production that equaled or exceeded a volume of 750 barrels a 21 day declines to less than that amount for a period of at least one calendar 22 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 23 as long as the volume of oil produced from the platform remains less than 750 24 barrels a day; the provisions of this subparagraph apply to 25 (i) Granite Point; 26 (ii) Anna; and 27 (iii) Bruce; 28 (F) shall pay a royalty calculated under this subparagraph if the 29 volume of oil produced from the platform that was certified by the Alaska Oil 30 and Gas Conservation Commission under (E) of this paragraph later increases 31 to 750 or more barrels a day and remains at 750 or more barrels a day for a
01 period of at least one calendar quarter; until the royalty rate determined under 02 this subparagraph applies, the royalty continues to be calculated under (E) of 03 this paragraph; on and after the first day of the month following the month the 04 increased production exceeds the period specified in this subparagraph, the 05 royalty payable under this subparagraph is 06 (i) for production of at least 750 barrels a day but not 07 more than 850 barrels a day - seven percent; 08 (ii) for production of more than 850 barrels a day but 09 not more than 1,000 barrels a day - 8.5 percent; 10 (iii) for production of more than 1,000 barrels a day but 11 not more than 1,200 barrels a day - 10 percent; and 12 (iv) for production of more than 1,200 barrels a day - 13 12.5 percent; 14 (G) shall pay a royalty of five percent on oil produced from the 15 field if oil production that equaled or exceeded a volume of 750 barrels a day 16 declines to less than that amount for a period of at least one calendar quarter, 17 as certified by the Alaska Oil and Gas Conservation Commission, for as long 18 as the volume of oil produced from the field remains less than 750 barrels a 19 day; the provisions of this subparagraph apply to the West McArthur River 20 field; 21 (H) shall pay a royalty calculated under this subparagraph if the 22 volume of oil produced from the field that was certified by the Alaska Oil and 23 Gas Conservation Commission under (G) of this paragraph later increases to 24 750 or more barrels a day and remains at 750 or more barrels a day for a period 25 of at least one calendar quarter; until the royalty rate determined under this 26 subparagraph applies, the royalty continues to be calculated under (G) of this 27 paragraph; on and after the first day of the month following the month the 28 increased production exceeds the period specified in this subparagraph, the 29 royalty payable under this subparagraph is 30 (i) for production of at least 750 barrels a day but not 31 more than 850 barrels a day - seven percent;
01 (ii) for production of more than 850 barrels a day but 02 not more than 1,000 barrels a day - 8.5 percent; 03 (iii) for production of more than 1,000 barrels a day but 04 not more than 1,200 barrels a day - 10 percent; and 05 (iv) for production of more than 1,200 barrels a day - 06 12.5 percent; and 07 (I) may obtain the benefits of the royalty adjustments set out in 08 (A) - (H) of this paragraph only if the commissioner determines that the 09 reduction in production from the platform or the field [IS] 10 (i) is based on the average daily production during the 11 calendar quarter based on reservoir conditions; and 12 (ii) is not the result of short-term production declines due to mechanical or 13 other choke-back factors, temporary shutdowns or decreased production due to 14 environmental or facility constraints, or market conditions. 15 * Sec. 3. AS 38.05.180 is amended by adding new subsections to read: 16 (mm) Notwithstanding the requirement that information be kept confidential 17 under AS 38.05.035(a), 38.05.133(e), or any other law, the commissioner shall prepare 18 a report related to royalty reductions under (f)(5) of this section and shall, by 19 February 1 of each year, deliver the report to the senate secretary and the chief clerk of 20 the house of representatives, notify the legislature that the report is available, and 21 publish the report on the department's Internet website. A lessee receiving a royalty 22 reduction under (f)(5) of this section shall provide the department with the information 23 necessary for the department to produce the report. At the request of a legislative 24 committee, a representative of the department shall appear in that committee to review 25 the report. The commissioner may aggregate information in the report by project or by 26 area if lease areas are in reasonably close proximity and the information reported is 27 materially accurate. Upon request, the commissioner shall provide information 28 aggregated in the report, broken down by lessee or lease, at the option of the requester. 29 The report must include, 30 (1) for each lease area or project producing oil or gas receiving a 31 royalty reduction under (f)(5) of this section,
01 (A) the name of each lessee receiving a royalty reduction; 02 (B) the starting date of the royalty reduction; 03 (C) the name of each lessee named on the lease; 04 (D) the name of each person with an ownership interest in the 05 lease or in the lessee or, if more than 10 people have an ownership interest in 06 the lease or lessee, the 10 persons with the highest percentage of ownership 07 interest in the lease or lessee; 08 (E) the lease identification number; 09 (F) a description of the location of the lease; 10 (G) the total lease acreage; 11 (H) a summary of the project producing the oil or gas receiving 12 the royalty reduction; 13 (I) the number of firm gas sales contracts the lessee currently 14 holds with utilities regulated under AS 42.05; 15 (J) the volume of gas receiving the royalty reduction produced 16 by the lessee 17 (i) in the preceding calendar year; and 18 (ii) cumulatively, beginning the calendar year the lessee 19 first received the royalty reduction; 20 (K) the volume of oil receiving the royalty reduction produced 21 by the lessee 22 (i) in the preceding calendar year; and 23 (ii) cumulatively, beginning the calendar year the lessee 24 first received the royalty reduction; 25 (L) for each lessee that produced gas that received the royalty 26 reduction, the royalty payments for that gas received by the state 27 (i) in the preceding calendar year; 28 (ii) cumulatively, beginning the calendar year the lessee 29 first received the royalty reduction; 30 (M) for each lessee that produced oil that received the royalty 31 reduction, the royalty payments for that oil received by the state
01 (i) in the preceding calendar year; 02 (ii) cumulatively, beginning the calendar year the lessee 03 first received the royalty reduction; 04 (N) a summary of the exploration work performed by the lessee 05 during the period for which the lessee received the royalty rate under (f)(5) of 06 this section, and the results of the exploration work; 07 (O) whether the royalty rate under (f)(5) of this section has 08 expired or been terminated; and 09 (2) for each lessee declining to receive the royalty rate under (f)(5) of 10 this section, the name of the lessee and the lease identification number of the lease for 11 which the royalty rate has been declined. 12 (nn) The commissioner shall provide adequate notice, in writing, of the 13 royalty reduction under (f)(5) of this section and the reporting requirements of (mm) 14 of this section to a lessee that is or may become eligible for the royalty reduction 15 under (f)(5) of this section. 16 * Sec. 4. AS 31.05.030(i) and AS 38.05.180(dd) are repealed. 17 * Sec. 5. AS 38.05.180(mm) and 38.05.180(nn) are repealed February 2, 2040. 18 * Sec. 6. This Act takes effect immediately under AS 01.10.070(c).