(a) If a lessee or
its affiliate processes qualified gas in an affiliated gas processing plant,
the processing allowance used to determine the monthly value of that lessee's
qualified gas must be the plant affiliate's allowable actual and reasonable
costs allocated to the royalty reporting period as provided in
11 AAC 25.060 -
11 AAC 25.090 and
11 AAC 25.230 -
11 AAC 25.260.
(b) The processing allowance for a non-arm's
length contract or an arrangement without a contract is based upon the plant
affiliate's actual and reasonable, directly attributable and allocable
processing costs in the form of operating and maintenance expense, overhead,
depreciation, and a return on undepreciated capital investment as provided in
(d) of this section. Allowable capital costs are the original costs for
depreciable fixed assets, including costs of delivery and installation of
capital equipment that is an integral part of the processing plant.
(c) To compute depreciation for the purposes
of this section, the lessee shall use straight-line depreciation based on the
economic life of the processing plant. A change in ownership of a processing
plant does not alter the depreciation schedule established by the original
processor or lessee for purposes of calculating a processing allowance under
this chapter. Notwithstanding a change in ownership, a processing plant may
only be depreciated once. Equipment may not be depreciated below a reasonable,
positive salvage value.
(d) Each
February, the department will determine and publish the prevailing yield during
the preceding January on corporate bonds whose relevant characteristics are
comparable to those for which Moody's Investor Services, Inc., published its
Moody's Seasoned Baa Corporate Bond Yield - All Industries for January 2010.
The prevailing yield published by the department is the rate of return for
purposes of calculating the return for that calendar year on undepreciated
capital investment under (b) of this section.
(e) For new processing plants processing gas
involved in a non-arm's length transaction, the lessee shall include in its
initial processing allowance estimates of the allocable gas processing costs
allowed under (b) of this section for the applicable royalty reporting period.
Cost estimates must be based upon the most recently available operations data
for the plant; if these data are not available, the lessee shall base cost
estimates upon industry data for similar gas processing plants. To the extent
that a processing allowance is based on estimates, the lessee shall file
royalty reports revising the allowance after actual costs are known.
(f) The billing determinant to be used in
calculating a processing allowance under this section is throughput for the
processing plant, except that the billing determinant is contract capacity if
(1) the processing plant is constructed after
FERC issues a certificate of public convenience and necessity for the Alaska
mainline; and
(2) the processing
plant solicits and accepts bids for firm processing capacity.
(g) A reasonable share of overhead
directly attributable and allocable to the operation and maintenance of a
processing plant involved in a non-arm's length transaction is an allowable
operating expense for purposes of this section.
