11 AAC 25.260 - Non-allowable processing costs

(a) A lessee may not include the following costs in determining an arm's length processing allowance under 11 AAC 25.240 or a non-arm's length processing allowance under 11 AAC 25.250:

(1) a cost not directly related to processing of qualified gas;

(2) a cost for processing qualified gas downstream of destination;

(3) a cost greater than the consideration transferred, either directly or indirectly, from the lessee or its affiliate to the processor, regardless of the cost or fee identified in a processing contract;

(4) a cost incidental to marketing;

(5) a cost for a processes that normally take place on or near the lease or unit of production, including natural pressure reduction, mechanical separation, heating, cooling, dehydration, compression, and other acts undertaken to put gas in marketable condition.

(b) A lessee may not include the following capital costs in determining a non-arm's length processing allowance under 11 AAC 25.250:

(1) a cost for capital improvement or equipment that is not an integral part of the processing facility;

(2) nondepreciable property, including land and a pipeline right-of-way;

(3) a facility used to store, deliver, or otherwise dispose of residue gas or gas plant products after extraction.

(c) A lessee may not include the following noncapital costs in determining a non-arm's length processing allowance under 11 AAC 25.250:

(1) operating and maintenance cost not directly related to processing;

(2) a cost associated with a capital improvement or equipment if the cost of the capital improvement or equipment is disallowed under (b) of this section;

(3) federal, state, or other income taxes;

(4) production or severance taxes;

(5) royalty payments.

Notes

11 AAC 25.260

Eff. 5/29/2010, Register 194

Authority:AS 38.05.020

AS 38.05.180

AS 43.90.310