11 AAC 25.280 - Lease amendment for switching between royalty-in-value and royalty-in-kind gas

(a) A qualified person that has elected under AS 43.90.310(b)(2) and 11 AAC 25.040 to enter into a contract with the state to amend the existing lease terms that apply to the state's exercise of the state's right to switch between taking the state's royalty share of qualified gas in value or in kind must submit a contract amendment form provided by the department.

(b) While the Federal Energy Regulatory Commission's (FERC) Order on Petition for Waiver, 130 FERC Para. 61,070 (Docket no. RP10-145-000, January 28, 2010) is in effect, an amended contract under AS 43.90.310(b)(2) and this section will require

(1) the lessee or its affiliate to provide, and the state or the state's royalty-in-kind purchaser to obtain, firm transportation capacity on the Alaska mainline and, if required under (f) of this section, the Canada mainline by temporary release of capacity from the lessee or its affiliate to the state or the state's royalty-in-kind purchaser when royalty gas that is qualified gas is shipped on the Alaska mainline in kind rather than in value;

(2) the state or the state's royalty-in-kind purchaser to pay the same transportation rate to the same delivery point that the lessee or its affiliate would pay the Alaska mainline and, if required under (f) of this section, the Canada mainline for the firm transportation capacity released, notwithstanding higher or lower recourse rates, and notwithstanding a decision by the state or the state's royalty-in-kind purchaser to ship the royalty-in-kind gas to a delivery point other than the delivery point for the capacity that is to be released; and

(3) the state to increase the notice period for switching between royalty in value and royalty in kind from the period specified in the existing lease to

(A) 120 days if the estimated quantity that is the subject of a notice of switching exceeds 100,000 MMBtus per day but is less than 200,000 MMBtus per day; and

(B) 180 days if the estimated quantity that is the subject of a notice of switching is 200,000 MMBtus per day or greater.

(c) When FERC's Order on Petition for Waiver, 130 FERC Para. 61,070 (Docket no. RP10-145-000, January 28, 2010) is not in effect, an amended contract under AS 43.90.310(b)(2) and this section will require the state to increase the notice period for switching between royalty in value and royalty in kind from the period specified in the existing lease to 180 days.

(d) If a lessee intends to sell more than 80 percent of the lessee's qualified gas under arm's length sales agreements requiring deliveries over a period exceeding one year, the lessee may apply to the commissioner for an extension of the notice periods set out in (b) and (c) of this section. The commissioner may grant the application if the commissioner determines that the extension

(1) is necessitated by the lessee's arm's length sales agreements requiring deliveries over a period exceeding one year, and is limited to the time period and quantity set out in the sales agreements;

(2) does not interfere with an ongoing royalty-in-kind sale or a proposed royalty in-kind sale that has been publicly noticed; and

(3) does not compromise the state's ability to sell royalty-in-kind gas for consumption as fuel in the state, including consumption as fuel to generate electricity in the state.

(e) If a lessee or its affiliate that is required to provide firm transportation capacity to the state or the state's royalty-in-kind purchaser under (b) of this section holds firm transportation capacity that extends from more than one receipt point or to more than one delivery point on the Alaska mainline and, if required under (f) of this section, the Canada mainline, the commissioner may determine the receipt and delivery points for the capacity to be temporarily released by determining the receipt and delivery points for the state's royalty gas share as if it were to be taken in value rather than in kind.

(f) If the receipt and delivery points for taking the state's royalty share of qualified gas include receipt and delivery points on both the Alaska mainline and the Canada mainline, and upon the state's switching from royalty in value to royalty in kind, the obligations to provide, accept, and pay for capacity that is temporarily released under (b) of this section extend to both the Alaska mainline and the Canada mainline, even if the state or the state's royalty-in-kind purchaser chooses to transport the royalty-in-kind gas on only the Alaska mainline. However, the obligations to provide, accept, and pay for capacity on the Canada mainline is limited to the state's royalty-in-kind share of capacity acquired in the first binding open season for the Canada mainline.

Notes

11 AAC 25.280

Eff. 5/29/2010, Register 194

Authority:AS 38.05.020

AS 38.05.180

AS 43.90.310