Processing cost deduction for a downstream gas plant

# (a)

For gas processed in a downstream gas plant under an arm's length contract, the processing cost deduction under 15 AAC 55.151(b)(2)(B) is the actual cost incurred by the producer under the contract for processing the taxable gas, except as otherwise provided under

(c) of this section.

# (b)

For gas processed in a downstream gas plant other than under an arm's length contract, except as otherwise provided under (c) of this section, the processing cost deduction under 15 AAC 55.151(b)(2)(B)

# (1)

will be calculated by the department as a volume-weighted average of processing costs under arm's length contracts for comparable processing in the area where the downstream gas plant is located, if the department determines that sufficient arm's length contracts for comparable processing exist and are available to the department to provide a reliable basis for the processing cost deduction;

# (2)

otherwise is calculated using the methodology under 15 AAC 55.141.

# (c)

Allowable processing costs do not include

# (1)

a cost not directly related to processing of taxable gas;

# (2)

a cost for processing gas downstream of the point where destination value is determined under 15 AAC 55.151(b)(1);

# (3)

a cost greater than the consideration transferred, either directly or indirectly, from the producer to the processor, regardless of the cost or fee identified in a processing contract;

# (4)

a cost incidental to marketing.

# (d)

On or after January 1 of a calendar year during which a producer produces gas from leases or properties in the state that is processed in a downstream gas plant other than under an arm's length contract, the producer may request in writing the department's determination whether the processing cost deduction for the calendar year for that gas will be calculated under (b)(1) of this section or 15 AAC 55.141. No later than 90 days after receiving the request, the department will notify the producer of the department's determination. If the department determines that the processing cost deduction will be calculated under (b)(1) of this section, the department will provide the department's calculation to the producer no later than the later of July 1 of the calendar year or 150 days after the department receives the producer's request.

# (e)

If a producer's gas produced from leases or properties in the state is processed during a month in a downstream gas plant in an area where the producer's other gas is also processed during the month,

# (1)

for each downstream gas plant in that area in which the producer's gas from whatever source is processed, the percentage of the producer's gas processed in that plant during the month that is considered to be gas produced from leases or properties in the state is equal to the percentage that the producer's gas produced from leases or properties in the state constitutes of the producer's total amount of gas processed in downstream gas plants in that area during the month;

# (2)

if the producer has gas processed during the month under multiple contracts in a given downstream gas plant, the percentage of the producer's gas processed under each of those contracts during the month that is considered to be gas produced from leases or properties in the state is equal to the percentage that the producer's gas produced from leases or properties in the state constitutes of the producer's total amount of gas processed under those contracts during the month.
(Eff. 4/30/2010, Register 194)
Statutory Authority:
Authority:
AS 43.05.080 AS 43.55.110 AS 43.55.900