Title 31. Oil and Gas.

Chapter 05. Alaska Oil and Gas Conservation Act.

Article 1. Administration.


Sec. 31.05.005. Alaska Oil and Gas Conservation Commission created.
 (a) There is created as an independent quasi-judicial agency of the state the Alaska Oil and Gas Conservation Commission, composed of three commissioners appointed by the governor and confirmed by the legislature in joint session. In making appointments to the commission under AS 31.05.009 and this subsection, the governor shall consider and give preference to a person who demonstrates experience in oil and gas operations in the state.

 (b) The governor shall designate one member of the commission as chair of the commission. This member shall serve as chair for a term of four years, but may not be appointed for successive terms as chair of the commission.




Sec. 31.05.007. Term of office; vacancy; removal.
 (a) The term of office of each member is six years. A commissioner, upon the expiration of a term, shall continue to hold office until a successor is appointed and qualified.

 (b) A vacancy arising in the office of a commissioner shall be filled by appointment by the governor and confirmed by the legislature in joint session, and, except as provided in AS 39.05.080(4), an appointee selected to fill a vacancy shall hold office for the balance of the full term for which the predecessor on the commission was appointed.

 (c) A vacancy in the commission does not impair the authority of a quorum of commissioners to exercise all the powers and perform all the duties of the commission.

 (d) The governor may remove a commissioner from office for cause including but not limited to incompetence, neglect of duty or misconduct in office. A commissioner, to be removed for cause, shall be given a copy of the charges and afforded an opportunity to be publicly heard in person or by counsel in the commissioner’s own defense upon not less than 10 days’ notice. If a commissioner is removed for cause, the governor shall file with the lieutenant governor a complete statement of all charges made against the commissioner and the governor’s finding based on the charges, together with a complete record of the proceedings.




Sec. 31.05.009. Qualifications of members.
Members shall be qualified as follows:
     (1) one member shall be a petroleum engineer who
          (A) holds a certificate of registration as an engineer under AS 08.48 and, under regulations adopted to implement that chapter, has qualified as a petroleum engineer; or

          (B) has earned a degree from a university in the field of engineering and has at least 10 years of professional subsurface experience in the oil and gas industry in drilling, well operations, production process operations, reservoir engineering, or a combination thereof; for the purposes of this subparagraph, a person meets the requirement of earning a degree in the field of engineering if the person obtains an undergraduate or graduate degree in engineering that meets the requirements for program accreditation by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology and the person completes university or industry training specific to petroleum engineering that illustrates application of engineering principles to the problems encountered and methods used in the petroleum industry, including drilling, production, reservoir engineering, fluid flow through subsurface formations, and hydrocarbon transportation;

     (2) one member shall be a geologist who
          (A) holds a certification as a professional geologist under AS 08.02.011 and has professional experience in the field of petroleum geology; or

          (B) has earned a degree in the field of geology from a university accredited in the field of geology and has a minimum of 10 years professional experience in the field of petroleum geology; and

     (3) one member who shall have training or experience that gives the person a fundamental understanding of the oil and gas industry in the state.




Sec. 31.05.010. Application. [Repealed by § 4 ch 158 SLA 1978.]
Sec. 31.05.011. Quorum.
Two members of the commission constitute a quorum for the transaction of business, for the performance of a duty, or for the exercise of a power of the commission.


Sec. 31.05.013. Oath of office.
Each commissioner, before entering upon the duties of office, shall take and subscribe to the oath prescribed for principal officers of the state.


Sec. 31.05.015. Compensation of members of the commission.
Members of the commission are in the exempt service and shall receive an annual salary.


Sec. 31.05.017. Principal office; seal.
 (a) The commission shall establish a principal office and branch offices necessary to discharge its business efficiently. For the convenience of the public or of parties to a proceeding the commission may hold meetings, hearings, or other proceedings at other locations.

 (b) The commission shall have an official seal.




Sec. 31.05.020. [Renumbered as AS 31.05.095.]
Sec. 31.05.021. Legal counsel.
 (a) The Department of Law shall provide full-time legal counsel to the commission. The legal counsel provided by the Department of Law is subject to the approval of the commission.

 (b) The commission may, subject to the approval of the attorney general, contract for the services of additional specialized legal counsel or legal consultants.




Sec. 31.05.023. Commission staff.
 (a) The commission shall employ such staff as it considers necessary to carry out its responsibilities.

 (b) The professional staff of the commission and the personal secretary of each commissioner are in the exempt service under AS 39.25.110.

 (c) The secretarial and clerical staff of the commission, except the personal secretary of each commissioner, are in the classified service.

 (d) In addition to its staff of regular employees, the commission may contract for and engage the services of consultants and experts the commission considers necessary.




Sec. 31.05.025. Conflict of interest.
 (a) Members and employees of the commission, except clerical and secretarial staff, are subject to AS 39.50.

 (b) A member of the commission is disqualified from voting upon any matter before the commission in which the member has a conflict of interest.




Sec. 31.05.026. Relationship to Department of Natural Resources.
 (a) The Department of Natural Resources shall have standing before the commission to raise all issues relating to state-owned land without regard to the type of proprietary interest held by the state in that land.

 (b) With respect to federal land from which the state or any subdivision of the state is entitled under federal law to receive a share of the federal royalty interest, the Department of Natural Resources shall have the same standing before the commission as if it were the holder of the equivalent royalty interest.

 (c) When both the Department of Natural Resources and the commission have the authority to require, and do require, the submission of substantially the same information from persons subject to this chapter, the commission, in order to alleviate the administrative burdens placed on those persons, may by regulation enter into an agreement with the Department of Natural Resources whereby either the commission or the Department of Natural Resources shall have the responsibility to collect the information lawfully required by both.

 (d) For budget and audit procedures and considerations, the commission shall have the same standing as any other major state agency. Whenever practicable the commission may enter into state interagency agreements concerning administrative, employee relations, and fiscal duties.

 (e) The Department of Natural Resources shall have the same standing (no more or less) before the commission as granted by law to any other proprietary interest.




Sec. 31.05.027. Land subject to commission’s authority.
The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. The authority of the commission further applies to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p).


Sec. 31.05.030. Powers and duties of commission.
 (a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter.

 (b) The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it.

 (c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter.

 (d) The commission may require
     (1) identification of ownership of wells, producing leases, tanks, plants, and drilling structures;

     (2) the making and filing of reports, well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission, subject to the following:
          (A) the reports required to be filed by the commission under this paragraph shall be filed within 30 days after the completion, abandonment, or suspension of the well; and

          (B) the well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other information required to be filed by the commission under this paragraph shall be filed within 90 days after the completion, abandonment, or suspension of the well, unless extended by the commission on request;

     (3) the drilling, casing, and plugging of wells in a manner that will prevent the escape of oil or gas out of one stratum into another, the intrusion of water into an oil or gas stratum, the pollution of fresh water supplies by oil, gas, or salt water, and prevent blowouts, cavings, seepages, and fires;

     (4) the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste;

     (5) the operation of wells with efficient gas-oil and water-oil ratios, and may fix these ratios;

     (6) the gauging or other measuring of oil and gas to determine the quality and quantity of oil and gas;

     (7) every person who produces oil or gas in the state to keep and maintain for a period of five years in the state complete and accurate records of the quantities of oil and gas produced, which shall be available for examination by the commission at all reasonable times;

     (8) the measuring and monitoring of oil and gas pool pressures;

     (9) the filing and approval of a plan of development and operation for a field or pool to prevent waste, ensure a greater ultimate recovery of oil and gas, and protect the correlative rights of persons owning interests in the tracts of land affected.

 (e) The commission may regulate
     (1) for conservation purposes and, to the extent not in conflict with regulation by the Department of Labor and Workforce Development or the Department of Environmental Conservation, for public health and safety purposes,
          (A) the drilling, producing, and plugging of wells;

          (B) the perforating, fracture stimulation, and chemical treatment of wells;

          (C) the spacing of wells;

          (D) the disposal of salt water, nonpotable water, and oil field wastes;

          (E) the contamination or waste of underground water;

          (F) the quantity and rate of the production of oil and gas from a well or property; this authority shall also apply to a well or property in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p);

          (G) the underground injection of gas for purposes of storage;

     (2) the disposal of drilling mud, cuttings, and nonhazardous drilling operation wastes in the annular space of a well for which a permit to drill has been issued by the commission; in this paragraph, a “nonhazardous drilling operation waste” means a waste, other than a hazardous waste identified by the Environmental Protection Agency in 40 C.F.R., Part 261, its regulation identifying and listing hazardous wastes, associated with the act of drilling a well for exploratory or production purposes.

 (f) The commission may classify a well or a specific portion of a well as an exploratory, development, service, or stratigraphic test well and may classify a development well as an oil or gas well for purposes material to the interpretation or enforcement of this chapter.

 (g) When the commission finds sufficient likelihood of an unexpected encounter of oil, gas, or other hazardous substance as a result of well drilling in an area of the state, the commission may, by regulation, designate the area and specify a depth in the area as one in which wells or any boring into the soil in excess of the specified depth but not otherwise subject to this chapter are subject to the regulations and requirements adopted under this section. The designation of an area or specification of a depth under this subsection does not constitute a certification that no hazardous substance will be encountered in another area or at a lesser depth, and the state is not liable for any damages arising from such an unexpected encounter of a hazardous substance.

 (h) The commission may take all actions necessary to allow the state to acquire primary enforcement responsibility under 42 U.S.C. 300h-1 and 42 U.S.C. 300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300f — 300j-26), for the control of underground injection related to the recovery and production of oil and natural gas and the control of underground injection in Class I wells, as defined in 40 C.F.R. 144.6, as amended.

 (i) The commission shall accept written plans submitted by lessees for purposes of AS 38.05.180(f)(5). If a lessee submits a plan, the commission shall hold a public hearing on the plan and, within 45 days after receipt of the plan, grant approval of the plan if the plan contains a voluntary agreement by the lessee to use its best efforts to employ residents of this state, consistent with law, and to contract with firms in this state for work in connection with the development of the field, including the fabrication and installation of required facilities, whenever feasible. The decision of the commission to grant approval may not be appealed.

 (j) For exploration and development operations involving nonconventional gas, the commission
     (1) may not
          (A) issue a permit to drill under this chapter if the well would be used to produce gas from an aquifer that serves as a source of water for human consumption or agricultural purposes unless the commission determines that the well will not adversely affect the aquifer as a source of water for human consumption or agricultural purposes; or

          (B) allow injection of produced water except at depths below known sources of water for human consumption or agricultural purposes;

     (2) shall
          (A) regulate hydraulic fracturing in nonconventional gas wells to ensure protection of drinking water quality;

          (B) regulate the disposal of wastes produced from the operations unless the disposal is otherwise subject to regulation by the Department of Environmental Conservation or the United States Environmental Protection Agency;

          (C) as a condition of approval of a permit to drill a well for regular production of coal bed methane, require the operator to design and implement a water well testing program to provide baseline data on water quality and quantity; the commission shall make the results of the water well testing program available to the public.

 (k) The commission shall certify to the Department of Natural Resources the volume of oil production from a field or platform for the purposes of AS 38.05.180(f)(6)(A), (C), (E), and (G).

 (l) For purposes of AS 46.04.050(c) and upon application by the operator, the commission shall evaluate the likelihood that a well at a natural gas exploration facility may penetrate a formation capable of flowing oil to the ground surface and issue a determination based on results of the evaluation. If the commission determines that evidence obtained through the evaluation demonstrates with reasonable certainty that a well will not penetrate a formation capable of flowing oil to the ground surface, it shall report its determination to the Department of Environmental Conservation. In this subsection,
     (1) “natural gas exploration facility” has the meaning given in AS 46.04.050(c);

     (2) “oil” has the meaning given in AS 46.04.050(c).

 (m) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of AS 41.06, except for provisions in AS 41.06 for which the Department of Natural Resources has jurisdiction.

 (n) Upon request of the commissioner of revenue, the commission shall determine the commencement of regular production from a lease or property for purposes of AS 43.55.160(f) and (g) and 43.55.165(n) and (o).




Sec. 31.05.032. Certification of gas storage capacity.
 (a) An owner of a gas storage facility that seeks an exemption under AS 38.05.180(u) or a credit under AS 43.20.046 shall apply to the commission for certification of the facility’s working gas storage capacity and certification of the facility’s gas withdrawal capability. The application shall be on a form prescribed by the commission.

 (b) Within six months after receiving an application under (a) of this section, the commission shall determine and certify
     (1) the working gas storage capacity of the facility on the date the facility commences commercial operation rounded to the nearest 500,000,000 cubic feet;

     (2) whether the gas storage facility is capable of withdrawing a minimum of 10,000,000 cubic feet of gas a day; and

     (3) that the facility qualifies as a gas storage facility for the purposes of this section.

 (c) The commission shall provide a copy of the certifications required by (b) of this section to the owner of the gas storage facility that requested the certification, the commissioner of natural resources, and the commissioner of revenue.

 (d) If a gas storage facility ceases commercial operation, an owner of the gas storage facility shall give written notice to the commission that commercial operation has ceased. The notice must be filed with the commission before April 1 of the year immediately following the year in which the gas storage facility ceases commercial operation.

 (e) In this section,
     (1) “ceases commercial operation” means that the gas storage facility fails to inject or withdraw more than 100,000,000 cubic feet of gas during a calendar year following the year in which a gas storage facility commences commercial operation;

     (2) “commences commercial operation” means the first injection of non-native gas into a gas storage facility for purposes other than testing;

     (3) “cushion gas” means native and non-native gas in a gas storage facility that is needed to pressurize the facility and that allows the facility to function;

     (4) “gas storage facility” means a tank or a depleted or nearly depleted reservoir or pool in the state that is available for the storage of gas;

     (5) “native gas” means gas in a gas storage facility that was not injected;

     (6) “non-native gas” means gas that is produced elsewhere and injected into a gas storage facility;

     (7) “pool” has the meaning given in AS 31.05.170;

     (8) “working gas storage capacity” means the maximum volume of non-native gas a gas storage facility may safely contain without creating or causing waste; the maximum volume of non-native gas does not include the volume of cushion gas present or the volume required for proper functioning of the gas storage facility at the working gas storage capacity certified under (b) of this section.




Sec. 31.05.035. Confidential reports.
 (a) For all wells for which a permit to drill has been issued by the commission, the commission may require
     (1) the making and filing of reports, well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission;

     (2) the filing of flow test information and all logs, except experimental logs and velocity surveys run on a well and not required by (1) of this subsection; and

     (3) the operator to make available for copying the digitized log information, if it is available, on any log required to be filed under (1) or (2) of this subsection.

 (b) Reports and information required under (a)(1) and (2) of this section shall be filed within 30 days after the completion, abandonment, or suspension of a well. However, under (a)(1) of this section, the commission may not require the making of a log on a well completed, abandoned or suspended before June 19, 1970.

 (c) The reports and information required in (a) of this section that relate to an exploratory or stratigraphic test well and those portions of an application for a permit to drill an exploratory or stratigraphic test well that the commission determines contain proprietary engineering or geotechnical information shall be kept confidential for 24 months following the 30-day filing period unless the owner of the well gives written permission to release the application and reports and information at an earlier date. If the commissioner of natural resources finds that the required reports and information contain significant information relating to the valuation of unleased land in the same vicinity, the commissioner shall keep the reports and information confidential for a reasonable time after the disposition of all affected unleased land, unless the owner of the well gives written permission to release the reports and information at an earlier date. Well surface and bottom hole locations, well depth, well status, production data, and production reports required by the commission to be filed subsequent to the 30-day filing period shall be considered public information and may not be classified confidential. Production data, as used in this subsection, means volume, gravity, and gas-oil ratio of all production of oil or gas after the well begins regular production.

 (d) Engineering, geological, and other information not required by (a) of this section but voluntarily filed with the commission shall be kept confidential if the person filing the information so requests.

 (e) Notwithstanding (c) of this section, claims of confidentiality will be denied for information disclosed to the commission under AS 31.05.030(h) that is required to be disclosed under 42 U.S.C. 300h-4.

 (f) Confidentiality under (d) of this section is not applicable to information submitted with or as part of a petition for a commission order or to information submitted for or as part of a hearing before the commission.




Sec. 31.05.040. Regulations and orders.
 (a) The commission shall adopt regulations governing practice and procedure before it under this chapter.

 (b) All orders issued by the commission shall be in writing, shall be entered in full and indexed in books kept by the commission for that purpose, and shall be public records open for inspection at all times during reasonable office hours. A copy of an order certified by the commission, under its seal, shall be received in evidence in all courts of the state with the same effect as the original.




Sec. 31.05.050. Notice.
 (a) A notice required by this chapter shall be given in accordance with AS 44.62 (Administrative Procedure Act).

 (b) Procedures to be followed under (a) of this section do not apply if the nature of the notice is not of a statewide or general application but is concerned only with operations on a single well or within a single field and the modification of procedure is within the authority delegated to the commission under AS 31.05.030. A notice required by this chapter shall be given by one publication in a newspaper published in the borough in which the hearing is to be held, or if none is published in the borough, in a newspaper published in this state and circulating within the borough, and posted in at least one public place within the borough, at least 10 days before the date of the hearing. The notice shall be issued in the name of the state, shall be signed by the commission, and shall specify the style and number of the proceeding, the time and place of the hearing, and shall briefly state the purpose of the proceeding. The commission may also give, or require the giving of, additional notice in a proceeding, or class of proceeding, which it considers necessary or desirable.




Sec. 31.05.060. Action by commission.
 (a) The commission may act upon its own motion, or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for a hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The commission shall enter its order within 30 days after the hearing.

 (b) Except as provided in this subsection, any action by the commission under this chapter that has statewide or general application shall be performed in accordance with AS 44.62 (Administrative Procedure Act). Any action by the commission under this chapter that has application to a single well or single field need not comply with the provisions of AS 44.62.330 — 44.62.630, but shall be performed in accordance with regulations of the commission designed to afford persons affected by the action notice and an opportunity to be heard.

 (c) Notwithstanding the requirements of (a) and (b) of this section that relate to fixing a date for a hearing and causing notice of the hearing to be given, for an action under this chapter that involves the exploration for or development of nonconventional gas and that has application to a single well or a single field, upon the request of a lessee or operator, the commission may, where operations might be unduly delayed, approve a variance from the commission’s regulations that apply to the well or field without providing notice and opportunity to be heard. In the exercise of its authority to issue the variance,
     (1) the commission may approve the variance if
          (A) the approval provides at least an equally effective means of accomplishing the requirement set out in the commission’s regulation; or

          (B) the commission determines that the request is more appropriate to the proposed operation than compliance with the requirement of the regulation; and

     (2) the terms of the approval of the variance may include exempting the lessee or operator from a requirement of a regulation if the commission determines that the requirement is not necessary or not suited to the well or field taking into consideration
          (A) the nature of the operation involved;

          (B) the characteristics of the well or field for which the variance is sought; and

          (C) the reasonably anticipated risks of the exemption from the requirement to human safety and the environment.

 (d) The provisions of (c) of this section do not apply to authorize approval of a variance from the commission’s regulations that relate to underground injection.




Sec. 31.05.070. Attendance and testimony of witnesses.
 (a) The commission may summon witnesses, administer oaths, and require the production of records, books and documents for examination at a hearing or investigation conducted by it. A person may not be excused from attending and testifying, or from producing books, papers and records before the commission or a court, or from obedience to the subpoena of the commission or a court, on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of that person may tend to incriminate or subject that person to a penalty or forfeiture. This section does not require a person to produce books, papers or records, or to testify in response to an inquiry not pertinent to some question lawfully before the commission or court for determination. A natural person is not subject to criminal prosecution or to a penalty or forfeiture for or on account of any transaction, matter or thing concerning which, in spite of objection, that person may be required to testify or produce evidence, documentary or otherwise, before the commission or court, or in obedience to its subpoena. However, a person testifying is not exempt from prosecution and punishment for perjury committed in so testifying.

 (b) If a person fails or refuses to comply with the subpoena issued by the commission, or refuses to testify as to any matter regarding which the person may be interrogated, any court of record in the state, upon application of the commission, may issue an attachment for the person and compel that person to comply with the subpoena, and attend before the commission and produce the records, books, and documents for examination, and give testimony. The court may punish for contempt as in the case of disobedience to a subpoena issued by the court, or for refusal to testify in court.




Sec. 31.05.080. Reconsiderations.
 (a) Within 20 days after written notice of the entry of an order or decision of the commission, or such further time as the commission grants for good cause shown, a person affected by it may file with the commission an application for reconsideration of the matter determined by the order or decision, setting out the respect in which the order or decision is believed to be erroneous. The commission shall grant or refuse the application in whole or in part within 10 days after it is filed, and failure to act on it within this period is a refusal of it and a final disposition of the application. If reconsideration is granted, the commission may enter a new order or decision after reconsideration as may be required under the circumstances.

 (b) [Repealed, § 82 ch 41 SLA 2009.]
 (c) [Repealed, § 15 ch 54 SLA 2007.]
 (d) [Repealed, § 15 ch 54 SLA 2007.]




Sec. 31.05.085. Expenses of investigation or hearing.
 (a) During a hearing or investigation held under this chapter, the commission may allocate the costs of the hearing or investigation among the parties, including the commission, as is just under the circumstances. In allocating costs, the commission shall consider the regulatory cost charge paid by a person under AS 31.05.093 and may consider the results, evidence of good faith, other relevant factors, and mitigating circumstances. The costs allocated may include
     (1) the costs of any time devoted to the investigation or hearing by hired consultants, whether or not the consultants appear as witnesses or participants;

     (2) any out-of-pocket expenses incurred by the commission in the particular proceeding; and

     (3) when the investigation or hearing relates to a violation of a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission, the costs of any time devoted to the investigation or hearing by the commission staff.

 (b) The commission shall provide an opportunity for any person objecting to an allocation to be heard before the allocation becomes final.




Article 2. Regulation of Operations.


Sec. 31.05.090. Permits to drill wells.
 (a) A person shall apply for and receive a permit from the commission before drilling
     (1) a well in search of oil or gas;

     (2) a well in support of the recovery or production of oil or gas;

     (3) an underground injection well for the purpose of gas storage; or

     (4) an underground injection well for which the state has acquired primary enforcement responsibility under AS 31.05.030(h).

 (b) A person must submit a separate permit application for each well. The permit application must be in the form required by the commission and include all information required by the commission.

 (c) After receiving an application under (b) of this section, the commission shall promptly approve or deny the application for a permit to drill.

 (d) In making a determination under (c) of this section, the commission shall consider whether the
     (1) proposed well is contrary to law, a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission; or

     (2) applicant is in violation of a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission and the magnitude of such violation.




Sec. 31.05.093. Regulated well regulatory cost charge.
 (a) Every person that on the first day of a state fiscal year is the operator of a well for which a permit to drill has been issued under AS 31.05.090 and that has not, before that day, been plugged and abandoned and reported as abandoned in accordance with regulations of the commission shall pay to the commission an annual regulatory cost charge for that fiscal year. A regulatory cost charge may not be collected from a person unless the operation for which the person is responsible is within the jurisdiction of the commission.

 (b) The commission shall annually determine regulatory cost charges under this section. The regulatory cost charge to be paid by a person for a state fiscal year must be based on the total volume during the most recently concluded calendar year for the wells described in (a) of this section of which the person was the operator on the first day of the fiscal year as a percentage of the total volume during the same calendar year for all wells described in (a) of this section. For purposes of this subsection, “total volume” means the sum of the volume of all oil and gas produced from a well and all oil, gas, water, and other fluids, including waste slurry, injected into the well. For purposes of determining volume under this subsection, 6,000 cubic feet of gas has a volume that is the equivalent of one barrel of oil.

 (c) The commission shall determine the regulatory cost charges levied under this section so that the total amount to be collected approximately equals the appropriations made for the operating costs of the commission under this chapter for the fiscal year.

 (d) The commission shall administer the collection of the regulatory cost charges imposed under this section. The Department of Administration shall identify the amount of the appropriations made for the operating costs of the commission under this chapter that lapses into the general fund each year. The legislature may appropriate to the commission for its operating costs under this chapter for the next fiscal year an amount that is at least equal to the lapsed amount. If the legislature makes an appropriation to the commission under this subsection that is at least equal to the lapsed amount, the commission shall reduce the total regulatory cost charge collected for that fiscal year by a comparable amount.

 (e) The commission may adopt regulations under AS 44.62 (Administrative Procedure Act) necessary to administer this section, including regulations for investigation of the accuracy of reported information and for collecting required payments.




Sec. 31.05.095. Waste prohibited.
The waste of oil and gas in the state is prohibited.


Sec. 31.05.100. Establishment of drilling units for pools.
 (a) For the prevention of waste, to protect and enforce the correlative rights of lessees in a pool, and to avoid the augmenting and accumulation of risks arising from the drilling of an excessive number of wells, or the reduced recovery which might result from too small a number of wells, the commission shall, after a hearing, establish a drilling unit or units for each pool. The establishment of a unit for gas shall be limited to the production of gas.

 (b) Each well permitted to be drilled on a drilling unit shall be drilled under the rules and regulations and in accordance with the spacing pattern as the commission prescribes for the pool in which the well is located. Exceptions to the rules and spacing pattern may be granted where it is shown, after notice and hearing, that the unit is partly outside the pool, or for some other reason a well so located on the unit would be nonproductive, or topographical conditions are such as to make the drilling at such a location unduly burdensome. If an exception is granted, the commission shall take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the drilling of the well as an exception, and so that drainage from developed units to the tract with respect to which the exception is granted will be prevented or minimized, and the producer of the well drilled as an exception will be allowed to produce no more than a just and equitable share of the oil and gas in the pool.

 (c) When two or more separately owned tracts of land are embraced within an established drilling unit, persons owning the drilling rights in it and the right to share in the production from it may agree to pool their interests and develop their lands as a drilling unit. If the persons do not agree to pool their interests, the commission may enter an order pooling and integrating their interests for the development of their lands as a drilling unit for the prevention of waste, for the protection of correlative rights, or to avoid the drilling of unnecessary wells. Orders effectuating such pooling shall be made after notice and hearing, and shall be upon terms and conditions which will afford to the owner of each tract the opportunity to recover or receive the owner’s just and equitable share of the oil and gas in the pool without unnecessary expense. Operations incident to the drilling of a well upon a portion of a unit covered by a pooling order shall be considered for all purposes to be the conduct of the operation upon each separately owned tract in the unit by the several lessees of it. The portion of the production allocated to the lessee of each tract included in a drilling unit formed by a pooling order shall, when produced, be considered as if it had been produced from the tract by a well drilled on it. If pooling is effectuated, the cost of development and operation of the pooled unit chargeable by the operator to the other interested lessee is limited to the actual and reasonable expenditures for this purpose, including a reasonable charge for supervision. As to lessees who refuse to agree upon pooling, the order shall provide for reimbursement for costs chargeable to each lessee out of, and only out of, production from the unit belonging to such lessee. In the event of a dispute relative to the costs, the commission shall determine the proper costs upon notice to all interested parties and hearing. Appeals may be taken from the determination as from any other order of the commission. If a lessee drills and operates, or pays the expense of drilling and operating the well for the benefit of others, then in addition to any other right conferred by the pooling order, the lessee drilling or operating has a lien on the share of production from the unit accruing to the interest of each of the other lessees for the payment of the proportionate share of such expenses. All the oil and gas subject to the lien, or so much of the oil and gas subject to the lien as is necessary shall be marketed and sold by the creditor, and the proceeds applied in payment of the expenses secured by the lien, with the balance, if any, payable to the debtor.

 (d) The commission shall, in all instances where a unit has been formed out of lands or areas of more than one ownership, require the operator, upon request of a lessee, but subject to the right of the operator to market production and collect the proceeds with respect to a lessee in default, as provided in (c) of this section, to deliver to the lessee or assigns the lessee’s proportionate share of the production from the well common to the drilling unit. The lessee receiving a share shall provide at the lessee’s own expense proper receptacles for the receipt and storage of it.

 (e) If persons owning the drilling or other rights in separate tracts embraced within a drilling unit fail to agree upon the pooling of the tracts and the drilling of the well on the unit, and if the commission is without authority to require pooling as provided by this section, then, subject to all other applicable provisions of this chapter, the lessee of each tract embraced within the drilling unit may drill on the lessee’s tract, but the allowable production from the tract shall be the proportion of the allowable production for the full drilling unit as the area of the separately owned tract bears to the full drilling unit.




Sec. 31.05.110. Unitization and unitized operation of pools and integration of interests by agreement.
 (a) To prevent, or to assist in preventing waste, to insure a greater ultimate recovery of oil and gas, and to protect the correlative rights of persons owning interests in the tracts of land affected, these persons may validly integrate their interests to provide for the unitized management, development, and operation of such tracts of land as a unit. Where, however, they have not agreed to integrate their interests, the commission, upon proper petition, after notice and hearing, has jurisdiction, power and authority, and it is its duty to make and enforce orders and do the things necessary or proper to carry out the purposes of this section.

 (b) If upon the filing of a petition by or with the commission and after notice and hearing, all in the form and manner and in accordance with the procedure and requirements provided in this section, the commission finds that (1) the unitized management, operation and further development of a pool or portion of a pool is reasonably necessary in order to effectively carry on pressure control, pressure-maintenance or repressuring operations, cycling operations, water flooding operations, or any combination of these, or any other form of joint effort calculated to substantially increase the ultimate recovery of oil and gas from the pool; (2) one or more of the unitized methods of operation as applied to the pool or portion of it is feasible, and will prevent waste and will with reasonable probability result in the increased recovery of substantially more oil and gas from the pool than would otherwise be recovered; (3) the estimated additional cost, if any, of conducting such operations will not exceed the value of the additional oil and gas so recovered; and (4) the unitization and adoption of one or more of the unitized methods of operation is for the common good, it shall make a finding to that effect and make an order creating the unit and providing for the unitization and unitized operation of the pool or portion of it described in the order, upon the terms and conditions, as may be shown by the evidence to be fair, reasonable, equitable, and which are necessary or proper to protect, safeguard and adjust the respective rights and obligations of the several persons affected, including royalty owner, owners of overriding royalties, oil and gas payments, carried interests, mortgages, lien claimants and others, as well as the lessees. The petition shall set out a description of the proposed unit area with a map or plat of it attached, shall allege the existence of the facts required to be found by the commission as provided in this subsection and shall have attached to it a recommended plan of unitization applicable to the proposed unit area and which the petitioner considers to be fair, reasonable and equitable.

 (c) The order of the commission shall define the boundary of the area to be included within the unit area and prescribe with reasonable detail the plan of unitization applicable to it. Each unit and unit area may be limited to all or a portion of a single pool. Only so much of a pool or pools as has been defined and determined to be productive on the basis of information available to the commission may be so included within the unit area. A unit may be created to embrace less than the whole of a pool only where it is shown by the evidence that the area to be so included within the unit area is of a size and shape as may be reasonably required for the successful and efficient conduct of the unitized method of operation for which the unit is created, and that the conduct of it will have no material adverse effect upon the remainder of the pool. The plan of unitization for each unit and unit area shall be one suited to the needs and requirements of the particular unit dependent upon the facts and conditions found to exist with respect to it. In addition to other terms, provisions, conditions and requirements found by the commission to be reasonably necessary or proper to carry out the purpose of this chapter, and subject to the further requirements of this section, each plan of unitization shall contain fair, reasonable and equitable provisions for
     (1) the efficient unitized management or control of the further development and operation of the unit area for the recovery of oil and gas from the pool affected; under such a plan the actual operations within the unit area may be carried on in whole or in part by the unit itself, or by one or more of the lessees within the unit area as the unit operator subject to the supervision and direction of the unit, dependent upon what is most beneficial or expedient; the designation of the unit operator shall be by vote of the lessees in the unit in a manner provided in the plan of unitization and not by the commission;

     (2) the division of interest or formula for the apportionment and allocation of the unit production, among and to the several separately owned tracts within the unit area such as will reasonably permit persons otherwise entitled to share in or benefit by the production from such separately owned tracts to produce and receive, instead thereof, their fair, equitable and reasonable share of the unit production or other benefits of it; a separately owned tract’s fair, equitable, and reasonable share of the unit production shall be measured by the value of each such tract for oil and gas purposes and its contributing value to the unit in relation to like values of other tracts in the unit, taking into account acreage, the quantity of oil and gas recoverable from it, location on the structure, its probable productivity of oil and gas in the absence of unit operations, the burden of operations to which the tract will or is likely to be subjected, or so many of these factors, or such other pertinent engineering, geological or operating factors as may be reasonably susceptible of determination; “unit production” as that term is used in this chapter means all oil and gas produced from a unit area from the effective date of the order of the commission creating the unit regardless of the well or tract within the unit area from which the same is produced;

     (3) the manner in which the unit and the further development and operation of the unit area shall or may be financed and the basis, terms and conditions on which the cost and expense of it shall be apportioned among and assessed against the tracts and interests made chargeable with it, including a detailed accounting procedure governing all charges and credits incident to such operations; upon terms and conditions as to time and rate of interest as may be fair to all concerned, reasonable provision shall be made in the plan of unitization for carrying or otherwise financing lessees who are unable to promptly meet their financial obligations in connection with the unit;

     (4) the procedure and basis upon which wells, equipment, and other properties of the several lessees within the unit area are to be taken over and used for unit operations, including the method of arriving at the compensation for it, or of otherwise proportionately equalizing or adjusting the investment of the several lessees in the project as of the effective date of unit operation;

     (5) the creation of an operating committee to have general overall management and control of the unit and the conduct of its business and affairs and the operations carried on by it, together with the creation or designation of other subcommittees, boards or officers to function under the authority of the operating committee as may be necessary, proper or convenient in the efficient management of the unit, defining the powers and duties of all the committees, boards and officers, and prescribing their tenure and time and method for their selection;

     (6) the time when the plan of unitization becomes effective;

     (7) the time when and the conditions under which and the method by which the unit shall or may be dissolved and its affairs wound up.

 (d) [Repealed, § 17 ch 160 SLA 1978.]
 (e) Except as otherwise expressly provided in this section, all proceedings held under this chapter, including the filing of petitions, the giving of notices, the conduct of hearings and other action taken by the commission shall be in the form and manner and in accordance with the procedure provided in AS 31.05.040 — 31.05.060. Additional notice shall be given as the commission requires.

 (f) From the effective date of an order of the commission creating a unit and prescribing the plan of unitization applicable to it, the operation of a well producing from the pool or portion of it within the unit area defined in the order by persons other than the unit or persons acting under its authority or except in the manner and to the extent provided in the plan of unitization is unlawful and is prohibited.

 (g) The obligation or liability of the lessees or other owners of the oil and gas rights in the several separately owned tracts for the payment of unit expense shall at all times be several and not joint or collective and in no event shall a lessee or other owner of the oil and gas rights in the separately owned tract be chargeable with, obligated or liable, directly or indirectly, for more than the amount apportioned, assessed or otherwise charged to that lessee’s or owner’s interest in the separately owned tract under the plan of unitization and then only to the extent of the lien provided for in this chapter.

 (h) Subject to such reasonable limitations as may be set out in the plan of unitization, the unit has a first and prior lien upon the leasehold estate and all other oil and gas rights (exclusive of a landowners’ royalty interest) in and to each separately owned tract, the interest of the owners in and to the unit production and all equipment in the possession of the unit, to secure the payment of the amount of the unit expense charged to and assessed against such separately owned tract. The interest of the lessee or other persons who by lease, contract, or otherwise are obligated or responsible for the cost and expense of developing and operating a separately owned tract for oil and gas in the absence of unitization shall, however, be primarily responsible for and charged with any assessment for unit expense made against the tract and resort may be had to overriding royalties, oil and gas payments, or other interests, except royalty interests, which otherwise are not chargeable with these costs, only in the event the owner of interest primarily responsible fails to pay the assessment of the production to the credit thereof, or production is insufficient for that purpose. If the owner of any royalty interest, overriding royalty, oil or gas payment, or any other interest which under the plan of unitization is not primarily responsible for it pays in whole or in part the amount of an assessment for unit expense for the purpose of protecting such interest, or the amount of the assessment in whole or in part is deducted from the unit production to the credit of such interest, the owner of it is to the extent of the payment or deduction subrogated to all the rights of the unit with respect to the interest or interests primarily responsible for the assessment. The landowners’ royalty share of the unit production allocated to each separately owned tract shall be regarded as royalty to be distributed to and among, or the proceeds of it paid to, the landowners, free and clear of all unit expense and free of any lien for it.

 (i) Property rights, leases, contracts, and all other rights and obligations shall be regarded as amended and modified to the extent necessary to conform to the provisions and requirements of this chapter, and to any valid and applicable plan of unitization or order of the commission made and adopted under this chapter, but otherwise remain in effect.

 (j) Nothing contained in this chapter shall be construed to require a transfer to or vesting in the unit of title to the separately owned tracts or leases on them within the unit area, other than the right to use and operate them to the extent set out in the plan of unitization; nor shall the unit be regarded as owning the unit production. The unit production and the proceeds from the sale of it shall be owned by the several persons to whom it is allocated under the plan of unitization. All property, whether real or personal, which the unit may in any way acquire, hold, or possess, may not be acquired, held, or possessed by the unit for its own account but shall be acquired, held, and possessed by the unit for the account and as agent of the several lessees and shall be the property of the lessees as their interests appear under the plan of unitization, subject, however, to the right of the unit to the possession, management, use, or disposal of the same in the proper conduct of its affairs, and subject to any lien the unit may have on it to secure the payment of unit expense. Neither the unit production or proceeds of the sale of it, nor the other receipts shall be treated, regarded, or taxed as income or profits of the unit; but instead, all such receipts shall be the income of the several persons to whom or to whose credit the same are payable under the plan of unitization. To the extent the unit may receive or disburse the receipts it shall only do so as a common administrative agent of the persons to whom the receipts are payable.

 (k) The amount of the unit production allocated to each separately owned tract within the unit, and only that amount, regardless of the well or wells in the unit area from which it may be produced and regardless of whether it is more or less than the amount of the production from the well or wells, if any, on any such separately owned tract, shall for all intents, uses and purposes be regarded and considered as production from the separately owned tract, and, except as may be otherwise authorized in this chapter, or in the plan of unitization approved by the commission, shall be distributed among or the proceeds of it paid to the persons entitled to share in the production from the separately owned tract in the same manner, in the same proportions, and upon the same condition that they would have participated and shared in the production or proceeds of it from such separately owned tract had not the unit been organized, and with the same legal effect. If adequate provisions are made for the receipt of it, the share of the unit production allocated to each separately owned tract shall be delivered in kind to the persons entitled to it by virtue of ownership of oil and gas rights in it or by purchase from the owners subject to the rights of the unit to withhold and sell the same in payment of unit expense under the plan of unitization, and subject further to the call of the unit on such portions of the gas for operating purposes as may be provided in the plan of unitization.

 (l) An agreement or plan for the development and operation of a field or pool of oil or gas as a unit, if approved by the commission for the purpose of conserving oil or gas, does not violate a statute of the state prohibiting monopolies or acts, arrangements, agreements, contracts, combinations, or conspiracies in restraint of trade or commerce.

 (m) Operations carried on under and in accordance with the plan of unitization shall be regarded and considered as a fulfillment of a compliance with all of the provisions, covenants and conditions, express or implied, of the several oil and gas leases upon lands included within the unit area, or other contracts pertaining to the development of it insofar as the leases or other contracts may relate to the pool or portion of it included in the unit area. Wells drilled or operated on any part of the unit area no matter where located shall for all purposes be regarded as wells drilled on each separately owned tract within the unit area.

 (n) Nothing in this section or in any plan of unitization shall be construed as increasing or decreasing the implied covenants of a lease in respect to a common source of supply or lands not included within the unit area of a unit.

 (o) The unit area of a unit may be enlarged to include adjoining portions of the same pool, including the unit area of another unit, and a new unit created for the unitized management, operation and further development of the enlarged unit area, or the plan of unitization may be otherwise amended, or the unit area contracted, all in the same manner, upon the same conditions and subject to the same limitations as provided with respect to the creation of a unit in the first instance.

 (p) An aliquot of unit production may be underlifted or overlifted from a unit established under this chapter or AS 38.05.180(p) only when it does not create waste, except the commissioner may permit underlifting or overlifting for temporary periods for the purpose of accommodating extraordinary disruptions to an interest owner’s production disposal system. Underlifted oil may be recovered by an interest owner at a daily rate not to exceed 10 percent of the owner’s working or royalty interest share of daily production at the time of underlift recovery. This subsection applies to all units created after June 30, 1978.

 (q) This section applies to all involuntary units formed in the state. Subsections (a) and (g) — (p) of this section apply to all voluntary units formed in the state and to a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p).




Sec. 31.05.120. Use of gas from well to manufacture carbon products without permit is prima facie waste.
The use of gas from a well producing gas only, or from a well which is primarily a gas well for the manufacture of carbon black or similar products predominantly carbon is declared to constitute waste prima facie, and the gas well may not be used for this purpose unless it is clearly shown at a public hearing held by the commission, on application of the person desiring to use the gas, that waste would not take place by the use of the gas for the purpose applied for, and that gas which would otherwise be lost is now available for such purpose, and that the gas to be used cannot be used for a more beneficial purpose, such as for light or fuel purposes, except at prohibitive cost, and that it would be in the public interest to grant the permit. If the commission finds that the applicant has clearly shown a right to use the gas for the purpose applied for, it shall issue a permit upon terms and conditions it finds necessary in order to permit the use of the gas and at the same time require compliance with the intent of this section.


Article 3. General Provisions.


Sec. 31.05.125. Regulation of shallow natural gas; relationship of chapter to other laws. [Repealed, § 58 ch 49 SLA 2004.]
Secs. 31.05.130 — 31.05.140. Levy of Tax and Disposition of Funds. [Repealed, § 2 ch 247 SLA 1970.]
Sec. 31.05.150. Penalties.
 (a) In addition to the penalties in (b) — (e) of this section, a person who violates a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is liable for a civil penalty of not more than $100,000 for the initial violation and not more than $10,000 for each day thereafter on which the violation continues.

 (b) A person who knowingly commits an act specified in AS 11.46.630(a) for the purpose of evading a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is guilty of a class A misdemeanor.

 (c) A person who knowingly aids or abets another person in the violation of a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is subject to the same penalty as that prescribed in this chapter for the violation by the other person.

 (d) In addition to the penalties in (a) — (c) and (e) of this section, the commission may impose a civil penalty for each 1,000 cubic feet of natural gas flared, vented, or otherwise determined to be waste as defined in AS 31.05.170. The penalty shall be twice the fair market value of the natural gas at the point of waste.

 (e) A person who knowingly violates a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is guilty of a misdemeanor punishable by a fine of not more than $10,000 a day for each day of violation.

 (f) The commission may assess the civil penalties provided in this section, and, if not paid, the penalties are recoverable by suit filed by the attorney general in the name and on behalf of the commission in the superior court. The payment of a penalty does not relieve a person on whom the penalty is imposed from liability to any other person for damages arising out of the violation.

 (g) In determining the amount of a penalty assessed under (a) of this section, the commission shall consider
     (1) the extent to which the person committing the violation was acting in good faith in attempting to comply;

     (2) the extent to which the person committing the violation acted in a wilful or knowing manner;

     (3) the extent and seriousness of the violation and the actual or potential threat to public health or the environment;

     (4) the injury to the public resulting from the violation;

     (5) the benefits derived by the person committing the violation from the violation;

     (6) the history of compliance or noncompliance by the person committing the violation with the provisions of this chapter, the regulations adopted under this chapter, and the orders, stipulations, or terms of permits issued by the commission;

     (7) the need to deter similar behavior by the person committing the violation and others similarly situated at the time of the violation or in the future;

     (8) the effort made by the person committing the violation to correct the violation and prevent future violations; and

     (9) other factors considered relevant to the assessment that are adopted by the commission in regulation.




Sec. 31.05.160. Injunctive relief.
 (a) Whenever it appears that a person is violating or threatening to violate any provision of this chapter, or any regulation or order of the commission, the commission shall bring suit against that person in the superior court of the judicial district where the violation occurs or is threatened, to restrain the person from continuing the violation or from carrying out the threat of violation. In the suit, the court shall have jurisdiction to grant to the commission, without bond or otherwise undertaking, such prohibitory and mandatory injunctions as the facts warrant.

 (b) If the commission fails to bring suit to enjoin a violation or threatened violation within 10 days after receipt of written request to do so by a person who is or will be adversely affected by the violation, the person making the request may bring suit to restrain the violation or threatened violation in the court in which the commission may bring suit. If the court finds that injunctive relief should be granted, the commission shall be made a party and shall be substituted for the person who brought the suit, and the injunction shall be issued as if the commission had at all times been the plaintiff.




Sec. 31.05.170. Definitions.
In this chapter, unless the context otherwise requires
     (1) “and” includes “or” and “or” includes “and”;

     (2) “commission” means the Alaska Oil and Gas Conservation Commission;

     (3) “correlative rights” mean the opportunity afforded, so far as it is practicable to do so, to the owner of each property in a pool to produce without waste the owner’s just and equitable share of the oil or gas, or both, in the pool; being an amount, so far as can be practically determined, and so far as can practicably be obtained without waste, substantially in the proportion that the quantity of recoverable oil or gas, or both under the property bears to the total recoverable oil or gas or both in the pool, and for such purposes to use the owner’s just and equitable share of the reservoir energy;

     (4) “cubic foot” of natural gas means the volume of gas contained in one cubic foot of space measured at a pressure base of 14.65 pounds per square inch absolute and a temperature base of 60 degrees Fahrenheit;

     (5) “field” means a general area which is underlain or appears to be underlain by at least one pool, and includes the underground reservoir containing oil or gas; and the words “pool” and “field” mean the same thing when only one underground reservoir is involved, but “field” unlike “pool” may relate to two or more pools;

     (6) “gas” includes all natural gas and all hydrocarbons produced at the wellhead not defined as oil;

     (7) “landowner” means the owner of the subsurface estate of the tract affected;

     (8) “nonconventional gas” has the meaning given in AS 38.05.965;

     (9) “oil” includes crude petroleum oil and other hydrocarbons regardless of gravity which are produced at the wellhead in liquid form and the liquid hydrocarbons known as distillate or condensate recovered or extracted from gas, other than gas produced in association with oil and commonly known as casinghead gas;

     (10) “owner” means the person who has the right to drill into and produce from a pool and to appropriate the oil and gas the person produces from a pool for that person and others;

     (11) “person” includes a natural person, corporation, association, partnership, receiver, trustee, executor, administrator, guardian, fiduciary or other representative of any kind, and includes a department, agency or instrumentality of the state or a governmental subdivision of the state;

     (12) “pool” means an underground reservoir containing, or appearing to contain, a common accumulation of oil or gas; each zone of a general structure which is completely separated from any other zone in the structure is covered by the term “pool”;

     (13) “producer” means the owner of a well or wells capable of producing oil or gas or both;

     (14) “regular production” means continuing production of oil or gas from a well into production facilities and transportation to market, but does not include short term testing, evaluation, or experimental pilot production activities that have been approved by permit or order of the commission;

     (15) “waste” means, in addition to its ordinary meaning, “physical waste” and includes
          (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices;

          (B) the inefficient above-ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas;

          (C) producing oil or gas in a manner causing unnecessary water channeling or coning;

          (D) the operation of an oil well with an inefficient gas-oil ratio;

          (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission;

          (F) underground waste;

          (G) the creation of unnecessary fire hazards;

          (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission;

          (I) the use of gas for the manufacture of carbon black, except as provided in this chapter;

          (J) the drilling of wells unnecessary to carry out the purpose or intent of this chapter.




Chapter 15. Common Purchasers of Oil.

Sec. 31.15.010. Hearing on question of discrimination.
 (a) Upon the complaint of a person having an interest in the production of oil from a field, the commission shall hold a hearing or hearings, or, at the commission’s own discretion, the commission may hold a hearing or hearings to determine if there has been unjust and unreasonable discrimination in purchases of oil offered for purchase within the state,
     (1) in favor of one or more owners of oil produced as against another owner in the same field; or

     (2) in favor of one or more fields in reasonably close proximity to each other.

 (b) In determining whether there has been unjust and unreasonable discrimination in favor of one or more owners of oil produced from a field, the commission shall consider the kind and quality of the oil, the sales prices of the oil, and other related matters.

 (c) In determining whether there has been unjust and unreasonable discrimination in favor of one or more fields in reasonably close proximity to each other, the commission shall consider the kind and quality of the oil, the sales prices of the oil, the size and location of the fields, the maximum efficient rate of production from the pools, the cost and mode of transporting the oil from the fields, the term of the offerings, and other related matters.




Sec. 31.15.020. Determination of common purchaser.
 (a) Where a purchaser is purchasing from a field and the commission finds that the purchaser has unjustly and unreasonably discriminated in purchases with regard to oil offered for sale in favor of one or more owners of oil produced in the field, the commission shall order the purchaser to be a common purchaser with respect to oil offered for sale from the field.

 (b) Where a purchaser is purchasing from fields in reasonably close proximity to each other and the commission finds that the purchaser has unjustly and unreasonably discriminated in purchases with regard to oil offered for sale in favor of one or more of the fields, the commission shall order the purchaser to be a common purchaser with respect to oil offered for sale from each field involved.

 (c) A purchaser cannot be ordered to be a common purchaser on the basis of purchases of oil taken in kind by the United States or the State of Alaska, or on the basis of the payment of royalties, overriding royalties, net profits, carried interests or similar interests, whether in kind or in value or on the basis of a producer taking its own production.




Sec. 31.15.030. Responsibility of common purchaser.
 (a) A common purchaser purchasing in this state shall purchase ratably without unjust and unreasonable discrimination in favor of any owner or producer over any other owner or producer offering to sell oil produced from a field where it is a common purchaser or from fields in reasonably close proximity to each other where it is a common purchaser.

 (b) If a purchaser is a common purchaser in more than one field in reasonably close proximity to each other, the commission may order the purchaser to purchase ratably from the fields involved in proportions that will prevent unjust and unreasonable discrimination among the fields.

 (c) The commission may make inquiry in each field concerning the connections of the various producers and when unjust and unreasonable discrimination is found to be practiced by any common purchaser as defined in this chapter the commission shall issue an order to the common purchaser to make reasonable extensions of their lines and reasonable connections as will prevent the discrimination.




Sec. 31.15.040. Penalty.
A person violating an order issued under this chapter shall be assessed by the commission a civil penalty of not less than $1,000 nor more than $10,000. Each day a violation continues constitutes a separate offense.


Sec. 31.15.050. Definitions.
In this chapter,
     (1) “commission” means the Regulatory Commission of Alaska;

     (2) “field” means a general area which is underlain or appears to be underlain by at least one pool, and includes the underground reservoir containing oil or gas; and the words “pool” and “field” mean the same thing when only one underground reservoir is involved, but “field” unlike “pool” may relate to two or more pools;

     (3) “oil” includes crude petroleum oil and other hydrocarbons regardless of gravity which are produced at the wellhead in liquid form and the liquid hydrocarbons known as distillate or condensate recovered or extracted from gas, other than gas produced in association with oil and commonly known as casinghead gas;

     (4) “pool” means an underground reservoir containing oil; each zone of a general structure which is completely separated from any other zone in the structure is covered by the term “pool”;

     (5) “purchaser” means a person who purchases oil in the state.




Article 1. Organization, Administration, and Powers.


Chapter 25. Alaska Gasline Development Corporation.

Sec. 31.25.005. Purpose.
The corporation shall, for the benefit of the state, to the fullest extent possible,
     (1) develop and have primary responsibility for developing natural gas pipelines, an Alaska liquefied natural gas project, and other transportation mechanisms to deliver natural gas in-state for the maximum benefit of the people of the state;

     (2) when developing natural gas pipelines, an Alaska liquefied natural gas project, and other transportation mechanisms to deliver natural gas in-state, provide economic benefits in the state and revenue to the state;

     (3) assist the Department of Natural Resources and the Department of Revenue to maximize the value of the state’s royalty natural gas, natural gas delivered to the state as payment of tax, and other natural gas received by the state;

     (4) advance an in-state natural gas pipeline as described in the July 1, 2011, project plan prepared under former AS 38.34.040 by the corporation while a subsidiary of the Alaska Housing Finance Corporation, with modifications determined by the corporation to be appropriate to develop, finance, construct, and operate an in-state natural gas pipeline in a safe, prudent, economical, and efficient manner, for the purpose of making natural gas, including propane and other hydrocarbons associated with natural gas other than oil, available to Fairbanks, the Southcentral region of the state, and other communities in the state at the lowest rates possible;

     (5) advance an Alaska liquefied natural gas project by developing infrastructure and providing related services, including services related to transportation, liquefaction, a marine terminal, marketing, and commercial support; if the corporation provides a service under this paragraph to the state, a public corporation or instrumentality of the state, a political subdivision of the state, or another entity of the state, the corporation may not charge a fee for the service in an amount greater than the amount necessary to reimburse the corporation for the cost of the service;

     (6) endeavor to develop natural gas pipelines and other transportation mechanisms to deliver natural gas, including propane and other hydrocarbons associated with natural gas other than oil, to public utility and industrial customers in areas of the state to which the natural gas, including propane and other hydrocarbons associated with natural gas other than oil, may be delivered at commercially reasonable rates; and

     (7) endeavor to develop natural gas pipelines and other transportation mechanisms that offer commercially reasonable rates for shippers and access for shippers who produce natural gas, including propane and other hydrocarbons associated with natural gas other than oil, in the state.




Sec. 31.25.007. Expedited review and action by state agencies or entities.
A state agency or entity conducting a review or taking action relating to a project under this chapter shall expedite the review or action in a manner consistent with the timely completion of the project.


Sec. 31.25.010. Structure.
The Alaska Gasline Development Corporation is a public corporation and government instrumentality acting in the best interest of the state for the purposes required by AS 31.25.005, located for administrative purposes in the Department of Commerce, Community, and Economic Development, but having a legal existence independent of and separate from the state. The corporation may not be terminated as long as it has bonds, notes, or other obligations outstanding. The corporation may dissolve when no bonds, notes, or other obligations of the corporation or a subsidiary of the corporation are outstanding and the corporation or a subsidiary of the corporation is no longer engaged in the development, financing, construction, or operation of an in-state natural gas pipeline or an Alaska liquefied natural gas project. Upon termination of the corporation, its rights and property pass to the state.


Sec. 31.25.020. Governing body.
 (a) The corporation shall be governed by a board of directors consisting of
     (1) five public members; and

     (2) two individuals designated by the governor that are each the head of a principal department of the state, except that the commissioner of natural resources and the commissioner of revenue may not be designated to serve on the board.

 (b) Public members of the board shall be appointed by the governor and are subject to confirmation by the legislature. When appointing a public member to the board, the governor shall consider an individual’s expertise and experience in natural gas pipeline construction, operation, and marketing; finance; large project management; and other expertise and experience that is relevant to the purpose, powers, and duties of the corporation. Public members of the board serve staggered five-year terms. A public member serves at the pleasure of the governor. A vacancy shall be filled in the same manner as the original appointment. Notwithstanding AS 39.05.100, a public member appointed under (a)(1) of this section is not required to be a registered voter or a resident of the state. If the governor appoints a public member to the board who is not a registered voter in the state or a resident of the state, the governor shall send a written statement to the legislature with the notice of appointment explaining the governor’s reasons for making the appointment.

 (c) Notwithstanding AS 39.05.055, the terms of the initially appointed public members of the board shall be set by the governor to be two years for two members, three years for two members, and five years for one member.

 (d) The public members of the board receive $400 compensation for each day spent on official business of the corporation and may be reimbursed by the corporation for actual and necessary expenses at the same rate paid to members of state boards under AS 39.20.180.




Sec. 31.25.030. Meetings of board.
 (a) The board shall elect a chair, secretary, and treasurer from among its membership at each annual meeting. A majority of the members constitutes a quorum for organizing the board, conducting its business, and exercising the powers of the corporation. The board shall meet at the call of the chair. The board shall meet at least once every three months.

 (b) The board may meet and transact business by electronic media if
     (1) public notice of the time and locations where the meeting will be held by electronic media has been given in the same manner as if the meeting were held in a single location;

     (2) participants and members of the public in attendance can hear and have the same right to participate in the meeting as if the meeting were conducted in person; and

     (3) copies of pertinent reference materials, statutes, regulations, and audio-visual materials are reasonably available to participants and to the public.

 (c) A meeting by electronic media as provided in this section has the same legal effect as a meeting in person.

 (d) For the purposes of this chapter, public notice of 24 hours or more is adequate notice of a meeting of the board at which the issuance of corporation bonds is authorized.

 (e) An affirmative vote of at least four members of the board is required to approve
     (1) the sale and issuance of bonds;

     (2) the sale or other disposition of a substantial asset or substantial amount of the assets of the corporation; the corporation shall adopt a regulation that defines a substantial asset and a substantial amount of assets for the purposes of this paragraph;

     (3) the ownership structure for a pipeline project of which the corporation is a participant;

     (4) an action committing the corporation to an additional natural gas pipeline project; and

     (5) action on other matters identified in a regulation adopted by the corporation as being subject to this subsection.




Sec. 31.25.035. Minutes of meetings.
The board shall keep minutes of each meeting and send certified copies to the governor and to the Legislative Budget and Audit Committee.


Sec. 31.25.040. Administration of affairs; program directors.
 (a) The board shall manage the assets and business of the corporation and may adopt, amend, and repeal bylaws and regulations governing the manner in which the business of the corporation is conducted and the manner in which its powers are exercised. The board shall delegate supervision of the administration of the corporation to the executive director, appointed in accordance with AS 31.25.045.

 (b) The board shall adopt and publish procedures to govern the procurement by the corporation of supplies, services, professional services, and construction. The procurement procedures must provide for an Alaska veterans’ preference that is consistent with the Alaska veterans’ preference in AS 36.30.175.

 (c) To the maximum extent practicable, the board shall
     (1) maximize the efficient use of state resources; and

     (2) establish appropriate separation within the corporation by separating personnel and functions and by other means to the extent that separation may be required by contract or applicable law for the purpose of screening and preventing the exchange of commercially sensitive information when developing an in-state natural gas pipeline, an Alaska liquefied natural gas project, and other transportation mechanisms to deliver natural gas in the state.

 (d) The board may appoint a program director for an Alaska liquefied natural gas project. The board may appoint a separate program director for an in-state natural gas pipeline as described in the July 1, 2011, project plan prepared under former AS 38.34.040 and defined in AS 31.25.390. A program director appointed under this section shall
     (1) serve at the pleasure of the board; and

     (2) report to the executive director of the corporation.




Sec. 31.25.045. Executive director.
The corporation shall employ an executive director who may not be a member of the board. The executive director shall be appointed by the board and serves at the pleasure of the board.


Sec. 31.25.050. Legal counsel.
 (a) Except as provided in (b) of this section, the corporation shall retain legal counsel to advise the corporation in legal matters and represent it in litigation.

 (b) The attorney general shall
     (1) be the legal counsel for the corporation for legal services related to the development of contracts and agreements by the corporation that relate to an Alaska liquefied natural gas project; and

     (2) consult with the corporation when procuring outside counsel for legal services for the corporation related to an Alaska liquefied natural gas project.




Sec. 31.25.060. Employment of personnel.
The board may appoint other officers and engage professional and technical advisors as independent contractors. The executive director may hire employees of the corporation and engage professional and technical advisors under contract with the corporation. The board shall prescribe the duties and compensation of corporation personnel, including the executive director.


Sec. 31.25.065. Personnel exempt from State Personnel Act.
The personnel of the corporation are exempt from AS 39.25.


Sec. 31.25.080. Powers and duties.
 (a) In addition to other powers granted in this chapter, the corporation may
     (1) determine the form of ownership and the operating structure of an in-state natural gas pipeline developed by the corporation and may enter into agreements with other persons for joint ownership, joint operation, or both of an in-state natural gas pipeline or an Alaska liquefied natural gas project;

     (2) plan, finance, construct, develop, acquire, maintain, and operate a pipeline system and other transportation mechanism, including pipelines, compressors, storage facilities, and other related facilities, equipment, and works of public improvement, in the state to facilitate production, transportation, and delivery of natural gas or other related natural resources to the point of consumption or to the point of distribution for consumption;

     (3) lease or rent facilities, structures, and properties;

     (4) exercise the power of eminent domain and file a declaration of taking under AS 09.55.240 — 09.55.460 to acquire land or an interest in land that is necessary for an in-state natural gas pipeline or an Alaska liquefied natural gas project; the exercise of powers by the corporation under this paragraph may not exceed the permissible exercise of the powers by the state;

     (5) acquire, by purchase, lease, or gift, land, structures, real or personal property, an interest in property, a right-of-way, a franchise, an easement, or other interest in land, or an interest in or right to capacity in a pipeline system determined to be necessary or convenient for the development, financing, construction, or operation of an in-state natural gas pipeline project or an Alaska liquefied natural gas project or part of an in-state natural gas pipeline project or an Alaska liquefied natural gas project;

     (6) transfer or otherwise dispose of all or part of an in-state natural gas pipeline project, an Alaska liquefied natural gas project, or an interest in an asset of the corporation;

     (7) elect to provide transportation of natural gas as a contract carrier, common carrier, or otherwise;

     (8) provide light, water, security, and other services for property of the corporation;

     (9) conduct hearings to gather and develop data consistent with the purpose and powers of the corporation;

     (10) advocate for new pipeline capacity before the Federal Energy Regulatory Commission;

     (11) make and execute agreements, contracts, and other instruments necessary or convenient in the exercise of the powers and functions of the corporation under this chapter, including a contract with a person, firm, corporation, governmental agency, or other entity;

     (12) sue and be sued in its own name;

     (13) adopt an official seal;

     (14) adopt bylaws for the regulation of its affairs and the conduct of its business and adopt regulations and policies in connection with the performance of its functions and duties;

     (15) employ fiscal consultants, engineers, attorneys, appraisers, and other consultants and employees that may, in the judgment of the corporation, be required and fix and pay their compensation from funds available to the corporation;

     (16) procure insurance against a loss in connection with its operation;

     (17) borrow money as provided in this chapter to carry out its corporate purposes and issue its obligations as evidence of borrowing;

     (18) include in a borrowing the amounts necessary to pay financing charges, to pay interest on the obligations, and to pay the interest, consultant, advisory, and legal fees, and other expenses that are necessary or incident to the borrowing;

     (19) receive, administer, and comply with the conditions and requirements of an appropriation, gift, grant, or donation of property or money;

     (20) do all acts and things necessary, convenient, or desirable to carry out the powers expressly granted or necessarily implied in this chapter;

     (21) invest or reinvest, subject to its contracts with noteholders and bondholders, money or funds held by the corporation, including funds in the in-state natural gas pipeline fund (AS 31.25.100) and the Alaska liquefied natural gas project fund (AS 31.25.110), in obligations or other securities or investments in which banks or trust companies in the state may legally invest funds held in reserves or sinking funds or funds not required for immediate disbursement, and in certificates of deposit or time deposits secured by obligations of, or guaranteed by, the state or the United States;

     (22) enter into, as it determines to be necessary or appropriate, any swap or hedge, cap, or other contract providing for payments based on levels of or changes in interest rates or indices or in the cost or price of any commodity, supply, or expense expected to be used or incurred in connection with the acquisition, construction, or operation of any facility or property owned, leased, or operated by the corporation, or an option with respect to any of the foregoing;

     (23) except as provided in (g) of this section, acquire an ownership or participation interest in an Alaska liquefied natural gas project, natural gas treatment facilities, natural gas pipeline facilities, liquefaction facilities, marine terminal facilities related to the infrastructure of an Alaska liquefied natural gas project, or an entity or joint venture that has an ownership interest in or is engaged in the planning, financing, acquisition, maintenance, construction, and operation of an Alaska liquefied natural gas project;

     (24) after consultation with the commissioner of revenue and the commissioner of natural resources, enter into contracts relating to an Alaska liquefied natural gas project, including contracts for services related to operation, marketing, transportation, gas treatment, marine terminal operation, or liquefaction.

 (b) Upon commencement of construction of an in-state natural gas pipeline, the corporation shall analyze potential natural gas pipelines and other transportation mechanisms connecting to industrial, residential, or utility customers in other regions of the state. If the corporation finds that a natural gas pipeline or other transportation mechanism analyzed under this subsection is in the best interest of the state and can meet the needs of industrial, residential, or utility customers at commercially reasonable rates, the corporation may finance, construct, or operate the natural gas pipeline or other transportation mechanism as necessary. When developing or constructing a connecting line or other transportation mechanism, the corporation shall, to the maximum extent feasible, use existing land, structures, real or personal property, rights-of-way, easements, or other interests in land acquired by the corporation.

 (c) The corporation may not develop or construct a natural gas pipeline that is a competing natural gas pipeline project for purposes of AS 43.90.440.

 (d) The corporation shall establish a schedule of reasonable fees, rental rates, and other charges, and collect fees, rentals, and other charges for use of the facilities of the corporation.

 (e) If commitments to acquire firm transportation capacity for the in-state natural gas pipeline are received in an open season conducted by the corporation, the corporation shall, within 10 days after accepting and executing the written commitments received during the open season, report the results of the open season to the president of the senate and the speaker of the house of representatives and inform the public of the results of the open season through publication on the Internet website of the corporation and in a press release or other announcement to the media. The results made public must include the name of each prospective shipper, the amount of capacity allocated, and the period of the commitment. If the corporation determines that the commitments received during the open season are not sufficient to permit the corporation to continue the development or construction of the natural gas pipeline, the corporation shall report that to the legislature within 30 days.

 (f) [Repealed, § 71 ch 14 SLA 2014.]
 (g) The power in (a)(23) of this section may not be exercised by an entity or subsidiary of the corporation that is advancing the development of an in-state natural gas pipeline.




Sec. 31.25.090. Confidentiality; interagency cooperation.
 (a) The corporation shall have access to information of departments, agencies, and public corporations of the state that is directly related to the planning, financing, development, acquisition, maintenance, construction, or operation of an in-state natural gas pipeline. The corporation shall avoid duplicating studies, plans, and designs that have already been provided or obtained by other state entities. All departments, agencies, and public corporations of the state shall cooperate with and shall provide information, services, and facilities to the corporation upon its request and, except for requests from the Alaska Gasline Inducement Act coordinator appointed under AS 43.90.250, give priority to processing authorization applications and other requests of the corporation.

 (b) Upon request by the corporation, a state entity shall provide water, sand and gravel, other nonhydrocarbon natural resources, and a permit or a lease to the corporation at the usual and customary rates, except as provided in (d) of this section. Review of and action on a request shall be conducted and taken as provided in AS 38.34.020. In this subsection, “state entity” means a state department, authority, or other administrative unit of the executive branch of state government, a public university, or a public corporation of the state.

 (c) That part of the cost of providing, under (b) of this section, water, sand and gravel, or other nonhydrocarbon natural resources, or of entering into a lease or issuing a permit, that is borne by the corporation for an in-state natural gas pipeline project that is owned in whole or in part by the corporation may not be included in the rate base in a proceeding under AS 42 or before the Federal Energy Regulatory Commission.

 (d) Notwithstanding any contrary provision of law, the Department of Natural Resources shall grant the corporation a right-of-way lease under AS 38.35 for the gas pipeline transportation corridor at no appraisal or rental cost if
     (1) a complete right-of-way lease application under AS 38.35.050 is submitted;

     (2) the lease application is made the subject of notice and other reasonable and appropriate publication requirements under AS 38.35.070; and

     (3) the corporation submits the application for the right-of-way lease and agrees to be bound by those right-of-way lease covenants set out in
          (A) AS 38.35.120 for an in-state natural gas pipeline that the corporation intends to be a common carrier; or

          (B) AS 38.35.121 for an in-state natural gas pipeline that the corporation intends to be a contract carrier.

 (e) After approval by the commissioner of natural resources, a right-of-way lease received by the corporation under (d) of this section may be transferred to a successor in interest under the same terms and conditions applicable to the right-of-way lease granted to the corporation.

 (f) The corporation may enter into confidentiality agreements necessary to acquire or provide information to carry out its functions. If a state agency determines that a law or provision of a contract to which the state agency is a party requires the state agency to preserve the confidentiality of the information and that delivering the information to the corporation would violate the confidentiality provision of that law or contract, the state agency shall
     (1) identify the applicable law or contract provision to the corporation; and

     (2) obtain the consent of the person who has the right to waive the confidentiality of the information under the applicable law or contract provision before the state agency transfers the information to the corporation.

 (g) The portions of records containing information acquired or provided by the corporation under a confidentiality agreement are not subject to AS 40.25.100 — 40.25.295. The corporation may enter into confidentiality agreements with a public agency, as defined in AS 40.25.220, to allow release of confidential information. The portions of the records and files of a public agency bound by a confidentiality agreement that reflect, incorporate, or analyze information subject to a confidentiality agreement under this subsection are not public records. Confidentiality agreements entered into under this subsection are valid and binding against all parties in accordance with the terms of the confidentiality agreement.

 (h) Information and trade secrets of the corporation are confidential and not subject to AS 40.25.100 — 40.25.295 if the corporation determines that disclosure would cause commercial or competitive harm or damage to the corporation. Information that discloses the particulars of a business or the affairs of a private enterprise, investor, advisor, consultant, counsel, or manager that is developed or obtained by the corporation and related to the development, financing, construction, or operation of an in-state natural gas pipeline project by the corporation is confidential and not subject to AS 40.25.100 — 40.25.295. The corporation may waive the confidentiality described in this subsection, except for information that is confidential under another provision of state law or under a federal law or regulation and except for information acquired from another person that is subject to a confidentiality agreement, if the waiver is consistent with the interests of the state and will facilitate the development, financing, or construction of an in-state natural gas pipeline. On the date that the in-state natural gas pipeline project becomes operational, the corporation shall make available, upon request under AS 40.25.100 — 40.25.295, records that were exempt from AS 40.25.100 — 40.25.295 under this subsection or (g) of this section, unless the corporation determines that
     (1) maintaining the confidentiality of the information is necessary to protect the economic interests of the corporation or the state; or

     (2) disclosure of the information will violate another provision of state law, a federal law or regulation, or the terms of a confidentiality agreement or other agreement to which the corporation is a party or that is binding on the corporation.

 (i) Subject to limitations on the disclosure of confidential information in (g) and (h) of this section, the corporation shall provide to the commissioner of natural resources and the commissioner of revenue access to information that is related to the development of contracts under AS 38.05.020(b)(10) and (11).




Sec. 31.25.100. In-state natural gas pipeline fund.
The in-state natural gas pipeline fund is established in the corporation and consists of money appropriated to it. The corporation shall determine fund management and may contract with the Department of Revenue for fund management. Unless otherwise provided by law, money appropriated to the fund lapses into the general fund on the day this section is repealed. Interest and other income received on money in the fund shall be separately accounted for and may be appropriated to the fund. The corporation may use money appropriated to the fund without further appropriation for the cost of managing the fund and for the planning, financing, development, acquisition, maintenance, construction, and operation of the in-state natural gas pipeline described in AS 31.25.005(4) and for the purposes in AS 31.25.005(4), (6), and (7).


Sec. 31.25.110. Alaska liquefied natural gas project fund.
The Alaska liquefied natural gas project fund is established in the corporation and consists of money appropriated to it. The corporation shall determine fund management and may contract with the Department of Revenue for fund management. If money is appropriated to the fund to finance the cost of an Alaska liquefied natural gas project, the corporation shall create an account in the fund for that purpose and hold the money appropriated for that purpose in that account. Interest and other income received on money in the fund shall be separately accounted for and may be appropriated to the fund. The corporation may use money appropriated to the fund without further appropriation for the purpose of managing the fund, for purposes related to an Alaska liquefied natural gas project, and for the purpose of transferring net revenue received by the corporation related to equity interests, contracts, and other activities to the appropriate fund of the state as determined by the commissioner of revenue in consultation with the commissioner of natural resources.


Sec. 31.25.120. Creation of subsidiaries.
The corporation may create subsidiary corporations for the purpose of developing, constructing, operating, and financing in-state natural gas pipeline projects or other transportation mechanisms; for the purpose of aiding in the development, construction, operation, and financing of in-state natural gas pipeline projects; or for the purpose of acquiring natural gas from the North Slope, and natural gas from other regions of the state, including the state’s outer continental shelf, and making that natural gas available to markets in the state, including the delivery of natural gas, including propane and other hydrocarbons associated with natural gas other than oil, to coastal communities in the state, or for export. Subject to the limitations for the use of money appropriated to the in-state natural gas pipeline fund (AS 31.25.100) and the Alaska liquefied natural gas project fund (AS 31.25.110), the corporation may transfer assets of the corporation to a subsidiary created under this section. A subsidiary created under this section may borrow money and issue bonds as evidence of that borrowing and has all the powers of the corporation that the corporation grants to it. Unless otherwise provided by the corporation, the debts, liabilities, and obligations of a subsidiary corporation created under this section are not the debts, liabilities, or obligations of the corporation.


Sec. 31.25.130. Administrative procedure; regulations.
 (a) Except for AS 44.62.310 — 44.62.319 (Open Meetings Act), AS 44.62 (Administrative Procedure Act) does not apply to this chapter. The corporation shall make available to members of the public copies of the regulations adopted under (b) — (e) of this section. Within 45 days after adoption, the chair of the board shall submit a regulation adopted under (b) — (e) of this section to the chair of the Administrative Regulation Review Committee under AS 24.20.400 — 24.20.460.

 (b) The board may adopt regulations by motion or by resolution or in another manner permitted by its bylaws.

 (c) The board may adopt regulations to carry out the purposes of this chapter.

 (d) Except as provided in (e) of this section, at least 15 days before the adoption, amendment, or repeal of a regulation, the board shall give public notice of the proposed action by posting notice on the corporation’s Internet website and on the Alaska Online Public Notice System and by mailing a copy of the notice to every person who has filed a request for notice of proposed regulations with the board or the corporation. The public notice must include a statement of the time, place, and nature of the proceedings for the adoption, amendment, or repeal of the regulation and must include an informative summary of the proposed subject of the regulation. On the date and at the time and place designated in the notice, the board shall give each interested person or an authorized representative, or both, the opportunity to present statements, arguments, or contentions in writing and shall give members of the public an opportunity to present oral statements, arguments, or contentions for a total period of at least one hour. The board shall consider all relevant matter presented to it before adopting, amending, or repealing a regulation. At a hearing under this subsection, the board may continue or postpone the hearing to a time and place that it determines. A regulation that is adopted, or its amendment or repeal, may vary in content from the informative summary specified in this subsection if the subject matter of the regulation, or its amendment or repeal, remains the same and the original notice was written to ensure that members of the public are reasonably notified of the proposed subject of the board’s action in order for them to determine whether their interests could be affected by the board’s action on that subject.

 (e) A regulation or order of repeal may be adopted as an emergency regulation or order of repeal if the board makes a finding in its order of adoption or repeal, including a statement of the facts that constitute the emergency, that the adoption of the regulation or order of repeal is necessary for the immediate preservation of the orderly operation of the corporation’s bonding programs. Upon adoption of an emergency regulation, the board shall, within 10 days after adoption, give notice of the adoption in accordance with (d) of this section. An emergency regulation adopted under this subsection does not remain in effect more than 120 days unless the board complies with (d) of this section during the 120-day period.

 (f) A regulation adopted under (b) — (e) of this section becomes effective immediately upon its adoption by the board, unless otherwise specifically provided by the order of adoption.




Sec. 31.25.140. Exemption from the State Procurement Code; application of the Executive Budget Act; corporation finances.
 (a) The corporation and its subsidiaries are exempt from the provisions of AS 36.30 (State Procurement Code).

 (b) The operating budget of the corporation and a subsidiary of the corporation are subject to AS 37.07 (Executive Budget Act).

 (c) To further ensure effective budgetary decision making by the legislature, the board shall
     (1) annually review the corporation’s assets, including the assets of the in-state natural gas pipeline fund under AS 31.25.100 and the Alaska liquefied natural gas project fund under AS 31.25.110, to determine whether assets of the corporation exceed an amount required to fulfill the purposes of the corporation as defined in this chapter; in making its review, the board shall determine whether, and to what extent, assets in excess of the amount required to fulfill the purposes of the corporation during the next fiscal year are available without
          (A) breaching an agreement entered into by the corporation;

          (B) materially impairing the operations or financial integrity of the corporation; or

          (C) materially affecting the ability of the corporation to fulfill the purposes of the corporation as defined in this chapter;

     (2) specifically identify in the corporation’s assets the amounts that the board believes are necessary to meet the requirements of (1)(C) of this subsection; and

     (3) present to the legislature by January 10 of each year a complete accounting of all assets of the corporation, including assets of the in-state natural gas pipeline fund under AS 31.25.100 and the Alaska liquefied natural gas project fund under AS 31.25.110, and a report of the review and determination made under (1) and (2) of this subsection; the accounting shall be audited by an independent outside auditor.




Article 2. Bonds and Notes.


Sec. 31.25.160. Bonds and notes.
 (a) The corporation may, by resolution, issue bonds and bond anticipation notes to provide funds to carry out its purposes.

 (b) The principal of and interest on the bonds or notes are payable from corporation funds. Bond anticipation notes may be payable from the proceeds of the sale of bonds or from the proceeds of sale of other bond anticipation notes or, in the event bond or bond anticipation note proceeds are not available, from other funds or assets of the corporation. Bonds or notes may be additionally secured by a pledge of a grant or contribution from the federal government, or a corporation, association, institution, or person, or a pledge of money, income, or revenue of the corporation from any source.

 (c) Bonds or bond anticipation notes may be issued in one or more series and shall be dated, bear interest at the rate or rates a year or within the maximum rate, be in the denomination, be in the form, either coupon or registered, carry the conversion or registration provisions, have the rank or priority, be executed in the manner and form, be payable from the sources in the medium of payment and place or places within or outside the state, be subject to authentication by a trustee or fiscal agent, and be subject to the terms of redemption with or without premium, as the resolution of the corporation may provide. Bond anticipation notes shall mature at the time or times that are determined by the corporation. Bonds shall mature at a time, not exceeding 50 years from their date, that is determined by the corporation. Before the preparation of definitive bonds or bond anticipation notes, the corporation may issue interim receipts or temporary bonds or bond anticipation notes, with or without coupons, exchangeable for bonds or bond anticipation notes when the definitive bonds or bond anticipation notes have been executed and are available for delivery.

 (d) Bonds or bond anticipation notes may be sold in the manner and on the terms the corporation determines.

 (e) If an officer whose signature or a facsimile of whose signature appears on bonds or notes or coupons attached to them ceases to be an officer before the delivery of the bond, note, or coupon, the signature or facsimile is valid the same as if the officer had remained in office until delivery.

 (f) In a resolution of the corporation authorizing or relating to the issuance of bonds or bond anticipation notes, the corporation has power by provisions in the resolution that will constitute covenants of the corporation and contracts with the holders of the bonds or bond anticipation notes
     (1) to pledge to a payment or purpose all or a part of its revenue to which its right then exists or may thereafter come into existence the money derived from the revenue and the proceeds of the bonds or notes;

     (2) to covenant against pledging all or a part of its revenue or against permitting or suffering a lien on the revenue of its property;

     (3) to covenant as to the use and disposition of payments of principal or interest received by the corporation on investments held by the corporation;

     (4) to covenant as to establishment of reserves or sinking funds and the making of provision for and the regulation and disposition of the reserves or sinking funds;

     (5) to covenant with respect to or against limitations on a right to sell or otherwise dispose of property of any kind;

     (6) to covenant as to bonds and notes to be issued, and their limitations, terms, and condition, and as to the custody, application, and disposition of the proceeds of the bonds and notes;

     (7) to covenant as to the issuance of additional bonds or notes or as to limitations on the issuance of additional bonds or notes and the incurring of other debts;

     (8) to covenant as to the payment of the principal of or interest on the bonds or notes, as to the sources and methods of the payment, as to the rank or priority of the bonds or notes with respect to a lien or security, or as to the acceleration of the maturity of the bonds or notes;

     (9) to provide for the replacement of lost, stolen, destroyed, or mutilated bonds or notes;

     (10) to covenant against extending the time for the payment of bonds or notes or interest on the bonds or notes;

     (11) to covenant as to the redemption of bonds or notes and privileges of their exchange for other bonds or notes of the corporation;

     (12) to covenant to create or authorize the creation of special funds of money to be held in pledge or otherwise for operating expenses, payment or redemption of bonds or notes, reserves, or other purposes, and as to the use and disposition of the money held in the funds;

     (13) to establish the procedure, if any, by which the terms of a contract or covenant with or for the benefit of the holders of bonds or notes may be amended or abrogated, the amount of bonds or notes the holders of which must consent to amendment or abrogation, and the manner in which the consent may be given;

     (14) to covenant as to the custody of any of its properties or investments, the safekeeping and insurance of its properties or investments, and the use and disposition of insurance money;

     (15) to covenant as to the time or manner of enforcement or restraint from enforcement of any rights of the corporation arising by reason of or with respect to nonpayment or violation of the terms of an agreement to which the corporation is a party or with respect to which the corporation has enforcement rights;

     (16) to provide for the rights, liabilities, powers, and duties arising upon the breach of a covenant, condition, or obligation, and to prescribe the events of default and the terms and conditions on which any or all of the bonds, notes, or other obligations of the corporation become or may be declared due and payable before maturity and the terms and conditions on which a declaration and its consequences may be waived;

     (17) to vest in a trustee or trustees within or outside the state the property, rights, powers, and duties in trust as the corporation may determine, which may include any or all of the rights, powers, and duties of a trustee appointed by the holders of the bonds or notes, and to limit or abrogate the right of the holders of the bonds or notes of the corporation to appoint a trustee under this chapter or limit the rights, powers, and duties of the trustee;

     (18) to pay the costs or expenses incident to the enforcement of the bonds or notes or of the provisions of the resolution or of a covenant or agreement of the corporation with the holders of its bonds or notes;

     (19) to agree with a corporate trustee, which may be a trust company or bank having the powers of a trust company within or outside the state, as to the pledging or assigning of revenue or funds to which or in which the corporation has any rights or interest; the agreement may further provide for other rights and remedies exercisable by the trustee as may be proper for the protection of the holders of the bonds or notes of the corporation and not otherwise in violation of law and may provide for the restriction of the rights of an individual holder of bonds or notes of the corporation;

     (20) to appoint and provide for the duties and obligations of any paying agent or paying agents, or other fiduciaries as the resolution may provide within or outside the state;

     (21) to limit the rights of the holders of the bonds or notes to enforce a pledge or covenant securing bonds or notes;

     (22) to make covenants other than and in addition to the covenants expressly authorized in this section, of like or different character, and to make covenants to do or refrain from doing acts and things as may be necessary, or as may be convenient and desirable, to better secure bonds or notes or that, in the absolute discretion of the corporation, would tend to make bonds or notes more marketable, notwithstanding that the covenants, acts, or things may not be enumerated in this section.




Sec. 31.25.170. Independent financial advisor.
In negotiating the sale of bonds or bond anticipation notes to an underwriter, the corporation may retain a financial advisor. A financial advisor retained under this section must be independent from the underwriter.


Sec. 31.25.180. Validity of pledge.
The pledge of assets or revenue of the corporation to the payment of the principal of or interest on an obligation of the corporation is valid and binding from the time the pledge is made, and the assets or revenue are immediately subject to the lien of the pledge without physical delivery or further act. The lien of the pledge is valid and binding against all parties having claims of any kind in tort, contract, or otherwise against the corporation, regardless of whether those parties have notice of the lien of the pledge. This section does not prohibit the corporation from selling assets subject to a pledge, except that the sale may be restricted by the trust agreement or resolution providing for the issuance of the obligations.


Sec. 31.25.190. Capital reserve funds.
 (a) The corporation may not establish a capital reserve fund as described in this section except as expressly authorized by law. The enactment of this section does not express that authorization. Upon enactment of a law expressly authorizing the establishment of a capital reserve fund described in this section and for the purpose of securing one or more issues of its obligations, the corporation may establish one or more special funds, called “capital reserve funds,” and shall pay into those capital reserve funds
     (1) money appropriated and made available by the state for the purpose of any of those funds;

     (2) proceeds of the sale of its obligations, to the extent provided in the resolution or resolutions of the corporation authorizing their issuance; and

     (3) other money that may be made available to the corporation for the purposes of those funds from another source.

 (b) All money held in a capital reserve fund, except as provided in this section, shall be used as required, solely for the payment of the principal of obligations or of the sinking fund payments with respect to those obligations; the purchase or redemption of obligations; the payment of interest on obligations; or the payment of a redemption premium required to be paid when those obligations are redeemed before maturity. However, money in a fund may not, at any time, be withdrawn from the fund in an amount that would reduce the amount of that fund to less than the capital reserve requirement set out in (c) of this section, except for the purpose of making, with respect to those obligations, payment, when due, of principal, interest, redemption premiums, and the sinking fund payments for the payment of which other money of the corporation is not available. Income or interest earned by, or increment to, a capital reserve fund, because of the investment of the fund or other amounts in it, may be transferred by the corporation to other funds or accounts of the corporation to the extent that the transfer does not reduce the amount of the capital reserve fund below the capital reserve fund requirement.

 (c) If the corporation decides to issue obligations secured by a capital reserve fund, the obligations may not be issued if the amount in the capital reserve fund is less than a percentage, not exceeding 10 percent of the principal amount of all of those obligations secured by that capital reserve fund then to be issued and then outstanding in accordance with their terms, as may be established by resolution of the corporation (called the “capital reserve fund requirement”), unless the corporation, at the time of issuance of the obligations, deposits in the capital reserve fund from the proceeds of the obligations to be issued or from other sources an amount that, together with the amount then in the fund, would not be less than the capital reserve fund requirement.

 (d) In computing the amount of a capital reserve fund for the purpose of this section, securities in which all or a portion of the funds are invested shall be valued at par or, if purchased at less than par, at amortized costs as the term is defined by resolution of the corporation authorizing the issue of the obligations, or by some other reasonable method established by the corporation by resolution. Valuation on a particular date shall include the amount of interest earned or accrued to that date.

 (e) The chair of the corporation shall annually, not later than January 2, make and deliver to the governor and chairs of the house and senate finance committees a certificate stating the sum, if any, required to restore a capital reserve fund to the capital reserve fund requirement. The legislature may appropriate that sum, and the corporation shall deposit all sums appropriated by the legislature during the then current fiscal year for the restoration in the proper capital reserve fund. Nothing in this section creates a debt or liability of the state.




Sec. 31.25.200. Remedies.
A holder of obligations or coupons attached to them issued under this chapter, and a trustee under a trust agreement or resolution authorizing the issuance of the obligations, except as restricted by a trust agreement or resolution, either at law or in equity,
     (1) may enforce all rights granted under this chapter, under the trust agreement or resolution, or under another contract executed by the corporation under this chapter; and

     (2) may enforce and compel the performance of all duties required by this chapter or by the trust agreement or resolution to be performed by the corporation or by an officer of the corporation.




Sec. 31.25.210. Negotiable instruments.
All obligations and interest coupons attached to them are negotiable instruments under the laws of this state, subject only to applicable provisions for registration.


Sec. 31.25.220. Obligations eligible for investment.
Obligations issued under this chapter are securities in which all public officers and public bodies of the state and its political subdivisions and all insurance companies, trust companies, banking associations, investment companies, executors, administrators, trustees, and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them. Those obligations may be deposited with a state or municipal officer of an agency or political subdivision of the state for any purpose for which the deposit of bonds, notes, or obligations of the state is authorized by law.


Sec. 31.25.230. Refunding obligations.
 (a) The corporation may provide for the issuance of refunding obligations for the purpose of refunding obligations then outstanding that have been issued under this chapter, including the payment of the redemption premium on them and interest accrued or to accrue to the date of redemption of the obligations. The issuance of the obligations, the maturities and other details of them, the rights of the holders of them, and the rights, duties, and obligations of the corporation with respect to them are governed by the provisions of this chapter that relate to the issuance of obligations, insofar as those provisions may be appropriate.

 (b) Refunding obligations may be sold or exchanged for outstanding obligations issued under this chapter, and, if sold, the proceeds may be applied, in addition to other authorized purposes, to the purchase, redemption, or payment of the outstanding obligations.




Sec. 31.25.240. Credit of state not pledged.
 (a) Obligations issued under this chapter do not constitute a debt, liability, or obligation of the state or of a political subdivision of the state or a pledge of the faith and credit of the state or of a political subdivision of the state but are payable solely from the revenue or assets of the corporation. Each obligation issued under this chapter shall contain on its face a statement that the corporation is not obligated to pay the obligation or the interest on the obligation except from the revenue or assets of the corporation and that neither the faith and credit nor the taxing power of the state or of any political subdivision of the state is pledged to the payment of the principal of or the interest on the obligation. This subsection applies to all debt, obligations, and liabilities of the corporation regardless of how the debt, obligations, or liabilities are created, including by contract, tort, or bond or note issuance. Except as provided in this subsection, a person may not bring suit against the state or a political subdivision of the state other than the corporation in the courts of the state to enforce or seek a remedy with respect to a debt, obligation, or liability of the corporation.

 (b) Expenses incurred by the corporation in carrying out the provisions of this chapter are payable from funds provided under this chapter, and liability may not be incurred by the corporation in excess of those funds.




Article 3. General Provisions.


Sec. 31.25.250. Limitation on personal liability.
A member of the board or other officer of the corporation or a subsidiary of the corporation is not subject to personal liability or accountability because the member or officer executed or issued an obligation.


Sec. 31.25.260. Tax exemption.
 (a) The exercise of the powers granted by this chapter is, in all respects, for the benefit of the people of the state, for their well-being and prosperity, and for the improvement of their social and economic conditions, and the corporation is not required to pay a tax or assessment on any property owned by the corporation under the provisions of this chapter or on the income from it, including state taxes levied or authorized under AS 43.56.010(a) and municipal taxes under AS 43.56.010(b) as provided in AS 43.56.020.

 (b) All obligations issued under this chapter are declared to be issued by a body corporate and public of the state and for an essential public and governmental purpose, and the obligations, and the interest and income on and from the obligations, and all fees, charges, funds, revenue, income, and other money pledged or available to pay or secure the payment of the obligations, or interest on the obligations, are exempt from taxation except for transfer, inheritance, and estate taxes.




Sec. 31.25.270. Annual report; final report.
 (a) The corporation shall prepare and transmit annually a report to the governor accounting for the efficient discharge of all responsibility assigned by law or by directive to the corporation. The corporation shall notify the legislature that the report is available.

 (b) By January 10 of each year, the board shall prepare a report of the corporation. The board shall notify the governor and the legislature that the report is available, and publish notice to the public on the Alaska Online Public Notice System under AS 44.62.175 that the report is available on the corporation’s Internet website. The report shall be written in easily understandable language. The report must include a financial statement audited by an independent outside auditor and any other information the board believes would be of interest to the governor, the legislature, and the public. The annual income statement and balance sheet of the corporation shall be published on the Internet. The board may also publish electronically or in print, at the corporation’s discretion, other reports it considers desirable to carry out its purpose.

 (c) After a decision of the corporation to dissolve under AS 31.25.010, the corporation shall provide a final report to the governor, the legislature, and the public that summarizes the reasons for the dissolution of the corporation and a statement by an independent outside auditor that the corporation and the subsidiaries of the corporation, if any, have no bonds, notes, or other obligations outstanding.




Sec. 31.25.390. Definitions.
In this chapter, unless the context clearly indicates a different meaning,
     (1) “Alaska liquefied natural gas project” means a natural gas project as described in AS 31.25.005(5) that includes collectively, the Prudhoe Bay unit gas transmission line, the Point Thomson unit gas transmission line, a gas pipeline, the gas treatment plant, a liquefied natural gas plant, and a marine terminal; in this paragraph,
          (A) “gas pipeline”
               (i) means the main natural gas pipeline from the outlet flange of the gas treatment plant on the North Slope to the inlet flange of the liquefied natural gas plant located in the Southcentral region of the state, which shall have offtake points along the pipeline for deliveries of gas in the state;

               (ii) does not include any gas lines downstream of any offtake point between the gas treatment plant and the liquefied natural gas plant;

          (B) “gas treatment plant” means those facilities and related activities required to receive natural gas from the Prudhoe Bay unit gas transmission line, the Point Thomson unit gas transmission line, and other facilities, treat the natural gas to pipeline specifications, dispose of or deliver by-products, deliver liquid products for further transportation, and deliver treated natural gas for transportation through the gas pipeline;

          (C) “liquefied natural gas plant” means the facility for liquefying natural gas and includes structures, equipment, underlying land rights, other associated systems, storage, and facilities for off-loading liquefied natural gas;

          (D) “marine terminal” means the terminal and those facilities required to receive liquefied natural gas from the boundary of the liquefied natural gas plant for marine transportation, including auxiliary vessels used in the operation of the terminal;

          (E) “Point Thomson unit gas transmission line” means a natural gas transmission line from the outlet flange of the Point Thomson unit production facility to the inlet flange of the gas treatment plant; and

          (F) “Prudhoe Bay unit gas transmission line” means a natural gas transmission line from the outlet flange of the Prudhoe Bay unit central gas facility to the inlet flange of the gas treatment plant;

     (2) “board” means the board of directors of the corporation;

     (3) “bond” or “obligation” means a bond, bond anticipation note, or other note of the corporation authorized to be issued by the corporation under this chapter;

     (4) “corporation” means the Alaska Gasline Development Corporation;

     (5) “governmental agency” means a department, division, public agency, political subdivision, or other public instrumentality of the state or the federal government;

     (6) “in-state natural gas pipeline” means a natural gas pipeline for transporting natural gas in the state;

     (7) “natural gas pipeline” means a total system of pipe and connected facilities for the transportation, treatment or conditioning, delivery, storage, or further transportation of natural gas, including all pipe, compressor stations, station equipment, and all other facilities used or necessary for an integral line of pipe to carry out the transportation of the natural gas.




Chapter 30. Miscellaneous Provisions.

Sec. 31.30.010. Damages for wrongful extraction of oil or gas.
 (a) If oil or gas has been or is extracted from any existing or subsequently drilled well by any person without right but who asserts a claim of right in good faith or who is acting under an honest belief as to the law or the facts, the measure of damages, if there is any right of recovery under existing law, shall be the value of the oil or gas at the time of extraction, without interest, after deducting all costs of development, operation, and production. The costs shall include taxes and interest on all expenditures from the date of the expenditures.

 (b) In this section “oil or gas” includes all hydrocarbon minerals.




Secs. 31.30.040 — 31.30.070. Gas pipeline impact committee. [Repealed, § 4 ch 170 SLA 1975.]

Title 32. Partnership.