Alaska Administrative Code › Title 11 - Natural Resources › Part 3 - Oil and Gas › Chapter 25 - Royalty Election Under Alaska Gasline Inducement Act › 11 AAC 25.180 - Transportation contracts not at arm's length - Alaska mainline and Canada mainline

Current through May 31, 2024
(a) If a lessee, its marketing affiliate, or
				any affiliate other than a transportation affiliate transports qualified gas on
				the Alaska mainline or Canada mainline and that pipeline is a transportation
				affiliate, the cost of transportation must be the allowable actual and
				reasonable cost, as determined under (b) - (m) of this section,
				11 AAC 25.160, and
				11 AAC 25.210, of transportation
				provided by the pipeline that is the transportation affiliate. However, if the
				circumstances described in (n) of this section occur, the amount determined
				under that subsection must be used as the cost of transportation.
(b) If calculating allowable actual and
				reasonable cost in accordance with (b) - (m) of this section, the lessee,
				without regard to whether a pipeline is subject to the jurisdiction of the
				Federal Energy Regulatory Commission (FERC), and except as provided in (c) -
				(m) of this section, shall calculate that cost in accordance with the FERC
Cost-of-Service Rates Manual
, dated June 1999, the FERC Order
				Issuing Clarification and Granting Rehearing in Southern Natural Gas Co., 130
				FERC Para. 61,193 (Docket nos. CP09-36-002, CP09-40-001, and AD10-3-000, March
				18, 2010), and the FERC Order Granting Rehearing in Florida Gas Transmission
				Co., 130 FERC Para. 61,194 (Docket nos. CP09-17-001, AC08-161-002, and
				AD10-3-000, March 18, 2010). The FERC documents listed in this subsection are
				adopted by reference for purposes of this section, except as provided in (c) -
				(m) of this section.
(c) The cost
				of transportation under (b) - (m) of this section is determined by first
				identifying the term of years and profile for capital recovery in the
				transportation services agreement under which qualified gas is shipped. If
				those terms match the terms offered in the plan for conducting an open season
				for the Alaska mainline, the negotiated rate generated by those terms under the
				plan for conducting an open season for the Alaska mainline, as modified under
				(b) and (d) - (m) of this section, is the cost of transportation used to
				calculate the transportation allowance, unless the negotiated rate generated
				under the plan for conducting an open season for the Alaska mainline, as
				modified under (b) and (d) - (m) of this section, is greater than the amount
				determined under (n) of this section, in which case the amount determined under
				(n) of this section is the cost of transportation.
(d) If the transportation services agreement
				under which the qualified gas is shipped does not set out a profile for capital
				recovery, or sets out a term of years and profile for capital recovery other
				than one offered in the plan for conducting an open season for the Alaska
				mainline, depreciation must be calculated to recover capital investment over
				the economic life of the pipeline, and must be calculated using annual
				composite depreciation percentages that result in levelized rates over the life
				of the transportation services agreement and that recover that part of total
				capital investment that is the greater of 4/5 or the percentage that equals the
				ratio of the original term of years in the transportation services agreement to
				the economic life of the pipeline. In this calculation, the economic life must
				be the estimated useful life used to calculate the initial recourse rate for
				the pipeline.
(e) In the absence of
				long-term debt actually issued for the Alaska mainline or Canada mainline, as
				applicable, a lessee shall compute the return on the part of the capital
				investment treated as financed with long-term debt using the weighted average
				of the cost of long-term debt for the proxy group designated by the department
				under 11 AAC 25.190(j).
				After the commencement of commercial operations of the Alaska mainline or
				Canada mainline, as applicable, at least 75 percent of the capital investment
				must be treated as financed with long-term debt, unless the applicable
				transportation services agreement provides for a higher percentage debt, in
				which case the higher percentage must be used.
(f) Capital investment must be the properly
				allocable part of the lower of capital investment
(1) that would be properly reportable on FERC
				Form 2 if the pipeline were subject to FERC jurisdiction;
(2) that is prudently incurred, as determined
				by the regulatory agency with jurisdiction over the pipeline; or
(3) allowed under the applicable
				transportation services agreement.