Alaska Administrative Code › Title 15 - Revenue › Chapter 55 - Oil and Gas Production Tax and Oil Surcharge › Article 1 - Gross Value at the Point of Production of Oil and Gas › 15 AAC 55.141 - Methodology for calculating certain gas processing cost deductions

Current through May 31, 2024
(a) For gas
				processed in a downstream gas plant for which the processing cost deduction is
				calculated under this section, the applicable processing cost deduction is
				based on the downstream gas plant's actual and reasonable, directly allocable
				and attributable processing costs in the form of operating and maintenance
				expense, overhead, depreciation, and a return on undepreciated capital
				investment as provided in (c) of this section. Allowable capital costs are the
				original costs for depreciable fixed assets, including costs of delivery and
				installation of capital equipment that is an integral part of the
				plant.
(b) To compute depreciation
				for the purposes of this section, the producer shall use straight-line
				depreciation based on the economic life of the downstream gas plant. A change
				in ownership of a plant does not alter the depreciation schedule established by
				the original processor or producer for purposes of calculating a processing
				cost deduction under this section. Notwithstanding a change in ownership, a
				downstream gas plant may only be depreciated once. Equipment may not be
				depreciated below a reasonable, positive salvage value.
(c) Each February, the department will
				determine and publish the prevailing yield during the preceding January on
				corporate bonds whose relevant characteristics are comparable to those for
				which Moody's Investor Services, Inc., published its Moody's Seasoned Baa
				Corporate Bond Yield - All Industries for January 2010. The prevailing yield
				published by the department is the rate of return for purposes of calculating
				the return for that calendar year on undepreciated capital investment under (a)
				of this section.
(d) For a new
				downstream gas plant, the producer shall include in its initial processing cost
				deduction estimates of the directly allocable gas processing costs allowed
				under (a) of this section for the applicable period. The producer shall base
				cost estimates upon the most recently available operations data for the plant;
				if these data are not available, the producer shall base cost estimates upon
				industry data for similar downstream gas plants. To the extent a processing
				cost deduction is based on estimates, the deduction must be revised after
				actual costs are known.
(e) The
				billing determinant to be used in calculating a processing cost deduction under
				this section is throughput for the downstream gas plant.
(f) A reasonable share of overhead directly
				allocable and attributable to the operation and maintenance of a downstream gas
				plant is an allowable operating expense for purposes of this section.
(g) A producer may not include the following
				capital costs in determining a processing cost deduction under this section:
(1) a cost for a capital improvement or
				equipment that is not an integral part of the downstream processing
				plant;
(2) nondepreciable property,
				including land and a pipeline right-of-way;
(3) a facility used to store, deliver, or
				otherwise dispose of residue gas or gas plant products after
				extraction.