Opinion ID: 1119416
Heading Depth: 3
Heading Rank: 6

Heading: UCM's Interpretation of Adjusted Gross Value

Text: UCM argues that DNR erred in deciding that payments received by UCM from its customers for federal black lung taxes, federal AML reclamation fees, state royalties, and Denali Borough severance taxes are part of the adjusted gross value of UCM's coal within the meaning of 11 AAC 85.220. The State counters that DNR's interpretation of adjusted gross value as used in 11 AAC 85.220 is reasonable and should be upheld. DNR's interpretation of 11 AAC 82.225 is reviewed under the reasonable basis standard. Handley v. State, Dep't of Revenue, 838 P.2d 1231, 1233 (Alaska 1992). [W]here an agency interprets its own regulation ... a deferential standard of review properly recognizes that the agency is best able to discern its intent in promulgating the regulation at issue. Id. (quoting Rose v. Commercial Fisheries Entry Comm'n, 647 P.2d 154, 161 (Alaska 1982)). The regulation provides: (a) If the coal is sold in a bona fide arm's-length transaction between independent parties, adjusted gross value is the full consideration received by the lessee minus the following costs if those costs were borne by the lessee: (1) reasonable beneficiation costs as defined in (e)(1) of this section; and (2) reasonable transportation costs from the mine mouth to the point of sale, as defined in (e)(2) of this section. 11 AAC 85.225 (1996). [22] DNR interprets full consideration received as the total payment and benefit received by UCM for the sale of the coal. This amount does not allow deductions for initial royalty, tax, and fee obligations which are later reimbursed by UCM's customers. The only deductions allowed are those for reasonable beneficiation costs and reasonable transportation costs specifically provided in the regulation. 11 AAC 85.225(a)(1)-(2) (1996). This is a reasonable interpretation of adjusted gross value. As the State correctly points out, UCM is not required to collect the royalty, taxes or fees from its purchasers. If UCM was not reimbursed for these expenses, they would presumably be reflected in the sale price of the coal. Because DNR's interpretation of its regulation defining gross value is reasonable, it did not err in denying UCM's deductions for federal black lung taxes, federal AML reclamation fees, state royalties, and Denali Borough severance taxes, in calculating adjusted gross value.