1. (a) A lessee may not include the following costs in calculating an arm's length transportation allowance under 11 AAC 25.170 or a non-arm's length transportation allowance under 11 AAC 25.180 - 11 AAC 25.200:

   1. (1) the cost of transportation of qualified gas downstream of destination;
   2. (2) the cost of transportation of residue gas or gas plant products after processing of qualified gas is complete at destination;

   3. (3) a cost or fee incurred for storage, except that a lessee may deduct

      1. (A) a charge by a pipeline for storage for no more than 30 days if the storage is required under the applicable transportation services agreement and is necessary for pipeline operations;
      2. (B) a cost or fee for the storage as part of LNG transportation, if the fee or cost is allowed under 11 AAC 25.200;
   4. (4) an intra-hub transfer fee paid to a pipeline hub operator for administrative services, including accounting for the sale of qualified gas within a hub and title transfer tracking;
   5. (5) a fee paid to a scheduling service provider;
   6. (6) internal costs to schedule, nominate, and account for the sale or movement of qualified gas, if incurred by a lessee or its affiliate other than a transportation affiliate; those costs include salaries and related costs, rent and space costs, office equipment costs, and legal fees;
   7. (7) an aggregator or marketer fee, including a fee a lessee or its affiliate pays an affiliate or another person to market, purchase, or resell qualified gas, or find or maintain a market for qualified gas;
   8. (8) a fee paid to a broker, including a fee paid to a person that arranges marketing or transportation;

   9. (9) a penalty incurred as a shipper, including

      1. (A) an over-delivery cash-out penalty, including the difference between the price the pipeline pays for over-delivered volumes outside the tolerances and the price received for over-delivered volumes within the tolerances;
      2. (B) a scheduling penalty, including a penalty incurred for differences between daily volumes delivered into the pipeline and volumes scheduled or nominated at a receipt or delivery point;
      3. (C) an imbalance penalty, including a penalty incurred for differences between volumes delivered into the pipeline and volumes scheduled or nominated at a receipt or delivery point;
      4. (D) an operational penalty, including fees incurred for violation of the pipeline's curtailment or operational orders issued to protect the operational integrity of the pipeline;

   10. (10) the cost of pipeline transportation within the unit of production, unless

       1. (A) the pipeline is regulated by FERC or the Regulatory Commission of Alaska; or
       2. (B) for Prudhoe Bay gas covered by the 1980 Prudhoe Bay Royalty Settlement Agreement, the cost is allowed under that agreement;

   11. (11) the cost of pipeline transportation within a state unit other than the unit of production where the gas was reinjected into a reservoir, unless

       1. (A) the pipeline is regulated by FERC or the Regulatory Commission of Alaska; or
       2. (B) for Prudhoe Bay gas covered by the 1980 Prudhoe Bay Royalty Settlement Agreement, the cost is allowed under that agreement;
   12. (12) the cost of a gathering pipeline or a pipeline in the state that is not subject to regulation by FERC or the Regulatory Commission of Alaska;
   13. (13) as provided in 11 AAC 25.070(d), the cost of transporting carbon dioxide in a pipeline upstream of the Alaska mainline in excess of quantities allowed in the specification of conditions for acceptance into the Alaska mainline;
   14. (14) the cost of transporting a gas or associated substance that is not royalty-bearing, except that lessees may include in a transportation allowance the costs of transporting carbon dioxide in quantities not to exceed the quantities allowed in the specification of conditions for acceptance into the Alaska mainline;
   15. (15) other costs a lessee incurs for services it is required to provide at no cost to the state as lessor or otherwise;

   16. (16) costs of arbitration, litigation, or other dispute resolution activity that involves the state or concerns the rights or obligations

       1. (A) among owners of a transportation entity; or
       2. (B) between an owner of a transportation entity and a shipper.

2. (b) In addition to the costs set out in (a) of this section, a lessee may not include the following costs in determining a non-arm's length transportation allowance under 11 AAC 25.180 - 11 AAC 25.200:

   1. (1) payments, either volumetric or in value, for actual or theoretical losses of qualified gas;
   2. (2) costs of a surety.

(Eff. 5/29/2010, Register 194)

Authority: AS 38.05.020, AS 38.05.180, AS 43.90.310