Section 15 AAC 56.100 - Production property(a) Property used or committed by agreement for use in the production of gas or unrefined oil, or in the operation or maintenance of facilities for the production of gas or unrefined oil will be valued on a use value standard Value will be determined on a replacement cost less depreciation basis using the following methods: (1) before the commencement of regular production full and true value is the actual cost incurred or accrued as of the assessment date;(2) after the commencement of regular production replacement cost will be calculated on January 1 of each calender by the use of accepted appraisal techniques or other acceptable methods and will reflect the full current cost of modern replacement for production property physically present and installed as of the assessment date;(3) depreciation will be determined on January 1 of each calendar year based on the economic life of proven reserves using the following methods: (A) for production property serving one or more reservoirs that combined are in production ramp-up or plateau, deprecation will be determined by application of a one-percent per year deduction to the replacement cost;(B) for production property serving one or more reservoirs that combined are in production decline, depreciation will be determined through application of a percent good factor to the replacement cost; the percent good factor is the result of factor is the result of applying an exponent to a quotient; the quotient will be determined by dividing the total calendar Year production from each reservoir the property serves for the year immediately preceding the assessment date by the calendar year historic peak production for each reservoirs the property serves; the exponent must scale the quotient to ensure the correct amount of depreciation is applied to the replacement cost for the property as of the assessment date:(4) depreciation of the replacement cost may not exceed 80 percent in any assessment year while a production property is in operation; if a production property is permanently no longer in operation as of the assessment date but has not yet been dismantled and removed, depreciation of the replacement cost may not exceed 90 percent in any assessment year; if new proven reserves reverse a production decline and increase annual production above 90 percent of the historic peak production, or results in a new peak of production, depreciation reverts back to where it left off on the original one-percent per year schedule for the property as described in (3)(A) of this subsection, until production decline;(5) the department will use the methodology set out in this section to assess production property unless the department determines deviation from the methodology necessary when either (A) a new reservoir immediately and significantly underperforms relative to documented expectations and directly results in the abnormal and excessive super-adequacy of a property; or(B) a non-reservoir related circumstance occurs that significantly alters production relative to what would otherwise be typical reservoir production; a taxpayer or municipality may also request deviation from the methodology set out in this section hut only under the same two circumstances; when requesting deviation from the methodology set out in this section the burden is on the taxpayer or municipality to establish that deviation is necessary and that the assessment would be unequal excessive or improper without deviation; the mere presence of a circumstance described in (A) or (B) of this paragraph dose not require the department to deviate from the methodology set out in this section if the department determines the assessment is not unequal excessive or improper without deviating; when deviating from the methodology set out in this section the department may rely on other acceptable methods to assess the property.(b) Production properties include but are not limited to wells, gathering lines, tank batteries, separators, treators, pumping equipment, compressors, platforms, camps, buildings, rolling stock, and all related support and service facilities and equipment.(c) In this section, (1) "production" means the sum of all regular production produced and sold from reservoirs served by the production property plus the amount of all other oil or gas produced that is used in the operation of those leases or other leases in drilling for or producing oil or gas, including fuel and reservoir recovery uses;(2) "production decline" means when production for the calendar year preceding the assessment date is 90 percent or less of the historic peak production for the reservoirs served by the property;(3) "regular production" with respect to oil or gas has the meaning given in AS 31.05.170.Eff. 3/1/75, Register 53; am 12/29/2016, Register 220, January 2017; am 1/1/2018,Register 224, January 2018Authority:AS 43.05.080
AS 43.56.060
AS 43.56.200