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Home My WebLink AboutO 049 e tit Image Project Order File Cover Page XHVZE This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspection of the file. o 0 4-1 Order File Identifier Organizing (done) o Two-sided 11111111111111 \1111 RESCAN DIGITAL DATA o Color Items: o Greyscale Items: o Diskettes, No. D Other, NolType: D Poor Quality Originals: o Other: NOTES: DateC?17 }07 Date ~/11 () 7 BY: ~ Project Proofing BY: ~ Scanning Preparation BY: Date: Production Scanning o Rescan Needed 1111111111111111111 OVERSIZED (Scannable) o Maps: o Other Items Scannable by a Large Scanner OVERSIZED (Non-Scannable) o Logs of various kinds: o Other:: ú1f I,~IIIIIIIIIIIIIIIIII iì1f <i?1_ /s/ + = TOTAL PAGES (Count does not include cover sheet) /sl 1111111111111111111 Stage 1 Page Count from Scanned File: 15 ~ (Count does include cover sheet) ~YES BY: Page Count Matches Number in Scanning Preparation: ~ Date: ß17/07 If NO in stage 1, page(s) discrepancies were found: Stage 1 BY: Maria Date: Scanning is complete at this point unless rescanning is required. NO YES Isl V\1 P NO Isl /1111111111I11 II III ReScanned BY: Maria Date: Isl Comments about this file: /1111111111111 "III Quality Checked 1IIII1I111111111111 10/6/2005 Orders File Cover Page. doc . . INDEX PETITION FOR REVIEW Other 49 CPA VS TAX DIVISION, STATE OF ALASKA, DEPT OF REVENUE 1. September 11, 2006 CPA Petition for Review, CPA vs Tax Division, State of Alaska, Dept of Revenue 2. October 20, 2006 3. October 27, 2006 4. January 19,2007 5. January 23, 2007 6. February 7, 2007 Hughes Bauman Pfiffner "Freedom of Information Act Request" AOGCC response to request Judge Weeks Order ConocoPhillips Alaska, Inc.'s Notice of Judicial Review and Petition for Review Joint Motion and Order for Extension of Time to File Responses and Reply. ,....',""'~-". 'è'''~'''=r . ~._'".-~ . ~r~.~ ~_ . .'-1' . I IroNY XJ.JOW12S6. GOY$"iJOR ¡ 00 ì I I . ~ '~ ~ J.. ..;.. ~: ,. \ n j, l r r0J. Oll r.~ 11\\ ¡I lA\" ¡;\ ífi\ /;=,\ ¡L¡~\~)\ I¡\\ 1;:'\ ~ f.,;. ~v ~ "~:.,..J -.; u~u .1' ~'.-..' ;'.'- ~ -..... fr~ ìL,I~ il)} iI .~~ w fr0~-r~ fe', ~'r r? \~, It IA\ II I~ ~) II iñ\ II II..... ~- w-w.....¡.",,; '--- 55() ~VF$T 7TH AVENUE,. S!!!r= !JW A.NCHOR46!!! At.ASKA 9!l5Ct (fJfJlJ 261UJ1J2O FAX (!}Or; 269~fJ644 DEPARTl'tiENT OF REv~N{;""E TAX DIVISION M,..,,'o......h<!,.... 7 ?nn1 !!'~~~'V,~:Tt-t'·d~ f j; kVV: Mr, Dan P. Kruse Mr Mfr:haA1 (."': \Nh:.::tfau >'.,,,..,,..,,,~,,_..... '-~ -.. ..~""""'.-J Phlmrs ,Alaska, h1CO!'pO!'?!t__d P,() R~v 1ññ~Hn AnCr!Orããê~ *~K 99510~0360 Advance tv1e1twater ELF RuHno RG \^Jhatiey Th¡::, '~HAr fC "" 1"'£>~""^"'ó\'J>G:> t".... o¡..mr.......· f'"'¡...fr1h~", ~^ ?ô(1,v"'" ...1' ~Qt fC~.g.1. .,·v-'p¡ ::tr, a-1u,v' ~~-'¡l'~~ ~ . "'...... ¡,-..~....... II.... ...". t ".................. t~\O,jò "" I t tlttftJ'" '-1'\.t\.'-"U__t -v) ___ _ ,......_ ' ""'~..... -....,..." ruik,g undôr 15 Me 55.027 regarding the "Mêìtwater~ development. Phiiiíps requested mat the üepartment rule that Meltwater wm nat be aggregated with either tha Kuparuk Participating Area {KPA}, We~t Sak Participating Area Tarn Participating Area (TRP¡f\j, crTEba8~G r":\or f,.;'n~ep"'; Lt'... ¡p..,", .......Þ4 ....."..... flf&.lUUQ,WO.. ",Lt~U -=;u~v as /j¡ For /77 ¡;7-h cJ ^- (j/7/Y' !'hi /a/~ or h /~_ . . "-'""'-"·i...,... ,~,",dv~n{:;; '¥!."..~ ! U1J?!2 11 -- On August 29,2001 the Department of Natural Resources approved the operator's May 8, 2001 application for an expansion of the Unit and a new partJçJpating area to accommodate the development On August 1 ¡ 2001 the Alaska Oil and Gas Conservation Commission established pool rules for the development, The reservoir was dIscovered in March 2000 by way of three exploration penetrations, including two wells and one side-track. The discovery is a oew located in the Bermuda Sands !'if thA !arrr::,;;t!cm, .U JIf I I" ... 12-1<:1- 1 1 : ti2!"'M a"t[ I LL! PS GKÞ PROJECT~ . 307 268 8943;# 4/10 . Advance MeJtwater BLF Ruling 11107/OJ3 Page: 3 of9 ·_--.ct .. . .- Operations, the equity participation factors for the Meltwaier Devèlopment Satellite are as follows: 'I -Phillips Alaska -BPX - Unocal - Chevron - exxon-Mobil (MobU Heritage) 55.380368% 39.343756% 4.950600% 0.1086000.10 0.216676% Exxon did not participate in the Meltwater Development. Phillips estimates mat approximately 30% of MeJtvveter's r~sar..¡ss. ware Ä-;r :~",J*vf;h~',:-n:~ T~-::J:r 7T~t~;; - "","-" ,- '- "-~ -"""",. "-iF ""2,,'''; .-- E ~~ L'&"H !~~~U:i~~lf~u ~:]rf~a~th:# ~}i c ~~._ ,;. ~ ,." -,,-' iic!: -=--~~:~ ~,,"~ ~:r;~~~'fi,- ~~--~-- ~='--",,-~-~_..~ '--'~4 ",k,;.....,.....~ ~j ~)U L~C.:Ç::..,f- ",_, ;-,} ~7_ ~ i'~-~~f:; !}~ ~{J-~H_--~~~e~ - .",~. ~- ~ .f.Lf..' ."\~H.,li"" :: . . ,.~::h.;~~~~ ~~~!~~~~:- ::~: ~ r;.~~:,.~... ~ ",.,i"...,. ~ti.... ~_ ¡~¡¡.~~ ~ ~¡i "!:;j. Phillips' request of October 30, 2000 asserts that Meltwater. Kuparuk. and the other Kuparuk satellites are separate leases or properties for purposes of AS 43.55, and requests a ruling that the Departmeirt will not aggregate Meltwater with Kuparuk or those other satemtes for purposes of determining the Econornic Limit Factor ("ELF") app~k:ab!eto MeitoNatar production. As Phimps notes, adopt~d a rGgu;at~on~ 15 :i~AC ~--_.~-.._--.. ~~-,--.--~ ~-~-- - -"--- - ~ ~ - - ~ -'--~ - u&.-...;O:.i.......v~...< _.~ :,;) "'..'·_...·e CC~ -~Tlrn{~?·r; ----- - "''''.' -"~ ---~--~~~-- ----~,.-..._~-~..- . .___.....,_.____'_'__._'___'"__..."....~__...'_"m ~~. ,~~-- ~~~----- ---~- ~- -~ ~ -- ~._- ------~--~_._-~_..__.. 011 or g~~ prLJ.dUCl!L-ri !}p~~ticng ürc not CODfÜlt;û tu f~ leü~ Or pr¡)~ty" ~~~.. "'- ~....-_~-- ~....->--.,:", ---_.- .-. .-------'- - ---- ..~~~~~ ;"';>..ii -"-""-,,L; "-..i:ü-"¡::,:,,,; ; ii '; ~.. . Adv~net ~-Ae!tvr~;ate-t. ELF RuJ,lug lll07101S Page S oC9 . ." property" from Kuparuk or the othétKuparuk sateflites. Therefore, 15 AAÇ 55.027(b) is not necessarily applicable. .- Under AS 43.55, the Department starts with the conçept of a "lease or property" in determínlng the tax rate applicable to particular production. AS 43.55.990(9) defines "lease or property.. as "any right, 'title or Interest in Of the right to produce orrecover tjif and ga~L..." Tha DepafÎ.rf¡~t¡l has not ye~ aftlcuiated by reguiation ~~~.,1l~ .;;;¡ ~ &g~ ~-,=::;,'==~::rE" ~- '<;~:f-'~ £"'~ c.=-' - ----- - ~- - . .....- ~ ¡.. . . 907 269 8943;# 7/10 Adv~:n~e ~fßltw¡¡.ter ELF iWlliig 111071016 Pale 6 un .' As a rule, these pockets of oil are also too smaU to Justify building stand-alone production facilities. WhOa thére is much to be lauded In these developmeñtSf they have nevertheless prompted the Department to review the- validity of the. assumptions underlying its current approach. Until that review is complete) however, tns Department will treat fv1aJtwater in a manner consistent with Its historIc approach. That is, until it has an opportunity . '. -- '. ",... 'f - _ ",-1' -_ . r"\. _ - - _ _ -. _ ~H __ _ _ _ ~ ~ ~ ~Q ~i.S p{HJC~es. ~f'.a tJepâ.rtment ~NîH f~gafQ me appmpriat5 field t;::¡, Meltwat6f productiQri p~lrp05e5 Ff!= cono~nons~ "ŸhC¡. 'kllj'r.,..¿- Re$Cur;:JÛi~! must be fof~o~ved _~ r~e Pf~Sentatiûr¡ ~- ~ t=~i¡ tf~U.SL interva¡~ and iass than full an production d.irecfjy fnto a!1 L..;! ~.! LJ- t . 12"""10= ! 1. ~~q,rM ;~n!tJ_ iP's nKA PRO,IPcr4 ~n~ ?A~ 8913:ff B!!C e e. Advance Meltwat~r ELF RuH~,g II/07/017 Page 7 of9 '" .-.: Greater Kuparuk Allocation Condiiions This ruling Is also contingent on the following measurement and allocation. conditions which, as a further condition to this ruling. shalt apply to all pools sharing the Kuparuk River Unit (KRU) production faCt1ities. 1. Except as otherwise provided herein, the measurement and aUocation procedures established by the Alaska Oil and Gas Conservation Commission in their pco~ mias, and the approval condItIons for estabHshmant of the participating area issued by the Department Natura! However mêrè adh6rerme aB!ab¡¡~h use best U:~e~ ¥v~thQU! f\ljei~Yater d, ~~~::~art¡çiPãtlng ~CI'H Ot· 12-Hi- 1 . 1 :54PM ;PHILLIPS GKÞ PROJECT~ . 907 269 8943i# 9/10 Advance Meltwater ELF Ruling 11107/018 Pllge 8 of9 theoretical Production for that month Is 100.000 barrels. the Tam Allocated Production for June 2001 would be 101 f 121 barrels. c. If the Floating Allocation Factor for a month is greater than 1.02, the Allocated Production for the Tam~ West Sak. Tabasco. Meltwater. and any other future GKA sataDne participating areas for that month shall be the participating area's Theoretical Production for that month multiplied by an allocation factor of 1.02. The Kuparuk Allocated Production for that month shall be the difference bet\veel1 the Adjusted Total Metered KRU Production and the sum of the production aUocated to the other partIcipating areas for that month. ~ .... d Phillips. as operator, does not currentiy use this method to report volumes for the KRU. it wm start using this method for all KRU volumes effective JanuBP/1} 2002, 3. The State and Phillips acknowledge that the process of pêriodicaily testing the stream of oil, gas, water, alid impürilies from each well producing from a part!cu!ar pOD!, and then estimating from these tests the total volume of oil actually produced from that pool during a month (Theoretic-al Production), cannot match thè level of discreet accuracy achieved by continuous metering of pipeline quality oil (Adjusted Total Metered KRU Production). The State and PhUlìps al$o ackno\"Jledge it is possible for the operator, using best avaitabfe technology and best industry practices to determine Theoretica! Production without introducing a bias in the allocation to any particular participating area aUtte expense of allooation to any other participating area, and that such product!or¡ aUocatkm may appropriately distribute the difference betv/een Total K.~U Theoretical Production and Adjusted Total Metered KRU Production, The operator shan employ best technology now available and bast industry practices in Its process of alfoca.ting production to each þroducing we!! on the basis of the Theoretical Production estimated for each we!! In the KRU. The department may audit wen tasting procedures and the aflocation of producUon among pools that share the KRU production facìUtlas, The department's audIt may include, but is not iirnited to, the inspection faciìities, equipment, weil test data, process simulatIons and vûh.Jme and backpressure ~.'~ f«· c t' - . QOjUfhl1,fH'H:t" if the department concludes that the KRU production aUocation results blat; of a partictJlar partfcipatmg area (PA) at the expense of another PA. or is axces£dveiy inaccurate, the department may: for purposes of calculatIng the . ... 12-1::1- 1 . 1 : 55FM ;PHIUJPS GKA PROJECT-t . S07 269 8943;#10/10 . "'J.:.I'II DI' Advance Meltwater ELF' Wq 111071019 Page 9 of9 appropriate ELF, aggregate some or alt of the pools that Sha(9 production facilities. 2. The operator will provide the Department a monthly allocation report by the 20th day of the following month. The monthly report should Include anocation factors by pool. Individual well test data from each satellite pool, daily allocated volumes of on, gas, natural gas liquids (if any) and water from each of the satenite pools and any other Information deemed necessary by the Department. 3. The operator will provide the Deparbnent with an allocation review presentation every six months. 4. The operator will establish a primary and secondary point of contact for all technical Inquiries regarding volume allocation. Operators will notify the Department in advance of any changes in the contact personnel. This advance ruling applies prospectively. I am wllUng to discuss this decision With you at your convenience. SðJ Or y · Dan E. Dickinson Director, Tax DMsion Department of Revenue cc: Mark. Myers. DNR AOGCC BPX Exxon-Mobil Chevron Unocal [Fwd: Re: Fetition for Review FYI] <' . . Subject: [Fwd: Re: Petition for Review FYI] From: Cammy Taylor <Camille_ Taylor@law.state.ak.us> Date: Fri, 29 Sep 2006 10:29:31 -0800 To: John Norman <' hn_norman@admin.state.ak.us> CC: jody_colombi admin.state.ak.us CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE John, Ken Diemer in our office is handling this matter on the tax side. He has also agreed to keep an eye on my cases while I'm gone. Unless you feel differently, I'm inclined to let this tax matter proceed along its own course without any intervention from the commission and we'll see what the Superior Court does in response to Conoco's petition for review. Ken has not heard anything from the Superior Court regarding this matter, and will let you know if he hears anything while I'm gone. »> John Norman <John_Norman@admin.state.ak.us> 09/13/06 9:52 AM »> Here is the Petition with missing pages. John -------- Original Message -------- Subject:Re: Petition for Review FYI Date:Tue, 12 Sep 2006 16:00:29 -0800 From:Terry Thurbon <terry thurbon@admin.state.ak.us> Organization:State of Alaska To:John Norman <john norman@admin.state.ak.us> CC:Scott J Nordstrand <scott nordstrand@admin.state.ak.us>, Melanie A Millhorn <melanie millhorn@admin.state.ak.us>, Kevin A Brooks <kevin brooks@admin.state.ak.us> References: <45071 CE8. 7030405@admin.state.ak.us> <450742C8.1070 108@admin.state.ak.us> Here is the rescanned petition with all pages included. John Norman wrote: > Thank you for bringing this to our attention Terry. We will review the > matter so we can determine our position. > > Pages 3 and 6 are missing from the attachment. Would it be possible > for you to res end these pages? > > Sincerely, > John > > > > Terry Thurbon wrote: > » Scott, » » Attached is a copy of a petition for review filed by Conoco Phillips lof2 9/29/2006 11:14 AM [Fwd: Re: lktition for Review FYI] r . . » in an OAH tax case. I am sending you this FYI copy and copying John » because the dispute between the taxpayer and Revenue inplicates » AOGCC's authority as well. The taxpayer and Revenue are engaged in a » severance tax dispute regarding which tax liability depends in part » on allocation of production among different fields. The taxpayer » filed a motion asking OAH to transfer jurisdication to AOGCC. OAH » denied the motion. » » The denial does not preclude the taxpayer from disputing Revenue's » alleged differing allocation or from arguing that AOGCC's » royalty-related allocation should control any allocation Revenue has » to use in calculating tax liability. The taxpayer nevertheless » appears hesitant to adjudicate such legal issues in an administrative » appeal at the executive branch level before the agency (OAH) vested » with original jurisdication over tax appeals. Instead, the taxpayer » is petitioning the superior court, asking that OAH be ordered to » transfer the allocation issues to AOGCC and stay the tax appeal » pending a decision from AOGCC on allocation. » » This is unlike the recent contract claim concerning which we wrestled » with issues about whether Law must provide DOA with counsel to defend » a decision on appeal before the court when another department of the » state, along with the private party, takes issue with the DOA » decision. It is different insofar as there is no reason to believe » that Revenue's counsel will suddenly join with the taxpayer and » challenge the OAH ruling on the motion denying transfer of » jurisdiction. However, if AOGCC has a particular position on how its » allocation determinations bear upon tax liability, the potential » exists for this matter to raise issues similar to those raised by the » contract claim--i.e., Revenue and AOGCC taking different views, » leading to a difference about what the "litigation" posture of the » state should be before the court. » » Terry > > 2 of2 9/29/200611:14 AM . . Jody-I believe this involves a situation that has been around for awhile. Please see ifwe have a file. If so, please bring it to me so I can review it. I think Jack lIartz worked on this at one time. AOGCC apparently authorized (directed?) ConocoPhillips to use one method for allocation of production, but on audit, Revenue disallowed the AOGCC approved method and is taking a different position which will cause the taxpayer to have to pay more tax. The taxpayer may also be forced to keep two sets of records-one to comply with our order and the other to satisfy Revenue. I'll cc Cammy with this to see if she recalls anything. We will need to decide whether Revenue's position intrudes upon our jurisdiction. If so we may find ourselves on the side of the taxpayer rather than Revenue. Sometimes taxing authorities apply rules contrary to their common meaning in law (in corporate taxation for example) so the fact they disagree with our approved allocation method does not necessarily create a jurisdictional conflict unless their interpretation will force taxpayers (producers) to allocate production in ways that adversely affect correlative rights, cause waste or will conflict with any of our other statutory responsibilities. Cammy, I'll call you to discuss. John -------- Original Message -------- Subject:Petition for Review FYI Date:Tue, 12 Sep 2006 12:47:36 -0800 From:Terry Thurbon <terry _ thurbon@admin.state.ak.us> Organization: State of Alaska To: Scott J Nordstrand <scott _ nordstrand@admin.state.ak.us> CC:John K Norman <john _ norman@admin.state.ak.us>, Melanie A Millhom <melanie _ millhom@admin.state.ak.us>, Kevin A Brooks <kevin _ brooks@admin.state.ak.us> Scott, Attached is a copy of a petition for review filed by Conoco Phillips in an OAR tax case. I am sending you this FYI copy and copying John because the dispute between the taxpayer and Revenue inplicates AOGCC's authority as well. The taxpayer and Revenue are engaged in a severance tax dispute regarding which tax liability depends in part on allocation of production among different fields. The taxpayer filed a motion asking OAR to transfer jurisdication to AOGCC. OAR denied the motion. The denial does not preclude the taxpayer from disputing Revenue's alleged differing allocation or from arguing that AOGCC's royalty-related allocation should control any allocation Revenue has to use in calculating tax liability. The taxpayer nevertheless appears hesitant to adjudicate such legal issues in an administrative appeal at the executive branch level before the agency (OAR) vested with original jurisdication over tax appeals. Instead, the taxpayer is petitioning the superior court, asking that OAR be ordered to transfer the allocation issues to AOGCC and stay the tax appeal pending a decision from AOGCC on allocation. lof2 9/12/2006 2:34 PM .. . . ,. This is unlike the recent contract claim concerning which we wrestled with issues about whether Law must provide DOA with counsel to defend a decision on appeal before the court when another department of the state, along with the private party, takes issue with the DOA decision. It is different insofar as there is no reason to believe that Revenue's counsel will suddenly join with the taxpayer and challenge the OAR ruling on the motion denying transfer of jurisdiction. However, if AOGCC has a particular position on how its allocation determinations bear upon tax liab~l~ty, LÌle potential ex~sts for this matter to ra~se issues siMlar: LQ Lhvðç .La';'",,,,,d by Lilt;:: L:UULr:aC1:: C.Lalm- l.e., Revenue and AOGCC taking dltterent v~ews, leading to a difference about what the "litigation" posture of the state should be before the court. Terry 2of2 9/12/20062:34 PM 08/01/2007 15:01 FAX 9072798644 . ATTORNEY GENERAL'S OFF . @002l009 BEFORE THE STATE OF ALASKA OFFICE OF ADMINISTRATIVE HEARINGS IN THE MATTER OF ConocoPhiHips Alaska, Inc. OAHNO.O~ÖIIVI(g) MAR 3 0 2007 DEPARTMENT OF LAW· OFFICE OF THEATTORNEV..-w.. 3· JUDICIAL rnS'tRICt ANCHORAGE. A~ In accordance with the attached Stipulation and Order for Dismissal of Appeal from the ) ) ) ) NOTICE OF DISMISSAL parties, which I have signed, this appeal has been dismissed. Although I do not anticipate any request for reconsideration or any appeal of this dismissal. I am providing the standard notices for a final decision on an appeal filed under Alaska Statute 43.05.405. NOTICE This is the hearing decision of the Administrative Law Judge under Alaska Statute 43.05.465(a). Unless reconsideration is ordered. this decision will become the final administrative decision 60 days from the date of service of this decision.! A party may request reconsideration in accordance with Alaska Statute 43.05.465(b) within 30 days of the date of service of this decision. When the decision becomes final, the decision and the record in this appeal become public records unless the Administrative Law Judge has issued a protective order requiring that specified parts of the record be kept confidentia1.2 A party may file a motion for a protective order, showing good cause why specific information in the record should remain confidential, within 30 days of the date of service of this decision? Judicial review of this decision may be obtained by filing an appeal in the Alaska 1 Alaska Statute 43.05 .465(f)(l). 2 Alaska Statute 43.05.470. 3 Alaska Statute 43.05.470(b). OAR No. 05-0304-T AX Page 1 of 2 Notice of Dismissal 08/01/2007 15:01 FAX 9072798644 . ATTORNEY GENERAL'S OFF . I4J 003/009 Superior Comt in accordance with Alaska Statute 43.05.480 within 30 days of the date of this 4 decision becomes final. ç" ./ . ",((if DATED this d-õ day of March 2007. By: Mark T. Handley Administrative Law Judge The undersigned certifIes that this date an exact copy of the foregoing was provided to the following individuals: ~ ~'0Ð ;; u ,~( Signature C)!fiN{ Datj Zf:(j7 4 Alaska Statute 43.05.465 sets out the tìmelines for when this decision will become final. OAR No. 05-0304-TAX Page 2 of 2 Notice of Dismissal 08/01/2007 15:01 FAX 9072798644 . 13 14 15 16 17 ..J g 18 « a:: '" ;=~ ~~ <q~:r:5g: 0 19 ...J u VJ 0 u..>z-«:;; WqW:,,: , Oza::¡VJffi 20 1-ê5~wS~ ffi):(,'J~-:¡; :¡¡««:r:UJ~ 21 ~wa::l-O .. a:::z:ªa::ct ~ «l-u::lC:o a..!Lz!fo:¡:;: UJo<.~D. 22 O~ ==2 - -< u. M U. 0 23 ° - 24 25 26 ATTORNEY GENERAL'S OFF . ¡g¡ 0041009 2 BEFORE THE STATE OF ALASKA OFFICE OF ADMINISTRATIVE HEARINGS ON REFERRAL BY THE COMMISSIONER OF THE DEPARTMENT OF ADMINISTRATI01fRECEIVED 3 4 In the Matter of ConocoPhillips Alaska, Inc. MAR 2 3 2007; State of Alaska Office of Administrative Hearings OAR No. 05-0304- TAX 5 6 Appellant. 7 8 STIPULATION AND ORDER FOR DISMISSAL OF APPEAL 9 Based on the stipulation executed in the proceeding on Appellant's 10 Petition for Review, attached as Exhibit 1, the parties to this appeal stipulate that this 11 appeal should be dismissed. 12 DATED: March~, 2007. FAULKNER BANFIELD, P.c. k.Rv- -z.aw- "- Leon T . Vance Alaska Bar No. 8309096 Attorney for Appellant DA TED: March Q, 2007. TALIS J. COLBERG ATTORNEY GENERAL_ "-- ' "" 08/01/2007 15:01 FAX 9072798644 . 13 By: 14 15 16 17 ...I g 18 ct a: N ~ ~ ~~ <cW::t::5'" 0 19 ...J(.:J(.)CI)m:: u.>-z ·ct", o~~~~m 20 I-Cl:mffict N zOw ....-. ¡.- <:J ~ « b ~!;c<::t:w~ 21 wa:l-~ .. l-:¡:oa:ctW a: I- x ::)[1: Š ~u.~o0::t: UJOctLl:i5 Q. 22 o III 3:z 2 ...ct u. <') u. 0 23 0 ... 24 25 26 ATTORNEY GENERAL'S OFF . @005/009 2 3 ORDER 4 Based on the foregoing stipulation, IT IS ORDERED that this appeal is 5 dismissed. ~. ~[~ Administrative Law Judge 6 DATED: March JO ~ 2007. 7 8 9 CERTIFICATE OF D)STRIBUTION 10 ] certify that on March ~ 2007, J sent a copy of the above Order as follows: 11 Leon T. Vanee Faulkner Banfield, P.c. One Sealaska Plaza, Suite 202 Juneau, Alaska 99801-1245 ~aSSma¡l o Fax: (907) 586-8090 Kenneth Diemer Assistant Altorney General State of Alaska, Department of Law 1031 W. Fourth Avenue, Suite 200 Anchorage, AK 99501-1994 By: ~t class mail o Fax: (907) 279-8644 12 '20vOI Date 08/01/2007 15:01 FAX 907279144 ATTORNEY GENERAL'S OFF I'lHt'i:-¿j-¿UUf rKJ UJ'JU '. oJUfCl\!Vl\ VVUI\I . "" av. '"".~ vv.~ I4J 006/009 .. --. -. ~,....~\ !-. CONOCOPHJU ,IPS ALASKA, INC., . " I .; IN THE SUPERIOR COURT FOR TIlE STATE OF.ALAST<A"j ~ I FIRST JUDICIAL DISTRICT AT JUNEÄ:Ìj":: ~<~ r;1 I:: ¡~) J~·'i:;:"::' ;.;;;:;~~..~~ ; ., :. i "¡' C~.U.i\ 2 :, 4 5 (, Petitioner. 7 v. x TAX DIVISION, STATE OF ALASKA DEPARTMENT or REVENUE, Case No. lJU-06-958 Civil OAR No. 05-0304-TAX 9 I () -.--.----"---- Res )ondent IJ STIPULATION ANn ORJ)}t~R OF DJSMISSAL OF }>ETITION FOR UEVIEW 12 The parlies lo Lhis review pn~cccding, and the Ala$ka on and Gas Conservation 1:1 Commission, agree to the dismissal of this proceeding on the following terms: 14 ] . The Depm·tment of Revenue wilJ withdraw the assessment of 15 11; nddiliollallaxcs identilied in lssnc Number 20 of the Audit Report dated July 30, 2003, pl'cp'lrcd in support of th~ Notice of Assessment of the same datc assessing additiona.l 17 <i g lR taxes under AS 43.55 ror tux year 2000 on the basis of retroactive adjustments to (t: N ~ ~ ~§ 5 ~:t 5 ~; g 9 ta'Xnblc volumes. LL~:Z¡j«U:; a!;' <1' h>)<! ~, í'ig'¡ZU]'[) 20 f ~ 0 lU ~:5 ~ 2. The Dcpnt1ll1cnt or Revenue will withdraw the assessmcnt o. ffi~::o~~~ ,,; .,z:«:CIU ~ ¡=~~~~¡¡; 21 ) f.'t 1- 5;:> ~ ~ addìtioné1! taxc8 identified in Issue Numbers 2 and 12 of the Audit Report (atcd Junc 30, ;f.µ..~ccx wO\JJ<t:::~tL 22 °0 >:.:: ~ ;;;..; 2005, prcparc.d in support or the Notice of Assessment of the same date assessing o ~ 23 additiomlL taxcs under AS 43.55 ror lax years 2001. and 2002 on the basis of retroactive 2-1 ndjusLmenLs to taxable volumes. 2.5 }() EXHIBIT \ page \ of L{ 08/01/2007 15:01 FAX 9072798644 "'''' ~v ~...v, -- e. .____n___ I~"..·'!IIJ.'. ~ g æ S;\ ~~ êg < \>.1:C::l en '" ..J " ~\ <II O. '" ,.. 2. <If.... I./., LoJ "Í ui:;¡ % o z ¡¡:;! J '" I-¡;:l'{¡l(j'~"" 20 ZßI.'>...J ¡;:- 1~I-cØ«~Q 'i; <I; .~ ;¡; lLI ![', ~w«¡..;.c¡.. 21 ltr:~~t2~ '" ....000 0 a.. 0:; ù- ;<; iF ,:) IJ.l t~ '" ~ 0'" -- Q I) :.- Z tG ~~ u. 0 o \- ATTORNEY GENERAL'S OFF e i~\ 141 007/009 2 3, COllocoPhillips Alaska, Inc., will dismiss it.:; appeal currently p~nding bclOte lhe Ol1icc of Administrative Hea.rings, No. 05-0304 TAX and wHI not pursue an :\ 4 ~lppC;:ll rch1ting to Issue Numbers 2 tlnd 12 of the Audit Report dated June 30, 2005, 5 prepared ín support (If the Notice of Assessment of the same date assessing additional (\ taxes ~mdçr ^S 43.55 for tax years 2001 and 2002 on the basis of retroactive 7 í.ldjustmcnts to taxabie volumes. H 9 4. ConocoPhilIips Alaska, Inc., acknowledges that with respect to the 10 allocation oJ"volumc5 within the Kupamk River Unit, as of January 1,2002, the method II or alIocation employeù was agreed upon by all af1ècled entities, even though it was 110t Il formally adopled by the AOCìCC until a later dale. 13 5. The Department or Revenue, ConocoPhillips ¡\laska) Inc., ~md the !4 Alaska Oil ~\!1d Gas Conscrvation ComnÜssion agree to execute any other documcnts IS \(':ccssnry to in1plcmc1Jt this £lgreement set forth in this stipulation. 16 n 6. The Parties agree that this stipulation has no precedentia.l effect in the 18 conlext of any oUler proceeding. 19 DATED: Marc.h 1-2.. , 2007. FAULKNER BANFIELD, P.C. n Hy;_t~ "¿L.... L,. Leon T. Vance Alaska Bar No. 8309096 Attorney for ConocoPhilIips, Inc. 24 7.5 2Ó StipuJ¡nìol1 ill1d Order of [)jsmi~~.11 (II' j\;\Ìli()n ror R~vicw C(1rwcol'lifIip~' (IJ(I.rk{~, IIIC, v. rCLY. JJivísiUJ1 c~sc No, IJU·06-9SS Civil Page 2 of3 EXHIBIT \ page_lL-of L\ 08/01/2~,~,~ ~~ :~Ov~ ,FAX ~.07.~7~i4 ,'~'\, , '. :#: 8 JM a; N ~d! ~¡¡¡ "1~5Vj::: g It) ~~zurcCtï ¿~~~~$ !:; g¡ t. ~ ~ ('< 20 ....::;I,.~..<t~ ~41:t<~LÚ'!?~ ;::~~t:ë~~ 21 a:1_:r.:;:,a:~ <:i:u.00C)0 Q; OZlL:J':C ~~"~~~22 * ~< \II' ~ 24 t!I \'l: ')'i S3f L~- "': ,.... Ni~C\ ~¡ d w 8 o .0-1 ATTORNEY GENERAL'S OF~ !-', 2 DATED: March L&~~\ 2007. :I '1 5 6 7 R 9 DArED: March Jb~__. 2007. 10 11 12 13 /4 15 1 (1 17 Based on the foregoing stipulation, 14! 008/009 TALIS J. COIJB'RRG A TTORNEYG](~NERAL <-.-.....--'....,. ......... 1J1": ~ iC¿:;J Ke ncth J. Dj~;~' '=-- ^ sistant Attorney General A aska Bar No. 92U075 Attorney for Rcspond~nt OOR TALIS J. COLBE1~G ATTORNEYGEN:ERAL ßY:~ tlt..W: ~r}w __ Camil1é Occhsti Taylor AssÎ!,;tant Attorney General Alaska Bnr No. 8412165 Attorney for Alaska Oil and Gas Conservation Commission ORDER IT IS ORDEREO thnl this proceeding is dismissed subject to the terms stated in the stipulation. DATED: March _º .' 2007, Stipulation lmd Order ofOismissal oFI't:liliol1 fur R~vicw ClIIJOcoPlrillip,f A/aska. Inc, v, Tax Divi.fÍ(J/1 L::;;~é~fd SUPERIOR COURT JUDGE ..........-- Case No. IJlJ-06-958 Civil Page 3 of3 EXHIBIT page. :5 \ of Li 08/01/2007 15:02 FAX 9072798644 ATTORNEY GENERAL'S OFF t1AR-23-2.UU'¡ rJ<1 Uj:¿lJ .' ~Urt.l\lUI\ vUUI\! 1111\ Itv. V . ""..... ,I~I I 141 009/009 .. - ~. - - ,-.., IN TIJE SUPERIOR COURT FOR THE S'fATE OF ALASKA 2 FIRST JUDICIAL DTSTRICT AT JUNEAU .3 4 CONOCOPIIILUPS ALASKA, INC., 5 () 7 Y. Pelitioner. 8 TAX DIVISION) STATE OF ALASKA IDEPAl{]MENT OF REVENUE, l) . ...-Ihlt.:' ur ''\lM ' '-"'~~~T JUDICIAL DiSiUJC / AT JUljEAU" . ..? :¿0 I U1 Case No. 1JU-06-958 Civil OAII No. 05-0304-TAX HJ -.--_.._____.-__.~-.-----_ .u.'. _.~~~SP~).I:C!~.~,~.",.... . . CERTIFICATE OF DISTRIBUTION .J 0 1M ..¡ 0 rc '" .. ,L( uJ Q ~ ~ I'" In ...;.tW'J:5m (,":1 I') a.J ~ f:. rr¡ ù) ~ ll.. W~IU"~ 1.1) 02:rz;~c" t 20 ~_ 11; CJ:\ ¡jj S '" [¡jêtt~·'f;§' :t!.~~:tU.I~ 2[ f-~():;:~!tJ CC ._::r..;;,tr: ~ r.(c~(.jooa Cl.OZL..::r:I: 2~ LU ill <r. ~ ~ a... D () -.... .- """« l~ '" ,... ò 2:1 a .. I] 12 I certify thal on March 2.~ ,2007, I sent a copy of the above Order a5 n l'olJows; 1·:1 15 Leon T. Vance Fa111knct' ß[1nfic1d, P.c. Ono Sc-ala5ka Plaza, Stc 202 June-nl!, Alaska 99801~1245 Kenneth Diemer Assistant Attorney General State üf Alaska Department ofLnw 1031 W. 4th Avenue, Ste 200 Am:horag¡;:, AI< 99501-1994 By: [J First class mail G':JFax: (907) 279-8644 -~ Signalme 26 Stipulmion í11)d Ordor (JfDi);fllì~SClI Dr PelililJ} for ItcvÎcw CCI!1QcoPlJi{iip.\· Alaska, Inc. v. 1'11."1: Di~'isil)n 16 17 By: [J First class mail [~ I,'ax: (907) 586-8090 o Court Box 2·\ 2.1 Cami!lé Oechsli Taylor Assistant Attorncy General State of Alaska DeparlmenlofLaw 1031 W. 411\ Av\?:nt~e, Stc 200 Ancnorage, AK 9950] -1994 By: 0 First class mail B'Fax: (907) 279-8644 Date Cæè Nù. IJU-06-958 Civil EXHIBIT \ page L\ of '-\ #6 ;i 8 a: .... s:~ ~~ «UJ::t3'" ...so()cn",g ¡,¡.>z-c:c;;; o~~~~tÐ a: CD Z ~ æ 20 !žgw~...Ir::- UJ¡...(.:Jc:c":o ~C:C«:rUJ~ ¡... UJ a: 1-"" .21 a:~ª~;i~ < !.L000 0 Q. 0 ~ .... :x: o..J: ~~, W .....() " a~ 3:z - -<: u.. "" ¡.¡. 0 I:> ....... . . IN THE S¡JPERIOR COURT FOR THE STATE OF ALASKA , ~ FIRST JUDICIAL DISTRICT AT JUNEAU ,~ CONOCOPfULLIPS ALASKA, fNC., ) ) Petitioner, ) ) ) ) 8 TAX DIVISION, STATE OF ALASKA) DEPARTMENT OF REVENUE, ) ) Respondent. ) _...-J 5 6 v. Case No. lJU-06-958 Civil OAB No. 05-0304- TAX 9 Gas Conservation Commission (AOGCC), through undersigned counsel, request an 10 II 1.2 JOINT MOTION AND ORDER FOR EXTENSION OF TIME TO FILE RESPONSES AND REPLY n Petitioner, ConocoPhiUips Alaska, Inc. (CPAI), and respondent, Tax 1-1. ~ivision, State of Alaska Department of Revenue (DOR), along with the Alaska Oil and 15 !6 ¡ 7 extension of time to tile the responses and reply as directed by this court's January 19, IX 2007 order granting CPAl's petition for rev i ev..... This joint motion is based on Alaska 19 R. App. P. 502(b) and 503(a), and (b), and the attached joint affidavit of undersigned ; 1/ 23 .:--1 .:'5 I 26 I -I Q < Q a: .... ~ ~ ~~ <w::r5C11 Q -J " (,) IJ CII :;:? f,¡.~:æ¡¡j~'t,' O%a:::;:)rn$ ¡..a:&XI%<N OWW...I - ~::c:dt<'¡:; ::¡«::rw5?;. . wa:I-" .. ;::x:ªo::<~ <1-(.)=0::0 c.u.zfi:°::r wOcr.¡Ja.. c~ 3=z - ,...« tJ.. <? IL. <::> o - . . counsel. Neither CP AI nor DOR (or thc AOGCC) have requested an extension of time - I J i previously with this court. D^TED:f(~14~Y fIr AX:n__ TALIS 1. COLBERG ATTORNEY GENERAL .:' -, BYt?. Â I~~~I Kenneth J~mc Assistant Attorney Ge '.aI Alaska Bar No. 9211075 Attornev for ReSDondent DOR ~ . R DA TED:~.óRY -L :z,007~___ 1:\ i ¡j/l:~ \6\--tGon T. v:nce~ ¿ Alaska Bar No. 8309096 Attorney for Petitioner 1..+ 15 16 !7 IX .{ . DATED:. _~JtL,-,-~, <-'. 7 / " r~<,j ;:..c.... 7 , TALIS J. COLBERG ATTORNEY GENERAL 19 '1' j -I : (;'rtt~E I,,': :::¿ ". ; -I ,'" (:.." \...G.( .--' .'\ - By: Camillé OechsIi Taylor Assistant Attorney General Alaska Bar No. 8412165 Attorney for Alaska Oil and Gas Conservation Commission " ~."" 2+ ~) 26 , JOINT MOTION AND ORDER CONOCOPHILLlPS ALASKA. fNC.. V, SOA ET At KD/Ai\E/JOINT MOTION.DOC CASE NO. 1 JU-06-958 CI/OAI! NO. 05-0304 TAX PAGE 2 OF 2 ;;¡ g iI: <\ ~~ ¡::~ <~ã5g¡g ..J / _ u.¡Z~ui<t'" oza:~æ$ ¡.. a: co w «.... 20 zOw>...J~ w:C1«<to :¡<t«:rui~ ~wa:....o.. 21 a::I:~a:«~ <.... c.>:::In: 0 o..u..zooJ:: wO<t~ða.. 1"1 OW 3:z ~ ...<t u. "" u. '" o ... . . ., , - I lN THE SUPERIOR COLRT FOR TI IE STA TF OF Al,ASKA , -' FZRST JUDICIAL DISTRICT AT JUNEAU -+ i CONOCOPf-HLLIPS ALASKA. INC., ) I 5 i ) Petitioner, ) ) ) ) 8 TAX DIVISION, STATE OF ALASKA) DEPARTMENT OF REVENUE, ) ) Respondent. ) ~~-----) I ~, ! 4' j v. Case No. I JU-06-958 Civil OAB No. 05-0304-T AX <) 10 -~"-" I ¡ JOINT AFFIDAVIT !2 p STATE OF ALASKA ) ) 55. ) 14 I FIRST JUDICIAL DISTRICT !5 Kenneth 1. Diemer, Leon T. Vance, and Camillé Oechsli Taylor, being 16 first duly sworn, jointly depose and state: 17 1. We represent the DOR, CPAI, and ADGCC, respectively in the IX I <) above-captioned case. 2. On January 19, 2007, this court granted CPAl's September II, 2006 petition for review requesting that the court grant review of a decision by the Oftice of Administrative Hearings. ." "':'-'1 i 2": 'I I I 25 ,I I 26 ' ~ g a:: N :t~ ~ã <¡g5S8lg ..J z(/) - LL~<UÎ< ~ OZa::::)~ $ I- a:: a:J æ < N 20 zOw:>..¡¡:: wt:d«o ::¡«J:w!1?,. '- w a: .... C!I .. '-:z:oa:«~ i%....J:=a:z «u.(,)oo!2 o.ozu.:t:... w « .(,)0. o W ~z 5:! _4: .... <") u. Q o - . . ::'1 -. ). This court's January 19. 2007 order directed CF AI to provide , notice of that review to both nOR and AOGCC and further ordered that DOR and -+ AOGCC file , 5 ,I responses within 15 days from the date of CPAI' s notice. CP AI \vas ordered to tile a 'I f> ' , . reply \v¡thin 5 days of the date of the responses. 71 4. As this court is most like!v aware. the November 2006 statewide .' . 15 election resulted in a change of administration, which, in turn, rcsuÌted in not only the 9 10 appointment of a new Attorney General but also very recent changes with respect to 11 nOR personnel charged with oversight of production tax matters. 12 5. Both the attorneys representing the nOR and AOGCC have u contacted the respective heads of each agency in order to formulate their responses. 14 The parties have spoken with one another and have agreed to Currently. undersigned counsel for the DOR is awaiting to confer with both the Deputy 15 Commissioner and Tax Division Director of the DOR as to this matter and the 16 17 underlying issue on appeal. 6. IS [9 extend the time in which to file their responses and reply,' Based upon that agreement the following schedule has been established: (1) DOR's and AOGCC's responses 1J , \vould be due on or before March 2, 2007; and (2) CPAI's reply would be due on or ..,.., i -- ! before lVlarch 9, 2007. ) ~ I -. ! ::..¡ '':;; j 26' his behalf. Counsel for CPAI has agreed to have counsel for DOR sign the joint motion and this affidavit on AFFIDA VIr CONOCOPHILLlPS ALASKA, INc., V 50A ET AL KDiAAEiAFFIDA VIT.DOC CASE NO. IJU-06-958 CI/OAH NO. 05-0304 TAX PAGE 2 OF 3 ~ g a: N 3:~ ~g :3~5~$8 u..¡Z~w;2; ;: ~ ~ ffi ~ ~ 20 2d~w>..J r=: WI-C)«o :ãl-~~~~'~ 21 :roa:< U.I Cl:1-J:::¡a:z <u.uooo Q.ozu.::r::~ ww<Siu O<¿ _~ .... t") u. 0 o r . . 7. The parties have not sought an;y previous extensions of timc. This , J rcqucst iè)r extension of time is not lòr thc purposes of harassment or delay. 4 FURTHER THE AFFIANTS SA YETI-I NAUGHT. DATED: f(i3~A-R...lj 1 20:)7 . . :; 6 TAUS J. COLBERG ATTORNEY GENERAL K 9 f-[J~~~ Kenneth Y15ie~' Assistant Attorney General Alaska Bar No. 9211075 Attorney for Respondent DOR II 10 By: 12 13 DATED: ~fßW4i!Y '1~Ç£)ì ~ 14 ¡ 5 16 -+1< Leon T. Varn;; laska Bar No. 8309096 Attorney for Petitioner 17 \~ 18 1<,) DA'rED:_:;riL'W¿{.v~ /ò ''1 ¡ ,)-co 1 ' - TALIS 1. COLBERG ATTORNEY GENERAL /} .,^ ',' C i .11'-".~£~~.(-¿_· ff-{¿ !(..:'I,t.. ¡'\i<-..~\c 4·<1.__' 23 i¡1 By: '..' 24 CamiIJé Oechsli Taylor Assistant Attomev Genera! ~ Alaska Bar No. 8412165 Attorney for Alaska Oil and Gas Conservation Commission ~5 26 I " ! AFFIDA VIT : CONOCOPHILLJPS ALASKA INC., V. SOA ET AL KDiAAE/AFFJDA VIT.DOC CASE NO. I JU-06-958 C!!OAH NO. 05-0304 TAX PAGE 3 OF 3 ...I Q c( 0 0:: N LIJ UJ- 3:% ~~ <~:t:S~ 0 ..J....O(/)~·O u.>-Z-<:b O~~~~ ~ 1-000i:D~<N ZOW.......I .... '"'C~< ~ W '"'... . _ :IE <...:::: w ::::. .... LIJ a: I- C .. å::r~e<C~ -1-0....0::0 Q::U.ZOO:r wO<Ll:5Q. Q w ~z ç ,..< ~ '" u. 0 o .. n Ii .....- ii, ""1.1 i i _. ·1 ~ . .:,'-4- 26 '; . . 1 , ., I IN THE SUPERIOR COURT FOR THE STATE OF ALASKA F-RST JUDICIAl. DISTRiCT AT JUNEAU 3 1 CON()(~~()f)HIL.l~-IPS l;\I-,~J\SK£~~ INC.. ) ) Petitioner, ) ) ) ) TAX DIVISION, STATE OF ALASKA ) ~ DEPARTMENT OF REVENUE, ) ) Respondent. ) 10 I -------.--.--.-..------...---) I 5 6 v. 7 Case No. lJU-06-958 Civil OAH No. 05-0304- T AX g ORDER !2 . Based upon the joint motion and affidavit in support between Petitioner, ¡ r 3 ,I Respondent, and the Alaska Oil and Gas Conservation Commission, it is hereby ordered ¡ -f I i that the motion for extension of time to tile the responses and reply is 15 GRANTED. !f¡ 17 The Respondent's and AOGCC's responses are now due on or before î 8 March 2, 2007; and the Petitioner's reply now is due on or before March 9, 2007. I I J<.) i 20 I '1 I ~ I Larry R. Weeks SUPERIOR COURT JUDGE " 171 ¡ ;;i g i8i a: '" ~~ ~õ I <~lPsi g 19' ..J zen _ U.¡;:¡<ui<~ ' ~ ~ ~ ~ ~ ~ 20 11 OwW-' - ~;:èJ~<¡; :æ«J:w'"~ ¡-wtrf-èJ·· 21 a:~~g¡~~ «u.uooc ~ 0 ~ ~ tš it 22 i o~ ==z - -« u,. :") ¡s;: 2~ ì i 'i . . iN THE SUPERIOR COURT FOR THE STA TE OF ALASKA .~ , .' FIRST JUDICIAL DISTRICT AT JUNEAU .j CONOCOPHILLIPS ALASKA, INC.. ) ) Petitioner. ) ) ) ) 8 I TAX DIVISION, STATE OF ALASKA ) DEPARTMENT OF REVENUE, ) ) Respondent. ) ) .5 6 v. Case No. 11U-06-958 Civil OAH No. 05-0304- TAX 9 !D -~~-~~._--- ¡ I CERTIFICATE OF SERVICE 12 I hereby certifY that on this date, a correct copy of the JOINT MOTION 1:1 AND ORDER FOR EXTENSION OF TIME TO FILE RESPONSES AND 14 i i 5 ! REPLY, JOINT AFFIDAVIT, and ORDER in this proceeding was mailed to: 16 Leon T.Vance, Esq. Faulkner Banfield, P.C. One Scalaska Plaza, Suite 202 Juneau, AK 99801·1245 ~. .& 41t{ Signature ~ --1J2 In lOt Datc ~ 24 2~· 2() ~5 \1") -.:t N ...... ...:. 00 000\ 0\0 0\00 c<! --b ~oo ~ \1") . ~ ~ U ~ 0 . ;:I 0\ p.. c<! ~ ~ Q) .. '"0 ¡:: ¡;¡ '"¡) ;:I ~ .... ....., 1: . . c<! N 0 ç:QO...... ... N N ~ ~ ~ ~ .... 00 "3rJ5\1") c<! ~ ~ if b c<! 0\ J:l:'::' c<! Q) ~ ¡:: ~ 0 _..d c<! p.. Q) if) Q) ¡:: o . .-:.,:,~'l ,~ '. ~ .::or:- &» 9 i1P Þø .~ ~ ;:r ,:;¡ C'"") ~ Q ¡;~ ~ . IN THE SUPERIOR COURT FOR THE STATE OF ALASKA FIRST mDICIAL DISTRICT AT JUNEAU CONOCOPHILLIPS ALASKA, INC., Petitioner. v. TAX DIVISION, STATE OF ALASKA DEPARTMENT OF REVENUE, Case No. lJU-06-958 Civil OAH No. 05-0304-TAX Res ondent. NOTICE OF JUDICIAL REVIEW On September 11, 2006, ConocoPhillips Alaska, Inc. ("CP AI"), filed a petition for review under Alaska Rule of Appellate Procedure 610, requesting that the Superior Court grant review of a decision by the Office of Administrative Hearings. 1 On January 19, 2007, the Superior Court granted that petition, ordered CP AI to provide notice of that review to both the Department of Revenue and the Alaska Oil and Gas Conservation Commission, and ordered that each of those entities would have 15 days from the date this notice to file a response.2 The purpose of this pleading is to provide that notice. 1111 1111 1111 1 Exhibit 1. 2 Exhibit 2. Notice of Judicial Review ConocoPhillips Alaska, Inc. v. Tax Division Case No. Im-06-958 Civil Page I of2 :;ø m o m - < m a ç.' U"\ '<t N ..... . ..... 00 000\ 0\0 0\00 C':S >ob ~oo C':S U"\ q~b p.. ~ ~ ~ Q) .. ;:g§~ .2:! -. µ.. 1::.. C':SNO ~O"'" ... N N ~ ~ ~ ~ .... 00 1æU"\ rTo ~ r::: .... ¡:¡ 0 C':S 0\ p:::~ dJ C':S ¡:: ~ 0 ~..s:: <i1p.. Q) if) Q) ¡:: o . DA TED: January 23, 2007. CERTIFICATE OF SERVICE This certifies that on January 23, 2007 I caused a copy of the Notice of Judicial Review to be sent via first class mail to: Kenneth Diemer Assistant Attorney General State of Alaska, Department of Law 1031 W. Fourth Ave., Ste. 200 Anchorage, AK 99501-1994 Attorney for the Department of Revenue ""... -e.ll...", Leon T. Vance . FAULKNER BANFIELD, P.C. ""... -e.ll...", Leon T. Vance Alaska Bar No. 8309096 Alaska Oil & Gas Conservation Commission 333 W. 7th Ave., Ste. 100 Anchorage, Alaska 99501 Notice of Judicial Review ConocoPhillips Alaska, Inc. v. Tax Division Case No. lJU-06-958 Civil Page 2 of2 l¥) ..". ('\ ..... ,..:.. o 0 COo- 0\0 O\CJJ '" ...() ..:.ICJJ ~ U'\ . ~ r::: ü .0 . ';j 0\ p.. C<I - Q .. -"Ô S 1d '"¡j ~ þ.., .~ -. ~ . . '" N 0 ¡:(¡O...... .. N N <IJ Q N ¡::: ~ ...() ~ -5 co :::J CI) IJ'\ '" . r:::: µ.. (! 0 ~ 0- - - p.. .' '" (1.) ~ ¡::: ~ ~ ~p.. <IJ CI) (1.) ¡::: o . . IN THE SUPERIOR COURT FOR THE STATE OF ALASKA FIRST JUDICIAL DISTRICT AT JUNEAU CONOCOPHILLIPS ALASKA, INC., ,-"oPT' -.Jrigina I Receiv~,c Petitioner. SEP 1 ! 2006 ""rk of the Trial COI'I v. TAX DIVISION, STATE OF ALASKA DEPARTMENT OF REVENUE, Case No. lJU-06- C\E) ~ Civil OAR No. 05-0304- TAX Res on dent. PETITION FOR REVIEW Under Alaska Rule of Appellate Procedure 610, ConocoPhillips Alaska, Inc. ("CP AI"), petitions this court to grant review of a decision by the Office of Administrative Hearings ("OAH"). The basis for this petition is the existence of a conflict in the exercise of jurisdiction by two different state agencies. By resolving that conflict, this cOUli can render the underlying appeal unnecessary and permit the agency with the expeliise and jurisdiction to address the underlying issue to do so in an equitable manner for all parties and all purposes, a resolution the OAH does not have the jurisdiction to provide. I. FACTS During 2000, CP AI took possession of its ownership interest in, paid royalties to the State of Alaska on and paid production taxes to the State of Alaska based on volumes of oil calculated by an allocation formula approved by the Alaska Oil and Gas Conservation Commission ("AOGCC").. I.n 2003, without requesting action from the Exhibit 1 Page 1 of 14 Petition for Review COllocoPhillips Alaska. rnc. v. Tax Division OAH 05-0304-TAX Page 1 of 13 m 't" N ..... ...:. 00 OCJO\ 0\0 O\OCJ <IS -b ~OCJ ~ m . :;;: r::: u ~ 0 . ;: 0\ p.. <IS ~ Q) .. ..¿ ¡:: ~ Qj ;: µ.. .~ ,.-, 1: . · <IS N 0 ~O"'" ... N N ~ E :6 ~ .~ OCJ "3cEm <IS ~ µ.. ct' b <IS 0\ ~'::' <IS Q) ~ ¡:: ~ 0 _A <IS p.. Q) if) Q) ¡:: o . . AOGCC, the Department of Revenue ("DOR") unilaterally and retroactively reallocated the volumes for 2000 for production tax purposes, even though it had no ability to reallocate volumes for ownership or royalty purposes. CP AI appealed DOR's unilateral action solely on the grounds of the improper reallocation and requested that the OAR transfer jurisdiction over the reallocation issue to the AOGCC, the only agency with the expertise and jurisdiction to address the allocation issue for all parties and all purposes. The OAH declined to do so, prompting this petition. A. The Agencies in Conflict The AOGCC is an "independent quasi-judicial agency of the state", charged with overseeing the prevention of waste in the development of Alaska's oil and gas resources. 1 One of the three members of the Commission is required to be a petroleum engineer, and one is required to be a geologist. 2 Its jurisdiction is broad: The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. 3 In particular, the AOGCC is authorized to control the development of oil and gas fields, specifically including the measurement of oil and gas produced, and to require: the filing and approval of a plan of development and operation for a field or pool in order to prevent waste, insure a greater ultimate recovery of oil and gas, and protect the I AS 31.05.005(a). 2 AS 31.05.009. 3 AS 31.05.030(a). Exhibit 1 Page 2 of 14 OAR 05-0304- TAX Page 2 of 13 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division 11'\ ;- N ...... ..:. 00 000\ 0\0 0\00 " -.b ~oo ~ 11'\ . ~ r:: ü ~ 0 . := 0\ p.. ,,~ ~ <1) .. '"0 ¡:: ~ ],E,~ 'E . . "NO ÇQO...... ...NN ~ ~ ~ ~ .... 00 ...... := 11'\ gCl)~ ~ ci' b " 0\ P:;':;' ~ ~ ~ 0 ........c: " p.. <1) CI) <1) ¡:: o . . correlative rights of persons owning interests in the tracts of land affected. 4 The volumes of oil and gas measured according to methods approved by the AOGCC and reported to that agency are used for management of the reservoir, calculation of ownership interests in the oil and gas, calculation of royalty obligations and calculation of production taxes. DOR is an agency charged with the enforcement of the revenue laws of the State of Alaska, along with other functions not relevant here.5 For the purposes of the Oil and Gas Properties Production Tax, AS 43.55, taxpayers report to DOR the volumes of oil and gas they have taken, measured as required by and reported to the AOGCC. B. The Conflict CP AI is a company engaged in the production of oil and gas and owns an interest in the Kuparuk, Tabasco, Tam and West Sak Participating Areas of the Kuparuk River Unit on the North Slope of Alaska. The Kuparuk Participating Area was developed using surface production facilities built specifically for that field. At those surface production facilities, the fluids produced from various wells are separated into three distinct streams: oil, natural gas and water. The only stream at issue here is the oil stream. After the oil stream leaves the surface production facilities, its volume is measured by meters known as "LACT" (Lease Automatic Custody Transfer) meters. 4 AS 31.05.030(d)(9) and (6). 5 AS 44.25.020. Exhibit 1 Page 3 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAR 05-0304-TAX Page 3 of 13 lI'\ '1" N ..... ..:. 00 00", "'0 "'00 <':! ' ~\O ~ ~ . ~ ~ U ~ 0 ';:j", p... <':!~ c) .. ..¿ ¡:: ¡;¡ ] ..2. µ.. 1:.. <':! N 0 ¡:cO..... ... N N ~ ~ ~ ~ .... 00 ;:;J3l1'\ <':! ~ ~ µ.. <':! 0 ~ '" ¡S:;'::' <':! c) ~ ¡:: ~ 0 ......-C <':! p... c) if) c) ¡:: o . . The Tabasco, Tarn and West Sak Participating Areas are fields much smaller than the Kuparuk Participating Area, and are referred to as "Satellites" of the Kuparuk Participating Area. Under plans of development approved by the AOGCC, each of the Satellites was developed without building separate surface production facilities; instead, each Satellite uses the surface production facilities of the Kuparuk Participating Area. The stream of fluids (oil, natural gas and water) from wells in each Satellite is mixed with the stream of fluids from wells in the Kuparuk Participating Area before the resulting commingled stream enters the surface production facilities. It is not possible to measure with acceptable accuracy the volume of oil in the stream of well fluids until after the oil stream has been separated at the surface production facilities. Thus, the first measurement of oil with acceptable accuracy occurs at the LACT meter downstream from the surface production facilities in the Kuparuk Participating Area. That volume is the product of the commingled streams from the Satellites and the Kuparuk Participating Area. As each Satellite was developed, therefore, in Conservation Orders establishing the "Pool Rules" governing the development and operation of the fields, the AOGCC approved a method for determining the volume of oil produced from each Satellite and from the Kuparuk Participating Area. The method used an allocation formula that relied on well tests in the various fields to estimate the volumes of oil produced in those fields, with adjustments based upon the actual measurement of the commingled volume at the Exhibit 1 Page 4 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAH 05-0304- T AX Page 4 of 13 l1'1 "t" N ...... ...... 00 r:JJa- a-O a-r:JJ 0:1 ' ~\O ~ ~ . ~ ~ U - 0 . ;:I a- p.. 0:I~ - () .. '"0 ¡:: ~ ] .2.. ¡¡.. 1: . . 0:1 N 0 p::¡0...... ... N N ~ ~ :6 ~.... r:JJ "3J5l1'1 0:1 ~ ¡¡.. ct' b 0:1 a- ¡l;-:: 0:1 () ~ ¡:: '" 0 0:I,.d c;p.. () en () ¡:: o . . LACT meter. The method the AOGCC approved for each Satellite was called a "fixed- float" allocation formula. 6 With respect to each Satellite, the AOGCC approved the fixed-float allocation formula after consultation with all affected entities, including DOR. In addition, the AOGCC specifically provided for the amendment of pool rules if any affected party determined the need for any adjustment: Upon proper application, the Commission may administratively waive the requirements of any rule stated above or administratively amend this order as long as the change does not promote waste, jeopardize correlative rights, and is based on sound engineering principles. 7 In the time periods following the adoption of the pool rules for each field through 2000, DOR did not apply to the AOGCC for the amendment of the allocation method or any other pool rule. After 2000 DOR did not ever apply to the AOGCC for a retroactive amendment of the allocation method. In 2002 a different allocation method was adopted by mutual agreement, the "capped float-float" formula, and in 2003, after consulting all 6 The term "fixed-float" refers to the mechanics of the process. The total volume of oil produced from the Kuparuk Participating Area and the Satellites for a particular month was determined by reference to the volume measured at the LACT meter downstream from the surface production facilities. Of that total volume, the volume of oil allocated to Tam, West Sak or Tabasco was the amount estimated by the well tests; those volumes were "fixed". The volume of oil production allocated to the Kuparuk Participating Area then was determined by the volume remaining; the Kuparuk allocation factor "floated" up or down, depending upon whether the total volumes predicted by the well tests proved to be more or less than the total volumes measured at the LACT meter 7 AOGCC Conservation Order 406, Rule 13 (October 16, 1997); AOGCC Conservation Order 430, Rule 13 (July 21, 1998); AOGCC Conservation Order 435, Rule 13 (November 5, 1998). Exhibit 1 Page 5 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAH 05-0304- TAX Page 5 of 13 tr) '=t N ...... ...... 00 OC)O\ 0\0 O\OC) co; . ...>::\0 ~ ~ , ~ ;:: () ~ 0 '::10\ p.. co; ~ Q) .. ..¿- d 1;3 õ) ::I ~ ,~ ....... 1::.. co;NO p:¡0...... ... N N ~ ~ ~ ...>:: .~ OC) ;3J5tr) co; ~;:: ~ ~ 0 co; 0\ ¡S:;'::' co; Q) ...>:: d ~ 0 c¡;~ Q) if) Q) d o . . affected parties, including DOR, the AOGCC did amend the pool rules prospectively for each field, including the adoption of the "capped float-float" allocation fonnula.8 During tax year 2000, CP AI calculated and paid oil production taxes for the Satellites and the Kuparuk Participating Area on the basis of its share of the volumes allocated to each of the participating areas under the pool rules then in effect under the relevant AOGCC Conservation Order. Those volumes, allocated according to the fixed- float method, were the same volumes used to define royalty obligations and CP AI and the other working interest owners also paid royalties on the basis of those allocated volumes. In 2003, DOR issued a notice and demand for payment for additional production taxes for tax year 2000. In particular, for 2000 DOR recalculated the volumes allocated to the Satellites and the Kuparuk Participating Area using the capped float-float method. DOR's unilateral, retroactive reallocation of oil production volumes resulted in a decrease in the volume of oil allocated to the Tam Participating Area, and an increase in the volume of oil allocated to the Kuparuk Participating Area, at least for production tax purposes. Because the tax rates for the two participating areas were different, the retroactive reallocation resulted in an increase in production tax due rrom CP AI. 8 Under the "capped float-float" allocation method, the volumes allocated to all participating areas "float" up or down proportionately, depending upon whether the predicted total volume is greater or less than the metered total volume. For the Satellites, however, the amount of float is "capped" at a certain allocation factor. If the comparison between the predicted total volume and metered total volume produces an allocation factor exceeding the "cap", the volumes allocated to the Satellites are "capped" at the volumes produced by the capped allocation factor, and the remaining differential volume is allocated to Kuparuk. Exhibit 1 Page 6 of 14 OAR 05-0304- T AX Page 6 of 13 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division U) ,.. N - - 00 000\ 0\0 0\00 o.s ' ~\O '" 00 o.s U) , ~ r:: u ~ 0 ';:10\ p.. o.s ~ (1) " .¿ ¡:: ~ ~ ;:I µ.. .~ ,...., 1: . · o.sNO ÇQO- ... N N ~ ~ ~ ~ .~ 00 :3.2U) o.s ~ r:: µ.. ~ 0 o.s 0\ ¡S::--:. o.s (1) ~ ¡:: '" 0 o.s,.d cap.. (1) if.) (1) ¡:: o . . For CPAI, though, that was not the only consequence ofDOR's action. Because the working interest owners in the various participating areas are not the same, when it unilaterally and retroactively reallocated production, DOR had to account for the fact that one working interest owner did not have any volume of oil to reallocate to Kuparuk. The additional volumes of oil that would have been attributed to that taxpayer therefore were attributed to CP AI (and the other working interest owners in the Kuparuk Participating Area). Thus, CP AI was required to pay the higher tax rate on volumes of oil to which, under DOR's revised allocation, it had no ownership right. In reality, CP AI did receive the oil in 2000, and it paid both production tax and royalties on that oil. Under the allocation procedures required by the AOGCC, the volumes DOR has reallocated to Kuparuk in fact were treated as Tam production. Royalties in fact were due, and in fact paid, on 100% of that volume. In the Kuparuk Participating Area, however, 10% of the production volume is exempt from royalty under agreements between the State of Alaska and the working interest owners. The production tax is not imposed on oil that is exempt from taxation, so the State of Alaska's royalty share of the gas is not subject to the production tax. In Tam, 100% of the production stream is subject to royalty, which CP AI in fact paid, and 100% of the production stream therefore is subject to a royalty deduction under the production tax. In Kuparuk, 90% ofthe production stream is subject to State royalty, with the royalty share being exempt from the production tax. The remaining 10% of the production stream is exempt from State royalty, so those volumes are subject to the production tax without Exhibit 1 Page 7 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAR 05-0304- T AX Page 7 of 13 l/"¡ ;- N ...... ..:.. 00 000\ 0\0 0\00 c,¡ , ~\O ~ ~ . ~ ~ C) ~ 0 ';:;0\ p... c,¡~ ~ Q) .. :9 § ~ .~ ~~ 'E.. c,¡ N 0 (:00...... ... N N ~ B :b ~ .... 00 ~rËl/"¡ c,¡ ~ ~ ~ b c,¡ 0\ P::':: c,¡ Q) ~ ::: ~ 0 _A c,¡ p... Q) rn Q) ::: o . . exemption. When DOR unilaterally and retroactively reallocated production, therefore, it treated production on which royalty was paid on 100% of the volume as if it were production on which royalty was paid on 90% of the volume. Accordingly, DOR reduced the exemption under the production tax for royalty volumes, even though CP AI in fact had paid royalties on 100% of the volumes previously allocated to Tam. In sum, without requesting any modification of the pool rules from the AOGCC, DOR unilaterally and retroactively reallocated for production tax purposes oil that previously in had been allocated for all purposes according to the method approved by the AOGCC. That reallocation has impacts on previously detennined ownership interests and royalty obligations, but DOR does not have the jurisdiction to address those impacts. c. Administrative Proceedings CP AI filed an appeal with DOR, which was heard by an appeals officer at an infonnal conference. The appeals officer issued an infonnal conference decision that addressed various issues and specifically upheld the retroactive reallocation. CP AI then appealed the infonnal conference decision on the sole basis of the retroactive reallocation of volumes. The appeal was referred to the OAR. Before the OAR, CP AI filed a motion seeking to transfer jurisdiction of the allocation issue to the AOGCC. CP AI pointed out that the issue before the OAR did not involve the application of the production tax, but the selection of the proper oil volume allocation method. That issue is committed to the jurisdiction of the AOGCC, and only the AOGCC can ensure that the allocation method is implemented for all parties and all purposes. If the AOGCC Exhibit 1 Page 8 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAR 05-0304- T AX Page 8 of 13 It\ ...,. N ...... ...... 00 000\ 0\0 0\00 o: , ~\D ~ ~ . ~ ~ U - 0 . ;:j 0\ p.. o: ~ Q) .. -d' ¡:: ~ ] ,E, ¡¡. 13 . · o:NO ~O""" ... N N ~ ~ ~ ~ .~ 00 ..... ;:j It\ ;(/)~ ¡¡. if b o: 0\ p::~ o: Q) ~ ¡:: ~ 0 ~~ Q) (/) Q) ¡:: o . . determined that volumes should be reallocated for all parties and all purposes, then there would not be a tax issue to appeal. In short, the issue for determination was one requiring the expertise and scope of power of the AOGCC, which should be given the opportunity to address the issue. The OAR Administrative Law Judge denied the motion, stating only that the issue arose in a tax appeal. 9 II. STATEMENT OF THE QUESTION Should the AOGCC first determine whether the pool rules it adopted should be amended retroactively, so that if it agrees with DOR that such a retroactive amendment is necessary, the resulting reallocation can be harmonized for all entities and purposes relying on the allocation? III. REASONS WHY REVIEW SHOULD BE GRANTED Under Appellate Rule 61 O(b)(1), review should be granted because postponement of review will result in injustice due to unnecessary delay. Under Appellate Rule 61 O(b )(2), review should be granted because the order involves a controlling question of law and an immediate review of the order will materially advance the termination of the proceeding in the OAR. Both grounds exist for this reason: the OAR does not have the jurisdiction to provide complete relief; only the AOGCC, which DOR failed to consult, can provide complete relief. The only issue in the underlying appeal is the proper allocation formula to apply to oil produced during the year 2000: the one that the AOGCC approved and relied on for all purposes during 9 Exhibit 1. Exhibit 1 Page 9 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAH 05-0304- TAX Page 9 of 13 tr) '<t N '";< ..... 00 000\ 0\0 0\00 '" . .l<i\D ~ ~ . ~ ~ U - 0 . ;::I 0\ p.. '" ~ - Q) .. '"C ~ ¡;¡ ~ ,E, µ. 1: . · '" N 0 ç:QO..... ... N N ~ ~ ~ .l<i .... 00 ..... ;::I tr) ~rJ)~ µ. ¡f b '" 0\ p::,;:, ~ ~ ~ 0 .......c '" p.. Q) rJ) Q) ~ o . . that year, or the one that DOR retroactively imposed in 2003 without seeking AOGCC approval. That oil measurement issue is an AOGCC issue, not a tax issue. CP AI did not have any reason to request a change in allocation fonnulas, either prospectively or retroactively. CP AI therefore never had the opportunity to present the issue to the AOGCC, and instead simply reported volumes based on the allocation fonnula the AOGCC had approved in the pool rules. Had DOR timely petitioned the AOGCC prospectively for such a change, or even if it had applied for a retroactive change, the AOGCC could have detennined whether the change was necessary and, if so, it could have reallocated the volumes so that all parties were properly assigned volumes for all purposes. Had the AOGCC disagreed, then DOR could have appealed that decision. DOR's attempted unilateral, retroactive reallocation can not address the allocation of volumes to all parties, nor can it address the allocation for any purpose other than the production tax, even though the reallocation affects ownership interests and royalty obligations as well. CPAI's motion merely requested the OAH to transfer jurisdiction of the allocation issue to the AOGCC. If the AOGCC agrees with DOR, then the volumes can be reallocated for all parties and all purposes, and there will be no tax appeal. If the AOGCC disagrees with DOR, DOR can file its own appeal of the AOGCC's action. CP AI would not even need to participate in that appeal. CP AI is not disputing the method of calculating the amount of tax due, nor is it even debating the merits of the various allocation methods that could be used. It simply is pointing out that the relevant Exhibit 1 Page 10 of 14 Petition for Review Co no coP hill ips Alaska, Inc. v. Tax Division OAH 05-0304-TAX Page 10 of 13 11') 'T N '";" ...... 00 ooa- a-O a-oo o; --b ">::00 ~ 11') . ~ ¡::: U ~ 0 . ;j a- p.. o; ~ () .. .,j ¡:: 1;î ] ,.2, µ. 11.· o; N 0 ¡:QO""" ... N N ~ ~ ~ ..>:: .~ 00 :3rE1I') o; ~ ¡::: µ. ~ 0 o; a- il:'::' o; () ..>:: ¡:: '" 0 o;,.C -¡:;;p.. () if.) () ¡::: o . . volumes in fact were allocated based on pool rules approved by the AOGCC, and ownership interests, royalties and taxes all in fact were based on those volumes. If those volumes are to be reallocated retroactively, that reallocation must occur across all purposes that relied on the original allocations. DOR, and by extension the OAR, can not perfonn that universal reallocation. Only the AOGCC has the jurisdiction to reallocate universally. Once this issue is directed properly to the agency with the jurisdiction to address it, CPAI's current appeal will be resolved. IV. REASONS WHY THE DECISION BELOW IS ERRONEOUS The decision below simply failed to address the issue of jurisdiction. Because the allocation issue arose in the context of a tax appeal, the administrative law judge ruled that its resolution was within the jurisdiction of the OAR. CP AI never argued that DOR and OAR do not have jurisdiction over the tax consequences of the allocation issue. Rather, CP AI pointed out that the issue was not the means of calculating the amount of tax due, but the volume of oil on which the tax was due. The volume issue in turn did not arise ITom an audit of reported volumes or some other manner in which DOR applied its tax expertise. Rather, the volume issue arose from the DOR's unilateral and retroactive application of an allocation method different from the one approved by the AOGCC in the pool rules that govern the measurement of volumes. Because DOR elected not to go to the AOGCC to seek an administrative amendment of the pool rules to adopt a different allocation method, and instead chose to impose the unilateral, retroactive allocation in the context of a tax audit of an individual taxpayer, Exhibit 1 Page 11 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAH 05-0304- T AX Page 11 of 13 lI"\ ..,.. N ...... , ...... 00 00", "'0 "'00 ~ ' ~\O en 00 ~ lI"\ . ~ r:: u ~ 0 . ;: '" p., ~ ~ ill .. ..¿ ¡:: ~ ] .E. µ. 1: . · ~NO ~O""" ...NN ~ ~ ~ ~ .... 00 '"3~lI"\ ~ ~ µ. if 8 ~ '" ¡s::'::' ~ ill ~ ¡:: en 0 ~ A ~p., ill if.) ill ¡:: o . . CP AI had no option but to raise the issue in the first instance in the tax appeal. The issue, however, is not a tax calculation issue; it is an oil volume measurement issue. Volume measurement is a matter within the expertise and jurisdiction of the AOGCC, and that agency in the first instance should decide the issue. The decision below fails to resolve the conflict between two agencies. DOR failed to acknowledge the jurisdiction of the AOGCC in the first instance by retroactively imposing an allocation method different from the one approved by the AOGCC, placing CP AI in the untenable position of trying to comply with conflicting orders from co-equal agencies. Though the two agencies are of equal stature, their areas of jurisdiction are not congruent. Thus, when DOR invaded the AOGCC'sjurisdiction on oil allocation, it did so without the jurisdiction to address the impacts of the reallocation on ownership interests and royalties. The interests of the State as whole are not served when one agency ignores the rulings and jurisdiction of another. The OAR decision, too, fails to recognize the jurisdiction of the AOGCC to address the allocation issue, requiring CP AI to continue to pursue an appeal before a tribunal that can not provide it relief from the conflicting obligations created by the conflicting allocations. V. RELIEF SOUGHT The relief CP AI requests is for the court to direct the OAR to transfer jurisdiction over the allocation issue to the AOGCC and stay the tax appeal pending resolution of the allocation issue. In particular, the OAR should request the AOGCC to determine whether there should be a retroactive reallocation of oil production volumes for the Exhibit 1 Page 12 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAR 05-0304-TAX Page 12 of 13 It) .,¡- N ..... ..... 00 000\ 0\0 0\00 o , ~\O ~ ~ . ~ r::: U - 0 . ;:: 0\ p.. o ~ III .. -Ô ¡:: ~ ],E,~ 1:.. o N 0 ~O"'" ...NN ~ ~ ~ ~ ..... 00 - ;:: It) ¡g(Z)~ ~ ci' b o 0\ ~--:. ~ ~ ~ 0 ~~ III (Z) III ¡:: o . . Satellites and the Kuparuk Participating Area for 2000. If the AOGCC determines that such a reallocation is necessary, the AOGCC should determine what method should apply and direct the manner in which volumes reported for ownership interests, royalty obligations and production tax obligations should be revised. DATED: September 11,2006. CERTIFICATE OF SERVICE This certifies that on September 11, 2006 I caused a copy of the Petition for Review to be sent via first class mail to: Kenneth Diemer Assistant Attorney General State of Alaska, Department of Law 1031 W. Fourth Avenue, Suite 200 Anchorage, AK 99501-1994 ,,.. v.... r.., Leon T. Vance 22313 FAULKNER BANFIELD, P.C. ~,þfIM Leon T . Vance Alaska Bar No. 8309096 Mark T. Handley Administrative Law Judge Office of Administrative Hearings P. O. Box 110231 Juneau, AK 99811-0231 Exhibit 1 Page 13 of 14 Petition for Review ConocoPhillips Alaska, Inc. v. Tax Division OAR 05-0304- T AX Page 13 of 13 . . BEFORE THE STATE OF ALASKA OFFICE OF ADMINISTRATIVE HEARINGS INTHEMATIER OF CONOCOPHILLIPS ALASKA, me. OIL & GAS PRODUCTION TAX (AS 43.55) 2000 TAX YEAR ) ) ) ) ) ) OAH No. 05-0304- T AX Appeal of Revenue Infonnal Conference Decision 3rd PRE-HEARING ORDER Having reviewed the parties' briefing on denying the motion to transfer jurisdiction, I have determined to that the motion should be denied. While the Alaska Oil and Gas Conservation Commission's assertedjuriscliction in setting the method of allocation of oil production may be relevant to taxpayer's Hability in this appeal, it is a tax appeal. Its resolution is therefore under the jurisdiction of the Office of Administrative Hearings. I have also signed the enclosed order for the stipulated extension of the briefing schedule and have schedLlled a status conference in that order. Parties with questions and scheduling issues should call Legal Office Assistant Neil Roberts at (907) 465-1886. I-; DATED: August.JO, 2006 ~g4p Ø~//~ / /"'/ / I / j/~, By: The UI :,:.i~1r: ,ignec certifies. that Mark T. Handley this date an ex~ct copy ot the foregoing. wasprov¡ded to the Administrative Law Judge following Indtvdua.ls~ tc. eé) ^- . I V (.). v-..<..' e =X~V\.n.€--r(,::=5=~eYJ:\e r) ,6lA b- s~;y ilX: O~/3()(ð0 , {-~ EXHIBIT 1 Page 1 of 1 Exhibit 1 Page 14 of 14 . . IN THE SUPERIOR COURT FOR THE STATE OF ALASKA FIRST JUDICIAL DISTRICT AT JUNEAU CONOCOPHILLIPS ALASKA, INC., ) ) Petitioner, ) ) vs. ) ) TAX DIVISION, STATE OF ALASKA ) DEPARTMENT OF REVENUE, ) ) _______Jtes]ondçnt. ) ,.j' JUP"cIAi. '''DI,I) I t ðd~7J JPðf¡ lJU-06-958 CI OAH No. 05~0304~TAX ORDER GRANTING PETITION FOR REVIEW On September 11, 2006 ConocoPhillips Alaska, Inc. ("CP AI), filed a petition for review under Alaska Rule of Appellate Procedure 610, requesting that the court grant review of a decision by the Office of Administrative Hearing ("OAH"). The State did not respond. In 2003, the Department of Rcvem1e ("DOR") issued, to CPAI, a notice and demand :for payment of additiona1 oil production taxes for tax year 2000. Allegedly, DOR calculated CPAI's new tax liability by retroactively implementing a new allocation fonnula. The Alaska Oil and Gas Conservation Commission ("AOGCC") creates and approves allocation formulas. For the purposes of the on and Gas Properties Production Tax, AS 43.55, taxpayers report to DOR the volumes of oil and gas they take, measured according to AOGCC allocation formulas. Alaska Court System Page J ConocoPhillips v. OOR; JJU-06·958 CI; OrderOranting Petition for Review Exhibit 2 Page 1 of 3 . . CP AI filed an appeal with DOR regarding this recalculation. An appeals officer heard the appeal and issued an informal decision upholding DOR reallocation. CP Al then appea]ed the informal decision. The appeal was referred to the OAH. Before the OAH, CP AI filed a motion seeking to transfer jurisdiction of the allocation issue to the AOGCC. CP AI claimed that the issue before the OAR did not involve the application of production tax, but involved selection of the proper oil volume allocation method, CP AI contended that such an issue is committed to the jurisdiction of the AOGCC. The OAR Administrative Law Judge denied the motion, stating that the issue arose in a tax appeal and, as such, its resolution is under the jurisdiction of the OAH. CPAI petitioned the court for review. Under Appellate Rule 610(b)(l) and (b)(2), superior court review is appropriate because postponement of review will result in injustice due to unnecessary delay and because the order involves a controlling question oflaw and an immediate review of the order will materially advance the termination of the proceeding with the OAH. CPAI must provide notice to AOGCC and DOR of this review. AOGCC and DOR have 15 days to file a response to CPAl's notice. CPAI has five days to reply. The court stays aU proceedings before OAH. G~' -- Dated this _Il__ day of _ -~ 40 ,2007, at Juneau, Alaska. D ("~J /) '-~... ~)._-~_...._.;;> . J, .~, Larry R.«Veeks Superior Court Judge AlaÛa Court System Page 2 ConocoPhillips v. DOR; lJU-06-958 CI; Oedet' Granting Petition for Review Exhibit 2 Page 2 of 3 .. . . CERTIFICATION OF SERVICE 1 certify that 1 served the following parties Dn the _~ day of ~-- Leon Vance One Sealaska Plaza~ Ste 202 Juneau, AK 99801 Kenneth Diemer Attorney General's Offiee 1031 W. FourthAve.~ Ste 200 Anchorage, AK 99501 Mark T. Handley Administrative Law Judge Office of Administrative Hearings P.O. Box 110231 Juneau, AK 99811 - d·~-..--------_. - Tracy Ver Velde Professional Assistant to Judge Week Ala.~ka COUl" System Page 3 ConocoPhíllips v. DOR; 110.-06-958 CI; Order Grantjn~ Petition fOJ' Review Exhibit 2 Page 3 of 3 "=t=f 4 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA FIRST JUDICIAL DISTRICT AT JUNEAU CONOCOPHILLIPS ALASKA, INC., ) ) Petitioner, ) ) vs. ) ) TAX DIVlSION, STATE OF ALASKA ) DEPARTMENT OF REVENUE, ) ) __Res]ondent. ) ,.j' JUDIÓA;. "'D/S¡ .(\r JUNfA '- ,. d''J.tI.Jj JOð~ lJU-06-958 CI OAH No. 05-0304- TAX ORDER GRANfING PETITION FOR REVIEW On September 11, 2006 ConocoPhillips Alaska, Inc. ("CPAI), filed a petition for review under Alaska Rule of Appellate Procedure 610, requesting that the court grant review of a decision by the Office of Administrative Hearing ("OAR"). The State did not respond. 1112003, the Department of Revenue ("DOR") issued, to CPAI, a notice and demand for payment of additional oil production taxes for tax year 2000. Allegedly, DOR calculated CPAI's new tax liability by retroactively implementing a new allocation fonnula. The Alaska Oil and Gas Conservation Commission ("AOGCC") creates and approves allocation formulas. For the purposes of the Oil and Gas Properties Production Tax, AS 43.55, taxpayers report to DOR the volumes of oil and gas they take, measured according to AOGCC allocation formulas. Alaslca Court System Page J ConocoPhillips v. OOR; J 3U·06·958 CI; Order Granting Petition for Review . . 10 .> CP AI filed an appeal with DOR regarding this recalculation. An appeals officer heard the appeal and issued an informal decision upholding DOR reallocation. CP AI then appeaJed the infonnal decision. The appeal was referred to the OAH. Before the OAH, CP AI filed a motion seeking to transfer jurisdiction of the allocation issue to the AOGCC. CPAI claimed that the issue before the OAR did not involve the application of production tax, but involved selection of the proper oil volume allocation method. CPAI contended that such an issue is committed to the jurisdiction of the AOGCC. The OAH Administrative Law Judge denied the motion, staling that the issue arose in a tax appeal and, as such, its resolution is under the jurisdiction of the OAH. CPAI petitioned the court for review. Under Appellate Rule 610(b)(I) and (b)(2), superior court review is appropriate because postponement of review will result in injustice due to unnecessary delay and because tbe order involves a controlling question oflaw and an immediate review of the order will materially advance the termination of the proceeding with the OAH. CPAI must provide notice to AOGCC and DOR of this review. AOGCC and OOR have 15 days to file a response to CPAPs notice. CPAI has five days to reply. The court stays aU proceedings before OAB. c 'ffl, Dated this I l 'day of _J'l}ù . 2007, at Juneau, Alaska. ~'-~-h{$¡ 'R . LlJf Larry R. eeks Superior Court Judge Alarko Court System Page 2 C.onocoPhiUlps v. DOR; lJU·06-958 CI; Order Granting Petition for Review . . .. CERTIFICA nON OF. SERVICE I certify tIuú I served the following parties on the _~ day of ~:-. Leon Vance Onc Sealaska Plaza, Stc 202 Juneau, AK 99801 Kenneth Diemer Attorney General's Office 1031 W. Fourth Ave,:> Ste 200 Anchorage, AK 99501 Mark T. Handley Administrative Law Judge Office of Administrative Hearings P.O. Box 110231 Juneau, AI< 99811 -1~ ( Tracy Ver Velde Professional Assistant to Judge Week Alarica Courl System Page 3 f'..onocoPhíllips v. DOR; 1JU.o6-958 CI; Order Granting Petition fOJ'Review ~3 , n_.) FRANK H. MURKOWSKI, GOVERNOR ALASKA OIL AND GAS CONSERVATION COMMISSION 333 W. 7TH AVENUE. SUITE 100 ANCHORAGE. ALASKA 99501·3539 PHONE (907) 279-1433 FAX (907) 276-7542 October 27,2006 Certified ¡"'Jail Return Receipt Requested #7005 l/60 0001 57540031 Steven F. Mahoney Hughes Bauman Pfiffner Gorski & Seedorf, LLC 3900 C Street, Suite 100 I Anchorage, AK 99503-593 I Dear Mr. Mahoney: Your request for information, by letter dated October 20,2006, is denied. AS 40.25.122 provides, in relevant part, that ". . . with respect to a person involved in litigation [with a public agency], the records sought shall be disclosed in accordance with the rules of procedure applicable in a court. . ." 2 AAC 96.220 further provides, in relevant part, that where ". . . the person making the request is a party, or represents a party, involved in litigation with the state or a public agency to which the requested record is relevant. . . the requestor shall be informed to make the request in accordance with the applicable court rules." The parties for whom you are requesting this information, the TAPS carriers, are persons involved in property tax litigation with the State of Alaska, Department of Revenue, in Case Nos. 3AN-06-8446 CI, 3AN-06- 9153 cr, and 3AN-06-11284 CI, and the records that you have requested from the Alaska Oil and Gas Conservation Commission appear to be relevant to that ongoing litigation. You are required, therefore, to use discovery procedures to obtain the documents. See, e.g., Brady v. State, 965 P2d. I, 18 (Alaska 1998). You may: (I) administratively appeal this denial by complying with the procedures set out in 2 AAC 96.340; or (2) obtain immediate judicial review of this denial by seeking an injunction from the superior court under AS 40.25.125. An election to pursue injunctive remedies in superior court will have no adverse effects on your rights before this agency. An administrative appeal from this denial requires no appeal bond. Enclosure: 2 AAC 96.335-2 AAC 96.350 cc: Commissioner Dan Seamount, AOGCC Commissioner Cathy Foerster, AOGCC Commissioner Scott Nordstrand, Department of Administration Deputy Commissioner Melanie Millhorn, Department of Administration Cammy O. Taylor, Assistant Attorney General Bonnie E. Harris, Assistant Attorney General Ken Diemer, Assistant Attorney General ,..:¡ fT1 I:J I:J U.S. ~tat Servicer", CE-R IIFIED MAIL,.1 RECEIPT (Domestic Mall Only; No Insurance Coverag'e Provided) . '0" . ~ ANt@.ÞF9$C I A L USE U1 ,.., I:J I:J I:J t::I ....0 ,..:¡ ,..:¡ Postage $ $0.63 0535 CertlRed Fee $2.40 01(~>;:1 " ·/,·'/·Postmark·' Return Receipt Fee ' ,.,)t (Endorsement Required) $1.85 .J '/ Here ¡":")1 IIOU/ ", Restricted Delivery Fee ' '\ ~ (Endorsement Required) $().OO [ (, " L,\ ,''") Total Postage & Fees $ $4.00 U1 I:J nt Steven F. Mahoney ~ ~____. Hughes Bauman Pfiffner Gorski & Seedorf, o~ LLC ëii-63900 C Street, Suite 1001 Anchorage, AK 99503-5931 . I' . II e urn cpt (Green $1.85 Card) Certified $2.40 Label #: 70051160000157540031 Customer Postage -$5.39 Subtotal: $0.00 ----...--- ----...--- Issue PVI: $0.00 -----. .---- -----~,._--- Total: $0.00 Paid by: Bi11#:1000200071693 C1erk:07 All sales final on stamps and postage. Refunds for guaranteed services Dilly. Thank you for your business. Customer Copy , ·.....-1 m I .ª 1: e ~ 't C G>1J ~~ jg ~ .~~ 'õ ~ cD DO 10 DO ::E 0 Q .. Ó C'- .2 ,~ i ~ êi. 1ä '§ Ë] ¡::E. g¡a: :;:-w £ g¡ I!! E c:i ~ ~ ~~ a.jd ~a:ó ~ Q ODD . 1:1 'c ~ t J!¡ . .I§ ,I ~ ~~ 1J1J 'æ . 'æ kÈi ~1\! G>::E}::E e" .J ~ ~ .]1 ~ . a¡ ~fii ~ ~ .~(. ~gf ut:i':I C Q1 '- ð III ~(~ &¡ 1J>- ~ a:£; 'J!! ~ ~DDD « >< !Ii ci <'Í .,¡ (þ B Q) ~ .g¡ - > a. ~"Ó ~ .:æ O~()ðE °ëii£i >'(þ 5!~c.9:5 . ~ 0".... UJ ......!I.! ~ '" o:t:: (')~~B'ÕE -g.~~~Z 8. asãias-øø C\ÌC'OE:5~ ?--¡ æ a s ~ 13 UJõQ)~'E~ EEElijas'" i :ê¡g~oog ~ .æ~5~11Q) 't !:; ~ió~£i :'i EEë:5(d§ ~ 8:êit ß~ 15 ~ . . . ..: 't:^ o '1:1 <) <) V) ~ :.:;¿ ~ o <.? f'") '- ~O\ () oV) .<:: 0 íB -8 ~ ¡f .~ ~ O¡:;: ¡:;: :::I 0\ <'d V:;::,¿ -æe ~<t: .:Eg ~ai t..t..: co V) OJ) '" <'d ~<) Us tfougfl t5:Ë:j~~ ~ H ~ m U) ~ ,..:¡ fT1 t::I c::J ::r Lf I"- Lf ,..:¡ c::J êi. t::I 15 u , c::J Q1 a: t::I E ::J ....0 Gí ,..:¡ a: ,..:¡ u ¡ Lf E t::I 0 Q t::I l"- v 0 0 J C\/ ~ as Q) 2 Q .Q i Q) u. f~ ,... ,... co z.æ C') J! !II E ~~ ¡f Ñ (/) Do DOC Bo~Page . http://www.legis.stat.us/cgi -b in/fo lio isa. dIll aac/ query=%5 B group.. . . . 2 AAC 96.335. Denial of request (a) A request for a public record that complies with this chapter may be denied only if (1) the record is not known to exist after the public agency makes a diligent search for it; (2) the record is not in the public agency's possession, and after a diligent search the public agency does not know where the record is to be found; (3) the record has been destroyed in accordance with an applicable record-retention schedule; (4) nondisclosure of the record is authorized by a federal law or regulation, or by state law; or (5) the record is believed to be in the agency's possession but has not yet been located, in which case the public agency shall proceed under (f) of this section. (b) A request may be denied by the public agency head or by an agency employee to whom denial authority has been delegated by the public agency head. (c) An initial denial of a written request must be in writing; must state the reasons for the denial, including any specific legal grounds for the denial; and must be dated and signed by the person issuing the denial. If a request is denied by a public agency employee to whom denial authority has been delegated, the notice of denial must reflect this delegation. A copy of 2 AAC 96.335 - 2 AAC 96.350 must be enclosed with the denial. (d) A denial ofa written request, in whole or in part, must state that (1) the requestor may administratively appeal the denial by complying with the procedures in 2 AAC 96.340; (2) the requestor may obtain immediate judicial review of the denial by seeking an injunction from the superior court under AS 40.25.125 ; (3) an election not to pursue injunctive remedies in superior court shall have no adverse effects on the rights of the requestor before the public agency; and of6 10/27/20063:53 PM DOC· BodyPage . http://www.legis.stal.us/cgi -bin/fo lioisa.dll/aac/query=%5Bgroup... (4) an administrative appeal from a denial of a request for public records requires no appeal bond. (e) A denial of a written request is considered to be issued at the time the denial is either delivered to the United States Postal Service for mailing, or hand-delivered to the requestor by an employee or agent of the public agency. (f) If a written request is denied because a record has not yet been located and the record is believed to exist in the agency's possession, the office in the public agency responsible for maintaining the record is believed to exist in the agency's possession, the office in the public agency responsible for maintaining the record shall continue to search until the record is located or until it appears that the record does not exist or is not in the public agency's possession. The public agency shall periodically inform the requestor of its progress in searching for the requested record. (g) A record that is the subject of a public records request that has been denied shall not be destroyed or transferred from the public agency's custody, except that records may be transferred to state archives and records management services as provided by AS 40.21 and regulations adopted under AS 40.21. A public agency may not destroy or transfer custody of a record to which access has been denied or restricted until at least 60 working days after the requestor is notified in writing that the request has been denied, or if there is an administrative or judicial appeal or other legal action pending at the end of the 60-working-day period, until the requestor has exhausted those actions. History: Eff. 11/6/94, Register 132 Authority: AS 40.25.110 AS 40.25.120 AS 40.25.123 AS 40.25.125 Editor's note: As of Register 17 6 (January 2006), and acting under AS 44.62.125 (b)( 6), the regulations attorney relocated former 6 AAC 96.335 to 2 AAC 96.335, and made conforming technical changes to 2 AAC 96.335(c) and (d)(1), to reflect Executive Order 113 (2005). Executive Order 113 eliminated the Telecommunications Information Council and transferred its functions to the governor and to the Department of Administration. The history note for 2 AAC 96.335 carries forward the history from former 6 AAC 96.335. As of Register 158 (July 2001), the regulations attorney made technical revisions under AS 44.62.125 (b )(6), to reflect the 2000 renumbering of former AS 09.25.100 - 09.25.220 by the revisor of statutes. The provisions of former AS 09.25.100 - 09.25.220 were relocated to AS 40.25.100 - 40.25.220. 2 AAC 96.340. Appeal from denial; manner of making (a) A requestor whose written request for a public record has been denied, in whole or in part, may ask for reconsideration of the denial by submitting a written appeal to the agency head. of6 10/27/20063:53 PM DOC'BodyPage . http://www .legis.statl us/cgi -bin/fa lioisa.dll/aacl query=%5 Bgroup... (b) An appeal under (a) of this section must be mailed or hand-delivered to the agency head within 60 working days after the denial is issued and must include the date of the denial and the name and address of the person issuing the denial. The appeal must also identify the records to which access was denied and which are the subject of the appeal. If an appeal is from the failure of the agency to respond to the records request within the appropriate time limit under 2 AAC 96.325, the appeal must so state, must identify the records sought, and must identify the public agency to which the request was directed and the date of the request. (c) The 60 working days within which an appeal must be filed begins to run upon the issuance of the denial or, if no denial is issued, upon the expiration of the time period within which the public agency should have responded. History: Eff. 11/6/94, Register 132 Authority: AS 40.25.110 AS 40.25.120 AS 40.25.123 AS 40.25.125 Editor's note: As of Register 176 (January 2006), and acting under AS 44.62.125 (b)(6), the regulations attorney relocated former 6 AAC 96.340 to 2 AAC 96.340, and made a conforming technical change to 2 AAC 96.340(b), to reflect Executive Order 113 (2005). Executive Order 113 eliminated the Telecommunications Information Council and transferred its functions to the governor and to the Department of Administration. The history note for 2 AAC 96.340 carries forward the history from former 6 AAC 96.340. As of Register 158 (July 2001), the regulations attorney made technical revisions under AS 44.62.125 (b)(6), to reflect the 2000 renumbering of former AS 09.25.100 - 09.25.220 by the revisor of statutes. The provisions of former AS 09.25.1 00 - 09.25.220 were relocated to AS 40.25.100 - 40.25.220. 2 AAC 96.345. Appeal determinations; time allowed; by whom made (a) As soon as practicable, but not later than the 10th working day after the close of the record on appeal, the agency head shall issue a written determination stating which of the records that are the subject of the appeal will be disclosed and which records will not be disclosed. The written determination must comply with 2 AAC 96.350. (b) The agency head may extend the 1 O-working-day period for a period not to exceed 30 working days upon written request from the requestor, or by sending a written notice to the requestor within the basic 10-working-day period. (c) The agency head may delegate authority and duties under (a) and (b) of this section to a full-time employee of the public agency not involved in the denial and not subordinate to the employee responsible for the denial. The employee delegated this authority may not subdelegate to another of6 10/27/20063:53 PM . DOC BodyPage . http://www .legis . stat_us/ cgi-bin/fo I ioisa.dll/aac/ query=%5 Bgroup... employee. History: Eff. 11/6/94, Register 132 Authority: AS 40.25.110 AS 40.25.120 AS 40.25.123 AS 40.25.124 Editor's note: As of Register 176 (January 2006), and acting under AS 44.62.125 (b)(6), the regulations attorney relocated former 6 AAC 96.345 to 2 AAC 96.345, and made a conforming technical change to 2 AAC 96.345(a), to reflect Executive Order 113 (2005). Executive Order 113 eliminated the Telecommunications Information Council and transferred its functions to the governor and to the Department of Administration. The history note for 2 AAC 96.345 carries forward the history from former 6 AAC 96.345. As of Register 158 (July 2001), the regulations attorney made technical revisions under AS 44.62.125 (b)( 6), to reflect the 2000 renumbering of former AS 09.25.100 - 09.25.220 by the revisor of statutes. The provisions of former AS 09.25.100 - 09.25.220 were relocated to AS 40.25.100 - 40.25.220. 2 AAC 96.350. Contents of determination denying appeal A determination under 2 AAC 96.345 responding to an appeal must be in writing, must specify the specific statute, regulation, or court decision that is the basis for the denial, and must state briefly the reason for the denial. A denial under this section is the final agency decision. A denial must further state that, as provided by AS 40.25.124 , the requestor may obtain judicial review of the denial by appealing the denial to the superior court. History: Eff. 11/6/94, Register 132 Authority: AS 40.25.110 AS 40.25.120 AS 40.25.123 AS 40.25.124 AS 40.25.125 Editor's note: As of Register 176 (January 2006), and acting under AS 44.62.125 (b)(6), the regulations attorney relocated former 6 AAC 96.350 to 2 AAC 96.350. and made a conforming technical change to 2 AAC 96.350, to reflect Executive Order 113 (2005). Executive Order 113 eliminated the Telecommunications Information Council and transferred its functions to the governor and to the Department of Administration. The history note for 2 AAC 96.350 carries forward the history from former 6 AAC 96.350. As of Register 158 (July 2001), the regulations attorney made technical revisions under AS 44.62.125 . of6 10/27/20063:53 PM DOC' BodyPage . http://www.legis.stat.us/cgi -b in/fo lio isa. dll/ aac/ query=%5B group. . (b)(6), to reflect the 2000 renumbering of former AS 09.25.100 - 09.25.220 by the revisor of statutes. The provisions of former AS 09.25.100 - 09.25.220 were relocated to AS 40.25.100 - 40.25.220. 2 AAC 96.355. Records in electronic form (a) Except as otherwise provided by law, public records maintained in electronic form are subject to disclosure and copying. Upon receipt of a request complying with this chapter, a public agency shall provide a copy of a public record in the form in which it is maintained or disseminated by the public agency. A public agency may not release proprietary software except as provided in 2 AAC 96.440. (b) A copy of an electronic public record is generated by copying the electronic file that was used to produce the printed form of the public record. Except as provided in (c) and (d) of this section, a public agency shall establish the fee to duplicate an electronic public record in accordance with 2 AAC 96.360. (c) A copy of an electronic public record in a geographic information system is generated by copying the plot file, the associated geographic and tabular files, or other files required to generate the printed form of the public record. A public agency shall establish the fee to duplicate an electronic public record in a geographic information system in accordance with 2 AAC 96.460. (d) The Department of Public Safety will establish the fee for a copy of an electronic public record in a vehicle registration list in accordance with 2 AAC 96.460. (e) A public agency entering into a contract with a private, public, or nonprofit entity to provide electronic copies of public records is not relieved from complying with AS 40.25.110 and this chapter. History: Eff. 11/6/94, Register 132 Authority: AS 40.25.110 AS 40.25.115 AS 40.25.120 AS 40.25.123 Editor's note: As of Register 176 (January 2006), and acting under AS 44.62.125 (b)(6), the regulations attorney relocated former 6 AAC 96.355 to 2 AAC 96.355, and made conforming technical changes to 2 AAC 96.355, to reflect Executive Order 113 (2005). Executive Order 113 eliminated the Telecommunications Information Council and transferred its functions to the governor and to the Department of Administration. The history note for 2 AAC 96.355 carries forward the history from former 6 AAC 96.355. As of Register 158 (July 200 I), the regulations attorney made technical revisions under AS 44.62.125 (b)(6), to reflect the 2000 renumbering of former AS 09.25.100 - 09.25.220 by the revisor of statutes. The provisions of former AS 09.25.100 - 09.25.220 were relocated to AS 40.25.100 - 40.25.220. of6 10/27/20063:53 PM DOC·BodyPage " . http://www.legis.stat.us/cgi-binífO lioisa.dlI/aac/ query=%5Bgroup... ~r of6 10/27/20063:53 PM ~2 10/~0/2006 10:46 FAX . Odob~r 20. 2006 . ~001/002 I?S-c . ~~Í'~~^E~!t;~~;;~1~'a. OCr ~ ;IVS-D ¡~TT()nNI~Y~'; AT lAW i/~ß. .2006 'II.rc 4'Jch 01/.:. 11 '<>/"09. ""O~ rp'·"lJis.t/ (907) 26J~IQ72'lJ/J J~n1(Ù!¡.1J?P.!.;J\y,.IJ~~( S<:ott.J. Nonbtrand, C()mrni~:-;¡oncr Alaska Oil and (ins Cpnscrvation Commission Slal~: of Alaska Departmcnt or Administration l.:n West 71h Av\;.~nll~. Suite 100 Anchoragç. Alaska 9950 I VIA FAX 27ó-7Si~2 Rú: Fn:<:dom of Inj()"fnation Act RequesT Dem Commissioner: This requcst i.s made under the Fn;¡;dom or Int()rrnaIÎon Act, 5 U.S.c. ~ )52. Opcn R¡;¡;ords Act, and AS 40.25.1 IO (see also. ('11.1- ()( Kenai v. Kenai Peninsula Newspapers. hlC., Ü42 P.ll! !316 (Alaska 1\)~2)). Pursuant to AS 40.25.1 10. whkh gives the public the right 10 inspcçt public n:<:ords. I requ~~s( a copy orth~~ f()llowing: ¡, AI! other infonnalìon, wnrkpnp~rs. d¡;,~ctronic files. com Itl urlic.atlons. reports or rccords pnlaÍning to the T)cpmimcnt'~ çah.:·ulations nnd filcs r(;bt<.~d 10 .n.)l·I;~castcd crud~~ oj I production èstim:.lles and/or oi! and gas reserves estima(<:s !~)r any and all potential or proven oil and/or gas aCI,.:lIlllulations on (h~~ North S1op~~ or ^Iaska. This n.::.sponse shoulcJ Înclud~~ all "puhtíç n~cords" ~IS that term is det1n~d in AS 40.25.220(3) and any and aU estimates of hydr()(;arbon res~~rv(~s made by the Ik¡xlftmcnl, by çontmctnJ's, or othcr department.'s of the Stí:lk~ or A !ask;] currently in thc poss~ssìon of tl¡l;~ Ikp¡lrt.nH.~nt. This n~qucst is in(l~mkd to cover all studies, legislative and other reports. c()rrl'~pondcnce, memornnda, cmails, rcference mntcri:tls, ~:.ontracls, logs, photographs, charts, (;:]ecttonic prcsentations and any or hcr dCI(;unwnt wht;~thcr retained in r)fÎn! or stored digitally, ¡.J(~rtajn¡ng 10 th(~ suhject mattcr rl,;~j~~rcllccd ~lhow. 'rhis requ¡:st should cover years 2004, 2005. and 200Ô Requestor I'cprcscr1\s parties \vhose property wì1! be subject to AS 43.56.010 ad valorem lax liabilities ¡IS of llll: prop(~rty lien datl~ on January ], 2007, to which Ihis irÜormalion is r'í.:;Il:V~H"1t. If there arc any [e~s J()I' searching for. reviewing, or copying the n;l,.:ords. plc~Jse slIppJy 111(; n~c~)rds without informing us ol'the cost. i r the fees do not exceed $J.OOO, whíçh \V(~ agree to pay. We would he h:'lPPY to rccçÍve part or all oftlK~ n:;l..Jues(t;~d docurnçnts and inl"orll1atíon in digital fÒnnal, (í.\,.~.. cr.> R()M) i1" you find lhat more conv~niellt. ~J (~ c, ('j ç ~~I " 1'.;' I... L.. r I ~..~ \.J ( T C. ,(1 () I, ^ N r:-. H (M r;· "" (~ I.. \ Þ)., L /J. ~.:~ )<. 1\ 9 I:) 1::J 0 :.~ r F!. r- f"' I ~ (1 N t~ (~,.,) (.') '/' J ;,:' '] "1 " "I !':1 ;,7 ;,~ ... F' A (: ~:', ! M t L I:., ('.~ <) "'I ì ~:~ 1:'::. _:~ ,~ !:,~ :',1 ;:~ f-¡ I·'tt~): / IWWW...1f.:.pl(IW.r..)t:~t 10/20/2008 10:48 FAX - . . HU(;IŒS BAUMAN P¡;IHiNER ëT(·;¡ts'¡( I. & --šËËDõ·It¡:,:";""J.i':C ~ 002/002 ) 1\( r'-"I'~N[.~'Y~:'} AT LAW 11¡lgc '2 () r :2 Cktohl::' 20. 2006 ..."..._.._.....'''".."...",......."".....~......,".....,' "'"""'-"""1,'._....,,,,,,0'''' I r YOll dCIlY all 01' any part of this l\:~quest, ple:,lsc cite (;(ld1 spc(.~îk ex(~mpljon YOll thínk justifIes your rcl'uS¡ll to rclea::;e the in!<>nnal.ion and notify us or appeal proccdur'cs aV¡lil¡¡blc undcl' rhe Ll\v. lkcaus~~ or the licn dat(~ de1in¡;d above we r(~qucst thìs inforrnal.ion on an expedited basis. If you IHlve any questions about handling this request you may contact us by I.ckphonc or emaillistcd ¡¡!."'tow. Very truly yours, IIU(HIL::S BAI ¡MAN PFIFFNI::~R GORSKI & sEr:;{)()RF LLC I ..- /) I (," /1" . ,. I.. I.:,t_,,· .~"...,.'II B) _ \,....1· .......,.. .,.),(\,<.\...,~"",._... ¡:, Steven Mahoney /1 ::;'~~~·"Ir.,.ti"···· /~" (0 :); 1').\7 .::ft=1 .n -.r .... - . - ~ § 0\00 J2\Ò ;!d ~ . "< r:: U ·0 ç.; ~ Ð .¿ ~ g ']~ti: ~ . . '" <'I 0 t:Cc.- c... r-' ,...'! ~ ~ :6 = 'S X; ::3(1)'" J: ¿ ¡:::. ... Q '" 0\ p:-;: :.¡ j¿ ¡:: ~ ] r:~ III rn ... c: o . . IN THE SUPERIOR COURT FOR THE STATE OF ALASKA FIRST JUDICIAL DISTRICT AT JUNEAU RECEIVED SEP 1 2 2006 State of Alaska Office of Administrative Hearings CONOCOPHILLIPS ALASKA, INC., Petitioner. v. TAX DIVISION, STATE OF ALASKA DEPARTMENT OF REVENUE, Case No. l1U-06- OAH No. 05-0304- T AX Civil Res ondent. PETITION FOR REVIEW Under Alaska Rule of Appellate Procedure 610, ConocoPhi1lips Alaska, Inc. (UCP A I"), petitions this court to grant review of a decision by the Office of Administrative Hearings ("OAH·'). The basis for this petition is the existence of a contliet in the exercise of jurisdiction by two different state agencies. By resolving that contlict, this court can render the underlying appeal unnecessary and permit the agency with the expertise and jurisdiction to address the underlying issue to do so in an equitable manner for all parties and all purposes, a resolution the OAH does not have the jurisdiction to provide. I. FACTS During 2000, CP AI took possession of its ownership interest in, paid royalties to the State of Alaska on and paid production taxes to the State of Alaska based on volumes of oil calculated by an allocation formula approved by the Alaska Oil and Gas Conservation Commission ("AOGCC"). In 2003, without requesting action from the Petition for Rcview COIIOL'oP/¡ilfip.\' Alaska. ¡flC. v. Tax Divisio1l OAH 05-0304-T AX Page lor 13 Ir1 -.to ..... '":" - 00 g¿~ 0\00 ~-.b '" 00 nI Ir\ . ~ r::: U .Q "". :: .0\ ..... r: - ... QJ ... ~ §.~ .~ -.- '-:;:: + + ;; ". 0. a::¡ 0- .. N N :.J ~ "'. Jj .:: ~ - ::I '" ::I rF; :.r: .r:: ~ ~ ë:':: Jž ~ ~ ~ r;E: <1.1 rFJ 1; s::: o . . AOGCC, the Department of Revenue ("DOR") unilaterally and r~troactively reallocated the volumes for 2000 for production tax purposes, even though it had no ability to reallocate volumes for ownership or royalty purposes. CPAI apþúaled DOR's unilateral action solely on the grounds of the improper real1ocation and requested that the OAH transfer jurisdiction over the reallocation issue to the AOGCC, the only agency with the expertise and jurisdiction to address the allocation issue for all parties and all purposes. The OAH declined to do so, prompting this petition. A. The Agencies in Conflict The AOGCC is an "independent quasi-judicial agency of the state", charged with overseeing the prevention of waste in the development of Alaska's oil and gas resources. I One of the three members of the Commission is required to be a petroleum engineer, and one is required to be a geologist.2 Its jurisdiction i~ broad: The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent ofthis chapter.3 In particular, the AOGCC is authorized to control the development of oil and gas tields, specifically including the measurement of oil and gas produced, and to require: the filing and approval of a plan of development and operation for a field or pool in order to prevent waste, insure a greater ultimate recovery of oil and gas, and protect the I AS 31.05.005(a). z AS 31.05.009. 3 AS 31.05.030(a). Petition for Review ('w/OcoPhillips Alaska. hI£'. v. Tax Division OAH 05-0304-TAX Page 2 of 13 I.l1 ~ "I - . - ~~ 0\0 O\rr; <C -b ~oo Ii! tr\ . <: ~ ~ ~ 0 """ .,J. C' ,.... r:¡- -5 ~ ~ '1) = ~ . - .... c . · r: t"'-I 0 :.00'- ... "J t'1 <:J IU N c: .. -Ò = 'S rL) ::< fJ:) on ~ <IÌ ¡::; ~ 0 _0- i:l.7. <:J J: c 'r. 0 Ii! ..c: -¡;ç.. '1J Vj :.; ,.. Õ . . correlative rights of persons owning interests in the tracts of land atTected.4 Thc volumcs of oil and gas measured according to methods approved by the AOGCC and reported to that agency are used for management of the reservoir, calculation of ownership interests in the oil and gas, calculation of royalty obligations and calcu lation of production taxes. OOR is an agency charged with the enforcement of the revenue laws of the State of Alaska, along with other functions not relevant here.' For the purposes of the Oil and Gas Properties Production Tax, AS 43.55, taxpayers report to OOR the volumes of oil and gas they have taken, measured as required by and reported to the AOGCC. B. The Conflict CP AI is a company engaged in the production of oil and gas and owns an interest in the Kuparuk, Tabasco, Tam and West Sak Participating Areas of the Kuparuk River Unit on the North Slope of Alaska. The Kuparuk Participating Area was developed using surface production facilities built specifically for that field. At those surface production faciJities, the fluids produced from various wells are separated into three distinct streams: oil, natural gas and water. The only stream at issue here is the oil stream. After the oil stream leaves the surface production facilities, its volume is measured by meters known as "LACT" (Lease Automatic Custody Transfer) meters. 4 AS 31.05.030(d)(9) and (6). , AS 44.25.020. Petition for Rcview COIIOCOPf¡j/lips Ala.\·ka. lllc. v. Tax Divisioll OAH 05-0304-TAX Page 3 of 13 ..... "<I" ~I - . ..... 00 ~~ 0-00 .g~ r.¡ ~ .:;;: ~ ü - 0 . : 0- ¡::.. "'- -õ ~ ~ ~ :I ~ .- ....-. ¡: . . ;;NO ::00- s..r. N,...I QJ QJ ..... :::: ... \Ò :::: "3 aJ ::100'" ~ ¿ r: . 0 a C]\ ::;-- - .. '" g ~ 0 ~.r: ~p.. <:I 00 <:ì c: o . . The Tabasco, Tam and West Sak Participating Areas are fields much smaller than the Kuparuk Participating Area, and are refelTed to as "Satellites" of the Kuparuk Participating Area. Under plans of development approved by the AOGCC, each of the SateHites was developed without building separate surface production facilities; instead, each Satellite uses the surface production facilities of the Kuparuk PaI1icipating Area. The stream of fluids (oil, natural gas and water) from wells in each Satellite is mixed with the stream of fluids from wells in the Kuparuk Participating Area before the resulting comming[ed stream enters the surface production facilities. £t is not possible to measure with acceptable accuracy the volume of oil in the stream of well fluids until after the oil stream has been separated at the surface production facilities. Thus, the first measurement of oil with acceptable accuracy occurs at the LACT meter downstream from the surface production facilities in the Kuparuk Participating Area. That volume is the product of the commingled streams from the Satellites and the Kuparuk Participating Area. As each SateUite was developed, therefore, in Conservation Orders establishing the "Pool Rules" governing the development and operation of the fields, the AOGCC approved a method for determining the volume of oH produced from each Satellite and from the Kuparuk Participating Area. The method used an allocation fonnula that relied on well tests in the various fields to estimate the volumes of oil produced in those fields. with adjustments based upon the actual measurement of thc commingled volume at the Petition tor Review COl/()coPhillip.~ Alaska, file. v. Tax Di~'isi011 OAH 05-0304-T AX Page 4 of 13 .., '<I" .... .... . - 00 ~~ ~~ ~ '" .:( ~ U ·0 ~ ~ ~ 11 .. :i è ~ .~ ,.:!, ¡.¡.. '--;:: . . jNCI --0- L. f"J ~} I,¡ I,¡ N j.~ ~ "'S~U'\ ~ ¿ ¡::; ~ ð: ^,,- ...... .- 11 "ª I:: ~ ~ -¡¡¡~ t.I V'; .... c:: o . . LACT meter. The method the AOGCC approved for each Satellite was called a "tìxed- float" al1ocation formula.6 With respect to each SateHite, the AOGCC approved the fixed-float allocation formula after consultation with all affected entities, including DOR. In addition, the AOGCC specifically provided for the amendment of pool rules if any affected party detenllined the need for any adjustment: Upon proper application, the Commission may administratively waive the requirements of any rule stated above or administratively amend this order as long as the change does not promote waste, jeopardize correlative rights, and is based on sound engineering principles.7 In the time periods following the adoption of the pool rule:.; for each field through 2000, DOR did not apply to the AOGCC for the amendment of the allocation method or any other pool rule. After 2000 DOR did not ever apply to the AOGCC for a retroactive amendment of the allocation method. In 2002 a different allocation method was adopted by mutual agreement, the "capped float-float" fonnula, and in 2003, after consulting all (¡ The term "fixed-float" refers to the mechanics of the process. The total volume ofoit produced from the Kuparuk Participating Area and the Satellites for a particular month was determined by reference to the volume measured at the LACT meter downstream from the surface production facilities. Of that total volume, the volume of oil allocated to Tarn, West Sak or Tabasco was the amount estimated by the well tests; those volumes were "fixed". The volume of oil production alJocated to the Kuparuk Participating Area then was determined by the volume remaining; the Kuparuk allocation factor "floated" up or down, depending upon whether the total volumes predicted by the well tests proved to be more or less than the total volumes measured at the LACT meter ì AOGCC Conservation Order 406, Rule 13 (October 16,1997); AOGCC Conservation Order 430, Rule 13 (July 21,1998); AOGCC Conservation Orde!" 435, Rule 13 (November 5, 1998). Petition for Review COllocoPhillips Alaska. II/c, ~'. Tax ÐÙ'i!;ÎOIl OAH 05-0304-TAX Page 5 of IJ "" -.:" N "7 .... 00 ~g; O\r.o t: .J; ~OO ì':! "" . ~ ~ U -0 ..... ::: ~ - ~.- _ IJJ ~ "'0 ::: (,¡ 'lj ::: ~ .- ..... .-;:: . . ;.....0 £:CO"" ... N"'" .~ "" C ~ -.b ..:.Ii .- r.o -;~." t:I ~ u.. :i r- :;j 0 _ 0- "",7- fJ J2 C '" 0 t:I..r;; tio.. <lot t.n <11 :::: o . . aŒected parties, including OOR, the AOGCC did amend the pool nales prospectively for each field, including the adoption of the "capped float-float" allocation formula.s During tax year 2000, CPA I calculated and paid oil production taxes for the Satellites and the Kuparuk Participating Area on the basis of its share of the volumes allocated to each of the participating areas under the pool rules then in effect under the relevant AOGCC Conservation Order. Those volumes, allocated according to the fixed- float method, were the same volumes used to define royalty obligations and CP AI and the other working interest owners also paid royalties on the basis of those alJocated volumes. In 2003, DOR issued a notice and demand for payment for additional production taxes for tax year 2000. In particular, for 2000 DOR recalculated the volumes allocated to the Satellites and the Kuparuk Participating Area using the capped float-float method. DOR's unilateral, retroactive reallocation of oil production volumes resulted in a decrease in the volume of oil allocated to the Tam Participating Area, and an increase in the volume of oil aHocated to the Kuparuk Participating Area, at least for production tax purposes. Because the tax rates for the two participating areas were different, the retroactive reallocation resulted in an increase in production tax due from CP AI. S Under the "capped float-float" allocation method, the volumes allocated to all participating areas "float" up or down proportionately, depending upon whether the predicted total volume is greater or less than the metered total volume. For the Satellites, however, the amount of float is "capped" at a certain allocation factor. If the comparison between the predicted total volume and metered total volume produces an allocation factor exceeding the "cap", the volumes allocated to the Satellites are "capped" at the volumes produced by the capped allocation facto., and the remaining differential volume is allocated to Kuparuk. Petition tor Review COllocoPhillips Alaska. fllc. v. Tax Di~'isioll OAH 05-0304-TA.X Page 6 of 13 '" '<t" M - . - °0 00 0\ 0\0 0\00 co: . ..:.\10 ..", t:J:; co: '" r, ~ -¡:::; 'wi -0 '::10\ ::.. œ- ~ .. ..¿ s:: ~ ~ ::I u.. .- ...... '1::.. "'.....0 ::00- .. M ..... ~ f'" ... <:.I ..¿ ~ -; 00 :1 00 ,~ ;.r; ¿-¡:::; t; ~ õ:-:: co: ~ ~ - ." 0 ¡:¡¡ .- -as: ~ VI 'IJ s:: o . . For CPAI, though, that was not the only consequence ofDOR's action. Because the working interest owners in the various participating areas are not the same, when it unilaterally and retroactively reallocated production, DOR had to account for the fact that one working interest owner did not have any volume of oil to reallocate to Kuparuk. The additional volumes of oil that would have been attributed to that taxpayer therefore were attributed to CP AI (and the other working interest owners in the Kuparuk Pm1icipating Area). Thus, CP AI was required to pay the higher tax rate on volumes of oil to which, under DOR's revised allocation, it had no ownership right. In reality, CP AI did receive the oil in 2000, and it paid both production tax and royalties on that oil. Under the aHocation procedures required by the AOGCC, the volumes DOR has reallocated to Kuparuk in fact were treated as Tarn production. Royalties in fact were due, and in fact paid, on 100% of that volume. In the Kuparuk Participating Area, however, 10% of the production volume is exempt from royalty under agreements between the State of Alaska and the working interest owners. The production tax is not imposed on oil that is exempt from taxation, so the State of Alaska's royalty share ofthe gas is not subject to the production tax. In Tam, 100% of the production stream is subject to royalty, which CP AI in tàct paid, and 100% of the production stream therefore is subject to a royalty deduction under the production tax. [n Kuparuk, 90% of the production stream is subject to State royalty, with the royalty share being exempt from the production tax. The remaining 10% of the production stream is exempt from State royalty, so those volumes are subject to the production tax without Petition for Review COIlOcoPhillips Alaska. [I/c. v. Tax Division OAH 05-0304-TAX Page 7 of 13 .,., ..,¡. ..., ..... . - ~~ 0\ 0 ~: ~ ~ . < r::: () - 0 -=0\ P. d - - !¡ .. '"1:; C ~ Æ.2.p.,. c . · ~ 1'1 0 ~O"" .. M '" ~. ~ .....1 ~ .- ~ "'5~&.n ~ - ;.L.. ri r- N C .. '" Õ:~ ~ ~ C ~ ~ -;E: !¡ 00 q,¡ C o . . exemption. When OOR unilaterally and retroactively reallocated production, therefore, it treated production on which royalty was paid on 100% of the volume as ifit were production on which royalty was paid on 90% of the volume. Accordingly, OOR reduced the exemption under the production tax for royalty volumes, even though CP AI in fact had paid royalties on 100% of the volumes previously allocated to Tam. In sum, without requesting any modification of the pool rules from the AOGCC, OOR unilaterally and retroactively reallocated for production tax purposes oil that previously in had been allocated for all purposes according to the method approved by the AOGCC. That reallocation has impacts on previously determined ownership interests and royalty obligations, but DOR does not have the jurisdiction to address those impacts. C. Administrative Proceedings CP Al filed an appeal with DOR, which was heard by an appeals officer at an informal conference. The appeals officer issued an informal conference decision that addressed various issues and specifically upheld the retroactive reallocation. CPAJ then appealed the informal conference decision on the sole basis of the retroactive reallocation of volumes. The appeal was referred to the OAH. Before the OAH, CPAI filed a motion seeking to transfer jurisdiction of the allocation issue to the AOGCC. CP AI pointed out that the issue before the OAH did not involve the application of the production tax, but the selection of the proper oil volume allocation method. That issue is committed to the jurisdiction of the AOGCC. and only the AOGCC can ensure that the allocation method is implemented for all parties and all purposes. If the AOGCC Petition tor Review COIlOcoPIÛllips Alaska. Illc. v. Tax DMsioll OAH 05-0304-TAX Page 8 of 13 II'> "<T N - . - ~~ ~~ ":':00 ~ '" U· < ;:: ~ 0 ~ ~ ~ ~ ~ .. ~ 5 ~ ~ .,J tLt .- -. -i: . · <U ,.... ç, c:co- .. ,.... .... ;J ~ f"t j.';:: ~ =~'" .r: r.r.r:: .. 0 ~ 0' a::-:: '" ~ ..:t c: "" 0 n:o!:: ñ!¡::" <1.1 'f.) ~ ::: o . . determined that volumes should be reallocated for all parties and all purposes, then there would not be a tax issue to appeal. In short, the issue for determination was one requiring the expertise and scope of power of the AOGCC, which should be given the opportunity to address the issue. The OAH Administrative Law Judge denied the motion, stating only that the issue arose in a tax appeal.9 II. STATEMENT OF THE QUESTION Should the AOGCC first determine whether the pool rules it adopted should be amended retroactively, so that if it agrees with DOR that such a retroactive amendment is necessary, the resulting reallocation can be harmonized for all entities and purposes relying on the allocation? III. REASONS WHY REVIEW SHOULD BE GRANTED Under Appellate Rule 61O(b)(l), review should be granted because postponement of review will result in injustice due to unnecessary delay. Under Appellate Rule 610(b)(2), review should be granted because the order involves a controlling question of law and an immediate review of the order will materially advance the termination of the proceeding in the OAH. Both grounds exist for this reason: the OAH does not have the jurisdiction to provide complete relief; only the AOGCC, which OOR failed to consult, can provide complete relief. The only issue in the underlying appeal is the proper allocation fomlllla to apply to oil produced during the year 2000: the one that the AOGCC approved and relied on for all purposes during ') Exhibit I. Petition for Review lOlIOCOPhillips Alaska. 111c. P. Tax DÌ\,isiOll OAH 05-0304- TAX Page 9 of 13 \r '<t' ....1 - . - 00 ooa- ~o 00 j¿1Ò '" (L) ..: tn . "< ;: U - 0 ~ 1; ~ .... .. :3 :: ~ ¡OJ -- {J..,¡ .- ..... --:::.. ; f".~ 0 ~O"'" .. M C-I ~ ~ :b ..:t -:: r£J - ... 11"\ ::1m ;£: nr ~ N 0 (\: a- ~- ~ U ..:.: c: ~1 ;¡¡o... ...., r;n 'II c: o . . that year, or the one that DOR retroactively imposed in 2003 without seeking AOGCC approval. That oil measurement issue is an AOGCC issue, not a tax issue. CPAI did not have any reason to request a change in allocation formulas, either prospectively or retroactively. CP AI therefore never had the opportunity to present the issue to the AOGCC, and instead simply reported volumes based on the allocation formula the AOGCC had approved in the pool rules. Had DOR timely petitioned the AOGCC prospectively for such a change, or even if it had applied for a retroactive change, the AOGCC could have determined whether the change was necessary and, if so, it could have reallocated the volumes so that all parties were properly assigned volumes for all purposes. Had the AOGCC disagreed, then DOR could have appealed that decision. DOR's attempted unilateral, retroactive reallocation can not address the allocation of volumes to all parties, nor can it address the allocation for any purpose other than the production tax, even though the reallocation affects ownership interests and royalty obligations as well. CPAI's motion merely requested the OAH to transfer jurisdiction of the allocation issue to the AOGCC. If the AOGCC agrees with DOR, then the volumes can be reallocated for all parties and all purposes, and there will be no tax appeal. [f the AOGCC disagrees with DOR, DOR can file its own appeal of the AOGCC's action. CPAI would not even need to participate in that appeal. CPA I is not disputing the method of calculating the amount of tax due, nor is it even debating the merits of the various allocation methods that could be used. It simply is pointing out that the relevant Petition for Review C(}f/(}coPhi//ips AllIska. IIIe. v. Tax Divisioll OAH 05-0304- T ¡.'v'{ Page 10 of IJ . . volumes in fact were al10eated based on pool rules approved by the AOGCC, and ownership interests, royalties and taxes all in fact were based on those volumes. If those volumes are to be reallocated retroactively, that reallocation must occur across all purposes that relied on the original allocations. DOR, and by extension the OAH, can not perform that universal reallocation. Only the AOGCC has the jurisdiction to reallocate universally. Once this issue is directed properly to the agency with the jurisdiction to address it, CPAl's current appeal will be resolved. '" ~ IV. REASONS WHY THE DECISION BELOW IS ERRONEOUS .... .... ~g ~oo ..fj~ ~ "" · :;: r:: ü ~ 0 · ::: Q\ c.. te - · ~ ~ -::I I: ~ "1j ~ tL. .- -- ""::= . . jNO ......0- s... "'J f"1 1) ..... t: ~ -.è ..:a: .- (r;, -;æ"" ;1: r: ¡:. N 0 '" t;;' s:-: '" j¿ c 'I: 0 id .c: -¡¡¡¡l. 'oJ tf) 'oJ C o The decision below simply failed to address the issue of jurisdiction. Because the allocation issue arose in the context ofa tax appeal, the administrative law judge ruled that its resolution was within the jurisdiction of the OAR. CP AI never argued that DOR and OAH do not have jurisdiction over the tax consequences of the allocation issue. Rather, CPAI pointed out that the issue was not the means of calculating the amount of tax due, but the volume of oil on which the tax was due. The volume issue in turn did not arise from an audit of reported volumes or some other manner in which DOR applied its tax expertise. Rather, the volume issue arose from the OOR's unilateral and retroactive application of an allocation method different from the one approved by the AOGeC in the pool rules that govern the measurement of volumes. Because DOR elected not to go to the AOGCe to seek an administrative amendment of the pool rules to adopt a different allocation method, and instead chose to impose the unilateral, retroactive allocation in the context of a tax audit of an individual taxpayer, Petition for Review COlluc:vPhillips Alas!w, lilt:. v. TcL'í Divisioll OAH 05-0304-TAX Page II of \3 lI\ "T ('>1 ..... ~ ~~ 0'10 0'100 ..: >b ":<:00 ~ lI\ . "< r:: c..¡ ::i ~ p., '" - ;,¡ .. --ò t: ¡;¡ ~ :; LL. .- -- '¡: . . .... N Co ~O"" J". N"') C,¡ ~ r>1 C ... >b = 'S CJ; ::Icn'" tU - ~ tå'r- ~ ~ s:-: ~ Jj c or, 0 ¡;¡ ... -¡;¡¡:: o:J cn ~ c: o . . CP AI had no option but to raise the issue in the first instance in the tax appeal. The issue, however, is not a tax calculation issue~ it is an oil volume measurement issue. V olume measurement is a matter within the expertise and jurisdiction of the AOGCC, and that agency in the first instance should decide the issue. The decision below fails to resolve the conflict between two agencies. DOR failed to acknowledge the jurisdiction of the AOGCC in the first instance by retroactively imposing an allocation method different from the one approved by the AOGCC, placing CP AI in the untenable position of trying to comply with conflicting orders from co-equal agencies. Though the two agencies are of equal stahire, their areas of jurisdiction are not congruent. Thus, when DOR invaded the AOGCC's jurisdiction on oil allocation, it did so without the jurisdiction to address the impacts of the reallocation on ownership interests and royalties. The interests of the State as whole are not served when one agency ignores the ruJings and jurisdiction of another. The OAH decision, too, fails to recognize the jurisdiction of the AOGCC to address the allocation issue, requiring CP Al to continue to pursue an appeal before a tribunal that can not provide it relief from the conflicting obligations created by the conflicting allocations. V. RELIEF SOUGHT The reliefCPAI requests is for the court to direct the OAH to transfer jurisdiction over the allocation issue to the AOGCC and stay the tax appeal pending resolution of the allocation issue. In particular, the OAH should request the AOGCC to determine whether there should be a retroactive reallocation of oil production volumes for the Petition f()r Review COllocoPhi/Jips Alaska. [/lc. v. Tax Division OAH 05-0304-T AX Page 12 of 13 ,,\ '<t" M '";' .... 00 00 a- 0\ 0 0\00 ~oJ:, v. 00 iiI \n · ~ ~ U ·0 · ::la- p". <'G - · I .. "'1::1 c: ~ ~ ~;:.. .- -. C . . ~NO c::¡O.... ...NN I I N ~ .:: oJ:, _ ::I to := 00 Ln '" ~ ~ ti r- N 0 .!J~ -; ~ ..:.c - '" 0 <'G ... -¡¡¡E: '1i 'Jj I 1:: o . . Satellites and the Kupamk Participating Area for 2000. If the AOGCC determines that such a reallocation is necessary, the AOGCC should determine what method should apply and direct the manner in which volumes reported for ownership interests, royalty obligations and production tax obligations should be revised. DATED: September II, 2006. CERTIFICATE OF SERVICE This certìfies that on September II. 2006 I caused a copy of the Petition for Review 10 be sent via first class mail to: Kenneth Diemer Assistant Attorney General State of A laska. Department of Law 1031 W. Fourth Avenuc. Suitc 200 Anchorage, AK 99501-1994 t1Þ"- 2 V~ Go Leon T. Vance 22313 FAULKNER BANFIELD~ P.C. "'-- ?. I/a..... c.. Leon T. Vance Alaska Bar No. 8309096 Mark T. Handley Administrative Law Judge Office of Administrative Hearings P. Q. Box 110231 Juneau, AK 99811·0231 Petition for Review CUf/oc()Phillips Alaska, If/c. \'. Tax DivisioJl OAH 05-0J04-TAX Page JJ of 13 . . ßEFORE THE STATE OF ALASKA OFFICE OF ADMINISTRATIVE HEARINGS OIL & GAS PRODUCTION TAX (AS 43.55) 2000 TAX YEAR ) } ) ) ) } OAH No. 05-0304- T AX Appeal of Revenuc Infonnal Conference Decision TN THE MA TIER OF CONOCOPHllLIPS ALASKA, INe. 3rd PRE-HEARING ORDER Having reviewed the pat1ies' briefing on denying the motion to transfer jurisdiction, I have determined to that the motion should be denied. While the Alaska Oil and Gas Conservation Commission's assertcdjl11Ìsdiction in setting the method of allocation of oil production may be relevant to taxpayer's liability in this appeal. it is a tax appeal. Its resolution is therefore under the jurisdiction of the Office of Administrative Hearings. I have also signed the enclosed order for the stipu]uted extension of the bticfing schedule and have scheduled a status conference in that order. Parties with questions and scheduling issues should call Legal Office Assistant Neil Robel1S at (907) 465-1886. ~ DATED: AugustJð. 2006 ~"- /1 /') ~~/. ~/.... ~_/'''' .'/0/' ;./ .,,"1". "''''' /.. /./ ;to . /' ' " / 4'Y / ,0ø. /' /'/ // TY~ By: The ul~·:i-:.':¡i9ner.l c,~rtifies_ that Mark T. Handiey thi3 <.1ale an exact copy at me forego1ngwasprovided to the Administrative Law Judge follOW. ing IndIviduals: t: € t) ^ 7í V£.l \"-(~ ~ -¥:e.A1~e.f(\. ~\er) l1A(~ -;~.- - --~--- D:Jte Slgn·ü;tti;: ~/'3ðfðro ~ EXHIBIT 1 Page 1 of 1