00 CS FOR HOUSE BILL NO. 289(FIN) 01 "An Act relating to a liquefied natural gas storage facility; relating to the tax credit for 02 an investment in a liquefied natural gas storage facility; relating to the regulation of 03 liquefied natural gas storage as a utility; relating to the powers and duties of the director 04 of the division of lands and to lease fees for a liquefied natural gas storage facility on 05 state land; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07  * Section 1. AS 38.05 is amended by adding a new section to read: 08 Sec. 38.05.096. Exemption from rental payments on land leased for certain  09 liquefied natural gas storage facilities. (a) A person leasing state land for a liquefied 10 natural gas storage facility other than a gas storage facility subject to AS 38.05.180(u) 11 may request an exemption from lease payments as provided in this section. The 12 exemption is applicable for the periods described in (b) of this section. 13 (b) The exemption is available for the calendar year in which the liquefied 01 natural gas storage facility commences commercial operation and for each of the nine 02 calendar years immediately following the first year of commercial operation. 03 However, an exemption is not applicable for the calendar year after the facility ceases 04 commercial operation or for any subsequent calendar year. 05 (c) The lessee shall provide the director with any information the director 06 requests to determine whether the lessee qualifies for the exemption. 07 (d) Information related to state land leased for a liquefied natural gas storage 08 facility qualifying for the exemption in this section is public information and may be 09 furnished to the Regulatory Commission of Alaska. On request, the director shall 10 provide the name of each person using state land leased for a liquefied natural gas 11 storage facility, the years for which an exemption was granted, and the amount of the 12 exemption. 13 (e) A person receiving an exemption for a payment under this section that 14 contracts to store liquefied natural gas for a utility regulated under AS 42.05 shall 15 reduce the storage price to reflect the value of the exemption. 16 (f) In this section, 17 (1) "ceases commercial operation" and "commences commercial 18 operation" have the meanings given in AS 31.05.032; 19 (2) "liquefied natural gas storage facility" has the meaning given in 20 AS 42.05.990. 21  * Sec. 2. AS 42.05.381(k) is amended to read: 22 (k) The cost to the utility of storing gas in a gas storage facility or storing  23 liquefied natural gas in a liquefied natural gas storage facility that is allowed in 24 determining a just and reasonable rate shall reflect the reduction in cost attributable to 25 any exemption from a payment due under AS 38.05.096 or 38.05.180(u), as  26 applicable, [AS 38.05.180(u)] and the value of a tax credit that the owner of the gas 27 storage facility received under AS 43.20.046 or 43.20.047, as applicable. The 28 commission may request the (1) commissioner of natural resources to report the value 29 of the exemption from a payment due under AS 38.05.096 or 38.05.180(u), as  30 applicable, [AS 38.05.180(u)] that the gas storage facility received; and (2) 31 commissioner of revenue to report information on the amount of tax credits claimed 01 under AS 43.20.046 and 43.20.047, as applicable, for the gas storage facility or  02 liquefied natural gas storage facility. In this subsection, 03 (1) "gas storage facility" has the meaning given in AS 31.05.032;  04 (2) "liquefied natural gas storage facility" has the meaning given  05 in AS 42.05.990. 06  * Sec. 3. AS 42.05.990(5) is amended to read: 07 (5) "public utility" or "utility" includes every corporation whether 08 public, cooperative, or otherwise, company, individual, or association of individuals, 09 their lessees, trustees, or receivers appointed by a court, that owns, operates, manages, 10 or controls any plant, pipeline, or system for 11 (A) furnishing, by generation, transmission, or distribution, 12 electrical service to the public for compensation; 13 (B) furnishing telecommunications service to the public for 14 compensation; 15 (C) furnishing water, steam, or sewer service to the public for 16 compensation; 17 (D) furnishing by transmission or distribution of natural or 18 manufactured gas to the public for compensation; 19 (E) furnishing for distribution or by distribution petroleum or 20 petroleum products to the public for compensation when the consumer has no 21 alternative in the choice of supplier of a comparable product and service at an 22 equal or lesser price; 23 (F) furnishing collection and disposal service of garbage, 24 refuse, trash, or other waste material to the public for compensation; 25 (G) furnishing the service of natural gas storage to the public 26 for compensation; 27 (H) furnishing the service of liquefied natural gas storage to  28 the public for compensation;  29  * Sec. 4. AS 42.05.990 is amended by adding new paragraphs to read: 30 (11) "liquefied natural gas storage facility" means a facility that 31 receives natural gas volumes in a liquid or gaseous state from customers, holds the gas 01 volumes in a liquid state in a reservoir, and delivers the gas volumes in a liquid or 02 gaseous state to the customer; in this paragraph, "facility" includes 03 (A) all parts of the facility from the point at which the natural 04 gas volumes are received by the facility from the customer to the point at 05 which the natural gas volumes are delivered by the facility to the customer; 06 (B) a facility consisting of a reservoir, either underground or 07 aboveground, and one or more of the following components of the facility: 08 (i) pipe; 09 (ii) compressor stations; 10 (iii) station equipment; 11 (iv) liquefaction plant or facility; 12 (v) gasification plant or facility; 13 (vi) on-site or remote monitoring, supervision, and 14 control facilities; 15 (vii) gas processing plants and gas treatment plants, but 16 not including a manufacturing plant or facility; 17 (viii) other equipment necessary to receive, place into 18 the reservoir, monitor, remove from the reservoir, process, and deliver 19 natural gas; 20 (12) "reservoir" means a receptacle or chamber, either natural or man- 21 made, holding a gas or liquid, and includes a tank or a depleted or nearly depleted 22 pool; 23 (13) "service of liquefied natural gas storage" means the operation of a 24 liquefied natural gas storage facility; "service of liquefied natural gas storage" does 25 not include the storage of liquefied natural gas 26 (A) owned by or contractually obligated to the owner, operator, 27 or manager of the liquefied natural gas storage facility; 28 (B) that is incidental to the production or sale of natural gas to 29 one or more third-party customers; or 30 (C) for which the price of storage is not separately itemized. 31  * Sec. 5. AS 43.20 is amended by adding a new section to article 1 to read: 01 Sec. 43.20.047. Liquefied natural gas storage facility tax credit. (a) A 02 person that is an owner of a liquefied natural gas storage facility described in (b) of 03 this section that commences commercial operation before January 1, 2020, may apply 04 a refundable credit against a tax liability that may be imposed on the person under this 05 chapter or receive the amount of the credit in the form of a payment for the taxable 06 year in which the liquefied natural gas storage facility commences commercial 07 operation. The tax credit or payment under this section may not exceed the lesser of 08 $15,000,000 or 50 percent of the costs incurred to establish or expand the liquefied 09 natural gas storage facility. The tax credit in this section is in addition to any other 10 credit under this chapter for which the person is eligible. 11 (b) To qualify for the credit in this section, a liquefied natural gas storage 12 facility 13 (1) must have a liquefied natural gas storage volume of not less than 14 25,000 gallons of liquefied natural gas, or, if the credit is claimed for an expansion, the 15 expansion must have increased the capacity of an existing liquefied natural gas storage 16 facility by more than 25,000 gallons; 17 (2) may not have been in operation as a liquefied natural gas storage 18 facility before January 1, 2011, unless the tax credit in this section is based on the 19 expansion of the liquefied natural gas storage facility after December 31, 2011; 20 (3) must be regulated under AS 42.05 as a utility and be available to 21 furnish the service of liquefied natural gas storage to customers, utilities, or industrial 22 facilities; in this paragraph, "service of liquefied natural gas storage" has the meaning 23 given in AS 42.05.990; 24 (4) if located on state land and leased or subject to a lease under 25 AS 38.05, must be in compliance with the terms of the lease; and 26 (5) must have commenced commercial operation on or before the date 27 the person takes a credit under (a) of this section or applies for a payment under (a) of 28 this section. 29 (c) To claim the credit or request a payment, a person shall submit to the 30 department a certification of the capacity of the liquefied natural gas storage facility 31 measured in gallons or the capacity of an expansion to an existing liquefied natural gas 01 storage facility measured in gallons, the date that the liquefied natural gas storage 02 facility commenced commercial operation, the date that any expansion to the liquefied 03 natural gas storage facility commenced commercial operation, and other information 04 required by the department. 05 (d) A person applying the credit under this section against a liability under this 06 chapter shall claim the credit on the person's return. A person entitled to a tax credit 07 under this section that is greater than the person's tax liability under this chapter may 08 request a refund or payment in the amount of the unused portion of the tax credit. 09 (e) The department may use money available in the oil and gas tax credit fund 10 established in AS 43.55.028 to make a refund or payment under (d) of this section in 11 whole or in part if the department finds that (1) the claimant does not have an 12 outstanding liability to the state for unpaid delinquent taxes under this title; and (2) 13 after application of all available tax credits, the claimant's total tax liability under this 14 chapter for the calendar year in which the claim is made is zero. In this subsection, 15 "unpaid delinquent tax" means an amount of tax for which the department has issued 16 an assessment that has not been paid and, if contested, has not been finally resolved in 17 the taxpayer's favor. 18 (f) For the purpose of determining the amount of the credit under this section, 19 the costs incurred to establish a liquefied natural gas storage facility or to expand a 20 liquefied natural gas storage facility shall be submitted to the department with 21 verification by an independent certified public accountant, licensed in the state. The 22 volume of working liquefied natural gas storage or volume of the expansion to an 23 existing liquefied natural gas storage facility shall be verified by a professional 24 engineer licensed in the state with relevant experience. 25 (g) A person may not receive a credit under this section for the acquisition of a 26 liquefied natural gas storage facility for which a credit has been taken under this 27 section. 28 (h) If the liquefied natural gas storage facility for which a credit was received 29 under this section ceases commercial operation during the nine calendar years 30 immediately following the calendar year in which the liquefied natural gas storage 31 facility commences commercial operation, the tax liability under this chapter of the 01 person who claimed the credit shall be increased, and a person not subject to the tax 02 under this chapter that received a payment under (d) and (e) of this section shall be 03 liable to the state in the amount determined in this subsection. The amount of the 04 increase in tax liability or liability to the state 05 (1) for a person subject to the tax under this chapter, shall be 06 determined and assessed for the taxable year in which the liquefied natural gas storage 07 facility ceases commercial operation, regardless of whether the liquefied natural gas 08 storage facility subsequently resumes commercial operation; 09 (2) for a person not subject to the tax due under this chapter, shall be 10 determined and assessed as of December 31 of the calendar year in which the liquefied 11 natural gas storage facility ceases commercial operation, regardless of whether the 12 liquefied natural gas storage facility subsequently resumes commercial operation; and 13 (3) is equal to the total amount of the credit taken or received as a 14 payment under (d) of this section, as applicable, multiplied by a fraction, the 15 numerator of which is the difference between 10 and the number of calendar years for 16 which the liquefied natural gas storage facility was eligible for a tax credit under this 17 section and the denominator of which is 10. 18 (i) The issuance of a refund under this section does not limit the department's 19 ability to later audit or adjust the claim if the department determines, as a result of the 20 audit, that the person that claimed the credit was not entitled to the amount of the 21 credit. The tax liability of the person receiving the credit under this chapter is 22 increased by the amount of the credit that exceeds that to which the person was 23 entitled. If the tax liability is increased under this subsection, the increase bears 24 interest at the rate set by AS 43.05.225 from the date the refund was issued. 25 (j) A person claiming a tax credit under this section for a liquefied natural gas 26 storage facility that ceases commercial operation within nine calendar years 27 immediately following the calendar year in which the liquefied natural gas storage 28 facility commences commercial operation shall notify the department in writing of the 29 date the liquefied natural gas storage facility ceased commercial operation. The notice 30 must be filed with the return for the taxable year in which the liquefied natural gas 31 storage facility ceases commercial operation. 01 (k) A refund under this section does not bear interest. 02 (l) In this section, 03 (1) "ceases commercial operation" means that the liquefied natural gas 04 storage facility fails to add or withdraw 20 percent or more of its working capacity of 05 liquefied natural gas during a calendar year after the calendar year in which the 06 liquefied natural gas storage facility commences commercial operation; 07 (2) "commences commercial operation" means the first input of 08 liquefied natural gas into a liquefied natural gas storage facility for purposes other than 09 testing; 10 (3) "liquefied natural gas storage facility" has the meaning given in 11 AS 42.05.990. 12  * Sec. 6. AS 43.55.028(a) is amended to read: 13 (a) The oil and gas tax credit fund is established as a separate fund of the state. 14 The purpose of the fund is to purchase transferable tax credit certificates issued under 15 AS 43.55.023 and production tax credit certificates issued under AS 43.55.025 and to 16 pay refunds and payments claimed under AS 43.20.046 or 43.20.047. 17  * Sec. 7. AS 43.55.028(g) is amended to read: 18 (g) The department may adopt regulations to carry out the purposes of this 19 section, including standards and procedures to allocate available money among 20 applications for purchases under this chapter and claims for refunds and payments 21 under AS 43.20.046 or 43.20.047 when the total amount of the applications for 22 purchase and claims for refund exceed the amount of available money in the fund. The 23 regulations adopted by the department may not, when allocating available money in 24 the fund under this section, distinguish an application for the purchase of a credit 25 certificate issued under AS 43.55.023(m) or a claim for refund under AS 43.20.046 or  26 AS 43.20.047. 27  * Sec. 8. This Act takes effect immediately under AS 01.10.070(c).