00 SENATE BILL NO. 50 01 "An Act relating to the oil and gas production tax; relating to oil and gas production tax 02 credits; amending the minimum tax on oil and gas production; relating to the 03 determination of the production tax value of oil and gas; relating to the financing of oil 04 processing facilities on the North Slope by the Alaska Industrial Development and 05 Export Authority; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07  * Section 1. AS 38.05.180(h) is amended to read: 08 (h) The commissioner shall [MAY] include terms in a [ANY] lease that  09 impose [IMPOSING] a minimum work commitment on the lessee to implement the  10 plan of development submitted by the lessee with a bid for an oil and gas or gas  11 only lease. The terms of the minimum work commitment must [. THESE TERMS 12 SHALL BE MADE PUBLIC BEFORE THE SALE, AND MAY] include appropriate 13 penalty provisions to take effect in the event the lessee does not fulfill the minimum 01 work commitment. If it is demonstrated that a lease has been proven unproductive by 02 actions of adjacent lease holders, the commissioner may set aside a work commitment. 03 The commissioner may waive for a period not to exceed one two-year period any term 04 of a minimum work commitment if the commissioner makes a written finding either 05 that conditions preventing drilling or exploration were beyond the lessee's reasonable 06 ability to foresee or control or that the lessee has demonstrated through good faith 07 efforts an intent and ability to drill or develop the lease during the term of the waiver. 08  * Sec. 2. AS 38.05.180(x) is amended to read: 09 (x) A lessee conducting or permitting any exploration for, or development or 10 production of, oil or gas on state land shall provide the commissioner access to all 11 noninterpretive data obtained from that lease; shall provide the commissioner access  12 to all information necessary to perform an economic analysis under (ii)(2) of this  13 section, including the capital, operating, production, and development costs and  14 an estimate of total reserves; and shall provide copies of that data and information, 15 as the commissioner may request. The confidentiality provisions of AS 38.05.035 16 apply to the information obtained under this subsection. 17  * Sec. 3. AS 38.05.180 is amended by adding new subsections to read: 18 (hh) The commissioner shall require each bidder for an oil and gas lease or gas 19 only lease and each lessee applying for an extension or renewal of an oil and gas lease 20 or gas only lease to submit a plan of development for exploring, developing, and 21 producing from the lease within the period of the lease or the extension or renewal of 22 the lease. The commissioner shall review each plan of development and determine 23 whether the proposed plan of development is reasonably expected to develop the lease 24 in the best interest of the state. The plan of development shall be included in a lease 25 along with penalties for failing to comply with the plan of development and other 26 terms of the lease. A bidder may not be a qualified bidder for the purposes of (f)(1) of 27 this section if the commissioner finds that the bidder has not submitted a proposed 28 plan of development that is in the best interest of the state or that the person that 29 submitted the plan of development is not reasonably capable of implementing the plan. 30 (ii) The commissioner shall 31 (1) review each oil and gas lease or gas only lease each year for the 01 purpose of determining whether a lease is being developed in the best interest of the 02 state, whether the lessee is complying with the plan of development applicable to the 03 lease, and whether revision of a plan of development, including the planned rate of 04 development, would provide the maximum benefit to the people of the state; 05 (2) every five years, perform an economic analysis on each 06 participating area and determine whether the participating area is capable of increased 07 production in paying quantities over the current rate of production or plan of 08 development; 09 (3) enforce the terms of each oil and gas lease or gas only lease, 10 including imposing any applicable penalty or other remedy for noncompliance, within 11 a reasonable time after finding that a lessee is out of compliance with the terms of the 12 lease; 13 (4) submit a report to the legislature before the first day of each regular 14 session that lists each oil and gas or gas only lessee that is found to be out of 15 compliance and the action by the commissioner to bring the lessee back into 16 compliance or to terminate the lease. 17 (jj) For the purposes of (hh) and (ii) of this section, a plan of development for 18 a cooperative or unit under (p) of this section is the plan of development for a lease 19 within the cooperative or unit, except where a different plan of development is 20 established for a lease within the cooperative or unit. 21 (kk) For purposes of (ii) of this section, 22 (1) "participating area" means that part of an oil and gas lease unit area 23 to which production is allocated in the manner described in a unit agreement; 24 (2) "production in paying quantities" means production in quantities 25 sufficient to yield a return in excess of drilling, development, and operating costs. 26  * Sec. 4. AS 43.55.011(e) is amended to read: 27 (e) There is levied on the producer of oil or gas a tax for all oil and gas 28 produced each calendar year from each lease or property in the state, less any oil and 29 gas the ownership or right to which is exempt from taxation or constitutes a 30 landowner's royalty interest. Except as otherwise provided under (f), (j), (k), (o), and 31 (p) of this section, the tax is equal to the sum of 01 (1) the annual production tax value of the taxable oil and gas as 02 calculated under AS 43.55.160(a)(1), as adjusted by AS 43.55.162, multiplied by 25 03 percent; and 04 (2) the sum, over all months of the calendar year, of the tax amounts 05 determined under (g) of this section. 06  * Sec. 5. AS 43.55.011(f) is repealed and reenacted to read: 07 (f) Except for oil and gas subject to (i) of this section and gas subject to (o) of 08 this section, the provisions of this subsection apply to oil and gas produced from each 09 lease or property within a unit or nonunitized reservoir that has cumulatively produced 10 1,000,000,000 BTU equivalent barrels of oil or gas by the close of the most recent 11 calendar year and from which the average daily oil and gas production from the unit or 12 nonunitized reservoir during the most recent calendar year exceeded 100,000 BTU 13 equivalent barrels. Notwithstanding any contrary provision of law, a producer may not 14 apply tax credits to reduce its total tax liability under (e) and (g) of this section for oil 15 and gas produced from all leases or properties within the unit or nonunitized reservoir 16 below 10 percent of the total gross value at the point of production of that oil and gas. 17 If the amount of tax calculated by multiplying the tax rates in (e) and (g) of this 18 section by the total production tax value of the oil and gas taxable under (e) and (g) of 19 this section produced from all of the producer's leases or properties within the unit or 20 nonunitized reservoir is less than 10 percent of the total gross value at the point of 21 production of that oil and gas, the tax levied by (e) and (g) of this section for that oil 22 and gas is equal to 10 percent of the total gross value at the point of production of that 23 oil and gas. 24  * Sec. 6. AS 43.55.011(g) is amended to read: 25 (g) For each month of the calendar year for which the producer's average 26 monthly production tax value under AS 43.55.160(a)(2) of a [PER] BTU equivalent 27 barrel of the taxable oil and gas is more than $30, the amount of tax for purposes of 28 (e)(2) of this section is determined by multiplying the monthly production tax value of 29 the taxable oil and gas produced during the month, as adjusted by AS 43.55.162, by 30 the tax rate calculated as follows: 31 (1) if the producer's average monthly production tax value of a [PER] 01 BTU equivalent barrel of the taxable oil and gas for the month is not more than 02 $92.50, the tax rate is 0.4 percent multiplied by the number that represents the 03 difference between that average monthly production tax value of a [PER] BTU 04 equivalent barrel and $30; or 05 (2) if the producer's average monthly production tax value of a [PER] 06 BTU equivalent barrel of the taxable oil and gas for the month is more than $92.50, 07 the tax rate is the sum of 25 percent and the product of 0.1 percent multiplied by the 08 number that represents the difference between the average monthly production tax 09 value of a [PER] BTU equivalent barrel and $92.50, except that the sum determined 10 under this paragraph may not exceed 30 [50] percent. 11  * Sec. 7. AS 43.55.020(a) is amended to read: 12 (a) For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i) 13 or (p) shall pay the tax as follows: 14 (1) an installment payment of the estimated tax levied by 15 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 16 month of the calendar year on the last day of the following month; except as otherwise 17 provided under (2) of this subsection, the amount of the installment payment is the 18 sum of the following amounts, less 1/12 of the tax credits that are allowed by law to be 19 applied against the tax levied by AS 43.55.011(e) for the calendar year, but the amount 20 of the installment payment may not be less than zero: 21 (A) for oil and gas produced from leases or properties in the 22 state outside the Cook Inlet sedimentary basin but not subject to 23 AS 43.55.011(o) or (p), other than leases or properties subject to 24 AS 43.55.011(f), the greater of 25 (i) zero; or 26 (ii) the sum of 25 percent and the tax rate calculated for 27 the month under AS 43.55.011(g) multiplied by the remainder obtained 28 by subtracting 1/12 of the producer's adjusted lease expenditures for the 29 calendar year of production under AS 43.55.165 and 43.55.170 that are 30 deductible for the leases or properties under AS 43.55.160 and 1/12 of  31 the adjustment to production tax value for the calendar year under  01 AS 43.55.162 from the gross value at the point of production of the oil 02 and gas produced from the leases or properties during the month for 03 which the installment payment is calculated; 04 (B) for oil and gas produced from leases or properties subject 05 to AS 43.55.011(f), 10 percent of the gross value at the point of production  06 of that oil and gas [THE GREATEST OF 07 (i) ZERO; 08 (ii) ZERO PERCENT, ONE PERCENT, TWO 09 PERCENT, THREE PERCENT, OR FOUR PERCENT, AS 10 APPLICABLE, OF THE GROSS VALUE AT THE POINT OF 11 PRODUCTION OF THE OIL AND GAS PRODUCED FROM ALL 12 LEASES OR PROPERTIES DURING THE MONTH FOR WHICH 13 THE INSTALLMENT PAYMENT IS CALCULATED; OR 14 (iii) THE SUM OF 25 PERCENT AND THE TAX 15 RATE CALCULATED FOR THE MONTH UNDER AS 43.55.011(g) 16 MULTIPLIED BY THE REMAINDER OBTAINED BY 17 SUBTRACTING 1/12 OF THE PRODUCER'S ADJUSTED LEASE 18 EXPENDITURES FOR THE CALENDAR YEAR OF PRODUCTION 19 UNDER AS 43.55.165 AND 43.55.170 THAT ARE DEDUCTIBLE 20 FOR THOSE LEASES OR PROPERTIES UNDER AS 43.55.160 21 FROM THE GROSS VALUE AT THE POINT OF PRODUCTION 22 OF THE OIL AND GAS PRODUCED FROM THOSE LEASES OR 23 PROPERTIES DURING THE MONTH FOR WHICH THE 24 INSTALLMENT PAYMENT IS CALCULATED]; 25 (C) for oil and gas produced from each lease or property 26 subject to AS 43.55.011(j), (k), (o), or (p), the greater of 27 (i) zero; or 28 (ii) the sum of 25 percent and the tax rate calculated for 29 the month under AS 43.55.011(g) multiplied by the remainder obtained 30 by subtracting 1/12 of the producer's adjusted lease expenditures for the 31 calendar year of production under AS 43.55.165 and 43.55.170 that are 01 deductible under AS 43.55.160 and 1/12 of the adjustment to  02 production tax value for the calendar year under AS 43.55.162 for 03 oil or gas, as applicable [RESPECTIVELY], produced from the lease 04 or property from the gross value at the point of production of the oil or 05 gas, as applicable [RESPECTIVELY], produced from the lease or 06 property during the month for which the installment payment is 07 calculated; 08 (2) an amount calculated under (1)(C) of this subsection for oil or gas 09 produced from a lease or property 10 (A) subject to AS 43.55.011(j), (k), or (o) may not exceed the 11 product obtained by carrying out the calculation set out in AS 43.55.011(j)(1) 12 or (2) or 43.55.011(o), as applicable, for gas or set out in AS 43.55.011(k)(1) 13 or (2), as applicable, for oil, but substituting in AS 43.55.011(j)(1)(A) or (2)(A) 14 or 43.55.011(o), as applicable, the amount of taxable gas produced during the 15 month for the amount of taxable gas produced during the calendar year and 16 substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the amount of 17 taxable oil produced during the month for the amount of taxable oil produced 18 during the calendar year; 19 (B) subject to AS 43.55.011(p) may not exceed four percent of 20 the gross value at the point of production of the oil or gas; 21 (3) an installment payment of the estimated tax levied by 22 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 23 on the last day of the following month; the amount of the installment payment is the 24 sum of 25 (A) the applicable tax rate for oil provided under 26 AS 43.55.011(i), multiplied by the gross value at the point of production of the 27 oil taxable under AS 43.55.011(i) and produced from the lease or property 28 during the month; and 29 (B) the applicable tax rate for gas provided under 30 AS 43.55.011(i), multiplied by the gross value at the point of production of the 31 gas taxable under AS 43.55.011(i) and produced from the lease or property 01 during the month; 02 (4) any amount of tax levied by AS 43.55.011(e) or (i), net of any 03 credits applied as allowed by law, that exceeds the total of the amounts due as 04 installment payments of estimated tax is due on March 31 of the year following the 05 calendar year of production. 06  * Sec. 8. AS 43.55.024(d) is amended to read: 07 (d) A producer may not take a tax credit under (c) of this section for any 08 calendar year after the later of 09 (1) 2022 [2016]; or 10 (2) if the producer did not have commercial oil or gas production from 11 a lease or property in the state before April 1, 2006, the ninth calendar year after the 12 calendar year during which the producer first has commercial oil or gas production 13 before May 1, 2022 [2016], from at least one lease or property in the state. 14  * Sec. 9. AS 43.55 is amended by adding a new section to read: 15 Sec. 43.55.026. Heavy oil research and development tax credit. (a) A 16 taxpayer may apply 20 percent of the taxpayer's expenditure attributable to this state 17 for research and development related to improving methods of producing heavy oil in 18 the state for the taxable year that exceeds the base amount, but not to exceed 19 $10,000,000, as a credit against the state tax liability imposed on the taxpayer under 20 this chapter. 21 (b) Research and development expenditures in this section are attributable to 22 this state if the research and development is being conducted in this state or the payroll 23 of employees conducting the research and development is in this state. In this 24 subsection, payroll of an employee is in this state if compensation is paid to an 25 employee in this state and reported as paid in this state in the quarterly contribution 26 report under AS 23.20 to the Department of Labor and Workforce Development. 27 (c) If the tax credit under this section exceeds the taxpayer's tax liability after 28 other tax credits are taken under this chapter for the year in which the expenditure is 29 incurred, the excess of the tax credit over the liability may be carried forward for up to 30 seven years. If an unused credit is carried forward to a tax year from an earlier year, 31 the credit arising in the earliest year is applied first against the tax liability for the year. 01 (d) A person may not claim a credit under this section for research and 02 development expenditures that were deducted in the calculation of tax liability under 03 AS 43.55.011(e). 04 (e) Each year, if three or more taxpayers claim the credit authorized under this 05 section during the immediately preceding year, the department shall report to the 06 legislature the number of taxpayers who claimed credits under this section in the prior 07 year, the total cumulative amount of credits granted to all taxpayers under this section 08 for the prior tax year, a description of the research and development projects for which 09 the credit was granted, and the total cumulative number of employees conducting the 10 research and development for which all taxpayers claim the credit. 11 (f) The commissioner shall establish in regulation a method for apportioning 12 research expenditures of a producer related to heavy oil production in and outside of 13 the state. When developing the regulations, the commissioner may consider the 14 relative amounts of heavy oil the producer is seeking to produce in areas in and 15 outside of the state or consider another reasonable basis on which fairly to apportion 16 costs for research related to in-state oil production and oil produced outside of the 17 state. 18 (g) In this section, "base amount" means the average of research and 19 development expenditures related to improving methods of producing heavy oil and 20 attributable to this state for the three tax years immediately preceding the taxable year 21 for which the credit is being claimed. 22  * Sec. 10. AS 43.55.030(a) is amended to read: 23 (a) A producer that produces oil or gas from a lease or property in the state 24 during a calendar year, whether or not any tax payment is due under AS 43.55.020(a) 25 for that oil or gas, shall file with the department on March 31 of the following year a 26 statement, under oath, in a form prescribed by the department, giving, with other 27 information required by the department under a regulation adopted by the  28 department, the following: 29 (1) a description of each lease or property from which oil or gas was 30 produced, by name, legal description, lease number, or accounting codes assigned by 31 the department; 01 (2) the names of the producer and, if different, the person paying the 02 tax, if any; 03 (3) the gross amount of oil and the gross amount of gas produced from 04 each lease or property, and the percentage of the gross amount of oil and gas owned by 05 the producer; 06 (4) the gross value at the point of production of the oil and of the gas 07 produced from each lease or property owned by the producer and the costs of 08 transportation of the oil and gas; 09 (5) the name of the first purchaser and the price received for the oil and 10 for the gas, unless relieved from this requirement in whole or in part by the 11 department; 12 (6) the producer's qualified capital expenditures, as defined in 13 AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other 14 payments or credits under AS 43.55.170; 15 (7) the production tax values of the oil and gas under AS 43.55.160; 16 (8) any claims for tax credits to be applied; [AND] 17 (9) calculations showing the amounts, if any, that were or are due 18 under AS 43.55.020(a) and interest on any underpayment or overpayment; and  19 (10) for each expenditure that is the basis for a credit claimed  20 under AS 43.55.023 or 43.55.025, a description of the expenditure, a detailed  21 description of the purpose of the expenditure, and a description of the lease or  22 property for which the expenditure was incurred; notwithstanding  23 AS 40.25.100(a) and AS 43.05.230(a), information submitted under this  24 paragraph may be disclosed to the public and shall be disclosed to the legislature  25 in a report submitted within 10 days after the convening of the next regular  26 legislative session following the date a statement is filed under this section. 27  * Sec. 11. AS 43.55.030(e) is amended to read: 28 (e) An explorer or producer that incurs a lease expenditure under 29 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 30 year but does not produce oil or gas from a lease or property in the state during the 31 calendar year shall file with the department on March 31 of the following year a 01 statement, under oath, in a form prescribed by the department, giving, with other 02 information required by the department under a regulation adopted by the  03 department, the following: 04 (1) the producer's qualified capital expenditures, as defined in 05 AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other 06 payments or credits under AS 43.55.170; [AND] 07 (2) if the explorer or producer receives a payment or credit under 08 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 09 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount; and  10 (3) for each expenditure that is the basis for a credit claimed under  11 this chapter, a description of the expenditure, a detailed description of the  12 purpose of the expenditure, and a description of the lease or property for which  13 the expenditure was incurred; notwithstanding AS 40.25.100(a) and  14 AS 43.05.230(a), information submitted under this paragraph may be disclosed to  15 the public and shall be disclosed to the legislature in a report submitted within 10  16 days after the convening of the next regular legislative session following the date  17 a statement is filed under this section. 18  * Sec. 12. AS 43.55.160(a) is amended to read: 19 (a) Except as provided in (b) of this section, and subject to adjustment  20 under AS 43.55.162, for the purposes of 21 (1) AS 43.55.011(e), the annual production tax value of the taxable oil, 22 gas, or oil and gas subject to this paragraph produced during a calendar year is the 23 gross value at the point of production of the oil, gas, or oil and gas taxable under 24 AS 43.55.011(e), less the producer's lease expenditures under AS 43.55.165 for the 25 calendar year applicable to the oil, gas, or oil and gas, as applicable, produced by the 26 producer from leases or properties, as adjusted under AS 43.55.170; this paragraph 27 applies to 28 (A) oil and gas produced from leases or properties in the state 29 that include land north of 68 degrees North latitude, other than gas produced 30 before 2022 and used in the state; 31 (B) oil and gas produced from leases or properties in the state 01 outside the Cook Inlet sedimentary basin, no part of which is north of 68 02 degrees North latitude; this subparagraph does not apply to gas 03 (i) produced before 2022 and used in the state; or 04 (ii) oil and gas subject to AS 43.55.011(p); 05 (C) oil produced before 2022 from a lease or property in the 06 Cook Inlet sedimentary basin; 07 (D) gas produced before 2022 from a lease or property in the 08 Cook Inlet sedimentary basin; 09 (E) gas produced before 2022 from a lease or property in the 10 state outside the Cook Inlet sedimentary basin and used in the state; 11 (F) oil and gas subject to AS 43.55.011(p) produced from 12 leases or properties in the state; 13 (G) oil and gas produced from a lease or property no part of 14 which is north of 68 degrees North latitude, other than oil or gas described in 15 (B), (C), (D), (E), or (F) of this paragraph; 16 (2) AS 43.55.011(g), the monthly production tax value of the taxable 17 (A) oil and gas produced during a month from leases or 18 properties in the state that include land north of 68 degrees North latitude is the 19 gross value at the point of production of the oil and gas taxable under 20 AS 43.55.011(e) and produced by the producer from those leases or properties, 21 less 1/12 of the producer's lease expenditures under AS 43.55.165 for the 22 calendar year applicable to the oil and gas produced by the producer from 23 those leases or properties, as adjusted under AS 43.55.170; this subparagraph 24 does not apply to gas subject to AS 43.55.011(o); 25 (B) oil and gas produced during a month from leases or 26 properties in the state outside the Cook Inlet sedimentary basin, no part of 27 which is north of 68 degrees North latitude, is the gross value at the point of 28 production of the oil and gas taxable under AS 43.55.011(e) and produced by 29 the producer from those leases or properties, less 1/12 of the producer's lease 30 expenditures under AS 43.55.165 for the calendar year applicable to the oil and 31 gas produced by the producer from those leases or properties, as adjusted under 01 AS 43.55.170; this subparagraph does not apply to gas subject to 02 AS 43.55.011(o); 03 (C) oil produced during a month from a lease or property in the 04 Cook Inlet sedimentary basin is the gross value at the point of production of 05 the oil taxable under AS 43.55.011(e) and produced by the producer from that 06 lease or property, less 1/12 of the producer's lease expenditures under 07 AS 43.55.165 for the calendar year applicable to the oil produced by the 08 producer from that lease or property, as adjusted under AS 43.55.170; 09 (D) gas produced during a month from a lease or property in 10 the Cook Inlet sedimentary basin is the gross value at the point of production 11 of the gas taxable under AS 43.55.011(e) and produced by the producer from 12 that lease or property, less 1/12 of the producer's lease expenditures under 13 AS 43.55.165 for the calendar year applicable to the gas produced by the 14 producer from that lease or property, as adjusted under AS 43.55.170; 15 (E) gas produced during a month from a lease or property 16 outside the Cook Inlet sedimentary basin and used in the state is the gross 17 value at the point of production of that gas taxable under AS 43.55.011(e) and 18 produced by the producer from that lease or property, less 1/12 of the 19 producer's lease expenditures under AS 43.55.165 for the calendar year 20 applicable to that gas produced by the producer from that lease or property, as 21 adjusted under AS 43.55.170. 22  * Sec. 13. AS 43.55 is amended by adding a new section to read: 23 Sec. 43.55.162. Adjustments to production tax value. (a) The annual 24 production tax value of oil produced from a lease or property north of 68 degrees 25 North latitude by the producer is reduced, during the first seven consecutive years 26 after the start of commercial production by 20 percent of the gross value at the point of 27 production of oil produced during the calendar year. This subsection does not apply to 28 a lease or property that 29 (1) was in commercial production before January 1, 2007; 30 (2) is located within a unit area that has never had commercial 31 production; or 01 (3) is located within a unit for more than 20 years before the first 02 commercial production on the lease or property. 03 (b) The annual production tax value of oil or gas produced by a producer is 04 reduced during the first five consecutive years after the start of commercial production 05 by 10 percent if the oil or gas is produced from a participating area established after 06 December 31, 2012, that is within a unit formed under AS 38.05.180(p) before 07 January 1, 2003, if the participating area does not contain a reservoir that had 08 previously been in a participating area established before January 1, 2012. This 09 subsection does not apply to production from a lease or property located within a unit 10 for more than 20 years before the first commercial production on the lease or property. 11 (c) The annual production tax value of heavy oil produced by a producer is 12 reduced by 10 percent of the gross value at the point of production of heavy oil 13 produced, for the calendar year, from a lease or property that is located within a unit 14 area existing on January 1, 2014. 15 (d) For a calendar year after 2012, the annual production tax value of oil 16 produced by a producer that produced oil in 2012 is reduced by 10 percent of the gross 17 value at the point of production of the volume of oil produced during the calendar year 18 in excess of the total volume produced by the producer in 2012. The volume of oil 19 produced by a producer in 2012 is the average daily statewide production of the 20 producer, excluding from the calculation the days on which production is significantly 21 reduced, multiplied by the number of days in the calendar year. For the purposes of 22 this subsection, production is significantly reduced when the production volume of oil 23 for the day is less than one-half of the quotient of the total volume of oil production 24 that is produced by the producer for the year and the number of days in the calendar 25 year. A producer that increases its volume of production through the purchase, merger, 26 or other acquisition of another producer is the sum of the producer's total target 27 volume and the total target volume for the producer that is purchased, merged with, or 28 otherwise acquired; however, if the producer that is purchased, merged with, or 29 otherwise acquired did not have a target volume determined under this section, the 30 volume of the increased production that is attributable to the purchase, merger, or 31 other acquisition may not be considered for the purpose of determining whether the 01 producer that acquired the additional production has increased the volume of 02 production above its target volume. 03 (e) A reduction in production tax value provided by this section may not be 04 combined with any other reduction in production tax value provided by this section in 05 the same year. Oil or gas from a lease or property that produces oil or gas that results 06 in a production tax reduction under (a) of this section is ineligible for a production tax 07 reduction under (b) and (c) of this section and may not be used in the calculation of 08 production volume under (d) of this section. 09 (f) A reduction in production tax value provided by this section may not 10 reduce the production tax value of a producer below zero. 11 (g) The rate of tax under AS 43.55.011(g) shall be determined before the 12 application of the adjustment provided by this section. 13 (h) In this section, 14 (1) "commercial production" means the production of oil for the 15 purpose of sale or other beneficial use, except when the sale or beneficial use is 16 incidental to the testing of an unproved well or unproved completion interval; 17 (2) "participating area" means that part of an oil and gas lease unit to 18 which production is allocated in the manner described in a unit agreement. 19  * Sec. 14. AS 43.55.990 is amended by adding a new paragraph to read: 20 (14) "heavy oil" means oil with an American Petroleum Institute 21 gravity of less than 18 degrees. 22  * Sec. 15. AS 44.88.080 is amended by adding a new paragraph to read: 23 (32) to acquire an interest in a project as necessary or appropriate to 24 provide working or venture capital for an oil or natural gas development project under 25 AS 44.88.800 and 44.88.810, whether by purchase, gift, or lease. 26  * Sec. 16. AS 44.88 is amended by adding new sections to read: 27 Article 9A. Interest in Oil and Gas Resources.  28 Sec. 44.88.800. Acquisition of interest in businesses. (a) The authority may 29 acquire, through purchase or other means, an interest in a lease held by a corporation 30 or other business entity in an oil or natural gas field in the state that has been explored, 31 but only if the authority determines the leaseholder has made reasonable efforts to 01 obtain financing from the private sector to develop the lease and those efforts have, in 02 whole or part, been unsuccessful. The authority shall exercise due diligence in 03 acquiring a leasehold interest under this section. 04 (b) If the authority acquires a leasehold interest under this section, the 05 authority may use the authority's assets, as appropriate, to aid in the development of 06 the oil or natural gas field in which the business entity has a leasehold interest. 07 Sec. 44.88.810. Alaska resource development fund. (a) The Alaska resource 08 development fund is established in the authority for the purpose of developing oil and 09 gas resources, and consists of appropriations to the fund. The authority shall manage 10 the fund and may create separate accounts within it. Income of the fund or of 11 enterprises of the authority shall be separately accounted for and may be appropriated 12 to the fund. 13 (b) The authority may use money from the fund to carry out the purpose of the 14 fund set out in (a) of this section. 15  * Sec. 17. AS 44.88.900(10) is amended to read: 16 (10) "project" means 17 (A) a plant or facility used or intended for use in connection 18 with making, processing, preparing, transporting, or producing in any manner, 19 goods, products, or substances of any kind or nature or in connection with 20 developing or utilizing a natural resource, or extracting, smelting, transporting, 21 converting, assembling, or producing in any manner, minerals, raw materials, 22 chemicals, compounds, alloys, fibers, commodities and materials, products, or 23 substances of any kind or nature; 24 (B) a plant or facility used or intended for use in connection 25 with a business enterprise; 26 (C) commercial activity by a business enterprise; 27 (D) a plant or facility demonstrating technological advances of 28 new methods and procedures and prototype commercial applications for the 29 exploration, development, production, transportation, conversion, and use of 30 energy resources; 31 (E) infrastructure for a new tourism destination facility or for 01 the expansion of a tourism destination facility; in this subparagraph, "tourism 02 destination facility" does not include a hotel or other overnight lodging facility; 03 (F) a plant or facility, other than a plant or facility described in 04 (D) of this paragraph, for the generation, transmission, development, 05 transportation, conversion, or use of energy resources; 06 (G) a plant or facility that enhances, provides for, or promotes 07 economic development with respect to transportation, communications, 08 community public purposes, technical innovations, prototype commercial 09 applications of intellectual property, or research; 10 (H) a plant or facility used or intended for use as a federal 11 facility, including a United States military, national guard, or coast guard 12 facility; 13 (I) infrastructure for an area that is designated as a military 14 facility zone under AS 26.30; 15 (J) development of an oil and gas field by providing  16 working or venture capital in exchange for an equity interest;  17  * Sec. 18. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 APPLICABILITY. (a) Section 1 of this Act and AS 38.05.180(hh), enacted by sec. 3 20 of this Act, apply to a proposed lease sale and the renewal or extension of a lease on or after 21 the effective date of this Act. 22 (b) The reduction in production tax value under AS 43.55.162, enacted by sec. 13 of 23 this Act, applies to oil or gas produced after December 31, 2013. 24  * Sec. 19. The uncodified law of the State of Alaska is amended by adding a new section to 25 read: 26 LEGISLATIVE APPROVAL; NORTH SLOPE OIL PROCESSING FACILITY. (a) 27 The Alaska Industrial Development and Export Authority may issue a loan to a producer of 28 oil or gas to finance the construction and improvement of an oil processing facility on the 29 Alaska North Slope and flow lines and other surface infrastructure for the facility. A loan 30 under this section shall 31 (1) be issued to a producer that produces less than 100,000 barrels of oil a day; 01 (2) be issued for the purpose of financing a facility to facilitate production 02 from a unit established after January 1, 2014; and 03 (3) have an interest rate that does not exceed the prime rate of interest plus one 04 percent. 05 (b) In this section, "prime rate" means the lowest United States money center prime 06 rate of interest that is published in the Wall Street Journal. 07  * Sec. 20. Section 19 of this Act is repealed June 30, 2017. Repeal of sec. 19 of this Act 08 does not affect loans issued by the Alaska Industrial Development and Export Authority under 09 sec. 19 of this Act before June 30, 2017. 10  * Sec. 21. This Act takes effect January 1, 2014.