00 CS FOR HOUSE BILL NO. 247(FIN) 01 "An Act relating to interest applicable to delinquent tax; relating to the oil and gas 02 production tax, tax payments, and credits; relating to the minimum oil and gas 03 production tax; relating to refunds for the gas storage facility tax credit, the liquefied 04 natural gas storage facility tax credit, and the qualified in-state oil refinery 05 infrastructure expenditures tax credit; relating to the assessment of an oil and gas 06 production tax imposed; relating to oil and gas lease expenditures and production tax 07 credits for municipal entities; relating to a bond or cash deposit required for an oil or 08 gas business; establishing a legislative working group to study the tax structure for oil 09 and gas produced south of 68 degrees North latitude; and providing for an effective 10 date." 11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 12  * Section 1. AS 38.05.036(a) is amended to read: 01 (a) The department may conduct audits regarding royalty and net profits under 02 oil and gas contracts, agreements, or leases under this chapter and regarding costs 03 related to exploration licenses entered into under AS 38.05.131 - 38.05.134 and 04 exploration incentive credits under this chapter [OR UNDER AS 41.09]. For purposes 05 of an audit under this section, 06 (1) the department may examine the books, papers, records, or 07 memoranda of a person regarding matters related to the audit; and 08 (2) the records and premises where a business is conducted shall be 09 open at all reasonable times for inspection by the department. 10  * Sec. 2. AS 38.05.036(b) is amended to read: 11 (b) The Department of Revenue may obtain from the department information 12 relating to royalty and net profits payments and to exploration incentive credits under 13 this chapter [OR UNDER AS 41.09], whether or not that information is confidential. 14 The Department of Revenue may use the information in carrying out its functions and 15 responsibilities under AS 43, and shall hold that information confidential to the extent 16 required by an agreement with the department or by AS 38.05.035(a)(8) [, 17 AS 41.09.010(d),] or AS 43.05.230. 18  * Sec. 3. AS 38.05.036(c) is amended to read: 19 (c) The department may obtain from the Department of Revenue all 20 information obtained under AS 43 relating to royalty and net profits and to exploration 21 incentive credits. The department may use the information for purposes of carrying out 22 its responsibilities and functions under this chapter [AND AS 41.09]. Information 23 made available to the department that was obtained under AS 43 is confidential and 24 subject to the provisions of AS 43.05.230. 25  * Sec. 4. AS 38.05.036(f) is amended to read: 26 (f) Except as otherwise provided in this section or in connection with official 27 investigations or proceedings of the department, it is unlawful for a current or former 28 officer, employee, or agent of the state to divulge information obtained by the 29 department as a result of an audit under this section that is required by an agreement 30 with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)] to be kept 31 confidential. 01  * Sec. 5. AS 38.05.036(g) is amended to read: 02 (g) Nothing in this section prohibits the publication of statistics in a manner 03 that maintains the confidentiality of information to the extent required by an 04 agreement with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)]. 05  * Sec. 6. AS 43.05.225 is amended to read: 06 Sec. 43.05.225. Interest. Unless otherwise provided, 07 (1) a delinquent tax under this title, 08 (A) before January 1, 2014, bears interest in each calendar 09 quarter at the rate of five percentage points above the annual rate charged 10 member banks for advances by the 12th Federal Reserve District as of the first 11 day of that calendar quarter, or at the annual rate of 11 percent, whichever is 12 greater, compounded quarterly as of the last day of that quarter; [OR] 13 (B) on and after January 1, 2014, and before January 1, 2017,  14 bears interest in each calendar quarter at the rate of three percentage points 15 above the annual rate charged member banks for advances by the 12th Federal 16 Reserve District as of the first day of that calendar quarter; 17 (C) on and after January 1, 2017, bears interest  18 (i) for the first four years after a tax becomes  19 delinquent, in each calendar quarter at the rate of five percentage  20 points above the annual rate charged member banks for advances  21 by the 12th Federal Reserve District as of the first day of that  22 calendar quarter, compounded quarterly as of the last day of that  23 quarter; and  24 (ii) after the first four years after a tax becomes  25 delinquent, in each calendar quarter at a rate of five percentage  26 points above the annual rate charged member banks for advances  27 by the 12th Federal Reserve District as of the first day of that  28 calendar quarter; 29 (2) the interest rate is 12 percent a year for 30 (A) delinquent fees payable under AS 05.15.095(c); and 31 (B) unclaimed property that is not timely paid or delivered, as 01 allowed by AS 34.45.470(a). 02  * Sec. 7. AS 43.20.046(e) is amended to read: 03 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 04 may use available money in the oil and gas tax credit fund established in AS 43.55.028 05 to make the refund applied for under (d) of this section in whole or in part if the 06 department finds that, [(1) THE CLAIMANT DOES NOT HAVE AN 07 OUTSTANDING LIABILITY TO THE STATE FOR UNPAID DELINQUENT 08 TAXES UNDER THIS TITLE; AND (2)] after application of all available tax credits, 09 the claimant's total tax liability under this chapter for the calendar year in which the 10 claim is made is zero. [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" 11 MEANS AN AMOUNT OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED 12 AN ASSESSMENT THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS 13 NOT BEEN FINALLY RESOLVED IN THE TAXPAYER'S FAVOR.] 14  * Sec. 8. AS 43.20.047(e) is amended to read: 15 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 16 may use money available in the oil and gas tax credit fund established in AS 43.55.028 17 to make a refund or payment under (d) of this section in whole or in part if the 18 department finds that, [(1) THE CLAIMANT DOES NOT HAVE AN 19 OUTSTANDING LIABILITY TO THE STATE FOR UNPAID DELINQUENT 20 TAXES UNDER THIS TITLE; AND (2)] after application of all available tax credits, 21 the claimant's total tax liability under this chapter for the calendar year in which the 22 claim is made is zero. [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" 23 MEANS AN AMOUNT OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED 24 AN ASSESSMENT THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS 25 NOT BEEN FINALLY RESOLVED IN THE TAXPAYER'S FAVOR.] 26  * Sec. 9. AS 43.20.053(e) is amended to read: 27 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 28 may use money available in the oil and gas tax credit fund established in AS 43.55.028 29 to make a refund or payment under (d) of this section in whole or in part if the 30 department finds that, 31 [(1) THE CLAIMANT DOES NOT HAVE AN OUTSTANDING 01 LIABILITY TO THE STATE FOR UNPAID DELINQUENT TAXES UNDER THIS 02 TITLE; AND 03 (2)] after application of all available tax credits, the claimant's total tax 04 liability under this chapter for the calendar year in which the claim is made is zero. 05  * Sec. 10. AS 43.55.011(f) is amended to read: 06 (f) The levy of tax under (e) of this section for 07 (1) oil and gas produced before January 1, 2017 [JANUARY 1, 08 2022], from leases or properties that include land north of 68 degrees North latitude, 09 other than gas subject to (o) of this section, may not be less than 10 (A) four percent of the gross value at the point of production 11 when the average price per barrel for Alaska North Slope crude oil for sale on 12 the United States West Coast during the calendar year for which the tax is due 13 is more than $25; 14 (B) three percent of the gross value at the point of production 15 when the average price per barrel for Alaska North Slope crude oil for sale on 16 the United States West Coast during the calendar year for which the tax is due 17 is over $20 but not over $25; 18 (C) two percent of the gross value at the point of production 19 when the average price per barrel for Alaska North Slope crude oil for sale on 20 the United States West Coast during the calendar year for which the tax is due 21 is over $17.50 but not over $20; 22 (D) one percent of the gross value at the point of production 23 when the average price per barrel for Alaska North Slope crude oil for sale on 24 the United States West Coast during the calendar year for which the tax is due 25 is over $15 but not over $17.50; or 26 (E) zero percent of the gross value at the point of production 27 when the average price per barrel for Alaska North Slope crude oil for sale on 28 the United States West Coast during the calendar year for which the tax is due 29 is $15 or less; [AND] 30 (2) oil and gas produced on and after January 1, 2017, and before 31 January 1, 2022, from leases or properties that include land north of 68 degrees North 01 latitude, other than gas subject to (o) of this section, may not be less than [(A)] four 02 percent of the gross value at the point of production, except that a credit authorized  03 under this chapter may reduce the tax under this subsection to less than four  04 percent, but not to less than two percent of the gross value at the point of  05 production;  06 (3) oil produced on and after January 1, 2022, from leases or  07 properties that include land north of 68 degrees North latitude may not be less  08 than four percent of the gross value at the point of production, except that a  09 credit authorized under this chapter may reduce the tax under this subsection to  10 less than four percent, but not to less than two percent of the gross value at the  11 point of production [WHEN THE AVERAGE PRICE PER BARREL FOR 12 ALASKA NORTH SLOPE CRUDE OIL FOR SALE ON THE UNITED STATES 13 WEST COAST DURING THE CALENDAR YEAR FOR WHICH THE TAX IS 14 DUE IS MORE THAN $25; 15 (B) THREE PERCENT OF THE GROSS VALUE AT THE 16 POINT OF PRODUCTION WHEN THE AVERAGE PRICE PER BARREL 17 FOR ALASKA NORTH SLOPE CRUDE OIL FOR SALE ON THE UNITED 18 STATES WEST COAST DURING THE CALENDAR YEAR FOR WHICH 19 THE TAX IS DUE IS OVER $20 BUT NOT OVER $25; 20 (C) TWO PERCENT OF THE GROSS VALUE AT THE 21 POINT OF PRODUCTION WHEN THE AVERAGE PRICE PER BARREL 22 FOR ALASKA NORTH SLOPE CRUDE OIL FOR SALE ON THE UNITED 23 STATES WEST COAST DURING THE CALENDAR YEAR FOR WHICH 24 THE TAX IS DUE IS OVER $17.50 BUT NOT OVER $20; 25 (D) ONE PERCENT OF THE GROSS VALUE AT THE 26 POINT OF PRODUCTION WHEN THE AVERAGE PRICE PER BARREL 27 FOR ALASKA NORTH SLOPE CRUDE OIL FOR SALE ON THE UNITED 28 STATES WEST COAST DURING THE CALENDAR YEAR FOR WHICH 29 THE TAX IS DUE IS OVER $15 BUT NOT OVER $17.50; OR 30 (E) ZERO PERCENT OF THE GROSS VALUE AT THE 31 POINT OF PRODUCTION WHEN THE AVERAGE PRICE PER BARREL 01 FOR ALASKA NORTH SLOPE CRUDE OIL FOR SALE ON THE UNITED 02 STATES WEST COAST DURING THE CALENDAR YEAR FOR WHICH 03 THE TAX IS DUE IS $15 OR LESS]. 04  * Sec. 11. AS 43.55.011(m) is amended to read: 05 (m) Notwithstanding any contrary provision of [AS 38.05.180(i), 06 AS 41.09.010,] AS 43.55.024 [,] or 43.55.025, the department shall provide by 07 regulation a method to ensure that, for a calendar year for which a producer's tax 08 liability is limited by (j), (k), or (o) of this section, tax credits based on a lease 09 expenditure incurred before January 1, 2011, that are otherwise available under 10 [AS 38.05.180(i), AS 41.09.010,] AS 43.55.024 [,] or 43.55.025 and allocated to gas 11 subject to the limitations in (j), (k), and (o) of this section are accounted for as though 12 the credits had been applied first against a tax liability calculated without regard to the 13 limitations under (j), (k), and (o) of this section so as to reduce the tax liability to the 14 maximum amount provided for under (j) or (o) of this section for the production of gas 15 or (k) of this section for the production of oil. The regulation must provide for a 16 reasonable method to allocate tax credits to gas subject to (j) and (o) of this section. 17 Only the amount of a tax credit remaining after the accounting provided for under this 18 subsection may be used for a later calendar year, transferred to another person, or 19 applied against a tax levied on the production of oil or gas not subject to (j), (k), or (o) 20 of this section to the extent otherwise allowed. 21  * Sec. 12. AS 43.55.019(e) is amended to read: 22 (e) The credit under this section may not reduce a person's tax liability for the  23 calendar year under AS 43.55.011(e) to below the amount calculated under  24 AS 43.55.011(f) [ZERO FOR ANY TAX YEAR]. An unused credit or portion of a 25 credit not used under this section for a tax year may not be sold, traded, transferred, or 26 applied in a subsequent tax year. 27  * Sec. 13. AS 43.55.020(a) is amended to read: 28 (a) For a calendar year, a producer subject to tax under AS 43.55.011 shall pay 29 the tax as follows: 30 (1) for oil and gas produced before January 1, 2014, an installment 31 payment of the estimated tax levied by AS 43.55.011(e), net of any tax credits applied 01 as allowed by law, is due for each month of the calendar year on the last day of the 02 following month; except as otherwise provided under (2) of this subsection, the 03 amount of the installment payment is the sum of the following amounts, less 1/12 of 04 the tax credits that are allowed by law to be applied against the tax levied by 05 AS 43.55.011(e) for the calendar year, but the amount of the installment payment may 06 not be less than zero: 07 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 08 produced from leases or properties in the state outside the Cook Inlet 09 sedimentary basin, other than leases or properties subject to AS 43.55.011(f), 10 the greater of 11 (i) zero; or 12 (ii) the sum of 25 percent and the tax rate calculated for 13 the month under AS 43.55.011(g) multiplied by the remainder obtained 14 by subtracting 1/12 of the producer's adjusted lease expenditures for the 15 calendar year of production under AS 43.55.165 and 43.55.170 that are 16 deductible for the oil and gas under AS 43.55.160 from the gross value 17 at the point of production of the oil and gas produced from the leases or 18 properties during the month for which the installment payment is 19 calculated; 20 (B) for oil and gas produced from leases or properties subject 21 to AS 43.55.011(f), the greatest of 22 (i) zero; 23 (ii) zero percent, one percent, two percent, three 24 percent, or four percent, as applicable, of the gross value at the point of 25 production of the oil and gas produced from the leases or properties 26 during the month for which the installment payment is calculated; or 27 (iii) the sum of 25 percent and the tax rate calculated for 28 the month under AS 43.55.011(g) multiplied by the remainder obtained 29 by subtracting 1/12 of the producer's adjusted lease expenditures for the 30 calendar year of production under AS 43.55.165 and 43.55.170 that are 31 deductible for the oil and gas under AS 43.55.160 from the gross value 01 at the point of production of the oil and gas produced from those leases 02 or properties during the month for which the installment payment is 03 calculated; 04 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for 05 each lease or property, the greater of 06 (i) zero; or 07 (ii) the sum of 25 percent and the tax rate calculated for 08 the month under AS 43.55.011(g) multiplied by the remainder obtained 09 by subtracting 1/12 of the producer's adjusted lease expenditures for the 10 calendar year of production under AS 43.55.165 and 43.55.170 that are 11 deductible under AS 43.55.160 for the oil or gas, respectively, 12 produced from the lease or property from the gross value at the point of 13 production of the oil or gas, respectively, produced from the lease or 14 property during the month for which the installment payment is 15 calculated; 16 (D) for oil and gas subject to AS 43.55.011(p), the lesser of 17 (i) the sum of 25 percent and the tax rate calculated for 18 the month under AS 43.55.011(g) multiplied by the remainder obtained 19 by subtracting 1/12 of the producer's adjusted lease expenditures for the 20 calendar year of production under AS 43.55.165 and 43.55.170 that are 21 deductible for the oil and gas under AS 43.55.160 from the gross value 22 at the point of production of the oil and gas produced from the leases or 23 properties during the month for which the installment payment is 24 calculated, but not less than zero; or 25 (ii) four percent of the gross value at the point of 26 production of the oil and gas produced from the leases or properties 27 during the month, but not less than zero; 28 (2) an amount calculated under (1)(C) of this subsection for oil or gas 29 subject to AS 43.55.011(j), (k), or (o) may not exceed the product obtained by 30 carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or 43.55.011(o), as 31 applicable, for gas or set out in AS 43.55.011(k)(1) or (2), as applicable, for oil, but 01 substituting in AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the 02 amount of taxable gas produced during the month for the amount of taxable gas 03 produced during the calendar year and substituting in as 43.55.011(k)(1)(A) or (2)(A), 04 as applicable, the amount of taxable oil produced during the month for the amount of 05 taxable oil produced during the calendar year; 06 (3) an installment payment of the estimated tax levied by 07 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 08 on the last day of the following month; the amount of the installment payment is the 09 sum of 10 (A) the applicable tax rate for oil provided under 11 AS 43.55.011(i), multiplied by the gross value at the point of production of the 12 oil taxable under AS 43.55.011(i) and produced from the lease or property 13 during the month; and 14 (B) the applicable tax rate for gas provided under 15 AS 43.55.011(i), multiplied by the gross value at the point of production of the 16 gas taxable under AS 43.55.011(i) and produced from the lease or property 17 during the month; 18 (4) any amount of tax levied by AS 43.55.011, net of any credits 19 applied as allowed by law, that exceeds the total of the amounts due as installment 20 payments of estimated tax is due on March 31 of the year following the calendar year 21 of production; 22 (5) for oil and gas produced on and after January 1, 2014, and before 23 January 1, 2022, an installment payment of the estimated tax levied by 24 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 25 month of the calendar year on the last day of the following month; except as otherwise 26 provided under (6) and (10) of this subsection, the amount of the installment payment 27 is the sum of the following amounts, less 1/12 of the tax credits that are allowed by 28 law to be applied against the tax levied by AS 43.55.011(e) for the calendar year, but 29 the amount of the installment payment may not be less than zero: 30 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 31 produced from leases or properties in the state outside the Cook Inlet 01 sedimentary basin, other than leases or properties subject to AS 43.55.011(f), 02 the greater of 03 (i) zero; or 04 (ii) 35 percent multiplied by the remainder obtained by 05 subtracting 1/12 of the producer's adjusted lease expenditures for the 06 calendar year of production under AS 43.55.165 and 43.55.170 that are 07 deductible for the oil and gas under AS 43.55.160 from the gross value 08 at the point of production of the oil and gas produced from the leases or 09 properties during the month for which the installment payment is 10 calculated; 11 (B) for oil and gas produced from leases or properties subject 12 to AS 43.55.011(f), the greatest of 13 (i) zero; 14 (ii) zero percent, one percent, two percent, three 15 percent, or four percent, as applicable, of the gross value at the point of 16 production of the oil and gas produced from the leases or properties 17 during the month for which the installment payment is calculated; or 18 (iii) 35 percent multiplied by the remainder obtained by 19 subtracting 1/12 of the producer's adjusted lease expenditures for the 20 calendar year of production under AS 43.55.165 and 43.55.170 that are 21 deductible for the oil and gas under AS 43.55.160 from the gross value 22 at the point of production of the oil and gas produced from those leases 23 or properties during the month for which the installment payment is 24 calculated, except that, for the purposes of this calculation, a reduction 25 from the gross value at the point of production may apply for oil and 26 gas subject to AS 43.55.160(f) or (g); 27 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for 28 each lease or property, the greater of 29 (i) zero; or 30 (ii) 35 percent multiplied by the remainder obtained by 31 subtracting 1/12 of the producer's adjusted lease expenditures for the 01 calendar year of production under AS 43.55.165 and 43.55.170 that are 02 deductible under AS 43.55.160 for the oil or gas, respectively, 03 produced from the lease or property from the gross value at the point of 04 production of the oil or gas, respectively, produced from the lease or 05 property during the month for which the installment payment is 06 calculated; 07 (D) for oil and gas subject to AS 43.55.011(p), the lesser of 08 (i) 35 percent multiplied by the remainder obtained by 09 subtracting 1/12 of the producer's adjusted lease expenditures for the 10 calendar year of production under AS 43.55.165 and 43.55.170 that are 11 deductible for the oil and gas under AS 43.55.160 from the gross value 12 at the point of production of the oil and gas produced from the leases or 13 properties during the month for which the installment payment is 14 calculated, but not less than zero; or 15 (ii) four percent of the gross value at the point of 16 production of the oil and gas produced from the leases or properties 17 during the month, but not less than zero; 18 (6) an amount calculated under (5)(C) of this subsection for oil or gas 19 subject to AS 43.55.011(j), (k), or (o) may not exceed the product obtained by 20 carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or 43.55.011(o), as 21 applicable, for gas or set out in AS 43.55.011(k)(1) or (2), as applicable, for oil, but 22 substituting in AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the 23 amount of taxable gas produced during the month for the amount of taxable gas 24 produced during the calendar year and substituting in AS 43.55.011(k)(1)(A) or 25 (2)(A), as applicable, the amount of taxable oil produced during the month for the 26 amount of taxable oil produced during the calendar year; 27 (7) for oil and gas produced on or after January 1, 2022, an installment 28 payment of the estimated tax levied by AS 43.55.011(e), net of any tax credits applied 29 as allowed by law, is due for each month of the calendar year on the last day of the 30 following month; except as provided in (10) of this subsection, the amount of the 31 installment payment is the sum of the following amounts, less 1/12 of the tax credits 01 that are allowed by law to be applied against the tax levied by AS 43.55.011(e) for the 02 calendar year, but the amount of the installment payment may not be less than zero: 03 (A) for oil produced from leases or properties that include land 04 north of 68 degrees North latitude, the greatest of 05 (i) zero; 06 (ii) zero percent, one percent, two percent, three 07 percent, or four percent, as applicable, of the gross value at the point of 08 production of the oil produced from the leases or properties during the 09 month for which the installment payment is calculated; or 10 (iii) 35 percent multiplied by the remainder obtained by 11 subtracting 1/12 of the producer's adjusted lease expenditures for the 12 calendar year of production under AS 43.55.165 and 43.55.170 that are 13 deductible for the oil under AS 43.55.160(h)(1) from the gross value at 14 the point of production of the oil produced from those leases or 15 properties during the month for which the installment payment is 16 calculated, except that, for the purposes of this calculation, a reduction 17 from the gross value at the point of production may apply for oil 18 subject to AS 43.55.160(f) or 43.55.160(f) and (g); 19 (B) for oil produced before or during the last calendar year 20 under AS 43.55.024(b) for which the producer could take a tax credit under 21 AS 43.55.024(a), from leases or properties in the state outside the Cook Inlet 22 sedimentary basin, no part of which is north of 68 degrees North latitude, other 23 than leases or properties subject to AS 43.55.011(p), the greater of 24 (i) zero; or 25 (ii) 35 percent multiplied by the remainder obtained by 26 subtracting 1/12 of the producer's adjusted lease expenditures for the 27 calendar year of production under AS 43.55.165 and 43.55.170 that are 28 deductible for the oil under AS 43.55.160(h)(2) from the gross value at 29 the point of production of the oil produced from the leases or properties 30 during the month for which the installment payment is calculated; 31 (C) for oil and gas produced from leases or properties subject 01 to AS 43.55.011(p), except as otherwise provided under (8) of this subsection, 02 the sum of 03 (i) 35 percent multiplied by the remainder obtained by 04 subtracting 1/12 of the producer's adjusted lease expenditures for the 05 calendar year of production under AS 43.55.165 and 43.55.170 that are 06 deductible for the oil under AS 43.55.160(h)(3) from the gross value at 07 the point of production of the oil produced from the leases or properties 08 during the month for which the installment payment is calculated, but 09 not less than zero; and 10 (ii) 13 percent of the gross value at the point of 11 production of the gas produced from the leases or properties during the 12 month, but not less than zero; 13 (D) for oil produced from leases or properties in the state, no 14 part of which is north of 68 degrees North latitude, other than leases or 15 properties subject to (B) or (C) of this paragraph, the greater of 16 (i) zero; or 17 (ii) 35 percent multiplied by the remainder obtained by 18 subtracting 1/12 of the producer's adjusted lease expenditures for the 19 calendar year of production under AS 43.55.165 and 43.55.170 that are 20 deductible for the oil under AS 43.55.160(h)(4) from the gross value at 21 the point of production of the oil produced from the leases or properties 22 during the month for which the installment payment is calculated; 23 (E) for gas produced from each lease or property in the state, 24 other than a lease or property subject to AS 43.55.011(p), 13 percent of the 25 gross value at the point of production of the gas produced from the lease or 26 property during the month for which the installment payment is calculated, but 27 not less than zero; 28 (8) an amount calculated under (7)(C) of this subsection may not 29 exceed four percent of the gross value at the point of production of the oil and gas 30 produced from leases or properties subject to AS 43.55.011(p) during the month for 31 which the installment payment is calculated; 01 (9) for purposes of the calculation under (1)(B)(ii), (5)(B)(ii), and 02 (7)(A)(ii) of this subsection, the applicable percentage of the gross value at the point 03 of production is determined under AS 43.55.011(f) [AS 43.55.011(f)(1) OR (2)] but 04 substituting the phrase "month for which the installment payment is calculated" in 05 [AS 43.55.011(f)(1) AND (2)] for the phrase "calendar year for which the tax is due"; 06 (10) after December 31, 2016, for the purposes of a calculation  07 under (5)(B)(ii) or (7)(A)(ii) of this subsection, a credit under this chapter may  08 not be applied to reduce an installment payment to less than the applicable  09 percentage under AS 43.55.011(f). ["]  10  * Sec. 14. AS 43.55.023(a) is amended to read: 11 (a) A producer or explorer may take a tax credit for a qualified capital 12 expenditure as follows: 13 (1) notwithstanding that a qualified capital expenditure may be a 14 deductible lease expenditure for purposes of calculating the production tax value of oil 15 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 16 [AS 38.05.180(i), AS 41.09.010,] AS 43.20.043 [,] or AS 43.55.025, a producer or 17 explorer that incurs a qualified capital expenditure may also elect to apply a tax credit 18 against a tax levied by AS 43.55.011(e) in the amount of 10 [20] percent of that 19 expenditure; 20 (2) a producer or explorer may take a credit for a qualified capital 21 expenditure incurred in connection with geological or geophysical exploration or in 22 connection with an exploration well only if the producer or explorer 23 (A) agrees, in writing, to the applicable provisions of 24 AS 43.55.025(f)(2); and 25 (B) submits to the Department of Natural Resources all data 26 that would be required to be submitted under AS 43.55.025(f)(2); 27 (3) a credit for a qualified capital expenditure incurred to explore for, 28 develop, or produce oil or gas deposits located north of 68 degrees North latitude may 29 be taken only if the expenditure is incurred before January 1, 2014. 30  * Sec. 15. AS 43.55.023(b) is amended to read: 31 (b) Before January 1, 2014, a producer or explorer may elect to take a tax 01 credit in the amount of 25 percent of a carried-forward annual loss. For lease 02 expenditures incurred on and after January 1, 2014, and before January 1, 2016, to 03 explore for, develop, or produce oil or gas deposits located north of 68 degrees North 04 latitude, a producer or explorer may elect to take a tax credit in the amount of 45 05 percent of a carried-forward annual loss. For lease expenditures incurred on and after 06 January 1, 2016, to explore for, develop, or produce oil or gas deposits located north 07 of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in 08 the amount of 35 percent of a carried-forward annual loss. For lease expenditures 09 incurred on or after January 1, 2014, and before January 1, 2017, to explore for, 10 develop, or produce oil or gas deposits located south of 68 degrees North latitude, a 11 producer or explorer may elect to take a tax credit in the amount of 25 percent of a 12 carried-forward annual loss. For lease expenditures incurred after December 31,  13 2016, to explore for, develop, or produce oil or gas deposits located south of 68  14 degrees North latitude and outside of the Cook Inlet sedimentary basin, a  15 producer or explorer may elect to take a tax credit in the amount of 25 percent of  16 a carried-forward annual loss. For lease expenditures incurred after  17 December 31, 2016, to explore for, develop, or produce oil or gas deposits located  18 in the Cook Inlet sedimentary basin, a producer or explorer may elect to take a  19 credit in the amount of 10 percent of a carried-forward annual loss. A credit under 20 this subsection may be applied against a tax levied by AS 43.55.011(e). For purposes 21 of this subsection, 22 (1) a carried-forward annual loss is the amount of a producer's or 23 explorer's adjusted lease expenditures under AS 43.55.165 and 43.55.170 for a 24 previous calendar year that was not deductible in calculating production tax values for 25 that calendar year under AS 43.55.160;  26 (2) for lease expenditures incurred on or after January 1, 2017,  27 any reduction under AS 43.55.160(f) or (g) is added back to the calculation of  28 production tax values for that calendar year under AS 43.55.160 for the  29 determination of a carried-forward annual loss.  30  * Sec. 16. AS 43.55.023(c) is amended to read: 31 (c) A credit or portion of a credit under this section may not be used to reduce 01 a person's tax liability under AS 43.55.011(e) for any calendar year below the amount  02 calculated under AS 43.55.011(f) [ZERO], and any unused credit or portion of a 03 credit not used under this subsection may be applied in a later calendar year. 04  * Sec. 17. AS 43.55.023(d) is amended to read: 05 (d) A person that is entitled to take a tax credit under this section that wishes 06 to transfer the unused credit to another person or obtain a cash payment under 07 AS 43.55.028 may apply to the department for a transferable tax credit certificate. An 08 application under this subsection must be in a form prescribed by the department and 09 must include supporting information and documentation that the department 10 reasonably requires. The department shall grant or deny an application, or grant an 11 application as to a lesser amount than that claimed and deny it as to the excess, not 12 later than 120 days after the latest of (1) March 31 of the year following the calendar 13 year in which the [QUALIFIED CAPITAL EXPENDITURE OR] carried-forward 14 annual loss for which the credit is claimed was incurred; (2) the date the statement 15 required under AS 43.55.030(a) or (e) was filed for the calendar year in which the 16 [QUALIFIED CAPITAL EXPENDITURE OR] carried-forward annual loss for which 17 the credit is claimed was incurred; or (3) the date the application was received by the 18 department. If, based on the information then available to it, the department is 19 reasonably satisfied that the applicant is entitled to a credit, the department shall issue 20 the applicant a transferable tax credit certificate for the amount of the credit. A 21 certificate issued under this subsection does not expire. 22  * Sec. 18. AS 43.55.023(e) is amended to read: 23 (e) A person to which a transferable tax credit certificate is issued under (d) of 24 this section may transfer the certificate to another person, and a transferee may further 25 transfer the certificate. Subject to the limitations set out in former (a) of this section  26 and (b) - (d) [(a) - (d)] of this section, and notwithstanding any action the department 27 may take with respect to the applicant under (g) of this section, the owner of a 28 certificate may apply the credit or a portion of the credit shown on the certificate only 29 against a tax levied by AS 43.55.011(e). However, a credit shown on a transferable tax 30 credit certificate may not be applied to reduce a transferee's total tax liability under 31 AS 43.55.011(e) for oil and gas produced during a calendar year to less than 80 01 percent of the tax that would otherwise be due without applying that credit. Any 02 portion of a credit not used under this subsection may be applied in a later period. 03  * Sec. 19. AS 43.55.023(l) is amended to read: 04 (l) A producer or explorer may apply for a tax credit for a well lease 05 expenditure incurred in the state [SOUTH OF 68 DEGREES NORTH LATITUDE] 06 after June 30, 2010, as follows: 07 (1) notwithstanding that a well lease expenditure incurred in the state 08 [SOUTH OF 68 DEGREES NORTH LATITUDE] may be a deductible lease 09 expenditure for purposes of calculating the production tax value of oil and gas under 10 AS 43.55.160(a), unless a credit for that expenditure is taken under (a) of this section, 11 [AS 38.05.180(i), AS 41.09.010,] AS 43.20.043, or AS 43.55.025, a producer or 12 explorer that incurs a well lease expenditure in the state [SOUTH OF 68 DEGREES 13 NORTH LATITUDE] may elect to apply a tax credit against a tax levied by 14 AS 43.55.011(e) in the amount of 15 (A) 40 percent of that expenditure incurred south of 68  16 degrees North latitude before January 1, 2017;  17 (B) 30 percent of that expenditure incurred south of 68  18 degrees North latitude after December 31, 2016, and before January 1,  19 2018; 20 (C) 20 percent of that expenditure incurred inside the Cook  21 Inlet sedimentary basin after December 31, 2017;  22 (D) 30 percent of that expenditure incurred outside the  23 Cook Inlet sedimentary basin and south of 68 degrees North latitude after  24 December 31, 2017, and before January 1, 2019 [; A TAX CREDIT 25 UNDER THIS PARAGRAPH MAY BE APPLIED FOR A SINGLE 26 CALENDAR YEAR]; 27 (2) a producer or explorer may take a credit for a well lease 28 expenditure incurred in the state south of 68 degrees North latitude in connection with 29 geological or geophysical exploration or in connection with an exploration well only if 30 the producer or explorer 31 (A) agrees, in writing, to the applicable provisions of 01 AS 43.55.025(f)(2); and 02 (B) submits to the Department of Natural Resources all data 03 that would be required to be submitted under AS 43.55.025(f)(2). 04  * Sec. 20. AS 43.55.024(f) is amended to read: 05 (f) A tax credit authorized by (a) of this section may not be applied to reduce a 06 producer's tax liability for any calendar year under AS 43.55.011(e) on oil and gas 07 produced from leases or properties outside the Cook Inlet sedimentary basin, no part 08 of which is north of 68 degrees North latitude, below the amount calculated under  09 AS 43.55.011(f) [ZERO]. 10  * Sec. 21. AS 43.55.024(g) is amended to read: 11 (g) A tax credit authorized by (c) of this section may not be applied to reduce 12 a producer's tax liability for any calendar year under AS 43.55.011(e) below the  13 amount calculated under AS 43.55.011(f) [ZERO]. 14  * Sec. 22. AS 43.55.024(i) is amended to read: 15 (i) A producer may apply against the producer's tax liability for the calendar 16 year under AS 43.55.011(e) a tax credit of $5 for each barrel of oil taxable under 17 AS 43.55.011(e) that meets one or more of the criteria in AS 43.55.160(f) or (g) and 18 that is produced during a calendar year after December 31, 2013. A tax credit 19 authorized by this subsection may not reduce a producer's tax liability for a calendar 20 year under AS 43.55.011(e) below the amount calculated under AS 43.55.011(f) 21 [ZERO]. 22  * Sec. 23. AS 43.55.024(j) is amended to read: 23 (j) A producer may apply against the producer's tax liability for the calendar 24 year under AS 43.55.011(e) a tax credit in the amount specified in this subsection for 25 each barrel of oil taxable under AS 43.55.011(e) that does not meet any of the criteria 26 in AS 43.55.160(f) or (g) and that is produced during a calendar year after 27 December 31, 2013, from leases or properties north of 68 degrees North latitude. 28 Notwithstanding AS 43.55.011(f)(2) and (3), a [A] tax credit under this subsection 29 may not reduce a producer's tax liability for a calendar year under AS 43.55.011(e) 30 below four percent of the gross value at the point of production for oil produced  31 on and after January 1, 2017 [THE AMOUNT CALCULATED UNDER 01 AS 43.55.011(f)]. The amount of the tax credit for a barrel of taxable oil subject to this 02 subsection produced during a month of the calendar year is 03 (1) $8 for each barrel of taxable oil if the average gross value at the 04 point of production for the month is less than $80 a barrel; 05 (2) $7 for each barrel of taxable oil if the average gross value at the 06 point of production for the month is greater than or equal to $80 a barrel, but less than 07 $90 a barrel; 08 (3) $6 for each barrel of taxable oil if the average gross value at the 09 point of production for the month is greater than or equal to $90 a barrel, but less than 10 $100 a barrel; 11 (4) $5 for each barrel of taxable oil if the average gross value at the 12 point of production for the month is greater than or equal to $100 a barrel, but less 13 than $110 a barrel; 14 (5) $4 for each barrel of taxable oil if the average gross value at the 15 point of production for the month is greater than or equal to $110 a barrel, but less 16 than $120 a barrel; 17 (6) $3 for each barrel of taxable oil if the average gross value at the 18 point of production for the month is greater than or equal to $120 a barrel, but less 19 than $130 a barrel; 20 (7) $2 for each barrel of taxable oil if the average gross value at the 21 point of production for the month is greater than or equal to $130 a barrel, but less 22 than $140 a barrel; 23 (8) $1 for each barrel of taxable oil if the average gross value at the 24 point of production for the month is greater than or equal to $140 a barrel, but less 25 than $150 a barrel; 26 (9) zero if the average gross value at the point of production for the 27 month is greater than or equal to $150 a barrel. 28  * Sec. 24. AS 43.55.025(m) is amended to read: 29 (m) The persons that drill the first four exploration wells in the state and 30 within the areas described in (o) of this section on state lands, private lands, or federal 31 onshore lands for the purpose of discovering oil or gas that penetrate and evaluate a 01 prospect in a basin described in (o) of this section are eligible for a credit under (a)(6) 02 of this section. A credit under this subsection may not be taken for more than two 03 exploration wells in a single area described in (o)(1) - (6) of this section. Exploration 04 expenditures eligible for the credit in this subsection must be incurred for work 05 performed after June 1, 2012, and before July 1, 2016, except that expenditures to  06 complete an exploration well that was spudded but not completed before July 1,  07 2016, are eligible for the credit under this subsection. A person planning to drill an 08 exploration well on private land and to apply for a credit under this subsection shall 09 obtain written consent from the owner of the oil and gas interest for the full public 10 release of all well data after the expiration of the confidentiality period applicable to 11 information collected under (f) of this section. The written consent of the owner of the 12 oil and gas interest must be submitted to the commissioner of natural resources before 13 approval of the proposed exploration well. In addition to the requirements in (c)(1), 14 (c)(2)(A), and (c)(2)(C) of this section and submission of the written consent of the 15 owner of the oil and gas interest, a person planning to drill an exploration well shall 16 obtain approval from the commissioner of natural resources before the well is 17 spudded. The commissioner of natural resources shall make a written determination 18 approving or rejecting an exploration well within 60 days after receiving the request 19 for approval or as soon as is practicable thereafter. Before approving the exploration 20 well, the commissioner of natural resources shall consider the following: the location 21 of the well; the proximity to a community in need of a local energy source; the 22 proximity of existing infrastructure; the experience and safety record of the explorer in 23 conducting operations in remote or roadless areas; the projected cost schedule; 24 whether seismic mapping and seismic data sufficiently identify a particular trap for 25 exploration; whether the targeted and planned depth and range are designed to 26 penetrate and fully evaluate the hydrocarbon potential of the proposed prospect and 27 reach the level below which economic hydrocarbon reservoirs are likely to be found, 28 or reach 12,000 feet or more true vertical depth; and whether the exploration plan 29 provides for a full evaluation of the wellbore below surface casing to the depth of the 30 well. Whether the exploration well for which a credit is requested under this 31 subsection is located within an area and a basin described under (o) of this section 01 shall be determined by the commissioner of natural resources and reported to the 02 commissioner. A taxpayer that obtains a credit under this subsection may not claim a 03 tax credit under AS 43.55.023 or another provision in this section for the same 04 exploration expenditure. 05  * Sec. 25. AS 43.55.025 is amended by adding a new subsection to read: 06 (q) A credit or portion of a credit under this section may not be used to reduce 07 a person's tax liability under AS 43.55.011(e) for any calendar year below the amount 08 calculated under AS 43.55.011(f). 09  * Sec. 26. AS 43.55.028(e) is amended to read: 10 (e) The department, on the written application of a person to whom a 11 transferable tax credit certificate has been issued under AS 43.55.023(d) or former 12 AS 43.55.023(m) or to whom a production tax credit certificate has been issued under 13 AS 43.55.025(f), may use available money in the oil and gas tax credit fund to 14 purchase, in whole or in part, the certificate. The department may not purchase a  15 total of more than $100,000,000 in tax credit certificates from a person in a  16 calendar year. Before purchasing a certificate or part of a certificate, [IF] the 17 department shall find [FINDS] that 18 (1) the calendar year of the purchase is not earlier than the first 19 calendar year for which the credit shown on the certificate would otherwise be allowed 20 to be applied against a tax; 21 (2) the application is not the result of the division of a single entity  22 into multiple entities that would reasonably be expected to apply as a single entity  23 if the $100,000,000 limitation in this subsection did not exist [APPLICANT DOES 24 NOT HAVE AN OUTSTANDING LIABILITY TO THE STATE FOR UNPAID 25 DELINQUENT TAXES UNDER THIS TITLE]; 26 (3) the applicant's total tax liability under AS 43.55.011(e), after 27 application of all available tax credits, for the calendar year in which the application is 28 made is zero; 29 (4) the applicant's average daily production of oil and gas taxable 30 under AS 43.55.011(e) during the calendar year preceding the calendar year in which 31 the application is made was not more than 50,000 BTU equivalent barrels; and 01 (5) the purchase is consistent with this section and regulations adopted 02 under this section. 03  * Sec. 27. AS 43.55.028 is amended by adding a new subsection to read: 04 (j) If an applicant or claimant has an outstanding liability to the state directly 05 related to the applicant's or claimant's oil or gas exploration, development, or 06 production and the department has not previously reduced the amount paid to that 07 applicant or claimant for a certificate or refund because of that outstanding liability, 08 the department may purchase only that portion of a certificate or pay only that portion 09 of a refund that exceeds the outstanding liability. With the applicant's or claimant's 10 consent, the department may apply the amount by which the department reduced its 11 purchase of a certificate or payment for a refund because of an outstanding liability to 12 satisfy the outstanding liability. Satisfaction of an outstanding liability under this 13 subsection does not affect the applicant's ability to contest that liability. The 14 department may enter into contracts or agreements with another department to which 15 the outstanding liability is owed. In this subsection, "outstanding liability" means an 16 amount of tax, interest, penalty, fee, rental, royalty, or other charge for which the state 17 has issued a demand for payment that has not been paid when due and, if contested, 18 has not been finally resolved against the state. 19  * Sec. 28. AS 43.55.029(a) is amended to read: 20 (a) An explorer or producer that has applied for a production tax credit under 21 former AS 43.55.023(a) [, (b),] or (l) or under AS 43.55.023(b) or 43.55.025(a) may 22 make a present assignment of the production tax credit certificate expected to be 23 issued by the department to a third-party assignee. The assignment may be made either 24 at the time the application is filed with the department or not later than 30 days after 25 the date of filing with the department. Once a notice of assignment in compliance with 26 this section is filed with the department, the assignment is irrevocable and cannot be 27 modified by the explorer or producer without the written consent of the assignee 28 named in the assignment. If a production tax credit certificate is issued to the explorer 29 or producer, the notice of assignment remains effective and shall be filed with the 30 department by the explorer or producer together with any application for the 31 department to purchase the certificate under AS 43.55.028(e). 01  * Sec. 29. AS 43.55.030(a) is amended to read: 02 (a) A producer that produces oil or gas from a lease or property in the state 03 during a calendar year, whether or not any tax payment is due under AS 43.55.020(a) 04 for that oil or gas, shall file with the department on March 31 of the following year a 05 statement, under oath, in a form prescribed by the department, giving, with other 06 information required, the following: 07 (1) a description of each lease or property from which oil or gas was 08 produced, by name, legal description, lease number, or accounting codes assigned by 09 the department; 10 (2) the names of the producer and, if different, the person paying the 11 tax, if any; 12 (3) the gross amount of oil and the gross amount of gas produced from 13 each lease or property, separately identifying the gross amount of gas produced from 14 each oil and gas lease to which an effective election under AS 43.55.014(a) applies, 15 the amount of gas delivered to the state under AS 43.55.014(b), and the percentage of 16 the gross amount of oil and gas owned by the producer; 17 (4) the gross value at the point of production of the oil and of the gas 18 produced from each lease or property owned by the producer and the costs of 19 transportation of the oil and gas; 20 (5) the name of the first purchaser and the price received for the oil and 21 for the gas, unless relieved from this requirement in whole or in part by the 22 department; 23 (6) the producer's qualified capital expenditures, [AS DEFINED IN 24 AS 43.55.023,] other lease expenditures under AS 43.55.165, and adjustments or other 25 payments or credits under AS 43.55.170; 26 (7) the production tax values of the oil and gas under AS 43.55.160(a) 27 or of the oil under AS 43.55.160(h), as applicable; 28 (8) any claims for tax credits to be applied; and 29 (9) calculations showing the amounts, if any, that were or are due 30 under AS 43.55.020(a) and interest on any underpayment or overpayment. 31  * Sec. 30. AS 43.55.030(e) is amended to read: 01 (e) An explorer or producer that incurs a lease expenditure under 02 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 03 year but does not produce oil or gas from a lease or property in the state during the 04 calendar year shall file with the department, on March 31 of the following year, a 05 statement, under oath, in a form prescribed by the department, giving, with other 06 information required, the following: 07 (1) the explorer's or producer's qualified capital expenditures, [AS 08 DEFINED IN AS 43.55.023,] other lease expenditures under AS 43.55.165, and 09 adjustments or other payments or credits under AS 43.55.170; and 10 (2) if the explorer or producer receives a payment or credit under 11 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 12 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount. 13  * Sec. 31. AS 43.55.160(f) is amended to read: 14 (f) On and after January 1, 2014, in the calculation of an annual production tax 15 value of a producer under (a)(1)(A) or (h)(1) of this section, the gross value at the 16 point of production of oil or gas produced from a lease or property north of 68 degrees 17 North latitude meeting one or more of the following criteria is reduced by 20 percent: 18 (1) the oil or gas is produced from a lease or property that does not contain a lease that 19 was within a unit on January 1, 2003; (2) the oil or gas is produced from a 20 participating area established after December 31, 2011, that is within a unit formed 21 under AS 38.05.180(p) before January 1, 2003, if the participating area does not 22 contain a reservoir that had previously been in a participating area established before 23 December 31, 2011; (3) the oil or gas is produced from acreage that was added to an 24 existing participating area by the Department of Natural Resources on and after 25 January 1, 2014, and the producer demonstrates to the department that the volume of 26 oil or gas produced is from acreage added to an existing participating area. This 27 subsection does not apply to gas produced before 2022 that is used in the state or to 28 gas produced on and after January 1, 2022. For oil or gas first produced after  29 December 31, 2016, the reduction under this subsection shall apply to oil or gas  30 produced from a lease or property for the first five years after the  31 commencement of production in commercial quantities of oil or gas from that  01 lease or property. For oil or gas first produced before January 1, 2017, the  02 reduction under this subsection for a lease or property shall expire January 1,  03 2021. A reduction under this subsection may not reduce the gross value at the point of 04 production below zero. In this subsection, "participating area" means a reservoir or 05 portion of a reservoir producing or contributing to production as approved by the 06 Department of Natural Resources. 07  * Sec. 32. AS 43.55.160(g) is amended to read: 08 (g) On and after January 1, 2014, in addition to the reduction under (f) of this 09 section, in the calculation of an annual production tax value of a producer under 10 (a)(1)(A) or (h)(1) of this section, the gross value at the point of production of oil or 11 gas produced from a lease or property north of 68 degrees North latitude that does not 12 contain a lease that was within a unit on January 1, 2003, is reduced by 10 percent if 13 the oil or gas is produced from a unit made up solely of leases that have a royalty 14 share of more than 12.5 percent in amount or value of the production removed or sold 15 from the lease as determined under AS 38.05.180(f). This subsection does not apply if 16 the royalty obligation for one or more of the leases in the unit has been reduced to 12.5 17 percent or less under AS 38.05.180(j) for all or part of the calendar year for which the 18 annual production tax value is calculated. This subsection does not apply to gas 19 produced before 2022 that is used in the state or to gas produced on and after 20 January 1, 2022. For oil or gas first produced after December 31, 2016, the  21 reduction under this subsection shall apply to oil or gas produced from a lease or  22 property for the first five years after the commencement of production in  23 commercial quantities of oil or gas from that lease or property. For oil or gas first  24 produced before January 1, 2017, the reduction under this subsection for a lease  25 or property shall expire January 1, 2021. A reduction under this subsection may not 26 reduce the gross value at the point of production below zero. 27  * Sec. 33. AS 43.55.165(a) is amended to read: 28 (a) For [EXCEPT AS PROVIDED IN (j) AND (k) OF THIS SECTION, 29 FOR] purposes of this chapter, a producer's lease expenditures for a calendar year are 30 (1) costs, other than items listed in (e) of this section, that are 31 (A) incurred by the producer during the calendar year after 01 March 31, 2006, to explore for, develop, or produce oil or gas deposits located 02 within the producer's leases or properties in the state or, in the case of land in 03 which the producer does not own an operating right, operating interest, or 04 working interest, to explore for oil or gas deposits within other land in the 05 state; and 06 (B) allowed by the department by regulation, based on the 07 department's determination that the costs satisfy the following three 08 requirements: 09 (i) the costs must be incurred upstream of the point of 10 production of oil and gas; 11 (ii) the costs must be ordinary and necessary costs of 12 exploring for, developing, or producing, as applicable, oil or gas 13 deposits; and 14 (iii) the costs must be direct costs of exploring for, 15 developing, or producing, as applicable, oil or gas deposits; and 16 (2) a reasonable allowance for that calendar year, as determined under 17 regulations adopted by the department, for overhead expenses that are directly related 18 to exploring for, developing, or producing, as applicable, the oil or gas deposits. 19  * Sec. 34. AS 43.55.165(e) is amended to read: 20 (e) For purposes of this section, lease expenditures do not include 21 (1) depreciation, depletion, or amortization; 22 (2) oil or gas royalty payments, production payments, lease profit 23 shares, or other payments or distributions of a share of oil or gas production, profit, or 24 revenue, except that a producer's lease expenditures applicable to oil and gas produced 25 from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net 26 profit paid to the state under that lease; 27 (3) taxes based on or measured by net income; 28 (4) interest or other financing charges or costs of raising equity or debt 29 capital; 30 (5) acquisition costs for a lease or property or exploration license; 31 (6) costs arising from fraud, wilful misconduct, gross negligence, 01 violation of law, or failure to comply with an obligation under a lease, permit, or 02 license issued by the state or federal government; 03 (7) fines or penalties imposed by law; 04 (8) costs of arbitration, litigation, or other dispute resolution activities 05 that involve the state or concern the rights or obligations among owners of interests in, 06 or rights to production from, one or more leases or properties or a unit; 07 (9) costs incurred in organizing a partnership, joint venture, or other 08 business entity or arrangement; 09 (10) amounts paid to indemnify the state; the exclusion provided by 10 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 11 a third-party insurer or surety; 12 (11) surcharges levied under AS 43.55.201 or 43.55.300; 13 (12) an expenditure otherwise deductible under (b) of this section that 14 is a result of an internal transfer, a transaction with an affiliate, or a transaction 15 between related parties, or is otherwise not an arm's length transaction, unless the 16 producer establishes to the satisfaction of the department that the amount of the 17 expenditure does not exceed the fair market value of the expenditure; 18 (13) an expenditure incurred to purchase an interest in any corporation, 19 partnership, limited liability company, business trust, or any other business entity, 20 whether or not the transaction is treated as an asset sale for federal income tax 21 purposes; 22 (14) a tax levied under AS 43.55.011 or 43.55.014; 23 (15) costs incurred for dismantlement, removal, surrender, or 24 abandonment of a facility, pipeline, well pad, platform, or other structure, or for the 25 restoration of a lease, field, unit, area, tract of land, body of water, or right-of-way in 26 conjunction with dismantlement, removal, surrender, or abandonment; a cost is not 27 excluded under this paragraph if the dismantlement, removal, surrender, or 28 abandonment for which the cost is incurred is undertaken for the purpose of replacing, 29 renovating, or improving the facility, pipeline, well pad, platform, or other structure; 30 (16) costs incurred for containment, control, cleanup, or removal in 31 connection with any unpermitted release of oil or a hazardous substance and any 01 liability for damages imposed on the producer or explorer for that unpermitted release; 02 this paragraph does not apply to the cost of developing and maintaining an oil 03 discharge prevention and contingency plan under AS 46.04.030; 04 (17) costs incurred to satisfy a work commitment under an exploration 05 license under AS 38.05.132; 06 (18) that portion of expenditures, that would otherwise be qualified 07 capital expenditures, [AS DEFINED IN AS 43.55.023,] incurred during a calendar 08 year that are less than the product of $0.30 multiplied by the total taxable production 09 from each lease or property, in BTU equivalent barrels, during that calendar year, 10 except that, when a portion of a calendar year is subject to this provision, the 11 expenditures and volumes shall be prorated within that calendar year; 12 (19) costs incurred for repair, replacement, or deferred maintenance of 13 a facility, a pipeline, a structure, or equipment, other than a well, that results in or is 14 undertaken in response to a failure, problem, or event that results in an unscheduled 15 interruption of, or reduction in the rate of, oil or gas production; or costs incurred for 16 repair, replacement, or deferred maintenance of a facility, a pipeline, a structure, or 17 equipment, other than a well, that is undertaken in response to, or is otherwise 18 associated with, an unpermitted release of a hazardous substance or of gas; however, 19 costs under this paragraph that would otherwise constitute lease expenditures under (a) 20 and (b) of this section may be treated as lease expenditures if the department 21 determines that the repair or replacement is solely necessitated by an act of war, by an 22 unanticipated grave natural disaster or other natural phenomenon of an exceptional, 23 inevitable, and irresistible character, the effects of which could not have been 24 prevented or avoided by the exercise of due care or foresight, or by an intentional or 25 negligent act or omission of a third party, other than a party or its agents in privity of 26 contract with, or employed by, the producer or an operator acting for the producer, but 27 only if the producer or operator, as applicable, exercised due care in operating and 28 maintaining the facility, pipeline, structure, or equipment, and took reasonable 29 precautions against the act or omission of the third party and against the consequences 30 of the act or omission; in this paragraph, 31 (A) "costs incurred for repair, replacement, or deferred 01 maintenance of a facility, a pipeline, a structure, or equipment" includes costs 02 to dismantle and remove the facility, pipeline, structure, or equipment that is 03 being replaced; 04 (B) "hazardous substance" has the meaning given in 05 AS 46.03.826; 06 (C) "replacement" includes renovation or improvement; 07 (20) costs incurred to construct, acquire, or operate a refinery or crude 08 oil topping plant, regardless of whether the products of the refinery or topping plant 09 are used in oil or gas exploration, development, or production operations; however, if 10 a producer owns a refinery or crude oil topping plant that is located on or near the 11 premises of the producer's lease or property in the state and that processes the 12 producer's oil produced from that lease or property into a product that the producer 13 uses in the operation of the lease or property in drilling for or producing oil or gas, the 14 producer's lease expenditures include the amount calculated by subtracting from the 15 fair market value of the product used the prevailing value, as determined under 16 AS 43.55.020(f), of the oil that is processed; 17 (21) costs of lobbying, public relations, public relations advertising, or 18 policy advocacy. 19  * Sec. 35. AS 43.55.165(f) is amended to read: 20 (f) For purposes of AS 43.55.023(b) [AS 43.55.023(a) AND (b)] and only as 21 to expenditures incurred to explore for an oil or gas deposit located within land in 22 which an explorer does not own a working interest, the term "producer" in this section 23 includes "explorer." 24  * Sec. 36. AS 43.55.170(c) is amended to read: 25 (c) For purposes of AS 43.55.023(b) [AS 43.55.023(a) AND (b)] and only as 26 to expenditures incurred to explore for an oil or gas deposit located within land in 27 which an explorer does not own a working interest, the term "producer" in this section 28 includes "explorer." 29  * Sec. 37. AS 43.55.890 is amended to read: 30 Sec. 43.55.890. Disclosure of tax information. Notwithstanding any contrary 31 provision of AS 40.25.100, and regardless of whether the information is considered 01 under AS 43.05.230(e) to constitute statistics classified to prevent the identification of 02 particular returns or reports, the department may publish the following information 03 under this chapter, if aggregated among three or more producers or explorers, showing 04 by month or calendar year and by lease or property, unit, or area of the state: 05 (1) the amount of oil or gas production; 06 (2) the amount of taxes levied under this chapter or paid under this 07 chapter; 08 (3) the effective tax rates under this chapter; 09 (4) the gross value of oil or gas at the point of production; 10 (5) the transportation costs for oil or gas; 11 (6) qualified capital expenditures [, AS DEFINED IN AS 43.55.023]; 12 (7) exploration expenditures under AS 43.55.025; 13 (8) production tax values of oil or gas under AS 43.55.160; 14 (9) lease expenditures under AS 43.55.165; 15 (10) adjustments to lease expenditures under AS 43.55.170; 16 (11) tax credits applicable or potentially applicable against taxes levied 17 by this chapter. 18  * Sec. 38. AS 43.55.895(b) is amended to read: 19 (b) A municipal entity subject to taxation because of this section 20 (1) is eligible for [ALL] tax credits proportionate to its production  21 taxable under AS 43.55.011(e); and  22 (2) shall allocate its lease expenditures in proportion to its  23 production taxable under AS 43.55.011(e) [UNDER THIS CHAPTER TO THE 24 SAME EXTENT AS ANY OTHER PRODUCER]. 25 * Sec. 39. AS 43.55.900 is amended by adding a new paragraph to read: 26 (26) "qualified capital expenditure" 27 (A) means, except as otherwise provided in (B) of this 28 paragraph, an expenditure that is a lease expenditure under AS 43.55.165 and 29 is 30 (i) incurred for geological or geophysical exploration; 31 (ii) treated as a capitalized expenditure under 26 U.S.C. 01 (Internal Revenue Code), as amended, regardless of elections made 02 under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 03 treated as a capitalized expenditure for federal income tax reporting 04 purposes by the person incurring the expenditure; or 05 (iii) treated as a capitalized expenditure under 26 U.S.C. 06 (Internal Revenue Code), as amended, regardless of elections made 07 under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 08 eligible to be deducted as an expense under 26 U.S.C. 263(c) (Internal 09 Revenue Code), as amended; 10 (B) does not include an expenditure incurred to acquire an asset 11 the cost of previously acquiring which was a lease expenditure under 12 AS 43.55.165 or would have been a lease expenditure under AS 43.55.165 if it 13 had been incurred after March 31, 2006, or that has previously been placed in 14 service in the state; an expenditure to acquire an asset is not excluded under 15 this subparagraph if not more than an immaterial portion of the asset meets a 16 description under this subparagraph; for purposes of this subparagraph, "asset" 17 includes geological, geophysical, and well data and interpretations. 18  * Sec. 40. AS 43.70 is amended by adding new sections to read: 19 Sec. 43.70.025. Bond or cash deposit required for an oil or gas business. (a) 20 At the time of applying for a license under this chapter, an applicant engaged in the 21 business of oil or gas exploration, development, or production shall file a surety bond 22 in the amount of $250,000 running to the state, conditioned upon the applicant's 23 promise to pay all 24 (1) taxes and contributions due the state and political subdivisions; 25 (2) persons furnishing labor or material or renting or supplying 26 equipment to the applicant; and 27 (3) amounts that may be adjudged against the applicant because of 28 negligent or improper work or breach of contract while engaged in the business of oil 29 or gas exploration, development, or production. 30 (b) In lieu of the surety bond required under this section, the applicant may 31 file with the commissioner a cash deposit or other negotiable security acceptable to the 01 commissioner in the amount of $250,000. 02 (c) The bond required by this section remains in effect until cancelled by 03 action of the surety, the principal, or if the commissioner finds that the business is 04 producing oil or gas in commercial quantities, by the commissioner. 05 Sec. 43.70.028. Claims against an oil or gas business. (a) A person having a 06 claim against a person required to file a surety bond under AS 43.70.025 because of 07 the failure to pay a liability described in AS 43.70.025(a) may bring suit upon the 08 bond. A copy of the complaint shall be served by registered or certified mail on the 09 commissioner at the time suit is filed, and the commissioner shall maintain a record, 10 available for public inspection, of all suits commenced. This service on the 11 commissioner shall constitute service on the surety, and the commissioner shall 12 transmit the complaint or a copy of it to the surety within 72 hours after it is received. 13 The surety on the bond is not liable in an aggregate amount in excess of that named in 14 the bond, but if claims pending at any one time exceed the amount of the bond, the 15 claims shall be satisfied from the bond in the following order: 16 (1) labor, including employee benefits; 17 (2) taxes and contributions due the state, city, and borough, in that 18 order; 19 (3) material and equipment; 20 (4) claims for negligent or improper work or breach of contract; 21 (5) repair of public facilities. 22 (b) If a judgment is entered against a cash deposit, the commissioner, upon 23 receipt of a certified copy of a final judgment, shall pay the judgment from the amount 24 of the deposit in accordance with the priorities set out in (a) of this section. 25 (c) An action described in (a) of this section may not be commenced on the 26 bond more than three years after the bond's cancellation. 27 * Sec. 41. AS 38.05.180(i); AS 41.09.010, 41.09.020, 41.09.030, 41.09.090; and 28 AS 43.20.053(j)(4) are repealed January 1, 2017. 29 * Sec. 42. AS 43.55.023(a), 43.55.023(l), 43.55.023(n), 43.55.023(o), 43.55.028(i), 30 43.55.075(d)(1), 43.55.165(j), and 43.55.165(k) are repealed January 1, 2022. 31 * Sec. 43. The uncodified law of the State of Alaska is amended by adding a new section to 01 read: 02 LEGISLATIVE WORKING GROUP. (a) A legislative working group is established 03 to analyze the Cook Inlet fiscal regime for oil and gas, review the state's tax structure and 04 rates on oil and gas produced south of 68 degrees North latitude, recommend changes to the 05 legislature for consideration during the First Regular Session of the Thirtieth Alaska State 06 Legislature, and develop terms for a comprehensive fiscal regime for the area south of 68 07 degrees North latitude including, 08 (1) a tax structure that accounts for the unique circumstances for each oil and 09 gas producing area south of 68 degrees North latitude; 10 (2) incentives for the exploration, development, and production of oil and gas 11 south of 68 degrees North latitude; 12 (3) consideration of the competitiveness of the area to attract new oil and gas 13 development; 14 (4) consideration of the unique market considerations of the Cook Inlet 15 sedimentary basin and the need to support energy supply security for communities in 16 Southcentral Alaska; 17 (5) alternative means of state support for the exploration, development, and 18 production of oil and gas in this area, including through the Alaska Industrial Export and 19 Development Authority; 20 (6) analysis of whether refundable state tax credits are still necessary for a 21 new regime; 22 (7) evaluation of the need for disclosure of some confidential information to 23 help legislators shape policy, including an evaluation of the associated state and federal 24 constitutional issues related to statutory waivers of taxpayer confidentiality. 25 (b) The working group consists of 26 (1) two co-chairs, one of whom is a member of the house appointed by the 27 speaker of the house of representatives, and one of whom is a member of the senate appointed 28 by the president of the senate; and 29 (2) members appointed by the co-chairs; members must be legislators and 30 must include members of the majority and minority caucuses. 31 (c) The co-chairs of the working group may form an advisory group to the working 01 group, composed of members who are not legislators and who have expertise and skills to 02 assist in the review and development of a new plan for the tax structure and rates on oil and 03 gas produced south of 68 degrees North latitude. The members of an advisory group may 04 include commissioners or employees of state departments, members of the oil and gas 05 industry or trade associations, and economists. 06 (d) The working group is to be supported by legislative consultants under contract 07 through the Legislative Budget and Audit Committee. 08  * Sec. 44. The uncodified law of the State of Alaska is amended by adding a new section to 09 read: 10 APPLICABILITY. Sections 7 - 9, 26, and 27 of this Act apply to a refund or payment 11 applied for on or after January 1, 2017. 12  * Sec. 45. The uncodified law of the State of Alaska is amended by adding a new section to 13 read: 14 TRANSITION: QUALIFIED CAPITAL EXPENDITURES AND WELL LEASE 15 EXPENDITURES. (a) Notwithstanding the repeal of AS 43.55.023(a), (l), (n), and (o) by sec. 16 42 of this Act, and the amendments to AS 43.55.023(d) and (e), 43.55.029(a), 43.55.165(f), 17 and 43.55.170(c) by secs. 17, 18, 28, 35, and 36 of this Act, a taxpayer who incurs 18 (1) a qualified capital expenditure before the effective date of sec. 42 of this 19 Act that qualifies for a qualified capital expenditure credit under AS 43.55.023(a) may apply 20 for a credit or transferable tax credit certificate under AS 43.55.023 and assign the tax credit 21 under AS 43.55.029, as those sections read on the day before the effective date of sec. 42 of 22 this Act; 23 (2) a well lease expenditure before the effective date of sec. 42 of this Act that 24 qualifies for a well lease expenditure credit under AS 43.55.023(l) may apply for a credit or 25 transferable tax credit certificate under AS 43.55.023 and assign the tax credit under 26 AS 43.55.029, as those sections read on the day before the effective date of sec. 42 of this 27 Act. 28 (b) The Department of Revenue may continue to apply and enforce AS 43.55.023 and 29 43.55.029, as those sections read on the day before the effective date of sec. 42 of this Act, for 30 qualified capital expenditures and well lease expenditures incurred before the effective date of 31 sec. 42 of this Act. 01  * Sec. 46. The uncodified law of the State of Alaska is amended by adding a new section to 02 read: 03 TRANSITION: LEASE EXPENDITURES FOR A CALENDAR YEAR AFTER 04 2006 AND BEFORE 2010. Notwithstanding AS 43.55.165(a), as amended by sec. 33 of this 05 Act, and the repeal of AS 43.55.165(j) and (k) by sec. 42 of this Act, AS 43.55.165(j) and (k) 06 apply to a producer's total lease expenditures for a calendar year after 2006 and before 2010 07 under AS 43.55.165, as that section read on the day before the effective date of sec. 42 of this 08 Act. 09 * Sec. 47. The uncodified law of the State of Alaska is amended by adding a new section to 10 read: 11 TRANSITION: REGULATIONS. The Department of Revenue and the Department of 12 Natural Resources may adopt regulations necessary to implement the changes made by this 13 Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), but not 14 before the effective date of the law implemented by the regulation. The Department of 15 Revenue shall adopt regulations governing the use of tax credits under AS 43.55 for a 16 calendar year for which the applicable tax credit provisions of AS 43.55 differ as between 17 parts of the year as a result of this Act. 18 * Sec. 48. The uncodified law of the State of Alaska is amended by adding a new section to 19 read: 20 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 21 contrary provision of AS 44.62.240, 22 (1) if the Department of Revenue expressly designates in a regulation that the 23 regulation applies retroactively, a regulation adopted by the Department of Revenue to 24 implement, interpret, make specific, or otherwise carry out this Act may apply retroactively to 25 the effective date of the law implemented by the regulation; 26 (2) if the Department of Natural Resources expressly designates in the 27 regulation that the regulation applies retroactively, a regulation adopted by the Department of 28 Natural Resources to implement, interpret, make specific, or otherwise carry out the statutory 29 amendments in this Act affecting the administration of oil and gas leases issued under 30 AS 38.05.180(f)(3)(B), (D), or (E), to the extent the regulation relates to the treatment of oil 31 and gas production taxes in determining net profits under those leases, may apply 01 retroactively to the effective date of the law implemented by the regulation. 02 * Sec. 49. Sections 24, 43, and 47 of this Act take effect immediately under 03 AS 01.10.070(c). 04  * Sec. 50. Sections 17, 18, 28 - 30, 33 - 37, 39, 42, 45, and 46 of this Act take effect 05 January 1, 2022. 06 * Sec. 51. Except as provided in secs. 49 and 50 of this Act, this Act takes effect January 1, 07 2017.