00 CONFERENCE CS FOR HOUSE BILL NO. 247 01 "An Act relating to the exploration incentive credits; relating to the powers and duties 02 of the Alaska Oil and Gas Conservation Commission; relating to interest applicable to 03 delinquent tax; relating to the oil and gas production tax, tax payments, and credits; 04 relating to tax credit certificates; relating to refunds for the gas storage facility tax 05 credit, the liquefied natural gas storage facility tax credit, and the qualified in-state oil 06 refinery infrastructure expenditures tax credit; relating to oil and gas lease expenditures 07 and production tax credits for municipal entities; requiring a bond or cash deposit with 08 a business license application for an oil or gas business; and providing for an effective 09 date." 10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 11  * Section 1. AS 31.05.030 is amended by adding a new subsection to read: 12 (n) Upon request of the commissioner of revenue, the commission shall 01 determine the commencement of regular production from a lease or property for 02 purposes of AS 43.55.160(f) and (g).  03  * Sec. 2. AS 38.05.036(a) is amended to read: 04 (a) The department may conduct audits regarding royalty and net profits under 05 oil and gas contracts, agreements, or leases under this chapter and regarding costs 06 related to exploration licenses entered into under AS 38.05.131 - 38.05.134 and 07 exploration incentive credits under this chapter [OR UNDER AS 41.09]. For purposes 08 of an audit under this section, 09 (1) the department may examine the books, papers, records, or 10 memoranda of a person regarding matters related to the audit; and 11 (2) the records and premises where a business is conducted shall be 12 open at all reasonable times for inspection by the department. 13  * Sec. 3. AS 38.05.036(b) is amended to read: 14 (b) The Department of Revenue may obtain from the department information 15 relating to royalty and net profits payments and to exploration incentive credits under 16 this chapter [OR UNDER AS 41.09], whether or not that information is confidential. 17 The Department of Revenue may use the information in carrying out its functions and 18 responsibilities under AS 43, and shall hold that information confidential to the extent 19 required by an agreement with the department or by AS 38.05.035(a)(8) [, 20 AS 41.09.010(d),] or AS 43.05.230. 21  * Sec. 4. AS 38.05.036(c) is amended to read: 22 (c) The department may obtain from the Department of Revenue all 23 information obtained under AS 43 relating to royalty and net profits and to exploration 24 incentive credits. The department may use the information for purposes of carrying out 25 its responsibilities and functions under this chapter [AND AS 41.09]. Information 26 made available to the department that was obtained under AS 43 is confidential and 27 subject to the provisions of AS 43.05.230. 28  * Sec. 5. AS 38.05.036(f) is amended to read: 29 (f) Except as otherwise provided in this section or in connection with official 30 investigations or proceedings of the department, it is unlawful for a current or former 31 officer, employee, or agent of the state to divulge information obtained by the 01 department as a result of an audit under this section that is required by an agreement 02 with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)] to be kept 03 confidential. 04  * Sec. 6. AS 38.05.036(g) is amended to read: 05 (g) Nothing in this section prohibits the publication of statistics in a manner 06 that maintains the confidentiality of information to the extent required by an 07 agreement with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)]. 08  * Sec. 7. AS 40.25.100(a) is amended to read: 09 (a) Information in the possession of the Department of Revenue that discloses 10 the particulars of the business or affairs of a taxpayer or other person, including 11 information under AS 38.05.020(b)(11) that is subject to a confidentiality agreement 12 under AS 38.05.020(b)(12), is not a matter of public record, except as provided in 13 AS 43.05.230(i) - (l) [AS 43.05.230(i) OR (k)] or for purposes of investigation and 14 law enforcement. The information shall be kept confidential except when its 15 production is required in an official investigation, administrative adjudication under 16 AS 43.05.405 - 43.05.499, or court proceeding. These restrictions do not prohibit the 17 publication of statistics presented in a manner that prevents the identification of 18 particular reports and items, prohibit the publication of tax lists showing the names of 19 taxpayers who are delinquent and relevant information that may assist in the collection 20 of delinquent taxes, or prohibit the publication of records, proceedings, and decisions 21 under AS 43.05.405 - 43.05.499. 22  * Sec. 8. AS 43.05.225 is amended to read: 23 Sec. 43.05.225. Interest. Unless otherwise provided, 24 (1) a delinquent tax [UNDER THIS TITLE,] 25 (A) under this title, before January 1, 2014, bears interest in 26 each calendar quarter at the rate of five percentage points above the annual rate 27 charged member banks for advances by the 12th Federal Reserve District as of 28 the first day of that calendar quarter, or at the annual rate of 11 percent, 29 whichever is greater, compounded quarterly as of the last day of that quarter; 30 [OR] 31 (B) under this title, on and after January 1, 2014, except as  01 provided in (C) of this paragraph, bears interest in each calendar quarter at 02 the rate of three percentage points above the annual rate charged member 03 banks for advances by the 12th Federal Reserve District as of the first day of 04 that calendar quarter;  05 (C) under AS 43.55, on and after January 1, 2017,  06 (i) for the first three years after a tax becomes  07 delinquent, bears interest in each calendar quarter at the rate of  08 seven percentage points above the annual rate charged member  09 banks for advances by the 12th Federal Reserve District as of the  10 first day of that calendar quarter, compounded quarterly as of the  11 last day of that quarter; and  12 (ii) after the first three years after a tax becomes  13 delinquent, does not bear interest; 14 (2) the interest rate is 12 percent a year for 15 (A) delinquent fees payable under AS 05.15.095(c); and 16 (B) unclaimed property that is not timely paid or delivered, as 17 allowed by AS 34.45.470(a). 18 * Sec. 9. AS 43.05.230 is amended by adding a new subsection to read: 19 (l) For tax credit certificates purchased by the department in the preceding 20 calendar year under AS 43.55.028, the department shall make the following 21 information public by April 30 of each year: 22 (1) the name of each person from whom the department purchased a 23 transferable tax credit certificate; and 24 (2) the aggregate amount of the tax credit certificates purchased from 25 the person in the preceding calendar year. 26  * Sec. 10. AS 43.20.046(e) is amended to read: 27 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 28 may use available money in the oil and gas tax credit fund established in AS 43.55.028 29 to make the refund applied for under (d) of this section in whole or in part if the 30 department finds that, [(1) THE CLAIMANT DOES NOT HAVE AN 31 OUTSTANDING LIABILITY TO THE STATE FOR UNPAID DELINQUENT 01 TAXES UNDER THIS TITLE; AND (2)] after application of all available tax credits, 02 the claimant's total tax liability under this chapter for the calendar year in which the 03 claim is made is zero. [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" 04 MEANS AN AMOUNT OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED 05 AN ASSESSMENT THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS 06 NOT BEEN FINALLY RESOLVED IN THE TAXPAYER'S FAVOR.] 07  * Sec. 11. AS 43.20.047(e) is amended to read: 08 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 09 may use money available in the oil and gas tax credit fund established in AS 43.55.028 10 to make a refund or payment under (d) of this section in whole or in part if the 11 department finds that, [(1) THE CLAIMANT DOES NOT HAVE AN 12 OUTSTANDING LIABILITY TO THE STATE FOR UNPAID DELINQUENT 13 TAXES UNDER THIS TITLE; AND (2)] after application of all available tax credits, 14 the claimant's total tax liability under this chapter for the calendar year in which the 15 claim is made is zero. [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" 16 MEANS AN AMOUNT OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED 17 AN ASSESSMENT THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS 18 NOT BEEN FINALLY RESOLVED IN THE TAXPAYER'S FAVOR.] 19  * Sec. 12. AS 43.20.053(e) is amended to read: 20 (e) Subject to the requirements in AS 43.55.028(j), the [THE] department 21 may use money available in the oil and gas tax credit fund established in AS 43.55.028 22 to make a refund or payment under (d) of this section in whole or in part if the 23 department finds that, 24 [(1) THE CLAIMANT DOES NOT HAVE AN OUTSTANDING 25 LIABILITY TO THE STATE FOR UNPAID DELINQUENT TAXES UNDER THIS 26 TITLE; AND 27 (2)] after application of all available tax credits, the claimant's total tax 28 liability under this chapter for the calendar year in which the claim is made is zero. 29  * Sec. 13. AS 43.55.011(j) is amended to read: 30 (j) For a calendar year [BEFORE 2022], the tax levied by (e) of this section 31 for gas produced from a lease or property in the Cook Inlet sedimentary basin may not 01 exceed 02 (1) for a lease or property that first commenced commercial production 03 of gas before April 1, 2006, the product obtained by multiplying (A) the amount of 04 taxable gas produced during the calendar year from the lease or property, times (B) the 05 average rate of tax that was imposed under this chapter for taxable gas produced from 06 the lease or property for the 12-month period ending on March 31, 2006, times (C) the 07 quotient obtained by dividing the total gross value at the point of production of the 08 taxable gas produced from the lease or property during the 12-month period ending on 09 March 31, 2006, by the total amount of that gas; 10 (2) for a lease or property that first commences commercial production 11 of gas after March 31, 2006, the product obtained by multiplying (A) the amount of 12 taxable gas produced during the calendar year from the lease or property, times (B) the 13 average rate of tax that was imposed under this chapter for taxable gas produced from 14 all leases or properties in the Cook Inlet sedimentary basin for the 12-month period 15 ending on March 31, 2006, times (C) the average prevailing value for gas delivered in 16 the Cook Inlet area for the 12-month period ending March 31, 2006, as determined by 17 the department under AS 43.55.020(f). 18  * Sec. 14. AS 43.55.011(k) is amended to read: 19 (k) For a calendar year [BEFORE 2022], the tax levied by (e) of this section 20 may not exceed one dollar per barrel of oil for oil produced from a lease or property 21 in the Cook Inlet sedimentary basin [MAY NOT EXCEED 22 (1) FOR A LEASE OR PROPERTY THAT FIRST COMMENCED 23 COMMERCIAL PRODUCTION OF OIL BEFORE APRIL 1, 2006, THE PRODUCT 24 OBTAINED BY MULTIPLYING (A) THE AMOUNT OF TAXABLE OIL 25 PRODUCED DURING THE CALENDAR YEAR FROM THE LEASE OR 26 PROPERTY, TIMES (B) THE AVERAGE RATE OF TAX THAT WAS IMPOSED 27 UNDER THIS CHAPTER FOR TAXABLE OIL PRODUCED FROM THE LEASE 28 OR PROPERTY FOR THE 12-MONTH PERIOD ENDING ON MARCH 31, 2006, 29 TIMES (C) THE QUOTIENT OBTAINED BY DIVIDING THE TOTAL GROSS 30 VALUE AT THE POINT OF PRODUCTION OF THE TAXABLE OIL PRODUCED 31 FROM THE LEASE OR PROPERTY DURING THE 12-MONTH PERIOD 01 ENDING ON MARCH 31, 2006, BY THE TOTAL AMOUNT OF THAT OIL; 02 (2) FOR A LEASE OR PROPERTY THAT FIRST COMMENCES 03 COMMERCIAL PRODUCTION OF OIL AFTER MARCH 31, 2006, THE 04 PRODUCT OBTAINED BY MULTIPLYING (A) THE AMOUNT OF TAXABLE 05 OIL PRODUCED DURING THE CALENDAR YEAR FROM THE LEASE OR 06 PROPERTY, TIMES (B) THE AVERAGE RATE OF TAX THAT WAS IMPOSED 07 UNDER THIS CHAPTER FOR TAXABLE OIL PRODUCED FROM ALL LEASES 08 OR PROPERTIES IN THE COOK INLET SEDIMENTARY BASIN FOR THE 12- 09 MONTH PERIOD ENDING ON MARCH 31, 2006, TIMES (C) THE AVERAGE 10 PREVAILING VALUE FOR OIL PRODUCED AND DELIVERED IN THE COOK 11 INLET AREA FOR THE 12-MONTH PERIOD ENDING ON MARCH 31, 2006, AS 12 DETERMINED BY THE DEPARTMENT UNDER AS 43.55.020(f)]. 13  * Sec. 15. AS 43.55.011(o) is amended to read: 14 (o) Notwithstanding other provisions of this section, for a calendar year 15 [BEFORE 2022], the tax levied under (e) of this section for each 1,000 cubic feet of 16 gas for gas produced from a lease or property outside the Cook Inlet sedimentary basin 17 and used in the state, other than gas subject to (p) of this section, may not exceed the 18 amount of tax for each 1,000 cubic feet of gas that is determined under (j)(2) of this 19 section. 20  * Sec. 16. AS 43.55.020(a) is amended to read: 21 (a) For a calendar year, a producer subject to tax under AS 43.55.011 shall pay 22 the tax as follows: 23 (1) for oil and gas produced before January 1, 2014, an installment 24 payment of the estimated tax levied by AS 43.55.011(e), net of any tax credits applied 25 as allowed by law, is due for each month of the calendar year on the last day of the 26 following month; except as otherwise provided under (2) of this subsection, the 27 amount of the installment payment is the sum of the following amounts, less 1/12 of 28 the tax credits that are allowed by law to be applied against the tax levied by 29 AS 43.55.011(e) for the calendar year, but the amount of the installment payment may 30 not be less than zero: 31 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 01 produced from leases or properties in the state outside the cook inlet 02 sedimentary basin, other than leases or properties subject to AS 43.55.011(f), 03 the greater of 04 (i) zero; or 05 (ii) the sum of 25 percent and the tax rate calculated for 06 the month under AS 43.55.011(g) multiplied by the remainder obtained 07 by subtracting 1/12 of the producer's adjusted lease expenditures for the 08 calendar year of production under AS 43.55.165 and 43.55.170 that are 09 deductible for the oil and gas under AS 43.55.160 from the gross value 10 at the point of production of the oil and gas produced from the leases or 11 properties during the month for which the installment payment is 12 calculated; 13 (B) for oil and gas produced from leases or properties subject 14 to AS 43.55.011(f), the greatest of 15 (i) zero; 16 (ii) zero percent, one percent, two percent, three 17 percent, or four percent, as applicable, of the gross value at the point of 18 production of the oil and gas produced from the leases or properties 19 during the month for which the installment payment is calculated; or 20 (iii) the sum of 25 percent and the tax rate calculated for 21 the month under AS 43.55.011(g) multiplied by the remainder obtained 22 by subtracting 1/12 of the producer's adjusted lease expenditures for the 23 calendar year of production under AS 43.55.165 and 43.55.170 that are 24 deductible for the oil and gas under AS 43.55.160 from the gross value 25 at the point of production of the oil and gas produced from those leases 26 or properties during the month for which the installment payment is 27 calculated; 28 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for 29 each lease or property, the greater of 30 (i) zero; or 31 (ii) the sum of 25 percent and the tax rate calculated for 01 the month under AS 43.55.011(g) multiplied by the remainder obtained 02 by subtracting 1/12 of the producer's adjusted lease expenditures for the 03 calendar year of production under AS 43.55.165 and 43.55.170 that are 04 deductible under AS 43.55.160 for the oil or gas, respectively, 05 produced from the lease or property from the gross value at the point of 06 production of the oil or gas, respectively, produced from the lease or 07 property during the month for which the installment payment is 08 calculated; 09 (D) for oil and gas subject to AS 43.55.011(p), the lesser of 10 (i) the sum of 25 percent and the tax rate calculated for 11 the month under AS 43.55.011(g) multiplied by the remainder obtained 12 by subtracting 1/12 of the producer's adjusted lease expenditures for the 13 calendar year of production under AS 43.55.165 and 43.55.170 that are 14 deductible for the oil and gas under AS 43.55.160 from the gross value 15 at the point of production of the oil and gas produced from the leases or 16 properties during the month for which the installment payment is 17 calculated, but not less than zero; or 18 (ii) four percent of the gross value at the point of 19 production of the oil and gas produced from the leases or properties 20 during the month, but not less than zero; 21 (2) an amount calculated under (1)(C) of this subsection for oil or gas 22 subject to AS 43.55.011(j), (k), or (o) may not exceed the product obtained by 23 carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or 43.55.011(o), as 24 applicable, for gas or set out in AS 43.55.011(k)(1) or (2), as applicable, for oil, but 25 substituting in AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the 26 amount of taxable gas produced during the month for the amount of taxable gas 27 produced during the calendar year and substituting in AS 43.55.011(k)(1)(A) or 28 (2)(A), as applicable, the amount of taxable oil produced during the month for the 29 amount of taxable oil produced during the calendar year; 30 (3) an installment payment of the estimated tax levied by 31 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 01 on the last day of the following month; the amount of the installment payment is the 02 sum of 03 (A) the applicable tax rate for oil provided under 04 AS 43.55.011(i), multiplied by the gross value at the point of production of the 05 oil taxable under AS 43.55.011(i) and produced from the lease or property 06 during the month; and 07 (B) the applicable tax rate for gas provided under 08 AS 43.55.011(i), multiplied by the gross value at the point of production of the 09 gas taxable under AS 43.55.011(i) and produced from the lease or property 10 during the month; 11 (4) any amount of tax levied by AS 43.55.011, net of any credits 12 applied as allowed by law, that exceeds the total of the amounts due as installment 13 payments of estimated tax is due on March 31 of the year following the calendar year 14 of production; 15 (5) for oil and gas produced on and after January 1, 2014, and before 16 January 1, 2022, an installment payment of the estimated tax levied by 17 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 18 month of the calendar year on the last day of the following month; except as otherwise 19 provided under (6) of this subsection, the amount of the installment payment is the 20 sum of the following amounts, less 1/12 of the tax credits that are allowed by law to be 21 applied against the tax levied by AS 43.55.011(e) for the calendar year, but the amount 22 of the installment payment may not be less than zero: 23 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 24 produced from leases or properties in the state outside the Cook Inlet 25 sedimentary basin, other than leases or properties subject to AS 43.55.011(f), 26 the greater of 27 (i) zero; or 28 (ii) 35 percent multiplied by the remainder obtained by 29 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 the leases or 02 properties during the month for which the installment payment is 03 calculated; 04 (B) for oil and gas produced from leases or properties subject 05 to AS 43.55.011(f), the greatest of 06 (i) zero; 07 (ii) zero percent, one percent, two percent, three 08 percent, or four percent, as applicable, of the gross value at the point of 09 production of the oil and gas produced from the leases or properties 10 during the month for which the installment payment is calculated; or 11 (iii) 35 percent multiplied by the remainder obtained by 12 subtracting 1/12 of the producer's adjusted lease expenditures for the 13 calendar year of production under AS 43.55.165 and 43.55.170 that are 14 deductible for the oil and gas under AS 43.55.160 from the gross value 15 at the point of production of the oil and gas produced from those leases 16 or properties during the month for which the installment payment is 17 calculated, except that, for the purposes of this calculation, a reduction 18 from the gross value at the point of production may apply for oil and 19 gas subject to AS 43.55.160(f) or (g); 20 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for 21 each lease or property, the greater of 22 (i) zero; or 23 (ii) 35 percent multiplied by the remainder obtained by 24 subtracting 1/12 of the producer's adjusted lease expenditures for the 25 calendar year of production under AS 43.55.165 and 43.55.170 that are 26 deductible under AS 43.55.160 for the oil or gas, respectively, 27 produced from the lease or property from the gross value at the point of 28 production of the oil or gas, respectively, produced from the lease or 29 property during the month for which the installment payment is 30 calculated; 31 (D) for oil and gas subject to AS 43.55.011(p), the lesser of 01 (i) 35 percent multiplied by the remainder obtained by 02 subtracting 1/12 of the producer's adjusted lease expenditures for the 03 calendar year of production under AS 43.55.165 and 43.55.170 that are 04 deductible for the oil and gas under AS 43.55.160 from the gross value 05 at the point of production of the oil and gas produced from the leases or 06 properties during the month for which the installment payment is 07 calculated, but not less than zero; or 08 (ii) four percent of the gross value at the point of 09 production of the oil and gas produced from the leases or properties 10 during the month, but not less than zero; 11 (6) an amount calculated under (5)(C) of this subsection for oil or gas 12 subject to AS 43.55.011(j), (k), or (o) may not exceed the product obtained by 13 carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or 43.55.011(o), as 14 applicable, for gas or set out in AS 43.55.011(k)(1) or (2), as applicable, for oil, but 15 substituting in AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the 16 amount of taxable gas produced during the month for the amount of taxable gas 17 produced during the calendar year and substituting in AS 43.55.011(k)(1)(A) or 18 (2)(A), as applicable, the amount of taxable oil produced during the month for the 19 amount of taxable oil produced during the calendar year; 20 (7) for oil and gas produced on or after January 1, 2022, an installment 21 payment of the estimated tax levied by AS 43.55.011(e), net of any tax credits applied 22 as allowed by law, is due for each month of the calendar year on the last day of the 23 following month; except as otherwise provided under (10) of this subsection, the 24 amount of the installment payment is the sum of the following amounts, less 1/12 of 25 the tax credits that are allowed by law to be applied against the tax levied by 26 AS 43.55.011(e) for the calendar year, but the amount of the installment payment may 27 not be less than zero: 28 (A) for oil produced from leases or properties subject to  29 AS 43.55.011(f) [THAT INCLUDE LAND NORTH OF 68 DEGREES 30 NORTH LATITUDE], the greatest of 31 (i) zero; 01 (ii) zero percent, one percent, two percent, three 02 percent, or four percent, as applicable, of the gross value at the point of 03 production of the oil produced from the leases or properties during the 04 month for which the installment payment is calculated; or 05 (iii) 35 percent multiplied by the remainder obtained by 06 subtracting 1/12 of the producer's adjusted lease expenditures for the 07 calendar year of production under AS 43.55.165 and 43.55.170 that are 08 deductible for the oil under AS 43.55.160(h)(1) from the gross value at 09 the point of production of the oil produced from those leases or 10 properties during the month for which the installment payment is 11 calculated, except that, for the purposes of this calculation, a reduction 12 from the gross value at the point of production may apply for oil 13 subject to AS 43.55.160(f) or 43.55.160(f) and (g); 14 (B) for oil produced before or during the last calendar year 15 under AS 43.55.024(b) for which the producer could take a tax credit under 16 AS 43.55.024(a), from leases or properties in the state outside the Cook Inlet 17 sedimentary basin, no part of which is north of 68 degrees North latitude, other 18 than leases or properties subject to AS 43.55.011(o) or (p) [AS 43.55.011(p)], 19 the greater of 20 (i) zero; or 21 (ii) 35 percent multiplied by the remainder obtained by 22 subtracting 1/12 of the producer's adjusted lease expenditures for the 23 calendar year of production under AS 43.55.165 and 43.55.170 that are 24 deductible for the oil under AS 43.55.160(h)(2) from the gross value at 25 the point of production of the oil produced from the leases or properties 26 during the month for which the installment payment is calculated; 27 (C) for oil and gas produced from leases or properties subject 28 to AS 43.55.011(p), except as otherwise provided under (8) of this subsection, 29 the sum of 30 (i) 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 for the oil under AS 43.55.160(h)(3) from the gross value at 03 the point of production of the oil produced from the leases or properties 04 during the month for which the installment payment is calculated, but 05 not less than zero; and 06 (ii) 13 percent of the gross value at the point of 07 production of the gas produced from the leases or properties during the 08 month, but not less than zero; 09 (D) for oil produced from leases or properties in the state, no 10 part of which is north of 68 degrees North latitude, other than leases or 11 properties subject to (B), [OR] (C), or (F) of this paragraph, the greater of 12 (i) zero; or 13 (ii) 35 percent multiplied by the remainder obtained by 14 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 under AS 43.55.160(h)(4) from the gross value at 17 the point of production of the oil produced from the leases or properties 18 during the month for which the installment payment is calculated; 19 (E) for gas produced from each lease or property in the state  20 outside the Cook Inlet sedimentary basin, other than a lease or property 21 subject to AS 43.55.011(o) or (p) [AS 43.55.011(p)], 13 percent of the gross 22 value at the point of production of the gas produced from the lease or property 23 during the month for which the installment payment is calculated, but not less 24 than zero; 25 (F) for oil subject to AS 43.55.011(k), for each lease or  26 property, the greater of  27 (i) zero; or  28 (ii) 35 percent multiplied by the remainder obtained  29 by subtracting 1/12 of the producer's adjusted lease expenditures  30 for the calendar year of production under AS 43.55.165 and  31 43.55.170 that are deductible under AS 43.55.160 for the oil,  01 produced from the lease or property from the gross value at the  02 point of production of the oil, produced from the lease or property  03 during the month for which the installment payment is calculated;  04 (G) for gas subject to AS 43.55.011(j) or (o), for each lease  05 or property, the greater of  06 (i) zero; or  07 (ii) 13 percent of the gross value at the point of  08 production of the gas produced from the lease or property during  09 the month for which the installment payment is calculated; 10 (8) an amount calculated under (7)(C) of this subsection may not 11 exceed four percent of the gross value at the point of production of the oil and gas 12 produced from leases or properties subject to AS 43.55.011(p) during the month for 13 which the installment payment is calculated; 14 (9) for purposes of the calculation under (1)(B)(ii), (5)(B)(ii), and 15 (7)(A)(ii) of this subsection, the applicable percentage of the gross value at the point 16 of production is determined under AS 43.55.011(f)(1) or (2) but substituting the 17 phrase "month for which the installment payment is calculated" in AS 43.55.011(f)(1) 18 and (2) for the phrase "calendar year for which the tax is due";  19 (10) an amount calculated under (7)(F) or (G) of this subsection  20 for oil or gas subject to AS 43.55.011(j), (k), or (o) may not exceed the product  21 obtained by carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or  22 43.55.011(o), as applicable, for gas, or set out in AS 43.55.011(k)(1) or (2), as  23 applicable, for oil, but substituting in AS 43.55.011(j)(1)(A) or (2)(A) or  24 43.55.011(o), as applicable, the amount of taxable gas produced during the month  25 for the amount of taxable gas produced during the calendar year and substituting  26 in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the amount of taxable oil  27 produced during the month for the amount of taxable oil produced during the  28 calendar year. ["] 29  * Sec. 17. AS 43.55.023(a) is amended to read: 30 (a) A producer or explorer may take a tax credit for a qualified capital 31 expenditure as follows: 01 (1) notwithstanding that a qualified capital expenditure may be a 02 deductible lease expenditure for purposes of calculating the production tax value of oil 03 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 04 [AS 38.05.180(i), AS 41.09.010,] AS 43.20.043 [,] or AS 43.55.025, a producer or 05 explorer that incurs a qualified capital expenditure may also elect to apply a tax credit 06 against a tax levied by AS 43.55.011(e) in the amount of 10 [20] percent of that 07 expenditure; 08 (2) a producer or explorer may take a credit for a qualified capital 09 expenditure incurred in connection with geological or geophysical exploration or in 10 connection with an exploration well only if the producer or explorer 11 (A) agrees, in writing, to the applicable provisions of 12 AS 43.55.025(f)(2); and 13 (B) submits to the Department of Natural Resources all data 14 that would be required to be submitted under AS 43.55.025(f)(2); 15 (3) a credit for a qualified capital expenditure incurred to explore for, 16 develop, or produce oil or gas deposits located 17 (A) north of 68 degrees North latitude may be taken only if the 18 expenditure is incurred before January 1, 2014;  19 (B) in the Cook Inlet sedimentary basin may be taken only  20 if the expenditure is incurred before January 1, 2018. 21  * Sec. 18. AS 43.55.023(b) is amended to read: 22 (b) Before January 1, 2014, a producer or explorer may elect to take a tax 23 credit in the amount of 25 percent of a carried-forward annual loss. For lease 24 expenditures incurred on and after January 1, 2014, and before January 1, 2016, to 25 explore for, develop, or produce oil or gas deposits located north of 68 degrees North 26 latitude, a producer or explorer may elect to take a tax credit in the amount of 45 27 percent of a carried-forward annual loss. For lease expenditures incurred on and after 28 January 1, 2016, to explore for, develop, or produce oil or gas deposits located north 29 of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in 30 the amount of 35 percent of a carried-forward annual loss. For lease expenditures 31 incurred on or after January 1, 2014, and before January 1, 2017, to explore for, 01 develop, or produce oil or gas deposits located south of 68 degrees North latitude, a 02 producer or explorer may elect to take a tax credit in the amount of 25 percent of a 03 carried-forward annual loss. For lease expenditures incurred on or after January 1,  04 2017, to explore for, develop, or produce oil or gas deposits located south of 68  05 degrees North latitude, a producer or explorer may elect to take a tax credit in  06 the amount of 15 percent of a carried-forward annual loss, except that a credit  07 for lease expenditures incurred to explore for, develop, or produce oil or gas  08 deposits located in the Cook Inlet sedimentary basin may only be taken if the  09 expenditure is incurred before January 1, 2018. A credit under this subsection may 10 be applied against a tax levied by AS 43.55.011(e). For purposes of this subsection, 11 (1) a carried-forward annual loss is the amount of a producer's or 12 explorer's adjusted lease expenditures under AS 43.55.165 and 43.55.170 for a 13 previous calendar year that was not deductible in calculating production tax values for 14 that calendar year under AS 43.55.160;  15 (2) for lease expenditures incurred on or after January 1, 2017,  16 any reduction under AS 43.55.160(f) or (g) is added back to the calculation of  17 production tax values for that calendar year under AS 43.55.160 for the  18 determination of a carried-forward annual loss.  19  * Sec. 19. AS 43.55.023(l) is amended to read: 20 (l) A producer or explorer may apply for a tax credit for a well lease 21 expenditure incurred in the state south of 68 degrees North latitude after June 30, 22 2010, as follows: 23 (1) notwithstanding that a well lease expenditure incurred in the state 24 south of 68 degrees North latitude may be a deductible lease expenditure for purposes 25 of calculating the production tax value of oil and gas under AS 43.55.160(a), unless a 26 credit for that expenditure is taken under (a) of this section, [AS 38.05.180(i), 27 AS 41.09.010,] AS 43.20.043, or AS 43.55.025, a producer or explorer that incurs a 28 well lease expenditure in the state south of 68 degrees North latitude may elect to 29 apply a tax credit against a tax levied by AS 43.55.011(e) in the amount of 30 (A) 40 percent of that expenditure incurred before January 1,  31 2017;  01 (B) 20 percent of that expenditure incurred on or after  02 January 1, 2017 [; A TAX CREDIT UNDER THIS PARAGRAPH MAY BE 03 APPLIED FOR A SINGLE CALENDAR YEAR]; 04 (2) a producer or explorer may take a credit for a well lease 05 expenditure incurred in the state south of 68 degrees North latitude in connection with 06 geological or geophysical exploration or in connection with an exploration well only if 07 the producer or explorer 08 (A) agrees, in writing, to the applicable provisions of 09 AS 43.55.025(f)(2); and 10 (B) submits to the Department of Natural Resources all data 11 that would be required to be submitted under AS 43.55.025(f)(2);  12 (3) a credit for a well lease expenditure incurred to explore for,  13 develop, or produce oil or gas deposits located in the Cook Inlet sedimentary  14 basin may be taken only if the expenditure is incurred before January 1, 2018. 15  * Sec. 20. AS 43.55.024(i) is amended to read: 16 (i) A producer may apply against the producer's tax liability for the calendar 17 year under AS 43.55.011(e) a tax credit of $5 for each barrel of oil taxable under 18 AS 43.55.011(e) that receives a reduction in the gross value at the point of  19 production under [MEETS ONE OR MORE OF THE CRITERIA IN] 20 AS 43.55.160(f) or (g) and that is produced during a calendar year after December 31, 21 2013. A tax credit authorized by this subsection may not reduce a producer's tax 22 liability for a calendar year under AS 43.55.011(e) below zero. 23  * Sec. 21. AS 43.55.024(j) is amended to read: 24 (j) A producer may apply against the producer's tax liability for the calendar 25 year under AS 43.55.011(e) a tax credit in the amount specified in this subsection for 26 each barrel of oil taxable under AS 43.55.011(e) that does not receive a reduction in  27 the gross value at the point of production under [MEET ANY OF THE CRITERIA 28 IN] AS 43.55.160(f) or (g) and that is produced during a calendar year after 29 December 31, 2013, from leases or properties north of 68 degrees North latitude. A tax 30 credit under this subsection may not reduce a producer's tax liability for a calendar 31 year under AS 43.55.011(e) below the amount calculated under AS 43.55.011(f). The 01 amount of the tax credit for a barrel of taxable oil subject to this subsection produced 02 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. 22. 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. 04 Notwithstanding (b) of this section, exploration [EXPLORATION] expenditures 05 eligible for the credit in this subsection must be incurred for work performed after 06 June 1, 2012, and before July 1, 2017, except that expenditures to complete an  07 exploration well that was spudded but not completed before July 1, 2017, are  08 eligible for the credit under this subsection [JULY 1, 2016]. A person planning to 09 drill an exploration well on private land and to apply for a credit under this subsection 10 shall obtain written consent from the owner of the oil and gas interest for the full 11 public release of all well data after the expiration of the confidentiality period 12 applicable to information collected under (f) of this section. The written consent of the 13 owner of the oil and gas interest must be submitted to the commissioner of natural 14 resources before approval of the proposed exploration well. In addition to the 15 requirements in (c)(1), (c)(2)(A), and (c)(2)(C) of this section and submission of the 16 written consent of the owner of the oil and gas interest, a person planning to drill an 17 exploration well shall obtain approval from the commissioner of natural resources 18 before the well is spudded. The commissioner of natural resources shall make a 19 written determination approving or rejecting an exploration well within 60 days after 20 receiving the request for approval or as soon as is practicable thereafter. Before 21 approving the exploration well, the commissioner of natural resources shall consider 22 the following: the location of the well; the proximity to a community in need of a local 23 energy source; the proximity of existing infrastructure; the experience and safety 24 record of the explorer in conducting operations in remote or roadless areas; the 25 projected cost schedule; whether seismic mapping and seismic data sufficiently 26 identify a particular trap for exploration; whether the targeted and planned depth and 27 range are designed to penetrate and fully evaluate the hydrocarbon potential of the 28 proposed prospect and reach the level below which economic hydrocarbon reservoirs 29 are likely to be found, or reach 12,000 feet or more true vertical depth; and whether 30 the exploration plan provides for a full evaluation of the wellbore below surface casing 31 to the depth of the well. Whether the exploration well for which a credit is requested 01 under this subsection is located within an area and a basin described under (o) of this 02 section shall be determined by the commissioner of natural resources and reported to 03 the commissioner. A taxpayer that obtains a credit under this subsection may not claim 04 a tax credit under AS 43.55.023 or another provision in this section for the same 05 exploration expenditure. 06  * Sec. 23. AS 43.55.028(e) is amended to read: 07 (e) The department, on the written application of a person to whom a 08 transferable tax credit certificate has been issued under AS 43.55.023(d) or former 09 AS 43.55.023(m) or to whom a production tax credit certificate has been issued under 10 AS 43.55.025(f), may use available money in the oil and gas tax credit fund to 11 purchase, in whole or in part, the certificate. The department may not purchase a  12 total of more than $70,000,000 in tax credit certificates from a person in a  13 calendar year. Before purchasing a certificate or part of a certificate, [IF] the 14 department shall find [FINDS] that 15 (1) the calendar year of the purchase is not earlier than the first 16 calendar year for which the credit shown on the certificate would otherwise be allowed 17 to be applied against a tax; 18 (2) the application is not the result of the division of a single entity  19 into multiple entities that would reasonably be expected to apply as a single entity  20 if the $70,000,000 limitation in this subsection did not exist [APPLICANT DOES 21 NOT HAVE AN OUTSTANDING LIABILITY TO THE STATE FOR UNPAID 22 DELINQUENT TAXES UNDER THIS TITLE]; 23 (3) the applicant's total tax liability under AS 43.55.011(e), after 24 application of all available tax credits, for the calendar year in which the application is 25 made is zero; 26 (4) the applicant's average daily production of oil and gas taxable 27 under AS 43.55.011(e) during the calendar year preceding the calendar year in which 28 the application is made was not more than 50,000 BTU equivalent barrels; and 29 (5) the purchase is consistent with this section and regulations adopted 30 under this section. 31  * Sec. 24. AS 43.55.028(g) is amended to read: 01 (g) The department shall [MAY] adopt regulations to carry out the purposes 02 of this section, including standards and procedures to allocate available money among 03 applications for purchases under this chapter and claims for refunds and payments 04 under AS 43.20.046, 43.20.047, or 43.20.053 when the total amount of the 05 applications for purchase and claims for refund exceed the amount of available money 06 in the fund. The regulations adopted by the department 07 (1) may not, when allocating available money in the fund under this 08 section, distinguish an application for the purchase of a credit certificate issued under 09 former AS 43.55.023(m) or a claim for a refund or payment under AS 43.20.046, 10 43.20.047, or 43.20.053;  11 (2) must, when allocating available money in the fund under this  12 section, grant a preference, between two applicants, to the applicant with a  13 higher percentage of resident workers in the applicant's workforce, including  14 workers employed by the applicant's direct contractors, in the state in the  15 previous calendar year; in this paragraph, "resident worker" has the meaning  16 given in AS 43.40.092(b);  17 (3) must provide for the purchase of the amount equal to the first  18 50 percent of the credit repurchase limit per person under (e) of this section at a  19 rate of 100 percent of the value of the certificate or portion of the certificate  20 requested to be purchased and the amount equal to the next 50 percent of the  21 credit repurchase limit per person under (e) of this section at a rate of 75 percent  22 of the value of the certificate or portion of the certificate requested to be  23 purchased. 24  * Sec. 25. AS 43.55.028 is amended by adding a new subsection to read: 25 (j) If an applicant or claimant has an outstanding liability to the state directly 26 related to the applicant's or claimant's oil or gas exploration, development, or 27 production and the department has not previously reduced the amount paid to that 28 applicant or claimant for a certificate or refund because of that outstanding liability, 29 the department may purchase only that portion of a certificate or pay only that portion 30 of a refund that exceeds the outstanding liability. After notifying the applicant or 31 claimant, the department may apply the amount by which the department reduced its 01 purchase of a certificate or payment for a refund because of an outstanding liability to 02 satisfy the outstanding liability. Satisfaction of an outstanding liability under this 03 subsection does not affect the applicant's ability to contest that liability. The 04 department may enter into contracts or agreements with another department to which 05 the outstanding liability is owed. In this subsection, "outstanding liability" means an 06 amount of tax, interest, penalty, fee, rental, royalty, or other charge for which the state 07 has issued a demand for payment that has not been paid when due and, if contested, 08 has not been finally resolved against the state. 09  * Sec. 26. AS 43.55.160(f) is amended to read: 10 (f) On and after January 1, 2014, in the calculation of an annual production tax 11 value of a producer under (a)(1)(A) or (h)(1) of this section, the gross value at the 12 point of production of oil or gas produced from a lease or property north of 68 degrees 13 North latitude meeting one or more of the following criteria is reduced by 20 percent: 14 (1) the oil or gas is produced from a lease or property that does not contain a lease that 15 was within a unit on January 1, 2003; (2) the oil or gas is produced from a 16 participating area established after December 31, 2011, that is within a unit formed 17 under AS 38.05.180(p) before January 1, 2003, if the participating area does not 18 contain a reservoir that had previously been in a participating area established before 19 December 31, 2011; (3) the oil or gas is produced from acreage that was added to an 20 existing participating area by the Department of Natural Resources on and after 21 January 1, 2014, and the producer demonstrates to the department that the volume of 22 oil or gas produced is from acreage added to an existing participating area. This 23 subsection does not apply to gas produced before 2022 that is used in the state or to 24 gas produced on and after January 1, 2022. For oil and gas first produced from a  25 lease or property after December 31, 2016, a reduction allowed under this  26 subsection applies from the date of commencement of regular production of oil  27 and gas from that lease or property and expires after three years, consecutive or  28 nonconsecutive, in which the average annual price per barrel for Alaska North  29 Slope crude oil for sale on the United States West Coast is more than $70 or after  30 seven years, whichever occurs first. For oil and gas first produced from a lease or  31 property before January 1, 2017, a reduction allowed under this subsection  01 expires on the earlier of January 1, 2023, or January 1 following three years,  02 consecutive or nonconsecutive, in which the average annual price per barrel for  03 Alaska North Slope crude oil for sale on the United States West Coast is more  04 than $70. The Alaska Oil and Gas Conservation Commission shall determine the  05 commencement of regular production of oil and gas for purposes of this section. 06 A reduction under this subsection may not reduce the gross value at the point of 07 production below zero. In this subsection, "participating area" means a reservoir or 08 portion of a reservoir producing or contributing to production as approved by the 09 Department of Natural Resources. 10  * Sec. 27. AS 43.55.160(g) is amended to read: 11 (g) On and after January 1, 2014, in addition to the reduction under (f) of this 12 section, in the calculation of an annual production tax value of a producer under 13 (a)(1)(A) or (h)(1) of this section, the gross value at the point of production of oil or 14 gas produced from a lease or property north of 68 degrees North latitude that does not 15 contain a lease that was within a unit on January 1, 2003, is reduced by 10 percent if 16 the oil or gas is produced from a unit made up solely of leases that have a royalty 17 share of more than 12.5 percent in amount or value of the production removed or sold 18 from the lease as determined under AS 38.05.180(f). This subsection does not apply if 19 the royalty obligation for one or more of the leases in the unit has been reduced to 12.5 20 percent or less under AS 38.05.180(j) for all or part of the calendar year for which the 21 annual production tax value is calculated. This subsection does not apply to gas 22 produced before 2022 that is used in the state or to gas produced on and after 23 January 1, 2022. For oil and gas first produced from a lease or property after  24 December 31, 2016, a reduction allowed under this subsection applies from the  25 date of commencement of regular production of oil and gas from that lease or  26 property and expires after three years, consecutive or nonconsecutive, in which  27 the average annual price per barrel for Alaska North Slope crude oil for sale on  28 the United States West Coast is more than $70 or after seven years, whichever  29 occurs first. For oil and gas first produced from a lease or property before  30 January 1, 2017, a reduction allowed under this subsection expires on the earlier  31 of January 1, 2023, or January 1 following three years, consecutive or  01 nonconsecutive, in which the average annual price per barrel for Alaska North  02 Slope crude oil for sale on the United States West Coast is more than $70. The  03 Alaska Oil and Gas Conservation Commission shall determine the  04 commencement of regular production for purposes of this subsection. A reduction 05 under this subsection may not reduce the gross value at the point of production below 06 zero.  07  * Sec. 28. AS 43.55.160(h) is amended to read: 08 (h) For oil produced on and after January 1, 2022, except as provided in (b), 09 (f), and (g) of this section, for the purposes of AS 43.55.011(e)(3), the annual 10 production tax value of oil taxable under AS 43.55.011(e) produced by a producer 11 during a calendar year 12 (1) from leases or properties in the state that include land north of 68 13 degrees North latitude is the gross value at the point of production of that oil, less the 14 producer's lease expenditures under AS 43.55.165 for the calendar year incurred to 15 explore for, develop, or produce oil and gas deposits located in the state north of 68 16 degrees North latitude or located in leases or properties in the state that include land 17 north of 68 degrees North latitude, as adjusted under AS 43.55.170; 18 (2) before or during the last calendar year under AS 43.55.024(b) for 19 which the producer could take a tax credit under AS 43.55.024(a), from leases or 20 properties in the state outside the Cook Inlet sedimentary basin, no part of which is 21 north of 68 degrees North latitude, other than leases or properties subject to 22 AS 43.55.011(p), is the gross value at the point of production of that oil, less the 23 producer's lease expenditures under AS 43.55.165 for the calendar year incurred to 24 explore for, develop, or produce oil and gas deposits located in the state outside the 25 Cook Inlet sedimentary basin and south of 68 degrees North latitude, other than oil 26 and gas deposits located in a lease or property that includes land north of 68 degrees 27 North latitude or that is subject to AS 43.55.011(p) or, before January 1, 2027, from 28 which commercial production has not begun, as adjusted under AS 43.55.170; 29 (3) from leases or properties subject to AS 43.55.011(p) is the gross 30 value at the point of production of that oil, less the producer's lease expenditures under 31 AS 43.55.165 for the calendar year incurred to explore for, develop, or produce oil and 01 gas deposits located in leases or properties subject to AS 43.55.011(p) or, before 02 January 1, 2027, located in leases or properties in the state outside the Cook Inlet 03 sedimentary basin, no part of which is north of 68 degrees North latitude from which 04 commercial production has not begun, as adjusted under AS 43.55.170; 05 (4) from leases or properties in the state no part of which is north of 68 06 degrees North latitude, other than leases or properties subject to (2) or (3) of this 07 subsection, is the gross value at the point of production of that oil less the producer's 08 lease expenditures under AS 43.55.165 for the calendar year incurred to explore for, 09 develop, or produce oil and gas deposits located in the state south of 68 degrees North 10 latitude, other than oil and gas deposits located in a lease or property in the state that 11 includes land north of 68 degrees North latitude, and excluding lease expenditures that 12 are deductible under (2) or (3) of this subsection or would be deductible under (2) or 13 (3) of this subsection if not prohibited by (b) of this section, as adjusted under 14 AS 43.55.170; a separate annual production tax value shall be calculated for  15 (A) oil produced from each lease or property in the Cook  16 Inlet sedimentary basin;  17 (B) oil produced from each lease or property outside the  18 Cook Inlet sedimentary basin, no part of which is north of 68 degrees  19 North latitude, other than leases or properties subject to (3) of this  20 subsection.  21  * Sec. 29. AS 43.55.165(a) is amended to read: 22 (a) For [EXCEPT AS PROVIDED IN (j) AND (k) OF THIS SECTION, 23 FOR] purposes of this chapter, a producer's lease expenditures for a calendar year are 24 (1) costs, other than items listed in (e) of this section, that are 25 (A) incurred by the producer during the calendar year after 26 March 31, 2006, to explore for, develop, or produce oil or gas deposits located 27 within the producer's leases or properties in the state or, in the case of land in 28 which the producer does not own an operating right, operating interest, or 29 working interest, to explore for oil or gas deposits within other land in the 30 state; and 31 (B) allowed by the department by regulation, based on the 01 department's determination that the costs satisfy the following three 02 requirements: 03 (i) the costs must be incurred upstream of the point of 04 production of oil and gas; 05 (ii) the costs must be ordinary and necessary costs of 06 exploring for, developing, or producing, as applicable, oil or gas 07 deposits; and 08 (iii) the costs must be direct costs of exploring for, 09 developing, or producing, as applicable, oil or gas deposits; and 10 (2) a reasonable allowance for that calendar year, as determined under 11 regulations adopted by the department, for overhead expenses that are directly related 12 to exploring for, developing, or producing, as applicable, the oil or gas deposits. 13  * Sec. 30. AS 43.55.895(b) is amended to read: 14 (b) A municipal entity subject to taxation because of this section 15 (1) is eligible for [ALL] tax credits proportionate to its production  16 taxable under AS 43.55.011(e); and  17 (2) shall allocate its lease expenditures in proportion to its  18 production taxable under AS 43.55.011(e) [UNDER THIS CHAPTER TO THE 19 SAME EXTENT AS ANY OTHER PRODUCER]. 20 * Sec. 31. AS 43.55.900 is amended by adding a new paragraph to read: 21 (26) "regular production" has the meaning given in AS 31.05.170. 22  * Sec. 32. AS 43.70 is amended by adding new sections to read: 23 Sec. 43.70.025. Bond or cash deposit required for an oil or gas business. (a) 24 At the time of applying for a license under this chapter, an applicant engaged in the 25 business of oil or gas exploration, development, or production shall file a surety bond 26 in the amount of $250,000 running to the state, conditioned upon the applicant's 27 promise to pay all 28 (1) taxes and contributions due the state and political subdivisions; and 29 (2) persons furnishing labor or material or renting or supplying 30 equipment to the applicant. 31 (b) In lieu of the surety bond required under this section, the applicant may 01 file with the commissioner a cash deposit or other negotiable security acceptable to the 02 commissioner in the amount of $250,000. 03 (c) The bond required by this section remains in effect until cancelled by 04 action of the surety, the principal, or if the commissioner finds that the business is 05 producing oil or gas in commercial quantities, by the commissioner. 06 Sec. 43.70.028. Claims against an oil or gas business. (a) A person having a 07 claim against a person required to file a surety bond under AS 43.70.025 because of 08 the failure to pay a liability described in AS 43.70.025(a) may bring suit upon the 09 bond. A copy of the complaint shall be served by registered or certified mail on the 10 commissioner at the time suit is filed, and the commissioner shall maintain a record, 11 available for public inspection, of all suits commenced. This service on the 12 commissioner shall constitute service on the surety, and the commissioner shall 13 transmit the complaint or a copy of it to the surety within 72 hours after it is received. 14 The surety on the bond is not liable in an aggregate amount in excess of that named in 15 the bond, but if claims pending at any one time exceed the amount of the bond, the 16 claims shall be satisfied from the bond in the following order: 17 (1) material, equipment, and supplies delivered in the state; 18 (2) labor, including employee benefits; 19 (3) taxes and other amounts due to the city and borough, in that order; 20 (4) repair of public facilities; 21 (5) taxes and other amounts due to the state. 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 cancellation of the bond. 27 * Sec. 33. AS 38.05.180(i); AS 41.09.010, 41.09.020, 41.09.030, 41.09.090; 28 AS 43.20.053(j)(4); and AS 43.55.011(m) are repealed January 1, 2017. 29  * Sec. 34. AS 43.55.165(j) and 43.55.165(k) are repealed January 1, 2018. 30  * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to 31 read: 01 APPLICABILITY. (a) AS 43.20.046(e), as amended by sec. 10 of this Act, 02 AS 43.20.047(e), as amended by sec. 11 of this Act, AS 43.20.053(e), as amended by sec. 12 03 of this Act, AS 43.55.028(e), as amended by sec. 23 of this Act, and AS 43.55.028(j), as 04 amended by sec. 25 of this Act, and regulations related to a tax credit certificate purchase 05 preference for applicants with a workforce of resident workers and tax credit purchase rates, 06 adopted under AS 43.55.028(g), as amended by sec. 24 of this act, apply to a purchase applied 07 for on or after the effective date of secs. 10, 11, 12, and 23 - 25 of this Act. 08 (b) AS 43.55.011(k), as amended by sec. 14 of this Act, applies to oil produced after 09 the effective date of sec. 14 of this Act. 10  * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 TRANSITION: LEASE EXPENDITURES FOR A CALENDAR YEAR AFTER 13 2006 AND BEFORE 2010. Notwithstanding AS 43.55.165(a), as amended by sec. 29 of this 14 Act, and the repeal of AS 43.55.165(j) and (k) by sec. 34 of this Act, AS 43.55.165(j) and (k) 15 apply to a producer's total lease expenditures for a calendar year after 2006 and before 2010 16 under AS 43.55.165, as that section read on the day before the repeal of AS 43.55.165(j) and 17 (k) by sec. 34 of this Act. 18 * Sec. 37. The uncodified law of the State of Alaska is amended by adding a new section to 19 read: 20 TRANSITION: REGULATIONS. The Department of Revenue, the Department of 21 Natural Resources, the Department of Commerce, Community, and Economic Development, 22 and the Alaska Oil and Gas Conservation Commission may adopt regulations necessary to 23 implement the changes made by this Act. The regulations take effect under AS 44.62 24 (Administrative Procedure Act), but not before the effective date of the law implemented by 25 the regulation. The Department of Revenue shall adopt regulations governing the use of tax 26 credits under AS 43.55 for a calendar year for which the applicable tax credit provisions of 27 AS 43.55 differ as between parts of the year as a result of this Act. 28 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to 29 read: 30 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 31 contrary provision of AS 44.62.240, 01 (1) if the Department of Revenue expressly designates in a regulation that the 02 regulation applies retroactively, a regulation adopted by the Department of Revenue to 03 implement, interpret, make specific, or otherwise carry out this Act may apply retroactively to 04 the effective date of the law implemented by the regulation; 05 (2) if the Department of Natural Resources expressly designates in the 06 regulation that the regulation applies retroactively, a regulation adopted by the Department of 07 Natural Resources to implement, interpret, make specific, or otherwise carry out the statutory 08 amendments in this Act affecting the administration of oil and gas leases issued under 09 AS 38.05.180(f)(3)(B), (D), or (E), to the extent the regulation relates to the treatment of oil 10 and gas production taxes in determining net profits under those leases, may apply 11 retroactively to the effective date of the law implemented by the regulation. 12 * Sec. 39. Sections 22, 37, and 38 of this Act take effect immediately under 13 AS 01.10.070(c). 14  * Sec. 40. Sections 29, 34, and 36 of this Act take effect January 1, 2018. 15 * Sec. 41. Except as provided in secs. 39 and 40 of this Act, this Act takes effect January 1, 16 2017.