CSHB 393(O&G): "An Act relating to contracts with the state establishing payments in lieu of other taxes by a qualified sponsor or qualified sponsor group for projects to develop stranded gas resources in the state; providing for the inclusion in the contracts of terms making certain adjustments regarding royalty value and the timing and notice of the state's right to take royalty in kind or in value from projects to develop stranded gas resources in the state; relating to the effect of the contracts on municipal taxation; and providing for an effective date."
00CS FOR HOUSE BILL NO. 393(O&G) 01 "An Act relating to contracts with the state establishing payments in lieu of 02 other taxes by a qualified sponsor or qualified sponsor group for projects to 03 develop stranded gas resources in the state; providing for the inclusion in the 04 contracts of terms making certain adjustments regarding royalty value and the 05 timing and notice of the state's right to take royalty in kind or in value from 06 projects to develop stranded gas resources in the state; relating to the effect of 07 the contracts on municipal taxation; and providing for an effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. FINDINGS. The legislature finds that 10 (1) a vast quantity of gas in Alaska is stranded from commercial development 11 because of the cost associated with providing access to markets for that gas; on the North 12 Slope alone, between the Colville and Canning Rivers, approximately 35 trillion cubic feet of 13 discovered gas resources are stranded in this way; 14 (2) because of the high cost of providing access to markets for North Slope
01 gas, exploration efforts there have historically focused on oil; if the infrastructure needed to 02 provide market access for North Slope gas were economically available, it is possible that new 03 gas exploration efforts would be initiated that could lead to the discovery and development 04 of significantly greater gas resources than have been discovered so far; 05 (3) maintaining production operations, whether for oil, gas, or both, enhances 06 the opportunities for oil and gas exploration and development on the North Slope; 07 (4) large areas of the state, encompassing a number of geologic provinces and 08 basins, do not have oil and gas production and still remain largely unexplored for oil and gas; 09 exploration for gas in some of these areas might be facilitated if infrastructure were 10 economically available to provide access for the gas to markets; 11 (5) it is unlikely that markets will develop within the state that would need 12 more than a relatively small proportion of the volume of stranded gas already discovered on 13 the North Slope; therefore, the primary need for gas infrastructure for at least the next decade 14 will be to provide access to markets outside the state; 15 (6) currently the principal mode anticipated for stranded North Slope gas to 16 access markets outside the state is a gas pipeline to an ice-free Alaska port where the gas 17 would be turned into liquefied natural gas and exported using specially designed marine 18 tankers; 19 (7) the size of the capital expenditure needed to get North Slope gas to market 20 by way of a liquefied natural gas project requires long-term contracts for gas on the order of 21 14,000,000 metric tons a year of liquefied natural gas; to be successful, a North Slope 22 liquefied natural gas project needs to reach this full annual volume in not more than six years 23 from the commencement of commercial operations; 24 (8) for a North Slope liquefied natural gas project to become economically 25 viable and competitive, the estimated costs of constructing such a project must be reduced 26 significantly; reducing the financial risk associated with the project would also improve the 27 project's chances of becoming economically viable and competitive; 28 (9) the state has contracted an extensive financial analysis of the 29 commercialization of North Slope gas; this analysis, performed by a recognized expert in 30 petroleum economics, Dr. Pedro Van Meurs, indicates that changes in the local, state, and 31 federal tax structure may be necessary to make commercialization of North Slope gas
01 resources economically viable; 02 (10) although the state can do little now to reduce expected construction costs, 03 the state can reduce some of the financial risk associated with a North Slope liquefied natural 04 gas project or other stranded gas development projects by specifying with as much certainty 05 as possible the state taxes and royalties that would apply to such a project throughout its life; 06 (11) the state could improve the economics and competitiveness of a stranded 07 gas development project by adjusting the timing of the state's receipt of its share of the 08 economic rent of the project; the present fiscal regime is front-end loaded, which means that 09 the state and local governments take a significant part of their shares of the economic rent of 10 a project early in the life of the project, even before the project starts to generate an income 11 stream; the state and local governments could improve the economics of a stranded gas 12 development project by taking more of their shares of the economic rent of a project later in 13 the life of the project; 14 (12) the state's present fiscal regime, as it would apply to a stranded gas 15 development project, is also regressive to the extent that it is insensitive to changes in the 16 profitability of the project, so that, in times of low profitability, the state and local 17 governments would take an excessive amount of the economic rent of the project, and, in 18 times of high profitability, they would take an inadequate amount of the economic rent of a 19 project; the state and local governments could improve the economics of a stranded gas 20 development project by making the overall fiscal system less regressive and more responsive 21 to the relative profitability of a project; 22 (13) establishing a fiscal regime applicable to a specific stranded gas 23 development project under a long-term contract with the state, where payments would be made 24 in lieu of other taxes, would 25 (A) enable the state to create a fiscal regime that is less front-end 26 loaded and less regressive for a project without rewriting the tax laws for gas already 27 being developed and produced; 28 (B) enable the state to customize the timing and burden of its fiscal 29 regime to fit the economic circumstances of a particular stranded gas development 30 project; 31 (C) reduce the financial risk of the project by reducing uncertainty
01 about the fiscal terms applicable to the project; 02 (14) authorizing the state, through the executive branch, to develop a contract 03 establishing the fiscal regime that would apply to a qualified stranded gas development project 04 if it were built will result in contracts that are an exercise of the legislature's taxing power 05 that is consistent with art. IX, sec. 1, Constitution of the State of Alaska; 06 (15) authorizing the state, through the executive branch, to develop a contract 07 establishing a fiscal regime that reduces the risks and improves the economics of a stranded 08 gas development project will result in contracts that are an exercise of the legislature's power 09 under art. IX, sec. 4, Constitution of the State of Alaska, to create tax exemptions by general 10 law and is consistent with the legislature's responsibility under art. VIII, sec. 2, of the 11 Constitution of the State of Alaska, to provide for the utilization, development, and 12 conservation of all natural resources belonging to the state for the maximum benefit of its 13 people; 14 (16) stranded gas development projects are a matter of statewide interest 15 because they are an important potential source of revenue to the state, job opportunities for 16 the people of the state, and gas for use by communities throughout the state; 17 (17) to the extent permissible under the Constitution of the United States and 18 the Constitution of the State of Alaska, the legislature intends that state residents and 19 businesses share in and not be excluded from the opportunities stemming from the 20 development of the state's gas resources; and 21 (18) good faith efforts by qualified sponsors, qualified sponsor groups, and 22 contractors of qualified sponsors and qualified sponsor groups that enter into a contract with 23 the state developed under this Act to undertake voluntary actions to provide employment 24 opportunities for Alaska residents and opportunities for Alaska businesses are in the long-term 25 interests of the state. 26 * Sec. 2. INTENT. (a) The legislature intends that contracts developed under this Act 27 provide stable fiscal terms that encourage the development of stranded gas projects that 28 otherwise might not be developed under the prevailing tax and royalty regime. The legislature 29 further intends that any fiscal term agreed to in a contract developed under this Act in lieu of 30 other taxes will fully and fairly compensate the people of the state for the severance, 31 production, and sale of natural resources belonging to the people of the state, for the negative
01 effects and the risks that a project may impose on the state, and for the value of the 02 infrastructure that may be provided by the state to a project, including all the advantages of 03 civilized society that may be provided by the state to the sponsors of a project. 04 (b) The legislature intends that, in order to provide the stable fiscal terms that will 05 encourage development of stranded gas projects, any contract developed under this Act will 06 express whether the state intends to be bound to the full extent allowed by the Constitution 07 of the State of Alaska; however, the legislature further intends that the terms of a contract 08 developed under this Act will not be binding on or enforceable against the state or the other 09 parties to the contract unless the governor is authorized to execute the contract by the 10 legislature. 11 (c) The legislature intends that a qualified sponsor or qualified sponsor group or a 12 contractor of a qualified sponsor or qualified sponsor group that enters into a contract 13 developed under this Act relating to a stranded gas project will, with respect to the project, 14 voluntarily 15 (1) undertake reasonable measures to hire Alaska residents to perform work 16 that they are qualified to perform on a competitive basis; 17 (2) assist Alaska residents who are capable of being qualified and who make 18 a good faith effort to obtain the requisite training required for employment; and 19 (3) use reasonable efforts to contract with qualified Alaska businesses when 20 their performance is competitive with regard to price, quality, and availability. 21 * Sec. 3. AS 43 is amended by adding a new chapter to read: 22 Chapter 82. Development of Alaska Stranded Gas. 23 Article 1. Contracts for Payments in Lieu of Other Taxes. 24 Sec. 43.82.010. Purpose. The purpose of this chapter is to 25 (1) encourage new investment to develop the state's stranded gas 26 resources by authorizing establishment of fiscal terms related to that new investment 27 without significantly altering tax and royalty methodologies and rates on existing oil 28 and gas infrastructure and production; 29 (2) allow the fiscal terms applicable to a qualified sponsor or the 30 members of a qualified sponsor group, with respect to a qualified project, to be tailored 31 to the particular economic conditions of the project and to establish those fiscal terms
01 in advance with as much certainty as the Constitution of the State of Alaska allows; 02 and 03 (3) maximize the benefit to the people of the state of the development 04 of the state's stranded gas resources. 05 Sec. 43.82.020. Contracts for payments in lieu of other taxes and for 06 royalty adjustments. The commissioner may, under this chapter, negotiate terms for 07 inclusion in a proposed contract with a qualified sponsor or qualified sponsor group 08 providing for 09 (1) periodic payment in lieu of one or more taxes that otherwise would 10 be imposed by the state or a municipality on the qualified sponsor or members of the 11 qualified sponsor group as a consequence of the sponsor's or group's participation in 12 an approved qualified project under this chapter; and 13 (2) certain adjustments regarding royalty under AS 43.82.220. 14 Article 2. Qualification and Application Procedures. 15 Sec. 43.82.100. Qualified project. Based on information available to the 16 commissioner, the commissioner may determine that a proposal for new investment is 17 a qualified project under this chapter only if the project 18 (1) would produce at least 500,000,000,000 cubic feet of stranded gas 19 within 20 years from the commencement of commercial operations; and 20 (2) is capable, subject to applicable commercial regulation and technical 21 and economic considerations, of making gas available to meet the reasonably 22 foreseeable demand in this state for gas within the economic proximity of the project. 23 Sec. 43.82.110. Qualified sponsor or qualified sponsor group. The 24 commissioner may determine that a person or group is a qualified sponsor or qualified 25 sponsor group if the person or a member of the group 26 (1) intends to own an equity interest in a qualified project or to commit 27 gas that it owns to a qualified project; and 28 (2) meets one or more of the following criteria: 29 (A) owns a working interest in at least 10 percent of the 30 stranded gas proposed to be developed by a qualified project; 31 (B) has the right to purchase at least 10 percent of the stranded
01 gas proposed to be developed by a qualified project; 02 (C) has the right to acquire, control, or market at least 10 03 percent of the stranded gas proposed to be developed by a qualified project; 04 (D) holds the permits that the department determines are 05 essential to construct and operate a qualified project; 06 (E) has a net worth equal to at least 33 percent of the estimated 07 cost of constructing a qualified project; 08 (F) has an unused line of credit equal to at least 25 percent of 09 the estimated cost of constructing a qualified project. 10 Sec. 43.82.120. Applications. (a) A qualified sponsor or qualified sponsor 11 group may submit to the department an application for development of a contract 12 under AS 43.82.020 evidencing that the requirements of AS 43.82.100 and 43.82.110 13 are met. The application must be submitted in the manner and form and contain the 14 information required by the department. 15 (b) Along with an application submitted under (a) of this section, an applicant 16 shall submit a proposed project plan for a qualified project that contains the following 17 information based on the information known to the applicant at the time of 18 application: 19 (1) a description of the work accomplished as of the date of the 20 application to further the project; 21 (2) a schedule of proposed development activity leading to the 22 projected commencement of commercial operations of the project; 23 (3) a description of the development activity proposed to be 24 accomplished under the proposed project plan; 25 (4) a description of each lease or property that the applicant believes 26 to contain the stranded gas that would be developed if the project was built; 27 (5) a description of the methods and terms under which the applicant 28 is prepared to make gas available to meet the reasonably foreseeable demand in this 29 state for gas within the economic proximity of the project during the term of the 30 proposed contract, including proposed pipeline transportation and expansion rules if 31 pipeline transportation is a part of the proposed project;
01 (6) a detailed description of options to mitigate the increased demand 02 for public services and other negative effects caused by the project; 03 (7) a detailed description of options for the safe management and 04 operation of the project once it is constructed; 05 (8) other information that the commissioner of revenue, in consultation 06 with the commissioner of natural resources, considers necessary to make a 07 determination that 08 (A) the work accomplished as of the date of application, the 09 schedule of proposed development activity, and the development activity 10 proposed to be accomplished under the proposed project plan reflect a proposal 11 for diligent development on the part of the applicant; 12 (B) the proposed project plan does not materially conflict with 13 the obligations of a lessee to the state under a lease or under a pool, unit, or 14 other agreement with the state; and 15 (C) the proposed project plan describes satisfactory methods and 16 terms for accommodating reasonably foreseeable demand for gas in this state 17 within the economic proximity of the project during the term of the proposed 18 contract. 19 (c) The requirements of (b) of this section do not diminish the obligations of 20 a qualified sponsor or member of a qualified sponsor group to the state or restrict the 21 authority of the commissioner of revenue or the commissioner of natural resources 22 under any other law or agreement relating to a plan of development for a lease, pool, 23 or unit. 24 Sec. 43.82.130. Qualified project plan. A proposed project plan submitted 25 under AS 43.82.120 may be approved as a qualified project plan under AS 43.82.140 26 if the proposed project plan 27 (1) reflects a proposal for diligent development of the project on the 28 part of the applicant; 29 (2) does not materially conflict with the obligations of a lessee to the 30 state under a lease or under a pool, unit, or other agreement with the state; and 31 (3) describes satisfactory methods and terms for making gas available
01 to meet the reasonably foreseeable demand in this state for gas within the economic 02 proximity of the project during the term of the proposed contract. 03 Sec. 43.82.140. Review of applications and determination of qualifications. 04 (a) The commissioner shall review an application submitted under AS 43.82.120 to 05 determine whether the provisions of AS 43.82.100 concerning a qualified project and 06 AS 43.82.110 concerning a qualified sponsor or qualified sponsor group have been 07 met. The commissioner may approve an application only if those provisions have been 08 met. 09 (b) If the commissioner approves an application under (a) of this section, the 10 commissioner and the commissioner of natural resources shall review the proposed 11 project plan submitted with the application to determine whether the provisions of 12 AS 43.82.130 have been met. The commissioner may approve the proposed project 13 plan as a qualified project plan only if the commissioner of natural resources concurs 14 in the approval. 15 (c) The commissioner shall send to the applicant written notice of and the 16 reasons for the determinations made under (a) and (b) of this section. 17 Sec. 43.82.150. Actions challenging determinations on applications. (a) 18 Only an applicant under AS 43.82.120 who is aggrieved by a determination of the 19 commissioner of revenue or the commissioner of natural resources under AS 43.82.140 20 may seek judicial review of the determination. 21 (b) The only grounds for judicial review of a determination made under 22 AS 43.82.140 are 23 (1) failure to follow the qualification and application procedures set out 24 in AS 43.82.100 - 43.82.180; or 25 (2) abuse of discretion that is so capricious, arbitrary, or confiscatory 26 as to constitute a denial of due process. 27 Sec. 43.82.160. Multiple applications for similar or competing qualified 28 projects. Nothing in this chapter prohibits different qualified sponsors or different 29 qualified sponsor groups from submitting applications under AS 43.82.120 relating to 30 similar or competing qualified projects or prohibits the commissioner of revenue or the 31 commissioner of natural resources from reviewing and approving applications and
01 proposed project plans under AS 43.82.140 relating to similar or competing qualified 02 projects. 03 Sec. 43.82.170. Application deadline. The commissioner of revenue or the 04 commissioner of natural resources may not act on an application for a contract 05 submitted under AS 43.82.120 unless the application is received by the Department of 06 Revenue no later than June 30, 2001. 07 Sec. 43.82.180. Withdrawal of applications. Subject to the terms of a 08 reimbursement agreement under AS 43.82.240 or other agreement with the Department 09 of Revenue, the Department of Natural Resources, the commissioner of revenue, or the 10 commissioner of natural resources affecting the withdrawal of an application, a 11 qualified sponsor or qualified sponsor group may withdraw an application submitted 12 under AS 43.82.120 at any time before the date that the commissioner of revenue 13 submits a contract to the governor under AS 43.82.430 without further obligation under 14 this chapter. 15 Article 3. Contract Development. 16 Sec. 43.82.200. Contract development. If the commissioner approves an 17 application and proposed project plan under AS 43.82.140, the commissioner may 18 develop a contract that may include 19 (1) terms concerning periodic payment in lieu of one or more taxes as 20 provided in AS 43.82.210; 21 (2) terms developed under AS 43.82.220 relating to 22 (A) timing and notice of the state's right to take royalty in kind 23 or in value; and 24 (B) royalty value; 25 (3) terms regarding the hiring of Alaska residents and contracting with 26 Alaska businesses under AS 43.82.230; 27 (4) terms regarding periodic payment to, or an equity or other interest 28 in a project for, municipalities under AS 43.82.500; 29 (5) terms regarding arbitration or alternative dispute resolution 30 procedures; 31 (6) terms and conditions for administrative termination of a contract
01 under AS 43.82.445; and 02 (7) other terms or conditions that are 03 (A) necessary to further the purposes of this chapter; or 04 (B) in the best interests of the state. 05 Sec. 43.82.210. Contract terms relating to payment in lieu of one or more 06 taxes. (a) If the commissioner approves an application and proposed project plan 07 under AS 43.82.140, the commissioner may develop proposed terms for inclusion in 08 a contract under AS 43.82.020 for periodic payment in lieu of one or more of the 09 following taxes that otherwise would be imposed by the state or a municipality on the 10 qualified sponsor or member of a qualified sponsor group as a consequence of 11 participating in an approved qualified project: 12 (1) oil and gas production taxes and oil surcharges under AS 43.55; 13 (2) oil and gas exploration, production, and pipeline transportation 14 property taxes under AS 43.56; 15 (3) oil and gas conservation tax under AS 43.57; 16 (4) Alaska net income tax under AS 43.20; 17 (5) municipal sales and use tax under AS 29.45.650 - 29.45.710; 18 (6) municipal property tax under AS 29.45.010 - 29.45.250 or 19 29.45.550 - 29.45.600; 20 (7) municipal special assessments under AS 29.46; 21 (8) a comparable tax or levy imposed by the state or a municipality 22 after the effective date of this section; 23 (9) other state or municipal taxes or categories of taxes identified by 24 the commissioner. 25 (b) If the commissioner chooses to develop proposed terms under (a) of this 26 section, the commissioner shall, if practicable and consistent with the long-term fiscal 27 interests of the state, develop the terms in a manner that attempts to balance the 28 following principles: 29 (1) the terms should, in conjunction with other factors such as cost 30 reduction of the project, cost overrun risk reduction of the project, increased fiscal 31 certainty, and successful marketing, improve the competitiveness of the approved
01 qualified project in relation to other development efforts aimed at supplying the same 02 market; 03 (2) the terms should accommodate the interests of the state, affected 04 municipalities, and the project sponsors under a wide range of economic conditions, 05 potential project structures, and marketing arrangements; 06 (3) the state's and affected municipalities' combined share of the 07 economic rent of the approved qualified project under the contract should be relatively 08 progressive; that is, the state's and affected municipalities' combined annual share of 09 the economic rent of the approved qualified project generally should not increase when 10 there are decreases in project profitability, or decrease when there are increases in 11 project profitability; 12 (4) the state's and affected municipalities' combined share of the 13 economic rent of the approved qualified project under the contract should be relatively 14 lower in the earlier years than in the later years of the approved qualified project; 15 (5) the terms should allow the project sponsors to retain a share of the 16 economic rent of the approved qualified project that is sufficient to compensate the 17 sponsors for risks under a range of economic circumstances; 18 (6) the terms should provide the state and affected municipalities with 19 a significant share of the economic rent of the approved qualified project, when 20 discounted to present value, under favorable price and cost conditions; 21 (7) the method for calculating the periodic payment in lieu of certain 22 taxes under the contract should be clear and unambiguous; and 23 (8) while cost calculations for the approved qualified project under the 24 contract should be based on amounts that closely approximate actual costs, agreed- 25 upon formulas reflecting reasonable economic assumptions should be used if possible to 26 promote administrative certainty and efficiency. 27 (c) Except as provided in (b) of this section, the commissioner's discretion 28 under this section in developing proposed terms for a contract under AS 43.82.020 is 29 not limited to consideration of the economic rent of the approved qualified project. 30 Sec. 43.82.220. Contract terms relating to royalty. (a) Notwithstanding any 31 contrary provisions of AS 38, the commissioner of natural resources, with the
01 concurrence of the commissioner of revenue and the affected parties holding a state 02 lease or unit agreement, may develop proposed terms for inclusion in a contract under 03 AS 43.82.020 that modify the timing and notice provisions of the applicable oil and 04 gas leases and unit agreements pertaining to the state's rights to receive its royalty on 05 gas in kind or in value if 06 (1) the viability of the approved qualified project depends on long-term 07 gas purchase and sale agreements; 08 (2) certainty over time regarding the quantity of royalty gas that the 09 state may be taking in kind is needed to secure the long-term purchase and sale 10 agreements; 11 (3) the specified period of the state's commitment to take its royalty 12 share in value or in kind does not exceed the term of the purchase and sale 13 agreements; and 14 (4) the modification does not impair the ability of the approved 15 qualified project or the state to meet the reasonably foreseeable demand in this state 16 for gas within economic proximity of the project during the term of the contract 17 developed under AS 43.82.020. 18 (b) Notwithstanding any contrary provisions of AS 38, the commissioner of 19 natural resources, with the concurrence of the commissioner of revenue and the 20 affected parties holding a state lease or unit agreement, may develop proposed terms 21 for inclusion in a contract under AS 43.82.020 that establish a valuation method for 22 the state's royalty share of the gas production from an approved qualified project. 23 (c) The commissioner of revenue shall include any proposed terms relating to 24 royalty developed in accordance with this section in the proposed contract under 25 AS 43.82.400. 26 (d) Nothing in this chapter permits modification of the state's rights that relate 27 to timing, notice, and rights to receive oil royalty in kind or in value under oil and gas 28 leases or unit agreements. 29 Sec. 43.82.230. Contract terms relating to hiring of Alaska residents and 30 contracting with Alaska businesses. (a) The commissioner shall include in a 31 contract under AS 43.82.020 a term requiring the qualified sponsor or qualified
01 sponsor group and contractors of the qualified sponsor or qualified sponsor group to 02 comply with all valid federal, state, and municipal laws relating to hiring Alaska 03 residents and contracting with Alaska businesses to work in the state on the approved 04 qualified project and not to discriminate against Alaska residents or Alaska businesses. 05 Within the constraints of law, the commissioner shall also include in a contract under 06 AS 43.82.020 a term that requires the qualified sponsor or qualified sponsor group and 07 contractors of the qualified sponsor or qualified sponsor group to employ Alaska 08 residents and to contract with Alaska businesses to work in the state on the approved 09 qualified project to the extent the residents and businesses are available, competitively 10 priced, and qualified. 11 (b) The commissioner shall include in a contract under AS 43.82.020 a term 12 requiring the qualified sponsor or qualified sponsor group and contractors of the 13 qualified sponsor or qualified sponsor group to 14 (1) advertise for available positions in newspapers in the location where 15 the work is to be performed and in other publications distributed throughout the state, 16 including in rural areas; and 17 (2) use Alaska job service organizations located throughout the state 18 and not just in the location where the work is to be performed in order to notify 19 Alaskans of work opportunities on the approved qualified project. 20 (c) Subject to the voluntary agreement of the qualified sponsor, the 21 commissioner may include a term in the contract providing for incentives to encourage 22 training and hiring of Alaska residents. 23 (d) This section does not create or abridge individual rights and does not create 24 a private right of action for any person. 25 (e) For purposes of this section, 26 (1) "Alaska business" means a firm or contractor that 27 (A) has held an Alaska business license for the preceding 12 28 months; 29 (B) maintains, and has maintained for the preceding 12 months, 30 a place of business in the state that competently and professionally deals in 31 supplies, services, or construction of the nature required for the approved
01 qualified project; and 02 (C) is 03 (i) a sole proprietorship and the proprietor is an Alaska 04 resident; 05 (ii) a partnership and more than 50 percent of the 06 partnership interest is held by Alaska residents; 07 (iii) a limited liability company and more than 50 08 percent of the membership interest is held by Alaska residents; 09 (iv) a corporation that has been incorporated in the state 10 or is authorized to do business in the state; or 11 (v) a joint venture and a majority of the venturers 12 qualify as Alaska businesses under this paragraph; 13 (2) "Alaska job service organizations" means those offices maintained 14 by the state and recommended by the Department of Labor whose functions are to aid 15 the unemployed or underemployed in finding employment; 16 (3) "Alaska resident" means a natural person who 17 (A) receives a permanent fund dividend under AS 43.23; or 18 (B) has a current Alaska 19 (i) voter registration card; and 20 (ii) resident fishing, hunting, or trapping license under 21 AS 16; 22 (4) "available," as applied to an Alaska resident or Alaska business, 23 means that the resident or business is available for employment at the time required 24 and is located anywhere in the state, not just in the area of the state where the work 25 is to be performed; 26 (5) "qualified," as applied to an Alaska resident or Alaska business, 27 means that the resident or business possesses the requisite education, training, skills, 28 certification, or experience to perform the work necessary for a particular position or 29 to perform a particular service. 30 Sec. 43.82.240. Use of an independent contractor. (a) The commissioner 31 may use an independent contractor to assist in the evaluation of an application or in
01 the development of contract terms under AS 43.82.200. The commissioner may 02 condition the development of a contract under AS 43.82.020 on an agreement by the 03 applicant to reimburse the state for the expenses of an independent contractor under 04 this section. 05 (b) An independent contractor selected under this section must sign an 06 agreement regarding confidentiality and disclosures consistent with the determinations 07 made under AS 43.82.310 before the contractor may review information that is 08 determined confidential under AS 43.82.310. 09 (c) Selection of an independent contractor under this section is not subject to 10 AS 36.30 (State Procurement Code). 11 Sec. 43.82.250. Term of contract; effective date. The term of a contract 12 developed under AS 43.82.020 may be for no longer than is necessary to develop the 13 stranded gas that is subject to the contract; however, the term of the contract may not 14 exceed 35 years from the commencement of commercial operations of the approved 15 qualified project. 16 Sec. 43.82.260. Change of parties to an application or a contract; 17 assignment of interests. (a) A qualified sponsor or member of a qualified sponsor 18 group may assign an interest in or add or withdraw a party to an application under 19 AS 43.82.120 only if the commissioner has 20 (1) made a finding that the assignment, addition, or withdrawal is 21 consistent with the requirements of AS 43.82.110; and 22 (2) given prior written approval for the assignment, addition, or 23 withdrawal. 24 (b) A contract developed under this chapter may provide for the assignment 25 to or withdrawal of a qualified sponsor or member of a qualified sponsor group. 26 (c) Upon being added to an application under this section, a party becomes a 27 qualified sponsor or a member of a qualified sponsor group, as appropriate, for the 28 relevant project. 29 (d) The commissioner may not unreasonably withhold approval under (a) of 30 this section, but may condition the approval in any way reasonably necessary to protect 31 the fiscal interests of the state and to further the purposes of this chapter.
01 (e) For purposes of this section, an assignment includes a transfer of stock or 02 a partnership interest in a manner that changes control of a qualified sponsor or 03 member of a qualified sponsor group. 04 Sec. 43.82.270. Project plans and work commitments. A contract under 05 AS 43.82.020 must include the qualified project plan approved under AS 43.82.140 06 and provisions for updating the plan at reasonable intervals until the commencement 07 of commercial operations of the approved qualified project. The commissioner of 08 revenue, in consultation with the commissioner of natural resources, may, as a term 09 in a contract under AS 43.82.020, include work commitments or other obligations in 10 the contract to be accomplished before the commencement of commercial operations 11 of the approved qualified project. 12 Article 4. Requests for Information; Confidentiality; 13 Disclosure of Information. 14 Sec. 43.82.300. Requests for information. The commissioner of revenue or 15 the commissioner of natural resources may request from an applicant information that 16 the respective commissioner determines is necessary to perform the respective 17 commissioner's responsibilities under AS 43.82.140. If the application is approved 18 under AS 43.82.140, the respective commissioner shall require the successful applicant 19 to provide financial, technical, and market information regarding the qualified project 20 that the respective commissioner determines is necessary for the purpose of developing 21 contract terms for the qualified project under AS 43.82.200. If requested information 22 is not provided, the commissioner of revenue may not continue to review the 23 application under AS 43.82.140 or develop the contract under AS 43.82.200 - 24 43.82.270, as applicable. 25 Sec. 43.82.310. Disclosure of information; confidentiality. (a) An applicant 26 may request confidential treatment of information that the applicant provides under 27 AS 43.82.300 by clearly identifying the information and the reasons supporting the 28 request for confidential treatment. The commissioner of revenue or the commissioner 29 of natural resources, as appropriate, shall keep the information confidential until the 30 commissioner determines whether the requirements of (b) of this section are met. If 31 the commissioner of revenue or the commissioner of natural resources has not made
01 a determination under (b) of this section within 14 days after receiving a request for 02 confidential treatment, the request is considered denied. If the appropriate 03 commissioner determines that the information does not meet the requirements of (b) 04 of this section or if the commissioner fails to make a determination within 14 days, the 05 commissioner shall return the information and any copies of it at the request of the 06 applicant. If the commissioner of revenue or the commissioner of natural resources, 07 as appropriate, returns information under this subsection, the commissioner shall cease 08 review of the application or cease contract development under AS 43.82.200 - 09 43.82.270, as appropriate, unless the commissioner determines that the returned 10 information is unnecessary to make a determination on the application or to develop 11 contract terms under AS 43.82.200 - 43.82.270. 12 (b) If requested by the applicant, information provided to the commissioner of 13 revenue or the commissioner of natural resources under AS 43.82.300 shall be kept 14 confidential if the commissioner receiving the information determines, upon an 15 adequate showing by the applicant, that the information 16 (1) is a trade secret or other proprietary research, development, or 17 commercial information that the applicant treats as confidential; 18 (2) affects the applicant's competitive position; and 19 (3) has commercial value that may be significantly diminished by 20 public disclosure or that public disclosure is not in the long-term fiscal interests of the 21 state. 22 (c) Information determined to be confidential under (b) of this section is 23 confidential under that subsection only so long as is necessary to protect the 24 competitive position of the applicant, to prevent the significant diminution of the 25 commercial value of the information, or to protect the long-term fiscal interests of the 26 state. The commissioner of revenue or the commissioner of natural resources, as 27 appropriate, may not release information that the commissioner has previously 28 determined to be confidential under (b) of this section without providing the applicant 29 notice and an opportunity to be heard. 30 (d) Notwithstanding the limitation in (c) of this section, the Department of 31 Revenue and the Department of Natural Resources may provide to one another, to the
01 Department of Law, to the legislature, and to the Office of the Governor any 02 information provided under AS 43.82.300 relevant to the implementation of this 03 chapter or to the enforcement of state or federal laws. Information that is exchanged 04 under this subsection that was determined to be confidential under (b) of this section 05 remains confidential except as provided in (c) of this section. The portions of the 06 records and files of the Department of Revenue, the Department of Natural Resources, 07 the Department of Law, the legislature, and the Office of the Governor that reflect, 08 incorporate, or analyze information that is determined to be confidential under (b) of 09 this section are not public records except as provided in (c) of this section. 10 (e) Notwithstanding the limitation in (c) of this section, information that is 11 determined to be confidential under (b) of this section shall be disclosed on request by 12 the commissioner of revenue, the commissioner of natural resources, or the attorney 13 general to a legislator; to the legislative auditor; and, as directed by the chair or vice- 14 chair of the Legislative Budget and Audit Committee, to the director of legislative finance, 15 to the permanent employees of those divisions who are responsible for evaluating a contract 16 under AS 43.82.020, and to agents or contractors of the legislative auditor or the director of 17 legislative finance who are engaged to evaluate a contract under AS 43.82.020. Information 18 that is determined to be confidential under (b) of this section may also be disclosed by the 19 commissioner of revenue or the commissioner of natural resources to an independent 20 contractor under AS 43.82.240 or to a municipal advisory group established under 21 AS 43.82.510. Before confidential information is disclosed under this subsection, the person 22 receiving the information must sign an appropriate confidentiality agreement. 23 (f) If the commissioner of revenue chooses to develop a contract under 24 AS 43.82.020, the portions of the records and files of the Department of Revenue, the 25 Department of Natural Resources, the Department of Law, and a municipal advisory 26 group established under AS 43.82.510 that reflect, incorporate, or analyze information 27 that is relevant to the development of the position or strategy of the commissioner of 28 revenue, the commissioner of natural resources, or the attorney general with respect 29 to a particular provision that may be incorporated into the contract are not public 30 records until the commissioner of revenue gives public notice under AS 43.82.410 of 31 the commissioner's preliminary findings and determination under AS 43.82.400.
01 Nothing in this subsection 02 (1) makes a record or file of the Department of Revenue, the 03 Department of Natural Resources, or the Department of Law a public record that 04 otherwise would not be a public record under AS 09.25.100 - 09.25.220; 05 (2) affects the confidentiality provisions of (a) - (e) of this section; or 06 (3) abridges a privilege recognized under the laws of this state, whether 07 at common law or by statute or by court rule. 08 Article 5. Contract Review, Approval, and Termination. 09 Sec. 43.82.400. Preliminary findings and determination regarding the 10 contract. (a) If the commissioner develops a proposed contract under AS 43.82.200 - 11 43.82.270, the commissioner shall 12 (1) make preliminary findings and a determination that the proposed 13 contract terms are in the long-term fiscal interests of the state and further the purposes 14 of this chapter; and 15 (2) prepare a proposed contract that includes those terms and shall 16 submit the contract to the governor. 17 (b) To make the preliminary findings and determination required by (a)(1) of 18 this section, the commissioner shall compare the projected public revenue anticipated 19 from the approved qualified project with the estimated operating and capital costs of 20 the additional state and municipal services anticipated to arise from the construction 21 and operation of the approved qualified project. The commissioner shall address the 22 reasonably foreseeable effects of the proposed contract on the public revenue. 23 (c) In conjunction with the making of preliminary findings and determination 24 required by (a)(1) of this section, the commissioner shall describe the principal factors, 25 including the projected price of gas, projected production rate or volume of gas, and 26 projected recovery, development, construction, and operating costs, upon which the 27 determination made under (a)(1) of this section is based. If the commissioner has 28 previously submitted a proposed contract to the governor, the commissioner shall 29 describe any material differences between the terms of the currently proposed contract 30 and the previously proposed contract. 31 Sec. 43.82.410. Notice and comment regarding the contract. The
01 commissioner shall 02 (1) give reasonable public notice of the preliminary findings and 03 determination made under AS 43.82.400; 04 (2) make copies of the proposed contract, the commissioner's 05 preliminary findings and determination, and, to the extent the information is not 06 required to be kept confidential under AS 43.82.310, the supporting financial, 07 technical, and market data, including the work papers, analyses, and recommendations 08 of any independent contractors used under AS 43.82.240 available to the public and 09 to 10 (A) the presiding officer of each house of the legislature; 11 (B) the chairs of the finance and resources committees of the 12 legislature; and 13 (C) the chairs of the special committees on oil and gas, if any, 14 of the legislature; 15 (3) offer to appear before the Legislative Budget and Audit Committee 16 to provide the committee a review of the commissioner's preliminary findings and 17 determination, the proposed contract, and the supporting financial, technical, and 18 market data; if the Legislative Budget and Audit Committee accepts the commissioner's 19 offer, the committee shall give notice of the committee's meeting to the public and all 20 members of the legislature; if the financial, technical, and market data that is to be 21 provided must be kept confidential under AS 43.82.310, the commissioner may not 22 release the confidential information during a public portion of a committee meeting; 23 and 24 (4) establish a period of at least 30 days for the public and members 25 of the legislature to comment on the proposed contract and the preliminary findings 26 and determination made under AS 43.82.400. 27 Sec. 43.82.420. Coordination of public and legislative review. To the extent 28 practicable, the commissioner shall coordinate the public comment opportunity 29 provided under AS 43.82.410(4) with a review by the Legislative Budget and Audit 30 Committee under AS 43.82.410(3). 31 Sec. 43.82.430. Final findings, determination, and proposed amendments;
01 execution of the contract. (a) Within 30 days after the close of the public comment 02 period under AS 43.82.410(4), the commissioner of revenue shall 03 (1) prepare a summary of the public comments received in response to 04 the proposed contract and the preliminary findings and determination; 05 (2) after consultation with the commissioner of natural resources, if 06 appropriate, and with the pertinent municipal advisory group established under 07 AS 43.82.510, prepare a list of proposed amendments, if any, to the proposed contract 08 that the commissioner of revenue determines are necessary to respond to public 09 comments; 10 (3) make final findings and a determination as to whether the proposed 11 contract and any proposed amendments prepared under (2) of this subsection meet the 12 requirements and purposes of this chapter. 13 (b) After considering the material described in (a) of this section and securing 14 the agreement of the other parties to the proposed contract regarding any proposed 15 amendments prepared under (a) of this section, if the commissioner determines that the 16 contract is in the long-term fiscal interests of the state, the commissioner shall submit 17 the contract to the governor. 18 (c) The commissioner's final findings and determination under (a) of this 19 section are final agency decisions under this chapter. 20 Sec. 43.82.435. Legislative authorization. The governor may transmit a 21 contract developed under this chapter to the legislature together with a request for 22 authorization to execute the contract. A contract developed under this chapter is not 23 binding upon or enforceable against the state or other parties to the contract unless the 24 governor is authorized to execute the contract by law. The state and the other parties 25 to the contract may execute the contract within 60 days after the effective date of the 26 law authorizing the contract. 27 Sec. 43.82.440. Judicial review. A person may not bring an action 28 challenging the constitutionality of a law authorizing a contract enacted under 29 AS 43.82.435 or the enforceability of a contract executed under a law authorizing a 30 contract enacted under AS 43.82.435 unless the action is commenced within 120 days 31 after the date that the contract was executed by the state and the other parties to the
01 contract. 02 Sec. 43.82.445. Administrative termination of a contract. (a) The 03 commissioner shall include terms in a contract developed under AS 43.82.020 that 04 provide for administrative termination of a party's rights under the procedures and 05 conditions set out in this section if the party has 06 (1) ceased to meet the requirements of AS 43.82.110 as a qualified 07 sponsor or qualified sponsor group; 08 (2) intentionally or fraudulently misrepresented, in whole or in part, 09 material facts or circumstances upon which the contract was made; 10 (3) failed to comply with a condition or material term of the contract 11 or a provision of this chapter; or 12 (4) failed to comply with the approved qualified project plan or any 13 updated project plan. 14 (b) Before administrative termination of a contract under this section, the 15 commissioner shall give notice to the parties of the commissioner's intent to terminate 16 the contract and an opportunity to be heard. The commissioner may also provide the 17 parties an opportunity to cure any deficiency that is the basis for the termination if the 18 commissioner determines that curing the deficiency is appropriate under the 19 circumstances. 20 (c) Notwithstanding (a) and (b) of this section, the commissioner may not 21 administratively terminate a contract after the party has committed full project funding 22 except as provided in (e) of this section. 23 (d) A party to a contract who is affected by the commissioner's action to 24 terminate under (a) of this section may file an appeal with the superior court under the 25 Alaska Rules of Appellate Procedure. 26 (e) The commissioner may provide terms and conditions in a contract 27 developed under AS 43.82.020 upon which a party's rights under the contract may be 28 administratively terminated after the party commits full project funding. 29 Article 6. Municipal Participation. 30 Sec. 43.82.500. Obligation to share payments with municipalities. If the 31 commissioner develops a contract under AS 43.82.020 that includes terms that exempt
01 a party to the contract, and the property, gas, products, and activities associated with 02 the approved qualified project that is subject to the contract, from a municipal tax or 03 assessment in accordance with AS 29.45.810 or AS 29.46.010(b), or AS 43.82.200 and 04 43.82.210, the commissioner shall include a term in the contract that the party pay a 05 portion of the periodic payments due under the contract to the revenue-affected 06 municipality. 07 Sec. 43.82.505. Payments to economically affected municipalities. If the 08 commissioner executes a contract under AS 43.82.020 that will produce one or more 09 economically affected municipalities, the commissioner shall include a term in the 10 contract that provides for a portion of the periodic payments to the economically 11 affected municipalities under the principles in AS 43.82.520. 12 Sec. 43.82.510. Municipal advisory group. (a) If the commissioner approves 13 an application and proposed project plan under AS 43.82.140 and decides to develop 14 a contract under AS 43.82.020 and 43.82.200, the commissioner shall notify each 15 revenue-affected municipality and economically affected municipality. 16 (b) The mayor of a municipality notified by the commissioner under (a) of this 17 section may appoint one representative to a municipal advisory group in relation to the 18 application. 19 (c) Each municipal advisory group serves until a final action is taken on the 20 application for which the group was appointed. 21 (d) Each municipal advisory group shall elect a chair. 22 Sec. 43.82.520. Duties of the commissioner of revenue in relation to 23 municipal participation. (a) The commissioner shall meet with each municipal 24 advisory group periodically to report on the development of the contract provisions that 25 affect the municipalities. 26 (b) In developing a contract under AS 43.82.200 - 43.82.270, the commissioner 27 shall ensure that each revenue-affected municipality and economically affected 28 municipality receives a fair and reasonable share of the payments provided under 29 AS 43.82.210 in accordance with the following principles: 30 (1) the share of the payments to revenue-affected municipalities should 31 be given priority over payments to economically affected municipalities with due
01 regard to the anticipated size of the tax base that the contract would exempt from 02 municipal taxation by revenue-affected municipalities; 03 (2) the share of the payments to municipalities should be determined 04 with due regard to the anticipated economic and social burdens that would be imposed 05 on the municipality by construction and operation of the project; 06 (3) the respective shares of the total payments to the state and to 07 municipalities should be fixed in a manner to ensure that their respective interests are 08 aligned; 09 (4) to the extent practicable, the periodic amounts paid to each of the 10 municipalities should be stable and predictable; and 11 (5) to the extent practicable, the provisions for sharing payments with 12 municipalities should be consistent with the principles established in AS 43.82.210(b). 13 (c) In establishing the municipal shares under (b) of this section, the 14 commissioner shall consult with the pertinent municipal advisory group. 15 Article 7. Miscellaneous Provisions. 16 Sec. 43.82.600. Governing law. If a provision of this chapter conflicts with 17 another provision of state or municipal law, the provision of this chapter governs. 18 Sec. 43.82.610. Regulations. The commissioner of revenue, the commissioner 19 of natural resources, and the commissioner of labor may adopt regulations to carry out 20 their respective duties under this chapter. 21 Sec. 43.82.620. Procedures for collection of amounts due; security. (a) 22 The commissioner may adopt procedures for the collection of amounts due the state 23 under a contract developed under AS 43.82.020, including the collection of interest and 24 penalties. 25 (b) The commissioner may require a party to a contract developed under 26 AS 43.82.020 to provide security sufficient to guarantee amounts due under the 27 contract. 28 Sec. 43.82.630. Reports and audits. The commissioner may require periodic 29 reports from and may at reasonable intervals conduct audits and inspect the books of 30 a party that has entered into a contract developed under AS 43.82.020 to ensure 31 compliance with the provisions of this chapter and the regulations adopted under this
01 chapter and of the terms of the contract. 02 Sec. 43.82.640. Annual report of the commissioner of labor. On an annual 03 basis, the commissioner of labor shall prepare and present to the legislature a 04 comprehensive report on each party to a contract with the state developed under 05 AS 43.82.020, and its contractors, regarding the state residency of the employees 06 working in this state on the approved qualified project that is subject to the contract. 07 The commissioner of labor shall use state databases, including data from the quarterly 08 reports by a party to the contract developed under AS 43.82.020 and its contractors for 09 unemployment insurance purposes, to determine state residency of employees regarding 10 compliance with AS 43.82.230. 11 Article 8. General Provisions. 12 Sec. 43.82.900. Definitions. In this chapter, unless the context requires 13 otherwise, 14 (1) "affected municipality" means an economically affected 15 municipality or a revenue-affected municipality; 16 (2) "commencement of commercial operations" means the start of 17 regular deliveries of marketable products from an approved qualified project; 18 (3) "cubic foot of gas" means the quantity of gas contained in a volume 19 of one cubic foot at a standard temperature of 60 degrees Fahrenheit and a standard 20 absolute pressure of 14.65 pounds per square inch; 21 (4) "economically affected municipality" means a municipality the 22 commissioner of revenue determines will be reasonably required to provide additional 23 public services under the terms proposed in an application approved under 24 AS 43.82.140(a); the commissioner may consider historical data from construction of 25 the Trans Alaska Pipeline System, and information submitted by a municipality in 26 making the determination; 27 (5) "economic proximity" means the distance within which a person 28 may be willing to design, construct, and operate a gas line to provide service to a local 29 consumer; 30 (6) "economic rent" means the estimated total gross revenue less 31 estimated total costs for a qualified project over the term of a contract under
01 AS 43.82.020, measured in undiscounted nominal dollars; for purposes of this 02 paragraph, total costs do not include a rate of return on capital, financing costs, or any 03 payments to governments; 04 (7) "full project funding" means full approval by a party to a contract 05 under AS 43.82.020 for the expenditure of the capital necessary for construction and 06 operation of the approved qualified project that is subject to the contract; 07 (8) "gas" has the meaning given in AS 43.55.900; 08 (9) "group" means two or more persons; 09 (10) "lease or property" has the meaning given in AS 43.55.900; 10 (11) "periodic payment" means payment made in lieu of one or more 11 other taxes under a contract under AS 43.82.020; 12 (12) "revenue-affected municipality" means a municipality that the 13 commissioner of revenue reliably expects will be restricted from imposing a tax, or a 14 portion of a tax, as a result of implementation of a contract developed under this 15 chapter; 16 (13) "stranded gas" means gas that is not being marketed due to 17 prevailing costs or price conditions as determined by an economic analysis by the 18 commissioner for a particular project. 19 Sec. 43.82.990. Short title. This chapter may be cited as the Alaska Stranded 20 Gas Development Act. 21 * Sec. 4. AS 29.10.200 is amended by adding new paragraphs to read: 22 (54) AS 29.45.810 (exemption from municipal taxation); 23 (55) AS 29.46.010(b) (exemption from municipal assessment). 24 * Sec. 5. AS 29.45 is amended by adding a new section to read: 25 Sec. 29.45.810. Exemption from municipal taxation. (a) A party to a 26 contract approved by the legislature as a result of submission of a proposed contract 27 developed under AS 43.82, and the property, gas, products, and activities associated 28 with the approved qualified project that is subject to the contract, are exempt, as 29 specified in the contract, from all taxes identified in the contract that would be levied 30 and collected by a municipality under state law as a consequence of the participation 31 by the party in the approved qualified project.
01 (b) This section applies to home rule and general law municipalities. 02 * Sec. 6. AS 29.46.010 is amended by adding a new subsection to read: 03 (b) Notwithstanding (a) of this section, a party to a contract approved by the 04 legislature as a result of submission of a proposed contract developed under AS 43.82 05 is exempt, as specified in the contract, from assessment under this chapter against real 06 property associated with the approved qualified project that is subject to the contract. 07 * Sec. 7. AS 36.30.850(b) is amended by adding a new paragraph to read: 08 (38) contracts between the commissioner of revenue and an independent 09 contractor under AS 43.82.240. 10 * Sec. 8. AS 43.20.072 is amended by adding a new subsection to read: 11 (h) A taxpayer that has signed a contract approved by the legislature as a result 12 of submission of a proposed contract developed under AS 43.82 providing for 13 payments in lieu of the tax under this chapter and that has nexus with the state solely 14 as the result of the taxpayer's participation in the approved qualified project that is 15 subject to the contract or would not, but for such participation, be engaged in the 16 production of oil or gas from a lease or property in this state or engaged in the 17 transportation of oil or gas by pipeline in this state, is not required to file a return 18 under this section unless required to do so by the contract. 19 * Sec. 9. AS 43.20.073 is amended by adding a new subsection to read: 20 (h) A corporation that has signed a contract approved by the legislature as a 21 result of submission of a proposed contract developed under AS 43.82 providing for 22 payments in lieu of the tax under this chapter and that has nexus with the state solely 23 as the result of the corporation's participation in the approved qualified project that is 24 subject to the contract is not required to file a return under this section unless required 25 to do so by the contract. 26 * Sec. 10. SEVERABILITY. Under AS 01.10.030, if any provision of this Act, or the 27 application of a provision of this Act to any person or circumstance, is held invalid, the 28 remainder of this Act and the application to other persons or circumstances is not affected. 29 * Sec. 11. This Act takes effect immediately under AS 01.10.070(c).