SB 288: "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 such 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 such projects; relating to the effect of such contracts on municipal taxation; and providing for an effective date."
00SENATE BILL NO. 288 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 such 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 such projects; relating to the effect of such contracts on municipal taxation; and 07 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, which 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) on the North Slope, in the absence of an economic development 08 opportunity, gas produced along with oil has been used for pressure maintenance and enhanced 09 oil recovery, resulting in greater ultimate hydrocarbon recovery and higher rates of oil 10 production, to the benefit of the people of Alaska; 11 (5) in the Cook Inlet area, which is Alaska's other currently producing oil and 12 gas area, oil and gas exploration and development activities historically also have focused 13 more on oil than gas, although there has been a relatively greater degree of exploration for and 14 commercial development of gas in the Cook Inlet area than there has been on the North Slope; 15 (6) large areas of Alaska, encompassing a number of geologic provinces and 16 basins, do not have oil and gas production and still remain largely unexplored for oil and gas; 17 exploration for gas in some of these areas might be facilitated if infrastructure was 18 economically available to provide access for such gas to markets; 19 (7) it is unlikely that markets will develop within Alaska that would need more 20 than a relatively small proportion of the volume of stranded gas already discovered on the 21 North Slope; therefore, the primary need for gas infrastructure for at least the next decade will 22 be to provide access to markets outside the state; 23 (8) although developing technology may offer other alternatives, such as gas- 24 to-liquids (GTL), currently the principal mode anticipated for stranded North Slope gas to 25 access markets outside the state is a gas pipeline to an ice-free Alaska port where the gas 26 would be turned into liquefied natural gas (LNG) and exported using specially designed 27 marine tankers; 28 (9) the gas pipeline required by a North Slope LNG project would be 800 29 miles long and expensive, with some estimates placing the construction cost for the project 30 as a whole as high as $15 billion; at that cost, given the prevailing price levels in the East 31 Asian LNG market and the fact that most of the pipeline system costs must be incurred before
01 any gas is delivered to that market, the project is not economic; 02 (10) in addition, the size of the capital expenditure needed to get North Slope 03 gas to market via an LNG project requires long-term contracts for an enormous volume of gas, 04 on the order of 14 million metric tons per year of LNG; that volume of gas represents 05 approximately one-quarter of the entire East Asian LNG market today and probably cannot 06 be placed into that market all at once; to be successful, a North Slope LNG project needs to 07 reach this full annual volume in not more than six years from the commencement of 08 commercial operations (the "ramp up" period), which means that the project must secure most, 09 if not all, of the projected growth in demand for LNG in the East Asian market over the ramp 10 up period; 11 (11) for a North Slope LNG project to become economically viable and 12 competitive, the estimated costs of constructing such a project must be reduced significantly; 13 reducing the financial risk associated with the project would also improve its chances of 14 becoming economically viable and competitive; 15 (12) although the state can do little now to reduce expected construction costs, 16 the state can reduce some of the financial risk associated with a North Slope LNG project, or 17 other stranded gas development projects, by specifying with as much certainty as possible the 18 state taxes and royalties that would apply to such a project throughout its life; 19 (13) the state may also improve a stranded gas development project's 20 economics and competitiveness by adjusting the timing of the state's receipt of its share of 21 such a project's economic rent; for example, Alaska's present fiscal regime is "front-end 22 loaded," which means that the state and local governments take a significant part of their share 23 of a project's economic rent early in the project's life, even before such a project starts to 24 generate an income stream; the state and local governments may improve the economics of 25 a stranded gas development project by taking more of their share of a project's economic rent 26 later in the project's life; 27 (14) the state's present fiscal regime, as it would apply to a stranded gas 28 development project, also is regressive to the extent that it is insensitive to changes in a 29 project's profitability, so that in times of low profitability the state and local governments may 30 take an excessive amount of a project's economic rent, and in times of high profitability they 31 may take an inadequate amount of a project's economic rent; the state and local governments
01 may improve the economics of a stranded gas development project by making the overall 02 fiscal system less regressive and more responsive to the relative profitability of a project; 03 (15) establishing a fiscal regime applicable to a specific stranded gas 04 development project under a long-term contract with the state, where payments would be made 05 in lieu of other taxes, would enable the state to create a less "front-end loaded" and less 06 regressive fiscal regime for a project without rewriting the tax laws for gas already being 07 developed and produced; it would also enable the state to customize the timing and burden 08 of its fiscal regime to fit the economic circumstances of a particular stranded gas development 09 project; finally, it would reduce the financial risk of such a project by reducing uncertainty 10 about the fiscal terms applicable to the project; 11 (16) authorizing the state, through the executive branch, to enter into a contract 12 establishing the fiscal regime that would apply to a qualified project if it was built is an 13 exercise of the legislature's taxing power that is consistent with art. IX, sec. 1, of the 14 Constitution of the State of Alaska; 15 (17) authorizing the state, through the executive branch, to enter into a contract 16 establishing a fiscal regime that reduces the risks and improves the economics of a stranded 17 gas development project is an exercise of the legislature's power under art. IX, sec. 4, of the 18 Constitution of the State of Alaska to create tax exemptions by general law and is consistent 19 with the legislature's responsibility under art. VIII, sec. 2, of the Constitution of the State of 20 Alaska to provide for the utilization, development, and conservation of all natural resources 21 belonging to the state for the maximum benefit of its people; 22 (18) stranded gas development projects are a matter of statewide interest 23 because they are an important potential source of revenue to the state, job opportunities for 24 the people of the state, and gas for use by communities throughout the state; 25 (19) to the extent permissible under the United States Constitution and the 26 Constitution of the State of Alaska, the legislature intends that state residents and businesses 27 share in, and not be excluded from, the opportunities stemming from the development of the 28 state's gas resources; and 29 (20) good faith efforts by qualified sponsors and qualified sponsor groups that 30 have entered into a contract with the state under this Act, and their contractors, to undertake 31 voluntary actions to achieve employment of Alaska residents and Alaska businesses are in the
01 long-term interests of the state. 02 * Sec. 2. INTENT. (a) The legislature intends that contracts entered into under this Act 03 provide stable fiscal terms that encourage the development of stranded gas projects that 04 otherwise might not be developed under the prevailing tax and royalty regime. The legislature 05 further intends, however, that any fiscal terms agreed to in a contract under this Act in lieu 06 of other taxes will fully and fairly compensate the people of the State of Alaska for the 07 severance, production, and sale of natural resources belonging to the people of the state, the 08 negative effects and risks that a project may impose upon the state, and the value of the 09 infrastructure that may be provided by the state to a project, including all the advantages of 10 civilized society that may be provided by the state to the sponsors of a project. 11 (b) The legislature intends that a qualified sponsor or qualified sponsor group that 12 enters into a contract relating to a stranded gas project under this Act, and its contractors, will, 13 with respect to the project, voluntarily 14 (1) undertake reasonable measures to hire Alaska residents to perform work 15 that they are qualified to perform on a competitive basis; 16 (2) assist Alaska residents who are capable of being qualified and who make 17 a good faith effort to obtain the requisite training required for employment; and 18 (3) use reasonable efforts to contract with qualified Alaska businesses 19 whenever their performance is competitive with regard to price, quality, and availability. 20 * Sec. 3. AS 43 is amended by adding a new chapter to read: 21 Chapter 82. Development of Alaska Stranded Gas. 22 Article 1. Contracts for Payments in Lieu of Other Taxes. 23 Sec. 43.82.010. Purpose. The purpose of this chapter is to 24 (1) encourage new investment to develop the state's stranded gas 25 resources by authorizing establishment of fiscal terms related to that new investment 26 without significantly altering tax and royalty methodologies and rates upon existing oil 27 and gas infrastructure and production; 28 (2) allow the fiscal terms applicable to a qualified sponsor or the 29 members of a qualified sponsor group, with respect to a qualified project, to be tailored 30 to the project's particular economic conditions and to establish those fiscal terms in 31 advance and with as much certainty as the Constitution of the State of Alaska allows;
01 and 02 (3) maximize the benefit to the people of the state of the development 03 of the state's stranded gas. 04 Sec. 43.82.020. Contracts for payments in lieu of other taxes and for 05 royalty adjustments. The commissioner may, under this chapter, enter into a contract 06 with a qualified sponsor or qualified sponsor group providing for (1) periodic payment 07 in lieu of one or more taxes that otherwise would be imposed by the state or a 08 municipality upon the qualified sponsor or members of the qualified sponsor group as 09 a consequence of the sponsor's or group's participation in an approved qualified 10 project under this chapter; and (2) certain adjustments regarding royalty under 11 AS 43.82.220. 12 Article 2. Qualification and Application Procedures. 13 Sec. 43.82.100. Qualified project. Based on information available to the 14 commissioner, the commissioner may determine that a proposal for new investment is 15 a qualified project under this chapter only if the project 16 (1) would produce at least 500 billion cubic feet of stranded gas within 17 20 years from the commencement of commercial operations; and 18 (2) is capable, subject to applicable commercial regulation and technical 19 and economic considerations, of making gas available to meet reasonably foreseeable 20 demand in this state for gas within proximity of the project. 21 Sec. 43.82.110. Qualified sponsor or qualified sponsor group. The 22 commissioner may determine that a person or group is a qualified sponsor or qualified 23 sponsor group if the person or a member of the group 24 (1) intends to own an equity interest in a qualified project or commit 25 gas that it owns to a qualified project; and 26 (2) meets one or more of the following criteria: 27 (A) owns a working interest in at least 10 percent of the 28 stranded gas proposed to be developed by a qualified project; 29 (B) has the right to purchase at least 10 percent of the stranded 30 gas proposed to be developed by a qualified project; 31 (C) has the right to acquire, control, or market at least 10
01 percent of the stranded gas proposed to be developed by a qualified project; 02 (D) holds the permits that the department determines are 03 essential to construct and operate a qualified project; 04 (E) has a net worth equal to at least 33 percent of the estimated 05 cost of constructing a qualified project; 06 (F) has an unused line of credit equal to at least 25 percent of 07 the estimated cost of constructing a qualified project. 08 Sec. 43.82.120. Applications. (a) A qualified sponsor or qualified sponsor 09 group may submit to the department an application for a contract under AS 43.82.020 10 evidencing that the requirements of AS 43.82.100 - 43.82.110 are met. The application 11 must be submitted in the manner and form, and contain the information, required by 12 the department. 13 (b) Along with an application submitted under (a) of this section, an applicant 14 shall submit a proposed project plan for a qualified project that contains the following 15 information based upon the information known to the applicant at the time of 16 application: 17 (1) a description of the work accomplished as of the date of the 18 application to further the project; 19 (2) a schedule of proposed development activity leading to the 20 projected commencement of commercial operations of the project; 21 (3) a description of the development activity proposed to be 22 accomplished under the proposed project plan; 23 (4) a description of each lease or property that the applicant believes 24 to contain the stranded gas that would be developed if the project was built; 25 (5) a description of the methods and terms under which the applicant 26 is prepared to make gas available to meet reasonably foreseeable demand in this state 27 for gas within proximity of the project during the term of the proposed contract, 28 including proposed pipeline transportation and expansion rules if pipeline transportation 29 is a part of the proposed project; 30 (6) other information that the commissioner of revenue, in consultation 31 with the commissioner of natural resources, considers necessary to make a
01 determination that 02 (A) the work accomplished as of the date of application, the 03 schedule of proposed development activity, and the development activity 04 proposed to be accomplished under the proposed project plan reflect a proposal 05 for diligent development on the part of the applicant; 06 (B) the proposed project plan does not materially conflict with 07 the obligations of a lessee to the state under a lease or under a pool, unit, or 08 other agreement with the state; and 09 (C) the proposed project plan describes satisfactory methods and 10 terms for accommodating reasonably foreseeable demand for gas in this state 11 within proximity of the project during the term of the proposed contract. 12 (c) The requirements of (b) of this section do not diminish the obligations of 13 a qualified sponsor or member of a qualified sponsor group to the state, or restrict the 14 authority of the commissioner of revenue or the commissioner of natural resources, 15 under any other law or agreement relating to a plan of development for a lease, pool, 16 or unit. 17 Sec. 43.82.130. Qualified project plan. A proposed project plan submitted 18 under AS 43.82.120 may be approved as a qualified project plan under AS 43.82.140 19 if the proposed project plan 20 (1) reflects a proposal for diligent development of the project on the 21 part of the applicant; 22 (2) does not materially conflict with the obligations of a lessee to the 23 state under a lease or under a pool, unit, or other agreement with the state; and 24 (3) describes satisfactory methods and terms for making gas available 25 to meet reasonably foreseeable demand in this state for gas within the proximity of the 26 project during the term of the proposed contract. 27 Sec. 43.82.140. Review of applications and determination of qualifications. 28 (a) The commissioner of revenue shall review an application submitted under 29 AS 43.82.120 to determine whether the provisions of AS 43.82.100 concerning a 30 qualified project and AS 43.82.110 concerning a qualified sponsor or qualified sponsor 31 group have been met. The commissioner of revenue may approve an application only
01 if those provisions have been met. 02 (b) If the commissioner of revenue approves an application under (a) of this 03 section, the commissioner of revenue and the commissioner of natural resources shall 04 review the proposed project plan submitted with the application to determine whether 05 the provisions of AS 43.82.130 have been met. The commissioner of revenue may 06 approve the proposed project plan as a qualified project plan only if the commissioner 07 of natural resources concurs in the approval. 08 (c) The commissioner of revenue shall send to the applicant written notice of 09 and the reasons for the determinations made under (a) and (b) of this section. 10 Sec. 43.82.150. Actions challenging determinations on applications. (a) 11 Only an applicant under AS 43.82.120 who is aggrieved by a determination of the 12 commissioner of revenue or the commissioner of natural resources under AS 43.82.140 13 has standing to seek judicial review of the determination. 14 (b) The only grounds for judicial review of a determination made under 15 AS 43.82.140 are 16 (1) failure to follow the qualification and application procedures set out 17 in AS 43.82.100 - 43.82.180; or 18 (2) abuse of discretion that is so capricious, arbitrary, or confiscatory 19 as to constitute a denial of due process. 20 Sec. 43.82.160. Multiple applications for similar or competing qualified 21 projects. Nothing in this chapter prohibits different qualified sponsors or different 22 qualified sponsor groups from submitting applications under AS 43.82.120 relating to 23 similar or competing qualified projects, or prohibits the commissioner of revenue or 24 the commissioner of natural resources from reviewing and approving applications and 25 proposed project plans under AS 43.82.140 relating to similar or competing qualified 26 projects. 27 Sec. 43.82.170. Application deadline. The commissioner of revenue or the 28 commissioner of natural resources may not act on an application for a contract 29 submitted under AS 43.82.120 unless the application is received by the Department of 30 Revenue no later than June 30, 2004. 31 Sec. 43.82.180. Withdrawal of applications. Subject to the terms of a
01 reimbursement agreement under AS 43.82.240 or other agreement with the Department 02 of Revenue, the Department of Natural Resources, the commissioner of revenue, or the 03 commissioner of natural resources affecting the withdrawal of an application, a 04 qualified sponsor or qualified sponsor group may withdraw an application submitted 05 under AS 43.82.120 at any time before the date that the commissioner of revenue 06 enters into a contract under AS 43.82.430 without further obligation under this chapter. 07 Article 3. Contract Development. 08 Sec. 43.82.200. Contract development. If the commissioner of revenue 09 approves an application and proposed project plan under AS 43.82.140, the 10 commissioner may develop a contract under AS 43.82.020 that may include 11 (1) terms concerning periodic payment in lieu of one or more taxes as 12 provided in AS 43.82.210; 13 (2) terms developed under AS 43.82.220 relating to 14 (A) timing and notice of the state's right to take royalty in kind 15 or in value; or 16 (B) royalty value; 17 (3) terms regarding Alaska hire and Alaska contracting under 18 AS 43.82.230; 19 (4) terms regarding periodic payment to, or an equity or other interest 20 in a project for, municipalities under AS 43.82.500; 21 (5) terms regarding arbitration or alternative dispute resolution 22 procedures; 23 (6) terms and conditions for administrative termination of a contract 24 under AS 43.82.440; and 25 (7) other terms or conditions that are 26 (A) necessary to further the purposes of this chapter; or 27 (B) in the best interests of the state. 28 Sec. 43.82.210. Contract terms relating to payment in lieu of one or more 29 taxes. (a) If the commissioner of revenue approves an application and proposed 30 project plan under AS 43.82.140, the commissioner may develop proposed terms, for 31 inclusion in a contract under AS 43.82.020, for periodic payment in lieu of one or
01 more of the following taxes that otherwise would be imposed by the state or a 02 municipality upon the qualified sponsor or a member of the qualified sponsor group 03 as a consequence of participating in an approved qualified project: 04 (1) oil and gas production taxes and oil surcharges under AS 43.55; 05 (2) oil and gas exploration, production, and pipeline transportation 06 property taxes under AS 43.56; 07 (3) oil and gas conservation tax under AS 43.57; 08 (4) Alaska net income tax under AS 43.20; 09 (5) municipal sales and use tax under AS 29.45.650 - 29.45.680 or 10 29.45.700 - 29.45.710; 11 (6) municipal property tax under AS 29.45.010 - 29.45.250 or 12 29.45.550 - 29.45.600; 13 (7) municipal special assessments under AS 29.46; 14 (8) a comparable tax or levy imposed by the state or a municipality 15 after the effective date of this bill section; 16 (9) other state or municipal taxes or categories of taxes identified by 17 the commissioner. 18 (b) If the commissioner chooses to develop proposed terms under (a) of this 19 section, the commissioner shall, if practicable and consistent with the long-term fiscal 20 interests of the state, develop the terms in a manner that attempts to balance the 21 following principles: 22 (1) the terms should, in conjunction with other factors such as cost 23 reduction of the project, cost overrun risk reduction of the project, and increased fiscal 24 certainty and successful marketing, improve the competitiveness of the approved 25 qualified project in relation to other development efforts aimed at supplying the same 26 market; 27 (2) the terms should accommodate the interests of the state, the affected 28 municipalities, and the project sponsors under a wide range of economic conditions, 29 potential project structures, and marketing arrangements; 30 (3) the state's and affected municipalities' combined share of the 31 approved qualified project's economic rent under the contract should be relatively
01 progressive; that is, the state's and affected municipalities' combined annual share of 02 the approved qualified project's economic rent generally should not increase when 03 there are decreases in project profitability, or decrease when there are increases in 04 project profitability; 05 (4) the state's and affected municipalities' combined share of the 06 approved qualified project's economic rent under the contract should be relatively 07 lower in the earlier years than in the later years of the approved qualified project; 08 (5) the terms should allow the project sponsors to retain a share of the 09 approved qualified project's economic rent that is sufficient to compensate the sponsors 10 for risks under a range of economic circumstances; 11 (6) the terms should provide the state and affected municipalities with 12 a significant share of the approved qualified project's economic rent, when discounted 13 to present value, under favorable price and cost conditions; 14 (7) the method for calculating the periodic payment in lieu of certain 15 taxes under the contract should be clear and unambiguous; and 16 (8) while cost calculations for the approved qualified project under the 17 contract should be based on amounts that closely approximate actual costs, agreed- 18 upon formulas reflecting reasonable economic assumptions should be used if possible to 19 promote administrative certainty and efficiency. 20 (c) Except as provided in (b) of this section, the commissioner's discretion 21 under this section in developing proposed terms for a contract under AS 43.82.020 is 22 not limited to consideration of the approved qualified project's economic rent. 23 Sec. 43.82.220. Contract terms relating to royalty. (a) Notwithstanding any 24 contrary provisions of AS 38, the commissioner of natural resources, with the 25 concurrence of the commissioner of revenue and the affected parties holding a state 26 lease or unit agreement, may develop proposed terms, for inclusion in a contract under 27 AS 43.82.020, that modify the timing and notice provisions of the applicable oil and 28 gas leases and unit agreements pertaining to the state's rights to receive its royalty in 29 kind or in value, if 30 (1) the viability of the approved qualified project depends upon long- 31 term gas purchase and sale agreements;
01 (2) certainty over time regarding the quantity of royalty gas that the 02 state may be taking in kind is needed to secure the long-term purchase and sale 03 agreements; 04 (3) the specified period of the state's commitment to take its royalty 05 share in value or in kind does not exceed the term of the purchase and sale 06 agreements; and 07 (4) the modification does not impair the ability of the approved 08 qualified project to meet the reasonably foreseeable demand in this state for gas within 09 proximity of the project during the term of the contract entered into under 10 AS 43.82.020. 11 (b) Notwithstanding any contrary provisions of AS 38, the commissioner of 12 natural resources, with the concurrence of the commissioner of revenue and the 13 affected parties holding a state lease or unit agreement, may develop proposed terms, 14 for inclusion in a contract under AS 43.82.020, that establish a valuation method for 15 the state's royalty share of the gas production from an approved qualified project. 16 (c) The commissioner of revenue shall include any proposed terms relating to 17 royalty developed in accordance with this section in the proposed contract under 18 AS 43.82.400. 19 Sec. 43.82.230. Contract terms relating to Alaska hire and Alaska 20 contracting. (a) The commissioner shall include in every contract under 21 AS 43.82.020 a term requiring the qualified sponsor or qualified sponsor group, and 22 its contractors, to comply with all valid federal, state, and municipal laws in hiring 23 Alaska residents and contracting with Alaska businesses to work in the state on the 24 approved qualified project, and to not discriminate against Alaska residents or Alaska 25 businesses. Within the constraints of law, the commissioner shall also include in a 26 contract under AS 43.82.020 a term that requires the qualified sponsor or qualified 27 sponsor group, and its contractors, to employ Alaska residents and Alaska businesses 28 to work in the state on the approved qualified project to the extent they are available, 29 competitively priced, and qualified. 30 (b) The commissioner shall include a term in every contract under 31 AS 43.82.020 requiring the qualified sponsor or qualified sponsor group, and its
01 contractors, to 02 (1) advertise for available positions in newspapers in the location where 03 the work is to be performed and in other publications distributed throughout the state, 04 including in rural areas; and 05 (2) use Alaska job service organizations located throughout the state 06 and not just in the location where the work is to be performed, in order to notify 07 Alaskans of work opportunities on the approved qualified project. 08 (c) This section does not create or abridge individual rights and does not create 09 a private right of action for any person. 10 (d) For purposes of this section, 11 (1) "Alaska business" means a firm or contractor that 12 (A) has held an Alaska business license for the preceding 12 13 months; 14 (B) maintains, and has maintained for the preceding 12 months, 15 a place of business within the state that competently and professionally deals 16 in the supplies, services, or construction of the nature required for the approved 17 qualified project; and 18 (C) is 19 (i) a sole proprietorship and the proprietor is an Alaska 20 resident; 21 (ii) a partnership and more than 50 percent of the 22 partnership interest is held by Alaska residents; 23 (iii) a limited liability company and more than 50 24 percent of the membership interest is held by Alaska residents; 25 (iv) a corporation that has been incorporated in the state 26 or is authorized to do business in the state; or 27 (v) a joint venture and a majority of the joint venturers 28 qualify as Alaska businesses under this paragraph; 29 (2) "Alaska job service organizations" means those offices maintained 30 by the state and recommended by the Department of Labor whose functions are to aid 31 the unemployed or underemployed in finding employment;
01 (3) "Alaska resident" means a natural person who 02 (A) receives a permanent fund dividend under AS 43.23; or 03 (B) has any two of the following: 04 (i) current Alaska voter registration card; 05 (ii) current Alaska resident fishing, hunting, or trapping 06 license under AS 16; 07 (iii) current Alaska driver's license; or 08 (iv) current Alaska motor vehicle registration; 09 (4) "available," as applied to an Alaska resident or Alaska business, 10 means that the resident or business is available for employment at the time required 11 and is located anywhere in the state, not just in the area of the state where the work 12 is to be performed; 13 (5) "qualified," as applied to an Alaska resident or Alaska business, 14 means that the resident or business possesses the requisite education, training, skills, 15 certification, or experience to perform the work necessary for a particular position or 16 to perform a particular service. 17 Sec. 43.82.240. Use of an independent contractor. (a) The commissioner 18 may use an independent contractor to assist in the evaluation of an application or in 19 the development of contract terms under AS 43.82.200. The commissioner may 20 condition the development of a contract under AS 43.82.020 upon an agreement by the 21 applicant to reimburse the state for the expenses of an independent contractor under 22 this section. 23 (b) An independent contractor selected under this section must sign an 24 agreement regarding confidentiality and disclosures, consistent with the determinations 25 made under AS 43.82.310, before the contractor may review information that is 26 determined confidential under that section. 27 (c) Selection of an independent contractor under this section is not subject to 28 AS 36.30. 29 Sec. 43.82.250. Term of contract; effective date. (a) A contract under 30 AS 43.82.020 may be entered into for a term no longer than is necessary to develop 31 the stranded gas that is subject to the contract; however, the term of the contract may
01 not exceed 35 years from the commencement of commercial operations of the 02 approved qualified project. 03 (b) The effective date of a contract under AS 43.82.020 is the date the 04 commissioner executes the contract unless another date is set out in the contract. The 05 commissioner may condition the effective date of a contract under AS 43.82.020 upon 06 the enactment of a federal law that improves the economic feasibility or 07 competitiveness of stranded gas projects in this state. 08 Sec. 43.82.260. Change of parties to an application or a contract; 09 assignment of interests. (a) A qualified sponsor or member of a qualified sponsor 10 group may assign an interest in an application under AS 43.82.120 or a contract under 11 AS 43.82.020, or add or withdraw a party to such an application or contract only if the 12 commissioner has 13 (1) made a finding that the assignment, addition, or withdrawal is 14 consistent with the requirements of AS 43.82.110; and 15 (2) given prior written approval for the assignment, addition, or 16 withdrawal. 17 (b) Upon being added to an application or contract under this section, a party 18 becomes a qualified sponsor or a member of a qualified sponsor group, as appropriate, 19 for the relevant project. 20 (c) The commissioner may not unreasonably withhold approval under (a) of 21 this section, but may condition the approval in any way reasonably necessary to protect 22 the fiscal interests of the state and further the purposes of this chapter. 23 (d) For purposes of this section, an assignment includes a transfer of stock or 24 a partnership interest in a manner that changes control of a qualified sponsor or 25 member of a qualified sponsor group. 26 Sec. 43.82.270. Project plans and work commitments. A contract under 27 AS 43.82.020 must include the qualified project plan approved under AS 43.82.140 28 and provisions for updating the plan at reasonable intervals until the commencement 29 of commercial operations of the approved qualified project. The commissioner of 30 revenue, in consultation with the commissioner of natural resources, may, as a 31 condition of a contract under AS 43.82.020, include work commitments or other
01 obligations in the contract to be accomplished before the commencement of 02 commercial operations of the approved qualified project. 03 Article 4. Requests for Information; Confidentiality; Disclosure of Information. 04 Sec. 43.82.300. Requests for information. The commissioner of revenue or 05 the commissioner of natural resources may request from an applicant information that 06 the respective commissioner determines is necessary to perform the respective 07 commissioner's responsibilities under AS 43.82.140. If the application is approved 08 under AS 43.82.140, the respective commissioner shall require the successful applicant 09 to provide financial, technical, and market information regarding the qualified project 10 that the respective commissioner determines is necessary for the purpose of developing 11 contract terms for the qualified project under AS 43.82.200. If requested information 12 is not provided, the commissioner of revenue may not continue to review the 13 application under AS 43.82.140 or develop the contract under AS 43.82.200 - 14 43.82.270, as applicable. 15 Sec. 43.82.310. Disclosure of information; confidentiality. (a) An applicant 16 may request confidential treatment of information that the applicant provides under 17 AS 43.82.300 by clearly identifying the information and the reasons supporting the 18 request for confidential treatment. The commissioner receiving the request shall keep 19 the information confidential until the commissioner determines whether the 20 requirements of (b) of this section are met. If the commissioner has not made a 21 determination under (b) of this section within 14 days after receiving a request, the 22 request is considered denied. If the commissioner determines that the information does 23 not meet the requirements of (b) of this section, or fails to make a determination 24 within 14 days, the commissioner shall return the information and any copies of it at 25 the request of the applicant that provided the information. If a commissioner returns 26 information under this subsection, the commissioner shall cease review of the 27 application or cease contract development under AS 43.82.200 - 43.82.270, as 28 applicable, unless the commissioner determines that the returned information is 29 unnecessary to make a determination on the application or to develop contract terms 30 under AS 43.82.200 - 43.82.270. 31 (b) If requested by the applicant, information provided to the commissioner of
01 revenue or the commissioner of natural resources under AS 43.82.300 shall be kept 02 confidential if the commissioner receiving the information determines, upon an 03 adequate showing by the applicant, that the information 04 (1) is a trade secret or other proprietary research, development, or 05 commercial information that the applicant treats as confidential; 06 (2) affects the applicant's competitive position; and 07 (3) has commercial value that may be significantly diminished by 08 public disclosure. 09 (c) Information determined to be confidential under (b) of this section is 10 confidential under that subsection only so long as is necessary to protect the 11 competitive position of the applicant and to prevent the significant diminution of the 12 commercial value of the information. A commissioner may not release information 13 that the commissioner has previously determined to be confidential under (b) of this 14 section without providing the applicant notice and an opportunity to be heard. 15 (d) Notwithstanding the release of information limitation of (c) of this section, 16 the Department of Revenue and the Department of Natural Resources may provide to 17 one another, to the Department of Law, and to the Office of the Governor any 18 information provided under AS 43.82.300 relevant to the implementation of this 19 chapter or to the enforcement of state or federal laws. Information that is exchanged 20 under this subsection that was determined to be confidential under (b) of this section 21 remains confidential except as provided in (c) of this section. The portions of the 22 records and files of the Department of Revenue, Department of Natural Resources, 23 Department of Law, and the Office of the Governor that reflect, incorporate, or analyze 24 information that was determined to be confidential under (b) of this section are not 25 public records except as provided in (c) of this section. 26 (e) Notwithstanding the release of information limitation of (c) of this section, 27 information that was determined to be confidential under (b) of this section may be 28 disclosed by the commissioner of revenue, the commissioner of natural resources, or 29 the attorney general to a legislator; to the legislative auditor in the division of 30 legislative audit; and, as directed by the chair or vice-chair of the Legislative Budget 31 and Audit Committee, to the director of the division of legislative finance, to the
01 permanent employees of those divisions who are responsible for evaluating a contract 02 made under AS 43.82.020, and to agents or contractors of the legislative auditor or the 03 director of legislative finance who are engaged to evaluate such a contract. 04 Information that was determined to be confidential under (b) of this section also may 05 be disclosed by the commissioner of revenue or the commissioner of natural resources 06 to an independent contractor under AS 43.82.240. Before confidential information is 07 disclosed under this subsection, the person receiving the information must sign an 08 appropriate confidentiality agreement. 09 (f) If the commissioner of revenue chooses to develop a contract under 10 AS 43.82.020, the portions of the records and files of the Department of Revenue, the 11 Department of Natural Resources, and the Department of Law that reflect, incorporate, 12 or analyze information that is relevant to the development of a commissioner's position 13 or strategy with respect to any particular provision that may be incorporated into the 14 contract are not public records until the commissioner of revenue gives public notice 15 under AS 43.82.410 of the commissioner's preliminary findings and determination 16 under AS 43.82.400. Nothing in this subsection (1) makes a record or file of the 17 Department of Revenue, the Department of Natural Resources, or the Department of 18 Law a public record that otherwise would not be a public record under AS 09.25.100 - 19 09.25.220; (2) affects the confidentiality provisions of (a) - (e) of this section; or (3) 20 abridges a privilege recognized under the laws of this state, whether at common law 21 or by statute. 22 Article 5. Contract Review, Approval, and Termination. 23 Sec. 43.82.400. Preliminary findings and determination regarding the 24 contract. (a) If the commissioner develops a proposed contract under AS 43.82.200 - 25 43.82.270, the commissioner 26 (1) must make preliminary findings and a determination that the 27 proposed contract terms are in the long-term fiscal interests of the state and further the 28 purposes of this chapter; and 29 (2) shall prepare a proposed contract that includes those terms and shall 30 announce that, under AS 43.82.020, the commissioner intends to enter into the 31 proposed contract.
01 (b) To make the preliminary findings and determination required by (a)(1) of 02 this section, the commissioner shall compare the projected public revenue anticipated 03 from the approved qualified project with the estimated operating and capital costs of 04 the additional state and municipal services anticipated to arise from the construction 05 and operation of the approved qualified project. The commissioner shall address the 06 reasonably foreseeable effects of the proposed contract on the public revenue. 07 (c) In conjunction with the making of preliminary findings and determination 08 required by (a)(1) of this section, the commissioner shall describe the principal factors, 09 including the projected price of gas, projected production rate or volume of gas, and 10 projected recovery, development, construction, and operating costs, upon which the 11 determination made under (a)(1) of this section is based. If the commissioner has 12 previously entered into a contract under AS 43.82.020 relating to another approved 13 qualified project that is similar to or would compete with the approved qualified 14 project that is the subject of the commissioner's preliminary findings and 15 determination, the commissioner shall describe any material differences between the 16 terms of the existing contract and the proposed contract. 17 Sec. 43.82.410. Notice and comment regarding the contract. The 18 commissioner shall 19 (1) give reasonable public notice of the preliminary findings and 20 determination made under AS 43.82.400; 21 (2) make copies of the proposed contract, the commissioner's 22 preliminary findings and determination, and, to the extent the information is not 23 required to be kept confidential under AS 43.82.310, the supporting financial, 24 technical, and market data, including the work papers, analyses, and recommendations 25 of any independent contractors used under AS 43.82.240, available to the public and 26 to 27 (A) the presiding officer of each house of the legislature; 28 (B) the chairs of the legislature's standing committees on 29 finance and resources; and 30 (C) the chairs of the legislature's special committees on oil and 31 gas, if any;
01 (3) establish a period of at least 30 days for the public to comment on 02 the proposed contract and the preliminary findings and determination made under 03 AS 43.82.400; and 04 (4) offer to appear before the Legislative Budget and Audit Committee 05 to provide the committee a review of the commissioner's preliminary findings and 06 determination, the proposed contract, and the supporting financial, technical, and 07 market data; if the Legislative Budget and Audit Committee accepts the commissioner's 08 offer, the committee shall give notice of the committee's meeting to the public and all 09 members of the legislature; if the financial, technical, and market data that is to be 10 provided must be kept confidential under AS 43.82.310, the commissioner may not 11 release the confidential information during a public portion of a committee meeting. 12 Sec. 43.82.420. Coordination of public and legislative review. To the extent 13 practicable, the commissioner shall coordinate the public comment opportunity 14 provided under AS 43.82.410(3) with any proposed review by the Legislative Budget 15 and Audit Committee of the contract and the preliminary findings and determination 16 under AS 43.82.410(4). 17 Sec. 43.82.430. Final findings, determination, and proposed amendments; 18 execution of the contract. (a) Within 30 days after the close of the public comment 19 period under AS 43.82.410(3), the commissioner shall 20 (1) prepare a summary of the public comments received in response to 21 the proposed contract and the preliminary findings and determination; 22 (2) after consultation with the commissioner of natural resources if 23 appropriate, prepare a list of proposed amendments, if any, to the proposed contract 24 that the commissioner determines are necessary to respond to public comments; 25 (3) make final findings and a determination as to whether the proposed 26 contract and any proposed amendments prepared under (2) of this subsection meet the 27 requirements and purposes of this chapter. 28 (b) After considering the material described in (a) of this section and securing 29 the agreement of the other parties to the proposed contract regarding any proposed 30 amendments prepared under (a) of this section, the commissioner may execute the 31 contract if the commissioner determines that the contract is in the long-term fiscal
01 interests of the state. 02 (c) The commissioner's final findings and determination under (a) of this 03 section, and decision regarding whether to execute the contract under (b) of this 04 section, are final agency decisions under this chapter. 05 Sec. 43.82.440. Administrative termination of a contract. (a) The 06 commissioner may terminate a party's rights under a contract under AS 43.82.020 if 07 the procedures and conditions set out in this section are met and the party has 08 (1) ceased to meet the requirements of AS 43.82.110 as a qualified 09 sponsor or as a qualified sponsor group; 10 (2) intentionally or fraudulently misrepresented, in whole or in part, 11 material facts or circumstances upon which the contract was made; 12 (3) failed to comply with a condition or material term of the contract 13 or a provision of this chapter; or 14 (4) failed to comply with the approved qualified project plan or any 15 updated project plan. 16 (b) Before administrative termination of a contract under this section, the 17 commissioner shall give notice to the parties of the commissioner's intent to terminate 18 and an opportunity to be heard. Additionally, the commissioner may provide the 19 parties an opportunity to cure any deficiency that is the basis for the termination if the 20 commissioner determines that curing the deficiency is appropriate under the 21 circumstances. 22 (c) Notwithstanding (a) and (b) of this section, the commissioner may not 23 administratively terminate a contract after the party has committed full project funding 24 except as provided in (e) of this section. 25 (d) A party to the contract who is affected by the commissioner's action to 26 terminate under (a) of this section may file an appeal with the superior court under the 27 Alaska Rules of Appellate Procedure. 28 (e) The commissioner may provide terms and conditions in a contract entered 29 into under AS 43.82.020 upon which a party's rights under the contract may be 30 administratively terminated after the party commits full project funding. 31 Article 6. Payment to Municipalities; Equity or
01 Other Participation by Municipalities. 02 Sec. 43.82.500. Payment to municipalities; equity or other participation by 03 municipalities. (a) If the commissioner executes a contract under AS 43.82.020 that 04 includes terms that exempt a party to the contract, and the property, gas, products, and 05 activities associated with the approved qualified project that is subject to the contract, 06 from a municipal tax in accordance with AS 29.45.810, AS 29.46.010(b), 07 AS 43.82.200, and 43.82.210, the commissioner shall require, as a condition of the 08 contract, that the party instead make periodic payment to the affected municipality in 09 a fair and reasonable amount as determined by the commissioner under (b) of this 10 section. 11 (b) After consultation with the affected municipality, the commissioner shall 12 determine the amount of payment due under (a) of this section. In making the 13 determination required by this subsection, the commissioner shall 14 (1) estimate the total operating and capital costs of additional services 15 and construction that would be provided and paid for by that municipality during the 16 term of the contract under AS 43.82.020 as a result of the construction and operation 17 in the municipality of the approved qualified project that is subject to the contract; and 18 (2) amortize the total costs estimated under (1) of this section over the 19 term of the contract or a portion of the term of the contract. 20 (c) In lieu of payments under (a) of this section, the commissioner, with the 21 concurrence of the municipality, may include a term in a contract under AS 43.82.020 22 that provides the municipality with an equity or other interest in the approved qualified 23 project that is subject to the contract. 24 Article 7. Miscellaneous Provisions. 25 Sec. 43.82.600. Governing law. If a provision of this chapter conflicts with 26 another provision of state or municipal law, the provision of this chapter governs. 27 Sec. 43.82.610. Regulations. The commissioner of revenue, the commissioner 28 of natural resources, and the commissioner of labor may adopt regulations to carry out 29 their respective duties under this chapter. 30 Sec. 43.82.620. Procedures for collection of amounts due; security. (a) 31 The commissioner may adopt procedures for the collection of amounts due the state
01 under a contract entered into under AS 43.82.020, including the collection of interest 02 and penalties. 03 (b) The commissioner may require a party to a contract under AS 43.82.020 04 to provide security sufficient to guarantee amounts due under the contract. 05 Sec. 43.82.630. Reports and audits. The commissioner may require periodic 06 reports from, and may at reasonable intervals conduct audits and inspect the books of, 07 a party that has entered into a contract under AS 43.82.020 to ensure compliance with 08 the provisions of this chapter and the regulations adopted under it and of the terms of 09 the contract. 10 Sec. 43.82.640. Annual report of the commissioner of labor. On an annual 11 basis, the commissioner of labor shall prepare and present to the legislature a 12 comprehensive report on each party to a contract with the state under AS 43.82.020, 13 and its contractors, regarding the state residency of the employees working in this state 14 on the approved qualified project that is subject to the contract. The commissioner of 15 labor shall use state databases, including data from the quarterly reports by a party to 16 the contract under AS 43.82.020 and its contractors for unemployment insurance 17 purposes, to determine state residency of employees regarding compliance with 18 AS 43.82.230. 19 Article 8. General Provisions. 20 Sec. 43.82.900. Definitions. In this chapter, unless the context requires 21 otherwise, 22 (1) "commencement of commercial operations" means the start of 23 regular deliveries of marketable products from an approved qualified project; 24 (2) "cubic foot of gas" means the quantity of gas contained in a volume 25 of one cubic foot at a standard temperature of 60 Fahrenheit and a standard absolute 26 pressure of 14.65 pounds per square inch; 27 (3) "economic rent" means the estimated total gross revenue less 28 estimated total costs for a qualified project over the term of a contract under 29 AS 43.82.020, measured in undiscounted nominal dollars; for purposes of this 30 paragraph, "total costs" do not include a rate of return on capital, financing costs, or 31 any payments to governments;
01 (4) "full project funding" means the date that a party to a contract 02 under AS 43.82.020 gives full approval for the expenditure of the capital necessary for 03 construction and operation of the approved qualified project that is subject to the 04 contract; 05 (5) "gas" has the meaning given that term in AS 43.55.900; 06 (6) "group" means two or more persons; 07 (7) "lease or property" has the meaning given that term in 08 AS 43.55.900; 09 (8) "municipality" has the meaning given that term in AS 29.71.800; 10 (9) "periodic payment" means payment made in lieu of one or more 11 other taxes under a contract under AS 43.82.020; 12 (10) "stranded gas" means gas that is uneconomic or uncompetitive to 13 develop as determined by the commissioner for a particular project. 14 Sec. 43.82.990. Short title. This chapter may be cited as the Alaska Stranded 15 Gas Development Act. 16 * Sec. 4. AS 29.10.200 is amended by adding new paragraphs to read: 17 (54) AS 29.45.810 (exemption from municipal taxation); 18 (55) AS 29.46.010(b) (exemption from municipal assessment). 19 * Sec. 5. AS 29.45 is amended by adding a new section to read: 20 Sec. 29.45.810. Exemption from municipal taxation. (a) A party to a 21 contract with the Department of Revenue under AS 43.82.020, and the property, gas, 22 products, and activities associated with the approved qualified project that is subject 23 to the contract, are exempt, as specified in the contract, from all taxes identified in the 24 contract that would be levied and collected by a municipality under state law as a 25 consequence of the participation by the party in the approved qualified project. 26 (b) This section applies to home rule and general law municipalities. 27 * Sec. 6. AS 29.46.010 is amended by adding a new subsection to read: 28 (b) Notwithstanding (a) of this section, a party to a contract with the 29 Department of Revenue under AS 43.82.020 is exempt, as specified in the contract, 30 from assessment under this chapter against real property associated with the approved 31 qualified project that is subject to the contract.
01 * Sec. 7. AS 36.30.850(b) is amended by adding a new paragraph to read: 02 (38) contracts between the commissioner of revenue and an independent 03 contractor under AS 43.82.240. 04 * Sec. 8. AS 43.20.072 is amended by adding a new subsection to read: 05 (h) A taxpayer that has signed a contract under AS 43.82.020 with the 06 commissioner providing for payments in lieu of the tax under this chapter, and that has 07 nexus with the state solely as the result of its participation in the approved qualified 08 project that is subject to the contract or, but for such participation, would not be 09 engaged in the production of oil or gas from a lease or property in this state or 10 engaged in the transportation of oil or gas by pipeline in this state, is not required to 11 file a return under this section unless required to do so by the contract. 12 * Sec. 9. AS 43.20.073 is amended by adding a new subsection to read: 13 (h) A corporation that has signed a contract with the commissioner under 14 AS 43.82.020 providing for payments in lieu of the tax under this chapter, and that has 15 nexus with the state solely as the result of its participation in the approved qualified 16 project that is subject to the contract is not required to file a return under this section 17 unless required to do so by the contract. 18 * Sec. 10. SEVERABILITY. Under AS 01.10.030, if any provision of this Act, or the 19 application of a provision of this Act to any person or circumstance, is held invalid, the 20 remainder of this Act and the application to other persons or circumstances is not affected. 21 * Sec. 11. This Act takes effect immediately under AS 01.10.070(c).