HB 519: "An Act authorizing priority treatment under the Right-of-Way Leasing Act for an Alaska North Slope natural gas project; expanding the scope for the kinds of gas development projects that may become qualified projects under the Alaska Stranded Gas Development Act; extending the deadline for submitting applications under the Alaska Stranded Gas Development Act; exempting an Alaska North Slope natural gas project from state property tax and all municipal taxes during construction; and providing for an effective date."
00 HOUSE BILL NO. 519 01 "An Act authorizing priority treatment under the Right-of-Way Leasing Act for an 02 Alaska North Slope natural gas project; expanding the scope for the kinds of gas 03 development projects that may become qualified projects under the Alaska Stranded 04 Gas Development Act; extending the deadline for submitting applications under the 05 Alaska Stranded Gas Development Act; exempting an Alaska North Slope natural gas 06 project from state property tax and all municipal taxes during construction; and 07 providing for an effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 10 to read: 11 FINDINGS AND INTENT. The legislature finds that 12 (1) a vast quantity of gas in Alaska is currently stranded from commercial 13 development, in part due to the cost associated with providing access to markets for that gas;
01 the Alaska North Slope has the largest known discovered natural gas resources, estimated to 02 be 35 trillion cubic feet, in the United States and has undiscovered gas resources estimated to 03 be in excess of 100 trillion cubic feet; 04 (2) demand for natural gas in the lower 48 states is expected to experience 05 record growth; the lower 48 states have an inadequate resource base to meet this expected 06 demand, and there is an urgency to make an Alaska natural gas pipeline project move forward 07 to fill this gap with North American gas rather than with gas from uncertain sources overseas; 08 (3) it is important for the United States to have a reliable and affordable source 09 of domestic natural gas for energy for its economy, for the well-being of its citizens, for the 10 growth of its businesses, and for the national security; 11 (4) the North Slope of Alaska is one of the few known locations in the United 12 States that can supply significant natural gas supplies to the lower 48 states for years to come; 13 (5) during the past three decades, several companies and entities have studied 14 different ways to commercialize Alaska North Slope gas and have been unsuccessful in 15 identifying an economic project; most recently, the three major producers, through their 16 Alaska Gas Producers Pipeline Team, have studied a southern route approximately following 17 a route along the Trans Alaska Pipeline System from Pump Station One to Delta Junction and 18 along the Alaska Highway through Alaska and Canada to the lower 48 states and a northern 19 route off the shore of the Arctic National Wildlife Refuge in the Beaufort Sea, and have 20 concluded that neither is sufficiently economic, given the magnitude of the risks associated 21 with the project; however, at least one producer has indicated a willingness to proceed further 22 if federal and state enabling legislation with provisions to mitigate long-term natural gas price 23 risks and for fiscal certainty and incentives is enacted; 24 (6) the major producers have proposed new federal enabling legislation that 25 they believe will expedite the construction and operation of a natural gas pipeline from the 26 North Slope to the lower 48 states; 27 (7) in addition to the state's receipt of revenue from taxes and royalties, 28 Alaskans will benefit from the commercialization of Alaska North Slope natural gas through 29 opportunities for in-state use of the natural gas and for participation by Alaskans in 30 construction, maintenance, and operation of a natural gas pipeline project, and the northern 31 route offers few of these benefits to Alaska;
01 (8) because of the high cost of providing access to markets for Alaska North 02 Slope gas, exploration efforts on the North Slope have historically focused on oil; recently, 03 some companies have expressed interest in gas exploration; if the infrastructure needed to 04 provide access to market for Alaska North Slope gas were available, new gas exploration 05 efforts might be initiated on the Alaska North Slope and in other basins that currently remain 06 largely unexplored for oil and gas; it is vital to the State of Alaska that there be continued and 07 robust exploration and development of natural gas resources on the Alaska North Slope; 08 (9) Alaskans need a portion of the gas from a natural gas pipeline project for 09 in-state use; however, it is unlikely that markets will develop within the state that would need 10 more than a relatively small portion of the volume of gas already discovered on the Alaska 11 North Slope; it is vital for economic development that Alaska communities and businesses 12 have access under fair and reasonable terms to the pipeline for in-state use of Alaska North 13 Slope natural gas; 14 (10) the construction and operation of a natural gas pipeline in the state and 15 the sale of Alaska North Slope gas is critical to the health and welfare of the state; 16 (11) for a natural gas pipeline project to become economically viable and 17 competitive, the estimated costs of constructing the project and the associated financial risk 18 must be reduced significantly; changes in the local, state, and federal tax structure may also be 19 necessary to make commercialization of the gas resources economically viable by, in part, 20 structuring tax and royalty incentives related to the project and providing as much clarity and 21 certainty as possible regarding the taxes that would apply to a project throughout its life; 22 (12) art. IX, sec. 4, Constitution of the State of Alaska, empowers the 23 legislature to create tax exemptions by general law, and the creation of tax exemptions to 24 make Alaska North Slope gas commercially viable and competitive is consistent with the 25 legislature's responsibility under art. VIII, sec. 2, Constitution of the State of Alaska; 26 (13) good faith efforts by producers and other companies engaged in the 27 design, construction, and operation of the natural gas pipeline voluntarily to provide 28 employment opportunities for Alaska residents and opportunities for Alaska businesses are in 29 the long-term interests of the state; 30 (14) there has been a history of costly disputes between producers of oil and 31 the state over the determination of the production taxes due for oil produced and sold, in part
01 because of disputes over the definition of terms pertinent to the calculation of the tax; 02 (15) it is in the state's best interest to provide clarity and certainty to the 03 process of determining a producer's tax liability; AS 43.82 (Alaska Stranded Gas 04 Development Act) provides a mechanism for the state and the sponsor of a North Slope 05 natural gas pipeline project to negotiate a contract that could provide that clarity and certainty 06 and resolve other important issues. 07 * Sec. 2. AS 29.45.030(a) is amended to read: 08 (a) The following property is exempt from general taxation: 09 (1) municipal property, including property held by a public corporation 10 of a municipality, state property, property of the University of Alaska, or land that is 11 in the trust established by the Alaska Mental Health Enabling Act of 1956, P.L. 84- 12 830, 70 Stat. 709, except that 13 (A) a private leasehold, contract, or other interest in the 14 property is taxable to the extent of the interest; however, an interest created by 15 a nonexclusive use agreement between the Alaska Industrial Development and 16 Export Authority and a user of an integrated transportation and port facility 17 owned by the authority and initially placed in service before January 1, 1999, 18 is taxable only to the extent of, and for the value associated with, those specific 19 improvements used for lodging purposes; 20 (B) notwithstanding any other provision of law, property 21 acquired by an agency, corporation, or other entity of the state through 22 foreclosure or deed in lieu of foreclosure and retained as an investment of a 23 state entity is taxable; this subparagraph does not apply to federal land granted 24 to the University of Alaska under AS 14.40.380 or 14.40.390, to other land 25 granted to the university by the state to replace land that had been granted 26 under AS 14.40.380 or 14.40.390, or to land conveyed by the state to the 27 university under AS 14.40.365; 28 (C) an ownership interest of a municipality in real property 29 located outside the municipality acquired after December 31, 1990, is taxable 30 by another municipality; however, a borough may not tax an interest in real 31 property located in the borough and owned by a city in that borough;
01 (2) household furniture and personal effects of members of a 02 household; 03 (3) property used exclusively for nonprofit religious, charitable, 04 cemetery, hospital, or educational purposes; 05 (4) property of a nonbusiness organization composed entirely of 06 persons with 90 days or more of active service in the armed forces of the United States 07 whose conditions of service and separation were other than dishonorable, or the 08 property of an auxiliary of that organization; 09 (5) money on deposit; 10 (6) the real property of certain residents of the state to the extent and 11 subject to the conditions provided in (e) of this section; 12 (7) real property or an interest in real property that is exempt from 13 taxation under 43 U.S.C. 1620(d), as amended; 14 (8) property of a political subdivision, agency, corporation, or other 15 entity of the United States to the extent required by federal law; except that a private 16 leasehold, contract, or other interest in the property is taxable to the extent of that 17 interest; 18 (9) natural resources in place including coal, ore bodies, mineral 19 deposits, and other proven and unproven deposits of valuable materials laid down by 20 natural processes, unharvested aquatic plants and animals, and timber; 21 (10) all property and interests in property exempted from 22 municipal taxation under AS 43.55.017, AS 43.56.020 or 43.56.030. 23 * Sec. 3. AS 38.35 is amended by adding a new section to read: 24 Sec. 38.35.240. Expeditious priority treatment by state officials and 25 agencies in support of development and construction of an Alaska North Slope 26 natural gas project under this chapter. (a) In the development and construction of 27 an Alaska North Slope natural gas project that requires the grant of a right-of-way 28 lease under this chapter, every state official and agency shall give full cooperation to 29 the commissioner, or to any official to whom delegation of the authority of the 30 commissioner is made by or under law, consistent with the provisions of the law 31 administered by the official or agency, by issuing or granting necessary permits,
01 certificates, authorizations, and similar actions required to be taken at the earliest 02 practicable date, with action to be taken on an expedited basis and, notwithstanding 03 any other provision of law, having precedence over any like matter pending before the 04 official or agency. 05 (b) In this section, "Alaska North Slope natural gas project" has the meaning 06 given to "North Slope natural gas pipeline" in AS 38.35.120(a)(1)(B), and related 07 facilities, constructed to follow generally a route that parallels the Trans Alaska 08 Pipeline System and the Alaska Highway to the Canadian border to transport natural 09 gas derived from the area of the state lying north of 64 degrees North latitude. 10 * Sec. 4. AS 43.56.020(a) is amended to read: 11 (a) The following are exempt from local taxes levied or authorized under 12 AS 43.56.010(b): 13 (1) property rights attached to or inherent in the right to explore for or 14 produce oil or gas; 15 (2) oil or gas leases or properties, whether producing or not; 16 (3) oil or gas in place; 17 (4) oil or gas produced or extracted in the state; 18 (5) the value of intangible drilling expenses and exploration expenses; 19 (6) an interest in property described in AS 43.55.017(a); 20 (7) an interest in taxable property that is part of an Alaska North 21 Slope natural gas project, whether or not, under AS 43.82, the project has been 22 determined by the commissioner of revenue to meet the requirements of 23 AS 43.82.100, from the project's construction commencement date until 24 December 31 of the second full calendar year in which the project is placed in 25 service; for purposes of this paragraph, "Alaska North Slope natural gas 26 project" has the meaning given in AS 38.35.240. 27 * Sec. 5. AS 43.56.020(b) is amended to read: 28 (b) There is exempt from state taxes levied or authorized under 29 AS 43.56.010(a), 30 (1) before the construction commencement date, property that is 31 committed by contract or other agreement for use in this state primarily for the
01 production or pipeline transportation of gas or unrefined oil, or in the operation or 02 maintenance of facilities for the production or pipeline transportation of gas or 03 unrefined oil; and 04 (2) taxable property described in (a)(7) of this section, subject to 05 the procedures set out in (d) of this section. 06 * Sec. 6. AS 43.56.020 is amended by adding a new subsection to read: 07 (d) For the Alaska North Slope natural gas project, the exemptions provided in 08 (a)(7) and (b)(2) of this section do not apply unless a taxpayer, or a person acting 09 under contract with the taxpayer or the project's sponsor, 10 (1) complies with all relevant requirements of 15 U.S.C. 717z (Natural 11 Gas Act) and 15 U.S.C. 719 - 719o (Alaska Natural Gas Transportation Act of 1976), 12 as applicable to the project; 13 (2) complies with all valid federal, state, and municipal laws relating to 14 hiring Alaska residents and contracting with Alaska businesses to work in the state in 15 the design, construction, and operation of the project to the extent the residents and 16 businesses are available and qualified; 17 (3) advertises for available positions in newspapers in the location 18 where the work is to be performed and in other publications distributed throughout the 19 state, including in rural areas, and uses Alaska job service organizations located 20 throughout the state and not just in the location where the work is to be performed in 21 order to notify Alaskans of work opportunities on the project; 22 (4) to the extent permitted by law, encourages the owner's contractors 23 to train and hire state residents; 24 (5) recruits and employs state residents as workers on available jobs; 25 the owner shall prepare and submit to the commissioner of labor and workforce 26 development 27 (A) on an annual basis, a report that sets out in detail the 28 specific measures that the owner and the owner's contractors have taken or are 29 planning to take 30 (i) to recruit qualified state residents for available jobs 31 and that describes job training opportunities; and
01 (ii) to use Alaska businesses; 02 (B) on a quarterly basis, a report concerning the use of state 03 residents, including the number of residents hired or employed during the 04 previous period; 05 (6) makes reasonable efforts 06 (A) to employ Alaska firms that are available and qualified to 07 perform engineering and construction services; and 08 (B) to fabricate or manufacture in the state needed gas 09 production and pipeline modules and other facilities. 10 * Sec. 7. AS 43.56.030 is amended to read: 11 Sec. 43.56.030. In place of other taxes. Except for those taxes imposed 12 under AS 43.55, the taxes levied or authorized under AS 43.56.010(b) are in place of 13 all other 14 (1) [ALL OTHER] ad valorem taxes or other taxes imposed by a 15 municipality on property subject to tax under this chapter or exempted from taxation 16 by AS 43.56.020; and 17 (2) [ALL OTHER] taxes imposed by a municipality on or with respect 18 to the property subject to tax under this chapter or exempted from taxation by 19 AS 43.56.020, including, but not limited to, 20 (A) taxes on the retail sale or use of the property except for the 21 retail sales tax on the first $1,000 of each sale; however, the exception for 22 retail sales or use taxes on the first $1,000 of each sale does not apply to a 23 retail sale or use involving property used or committed by contract or 24 other agreement for use in the development, construction, operation, or 25 maintenance of an Alaska North Slope natural gas project as that term is 26 defined in AS 38.35.240; 27 (B) taxes on the sale or use of gas or unrefined oil; 28 (C) taxes on the sale or use of services used in or associated 29 with the property or in its maintenance or operation except for the sales tax on 30 the first $1,000 of each sale; however, the exception for retail sales or use 31 taxes on the first $1,000 of each sale does not apply to a retail sale or use
01 involving services used in or associated with the property used or 02 committed by contract or other agreement for use in the development, 03 construction, operation, or maintenance of an Alaska North Slope natural 04 gas project as that term is defined in AS 38.35.240; 05 (D) taxes on or measured by gross or net income from the 06 property, including income from the exploration for, production of, or pipeline 07 transportation of gas or unrefined oil or property; and 08 (E) any license, excise, fee, charge, or other tax on or 09 pertaining to the property or services. 10 * Sec. 8. AS 43.56.210(2) is amended to read: 11 (2) "construction commencement date" means, for property subject 12 to tax under this chapter used in the exploration for, production of, or pipeline 13 transportation of unrefined oil through a facility the construction of which was 14 begun before April 1, 1974, the earlier of April 1, 1974, or the date the following 15 occur, and, for property subject to tax under this chapter used in the exploration 16 for, production of, or pipeline transportation of North Slope natural gas through 17 an Alaska North Slope natural gas project, as that term is defined in 18 AS 38.35.240, the date on which all of the following have occurred: 19 (A) there has been issued to the owner or an agent of the owner 20 right-of-way permits, leases, and title and other rights in land, and other 21 approvals, permits, licenses, and certificates, by federal, state, and local 22 agencies that a reasonable and prudent person would consider adequate to 23 commence construction of the facilities in the expectation that all other 24 approvals, permits, licenses, and certificates necessary for the completion of 25 facilities will be obtained; 26 (B) all approvals, permits, licenses, and certificates are in full 27 force and effect, unrevoked and without any modification that might jeopardize 28 the completion or continued construction of the facilities; and 29 (C) no order, judgment, decree, determination, or award of a 30 federal, state, or local court or administrative or regulatory agency enjoining, 31 either temporarily or permanently, the construction or the continuation of
01 construction of the facilities is in effect; 02 * Sec. 9. AS 43.82.100 is amended to read: 03 Sec. 43.82.100. Qualified project. Based on information available to the 04 commissioner, the commissioner may determine that a proposal for new investment is 05 a qualified project under this chapter only if the project 06 (1) is a project that principally involves 07 (A) the transportation of natural gas by pipeline to one or 08 more markets outside the state, including an Alaska North Slope natural 09 gas project as that term is defined in AS 38.35.240; or 10 (B) [FOR] the export of liquefied natural gas from the state to 11 one or more other states or countries; 12 (2) would produce at least 500,000,000,000 cubic feet of stranded gas 13 within 20 years from the commencement of commercial operations; and 14 (3) is capable, subject to applicable commercial regulation and 15 technical and economic considerations, of making gas available to meet the reasonably 16 foreseeable demand in this state for gas within the economic proximity of the project. 17 * Sec. 10. AS 43.82.170 is amended to read: 18 Sec. 43.82.170. Application deadline. The commissioner of revenue or the 19 commissioner of natural resources may not act on an application for a contract 20 submitted under AS 43.82.120 unless the application is received by the Department of 21 Revenue no later than June 30, 2005 . 22 * Sec. 11. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 RETROACTIVITY. Sections 9 and 10 of this Act are retroactive to July 1, 2001. 25 * Sec. 12. Sections 2 and 4 - 8 of this Act are effective January 1, 2003. 26 * Sec. 13. Except as provided in sec. 12 of this Act, this Act takes effect immediately under 27 AS 01.10.070(c).