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HB 420: "An Act relating to recovery of shallow natural gas; and providing for an effective date."

00                             HOUSE BILL NO. 420                                                                          
01 "An Act relating to recovery of shallow natural gas; and providing for an effective                                     
02 date."                                                                                                                  
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1.  AS 38.05.177(k) is amended to read:                                                                  
05            (k)  The commissioner [MAY]                                                                                  
06                 (1)  may adopt only the regulations that are reasonable and that are                                
07       necessary to implement, interpret, or make specific the provisions of this section or to                          
08       establish procedures to govern application of the provisions of this section; [AND]                               
09                 (2)  may, in addition to any requirement for a bond under                                           
10       AS 38.05.130, establish by regulation a form and amount for statewide, areawide,                                  
11       unit-wide, or per-lease bonds sufficient to secure damages that may be caused by the                              
12       activities of a lessee, or the lessee's successors or assigns, related to a shallow natural                       
13       gas lease entered into under this section; if the commissioner acts under this                                    
14       paragraph, the commissioner                                                                                       
01                      (A)  shall require a person applying for a lease under this                                        
02            section to post the bond as a condition for the director's executing the lease;                              
03                      (B)  may not require a bond posted under this paragraph from a                                     
04            person applying for a lease if the person has already posted a bond covering                                 
05            the person's statewide oil and gas leasing activities in an amount of at least                               
06            $500,000; and                                                                                            
07                 (3)  shall require the lessee to provide written advance notice to the                              
08       owner of initial entry onto the property of the owner at least 30 days before                                 
09       initial entry.                                                                                                
10    * Sec. 2.  AS 38.05.177 is amended by adding new subsections to read:                                              
11            (p)  From amounts collected under AS 43.57.020 that are deposited to the                                     
12       general fund and separately accounted for as described in that section, subject to                                
13       appropriation, the commissioner may pay                                                                           
14                 (1)  an owner for the costs of remedying the contamination or alteration                                
15       of a water well or of digging a new water well to serve as the source of the owner's                              
16       potable water; the commissioner may make a payment under this paragraph only if                                   
17                      (A)  within 30 days after receiving written notice under (k)(3) of                                 
18            this section, the owner tests the well for water purity and flow and maintains                               
19            the test record; and                                                                                         
20                      (B)  contamination or alteration of the water well occurs after                                    
21            commencement of activities under the lessee's entry onto the property or on                                  
22            adjacent property that is not more distant than 1,500 feet from the owner's                                  
23            well, and the activities appear to be probable hydrologic consequences of the                                
24            lessee's activities on the lease; and                                                                        
25                 (2)  a refund to a lessee that paid the exaction levied by AS 43.57.020                                 
26       on production from a shallow natural gas well if, during the period of the well's                                 
27       production and for a period of five years that follows the plugging and abandonment                               
28       of the well, the commissioner did not make payment on an application received under                               
29       (1) of this section asserting contamination or alteration of a water well based on                                
30       activities that appear to be probable hydrologic consequences of the lessee's activities                          
31       on the lease.                                                                                                     
01                                                                                                                         
02            (q)  In (k)(3) and (p) of this section, "owner" means a property owner whose                                 
03       property is subject to the reservation described in AS 38.05.125.                                                 
04    * Sec. 3.  AS 43.57 is amended by adding a new section to read:                                                    
05            Sec. 43.57.020.   Shallow natural gas exaction to meet costs of well water                                 
06       contamination or alteration.   (a)  Every producer of shallow natural gas from a lease                          
07       entered into under AS 38.05.177 shall pay an exaction of $.01 per 20 million cubic                                
08       feet of shallow natural gas removed from each lease or property in the state.                                     
09            (b)  The exaction described in (a) of this section is in addition to and shall be                            
10       paid in the same manner as the taxes imposed by AS 43.55.  Producers shall make                                   
11       reports of production in the same manner and under the same penalties as required by                              
12       AS 43.55.                                                                                                         
13            (c)  Proceeds of the exaction described in this section shall be paid into the                               
14       general fund.  The commissioner of administration shall separately account for all                                
15       proceeds deposited into the general fund under this section.                                                      
16            (d)  Not later than 30 days after the end of each calendar quarter, the                                      
17       commissioner of administration shall determine, as of the end of that quarter, the fiscal                         
18       year's balance in the account established in (c) of this section. Within 15 days after                            
19       making the determinations required by this subsection, the commissioner of                                        
20       administration shall report the sum calculated under this subsection to the                                       
21       commissioner of revenue.  If the commissioner of administration reports that the sum                              
22       reported under (b) of this section equals or exceeds $250,000, the commissioner of                                
23       revenue shall suspend imposition and collection of the exaction levied and collected                              
24       under (a) of this section.  Suspension of the imposition and collection of the exaction                           
25       begins on the first day of the calendar quarter next following the commissioner's                                 
26       receipt of the commissioner of administration's report under this subsection. Before                              
27       the first day of a suspension authorized by this subsection, the commissioner shall                               
28       make a reasonable effort to notify all persons who are known to the department to be                              
29       paying the exaction under (a) of this section that the levy and collection of the                                 
30       exaction will be suspended.                                                                                       
31            (e)  If the commissioner of administration reports that the sum determined                                   
01       under (d) of this section is less than $250,000, the commissioner of revenue shall                                
02       require imposition and collection of the exaction authorized under this section. If the                           
03       exaction is not in effect, reimposition of the exaction begins on the first day of the                            
04       calendar quarter next following the commissioner's receipt of the commissioner of                                 
05       administration's report under (d) of this section. Before the first day of reimposition of                        
06       the exaction authorized by this subsection, the commissioner shall make a reasonable                              
07       effort to notify all persons who are known to the department to be required to pay the                            
08       exaction under (a) of this section that the exaction will be reimposed.                                           
09            (f)  The provisions of AS 43.05 and AS 43.10 apply for the enforcement and                                   
10       collection of the exaction imposed by this section.                                                               
11    * Sec. 4.  This Act takes effect July 1, 2004.