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SSHB 441: "An Act amending the oil and gas properties production (severance) tax as it relates to oil to require payment of a tax of at least five percent of the gross value at the point of production before any price adjustments authorized by this Act, to modify the mechanism for calculating the effective tax rate, to provide for adjustments to the tax when the prevailing value of the oil exceeds $20 per barrel or falls below $16 per barrel and to limit the effect of the adjustments, to exempt certain kinds of oil from application of the adjustments, and to waive and defer payment of portions of the tax on oil when its prevailing value falls below $10 per barrel; and providing for an effective date."

00                  SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 441                                                              
01 "An Act amending the oil and gas properties production (severance) tax as it relates to                                 
02 oil to require payment of a tax of at least five percent of the gross value at the point of                             
03 production before any price adjustments authorized by this Act, to modify the                                           
04 mechanism for calculating the effective tax rate, to provide for adjustments to the tax                                 
05 when the prevailing value of the oil exceeds $20 per barrel or falls below $16 per barrel                               
06 and to limit the effect of the adjustments, to exempt certain kinds of oil from application                             
07 of the adjustments, and to waive and defer payment of portions of the tax on oil when its                               
08 prevailing value falls below $10 per barrel; and providing for an effective date."                                      
09 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
10    * Section 1.  AS 43.55.011(a) is amended to read:                                                                  
11            (a)  There is levied upon the producer of oil a tax for all oil produced from                                
12       each lease or property in the state, less any oil the ownership or right to which is                              
01       exempt from taxation. The tax is equal to either the percentage-of-value amount                                   
02       calculated under (b) of this section or the cents-per-barrel amount calculated under (c)                          
03       of this section, whichever is greater [, MULTIPLIED BY THE ECONOMIC LIMIT                                         
04       FACTOR DETERMINED FOR THE OIL PRODUCTION OF THE LEASE OR                                                          
05       PROPERTY UNDER AS 43.55.013].  If the amounts calculated under (b) and (c) of                                     
06       this section are equal, the amount calculated under (b) of this section shall be treated                          
07       as if it were the greater for purposes of this section.                                                           
08    * Sec. 2.  AS 43.55.011(b) is amended to read:                                                                     
09            (b)  The percentage-of-value amount equals the tax rate set out in (e) of this                           
10       section multiplied by [12.25 PERCENT OF THE GROSS VALUE AT THE POINT                                          
11       OF PRODUCTION OF TAXABLE OIL PRODUCED ON OR BEFORE JUNE 30,                                                       
12       1981, FROM THE LEASE OR PROPERTY AND 15 PERCENT OF THE GROSS                                                      
13       VALUE AT THE POINT OF PRODUCTION OF TAXABLE OIL PRODUCED                                                          
14       FROM THE LEASE OR PROPERTY AFTER JUNE 30, 1981; EXCEPT THAT FOR                                                   
15       A LEASE OR PROPERTY COMING INTO COMMERCIAL OIL PRODUCTION                                                         
16       AFTER JUNE 30, 1981, THE PERCENTAGE-OF-VALUE AMOUNT EQUALS                                                        
17       12.25 PERCENT OF THE GROSS VALUE AT THE POINT OF PRODUCTION OF                                                    
18       TAXABLE OIL PRODUCED FROM THE LEASE OR PROPERTY IN THE FIRST                                                      
19       FIVE YEARS AFTER THE START OF COMMERCIAL OIL PRODUCTION AND                                                       
20       EQUALS 15 PERCENT OF] the gross value at the point of production of taxable oil                                   
21       produced [THEREAFTER] from the lease or property.                                                                 
22    * Sec. 3.  AS 43.55.011(c) is amended to read:                                                                     
23            (c)  The cents-per-barrel amount equals [$0.60 PER BARREL OF TAXABLE                                         
24       OLD CRUDE OIL PRODUCED FROM THE LEASE OR PROPERTY, AND] $0.80                                                     
25       per barrel of taxable crude oil [FOR ALL OTHER TAXABLE OIL] produced from                                     
26       the lease or property, [BOTH] as adjusted by AS 43.55.012, multiplied by the                                  
27       economic limit factor determined for the oil production of the lease or property                              
28       under AS 43.55.013 and by the price adjustment factor set out in (e)(2)(C) of this                            
29       section.                                                                                                      
30    * Sec. 4.  AS 43.55.011 is amended by adding new subsections to read:                                              
31            (e)  Except as provided in (h) of this section for heavy oil, the tax rate is the                            
01       lesser of                                                                                                         
02                 (1)  25 percent; or                                                                                     
03                 (2)  the product of the volume adjusted tax rate multiplied by the price                                
04       adjustment factor; for purposes of                                                                                
05                      (A)  this paragraph, the volume adjusted tax rate is the greater                                   
06            of                                                                                                           
07                           (i)  five percent; or                                                                         
08                           (ii)  the economic limit factor determined for the oil                                        
09                 production of the lease or property under AS 43.55.013 multiplied by                                    
10                 the nominal tax rate;                                                                                   
11                      (B)  subparagraph (A) of this paragraph, the nominal tax rate is                                   
12                           (i)  12.25 percent during the first five years from the                                       
13                 date that is the start of commercial oil production; and                                                
14                           (ii)  15 percent after the first five years from the date                                     
15                 that is the start of commercial oil production; and                                                     
16                      (C)  this paragraph and for the purpose of determining the cents-                                  
17            per-barrel amount under (c) of this section, the price adjustment factor is one,                             
18            except that the price adjustment factor is the West Coast prevailing value                                   
19                           (i)  divided by 16 during each month in which the West                                        
20                 Coast prevailing value for oil under AS 43.55.020(f) averages less than                                 
21                 $16 per barrel;                                                                                         
22                           (ii)  divided by 20 during each month in which the West                                       
23                 Coast prevailing value for oil under AS 43.55.020(f) averages more                                      
24                 than $20 per barrel;                                                                                    
25            (f)  During a month in which the West Coast prevailing value for oil                                         
26       determined under AS 43.55.020(f) on which tax is due under this chapter averages less                             
27       than $10 per barrel, the payment of                                                                               
28                 (1)  one-half of the tax due and payable under this chapter is waived;                                  
29       and                                                                                                               
30                 (2)  the remaining one-half of the tax due and payable under this                                       
31       chapter is deferred, subject to the following:                                                                    
01                      (A)  the amount of tax payment that is deferred under this                                         
02            paragraph is payable by the taxpayer                                                                         
03                           (i)  during each month in which the West Coast                                                
04                 prevailing value for oil on which tax is due under this chapter averages                                
05                 at least $16 per barrel; and                                                                            
06                           (ii)  sequentially on a month-for-month basis in the                                          
07                 order in which the tax payment was deferred based on payment of one                                     
08                 month's deferred tax during each month that the West Coast prevailing                                   
09                 value for oil on which tax is due under this chapter averages at least                                  
10                 $16 per barrel; and                                                                                     
11                      (B)  amounts due and payable by reason of a payment deferral                                       
12            under this paragraph bear interest at the rate of a 10-year note of the United                               
13            States treasury at the time of the deferral.                                                                 
14            (g)  On and after July 1, 2005, the commissioner shall                                                       
15                 (1)  annually revise the dollar prices described in (e) and (f) of this                                 
16       section and the related denominators setout in (e)(2)(C)(i) and (ii) of this section to                           
17       reflect inflation as defined by regulation adopted by the department; and                                         
18                 (2)  promptly report the application of the revisions to all taxpayers                                  
19       subject to the tax levied and collected under this chapter.                                                       
20            (h)  Notwithstanding (e) of this section, the tax rate for heavy oil is the volume                           
21       adjusted tax rate.  The volume adjusted tax rate for heavy oil is determined by                                   
22       multiplying  the economic limit factor determined for the oil production of the lease or                          
23       property under AS 43.55.013 by the nominal tax rate set out in (e)(2)(A)(i) and (ii) of                           
24       this section.  In this subsection, "heavy oil" means oil equal to or less than 20 degrees                         
25       API gravity.                                                                                                      
26    * Sec. 5.  This Act takes effect July 1, 2004.