CSHB 71(FIN): "An Act extending and amending the requirements applicable to the credit that may be claimed for certain oil and gas exploration expenses incurred in Cook Inlet against oil and gas properties production (severance) taxes, and amending the credit against those taxes for certain exploration expenditures from leases or properties in the state; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 71(FIN) 01 "An Act extending and amending the requirements applicable to the credit that may be 02 claimed for certain oil and gas exploration expenses incurred in Cook Inlet against oil 03 and gas properties production (severance) taxes, and amending the credit against those 04 taxes for certain exploration expenditures from leases or properties in the state; and 05 providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. AS 43.55.025(a) is amended to read: 08 (a) Subject to the terms and conditions of this section, on oil and gas produced 09 on or after July 1, 2004, from an oil and gas lease, or on gas produced from a gas 10 only lease, [ON OR AFTER JULY 1, 2004,] a credit against the production tax due 11 under this chapter is allowed for exploration expenditures that qualify under (b) of 12 this section in an amount equal to one of the following: 13 (1) 20 percent of the total exploration expenditures that qualify only
01 under (b) and (c) of this section; 02 (2) [,] 20 percent of the total exploration expenditures that qualify only 03 under (b) and (d) of this section [, OR BOTH, FOR A TOTAL CREDIT THAT DOES 04 NOT EXCEED 40 PERCENT OF THE TOTAL EXPLORATION 05 EXPENDITURES]; 06 (3) 40 percent of the total exploration expenditures that qualify 07 under (b), (c), and (d) of this section; or 08 (4) [(2)] 40 percent of the total exploration expenditures that qualify 09 only under (b) and (e) of this section [, FOR A TOTAL PRODUCTION TAX 10 CREDIT THAT DOES NOT EXCEED 40 PERCENT OF THE TOTAL QUALIFIED 11 EXPLORATION EXPENDITURES]. 12 * Sec. 2. AS 43.55.025(b) is amended to read: 13 (b) To qualify for the production tax credit under (a) of this section, an 14 exploration expenditure must be incurred for work performed on or after July 1, 2003, 15 and before July 1, 2007, except that an exploration expenditure for a Cook Inlet 16 prospect must be incurred for work performed on or after July 1, 2005, and 17 before July 1, 2010, and except that an exploration expenditure, in whole or in 18 part, south of 68 degrees, 15 minutes, North latitude, and not part of a Cook Inlet 19 prospect must be incurred for work performed on or after July 1, 2003, and 20 before July 1, 2010, and 21 (1) may be for seismic or geophysical exploration costs not connected 22 with a specific well; 23 (2) if for an exploration well, 24 (A) must be incurred by an explorer that holds an interest in the 25 exploration well for which the production tax credit is claimed; 26 (B) may be for either an oil or gas discovery well or a dry hole; 27 and 28 (C) must be for goods, services, or rentals of personal property 29 reasonably required for the surface preparation, drilling, casing, cementing, 30 and logging of an exploration well, and, in the case of a dry hole, for the 31 expenses required for abandonment if the well is abandoned within 18 months
01 after the date the well was spudded; 02 (3) may not be for testing, stimulation, or completion costs; 03 administration, supervision, engineering, or lease operating costs; geological or 04 management costs; community relations or environmental costs; bonuses, taxes, or 05 other payments to governments related to the well; or other costs that are generally 06 recognized as indirect costs or financing costs; and 07 (4) may not be incurred for an exploration well or seismic exploration 08 that is included in a plan of exploration or a plan of development for any unit on 09 May 13, 2003. 10 * Sec. 3. AS 43.55.025(c) is amended to read: 11 (c) To be eligible for the [A] 20 percent production tax credit authorized by 12 (a)(1) of this section or the 40 percent production tax credit authorized by (a)(3) 13 of this section, exploration expenditures must 14 (1) qualify under (b) of this section; and 15 (2) be for an exploration well, subject to the following: 16 (A) for an exploration well other than a well that is 17 described in (B) of this paragraph, the well must be [THAT IS] located and 18 drilled in such a manner that the bottom hole is located not less than three 19 miles away from the bottom hole of a preexisting suspended, completed, or 20 abandoned oil or gas well; in this subparagraph [PARAGRAPH], 21 "preexisting" means a well that was spudded more than 150 days but less than 22 35 years before the exploration well was spudded; 23 (B) for an exploration well that explores a Cook Inlet 24 prospect, the well must be located at least three miles from any other well 25 drilled for oil and gas with all distances measured as the horizontal 26 distance between exploration targets, except that the exploration well that 27 is located within three miles of a well drilled for oil and gas qualifies for 28 the tax credit authorized by this subsection if the exploration well tests 29 potential hydrocarbon traps that the commissioner of natural resources 30 determines, after analyzing evidence submitted by the explorer and from 31 other information that the commissioner of natural resources determines
01 relevant, constitute a distinctly separate exploration target. 02 * Sec. 4. AS 43.55.025(d) is amended to read: 03 (d) To be eligible for the [AN ADDITIONAL] 20 percent production tax 04 credit authorized by (a)(2) of this section or the 40 percent production tax credit 05 authorized by (a)(3) of this section, an exploration expenditure must 06 (1) qualify under (b) of this section; and 07 (2) be for an exploration well that is located not less than 25 miles 08 outside of the outer boundary, as delineated on July 1, 2003, of any unit that is under a 09 plan of development, except that for an exploration well for a Cook Inlet prospect 10 to qualify under this paragraph, the exploration well must be located not less 11 than 10 miles outside the outer boundary, as delineated on July 1, 2003, of any 12 unit that is under a plan of development. 13 * Sec. 5. AS 43.55.025(e) is amended to read: 14 (e) To be eligible for the 40 percent production tax credit authorized by 15 (a)(4) [IN (a)] of this section, the exploration expenditure must 16 (1) qualify under (b) of this section; 17 (2) be for seismic exploration; and 18 (3) have been conducted outside the boundaries of a production unit or 19 an exploration unit; however, the amount of the expenditure that is otherwise eligible 20 under this subsection is reduced proportionately by the portion of the seismic 21 exploration activity that crossed into a production unit or an exploration unit. 22 * Sec. 6. AS 43.55.025(f) is amended to read: 23 (f) For a production tax credit under this section, 24 (1) an explorer shall, in a form prescribed by the department and 25 within six months of the completion of the exploration activity, claim the credit and 26 submit information sufficient to demonstrate to the department's satisfaction that the 27 claimed exploration expenditures qualify under this section; 28 (2) an explorer shall agree, in writing, 29 (A) to notify the Department of Natural Resources, within 30 30 days after completion of seismic or geophysical data processing, completion of 31 a well, or filing of a claim for credit, whichever is the latest, for which
01 exploration costs are claimed, of the date of completion and submit a report to 02 that department describing the processing sequence and providing a list of data 03 sets available; if, under (c)(2)(B) of this section, an explorer submits a 04 claim for a credit for expenditures for an exploration well that is located 05 within three miles of a well already drilled for oil and gas, in addition to 06 the submissions required under (1) of this subsection, the explorer shall 07 submit the information necessary for the commissioner of natural 08 resources to evaluate the validity of the explorer's claim that the well is 09 directed at a distinctly separate exploration target, and the commissioner 10 of natural resources shall, upon receipt of all evidence sufficient for the 11 commissioner to evaluate the explorer's claim, make that determination 12 within 60 days; 13 (B) to provide to the Department of Natural Resources, within 14 30 days after the date of a request, specific data sets, ancillary data, and reports 15 identified in (A) of this paragraph; 16 (C) that, notwithstanding any provision of AS 38, information 17 provided under this paragraph will be held confidential by the Department of 18 Natural Resources for 10 years following the completion date, at which time 19 that department will release the information after 30 days' public notice; 20 (3) if more than one explorer holds an interest in a well or seismic 21 exploration, each explorer may claim an amount of credit that is proportional to the 22 explorer's cost incurred; 23 (4) the department may exercise the full extent of its powers as though 24 the explorer were a taxpayer under this title, in order to verify that the claimed 25 expenditures are qualified exploration expenditures under this section; and 26 (5) if the department is satisfied that the explorer's claimed 27 expenditures are qualified under this section, the department shall issue to the explorer 28 a production tax credit certificate for the amount of credit to be allowed against 29 production taxes due under this chapter; however, notwithstanding any other 30 provision of this section, the department may not issue to an explorer a 31 production tax credit certificate if the total of production tax credits submitted
01 for Cook Inlet production, based on exploration expenditures for work 02 performed during the period described in (b) of this section for that production, 03 that have been approved by the department exceeds $20,000,000. 04 * Sec. 7. AS 43.55.025(k) is amended to read: 05 (k) In this section, 06 (1) "Cook Inlet production" means oil or gas production from the 07 Cook Inlet sedimentary basin, as that term is defined by regulation adopted to 08 implement AS 38.05.180(f)(4); 09 (2) "Cook Inlet prospect" means a location within the Cook Inlet 10 sedimentary basin, as that term is defined by regulation adopted to implement 11 AS 38.05.180(f)(4); 12 (3) "explorer" means a person who, in exploring for new oil or gas 13 reserves, incurs expenditures. 14 * Sec. 8. AS 43.55.025 is amended by adding a new subsection to read: 15 (l) The provisions of this section do not apply to the Arctic National Wildlife 16 Refuge. 17 * Sec. 9. This Act takes effect immediately under AS 01.10.070(c).