SB 163: "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."
00 SENATE BILL NO. 163 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." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 43.55.025(b) is amended to read: 06 (b) To qualify for the production tax credit under (a) of this section, an 07 exploration expenditure must be incurred for work performed on or after July 1, 2003, 08 and before July 1, 2007, except that an exploration expenditure for a Cook Inlet 09 prospect must be incurred for work performed on or after July 1, 2005, and 10 before July 1, 2010, and 11 (1) may be for seismic or geophysical exploration costs not connected 12 with a specific well; 13 (2) if for an exploration well, 14 (A) must be incurred by an explorer that holds an interest in the
01 exploration well for which the production tax credit is claimed; 02 (B) may be for either an oil or gas discovery well or a dry hole; 03 and 04 (C) must be for goods, services, or rentals of personal property 05 reasonably required for the surface preparation, drilling, casing, cementing, 06 and logging of an exploration well, and, in the case of a dry hole, for the 07 expenses required for abandonment if the well is abandoned within 18 months 08 after the date the well was spudded; 09 (3) may not be for testing, stimulation, or completion costs; 10 administration, supervision, engineering, or lease operating costs; geological or 11 management costs; community relations or environmental costs; bonuses, taxes, or 12 other payments to governments related to the well; or other costs that are generally 13 recognized as indirect costs or financing costs; and 14 (4) may not be incurred for an exploration well or seismic exploration 15 that is included in a plan of exploration or a plan of development for any unit on 16 May 13, 2003. 17 * Sec. 2. AS 43.55.025(c) is amended to read: 18 (c) To be eligible for a 20 percent production tax credit, exploration 19 expenditures must 20 (1) qualify under (b) of this section; and 21 (2) be for an exploration well, subject to the following: 22 (A) for an exploration well other than a well that is 23 described in (B) of this paragraph, the well must be [THAT IS] located and 24 drilled in such a manner that the bottom hole is located not less than three 25 miles away from the bottom hole of a preexisting suspended, completed, or 26 abandoned oil or gas well; in this subparagraph [PARAGRAPH], 27 "preexisting" means a well that was spudded more than 150 days but less than 28 35 years before the exploration well was spudded; 29 (B) for an exploration well that explores a Cook Inlet 30 prospect, the well must be located at least three miles from any other well 31 drilled for oil and gas with all distances measured as the horizontal
01 distance between exploration targets, except that the exploration well that 02 is located within three miles of a well drilled for oil and gas qualifies for 03 the tax credit authorized by this subsection if the exploration well tests 04 potential hydrocarbon traps that the commissioner of natural resources 05 determines, after analyzing evidence submitted by the explorer and from 06 other information that the commissioner of natural resources determines 07 relevant, constitute a distinctly separate exploration target. 08 * Sec. 3. AS 43.55.025(d) is amended to read: 09 (d) To be eligible for an additional 20 percent production tax credit, an 10 exploration expenditure must 11 (1) qualify under (b) of this section; and 12 (2) be for an exploration well that is located not less than 25 miles 13 outside of the outer boundary, as delineated on July 1, 2003, of any unit that is under a 14 plan of development, except that for an exploration well for a Cook Inlet prospect 15 to qualify under this paragraph, the exploration well must be located not less 16 than 10 miles outside the outer boundary, as delineated on July 1, 2003, of any 17 unit that is under a plan of development. 18 * Sec. 4. AS 43.55.025(f) is amended to read: 19 (f) For a production tax credit under this section, 20 (1) an explorer shall, in a form prescribed by the department and 21 within six months of the completion of the exploration activity, claim the credit and 22 submit information sufficient to demonstrate to the department's satisfaction that the 23 claimed exploration expenditures qualify under this section; 24 (2) an explorer shall agree, in writing, 25 (A) to notify the Department of Natural Resources, within 30 26 days after completion of seismic or geophysical data processing, completion of 27 a well, or filing of a claim for credit, whichever is the latest, for which 28 exploration costs are claimed, of the date of completion and submit a report to 29 that department describing the processing sequence and providing a list of data 30 sets available; if, under (c)(2)(B) of this section, an explorer submits a 31 claim for a credit for expenditures for an exploration well that is located
01 within three miles of a well already drilled for oil and gas, in addition to 02 the submissions required under (1) of this subsection, the explorer shall 03 submit the information necessary for the commissioner of natural 04 resources to evaluate the validity of the explorer's claim that the well is 05 directed at a distinctly separate exploration target, and the commissioner 06 of natural resources shall, upon receipt of all evidence sufficient for the 07 commissioner to evaluate the explorer's claim, make that determination 08 within 60 days; 09 (B) to provide to the Department of Natural Resources, within 10 30 days after the date of a request, specific data sets, ancillary data, and reports 11 identified in (A) of this paragraph; 12 (C) that, notwithstanding any provision of AS 38, information 13 provided under this paragraph will be held confidential by the Department of 14 Natural Resources for 10 years following the completion date, at which time 15 that department will release the information after 30 days' public notice; 16 (3) if more than one explorer holds an interest in a well or seismic 17 exploration, each explorer may claim an amount of credit that is proportional to the 18 explorer's cost incurred; 19 (4) the department may exercise the full extent of its powers as though 20 the explorer were a taxpayer under this title, in order to verify that the claimed 21 expenditures are qualified exploration expenditures under this section; and 22 (5) if the department is satisfied that the explorer's claimed 23 expenditures are qualified under this section, the department shall issue to the explorer 24 a production tax credit certificate for the amount of credit to be allowed against 25 production taxes due under this chapter; however, notwithstanding any other 26 provision of this section, the department may not issue to an explorer a 27 production tax credit certificate if the total of production tax credits submitted 28 for Cook Inlet production, based on exploration expenditures for work 29 performed during the period described in (b) of this section for that production, 30 that have been approved by the department exceeds $20,000,000. 31 * Sec. 5. AS 43.55.025(k) is amended to read:
01 (k) In this section, 02 (1) "Cook Inlet production" means oil or gas production from the 03 Cook Inlet sedimentary basin, as that term is defined by regulation adopted to 04 implement AS 38.05.180(f)(4); 05 (2) "Cook Inlet prospect" means a location within the Cook Inlet 06 sedimentary basin, as that term is defined by regulation adopted to implement 07 AS 38.05.180(f)(4); 08 (3) "explorer" means a person who, in exploring for new oil or gas 09 reserves, incurs expenditures.