CSSB 305(FIN) am: "An Act repealing the oil production tax and the gas production tax and providing for a production tax on oil and gas; relating to the calculation of the gross value at the point of production of oil and gas and to the determination of the value of oil and gas for purposes of the production tax on oil and gas; providing for tax credits against the production tax on oil and gas; relating to the relationship of the production tax on oil and gas to other taxes, to the dates those tax payments and surcharges are due, to interest on overpayments of the tax, and to the treatment of the tax in a producer's settlement with the royalty owners; relating to flared gas, and to oil and gas used in the operation of a lease or property under the production tax; relating to the prevailing value of oil and gas under the production tax; relating to surcharges on oil; relating to statements or other information required to be filed with or furnished to the Department of Revenue, to the penalty for failure to file certain reports for the tax, to the powers of the Department of Revenue, and to the disclosure of certain information required to be furnished to the Department of Revenue as applicable to the administration of the tax; relating to criminal penalties for violating conditions governing access to and use of confidential information relating to the tax, and to the deposit of tax money collected by the Department of Revenue; amending the definitions of 'gas,' 'oil,' and certain other terms for purposes of the production tax, and as the definition of the term 'gas' applies in the Alaska Stranded Gas Development Act, and adding further definitions; making conforming amendments; and providing for an effective date."
00 CS FOR SENATE BILL NO. 305(FIN) am 01 "An Act repealing the oil production tax and the gas production tax and providing for a 02 production tax on oil and gas; relating to the calculation of the gross value at the point 03 of production of oil and gas and to the determination of the value of oil and gas for 04 purposes of the production tax on oil and gas; providing for tax credits against the 05 production tax on oil and gas; relating to the relationship of the production tax on oil 06 and gas to other taxes, to the dates those tax payments and surcharges are due, to 07 interest on overpayments of the tax, and to the treatment of the tax in a producer's 08 settlement with the royalty owners; relating to flared gas, and to oil and gas used in the 09 operation of a lease or property under the production tax; relating to the prevailing 10 value of oil and gas under the production tax; relating to surcharges on oil; relating to 11 statements or other information required to be filed with or furnished to the 12 Department of Revenue, to the penalty for failure to file certain reports for the tax, to
01 the powers of the Department of Revenue, and to the disclosure of certain information 02 required to be furnished to the Department of Revenue as applicable to the 03 administration of the tax; relating to criminal penalties for violating conditions 04 governing access to and use of confidential information relating to the tax, and to the 05 deposit of tax money collected by the Department of Revenue; amending the definitions 06 of 'gas,' 'oil,' and certain other terms for purposes of the production tax, and as the 07 definition of the term 'gas' applies in the Alaska Stranded Gas Development Act, and 08 adding further definitions; making conforming amendments; and providing for an 09 effective date." 10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 11 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 12 to read: 13 LEGISLATIVE INTENT. (a) It is the intent of the legislature through sec. 11 of this 14 Act to confirm by clarification the long-standing interpretation of AS 43.55.020(f) by the 15 Department of Revenue. 16 (b) It is the intent of the legislature that the division or other unit of the Department of 17 Environmental Conservation assigned responsibility for administration of the programs under 18 AS 46.08 that are principally supported by the conservation surcharges on oil levied under 19 AS 43.55.201 - 43.55.299 and 43.55 300 - 43.55.310 20 (1) reduce program costs, including personnel costs, as necessary to operate 21 within the revenue anticipated to be generated by those surcharges, in the amounts of those 22 surcharges as amended by secs. 26 and 28 of this Act; and 23 (2) request appropriations for exceptional program needs and expansions 24 beyond what can be provided from the estimated amounts collected from those surcharges 25 from alternative funding sources. 26 * Sec. 2. AS 43.05.230(f) is amended to read: 27 (f) A wilful violation of the provisions of this section or of a condition 28 imposed under AS 43.55.040(1)(B) is punishable by a fine of not more than $5,000,
01 or by imprisonment for not more than two years, or by both. 02 * Sec. 3. AS 43.20.031(c) is amended to read: 03 (c) In computing the tax under this chapter, the taxpayer is not entitled to 04 deduct any taxes based on or measured by net income. The taxpayer may deduct the 05 tax levied and paid under AS 43.55. 06 * Sec. 4. AS 43.20.072(b) is amended to read: 07 (b) A taxpayer's business income to be apportioned under this section to the 08 state shall be the federal taxable income of the taxpayer's consolidated business for the 09 tax period, except that 10 (1) taxes based on or measured by net income that are deducted in the 11 determination of the federal taxable income shall be added back; the tax levied and 12 paid under AS 43.55 may not be added back; 13 (2) intangible drilling and development costs that are deducted as 14 expenses under 26 U.S.C. 263(c) (Internal Revenue Code) in the determination of the 15 federal taxable income shall be capitalized and depreciated as if the option to treat 16 them as expenses under 26 U.S.C. 263(c) (Internal Revenue Code) had not been 17 exercised; 18 (3) depletion deducted on the percentage depletion basis under 26 19 U.S.C. 613 (Internal Revenue Code) in the determination of the federal taxable income 20 shall be recomputed and deducted on the cost depletion basis under 26 U.S.C. 612 21 (Internal Revenue Code); and 22 (4) depreciation shall be computed on the basis of 26 U.S.C. 167 23 (Internal Revenue Code) as that section read on June 30, 1981. 24 * Sec. 5. AS 43.55.011 is amended by adding new subsections to read: 25 (e) There is levied on the producer of oil or gas a tax for all oil and gas 26 produced each month from each lease or property in the state, less any oil and gas the 27 ownership or right to which is exempt from taxation or constitutes a lessor's royalty 28 interest under an oil and gas lease. The tax is equal to 29 (1) for oil that is produced in the Cook Inlet sedimentary basin, as that 30 term is defined by regulations adopted to implement AS 38.05.180(f)(4), five percent 31 of the production tax value of the taxable oil as calculated under AS 43.55.160; and
01 (2) except as to oil described in (1) of this subsection, 22.5 percent of 02 the production tax value of the taxable oil and gas as calculated under AS 43.55.160. 03 (f) There is levied on the producer of oil or gas a tax for all oil and gas 04 produced each month from each lease or property in the state the ownership or right to 05 which constitutes a lessor's royalty interest under an oil and gas lease, except for oil 06 and gas the ownership or right to which is exempt from taxation. The provisions of 07 this subsection apply to a lessor's royalty interest under an oil and gas lease as follows: 08 (1) the rate of tax levied on oil produced from a lease is equal to five 09 percent of the gross value at the point of production of the oil; 10 (2) the rate of tax levied on gas produced from a lease is equal to 1.667 11 percent of the gross value at the point of production of the gas; 12 (3) if the department determines that, for purposes of reducing the 13 producer's tax liability under (1) or (2) of this subsection, the producer has received or 14 will receive consideration from the lessor offsetting all or a part of the producer's 15 royalty obligation, other than a deduction under AS 43.55.020(d) of the amount of a 16 tax paid, 17 (A) notwithstanding (1) of this subsection, the tax is equal to 18 (i) for oil that is produced in the Cook Inlet sedimentary 19 basin, as that term is defined by regulations adopted to implement 20 AS 38.05.180(f)(4), five percent of the gross value at the point of 21 production of the oil; and 22 (ii) for oil, except oil described in (i) of this 23 subparagraph, 22.5 percent of the gross value at the point of production 24 of the oil; and 25 (B) notwithstanding (2) of this subsection, the tax is equal to 26 7.5 percent of the gross value at the point of production of the gas. 27 (g) In addition to the taxes levied under (e) and (f) of this section, if the 28 average ANS West Coast price per barrel of oil during a month exceeds $50, there is 29 levied on the producer of oil a tax for oil produced during that month from each lease 30 or property in the state, less any oil the ownership or right to which is exempt from 31 taxation or that constitutes a lessor's royalty interest under an oil and gas lease. The tax
01 levied under this subsection is equal to 02 [((ANS West Coast price - $50) x .002) x [ANS wellhead price x (1 - PPT rate)]] 03 x (total taxable barrels of oil at the point of production) 04 where 05 (1) "ANS wellhead price" means the prevailing value for oil produced 06 in the Alaska North Slope area; and 07 (2) the PPT, or production profit tax, rate is the tax rate described in (e) 08 of this section. 09 (h) For purposes of (g) of this section, the department may calculate the 10 average price or may, by regulation, specify the method by which the average price 11 shall be calculated with reference to one or more published sources of price 12 information. If, in the department's judgment, reliable published sources of price 13 information on Alaska North Slope crude oil cease, or appear likely to soon cease, to 14 be available, or if, in the department's judgment, the price of Alaska North Slope crude 15 oil ceases, or appears likely to soon cease, to be a reliable indicator of the general 16 price level of crude oils, the department shall, by regulation, specify a substitute 17 formula for computing the oil price index. The substitute formula specified by the 18 department under this subsection must bear, as nearly as is reasonably possible, the 19 same relationship to the general price level of crude oils as did the price of Alaska 20 North Slope crude oil. 21 * Sec. 6. AS 43.55.017(a) is amended to read: 22 (a) Except as provided in this chapter, the taxes imposed by this chapter are in 23 place of all taxes now imposed by the state or any of its municipalities, and neither the 24 state nor a municipality may impose a tax on [UPON] 25 (1) producing oil or gas leases; 26 (2) oil or gas produced or extracted in the state; 27 (3) the value of intangible drilling and development costs, as 28 described in 26 U.S.C. 263(c) (Internal Revenue Code), as amended through 29 January 1, 1974 [EXPLORATION EXPENSES]. 30 * Sec. 7. AS 43.55.020(a) is repealed and reenacted to read: 31 (a) Ninety-five percent of the total tax levied under AS 43.55.011(e) - (g), net
01 of any credits applied under this chapter, is due on the last day of each calendar month 02 on oil and gas produced from each lease or property during the preceding month. The 03 remaining portion of the tax levied under AS 43.55.011(e) - (g), net of any credits 04 applied under this chapter, is due on March 31 of the year following the calendar year 05 during which the oil and gas were produced. An unpaid amount of tax that is not paid 06 when due in accordance with this subsection becomes delinquent. An overpayment of 07 tax with respect to a month may be applied against the tax due for any later month. 08 Notwithstanding any contrary provision of AS 43.05.280, interest on an overpayment 09 is allowed only from a date that is 90 days after the later of (1) the March 31 described 10 in this subsection, or (2) the date that the statement required under AS 43.55.030(a) 11 and (e) to be filed on or before that March 31 is filed. Interest is not allowed if the 12 overpayment was refunded within the 90-day period. 13 * Sec. 8. AS 43.55.020(b) is amended to read: 14 (b) The production tax on oil and [OR] gas shall be paid by or on behalf of the 15 producer. 16 * Sec. 9. AS 43.55.020(d) is amended to read: 17 (d) In making settlement with the royalty owner for oil and gas that is 18 taxable under AS 43.55.011, the producer may deduct the amount of the tax paid on 19 taxable royalty oil and [OR] gas, or may deduct taxable royalty oil or gas equivalent 20 in value at the time the tax becomes due to the amount of the tax paid. Unless 21 otherwise agreed between the producer and the royalty owner, the amount of the 22 tax paid under AS 43.55.011(e) and (g) on taxable royalty oil and gas for a month, 23 other than oil and gas the ownership or right to which constitutes a lessor's 24 royalty interest under an oil and gas lease, is considered to be the gross value at 25 the point of production of the taxable royalty oil and gas produced during the 26 month multiplied by a figure that is a quotient, in which 27 (1) the numerator is the producer's total tax liability under 28 AS 43.55.011(e) and (g) for the month of production; and 29 (2) the denominator is the total gross value at the point of 30 production of the oil and gas taxable under AS 43.55.011(e) and (g) produced by 31 the producer from all leases and properties in the state during the month.
01 * Sec. 10. AS 43.55.020(e) is repealed and reenacted to read: 02 (e) Gas flared, released, or allowed to escape in excess of the amount 03 authorized by the Alaska Oil and Gas Conservation Commission is considered, for the 04 purpose of AS 43.55.011 - 43.55.180, as gas produced from a lease or property. Oil or 05 gas used in the operation of a lease or property in the state in drilling for or producing 06 oil or gas, or for repressuring, except to the extent determined by the Alaska Oil and 07 Gas Conservation Commission to be waste, is not considered, for the purpose of 08 AS 43.55.011 - 43.55.180, as oil or gas produced from a lease or property. 09 * Sec. 11. AS 43.55.020(f) is amended to read: 10 (f) If oil or gas is produced but not sold, or if oil or gas is produced and 11 sold under circumstances where the sale price does not represent the prevailing value 12 for oil or gas of like kind, character, or quality in the field or area from which the 13 product is produced, the department may require the tax to be paid upon the basis of 14 the value of oil or gas of the same kind, quality, and character prevailing for that field 15 or area during the calendar month of production or sale [FOR THAT FIELD OR 16 AREA]. 17 * Sec. 12. AS 43.55 is amended by adding a new section to read: 18 Sec. 43.55.024. Tax credits for certain losses and expenditures. (a) A 19 producer or explorer may take a tax credit for a qualified capital expenditure as 20 follows: 21 (1) notwithstanding that a qualified capital expenditure may be a 22 deductible lease expenditure for purposes of calculating the production tax value of oil 23 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 24 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, 25 (A) a producer or explorer that incurs a qualified capital 26 expenditure may also elect to take a tax credit against a tax due under 27 AS 43.55.011(e) in the amount of 25 percent of that expenditure; 28 (B) for a calendar year for which the producer makes an 29 election under AS 43.55.160(f), instead of taking a tax credit at a rate 30 authorized by (A) of this paragraph as to each separate qualified capital 31 expenditure after it has been incurred, a producer that incurs a qualified capital
01 expenditure during that year and that wishes to apply a credit based on that 02 expenditure against a tax due under AS 43.55.011(e) shall calculate and apply 03 every month an annualized tax credit in an amount equal to 2 1/12 percent of 04 the total qualified capital expenditures incurred during that year and for which 05 the tax credit is taken for that year; 06 (2) a producer or explorer may take a credit for a qualified capital 07 expenditure incurred in connection with geological or geophysical exploration or in 08 connection with an exploration well only if the producer or explorer provides to the 09 department, as part of the statement required under AS 43.55.030(a) for the month for 10 which the credit is sought to be taken, the producer's or explorer's written agreement 11 (A) to notify the Department of Natural Resources, within 30 12 days after completion of the geological or geophysical data processing or 13 completion of the well, or within 30 days after the statement is filed, whichever 14 is the latest, of the date of completion and to submit a report to that department 15 describing the processing sequence and provide a list of data sets available; 16 (B) to provide to the Department of Natural Resources, within 17 30 days after the date of a request, specific data sets, ancillary data, and reports 18 identified in (A) of this paragraph; 19 (C) that, notwithstanding any provision of AS 38, the 20 Department of Natural Resources shall hold confidential the information 21 provided to that department under this paragraph for 10 years following the 22 completion date, after which the department shall publicly release the 23 information after 30 days' public notice. 24 (b) A producer or explorer may elect to take a tax credit in the amount of 22.5 25 percent of a carried-forward annual loss. A credit under this subsection may be applied 26 against a tax due under AS 43.55.011(e) and may be applied irrespective of whether 27 the producer or explorer also claims a credit for transitional investment expenditures 28 authorized by (i) of this section. For purposes of this subsection, a carried-forward 29 annual loss is the amount of a producer's or explorer's adjusted lease expenditures 30 under AS 43.55.160 for a previous calendar year that was not deductible in any month 31 under AS 43.55.160(a) and (b).
01 (c) A credit or portion of a credit under this section may not be used to reduce 02 a person's tax liability under AS 43.55.011(e) for any month below zero, and any 03 unused credit or portion of a credit not used under this subsection may be applied in a 04 later month. 05 (d) Except as limited by (i) of this section, a person entitled to take a tax credit 06 under this section that wishes to transfer the unused credit to another person may 07 apply to the department for a transferable tax credit certificate. An application under 08 this subsection must be on a form prescribed by the department and must include 09 supporting information and documentation that the department reasonably requires. 10 The department shall grant or deny an application, or grant an application as to a lesser 11 amount than that claimed and deny it as to the excess, not later than 60 days after the 12 latest of (1) March 31 of the year following the calendar year in which the qualified 13 capital expenditure or carried-forward annual loss for which the credit is claimed was 14 incurred; (2) if the applicant is required under AS 43.55.030(a) and (e) to file a 15 statement on or before March 31 of the year following the calendar year in which the 16 qualified capital expenditures or carried-forward annual loss for which the credit is 17 claimed was incurred, the date the statement was filed; or (3) the date the application 18 was received by the department. If, based on the information then available to it, the 19 department is reasonably satisfied that the applicant is entitled to a credit, the 20 department shall issue the applicant a transferable tax credit certificate for the amount 21 of the credit. A certificate issued under this subsection does not expire. 22 (e) A person to which a transferable tax credit certificate is issued under (d) of 23 this section may transfer the certificate to another person, and a transferee may further 24 transfer the certificate. Subject to the limitations set out in (a) - (c) of this section, and 25 notwithstanding any action the department may take with respect to the applicant 26 under (f) of this section, the owner of a certificate may apply the credit or a portion of 27 the credit shown on the certificate only against a tax due under AS 43.55.011(e). 28 However, a credit shown on a transferable tax credit certificate may not be applied to 29 reduce a transferee's total tax due under AS 43.55.011(e) on oil and gas produced 30 during a calendar year to less than 80 percent of the tax that would otherwise be due 31 without applying that credit. Any portion of a credit not used under this subsection
01 may be applied in a later period. 02 (f) The issuance of a transferable tax credit certificate under (d) of this section 03 does not limit the department's ability to later investigate or audit a tax credit claim to 04 which the certificate relates or to adjust or deny the claim if the department determines 05 that the applicant was not entitled to the amount of the credit for which the certificate 06 was issued. The tax liability of the applicant under AS 43.55.011(e) and 43.55.017 - 07 43.55.180 is increased by the amount of the credit that exceeds that to which the 08 applicant was entitled. That amount bears interest under AS 43.05.225 from the date 09 the transferable tax credit certificate was issued. For purposes of this subsection, an 10 applicant that is an explorer is considered a producer subject to the tax levied under 11 AS 43.55.011(e). 12 (g) The department may adopt regulations to carry out the purposes of this 13 section, including prescribing reporting, record keeping, and certification procedures 14 and requirements to verify the accuracy of credits claimed and to ensure that a credit is 15 not used more than once, and otherwise implementing this section. 16 (h) A person may not elect to take a tax credit under (a) or (i) of this section 17 for an expenditure incurred to acquire an asset (1) the cost of previously acquiring 18 which was a lease expenditure under AS 43.55.160(c) or would have been a lease 19 expenditure under AS 43.55.160(c) if it had been incurred on or after April 1, 2006; or 20 (2) that has previously been placed in service in the state. An expenditure to acquire an 21 asset is not excluded under this subsection if not more than an immaterial portion of 22 the asset meets a description under (1) or (2) of this subsection. For purposes of this 23 subsection, "asset" includes geological, geophysical, and well data and interpretations. 24 (i) For the purposes of this section, 25 (1) a producer's or explorer's transitional investment expenditures are 26 the sum of the expenditures the producer or explorer incurred on or after April 1, 27 2001, and before April 1, 2006, that would be qualified capital expenditures if they 28 were incurred on or after April 1, 2006, less the sum of the payments or credits the 29 producer or explorer received before April 1, 2006, for the sale or other transfer of 30 assets, including geological, geophysical, or well data or interpretations, acquired by 31 the producer or explorer as a result of expenditures the producer or explorer incurred
01 before April 1, 2006, that would be qualified capital expenditures, if they were 02 incurred on or after April 1, 2006; 03 (2) a producer or explorer may elect to take a tax credit against a tax 04 due under AS 43.55.011(e) in the amount of 20 percent of the producer's or explorer's 05 transitional investment expenditures, but only to the extent that the amount does not 06 exceed 07 (A) one-half of the producer's or explorer's qualified capital 08 expenditures that are incurred during the month for which the credit is taken, if 09 the producer or explorer does not make an election under AS 43.55.160(f); 10 (B) 1/24 of the producer's or explorer's qualified capital 11 expenditures that are incurred during the calendar year that includes the month 12 for which the credit is taken, if the producer or explorer makes an election 13 under AS 43.55.160(f); 14 (3) a producer or explorer may not take a tax credit for a transitional 15 investment expenditure 16 (A) in any month that ends after March 31, 2013; 17 (B) more than once; or 18 (C) if a credit for that expenditure was taken under 19 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 20 (4) notwithstanding (d) - (f) of this section, a producer or explorer may 21 not transfer a tax credit or obtain a transferable tax credit certificate for a transitional 22 investment expenditure. 23 (j) As a condition of receiving a tax credit under this section, a producer, 24 explorer, or other taxpayer that obtains the tax credit for or directly related to a 25 pipeline, facility, or other asset that 26 (1) is or becomes subject to regulation by the Federal Energy 27 Regulatory Commission or the Regulatory Commission of Alaska, or a successor 28 regulatory body shall at all times support and in all rate proceedings file to flow 29 through 100 percent of the tax credits to ratepayers as a reduction in the costs of 30 service for the pipeline, facility, or other asset; 31 (2) is not regulated by the Federal Energy Regulatory Commission or
01 the Regulatory Commission of Alaska, or a successor regulatory body, and that 02 charges third parties for use of a pipeline, facility, or other asset shall flow through 03 100 percent of the tax credits as a reduction in the costs of service on which the 04 charges set by the producer, explorer, or other taxpayer for the pipeline, facility, or 05 other asset are based. 06 (k) To ensure compliance with (j) of this section, the department 07 (1) may review the books and records of a producer, explorer, or 08 taxpayer receiving a credit that is subject to the conditions of that subsection; and 09 (2) shall, if the department determines that the producer, explorer, or 10 taxpayer receiving a credit that is subject to the conditions of (j) of this section has not 11 complied with (j)(1) or (2) of this section, disallow the credit for the period in which 12 the producer, explorer, or taxpayer was not in compliance and require repayment of an 13 amount equal to the amount of the credit received. 14 (l) In this section, "qualified capital expenditure" means, except as otherwise 15 provided in (h) of this section, an expenditure that is a lease expenditure under 16 AS 43.55.160 and is 17 (1) incurred for geological or geophysical exploration; or 18 (2) treated as a capitalized expenditure under 26 U.S.C. (Internal 19 Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) 20 (Internal Revenue Code), as amended, and is 21 (A) treated as a capitalized expenditure for federal income tax 22 reporting purposes by the person incurring the expenditure; or 23 (B) eligible to be deducted as an expense under 26 U.S.C. 24 263(c) (Internal Revenue Code), as amended. 25 * Sec. 13. AS 43.55.025(a) is amended to read: 26 (a) Subject to the terms and conditions of this section, [ON OIL AND GAS 27 PRODUCED ON OR AFTER JULY 1, 2004, FROM AN OIL AND GAS LEASE, 28 OR ON GAS PRODUCED FROM A GAS ONLY LEASE,] a credit against the 29 production tax due under AS 43.55.011(e) [THIS CHAPTER] is allowed for 30 exploration expenditures that qualify under (b) of this section in an amount equal to 31 one of the following:
01 (1) 20 percent of the total exploration expenditures that qualify only 02 under (b) and (c) of this section; 03 (2) 20 percent of the total exploration expenditures for work performed 04 before July 1, 2007, and that qualify only under (b) and (d) of this section; 05 (3) 40 percent of the total exploration expenditures that qualify under 06 (b), (c), and (d) of this section; or 07 (4) 40 percent of the total exploration expenditures that qualify only 08 under (b) and (e) of this section. 09 * Sec. 14. AS 43.55.025(b) is amended to read: 10 (b) To qualify for the production tax credit under (a) of this section, an 11 exploration expenditure must be incurred for work performed on or after July 1, 2003, 12 and before July 1, 2016 [2007], except that an exploration expenditure for a Cook Inlet 13 prospect must be incurred for work performed on or after July 1, 2005, [AND 14 BEFORE JULY 1, 2010, AND EXCEPT THAT AN EXPLORATION 15 EXPENDITURE, IN WHOLE OR IN PART, SOUTH OF 68 DEGREES, 15 16 MINUTES, NORTH LATITUDE, AND NOT PART OF A COOK INLET 17 PROSPECT MUST BE INCURRED FOR WORK PERFORMED ON OR AFTER 18 JULY 1, 2003, AND BEFORE JULY 1, 2010,] and 19 (1) may be for seismic or geophysical exploration costs not connected 20 with a specific well; 21 (2) if for an exploration well, 22 (A) must be incurred by an explorer that holds an interest in the 23 exploration well for which the production tax credit is claimed; 24 (B) may be for either an oil or gas discovery well or a dry hole; 25 and 26 (C) must be for goods, services, or rentals of personal property 27 reasonably required for the surface preparation, drilling, casing, cementing, 28 and logging of an exploration well, and, in the case of a dry hole, for the 29 expenses required for abandonment if the well is abandoned within 18 months 30 after the date the well was spudded; 31 (3) may not be for testing, stimulation, or completion costs;
01 administration, supervision, engineering, or lease operating costs; geological or 02 management costs; community relations or environmental costs; bonuses, taxes, or 03 other payments to governments related to the well; or other costs that are generally 04 recognized as indirect costs or financing costs; and 05 (4) may not be incurred for an exploration well or seismic exploration 06 that is included in a plan of exploration or a plan of development for any unit on 07 May 13, 2003. 08 * Sec. 15. AS 43.55.025(f) is amended to read: 09 (f) For a production tax credit under this section, 10 (1) an explorer shall, in a form prescribed by the department and 11 within six months of the completion of the exploration activity, claim the credit and 12 submit information sufficient to demonstrate to the department's satisfaction that the 13 claimed exploration expenditures qualify under this section; 14 (2) an explorer shall agree, in writing, 15 (A) to notify the Department of Natural Resources, within 30 16 days after completion of seismic or geophysical data processing, completion of 17 a well, or filing of a claim for credit, whichever is the latest, for which 18 exploration costs are claimed, of the date of completion and submit a report to 19 that department describing the processing sequence and providing a list of data 20 sets available; if, under (c)(2)(B) of this section, an explorer submits a claim 21 for a credit for expenditures for an exploration well that is located within three 22 miles of a well already drilled for oil and gas, in addition to the submissions 23 required under (1) of this subsection, the explorer shall submit the information 24 necessary for the commissioner of natural resources to evaluate the validity of 25 the explorer's claim that the well is directed at a distinctly separate exploration 26 target, and the commissioner of natural resources shall, upon receipt of all 27 evidence sufficient for the commissioner to evaluate the explorer's claim, make 28 that determination within 60 days; 29 (B) to provide to the Department of Natural Resources, within 30 30 days after the date of a request, specific data sets, ancillary data, and reports 31 identified in (A) of this paragraph;
01 (C) that, notwithstanding any provision of AS 38, information 02 provided under this paragraph will be held confidential by the Department of 03 Natural Resources for 10 years following the completion date, at which time 04 that department will release the information after 30 days' public notice; 05 (3) if more than one explorer holds an interest in a well or seismic 06 exploration, each explorer may claim an amount of credit that is proportional to the 07 explorer's cost incurred; 08 (4) the department may exercise the full extent of its powers as though 09 the explorer were a taxpayer under this title, in order to verify that the claimed 10 expenditures are qualified exploration expenditures under this section; and 11 (5) if the department is satisfied that the explorer's claimed 12 expenditures are qualified under this section, the department shall issue to the explorer 13 a production tax credit certificate for the amount of credit to be allowed against 14 production taxes due under AS 43.55.011(e) [THIS CHAPTER]; however, 15 notwithstanding any other provision of this section, after the end of the calendar 16 year following the calendar year in which the total of production tax credit 17 certificates issued by the department under this section based on exploration 18 expenditures for Cook Inlet prospects reaches $20,000,000, the department may 19 not issue to an explorer a production tax credit certificate [IF THE TOTAL OF 20 PRODUCTION TAX CREDITS SUBMITTED FOR COOK INLET 21 PRODUCTION,] based on an exploration expenditure for a Cook Inlet prospect 22 [EXPENDITURES FOR WORK PERFORMED DURING THE PERIOD 23 DESCRIBED IN (b) OF THIS SECTION FOR THAT PRODUCTION, THAT HAVE 24 BEEN APPROVED BY THE DEPARTMENT EXCEEDS $20,000,000]. 25 * Sec. 16. AS 43.55.025(h) is amended to read: 26 (h) A producer that purchases a production tax credit certificate may apply the 27 credits against its production tax liability under AS 43.55.011(e) [THIS CHAPTER]. 28 Regardless of the price the producer paid for the certificate, the producer may receive 29 a credit against its production tax liability for the full amount of the credit, but for not 30 more than the amount for which the certificate is issued. A production tax credit 31 allowed under this section may not be applied more than once.
01 * Sec. 17. AS 43.55.025(i) is amended to read: 02 (i) For a production tax credit under this section, 03 (1) the amount of the credit that may be applied against the production 04 tax for each tax month may not exceed the total production tax liability under 05 AS 43.55.011(e) of the taxpayer applying the credit for the same month; and 06 (2) an amount of the production tax credit that is greater than the total 07 tax liability under AS 43.55.011(e) of the taxpayer applying the credit for a tax month 08 may be carried forward and applied against the taxpayer's production tax liability 09 under AS 43.55.011(e) in one or more immediately following months. 10 * Sec. 18. AS 43.55.030(a) is amended to read: 11 (a) The tax shall be paid to the department, and the person paying the tax shall 12 file with the department at the time the tax or a portion of the tax is required to be 13 paid a statement, under oath, on forms prescribed by or acceptable to the department, 14 giving, with other information required, the following: 15 (1) a description of each [THE] lease or property from which the oil 16 and [OR] gas were [WAS] produced, by name, legal description, lease number, or 17 [BY] accounting codes [CODE NUMBERS] assigned by the department; 18 (2) the names of the producer and the person paying the tax; 19 (3) the gross amount of oil and the gross amount of [OR] gas 20 produced from each [THE] lease or property, and the percentage of the gross amount 21 of oil and gas owned by each producer for whom the tax is paid; 22 (4) the gross [TOTAL] value at the point of production of the oil 23 and of the [OR] gas produced from each [THE] lease or property owned by each 24 producer for whom the tax is paid; [AND] 25 (5) the name of the first purchaser and the price received for the oil 26 and for the [OR] gas, unless relieved from this requirement in whole or in part by 27 the department; and 28 (6) the producer's lease expenditures and adjustments as 29 calculated under AS 43.55.160 [IF SOLD IN THE STATE]. 30 * Sec. 19. AS 43.55.030(d) is amended to read: 31 (d) Reports by or on behalf of the producer are delinquent the first day
01 following the day the tax is due. [EACH PRODUCER IS SUBJECT TO A PENALTY 02 OF $25 A DAY FOR EACH LEASE OR PROPERTY UPON WHICH THE 03 REPORT IS NOT FILED. THE PENALTY FOR FAILURE TO FILE A REPORT IS 04 IN ADDITION TO THE PENALTY FOR DELINQUENT TAXES, AND IS A LIEN 05 AGAINST THE ASSETS OF THE PRODUCER.] 06 * Sec. 20. AS 43.55.030 is amended by adding a new subsection to read: 07 (e) In addition to other required information, the statement required to be filed 08 on or before March 31 of a year must show any adjustments or corrections to the 09 statements that were required under (a) of this section to be filed for the months of the 10 preceding calendar year during which the oil or gas was produced. 11 * Sec. 21. AS 43.55.040 is amended to read: 12 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 13 AS 43.05.405 - 43.05.499, the department may 14 (1) require a person engaged in production and the agent or employee 15 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 16 or gas to furnish, whether by the filing of regular statements or reports or 17 otherwise, additional information that is considered by the department as necessary to 18 compute the amount of the tax; notwithstanding any contrary provision of law, the 19 disclosure of additional information under this paragraph to the producer 20 obligated to pay the tax does not violate AS 40.25.100(a) or AS 43.05.230(a); 21 before disclosing information under this paragraph that is otherwise required to 22 be held confidential under AS 40.25.100(a) or AS 43.05.230(a), the department 23 shall 24 (A) provide the person that furnished the information a 25 reasonable opportunity to be heard regarding the proposed disclosure and 26 the conditions to be imposed under (B) of this paragraph; and 27 (B) impose appropriate conditions limiting 28 (i) access to the information to those legal counsel, 29 consultants, employees, officers, and agents of the producer who 30 have a need to know that information for the purpose of 31 determining or contesting the producer's tax obligation; and
01 (ii) the use of the information to use for that 02 purpose; 03 (2) examine the books, records, and files of such a person; 04 (3) conduct hearings and compel the attendance of witnesses and the 05 production of books, records, and papers of any person; and 06 (4) make an investigation or hold an inquiry that is considered 07 necessary to a disclosure of the facts as to 08 (A) the amount of production from any oil or gas location, or of 09 a company or other producer of oil or gas; and 10 (B) the rendition of the oil and gas for taxing purposes. 11 * Sec. 22. AS 43.55.080 is amended to read: 12 Sec. 43.55.080. Collection and deposit of revenue. Except as otherwise 13 provided under art. IX, sec. 17, Constitution of the State of Alaska, the [THE] 14 department shall deposit in the general fund the money collected by it under 15 AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150]. 16 * Sec. 23. AS 43.55.135 is amended to read: 17 Sec. 43.55.135. Measurement. For the purposes of AS 43.55.011 - 43.55.180 18 [AS 43.55.011 - 43.55.150], oil is [SHALL BE] measured in terms of a "barrel of oil" 19 and gas is [SHALL BE] measured in terms of a "cubic foot of gas." 20 * Sec. 24. AS 43.55.150(a) is amended to read: 21 (a) For the purposes of AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150], 22 the gross value at the point of production is [SHALL BE] calculated using the 23 reasonable costs of transportation of the oil or gas. The reasonable costs of 24 transportation are [SHALL BE] the actual costs, except when the 25 (1) [WHEN THE] parties to the transportation of oil or gas are 26 affiliated; 27 (2) [WHEN THE] contract for the transportation of oil or gas is not an 28 arm's length transaction or is not representative of the market value of that 29 transportation; and 30 (3) [WHEN THE] method of transportation of oil or gas is not 31 reasonable in view of existing alternative methods of transportation.
01 * Sec. 25. AS 43.55 is amended by adding new sections to article 1 to read: 02 Sec. 43.55.160. Determination of production tax value of oil and gas. (a) 03 Except as provided in (f) of this section, for purposes of AS 43.55.011(e) and (g), the 04 production tax value of the taxable oil and gas produced during a month is the total of 05 the gross value at the point of production of the oil and one-third of the gross value at 06 the point of production of the gas that are taxable under AS 43.55.011(e) and (g) and 07 produced by the producer from all leases or properties in the state, less the producer's 08 lease expenditures for the month as adjusted under (e) of this section. However, the 09 production tax value calculated under this subsection may not be less than zero. If a 10 producer does not produce taxable oil or gas during a month, the producer is 11 considered to have generated a positive production tax value if the calculation 12 described in this subsection yields a positive number because the producer's adjusted 13 lease expenditures for a month are less than zero as a result of the producer's receiving 14 a payment or credit under (e) of this section or otherwise. 15 (b) For purposes of administration of (a) of this section, 16 (1) any adjusted lease expenditures that would otherwise be deductible 17 in a month but whose deduction would cause the production tax value calculated under 18 (a) of this section of the taxable oil and gas produced during the month to be less than 19 zero may be added to the producer's adjusted lease expenditures for one or more other 20 months in the same calendar year; the total of any adjusted lease expenditures that are 21 not deductible in any month during a calendar year because their deduction would 22 cause the production tax value calculated under (a) of this section of the taxable oil 23 and gas produced during one or more months to be less than zero may be used to 24 establish a carried-forward annual loss under AS 43.55.024(b); 25 (2) an explorer that has taken a tax credit under AS 43.55.024(b) or 26 that has obtained a transferable tax credit certificate under AS 43.55.024(d) for the 27 amount of a tax credit under AS 43.55.024(b) is considered a producer, subject to the 28 tax levied under AS 43.55.011(e), to the extent that the explorer generates a positive 29 production tax value as the result of the explorer's receiving a payment or credit 30 described in (e) of this section. 31 (c) For purposes of this section,
01 (1) a producer's lease expenditures for a period are the total costs 02 upstream of the point of production of oil and gas that are incurred on or after April 1, 03 2006, by the producer during the period and that are direct, ordinary, and necessary 04 costs of exploring for, developing, or producing oil or gas deposits located within the 05 producer's leases or properties in the state or, in the case of land in which the producer 06 does not own a working interest, direct, ordinary, and necessary costs of exploring for 07 oil or gas deposits located within other land in the state; however, lease expenditures 08 do not include the costs incurred to satisfy a work commitment under an exploration 09 license under AS 38.05.132; in determining whether costs are direct, ordinary, and 10 necessary costs of exploring for, developing, or producing oil or gas deposits located 11 within a lease or property or other land in the state, 12 (A) the department shall give substantial weight to the typical 13 industry practices and standards in the state and in the United States as to costs 14 that an operator is allowed to bill a working interest owner that is not the 15 operator, under unit operating agreements or similar operating agreements that 16 were in effect on or before December 1, 2005, and were subject to negotiation 17 with working interest owners, not the operator, with substantial bargaining 18 power; and 19 (B) as to matters that are not addressed by the industry 20 practices and standards described in (A) of this paragraph or as to which those 21 practices and standards are not clear or are not uniform, the department shall 22 give substantial weight to the standards adopted by the Department of Natural 23 Resources as to the costs, other than interest, that a lessee is allowed to deduct 24 from revenue in calculating net profits under a lease issued under 25 AS 38.05.180(f)(3)(B), (D), or (E); 26 (2) the Department of Revenue may authorize a producer, including a 27 producer that is an operator, to treat as its lease expenditures under this section the 28 costs paid by the producer that are billed to the producer by an operator in accordance 29 with the terms of a unit operating agreement or similar operating agreement if the 30 Department of Revenue finds that 31 (A) the pertinent provisions of the operating agreement are
01 substantially consistent with the Department of Revenue's determinations and 02 standards otherwise applicable under this subsection; and 03 (B) at least one working interest owner party to the agreement, 04 other than the operator, has substantial incentive and ability to effectively audit 05 billings under the agreement. 06 (d) For purposes of (c) of this section, "direct costs" 07 (1) includes 08 (A) an expenditure, when incurred, to acquire an item if the 09 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure 10 may be required to be capitalized rather than treated as an expense for financial 11 accounting or federal income tax purposes; 12 (B) payments of property taxes, sales and use taxes, motor fuel 13 taxes, and excise taxes; 14 (C) a reasonable allowance, as determined under regulations 15 adopted by the department, for overhead expenses directly related to exploring 16 for, developing, and producing oil or gas deposits located within leases or 17 properties or other land in the state; 18 (2) does not include 19 (A) depreciation, depletion, or amortization; 20 (B) royalty payments for oil or gas; 21 (C) taxes based on or measured by net income; 22 (D) interest or other financing charges or costs of raising equity 23 or debt capital; 24 (E) acquisition costs for a lease or property or exploration 25 license; 26 (F) costs arising from fraud, wilful misconduct, or negligence; 27 (G) fines or penalties imposed by law; 28 (H) costs of arbitration, litigation, or other dispute resolution 29 activities that involve the state or concern the rights or obligations among 30 owners of interests in, or rights to production from, one or more leases or 31 properties or a unit;
01 (I) donations; 02 (J) costs incurred in organizing a partnership, joint venture, or 03 other business entity or arrangement; 04 (K) amounts paid to indemnify the state; the exclusion 05 provided by this paragraph does not apply to the costs of obtaining insurance 06 or a surety bond from a third-party insurer or surety; 07 (L) surcharges levied under AS 43.55.201 or 43.55.300; 08 (M) for a transaction that is an internal transfer or is otherwise 09 not an arm's length transaction, expenditures incurred that are in excess of fair 10 market value; 11 (N) an expenditure incurred to purchase an interest in any 12 corporation, partnership, limited liability company, business trust, or any other 13 business entity, whether or not the transaction is treated as an asset sale for 14 federal income tax purposes; 15 (O) a tax levied under AS 43.55.011; 16 (P) the portion of costs incurred for dismantlement, removal, 17 surrender, or abandonment of a well, facility, pipeline, platform, or other 18 structure, or for the restoration of a lease, field, unit, area, body of water, or 19 right-of-way in conjunction with dismantlement, removal, surrender, or 20 abandonment, that is attributable to production of oil or gas occurring before 21 the effective date of this section; the portion is calculated as a ratio of 22 production of oil or gas associated with the well, facility, pipeline, platform, or 23 other structure, lease, field, unit, area, body of water, or right-of-way occurring 24 before the effective date of this section to all production of oil or gas 25 associated with that well, facility, pipeline, platform, or other structure, lease, 26 field, unit, area, body of water, or right-of-way through the end of the calendar 27 month before commencement of the dismantlement, removal, surrender, or 28 abandonment. 29 (e) A producer's lease expenditures must be adjusted by subtracting certain 30 payments or credits received by the producer, as provided in this subsection. If one or 31 more payments or credits subject to this subsection are received by a producer during
01 a month or, under (f) of this section, during a calendar year, and if either the total 02 amount of the payments or credits exceeds the amount of the producer's lease 03 expenditures or the producer has no lease expenditures, the producer shall nevertheless 04 subtract those payments or credits from the lease expenditures or from zero, 05 respectively, and the producer's adjusted lease expenditures for that month or calendar 06 year are a negative number and shall be applied to the calculation under (a) of this 07 section as a negative number. The payments or credits that a producer shall subtract 08 from the producer's lease expenditures, or from zero, under this subsection are 09 payments or credits, other than tax credits, received by the producer for 10 (1) the use by another person of a production facility in which the 11 producer has an ownership interest or the management by the producer of a production 12 facility under a management agreement providing for the producer to receive a 13 management fee; 14 (2) a reimbursement or similar payment that offsets the producer's 15 lease expenditures, including a payment from the state or federal government for 16 reimbursement of the producer's upstream costs, including costs for gathering, 17 separating, cleaning, dehydration, compressing, or other field handling associated with 18 the production of oil or gas upstream of the point of production; 19 (3) the sale or other transfer of 20 (A) an asset, including geological, geophysical, or well data or 21 interpretations, acquired by the producer as a result of a lease expenditure or an 22 expenditure that would be a lease expenditure if it were incurred on or after 23 April 1, 2006; for purposes of this subparagraph, 24 (i) if a producer removes from the state, for use outside 25 the state, an asset described in this subparagraph, the value of the asset 26 at the time it is removed is considered a payment received by the 27 producer for sale or transfer of the asset; 28 (ii) for a transaction that is an internal transfer or is 29 otherwise not an arm's length transaction, if the sale or transfer of the 30 asset is made for less than fair market value, the amount subtracted 31 must be the fair market value; and
01 (B) oil or gas 02 (i) that is not considered produced from a lease or 03 property under AS 43.55.020(e); and 04 (ii) the cost of acquiring which is a lease expenditure 05 incurred by the person that acquires the oil or gas. 06 (f) In place of the adjusted lease expenditures for a month under (a) of this 07 section, a producer may, at any time, elect to substitute, for every month of a calendar 08 year, 1/12 of the producer's adjusted lease expenditures for the calendar year. An 09 election made under this subsection applies to calculation of the tax under 10 AS 43.55.011(e) and (g). 11 (g) The department shall specify or approve a reasonable allocation method 12 for determining the portion of a cost that is appropriately treated as a lease expenditure 13 under (c) of this section if a cost that would otherwise constitute a lease expenditure 14 under (c) of this section is incurred to explore for, develop, or produce 15 (1) both an oil or gas deposit located within land outside the state and 16 an oil or gas deposit located within a lease or property, or other land, in the state; or 17 (2) an oil or gas deposit located partly within land outside the state and 18 partly within a lease or property, or other land, in the state. 19 (h) For purposes of AS 43.55.024(a) and (b) and only as to expenditures 20 incurred to explore for an oil or gas deposit located within land in which an explorer 21 does not own a working interest, the term "producer" in (b), (c), and (e) of this section 22 includes "explorer." 23 (i) The department may adopt regulations that establish additional standards 24 necessary to carrying out the purposes of this section, including the incorporation of 25 the concepts of 26 U.S.C. 482 (Internal Revenue Code), as amended, and 26 U.S.C. 26 6662(e) (Internal Revenue Code), as amended, the related or accompanying 27 regulations of each of those sections, and any ruling or guidance issued by the United 28 States Internal Revenue Service that relates to each of those sections. 29 (j) For purposes of this section, 30 (1) "explore" includes conducting geological or geophysical 31 exploration, including drilling a stratigraphic test well;
01 (2) "ordinary and necessary" has the meaning given to "ordinary and 02 necessary" in 26 U.S.C. 162 (Internal Revenue Code), as amended, and regulations 03 adopted under that section; 04 (3) "stratigraphic test well" means a well drilled for the sole purpose of 05 obtaining geological information to aid in exploring for an oil or gas deposit and the 06 target zones of which are located in the state. 07 Sec. 43.55.170. Additional nontransferable tax credit. (a) For a month that 08 ends before April 1, 2016, and for which a producer's tax liability under 09 AS 43.55.011(e) exceeds zero before application of any credits under this chapter, a 10 producer that qualifies under (c) of this section may take a tax credit under this 11 section. If the average amount of oil and gas produced a day during that month and 12 taxable under AS 43.55.011(e) is 13 (1) not more than 5,000 barrels of oil equivalent, the amount of the 14 credit 15 (A) for oil subject to tax under AS 43.55.011(e)(1) is five 16 percent of the producer's production tax value for that month under 17 AS 43.55.160(a); and 18 (B) for oil and gas subject to tax under AS 43.55.011(e)(2) is 19 22.5 percent of the producer's production tax value for that month under 20 AS 43.55.160(a); and 21 (2) more than 5,000 barrels of oil equivalent, the amount of the credit 22 (A) for oil subject to tax under AS 43.55.011(e)(1) is five 23 percent of the producer's production tax value for that month under 24 AS 43.55.160(a) multiplied by the quotient of 5,000 divided by the average 25 amount of oil and gas expressed as barrels of oil equivalent, produced a day 26 during that month and taxable under AS 43.55.011(e)(1); and 27 (B) for oil and gas subject to tax under AS 43.55.011(e)(2) is 28 22.5 percent of the producer's production tax value for that month under 29 AS 43.55.160(a) multiplied by the quotient of 5,000 divided by the average 30 amount of oil and gas expressed as barrels of oil equivalent, produced a day 31 during that month and taxable under AS 43.55.011(e)(2).
01 (b) A tax credit under this section 02 (1) may be applied only against the tax levied under AS 43.55.011(e); 03 (2) must be applied before any other credit is applied; 04 (3) is not transferable and may not be carried forward or used in a 05 different month; 06 (4) except as provided in (5) of this subsection, may not be applied if it 07 would cause the total of the tax credits applied by the producer under this section 08 during a calendar year to exceed $14,000,000; and 09 (5) may not be applied if it would cause the total of the tax credits 10 applied by the producer under this section during 2016 to exceed $3,500,000. 11 (c) On written application by a producer, including any information the 12 department may require, the department shall determine whether the producer 13 qualifies under this section for a calendar year. To qualify under this section, a 14 producer shall demonstrate that the producer's operation in the state or the producer's 15 ownership of an interest in a lease or property in the state as a distinct producer entity 16 would not result in the division among multiple producer entities of any production tax 17 liability under AS 43.55.011(e) that would be reasonably expected to be attributed to a 18 single producer entity if the tax credit provision of (a) of this section did not exist. 19 (d) For purposes of this section, a barrel of oil equivalent is 20 (1) one barrel of oil, in the case of oil; 21 (2) 6,000 cubic feet of gas, in the case of gas. 22 Sec. 43.55.180. Required reports. (a) The Department of Revenue shall 23 (1) study 24 (A) the effects of the tax rates under AS 43.55.011(f) and of 25 potential changes in those tax rates on state revenue and on oil and gas 26 exploration, development, and production on private land; and 27 (B) the fairness of the tax rates under AS 43.55.011(f) and of 28 potential changes in those tax rates for private landowners; and 29 (2) prepare a report on or before the first day of the 2013 regular 30 session of the legislature on the results of the study made under (1) of this subsection, 31 including a recommendation as to whether those tax rates should be changed; the
01 department shall notify the legislature that the report prepared under this paragraph is 02 available. 03 (b) The Department of Revenue shall 04 (1) study the effects of the credits authorized by AS 43.55.025 and 05 43.55.170 on state revenue, on the encouragement of exploration, development, and 06 production of oil and gas deposits located in the state, and on the encouragement of 07 new entrants into the oil and gas industry in the state; and 08 (2) prepare a report on or before the first day of the 2015 regular 09 session of the legislature on the results of the study made under (1) of this subsection, 10 and shall include with the report a recommendation as to whether the legislature 11 should extend the availability of the credits under AS 43.55.025 and 43.55.170 beyond 12 April 30, 2016; the department shall notify the legislature that the report prepared 13 under this paragraph is available. 14 * Sec. 26. AS 43.55.201 is amended to read: 15 Sec. 43.55.201. Surcharge levied. (a) Every producer of oil shall pay a 16 surcharge of $.01 [$.02] per barrel of oil produced from each lease or property in the 17 state, less any oil the ownership or right to which is exempt from taxation. 18 (b) The surcharge imposed by (a) of this section is in addition to the tax 19 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 20 from each lease or property during the preceding month. The surcharge [SHALL 21 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 22 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.300 - 23 43.55.310. 24 (c) A producer of oil shall make reports of production in the same manner and 25 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 26 43.55.150]. 27 * Sec. 27. AS 43.55.201 is amended by adding a new subsection to read: 28 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 29 property is not considered to be produced from a lease or property for purposes of this 30 section. 31 * Sec. 28. AS 43.55.300 is amended to read:
01 Sec. 43.55.300. Surcharge levied. (a) Every producer of oil shall pay a 02 surcharge of $.05 [$.03] per barrel of oil produced from each lease or property in the 03 state, less any oil the ownership or right to which is exempt from taxation. 04 (b) The surcharge imposed by (a) of this section is in addition to the tax 05 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 06 from each lease or property during the preceding month. The surcharge [SHALL 07 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 08 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.201 - 09 43.55.231. 10 (c) A producer of oil shall make reports of production in the same manner and 11 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 12 43.55.150]. 13 * Sec. 29. AS 43.55.300 is amended by adding a new subsection to read: 14 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 15 property is not considered to be produced from a lease or property for purposes of this 16 section. 17 * Sec. 30. AS 43.55.900(6) is repealed and reenacted to read: 18 (6) "gas" means 19 (A) all natural, associated, or casinghead gas; 20 (B) all hydrocarbons that 21 (i) are recovered by mechanical separation of well 22 fluids or by gas processing; and 23 (ii) exist in a gaseous phase at the completion of 24 mechanical separation and any gas processing; and 25 (C) all other hydrocarbons produced from a well not defined as 26 oil; 27 * Sec. 31. AS 43.55.900(7) is repealed and reenacted to read: 28 (7) "gross value at the point of production" means 29 (A) for oil, the value of the oil at the automatic custody transfer 30 meter or device through which the oil enters into the facilities of a carrier 31 pipeline or other transportation carrier in a condition of pipeline quality; in the
01 absence of an automatic custody transfer meter or device, "gross value at the 02 point of production" means the value of the oil at the mechanism or device to 03 measure the quantity of oil that has been approved by the department for that 04 purpose, through which the oil is tendered and accepted in a condition of 05 pipeline quality into the facilities of a carrier pipeline or other transportation 06 carrier or into a field topping plant; 07 (B) for gas, other than gas described in (C) of this paragraph, 08 that is 09 (i) not subjected to or recovered by mechanical 10 separation or gas processing, the value of the gas at the first point 11 where the gas is accurately metered; 12 (ii) subjected to or recovered by mechanical separation 13 but not gas processing, the value of the gas at the first point where the 14 gas is accurately metered after completion of mechanical separation; 15 (iii) subjected to or recovered by gas processing, the 16 value of the gas at the first point where the gas is accurately metered 17 after completion of gas processing; 18 (C) for gas run through an integrated gas processing and gas 19 treatment facility that does not accurately meter the gas after the gas 20 processing and before the gas treatment, the value of the gas at the first point 21 where gas processing is completed or where gas treatment begins, whichever is 22 further upstream; 23 * Sec. 32. AS 43.55.900(10) is repealed and reenacted to read: 24 (10) "oil" means 25 (A) crude petroleum oil; and 26 (B) all liquid hydrocarbons that are recovered by mechanical 27 separation of well fluids or by gas processing; 28 * Sec. 33. AS 43.55.900 is amended by adding new paragraphs to read: 29 (17) "explorer" means a person who, in exploring for new oil or gas 30 reserves, incurs expenditures; 31 (18) "gas processing"
01 (A) means processing a gaseous mixture of hydrocarbons 02 (i) by means of absorption, adsorption, externally 03 applied refrigeration, artificial compression followed by adiabatic 04 expansion using the Joule-Thomson effect, or another physical process 05 that is not mechanical separation; 06 (ii) for the purpose of extracting and recovering liquid 07 hydrocarbons; and 08 (iii) upstream of any gas treatment and upstream of the 09 inlet of any gas pipeline system transporting gas to a market; 10 (B) does not include gas treatment; 11 (19) "gas treatment" 12 (A) means conditioning gas and removing from gas 13 nonhydrocarbon substances for the purpose of rendering the gas acceptable for 14 tender and acceptance into a gas pipeline system; and 15 (B) includes incidentally removing liquid hydrocarbons from 16 the gas; 17 (20) "oil and gas lease" includes an oil and gas lease, a gas only lease, 18 and an oil only lease. 19 * Sec. 34. AS 43.55.011(a), 43.55.011(b), 43.55.011(c), 43.55.012, 43.55.013, 43.55.016, 20 43.55.025(k)(1), 43.55.025(k)(3), 43.55.900(1), 43.55.900(8), 43.55.900(11), 43.55.900(12), 21 and 43.55.900(16) are repealed. 22 * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 APPLICABILITY. (a) Sections 5, 7 - 10, 12, 13, 15 - 18, 20, and 24 - 34 of this Act 25 apply to oil and gas produced on or after April 1, 2006. 26 (b) Section 11 of this Act applies to oil and gas produced before, on, or after the 27 effective date of sec. 11 of this Act. 28 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 29 read: 30 TRANSITIONAL PROVISIONS. (a) Notwithstanding any contrary provision of 31 AS 43.55.024(a), enacted by sec. 12 of this Act, for oil and gas produced on or after April 1,
01 2006, and before January 1, 2007, the phrase "every month an annualized tax credit in an 02 amount equal to 2 1/12 percent" in AS 43.55.024(a)(1), enacted by sec. 12 of this Act, shall be 03 replaced by the phrase "every month during the period April 1, 2006, through December 31, 04 2006, an annualized tax credit in an amount equal to 2 7/9 percent." 05 (b) Notwithstanding any contrary provision of AS 43.55.024(e), enacted by sec. 12 of 06 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 07 phrase "a calendar year" in AS 43.55.024(e), enacted by sec. 13 of this Act, shall be replaced 08 by the phrase "the last nine months of the calendar year." 09 (c) Notwithstanding any contrary provision of AS 43.55.024(i)(2), enacted by sec. 12 10 of this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, 11 (1) the number "1/24" in AS 43.55.024(i)(2)(B), enacted by sec. 12 of this 12 Act, shall be replaced by the number "1/18"; 13 (2) the phrase "calendar year" in AS 43.55.024(i)(2)(B), enacted by sec. 12 of 14 this Act, shall be replaced by the phrase "last nine months of the calendar year." 15 (d) Notwithstanding any contrary provision of AS 43.55.160(f), enacted by sec. 25 of 16 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 17 phrase "for every month of a calendar year, 1/12 of the producer's adjusted lease expenditures 18 for the calendar year" in AS 43.55.160(f), enacted by sec. 25 of this Act, shall be replaced by 19 the phrase "for each of the last nine months of 2006, one-ninth of the producer's adjusted lease 20 expenditures for that nine-month period." 21 (e) Notwithstanding any contrary provision of AS 43.55.170(b), enacted by sec. 25 of 22 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 23 amount of "$14,000,000" in AS 43.55.170(b)(4), enacted by sec. 25 of this Act, shall be 24 replaced by "$10,500,000." 25 (f) For oil and gas produced before April 1, 2006, the provisions of AS 43.55, and 26 regulations adopted under AS 43.55, that were in effect before April 1, 2006, and that were 27 applicable to the oil and gas continue to apply to that oil and gas. 28 (g) Notwithstanding any contrary provision of AS 43.55.020(a), as repealed and 29 reenacted by sec. 7 of this Act, for oil and gas produced on or after April 1, 2006, and before 30 the first day of the first month that begins at least 180 days after the effective date of sec. 7 of 31 this Act,
01 (1) the amount of the taxes that would have been levied on the producer under 02 AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on the last day of 03 each calendar month on the oil and gas that was produced from each lease or property during 04 the preceding month; 05 (2) the portion, if any, of the taxes levied under AS 43.55.011(e) - (g), enacted 06 by sec. 5 of this Act, that is due under AS 43.55.020(a), as repealed and reenacted by sec. 7 of 07 this Act, and that remains unpaid, net of any credits applied as allowed by law, is due on the 08 last day of the first month that begins at least 180 days after the effective date of sec. 5 of this 09 Act. 10 (h) Notwithstanding any contrary provision of AS 43.55.030(a), as amended by sec. 11 18 of this Act, for oil and gas produced on or after April 1, 2006, and before the first day of 12 the first month that begins at least 180 days after the effective date of sec. 18 of this Act, the 13 person paying the tax shall file with the Department of Revenue, at the time an amount of tax 14 is due 15 (1) under (g)(1) of this section, the statement required under former 16 AS 43.55.030(a), as that subsection read on March 31, 2006; and 17 (2) under (g)(2) of this section, the statements required under 18 AS 43.55.030(a), as amended by sec. 18 of this Act. 19 (i) For purposes of taxes to be calculated and due under (g)(1) of this section and 20 statements to be filed under (h)(1) of this section, regulations that were adopted by the 21 Department of Revenue under AS 43.55, as the provisions of that chapter read on March 31, 22 2006, and that were in effect on that date apply to those taxes and statements. 23 * Sec. 37. The uncodified law of the State of Alaska is amended by adding a new section to 24 read: 25 TRANSITION: REGULATIONS AND RETROACTIVITY OF REGULATIONS. (a) 26 The Department of Revenue may proceed to adopt regulations to implement the changes 27 made by this Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), 28 but not before the effective date of the law implemented by the regulation. 29 (b) Notwithstanding any contrary provision of AS 44.62.240, a regulation adopted by 30 the Department of Revenue to implement, interpret make specific, or otherwise carry out the 31 provisions of secs. 5, 7 - 10, 12, 13, 15 - 18, 20, 24 - 34, and 36 of this Act may apply
01 retroactively as of April 1, 2006, if the Department of Revenue expressly designates in the 02 regulation that the regulation applies retroactively to that date. 03 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to 04 read: 05 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the 06 heading of 07 (1) AS 43.55 from "Oil and Gas Production Taxes and Oil Surcharge" to "Oil 08 and Gas Production Tax and Oil Surcharge"; 09 (2) article 1 of AS 43.55 from "Oil and Gas Properties Production Taxes" to 10 "Oil and Gas Production Tax"; 11 (3) AS 43.55.011 from "Oil production tax" to "Oil and gas production tax"; 12 (4) AS 43.55.025 from "Tax credit for oil and gas exploration or gas only 13 exploration" to "Alternative tax credit for oil and gas exploration"; 14 (5) AS 43.55.150 from "Determination of gross value" to "Determination of 15 gross value at the point of production." 16 * Sec. 39. The uncodified law of the State of Alaska is amended by adding a new section to 17 read: 18 RETROACTIVITY OF PROVISIONS OF ACT. Sections 5, 7 - 10, 12, 13, 15 - 18, 19 20, 24 - 36 of this Act apply retroactively to April 1, 2006, and apply to oil and gas produced 20 after March 31, 2006. 21 * Sec. 40. This Act takes effect immediately under AS 01.10.070(c).