HCS CSSB 305(FIN): "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 HOUSE CS FOR CS FOR SENATE BILL NO. 305(FIN) 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 landowner's 28 royalty interest. Except as otherwise provided under (i) of this section, the tax is equal 29 to 20 percent of the production tax value of the taxable oil and gas as calculated under 30 AS 43.55.160. 31 (f) There is levied on the producer of oil or gas a tax for all oil and gas
01 produced each month from each lease or property in the state the ownership or right to 02 which constitutes a landowner's royalty interest, except for oil and gas the ownership 03 or right to which is exempt from taxation. The provisions of this subsection apply to a 04 landowner's royalty interest as follows: 05 (1) the rate of tax levied on oil is equal to five percent of the gross 06 value at the point of production of the oil; 07 (2) the rate of tax levied on gas is equal to 1.667 percent of the gross 08 value at the point of production of the gas; 09 (3) if the department determines that, for purposes of reducing the 10 producer's tax liability under (1) or (2) of this subsection, the producer has received or 11 will receive consideration from the royalty owner offsetting all or a part of the 12 producer's royalty obligation, other than a deduction under AS 43.55.020(d) of the 13 amount of a tax paid, 14 (A) notwithstanding (1) of this subsection, the tax is equal to 15 (i) for oil that is produced from a lease or property in 16 the Cook Inlet sedimentary basin, five percent of the gross value at the 17 point of production of the oil; 18 (ii) for oil, except oil described in (i) of this 19 subparagraph, 20 percent of the gross value at the point of production 20 of the oil; and 21 (B) notwithstanding (2) of this subsection, for gas the tax is 22 equal to 6.67 percent of the gross value at the point of production of the gas. 23 (g) In addition to the taxes levied under (e) and (f) of this section, during each 24 month for which the price index determined under (h) of this section is greater than 25 zero, there is levied on the producer of oil or gas a tax for all oil and gas produced 26 during that 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 landowner's 28 royalty interest. Except as otherwise provided under (i) of this section, the tax levied 29 under this subsection is equal to .25 percent of the production tax value of the taxable 30 oil and gas as calculated under AS 43.55.160, multiplied by the price index 31 determined under (h) of this section.
01 (h) For purposes of (g) of this section, the price index for a month is calculated 02 by subtracting 35 from the number that is equal to the quotient of the production tax 03 value of the taxable oil and gas produced during that month, as calculated under 04 AS 43.55.160, divided by the number of barrels of oil equivalent of that oil and gas. 05 For purposes of this subsection, a barrel of oil equivalent is a barrel of oil, in the case 06 of oil, or 6,000 cubic feet of gas, in the case of gas. 07 (i) If a producer produces gas during a month from a lease or property in the 08 Cook Inlet sedimentary basin, and if the imputed gas tax rate for that month under (j) 09 of this section exceeds $ .019 per Mcf, the producer's total tax for that month levied 10 under (e) and (g) of this section is reduced by the amount equal to the number of Mcf 11 produced by the producer from all leases or properties in the Cook Inlet sedimentary 12 basin and taxable under (e) and (g) of this section, multiplied by the difference 13 between that imputed gas rate and $ .019 per Mcf. 14 (j) For purposes of (i) of this section, a producer's imputed gas tax rate for a 15 month is equal to 16 1/6 x TT/BOE 17 where 18 (1) TT = the producer's total tax for the month levied under (e) and (g) 19 of this section, calculated without regard to (i) of this section and net of any credits 20 that are available to be applied under this chapter; and 21 (2) BOE = the amount of oil and gas produced by the producer during 22 the month and taxable under (e) of this section, expressed as barrels of oil equivalent; 23 for purposes of this paragraph, a barrel of oil equivalent is 24 (A) one barrel of oil, in the case of oil; 25 (B) six Mcf of gas, in the case of gas. 26 (k) In (i) and (j) of this section, "Mcf" means 1,000 cubic feet. 27 * Sec. 6. AS 43.55.017(a) is amended to read: 28 (a) Except as provided in this chapter, the taxes imposed by this chapter are in 29 place of all taxes now imposed by the state or any of its municipalities, and neither the 30 state nor a municipality may impose a tax on [UPON] 31 (1) producing oil or gas leases;
01 (2) oil or gas produced or extracted in the state; 02 (3) the value of intangible drilling and development costs, as 03 described in 26 U.S.C. 263(c) (Internal Revenue Code), as amended through 04 January 1, 1974 [EXPLORATION EXPENSES]. 05 * Sec. 7. AS 43.55.020(a) is repealed and reenacted to read: 06 (a) Ninety-five percent of the total tax levied under AS 43.55.011(e) - (g), net 07 of any credits applied under this chapter, is due on the last day of each calendar month 08 on oil and gas produced from each lease or property during the preceding month. The 09 remaining portion of the tax levied under AS 43.55.011(e) - (g), net of any credits 10 applied under this chapter, is due on March 31 of the year following the calendar year 11 during which the oil and gas were produced. An unpaid amount of tax that is not paid 12 when due in accordance with this subsection becomes delinquent. An overpayment of 13 tax with respect to a month may be applied against the tax due for any later month. 14 Notwithstanding any contrary provision of AS 43.05.280, interest on an overpayment 15 is allowed only from a date that is 90 days after the later of (1) the March 31 described 16 in this subsection, or (2) the date that the statement required under AS 43.55.030(a) 17 and (e) to be filed on or before that March 31 is filed. Interest is not allowed if the 18 overpayment was refunded within the 90-day period. 19 * Sec. 8. AS 43.55.020(b) is amended to read: 20 (b) The production tax on oil and [OR] gas shall be paid by or on behalf of the 21 producer. 22 * Sec. 9. AS 43.55.020(d) is amended to read: 23 (d) In making settlement with the royalty owner for oil and gas that is 24 taxable under AS 43.55.011, the producer may deduct the amount of the tax paid on 25 taxable royalty oil and [OR] gas, or may deduct taxable royalty oil or gas equivalent 26 in value at the time the tax becomes due to the amount of the tax paid. Unless 27 otherwise agreed between the producer and the royalty owner, the amount of the 28 tax paid under AS 43.55.011(e) and (g) on taxable royalty oil and gas for a month, 29 other than oil and gas the ownership or right to which constitutes a landowner's 30 royalty interest, is considered to be the gross value at the point of production of 31 the taxable royalty oil and gas produced during the month multiplied by a figure
01 that is a quotient, in which 02 (1) the numerator is the producer's total tax liability under 03 AS 43.55.011(e) and (g) for the month of production; and 04 (2) the denominator is the total gross value at the point of 05 production of the oil and gas taxable under AS 43.55.011(e) and (g) produced by 06 the producer from all leases and properties in the state during the month. 07 * Sec. 10. AS 43.55.020(e) is repealed and reenacted to read: 08 (e) Gas flared, released, or allowed to escape in excess of the amount 09 authorized by the Alaska Oil and Gas Conservation Commission is considered, for the 10 purpose of AS 43.55.011 - 43.55.180, as gas produced from a lease or property. Oil or 11 gas used in the operation of a lease or property in the state in drilling for or producing 12 oil or gas, or for repressuring, except to the extent determined by the Alaska Oil and 13 Gas Conservation Commission to be waste, is not considered, for the purpose of 14 AS 43.55.011 - 43.55.180, as oil or gas produced from a lease or property. 15 * Sec. 11. AS 43.55.020(f) is amended to read: 16 (f) If oil or gas is produced but not sold, or if oil or gas is produced and 17 sold under circumstances where the sale price does not represent the prevailing value 18 for oil or gas of like kind, character, or quality in the field or area from which the 19 product is produced, the department may require the tax to be paid upon the basis of 20 the value of oil or gas of the same kind, quality, and character prevailing for that field 21 or area during the calendar month of production or sale [FOR THAT FIELD OR 22 AREA]. 23 * Sec. 12. AS 43.55 is amended by adding a new section to read: 24 Sec. 43.55.024. Tax credits for certain losses and expenditures. (a) A 25 producer or explorer may take a tax credit for a qualified capital expenditure as 26 follows: 27 (1) notwithstanding that a qualified capital expenditure may be a 28 deductible lease expenditure for purposes of calculating the production tax value of oil 29 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 30 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, 31 (A) a producer or explorer that incurs a qualified capital
01 expenditure may also elect to take a tax credit against a tax due under 02 AS 43.55.011(e) in the amount of 20 percent of that expenditure; 03 (B) for a calendar year for which the producer makes an 04 election under AS 43.55.160(f), instead of taking a tax credit at a rate 05 authorized by (A) of this paragraph as to each separate qualified capital 06 expenditure after it has been incurred, a producer that incurs a qualified capital 07 expenditure during that year and that wishes to apply a credit based on that 08 expenditure against a tax due under AS 43.55.011(e) shall calculate and apply 09 every month an annualized tax credit in an amount equal to 1 2/3 percent of the 10 total qualified capital expenditures incurred during that year and for which the 11 tax credit is taken for that year; 12 (2) a producer or explorer may take a credit for a qualified capital 13 expenditure incurred in connection with geological or geophysical exploration or in 14 connection with an exploration well only if the producer or explorer provides to the 15 department, as part of the statement required under AS 43.55.030(a) for the month for 16 which the credit is sought to be taken, the producer's or explorer's written agreement 17 (A) to notify the Department of Natural Resources, within 30 18 days after completion of the geological or geophysical data processing or 19 completion of the well, or within 30 days after the statement is filed, whichever 20 is the latest, of the date of completion and to submit a report to that department 21 describing the processing sequence and provide a list of data sets available; 22 (B) to provide to the Department of Natural Resources, within 23 30 days after the date of a request, specific data sets, ancillary data, and reports 24 identified in (A) of this paragraph; 25 (C) that, notwithstanding any provision of AS 38, the 26 Department of Natural Resources shall hold confidential the information 27 provided to that department under this paragraph for 10 years following the 28 completion date, after which the department shall publicly release the 29 information after 30 days' public notice. 30 (b) A producer or explorer may elect to take a tax credit in the amount of 20 31 percent of a carried-forward annual loss. A credit under this subsection may be applied
01 against a tax due under AS 43.55.011(e) and may be applied irrespective of whether 02 the producer or explorer also claims a credit for transitional investment expenditures 03 authorized by (j) of this section. For purposes of this subsection, a carried-forward 04 annual loss is the amount of a producer's or explorer's adjusted lease expenditures 05 under AS 43.55.160 for a previous calendar year that was not deductible in any month 06 under AS 43.55.160(a) and (b). 07 (c) A credit or portion of a credit under this section may not be used to reduce 08 a person's tax liability under AS 43.55.011(e) for any month below zero, and any 09 unused credit or portion of a credit not used under this subsection may be applied in a 10 later month. 11 (d) Except as limited by (j) of this section, a person entitled to take a tax credit 12 under this section that wishes to transfer the unused credit to another person may 13 apply to the department for a transferable tax credit certificate. An application under 14 this subsection must be on a form prescribed by the department and must include 15 supporting information and documentation that the department reasonably requires. 16 The department shall grant or deny an application, or grant an application as to a lesser 17 amount than that claimed and deny it as to the excess, not later than 60 days after the 18 latest of (1) March 31 of the year following the calendar year in which the qualified 19 capital expenditure or carried-forward annual loss for which the credit is claimed was 20 incurred; (2) if the applicant is required under AS 43.55.030(a) and (e) to file a 21 statement on or before March 31 of the year following the calendar year in which the 22 qualified capital expenditures or carried-forward annual loss for which the credit is 23 claimed was incurred, the date the statement was filed; or (3) the date the application 24 was received by the department. If, based on the information then available to it, the 25 department is reasonably satisfied that the applicant is entitled to a credit, the 26 department shall issue the applicant a transferable tax credit certificate for the amount 27 of the credit. A certificate issued under this subsection does not expire. 28 (e) A person to which a transferable tax credit certificate is issued under (d) of 29 this section may transfer the certificate to another person, and a transferee may further 30 transfer the certificate. Subject to the limitations set out in (a) - (c) of this section, and 31 notwithstanding any action the department may take with respect to the applicant
01 under (g) of this section, the owner of a certificate may apply the credit or a portion of 02 the credit shown on the certificate only against a tax due under AS 43.55.011(e). 03 However, a credit shown on a transferable tax credit certificate may not be applied to 04 reduce a transferee's total tax due under AS 43.55.011(e) on oil and gas produced 05 during a calendar year to less than 80 percent of the tax that would otherwise be due 06 without applying that credit. Any portion of a credit not used under this subsection 07 may be applied in a later period. 08 (f) Under standards established in regulations adopted by the department and 09 subject to appropriations made by law, the department, on the written application of 10 the person to whom a transferable tax credit has been issued under (d) of this section 11 and whose average amount of oil and gas produced a day taxable under 12 AS 43.55.011(e) is not more than 50,000 barrels of oil equivalent a day for the 13 preceding calendar year, shall issue a cash refund, in whole or in part, for the 14 certificate if the department finds 15 (1) after investigation and audit of the tax credit claim by the 16 department, that the applicant is entitled to the credit to the extent of the refund 17 amount; 18 (2) within 24 months after having applied for the transferable tax credit 19 certificate, that the applicant incurred a qualified capital expenditure or was the 20 successful bidder on a bid submitted for a lease on state land under AS 38.05.180(f); 21 (3) that the amount of the refund would not exceed the total of 22 qualified capital expenditures and successful bids described in (2) of this subsection 23 that have not been the subject of a finding made under this paragraph for purposes of a 24 previous refund; 25 (4) that the applicant does not have an outstanding liability to the state 26 for unpaid delinquent taxes under this title; and 27 (5) that the sum of the amount of the refund applied for and amounts 28 previously refunded to the applicant during the calendar year under this subsection 29 would not exceed $25,000,000. 30 (g) The issuance of a transferable tax credit certificate under (d) of this section 31 does not limit the department's ability to later audit a tax credit claim to which the
01 certificate relates or to adjust or deny the claim if the department determines that the 02 applicant was not entitled to the amount of the credit for which the certificate was 03 issued. The tax liability of the applicant under AS 43.55.011(e) and 43.55.017 - 04 43.55.180 is increased by the amount of the credit that exceeds that to which the 05 applicant was entitled. That amount bears interest under AS 43.05.225 from the date 06 the transferable tax credit certificate was issued. For purposes of this subsection, an 07 applicant that is an explorer is considered a producer subject to the tax levied under 08 AS 43.55.011(e). 09 (h) The department may adopt regulations to carry out the purposes of this 10 section, including prescribing reporting, record keeping, and certification procedures 11 and requirements to verify the accuracy of credits claimed and to ensure that a credit is 12 not used more than once, and otherwise implementing this section. 13 (i) A person may not elect to take a tax credit under (a) or (j) of this section for 14 an expenditure incurred to acquire an asset (1) the cost of previously acquiring which 15 was a lease expenditure under AS 43.55.160(c) or would have been a lease 16 expenditure under AS 43.55.160(c) if it had been incurred on or after April 1, 2006; or 17 (2) that has previously been placed in service in the state. An expenditure to acquire an 18 asset is not excluded under this subsection if not more than an immaterial portion of 19 the asset meets a description under (1) or (2) of this subsection. For purposes of this 20 subsection, "asset" includes geological, geophysical, and well data and interpretations. 21 (j) For the purposes of this section, 22 (1) a producer's or explorer's transitional investment expenditures are 23 the sum of the expenditures the producer or explorer incurred on or after April 1, 24 2001, and before April 1, 2006, that would be qualified capital expenditures if they 25 were incurred on or after April 1, 2006, less the sum of the payments or credits the 26 producer or explorer received before April 1, 2006, for the sale or other transfer of 27 assets, including geological, geophysical, or well data or interpretations, acquired by 28 the producer or explorer as a result of expenditures the producer or explorer incurred 29 before April 1, 2006, that would be qualified capital expenditures, if they were 30 incurred on or after April 1, 2006; 31 (2) a producer or explorer may elect to take a tax credit against a tax
01 due under AS 43.55.011(e) in the amount of 20 percent of the producer's or explorer's 02 transitional investment expenditures, but only to the extent that the amount does not 03 exceed 04 (A) one-half of the producer's or explorer's qualified capital 05 expenditures that are incurred during the month for which the credit is taken, if 06 the producer or explorer does not make an election under AS 43.55.160(f); 07 (B) 1/24 of the producer's or explorer's qualified capital 08 expenditures that are incurred during the calendar year that includes the month 09 for which the credit is taken, if the producer or explorer makes an election 10 under AS 43.55.160(f); 11 (3) a producer or explorer may not take a tax credit for a transitional 12 investment expenditure 13 (A) for any month that ends the later of 14 (i) April 30, 2013; or 15 (ii) the seventh anniversary of the last day of the month 16 for which the producer first applies a credit under this subsection 17 against a tax due under AS 43.55.011(e), if the producer did not have 18 commercial production of oil or gas from a lease or property in the state 19 before April 1, 2006; 20 (B) more than once; or 21 (C) if a credit for that expenditure was taken under 22 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 23 (4) notwithstanding (d), (e), and (g) of this section, a producer or 24 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for a 25 transitional investment expenditure. 26 (k) As a condition of receiving a tax credit under this section, a producer or 27 explorer that obtains the tax credit for or directly related to a pipeline, facility, or other 28 asset that is or becomes subject to regulation by the Federal Energy Regulatory 29 Commission or the Regulatory Commission of Alaska, or a successor regulatory body 30 shall at all times support and in all rate proceedings file to flow through 100 percent of 31 the tax credits to ratepayers as a reduction in the costs of service for the pipeline,
01 facility, or other asset. 02 (l) In this section, "qualified capital expenditure" means, except as otherwise 03 provided in (i) of this section, an expenditure that is a lease expenditure under 04 AS 43.55.160 and is 05 (1) incurred for geological or geophysical exploration; or 06 (2) treated as a capitalized expenditure under 26 U.S.C. (Internal 07 Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) 08 (Internal Revenue Code), as amended, and is 09 (A) treated as a capitalized expenditure for federal income tax 10 reporting purposes by the person incurring the expenditure; or 11 (B) eligible to be deducted as an expense under 26 U.S.C. 12 263(c) (Internal Revenue Code), as amended. 13 * Sec. 13. AS 43.55.025(a) is amended to read: 14 (a) Subject to the terms and conditions of this section, [ON OIL AND GAS 15 PRODUCED ON OR AFTER JULY 1, 2004, FROM AN OIL AND GAS LEASE, 16 OR ON GAS PRODUCED FROM A GAS ONLY LEASE,] a credit against the 17 production tax due under AS 43.55.011(e) [THIS CHAPTER] is allowed for 18 exploration expenditures that qualify under (b) of this section in an amount equal to 19 one of the following: 20 (1) 20 percent of the total exploration expenditures that qualify only 21 under (b) and (c) of this section; 22 (2) 20 percent of the total exploration expenditures for work performed 23 before July 1, 2007, and that qualify only under (b) and (d) of this section; 24 (3) 40 percent of the total exploration expenditures that qualify under 25 (b), (c), and (d) of this section; or 26 (4) 40 percent of the total exploration expenditures that qualify only 27 under (b) and (e) of this section. 28 * Sec. 14. AS 43.55.025(b) is amended to read: 29 (b) To qualify for the production tax credit under (a) of this section, an 30 exploration expenditure must be incurred for work performed on or after July 1, 2003, 31 and before July 1, 2016 [2007], except that an exploration expenditure for a Cook Inlet
01 prospect must be incurred for work performed on or after July 1, 2005, [AND 02 BEFORE JULY 1, 2010, AND EXCEPT THAT AN EXPLORATION 03 EXPENDITURE, IN WHOLE OR IN PART, SOUTH OF 68 DEGREES, 15 04 MINUTES, NORTH LATITUDE, AND NOT PART OF A COOK INLET 05 PROSPECT MUST BE INCURRED FOR WORK PERFORMED ON OR AFTER 06 JULY 1, 2003, AND BEFORE JULY 1, 2010,] and 07 (1) may be for seismic or geophysical exploration costs not connected 08 with a specific well; 09 (2) if for an exploration well, 10 (A) must be incurred by an explorer that holds an interest in the 11 exploration well for which the production tax credit is claimed; 12 (B) may be for either an oil or gas discovery well or a dry hole; 13 and 14 (C) must be for goods, services, or rentals of personal property 15 reasonably required for the surface preparation, drilling, casing, cementing, 16 and logging of an exploration well, and, in the case of a dry hole, for the 17 expenses required for abandonment if the well is abandoned within 18 months 18 after the date the well was spudded; 19 (3) may not be for testing, stimulation, or completion costs; 20 administration, supervision, engineering, or lease operating costs; geological or 21 management costs; community relations or environmental costs; bonuses, taxes, or 22 other payments to governments related to the well; or other costs that are generally 23 recognized as indirect costs or financing costs; and 24 (4) may not be incurred for an exploration well or seismic exploration 25 that is included in a plan of exploration or a plan of development for any unit on 26 May 13, 2003. 27 * Sec. 15. AS 43.55.025(f) is amended to read: 28 (f) For a production tax credit under this section, 29 (1) an explorer shall, in a form prescribed by the department and 30 within six months of the completion of the exploration activity, claim the credit and 31 submit information sufficient to demonstrate to the department's satisfaction that the
01 claimed exploration expenditures qualify under this section; 02 (2) an explorer shall agree, in writing, 03 (A) to notify the Department of Natural Resources, within 30 04 days after completion of seismic or geophysical data processing, completion of 05 a well, or filing of a claim for credit, whichever is the latest, for which 06 exploration costs are claimed, of the date of completion and submit a report to 07 that department describing the processing sequence and providing a list of data 08 sets available; if, under (c)(2)(B) of this section, an explorer submits a claim 09 for a credit for expenditures for an exploration well that is located within three 10 miles of a well already drilled for oil and gas, in addition to the submissions 11 required under (1) of this subsection, the explorer shall submit the information 12 necessary for the commissioner of natural resources to evaluate the validity of 13 the explorer's claim that the well is directed at a distinctly separate exploration 14 target, and the commissioner of natural resources shall, upon receipt of all 15 evidence sufficient for the commissioner to evaluate the explorer's claim, make 16 that determination within 60 days; 17 (B) to provide to the Department of Natural Resources, within 18 30 days after the date of a request, specific data sets, ancillary data, and reports 19 identified in (A) of this paragraph; 20 (C) that, notwithstanding any provision of AS 38, information 21 provided under this paragraph will be held confidential by the Department of 22 Natural Resources for 10 years following the completion date, at which time 23 that department will release the information after 30 days' public notice; 24 (3) if more than one explorer holds an interest in a well or seismic 25 exploration, each explorer may claim an amount of credit that is proportional to the 26 explorer's cost incurred; 27 (4) the department may exercise the full extent of its powers as though 28 the explorer were a taxpayer under this title, in order to verify that the claimed 29 expenditures are qualified exploration expenditures under this section; and 30 (5) if the department is satisfied that the explorer's claimed 31 expenditures are qualified under this section, the department shall issue to the explorer
01 a production tax credit certificate for the amount of credit to be allowed against 02 production taxes due under AS 43.55.011(e) [THIS CHAPTER; HOWEVER, 03 NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, THE 04 DEPARTMENT MAY NOT ISSUE TO AN EXPLORER A PRODUCTION TAX 05 CREDIT CERTIFICATE IF THE TOTAL OF PRODUCTION TAX CREDITS 06 SUBMITTED FOR COOK INLET PRODUCTION, BASED ON EXPLORATION 07 EXPENDITURES FOR WORK PERFORMED DURING THE PERIOD 08 DESCRIBED IN (b) OF THIS SECTION FOR THAT PRODUCTION, THAT HAVE 09 BEEN APPROVED BY THE DEPARTMENT EXCEEDS $20,000,000]. 10 * Sec. 16. AS 43.55.025(h) is amended to read: 11 (h) A producer that purchases a production tax credit certificate may apply the 12 credits against its production tax liability under AS 43.55.011(e) [THIS CHAPTER]. 13 Regardless of the price the producer paid for the certificate, the producer may receive 14 a credit against its production tax liability for the full amount of the credit, but for not 15 more than the amount for which the certificate is issued. A production tax credit 16 allowed under this section may not be applied more than once. 17 * Sec. 17. AS 43.55.025(i) is amended to read: 18 (i) For a production tax credit under this section, 19 (1) the amount of the credit that may be applied against the production 20 tax for each tax month may not exceed the total production tax liability under 21 AS 43.55.011(e) of the taxpayer applying the credit for the same month; and 22 (2) an amount of the production tax credit that is greater than the total 23 tax liability under AS 43.55.011(e) of the taxpayer applying the credit for a tax month 24 may be carried forward and applied against the taxpayer's production tax liability 25 under AS 43.55.011(e) in one or more immediately following months. 26 * Sec. 18. AS 43.55.030(a) is amended to read: 27 (a) The tax shall be paid to the department, and the person paying the tax shall 28 file with the department at the time the tax or a portion of the tax is required to be 29 paid a statement, under oath, on forms prescribed by or acceptable to the department, 30 giving, with other information required, the following: 31 (1) a description of each [THE] lease or property from which the oil
01 and [OR] gas were [WAS] produced, by name, legal description, lease number, or 02 [BY] accounting codes [CODE NUMBERS] assigned by the department; 03 (2) the names of the producer and the person paying the tax; 04 (3) the gross amount of oil and the gross amount of [OR] gas 05 produced from each [THE] lease or property, and the percentage of the gross amount 06 of oil and gas owned by each producer for whom the tax is paid; 07 (4) the gross [TOTAL] value at the point of production of the oil 08 and of the [OR] gas produced from each [THE] lease or property owned by each 09 producer for whom the tax is paid; [AND] 10 (5) the name of the first purchaser and the price received for the oil 11 and for the [OR] gas, unless relieved from this requirement in whole or in part by 12 the department; and 13 (6) the producer's lease expenditures and adjustments as 14 calculated under AS 43.55.160 [IF SOLD IN THE STATE]. 15 * Sec. 19. AS 43.55.030(d) is amended to read: 16 (d) Reports by or on behalf of the producer are delinquent the first day 17 following the day the tax is due. [EACH PRODUCER IS SUBJECT TO A PENALTY 18 OF $25 A DAY FOR EACH LEASE OR PROPERTY UPON WHICH THE 19 REPORT IS NOT FILED. THE PENALTY FOR FAILURE TO FILE A REPORT IS 20 IN ADDITION TO THE PENALTY FOR DELINQUENT TAXES, AND IS A LIEN 21 AGAINST THE ASSETS OF THE PRODUCER.] 22 * Sec. 20. AS 43.55.030 is amended by adding a new subsection to read: 23 (e) In addition to other required information, the statement required to be filed 24 on or before March 31 of a year must show any adjustments or corrections to the 25 statements that were required under (a) of this section to be filed for the months of the 26 preceding calendar year during which the oil or gas was produced. 27 * Sec. 21. AS 43.55.040 is amended to read: 28 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 29 AS 43.05.405 - 43.05.499, the department may 30 (1) require a person engaged in production and the agent or employee 31 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil
01 or gas to furnish, whether by the filing of regular statements or reports or 02 otherwise, additional information that is considered by the department as necessary to 03 compute the amount of the tax; notwithstanding any contrary provision of law, the 04 disclosure of additional information under this paragraph to the producer 05 obligated to pay the tax does not violate AS 40.25.100(a) or AS 43.05.230(a); 06 before disclosing information under this paragraph that is otherwise required to 07 be held confidential under AS 40.25.100(a) or AS 43.05.230(a), the department 08 shall 09 (A) provide the person that furnished the information a 10 reasonable opportunity to be heard regarding the proposed disclosure and 11 the conditions to be imposed under (B) of this paragraph; and 12 (B) impose appropriate conditions limiting 13 (i) access to the information to those legal counsel, 14 consultants, employees, officers, and agents of the producer who 15 have a need to know that information for the purpose of 16 determining or contesting the producer's tax obligation; and 17 (ii) the use of the information to use for that 18 purpose; 19 (2) examine the books, records, and files of such a person; 20 (3) conduct hearings and compel the attendance of witnesses and the 21 production of books, records, and papers of any person; and 22 (4) make an investigation or hold an inquiry that is considered 23 necessary to a disclosure of the facts as to 24 (A) the amount of production from any oil or gas location, or of 25 a company or other producer of oil or gas; and 26 (B) the rendition of the oil and gas for taxing purposes. 27 * Sec. 22. AS 43.55.080 is amended to read: 28 Sec. 43.55.080. Collection and deposit of revenue. Except as otherwise 29 provided under art. IX, sec. 17, Constitution of the State of Alaska, the [THE] 30 department shall deposit in the general fund the money collected by it under 31 AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150].
01 * Sec. 23. AS 43.55.135 is amended to read: 02 Sec. 43.55.135. Measurement. For the purposes of AS 43.55.011 - 43.55.180 03 [AS 43.55.011 - 43.55.150], oil is [SHALL BE] measured in terms of a "barrel of oil" 04 and gas is [SHALL BE] measured in terms of a "cubic foot of gas." 05 * Sec. 24. AS 43.55.150(a) is amended to read: 06 (a) For the purposes of AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150], 07 the gross value at the point of production is [SHALL BE] calculated using the 08 reasonable costs of transportation of the oil or gas. The reasonable costs of 09 transportation are [SHALL BE] the actual costs, except when the 10 (1) [WHEN THE] parties to the transportation of oil or gas are 11 affiliated; 12 (2) [WHEN THE] contract for the transportation of oil or gas is not an 13 arm's length transaction or is not representative of the market value of that 14 transportation; and 15 (3) [WHEN THE] method of transportation of oil or gas is not 16 reasonable in view of existing alternative methods of transportation. 17 * Sec. 25. AS 43.55 is amended by adding new sections to article 1 to read: 18 Sec. 43.55.160. Determination of production tax value of oil and gas. (a) 19 Except as provided in (f) of this section, for purposes of AS 43.55.011(e) and (g), the 20 production tax value of the taxable oil and gas produced during a month is (1) the total 21 of (A) the gross value at the point of production of the oil taxable under 22 AS 43.55.011(e) and (g) and produced by the producer from all leases or properties in 23 the state, less three-quarters of the gross value at the point of production of the oil 24 taxable under AS 43.55.011(e) and (g) and produced by the producer from leases or 25 properties in the Cook Inlet sedimentary basin, and (B) one-third of the gross value at 26 the point of production of the gas taxable under AS 43.55.011(e) and (g) and produced 27 by the producer from all leases or properties in the state, (2) less the producer's lease 28 expenditures for the month as adjusted under (e) of this section. However, the 29 production tax value calculated under this subsection may not be less than zero. If a 30 producer does not produce taxable oil or gas during a month, the producer is 31 considered to have generated a positive production tax value if the calculation
01 described in this subsection yields a positive number because the producer's adjusted 02 lease expenditures for a month are less than zero as a result of the producer's receiving 03 a payment or credit under (e) of this section or otherwise. 04 (b) For purposes of administration of (a) of this section, 05 (1) any adjusted lease expenditures that would otherwise be deductible 06 in a month but whose deduction would cause the production tax value calculated under 07 (a) of this section of the taxable oil and gas produced during the month to be less than 08 zero may be added to the producer's adjusted lease expenditures for one or more other 09 months in the same calendar year; the total of any adjusted lease expenditures that are 10 not deductible in any month during a calendar year because their deduction would 11 cause the production tax value calculated under (a) of this section of the taxable oil 12 and gas produced during one or more months to be less than zero may be used to 13 establish a carried-forward annual loss under AS 43.55.024(b); 14 (2) an explorer that has taken a tax credit under AS 43.55.024(b) or 15 that has obtained a transferable tax credit certificate under AS 43.55.024(d) for the 16 amount of a tax credit under AS 43.55.024(b) is considered a producer, subject to the 17 tax levied under AS 43.55.011(e), to the extent that the explorer generates a positive 18 production tax value as the result of the explorer's receiving a payment or credit 19 described in (e) of this section. 20 (c) For purposes of this section, 21 (1) a producer's lease expenditures for a period are the total costs 22 upstream of the point of production of oil and gas that are incurred on or after April 1, 23 2006, by the producer during the period and that are direct and ordinary costs of 24 exploring for, developing, or producing oil or gas deposits located within the 25 producer's leases or properties in the state or, in the case of land in which the producer 26 does not own a working interest, direct and ordinary costs of exploring for oil or gas 27 deposits located within other land in the state; however, lease expenditures do not 28 include the costs incurred to satisfy a work commitment under an exploration license 29 under AS 38.05.132; in determining whether costs are direct and ordinary costs of 30 exploring for, developing, or producing oil or gas deposits located within a lease or 31 property or other land in the state,
01 (A) the department shall give substantial weight to the typical 02 industry practices and standards in the state and in the United States that 03 determine the costs that an operator is allowed to bill a working interest owner 04 that is not the operator, under unit operating agreements or similar operating 05 agreements that were in effect on or before December 1, 2005, and were 06 subject to negotiation with at least one working interest owner with substantial 07 bargaining power, other than the operator; and 08 (B) as to matters that are not addressed by the industry 09 practices and standards described in (A) of this paragraph or as to which those 10 practices and standards are not clear or are not uniform, the department shall 11 give substantial weight to the standards adopted by the Department of Natural 12 Resources that determine the costs, other than interest, that a lessee is allowed 13 to deduct from revenue in calculating net profits under a lease issued under 14 AS 38.05.180(f)(3)(B), (D), or (E); 15 (2) the Department of Revenue may authorize a producer, including a 16 producer that is an operator, to treat as its lease expenditures under this section the 17 costs paid by the producer that are billed to the producer by an operator in accordance 18 with the terms of a unit operating agreement or similar operating agreement if the 19 Department of Revenue finds that 20 (A) the pertinent provisions of the operating agreement are 21 substantially consistent with the Department of Revenue's determinations and 22 standards otherwise applicable under this subsection; and 23 (B) at least one working interest owner party to the agreement, 24 other than the operator, has substantial incentive and ability to effectively audit 25 billings under the agreement; 26 (3) an activity does not need to be physically located on or near the 27 premises of the lease or property from which oil or gas is recovered in order for the 28 cost of the activity to be a cost upstream of the point of production of the oil or gas. 29 (d) For purposes of (c) of this section, "direct costs" 30 (1) includes 31 (A) an expenditure, when incurred, to acquire an item if the
01 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure 02 may be required to be capitalized rather than treated as an expense for financial 03 accounting or federal income tax purposes; 04 (B) payments of or in lieu of property taxes, sales and use 05 taxes, motor fuel taxes, and excise taxes; 06 (C) a reasonable allowance, as determined under regulations 07 adopted by the department, for overhead expenses directly related to exploring 08 for, developing, and producing oil or gas deposits located within leases or 09 properties or other land in the state; 10 (2) does not include 11 (A) depreciation, depletion, or amortization; 12 (B) oil or gas royalty payments, production payments, lease 13 profit shares, or other payments or distributions of a share of oil or gas 14 production, profit, or revenue; 15 (C) taxes based on or measured by net income; 16 (D) interest or other financing charges or costs of raising equity 17 or debt capital; 18 (E) acquisition costs for a lease or property or exploration 19 license; 20 (F) costs arising from fraud, wilful misconduct, or negligence; 21 (G) fines or penalties imposed by law; 22 (H) costs of arbitration, litigation, or other dispute resolution 23 activities that involve the state or concern the rights or obligations among 24 owners of interests in, or rights to production from, one or more leases or 25 properties or a unit; 26 (I) donations; 27 (J) costs incurred in organizing a partnership, joint venture, or 28 other business entity or arrangement; 29 (K) amounts paid to indemnify the state; the exclusion 30 provided by this paragraph does not apply to the costs of obtaining insurance 31 or a surety bond from a third-party insurer or surety;
01 (L) surcharges levied under AS 43.55.201 or 43.55.300; 02 (M) for a transaction that is an internal transfer or is otherwise 03 not an arm's length transaction, expenditures incurred that are in excess of fair 04 market value; 05 (N) an expenditure incurred to purchase an interest in any 06 corporation, partnership, limited liability company, business trust, or any other 07 business entity, whether or not the transaction is treated as an asset sale for 08 federal income tax purposes; 09 (O) a tax levied under AS 43.55.011; 10 (P) the portion of costs incurred for dismantlement, removal, 11 surrender, or abandonment of a well, facility, pipeline, platform, or other 12 structure, or for the restoration of a lease, field, unit, area, body of water, or 13 right-of-way in conjunction with dismantlement, removal, surrender, or 14 abandonment, that is attributable to production of oil or gas occurring before 15 April 1, 2006; the portion is calculated as a ratio of the amount of oil and gas 16 production associated with the well, facility, pipeline, platform, or other 17 structure, lease, field, unit, area, body of water, or right-of-way occurring 18 before April 1, 2006 to the total amount of oil and gas production associated 19 with that well, facility, pipeline, platform, or other structure, lease, field, unit, 20 area, body of water, or right-of-way through the end of the calendar month 21 before commencement of the dismantlement, removal, surrender, or 22 abandonment; for purposes of the ratio calculated under this subparagraph, 23 6,000 cubic feet of gas is considered to be equivalent to one barrel of oil. 24 (e) A producer's lease expenditures must be adjusted by subtracting certain 25 payments or credits received by the producer, as provided in this subsection. If one or 26 more payments or credits subject to this subsection are received by a producer during 27 a month or, under (f) of this section, during a calendar year, and if either the total 28 amount of the payments or credits exceeds the amount of the producer's lease 29 expenditures or the producer has no lease expenditures, the producer shall nevertheless 30 subtract those payments or credits from the lease expenditures or from zero, 31 respectively, and the producer's adjusted lease expenditures for that month or calendar
01 year are a negative number and shall be applied to the calculation under (a) of this 02 section as a negative number. The payments or credits that a producer shall subtract 03 from the producer's lease expenditures, or from zero, under this subsection are 04 payments or credits, other than tax credits, received by the producer for 05 (1) the use by another person of a production facility in which the 06 producer has an ownership interest or the management by the producer of a production 07 facility under a management agreement providing for the producer to receive a 08 management fee; 09 (2) a reimbursement or similar payment that offsets the producer's 10 lease expenditures, including a payment from the state or federal government for 11 reimbursement of the producer's upstream costs, including costs for gathering, 12 separating, cleaning, dehydration, compressing, or other field handling associated with 13 the production of oil or gas upstream of the point of production; 14 (3) the sale or other transfer of 15 (A) an asset, including geological, geophysical, or well data or 16 interpretations, acquired by the producer as a result of a lease expenditure or an 17 expenditure that would be a lease expenditure if it were incurred on or after 18 April 1, 2006; for purposes of this subparagraph, 19 (i) if a producer removes from the state, for use outside 20 the state, an asset described in this subparagraph, the value of the asset 21 at the time it is removed is considered a payment received by the 22 producer for sale or transfer of the asset; 23 (ii) for a transaction that is an internal transfer or is 24 otherwise not an arm's length transaction, if the sale or transfer of the 25 asset is made for less than fair market value, the amount subtracted 26 must be the fair market value; and 27 (B) oil or gas 28 (i) that is not considered produced from a lease or 29 property under AS 43.55.020(e); and 30 (ii) the cost of acquiring which is a lease expenditure 31 incurred by the person that acquires the oil or gas;
01 (4) insurance recoveries. 02 (f) In place of the adjusted lease expenditures for a month under (a) of this 03 section, a producer may, at any time, elect to substitute, for every month of a calendar 04 year, 1/12 of the producer's adjusted lease expenditures for the calendar year. An 05 election made under this subsection applies to calculation of the tax under 06 AS 43.55.011(e) and (g). 07 (g) The department shall specify or approve a reasonable allocation method 08 for determining the portion of a cost that is appropriately treated as a lease expenditure 09 under (c) of this section if a cost that would otherwise constitute a lease expenditure 10 under (c) of this section is incurred to explore for, develop, or produce 11 (1) both an oil or gas deposit located within land outside the state and 12 an oil or gas deposit located within a lease or property, or other land, in the state; or 13 (2) an oil or gas deposit located partly within land outside the state and 14 partly within a lease or property, or other land, in the state. 15 (h) For purposes of AS 43.55.024(a) and (b) and only as to expenditures 16 incurred to explore for an oil or gas deposit located within land in which an explorer 17 does not own a working interest, the term "producer" in (b), (c), and (e) of this section 18 includes "explorer." 19 (i) The department may adopt regulations that establish additional standards 20 necessary to carrying out the purposes of this section, including the incorporation of 21 the concepts of 26 U.S.C. 482 (Internal Revenue Code), as amended, the related or 22 accompanying regulations of that section, and any ruling or guidance issued by the 23 United States Internal Revenue Service that relates to that section. 24 (j) For purposes of this section, 25 (1) "explore" includes conducting geological or geophysical 26 exploration, including drilling a stratigraphic test well; 27 (2) "ordinary" has the meaning given to "ordinary" in 26 U.S.C. 162 28 (Internal Revenue Code), as amended, and regulations adopted under that section; 29 (3) "stratigraphic test well" means a well drilled for the sole purpose of 30 obtaining geological information to aid in exploring for an oil or gas deposit and the 31 target zones of which are located in the state.
01 Sec. 43.55.170. Additional nontransferable tax credit. (a) For a month for 02 which a producer's tax liability under AS 43.55.011(e) exceeds zero before application 03 of any credits under this chapter, a producer that is qualified under (c) of this section 04 and whose average amount of oil and gas produced a day and taxable under 05 AS 43.55.011(e) is less than 100,000 barrels of oil equivalent a day may apply a tax 06 credit under this section against that liability. A producer whose average amount of oil 07 and gas produced a day and taxable under AS 43.55.011(e) is 08 (1) not more than 50,000 barrels of oil equivalent may apply a tax 09 credit of up to $1,000,000 for the month; 10 (2) more than 50,000 and less than 100,000 barrels of oil equivalent 11 may apply a tax credit of up to the following fraction of $1,000,000 for the month: 12 1 - [2 x (AP - 50,000)]/100,000, 13 where AP = the average amount of oil and gas, expressed as barrels of oil equivalent, 14 produced a day during the month and taxable under AS 43.55.011(e). 15 (b) A producer may not take a tax credit under this section for any month that 16 ends the later of 17 (1) July 31, 2016; or 18 (2) the 10th anniversary of the last day of the month for which the 19 producer first has commercial oil or gas production from at least one lease or property 20 in the state, if the producer did not have commercial oil or gas production from a lease 21 or property in the state before July 1, 2006. 22 (c) On written application by a producer, including any information the 23 department may require, the department shall determine whether the producer 24 qualifies under this section for a calendar year. To qualify under this section, a 25 producer must demonstrate that its operation in the state or its ownership of an interest 26 in a lease or property in the state as a distinct producer entity would not result in the 27 division among multiple producer entities of any production tax liability under 28 AS 43.55.011(e) that would be reasonably expected to be attributed to a single 29 producer entity if the tax credit provision of (a) of this section did not exist. 30 (d) A tax credit authorized by this section may not be applied to reduce a 31 producer's tax liability under AS 43.55.011(e) for any month below zero. An unused
01 portion of a tax credit that could otherwise be applied for a month but whose 02 application would cause the producer's tax liability under AS 43.55.011(e) for the 03 month to be less than zero may be applied for one or more other months in the same 04 calendar year to the extent otherwise allowed under this section. 05 (e) An unused tax credit or portion of a tax credit under this section is not 06 transferable and may not be carried forward to or used in a later calendar year. 07 (f) For the purposes of this section, a barrel of oil equivalent is 08 (1) one barrel of oil, in the case of oil; 09 (2) 6,000 cubic feet of gas, in the case of gas. 10 Sec. 43.55.180. Required reports. (a) The Department of Revenue shall 11 (1) study 12 (A) the effects of the tax rates under AS 43.55.011(f) and of 13 potential changes in those tax rates on state revenue and on oil and gas 14 exploration, development, and production on private land; and 15 (B) the fairness of the tax rates under AS 43.55.011(f) and of 16 potential changes in those tax rates for private landowners; and 17 (2) prepare a report on or before the first day of the 2013 regular 18 session of the legislature on the results of the study made under (1) of this subsection, 19 including a recommendation as to whether those tax rates should be changed; the 20 department shall notify the legislature that the report prepared under this paragraph is 21 available. 22 (b) The Department of Revenue shall 23 (1) study the effects of the credits authorized by AS 43.55.025 and 24 43.55.170 on state revenue, on the encouragement of exploration, development, and 25 production of oil and gas deposits located in the state, and on the encouragement of 26 new entrants into the oil and gas industry in the state; and 27 (2) prepare a report on or before the first day of the 2015 regular 28 session of the legislature on the results of the study made under (1) of this subsection, 29 and shall include with the report a recommendation as to whether the legislature 30 should extend the availability of the credits under AS 43.55.025 and 43.55.170; the 31 department shall notify the legislature that the report prepared under this paragraph is
01 available. 02 * Sec. 26. AS 43.55.201 is amended to read: 03 Sec. 43.55.201. Surcharge levied. (a) Every producer of oil shall pay a 04 surcharge of $.01 [$.02] per barrel of oil produced from each lease or property in the 05 state, less any oil the ownership or right to which is exempt from taxation. 06 (b) The surcharge imposed by (a) of this section is in addition to the tax 07 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 08 from each lease or property during the preceding month. The surcharge [SHALL 09 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 10 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.300 - 11 43.55.310. 12 (c) A producer of oil shall make reports of production in the same manner and 13 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 14 43.55.150]. 15 * Sec. 27. AS 43.55.201 is amended by adding a new subsection to read: 16 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 17 property is not considered to be produced from a lease or property for purposes of this 18 section. 19 * Sec. 28. AS 43.55.300 is amended to read: 20 Sec. 43.55.300. Surcharge levied. (a) Every producer of oil shall pay a 21 surcharge of $.04 [$.03] per barrel of oil produced from each lease or property in the 22 state, less any oil the ownership or right to which is exempt from taxation. 23 (b) The surcharge imposed by (a) of this section is in addition to the tax 24 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 25 from each lease or property during the preceding month. The surcharge [SHALL 26 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 27 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.201 - 28 43.55.231. 29 (c) A producer of oil shall make reports of production in the same manner and 30 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 31 43.55.150].
01 * Sec. 29. AS 43.55.300 is amended by adding a new subsection to read: 02 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 03 property is not considered to be produced from a lease or property for purposes of this 04 section. 05 * Sec. 30. AS 43.55.900(6) is repealed and reenacted to read: 06 (6) "gas" means 07 (A) all natural, associated, or casinghead gas; 08 (B) all hydrocarbons that 09 (i) are recovered by mechanical separation of well 10 fluids or by gas processing in a gas processing plant; and 11 (ii) exist in a gaseous phase at the completion of 12 mechanical separation and any gas processing in a gas processing plant; 13 and 14 (C) all other hydrocarbons produced from a well not defined as 15 oil; 16 * Sec. 31. AS 43.55.900(7) is repealed and reenacted to read: 17 (7) "gross value at the point of production" means 18 (A) for oil, the value of the oil at its point of production 19 without deduction of any costs upstream of that point of production; 20 (B) for gas, the value of the gas at its point of production 21 without deduction of any costs upstream of that point of production; 22 * Sec. 32. AS 43.55.900(10) is repealed and reenacted to read: 23 (10) "oil" means 24 (A) crude petroleum oil; and 25 (B) all liquid hydrocarbons that are recovered by mechanical 26 separation of well fluids or by gas processing in a gas processing plant; 27 * Sec. 33. AS 43.55.900 is amended by adding new paragraphs to read: 28 (17) "Cook Inlet sedimentary basin" has the meaning given in 29 regulations adopted to implement AS 38.05.180(f)(4); 30 (18) "explorer" means a person who, in exploring for new oil or gas 31 reserves, incurs expenditures;
01 (19) "gas processing" 02 (A) means processing a gaseous mixture of hydrocarbons 03 (i) by means of absorption, adsorption, externally 04 applied refrigeration, artificial compression followed by adiabatic 05 expansion using the Joule-Thomson effect, or another physical process 06 that is not mechanical separation; and 07 (ii) for the purpose of extracting and recovering liquid 08 hydrocarbons; 09 (B) does not include gas treatment; 10 (20) "gas processing plant" means a facility that 11 (A) extracts and recovers liquid hydrocarbons from a gaseous 12 mixture of hydrocarbons by gas processing; and 13 (B) is located upstream of any gas treatment and upstream of 14 the inlet of any gas pipeline system transporting gas to a market; 15 (21) "gas treatment" 16 (A) means conditioning gas and removing from gas 17 nonhydrocarbon substances for the purpose of rendering the gas acceptable for 18 tender and acceptance into a gas pipeline system; 19 (B) includes incidentally removing liquid hydrocarbons from 20 the gas; 21 (C) does not include 22 (i) dehydration required to facilitate the movement of 23 gas from the well to the point where gas processing takes place; 24 (ii) the scrubbing of liquids from gas to facilitate gas 25 processing; 26 (22) "landowner's royalty interest" means 27 (A) a lessor's royalty interest under an oil and gas lease; or 28 (B) a royalty interest that is 29 (i) held by a surface owner of land from which oil or 30 gas is produced; and 31 (ii) granted in exchange for the right to use the surface
01 of that land or as compensation for damage to the surface of that land; 02 (23) "oil and gas lease" includes an oil and gas lease, a gas only lease, 03 and an oil only lease; 04 (24) "point of production" means 05 (A) for oil, the automatic custody transfer meter or device 06 through which the oil enters into the facilities of a carrier pipeline or other 07 transportation carrier in a condition of pipeline quality; in the absence of an 08 automatic custody transfer meter or device, "point of production" means the 09 mechanism or device to measure the quantity of oil that has been approved by 10 the department for that purpose, through which the oil is tendered and accepted 11 in a condition of pipeline quality into the facilities of a carrier pipeline or other 12 transportation carrier or into a field topping plant; 13 (B) for gas, other than gas described in (C) of this paragraph, 14 that is 15 (i) not subjected to or recovered by mechanical 16 separation or run through a gas processing plant, the first point where 17 the gas is accurately metered; 18 (ii) subjected to or recovered by mechanical separation 19 but not run through a gas processing plant, the first point where the gas 20 is accurately metered after completion of mechanical separation; 21 (iii) run through a gas processing plant, the first point 22 where the gas is accurately metered downstream of the plant; 23 (C) for gas run through an integrated gas processing plant and 24 gas treatment facility that does not accurately meter the gas after the gas 25 processing and before the gas treatment, the first point where gas processing is 26 completed or where gas treatment begins, whichever is further upstream. 27 * Sec. 34. AS 43.55.011(a), 43.55.011(b), 43.55.011(c), 43.55.012, 43.55.013, 43.55.016, 28 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), 29 and 43.55.900(16) are repealed. 30 * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to 31 read:
01 APPLICABILITY. (a) Sections 5, 7 - 10, 12, 13, 15 - 18, 20, 24, and 26 - 34 of this 02 Act and AS 43.55.160 and 43.55.170, enacted by sec. 25 of this Act, apply to oil and gas 03 produced on or after April 1, 2006. 04 (b) Section 11 of this Act applies to oil and gas produced before, on, or after the 05 effective date of sec. 11 of this Act. 06 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 TRANSITIONAL PROVISIONS. (a) Notwithstanding any contrary provision of 09 AS 43.55.024(a), enacted by sec. 12 of this Act, for oil and gas produced on or after April 1, 10 2006, and before January 1, 2007, the phrase "every month an annualized tax credit in an 11 amount equal to 1 2/3 percent" in AS 43.55.024(a)(1)(B), enacted by sec. 12 of this Act, shall 12 be replaced by the phrase "every month during the period April 1, 2006, through 13 December 31, 2006, an annualized tax credit in an amount equal to 2.222 percent." 14 (b) Notwithstanding any contrary provision of AS 43.55.024(e), enacted by sec. 12 of 15 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 16 phrase "a calendar year" in AS 43.55.024(e), enacted by sec. 12 of this Act, shall be replaced 17 by the phrase "the last nine months of the calendar year." 18 (c) Notwithstanding any contrary provision of AS 43.55.024(j)(2), enacted by sec. 12 19 of this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, 20 (1) the number "1/24" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of this 21 Act, shall be replaced by the number "1/18"; 22 (2) the phrase "calendar year" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of 23 this Act, shall be replaced by the phrase "last nine months of the calendar year." 24 (d) Notwithstanding any contrary provision of AS 43.55.160(f), enacted by sec. 25 of 25 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 26 phrase "for every month of a calendar year, 1/12 of the producer's adjusted lease expenditures 27 for the calendar year" in AS 43.55.160(f), enacted by sec. 25 of this Act, shall be replaced by 28 the phrase "for each of the last nine months of 2006, one-ninth of the producer's adjusted lease 29 expenditures for that nine-month period." 30 (e) For oil and gas produced before April 1, 2006, the provisions of AS 43.55, and 31 regulations adopted under AS 43.55, that were in effect before April 1, 2006, and that were
01 applicable to the oil and gas continue to apply to that oil and gas. 02 (f) Notwithstanding any contrary provision of AS 43.55.020(a), as repealed and 03 reenacted by sec. 7 of this Act, for oil and gas produced on or after April 1, 2006, and before 04 the first day of the first month that begins at least 10 months after the effective date of sec. 7 05 of this Act, 06 (1) the amount of the taxes that would have been levied on the producer under 07 AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on the last day of 08 each calendar month on the oil and gas that was produced from each lease or property during 09 the preceding month; 10 (2) the portion, if any, of the taxes levied under AS 43.55.011(e) - (g), enacted 11 by sec. 5 of this Act, that is due under AS 43.55.020(a), as repealed and reenacted by sec. 7 of 12 this Act, and that remains unpaid, net of any credits applied as allowed by law, is due on the 13 last day of the first month that begins at least 10 months after the effective date of sec. 5 of 14 this Act. 15 (g) Notwithstanding any contrary provision of AS 43.55.030(a), as amended by sec. 16 18 of this Act, for oil and gas produced on or after April 1, 2006, and before the first day of 17 the first month that begins at least 10 months after the effective date of sec. 18 of this Act, the 18 person paying the tax shall file with the Department of Revenue, at the time an amount of tax 19 is due 20 (1) under (f)(1) of this section, the statement required under former 21 AS 43.55.030(a), as that subsection read on March 31, 2006; and 22 (2) under (f)(2) of this section, the statements required under AS 43.55.030(a), 23 as amended by sec. 18 of this Act. 24 (h) Notwithstanding any contrary provision of AS 43.55.201(a) or (b), as amended by 25 sec. 26 of this Act, or AS 43.55.300(a) or (b), as amended by sec. 28 of this Act, for oil 26 produced on or after April 1, 2006, and before the first day of the first month that begins at 27 least 10 months after the effective date of secs. 26 and 28 of this Act, 28 (1) the amount of the surcharges that would have been imposed on the 29 producer under AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on 30 the last day of each calendar month on oil produced from each lease or property during the 31 preceding month;
01 (2) the portion, if any, of the surcharges imposed under AS 43.55.201(a), as 02 amended by sec. 26 of this Act, and AS 43.55.300(a), as amended by sec. 28 of this Act, and 03 that remains unpaid is due on the last day of the first month that begins at least 10 months 04 after the effective date of secs. 26 and 28 of this Act. 05 (i) Notwithstanding any contrary provision of AS 43.55.201(c), as amended by sec. 06 26 of this Act, or AS 43.55.300(c), as amended by sec. 28 of this Act, for oil produced on or 07 after April 1, 2006, and before the first day of the first month that begins at least 10 months 08 after the effective date of secs. 26 and 28 of this Act, at the time an amount of surcharge is 09 due, 10 (1) under (h)(1) of this section, the producer shall file the report of production 11 required under former AS 43.55.201(c) and 43.55.300(c), as those provisions read on 12 March 31, 2006; and 13 (2) under (h)(2) of this section, the producer shall file the report of production 14 required under former AS 43.55.201(c), as amended by sec. 26 of this Act, and 15 AS 43.55.300(c), as amended by sec. 28 of this Act. 16 (j) For purposes of taxes to be calculated and due under (f)(1) of this section and 17 statements to be filed under (g)(1) of this section, regulations that were adopted by the 18 Department of Revenue under AS 43.55, as the provisions of that chapter read on March 31, 19 2006, and that were in effect on that date apply to those taxes and statements. 20 * Sec. 37. The uncodified law of the State of Alaska is amended by adding a new section to 21 read: 22 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 23 contrary provision of AS 44.62.240, a regulation adopted by the Department of Revenue to 24 implement, interpret make specific, or otherwise carry out the provisions of secs. 5, 7 - 10, 12, 25 13, 15 - 18, 20, 24 - 34, and 36 of this Act may apply retroactively as of April 1, 2006, if the 26 Department of Revenue expressly designates in the regulation that the regulation applies 27 retroactively to that date. 28 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to 29 read: 30 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the 31 heading of
01 (1) AS 43.55 from "Oil and Gas Production Taxes and Oil Surcharge" to "Oil 02 and Gas Production Tax and Oil Surcharge"; 03 (2) article 1 of AS 43.55 from "Oil and Gas Properties Production Taxes" to 04 "Oil and Gas Production Tax"; 05 (3) AS 43.55.011 from "Oil production tax" to "Oil and gas production tax"; 06 (4) AS 43.55.025 from "Tax credit for oil and gas exploration or gas only 07 exploration" to "Alternative tax credit for oil and gas exploration"; 08 (5) AS 43.55.150 from "Determination of gross value" to "Determination of 09 gross value at the point of production." 10 * Sec. 39. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 RETROACTIVITY OF PROVISIONS OF ACT. Sections 5, 7 - 10, 12, 13, 15 - 18, 13 20, 24 - 36 of this Act are retroactive to April 1, 2006. 14 * Sec. 40. This Act takes effect immediately under AS 01.10.070(c).