HCS CSSB 305(FIN) am H: "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) am H 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 21.5 percent of the production tax value of the taxable oil and gas as calculated 30 under 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. However, application of this subsection may not,
01 when added to the tax levied under (e) of this section, impose a total tax levy of more 02 than 50 percent of the production tax value of taxable oil and gas as calculated under 03 AS 43.55.160. The legislature may appropriate amounts from the annual estimated 04 balance of the account maintained under AS 37.05.142 for deposits into the general 05 fund of the proceeds of the tax levied under this subsection to the high energy cost 06 offset fund established by AS 43.55.420. 07 (h) For purposes of (g) of this section, the price index for a month is calculated 08 by subtracting 35 from the number that is equal to the quotient of the production tax 09 value of the taxable oil and gas produced during that month, as calculated under 10 AS 43.55.160, divided by the number of barrels of oil equivalent of that oil and gas. 11 For purposes of this subsection, a barrel of oil equivalent is a barrel of oil, in the case 12 of oil, or 6,000 cubic feet of gas, in the case of gas. 13 (i) For a month that ends before April 1, 2021, the total tax levied by (e) and 14 (g) of this section on gas produced from a lease or property in the Cook Inlet 15 sedimentary basin may not exceed 16 (1) for a lease or property that first commenced commercial production 17 of gas before April 1, 2006, (A) the amount of gas produced from the lease or 18 property, (B) multiplied by the average rate of tax that was imposed under this chapter 19 on gas produced from the lease or property for the 12-month period ending on 20 March 31, 2006, and (C) multiplied by the average prevailing value for gas delivered 21 in the Cook Inlet area for the 12-month period ending March 31, 2006, as determined 22 by the department under AS 43.55.020(f); 23 (2) for a lease or property that first commences commercial production 24 of gas after March 31, 2006, (A) the amount of gas produced from the lease or 25 property, (B) multiplied by the average rate of tax that was imposed under this chapter 26 on gas produced from all leases or properties in the Cook Inlet sedimentary basin for 27 the 12-month period ending on March 31, 2006, and (C) multiplied by the average 28 prevailing value for gas delivered in the Cook Inlet area for the 12-month period 29 ending March 31, 2006, as determined by the department under AS 43.55.020(f). 30 * Sec. 6. AS 43.55.017(a) is amended to read: 31 (a) Except as provided in this chapter, the taxes imposed by this chapter are in
01 place of all taxes now imposed by the state or any of its municipalities, and neither the 02 state nor a municipality may impose a tax on [UPON] 03 (1) producing oil or gas leases; 04 (2) oil or gas produced or extracted in the state; 05 (3) the value of intangible drilling and development costs, as 06 described in 26 U.S.C. 263(c) (Internal Revenue Code), as amended through 07 January 1, 1974 [EXPLORATION EXPENSES]. 08 * Sec. 7. AS 43.55.020(a) is repealed and reenacted to read: 09 (a) Ninety-five percent of the total tax levied under AS 43.55.011(e) - (g), net 10 of any credits applied under this chapter, is due on the last day of each calendar month 11 on oil and gas produced from each lease or property during the preceding month. The 12 remaining portion of the tax levied under AS 43.55.011(e) - (g), net of any credits 13 applied under this chapter, is due on March 31 of the year following the calendar year 14 during which the oil and gas were produced. An unpaid amount of tax that is not paid 15 when due in accordance with this subsection becomes delinquent. An overpayment of 16 tax with respect to a month may be applied against the tax due for any later month. 17 Notwithstanding any contrary provision of AS 43.05.280, interest on an overpayment 18 is allowed only from a date that is 90 days after the later of (1) the March 31 described 19 in this subsection, or (2) the date that the statement required under AS 43.55.030(a) 20 and (e) to be filed on or before that March 31 is filed. Interest is not allowed if the 21 overpayment was refunded within the 90-day period. 22 * Sec. 8. AS 43.55.020(b) is amended to read: 23 (b) The production tax on oil and [OR] gas shall be paid by or on behalf of the 24 producer. 25 * Sec. 9. AS 43.55.020(d) is amended to read: 26 (d) In making settlement with the royalty owner for oil and gas that is 27 taxable under AS 43.55.011, the producer may deduct the amount of the tax paid on 28 taxable royalty oil and [OR] gas, or may deduct taxable royalty oil or gas equivalent 29 in value at the time the tax becomes due to the amount of the tax paid. Unless 30 otherwise agreed between the producer and the royalty owner, the amount of the 31 tax paid under AS 43.55.011(e) and (g) on taxable royalty oil and gas for a month,
01 other than oil and gas the ownership or right to which constitutes a landowner's 02 royalty interest, is considered to be the gross value at the point of production of 03 the taxable royalty oil and gas produced during the month multiplied by a figure 04 that is a quotient, in which 05 (1) the numerator is the producer's total tax liability under 06 AS 43.55.011(e) and (g) for the month of production; and 07 (2) the denominator is the total gross value at the point of 08 production of the oil and gas taxable under AS 43.55.011(e) and (g) produced by 09 the producer from all leases and properties in the state during the month. 10 * Sec. 10. AS 43.55.020(e) is repealed and reenacted to read: 11 (e) Gas flared, released, or allowed to escape in excess of the amount 12 authorized by the Alaska Oil and Gas Conservation Commission is considered, for the 13 purpose of AS 43.55.011 - 43.55.180, as gas produced from a lease or property. Oil or 14 gas used in the operation of a lease or property in the state in drilling for or producing 15 oil or gas, or for repressuring, except to the extent determined by the Alaska Oil and 16 Gas Conservation Commission to be waste, is not considered, for the purpose of 17 AS 43.55.011 - 43.55.180, as oil or gas produced from a lease or property. 18 * Sec. 11. AS 43.55.020(f) is amended to read: 19 (f) If oil or gas is produced but not sold, or if oil or gas is produced and 20 sold under circumstances where the sale price does not represent the prevailing value 21 for oil or gas of like kind, character, or quality in the field or area from which the 22 product is produced, the department may require the tax to be paid upon the basis of 23 the value of oil or gas of the same kind, quality, and character prevailing for that field 24 or area during the calendar month of production or sale [FOR THAT FIELD OR 25 AREA]. 26 * Sec. 12. AS 43.55 is amended by adding a new section to read: 27 Sec. 43.55.024. Tax credits for certain losses and expenditures. (a) A 28 producer or explorer may take a tax credit for a qualified capital expenditure as 29 follows: 30 (1) notwithstanding that a qualified capital expenditure may be a 31 deductible lease expenditure for purposes of calculating the production tax value of oil
01 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 02 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, 03 (A) a producer or explorer that incurs a qualified capital 04 expenditure may also elect to take a tax credit against a tax due under 05 AS 43.55.011(e) in the amount of 20 percent of that expenditure; 06 (B) for a calendar year for which the producer makes an 07 election under AS 43.55.160(f), instead of taking a tax credit at a rate 08 authorized by (A) of this paragraph as to each separate qualified capital 09 expenditure after it has been incurred, a producer that incurs a qualified capital 10 expenditure during that year and that wishes to apply a credit based on that 11 expenditure against a tax due under AS 43.55.011(e) shall calculate and apply 12 every month an annualized tax credit in an amount equal to 1 2/3 percent of the 13 total qualified capital expenditures incurred during that year and for which the 14 tax credit is taken for that year; 15 (2) a producer or explorer may take a credit for a qualified capital 16 expenditure incurred in connection with geological or geophysical exploration or in 17 connection with an exploration well only if the producer or explorer provides to the 18 department, as part of the statement required under AS 43.55.030(a) for the month for 19 which the credit is sought to be taken, the producer's or explorer's written agreement 20 (A) to notify the Department of Natural Resources, within 30 21 days after completion of the geological or geophysical data processing or 22 completion of the well, or within 30 days after the statement is filed, whichever 23 is the latest, of the date of completion and to submit a report to that department 24 describing the processing sequence and provide a list of data sets available; 25 (B) to provide to the Department of Natural Resources, within 26 30 days after the date of a request, specific data sets, ancillary data, and reports 27 identified in (A) of this paragraph; 28 (C) that, notwithstanding any provision of AS 38, the 29 Department of Natural Resources shall hold confidential the information 30 provided to that department under this paragraph for 10 years following the 31 completion date, after which the department shall publicly release the
01 information after 30 days' public notice. 02 (b) A producer or explorer may elect to take a tax credit in the amount of 20 03 percent of a carried-forward annual loss. A credit under this subsection may be applied 04 against a tax due under AS 43.55.011(e) and may be applied irrespective of whether 05 the producer or explorer also claims a credit for transitional investment expenditures 06 authorized by (j) of this section. For purposes of this subsection, a carried-forward 07 annual loss is the amount of a producer's or explorer's adjusted lease expenditures 08 under AS 43.55.160 for a previous calendar year that was not deductible in any month 09 under AS 43.55.160(a) and (b). 10 (c) A credit or portion of a credit under this section may not be used to reduce 11 a person's tax liability under AS 43.55.011(e) for any month below zero, and any 12 unused credit or portion of a credit not used under this subsection may be applied in a 13 later month. 14 (d) Except as limited by (j) of this section, a person entitled to take a tax credit 15 under this section that wishes to transfer the unused credit to another person may 16 apply to the department for a transferable tax credit certificate. An application under 17 this subsection must be on a form prescribed by the department and must include 18 supporting information and documentation that the department reasonably requires. 19 The department shall grant or deny an application, or grant an application as to a lesser 20 amount than that claimed and deny it as to the excess, not later than 60 days after the 21 latest of (1) March 31 of the year following the calendar year in which the qualified 22 capital expenditure or carried-forward annual loss for which the credit is claimed was 23 incurred; (2) if the applicant is required under AS 43.55.030(a) and (e) to file a 24 statement on or before March 31 of the year following the calendar year in which the 25 qualified capital expenditures or carried-forward annual loss for which the credit is 26 claimed was incurred, the date the statement was filed; or (3) the date the application 27 was received by the department. If, based on the information then available to it, the 28 department is reasonably satisfied that the applicant is entitled to a credit, the 29 department shall issue the applicant a transferable tax credit certificate for the amount 30 of the credit. A certificate issued under this subsection does not expire. 31 (e) A person to which a transferable tax credit certificate is issued under (d) of
01 this section may transfer the certificate to another person, and a transferee may further 02 transfer the certificate. Subject to the limitations set out in (a) - (c) of this section, and 03 notwithstanding any action the department may take with respect to the applicant 04 under (g) of this section, the owner of a certificate may apply the credit or a portion of 05 the credit shown on the certificate only against a tax due under AS 43.55.011(e). 06 However, a credit shown on a transferable tax credit certificate may not be applied to 07 reduce a transferee's total tax due under AS 43.55.011(e) on oil and gas produced 08 during a calendar year to less than 80 percent of the tax that would otherwise be due 09 without applying that credit. Any portion of a credit not used under this subsection 10 may be applied in a later period. 11 (f) Under standards established in regulations adopted by the department and 12 subject to appropriations made by law, the department, on the written application of 13 the person to whom a transferable tax credit has been issued under (d) of this section 14 and whose average amount of oil and gas produced a day taxable under 15 AS 43.55.011(e) is not more than 50,000 barrels of oil equivalent a day for the 16 preceding calendar year, shall issue a cash refund, in whole or in part, for the 17 certificate if the department finds 18 (1) after investigation and audit of the tax credit claim by the 19 department, that the applicant is entitled to the credit to the extent of the refund 20 amount; 21 (2) within 24 months after having applied for the transferable tax credit 22 certificate, that the applicant incurred a qualified capital expenditure or was the 23 successful bidder on a bid submitted for a lease on state land under AS 38.05.180(f); 24 (3) that the amount of the refund would not exceed the total of 25 qualified capital expenditures and successful bids described in (2) of this subsection 26 that have not been the subject of a finding made under this paragraph for purposes of a 27 previous refund; 28 (4) that the applicant does not have an outstanding liability to the state 29 for unpaid delinquent taxes under this title; and 30 (5) that the sum of the amount of the refund applied for and amounts 31 previously refunded to the applicant during the calendar year under this subsection
01 would not exceed $25,000,000. 02 (g) The issuance of a transferable tax credit certificate under (d) of this section 03 does not limit the department's ability to later audit a tax credit claim to which the 04 certificate relates or to adjust or deny the claim if the department determines that the 05 applicant was not entitled to the amount of the credit for which the certificate was 06 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 (h) 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 (i) A person may not elect to take a tax credit under (a) or (j) of this section for 17 an expenditure incurred to acquire an asset (1) the cost of previously acquiring which 18 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 (j) 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) for any month that ends the later of 17 (i) April 30, 2013; or 18 (ii) the seventh anniversary of the last day of the month 19 for which the producer first applies a credit under this subsection 20 against a tax due under AS 43.55.011(e), if the producer did not have 21 commercial production of oil or gas from a lease or property in the state 22 before April 1, 2006; 23 (B) more than once; or 24 (C) if a credit for that expenditure was taken under 25 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 26 (4) notwithstanding (d), (e), and (g) of this section, a producer or 27 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for a 28 transitional investment expenditure. 29 (k) As a condition of receiving a tax credit under this section, a producer or 30 explorer that obtains the tax credit for or directly related to a pipeline, facility, or other 31 asset that is or becomes subject to regulation by the Federal Energy Regulatory
01 Commission or the Regulatory Commission of Alaska, or a successor regulatory body 02 shall at all times support and in all rate proceedings file to flow through 100 percent of 03 the tax credits to ratepayers as a reduction in the costs of service for the pipeline, 04 facility, or other asset. 05 (l) In this section, "qualified capital expenditure" means, except as otherwise 06 provided in (i) of this section, an expenditure that is a lease expenditure under 07 AS 43.55.160 and is 08 (1) incurred for geological or geophysical exploration; or 09 (2) treated as a capitalized expenditure under 26 U.S.C. (Internal 10 Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) 11 (Internal Revenue Code), as amended, and is 12 (A) treated as a capitalized expenditure for federal income tax 13 reporting purposes by the person incurring the expenditure; or 14 (B) eligible to be deducted as an expense under 26 U.S.C. 15 263(c) (Internal Revenue Code), as amended. 16 * Sec. 13. AS 43.55.025(a) is amended to read: 17 (a) Subject to the terms and conditions of this section, [ON OIL AND GAS 18 PRODUCED ON OR AFTER JULY 1, 2004, FROM AN OIL AND GAS LEASE, 19 OR ON GAS PRODUCED FROM A GAS ONLY LEASE,] a credit against the 20 production tax due under AS 43.55.011(e) [THIS CHAPTER] is allowed for 21 exploration expenditures that qualify under (b) of this section in an amount equal to 22 one of the following: 23 (1) 20 percent of the total exploration expenditures that qualify only 24 under (b) and (c) of this section; 25 (2) 20 percent of the total exploration expenditures for work performed 26 before July 1, 2007, and that qualify only under (b) and (d) of this section; 27 (3) 40 percent of the total exploration expenditures that qualify under 28 (b), (c), and (d) of this section; or 29 (4) 40 percent of the total exploration expenditures that qualify only 30 under (b) and (e) of this section. 31 * Sec. 14. AS 43.55.025(b) is amended to read:
01 (b) To qualify for the production tax credit under (a) of this section, an 02 exploration expenditure must be incurred for work performed on or after July 1, 2003, 03 and before July 1, 2016 [2007], except that an exploration expenditure for a Cook Inlet 04 prospect must be incurred for work performed on or after July 1, 2005, [AND 05 BEFORE JULY 1, 2010, AND EXCEPT THAT AN EXPLORATION 06 EXPENDITURE, IN WHOLE OR IN PART, SOUTH OF 68 DEGREES, 15 07 MINUTES, NORTH LATITUDE, AND NOT PART OF A COOK INLET 08 PROSPECT MUST BE INCURRED FOR WORK PERFORMED ON OR AFTER 09 JULY 1, 2003, AND BEFORE JULY 1, 2010,] and 10 (1) may be for seismic or geophysical exploration costs not connected 11 with a specific well; 12 (2) if for an exploration well, 13 (A) must be incurred by an explorer that holds an interest in the 14 exploration well for which the production tax credit is claimed; 15 (B) may be for either an oil or gas discovery well or a dry hole; 16 and 17 (C) must be for goods, services, or rentals of personal property 18 reasonably required for the surface preparation, drilling, casing, cementing, 19 and logging of an exploration well, and, in the case of a dry hole, for the 20 expenses required for abandonment if the well is abandoned within 18 months 21 after the date the well was spudded; 22 (3) may not be for testing, stimulation, or completion costs; 23 administration, supervision, engineering, or lease operating costs; geological or 24 management costs; community relations or environmental costs; bonuses, taxes, or 25 other payments to governments related to the well; or other costs that are generally 26 recognized as indirect costs or financing costs; and 27 (4) may not be incurred for an exploration well or seismic exploration 28 that is included in a plan of exploration or a plan of development for any unit on 29 May 13, 2003. 30 * Sec. 15. AS 43.55.025(f) is amended to read: 31 (f) For a production tax credit under this section,
01 (1) an explorer shall, in a form prescribed by the department and 02 within six months of the completion of the exploration activity, claim the credit and 03 submit information sufficient to demonstrate to the department's satisfaction that the 04 claimed exploration expenditures qualify under this section; 05 (2) an explorer shall agree, in writing, 06 (A) to notify the Department of Natural Resources, within 30 07 days after completion of seismic or geophysical data processing, completion of 08 a well, or filing of a claim for credit, whichever is the latest, for which 09 exploration costs are claimed, of the date of completion and submit a report to 10 that department describing the processing sequence and providing a list of data 11 sets available; if, under (c)(2)(B) of this section, an explorer submits a claim 12 for a credit for expenditures for an exploration well that is located within three 13 miles of a well already drilled for oil and gas, in addition to the submissions 14 required under (1) of this subsection, the explorer shall submit the information 15 necessary for the commissioner of natural resources to evaluate the validity of 16 the explorer's claim that the well is directed at a distinctly separate exploration 17 target, and the commissioner of natural resources shall, upon receipt of all 18 evidence sufficient for the commissioner to evaluate the explorer's claim, make 19 that determination within 60 days; 20 (B) to provide to the Department of Natural Resources, within 21 30 days after the date of a request, specific data sets, ancillary data, and reports 22 identified in (A) of this paragraph; 23 (C) that, notwithstanding any provision of AS 38, information 24 provided under this paragraph will be held confidential by the Department of 25 Natural Resources for 10 years following the completion date, at which time 26 that department will release the information after 30 days' public notice; 27 (3) if more than one explorer holds an interest in a well or seismic 28 exploration, each explorer may claim an amount of credit that is proportional to the 29 explorer's cost incurred; 30 (4) the department may exercise the full extent of its powers as though 31 the explorer were a taxpayer under this title, in order to verify that the claimed
01 expenditures are qualified exploration expenditures under this section; and 02 (5) if the department is satisfied that the explorer's claimed 03 expenditures are qualified under this section, the department shall issue to the explorer 04 a production tax credit certificate for the amount of credit to be allowed against 05 production taxes due under AS 43.55.011(e) [THIS CHAPTER; HOWEVER, 06 NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, THE 07 DEPARTMENT MAY NOT ISSUE TO AN EXPLORER A PRODUCTION TAX 08 CREDIT CERTIFICATE IF THE TOTAL OF PRODUCTION TAX CREDITS 09 SUBMITTED FOR COOK INLET PRODUCTION, BASED ON EXPLORATION 10 EXPENDITURES FOR WORK PERFORMED DURING THE PERIOD 11 DESCRIBED IN (b) OF THIS SECTION FOR THAT PRODUCTION, THAT HAVE 12 BEEN APPROVED BY THE DEPARTMENT EXCEEDS $20,000,000]. 13 * Sec. 16. AS 43.55.025(h) is amended to read: 14 (h) A producer that purchases a production tax credit certificate may apply the 15 credits against its production tax liability under AS 43.55.011(e) [THIS CHAPTER]. 16 Regardless of the price the producer paid for the certificate, the producer may receive 17 a credit against its production tax liability for the full amount of the credit, but for not 18 more than the amount for which the certificate is issued. A production tax credit 19 allowed under this section may not be applied more than once. 20 * Sec. 17. AS 43.55.025(i) is amended to read: 21 (i) For a production tax credit under this section, 22 (1) the amount of the credit that may be applied against the production 23 tax for each tax month may not exceed the total production tax liability under 24 AS 43.55.011(e) of the taxpayer applying the credit for the same month; and 25 (2) an amount of the production tax credit that is greater than the total 26 tax liability under AS 43.55.011(e) of the taxpayer applying the credit for a tax month 27 may be carried forward and applied against the taxpayer's production tax liability 28 under AS 43.55.011(e) in one or more immediately following months. 29 * Sec. 18. AS 43.55.030(a) is amended to read: 30 (a) The tax shall be paid to the department, and the person paying the tax shall 31 file with the department at the time the tax or a portion of the tax is required to be
01 paid a statement, under oath, on forms prescribed by or acceptable to the department, 02 giving, with other information required, the following: 03 (1) a description of each [THE] lease or property from which the oil 04 and [OR] gas were [WAS] produced, by name, legal description, lease number, or 05 [BY] accounting codes [CODE NUMBERS] assigned by the department; 06 (2) the names of the producer and the person paying the tax; 07 (3) the gross amount of oil and the gross amount of [OR] gas 08 produced from each [THE] lease or property, and the percentage of the gross amount 09 of oil and gas owned by each producer for whom the tax is paid; 10 (4) the gross [TOTAL] value at the point of production of the oil 11 and of the [OR] gas produced from each [THE] lease or property owned by each 12 producer for whom the tax is paid; [AND] 13 (5) the name of the first purchaser and the price received for the oil 14 and for the [OR] gas, unless relieved from this requirement in whole or in part by 15 the department; and 16 (6) the producer's lease expenditures and adjustments as 17 calculated under AS 43.55.160 [IF SOLD IN THE STATE]. 18 * Sec. 19. AS 43.55.030(d) is amended to read: 19 (d) Reports by or on behalf of the producer are delinquent the first day 20 following the day the tax is due. [EACH PRODUCER IS SUBJECT TO A PENALTY 21 OF $25 A DAY FOR EACH LEASE OR PROPERTY UPON WHICH THE 22 REPORT IS NOT FILED. THE PENALTY FOR FAILURE TO FILE A REPORT IS 23 IN ADDITION TO THE PENALTY FOR DELINQUENT TAXES, AND IS A LIEN 24 AGAINST THE ASSETS OF THE PRODUCER.] 25 * Sec. 20. AS 43.55.030 is amended by adding a new subsection to read: 26 (e) In addition to other required information, the statement required to be filed 27 on or before March 31 of a year must show any adjustments or corrections to the 28 statements that were required under (a) of this section to be filed for the months of the 29 preceding calendar year during which the oil or gas was produced. 30 * Sec. 21. AS 43.55.040 is amended to read: 31 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in
01 AS 43.05.405 - 43.05.499, the department may 02 (1) require a person engaged in production and the agent or employee 03 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 04 or gas to furnish, whether by the filing of regular statements or reports or 05 otherwise, additional information that is considered by the department as necessary to 06 compute the amount of the tax; notwithstanding any contrary provision of law, the 07 disclosure of additional information under this paragraph to the producer 08 obligated to pay the tax does not violate AS 40.25.100(a) or AS 43.05.230(a); 09 before disclosing information under this paragraph that is otherwise required to 10 be held confidential under AS 40.25.100(a) or AS 43.05.230(a), the department 11 shall 12 (A) provide the person that furnished the information a 13 reasonable opportunity to be heard regarding the proposed disclosure and 14 the conditions to be imposed under (B) of this paragraph; and 15 (B) impose appropriate conditions limiting 16 (i) access to the information to those legal counsel, 17 consultants, employees, officers, and agents of the producer who 18 have a need to know that information for the purpose of 19 determining or contesting the producer's tax obligation; and 20 (ii) the use of the information to use for that 21 purpose; 22 (2) examine the books, records, and files of such a person; 23 (3) conduct hearings and compel the attendance of witnesses and the 24 production of books, records, and papers of any person; and 25 (4) make an investigation or hold an inquiry that is considered 26 necessary to a disclosure of the facts as to 27 (A) the amount of production from any oil or gas location, or of 28 a company or other producer of oil or gas; and 29 (B) the rendition of the oil and gas for taxing purposes. 30 * Sec. 22. AS 43.55.080 is amended to read: 31 Sec. 43.55.080. Collection and deposit of revenue. Except as otherwise
01 provided under art. IX, sec. 17, Constitution of the State of Alaska, the [THE] 02 department shall deposit in the general fund the money collected by it under 03 AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150]. 04 * Sec. 23. AS 43.55.135 is amended to read: 05 Sec. 43.55.135. Measurement. For the purposes of AS 43.55.011 - 43.55.180 06 [AS 43.55.011 - 43.55.150], oil is [SHALL BE] measured in terms of a "barrel of oil" 07 and gas is [SHALL BE] measured in terms of a "cubic foot of gas." 08 * Sec. 24. AS 43.55.150(a) is amended to read: 09 (a) For the purposes of AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150], 10 the gross value at the point of production is [SHALL BE] calculated using the 11 reasonable costs of transportation of the oil or gas. The reasonable costs of 12 transportation are [SHALL BE] the actual costs, except when the 13 (1) [WHEN THE] parties to the transportation of oil or gas are 14 affiliated; 15 (2) [WHEN THE] contract for the transportation of oil or gas is not an 16 arm's length transaction or is not representative of the market value of that 17 transportation; and 18 (3) [WHEN THE] method of transportation of oil or gas is not 19 reasonable in view of existing alternative methods of transportation. 20 * Sec. 25. AS 43.55 is amended by adding new sections to article 1 to read: 21 Sec. 43.55.160. Determination of production tax value of oil and gas. (a) 22 Except as provided in (f) of this section, for purposes of AS 43.55.011(e) and (g), the 23 production tax value of the taxable oil and gas produced during a month, other than 24 gas produced from leases or properties in the Cook Inlet sedimentary basin, is (1) the 25 total of (A) the gross value at the point of production of the oil taxable under 26 AS 43.55.011(e) and (g) and produced by the producer from all leases or properties in 27 the state, less three-quarters of the gross value at the point of production of the oil 28 taxable under AS 43.55.011(e) and (g) and produced by the producer from leases or 29 properties in the Cook Inlet sedimentary basin, and (B) two-thirds of the gross value at 30 the point of production of the gas taxable under AS 43.55.011(e) and (g) and produced 31 by the producer from all leases or properties in the state outside the Cook Inlet
01 sedimentary basin, less one-sixth of the gross value at the point of production of the 02 gas taxable under AS 43.55.011(e) and (g) and produced by the producer from all 03 leases or properties in the state located south of 68 degrees 15 minutes North latitude 04 outside of the Cook Inlet sedimentary basin, (2) less the producer's lease expenditures 05 for the month as adjusted under (e) of this section, other than lease expenditures 06 applicable to gas produced from leases or properties in the Cook Inlet sedimentary 07 basin. Except as provided in (f) of this section, for the purposes of AS 43.55.011(e) 08 and (g), the production tax value of the taxable gas produced during a month from 09 leases or properties in the Cook Inlet sedimentary basin is one-third of the gross value 10 at the point of production of the gas taxable under AS 43.55.011(e) and (g) and 11 produced by the producer from those leases or properties, less the producer's lease 12 expenditures for the month applicable to gas produced from leases or properties in the 13 Cook Inlet sedimentary basin, as adjusted under (e) of this section. However, a 14 production tax value calculated under this subsection may not be less than zero. If a 15 producer does not produce taxable oil or gas during a month, the producer is 16 considered to have generated a positive production tax value if the calculation 17 described in this subsection yields a positive number because the producer's adjusted 18 lease expenditures for a month are less than zero as a result of the producer's receiving 19 a payment or credit under (e) of this section or otherwise. 20 (b) For purposes of administration of (a) of this section, 21 (1) any adjusted lease expenditures that would otherwise be deductible 22 in a month but whose deduction would cause a production tax value calculated under 23 (a) of this section of taxable oil or gas produced during the month to be less than zero 24 may be added to the producer's adjusted lease expenditures for one or more other 25 months in the same calendar year; the total of any adjusted lease expenditures that are 26 not deductible in any month during a calendar year because their deduction would 27 cause a production tax value calculated under (a) of this section of taxable oil or gas 28 produced during one or more months to be less than zero may be used to establish a 29 carried-forward annual loss under AS 43.55.024(b); 30 (2) an explorer that has taken a tax credit under AS 43.55.024(b) or 31 that has obtained a transferable tax credit certificate under AS 43.55.024(d) for the
01 amount of a tax credit under AS 43.55.024(b) is considered a producer, subject to the 02 tax levied under AS 43.55.011(e), to the extent that the explorer generates a positive 03 production tax value as the result of the explorer's receiving a payment or credit 04 described in (e) of this section. 05 (c) For purposes of this section, 06 (1) a producer's lease expenditures for a period are the total costs 07 upstream of the point of production of oil and gas that are incurred on or after April 1, 08 2006, by the producer during the period and that are direct, ordinary and necessary 09 costs of exploring for, developing, or producing oil or gas deposits located within the 10 producer's leases or properties in the state or, in the case of land in which the producer 11 does not own a working interest, direct, ordinary and necessary costs of exploring for 12 oil or gas deposits located within other land in the state; however, lease expenditures 13 do not include the costs incurred to satisfy a work commitment under an exploration 14 license under AS 38.05.132; in determining whether costs are direct, ordinary and 15 necessary costs of exploring for, developing, or producing oil or gas deposits located 16 within a lease or property or other land in the state, 17 (A) the department shall give substantial weight to the typical 18 industry practices and standards in the state and in the United States that 19 determine the costs that an operator is allowed to bill a working interest owner 20 that is not the operator, under unit operating agreements or similar operating 21 agreements that were in effect on or before December 1, 2005, and were 22 subject to negotiation with at least one working interest owner with substantial 23 bargaining power, other than the operator; and 24 (B) as to matters that are not addressed by the industry 25 practices and standards described in (A) of this paragraph or as to which those 26 practices and standards are not clear or are not uniform, the department shall 27 give substantial weight to the standards adopted by the Department of Natural 28 Resources that determine the costs, other than interest, that a lessee is allowed 29 to deduct from revenue in calculating net profits under a lease issued under 30 AS 38.05.180(f)(3)(B), (D), or (E); 31 (2) the Department of Revenue may authorize a producer, including a
01 producer that is an operator, to treat as its lease expenditures under this section the 02 costs paid by the producer that are billed to the producer by an operator in accordance 03 with the terms of a unit operating agreement or similar operating agreement if the 04 Department of Revenue finds that 05 (A) the pertinent provisions of the operating agreement are 06 substantially consistent with the Department of Revenue's determinations and 07 standards otherwise applicable under this subsection; and 08 (B) at least one working interest owner party to the agreement, 09 other than the operator, has substantial incentive and ability to effectively audit 10 billings under the agreement; 11 (3) an activity does not need to be physically located on or near the 12 premises of the lease or property from which oil or gas is recovered in order for the 13 cost of the activity to be a cost upstream of the point of production of the oil or gas; 14 (4) the lease expenditures that are applicable to oil or gas produced in 15 an area of the state shall be determined under regulations adopted by the department 16 that provide for reasonable methods of allocating costs between oil and gas and 17 between areas of the state. 18 (d) For purposes of (c) of this section, "direct costs" 19 (1) includes 20 (A) an expenditure, when incurred, to acquire an item if the 21 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure 22 may be required to be capitalized rather than treated as an expense for financial 23 accounting or federal income tax purposes; 24 (B) payments of or in lieu of property taxes, sales and use 25 taxes, motor fuel taxes, and excise taxes; 26 (C) a reasonable allowance, as determined under regulations 27 adopted by the department, for overhead expenses directly related to exploring 28 for, developing, and producing oil or gas deposits located within leases or 29 properties or other land in the state; 30 (2) does not include 31 (A) depreciation, depletion, or amortization;
01 (B) oil or gas royalty payments, production payments, lease 02 profit shares, or other payments or distributions of a share of oil or gas 03 production, profit, or revenue; 04 (C) taxes based on or measured by net income; 05 (D) interest or other financing charges or costs of raising equity 06 or debt capital; 07 (E) acquisition costs for a lease or property or exploration 08 license; 09 (F) costs arising from fraud, wilful misconduct, or negligence; 10 (G) fines or penalties imposed by law; 11 (H) costs of arbitration, litigation, or other dispute resolution 12 activities that involve the state or concern the rights or obligations among 13 owners of interests in, or rights to production from, one or more leases or 14 properties or a unit; 15 (I) donations; 16 (J) costs incurred in organizing a partnership, joint venture, or 17 other business entity or arrangement; 18 (K) amounts paid to indemnify the state; the exclusion 19 provided by this paragraph does not apply to the costs of obtaining insurance 20 or a surety bond from a third-party insurer or surety; 21 (L) surcharges levied under AS 43.55.201 or 43.55.300; 22 (M) for a transaction that is an internal transfer or is otherwise 23 not an arm's length transaction, expenditures incurred that are in excess of fair 24 market value; 25 (N) an expenditure incurred to purchase an interest in any 26 corporation, partnership, limited liability company, business trust, or any other 27 business entity, whether or not the transaction is treated as an asset sale for 28 federal income tax purposes; 29 (O) a tax levied under AS 43.55.011; 30 (P) the portion of costs incurred for dismantlement, removal, 31 surrender, or abandonment of a well, facility, pipeline, platform, or other
01 structure, or for the restoration of a lease, field, unit, area, body of water, or 02 right-of-way in conjunction with dismantlement, removal, surrender, or 03 abandonment, that is attributable to production of oil or gas occurring before 04 April 1, 2006; the portion is calculated as a ratio of the amount of oil and gas 05 production associated with the well, facility, pipeline, platform, or other 06 structure, lease, field, unit, area, body of water, or right-of-way occurring 07 before April 1, 2006 to the total amount of oil and gas production associated 08 with that well, facility, pipeline, platform, or other structure, lease, field, unit, 09 area, body of water, or right-of-way through the end of the calendar month 10 before commencement of the dismantlement, removal, surrender, or 11 abandonment; for purposes of the ratio calculated under this subparagraph, 12 6,000 cubic feet of gas is considered to be equivalent to one barrel of oil; 13 (Q) losses or damages resulting from an unpermitted oil 14 discharge or costs to contain, clean up, or remediate an unpermitted oil 15 discharge to the extent that those costs exceed the routine costs of operation for 16 a producer or explorer that would otherwise be incurred as lease expenditures 17 in the absence of the unpermitted oil discharge; this subparagraph does not 18 apply to the cost of developing and maintaining an oil discharge prevention 19 and contingency plan under AS 46.04.030. 20 (e) A producer's lease expenditures must be adjusted by subtracting certain 21 payments or credits received by the producer, as provided in this subsection. If one or 22 more payments or credits subject to this subsection are received by a producer during 23 a month or, under (f) of this section, during a calendar year, and if either the total 24 amount of the payments or credits exceeds the amount of the producer's lease 25 expenditures or the producer has no lease expenditures, the producer shall nevertheless 26 subtract those payments or credits from the lease expenditures or from zero, 27 respectively, and the producer's adjusted lease expenditures for that month or calendar 28 year are a negative number and shall be applied to the calculation under (a) of this 29 section as a negative number. The payments or credits that a producer shall subtract 30 from the producer's lease expenditures, or from zero, under this subsection are 31 payments or credits, other than tax credits, received by the producer for
01 (1) the use by another person of a production facility in which the 02 producer has an ownership interest or the management by the producer of a production 03 facility under a management agreement providing for the producer to receive a 04 management fee; 05 (2) a reimbursement or similar payment that offsets the producer's 06 lease expenditures, including a payment from the state or federal government for 07 reimbursement of the producer's upstream costs, including costs for gathering, 08 separating, cleaning, dehydration, compressing, or other field handling associated with 09 the production of oil or gas upstream of the point of production; 10 (3) the sale or other transfer of 11 (A) an asset, including geological, geophysical, or well data or 12 interpretations, acquired by the producer as a result of a lease expenditure or an 13 expenditure that would be a lease expenditure if it were incurred on or after 14 April 1, 2006; for purposes of this subparagraph, 15 (i) if a producer removes from the state, for use outside 16 the state, an asset described in this subparagraph, the value of the asset 17 at the time it is removed is considered a payment received by the 18 producer for sale or transfer of the asset; 19 (ii) for a transaction that is an internal transfer or is 20 otherwise not an arm's length transaction, if the sale or transfer of the 21 asset is made for less than fair market value, the amount subtracted 22 must be the fair market value; and 23 (B) oil or gas 24 (i) that is not considered produced from a lease or 25 property under AS 43.55.020(e); and 26 (ii) the cost of acquiring which is a lease expenditure 27 incurred by the person that acquires the oil or gas; 28 (4) insurance recoveries. 29 (f) In place of the adjusted lease expenditures for a month under (a) of this 30 section, a producer may, at any time, elect to substitute, for every month of a calendar 31 year, 1/12 of the producer's adjusted lease expenditures for the calendar year. An
01 election made under this subsection applies to calculation of the tax under 02 AS 43.55.011(e) and (g). 03 (g) The department shall specify or approve a reasonable allocation method 04 for determining the portion of a cost that is appropriately treated as a lease expenditure 05 under (c) of this section if a cost that would otherwise constitute a lease expenditure 06 under (c) of this section is incurred to explore for, develop, or produce 07 (1) both an oil or gas deposit located within land outside the state and 08 an oil or gas deposit located within a lease or property, or other land, in the state; or 09 (2) an oil or gas deposit located partly within land outside the state and 10 partly within a lease or property, or other land, in the state. 11 (h) For purposes of AS 43.55.024(a) and (b) and only as to expenditures 12 incurred to explore for an oil or gas deposit located within land in which an explorer 13 does not own a working interest, the term "producer" in (b), (c), and (e) of this section 14 includes "explorer." 15 (i) The department may adopt regulations that establish additional standards 16 necessary to carrying out the purposes of this section, including the incorporation of 17 the concepts of 26 U.S.C. 482 (Internal Revenue Code), as amended, the related or 18 accompanying regulations of that section, and any ruling or guidance issued by the 19 United States Internal Revenue Service that relates to that section. 20 (j) For purposes of this section, 21 (1) "explore" includes conducting geological or geophysical 22 exploration, including drilling a stratigraphic test well; 23 (2) "ordinary and necessary" has the meaning given to "ordinary and 24 necessary" in 26 U.S.C. 162 (Internal Revenue Code), as amended, and regulations 25 adopted under that section; 26 (3) "stratigraphic test well" means a well drilled for the sole purpose of 27 obtaining geological information to aid in exploring for an oil or gas deposit and the 28 target zones of which are located in the state. 29 Sec. 43.55.170. Additional nontransferable tax credit. (a) For a month for 30 which a producer's tax liability under AS 43.55.011(e) exceeds zero before application 31 of any credits under this chapter, a producer that is qualified under (c) of this section
01 and whose average amount of oil and gas produced a day and taxable under 02 AS 43.55.011(e) is less than 100,000 barrels of oil equivalent a day may apply a tax 03 credit under this section against that liability. A producer whose average amount of oil 04 and gas produced a day and taxable under AS 43.55.011(e) is 05 (1) not more than 50,000 barrels of oil equivalent may apply a tax 06 credit of up to $1,000,000 for the month; 07 (2) more than 50,000 and less than 100,000 barrels of oil equivalent 08 may apply a tax credit of up to the following fraction of $1,000,000 for the month: 09 1 - [2 x (AP - 50,000)]/100,000, 10 where AP = the average amount of oil and gas, expressed as barrels of oil equivalent, 11 produced a day during the month and taxable under AS 43.55.011(e). 12 (b) A producer may not take a tax credit under this section for any month that 13 ends the later of 14 (1) March 31, 2016; or 15 (2) the 10th anniversary of the last day of the month for which the 16 producer first has commercial oil or gas production from at least one lease or property 17 in the state, if the producer did not have commercial oil or gas production from a lease 18 or property in the state before April 1, 2006. 19 (c) On written application by a producer, including any information the 20 department may require, the department shall determine whether the producer 21 qualifies under this section for a calendar year. To qualify under this section, a 22 producer must demonstrate that its operation in the state or its ownership of an interest 23 in a lease or property in the state as a distinct producer entity would not result in the 24 division among multiple producer entities of any production tax liability under 25 AS 43.55.011(e) that would be reasonably expected to be attributed to a single 26 producer entity if the tax credit provision of (a) of this section did not exist. 27 (d) A tax credit authorized by this section may not be applied to reduce a 28 producer's tax liability under AS 43.55.011(e) for any month below zero. An unused 29 portion of a tax credit that could otherwise be applied for a month but whose 30 application would cause the producer's tax liability under AS 43.55.011(e) for the 31 month to be less than zero may be applied for one or more other months in the same
01 calendar year to the extent otherwise allowed under this section. 02 (e) An unused tax credit or portion of a tax credit under this section is not 03 transferable and may not be carried forward to or used in a later calendar year. 04 (f) For the purposes of this section, a barrel of oil equivalent is 05 (1) one barrel of oil, in the case of oil; 06 (2) 6,000 cubic feet of gas, in the case of gas. 07 Sec. 43.55.180. Required reports. (a) The Department of Revenue shall 08 (1) study 09 (A) the effects of the tax rates under AS 43.55.011(f) and of 10 potential changes in those tax rates on state revenue and on oil and gas 11 exploration, development, and production on private land; and 12 (B) the fairness of the tax rates under AS 43.55.011(f) and of 13 potential changes in those tax rates for private landowners; and 14 (2) prepare a report on or before the first day of the 2013 regular 15 session of the legislature on the results of the study made under (1) of this subsection, 16 including a recommendation as to whether those tax rates should be changed; the 17 department shall notify the legislature that the report prepared under this paragraph is 18 available. 19 (b) The Department of Revenue shall 20 (1) study the effects of the credits authorized by AS 43.55.025 and 21 43.55.170 on state revenue, on the encouragement of exploration, development, and 22 production of oil and gas deposits located in the state, and on the encouragement of 23 new entrants into the oil and gas industry in the state; and 24 (2) prepare a report on or before the first day of the 2015 regular 25 session of the legislature on the results of the study made under (1) of this subsection, 26 and shall include with the report a recommendation as to whether the legislature 27 should extend the availability of the credits under AS 43.55.025 and 43.55.170; the 28 department shall notify the legislature that the report prepared under this paragraph is 29 available. 30 * Sec. 26. AS 43.55.201 is amended to read: 31 Sec. 43.55.201. Surcharge levied. (a) Every producer of oil shall pay a
01 surcharge of $.01 [$.02] per barrel of oil produced from each lease or property in the 02 state, less any oil the ownership or right to which is exempt from taxation. 03 (b) The surcharge imposed by (a) of this section is in addition to the tax 04 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 05 from each lease or property during the preceding month. The surcharge [SHALL 06 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 07 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.300 - 08 43.55.310. 09 (c) A producer of oil shall make reports of production in the same manner and 10 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 11 43.55.150]. 12 * Sec. 27. AS 43.55.201 is amended by adding a new subsection to read: 13 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 14 property is not considered to be produced from a lease or property for purposes of this 15 section. 16 * Sec. 28. AS 43.55.300 is amended to read: 17 Sec. 43.55.300. Surcharge levied. (a) Every producer of oil shall pay a 18 surcharge of $.04 [$.03] per barrel of oil produced from each lease or property in the 19 state, less any oil the ownership or right to which is exempt from taxation. 20 (b) The surcharge imposed by (a) of this section is in addition to the tax 21 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 22 from each lease or property during the preceding month. The surcharge [SHALL 23 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 24 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.201 - 25 43.55.231. 26 (c) A producer of oil shall make reports of production in the same manner and 27 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 28 43.55.150]. 29 * Sec. 29. AS 43.55.300 is amended by adding a new subsection to read: 30 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 31 property is not considered to be produced from a lease or property for purposes of this
01 section. 02 * Sec. 30. AS 43.55 is amended by adding a new section to read: 03 Sec. 43.55.420. High energy cost offset fund. (a) The high energy cost offset 04 fund is established as a separate fund in the general fund. The fund consists of all 05 money appropriated to it. 06 (b) The high energy cost offset fund shall be invested by the Department of 07 Revenue so as to yield competitive market rates, as provided in AS 37.10.071. Money 08 in the fund may be appropriated to provide cost offsets for higher energy costs of 09 consumers. 10 (c) Nothing in this section creates a dedication of funds. 11 * Sec. 31. AS 43.55.900(6) is repealed and reenacted to read: 12 (6) "gas" means 13 (A) all natural, associated, or casinghead gas; 14 (B) all hydrocarbons that 15 (i) are recovered by mechanical separation of well 16 fluids or by gas processing in a gas processing plant; and 17 (ii) exist in a gaseous phase at the completion of 18 mechanical separation and any gas processing in a gas processing plant; 19 and 20 (C) all other hydrocarbons produced from a well not defined as 21 oil; 22 * Sec. 32. AS 43.55.900(7) is repealed and reenacted to read: 23 (7) "gross value at the point of production" means 24 (A) for oil, the value of the oil at its point of production 25 without deduction of any costs upstream of that point of production; 26 (B) for gas, the value of the gas at its point of production 27 without deduction of any costs upstream of that point of production; 28 * Sec. 33. AS 43.55.900(10) is repealed and reenacted to read: 29 (10) "oil" means 30 (A) crude petroleum oil; and 31 (B) all liquid hydrocarbons that are recovered by mechanical
01 separation of well fluids or by gas processing in a gas processing plant; 02 * Sec. 34. AS 43.55.900 is amended by adding new paragraphs to read: 03 (17) "Cook Inlet sedimentary basin" has the meaning given in 04 regulations adopted to implement AS 38.05.180(f)(4); 05 (18) "explorer" means a person who, in exploring for new oil or gas 06 reserves, incurs expenditures; 07 (19) "gas processing" 08 (A) means processing a gaseous mixture of hydrocarbons 09 (i) by means of absorption, adsorption, externally 10 applied refrigeration, artificial compression followed by adiabatic 11 expansion using the Joule-Thomson effect, or another physical process 12 that is not mechanical separation; and 13 (ii) for the purpose of extracting and recovering liquid 14 hydrocarbons; 15 (B) does not include gas treatment; 16 (20) "gas processing plant" means a facility that 17 (A) extracts and recovers liquid hydrocarbons from a gaseous 18 mixture of hydrocarbons by gas processing; and 19 (B) is located upstream of any gas treatment and upstream of 20 the inlet of any gas pipeline system transporting gas to a market; 21 (21) "gas treatment" 22 (A) means conditioning gas and removing from gas 23 nonhydrocarbon substances for the purpose of rendering the gas acceptable for 24 tender and acceptance into a gas pipeline system; 25 (B) includes incidentally removing liquid hydrocarbons from 26 the gas; 27 (C) does not include 28 (i) dehydration required to facilitate the movement of 29 gas from the well to the point where gas processing takes place; 30 (ii) the scrubbing of liquids from gas to facilitate gas 31 processing;
01 (22) "landowner's royalty interest" means 02 (A) a lessor's royalty interest under an oil and gas lease; or 03 (B) a royalty interest that is 04 (i) held by a surface owner of land from which oil or 05 gas is produced; and 06 (ii) granted in exchange for the right to use the surface 07 of that land or as compensation for damage to the surface of that land; 08 (23) "oil and gas lease" includes an oil and gas lease, a gas only lease, 09 and an oil only lease; 10 (24) "point of production" means 11 (A) for oil, the automatic custody transfer meter or device 12 through which the oil enters into the facilities of a carrier pipeline or other 13 transportation carrier in a condition of pipeline quality; in the absence of an 14 automatic custody transfer meter or device, "point of production" means the 15 mechanism or device to measure the quantity of oil that has been approved by 16 the department for that purpose, through which the oil is tendered and accepted 17 in a condition of pipeline quality into the facilities of a carrier pipeline or other 18 transportation carrier or into a field topping plant; 19 (B) for gas, other than gas described in (C) of this paragraph, 20 that is 21 (i) not subjected to or recovered by mechanical 22 separation or run through a gas processing plant, the first point where 23 the gas is accurately metered; 24 (ii) subjected to or recovered by mechanical separation 25 but not run through a gas processing plant, the first point where the gas 26 is accurately metered after completion of mechanical separation; 27 (iii) run through a gas processing plant, the first point 28 where the gas is accurately metered downstream of the plant; 29 (C) for gas run through an integrated gas processing plant and 30 gas treatment facility that does not accurately meter the gas after the gas 31 processing and before the gas treatment, the first point where gas processing is
01 completed or where gas treatment begins, whichever is further upstream. 02 * Sec. 35. AS 43.55.011(a), 43.55.011(b), 43.55.011(c), 43.55.012, 43.55.013, 43.55.016, 03 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), 04 and 43.55.900(16) are repealed. 05 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 06 read: 07 APPLICABILITY. (a) Sections 5, 7 - 10, 12, 13, 15 - 18, 20, 24, 26 - 29, and 31 - 35 08 of this Act and AS 43.55.160 and 43.55.170, enacted by sec. 25 of this Act, apply to oil and 09 gas produced on or after April 1, 2006. 10 (b) Section 11 of this Act applies to oil and gas produced before, on, or after the 11 effective date of sec. 11 of this Act. 12 * Sec. 37. The uncodified law of the State of Alaska is amended by adding a new section to 13 read: 14 TRANSITIONAL PROVISIONS. (a) Notwithstanding any contrary provision of 15 AS 43.55.024(a), enacted by sec. 12 of this Act, for oil and gas produced on or after April 1, 16 2006, and before January 1, 2007, the phrase "every month an annualized tax credit in an 17 amount equal to 1 2/3 percent" in AS 43.55.024(a)(1)(B), enacted by sec. 12 of this Act, shall 18 be replaced by the phrase "every month during the period April 1, 2006, through 19 December 31, 2006, an annualized tax credit in an amount equal to 2.222 percent." 20 (b) Notwithstanding any contrary provision of AS 43.55.024(e), enacted by sec. 12 of 21 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 22 phrase "a calendar year" in AS 43.55.024(e), enacted by sec. 12 of this Act, shall be replaced 23 by the phrase "the last nine months of the calendar year." 24 (c) Notwithstanding any contrary provision of AS 43.55.024(j)(2), enacted by sec. 12 25 of this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, 26 (1) the number "1/24" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of this 27 Act, shall be replaced by the number "1/18"; 28 (2) the phrase "calendar year" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of 29 this Act, shall be replaced by the phrase "last nine months of the calendar year." 30 (d) Notwithstanding any contrary provision of AS 43.55.160(f), enacted by sec. 25 of 31 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the
01 phrase "for every month of a calendar year, 1/12 of the producer's adjusted lease expenditures 02 for the calendar year" in AS 43.55.160(f), enacted by sec. 25 of this Act, shall be replaced by 03 the phrase "for each of the last nine months of 2006, one-ninth of the producer's adjusted lease 04 expenditures for that nine-month period." 05 (e) For oil and gas produced before April 1, 2006, the provisions of AS 43.55, and 06 regulations adopted under AS 43.55, that were in effect before April 1, 2006, and that were 07 applicable to the oil and gas continue to apply to that oil and gas. 08 (f) Notwithstanding any contrary provision of AS 43.55.020(a), as repealed and 09 reenacted by sec. 7 of this Act, for oil and gas produced on or after April 1, 2006, and before 10 the first day of the first month that begins at least 10 months after the effective date of sec. 7 11 of this Act, 12 (1) the amount of the taxes that would have been levied on the producer under 13 AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on the last day of 14 each calendar month on the oil and gas that was produced from each lease or property during 15 the preceding month; 16 (2) the portion, if any, of the taxes levied under AS 43.55.011(e) - (g), enacted 17 by sec. 5 of this Act, that is due under AS 43.55.020(a), as repealed and reenacted by sec. 7 of 18 this Act, and that remains unpaid, net of any credits applied as allowed by law, is due on the 19 last day of the first month that begins at least 10 months after the effective date of sec. 5 of 20 this Act. 21 (g) Notwithstanding any contrary provision of AS 43.55.030(a), as amended by sec. 22 18 of this Act, for oil and gas produced on or after April 1, 2006, and before the first day of 23 the first month that begins at least 10 months after the effective date of sec. 18 of this Act, the 24 person paying the tax shall file with the Department of Revenue, at the time an amount of tax 25 is due 26 (1) under (f)(1) of this section, the statement required under former 27 AS 43.55.030(a), as that subsection read on March 31, 2006; and 28 (2) under (f)(2) of this section, the statements required under AS 43.55.030(a), 29 as amended by sec. 18 of this Act. 30 (h) Notwithstanding any contrary provision of AS 43.55.201(a) or (b), as amended by 31 sec. 26 of this Act, or AS 43.55.300(a) or (b), as amended by sec. 28 of this Act, for oil
01 produced on or after April 1, 2006, and before the first day of the first month that begins at 02 least 10 months after the effective date of secs. 26 and 28 of this Act, 03 (1) the amount of the surcharges that would have been imposed on the 04 producer under AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on 05 the last day of each calendar month on oil produced from each lease or property during the 06 preceding month; 07 (2) the portion, if any, of the surcharges imposed under AS 43.55.201(a), as 08 amended by sec. 26 of this Act, and AS 43.55.300(a), as amended by sec. 28 of this Act, and 09 that remains unpaid is due on the last day of the first month that begins at least 10 months 10 after the effective date of secs. 26 and 28 of this Act. 11 (i) Notwithstanding any contrary provision of AS 43.55.201(c), as amended by sec. 12 26 of this Act, or AS 43.55.300(c), as amended by sec. 28 of this Act, for oil produced on or 13 after April 1, 2006, and before the first day of the first month that begins at least 10 months 14 after the effective date of secs. 26 and 28 of this Act, at the time an amount of surcharge is 15 due, 16 (1) under (h)(1) of this section, the producer shall file the report of production 17 required under former AS 43.55.201(c) and 43.55.300(c), as those provisions read on 18 March 31, 2006; and 19 (2) under (h)(2) of this section, the producer shall file the report of production 20 required under former AS 43.55.201(c), as amended by sec. 26 of this Act, and 21 AS 43.55.300(c), as amended by sec. 28 of this Act. 22 (j) For purposes of taxes to be calculated and due under (f)(1) of this section and 23 statements to be filed under (g)(1) of this section, regulations that were adopted by the 24 Department of Revenue under AS 43.55, as the provisions of that chapter read on March 31, 25 2006, and that were in effect on that date apply to those taxes and statements. 26 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 29 contrary provision of AS 44.62.240, a regulation adopted by the Department of Revenue to 30 implement, interpret make specific, or otherwise carry out the provisions of secs. 5, 7 - 10, 12, 31 13, 15 - 18, 20, 24 - 29, 31 - 35, and 37 of this Act may apply retroactively as of April 1,
01 2006, if the Department of Revenue expressly designates in the regulation that the regulation 02 applies retroactively to that date. 03 * Sec. 39. 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. 40. 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 - 29, 31 - 37 of this Act are retroactive to April 1, 2006. 20 * Sec. 41. This Act takes effect immediately under AS 01.10.070(c).