SB 3001: "An Act relating to the production tax on oil and gas and to conservation surcharges on oil; relating to criminal penalties for violating conditions governing access to and use of confidential information relating to the production tax; amending the definition of 'gas' as that definition applies in the Alaska Stranded Gas Development Act; making conforming amendments; and providing for an effective date."
00 SENATE BILL NO. 3001 01 "An Act relating to the production tax on oil and gas and to conservation surcharges on 02 oil; relating to criminal penalties for violating conditions governing access to and use of 03 confidential information relating to the production tax; amending the definition of 'gas' 04 as that definition applies in the Alaska Stranded Gas Development Act; making 05 conforming amendments; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 08 to read: 09 LEGISLATIVE INTENT. (a) It is the intent of the legislature through sec. 11 of this 10 Act to confirm by clarification the long-standing interpretation of AS 43.55.020(f) by the 11 Department of Revenue. 12 (b) It is the intent of the legislature that the division or other unit of the Department of 13 Environmental Conservation assigned responsibility for administration of the programs under
01 AS 46.08 that are principally supported by the conservation surcharges on oil levied under 02 AS 43.55.201 - 43.55.299 and 43.55.300 - 43.55.310 03 (1) reduce program costs, including personnel costs, as necessary to operate 04 within the revenue anticipated to be generated by those surcharges, in the amounts of those 05 surcharges as amended by secs. 26 and 28 of this Act; and 06 (2) request appropriations for exceptional program needs and expansions 07 beyond what can be provided from the estimated amounts collected from those surcharges 08 from alternative funding sources. 09 * Sec. 2. AS 43.05.230(f) is amended to read: 10 (f) A wilful violation of the provisions of this section or of a condition 11 imposed under AS 43.55.040(1)(B) is punishable by a fine of not more than $5,000, 12 or by imprisonment for not more than two years, or by both. 13 * Sec. 3. AS 43.20.031(c) is amended to read: 14 (c) In computing the tax under this chapter, the taxpayer is not entitled to 15 deduct any taxes based on or measured by net income. The taxpayer may deduct the 16 tax levied and paid under AS 43.55. 17 * Sec. 4. AS 43.20.072(b) is amended to read: 18 (b) A taxpayer's business income to be apportioned under this section to the 19 state shall be the federal taxable income of the taxpayer's consolidated business for the 20 tax period, except that 21 (1) taxes based on or measured by net income that are deducted in the 22 determination of the federal taxable income shall be added back; the tax levied and 23 paid under AS 43.55 may not be added back; 24 (2) intangible drilling and development costs that are deducted as 25 expenses under 26 U.S.C. 263(c) (Internal Revenue Code) in the determination of the 26 federal taxable income shall be capitalized and depreciated as if the option to treat 27 them as expenses under 26 U.S.C. 263(c) (Internal Revenue Code) had not been 28 exercised; 29 (3) depletion deducted on the percentage depletion basis under 26 30 U.S.C. 613 (Internal Revenue Code) in the determination of the federal taxable income 31 shall be recomputed and deducted on the cost depletion basis under 26 U.S.C. 612
01 (Internal Revenue Code); and 02 (4) depreciation shall be computed on the basis of 26 U.S.C. 167 03 (Internal Revenue Code) as that section read on June 30, 1981. 04 * Sec. 5. AS 43.55.011 is amended by adding new subsections to read: 05 (e) There is levied on the producer of oil or gas a tax for all oil and gas 06 produced each month from each lease or property in the state, less any oil and gas the 07 ownership or right to which is exempt from taxation or constitutes a landowner's 08 royalty interest. Except as otherwise provided under (g) and (h) of this section, the tax 09 is equal to 20 percent of the production tax value of the taxable oil and gas as 10 calculated under AS 43.55.160. 11 (f) There is levied on the producer of oil or gas a tax for all oil and gas 12 produced each month from each lease or property in the state the ownership or right to 13 which constitutes a landowner's royalty interest, except for oil and gas the ownership 14 or right to which is exempt from taxation. The provisions of this subsection apply to a 15 landowner's royalty interest as follows: 16 (1) the rate of tax levied on oil is equal to five percent of the gross 17 value at the point of production of the oil; 18 (2) the rate of tax levied on gas is equal to 1.667 percent of the gross 19 value at the point of production of the gas; 20 (3) if the department determines that, for purposes of reducing the 21 producer's tax liability under (1) or (2) of this subsection, the producer has received or 22 will receive consideration from the royalty owner offsetting all or a part of the 23 producer's royalty obligation, other than a deduction under AS 43.55.020(d) of the 24 amount of a tax paid, 25 (A) notwithstanding (1) of this subsection, the tax is equal to 26 (i) for oil that is produced from a lease or property in 27 the Cook Inlet sedimentary basin, five percent of the gross value at the 28 point of production of the oil; 29 (ii) for oil, except oil described in (i) of this 30 subparagraph, 20 percent of the gross value at the point of production 31 of the oil; and
01 (B) notwithstanding (2) of this subsection, for gas the tax is 02 equal to 10 percent of the gross value at the point of production of the gas. 03 (g) For a month that ends before April 1, 2021, the total tax levied by (e) of 04 this section on gas produced from a lease or property in the Cook Inlet sedimentary 05 basin may not exceed 06 (1) for a lease or property that first commenced commercial production 07 of gas before April 1, 2006, the product obtained by multiplying (A) the amount of gas 08 produced during that month from the lease or property, times (B) the average rate of 09 tax that was imposed under this chapter on gas produced from the lease or property for 10 the 12-month period ending on March 31, 2006, times (C) the average prevailing value 11 for gas delivered in the Cook Inlet area for the 12-month period ending March 31, 12 2006, as determined by the department under AS 43.55.020(f); 13 (2) for a lease or property that first commences commercial production 14 of gas after March 31, 2006, the product obtained by multiplying (A) the amount of 15 gas produced during that month from the lease or property, times (B) the average rate 16 of tax that was imposed under this chapter on gas produced from all leases or 17 properties in the Cook Inlet sedimentary basin for the 12-month period ending on 18 March 31, 2006, times (C) the average prevailing value for gas delivered in the Cook 19 Inlet area for the 12-month period ending March 31, 2006, as determined by the 20 department under AS 43.55.020(f). 21 (h) For a month that ends before April 1, 2021, the total tax levied by (e) of 22 this section on oil produced from a lease or property in the Cook Inlet sedimentary 23 basin may not exceed 24 (1) for a lease or property that first commenced commercial production 25 of oil before April 1, 2006, the product obtained by multiplying (A) the amount of oil 26 produced during that month from the lease or property, times (B) the average rate of 27 tax that was imposed under this chapter on oil produced from the lease or property for 28 the 12-month period ending on March 31, 2006, times (C) the average prevailing value 29 for oil delivered in the Cook Inlet area for the 12-month period ending March 31, 30 2006, as determined by the department under AS 43.55.020(f); 31 (2) for a lease or property that first commences commercial production
01 of oil after March 31, 2006, the product obtained by multiplying (A) the amount of oil 02 produced during that month from the lease or property, times (B) the average rate of 03 tax that was imposed under this chapter on oil produced from all leases or properties in 04 the Cook Inlet sedimentary basin for the 12-month period ending on March 31, 2006, 05 times (C) the average prevailing value for oil delivered in the Cook Inlet area for the 06 12-month period ending March 31, 2006, as determined by the department under 07 AS 43.55.020(f). 08 (i) Notwithstanding any contrary provision of AS 38.05.180(i), AS 41.09.010, 09 AS 43.20.043, 43.55.025, or 43.55.170, tax credits under AS 38.05.180(i), 10 AS 41.09.010, AS 43.20.043, AS 43.55.025, and 43.55.170 that are allocated to gas 11 produced from leases or properties in the Cook Inlet sedimentary basin and that are 12 available to be applied against a tax levied by (e) of this section on gas produced from 13 leases or properties in the Cook Inlet sedimentary basin during a month may be 14 applied only against the tax levied by (e) of this section on that gas. The amount by 15 which the tax credits allocated to gas produced from leases or properties in the Cook 16 Inlet sedimentary basin and that the producer would otherwise be allowed to use for a 17 different month or transfer to another person that exceeds the amount of tax credits 18 whose application would reduce the tax levied by (e) of this section on that gas to 19 zero, if any, is considered the amount of excess tax credits and the excess tax credits 20 are subject to the following: 21 (1) for each lease or property for which a limitation under (g) or (h) of 22 this section on the tax levied by (e) of this section has the effect of reducing the 23 producer's tax below the amount of tax that would be levied in the absence of that 24 limitation, the producer shall calculate the amount of that reduction; 25 (2) the producer shall calculate the total of the reductions calculated 26 under (1) of this subsection for all affected leases or properties; 27 (3) the producer shall reduce the amount of excess tax credits by the 28 total calculated under (2) of this subsection, but not to less than zero; 29 (4) any amount of excess tax credits remaining after reduction under 30 (3) of this subsection may be used for a different month, transferred to another person, 31 or applied against a tax levied on oil or gas produced from a lease or property located
01 anywhere in the state to the extent otherwise allowed under applicable law governing 02 the tax credits. 03 (j) Allocation of credits under (i) of this section shall be made under 04 regulations adopted by the department that provide for reasonable methods of 05 allocating tax credits to gas produced from leases or properties in the Cook Inlet 06 sedimentary basin. The method of allocating tax credits available under AS 43.55.170 07 shall be based on the number of barrels of oil equivalent produced from a lease or 08 property. 09 * Sec. 6. AS 43.55.017(a) is amended to read: 10 (a) Except as provided in this chapter, the taxes imposed by this chapter are in 11 place of all taxes now imposed by the state or any of its municipalities, and neither the 12 state nor a municipality may impose a tax on [UPON] 13 (1) producing oil or gas leases; 14 (2) oil or gas produced or extracted in the state; 15 (3) the value of intangible drilling and development costs, as 16 described in 26 U.S.C. 263(c) (Internal Revenue Code), as amended through 17 January 1, 1974 [EXPLORATION EXPENSES]. 18 * Sec. 7. AS 43.55.020(a) is repealed and reenacted to read: 19 (a) Ninety-five percent of the total tax levied by AS 43.55.011(e) and (f), net 20 of any credits applied under this chapter, is due on the last day of each calendar month 21 on oil and gas produced from each lease or property during the preceding month. The 22 remaining portion of the tax levied by AS 43.55.011(e) and (f), net of any credits 23 applied under this chapter, is due on March 31 of the year following the calendar year 24 during which the oil and gas were produced. An unpaid amount of tax that is not paid 25 when due in accordance with this subsection becomes delinquent. An overpayment of 26 tax with respect to a month may be applied against the tax due for any later month. 27 Notwithstanding any contrary provision of AS 43.05.280, interest on an overpayment 28 is allowed only from a date that is 90 days after the later of (1) the March 31 described 29 in this subsection, or (2) the date that the statement required under AS 43.55.030(a) 30 and (e) to be filed on or before that March 31 is filed. Interest is not allowed if the 31 overpayment was refunded within the 90-day period.
01 * Sec. 8. AS 43.55.020(b) is amended to read: 02 (b) The production tax on oil and [OR] gas shall be paid by or on behalf of the 03 producer. 04 * Sec. 9. AS 43.55.020(d) is amended to read: 05 (d) In making settlement with the royalty owner for oil and gas that is 06 taxable under AS 43.55.011, the producer may deduct the amount of the tax paid on 07 taxable royalty oil and [OR] gas, or may deduct taxable royalty oil or gas equivalent 08 in value at the time the tax becomes due to the amount of the tax paid. Unless 09 otherwise agreed between the producer and the royalty owner, the amount of the 10 tax paid under AS 43.55.011(e) on taxable royalty oil and gas for a month, other 11 than oil and gas the ownership or right to which constitutes a landowner's 12 royalty interest, is considered to be the gross value at the point of production of 13 the taxable royalty oil and gas produced during the month multiplied by a figure 14 that is a quotient, in which 15 (1) the numerator is the producer's total tax liability under 16 AS 43.55.011(e) for the month of production; and 17 (2) the denominator is the total gross value at the point of 18 production of the oil and gas taxable under AS 43.55.011(e) produced by the 19 producer from all leases and properties in the state during the month. 20 * Sec. 10. AS 43.55.020(e) is repealed and reenacted to read: 21 (e) Gas flared, released, or allowed to escape in excess of the amount 22 authorized by the Alaska Oil and Gas Conservation Commission is considered, for the 23 purpose of AS 43.55.011 - 43.55.180, as gas produced from a lease or property. Oil or 24 gas used in the operation of a lease or property in the state in drilling for or producing 25 oil or gas, or for repressuring, except to the extent determined by the Alaska Oil and 26 Gas Conservation Commission to be waste, is not considered, for the purpose of 27 AS 43.55.011 - 43.55.180, as oil or gas produced from a lease or property. 28 * Sec. 11. AS 43.55.020(f) is amended to read: 29 (f) If oil or gas is produced but not sold, or if oil or gas is produced and 30 sold under circumstances where the sale price does not represent the prevailing value 31 for oil or gas of like kind, character, or quality in the field or area from which the
01 product is produced, the department may require the tax to be paid upon the basis of 02 the value of oil or gas of the same kind, quality, and character prevailing for that field 03 or area during the calendar month of production or sale [FOR THAT FIELD OR 04 AREA]. 05 * Sec. 12. AS 43.55 is amended by adding a new section to read: 06 Sec. 43.55.024. Tax credits for certain losses and expenditures. (a) A 07 producer or explorer may take a tax credit for a qualified capital expenditure as 08 follows: 09 (1) notwithstanding that a qualified capital expenditure may be a 10 deductible lease expenditure for purposes of calculating the production tax value of oil 11 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 12 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, 13 (A) a producer or explorer that incurs a qualified capital 14 expenditure may also elect to take a tax credit against a tax due under 15 AS 43.55.011(e) in the amount of 20 percent of that expenditure; 16 (B) for a calendar year for which the producer makes a 17 substitution under AS 43.55.160(f), instead of taking a tax credit at a rate 18 authorized by (A) of this paragraph as to each separate qualified capital 19 expenditure after it has been incurred, a producer that incurs a qualified capital 20 expenditure during that year and that wishes to apply a credit based on that 21 expenditure against a tax due under AS 43.55.011(e) shall calculate and apply 22 every month an annualized tax credit in an amount equal to 1 2/3 percent of the 23 total qualified capital expenditures incurred during that year and for which the 24 tax credit is taken for that year; 25 (2) a producer or explorer may take a credit for a qualified capital 26 expenditure incurred in connection with geological or geophysical exploration or in 27 connection with an exploration well only if the producer or explorer provides to the 28 department, as part of the statement required under AS 43.55.030(a) for the month for 29 which the credit is sought to be taken, the producer's or explorer's written agreement 30 (A) to notify the Department of Natural Resources, within 30 31 days after completion of the geological or geophysical data processing or
01 completion of the well, or within 30 days after the statement is filed, whichever 02 is the latest, of the date of completion and to submit a report to that department 03 describing the processing sequence and provide a list of data sets available; 04 (B) to provide to the Department of Natural Resources, within 05 30 days after the date of a request, specific data sets, ancillary data, and reports 06 identified in (A) of this paragraph; 07 (C) that, notwithstanding any provision of AS 38, the 08 Department of Natural Resources shall hold confidential the information 09 provided to that department under this paragraph for 10 years following the 10 completion date, after which the department shall publicly release the 11 information after 30 days' public notice. 12 (b) A producer or explorer may elect to take a tax credit in the amount of 20 13 percent of a carried-forward annual loss. A credit under this subsection may be applied 14 against a tax due under AS 43.55.011(e). For purposes of this subsection, a carried- 15 forward annual loss is the amount of a producer's or explorer's adjusted lease 16 expenditures under AS 43.55.160 for a previous calendar year that was not deductible 17 in any month under AS 43.55.160(a) and (b). 18 (c) A credit or portion of a credit under this section may not be used to reduce 19 a person's tax liability under AS 43.55.011(e) for any month below zero, and any 20 unused credit or portion of a credit not used under this subsection may be applied in a 21 later month. 22 (d) Except as limited by (j) of this section, a person entitled to take a tax credit 23 under this section that wishes to transfer the unused credit to another person may 24 apply to the department for a transferable tax credit certificate. An application under 25 this subsection must be on a form prescribed by the department and must include 26 supporting information and documentation that the department reasonably requires. 27 The department shall grant or deny an application, or grant an application as to a lesser 28 amount than that claimed and deny it as to the excess, not later than 60 days after the 29 latest of (1) March 31 of the year following the calendar year in which the qualified 30 capital expenditure or carried-forward annual loss for which the credit is claimed was 31 incurred; (2) if the applicant is required under AS 43.55.030(a) and (e) to file a
01 statement on or before March 31 of the year following the calendar year in which the 02 qualified capital expenditures or carried-forward annual loss for which the credit is 03 claimed was incurred, the date the statement was filed; or (3) the date the application 04 was received by the department. If, based on the information then available to it, the 05 department is reasonably satisfied that the applicant is entitled to a credit, the 06 department shall issue the applicant a transferable tax credit certificate for the amount 07 of the credit. A certificate issued under this subsection does not expire. 08 (e) A person to which a transferable tax credit certificate is issued under (d) of 09 this section may transfer the certificate to another person, and a transferee may further 10 transfer the certificate. Subject to the limitations set out in (a) - (c) of this section, and 11 notwithstanding any action the department may take with respect to the applicant 12 under (g) of this section, the owner of a certificate may apply the credit or a portion of 13 the credit shown on the certificate only against a tax due under AS 43.55.011(e). 14 However, a credit shown on a transferable tax credit certificate may not be applied to 15 reduce a transferee's total tax due under AS 43.55.011(e) on oil and gas produced 16 during a calendar year to less than 80 percent of the tax that would otherwise be due 17 without applying that credit. Any portion of a credit not used under this subsection 18 may be applied in a later period. 19 (f) Under standards established in regulations adopted by the department and 20 subject to appropriations made by law, the department, on the written application of 21 the person to whom a transferable tax credit has been issued under (d) of this section 22 and whose average amount of oil and gas produced a day taxable under 23 AS 43.55.011(e) is not more than 50,000 barrels of oil equivalent a day for the 24 preceding calendar year, shall issue a cash refund, in whole or in part, for the 25 certificate if the department finds 26 (1) after investigation and audit of the tax credit claim by the 27 department, that the applicant is entitled to the credit to the extent of the refund 28 amount; 29 (2) within 24 months after having applied for the transferable tax credit 30 certificate, that the applicant incurred a qualified capital expenditure or was the 31 successful bidder on a bid submitted for a lease on state land under AS 38.05.180(f);
01 (3) that the amount of the refund would not exceed the total of 02 qualified capital expenditures and successful bids described in (2) of this subsection 03 that have not been the subject of a finding made under this paragraph for purposes of a 04 previous refund; 05 (4) that the applicant does not have an outstanding liability to the state 06 for unpaid delinquent taxes under this title; and 07 (5) that the sum of the amount of the refund applied for and amounts 08 previously refunded to the applicant during the calendar year under this subsection 09 would not exceed $25,000,000. 10 (g) The issuance of a transferable tax credit certificate under (d) of this section 11 does not limit the department's ability to later audit a tax credit claim to which the 12 certificate relates or to adjust the claim if the department determines that the applicant 13 was not entitled to the amount of the credit for which the certificate was issued. The 14 tax liability of the applicant under AS 43.55.011(e) and 43.55.017 - 43.55.180 is 15 increased by the amount of the credit that exceeds that to which the applicant was 16 entitled, or the applicant's available valid outstanding credits applicable against the tax 17 levied by AS 43.55.011(e) are reduced by that amount. If the applicant's tax liability is 18 increased under this subsection, the increase bears interest under AS 43.05.225 from 19 the date the transferable tax credit certificate was issued. For purposes of this 20 subsection, an applicant that is an explorer is considered a producer subject to the tax 21 levied by AS 43.55.011(e). 22 (h) The department may adopt regulations to carry out the purposes of this 23 section, including prescribing reporting, record keeping, and certification procedures 24 and requirements to verify the accuracy of credits claimed and to ensure that a credit is 25 not used more than once, and otherwise implementing this section. 26 (i) A person may not elect to take a tax credit under (a) or (j) of this section for 27 an expenditure incurred to acquire an asset (1) the cost of previously acquiring which 28 was a lease expenditure under AS 43.55.160(c) or would have been a lease 29 expenditure under AS 43.55.160(c) if it had been incurred on or after April 1, 2006; or 30 (2) that has previously been placed in service in the state. An expenditure to acquire an 31 asset is not excluded under this subsection if not more than an immaterial portion of
01 the asset meets a description under (1) or (2) of this subsection. For purposes of this 02 subsection, "asset" includes geological, geophysical, and well data and interpretations. 03 (j) For the purposes of this section, 04 (1) a producer's or explorer's transitional investment expenditures are 05 the sum of the expenditures the producer or explorer incurred on or after April 1, 06 2001, and before April 1, 2006, that would be qualified capital expenditures if they 07 were incurred on or after April 1, 2006, less the sum of the payments or credits the 08 producer or explorer received before April 1, 2006, for the sale or other transfer of 09 assets, including geological, geophysical, or well data or interpretations, acquired by 10 the producer or explorer as a result of expenditures the producer or explorer incurred 11 before April 1, 2006, that would be qualified capital expenditures, if they were 12 incurred on or after April 1, 2006; 13 (2) a producer or explorer may elect to take a tax credit against a tax 14 due under AS 43.55.011(e) in the amount of 20 percent of the producer's or explorer's 15 transitional investment expenditures, but only to the extent that the amount does not 16 exceed 17 (A) 1/10 of the producer's or explorer's qualified capital 18 expenditures that are incurred during the month for which the credit is taken, if 19 the producer or explorer does not make a substitution under AS 43.55.160(f); 20 (B) 1/120 of the producer's or explorer's qualified capital 21 expenditures that are incurred during the calendar year that includes the month 22 for which the credit is taken, if the producer or explorer makes a substitution 23 under AS 43.55.160(f); 24 (3) a producer or explorer may not take a tax credit for a transitional 25 investment expenditure 26 (A) for any month that ends the later of 27 (i) April 30, 2013; or 28 (ii) the seventh anniversary of the last day of the month 29 for which the producer first applies a credit under this subsection 30 against a tax due under AS 43.55.011(e), if the producer did not have 31 commercial production of oil or gas from a lease or property in the state
01 before April 1, 2006; 02 (B) more than once; or 03 (C) if a credit for that expenditure was taken under 04 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 05 (4) notwithstanding (d), (e), and (g) of this section, a producer or 06 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for a 07 transitional investment expenditure. 08 (k) As a condition of receiving a tax credit under this section, a producer or 09 explorer that obtains the tax credit for or directly related to a pipeline, facility, or other 10 asset that is or becomes subject to regulation by the Federal Energy Regulatory 11 Commission or the Regulatory Commission of Alaska, or a successor regulatory body 12 shall at all times support and in all rate proceedings file to flow through 100 percent of 13 the tax credits to ratepayers as a reduction in the costs of service for the pipeline, 14 facility, or other asset. 15 (l) In this section, "qualified capital expenditure" means, except as otherwise 16 provided in (i) of this section, an expenditure that is a lease expenditure under 17 AS 43.55.160 and is 18 (1) incurred for geological or geophysical exploration; or 19 (2) treated as a capitalized expenditure under 26 U.S.C. (Internal 20 Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) 21 (Internal Revenue Code), as amended, and is 22 (A) treated as a capitalized expenditure for federal income tax 23 reporting purposes by the person incurring the expenditure; or 24 (B) eligible to be deducted as an expense under 26 U.S.C. 25 263(c) (Internal Revenue Code), as amended. 26 * Sec. 13. AS 43.55.025(a) is amended to read: 27 (a) Subject to the terms and conditions of this section, [ON OIL AND GAS 28 PRODUCED ON OR AFTER JULY 1, 2004, FROM AN OIL AND GAS LEASE, 29 OR ON GAS PRODUCED FROM A GAS ONLY LEASE,] a credit against the 30 production tax due under AS 43.55.011(e) [THIS CHAPTER] is allowed for 31 exploration expenditures that qualify under (b) of this section in an amount equal to
01 one of the following: 02 (1) 20 percent of the total exploration expenditures that qualify only 03 under (b) and (c) of this section; 04 (2) 20 percent of the total exploration expenditures for work performed 05 before July 1, 2007, and that qualify only under (b) and (d) of this section; 06 (3) 40 percent of the total exploration expenditures that qualify under 07 (b), (c), and (d) of this section; or 08 (4) 40 percent of the total exploration expenditures that qualify only 09 under (b) and (e) of this section. 10 * Sec. 14. AS 43.55.025(b) is amended to read: 11 (b) To qualify for the production tax credit under (a) of this section, an 12 exploration expenditure must be incurred for work performed on or after July 1, 2003, 13 and before July 1, 2016 [2007], except that an exploration expenditure for a Cook Inlet 14 prospect must be incurred for work performed on or after July 1, 2005, [AND 15 BEFORE JULY 1, 2010, AND EXCEPT THAT AN EXPLORATION 16 EXPENDITURE, IN WHOLE OR IN PART, SOUTH OF 68 DEGREES, 15 17 MINUTES, NORTH LATITUDE, AND NOT PART OF A COOK INLET 18 PROSPECT MUST BE INCURRED FOR WORK PERFORMED ON OR AFTER 19 JULY 1, 2003, AND BEFORE JULY 1, 2010,] and 20 (1) may be for seismic or geophysical exploration costs not connected 21 with a specific well; 22 (2) if for an exploration well, 23 (A) must be incurred by an explorer that holds an interest in the 24 exploration well for which the production tax credit is claimed; 25 (B) may be for either an oil or gas discovery well or a dry hole; 26 and 27 (C) must be for goods, services, or rentals of personal property 28 reasonably required for the surface preparation, drilling, casing, cementing, 29 and logging of an exploration well, and, in the case of a dry hole, for the 30 expenses required for abandonment if the well is abandoned within 18 months 31 after the date the well was spudded;
01 (3) may not be for testing, stimulation, or completion costs; 02 administration, supervision, engineering, or lease operating costs; geological or 03 management costs; community relations or environmental costs; bonuses, taxes, or 04 other payments to governments related to the well; or other costs that are generally 05 recognized as indirect costs or financing costs; and 06 (4) may not be incurred for an exploration well or seismic exploration 07 that is included in a plan of exploration or a plan of development for any unit on 08 May 13, 2003. 09 * Sec. 15. AS 43.55.025(f) is amended to read: 10 (f) For a production tax credit under this section, 11 (1) an explorer shall, in a form prescribed by the department and 12 within six months of the completion of the exploration activity, claim the credit and 13 submit information sufficient to demonstrate to the department's satisfaction that the 14 claimed exploration expenditures qualify under this section; 15 (2) an explorer shall agree, in writing, 16 (A) to notify the Department of Natural Resources, within 30 17 days after completion of seismic or geophysical data processing, completion of 18 a well, or filing of a claim for credit, whichever is the latest, for which 19 exploration costs are claimed, of the date of completion and submit a report to 20 that department describing the processing sequence and providing a list of data 21 sets available; if, under (c)(2)(B) of this section, an explorer submits a claim 22 for a credit for expenditures for an exploration well that is located within three 23 miles of a well already drilled for oil and gas, in addition to the submissions 24 required under (1) of this subsection, the explorer shall submit the information 25 necessary for the commissioner of natural resources to evaluate the validity of 26 the explorer's claim that the well is directed at a distinctly separate exploration 27 target, and the commissioner of natural resources shall, upon receipt of all 28 evidence sufficient for the commissioner to evaluate the explorer's claim, make 29 that determination within 60 days; 30 (B) to provide to the Department of Natural Resources, within 31 30 days after the date of a request, specific data sets, ancillary data, and reports
01 identified in (A) of this paragraph; 02 (C) that, notwithstanding any provision of AS 38, information 03 provided under this paragraph will be held confidential by the Department of 04 Natural Resources for 10 years following the completion date, at which time 05 that department will release the information after 30 days' public notice; 06 (3) if more than one explorer holds an interest in a well or seismic 07 exploration, each explorer may claim an amount of credit that is proportional to the 08 explorer's cost incurred; 09 (4) the department may exercise the full extent of its powers as though 10 the explorer were a taxpayer under this title, in order to verify that the claimed 11 expenditures are qualified exploration expenditures under this section; and 12 (5) if the department is satisfied that the explorer's claimed 13 expenditures are qualified under this section, the department shall issue to the explorer 14 a production tax credit certificate for the amount of credit to be allowed against 15 production taxes due under AS 43.55.011(e) [THIS CHAPTER; HOWEVER, 16 NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, THE 17 DEPARTMENT MAY NOT ISSUE TO AN EXPLORER A PRODUCTION TAX 18 CREDIT CERTIFICATE IF THE TOTAL OF PRODUCTION TAX CREDITS 19 SUBMITTED FOR COOK INLET PRODUCTION, BASED ON EXPLORATION 20 EXPENDITURES FOR WORK PERFORMED DURING THE PERIOD 21 DESCRIBED IN (b) OF THIS SECTION FOR THAT PRODUCTION, THAT HAVE 22 BEEN APPROVED BY THE DEPARTMENT EXCEEDS $20,000,000]. 23 * Sec. 16. AS 43.55.025(h) is amended to read: 24 (h) A producer that purchases a production tax credit certificate may apply the 25 credits against its production tax liability under AS 43.55.011(e) [THIS CHAPTER]. 26 Regardless of the price the producer paid for the certificate, the producer may receive 27 a credit against its production tax liability for the full amount of the credit, but for not 28 more than the amount for which the certificate is issued. A production tax credit 29 allowed under this section may not be applied more than once. 30 * Sec. 17. AS 43.55.025(i) is amended to read: 31 (i) For a production tax credit under this section,
01 (1) the amount of the credit that may be applied against the production 02 tax for each tax month may not exceed the total production tax liability under 03 AS 43.55.011(e) of the taxpayer applying the credit for the same month; and 04 (2) an amount of the production tax credit that is greater than the total 05 tax liability under AS 43.55.011(e) of the taxpayer applying the credit for a tax month 06 may be carried forward and applied against the taxpayer's production tax liability 07 under AS 43.55.011(e) in one or more immediately following months. 08 * Sec. 18. AS 43.55.030(a) is amended to read: 09 (a) The tax shall be paid to the department, and the person paying the tax shall 10 file with the department at the time the tax or a portion of the tax is required to be 11 paid a statement, under oath, on forms prescribed by or acceptable to the department, 12 giving, with other information required, the following: 13 (1) a description of each [THE] lease or property from which the oil 14 and [OR] gas were [WAS] produced, by name, legal description, lease number, or 15 [BY] accounting codes [CODE NUMBERS] assigned by the department; 16 (2) the names of the producer and the person paying the tax; 17 (3) the gross amount of oil and the gross amount of [OR] gas 18 produced from each [THE] lease or property, and the percentage of the gross amount 19 of oil and gas owned by each producer for whom the tax is paid; 20 (4) the gross [TOTAL] value at the point of production of the oil 21 and of the [OR] gas produced from each [THE] lease or property owned by each 22 producer for whom the tax is paid; [AND] 23 (5) the name of the first purchaser and the price received for the oil 24 and for the [OR] gas, unless relieved from this requirement in whole or in part by 25 the department; and 26 (6) the producer's lease expenditures and adjustments as 27 calculated under AS 43.55.160 [IF SOLD IN THE STATE]. 28 * Sec. 19. AS 43.55.030(d) is amended to read: 29 (d) Reports by or on behalf of the producer are delinquent the first day 30 following the day the tax is due. [EACH PRODUCER IS SUBJECT TO A PENALTY 31 OF $25 A DAY FOR EACH LEASE OR PROPERTY UPON WHICH THE
01 REPORT IS NOT FILED. THE PENALTY FOR FAILURE TO FILE A REPORT IS 02 IN ADDITION TO THE PENALTY FOR DELINQUENT TAXES, AND IS A LIEN 03 AGAINST THE ASSETS OF THE PRODUCER.] 04 * Sec. 20. AS 43.55.030 is amended by adding new subsections to read: 05 (e) In addition to other required information, the statement required to be filed 06 on or before March 31 of a year must show any adjustments or corrections to the 07 statements that were required under (a) of this section to be filed for the months of the 08 preceding calendar year during which the oil or gas was produced. 09 (f) For purposes of AS 43.05.260(a), the statement required to be filed on or 10 before March 31 of a year is considered to be the return for the tax imposed by 11 AS 43.55.011(e) and (f) for oil and gas produced each month of the preceding 12 calendar year. 13 * Sec. 21. AS 43.55.040 is amended to read: 14 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 15 AS 43.05.405 - 43.05.499, the department may 16 (1) require a person engaged in production and the agent or employee 17 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 18 or gas to furnish, whether by the filing of regular statements or reports or 19 otherwise, additional information that is considered by the department as necessary to 20 compute the amount of the tax; notwithstanding any contrary provision of law, the 21 disclosure of additional information under this paragraph to the producer 22 obligated to pay the tax does not violate AS 40.25.100(a) or AS 43.05.230(a); 23 before disclosing information under this paragraph that is otherwise required to 24 be held confidential under AS 40.25.100(a) or AS 43.05.230(a), the department 25 shall 26 (A) provide the person that furnished the information a 27 reasonable opportunity to be heard regarding the proposed disclosure and 28 the conditions to be imposed under (B) of this paragraph; and 29 (B) impose appropriate conditions limiting 30 (i) access to the information to those legal counsel, 31 consultants, employees, officers, and agents of the producer who
01 have a need to know that information for the purpose of 02 determining or contesting the producer's tax obligation; and 03 (ii) the use of the information to use for that 04 purpose; 05 (2) examine the books, records, and files of such a person; 06 (3) conduct hearings and compel the attendance of witnesses and the 07 production of books, records, and papers of any person; and 08 (4) make an investigation or hold an inquiry that is considered 09 necessary to a disclosure of the facts as to 10 (A) the amount of production from any oil or gas location, or of 11 a company or other producer of oil or gas; and 12 (B) the rendition of the oil and gas for taxing purposes. 13 * Sec. 22. AS 43.55.080 is amended to read: 14 Sec. 43.55.080. Collection and deposit of revenue. Except as otherwise 15 provided under art. IX, sec. 17, Constitution of the State of Alaska, the [THE] 16 department shall deposit in the general fund the money collected by it under 17 AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150]. 18 * Sec. 23. AS 43.55.135 is amended to read: 19 Sec. 43.55.135. Measurement. For the purposes of AS 43.55.011 - 43.55.180 20 [AS 43.55.011 - 43.55.150], oil is [SHALL BE] measured in terms of a "barrel of oil" 21 and gas is [SHALL BE] measured in terms of a "cubic foot of gas." 22 * Sec. 24. AS 43.55.150(a) is amended to read: 23 (a) For the purposes of AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150], 24 the gross value at the point of production is [SHALL BE] calculated using the 25 reasonable costs of transportation of the oil or gas. The reasonable costs of 26 transportation are [SHALL BE] the actual costs, except when the 27 (1) [WHEN THE] parties to the transportation of oil or gas are 28 affiliated; 29 (2) [WHEN THE] contract for the transportation of oil or gas is not an 30 arm's length transaction or is not representative of the market value of that 31 transportation; and
01 (3) [WHEN THE] method of transportation of oil or gas is not 02 reasonable in view of existing alternative methods of transportation. 03 * Sec. 25. AS 43.55 is amended by adding new sections to article 1 to read: 04 Sec. 43.55.160. Determination of production tax value of oil and gas. (a) 05 Except as provided in (f) of this section, for purposes of AS 43.55.011(e), the 06 production tax value of the taxable (1) oil and gas produced during a month from a 07 lease or property in the state that includes land north of 68 degrees North latitude is 08 the gross value at the point of production of the oil and gas taxable under 09 AS 43.55.011(e) and produced by the producer from that lease or property, less the 10 producer's lease expenditures for the month applicable to that oil and gas, as adjusted 11 under (e) of this section; (2) oil and gas produced during a month from a lease or 12 property in the state outside the Cook Inlet sedimentary basin and south of 68 degrees 13 North latitude is the gross value at the point of production of the oil and gas taxable 14 under AS 43.55.011(e) and produced by the producer from that lease or property, less 15 the producer's lease expenditures for the month applicable to that oil and gas, as 16 adjusted under (e) of this section; (3) oil produced during a month from a lease or 17 property in the Cook Inlet sedimentary basin is the gross value at the point of 18 production of the oil taxable under AS 43.55.011(e) and produced by the producer 19 from that lease or property, less the producer's lease expenditures for the month 20 applicable to that oil, as adjusted under (e) of this section; (4) gas produced during a 21 month from a lease or property in the Cook Inlet sedimentary basin is the gross value 22 at the point of production of the gas taxable under AS 43.55.011(e) and produced by 23 the producer from that lease or property, less the producer's lease expenditures for the 24 month applicable to that gas, as adjusted under (e) of this section. However, a 25 production tax value calculated under this subsection may not be less than zero. If a 26 producer does not produce taxable oil or gas during a month, the producer is 27 considered to have generated a positive production tax value if a calculation described 28 in this subsection yields a positive number because the producer's adjusted lease 29 expenditures for a month are less than zero as a result of the producer's receiving a 30 payment or credit under (e) of this section or otherwise. 31 (b) For purposes of administration of (a) of this section,
01 (1) any adjusted lease expenditures that would otherwise be deductible 02 in a month but whose deduction would cause a production tax value calculated under 03 (a) of this section of taxable oil or gas produced during the month to be less than zero 04 may be added to the producer's adjusted lease expenditures for one or more other 05 months in the same calendar year; the total of any adjusted lease expenditures that are 06 not deductible in any month during a calendar year because their deduction would 07 cause a production tax value calculated under (a) of this section of taxable oil or gas 08 produced during one or more months to be less than zero may be used to establish a 09 carried-forward annual loss under AS 43.55.024(b); 10 (2) an explorer that has taken a tax credit under AS 43.55.024(b) or 11 that has obtained a transferable tax credit certificate under AS 43.55.024(d) for the 12 amount of a tax credit under AS 43.55.024(b) is considered a producer, subject to the 13 tax levied under AS 43.55.011(e), to the extent that the explorer generates a positive 14 production tax value as the result of the explorer's receiving a payment or credit 15 described in (e) of this section. 16 (c) For purposes of this section, 17 (1) a producer's lease expenditures for a period are the ordinary and 18 necessary costs upstream of the point of production of oil and gas that are incurred on 19 or after April 1, 2006, by the producer during the period and that are direct costs of 20 exploring for, developing, or producing oil or gas deposits located within the 21 producer's leases or properties in the state or, in the case of land in which the producer 22 does not own a working interest, that are direct costs of exploring for oil or gas 23 deposits located within other land in the state; in determining whether costs are lease 24 expenditures, 25 (A) the department shall give substantial weight to the typical 26 industry practices and standards in the state that determine the costs that an 27 operator is allowed to bill a working interest owner that is not the operator, 28 under unit operating agreements or similar operating agreements that were in 29 effect on or before December 1, 2005, and were subject to negotiation with at 30 least one working interest owner with substantial bargaining power, other than 31 the operator; and
01 (B) as to matters that are not addressed by the industry 02 practices and standards described in (A) of this paragraph or as to which those 03 practices and standards are not clear or are not uniform, the department shall 04 give substantial weight to the standards adopted by the Department of Natural 05 Resources that determine the costs, other than interest, that a lessee is allowed 06 to deduct from revenue in calculating net profits under a lease issued under 07 AS 38.05.180(f)(3)(B), (D), or (E); 08 (2) the Department of Revenue may authorize a producer, including a 09 producer that is an operator, to treat as its lease expenditures under this section the 10 costs, other than items listed in (d) of this section, paid by the producer that are billed 11 to the producer by an operator in accordance with the terms of a unit operating 12 agreement or similar operating agreement if the Department of Revenue finds that 13 (A) the pertinent provisions of the operating agreement are 14 substantially consistent with the Department of Revenue's determinations and 15 standards otherwise applicable under this subsection; and 16 (B) at least one working interest owner party to the agreement, 17 other than the operator, has substantial incentive and ability to effectively audit 18 billings under the agreement; 19 (3) an activity does not need to be physically located on, near, or 20 within the premises of the lease or property within which an oil or gas deposit being 21 explored for, developed, or produced is located in order for the cost of the activity to 22 be a cost upstream of the point of production of the oil or gas; 23 (4) the lease expenditures that are applicable to oil or gas produced 24 from a lease or property shall be determined under regulations adopted by the 25 department that provide for reasonable methods of allocating costs between oil and 26 gas and among leases or properties; 27 (5) "direct costs" include 28 (A) an expenditure, when incurred, to acquire an item if the 29 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure 30 may be required to be capitalized rather than treated as an expense for financial 31 accounting or federal income tax purposes;
01 (B) payments of or in lieu of property taxes, sales and use 02 taxes, motor fuel taxes, and excise taxes; 03 (C) a reasonable allowance, as determined under regulations 04 adopted by the department, for overhead expenses directly related to exploring 05 for, developing, and producing oil or gas deposits located within leases or 06 properties or other land in the state. 07 (d) For purposes of (c) of this section, lease expenditures do not include 08 (1) depreciation, depletion, or amortization; 09 (2) oil or gas royalty payments, production payments, lease profit 10 shares, or other payments or distributions of a share of oil or gas production, profit, or 11 revenue; 12 (3) taxes based on or measured by net income; 13 (4) interest or other financing charges or costs of raising equity or debt 14 capital; 15 (5) acquisition costs for a lease or property or exploration license; 16 (6) costs arising from fraud, wilful misconduct, or gross negligence; 17 (7) fines or penalties imposed by law; 18 (8) costs of arbitration, litigation, or other dispute resolution activities 19 that involve the state or concern the rights or obligations among owners of interests in, 20 or rights to production from, one or more leases or properties or a unit; 21 (9) donations; 22 (10) costs incurred in organizing a partnership, joint venture, or other 23 business entity or arrangement; 24 (11) amounts paid to indemnify the state; the exclusion provided by 25 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 26 a third-party insurer or surety; 27 (12) surcharges levied under AS 43.55.201 or 43.55.300; 28 (13) for a transaction that is an internal transfer or is otherwise not an 29 arm's length transaction, expenditures incurred that are in excess of fair market value; 30 (14) an expenditure incurred to purchase an interest in any corporation, 31 partnership, limited liability company, business trust, or any other business entity,
01 whether or not the transaction is treated as an asset sale for federal income tax 02 purposes; 03 (15) a tax levied under AS 43.55.011; 04 (16) the portion of costs incurred for dismantlement, removal, 05 surrender, or abandonment of a facility, pipeline, well pad, platform, or other 06 structure, or for the restoration of a lease, field, unit, area, body of water, or right-of- 07 way in conjunction with dismantlement, removal, surrender, or abandonment, that is 08 attributable to production of oil or gas occurring before April 1, 2006; the portion is 09 calculated as a ratio of the amount of oil and gas production in barrels of oil equivalent 10 associated with the facility, pipeline, well pad, platform, or other structure, lease, field, 11 unit, area, body of water, or right-of-way occurring before April 1, 2006, to the total 12 amount of oil and gas production in barrels of oil equivalent associated with that 13 facility, pipeline, well pad, platform, or other structure, lease, field, unit, area, body of 14 water, or right-of-way through the end of the calendar month before commencement 15 of the dismantlement, removal, surrender, or abandonment; a cost is not excluded 16 under this paragraph if the dismantlement, removal, surrender, or abandonment for 17 which the cost is incurred is undertaken for the purpose of replacing, renovating, or 18 improving the facility, pipeline, well pad, platform, or other structure; 19 (17) losses or damages resulting from an unpermitted oil discharge that 20 is not confined to a pad, platform, or other structure, or costs to contain, clean up, or 21 remediate such an unpermitted oil discharge to the extent that those costs exceed the 22 routine costs of operation for a producer or explorer that would otherwise be incurred 23 as lease expenditures in the absence of the unpermitted oil discharge; this paragraph 24 does not apply to the cost of developing and maintaining an oil discharge prevention 25 and contingency plan under AS 46.04.030; 26 (18) costs incurred to satisfy a work commitment under an exploration 27 license under AS 38.05.132. 28 (e) Unless the payment or credit has already been subtracted in calculating 29 billed costs under (c)(2) of this section, a producer's lease expenditures must be 30 adjusted by subtracting certain payments or credits received by the producer or by an 31 operator acting for the producer, as provided in this subsection. If one or more
01 payments or credits subject to this subsection are received by a producer or by an 02 operator acting for the producer during a month or, under (f) of this section, during a 03 calendar year, and if either the total amount of the payments or credits exceeds the 04 amount of the producer's lease expenditures or the producer has no lease expenditures, 05 the producer shall nevertheless subtract those payments or credits from the lease 06 expenditures or from zero, respectively, and the producer's adjusted lease expenditures 07 for that month or calendar year are a negative number and shall be applied to the 08 calculation under (a) of this section as a negative number. The payments or credits that 09 a producer shall subtract from the producer's lease expenditures, or from zero, under 10 this subsection are payments or credits, other than tax credits, received by the producer 11 or by an operator acting for the producer for 12 (1) the use by another person of a production facility in which the 13 producer has an ownership interest or the management by the producer of a production 14 facility under a management agreement providing for the producer to receive a 15 management fee; 16 (2) a reimbursement or similar payment that offsets the producer's 17 lease expenditures, including an insurance recovery from a third-party insurer and a 18 payment from the state or federal government for reimbursement of the producer's 19 upstream costs, including costs for gathering, separating, cleaning, dehydration, 20 compressing, or other field handling associated with the production of oil or gas 21 upstream of the point of production; 22 (3) the sale or other transfer of 23 (A) an asset, including geological, geophysical, or well data or 24 interpretations, acquired by the producer as a result of a lease expenditure or an 25 expenditure that would be a lease expenditure if it were incurred on or after 26 April 1, 2006; for purposes of this subparagraph, 27 (i) if a producer removes from the state, for use outside 28 the state, an asset described in this subparagraph, the value of the asset 29 at the time it is removed is considered a payment received by the 30 producer for sale or transfer of the asset; 31 (ii) for a transaction that is an internal transfer or is
01 otherwise not an arm's length transaction, if the sale or transfer of the 02 asset is made for less than fair market value, the amount subtracted 03 must be the fair market value; and 04 (B) oil or gas 05 (i) that is not considered produced from a lease or 06 property under AS 43.55.020(e); and 07 (ii) the cost of acquiring which is a lease expenditure 08 incurred by the person that acquires the oil or gas. 09 (f) In place of the adjusted lease expenditures for a month under (a) of this 10 section, a producer may, at any time, elect to substitute, for every month of a calendar 11 year, 1/12 of the producer's adjusted lease expenditures for the calendar year. 12 (g) The department shall specify or approve a reasonable allocation method 13 for determining the portion of a cost that is appropriately treated as a lease expenditure 14 under (c) of this section if a cost that would otherwise constitute a lease expenditure 15 under (c) of this section is incurred to explore for, develop, or produce 16 (1) both an oil or gas deposit located within land outside the state and 17 an oil or gas deposit located within a lease or property, or other land, in the state; or 18 (2) an oil or gas deposit located partly within land outside the state and 19 partly within a lease or property, or other land, in the state. 20 (h) For purposes of AS 43.55.024(a) and (b) and only as to expenditures 21 incurred to explore for an oil or gas deposit located within land in which an explorer 22 does not own a working interest, the term "producer" in (b), (c), and (e) of this section 23 includes "explorer." 24 (j) The department may adopt regulations that establish additional standards 25 necessary to carrying out the purposes of this section, including the incorporation of 26 the concepts of 26 U.S.C. 482 (Internal Revenue Code), as amended, the related or 27 accompanying regulations of that section, and any ruling or guidance issued by the 28 United States Internal Revenue Service that relates to that section. 29 (j) For purposes of this section, 30 (1) "explore" includes conducting geological or geophysical 31 exploration, including drilling a stratigraphic test well;
01 (2) "ordinary and necessary" has the meaning given in 26 U.S.C. 162 02 (Internal Revenue Code), as amended, and regulations adopted under that section; 03 (3) "stratigraphic test well" means a well drilled for the sole purpose of 04 obtaining geological information to aid in exploring for an oil or gas deposit and the 05 target zones of which are located in the state. 06 Sec. 43.55.170. Additional nontransferable tax credits. (a) For a month for 07 which a producer's tax liability under AS 43.55.011(e) on oil and gas produced from 08 leases or properties outside the Cook Inlet sedimentary basin and south of 68 degrees 09 North latitude exceeds zero before application of any credits under this chapter, a 10 producer that is qualified under (e) of this section may apply a tax credit against that 11 liability of up to $500,000. 12 (b) A producer may not take a tax credit under (a) of this section for any 13 month that ends the later of 14 (1) April 30, 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 before May 1, 2016, from at least 17 one lease or property in the state outside the Cook Inlet sedimentary basin and south of 18 68 degrees North latitude, if the producer did not have commercial oil or gas 19 production from a lease or property in the state outside the Cook Inlet sedimentary 20 basin and south of 68 degrees North latitude before April 1, 2006. 21 (c) For a month for which a producer's tax liability under AS 43.55.011(e) 22 exceeds zero before application of any credits under this chapter, other than a credit 23 under (a) of this section, but after application of any credit under (a) of this section, a 24 producer that is qualified under (e) of this section and whose average amount of oil 25 and gas produced a day and taxable under AS 43.55.011(e) is less than 100,000 barrels 26 of oil equivalent a day may apply a tax credit under this section against that liability. A 27 producer whose average amount of oil and gas produced a day and taxable under 28 AS 43.55.011(e) is 29 (1) not more than 50,000 barrels of oil equivalent may apply a tax 30 credit of up to $1,000,000 for the month; 31 (2) more than 50,000 and less than 100,000 barrels of oil equivalent
01 may apply a tax credit of up to the following fraction of $1,000,000 for the month: 02 1 - [2 x (AP - 50,000)]/100,000, 03 where AP = the average amount of oil and gas, expressed as barrels of oil equivalent, 04 produced a day during the month and taxable under AS 43.55.011(e). 05 (d) A producer may not take a tax credit under (c) of this section for any 06 month that ends the later of 07 (1) April 30, 2016; or 08 (2) the 10th anniversary of the last day of the month for which the 09 producer first has commercial oil or gas production before May 1, 2016, from at least 10 one lease or property in the state, if the producer did not have commercial oil or gas 11 production from a lease or property in the state before April 1, 2006. 12 (e) On written application by a producer, including any information the 13 department may require, the department shall determine whether the producer 14 qualifies under this section for a calendar year. To qualify under this section, a 15 producer must demonstrate that its operation in the state or its ownership of an interest 16 in a lease or property in the state as a distinct producer entity would not result in the 17 division among multiple producer entities of any production tax liability under 18 AS 43.55.011(e) that would be reasonably expected to be attributed to a single 19 producer entity if the tax credit provisions of (a) or (c) of this section did not exist. 20 (f) A tax credit authorized by (a) of this section may not be applied to reduce a 21 producer's tax liability for any month under AS 43.55.011(e) on oil and gas produced 22 from leases or properties outside the Cook Inlet sedimentary basin and south of 68 23 degrees North latitude below zero. An unused portion of a tax credit authorized by (a) 24 of this section that could otherwise be applied for a month, but whose application 25 would cause the producer's tax liability for the month on oil and gas produced from 26 leases or properties outside the Cook Inlet sedimentary basin and south of 68 degrees 27 North latitude to be less than zero, may be applied for one or more other months in the 28 same calendar year to the extent otherwise allowed under this section. 29 (g) A tax credit authorized by (c) of this section may not be applied to reduce 30 a producer's tax liability under AS 43.55.011(e) for any month below zero. An unused 31 portion of a tax credit that could otherwise be applied for a month but whose
01 application would cause the producer's tax liability under AS 43.55.011(e) for the 02 month to be less than zero may be applied for one or more other months in the same 03 calendar year to the extent otherwise allowed under this section. 04 (h) An unused tax credit or portion of a tax credit under this section is not 05 transferable and may not be carried forward to or used in a later calendar year. 06 Sec. 43.55.180. Required reports. (a) The Department of Revenue shall 07 (1) study 08 (A) the effects of the tax rates under AS 43.55.011(f) and of 09 potential changes in those tax rates on state revenue and on oil and gas 10 exploration, development, and production on private land; and 11 (B) the fairness of the tax rates under AS 43.55.011(f) and of 12 potential changes in those tax rates for private landowners; and 13 (2) prepare a report on or before the first day of the 2013 regular 14 session of the legislature on the results of the study made under (1) of this subsection, 15 including a recommendation as to whether those tax rates should be changed; the 16 department shall notify the legislature that the report prepared under this paragraph is 17 available. 18 (b) The Department of Revenue shall 19 (1) study the effects of the credits authorized by AS 43.55.025 and 20 43.55.170 on state revenue, on the encouragement of exploration, development, and 21 production of oil and gas deposits located in the state, and on the encouragement of 22 new entrants into the oil and gas industry in the state; and 23 (2) prepare a report on or before the first day of the 2015 regular 24 session of the legislature on the results of the study made under (1) of this subsection, 25 and shall include with the report a recommendation as to whether the legislature 26 should extend the availability of the credits under AS 43.55.025 and 43.55.170; the 27 department shall notify the legislature that the report prepared under this paragraph is 28 available. 29 * Sec. 26. AS 43.55.201 is amended to read: 30 Sec. 43.55.201. Surcharge levied. (a) Every producer of oil shall pay a 31 surcharge of $.01 [$.02] per barrel of oil produced from each lease or property in the
01 state, less any oil the ownership or right to which is exempt from taxation. 02 (b) The surcharge imposed by (a) of this section is in addition to the tax 03 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 04 from each lease or property during the preceding month. The surcharge [SHALL 05 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 06 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.300 - 07 43.55.310. 08 (c) A producer of oil shall make reports of production in the same manner and 09 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 10 43.55.150]. 11 * Sec. 27. AS 43.55.201 is amended by adding a new subsection to read: 12 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 13 property is not considered to be produced from a lease or property for purposes of this 14 section. 15 * Sec. 28. AS 43.55.300 is amended to read: 16 Sec. 43.55.300. Surcharge levied. (a) Every producer of oil shall pay a 17 surcharge of $.04 [$.03] per barrel of oil produced from each lease or property in the 18 state, less any oil the ownership or right to which is exempt from taxation. 19 (b) The surcharge imposed by (a) of this section is in addition to the tax 20 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 21 from each lease or property during the preceding month. The surcharge [SHALL 22 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 23 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.201 - 24 43.55.231. 25 (c) A producer of oil shall make reports of production in the same manner and 26 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 27 43.55.150]. 28 * Sec. 29. AS 43.55.300 is amended by adding a new subsection to read: 29 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 30 property is not considered to be produced from a lease or property for purposes of this 31 section.
01 * Sec. 30. AS 43.55.900(6) is repealed and reenacted to read: 02 (6) "gas" means 03 (A) all natural, associated, or casinghead gas; 04 (B) all hydrocarbons that 05 (i) are recovered by mechanical separation of well 06 fluids or by gas processing in a gas processing plant; and 07 (ii) exist in a gaseous phase at the completion of 08 mechanical separation and any gas processing in a gas processing plant; 09 and 10 (C) all other hydrocarbons produced from a well not defined as 11 oil; 12 * Sec. 31. AS 43.55.900(7) is repealed and reenacted to read: 13 (7) "gross value at the point of production" means 14 (A) for oil, the value of the oil at its point of production 15 without deduction of any costs upstream of that point of production; 16 (B) for gas, the value of the gas at its point of production 17 without deduction of any costs upstream of that point of production; 18 * Sec. 32. AS 43.55.900(10) is repealed and reenacted to read: 19 (10) "oil" means 20 (A) crude petroleum oil; and 21 (B) all liquid hydrocarbons that are recovered by mechanical 22 separation of well fluids or by gas processing in a gas processing plant; 23 * Sec. 33. AS 43.55.900 is amended by adding new paragraphs to read: 24 (17) "barrel of oil equivalent" means 25 (A) in the case of oil, one barrel; 26 (B) in the case of gas, 6,000 cubic feet; 27 (18) "Cook Inlet sedimentary basin" has the meaning given in 28 regulations adopted to implement AS 38.05.180(f)(4); 29 (19) "explorer" means a person who, in exploring for new oil or gas 30 reserves, incurs expenditures; 31 (20) "gas processing"
01 (A) means processing a gaseous mixture of hydrocarbons 02 (i) by means of absorption, adsorption, externally 03 applied refrigeration, artificial compression followed by adiabatic 04 expansion using the Joule-Thomson effect, or another physical process 05 that is not mechanical separation; and 06 (ii) for the purpose of extracting and recovering liquid 07 hydrocarbons; 08 (B) does not include gas treatment; 09 (21) "gas processing plant" means a facility that 10 (A) extracts and recovers liquid hydrocarbons from a gaseous 11 mixture of hydrocarbons by gas processing; and 12 (B) is located upstream of any gas treatment and upstream of 13 the inlet of any gas pipeline system transporting gas to a market; 14 (22) "gas treatment" 15 (A) means conditioning gas and removing from gas 16 nonhydrocarbon substances for the purpose of rendering the gas acceptable for 17 tender and acceptance into a gas pipeline system; 18 (B) includes incidentally removing liquid hydrocarbons from 19 the gas; 20 (C) does not include 21 (i) dehydration required to facilitate the movement of 22 gas from the well to the point where gas processing takes place; 23 (ii) the scrubbing of liquids from gas to facilitate gas 24 processing; 25 (23) "landowner's royalty interest" means 26 (A) a lessor's royalty interest under an oil and gas lease; or 27 (B) a royalty interest that is 28 (i) held by a surface owner of land from which oil or 29 gas is produced; and 30 (ii) granted in exchange for the right to use the surface 31 of that land or as compensation for damage to the surface of that land;
01 (24) "oil and gas lease" includes an oil and gas lease, a gas only lease, 02 and an oil only lease; 03 (25) "point of production" means 04 (A) for oil, the automatic custody transfer meter or device 05 through which the oil enters into the facilities of a carrier pipeline or other 06 transportation carrier in a condition of pipeline quality; in the absence of an 07 automatic custody transfer meter or device, "point of production" means the 08 mechanism or device to measure the quantity of oil that has been approved by 09 the department for that purpose, through which the oil is tendered and accepted 10 in a condition of pipeline quality into the facilities of a carrier pipeline or other 11 transportation carrier or into a field topping plant; 12 (B) for gas, other than gas described in (C) of this paragraph, 13 that is 14 (i) not subjected to or recovered by mechanical 15 separation or run through a gas processing plant, the first point where 16 the gas is accurately metered; 17 (ii) subjected to or recovered by mechanical separation 18 but not run through a gas processing plant, the first point where the gas 19 is accurately metered after completion of mechanical separation; 20 (iii) run through a gas processing plant, the first point 21 where the gas is accurately metered downstream of the plant; 22 (C) for gas run through an integrated gas processing plant and 23 gas treatment facility that does not accurately meter the gas after the gas 24 processing and before the gas treatment, the first point where gas processing is 25 completed or where gas treatment begins, whichever is further upstream. 26 * Sec. 34. AS 43.55.011(a), 43.55.011(b), 43.55.011(c), 43.55.012, 43.55.013, 43.55.016, 27 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), 28 and 43.55.900(16) are repealed. 29 * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to 30 read: 31 APPLICABILITY. (a) Sections 5, 7 - 10, 12, 13, 15 - 18, 20, 24, and 26 - 34 of this
01 Act and AS 43.55.160 and 43.55.170, enacted by sec. 25 of this Act, apply to oil and gas 02 produced after March 31, 2006. 03 (b) Section 11 of this Act applies to oil and gas produced before, on, or after the 04 effective date of sec. 11 of this Act. 05 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 06 read: 07 TRANSITIONAL PROVISIONS. (a) Notwithstanding any contrary provision of 08 AS 43.55.024(a), enacted by sec. 12 of this Act, for oil and gas produced after March 31, 09 2006, and before January 1, 2007, the phrase "every month an annualized tax credit in an 10 amount equal to 1 2/3 percent" in AS 43.55.024(a)(1)(B), enacted by sec. 12 of this Act, shall 11 be replaced by the phrase "every month during the period April 1, 2006, through 12 December 31, 2006, an annualized tax credit in an amount equal to 2.222 percent." 13 (b) Notwithstanding any contrary provision of AS 43.55.024(e), enacted by sec. 12 of 14 this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007, the 15 phrase "a calendar year" in AS 43.55.024(e), enacted by sec. 12 of this Act, shall be replaced 16 by the phrase "the last nine months of the calendar year." 17 (c) Notwithstanding any contrary provision of AS 43.55.024(j)(2), enacted by sec. 12 18 of this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007, 19 (1) the number "1/120" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of this 20 Act, shall be replaced by the number "1/90"; 21 (2) the phrase "calendar year" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of 22 this Act, shall be replaced by the phrase "last nine months of the calendar year." 23 (d) Notwithstanding any contrary provision of AS 43.55.160(f), enacted by sec. 25 of 24 this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007, the 25 phrase "for every month of a calendar year, 1/12 of the producer's adjusted lease expenditures 26 for the calendar year" in AS 43.55.160(f), enacted by sec. 25 of this Act, shall be replaced by 27 the phrase "for each of the last nine months of 2006, one-ninth of the producer's adjusted lease 28 expenditures for that nine-month period." 29 (e) For oil and gas produced before April 1, 2006, the provisions of AS 43.55, and 30 regulations adopted under AS 43.55, that were in effect before April 1, 2006, and that were 31 applicable to the oil and gas continue to apply to that oil and gas.
01 (f) Notwithstanding any contrary provision of AS 43.55.020(a), as repealed and 02 reenacted by sec. 7 of this Act, for oil and gas produced after March 31, 2006, and before the 03 first day of the first month that begins at least 270 days after the effective date of sec. 7 of this 04 Act, 05 (1) the amount of the taxes that would have been levied on the producer by 06 AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on the last day of 07 each calendar month on the oil and gas that was produced from each lease or property during 08 the preceding month; 09 (2) the amount, if any, of the taxes levied by AS 43.55.011(e) and (f), enacted 10 by sec. 5 of this Act, net of any credits applied as allowed by law, that exceeds the amount 11 due under (1) of this subsection, is due on the last day of the first month that begins after the 12 last payment under (1) of this subsection is due. 13 (g) Notwithstanding any contrary provision of AS 43.55.030(a), as amended by sec. 14 18 of this Act, for oil and gas produced after March 31, 2006, and before the first day of the 15 first month that begins at least 270 days after the effective date of sec. 18 of this Act, the 16 person paying the tax shall file with the Department of Revenue, at the time an amount of tax 17 is due 18 (1) under (f)(1) of this section, the statement required under former 19 AS 43.55.030(a), as that subsection read on March 31, 2006; and 20 (2) under (f)(2) of this section, the statements required under AS 43.55.030(a), 21 as amended by sec. 18 of this Act. 22 (h) Notwithstanding any contrary provision of AS 43.55.201(a) or (b), as amended by 23 sec. 26 of this Act, or AS 43.55.300(a) or (b), as amended by sec. 28 of this Act, for oil 24 produced after March 31, 2006, and before the first day of the first month that begins at least 25 270 days after the effective date of secs. 26 and 28 of this Act, 26 (1) the amount of the surcharges that would have been imposed on the 27 producer under AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on 28 the last day of each calendar month on oil produced from each lease or property during the 29 preceding month; 30 (2) the amount, if any, of the surcharges imposed under AS 43.55.201(a), as 31 amended by sec. 26 of this Act, and AS 43.55.300(a), as amended by sec. 28 of this Act, that
01 exceeds the amount due under (1) of this subsection, is due on the last day of the first month 02 that begins after the last payment under (1) of this subsection is due. 03 (i) Notwithstanding any contrary provision of AS 43.55.201(c), as amended by sec. 04 26 of this Act, or AS 43.55.300(c), as amended by sec. 28 of this Act, for oil produced after 05 March 31, 2006, and before the first day of the first month that begins at least 270 days after 06 the effective date of secs. 26 and 28 of this Act, at the time an amount of surcharge is due 07 (1) under (h)(1) of this section, the producer shall file the report of production 08 required under former AS 43.55.201(c) and 43.55.300(c), as those provisions read on 09 March 31, 2006; and 10 (2) under (h)(2) of this section, the producer shall file the report of production 11 required under AS 43.55.201(c), as amended by sec. 26 of this Act, and AS 43.55.300(c), as 12 amended by sec. 28 of this Act. 13 (j) For purposes of taxes to be calculated and due under (f)(1) of this section and 14 statements to be filed under (g)(1) of this section, regulations that were adopted by the 15 Department of Revenue under AS 43.55, as the provisions of that chapter read on March 31, 16 2006, and that were in effect on that date apply to those taxes and statements. 17 * Sec. 37. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 20 contrary provision of AS 44.62.240, a regulation adopted by the Department of Revenue to 21 implement, interpret, make specific, or otherwise carry out the provisions of secs. 5, 7 - 10, 22 12, 13, 15 - 18, 20, 24 - 34, and 36 of this Act may apply retroactively as of April 1, 2006, if 23 the Department of Revenue expressly designates in the regulation that the regulation applies 24 retroactively to that date. 25 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to 26 read: 27 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the 28 heading of 29 (1) AS 43.55 from "Oil and Gas Production Taxes and Oil Surcharge" to "Oil 30 and Gas Production Tax and Oil Surcharge"; 31 (2) article 1 of AS 43.55 from "Oil and Gas Properties Production Taxes" to
01 "Oil and Gas Production Tax"; 02 (3) AS 43.55.011 from "Oil production tax" to "Oil and gas production tax"; 03 (4) AS 43.55.025 from "Tax credit for oil and gas exploration or gas only 04 exploration" to "Alternative tax credit for oil and gas exploration"; 05 (5) AS 43.55.150 from "Determination of gross value" to "Determination of 06 gross value at the point of production." 07 * Sec. 39. The uncodified law of the State of Alaska is amended by adding a new section to 08 read: 09 RETROACTIVITY OF PROVISIONS OF ACT. Sections 5, 7 - 10, 12, 13, 15 - 18, 10 and 24 - 38 of this Act are retroactive to April 1, 2006. 11 * Sec. 40. This Act takes effect immediately under AS 01.10.070(c).