SCS CSHB 2001(FIN): "An Act relating to the production tax on oil and gas and to conservation surcharges on oil; relating to the sharing between agencies of certain information relating to the production tax and to oil and gas or gas only leases; expanding the period in which the Department of Revenue may assess the amount of oil and gas production tax and conservation surcharges; relating to state oil and gas audit masters; relating to oil and gas auditors and certain oil and gas auditor supervisors; making conforming amendments; and providing for an effective date."
00 SENATE CS FOR CS FOR HOUSE BILL NO. 2001(FIN) 01 "An Act relating to the production tax on oil and gas and to conservation surcharges on 02 oil; relating to the sharing between agencies of certain information relating to the 03 production tax and to oil and gas or gas only leases; expanding the period in which the 04 Department of Revenue may assess the amount of oil and gas production tax and 05 conservation surcharges; relating to state oil and gas audit masters; relating to oil and 06 gas auditors and certain oil and gas auditor supervisors; making conforming 07 amendments; and providing for an effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 10 to read: 11 LEGISLATIVE INTENT. (a) It is the intent of the legislature that AS 43.55.075(b), 12 enacted by sec. 47 of this Act, confirm by clarification the long-standing interpretation of 13 AS 43.05.260 by the Department of Revenue relating to limitation of assessments for the
01 production tax on oil and gas and conservation surcharges on oil. 02 (b) It is the intent of the legislature that the amount of money received by the state as 03 a result of the retroactivity of certain provisions under sec. 68 of this Act that exceeds the 04 amount of money the state would have received if those provisions had not taken effect until 05 January 1, 2008, will be appropriated to the public education fund (AS 14.17.300). 06 (c) It is the intent of the legislature that the legislature will responsibly invest the 07 amounts received after December 31, 2007, as the result of the enactment of this Act that 08 exceed the amounts that would have been received under AS 43.55.011 - 43.55.180, as those 09 provisions read on June 30, 2007, as if those provisions had been applied after December 31, 10 2007, by making appropriations to the following: 11 (1) the public education fund (AS 14.17.300); 12 (2) the budget reserve fund (art. IX, sec. 17, Constitution of the State of 13 Alaska); 14 (3) to extinguish the amount of the employers' unfunded liability in the 15 teachers' defined benefit retirement plan and the public employees' defined benefit retirement 16 plan; 17 (4) the development and implementation of a long-range fiscal plan for the 18 state; and 19 (5) for statewide energy needs of Alaskans to assist with rising energy costs. 20 * Sec. 2. AS 38.05.035(a) is amended to read: 21 (a) The director shall 22 (1) have general charge and supervision of the division and may 23 exercise the powers specifically delegated to the director; the director may employ 24 and fix the compensation of assistants and employees necessary for the operations of 25 the division; the director [AND] is the certifying officer of the division, with the 26 consent of the commissioner, and may approve vouchers for disbursements of money 27 appropriated to the division; 28 (2) manage, inspect, and control state land and improvements on it 29 belonging to the state and under the jurisdiction of the division; 30 (3) execute laws, rules, regulations, and orders adopted by the 31 commissioner;
01 (4) prescribe application procedures and practices for the sale, lease, 02 or other disposition of available land, resources, property, or interest in them; 03 (5) prescribe fees or service charges, with the consent of the 04 commissioner, for any public service rendered; 05 (6) under the conditions and limitations imposed by law and the 06 commissioner, issue deeds, leases, or other conveyances disposing of available land, 07 resources, property, or any interests in them; 08 (7) have jurisdiction over state land, except that land acquired by the 09 Alaska World War II Veterans Board and the Agricultural Loan Board or the 10 departments or agencies succeeding to their respective functions through foreclosure 11 or default; to this end, the director possesses the powers and, with the approval of the 12 commissioner, shall perform the duties necessary to protect the state's rights and 13 interest in state land, including the taking of all necessary action to protect and 14 enforce the state's contractual or other property rights; 15 (8) [REPEALED 16 (9)] maintain the [SUCH] records [AS] the commissioner considers 17 necessary, administer oaths, and do all things incidental to the authority imposed; the 18 following records and files shall be kept confidential upon request of the person 19 supplying the information: 20 (A) the name of the person nominating or applying for the 21 sale, lease, or other disposal of land by competitive bidding; 22 (B) before the announced time of opening, the names of the 23 bidders and the amounts of the bids; 24 (C) all geological, geophysical, and engineering data supplied, 25 whether or not concerned with the extraction or development of natural 26 resources; 27 (D) except as provided in AS 38.05.036, cost data and 28 financial information submitted in support of applications, bonds, leases, and 29 similar items; 30 (E) applications for rights-of-way or easements; 31 (F) requests for information or applications by public agencies
01 for land that [WHICH] is being considered for use for a public purpose; 02 (9) [(10)] account for the fees, licenses, taxes, or other money 03 received in the administration of this chapter including the sale or leasing of land, 04 identify their source, and promptly transmit them to the proper fiscal department after 05 crediting them to the proper fund; receipts from land application filing fees and 06 charges for copies of maps and records shall be deposited immediately in the general 07 fund of the state by the director; 08 (10) [(11)] select and employ or obtain at reasonable compensation 09 cadastral, appraisal, or other professional personnel the director considers necessary 10 for the proper operation of the division; 11 (11) [(12)] be the certifying agent of the state to select, accept, and 12 secure by whatever action is necessary in the name of the state, by deed, sale, gift, 13 devise, judgment, operation of law, or other means any land, of whatever nature or 14 interest, available to the state; and be the certifying agent of the state, to select, 15 accept, or secure by whatever action is necessary in the name of the state any land, or 16 title or interest to land available, granted, or subject to being transferred to the state 17 for any purpose; 18 (12) on request, furnish records, files, and other information 19 related to the administration of AS 38.05.180 to the Department of Revenue for 20 use in forecasting state revenue under or administering AS 43.55, whether or not 21 those records, files, and other information are required to be kept confidential 22 under (8) of this subsection; in the case of records, files, or other information 23 required to be kept confidential under (8) of this subsection, the Department of 24 Revenue shall maintain the confidentiality that the Department of Natural 25 Resources is required to extend to records, files, and other information under (8) 26 of this subsection 27 [(13) REPEALED 28 (14) REPEALED]. 29 * Sec. 3. AS 38.05.036(b) is amended to read: 30 (b) The Department of Revenue may obtain from the department information 31 relating to royalty and net profits payments and to exploration incentive credits under
01 this chapter or under AS 41.09, whether or not that information is confidential. The 02 Department of Revenue may use the information in carrying out its functions and 03 responsibilities under AS 43, and shall hold that information confidential to the extent 04 required by an agreement with the department or by AS 38.05.035(a)(8) 05 [AS 38.05.035(a)(9)], AS 41.09.010(d), or AS 43.05.230. 06 * Sec. 4. AS 38.05.036(f) is amended to read: 07 (f) Except as otherwise provided in this section or in connection with official 08 investigations or proceedings of the department, it is unlawful for a current or former 09 officer, employee, or agent of the state to divulge information obtained by the 10 department as a result of an audit under this section that is required by an agreement 11 with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or 12 AS 41.09.010(d) to be kept confidential. 13 * Sec. 5. AS 38.05.036(g) is amended to read: 14 (g) Nothing in this section prohibits the publication of statistics in a manner 15 that maintains the confidentiality of information to the extent required by an 16 agreement with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or 17 AS 41.09.010(d). 18 * Sec. 6. AS 38.05.123(f) is amended to read: 19 (f) As part of the timber sale negotiations authorized by this section, the 20 commissioner may require a prospective purchaser negotiating a timber sale contract 21 to submit financial and technical data that demonstrates that the requirements of this 22 section have been or will be met. Upon the prospective purchaser's request, the 23 commissioner shall keep data provided by the purchaser confidential in accordance 24 with the requirements of AS 38.05.035(a)(8) [AS 38.05.035(a)(9)]. 25 * Sec. 7. AS 38.05.133(e) is amended to read: 26 (e) The commissioner may make a written request to a prospective licensee 27 for additional information on the prospective licensee's proposal. The commissioner 28 shall keep confidential information described in AS 38.05.035(a)(8) 29 [AS 38.05.035(a)(9)] that is voluntarily provided if the prospective licensee has made 30 a written request that the information remain confidential. 31 * Sec. 8. AS 38.05.180(j) is amended to read:
01 (j) The commissioner 02 (1) may provide for modification of royalty on individual leases, 03 leases unitized as described in (p) of this section, leases subject to an agreement 04 described in (s) or (t) of this section, or interests unitized under AS 31.05 05 (A) to allow for production from an oil or gas field or pool if 06 (i) the oil or gas field or pool has been sufficiently 07 delineated to the satisfaction of the commissioner; 08 (ii) the field or pool has not previously produced oil or 09 gas for sale; and 10 (iii) oil or gas production from the field or pool would 11 not otherwise be economically feasible; 12 (B) to prolong the economic life of an oil or gas field or pool 13 as per barrel or barrel equivalent costs increase or as the price of oil or gas 14 decreases, and the increase or decrease is sufficient to make future production 15 no longer economically feasible; or 16 (C) to reestablish production of shut-in oil or gas that would 17 not otherwise be economically feasible; 18 (2) may not grant a royalty modification unless the lessee or lessees 19 requesting the change make a clear and convincing showing that a modification of 20 royalty meets the requirements of this subsection and is in the best interests of the 21 state; 22 (3) shall provide for an increase or decrease or other modification of 23 the state's royalty share by a sliding scale royalty or other mechanism that shall be 24 based on a change in the price of oil or gas and may also be based on other relevant 25 factors such as a change in production rate, projected ultimate recovery, development 26 costs, and operating costs; 27 (4) may not grant a royalty reduction for a field or pool 28 (A) under (1)(A) of this subsection if the royalty modification 29 for the field or pool would establish a royalty rate of less than five percent in 30 amount or value of the production removed or sold from a lease or leases 31 covering the field or pool;
01 (B) under (1)(B) or (1)(C) of this subsection if the royalty 02 modification for the field or pool would establish a royalty rate of less than 03 three percent in amount or value of the production removed or sold from a 04 lease or leases covering the field or pool; 05 (5) may not grant a royalty reduction under this subsection without 06 including an explicit condition that the royalty reduction is not assignable without the 07 prior written approval, which may not be unreasonably withheld, by the 08 commissioner; the commissioner shall, in the preliminary and final findings and 09 determinations, set out the conditions under which the royalty reduction may be 10 assigned; 11 (6) shall require the lessee or lessees to submit, with the application 12 for the royalty reduction, financial and technical data that demonstrate that the 13 requirements of this subsection are met; the commissioner 14 (A) may require disclosure of only the financial and technical 15 data related to development, production, and transportation of oil and gas or 16 gas only from the field or pool that are reasonably available to the applicant; 17 and 18 (B) shall keep the data confidential under AS 38.05.035(a)(8) 19 [AS 38.05.035(a)(9)] at the request of the lessee or lessees making application 20 for the royalty reduction; the confidential data may be disclosed by the 21 commissioner to legislators and to the legislative auditor and as directed by 22 the chair or vice-chair of the Legislative Budget and Audit Committee to the 23 director of the division of legislative finance, the permanent employees of 24 their respective divisions who are responsible for evaluating a royalty 25 reduction, and to agents or contractors of the legislative auditor or the 26 legislative finance director who are engaged under contract to evaluate the 27 royalty reduction, if they sign an appropriate confidentiality agreement; 28 (7) may 29 (A) require the lessee or lessees making application for the 30 royalty reduction under (1)(A) of this subsection to pay for the services of an 31 independent contractor, selected by the lessee or lessees from a list of
01 qualified consultants compiled by the commissioner, to evaluate hydrocarbon 02 development, production, transportation, and economics and to assist the 03 commissioner in evaluating the application and financial and technical data; 04 if, under this subparagraph, the commissioner requires payment for the 05 services of an independent contractor, the total cost of the services to be paid 06 for by the lessee or lessees may not exceed $150,000 for each application, and 07 the commissioner shall determine the relevant scope of the work to be 08 performed by the contractor; selection of an independent contractor under this 09 subparagraph is not subject to AS 36.30; 10 (B) with the mutual consent of the lessee or lessees making 11 application for the royalty reduction under (1)(B) or (1)(C) of this subsection, 12 request payment for the services of an independent contractor, selected from a 13 list of qualified consultants to evaluate hydrocarbon development, production, 14 transportation, and economics by the commissioner to assist the commissioner 15 in evaluating the application and financial and technical data; if, under this 16 subparagraph, the commissioner requires payment for the services of an 17 independent contractor, the total cost of the services that may be paid for by 18 the lessee or lessees may not exceed $150,000 for each application, and the 19 commissioner shall determine the relevant scope of the work to be performed 20 by the contractor; selection of an independent contractor under this 21 subparagraph is not subject to AS 36.30; 22 (8) shall make and publish a preliminary findings and determination 23 on the royalty reduction application, give reasonable public notice of the preliminary 24 findings and determination, and invite public comment on the preliminary findings 25 and determination during a 30-day period for receipt of public comment; 26 (9) shall offer to appear before the Legislative Budget and Audit 27 Committee, on a day that is not earlier than 10 days and not later than 20 days after 28 giving public notice under (8) of this subsection, to provide the committee a review of 29 the commissioner's preliminary findings and determination on the royalty reduction 30 application and administrative process; if the Legislative Budget and Audit 31 Committee accepts the commissioner's offer, the committee shall give notice of the
01 committee's meeting to all members of the legislature; 02 (10) shall make copies of the preliminary findings and determination 03 available to 04 (A) the presiding officer of each house of the legislature; 05 (B) the chairs of the legislature's standing committees on 06 resources; and 07 (C) the chairs of the legislature's special committees on oil and 08 gas, if any; 09 (11) shall, within 30 days after the close of the public comment period 10 under (8) of this subsection, 11 (A) prepare a summary of the public response to the 12 commissioner's preliminary findings and determination; 13 (B) make a final findings and determination; the 14 commissioner's final findings and determination prepared under this 15 subparagraph regarding a royalty reduction is final and not appealable to the 16 court; 17 (C) transmit a copy of the final findings and determination to 18 the lessee; 19 (D) with the applicant's consent, amend the applicant's lease or 20 unitization agreement consistent with the commissioner's final decision; and 21 (E) make copies of the final findings and determination 22 available to each person who submitted comment under (8) of this subsection 23 and who has filed a request for the copies; 24 (12) is not limited by the provisions of AS 38.05.134(3) or (f) of this 25 section in the commissioner's determination under this subsection. 26 * Sec. 9. AS 38.05.275(c) is amended to read: 27 (c) Subsection (b) of this section may not be construed to limit the director in 28 the exercise of authority granted by AS 38.05.035(a)(11) [AS 38.05.035(a)(12)]. 29 * Sec. 10. AS 39.25.110 is amended by adding a new paragraph to read: 30 (42) oil and gas audit masters employed in a professional capacity by 31 the Department of Revenue and the Department of Natural Resources to collect oil
01 and gas revenue by developing policy, conducting studies, drafting proposed 02 regulations, enforcing regulations, and directing audits by oil and gas revenue 03 auditors. 04 * Sec. 11. AS 41.09.010(d) is amended to read: 05 (d) Data derived from drilling a stratigraphic test well or exploratory well that 06 is provided to the commissioner under (c)(3) of this section shall be kept confidential 07 for 24 months after receipt by the commissioner unless the owner of the well gives 08 written permission to the state to release the well data at an earlier date, and, 09 notwithstanding AS 31.05.035(c), confidentiality may not be extended beyond 24 10 months. The provisions of AS 38.05.035(a)(8)(C) [AS 38.05.035(a)(9)(C)] apply to 11 other data provided to the commissioner under (c)(3) of this section, except that the 12 commissioner, under appropriate confidentiality provisions and without preference or 13 discrimination, may display to all interested third parties, but may not distribute or 14 transfer in hard copy or electronic form, those data with respect to all land if the 15 commissioner determines that the limited disclosure is necessary to further the 16 interest of the state in evaluating or developing its land. 17 * Sec. 12. AS 43.05.230(a) is amended to read: 18 (a) It is unlawful for a current or former officer, employee, or agent of the 19 state to divulge the amount of income or the particulars set out or disclosed in a report 20 or return made under this title, except 21 (1) in connection with official investigations or proceedings of the 22 department, whether judicial or administrative, involving taxes due under this title; 23 (2) in connection with official investigations or proceedings of the 24 child support enforcement agency, whether judicial or administrative, involving child 25 support obligations imposed or imposable under AS 25 or AS 47; 26 (3) as provided in AS 38.05.036 pertaining to audit functions of the 27 Department of Natural Resources; 28 (4) as provided in AS 43.05.405 - 43.05.499; and 29 (5) as otherwise provided in this section or AS 43.55.890. 30 * Sec. 13. AS 43.05.230(h) is amended to read: 31 (h) The commissioner shall, upon request, furnish to the Department of
01 Natural Resources copies of tax returns, reports, and other documents filed under 02 AS 43.55 or AS 43.65, and the Department of Revenue's determinations and 03 workpapers under those chapters. The Department of Natural Resources shall 04 maintain the confidentiality that the Department of Revenue is required to extend to 05 the returns, reports, documents, determinations, and workpapers furnished to the 06 Department of Natural Resources under this subsection. 07 * Sec. 14. AS 43.05.260(a) is amended to read: 08 (a) Except as provided in (c) of this section, [AND] AS 43.20.200(b), and 09 AS 43.55.075, the amount of a tax imposed by this title must be assessed within three 10 years after the return was filed, whether or not a return was filed on or after the date 11 prescribed by law. If the tax is not assessed before the expiration of the applicable 12 [THREE-YEAR] period, proceedings may not be instituted in court for the collection 13 of the tax. 14 * Sec. 15. AS 43.55.011(e) is repealed and reenacted to read: 15 (e) There is levied on the producer of oil or gas a tax for all oil and gas 16 produced each calendar year from each lease or property in the state, less any oil and 17 gas the ownership or right to which is exempt from taxation or constitutes a 18 landowner's royalty interest. Except as otherwise provided under (f), (j), and (k) of 19 this section, the tax is equal to the sum, over all the months of the calendar year, of 20 the production tax value for the month of the taxable oil and gas as calculated under 21 AS 43.55.160 multiplied by the tax rate for the month determined under (g) of this 22 section. 23 * Sec. 16. AS 43.55.011(f) is amended to read: 24 (f) The levy of tax under this section for [ON A PRODUCER OF] oil and gas 25 produced north of 68 degrees North latitude, other than oil and gas production 26 subject to (i) of this section, may not be less than 27 (1) four percent of the gross value at the point of production when the 28 average price per barrel for Alaska North Slope crude oil for sale on the United States 29 West Coast during the calendar year for which the tax is due is more than $25; 30 (2) three percent of the gross value at the point of production when the 31 average price per barrel for Alaska North Slope crude oil for sale on the United States
01 West Coast during the calendar year for which the tax is due is over $20 but not over 02 $25; 03 (3) two percent of the gross value at the point of production when the 04 average price per barrel for Alaska North Slope crude oil for sale on the United States 05 West Coast during the calendar year for which the tax is due is over $17.50 but not 06 over $20; 07 (4) one percent of the gross value at the point of production when the 08 average price per barrel for Alaska North Slope crude oil for sale on the United States 09 West Coast during the calendar year for which the tax is due is over $15 but not over 10 $17.50; or 11 (5) zero percent of the gross value at the point of production when the 12 average price per barrel for Alaska North Slope crude oil for sale on the United States 13 West Coast during the calendar year for which the tax is due is $15 or less. 14 * Sec. 17. AS 43.55.011(g) is repealed and reenacted to read: 15 (g) The tax rate applied to the monthly production tax value of oil and gas 16 under (e) of this section for each month of the calendar year in which the tax is levied 17 is 25 percent plus, for each month for which the monthly average production tax 18 value for each BTU equivalent barrel is more than 19 (1) $30 but not more than $90, 0.4 percent multiplied by the number 20 that represents the difference between the average production tax value for each BTU 21 equivalent barrel of the taxable oil and gas for that month and $30; 22 (2) $90, the sum of 24 percent and the product of 0.1 percent 23 multiplied by the number that represents the difference between the average 24 production tax value for each BTU equivalent barrel of the taxable oil and gas for that 25 month and $90, except that the sum determined under this paragraph may not exceed 26 50 percent. 27 * Sec. 18. AS 43.55.011(j) is amended to read: 28 (j) For a calendar year before 2022, the [TOTAL] tax levied by (e) [AND (g)] 29 of this section for [ON] gas produced from a lease or property in the Cook Inlet 30 sedimentary basin may not exceed 31 (1) for a lease or property that first commenced commercial
01 production of gas before April 1, 2006, the product obtained by multiplying (A) the 02 amount of taxable gas produced during the calendar year from the lease or property, 03 times (B) the average rate of tax that was imposed under this chapter for [ON] 04 taxable gas produced from the lease or property for the 12-month period ending on 05 March 31, 2006, times (C) the quotient obtained by dividing the total gross value at 06 the point of production of the taxable gas produced from the lease or property during 07 the 12-month period ending on March 31, 2006, by the total amount of that gas; 08 (2) for a lease or property that first commences commercial 09 production of gas after March 31, 2006, the product obtained by multiplying (A) the 10 amount of taxable gas produced during the calendar year from the lease or property, 11 times (B) the average rate of tax that was imposed under this chapter for [ON] 12 taxable gas produced from all leases or properties in the Cook Inlet sedimentary basin 13 for the 12-month period ending on March 31, 2006, times (C) the average prevailing 14 value for gas delivered in the Cook Inlet area for the 12-month period ending 15 March 31, 2006, as determined by the department under AS 43.55.020(f). 16 * Sec. 19. AS 43.55.011(k) is amended to read: 17 (k) For a calendar year before 2022, the [TOTAL] tax levied by (e) [AND 18 (g)] of this section for [ON] oil produced from a lease or property in the Cook Inlet 19 sedimentary basin may not exceed 20 (1) for a lease or property that first commenced commercial 21 production of oil before April 1, 2006, the product obtained by multiplying (A) the 22 amount of taxable oil produced during the calendar year from the lease or property, 23 times (B) the average rate of tax that was imposed under this chapter for [ON] 24 taxable oil produced from the lease or property for the 12-month period ending on 25 March 31, 2006, times (C) the quotient obtained by dividing the total gross value at 26 the point of production of the taxable oil produced from the lease or property during 27 the 12-month period ending on March 31, 2006, by the total amount of that oil; 28 (2) for a lease or property that first commences commercial 29 production of oil after March 31, 2006, the product obtained by multiplying (A) the 30 amount of taxable oil produced during the calendar year from the lease or property, 31 times (B) the average rate of tax that was imposed under this chapter for [ON]
01 taxable oil produced from all leases or properties in the Cook Inlet sedimentary basin 02 for the 12-month period ending on March 31, 2006, times (C) the average prevailing 03 value for oil produced and delivered in the Cook Inlet area for the 12-month period 04 ending on March 31, 2006, as determined by the department under AS 43.55.020(f). 05 * Sec. 20. AS 43.55.011(m) is repealed and reenacted: 06 (m) Notwithstanding any contrary provision of AS 38.05.180(i), 07 AS 41.09.010, AS 43.55.024, or 43.55.025, the department shall provide by 08 regulation a method to ensure that for a calendar year for which a producer's tax 09 liability is limited by AS 43.55.011(j) or (k), tax credits otherwise available under 10 AS 38.05.180(i), AS 41.09.010, AS 43.55.024, or 43.55.025 and allocated to oil or 11 gas subject to the limitations in AS 43.55.011(j) and (k) are accounted for as though 12 the credits had been applied first against a tax liability calculated without regard to 13 the limitations under AS 43.55.011(j) and (k) so as to reduce the tax liability to the 14 maximum amount provided for under AS 43.55.011(j) for the production of gas or 15 AS 43.55.011(k) for the production of oil. The regulation must provide for a 16 reasonable method to allocate tax credits to oil or gas subject to AS 43.55.011(j) and 17 (k). Only the amount of a tax credit remaining after the accounting provided for under 18 this subsection may be used for a later calendar year, transferred to another person, or 19 applied against a tax levied on the production of oil or gas not subject to 20 AS 43.55.011(j) or (k) to the extent otherwise allowed. 21 * Sec. 21. AS 43.55.020(a) is repealed and reenacted to read: 22 (a) For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i) 23 shall pay the tax as follows: 24 (1) an installment payment of the estimated tax levied by 25 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 26 month of the calendar year on the last day of the following month; except as 27 otherwise provided under (2) of this subsection, the amount of the installment 28 payment is the sum of the following amounts, less 1/12 of the tax credits that are 29 allowed by law to be applied against the tax levied by AS 43.55.011(e) for the 30 calendar year, but the amount of the installment payment may not be less than zero: 31 (A) for oil and gas produced from leases or properties in the
01 state outside the Cook Inlet sedimentary basin, other than leases or properties 02 subject to AS 43.55.011(f), the greater of 03 (i) zero; or 04 (ii) the total tax rate for the month determined in 05 AS 43.55.011(g) multiplied by the remainder obtained by subtracting 06 1/12 of the producer's adjusted lease expenditures for the calendar year 07 of production under AS 43.55.165 and 43.55.170 that are deductible 08 for the leases or properties under AS 43.55.160 from the gross value at 09 the point of production of the oil and gas produced from the leases or 10 properties during the month for which the installment payment is 11 calculated; 12 (B) for oil and gas produced from leases or properties subject 13 to AS 43.55.011(f), the greatest of 14 (i) zero; 15 (ii) zero percent, one percent, two percent, three 16 percent, or four percent, as applicable, of the gross value at the point of 17 production of the oil and gas produced from all leases or properties 18 during the month for which the installment payment is calculated; or 19 (iii) the total tax rate for the month determined in 20 AS 43.55.011(g) multiplied by the remainder obtained by subtracting 21 1/12 of the producer's adjusted lease expenditures for the calendar year 22 of production under AS 43.55.165 and 43.55.170 that are deductible 23 for those leases or properties under AS 43.55.160 from the gross value 24 at the point of production of the oil and gas produced from those leases 25 or properties during the month for which the installment payment is 26 calculated; 27 (C) for oil and gas produced from each lease or property 28 subject to AS 43.55.011(j) or (k), the greater of 29 (i) zero; or 30 (ii) the total tax rate for the month determined in 31 AS 43.55.011(g) multiplied by the remainder obtained by subtracting
01 1/12 of the producer's adjusted lease expenditures for the calendar year 02 of production under AS 43.55.165 and 43.55.170 that are deductible 03 under AS 43.55.160 for oil or gas, respectively, produced from the 04 lease or property from the gross value at the point of production of the 05 oil or gas, respectively, produced from the lease or property during the 06 month for which the installment payment is calculated; 07 (2) an amount calculated under (1)(C) of this subsection for oil or gas 08 produced from a lease or property subject to AS 43.55.011(j) or (k) may not exceed 09 the product obtained by carrying out the calculation set out in AS 43.55.011(j)(1) or 10 (2), as applicable, for gas or set out in AS 43.55.011(k)(1) or (2), as applicable, for 11 oil, but substituting in AS 43.55.011(j)(1)(A) or (2)(A), as applicable, the amount of 12 taxable gas produced during the month for the amount of taxable gas produced during 13 the calendar year and substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, 14 the amount of taxable oil produced during the month for the amount of taxable oil 15 produced during the calendar year; 16 (3) an installment payment of the estimated tax levied by 17 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 18 on the last day of the following month; the amount of the installment payment is the 19 sum of 20 (A) the applicable tax rate for oil provided under 21 AS 43.55.011(i), multiplied by the gross value at the point of production of 22 the oil taxable under AS 43.55.011(i) and produced from the lease or property 23 during the month; and 24 (B) the applicable tax rate for gas provided under 25 AS 43.55.011(i), multiplied by the gross value at the point of production of 26 the gas taxable under AS 43.55.011(i) and produced from the lease or property 27 during the month; 28 (4) any amount of tax levied by AS 43.55.011(e) or (i), net of any 29 credits applied as allowed by law, that exceeds the total of the amounts due as 30 installment payments of estimated tax is due on March 31 of the year following the 31 calendar year of production.
01 * Sec. 22. AS 43.55.020(g) is amended to read: 02 (g) Notwithstanding any contrary provision of AS 43.05.225, an unpaid 03 amount of an installment payment required under (a)(1) - (3) [(a)(1) - (4)] of this 04 section that is not paid when due bears interest (1) at the rate provided for an 05 underpayment under 26 U.S.C. 6621 (Internal Revenue Code), as amended, 06 compounded daily, from the date the installment payment is due until [THE] 07 March 31 following the calendar year of production [DESCRIBED IN 08 AS 43.55.030(a)], and (2) as provided for a delinquent tax under AS 43.05.225 after 09 that March 31. Interest accrued under (1) of this subsection that remains unpaid after 10 that March 31 is treated as an addition to tax that bears interest under (2) of this 11 subsection. An unpaid amount of tax due under (a)(4) [(a)(5)] of this section that is 12 not paid when due bears interest as provided for a delinquent tax under AS 43.05.225. 13 * Sec. 23. AS 43.55.020(h) is amended to read: 14 (h) Notwithstanding any contrary provision of AS 43.05.280, 15 (1) an overpayment of an installment payment required under (a)(1) - 16 (3) [(a)(1) - (4)] of this section bears interest at the rate provided for an overpayment 17 under 26 U.S.C. 6621 (Internal Revenue Code), as amended, compounded daily, from 18 the later of the date the installment payment is due or the date the overpayment is 19 made, until the earlier of 20 (A) the date it is refunded or is applied to an underpayment; [,] 21 or 22 (B) [THE] March 31 following the calendar year of 23 production [DESCRIBED IN AS 43.55.030(a)]; 24 (2) except as provided under (1) of this subsection, interest with 25 respect to an overpayment is allowed only on any net overpayment of the payments 26 required under (a) of this section that remains after the later of [THE] March 31 27 following the calendar year of production [DESCRIBED IN AS 43.55.030(a)] or 28 the date that the statement required under AS 43.55.030(a) is filed; 29 (3) interest is allowed under (2) of this subsection only from a date 30 that is 90 days after the later of [THE] March 31 following the calendar year of 31 production [DESCRIBED IN AS 43.55.030(a)] or the date that the statement
01 required under AS 43.55.030(a) is filed; interest is not allowed if the overpayment 02 was refunded within the 90-day period; 03 (4) interest under (2) and (3) of this subsection is paid at the rate and 04 in the manner provided in AS 43.05.225(1). 05 * Sec. 24. AS 43.55.023(a) is amended to read: 06 (a) A producer or explorer may take a tax credit for a qualified capital 07 expenditure as follows: 08 (1) notwithstanding that a qualified capital expenditure may be a 09 deductible lease expenditure for purposes of calculating the production tax value of 10 oil and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 11 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, a producer or 12 explorer that incurs a qualified capital expenditure may also elect to apply [TAKE] a 13 tax credit against a tax levied by [DUE UNDER] AS 43.55.011(e) in the amount of 14 20 percent of that expenditure; however, not more than half of the tax credit may 15 be applied for a single calendar year; 16 (2) a producer or explorer may take a credit for a qualified capital 17 expenditure incurred in connection with geological or geophysical exploration or in 18 connection with an exploration well only if the producer or explorer [PROVIDES TO 19 THE DEPARTMENT, AS PART OF THE STATEMENT REQUIRED UNDER 20 AS 43.55.030(a) FOR THE CALENDAR YEAR FOR WHICH THE CREDIT IS 21 SOUGHT TO BE TAKEN, THE PRODUCER'S OR EXPLORER'S WRITTEN 22 AGREEMENT] 23 (A) agrees, in writing, to the applicable provisions of 24 AS 43.55.025(f)(2) [TO NOTIFY THE DEPARTMENT OF NATURAL 25 RESOURCES, BEFORE THE LATER OF 30 DAYS AFTER 26 COMPLETION OF THE GEOLOGICAL OR GEOPHYSICAL DATA 27 PROCESSING OR COMPLETION OF THE WELL, OR 30 DAYS AFTER 28 THE STATEMENT IS FILED, OF THE DATE OF COMPLETION AND TO 29 SUBMIT A REPORT TO THAT DEPARTMENT DESCRIBING THE 30 PROCESSING SEQUENCE AND PROVIDE A LIST OF DATA SETS 31 AVAILABLE];
01 (B) submits [TO PROVIDE] to the Department of Natural 02 Resources all data that would be required to be submitted under 03 AS 43.55.025(f)(2) [, WITHIN 30 DAYS AFTER THE DATE OF A 04 REQUEST, SPECIFIC DATA SETS, ANCILLARY DATA, AND 05 REPORTS IDENTIFIED IN (A) OF THIS PARAGRAPH; 06 (C) THAT, NOTWITHSTANDING ANY PROVISION OF 07 AS 38, THE DEPARTMENT OF NATURAL RESOURCES SHALL HOLD 08 CONFIDENTIAL THE INFORMATION PROVIDED TO THAT 09 DEPARTMENT UNDER THIS PARAGRAPH FOR 10 YEARS 10 FOLLOWING THE COMPLETION DATE, AFTER WHICH THE 11 DEPARTMENT SHALL PUBLICLY RELEASE THE INFORMATION 12 AFTER 30 DAYS' PUBLIC NOTICE]. 13 * Sec. 25. AS 43.55.023(b) is amended to read: 14 (b) A producer or explorer may elect to take a tax credit in the amount of 25 15 [20] percent of a carried-forward annual loss. A credit under this subsection may be 16 applied against a tax levied by [DUE UNDER] AS 43.55.011(e). For purposes of this 17 subsection, a carried-forward annual loss is the amount of a producer's or explorer's 18 adjusted lease expenditures under AS 43.55.165 and 43.55.170 for a previous 19 calendar year that was not deductible in calculating production tax values for that 20 calendar year under AS 43.55.160 [AS 43.55.160(b) AND (e)]. 21 * Sec. 26. AS 43.55.023(d) is amended to read: 22 (d) Except as limited by (i) of this section, a person that is entitled to take a 23 tax credit under this section that wishes to transfer the unused credit to another person 24 or obtain a cash payment may apply to the department for [A] transferable tax credit 25 certificates [CERTIFICATE]. An application under this subsection must be in a form 26 prescribed by the department and must include supporting information and 27 documentation that the department reasonably requires. The department shall grant or 28 deny an application, or grant an application as to a lesser amount than that claimed 29 and deny it as to the excess, not later than 120 [60] days after the latest of (1) 30 March 31 of the year following the calendar year in which the qualified capital 31 expenditure or carried-forward annual loss for which the credit is claimed was
01 incurred; (2) [IF THE APPLICANT IS REQUIRED UNDER AS 43.55.030(a) TO 02 FILE A STATEMENT ON OR BEFORE MARCH 31 OF THE YEAR 03 FOLLOWING THE CALENDAR YEAR IN WHICH THE QUALIFIED CAPITAL 04 EXPENDITURES OR CARRIED-FORWARD ANNUAL LOSS FOR WHICH THE 05 CREDIT IS CLAIMED WAS INCURRED,] the date the statement required under 06 AS 43.55.030(a) or (e) was filed for the calendar year in which the qualified 07 capital expenditure or carried-forward annual loss for which the credit is 08 claimed was incurred; or (3) the date the application was received by the 09 department. If, based on the information then available to it, the department is 10 reasonably satisfied that the applicant is entitled to a credit, the department shall issue 11 the applicant two [A] transferable tax credit certificates, each [CERTIFICATE] for 12 half of the amount of the credit. The credit shown on one of the two certificates is 13 available for immediate use. The credit shown on the second of the two 14 certificates may not be applied against a tax for a calendar year earlier than the 15 calendar year following the calendar year in which the certificate is issued, and 16 the certificate must contain a conspicuous statement to that effect. A certificate 17 issued under this subsection does not expire. 18 * Sec. 27. AS 43.55.023(e) is amended to read: 19 (e) A person to which a transferable tax credit certificate is issued under (d) 20 of this section may transfer the certificate to another person, and a transferee may 21 further transfer the certificate. Subject to the limitations set out in (a) - (d) [(a) - (c)] 22 of this section, and notwithstanding any action the department may take with respect 23 to the applicant under (g) of this section, the owner of a certificate may apply the 24 credit or a portion of the credit shown on the certificate only against a tax levied by 25 [DUE UNDER] AS 43.55.011(e). However, a credit shown on a transferable tax 26 credit certificate may not be applied to reduce a transferee's total tax liability [DUE] 27 under AS 43.55.011(e) for [ON] oil and gas produced during a calendar year to less 28 than 80 percent of the tax that would otherwise be due without applying that credit. 29 Any portion of a credit not used under this subsection may be applied in a later 30 period. 31 * Sec. 28. AS 43.55.023(i) is amended to read:
01 (i) For the purposes of this section, 02 (1) a producer's or explorer's transitional investment expenditures are 03 the sum of the expenditures the producer or explorer incurred after March 31, 2001, 04 and before April 1, 2006, that would be qualified capital expenditures if they were 05 incurred after March 31, 2006, less the sum of the payments or credits the producer or 06 explorer received before April 1, 2006, for the sale or other transfer of assets, 07 including geological, geophysical, or well data or interpretations, acquired by the 08 producer or explorer as a result of expenditures the producer or explorer incurred 09 before April 1, 2006, that would be qualified capital expenditures, if they were 10 incurred after March 31, 2006; 11 (2) a producer or explorer that did not have commercial production 12 of oil or gas from a lease or property in the state before April 1, 2006, may elect 13 to take a tax credit against a tax levied by [DUE UNDER] AS 43.55.011(e) in the 14 amount of 20 percent of the producer's or explorer's transitional investment 15 expenditures, but only to the extent that the amount does not exceed 1/10 of the 16 producer's or explorer's qualified capital expenditures that are incurred during the 17 calendar year for which the credit is taken; 18 (3) a producer or explorer may not take a tax credit for a transitional 19 investment expenditure 20 (A) for any calendar year after [THE LATER OF 21 (i)] 2013; [OR 22 (ii) THE SIXTH CALENDAR YEAR AFTER THE 23 CALENDAR YEAR FOR WHICH THE PRODUCER FIRST 24 APPLIES A CREDIT UNDER THIS SUBSECTION AGAINST A 25 TAX DUE UNDER AS 43.55.011(e), IF THE PRODUCER DID NOT 26 HAVE COMMERCIAL PRODUCTION OF OIL OR GAS FROM A 27 LEASE OR PROPERTY IN THE STATE BEFORE APRIL 1, 2006;] 28 (B) more than once; or 29 (C) if a credit for that expenditure was taken under 30 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 31 (4) notwithstanding (d), (e), and (g) of this section, a producer or
01 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for 02 a transitional investment expenditure. 03 * Sec. 29. AS 43.55.023 is amended by adding a new subsection to read: 04 (l) An entity that is exempt from taxation under this chapter may not apply 05 for a transferable tax credit certificate. 06 * Sec. 30. AS 43.55.024(a) is amended to read: 07 (a) For a calendar year for which a producer's tax liability under 08 AS 43.55.011(e) [OR (f)] on oil and gas produced from leases or properties outside 09 the Cook Inlet sedimentary basin, no part of which is north of 68 degrees North 10 latitude, exceeds zero before application of any credits under this chapter, a producer 11 that is qualified under (e) of this section may apply a tax credit against that liability of 12 not more than $6,000,000. 13 * Sec. 31. AS 43.55.024(c) is amended to read: 14 (c) For a calendar year for which a producer's tax liability under 15 AS 43.55.011(e) [OR (f)] exceeds zero before application of any credits under this 16 chapter, other than a credit under (a) of this section but after application of any credit 17 under (a) of this section, a producer that is qualified under (e) of this section and 18 whose average amount of oil and gas produced a day and taxable under 19 AS 43.55.011(e) [OR (f)] is less than 100,000 BTU equivalent barrels a day may 20 apply a tax credit under this subsection against that liability. A producer whose 21 average amount of oil and gas produced a day and taxable under AS 43.55.011(e) 22 [OR (f)] is 23 (1) not more than 50,000 BTU equivalent barrels may apply a tax 24 credit of not more than $12,000,000 for the calendar year; 25 (2) more than 50,000 and less than 100,000 BTU equivalent barrels 26 may apply a tax credit of not more than $12,000,000 multiplied by the following 27 fraction for the calendar year: 28 1 - [2 X (AP - 50,000)] ÷ 100,000 29 where AP = the average amount of oil and gas taxable under AS 43.55.011(e) [OR 30 (f)], produced a day during the calendar year in BTU equivalent barrels. 31 * Sec. 32. AS 43.55.024(e) is amended to read:
01 (e) On written application by a producer that includes any information the 02 department may require, the department shall determine whether the producer 03 qualifies for a calendar year under this section. To qualify under this section, a 04 producer must demonstrate that its operation in the state or its ownership of an 05 interest in a lease or property in the state as a distinct producer would not result in the 06 division among multiple producer entities of any production tax liability under 07 AS 43.55.011(e) [OR (f)] that reasonably would be expected to be attributed to a 08 single producer if the tax credit provisions of (a) or (c) of this section did not exist. 09 * Sec. 33. AS 43.55.024(g) is amended to read: 10 (g) A tax credit authorized by (c) of this section may not be applied to reduce 11 a producer's tax liability for any calendar year under AS 43.55.011(e) [OR (f)] below 12 zero. 13 * Sec. 34. AS 43.55.025(a) is amended to read: 14 (a) Subject to the terms and conditions of this section, a credit against the 15 production tax levied by [DUE UNDER] AS 43.55.011(e) [OR (f)] is allowed for 16 exploration expenditures that qualify under (b) of this section in an amount equal to 17 one of the following: 18 (1) 30 [20] percent of the total exploration expenditures that qualify 19 only under (b) and (c) of this section; 20 (2) 30 [20] percent of the total exploration expenditures [FOR WORK 21 PERFORMED BEFORE JULY 1, 2007, AND] that qualify only under (b) and (d) of 22 this section; 23 (3) 40 percent of the total exploration expenditures that qualify under 24 (b), (c), and (d) of this section; or 25 (4) 40 percent of the total exploration expenditures that qualify only 26 under (b) and (e) of this section. 27 * Sec. 35. AS 43.55.025(b) is amended to read: 28 (b) To qualify for the production tax credit under (a) of this section, an 29 exploration expenditure must be incurred for work performed [ON OR] after 30 December 31, 2007 [JULY 1, 2003], and before July 1, 2016, [EXCEPT THAT AN 31 EXPLORATION EXPENDITURE FOR A COOK INLET PROSPECT MUST BE
01 INCURRED FOR WORK PERFORMED ON OR AFTER JULY 1, 2005,] and 02 (1) may be for seismic or other geophysical exploration costs not 03 connected with a specific well; 04 (2) if for an exploration well, 05 (A) must be incurred by an explorer that holds an interest in 06 the exploration well for which the production tax credit is claimed; 07 (B) may be for either a [AN OIL OR GAS DISCOVERY] 08 well that encounters an oil or gas deposit or a dry hole; [AND] 09 (C) must be for a well that has been completed, suspended, 10 or abandoned at the time the explorer claims the tax credit under (f) of 11 this section; and 12 (D) must be for goods, services, or rentals of personal 13 property reasonably required for the surface preparation, drilling, casing, 14 cementing, and logging of an exploration well, and, in the case of a dry hole, 15 for the expenses required for abandonment if the well is abandoned within 18 16 months after the date the well was spudded; 17 (3) may not be for [TESTING, STIMULATION, OR COMPLETION 18 COSTS;] administration, supervision, engineering, or lease operating costs; 19 geological or management costs; community relations or environmental costs; 20 bonuses, taxes, or other payments to governments related to the well; costs, including 21 repairs and replacements, arising from or associated with fraud, wilful 22 misconduct, gross negligence, criminal negligence, or violation of law, including 23 a violation of 33 U.S.C. 1319(c)(1) or 1321(b)(3) (Clean Water Act); or other costs 24 that are generally recognized as indirect costs or financing costs; and 25 (4) may not be incurred for an exploration well or seismic exploration 26 that is included in a plan of exploration or a plan of development for any unit before 27 May 14, 2003 [ON MAY 13, 2003]. 28 * Sec. 36. AS 43.55.025(c) is repealed and reenacted to read: 29 (c) To be eligible for the 30 percent production tax credit authorized by (a)(1) 30 of this section or the 40 percent production tax credit authorized by (a)(3) of this 31 section, exploration expenditures must
01 (1) qualify under (b) of this section; and 02 (2) be for an exploration well, subject to the following: 03 (A) before spudding the well, 04 (i) the explorer shall submit to the commissioner of 05 natural resources the information necessary to determine whether the 06 geological objective of the well is a potential oil or gas trap that is 07 distinctly separate from any trap that has been tested by a preexisting 08 well; and 09 (ii) the commissioner of natural resources must make 10 an affirmative determination on that question; the commissioner of 11 natural resources shall decide whether to make that determination 12 within 60 days after receiving all the necessary information from the 13 explorer and based on the information received and on other 14 information the commissioner of natural resources may consider 15 relevant; 16 (B) for an exploration well other than a well to explore a Cook 17 Inlet prospect, the well must be located and drilled in such a manner that the 18 bottom hole is located not less than three miles away from the bottom hole of 19 a preexisting well drilled for oil or gas, irrespective of whether the preexisting 20 well has been completed, suspended, or abandoned; 21 (C) after completion, suspension, or abandonment of the 22 exploration well, the commissioner of natural resources must determine that 23 the well adequately achieved the explorer's stated geological objective. 24 * Sec. 37. AS 43.55.025(f) is amended to read: 25 (f) For a production tax credit under this section, 26 (1) an explorer shall, in a form prescribed by the department and, 27 except for a credit under (l) of this section, within six months of the completion of 28 the exploration activity, claim the credit and submit information sufficient to 29 demonstrate to the department's satisfaction that the claimed exploration expenditures 30 qualify under this section; 31 (2) an explorer shall agree, in writing,
01 (A) to notify the Department of Natural Resources, within 30 02 days after completion of seismic or geophysical data processing, completion 03 of [A] well drilling, or filing of a claim for credit, whichever is the latest, for 04 which exploration costs are claimed, of the date of completion and submit a 05 report to that department describing the processing sequence and providing a 06 list of data sets available; [IF, UNDER (c)(2)(B) OF THIS SECTION, AN 07 EXPLORER SUBMITS A CLAIM FOR A CREDIT FOR EXPENDITURES 08 FOR AN EXPLORATION WELL THAT IS LOCATED WITHIN THREE 09 MILES OF A WELL ALREADY DRILLED FOR OIL AND GAS, IN 10 ADDITION TO THE SUBMISSIONS REQUIRED UNDER (1) OF THIS 11 SUBSECTION, THE EXPLORER SHALL SUBMIT THE INFORMATION 12 NECESSARY FOR THE COMMISSIONER OF NATURAL RESOURCES 13 TO EVALUATE THE VALIDITY OF THE EXPLORER'S CLAIM THAT 14 THE WELL IS DIRECTED AT A DISTINCTLY SEPARATE 15 EXPLORATION TARGET, AND THE COMMISSIONER OF NATURAL 16 RESOURCES SHALL, UPON RECEIPT OF ALL EVIDENCE 17 SUFFICIENT FOR THE COMMISSIONER TO EVALUATE THE 18 EXPLORER'S CLAIM, MAKE THAT DETERMINATION WITHIN 60 19 DAYS;] 20 (B) to provide to the Department of Natural Resources, within 21 30 days after the date of a request, unless a longer period is provided by the 22 Department of Natural Resources, specific data sets, ancillary data, and 23 reports identified in (A) of this paragraph; in this subparagraph, 24 (i) a seismic or geophysical data set includes the 25 data for an entire seismic survey, irrespective of whether the 26 survey area covers nonstate land in addition to state land or land 27 in a unit in addition to land outside a unit; 28 (ii) well data include all derivative products, results, 29 and copies of data collected and data analyses for the well; well 30 logs; sample analyses; geophysical and velocity data including 31 vertical seismic profiles and check shot surveys; and tangible
01 material including, for each whole core collected, a lengthwise cut 02 slab that is at least 1/3 of the whole core volume, and 03 representative samples, as specified by the Department of Natural 04 Resources, of other gaseous, liquid, or solid material collected 05 from drilling or testing the well; 06 (C) that, notwithstanding any provision of AS 38, information 07 provided under this paragraph will be held confidential by the Department of 08 Natural Resources 09 (i) in the case of well data, until the expiration of the 10 24-month period of confidentiality described in AS 31.05.035(c) 11 [FOR 10 YEARS FOLLOWING THE COMPLETION DATE], at 12 which time the Department of Natural Resources [THAT 13 DEPARTMENT] will release the information after 30 days' public 14 notice unless, in the discretion of the commissioner of natural 15 resources, it is necessary to protect information relating to the 16 valuation of unleased acreage in the same vicinity, or unless the 17 well is on private land and the owner, including the lessor but not 18 the lessee, of the oil and gas resources has not given permission to 19 release the well data; 20 (ii) in the case of seismic or other geophysical data, 21 other than seismic data acquired by seismic exploration subject to 22 (l) of this section, for 10 years following the completion date, at 23 which time the Department of Natural Resources will release the 24 information after 30 days' public notice, except as to seismic or 25 other geophysical data acquired from private land, unless the 26 owner, including a lessor but not a lessee, of the oil and gas 27 resources in the private land gives permission to release the 28 seismic or other geophysical data associated with the private land; 29 (iii) in the case of seismic data obtained by seismic 30 exploration subject to (l) of this section, only until the expiration of 31 30 days' public notice issued on or after the date the production
01 tax credit certificate is issued under (5) of this subsection; 02 (3) if more than one explorer holds an interest in a well or seismic 03 exploration, each explorer may claim an amount of credit that is proportional to the 04 explorer's cost incurred; 05 (4) the department may exercise the full extent of its powers as though 06 the explorer were a taxpayer under this title, in order to verify that the claimed 07 expenditures are qualified exploration expenditures under this section; and 08 (5) if the department is satisfied that the explorer's claimed 09 expenditures are qualified under this section and that all data required to be 10 submitted under this section have been submitted, the department shall issue to the 11 explorer a production tax credit certificate for the amount of credit to be allowed 12 against production taxes levied by AS 43.55.011(e); notwithstanding any contrary 13 provision of AS 38, AS 40.25.100, or AS 43.05.230, the following information is 14 not confidential: 15 (A) the explorer's name; 16 (B) the date of the application; 17 (C) the location of the well or seismic exploration; 18 (D) the date of the department's issuance of the certificate; 19 and 20 (E) the date on which the information required to be 21 submitted under this section will be released [DUE UNDER 22 AS 43.55.011(e) OR (f)]. 23 * Sec. 38. AS 43.55.025(g) is amended to read: 24 (g) An explorer, other than an entity that is exempt from taxation under 25 this chapter, may transfer, convey, or sell its production tax credit certificate to any 26 person, and any person who receives a production tax credit certificate may also 27 transfer, convey, or sell the certificate. 28 * Sec. 39. AS 43.55.025(h) is amended to read: 29 (h) A producer that purchases a production tax credit certificate may apply 30 the credits against its production tax levied by [LIABILITY UNDER] 31 AS 43.55.011(e) [OR (f)]. Regardless of the price the producer paid for the
01 certificate, the producer may receive a credit against its production tax liability for the 02 full amount of the credit, but for not more than the amount for which the certificate is 03 issued. A production tax credit allowed under this section may not be applied more 04 than once. 05 * Sec. 40. AS 43.55.025(i) is repealed and reenacted to read: 06 (i) For a production tax credit under this section, 07 (1) a credit may not be applied to reduce a taxpayer's tax liability 08 under AS 43.55.011(e) below zero for a calendar year; and 09 (2) an amount of the production tax credit in excess of the amount that 10 may be applied for a calendar year under this subsection may be carried forward and 11 applied against the taxpayer's tax liability under AS 43.55.011(e) in one or more later 12 calendar years. 13 * Sec. 41. AS 43.55.025(k) is amended by adding a new paragraph to read: 14 (4) "preexisting well" means a well that was spudded more than 540 15 days but less than 35 years before the date on which the exploration well to which it 16 is compared is spudded. 17 * Sec. 42. AS 43.55.025 is amended by adding a new subsection to read: 18 (l) Subject to the terms and conditions of this section, if a claim is filed under 19 (f)(1) of this section before January 1, 2016, a credit against the production tax levied 20 by AS 43.55.011(e) is allowed in an amount equal to five percent of an eligible 21 expenditure under this subsection incurred for seismic exploration performed before 22 July 1, 2003. To be eligible under this subsection, an expenditure must 23 (1) have been for seismic exploration that 24 (A) obtained data that the commissioner of natural resources 25 considers to be in the best interest of the state to acquire for public 26 distribution; and 27 (B) was conducted outside the boundaries of a production unit; 28 however, the amount of the expenditure that is otherwise eligible under this 29 section is reduced proportionately by the portion of the seismic exploration 30 activity that crossed into a production unit; and 31 (2) qualify under (b)(3) of this section.
01 * Sec. 43. AS 43.55.030(a) is amended to read: 02 (a) A producer that produces oil or gas from a lease or property in the 03 state during a calendar year, whether or not any tax payment is due under 04 AS 43.55.020(a) for that oil or gas, [THE PERSON PAYING THE TAX] shall file 05 with the department on March 31 of the following year [FOLLOWING THE 06 CALENDAR YEAR FOR WHICH THE TAX WAS LEVIED] a statement, under 07 oath, in a form prescribed by the department, giving, with other information required, 08 the following: 09 (1) a description of each lease or property from which [THE] oil or 10 [AND] gas was [WERE] produced, by name, legal description, lease number, or 11 accounting codes assigned by the department; 12 (2) the names of the producer and, if different, the person paying the 13 tax, if any; 14 (3) the gross amount of oil and the gross amount of gas produced from 15 each lease or property, and the percentage of the gross amount of oil and gas owned 16 by the [EACH] producer [FOR WHOM THE TAX IS PAID]; 17 (4) the gross value at the point of production of the oil and of the gas 18 produced from each lease or property owned by the [EACH] producer and the costs 19 of transportation of the oil and gas [FOR WHOM THE TAX IS PAID]; 20 (5) the name of the first purchaser and the price received for the oil 21 and for the gas, unless relieved from this requirement in whole or in part by the 22 department; [AND] 23 (6) the producer's qualified capital expenditures, as defined in 24 AS 43.55.023, other lease expenditures [AND ADJUSTMENTS AS 25 CALCULATED] under AS 43.55.165, and adjustments or other payments or 26 credits under AS 43.55.170; 27 (7) the production tax values of the oil and gas under 28 AS 43.55.160; 29 (8) any claims for tax credits to be applied; and 30 (9) calculations showing the amounts, if any, that were or are due 31 under AS 43.55.020(a) and interest on any underpayment or overpayment
01 [AS 43.55.160 - 43.55.170]. 02 * Sec. 44. AS 43.55.030(d) is amended to read: 03 (d) Reports required under this section [BY OR ON BEHALF OF THE 04 PRODUCER] are delinquent the first day following the day the report is due. The 05 person required to file the report is liable for a penalty, as determined by the 06 department under standards adopted in regulation by the department, of not 07 more than $1,000 for each day the person fails to file the report at the time 08 required. The penalty is in addition to the penalties in AS 43.05.220 and 09 43.05.290 and is assessed, collected, and paid in the same manner as a tax 10 deficiency under this title. In this subsection, "report" includes a statement. 11 * Sec. 45. AS 43.55.030 is amended by adding new subsections to read: 12 (e) An explorer or producer that incurs a lease expenditure under 13 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 14 year but does not produce oil or gas from a lease or property in the state during the 15 calendar year shall file with the department on March 31 of the following year a 16 statement, under oath, in a form prescribed by the department, giving, with other 17 information required, the following: 18 (1) the producer's qualified capital expenditures, as defined in 19 AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other 20 payments or credits under AS 43.55.170; and 21 (2) if the explorer or producer receives a payment or credit under 22 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 23 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount. 24 (f) The department may require a producer, an explorer, or an operator of a 25 lease or property to file monthly reports, as applicable, of 26 (1) the amounts and gross value at the point of production of oil and 27 gas produced; 28 (2) transportation costs of the oil and gas; 29 (3) any unscheduled interruption of, or reduction in the rate of, oil or 30 gas production; 31 (4) lease expenditures and adjustments under AS 43.55.165 and
01 43.55.170; 02 (5) joint interest billings; 03 (6) contracts for the sale or transportation of oil or gas; 04 (7) information and calculations used in determining monthly 05 installment payments of estimated tax under AS 43.55.020(a); and 06 (8) other records and information the department considers necessary 07 for the administration of this chapter. 08 * Sec. 46. AS 43.55.040 is amended to read: 09 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 10 AS 43.05.405 - 43.05.499, the department may 11 (1) require a person engaged in production and the agent or employee 12 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 13 or gas to furnish, whether by the filing of regular statements or reports or otherwise, 14 additional information that is considered by the department as necessary to compute 15 the amount of the tax; notwithstanding any contrary provision of law, the disclosure 16 of additional information under this paragraph to the producer obligated to pay the tax 17 does not violate AS 40.25.100(a) or AS 43.05.230(a); before disclosing information 18 under this paragraph that is otherwise required to be held confidential under 19 AS 40.25.100(a) or AS 43.05.230(a), the department shall 20 (A) provide the person that furnished the information a 21 reasonable opportunity to be heard regarding the proposed disclosure and the 22 conditions to be imposed under (B) of this paragraph; and 23 (B) impose appropriate conditions limiting 24 (i) access to the information to those legal counsel, 25 consultants, employees, officers, and agents of the producer who have 26 a need to know that information for the purpose of determining or 27 contesting the producer's tax obligation; and 28 (ii) the use of the information to use for that purpose; 29 (2) examine the books, records, and files of the [SUCH A] person; 30 (3) conduct hearings and compel the attendance of witnesses and the 31 production of books, records, and papers of any person; [AND]
01 (4) make an investigation or hold an inquiry that is considered 02 necessary to a disclosure of the facts as to 03 (A) the amount of production from any oil or gas location, or 04 of a company or other producer of oil or gas; and 05 (B) the rendition of the oil and gas for taxing purposes; 06 (5) require a producer, an explorer, or an operator of a lease or 07 property to file reports and copies of records that the department considers 08 necessary to forecast state revenue under this chapter; in the case of reports and 09 copies of records relating to proposed, expected, or approved unit expenditures 10 for a unit for which one or more working interest owners other than the 11 operator have authority to approve unit expenditures, the required reports and 12 copies of records are limited to those reports or copies of records that constitute 13 or disclose communications between the operator and the working interest 14 owners relating to unit budget matters; 15 (6) require a producer that has an average total production in the 16 state of more than 100,000 barrels a day for a calendar year to report the gross 17 value at the point of production of the producer's taxable oil and gas in the state 18 for a calendar year and the total amount of lease expenditures in the state for 19 that calendar year; and 20 (7) assess against a person required under this section to file a 21 report, statement, or other document a penalty, as determined by the 22 department under standards adopted in regulation by the department, of not 23 more than $1,000 for each day the person fails to file the report, statement, or 24 other document after notice by the department; the penalty is in addition to any 25 penalties under AS 43.05.220 and 43.05.290 and is assessed, collected, and paid 26 in the same manner as a tax deficiency under this title; the penalty shall bear 27 interest at the rate specified under AS 43.05.225(1). 28 * Sec. 47. AS 43.55 is amended by adding a new section to read: 29 Sec. 43.55.075. Limitation on assessment and amended returns. (a) Except 30 as provided in AS 43.05.260(c), the amount of a tax imposed by this chapter must be 31 assessed within four years after the latest return was filed.
01 (b) A decision of a regulatory agency, court, or other body with authority to 02 resolve disputes that results in a retroactive change to a lease expenditure, to an 03 adjustment to a lease expenditure, to costs of transportation, to sale price, to 04 prevailing value, or to consideration of quality differentials relating to the 05 commingling of oils has a corresponding effect, either an increase or decrease, as 06 applicable, on the production tax value of oil or gas or the amount or availability of a 07 tax credit as determined under this chapter. For purposes of this section, a change to a 08 lease expenditure includes a change in the categorization of a lease expenditure as a 09 qualified capital expenditure or as not a qualified capital expenditure. The producer 10 shall 11 (1) within 60 days after the change, notify the department in writing; 12 and 13 (2) within 120 days after the change, file amended returns covering all 14 periods affected by the change, unless the department agrees otherwise or a stay is in 15 place that affects the filing or payment, regardless of the pendency of appeals of the 16 decision. 17 (c) If an alteration in or modification of a producer's federal income tax return 18 or a recomputation of the producer's federal income tax or determination of 19 deficiency occurs that affects the amount of a tax imposed on the producer under this 20 chapter, the producer shall 21 (1) within 60 days after the final determination of the alteration, 22 modification, recomputation, or deficiency, notify the department in writing; and 23 (2) within 120 days after the final determination of the alteration, 24 modification, recomputation, or deficiency, file amended returns covering all affected 25 periods. 26 (d) In this section, 27 (1) "qualified capital expenditure" has the meaning given in 28 AS 43.55.023; 29 (2) "return" includes a report, a statement, and an amended return, 30 report, or statement. 31 * Sec. 48. AS 43.55.110 is amended by adding new subsections to read:
01 (e) The department may require that returns, statements, reports, notifications, 02 and applications filed under this chapter be filed electronically in a form and manner 03 approved or prescribed by the department. 04 (f) The department may require that payments required under this chapter be 05 made electronically in a form and manner approved or prescribed by the department. 06 (g) Notwithstanding AS 44.62, the department may issue, for the information 07 and guidance of producers, explorers, and other interested persons, advisory bulletins 08 stating the department's interpretation of provisions of this chapter and of regulations 09 adopted under this chapter. Unless otherwise provided by the department by 10 regulation, interpretations stated in the advisory bulletins are not binding on the 11 department or others. 12 (h) Subject to legislative appropriation, the department may compensate a 13 person who provides information to the department about noncompliance with the 14 provisions of this chapter by an explorer or a producer of oil or gas if that information 15 leads to the collection of additional taxes, penalties, or interest from the producer. The 16 amount of compensation under this subsection may not exceed the lesser of $500,000 17 or 10 percent of the additional tax, penalty, or interest collected as a result of the 18 information. A state employee or an agent of the state is not eligible for compensation 19 under this subsection. 20 (i) A person who, under (h) of this section, provides, in bad faith, to the 21 department erroneous information about noncompliance with the provisions of this 22 chapter by an explorer or producer of oil or gas shall pay to the 23 (1) department all expenses related to the department's investigation 24 of the alleged noncompliance; and 25 (2) explorer or producer about whom the noncompliance was alleged 26 all expenses that are incurred by the explorer or producer relating to the department's 27 investigation of the alleged noncompliance. 28 * Sec. 49. AS 43.55.150 is amended to read: 29 Sec. 43.55.150. Determination of gross value at the point of production. 30 (a) For the purposes of AS 43.55.011 - 43.55.180, the gross value at the point of 31 production is calculated using the actual [REASONABLE] costs of transportation of
01 the oil or gas [. THE REASONABLE COSTS OF TRANSPORTATION ARE THE 02 ACTUAL COSTS], except when the 03 (1) shipper [PARTIES TO THE TRANSPORTATION] of oil or gas 04 is [ARE] affiliated with the transportation carrier or with a person that owns an 05 interest in the transportation facility; 06 (2) contract for the transportation of oil or gas is not an arm's length 07 transaction [OR IS NOT REPRESENTATIVE OF THE MARKET VALUE OF 08 THAT TRANSPORTATION]; or [AND] 09 (3) method or terms of transportation of oil or gas are [IS] not 10 reasonable in view of existing alternative [METHODS OF] transportation options. 11 (b) If the department finds that a condition [THE CONDITIONS] in (a)(1), 12 (2), or [AND] (3) of this section is [ARE] present, the gross value at the point of 13 production is calculated using the actual costs of transportation, or the 14 reasonable costs of transportation as determined under this subsection, 15 whichever is lower. The [THE] department shall determine the reasonable costs of 16 transportation, using the fair market value of like transportation, the fair market value 17 of equally efficient and available alternative modes of transportation, or other 18 reasonable methods. Transportation costs fixed by tariff rates that have been 19 adjudicated as just and reasonable by [PROPERLY ON FILE WITH] the 20 Regulatory Commission of Alaska or another [OTHER] regulatory agency and 21 transportation costs in an arm's length transaction paid by parties not affiliated 22 with an owner of the method of transportation shall be considered prima facie 23 reasonable. 24 (c) In determining the gross value of oil under [(a) OF] this section, the 25 department may not allow as reasonable costs of transportation 26 (1) the amount of loss of or damage to, or of expense incurred due to 27 the loss of or damage to, a vessel used to transport oil if the loss, damage, or expense 28 is incurred in connection with a catastrophic oil discharge from the vessel into the 29 marine or inland waters of the state; 30 (2) the incremental costs of transportation of the oil that are 31 attributable to temporary use of or chartered or substituted service provided by
01 another vessel due to the loss of or damage to a vessel regularly used to transport oil 02 and that are incurred in connection with a catastrophic oil discharge into the marine or 03 inland waters of the state; and 04 (3) the costs incurred to charter, contract, or hire vessels and 05 equipment used to contain or clean up a catastrophic oil discharge. 06 * Sec. 50. AS 43.55.160(a) is amended to read: 07 (a) Except as provided in (b) of this section, for the purposes of 08 (1) AS 43.55.011(e), the annual production tax value of the taxable 09 (A) oil and gas produced during a calendar year from leases or 10 properties in the state that include land north of 68 degrees North latitude is 11 the gross value at the point of production of the oil and gas taxable under 12 AS 43.55.011(e) and produced by the producer from those leases or 13 properties, less the producer's lease expenditures under AS 43.55.165 for the 14 calendar year applicable to the oil and gas produced by the producer from 15 those leases or properties, as adjusted under AS 43.55.170; 16 (B) oil and gas produced during a calendar year from leases or 17 properties in the state outside the Cook Inlet sedimentary basin, no part of 18 which is north of 68 degrees North latitude, is the gross value at the point of 19 production of the oil and gas taxable under AS 43.55.011(e) and produced by 20 the producer from those leases or properties, less the producer's lease 21 expenditures under AS 43.55.165 for the calendar year applicable to the oil 22 and gas produced by the producer from those leases or properties, as adjusted 23 under AS 43.55.170; 24 (C) oil produced during a calendar year from a lease or 25 property in the Cook Inlet sedimentary basin is the gross value at the point of 26 production of the oil taxable under AS 43.55.011(e) and produced by the 27 producer from that lease or property, less the producer's lease expenditures 28 under AS 43.55.165 for the calendar year applicable to the oil produced by the 29 producer from that lease or property, as adjusted under AS 43.55.170; 30 (D) gas produced during a calendar year from a lease or 31 property in the Cook Inlet sedimentary basin is the gross value at the point of
01 production of the gas taxable under AS 43.55.011(e) and produced by the 02 producer from that lease or property, less the producer's lease expenditures 03 under AS 43.55.165 for the calendar year applicable to the gas produced by 04 the producer from that lease or property, as adjusted under AS 43.55.170; 05 (2) AS 43.55.011(g), the monthly production tax value of the taxable 06 (A) oil and gas produced during a month from leases or 07 properties in the state that include 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) [AS 43.55.011(g)] and produced by the producer from those 10 leases or properties, less 1/12 of the producer's lease expenditures under 11 AS 43.55.165 for the calendar year applicable to the oil and gas produced by 12 the producer from those leases or properties, as adjusted under AS 43.55.170; 13 (B) oil and gas produced during a month from leases or 14 properties in the state outside the Cook Inlet sedimentary basin, no part of 15 which is north of 68 degrees North latitude, is the gross value at the point of 16 production of the oil and gas taxable under AS 43.55.011(e) 17 [AS 43.55.011(g)] and produced by the producer from those leases or 18 properties, less 1/12 of the producer's lease expenditures under AS 43.55.165 19 for the calendar year applicable to the oil and gas produced by the producer 20 from those leases or properties, as adjusted under AS 43.55.170; 21 (C) oil produced during a month from a lease or property in 22 the Cook Inlet sedimentary basin is the gross value at the point of production 23 of the oil taxable under AS 43.55.011(e) [AS 43.55.011(g)] and produced by 24 the producer from that lease or property, less 1/12 of the producer's lease 25 expenditures under AS 43.55.165 for the calendar year applicable to the oil 26 produced by the producer from that lease or property, as adjusted under 27 AS 43.55.170; 28 (D) gas produced during a month from a lease or property in 29 the Cook Inlet sedimentary basin is the gross value at the point of production 30 of the gas taxable under AS 43.55.011(e) [AS 43.55.011(g)] and produced by 31 the producer from that lease or property, less 1/12 of the producer's lease
01 expenditures under AS 43.55.165 for the calendar year applicable to the gas 02 produced by the producer from that lease or property, as adjusted under 03 AS 43.55.170. 04 * Sec. 51. AS 43.55.160(b) is amended to read: 05 (b) A production tax value calculated under [(a) OF] this section may not be 06 less than zero. 07 * Sec. 52. AS 43.55.160(e) is amended to read: 08 (e) Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that 09 would otherwise be deductible by a producer in a calendar year but whose deduction 10 would cause a [AN ANNUAL] production tax value calculated under (a)(1) of this 11 section of taxable oil or gas produced during the calendar year to be less than zero 12 may be used to establish a carried-forward annual loss under AS 43.55.023(b). 13 However, the department shall provide by regulation a method to ensure that, 14 for a period for which a producer's tax liability is limited by AS 43.55.011(j) or 15 (k), any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that 16 would otherwise be deductible by a producer for that period but whose 17 deduction would cause a production tax value calculated under (a)(1)(C) or (D) 18 of this section to be less than zero are accounted for as though the adjusted lease 19 expenditures had first been used as deductions in calculating the production tax 20 values of oil or gas subject to any of the limitations under AS 43.55.011(j) or (k) 21 that have positive production tax values so as to reduce the tax liability 22 calculated without regard to the limitation to the maximum amount provided for 23 under the applicable provision of AS 43.55.011(j) or (k). Only the amount of 24 those adjusted lease expenditures remaining after the accounting provided for 25 under this subsection may be used to establish a carried-forward annual loss 26 under AS 43.55.023(b). In this subsection, "producer" includes "explorer." 27 * Sec. 53. AS 43.55.165(a) is amended to read: 28 (a) Except as provided under (c) and (e) [(c) - (e)] of this section, for the 29 purposes of AS 43.55.160, a producer's lease expenditures for a calendar year are the 30 ordinary and necessary costs upstream of the point of production of oil and gas that 31 are incurred during the calendar year by the producer after March 31, 2006, and that
01 are direct costs of exploring for, developing, or producing oil or gas deposits located 02 within the producer's leases or properties in the state or, in the case of land in which 03 the producer does not own a working interest, that are direct costs of exploring for oil 04 or gas deposits located within other land in the state. In determining whether costs are 05 lease expenditures, the department shall consider, among other factors, 06 (1) the typical industry practices and standards in the state that 07 determine the costs, other than items listed in (e) of this section, that an operator is 08 allowed to bill a working interest owner that is not the operator, under unit operating 09 agreements or similar operating agreements that were in effect before December 2, 10 2005, and were subject to negotiation with at least one working interest owner with 11 substantial bargaining power, other than the operator; and 12 (2) the standards adopted by the Department of Natural Resources that 13 determine the costs, other than items listed in (e) of this section, that a lessee is 14 allowed to deduct from revenue in calculating net profits under a lease issued under 15 AS 38.05.180(f)(3)(B), (D), or (E). 16 * Sec. 54. AS 43.55.165(c) is repealed and reenacted to read: 17 (c) Subject to (g) and (h) of this section, if the department finds that the 18 pertinent provisions of a unit operating agreement or similar operating agreement are 19 substantially consistent with the department's determinations and standards under (a) 20 and (b) of this section concerning whether costs are lease expenditures and, in 21 addition, finds that at least one working interest owner party to the agreement, other 22 than the operator, with substantial incentive and ability to effectively audit billings 23 under the agreement, in fact is effectively auditing billings under the agreement, the 24 department may authorize or require a producer, subject to conditions prescribed 25 under regulations adopted by the department, to treat as that portion of its lease 26 expenditures for a calendar year applicable to oil and gas produced from a lease or 27 property in the state only 28 (1) the costs, other than items listed in (e) of this section, that are 29 incurred by the operator during the calendar year and that 30 (A) are billed to the producer by the operator under the 31 agreement to which that lease or property is subject and are either not disputed
01 by a working interest owner party to the agreement or are finally determined 02 to be properly billable as a result of dispute resolution; or 03 (B) for a producer that is the operator, would be billable to the 04 producer by the operator in accordance with the terms of the agreement to 05 which that lease or property is subject if the producer were not the operator; 06 and 07 (2) a reasonable percentage, as determined under regulations adopted 08 by the department, of the costs that are billed under (1) of this subsection as an 09 allowance for overhead expenses directly related to exploring for, developing, and 10 producing oil or gas deposits located within the lease or property. 11 * Sec. 55. AS 43.55.165(e) is amended to read: 12 (e) For purposes of this section, lease expenditures do not include 13 (1) depreciation, depletion, or amortization; 14 (2) oil or gas royalty payments, production payments, lease profit 15 shares, or other payments or distributions of a share of oil or gas production, profit, or 16 revenue, except that a producer's lease expenditures applicable to oil and gas 17 produced from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the 18 share of net profit paid to the state under that lease; 19 (3) taxes based on or measured by net income; 20 (4) interest or other financing charges or costs of raising equity or 21 debt capital; 22 (5) acquisition costs for a lease or property or exploration license; 23 (6) costs, including repairs and replacements, arising from or 24 associated with fraud, wilful misconduct, [OR] gross negligence, criminal 25 negligence, or violation of law, including a violation of 33 U.S.C. 1319(c)(1) or 26 1321(b)(3) (Clean Water Act); 27 (7) fines or penalties imposed by law; 28 (8) costs of arbitration, litigation, or other dispute resolution activities 29 that involve the state or concern the rights or obligations among owners of interests 30 in, or rights to production from, one or more leases or properties or a unit; 31 (9) costs incurred in organizing a partnership, joint venture, or other
01 business entity or arrangement; 02 (10) amounts paid to indemnify the state; the exclusion provided by 03 this paragraph does not apply to the costs of obtaining insurance or a surety bond 04 from a third-party insurer or surety; 05 (11) surcharges levied under AS 43.55.201 or 43.55.300; 06 (12) for a transaction that is an internal transfer or is otherwise not an 07 arm's length transaction, expenditures incurred that are in excess of fair market value; 08 (13) an expenditure incurred to purchase an interest in any 09 corporation, partnership, limited liability company, business trust, or any other 10 business entity, whether or not the transaction is treated as an asset sale for federal 11 income tax purposes; 12 (14) a tax levied under AS 43.55.011; 13 (15) [THE PORTION OF] costs incurred for dismantlement, removal, 14 surrender, or abandonment of a facility, pipeline, well pad, platform, or other 15 structure, or for the restoration of a lease, field, unit, area, tract of land, body of 16 water, or right-of-way in conjunction with dismantlement, removal, surrender, or 17 abandonment [, THAT IS ATTRIBUTABLE TO PRODUCTION OF OIL OR GAS 18 OCCURRING BEFORE APRIL 1, 2006; THE PORTION IS CALCULATED AS A 19 RATIO OF THE AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF 20 OIL EQUIVALENT, ASSOCIATED WITH THE FACILITY, PIPELINE, WELL 21 PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY 22 OF WATER, OR RIGHT-OF-WAY OCCURRING BEFORE APRIL 1, 2006, TO 23 THE TOTAL AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF 24 OIL EQUIVALENT, ASSOCIATED WITH THAT FACILITY, PIPELINE, WELL 25 PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY 26 OF WATER, OR RIGHT-OF-WAY THROUGH THE END OF THE CALENDAR 27 MONTH BEFORE COMMENCEMENT OF THE DISMANTLEMENT, 28 REMOVAL, SURRENDER, OR ABANDONMENT]; a cost is not excluded under 29 this paragraph if the dismantlement, removal, surrender, or abandonment for which 30 the cost is incurred is undertaken for the purpose of replacing, renovating, or 31 improving the facility, pipeline, well pad, platform, or other structure; [FOR THE
01 PURPOSES OF THIS PARAGRAPH, "BARREL OF OIL EQUIVALENT" MEANS 02 (A) IN THE CASE OF OIL, ONE BARREL; 03 (B) IN THE CASE OF GAS, 6,000 CUBIC FEET;] 04 (16) costs incurred for containment, control, cleanup, or removal in 05 connection with any unpermitted release of oil or a hazardous substance and any 06 liability for damages imposed on the producer or explorer for that unpermitted 07 release; this paragraph does not apply to the cost of developing and maintaining an oil 08 discharge prevention and contingency plan under AS 46.04.030; 09 (17) costs incurred to satisfy a work commitment under an exploration 10 license under AS 38.05.132; 11 (18) that portion of expenditures, that would otherwise be qualified 12 capital expenditures, as defined in AS 43.55.023 [AS 43.55.023(k)], incurred during a 13 calendar year that are less than the product of $0.30 multiplied by the total taxable 14 production from each lease or property, in BTU equivalent barrels, during that 15 calendar year, except that, when a portion of a calendar year is subject to this 16 provision, the expenditures and volumes shall be prorated within that calendar year; 17 (19) costs incurred for repair, replacement, or deferred 18 maintenance of a facility, a pipeline, a structure, or equipment, other than a well, 19 that results in or is undertaken in response to a failure, problem, or event that 20 results in an unscheduled interruption of, or reduction in the rate of, oil or gas 21 production; or costs incurred for repair, replacement, or deferred maintenance 22 of a facility, a pipeline, a structure, or equipment, other than a well, that is 23 undertaken in response to, or is otherwise associated with, an unpermitted 24 release of a hazardous substance or of gas; however, costs under this paragraph 25 that would otherwise constitute lease expenditures under (a) and (b) of this 26 section may be treated as lease expenditures if the department determines that 27 the repair or replacement is solely necessitated by an act of war, by an 28 unanticipated grave natural disaster or other natural phenomenon of an 29 exceptional, inevitable, and irresistible character, the effects of which could not 30 have been prevented or avoided by the exercise of due care or foresight, or by an 31 intentional or negligent act or omission of a third party, other than a party or its
01 agents in privity of contract with, or employed by, the producer or an operator 02 acting for the producer, but only if the producer or operator, as applicable, 03 exercised due care in operating and maintaining the facility, pipeline, structure, 04 or equipment, and took reasonable precautions against the act or omission of the 05 third party and against the consequences of the act or omission; in this 06 paragraph, 07 (A) "costs incurred for repair, replacement, or deferred 08 maintenance of a facility, a pipeline, a structure, or equipment" includes 09 costs to dismantle and remove the facility, pipeline, structure, or 10 equipment that is being replaced; 11 (B) "hazardous substance" has the meaning given in 12 AS 46.03.826; 13 (C) "replacement" includes renovation or improvement; 14 (20) costs incurred to construct, acquire, or operate a refinery or 15 crude oil topping plant, regardless of whether the products of the refinery or 16 topping plant are used in oil or gas exploration, development, or production 17 operations; however, if a producer owns a refinery or crude oil topping plant 18 that is located on or near the premises of the producer's lease or property in the 19 state and that processes the producer's oil produced from that lease or property 20 into a product that the producer uses in the operation of the lease or property in 21 drilling for or producing oil or gas, the producer's lease expenditures include the 22 amount calculated by subtracting from the fair market value of the product used 23 the prevailing value, as determined under AS 43.55.020(f), of the oil that is 24 processed; 25 (21) costs of lobbying, public relations, public relations 26 advertising, or policy advocacy. 27 * Sec. 56. AS 43.55.165(h) is amended to read: 28 (h) The department shall adopt regulations that provide for reasonable 29 methods of allocating costs between oil and gas and between leases or properties in 30 those circumstances where an allocation of costs is required to determine [THE 31 DETERMINATION OF THE] lease expenditures that are costs of exploring for,
01 developing, or producing oil deposits or costs of exploring for, developing, or 02 producing gas deposits [APPLICABLE TO OIL OR TO GAS], or that are costs of 03 exploring for, developing, or producing oil or gas deposits located within 04 [APPLICABLE TO OIL AND GAS PRODUCED FROM] different leases or 05 properties [, REQUIRES AN ALLOCATION OF COSTS]. 06 * Sec. 57. AS 43.55.170(a) is amended to read: 07 (a) Unless the payment or credit has already been subtracted in calculating 08 billable or billed costs under AS 43.55.165(c) [OR (d)], a producer's lease 09 expenditures under AS 43.55.165 must be adjusted by subtracting payments or 10 credits, other than tax credits, received by the producer or by an operator acting for 11 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 14 production facility under a management agreement providing for the producer to 15 receive a 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 25 an expenditure that would be a lease expenditure if it were incurred after 26 March 31, 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 * Sec. 58. AS 43.55 is amended by adding new sections to article 4 to read: 10 Sec. 43.55.890. Disclosure of tax information. Notwithstanding any contrary 11 provision of AS 40.25.100, and regardless of whether the information is considered 12 under AS 43.05.230(e) to constitute statistics classified to prevent the identification of 13 particular returns or reports, the department may publish the following information 14 under this chapter, if aggregated among three or more producers or explorers, 15 showing by month or calendar year and by lease or property, unit, or area of the state: 16 (1) the amount of oil or gas production; 17 (2) the amount of taxes levied under this chapter or paid under this 18 chapter; 19 (3) the effective tax rates under this chapter; 20 (4) the gross value of oil or gas at the point of production; 21 (5) the transportation costs for oil or gas; 22 (6) qualified capital expenditures, as defined in AS 43.55.023; 23 (7) exploration expenditures under AS 43.55.025; 24 (8) production tax values of oil or gas under AS 43.55.160; 25 (9) lease expenditures under AS 43.55.165; 26 (10) adjustments to lease expenditures under AS 43.55.170; 27 (11) tax credits applicable or potentially applicable against taxes 28 levied by this chapter. 29 Sec. 43.55.895. Applicability to municipal entities. (a) Notwithstanding 30 AS 29.35.670(a) or other provision of law, a producer that is a municipal entity is 31 subject to taxation and payment of surcharges under this chapter for oil and gas that it
01 sells to another party. 02 (b) A municipal entity subject to taxation because of this section is eligible 03 for all tax credits under this chapter to the same extent as any other producer. 04 (c) In this section, "municipal entity" means a municipality, municipally 05 owned utility, public corporation of a municipality, or entity established by more than 06 one municipality. 07 * Sec. 59. AS 43.55.900 is amended by adding new paragraphs to read: 08 (22) "producer" means an owner of an operating right, operating 09 interest, or working interest in a mineral interest in oil or gas; 10 (23) "unit" means a group of tracts of land that is 11 (A) subject to a cooperative or a unit plan of development or 12 operation that has been certified by the commissioner of natural resources 13 under AS 38.05.180(p); 14 (B) subject to a cooperative or a unit plan of development or 15 operation that has been certified by the United States Secretary of the Interior 16 under 30 U.S.C. 226(m); 17 (C) subject to an agreement of the owners of interests in the 18 tracts of land to validly integrate their interests to provide for the unitized 19 management, development, and operation of the tracts of land as a unit, within 20 the meaning of AS 31.05.110(a); or 21 (D) within the unit area of a unit created by order of the 22 Alaska Oil and Gas Conservation Commission under AS 31.05.110(b). 23 * Sec. 60. AS 43.55.011(h), 43.55.011(l), 43.55.011(n), 43.55.160(c), and 43.55.165(d) are 24 repealed. 25 * Sec. 61. AS 39.25.110(42) is repealed December 31, 2011. 26 * Sec. 62. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 APPLICABILITY. (a) AS 43.55.165(e)(19), enacted by the amendment to 29 AS 43.55.165(e) in sec. 55 of this Act, applies to expenditures after March 31, 2006. 30 (b) Except as provided in (a) of this section, secs. 15 - 27, 29 - 42, and 49 - 60 of this 31 Act apply to oil and gas produced after June 30, 2007.
01 (c) Sections 43 and 45 of this Act apply to statements and reports under 02 AS 43.55.030(a), as amended by sec. 43 of this Act, and AS 43.55.030(e) and (f), as added 03 by sec. 45 of this Act, required to be filed after the effective date of secs. 43 and 45 of this 04 Act. 05 (d) Sections 34 - 37, 39, and 41 of this Act apply to exploration expenditures 06 incurred for work performed after December 31, 2007, that are the basis of tax credits that 07 may be claimed against taxes levied for oil and gas produced after December 31, 2007. 08 (e) AS 43.55.075(a), enacted by sec. 47 of this Act, applies to any tax liability under 09 AS 43.55 with respect to which the period of limitations on assessment under AS 43.05.260 10 had not expired before the effective date of secs. 14 and 47 of this Act. 11 (f) The penalty in AS 43.55.030(d), enacted by the amendment to AS 43.55.030(d) in 12 sec. 44 of this Act, applies to any report required to be filed after the effective date of sec. 44 13 of this Act that is not filed timely. 14 (g) The penalty in AS 43.55.040(7), enacted by the amendment to AS 43.55.040 in 15 sec. 46 of this Act, applies to any report, statement, or other document required to be filed 16 after the effective date of sec. 46 of this Act. 17 * Sec. 63. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 OIL AND GAS REVENUE AUDIT MASTER POSITIONS; LEGISLATIVE 20 INTENT. It is the intent of the legislature that the commissioner of administration shall cause 21 not more than four oil and gas revenue audit master positions to be created in the Department 22 of Revenue and not more than two oil and gas revenue audit master positions to be created in 23 the Department of natural Resources. Oil and gas revenue audit masters shall be employed in 24 a professional capacity to collect oil and gas revenue by developing policy, conducting 25 studies, drafting proposed regulations, enforcing regulations, and directing audits by oil and 26 gas auditors. 27 * Sec. 64. The uncodified law of the State of Alaska is amended by adding a new section to 28 read: 29 OIL AND GAS AUDITORS; CLASSIFICATION AND PAY PLANS. 30 Notwithstanding AS 39.25.150(2), the Department of Administration shall develop and 31 implement a distinct position classification plan and a distinct pay plan for oil and gas
01 auditors and their immediate supervisors, other than revenue audit masters, that perform 02 (1) oil and gas tax audits in the Department of Revenue under the direction of 03 an oil and gas revenue audit master; 04 (2) royalty audits, including net profit share audits, in the Department of 05 Natural Resources under the direction of an oil and gas revenue audit master. 06 * Sec. 65. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 TRANSITION: PAYMENT OF TAX. A person subject to tax under AS 43.55 that is 09 required to make one or more installment payments of estimated tax or other payment of tax 10 under AS 43.55.020(a) during the period after March 31, 2006, and before the effective date 11 of sec. 21 of this Act, and under AS 43.55.020(a), as amended by sec. 21 of this Act, for the 12 production of oil or gas during a month after March 31, 2006, and before the effective date of 13 sec. 21 of this Act but that failed to pay the full amount of the installment payments or other 14 payment of tax required under AS 43.55 because of the retroactive application of 15 AS 43.55.165(e)(19), as enacted in the amendment to AS 43.55.165(e) in sec. 55 of this Act, 16 that is retroactive to April 1, 2006, under sec. 68 of this Act, and the retroactive application 17 of secs. 15 - 27, 29 - 42, 49 - 54, 56 - 60, and that part of AS 43.55.165(e) in sec. 55 of this 18 Act under sec. 68 of this Act, shall pay before April 1, 2008, the balance of any tax due under 19 AS 43.55 for the period after March 31, 2006, and before the effective date of this section. 20 * Sec. 66. The uncodified law of the State of Alaska is amended by adding a new section to 21 read: 22 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 23 contrary provision of AS 44.62.240, 24 (1) if the Department of Revenue expressly designates in the regulation that 25 the regulation applies retroactively to that date, a regulation adopted by the Department of 26 Revenue to implement, interpret, make specific, or otherwise carry out secs. 15 - 27, 29 - 42, 27 and 49 - 60 of this Act may apply retroactively to July 1, 2007, except that a regulation 28 adopted by the Department of Revenue to implement, interpret, make specific, or otherwise 29 carry out AS 43.55.165(e)(19), as enacted in the amendment to AS 43.55.165(e) in sec. 55 of 30 this Act, may apply retroactively to April 1, 2006; 31 (2) a regulation adopted by the Department of Natural Resources to
01 implement, interpret, make specific, or otherwise carry out statutory provisions for the 02 administration of oil and gas leases issued under AS 38.05.180(f)(3)(B), (D), or (E), to the 03 extent the regulation deals with the treatment of oil and gas production taxes in determining 04 net profits under those leases, may apply retroactively to April 1, 2006, if the Department of 05 Natural Resources expressly designates in the regulation that the regulation applies 06 retroactively to that date. 07 * Sec. 67. The uncodified law of the State of Alaska is amended by adding a new section to 08 read: 09 TRANSITION: REGULATIONS. The Department of Natural Resources and the 10 Department of Revenue may proceed to adopt regulations to implement this Act. The 11 regulations take effect under AS 44.62 (Administrative Procedure Act), but not before the 12 effective date of the law implemented by the regulation. 13 * Sec. 68. The uncodified law of the State of Alaska is amended by adding a new section to 14 read: 15 RETROACTIVITY OF CERTAIN PROVISIONS OF THIS ACT. (a) Sections 29 16 and 38 of this Act are retroactive to July 1, 2003. 17 (b) AS 43.55.165(e)(19), enacted by the amendment to AS 43.55.165(e) in sec. 55 of 18 this Act, is retroactive to April 1, 2006. 19 (c) Except as provided in (b) of this section, secs. 15 - 27, 29 - 42, and 49 - 60 of this 20 Act are retroactive to July 1, 2007. 21 * Sec. 69. Section 28 of this Act takes effect January 1, 2008. 22 * Sec. 70. Except as provided in sec. 69 of this Act, this Act takes effect immediately under 23 AS 01.10.070(c).