CSSB 80(RES): "An Act relating to allowable lease expenditures for the purpose of determining the production tax value of oil and gas for the purposes of the oil and gas production tax; and providing for an effective date."
00 CS FOR SENATE BILL NO. 80(RES) 01 "An Act relating to allowable lease expenditures for the purpose of determining the 02 production tax value of oil and gas for the purposes of the oil and gas production tax; 03 and providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 43.55.165(e) is amended to read: 06 (e) For purposes of this section, lease expenditures do not include 07 (1) depreciation, depletion, or amortization; 08 (2) oil or gas royalty payments, production payments, lease profit 09 shares, or other payments or distributions of a share of oil or gas production, profit, or 10 revenue; 11 (3) taxes based on or measured by net income; 12 (4) interest or other financing charges or costs of raising equity or debt 13 capital; 14 (5) acquisition costs for a lease or property or exploration license;
01 (6) costs arising from fraud, wilful misconduct, or gross negligence; 02 (7) fines or penalties imposed by law; 03 (8) costs of arbitration, litigation, or other dispute resolution activities 04 that involve the state or concern the rights or obligations among owners of interests in, 05 or rights to production from, one or more leases or properties or a unit; 06 (9) costs incurred in organizing a partnership, joint venture, or other 07 business entity or arrangement; 08 (10) amounts paid to indemnify the state; the exclusion provided by 09 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 10 a third-party insurer or surety; 11 (11) surcharges levied under AS 43.55.201 or 43.55.300; 12 (12) for a transaction that is an internal transfer or is otherwise not an 13 arm's length transaction, expenditures incurred that are in excess of fair market value; 14 (13) an expenditure incurred to purchase an interest in any corporation, 15 partnership, limited liability company, business trust, or any other business entity, 16 whether or not the transaction is treated as an asset sale for federal income tax 17 purposes; 18 (14) a tax levied under AS 43.55.011; 19 (15) the portion of costs incurred for dismantlement, removal, 20 surrender, or abandonment of a facility, pipeline, well pad, platform, or other 21 structure, or for the restoration of a lease, field, unit, area, body of water, or right-of- 22 way in conjunction with dismantlement, removal, surrender, or abandonment, that is 23 attributable to production of oil or gas occurring before April 1, 2006; the portion is 24 calculated as a ratio of the amount of oil and gas production, in barrels of oil 25 equivalent, associated with the facility, pipeline, well pad, platform, other structure, 26 lease, field, unit, area, body of water, or right-of-way occurring before April 1, 2006, 27 to the total amount of oil and gas production, in barrels of oil equivalent, associated 28 with that facility, pipeline, well pad, platform, other structure, lease, field, unit, area, 29 body of water, or right-of-way through the end of the calendar month before 30 commencement of the dismantlement, removal, surrender, or abandonment; a cost is 31 not excluded under this paragraph if the dismantlement, removal, surrender, or
01 abandonment for which the cost is incurred is undertaken for the purpose of replacing, 02 renovating, or improving the facility, pipeline, well pad, platform, or other structure; 03 for the purposes of this paragraph, "barrel of oil equivalent" means 04 (A) in the case of oil, one barrel; 05 (B) in the case of gas, 6,000 cubic feet; 06 (16) costs incurred for containment, control, cleanup, or removal in 07 connection with any unpermitted release of oil or a hazardous substance and any 08 liability for damages imposed on the producer or explorer for that unpermitted release; 09 this paragraph does not apply to the cost of developing and maintaining an oil 10 discharge prevention and contingency plan under AS 46.04.030; 11 (17) costs incurred to satisfy a work commitment under an exploration 12 license under AS 38.05.132; 13 (18) that portion of expenditures, that would otherwise be qualified 14 capital expenditures as defined in AS 43.55.023(k), incurred during a calendar year 15 that are less than the product of $0.30 multiplied by the total taxable production from 16 each lease or property, in BTU equivalent barrels, during that calendar year, except 17 that, when a portion of a calendar year is subject to this provision, the expenditures 18 and volumes shall be prorated within that calendar year; 19 (19) costs or that portion of the costs determined by the 20 commissioner, in consultation with the commissioner of environmental 21 conservation, the commissioner of natural resources, and the person in the 22 Department of Natural Resources who is the lead person for exercising oversight 23 over the maintenance of oil and gas facilities, equipment, and infrastructure in 24 the state, and taking into consideration good oil field practice, to be 25 (A) related to the repair and replacement of property or 26 equipment that was not maintained or was improperly maintained; or 27 (B) incremental operating expenses incurred as a result of 28 operating facilities or equipment at diminished capacity when that 29 diminished capacity is caused by the lack of or improper maintenance of 30 property or equipment. 31 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to
01 read: 02 APPLICABILITY. Section 1 of this Act applies to oil and gas produced after 03 March 31, 2006. 04 * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 TRANSITIONAL PROVISIONS. (a) A person that filed a statement under 07 AS 43.55.030 before the effective date of this Act and deducted costs that may not be treated 08 as lease expenditures, or that claimed a credit based on costs that may not be claimed as lease 09 expenditures under AS 43.55.165(e)(19), as enacted by sec. 1 of this Act, shall file an 10 amended return and pay any additional tax within 90 days after the effective date of this Act. 11 (b) A person required to make an installment payment of estimated tax under 12 AS 43.55.020(a) before the effective date of this Act for a period not included in a return 13 required to be filed before the effective date of this Act shall determine the amount of the 14 underpayment, if any, that is attributable to costs that may not be treated as lease expenditures 15 or attributable to a credit based on costs that may not be claimed as lease expenditures under 16 AS 43.55.165(e)(19), as enacted by sec. 1 of this Act. The amount of any underpayment 17 determined under this subsection shall be paid within 90 days after the effective date of this 18 Act. 19 (c) Interest on an additional amount of tax due under (a) of this section or on the 20 amount of the underpayment of an installment under (b) of this section does not begin to 21 accrue until 90 days after the effective date of this Act. 22 * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 RETROACTIVITY. Section 1 of this Act is retroactive to April 1, 2006. 25 * Sec. 5. This Act takes effect immediately under AS 01.10.070(c).