CSSB 2001(JUD): "An Act relating to the production tax on oil and gas and to conservation surcharges on oil; providing a production tax limit on certain gas used in the state; relating to the issuance of advisory bulletins and the disclosure of certain information relating to the production tax and the sharing between agencies of certain information relating to the production tax and to oil and gas or gas only leases; amending the State Personnel Act to place in the exempt service certain state oil and gas audit managers; providing for civil penalties relating to oil and gas production tax payments; establishing an oil and gas tax credit fund and authorizing payment from that fund; providing for retroactive application of certain statutory and regulatory provisions relating to the production tax on oil and gas and conservation surcharges on oil; identifying certain revenue from the production tax on oil and gas that may be appropriated to the budget reserve fund; making conforming amendments; and providing for an effective date."
00 CS FOR SENATE BILL NO. 2001(JUD) 01 "An Act relating to the production tax on oil and gas and to conservation surcharges on 02 oil; providing a production tax limit on certain gas used in the state; relating to the 03 issuance of advisory bulletins and the disclosure of certain information relating to the 04 production tax and the sharing between agencies of certain information relating to the 05 production tax and to oil and gas or gas only leases; amending the State Personnel Act 06 to place in the exempt service certain state oil and gas audit managers; providing for 07 civil penalties relating to oil and gas production tax payments; establishing an oil and 08 gas tax credit fund and authorizing payment from that fund; providing for retroactive 09 application of certain statutory and regulatory provisions relating to the production tax 10 on oil and gas and conservation surcharges on oil; identifying certain revenue from the 11 production tax on oil and gas that may be appropriated to the budget reserve fund; 12 making conforming amendments; and providing for an effective date."
01 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 02 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 03 to read: 04 LEGISLATIVE INTENT. It is the intent of the legislature that 05 (1) provisions of this Act will ensure a fair and equitable means of assessing 06 and taxing the state's oil and gas resources, encourage the availability to the people of the 07 state of gas produced, transported, and consumed within the state; 08 (2) the enactment of AS 43.55.075(b) in sec. 50 of this Act, relating to 09 limitation of assessments for the production tax on oil and gas and conservation surcharges 10 on oil, confirms by clarification the long-standing interpretation of AS 43.05.260 by the 11 Department of Revenue; and 12 (3) the amount of money received by the state as a result of the retroactivity 13 of certain provisions under sec. 72(b) of this Act that exceeds the amount that would have 14 been received if those provisions had not been retroactive will be appropriated to the budget 15 reserve fund (art. IX, sec. 17, Constitution of the State of Alaska). 16 * Sec. 2. AS 37.10 is amended by adding a new section to read: 17 Sec. 37.10.440. Appropriations to the budget reserve fund of production 18 tax revenue. (a) By February 1 of each year, the Department of Revenue shall 19 determine the amount of money received by the state for the general fund during the 20 immediately preceding calendar year from the tax levied under AS 43.55, as well as 21 the amount the state would have received that year from the tax levied at the tax rates 22 in AS 43.55.011(e) and (g) under the law in effect immediately before January 1, 23 2007. If the amount received is greater than the amount that would have been 24 received at the tax rates under the law in effect immediately before January 1, 2007, 25 the department shall report the difference between the two amounts to the legislature. 26 (b) The legislature may appropriate 50 percent of the amount identified by the 27 Department of Revenue under (a) of this section to the budget reserve fund (art. IX, 28 sec. 17, Constitution of the State of Alaska). 29 (c) Nothing in this section requires that money be appropriated or creates a 30 dedicated fund. 31 * Sec. 3. AS 38.05.035(a) is amended to read:
01 (a) The director shall 02 (1) have general charge and supervision of the division and may 03 exercise the powers specifically delegated to the director; the director may employ 04 and fix the compensation of assistants and employees necessary for the operations of 05 the division; the director [AND] is the certifying officer of the division, with the 06 consent of the commissioner, and may approve vouchers for disbursements of money 07 appropriated to the division; 08 (2) manage, inspect, and control state land and improvements on it 09 belonging to the state and under the jurisdiction of the division; 10 (3) execute laws, rules, regulations, and orders adopted by the 11 commissioner; 12 (4) prescribe application procedures and practices for the sale, lease, 13 or other disposition of available land, resources, property, or interest in them; 14 (5) prescribe fees or service charges, with the consent of the 15 commissioner, for any public service rendered; 16 (6) under the conditions and limitations imposed by law and the 17 commissioner, issue deeds, leases, or other conveyances disposing of available land, 18 resources, property, or any interests in them; 19 (7) have jurisdiction over state land, except that land acquired by the 20 Alaska World War II Veterans Board and the Agricultural Loan Board or the 21 departments or agencies succeeding to their respective functions through foreclosure 22 or default; to this end, the director possesses the powers and, with the approval of the 23 commissioner, shall perform the duties necessary to protect the state's rights and 24 interest in state land, including the taking of all necessary action to protect and 25 enforce the state's contractual or other property rights; 26 (8) [REPEALED 27 (9)] maintain the [SUCH] records [AS] the commissioner considers 28 necessary, administer oaths, and do all things incidental to the authority imposed; the 29 following records and files shall be kept confidential upon request of the person 30 supplying the information: 31 (A) the name of the person nominating or applying for the
01 sale, lease, or other disposal of land by competitive bidding; 02 (B) before the announced time of opening, the names of the 03 bidders and the amounts of the bids; 04 (C) all geological, geophysical, and engineering data supplied, 05 whether or not concerned with the extraction or development of natural 06 resources; 07 (D) except as provided in AS 38.05.036, cost data and 08 financial information submitted in support of applications, bonds, leases, and 09 similar items; 10 (E) applications for rights-of-way or easements; 11 (F) requests for information or applications by public agencies 12 for land that [WHICH] is being considered for use for a public purpose; 13 (9) [(10)] account for the fees, licenses, taxes, or other money 14 received in the administration of this chapter including the sale or leasing of land, 15 identify their source, and promptly transmit them to the proper fiscal department after 16 crediting them to the proper fund; receipts from land application filing fees and 17 charges for copies of maps and records shall be deposited immediately in the general 18 fund of the state by the director; 19 (10) [(11)] select and employ or obtain at reasonable compensation 20 cadastral, appraisal, or other professional personnel the director considers necessary 21 for the proper operation of the division; 22 (11) [(12)] be the certifying agent of the state to select, accept, and 23 secure by whatever action is necessary in the name of the state, by deed, sale, gift, 24 devise, judgment, operation of law, or other means any land, of whatever nature or 25 interest, available to the state; and be the certifying agent of the state, to select, 26 accept, or secure by whatever action is necessary in the name of the state any land, or 27 title or interest to land available, granted, or subject to being transferred to the state 28 for any purpose; 29 (12) on request, furnish records, files, and other information 30 related to the administration of AS 38.05.180 to the Department of Revenue for 31 use in forecasting state revenue under or administering AS 43.55, whether or not
01 those records, files, and other information are required to be kept confidential 02 under (8) of this subsection; in the case of records, files, or other information 03 required to be kept confidential under (8) of this subsection, the Department of 04 Revenue shall maintain the confidentiality that the Department of Natural 05 Resources is required to extend to records, files, and other information under (8) 06 of this subsection 07 [(13) REPEALED 08 (14) REPEALED]. 09 * Sec. 4. AS 38.05.036(b) is amended to read: 10 (b) The Department of Revenue may obtain from the department information 11 relating to royalty and net profits payments and to exploration incentive credits under 12 this chapter or under AS 41.09, whether or not that information is confidential. The 13 Department of Revenue may use the information in carrying out its functions and 14 responsibilities under AS 43, and shall hold that information confidential to the extent 15 required by an agreement with the department or by AS 38.05.035(a)(8) 16 [AS 38.05.035(a)(9)], AS 41.09.010(d), or AS 43.05.230. 17 * Sec. 5. AS 38.05.036(f) is amended to read: 18 (f) Except as otherwise provided in this section or in connection with official 19 investigations or proceedings of the department, it is unlawful for a current or former 20 officer, employee, or agent of the state to divulge information obtained by the 21 department as a result of an audit under this section that is required by an agreement 22 with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or 23 AS 41.09.010(d) to be kept confidential. 24 * Sec. 6. AS 38.05.036(g) is amended to read: 25 (g) Nothing in this section prohibits the publication of statistics in a manner 26 that maintains the confidentiality of information to the extent required by an 27 agreement with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or 28 AS 41.09.010(d). 29 * Sec. 7. AS 38.05.123(f) is amended to read: 30 (f) As part of the timber sale negotiations authorized by this section, the 31 commissioner may require a prospective purchaser negotiating a timber sale contract
01 to submit financial and technical data that demonstrates that the requirements of this 02 section have been or will be met. Upon the prospective purchaser's request, the 03 commissioner shall keep data provided by the purchaser confidential in accordance 04 with the requirements of AS 38.05.035(a)(8) [AS 38.05.035(a)(9)]. 05 * Sec. 8. AS 38.05.133(e) is amended to read: 06 (e) The commissioner may make a written request to a prospective licensee 07 for additional information on the prospective licensee's proposal. The commissioner 08 shall keep confidential information described in AS 38.05.035(a)(8) 09 [AS 38.05.035(a)(9)] that is voluntarily provided if the prospective licensee has made 10 a written request that the information remain confidential. 11 * Sec. 9. AS 38.05.180(j) is amended to read: 12 (j) The commissioner 13 (1) may provide for modification of royalty on individual leases, 14 leases unitized as described in (p) of this section, leases subject to an agreement 15 described in (s) or (t) of this section, or interests unitized under AS 31.05 16 (A) to allow for production from an oil or gas field or pool if 17 (i) the oil or gas field or pool has been sufficiently 18 delineated to the satisfaction of the commissioner; 19 (ii) the field or pool has not previously produced oil or 20 gas for sale; and 21 (iii) oil or gas production from the field or pool would 22 not otherwise be economically feasible; 23 (B) to prolong the economic life of an oil or gas field or pool 24 as per barrel or barrel equivalent costs increase or as the price of oil or gas 25 decreases, and the increase or decrease is sufficient to make future production 26 no longer economically feasible; or 27 (C) to reestablish production of shut-in oil or gas that would 28 not otherwise be economically feasible; 29 (2) may not grant a royalty modification unless the lessee or lessees 30 requesting the change make a clear and convincing showing that a modification of 31 royalty meets the requirements of this subsection and is in the best interests of the
01 state; 02 (3) shall provide for an increase or decrease or other modification of 03 the state's royalty share by a sliding scale royalty or other mechanism that shall be 04 based on a change in the price of oil or gas and may also be based on other relevant 05 factors such as a change in production rate, projected ultimate recovery, development 06 costs, and operating costs; 07 (4) may not grant a royalty reduction for a field or pool 08 (A) under (1)(A) of this subsection if the royalty modification 09 for the field or pool would establish a royalty rate of less than five percent in 10 amount or value of the production removed or sold from a lease or leases 11 covering the field or pool; 12 (B) under (1)(B) or (1)(C) of this subsection if the royalty 13 modification for the field or pool would establish a royalty rate of less than 14 three percent in amount or value of the production removed or sold from a 15 lease or leases covering the field or pool; 16 (5) may not grant a royalty reduction under this subsection without 17 including an explicit condition that the royalty reduction is not assignable without the 18 prior written approval, which may not be unreasonably withheld, by the 19 commissioner; the commissioner shall, in the preliminary and final findings and 20 determinations, set out the conditions under which the royalty reduction may be 21 assigned; 22 (6) shall require the lessee or lessees to submit, with the application 23 for the royalty reduction, financial and technical data that demonstrate that the 24 requirements of this subsection are met; the commissioner 25 (A) may require disclosure of only the financial and technical 26 data related to development, production, and transportation of oil and gas or 27 gas only from the field or pool that are reasonably available to the applicant; 28 and 29 (B) shall keep the data confidential under AS 38.05.035(a)(8) 30 [AS 38.05.035(a)(9)] at the request of the lessee or lessees making application 31 for the royalty reduction; the confidential data may be disclosed by the
01 commissioner to legislators and to the legislative auditor and as directed by 02 the chair or vice-chair of the Legislative Budget and Audit Committee to the 03 director of the division of legislative finance, the permanent employees of 04 their respective divisions who are responsible for evaluating a royalty 05 reduction, and to agents or contractors of the legislative auditor or the 06 legislative finance director who are engaged under contract to evaluate the 07 royalty reduction, if they sign an appropriate confidentiality agreement; 08 (7) may 09 (A) require the lessee or lessees making application for the 10 royalty reduction under (1)(A) of this subsection to pay for the services of an 11 independent contractor, selected by the lessee or lessees from a list of 12 qualified consultants compiled by the commissioner, to evaluate hydrocarbon 13 development, production, transportation, and economics and to assist the 14 commissioner in evaluating the application and financial and technical data; 15 if, under this subparagraph, the commissioner requires payment for the 16 services of an independent contractor, the total cost of the services to be paid 17 for by the lessee or lessees may not exceed $150,000 for each application, and 18 the commissioner shall determine the relevant scope of the work to be 19 performed by the contractor; selection of an independent contractor under this 20 subparagraph is not subject to AS 36.30; 21 (B) with the mutual consent of the lessee or lessees making 22 application for the royalty reduction under (1)(B) or (1)(C) of this subsection, 23 request payment for the services of an independent contractor, selected from a 24 list of qualified consultants to evaluate hydrocarbon development, production, 25 transportation, and economics by the commissioner to assist the commissioner 26 in evaluating the application and financial and technical data; if, under this 27 subparagraph, the commissioner requires payment for the services of an 28 independent contractor, the total cost of the services that may be paid for by 29 the lessee or lessees may not exceed $150,000 for each application, and the 30 commissioner shall determine the relevant scope of the work to be performed 31 by the contractor; selection of an independent contractor under this
01 subparagraph is not subject to AS 36.30; 02 (8) shall make and publish a preliminary findings and determination 03 on the royalty reduction application, give reasonable public notice of the preliminary 04 findings and determination, and invite public comment on the preliminary findings 05 and determination during a 30-day period for receipt of public comment; 06 (9) shall offer to appear before the Legislative Budget and Audit 07 Committee, on a day that is not earlier than 10 days and not later than 20 days after 08 giving public notice under (8) of this subsection, to provide the committee a review of 09 the commissioner's preliminary findings and determination on the royalty reduction 10 application and administrative process; if the Legislative Budget and Audit 11 Committee accepts the commissioner's offer, the committee shall give notice of the 12 committee's meeting to all members of the legislature; 13 (10) shall make copies of the preliminary findings and determination 14 available to 15 (A) the presiding officer of each house of the legislature; 16 (B) the chairs of the legislature's standing committees on 17 resources; and 18 (C) the chairs of the legislature's special committees on oil and 19 gas, if any; 20 (11) shall, within 30 days after the close of the public comment period 21 under (8) of this subsection, 22 (A) prepare a summary of the public response to the 23 commissioner's preliminary findings and determination; 24 (B) make a final findings and determination; the 25 commissioner's final findings and determination prepared under this 26 subparagraph regarding a royalty reduction is final and not appealable to the 27 court; 28 (C) transmit a copy of the final findings and determination to 29 the lessee; 30 (D) with the applicant's consent, amend the applicant's lease or 31 unitization agreement consistent with the commissioner's final decision; and
01 (E) make copies of the final findings and determination 02 available to each person who submitted comment under (8) of this subsection 03 and who has filed a request for the copies; 04 (12) is not limited by the provisions of AS 38.05.134(3) or (f) of this 05 section in the commissioner's determination under this subsection. 06 * Sec. 10. AS 38.05.275(c) is amended to read: 07 (c) Subsection (b) of this section may not be construed to limit the director in 08 the exercise of authority granted by AS 38.05.035(a)(11) [AS 38.05.035(a)(12)]. 09 * Sec. 11. AS 39.25.110 is amended by adding a new paragraph to read: 10 (42) oil and gas audit managers employed in a professional capacity 11 by the Department of Revenue and the Department of Natural Resources to collect oil 12 and gas revenue by developing policy, conducting studies, drafting proposed 13 regulations, enforcing regulations, and supervising audits by oil and gas revenue 14 auditors. 15 * Sec. 12. AS 41.09.010(d) is amended to read: 16 (d) Data derived from drilling a stratigraphic test well or exploratory well that 17 is provided to the commissioner under (c)(3) of this section shall be kept confidential 18 for 24 months after receipt by the commissioner unless the owner of the well gives 19 written permission to the state to release the well data at an earlier date, and, 20 notwithstanding AS 31.05.035(c), confidentiality may not be extended beyond 24 21 months. The provisions of AS 38.05.035(a)(8)(C) [AS 38.05.035(a)(9)(C)] apply to 22 other data provided to the commissioner under (c)(3) of this section, except that the 23 commissioner, under appropriate confidentiality provisions and without preference or 24 discrimination, may display to all interested third parties, but may not distribute or 25 transfer in hard copy or electronic form, those data with respect to all land if the 26 commissioner determines that the limited disclosure is necessary to further the 27 interest of the state in evaluating or developing its land. 28 * Sec. 13. AS 43.05.230(a) is amended to read: 29 (a) It is unlawful for a current or former officer, employee, or agent of the 30 state to divulge the amount of income or the particulars set out or disclosed in a report 31 or return made under this title, except
01 (1) in connection with official investigations or proceedings of the 02 department, whether judicial or administrative, involving taxes due under this title; 03 (2) in connection with official investigations or proceedings of the 04 child support enforcement agency, whether judicial or administrative, involving child 05 support obligations imposed or imposable under AS 25 or AS 47; 06 (3) as provided in AS 38.05.036 pertaining to audit functions of the 07 Department of Natural Resources; 08 (4) as provided in AS 43.05.405 - 43.05.499; and 09 (5) as otherwise provided in this section or AS 43.55.890. 10 * Sec. 14. AS 43.05.230(h) is amended to read: 11 (h) The commissioner shall, upon request, furnish to the Department of 12 Natural Resources copies of tax returns, reports, and other documents filed under 13 AS 43.55 or AS 43.65, and the Department of Revenue's determinations and 14 workpapers under those chapters. The Department of Natural Resources shall 15 maintain the confidentiality that the Department of Revenue is required to extend to 16 the returns, reports, documents, determinations, and workpapers furnished to the 17 Department of Natural Resources under this subsection. 18 * Sec. 15. AS 43.05.260(a) is amended to read: 19 (a) Except as provided in (c) of this section, [AND] AS 43.20.200(b), and 20 AS 43.55.075, the amount of a tax imposed by this title must be assessed within three 21 years after the return was filed, whether or not a return was filed on or after the date 22 prescribed by law. If the tax is not assessed before the expiration of the applicable 23 [THREE-YEAR] period, proceedings may not be instituted in court for the collection 24 of the tax. 25 * Sec. 16. AS 43.55.011(e) is repealed and reenacted to read: 26 (e) There is levied on the producer of oil or gas a tax for all oil and gas 27 produced each calendar year from each lease or property in the state, less any oil and 28 gas the ownership or right to which is exempt from taxation or constitutes a 29 landowner's royalty interest. Except as otherwise provided under (f), (j), (k), and (o) 30 of this section, the tax is equal to the sum, over all months of the calendar year, of 31 each month's production tax value of the taxable oil and gas as calculated under
01 AS 43.55.160 multiplied by the tax rate determined under (g) of this section. 02 * Sec. 17. AS 43.55.011(f) is amended to read: 03 (f) The levy of tax under this section on a producer of oil and gas produced 04 north of 68 degrees North latitude, other than gas subject to (o) of this section, may 05 not be less than 06 (1) four percent of the gross value at the point of production when the 07 average price per barrel for Alaska North Slope crude oil for sale on the United States 08 West Coast during the calendar year for which the tax is due is more than $25; 09 (2) three percent of the gross value at the point of production when the 10 average price per barrel for Alaska North Slope crude oil for sale on the United States 11 West Coast during the calendar year for which the tax is due is over $20 but not over 12 $25; 13 (3) two percent of the gross value at the point of production when the 14 average price per barrel for Alaska North Slope crude oil for sale on the United States 15 West Coast during the calendar year for which the tax is due is over $17.50 but not 16 over $20; 17 (4) one percent of the gross value at the point of production when the 18 average price per barrel for Alaska North Slope crude oil for sale on the United States 19 West Coast during the calendar year for which the tax is due is over $15 but not over 20 $17.50; or 21 (5) zero percent of the gross value at the point of production when the 22 average price per barrel for Alaska North Slope crude oil for sale on the United States 23 West Coast during the calendar year for which the tax is due is $15 or less. 24 * Sec. 18. AS 43.55.011(g) is repealed and reenacted to read: 25 (g) The tax rate applied to the production tax value of oil and gas under (e) of 26 this section is 25 percent plus, for a month for which the price index determined 27 under (h) of this section is greater than zero, 0.40 multiplied by the price index 28 determined under (h) of this section. However, a tax rate calculated under this 29 subsection may not be more than 50 percent. 30 * Sec. 19. AS 43.55.011(h) is amended to read: 31 (h) For purposes of (g) of this section, the price index for a month is
01 calculated by subtracting 30 [40] from the number that is equal to the quotient of the 02 total of the [MONTHLY] production tax values [VALUE] of the taxable oil and gas 03 produced by the producer from all leases or properties in the state during that 04 month, as calculated under AS 43.55.160, divided by the total amount of that [THE 05 TAXABLE] oil and gas produced by the producer during that month, in BTU 06 equivalent barrels. However, a price index calculated under this subsection may not 07 be less than zero. 08 * Sec. 20. AS 43.55.011(j) is amended to read: 09 (j) For a calendar year before 2022, the [TOTAL] tax levied by (e) [AND (g)] 10 of this section for [ON] gas produced from a lease or property in the Cook Inlet 11 sedimentary basin may not exceed 12 (1) for a lease or property that first commenced commercial 13 production of gas before April 1, 2006, the product obtained by multiplying (A) the 14 amount of taxable gas produced during the calendar year from the lease or property, 15 times (B) the average rate of tax that was imposed under this chapter for [ON] 16 taxable gas produced from the lease or property for the 12-month period ending on 17 March 31, 2006, times (C) the quotient obtained by dividing the total gross value at 18 the point of production of the taxable gas produced from the lease or property during 19 the 12-month period ending on March 31, 2006, by the total amount of that gas; 20 (2) for a lease or property that first commences commercial 21 production of gas after March 31, 2006, the product obtained by multiplying (A) the 22 amount of taxable gas 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 gas produced from all leases or properties in the Cook Inlet sedimentary basin 25 for the 12-month period ending on March 31, 2006, times (C) the average prevailing 26 value for gas delivered in the Cook Inlet area for the 12-month period ending 27 March 31, 2006, as determined by the department under AS 43.55.020(f). 28 * Sec. 21. AS 43.55.011(k) is amended to read: 29 (k) For a calendar year before 2022, the [TOTAL] tax levied by (e) [AND 30 (g)] of this section for [ON] oil produced from a lease or property in the Cook Inlet 31 sedimentary basin may not exceed
01 (1) for a lease or property that first commenced commercial 02 production of oil before April 1, 2006, the product obtained by multiplying (A) the 03 amount of taxable oil produced during the calendar year from the lease or property, 04 times (B) the average rate of tax that was imposed under this chapter for [ON] 05 taxable oil produced from the lease or property for the 12-month period ending on 06 March 31, 2006, times (C) the quotient obtained by dividing the total gross value at 07 the point of production of the taxable oil produced from the lease or property during 08 the 12-month period ending on March 31, 2006, by the total amount of that oil; 09 (2) for a lease or property that first commences commercial 10 production of oil after March 31, 2006, the product obtained by multiplying (A) the 11 amount of taxable oil produced during the calendar year from the lease or property, 12 times (B) the average rate of tax that was imposed under this chapter for [ON] 13 taxable oil produced from all leases or properties in the Cook Inlet sedimentary basin 14 for the 12-month period ending on March 31, 2006, times (C) the average prevailing 15 value for oil produced and delivered in the Cook Inlet area for the 12-month period 16 ending on March 31, 2006, as determined by the department under AS 43.55.020(f). 17 * Sec. 22. AS 43.55.011(m) is amended to read: 18 (m) Notwithstanding any contrary provision of AS 38.05.180(i), 19 AS 41.09.010, AS 43.20.043, AS 43.55.024, or 43.55.025, tax credits under 20 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, AS 43.55.024, and 43.55.025 that are 21 allocated to gas produced from leases or properties in the Cook Inlet sedimentary 22 basin and that are available to be applied against a tax levied by (e) of this section for 23 [ON] gas produced from leases or properties in the Cook Inlet sedimentary basin 24 during a calendar year may be applied only against that [THE] tax and tax credits 25 under AS 38.05.180(i), AS 41.09.010, AS 43.20.043, AS 43.55.024, and 43.55.025 26 that are allocated to gas subject to (o) of this section and that are available to be 27 applied against a tax levied by (e) of this section for that gas during a calendar 28 year may be applied only against that tax [LEVIED BY (e) OF THIS SECTION 29 ON THAT GAS]. The amount by which the amount of tax credits that are allocated to 30 gas produced from leases or properties in the Cook Inlet sedimentary basin or to gas 31 subject to (o) of this section, respectively, and that the producer would otherwise be
01 allowed to use for a later calendar year or transfer to another person exceeds the 02 amount of tax credits whose application would reduce the tax levied by (e) of this 03 section for [ON] that respective gas to zero, if any, is considered the amount of 04 excess tax credits, and the excess tax credits are subject to the following, applied 05 separately for the Cook Inlet sedimentary basin and for gas subject to (o) of this 06 section, respectively: 07 (1) for each lease or property for which a limitation under (j), [OR] 08 (k), or (o) of this section on the tax levied by (e) [AND (g)] of this section has the 09 effect of reducing the producer's tax below the amount of tax that would be levied in 10 the absence of that limitation, the producer shall calculate the amount of that 11 reduction; 12 (2) the producer shall calculate the total of the reductions calculated 13 under (1) of this subsection for all affected leases or properties; 14 (3) the producer shall reduce the amount of excess tax credits by the 15 total calculated under (2) of this subsection, but not to less than zero; 16 (4) any amount of excess tax credits remaining after reduction under 17 (3) of this subsection may be used for a later calendar year, transferred to another 18 person, or applied against a tax levied for [ON] oil or gas produced from a lease or 19 property located anywhere in the state to the extent otherwise allowed under 20 applicable law governing the tax credits. 21 * Sec. 23. AS 43.55.011(n) is amended to read: 22 (n) Allocation of credits under (m) of this section shall be made under 23 regulations adopted by the department that provide for reasonable methods of 24 allocating tax credits to gas produced from leases or properties in the Cook Inlet 25 sedimentary basin and to gas subject to (o) of this section. The method of allocating 26 tax credits available under AS 43.55.024 shall be based on the number of BTU 27 equivalent barrels produced from a lease or property. 28 * Sec. 24. AS 43.55.011 is amended by adding a new subsection to read: 29 (o) For a calendar year before 2022, the tax levied by (e) of this section for 30 each 1,000 cubic feet of gas that is produced from a lease or property outside of the 31 Cook Inlet sedimentary basin and used in the state may not exceed the amount of tax
01 for each 1,000 cubic feet of gas that is determined under (j)(2) of this section. 02 * Sec. 25. AS 43.55.020(a) is amended to read: 03 (a) For a calendar year, a producer subject to tax under AS 43.55.011(e), (f), 04 [(g),] or (i), and notwithstanding that a producer may be liable for the tax under 05 AS 43.55.011(f) rather than the tax under AS 43.55.011(e), shall pay the tax as 06 follows: 07 (1) an installment payment of the estimated tax levied by 08 AS 43.55.011(e) or (f), net of any tax credits applied as allowed by law, is due for 09 each month of the calendar year on the last day of the following month; the amount of 10 the installment payment is [THE SUM OF THE AMOUNTS CALCULATED 11 UNDER (2) AND (3) OF THIS SUBSECTION, BUT NOT LESS THAN ZERO; 12 (2) THE FIRST OF THE TWO AMOUNTS USED TO 13 CALCULATE THE INSTALLMENT PAYMENT FOR A MONTH UNDER (1) OF 14 THIS SUBSECTION IS] equal to the remainder obtained by subtracting 15 [(A)] 1/12 of the tax credits that are allowed by law to be 16 applied against the tax levied by AS 43.55.011(e) for the calendar year [;] 17 from 18 [(B)] the total of the monthly production values calculated 19 under AS 43.55.160 [IN THE MANNER PROVIDED IN 20 AS 43.55.160(a)(2)] of all oil and gas taxable under AS 43.55.011(e) and 21 produced by the producer from leases or properties in the state during the 22 month, multiplied by the total tax rate for the month determined [22.5 23 PERCENT; 24 [(3) THE SECOND OF THE TWO AMOUNTS USED TO 25 CALCULATE THE INSTALLMENT PAYMENT FOR A MONTH UNDER (1) OF 26 THIS SUBSECTION IS THE AMOUNT CALCULATED FOR THE MONTH] 27 under AS 43.55.011(g); 28 (2) [(4)] an installment payment of the estimated tax levied by 29 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 30 on the last day of the following month; the amount of the installment payment is the 31 sum of
01 (A) the applicable percentage rate for oil provided under 02 AS 43.55.011(i), multiplied by the gross value at the point of production of 03 the oil taxable under AS 43.55.011(i) and produced from the lease or property 04 during the month; plus 05 (B) the applicable percentage rate for gas provided under 06 AS 43.55.011(i), multiplied times the gross value at the point of production of 07 the gas taxable under AS 43.55.011(i) and produced from the lease or property 08 during the month; 09 (3) [(5)] any amount of tax levied by AS 43.55.011(e), (f), and (i) 10 [AS 43.55.011(e) - (g) AND (i)], net of any credits applied as allowed by law, that 11 exceeds the total of the amounts due as installment payments of estimated tax is due 12 on March 31 of the year following the calendar year of production. 13 * Sec. 26. AS 43.55.020(d) is amended to read: 14 (d) In making settlement with the royalty owner for oil and gas that is taxable 15 under AS 43.55.011, the producer may deduct the amount of the tax paid on taxable 16 royalty oil and gas, or may deduct taxable royalty oil or gas equivalent in value at the 17 time the tax becomes due to the amount of the tax paid. If the total deductions of 18 installment payments of estimated tax for a calendar year exceed the actual tax for 19 that calendar year, the producer shall, before April 1 of the following year, refund the 20 excess to the royalty owner. Unless otherwise agreed between the producer and the 21 royalty owner, the amount of the tax paid under AS 43.55.011(e) and (f) 22 [AS 43.55.011(e) - (g)] on taxable royalty oil and gas for a calendar year, other than 23 oil and gas the ownership or right to which constitutes a landowner's royalty interest, 24 is considered to be the gross value at the point of production of the taxable royalty oil 25 and gas produced during the calendar year multiplied by a figure that is a quotient, in 26 which 27 (1) the numerator is the producer's total tax liability under 28 AS 43.55.011(e) and (f) [AS 43.55.011(e) - (g)] for the calendar year of production; 29 and 30 (2) the denominator is the total gross value at the point of production 31 of the oil and gas taxable under AS 43.55.011(e) and (f) [AS 43.55.011(e) - (g)]
01 produced by the producer from all leases and properties in the state during the 02 calendar year. 03 * Sec. 27. AS 43.55.020(g) is amended to read: 04 (g) Notwithstanding any contrary provision of AS 43.05.225, an unpaid 05 amount of an installment payment required under (a)(1) and (2) [(a)(1) - (4)] of this 06 section that is not paid when due bears interest (1) at the rate provided for an 07 underpayment under 26 U.S.C. 6621 (Internal Revenue Code), as amended, 08 compounded daily, from the date the installment payment is due until [THE] 09 March 31 of the year following the calendar year of production [DESCRIBED IN 10 AS 43.55.030(a)], and (2) as provided for a delinquent tax under AS 43.05.225 after 11 that March 31. Interest accrued under (1) of this subsection that remains unpaid after 12 that March 31 is treated as an addition to tax that bears interest under (2) of this 13 subsection. An unpaid amount of tax due under (a)(3) [(a)(5)] of this section that is 14 not paid when due bears interest as provided for a delinquent tax under AS 43.05.225. 15 * Sec. 28. AS 43.55.020(h) is amended to read: 16 (h) Notwithstanding any contrary provision of AS 43.05.280, 17 (1) an overpayment of an installment payment required under (a)(1) 18 and (2) [(a)(1) - (4)] of this section bears interest at the rate provided for an 19 overpayment under 26 U.S.C. 6621 (Internal Revenue Code), as amended, 20 compounded daily, from the later of the date the installment payment is due or the 21 date the overpayment is made, until the earlier of 22 (A) the date it is refunded or is applied to an underpayment; [,] 23 or 24 (B) [THE] March 31 of the year following the calendar year 25 of production [DESCRIBED IN AS 43.55.030(a)]; 26 (2) except as provided under (1) of this subsection, interest with 27 respect to an overpayment is allowed only on any net overpayment of the payments 28 required under (a) of this section that remains after the later of [THE] March 31 of 29 the year following the calendar year of production [DESCRIBED IN 30 AS 43.55.030(a)] or the date that the statement required under AS 43.55.030(a) is 31 filed;
01 (3) interest is allowed under (2) of this subsection only from a date 02 that is 90 days after the later of [THE] March 31 of the year following the calendar 03 year of production [DESCRIBED IN AS 43.55.030(a)] or the date that the statement 04 required under AS 43.55.030(a) is filed; interest is not allowed if the overpayment 05 was refunded within the 90-day period; 06 (4) interest under (2) and (3) of this subsection is paid at the rate and 07 in the manner provided in AS 43.05.225(1). 08 * Sec. 29. AS 43.55.023(i) is amended to read: 09 (i) For the purposes of this section, 10 (1) a producer's or explorer's transitional investment expenditures are 11 the sum of the expenditures the producer or explorer incurred after March 31, 2001, 12 and before April 1, 2006, that would be qualified capital expenditures if they were 13 incurred after March 31, 2006, less the sum of the payments or credits the producer or 14 explorer received before April 1, 2006, for the sale or other transfer of assets, 15 including geological, geophysical, or well data or interpretations, acquired by the 16 producer or explorer as a result of expenditures the producer or explorer incurred 17 before April 1, 2006, that would be qualified capital expenditures, if they were 18 incurred after March 31, 2006; 19 (2) a producer or explorer that did not have commercial production 20 of oil or gas from a lease or property in the state before January 1, 2008, may 21 elect to take a tax credit against a tax levied by [DUE UNDER] AS 43.55.011(e) in 22 the amount of 20 percent of the producer's or explorer's transitional investment 23 expenditures, but only to the extent that the amount does not exceed 1/10 of the 24 producer's or explorer's qualified capital expenditures that were incurred after 25 March 31, 2006, and before January 1, 2008 [ARE INCURRED DURING THE 26 CALENDAR YEAR FOR WHICH THE CREDIT IS TAKEN]; 27 (3) a producer or explorer may not take a tax credit for a transitional 28 investment expenditure 29 (A) for any calendar year after [THE LATER OF 30 (i)] 2013; [OR 31 (ii) THE SIXTH CALENDAR YEAR AFTER THE
01 CALENDAR YEAR FOR WHICH THE PRODUCER FIRST 02 APPLIES A CREDIT UNDER THIS SUBSECTION AGAINST A 03 TAX DUE UNDER AS 43.55.011(e), IF THE PRODUCER DID NOT 04 HAVE COMMERCIAL PRODUCTION OF OIL OR GAS FROM A 05 LEASE OR PROPERTY IN THE STATE BEFORE APRIL 1, 2006;] 06 (B) more than once; or 07 (C) if a credit for that expenditure was taken under 08 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 09 (4) notwithstanding (d), (e), and (g) of this section, a producer or 10 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for 11 a transitional investment expenditure. 12 * Sec. 30. AS 43.55.024(a) is amended to read: 13 (a) For a calendar year for which a producer's tax liability under 14 AS 43.55.011(e) [OR (f)] on oil and gas produced from leases or properties outside 15 the Cook Inlet sedimentary basin, no part of which is north of 68 degrees North 16 latitude, exceeds zero before application of any credits under this chapter, a producer 17 that is qualified under (e) of this section may apply a tax credit against that liability of 18 not more than $6,000,000. 19 * Sec. 31. AS 43.55.024(c) is amended to read: 20 (c) For a calendar year for which a producer's tax liability under 21 AS 43.55.011(e) [OR (f)] exceeds zero before application of any credits under this 22 chapter, other than a credit under (a) of this section but after application of any credit 23 under (a) of this section, a producer that is qualified under (e) of this section and 24 whose average amount of oil and gas produced a day and taxable under 25 AS 43.55.011(e) [OR (f)] is less than 100,000 BTU equivalent barrels a day may 26 apply a tax credit under this subsection against that liability. A producer whose 27 average amount of oil and gas produced a day and taxable under AS 43.55.011(e) 28 [OR (f)] is 29 (1) not more than 50,000 BTU equivalent barrels may apply a tax 30 credit of not more than $12,000,000 for the calendar year; 31 (2) more than 50,000 and less than 100,000 BTU equivalent barrels
01 may apply a tax credit of not more than $12,000,000 multiplied by the following 02 fraction for the calendar year: 03 1 - [2 X (AP - 50,000)] ÷ 100,000 04 where AP = the average amount of oil and gas taxable under AS 43.55.011(e) [OR 05 (f)], produced a day during the calendar year in BTU equivalent barrels. 06 * Sec. 32. AS 43.55.024(e) is amended to read: 07 (e) On written application by a producer that includes any information the 08 department may require, the department shall determine whether the producer 09 qualifies for a calendar year under this section. To qualify under this section, a 10 producer must demonstrate that its operation in the state or its ownership of an 11 interest in a lease or property in the state as a distinct producer would not result in the 12 division among multiple producer entities of any production tax liability under 13 AS 43.55.011(e) [OR (f)] that reasonably would be expected to be attributed to a 14 single producer if the tax credit provisions of (a) or (c) of this section did not exist. 15 * Sec. 33. AS 43.55.025(a) is amended to read: 16 (a) Subject to the terms and conditions of this section, a credit against the 17 production tax levied by [DUE UNDER] AS 43.55.011(e) [OR (f)] is allowed for 18 exploration expenditures that qualify under (b) of this section in an amount equal to 19 one of the following: 20 (1) 20 percent of the total exploration expenditures that qualify only 21 under (b) and (c) of this section; 22 (2) 20 percent of the total exploration expenditures [FOR WORK 23 PERFORMED BEFORE JULY 1, 2007, AND] that qualify only under (b) and (d) of 24 this section; 25 (3) 40 percent of the total exploration expenditures that qualify under 26 (b), (c), and (d) of this section; or 27 (4) 40 percent of the total exploration expenditures that qualify only 28 under (b) and (e) of this section. 29 * Sec. 34. AS 43.55.025(b) is amended to read: 30 (b) To qualify for the production tax credit under (a) of this section, an 31 exploration expenditure must be incurred for work performed [ON OR] after
01 December 31, 2007 [JULY 1, 2003], and before July 1, 2016, [EXCEPT THAT AN 02 EXPLORATION EXPENDITURE FOR A COOK INLET PROSPECT MUST BE 03 INCURRED FOR WORK PERFORMED ON OR AFTER JULY 1, 2005,] and 04 (1) may be for seismic or other geophysical exploration costs not 05 connected with a specific well; 06 (2) if for an exploration well, 07 (A) must be incurred by an explorer that holds an interest in 08 the exploration well for which the production tax credit is claimed; 09 (B) may be for either a [AN OIL OR GAS DISCOVERY] 10 well that encounters an oil or gas deposit or a dry hole; [AND] 11 (C) must be for a well that has been completed or 12 abandoned at the time the explorer claims the tax credit under (f) of this 13 section; and 14 (D) must be for goods, services, or rentals of personal 15 property reasonably required for the surface preparation, drilling, casing, 16 cementing, and logging of an exploration well, and, in the case of a dry hole, 17 for the expenses required for abandonment if the well is abandoned within 18 18 months after the date the well was spudded; 19 (3) may not be for testing, stimulation, or completion costs; 20 administration, supervision, engineering, or lease operating costs; geological or 21 management costs; community relations or environmental costs; bonuses, taxes, or 22 other payments to governments related to the well; costs arising from gross 23 negligence or violation of health, safety, or environmental statutes or 24 regulations; or other costs that are generally recognized as indirect costs or financing 25 costs; and 26 (4) may not be incurred for an exploration well or seismic exploration 27 that is included in a plan of exploration or a plan of development for any unit on 28 May 13, 2003. 29 * Sec. 35. AS 43.55.025(c) is repealed and reenacted to read: 30 (c) To be eligible for the 20 percent production tax credit authorized by (a)(1) 31 of this section or the 40 percent production tax credit authorized by (a)(3) of this
01 section, exploration expenditures must 02 (1) qualify under (b) of this section; and 03 (2) be for an exploration well, subject to the following: 04 (A) before spudding the well, (i) the explorer shall submit to 05 the commissioner of natural resources the information necessary to determine 06 whether the 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 well; 08 and (ii) the commissioner of natural resources must make an affirmative 09 determination on that question; the commissioner of natural resources shall 10 decide whether to make that determination within 60 days after receiving all 11 the necessary information from the explorer and based on the information 12 received and on other information the commissioner of natural resources may 13 consider relevant; 14 (B) for an exploration well other than a well to explore a Cook 15 Inlet prospect, the well must be located and drilled in such a manner that the 16 bottom hole is located not less than three miles away from the bottom hole of 17 a preexisting well drilled for oil or gas, irrespective of whether the preexisting 18 well has been completed, suspended, or abandoned; 19 (C) after completion or abandonment of the exploration well, 20 the commissioner of natural resources must determine that the well adequately 21 achieved the explorer's stated geological objective. 22 * Sec. 36. AS 43.55.025(f) is amended to read: 23 (f) For a production tax credit under this section, 24 (1) an explorer shall, in a form prescribed by the department and, 25 except for a credit under (l) of this section, within six months of the completion of 26 the exploration activity, claim the credit and submit information sufficient to 27 demonstrate to the department's satisfaction that the claimed exploration expenditures 28 qualify under this section; 29 (2) an explorer shall agree, in writing, 30 (A) to notify the Department of Natural Resources, within 30 31 days after completion of seismic or geophysical data processing, completion
01 of [A] well drilling, or filing of a claim for credit, whichever is the latest, for 02 which exploration costs are claimed, of the date of completion and submit a 03 report to that department describing the processing sequence and providing a 04 list of data sets available; [IF, UNDER (c)(2)(B) OF THIS SECTION, AN 05 EXPLORER SUBMITS A CLAIM FOR A CREDIT FOR EXPENDITURES 06 FOR AN EXPLORATION WELL THAT IS LOCATED WITHIN THREE 07 MILES OF A WELL ALREADY DRILLED FOR OIL AND GAS, IN 08 ADDITION TO THE SUBMISSIONS REQUIRED UNDER (1) OF THIS 09 SUBSECTION, THE EXPLORER SHALL SUBMIT THE INFORMATION 10 NECESSARY FOR THE COMMISSIONER OF NATURAL RESOURCES 11 TO EVALUATE THE VALIDITY OF THE EXPLORER'S CLAIM THAT 12 THE WELL IS DIRECTED AT A DISTINCTLY SEPARATE 13 EXPLORATION TARGET, AND THE COMMISSIONER OF NATURAL 14 RESOURCES SHALL, UPON RECEIPT OF ALL EVIDENCE 15 SUFFICIENT FOR THE COMMISSIONER TO EVALUATE THE 16 EXPLORER'S CLAIM, MAKE THAT DETERMINATION WITHIN 60 17 DAYS;] 18 (B) to provide to the Department of Natural Resources, within 19 30 days after the date of a request, unless a longer period is provided by the 20 Department of Natural Resources, specific data sets, ancillary data, and 21 reports identified in (A) of this paragraph; in this subparagraph, 22 (i) a seismic or geophysical data set includes the 23 data for an entire seismic survey, irrespective of whether the 24 survey area covers nonstate land in addition to state land or land 25 in a unit in addition to land outside a unit; 26 (ii) well data include all derivative products, results, 27 and copies of data collected and data analyses for the well; well 28 logs; sample analyses; geophysical and velocity data including 29 vertical seismic profiles and check shot surveys; and tangible 30 material including, for each whole core collected, a lengthwise cut 31 slab that is at least 1/3 of the whole core volume, and
01 representative samples, as specified by the Department of Natural 02 Resources, of other gaseous, liquid, or solid material collected 03 from drilling or testing the well; 04 (C) that, notwithstanding any provision of AS 38, information 05 provided under this paragraph will be held confidential by the Department of 06 Natural Resources 07 (i) in the case of well data, until the expiration of the 08 24-month period of confidentiality described in AS 31.05.035(c), 09 without extension, after which the Department of Natural 10 Resources [FOR 10 YEARS FOLLOWING THE COMPLETION 11 DATE, AT WHICH TIME THAT DEPARTMENT] will release the 12 information after 30 days' public notice; 13 (ii) in the case of seismic or other geophysical data, 14 other than seismic data acquired by seismic exploration subject to 15 (l) of this section, for 10 years following the completion date, at 16 which time the Department of Natural Resources will release the 17 information after 30 days' public notice; 18 (iii) in the case of seismic data obtained by seismic 19 exploration subject to (l) of this section, only until the expiration of 20 30 days' public notice issued on or after the date the production 21 tax credit certificates are issued under (5) of this subsection; and 22 (D) that, in the case of well data, the explorer will not make 23 a request under AS 31.05.035(c) that the commissioner of natural 24 resources keep the data confidential for longer than the 24-month period 25 of confidentiality described in AS 31.05.035(c); 26 (3) if more than one explorer holds an interest in a well or seismic 27 exploration, 28 (A) each explorer may claim an amount of credit that is 29 proportional to the explorer's cost incurred; 30 (B) in the case of a well, each explorer holding an interest 31 in the well shall agree, in writing, that the explorer will not make the
01 request described in (2)(D) of this subsection; 02 (4) the department may exercise the full extent of its powers as though 03 the explorer were a taxpayer under this title, in order to verify that the claimed 04 expenditures are qualified exploration expenditures under this section; and 05 (5) if the department is satisfied that the explorer's claimed 06 expenditures are qualified under this section and that all data required to be 07 submitted under this section have been submitted, the department shall issue to the 08 explorer two [A] production tax credit certificates, each [CERTIFICATE] for half of 09 the amount of the credit to be allowed against production taxes levied by 10 AS 43.55.011(e); the credit shown on one of the two certificates is available for 11 immediate use; the credit shown on the second of the two certificates may not be 12 applied against a tax for a calendar year earlier than the calendar year following 13 the calendar year in which the certificate is issued, and the certificate must 14 contain a conspicuous statement to that effect; notwithstanding any contrary 15 provision of AS 38, AS 40.25.100, or AS 43.05.230, the following information is 16 not confidential: 17 (A) the explorer's name; 18 (B) the date of the application; 19 (C) the location of the well or seismic exploration; 20 (D) the date of the department's issuance of the certificate; 21 and 22 (E) the date on which the information required to be 23 submitted under this section will be released [DUE UNDER 24 AS 43.55.011(e) OR (f)]. 25 * Sec. 37. AS 43.55.025(g) is amended to read: 26 (g) An explorer, other than an entity that is exempt from taxation under 27 this chapter, may transfer, convey, or sell its production tax credit certificate to any 28 person, and any person who receives a production tax credit certificate may also 29 transfer, convey, or sell the certificate. 30 * Sec. 38. AS 43.55.025(h) is amended to read: 31 (h) A producer that purchases a production tax credit certificate may apply
01 the credits against its production tax liability under AS 43.55.011(e) [OR (f)]. 02 Regardless of the price the producer paid for the certificate, the producer may receive 03 a credit against its production tax liability for the full amount of the credit, but for not 04 more than the amount for which the certificate is issued. A production tax credit 05 allowed under this section may not be applied more than once. 06 * Sec. 39. AS 43.55.025(i) is repealed and reenacted to read: 07 (i) For a production tax credit under this section, 08 (1) a credit may not be applied to reduce a taxpayer's tax liability 09 under AS 43.55.011(e) below zero for a calendar year; and 10 (2) an amount of the production tax credit in excess of the amount that 11 may be applied for a calendar year under this subsection may be carried forward and 12 applied against the taxpayer's tax liability under AS 43.55.011(e) in one or more later 13 calendar years. 14 * Sec. 40. AS 43.55.025(k) is amended by adding a new paragraph to read: 15 (4) "preexisting well" means a well that was spudded more than 540 16 days but less than 35 years before the date on which the exploration well to which it 17 is compared is spudded. 18 * Sec. 41. AS 43.55.025 is amended by adding a new subsection to read: 19 (l) Subject to the terms and conditions of this section, if a claim is filed under 20 (f)(1) of this section before January 1, 2016, a credit against the production tax levied 21 by AS 43.55.011(e) is allowed in an amount equal to five percent of an eligible 22 expenditure under this subsection incurred for seismic exploration performed before 23 July 1, 2003. To be eligible under this subsection, an expenditure must 24 (1) have been for seismic exploration that 25 (A) obtained data that the commissioner of natural resources 26 considers to be in the best interest of the state to acquire for public 27 distribution; and 28 (B) was conducted outside the boundaries of a production unit; 29 however, the amount of the expenditure that is otherwise eligible under this 30 section is reduced proportionately by the portion of the seismic exploration 31 activity that crossed into a production unit; and
01 (2) qualify under (b)(3) of this section. 02 * Sec. 42. AS 43.55 is amended by adding a new section to read: 03 Sec. 43.55.028. Oil and gas tax credit fund established; cash purchases of 04 tax credit certificates. (a) The oil and gas tax credit fund is established as a separate 05 fund of the state. The purpose of the fund is for the purchase of transferable tax credit 06 certificates issued under this chapter that are subject to purchase by the department. 07 (b) The oil and gas tax credit fund consists of money appropriated to the fund, 08 including any appropriation of the percentage provided under (c) of this section of all 09 revenue from taxes levied by AS 43.55.011 that is not required to be deposited in the 10 constitutional budget reserve fund established in art. IX, sec. 17(a), Constitution of 11 the State of Alaska, and any appropriation from the earnings of the fund. 12 (c) The applicable percentage for a fiscal year under (b) of this section is 13 determined with reference to the average price or value forecast by the department for 14 Alaska North Slope oil sold or otherwise disposed of on the United States West Coast 15 during the fiscal year for which the appropriation of revenue from taxes levied by 16 AS 43.55.011 is made. If that forecast is 17 (1) $60 a barrel or higher, the applicable percentage is 10 percent; 18 (2) less than $60 a barrel, the applicable percentage is 15 percent. 19 (d) The department shall manage the fund. 20 (e) The department may, on the written application of the person to whom a 21 production tax credit certificate has been issued under AS 43.55.025(f), use available 22 money in the oil and gas tax credit fund to purchase, in whole or in part, the 23 certificate if the department finds that 24 (1) the calendar year of the purchase is not earlier than the first 25 calendar year for which the credit shown on the certificate would otherwise be 26 allowed to be applied against a tax; 27 (2) within 24 months after applying for the transferable tax credit 28 certificate or filing a claim for the production tax credit certificate, the applicant 29 incurred a qualified capital expenditure or was the successful bidder on a bid 30 submitted for a lease on state land under AS 38.05.180(f); 31 (3) the amount expended for the purchase would not exceed the total
01 of qualified capital expenditures and successful bids described in (2) of this 02 subsection that have not been the subject of a finding made under this paragraph for 03 purposes of a previous purchase of a certificate; 04 (4) the applicant does not have an outstanding liability to the state for 05 unpaid delinquent taxes under this title; 06 (5) the applicant's total tax liability under AS 43.55.011(e), after 07 application of all available tax credits, for the calendar year in which the application 08 is made is zero; 09 (6) the applicant's average amount of oil and gas taxable under 10 AS 43.55.011(e) and produced each day during the calendar year preceding the 11 calendar year in which the application is made was not more than 50,000 BTU 12 equivalent barrels; and 13 (7) the purchase is consistent with this section and regulations adopted 14 under this section. 15 (f) Money in the fund remaining at the end of a fiscal year does not lapse and 16 remains available for expenditure in successive fiscal years. 17 (g) The department may adopt regulations to carry out the purposes of this 18 section, including standards and procedures to allocate available money among 19 applications for purchases the total amount of which exceeds the amount of available 20 money in the fund. 21 (h) Nothing in this section creates a dedicated fund. 22 (i) In this section, "qualified capital expenditure" has the meaning given in 23 AS 43.55.023. 24 * Sec. 43. AS 43.55.030(a) is amended to read: 25 (a) A producer that produces oil or gas from a lease or property in the 26 state during a calendar year, whether or not any tax payment is due under 27 AS 43.55.020(a) for that oil or gas, [THE PERSON PAYING THE TAX] shall file 28 with the department on March 31 of the following year [FOLLOWING THE 29 CALENDAR YEAR FOR WHICH THE TAX WAS LEVIED] a statement, under 30 oath, in a form prescribed by the department, giving, with other information required, 31 the following:
01 (1) a description of each lease or property from which [THE] oil or 02 [AND] gas was [WERE] produced, by name, legal description, lease number, or 03 accounting codes assigned by the department; 04 (2) the names of the producer and, if different, the person paying the 05 tax, if any; 06 (3) the gross amount of oil and the gross amount of gas produced from 07 each lease or property, and the percentage of the gross amount of oil and gas owned 08 by the [EACH] producer [FOR WHOM THE TAX IS PAID]; 09 (4) the gross value at the point of production of the oil and of the gas 10 produced from each lease or property owned by the [EACH] producer and the costs 11 of transportation of the oil and gas [FOR WHOM THE TAX IS PAID]; 12 (5) the name of the first purchaser and the price received for the oil 13 and for the gas, unless relieved from this requirement in whole or in part by the 14 department; [AND] 15 (6) the producer's qualified capital expenditures, as defined in 16 AS 43.55.023, other lease expenditures [AND ADJUSTMENTS AS 17 CALCULATED] under AS 43.55.165, and adjustments or other payments or 18 credits under AS 43.55.170; 19 (7) the production tax values of the oil and gas under 20 AS 43.55.160; 21 (8) any claims for tax credits to be applied; and 22 (9) calculations showing the amounts, if any, that were or are due 23 under AS 43.55.020(a) and interest on any underpayment or overpayment 24 [AS 43.55.160 - 43.55.170]. 25 * Sec. 44. AS 43.55.030(d) is amended to read: 26 (d) Reports required under this section [BY OR ON BEHALF OF THE 27 PRODUCER] are delinquent the first day following the day the report is due. The 28 person required to file the report is liable for a penalty, as determined by the 29 department under standards adopted in regulation by the department, of not 30 more than $1,000 for each day the person fails to file the report at the time 31 required. The penalty is in addition to the penalties in AS 43.05.220 and
01 43.05.290 and is assessed, collected, and paid in the same manner as a tax 02 deficiency under this title. In this subsection, "report" includes a statement. 03 * Sec. 45. AS 43.55.030 is amended by adding new subsections to read: 04 (e) An explorer or producer that incurs a lease expenditure under 05 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 06 year but does not produce oil or gas from a lease or property in the state during the 07 calendar year shall file with the department on March 31 of the following year a 08 statement, under oath, in a form prescribed by the department, giving, with other 09 information required, the following: 10 (1) the producer's qualified capital expenditures, as defined in 11 AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other 12 payments or credits under AS 43.55.170; and 13 (2) if the explorer or producer receives a payment or credit under 14 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 15 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount. 16 (f) The department may require a producer, an explorer, or an operator of a 17 lease or property to file monthly reports, as applicable, of 18 (1) the amounts and gross value at the point of production of oil and 19 gas produced; 20 (2) transportation costs of the oil and gas; 21 (3) any unscheduled interruption of, or reduction in the rate of, oil or 22 gas production; 23 (4) lease expenditures and adjustments under AS 43.55.165 and 24 43.55.170; 25 (5) joint interest billings; 26 (6) contracts for the sale or transportation of oil or gas; 27 (7) information and calculations used in determining monthly 28 installment payments of estimated tax under AS 43.55.020(a); and 29 (8) other records and information the department considers necessary 30 for the administration of this chapter. 31 * Sec. 46. AS 43.55.040 is amended to read:
01 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 02 AS 43.05.405 - 43.05.499, the department may 03 (1) require a person engaged in production and the agent or employee 04 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 05 or gas to furnish, whether by the filing of regular statements or reports or otherwise, 06 additional information that is considered by the department as necessary to compute 07 the amount of the tax; notwithstanding any contrary provision of law, the disclosure 08 of additional information under this paragraph to the producer obligated to pay the tax 09 does not violate AS 40.25.100(a) or AS 43.05.230(a); before disclosing information 10 under this paragraph that is otherwise required to be held confidential under 11 AS 40.25.100(a) or AS 43.05.230(a), the department shall 12 (A) provide the person that furnished the information a 13 reasonable opportunity to be heard regarding the proposed disclosure and the 14 conditions to be imposed under (B) of this paragraph; and 15 (B) impose appropriate conditions limiting 16 (i) access to the information to those legal counsel, 17 consultants, employees, officers, and agents of the producer who have 18 a need to know that information for the purpose of determining or 19 contesting the producer's tax obligation; and 20 (ii) the use of the information to use for that purpose; 21 (2) examine the books, records, and files of the [SUCH A] person; 22 (3) conduct hearings and compel the attendance of witnesses and the 23 production of books, records, and papers of any person; [AND] 24 (4) make an investigation or hold an inquiry that is considered 25 necessary to a disclosure of the facts as to 26 (A) the amount of production from any oil or gas location, or 27 of a company or other producer of oil or gas; and 28 (B) the rendition of the oil and gas for taxing purposes; 29 (5) require a producer, an explorer, or an operator of a lease or 30 property to file reports and copies of records that the department considers 31 necessary to forecast state revenue under this chapter; in the case of reports and
01 copies of records relating to proposed, expected, or approved unit expenditures 02 for a unit for which one or more working interest owners other than the 03 operator have authority to approve unit expenditures, the required reports and 04 copies of records may include those reports or copies of records that constitute 05 or disclose communications between the operator and the working interest 06 owners relating to unit budget matters; 07 (6) require a producer that has an average total production in the 08 state of more than 100,000 barrels a day for a calendar year to report the gross 09 value at the point of production of the producer's taxable oil and gas in the state 10 for a calendar year and the total amount of lease expenditures in the state for 11 that calendar year; and 12 (7) assess against a person required under this section to file a 13 report, statement, or other document a penalty, as determined by the 14 department under standards adopted in regulation by the department, of not 15 more than $1,000 for each day the person fails to file the report, statement, or 16 other document at the time required; the penalty is in addition to the penalties in 17 AS 43.05.220 and 43.05.290 and is assessed, collected, and paid in the same 18 manner as a tax deficiency under this title. 19 * Sec. 47. AS 43.55.050 is amended to read: 20 Sec. 43.55.050. Incorrect returns. The department may determine whether or 21 not a return required by this chapter to be filed with it is correct. If a person makes an 22 untrue or incorrect return of the gross amount of production, the gross value at the 23 point of production, the amount of lease expenditures, the amount of credits, or 24 other information that affects the amount of tax due under this chapter, [OR 25 THE VALUE OF IT,] or fails or refuses to make a return, the department shall, under 26 regulations adopted by it, determine the correct amount of tax due under this 27 chapter [GROSS PRODUCTION OR THE VALUE OF IT, AND COMPUTE THE 28 TAX]. 29 * Sec. 48. AS 43.55.050 is amended by adding a new subsection to read: 30 (b) The determination of the correct amount of tax due under this chapter by 31 the department is presumed to be correct, and the taxpayer bears the burden of proof
01 to prove that the determination by the department is incorrect and to prove the correct 02 amount of tax due under this chapter. 03 * Sec. 49. AS 43.55 is amended by adding a new section to read: 04 Sec. 43.55.055. Penalty for understatement of tax. (a) In addition to other 05 penalties prescribed by law, if there is a substantial understatement of tax required to 06 be shown on a return under this chapter, there shall be added to the tax an amount 07 equal to 20 percent of the substantial understatement of tax. 08 (b) In addition to other penalties prescribed by law, if there is a gross 09 understatement of tax required to be shown on a return under this chapter, there shall 10 be added to the tax an amount equal to 40 percent of the gross understatement of tax. 11 (c) In addition to the penalties imposed under (a) or (b) of this section, a 12 person who has made a substantial or gross underpayment of tax is liable to the state 13 for the reasonable costs of the state's enforcement action, including auditing costs. 14 (d) For purposes of this section, 15 (1) a substantial understatement of tax for any taxable year exists if 16 the amount of the understatement for the taxable year exceeds the lesser of 10 percent 17 of the tax required to be shown on the return for the taxable year or $10,000,000; 18 (2) a gross understatement of tax for any taxable year exists if the 19 amount of the understatement for the taxable year exceeds the lesser of 20 percent of 20 the tax required to be shown on the return for the taxable year or $20,000,000; 21 (3) "understatement" means the amount by which the tax required to 22 be shown on the return for the taxable year exceeds the amount of the tax reported as 23 due by the taxpayer as shown on the return. 24 * Sec. 50. AS 43.55 is amended by adding a new section to read: 25 Sec. 43.55.075. Limitation on assessment and amended returns. (a) Except 26 as provided in AS 43.05.260(c), the amount of a tax imposed by this chapter must be 27 assessed within six years after the latest return was filed. 28 (b) A decision of a regulatory agency, court, or other body with authority to 29 resolve disputes that results in a retroactive change to a lease expenditure, to an 30 adjustment to a lease expenditure, to costs of transportation, to sale price, to 31 prevailing value, or to consideration of quality differentials relating to the
01 commingling of oils has a corresponding effect, either an increase or decrease, as 02 applicable, on the production tax value of oil or gas or the amount or availability of a 03 tax credit as determined under this chapter. For purposes of this section, a change to a 04 lease expenditure includes a change in the categorization of a lease expenditure as a 05 qualified capital expenditure or as not a qualified capital expenditure. The producer 06 shall 07 (1) within 60 days after the change, notify the department in writing; 08 and 09 (2) within 120 days after the change, file amended returns covering all 10 periods affected by the change, unless the department agrees otherwise or a stay is in 11 place that affects the filing or payment, regardless of the pendency of appeals of the 12 decision. 13 (c) If an alteration in or modification of a producer's federal income tax return 14 or a recomputation of the producer's federal income tax or determination of 15 deficiency occurs that affects the amount of a tax imposed on the producer under this 16 chapter, the producer shall 17 (1) within 60 days after the final determination of the alteration, 18 modification, recomputation, or deficiency, notify the department in writing; and 19 (2) within 120 days after the final determination of the alteration, 20 modification, recomputation, or deficiency, file amended returns covering all affected 21 periods. 22 (d) In this section, 23 (1) "qualified capital expenditure" has the meaning given in 24 AS 43.55.023; 25 (2) "return" includes a report, a statement, and an amended return, 26 report, or statement. 27 * Sec. 51. AS 43.55.110 is amended by adding new subsections to read: 28 (e) The department may require that returns, statements, reports, notifications, 29 and applications filed under this chapter be filed electronically in a form and manner 30 approved or prescribed by the department. 31 (f) The department may require that payments required under this chapter be
01 made electronically in a form and manner approved or prescribed by the department. 02 (g) Notwithstanding AS 44.62, the department may issue, for the information 03 and guidance of producers, explorers, and other interested persons, advisory bulletins 04 stating the department's interpretation of provisions of this chapter and of regulations 05 adopted under this chapter. Unless otherwise provided by the department by 06 regulation, interpretations stated in the advisory bulletins are not binding on the 07 department or others. 08 (h) Subject to legislative appropriation, the department may compensate a 09 person who provides information to the department about noncompliance with the 10 provisions of this chapter by an explorer or a producer of oil or gas if that information 11 leads to the collection of additional taxes, penalties, or interest from the producer. The 12 amount of compensation under this subsection may not exceed the lesser of 13 $1,000,000 or 10 percent of the additional tax, penalty, or interest collected as a result 14 of the information. A state employee or an agent of the state is not eligible for 15 compensation under this subsection. 16 * Sec. 52. AS 43.55.150(a) is amended to read: 17 (a) For the purposes of AS 43.55.011 - 43.55.180, the gross value at the point 18 of production is calculated using the reasonable costs of transportation of the oil or 19 gas. The reasonable costs of transportation are the actual costs, except when the 20 (1) parties to the transportation of oil or gas are affiliated; 21 (2) contract for the transportation of oil or gas is not 22 (A) an arm's length transaction; or 23 (B) [IS NOT] representative of the market value of that 24 transportation; or [AND] 25 (3) method of transportation of oil or gas is not reasonable in view of 26 existing alternative methods of transportation. 27 * Sec. 53. AS 43.55.150(b) is amended to read: 28 (b) If the department finds that a condition [THE CONDITIONS] in (a)(1), 29 (2), or [AND] (3) of this section is [ARE] present, the department shall determine the 30 reasonable costs of transportation, using the fair market value of like transportation, 31 the fair market value of equally efficient and available alternative modes of
01 transportation, or other reasonable methods. Transportation costs fixed by tariff rates 02 that have been adjudicated as just and reasonable by [PROPERLY ON FILE 03 WITH] the Regulatory Commission of Alaska or other regulatory agency shall be 04 considered prima facie reasonable. 05 * Sec. 54. AS 43.55.160(a) is amended to read: 06 (a) Except as provided in (b) of this section, for the purposes of 07 [(1)] AS 43.55.011(e) and AS 43.55.020(a)(2) [, THE ANNUAL 08 PRODUCTION TAX VALUE OF THE TAXABLE 09 (A) OIL AND GAS PRODUCED DURING A CALENDAR 10 YEAR FROM LEASES OR PROPERTIES IN THE STATE THAT 11 INCLUDE LAND NORTH OF 68 DEGREES NORTH LATITUDE IS THE 12 GROSS VALUE AT THE POINT OF PRODUCTION OF THE OIL AND 13 GAS TAXABLE UNDER AS 43.55.011(e) AND PRODUCED BY THE 14 PRODUCER FROM THOSE LEASES OR PROPERTIES, LESS THE 15 PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE 16 CALENDAR YEAR APPLICABLE TO THE OIL AND GAS PRODUCED 17 BY THE PRODUCER FROM THOSE LEASES OR PROPERTIES, AS 18 ADJUSTED UNDER AS 43.55.170; 19 (B) OIL AND GAS PRODUCED DURING A CALENDAR 20 YEAR FROM LEASES OR PROPERTIES IN THE STATE OUTSIDE THE 21 COOK INLET SEDIMENTARY BASIN, NO PART OF WHICH IS NORTH 22 OF 68 DEGREES NORTH LATITUDE, IS THE GROSS VALUE AT THE 23 POINT OF PRODUCTION OF THE OIL AND GAS TAXABLE UNDER 24 AS 43.55.011(e) AND PRODUCED BY THE PRODUCER FROM THOSE 25 LEASES OR PROPERTIES, LESS THE PRODUCER'S LEASE 26 EXPENDITURES UNDER AS 43.55.165 FOR THE CALENDAR YEAR 27 APPLICABLE TO THE OIL AND GAS PRODUCED BY THE PRODUCER 28 FROM THOSE LEASES OR PROPERTIES, AS ADJUSTED UNDER 29 AS 43.55.170; 30 (C) OIL PRODUCED DURING A CALENDAR YEAR 31 FROM A LEASE OR PROPERTY IN THE COOK INLET SEDIMENTARY
01 BASIN IS THE GROSS VALUE AT THE POINT OF PRODUCTION OF 02 THE OIL TAXABLE UNDER AS 43.55.011(e) AND PRODUCED BY THE 03 PRODUCER FROM THAT LEASE OR PROPERTY, LESS THE 04 PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE 05 CALENDAR YEAR APPLICABLE TO THE OIL PRODUCED BY THE 06 PRODUCER FROM THAT LEASE OR PROPERTY, AS ADJUSTED 07 UNDER AS 43.55.170; 08 (D) GAS PRODUCED DURING A CALENDAR YEAR 09 FROM A LEASE OR PROPERTY IN THE COOK INLET SEDIMENTARY 10 BASIN IS THE GROSS VALUE AT THE POINT OF PRODUCTION OF 11 THE GAS TAXABLE UNDER AS 43.55.011(e) AND PRODUCED BY 12 THE PRODUCER FROM THAT LEASE OR PROPERTY, LESS THE 13 PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE 14 CALENDAR YEAR APPLICABLE TO THE GAS PRODUCED BY THE 15 PRODUCER FROM THAT LEASE OR PROPERTY, AS ADJUSTED 16 UNDER AS 43.55.170; 17 (2) AS 43.55.011(g)], the [MONTHLY] production tax value of the 18 taxable 19 (1) [(A)] oil and gas produced during a month from leases or 20 properties in the state that include land north of 68 degrees North latitude, other than 21 gas subject to AS 43.55.011(o), is the gross value at the point of production of the oil 22 and gas taxable under AS 43.55.011(e) [AS 43.55.011(g)] and produced by the 23 producer from those leases or properties, less 1/12 of the producer's lease 24 expenditures under AS 43.55.165 for the calendar year applicable to the oil and gas 25 produced by the producer from those leases or properties, as adjusted under 26 AS 43.55.170; 27 (2) [(B)] oil and gas produced during a month from leases or 28 properties in the state outside the Cook Inlet sedimentary basin, no part of which is 29 north of 68 degrees North latitude, other than gas subject to AS 43.55.011(o), is the 30 gross value at the point of production of the oil and gas taxable under 31 AS 43.55.011(e) [AS 43.55.011(g)] and produced by the producer from those leases
01 or properties, less 1/12 of the producer's lease expenditures under AS 43.55.165 for 02 the calendar year applicable to the oil and gas produced by the producer from those 03 leases or properties, as adjusted under AS 43.55.170; 04 (3) [(C)] oil produced during a month from a lease or property in the 05 Cook Inlet sedimentary basin is the gross value at the point of production of the oil 06 taxable under AS 43.55.011(e) [AS 43.55.011(g)] and produced by the producer from 07 that lease or property, less 1/12 of the producer's lease expenditures under 08 AS 43.55.165 for the calendar year applicable to the oil produced by the producer 09 from that lease or property, as adjusted under AS 43.55.170; 10 (4) [(D)] gas produced during a month from a lease or property in the 11 Cook Inlet sedimentary basin is the gross value at the point of production of the gas 12 taxable under AS 43.55.011(e) [AS 43.55.011(g)] and produced by the producer from 13 that lease or property, less 1/12 of the producer's lease expenditures under 14 AS 43.55.165 for the calendar year applicable to the gas produced by the producer 15 from that lease or property, as adjusted under AS 43.55.170; 16 (5) gas produced during a month from a lease or property outside 17 the Cook Inlet sedimentary basin and used in the state is the gross value at the 18 point of production of that gas taxable under AS 43.55.011(e) and produced by 19 the producer from that lease or property, less 1/12 of the producer's lease 20 expenditures under AS 43.55.165 for the calendar year applicable to that gas 21 produced by the producer from that lease or property as adjusted under 22 AS 43.55.170. 23 * Sec. 55. AS 43.55.160(c) is amended to read: 24 (c) Notwithstanding any contrary provision of AS 43.55.150, for purposes of 25 calculating a [MONTHLY] production tax value under (a) [(a)(2)] of this section, the 26 gross value at the point of production of the oil and gas taxable under 27 AS 43.55.011(e) [AS 43.55.011(g)] is calculated under regulations adopted by the 28 department that provide for using an appropriate monthly share of the producer's 29 costs of transportation for the calendar year. 30 * Sec. 56. AS 43.55.160(e) is amended to read: 31 (e) Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that
01 would otherwise be deductible by a producer in a calendar year but whose deduction 02 would cause a [AN ANNUAL] production tax value calculated under (a) [(a)(1)] of 03 this section of taxable oil or gas produced during the calendar year to be less than 04 zero may be used to establish a carried-forward annual loss under AS 43.55.023(b). In 05 this subsection, "producer" includes "explorer." 06 * Sec. 57. AS 43.55.165(a) is repealed and reenacted to read: 07 (a) For purposes of this chapter, a producer's lease expenditures for a calendar 08 year are 09 (1) costs, other than items listed in (e) of this section, that are 10 (A) incurred in the state by the producer during the calendar 11 year after March 31, 2006, to explore for, develop, or produce oil or gas 12 deposits located within the producer's leases or properties in the state or, in the 13 case of land in which the producer does not own an operating right, operating 14 interest, or working interest, to explore for oil or gas deposits within other 15 land in the state; and 16 (B) allowed by the department by regulation, based on the 17 department's determination that the costs satisfy the following three 18 requirements: 19 (i) the costs must be incurred upstream of the point of 20 production of oil and gas; 21 (ii) the costs must be ordinary and necessary costs of 22 exploring for, developing, or producing, as applicable, oil or gas 23 deposits; and 24 (iii) the costs must be direct costs of exploring for, 25 developing, or producing, as applicable, oil or gas deposits; and 26 (2) a reasonable allowance for that calendar year, as determined under 27 regulations adopted by the department, for overhead expenses that are directly related 28 to exploring for, developing, or producing, as applicable, the oil or gas deposits. 29 * Sec. 58. AS 43.55.165(b) is amended to read: 30 (b) For purposes of (a) of this section, 31 (1) direct costs include
01 (A) an expenditure, when incurred, to acquire an item if the 02 acquisition cost is otherwise a direct cost, notwithstanding that the 03 expenditure may be required to be capitalized rather than treated as an 04 expense for financial accounting or federal income tax purposes; 05 (B) payments of or in lieu of 06 (i) property taxes for properties on which oil and gas 07 exploration, development, or production is taking place; and 08 (ii) [,] sales and use taxes, motor fuel taxes, and excise 09 taxes related to transactions or activities involving oil or gas 10 exploration, development, or production; 11 (C) supplies to be used for oil or gas exploration, 12 development, or production [A REASONABLE ALLOWANCE, AS 13 DETERMINED UNDER REGULATIONS ADOPTED BY THE 14 DEPARTMENT, FOR OVERHEAD EXPENSES DIRECTLY RELATED 15 TO EXPLORING FOR, DEVELOPING, AND PRODUCING OIL OR GAS 16 DEPOSITS LOCATED WITHIN LEASES OR PROPERTIES OR OTHER 17 LAND IN THE STATE]; 18 (D) purchased fuel; 19 (E) routine maintenance; 20 (F) the wages and benefits of employees who are directly 21 participating in exploration, development, or production operations; and 22 (G) other direct costs as may be established in regulations 23 adopted by the department; 24 (2) in determining whether costs are lease expenditures, the 25 department may consider, among other factors, the 26 (A) typical industry practices and standards in the state 27 that determine the costs, other than items listed in (e) of this section, that 28 an operator is allowed to bill a producer that is not the operator, under 29 unit operating agreements or similar operating agreements that were in 30 effect before December 2, 2005, and were subject to negotiation with at 31 least one producer with substantial bargaining power, other than the
01 operator; and 02 (B) standards adopted by the Department of Natural 03 Resources that determine the costs, other than items listed in (e) of this 04 section, that a lessee is allowed to deduct from revenue in calculating net 05 profits under a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) [AN 06 ACTIVITY DOES NOT NEED TO BE PHYSICALLY LOCATED ON, 07 NEAR, OR WITHIN THE PREMISES OF THE LEASE OR PROPERTY 08 WITHIN WHICH AN OIL OR GAS DEPOSIT BEING EXPLORED FOR, 09 DEVELOPED, OR PRODUCED IS LOCATED IN ORDER FOR THE 10 COST OF THE ACTIVITY TO BE A COST UPSTREAM OF THE POINT 11 OF PRODUCTION OF THE OIL OR GAS]. 12 * Sec. 59. AS 43.55.165(e) is amended to read: 13 (e) For purposes of this section, lease expenditures do not include 14 (1) depreciation, depletion, or amortization; 15 (2) oil or gas royalty payments, production payments, lease profit 16 shares, or other payments or distributions of a share of oil or gas production, profit, or 17 revenue; 18 (3) taxes based on or measured by net income; 19 (4) interest or other financing charges or costs of raising equity or 20 debt capital; 21 (5) acquisition costs for a lease or property or exploration license; 22 (6) costs arising from fraud, wilful misconduct, [OR] gross 23 negligence, violation of law, or failure to comply with an obligation under a lease, 24 permit, or license issued by the state or federal government; 25 (7) fines or penalties imposed by law; 26 (8) costs of arbitration, litigation, [OR OTHER] dispute resolution 27 activities, lobbying, public relations, advertising, or policy advocacy [THAT 28 INVOLVE THE STATE OR CONCERN THE RIGHTS OR OBLIGATIONS 29 AMONG OWNERS OF INTERESTS IN, OR RIGHTS TO PRODUCTION FROM, 30 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) an expenditure otherwise deductible under (b) of this section 07 that is a result of [FOR A TRANSACTION THAT IS] an internal transfer, a 08 transaction with an affiliate, or a transaction between related parties, or is 09 otherwise not an arm's length transaction, unless the producer establishes to the 10 satisfaction of the department that the amount of the expenditure does not 11 exceed the [EXPENDITURES INCURRED THAT ARE IN EXCESS OF] fair 12 market value of the expenditure; 13 (13) an expenditure incurred to purchase an interest in any 14 corporation, partnership, limited liability company, business trust, or any other 15 business entity, whether or not the transaction is treated as an asset sale for federal 16 income tax purposes; 17 (14) a tax levied under AS 43.55.011; 18 (15) [THE PORTION OF] costs incurred for dismantlement, removal, 19 surrender, or abandonment of a facility, pipeline, well pad, platform, or other 20 structure, or for the restoration of a lease, field, unit, area, tract of land, body of 21 water, or right-of-way in conjunction with dismantlement, removal, surrender, or 22 abandonment [, THAT IS ATTRIBUTABLE TO PRODUCTION OF OIL OR GAS 23 OCCURRING BEFORE APRIL 1, 2006; THE PORTION IS CALCULATED AS A 24 RATIO OF THE AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF 25 OIL EQUIVALENT, ASSOCIATED WITH THE FACILITY, PIPELINE, WELL 26 PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY 27 OF WATER, OR RIGHT-OF-WAY OCCURRING BEFORE APRIL 1, 2006, TO 28 THE TOTAL AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF 29 OIL EQUIVALENT, ASSOCIATED WITH THAT FACILITY, PIPELINE, WELL 30 PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY 31 OF WATER, OR RIGHT-OF-WAY THROUGH THE END OF THE CALENDAR
01 MONTH BEFORE COMMENCEMENT OF THE DISMANTLEMENT, 02 REMOVAL, SURRENDER, OR ABANDONMENT]; a cost is not excluded under 03 this paragraph if the dismantlement, removal, surrender, or abandonment for which 04 the cost is incurred is undertaken for the purpose of replacing, renovating, or 05 improving the facility, pipeline, well pad, platform, or other structure; [FOR THE 06 PURPOSES OF THIS PARAGRAPH, "BARREL OF OIL EQUIVALENT" MEANS 07 (A) IN THE CASE OF OIL, ONE BARREL; 08 (B) IN THE CASE OF GAS, 6,000 CUBIC FEET;] 09 (16) costs incurred for containment, control, cleanup, or removal in 10 connection with any unpermitted release of oil or a hazardous substance and any 11 liability for damages imposed on the producer or explorer for that unpermitted 12 release; this paragraph does not apply to the cost of developing and maintaining an oil 13 discharge prevention and contingency plan under AS 46.04.030; 14 (17) costs incurred to satisfy a work commitment under an exploration 15 license under AS 38.05.132; 16 (18) that portion of expenditures, that would otherwise be qualified 17 capital expenditures, as defined in AS 43.55.023 [AS 43.55.023(k)], incurred during a 18 calendar year that are less than the product of $0.30 multiplied by the total taxable 19 production from each lease or property, in BTU equivalent barrels, during that 20 calendar year, except that, when a portion of a calendar year is subject to this 21 provision, the expenditures and volumes shall be prorated within that calendar year; 22 (19) costs incurred for repair, replacement, or deferred 23 maintenance of a facility, a pipeline, a structure, or equipment, other than a well, 24 that results in or is undertaken in response to a failure, problem, or event that 25 results in an unscheduled interruption of, or reduction in the rate of, oil or gas 26 production; costs incurred for repair, replacement, or deferred maintenance of a 27 facility, a pipeline, a structure, or equipment, other than a well, that is 28 undertaken in response to, or is otherwise associated with, an unpermitted 29 release of a hazardous substance or of gas; or costs incurred for repair, 30 replacement, or deferred maintenance of a facility, a pipeline, a structure or 31 equipment other than a well that was not maintained or was improperly
01 maintained; however, costs under this paragraph that would otherwise 02 constitute lease expenditures under (a) of this section may be treated as lease 03 expenditures if the department determines that the repair or replacement is 04 solely necessitated by an act of war, by an unanticipated grave natural disaster 05 or other natural phenomenon of an exceptional, inevitable, and irresistible 06 character, the effects of which could not have been prevented or avoided by the 07 exercise of due care or foresight, or by an intentional or negligent act or 08 omission of a third party, other than a party or its agents in privity of contract 09 with, or employed by, the producer or an operator acting for the producer, but 10 only if the producer or operator, as applicable, exercised due care in operating 11 and maintaining the facility, pipeline, structure, or equipment, and took 12 reasonable precautions against the act or omission of the third party and against 13 the consequences of the act or omission; in this paragraph, 14 (A) "costs incurred for repair, replacement, or deferred 15 maintenance of a facility, a pipeline, a structure, or equipment" includes 16 costs to dismantle and remove the facility, pipeline, structure, or 17 equipment that is being replaced; 18 (B) "hazardous substance" has the meaning given in 19 AS 46.03.826; 20 (C) "replacement" includes renovation or improvement; 21 (20) costs incurred to construct, acquire, or operate a refinery or 22 crude oil topping plant, regardless of whether the products of the refinery or 23 topping plant are used in oil or gas exploration, development, or production 24 operations; however, if a producer owns a refinery or crude oil topping plant 25 that is located on or near the premises of the producer's lease or property in the 26 state and that processes the producer's oil produced from that lease or property 27 into a product that the producer uses in the operation of the lease or property in 28 drilling for or producing oil or gas, the producer's lease expenditures include the 29 amount calculated by subtracting from the fair market value of the product used 30 the prevailing value, as determined under AS 43.55.020(f), of the oil that is 31 processed;
01 (21) costs relating to office buildings, fixtures and equipment, and 02 real property that are not located in the state; 03 (22) overhead, office, or administrative expenses, and all other 04 indirect costs of oil or gas exploration, development, or production. 05 * Sec. 60. AS 43.55.165(h) is amended to read: 06 (h) The department shall adopt regulations that provide for reasonable 07 methods of allocating costs between oil and gas, between gas subject to 08 AS 43.55.011(o) and other gas, and between leases or properties in those 09 circumstances where the determination of the lease expenditures that are applicable to 10 oil or to gas, that are applicable to gas subject to AS 43.55.011(o) or to other gas, 11 or that are applicable to oil and gas produced from different leases or properties, 12 requires an allocation of costs. 13 * Sec. 61. AS 43.55.170(a) is amended to read: 14 (a) A [UNLESS THE PAYMENT OR CREDIT HAS ALREADY BEEN 15 SUBTRACTED IN CALCULATING BILLABLE OR BILLED COSTS UNDER 16 AS 43.55.165(c) OR (d), A] producer's lease expenditures under AS 43.55.165 must 17 be adjusted by subtracting payments or credits, other than tax credits, received by the 18 producer or by an operator acting for the producer for 19 (1) the use by another person of a production facility in which the 20 producer has an ownership interest or the management by the producer of a 21 production facility under a management agreement providing for the producer to 22 receive a management fee; 23 (2) a reimbursement or similar payment that offsets the producer's 24 lease expenditures, including an insurance recovery from a third-party insurer and a 25 payment from the state or federal government for reimbursement of the producer's 26 upstream costs, including costs for gathering, separating, cleaning, dehydration, 27 compressing, or other field handling associated with the production of oil or gas 28 upstream of the point of production; 29 (3) the sale or other transfer of 30 (A) an asset, including geological, geophysical, or well data or 31 interpretations, acquired by the producer as a result of a lease expenditure or
01 an expenditure that would be a lease expenditure if it were incurred after 02 March 31, 2006; for purposes of this subparagraph, 03 (i) if a producer removes from the state, for use outside 04 the state, an asset described in this subparagraph, the value of the asset 05 at the time it is removed is considered a payment received by the 06 producer for sale or transfer of the asset; 07 (ii) for a transaction that is an internal transfer or is 08 otherwise not an arm's length transaction, if the sale or transfer of the 09 asset is made for less than fair market value, the amount subtracted 10 must be the fair market value; and 11 (B) oil or gas 12 (i) that is not considered produced from a lease or 13 property under AS 43.55.020(e); and 14 (ii) the cost of acquiring which is a lease expenditure 15 incurred by the person that acquires the oil or gas. 16 * Sec. 62. AS 43.55.170(b) is amended to read: 17 (b) Except as otherwise provided under this subsection, if one or more 18 payments or credits subject to this section are received by a producer or by an 19 operator acting for the producer during a calendar year and if either the total amount 20 of the payments or credits exceeds the amount of the producer's applicable lease 21 expenditures for that calendar year or the producer has no lease expenditures for that 22 calendar year, the producer shall nevertheless subtract those payments or credits from 23 the lease expenditures or from zero, respectively, and the producer's applicable 24 adjusted lease expenditures for that calendar year are a negative number and shall be 25 applied to the pertinent calculations [CALCULATION] under AS 43.55.160 26 [AS 43.55.160(a)] as a negative number. 27 * Sec. 63. AS 43.55 is amended by adding a new section to article 4 to read: 28 Sec. 43.55.890. Disclosure of tax information. Notwithstanding any contrary 29 provision of AS 40.25.100, and regardless of whether the information is considered 30 under AS 43.05.230(e) to constitute statistics classified to prevent the identification of 31 particular returns or reports, the department may publish
01 (1) the following information under this chapter, if aggregated among 02 three or more producers or explorers, showing by month or calendar year and by lease 03 or property, unit, or area of the state: 04 (A) the amount of oil or gas production; 05 (B) the amount of taxes levied under this chapter or paid under 06 this chapter; 07 (C) the effective tax rates under this chapter; 08 (D) the gross value of oil or gas at the point of production; 09 (E) the transportation costs for oil or gas; 10 (F) qualified capital expenditures under AS 43.55.023(k); 11 (G) exploration expenditures under AS 43.55.025; 12 (H) production tax values of oil or gas under AS 43.55.160; 13 (I) lease expenditures under AS 43.55.165; 14 (J) adjustments to lease expenditures under AS 43.55.170; 15 (K) tax credits applicable or potentially applicable against 16 taxes levied by this chapter; and 17 (2) the gross value at the point of production and the total amount of 18 the lease expenditures for each producer required to report under AS 43.55.040(5). 19 * Sec. 64. AS 43.55.900 is amended by adding new paragraphs to read: 20 (22) "producer" means an owner of an operating right, operating 21 interest, or working interest in a mineral interest in oil or gas; 22 (23) "unit" means a group of tracts of land that is 23 (A) subject to a cooperative or a unit plan of development or 24 operation that has been certified by the commissioner of natural resources 25 under AS 38.05.180(p); 26 (B) subject to a cooperative or a unit plan of development or 27 operation that has been certified by the United States Secretary of the Interior 28 under 30 U.S.C. 226(m); 29 (C) subject to an agreement of the owners of interests in the 30 tracts of land to validly integrate their interests to provide for the unitized 31 management, development, and operation of the tracts of land as a unit, within
01 the meaning of AS 31.05.110(a); or 02 (D) within the unit area of a unit created by order of the 03 Alaska Oil and Gas Conservation Commission under AS 31.05.110(b). 04 * Sec. 65. AS 43.55.165(c) and 43.55.165(d) are repealed. 05 * Sec. 66. AS 43.55.011(l) is repealed. 06 * Sec. 67. The uncodified law of the State of Alaska is amended by adding a new section to 07 read: 08 APPLICABILITY. (a) Sections 57 - 59, 61, and 65 of this Act apply to oil and gas 09 produced after March 31, 2006. 10 (b) Sections 16 - 28, 30 - 32, 37 - 39, and 54 - 56 of this Act apply to oil and gas 11 produced after December 31, 2006. 12 (c) Sections 43 - 45 of this Act apply to statements and reports under 13 AS 43.55.030(a), as amended by sec. 43 of this Act, and AS 43.55.030(e) and (f), as added 14 by sec. 45 of this Act, required to be filed after December 31, 2007. 15 (d) Section 49 of this Act applies to understatements made after the effective date of 16 sec. 49 of this Act. 17 (e) AS 43.05.075, added by sec. 50 of this Act, applies to any tax liability under 18 AS 43.55 with respect to which the period of limitation on assessment under AS 43.05.260 19 had not expired before the effective date of secs. 15 and 50 of this Act. 20 (f) Sections 33 - 36 and 40 of this Act apply to exploration expenditures incurred for 21 work performed after December 31, 2006, that are the bases of tax credits that may be 22 claimed against taxes levied for oil and gas produced after December 31, 2006. 23 * Sec. 68. The uncodified law of the State of Alaska is amended by adding a new section to 24 read: 25 OIL AND GAS REVENUE AUDIT MANAGER POSITIONS; LEGISLATIVE 26 INTENT. It is the intent of the legislature that the commissioner of administration shall cause 27 not more than four oil and gas revenue audit manager positions to be created in the 28 Department of Revenue and not more than two oil and gas revenue audit manager positions 29 to be created in the Department of Natural Resources. Oil and gas revenue audit managers 30 shall be employed in a professional capacity to collect oil and gas revenue by developing 31 policy, conducting studies, drafting proposed regulations, enforcing regulations, and
01 supervising audits by oil and gas revenue auditors. 02 * Sec. 69. The uncodified law of the State of Alaska is amended by adding a new section to 03 read: 04 TRANSITION: PAYMENT OF TAX. A person subject to tax under AS 43.55 that is 05 required to make one or more installment payments of estimated tax under AS 43.55.020(a), 06 as amended by sec. 25 of this Act, for the production of oil or gas during a month after 07 December 31, 2006, and before January 1, 2008, but that failed to pay the full amount of the 08 installment payments required under AS 43.55.020(a) because of the retroactive application 09 of secs. 16 - 41, 43 - 45, 54 - 56, and 66 of this Act under sec. 72(b) of this Act, shall pay the 10 balance of any tax due under AS 43.55 for the calendar year 2007 before April 1, 2008. 11 * Sec. 70. The uncodified law of the State of Alaska is amended by adding a new section to 12 read: 13 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 14 contrary provision of AS 44.62.240, 15 (1) if the Department of Revenue expressly designates in the regulation that 16 the regulation applies retroactively to that date, a regulation adopted by the Department of 17 Revenue to implement, interpret, make specific, or otherwise carry out 18 (A) secs. 57 - 59, 61, and 65 of this Act may apply retroactively to 19 April 1, 2006; 20 (B) secs. 16 - 41, 43, and 60 of this Act may apply retroactively to 21 January 1, 2007; 22 (2) a regulation adopted by the Department of Natural Resources to 23 implement, interpret, make specific, or otherwise carry out statutory provisions for the 24 administration of oil and gas leases issued under AS 38.05.180(f)(3)(B), (D), or (E), to the 25 extent the regulation deals with the treatment of oil and gas production taxes in determining 26 net profits under those leases, may apply retroactively to April 1, 2006, if the Department of 27 Natural Resources expressly designates in the regulation that the regulation applies 28 retroactively to that date. 29 * Sec. 71. The uncodified law of the State of Alaska is amended by adding a new section to 30 read: 31 TRANSITION: REGULATIONS. The Department of Natural Resources and the
01 Department of Revenue may proceed to adopt regulations to implement this Act. The 02 regulations take effect under AS 44.62 (Administrative Procedure Act), but not before the 03 effective date of the law implemented by the regulation. 04 * Sec. 72. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 RETROACTIVITY OF CERTAIN PROVISIONS OF THIS ACT. (a) Sections 57 - 07 59, 61, and 65 of this Act are retroactive to April 1, 2006. 08 (b) Sections 16 - 41, 43 - 45, 54 - 56, 60, and 66 of this Act are retroactive to 09 January 1, 2007. 10 * Sec. 73. This Act takes effect immediately under AS 01.10.070(c).