HB 308: "An Act relating to the tax rate applicable to the production of oil and gas; relating to credits against the oil and gas production tax; and relating to the period in which oil and gas production taxes may be assessed."
00 HOUSE BILL NO. 308 01 "An Act relating to the tax rate applicable to the production of oil and gas; relating to 02 credits against the oil and gas production tax; and relating to the period in which oil and 03 gas production taxes may be assessed." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 43.55.011(g) is amended to read: 06 (g) For each month of the calendar year for which the producer's average 07 monthly production tax value under AS 43.55.160(a)(2) per BTU equivalent barrel of 08 the taxable oil and gas is more than $30, the amount of tax for purposes of (e)(2) of 09 this section is determined by multiplying the monthly production tax value of the 10 taxable oil and gas produced during the month by the tax rate calculated as follows: 11 (1) if the producer's average monthly production tax value per BTU 12 equivalent barrel of the taxable oil and gas for the month is not more than $92.50, the 13 tax rate is 0.2 [0.4] percent multiplied by the number that represents the difference 14 between that average monthly production tax value per BTU equivalent barrel and
01 $30; or 02 (2) if the producer's average monthly production tax value per BTU 03 equivalent barrel of the taxable oil and gas for the month is more than $92.50, the tax 04 rate is the sum of 25 percent and the product of 0.1 percent multiplied by the number 05 that represents the difference between the average monthly production tax value per 06 BTU equivalent barrel and $92.50, except that the sum determined under this 07 paragraph may not exceed 50 percent. 08 * Sec. 2. AS 43.55.025(a) is amended to read: 09 (a) Subject to the terms and conditions of this section, a credit against the 10 production tax levied by AS 43.55.011(e) is allowed for exploration expenditures that 11 qualify under (b) of this section in an amount equal to one of the following: 12 (1) 30 percent of the total exploration expenditures that qualify only 13 under (b) and (c) of this section; 14 (2) 30 percent of the total exploration expenditures that qualify only 15 under (b) and (d) of this section; 16 (3) 30 [40] percent of the total exploration expenditures that qualify 17 under (b), (c), and (d) of this section; or 18 (4) 30 [40] percent of the total exploration expenditures that qualify 19 only under (b) and (e) of this section. 20 * Sec. 3. AS 43.55.025(c) is amended to read: 21 (c) To be eligible for the 30 percent production tax credit authorized by (a)(1) 22 or (3) [OF THIS SECTION OR THE 40 PERCENT PRODUCTION TAX CREDIT 23 AUTHORIZED BY (a)(3)] of this section, exploration expenditures must 24 (1) qualify under (b) of this section; and 25 (2) be for an exploration well, subject to the following: 26 (A) before the well is spudded, 27 (i) the explorer shall submit to the commissioner of 28 natural resources the information necessary to determine whether the 29 geological objective of the well is a potential oil or gas trap that is 30 distinctly separate from any trap that has been tested by a preexisting 31 well;
01 (ii) at the time of the submittal of information under (i) 02 of this subparagraph, the commissioner of natural resources may 03 request from the explorer that specific data sets, ancillary data, and 04 reports including all results, and copies of well data collected and data 05 analyses for the well be provided to the Department of Natural 06 Resources upon completion of the drilling; in this sub-subparagraph, 07 well data include all analyses conducted on physical material, and well 08 logs collected from the well and sample analyses; testing geophysical 09 and velocity data including vertical seismic profiles and check shot 10 surveys; testing data and analyses; age data; geochemical analyses; and 11 access to tangible material; and 12 (iii) the commissioner of natural resources must make 13 an affirmative determination as to whether the geological objective of 14 the well is a potential oil or gas trap that is distinctly separate from any 15 trap that has been tested by a preexisting well and what information 16 under (ii) of this subparagraph must be submitted by the explorer after 17 completion, abandonment, or suspension under AS 31.05.030; the 18 commissioner of natural resources shall make that determination within 19 60 days after receiving all the necessary information from the explorer 20 based on the information received and on other information the 21 commissioner of natural resources considers relevant; 22 (B) for an exploration well other than a well to explore a Cook 23 Inlet prospect, the well must be located and drilled in such a manner that the 24 bottom hole is located not less than three miles away from the bottom hole of a 25 preexisting well drilled for oil or gas, irrespective of whether the preexisting 26 well has been completed, suspended, or abandoned; 27 (C) after completion, suspension, or abandonment under 28 AS 31.05.030 of the exploration well, the commissioner of natural resources 29 must determine that the well was consistent with achieving the explorer's 30 stated geological objective. 31 * Sec. 4. AS 43.55.025(d) is amended to read:
01 (d) To be eligible for the 30 percent production tax credit authorized by (a)(2) 02 or (3) [OF THIS SECTION OR THE 40 PERCENT PRODUCTION TAX CREDIT 03 AUTHORIZED BY (a)(3)] of this section, an exploration expenditure must 04 (1) qualify under (b) of this section; and 05 (2) be for an exploration well that is located not less than 25 miles 06 outside of the outer boundary, as delineated on July 1, 2003, of any unit that is under a 07 plan of development, except that for an exploration well for a Cook Inlet prospect to 08 qualify under this paragraph, the exploration well must be located not less than 10 09 miles outside the outer boundary, as delineated on July 1, 2003, of any unit that is 10 under a plan of development. 11 * Sec. 5. AS 43.55.025(e) is amended to read: 12 (e) To be eligible for the 30 [40] percent production tax credit authorized by 13 (a)(4) of this section, the exploration expenditure must 14 (1) qualify under (b) of this section; 15 (2) be for seismic exploration; and 16 (3) have been conducted outside the boundaries of a production unit or 17 an exploration unit; however, the amount of the expenditure that is otherwise eligible 18 under this subsection is reduced proportionately by the portion of the seismic 19 exploration activity that crossed into a production unit or an exploration unit. 20 * Sec. 6. AS 43.55 is amended by adding a new section to read: 21 Sec. 43.55.026. Special credit for certain well-related expenditures. (a) In 22 addition to the credits authorized by AS 43.55.023 - 43.55.025, an explorer or 23 producer is entitled to a credit against the tax levied under AS 43.55.011(e) for capital 24 and noncapital expenditures incurred after December 31, 2010, for well drilling, 25 seismic exploration and analysis, and maintenance and well workovers that are 26 directly related to an oil or gas well as provided in this section. 27 (b) An explorer or producer is entitled to a credit of 10 percent of a capital 28 expenditure for well drilling or seismic exploration and analysis. 29 (c) An explorer or producer is entitled to a credit of 30 percent of an 30 expenditure that is noncapital expenditure for well drilling, seismic exploration and 31 analysis, or well maintenance and workovers.
01 (d) To receive a credit under this section, the owner of a well or a person 02 having a working interest in the property on which the work is performed shall apply 03 to the department. The application shall be made on the form required by the 04 department and provide information related to the basis for claiming the credit that is 05 required under regulations adopted by the department. An application for a credit must 06 be filed within three months after the end of the calendar year in which the 07 expenditures that are the basis for the claim are incurred. 08 (e) Whether or not an expenditure is a capital expenditure for purposes of (b) 09 of this section or a noncapital expenditure for purposes of (c) of this section shall be 10 determined by applying the generally accepted accounting principles applicable to the 11 oil and gas industry and regulations adopted by the department. 12 (f) A credit or portion of a credit under this section may not be used to reduce 13 a person's tax liability under AS 43.55.011(e) for any calendar year below zero, and 14 any unused credit or portion of a credit not used under this subsection may be applied 15 in a later calendar year. 16 (g) A person eligible for a credit under this section but not subject to tax under 17 AS 43.55.011(e) may transfer a credit to a person subject to tax under AS 43.55.011(e) 18 with written approval by the department. To transfer a credit under this subsection, the 19 person shall make an application to the department for the transfer and provide the 20 name of the person to whom the credit would be transferred. After approval by the 21 department, the department shall issue a certificate representing the amount of the 22 credit to be transferred. A person receiving the certificate may claim the credit against 23 a tax due under AS 43.55.011(e) subject to the limitations in (f) of this section. 24 (h) The department shall adopt regulations for administering this section that 25 must include the means for determining whether an expenditure is a capital 26 expenditure for the purposes of (b) of this section or a noncapital expenditure for the 27 purposes of (c) of this section. 28 * Sec. 7. AS 43.55.075(a) is amended to read: 29 (a) Except as provided in AS 43.05.260(c), the amount of a tax imposed by 30 this chapter must be assessed within three [SIX] years after the return was filed.