CSHB 276(RES): "An Act providing for a credit against the oil and gas production tax for costs incurred for conducting seismic exploration and drilling certain oil or natural gas exploration wells in certain basins; and relating to a limit on certain oil and gas production tax credits."
00 CS FOR HOUSE BILL NO. 276(RES) 01 "An Act providing for a credit against the oil and gas production tax for costs incurred 02 for conducting seismic exploration and drilling certain oil or natural gas exploration 03 wells in certain basins; and relating to a limit on certain oil and gas production tax 04 credits." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 43.55.025(a) is amended to read: 07 (a) Subject to the terms and conditions of this section and except as provided 08 in (q) of this section, a credit against the production tax levied by AS 43.55.011(e) is 09 allowed for exploration expenditures that qualify under (b) of this section in an 10 amount equal to one of the following: 11 (1) 30 percent of the total exploration expenditures that qualify only 12 under (b) and (c) of this section; 13 (2) 30 percent of the total exploration expenditures that qualify only 14 under (b) and (d) of this section;
01 (3) 40 percent of the total exploration expenditures that qualify under 02 (b), (c), and (d) of this section; 03 (4) 40 percent of the total exploration expenditures that qualify only 04 under (b) and (e) of this section; [OR] 05 (5) 80, 90, or 100 percent, or a lesser amount described in (l) of this 06 section, of the total exploration expenditures described in (b)(1) and (2) of this section 07 and not excluded by (b)(3) and (4) of this section that qualify only under (l) of this 08 section; 09 (6) the lesser of $22,500,000 or 80 percent of the total exploration 10 drilling expenditures described in (n) of this section that qualify under (b), (c), 11 and (p) of this section; or 12 (7) the lesser of $7,500,000 or 75 percent of the total seismic 13 exploration expenditures described in (o) of this section that qualify under (b) 14 and (p) of this section. 15 * Sec. 2. AS 43.55.025(c) is amended to read: 16 (c) To be eligible for a [THE 30 PERCENT] production tax credit authorized 17 by (a)(1), (3), or (6) of this section [OR THE 40 PERCENT PRODUCTION TAX 18 CREDIT AUTHORIZED BY (a)(3) OF THIS SECTION], exploration expenditures 19 must 20 (1) qualify under (b) of this section; and 21 (2) be for an exploration well, subject to the following: 22 (A) before the well is spudded, 23 (i) the explorer shall submit to the commissioner of 24 natural resources the information necessary to determine whether the 25 geological objective of the well is a potential oil or gas trap that is 26 distinctly separate from any trap that has been tested by a preexisting 27 well; 28 (ii) at the time of the submittal of information under (i) 29 of this subparagraph, the commissioner of natural resources may 30 request from the explorer that specific data sets, ancillary data, and 31 reports including all results, and copies of well data collected and data
01 analyses for the well be provided to the Department of Natural 02 Resources upon completion of the drilling; in this sub-subparagraph, 03 well data include all analyses conducted on physical material, and well 04 logs collected from the well and sample analyses; testing geophysical 05 and velocity data including vertical seismic profiles and check shot 06 surveys; testing data and analyses; age data; geochemical analyses; and 07 access to tangible material; and 08 (iii) the commissioner of natural resources must make 09 an affirmative determination as to whether the geological objective of 10 the well is a potential oil or gas trap that is distinctly separate from any 11 trap that has been tested by a preexisting well and what information 12 under (ii) of this subparagraph must be submitted by the explorer after 13 completion, abandonment, or suspension under AS 31.05.030; the 14 commissioner of natural resources shall make that determination within 15 60 days after receiving all the necessary information from the explorer 16 based on the information received and on other information the 17 commissioner of natural resources considers relevant; 18 (B) for an exploration well other than a well to explore a Cook 19 Inlet prospect, the well must be located and drilled in such a manner that the 20 bottom hole is located not less than three miles away from the bottom hole of a 21 preexisting well drilled for oil or gas, irrespective of whether the preexisting 22 well has been completed, suspended, or abandoned; 23 (C) after completion, suspension, or abandonment under AS 24 31.05.030 of the exploration well, the commissioner of natural resources must 25 determine that the well was consistent with achieving the explorer's stated 26 geological objective. 27 * Sec. 3. AS 43.55.025 is amended by adding new subsections to read: 28 (n) The persons that drill the first four exploration wells in an area described 29 in (p) of this section on state or private lands for the purpose of discovering oil or gas 30 that penetrate and evaluate a prospect in a basin described in (p) of this section are 31 eligible for a credit under (a)(6) of this section. A credit may not be taken for more
01 than two exploration wells in a single area described in (p)(1) - (6) of this section. A 02 person or an affiliate of a person may qualify for a credit for not more than two wells 03 under this subsection. The department shall make a determination of the order in 04 which the wells are drilled based on the date and time that the drill bit first turns to the 05 right for the purpose of drilling the well. A person planning to drill an exploration well 06 on private land and to obtain a credit under this subsection shall obtain written consent 07 from the owner of the oil and gas interest for the full public release of all well data 08 collected within two years after receiving a credit under this section and in conjunction 09 with and compliance with the data submission requirements in (f)(2) of this section. 10 The written consent of the owner of the oil and gas interest must be submitted to the 11 commissioner of natural resources before approval of the proposed exploration well. 12 In addition to the requirements in (c) of this section and submission of the written 13 consent of the owner of the oil and gas interest, a person planning to drill an 14 exploration well shall obtain approval from the commissioner of natural resources 15 before the well is spudded. Before approving the exploration well, the commissioner 16 of natural resources must make an affirmative finding that the exploration well is in 17 the best interest of the state based on the following: the location of the well; the 18 proximity to a community in need of a local energy source; the proximity of existing 19 infrastructure; the experience and safety record of the explorer in conducting 20 operations in remote or roadless areas; the projected cost schedule; whether seismic 21 mapping and seismic data sufficiently identify a particular trap for exploration; 22 whether the targeted and planned depth and range are designed to penetrate and fully 23 evaluate the hydrocarbon potential of the proposed prospect and reach the level below 24 which economic hydrocarbon reservoirs are likely to be found, or reach 12,000 feet or 25 more true vertical depth; and whether the exploration plan provides for a full 26 evaluation of the wellbore below surface casing to the depth of the well. Exploration 27 expenditures eligible for the credit in this subsection must be incurred for work 28 performed after June 1, 2012. Whether the exploration well for which a credit is 29 requested under this subsection is located within an area and a basin described under 30 (p) of this section shall be determined by the commissioner of natural resources and 31 reported to the commissioner. A taxpayer that obtains a credit under this subsection
01 may not claim a tax credit under AS 43.55.023 or another provision in this section for 02 the same exploration expenditure. 03 (o) The persons that conduct the first four seismic exploration projects in the 04 areas described in (p) of this section for the purpose of discovering oil or gas in a basin 05 are eligible for the credit under (a)(7) of this section. A credit may not be taken for 06 more than one seismic exploration project in a single area described in (p)(1) - (6) of 07 this section. Exploration expenditures eligible for the credit in this subsection must be 08 incurred for work performed after June 1, 2012. A person planning to conduct a 09 seismic exploration project on private land and to obtain a credit under this subsection 10 shall obtain written consent from the owner of the oil and gas interest for the full 11 public release of all geophysical data and compliance with the data submission 12 requirements in (f)(2) of this section. To qualify for a credit under this subsection, a 13 person shall submit the written consent of the owner of the oil and gas interest for the 14 release of data if applicable, and all data required under (f)(2) of this section to the 15 Department of Natural Resources and shall agree in writing that all seismic data 16 requirements submitted under the requirements of (f)(2) of this section may be made 17 public within two years after receiving the credit in this subsection. A person or an 18 affiliate of a person may qualify for a credit for more than one seismic exploration 19 project under this subsection. A person intending to qualify for the tax credit under 20 this subsection shall obtain approval from the commissioner of natural resources 21 before the commencement of the seismic exploration activities. Before approving a 22 seismic exploration project, the commissioner shall make an affirmative finding that 23 the seismic exploration project is in the best interest of the state based on the location 24 of the project, the projected cost schedule, the data acquisition and data processing 25 plan, the reasons for choosing the particular area for seismic exploration, and the 26 experience and safety record of the person in conducting seismic exploration 27 operations in remote or roadless areas. Whether the seismic exploration project for 28 which a credit is requested under this subsection is located in a basin described in (p) 29 of this section shall be determined by the commissioner of natural resources and 30 reported to the commissioner. A taxpayer that obtains a credit under this subsection 31 may not claim a tax credit under AS 43.55.023 or another provision in this section for
01 the same exploration expenditure. 02 (p) The activity that is the basis for a credit claimed under (a)(6) and (n) of 03 this section or (a)(7) and (o) of this section must be for the exploration of a basin and 04 within the following areas whose central points are determined using the World 05 Geographic System of 1984 datum, 06 (1) 100 miles from 66.896128 degrees North, -162.598187 degrees 07 West; 08 (2) 150 miles from 64.839474 degrees North, -147.72094 degrees 09 West; 10 (3) 50 miles from 62.776428 degrees North, -164.495201 degrees 11 West; 12 (4) 50 miles from 62.110357 degrees North, -145.530551 degrees 13 West; 14 (5) 100 miles from 58.189868 degrees North, -157.371104 degrees 15 West; 16 (6) 100 miles from 56.005988 degrees North, -160.56083 degrees 17 West. 18 (q) The amount of credit for an exploration expenditure under (a)(1) - (4) of 19 this section for an expenditure that is also a lease expenditure under AS 43.55.165 is 20 reduced by the amount necessary so that the tax benefit percentage is not more than 65 21 percent of the exploration expenditure. In this subsection, "tax benefit percentage" 22 means the sum of the average monthly tax rate under AS 43.55.011(e) and (g) for the 23 calendar year in which the credit is taken and the percentage of the exploration 24 expenditure that may be taken as a credit under (a)(1) - (4) of this section.