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CSHB 289(FIN): "An Act relating to a liquefied natural gas storage facility; relating to the tax credit for an investment in a liquefied natural gas storage facility; relating to the regulation of liquefied natural gas storage as a utility; relating to the powers and duties of the director of the division of lands and to lease fees for a liquefied natural gas storage facility on state land; and providing for an effective date."

00                       CS FOR HOUSE BILL NO. 289(FIN)                                                                    
01 "An Act relating to a liquefied natural gas storage facility; relating to the tax credit for                            
02 an investment in a liquefied natural gas storage facility; relating to the regulation of                                
03 liquefied natural gas storage as a utility; relating to the powers and duties of the director                           
04 of the division of lands and to lease fees for a liquefied natural gas storage facility on                              
05 state land; and providing for an effective date."                                                                       
06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
07    * Section 1. AS 38.05 is amended by adding a new section to read:                                                  
08            Sec. 38.05.096. Exemption from rental payments on land leased for certain                                  
09       liquefied natural gas storage facilities. (a) A person leasing state land for a liquefied                       
10       natural gas storage facility other than a gas storage facility subject to AS 38.05.180(u)                         
11       may request an exemption from lease payments as provided in this section. The                                     
12       exemption is applicable for the periods described in (b) of this section.                                         
13            (b)  The exemption is available for the calendar year in which the liquefied                                 
01       natural gas storage facility commences commercial operation and for each of the nine                              
02       calendar years immediately following the first year of commercial operation.                                      
03       However, an exemption is not applicable for the calendar year after the facility ceases                           
04       commercial operation or for any subsequent calendar year.                                                         
05            (c)  The lessee shall provide the director with any information the director                                 
06       requests to determine whether the lessee qualifies for the exemption.                                             
07            (d)  Information related to state land leased for a liquefied natural gas storage                            
08       facility qualifying for the exemption in this section is public information and may be                            
09       furnished to the Regulatory Commission of Alaska. On request, the director shall                                  
10       provide the name of each person using state land leased for a liquefied natural gas                               
11       storage facility, the years for which an exemption was granted, and the amount of the                             
12       exemption.                                                                                                        
13            (e)  A person receiving an exemption for a payment under this section that                                   
14       contracts to store liquefied natural gas for a utility regulated under AS 42.05 shall                             
15       reduce the storage price to reflect the value of the exemption.                                                   
16            (f)  In this section,                                                                                        
17                 (1)  "ceases commercial operation" and "commences commercial                                            
18       operation" have the meanings given in AS 31.05.032;                                                               
19                 (2)  "liquefied natural gas storage facility" has the meaning given in                                  
20       AS 42.05.990.                                                                                                     
21    * Sec. 2. AS 42.05.381(k) is amended to read:                                                                      
22            (k)  The cost to the utility of storing gas in a gas storage facility or storing                         
23       liquefied natural gas in a liquefied natural gas storage facility that is allowed in                          
24       determining a just and reasonable rate shall reflect the reduction in cost attributable to                        
25       any exemption from a payment due under AS 38.05.096 or 38.05.180(u), as                                       
26       applicable, [AS 38.05.180(u)] and the value of a tax credit that the owner of the gas                         
27       storage facility received under AS 43.20.046 or 43.20.047, as applicable. The                                 
28       commission may request the (1) commissioner of natural resources to report the value                              
29       of the exemption from a payment due under AS 38.05.096 or 38.05.180(u), as                                    
30       applicable, [AS 38.05.180(u)] that the gas storage facility received; and (2)                                 
31       commissioner of revenue to report information on the amount of tax credits claimed                                
01       under AS 43.20.046 and 43.20.047, as applicable, for the gas storage facility or                          
02       liquefied natural gas storage facility. In this subsection,                                                   
03                 (1)  "gas storage facility" has the meaning given in AS 31.05.032;                              
04                 (2)  "liquefied natural gas storage facility" has the meaning given                                 
05       in AS 42.05.990.                                                                                              
06    * Sec. 3. AS 42.05.990(5) is amended to read:                                                                      
07                 (5)  "public utility" or "utility" includes every corporation whether                                   
08       public, cooperative, or otherwise, company, individual, or association of individuals,                            
09       their lessees, trustees, or receivers appointed by a court, that owns, operates, manages,                         
10       or controls any plant, pipeline, or system for                                                                    
11                      (A)  furnishing, by generation, transmission, or distribution,                                     
12            electrical service to the public for compensation;                                                           
13                      (B)  furnishing telecommunications service to the public for                                       
14            compensation;                                                                                                
15                      (C)  furnishing water, steam, or sewer service to the public for                                   
16            compensation;                                                                                                
17                      (D)  furnishing by transmission or distribution of natural or                                      
18            manufactured gas to the public for compensation;                                                             
19                      (E)  furnishing for distribution or by distribution petroleum or                                   
20            petroleum products to the public for compensation when the consumer has no                                   
21            alternative in the choice of supplier of a comparable product and service at an                              
22            equal or lesser price;                                                                                       
23                      (F)  furnishing collection and disposal service of garbage,                                        
24            refuse, trash, or other waste material to the public for compensation;                                       
25                      (G)  furnishing the service of natural gas storage to the public                                   
26            for compensation;                                                                                            
27                      (H)  furnishing the service of liquefied natural gas storage to                                
28            the public for compensation;                                                                             
29    * Sec. 4. AS 42.05.990 is amended by adding new paragraphs to read:                                                
30                 (11)  "liquefied natural gas storage facility" means a facility that                                    
31       receives natural gas volumes in a liquid or gaseous state from customers, holds the gas                           
01       volumes in a liquid state in a reservoir, and delivers the gas volumes in a liquid or                             
02       gaseous state to the customer; in this paragraph, "facility" includes                                             
03                      (A)  all parts of the facility from the point at which the natural                                 
04            gas volumes are received by the facility from the customer to the point at                                   
05            which the natural gas volumes are delivered by the facility to the customer;                                 
06                      (B)  a facility consisting of a reservoir, either underground or                                   
07            aboveground, and one or more of the following components of the facility:                                    
08                           (i)  pipe;                                                                                    
09                           (ii)  compressor stations;                                                                    
10                           (iii)  station equipment;                                                                     
11                           (iv)  liquefaction plant or facility;                                                         
12                           (v)  gasification plant or facility;                                                          
13                           (vi)  on-site or remote monitoring, supervision, and                                          
14                 control facilities;                                                                                     
15                           (vii)  gas processing plants and gas treatment plants, but                                    
16                 not including a manufacturing plant or facility;                                                        
17                           (viii)  other equipment necessary to receive, place into                                      
18                 the reservoir, monitor, remove from the reservoir, process, and deliver                                 
19                 natural gas;                                                                                            
20                 (12)  "reservoir" means a receptacle or chamber, either natural or man-                                 
21       made, holding a gas or liquid, and includes a tank or a depleted or nearly depleted                               
22       pool;                                                                                                             
23                 (13)  "service of liquefied natural gas storage" means the operation of a                               
24       liquefied natural gas storage facility; "service of liquefied natural gas storage" does                           
25       not include the storage of liquefied natural gas                                                                  
26                      (A)  owned by or contractually obligated to the owner, operator,                                   
27            or manager of the liquefied natural gas storage facility;                                                    
28                      (B)  that is incidental to the production or sale of natural gas to                                
29            one or more third-party customers; or                                                                        
30                      (C)  for which the price of storage is not separately itemized.                                    
31    * Sec. 5. AS 43.20 is amended by adding a new section to article 1 to read:                                        
01            Sec. 43.20.047. Liquefied natural gas storage facility tax credit. (a) A                                   
02       person that is an owner of a liquefied natural gas storage facility described in (b) of                           
03       this section that commences commercial operation before January 1, 2020, may apply                                
04       a refundable credit against a tax liability that may be imposed on the person under this                          
05       chapter or receive the amount of the credit in the form of a payment for the taxable                              
06       year in which the liquefied natural gas storage facility commences commercial                                     
07       operation. The tax credit or payment under this section may not exceed the lesser of                              
08       $15,000,000 or 50 percent of the costs incurred to establish or expand the liquefied                              
09       natural gas storage facility. The tax credit in this section is in addition to any other                          
10       credit under this chapter for which the person is eligible.                                                       
11            (b)  To qualify for the credit in this section, a liquefied natural gas storage                              
12       facility                                                                                                          
13                 (1)  must have a liquefied natural gas storage volume of not less than                                  
14       25,000 gallons of liquefied natural gas, or, if the credit is claimed for an expansion, the                       
15       expansion must have increased the capacity of an existing liquefied natural gas storage                           
16       facility by more than 25,000 gallons;                                                                             
17                 (2)  may not have been in operation as a liquefied natural gas storage                                  
18       facility before January 1, 2011, unless the tax credit in this section is based on the                            
19       expansion of the liquefied natural gas storage facility after December 31, 2011;                                  
20                 (3)  must be regulated under AS 42.05 as a utility and be available to                                  
21       furnish the service of liquefied natural gas storage to customers, utilities, or industrial                       
22       facilities; in this paragraph, "service of liquefied natural gas storage" has the meaning                         
23       given in AS 42.05.990;                                                                                            
24                 (4)  if located on state land and leased or subject to a lease under                                    
25       AS 38.05, must be in compliance with the terms of the lease; and                                                  
26                 (5)  must have commenced commercial operation on or before the date                                     
27       the person takes a credit under (a) of this section or applies for a payment under (a) of                         
28       this section.                                                                                                     
29            (c)  To claim the credit or request a payment, a person shall submit to the                                  
30       department a certification of the capacity of the liquefied natural gas storage facility                          
31       measured in gallons or the capacity of an expansion to an existing liquefied natural gas                          
01       storage facility measured in gallons, the date that the liquefied natural gas storage                             
02       facility commenced commercial operation, the date that any expansion to the liquefied                             
03       natural gas storage facility commenced commercial operation, and other information                                
04       required by the department.                                                                                       
05            (d)  A person applying the credit under this section against a liability under this                          
06       chapter shall claim the credit on the person's return. A person entitled to a tax credit                          
07       under this section that is greater than the person's tax liability under this chapter may                         
08       request a refund or payment in the amount of the unused portion of the tax credit.                                
09            (e)  The department may use money available in the oil and gas tax credit fund                               
10       established in AS 43.55.028 to make a refund or payment under (d) of this section in                              
11       whole or in part if the department finds that (1) the claimant does not have an                                   
12       outstanding liability to the state for unpaid delinquent taxes under this title; and (2)                          
13       after application of all available tax credits, the claimant's total tax liability under this                     
14       chapter for the calendar year in which the claim is made is zero. In this subsection,                             
15       "unpaid delinquent tax" means an amount of tax for which the department has issued                                
16       an assessment that has not been paid and, if contested, has not been finally resolved in                          
17       the taxpayer's favor.                                                                                             
18            (f)  For the purpose of determining the amount of the credit under this section,                             
19       the costs incurred to establish a liquefied natural gas storage facility or to expand a                           
20       liquefied natural gas storage facility shall be submitted to the department with                                  
21       verification by an independent certified public accountant, licensed in the state. The                            
22       volume of working liquefied natural gas storage or volume of the expansion to an                                  
23       existing liquefied natural gas storage facility shall be verified by a professional                               
24       engineer licensed in the state with relevant experience.                                                          
25            (g)  A person may not receive a credit under this section for the acquisition of a                           
26       liquefied natural gas storage facility for which a credit has been taken under this                               
27       section.                                                                                                          
28            (h)  If the liquefied natural gas storage facility for which a credit was received                           
29       under this section ceases commercial operation during the nine calendar years                                     
30       immediately following the calendar year in which the liquefied natural gas storage                                
31       facility commences commercial operation, the tax liability under this chapter of the                              
01       person who claimed the credit shall be increased, and a person not subject to the tax                             
02       under this chapter that received a payment under (d) and (e) of this section shall be                             
03       liable to the state in the amount determined in this subsection. The amount of the                                
04       increase in tax liability or liability to the state                                                               
05                 (1)  for a person subject to the tax under this chapter, shall be                                       
06       determined and assessed for the taxable year in which the liquefied natural gas storage                           
07       facility ceases commercial operation, regardless of whether the liquefied natural gas                             
08       storage facility subsequently resumes commercial operation;                                                       
09                 (2)  for a person not subject to the tax due under this chapter, shall be                               
10       determined and assessed as of December 31 of the calendar year in which the liquefied                             
11       natural gas storage facility ceases commercial operation, regardless of whether the                               
12       liquefied natural gas storage facility subsequently resumes commercial operation; and                             
13                 (3)  is equal to the total amount of the credit taken or received as a                                  
14       payment under (d) of this section, as applicable, multiplied by a fraction, the                                   
15       numerator of which is the difference between 10 and the number of calendar years for                              
16       which the liquefied natural gas storage facility was eligible for a tax credit under this                         
17       section and the denominator of which is 10.                                                                       
18            (i)  The issuance of a refund under this section does not limit the department's                             
19       ability to later audit or adjust the claim if the department determines, as a result of the                       
20       audit, that the person that claimed the credit was not entitled to the amount of the                              
21       credit. The tax liability of the person receiving the credit under this chapter is                                
22       increased by the amount of the credit that exceeds that to which the person was                                   
23       entitled. If the tax liability is increased under this subsection, the increase bears                             
24       interest at the rate set by AS 43.05.225 from the date the refund was issued.                                     
25            (j)  A person claiming a tax credit under this section for a liquefied natural gas                           
26       storage facility that ceases commercial operation within nine calendar years                                      
27       immediately following the calendar year in which the liquefied natural gas storage                                
28       facility commences commercial operation shall notify the department in writing of the                             
29       date the liquefied natural gas storage facility ceased commercial operation. The notice                           
30       must be filed with the return for the taxable year in which the liquefied natural gas                             
31       storage facility ceases commercial operation.                                                                     
01            (k)  A refund under this section does not bear interest.                                                     
02            (l)  In this section,                                                                                        
03                 (1)  "ceases commercial operation" means that the liquefied natural gas                                 
04       storage facility fails to add or withdraw 20 percent or more of its working capacity of                           
05       liquefied natural gas during a calendar year after the calendar year in which the                                 
06       liquefied natural gas storage facility commences commercial operation;                                            
07                 (2)  "commences commercial operation" means the first input of                                          
08       liquefied natural gas into a liquefied natural gas storage facility for purposes other than                       
09       testing;                                                                                                          
10                 (3)  "liquefied natural gas storage facility" has the meaning given in                                  
11       AS 42.05.990.                                                                                                     
12    * Sec. 6. AS 43.55.028(a) is amended to read:                                                                      
13            (a)  The oil and gas tax credit fund is established as a separate fund of the state.                         
14       The purpose of the fund is to purchase transferable tax credit certificates issued under                          
15       AS 43.55.023 and production tax credit certificates issued under AS 43.55.025 and to                              
16       pay refunds and payments claimed under AS 43.20.046 or 43.20.047.                                         
17    * Sec. 7. AS 43.55.028(g) is amended to read:                                                                      
18            (g)  The department may adopt regulations to carry out the purposes of this                                  
19       section, including standards and procedures to allocate available money among                                     
20       applications for purchases under this chapter and claims for refunds and payments                             
21       under AS 43.20.046 or 43.20.047 when the total amount of the applications for                                 
22       purchase and claims for refund exceed the amount of available money in the fund. The                              
23       regulations adopted by the department may not, when allocating available money in                                 
24       the fund under this section, distinguish an application for the purchase of a credit                              
25       certificate issued under AS 43.55.023(m) or a claim for refund under AS 43.20.046 or                          
26       AS 43.20.047.                                                                                                 
27    * Sec. 8. This Act takes effect immediately under AS 01.10.070(c).