SB 177: "An Act relating to a credit against the oil and gas production tax for drilling certain exploration wells using a jack-up rig in the Cook Inlet sedimentary basin."
00 SENATE BILL NO. 177 01 "An Act relating to a credit against the oil and gas production tax for drilling certain 02 exploration wells using a jack-up rig in the Cook Inlet sedimentary basin." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 43.55.025(l) is amended to read: 05 (l) The first three unaffiliated persons that drill an offshore exploration well 06 for the purpose of discovering oil or gas in Cook Inlet that penetrates and fully 07 evaluates a prospect in the pre-Tertiary zone using a jack-up rig are eligible for the 08 credit under this subsection. The person that drills the first exploration well is entitled 09 to a credit in the amount of 100 percent of its exploration expenditures or $25,000,000, 10 whichever is less; the person that drills the second exploration well using a [THE 11 SAME] jack-up rig is entitled to a credit in the amount of 90 percent of its exploration 12 expenditures or $22,500,000, whichever is less; and the person that drills the third 13 exploration well using a [THE SAME] jack-up rig is entitled to a credit in the amount 14 of 80 percent of its exploration expenditures or $20,000,000, whichever is less. A
01 person or an affiliate of a person drilling an exploration well is not entitled to a credit 02 for more than one exploration well under this subsection. The department shall make a 03 determination of the order in which the wells are completed into the pre-Tertiary 04 zone [DRILLED BASED ON THE DATE AND TIME THAT THE DRILL BIT 05 FIRST TURNS TO THE RIGHT AGAINST THE SEAFLOOR FOR THE PURPOSE 06 OF DRILLING THE WELL]. Exploration expenditures eligible for the credit in this 07 subsection may include the necessary and reasonable costs to modify an existing jack- 08 up rig for use in Cook Inlet, may not include the cost to construct or manufacture a 09 jack-up rig, and, notwithstanding (b) of this section, must be incurred for work 10 performed after March 31, 2010. If the exploration well for which a credit is received 11 under this subsection results in sustained production of oil or gas from a reservoir in 12 the pre-Tertiary zone discovered by the exploration well, and notwithstanding that 13 the credit may have been transferred under (g) of this section, 50 percent of the 14 amount of the credit received shall be repaid to the department by the person that 15 received the credit in equal monthly installments over a 10-year period commencing 16 60 days after the start of sustained production of oil or gas. Whether the exploration 17 well for which a credit is requested under this subsection penetrated and fully 18 evaluated a prospect in the pre-Tertiary zone, whether the exploration well has been 19 evaluated using the best industry practices, and whether the exploration well 20 resulted in sustained production of oil or gas from a reservoir in the pre-Tertiary 21 zone discovered by the exploration well shall be determined by the Alaska Oil and 22 Gas Conservation Commission and the commissioner of natural resources and 23 reported to the commissioner. A taxpayer that obtains a credit under this subsection 24 may not claim a tax credit under AS 43.55.023 or another provision in this section for 25 the same exploration expenditure. In this subsection, 26 (1) "jack-up rig" means a mobile drilling platform with extendible legs 27 for support on the ocean floor; 28 (2) "reservoir" means an oil and gas accumulation, discovered and 29 evaluated by testing, that is separate from any other accumulation of oil and gas 30 previously produced or tested; 31 (3) "sustained production" means production of oil or gas from a
01 reservoir into a pipeline or other means of transportation to market, but does not 02 include testing, evaluation, or pilot production.