SB 202: "An Act relating to the oil and gas production tax; relating to oil and gas production tax credits; amending the minimum tax on oil and gas production; relating to the determination of the production tax value of oil and gas; relating to oil and gas leases; relating to the financing by the Alaska Industrial Development and Export Authority of oil processing facilities on the North Slope; and providing for an effective date."
00 SENATE BILL NO. 202 01 "An Act relating to the oil and gas production tax; relating to oil and gas production tax 02 credits; amending the minimum tax on oil and gas production; relating to the 03 determination of the production tax value of oil and gas; relating to oil and gas leases; 04 relating to the financing by the Alaska Industrial Development and Export Authority of 05 oil processing facilities on the North Slope; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. AS 29.60.850(b) is amended to read: 08 (b) Each fiscal year, the legislature may appropriate to the community revenue 09 sharing fund an amount equal to 20 percent of the money received by the state 10 during the previous calendar year under AS 43.55.011(g) [AS 43.20.030(c)]. The 11 amount may not exceed 12 (1) $60,000,000; or 13 (2) the amount that, when added to the fund balance on June 30 of the
01 previous fiscal year, equals $180,000,000. 02 * Sec. 2. AS 38.05.180(h) is amended to read: 03 (h) The commissioner shall [MAY] include terms in a [ANY] lease that 04 impose [IMPOSING] a minimum work commitment on the lessee to implement the 05 plan of development submitted by the lessee with a bid for an oil and gas or gas 06 only lease. The terms of the minimum work commitment must [. EXCEPT AS 07 PROVIDED IN (m) OF THIS SECTION, THESE TERMS MUST BE MADE 08 PUBLIC BEFORE THE SALE, AND MAY] include appropriate penalty provisions 09 to take effect in the event the lessee does not fulfill the minimum work commitment. If 10 it is demonstrated that a lease has been proven unproductive by actions of adjacent 11 lease holders, the commissioner may set aside a work commitment. The commissioner 12 may waive for a period not to exceed one two-year period any term of a minimum 13 work commitment if the commissioner makes a written finding either that conditions 14 preventing drilling or exploration were beyond the lessee's reasonable ability to 15 foresee or control or that the lessee has demonstrated through good faith efforts an 16 intent and ability to drill or develop the lease during the term of the waiver. 17 * Sec. 3. AS 38.05.180(x) is amended to read: 18 (x) A lessee conducting or permitting any exploration for, or development or 19 production of, oil or gas on state land shall provide the commissioner access to all 20 noninterpretive data obtained from that lease; shall provide the commissioner access 21 to all information necessary to perform an economic analysis under (ii)(2) of this 22 section, including the capital, operating, production, and development costs and 23 an estimate of total reserves; and shall provide copies of that data and information, 24 as the commissioner may request. The confidentiality provisions of AS 38.05.035 25 apply to the information obtained under this subsection. 26 * Sec. 4. AS 38.05.180 is amended by adding new subsections to read: 27 (hh) The commissioner shall require each bidder for an oil and gas lease or gas 28 only lease and each lessee applying for an extension or renewal of an oil and gas lease 29 or gas only lease to submit a plan of development for exploring, developing, and 30 producing from the lease within the period of the lease or the extension or renewal of 31 the lease. The commissioner shall review each plan of development and determine
01 whether the proposed plan of development is reasonably expected to develop the lease 02 in the best interest of the state. The plan of development shall be included in a lease 03 along with penalties for failing to comply with the plan of development and other 04 terms of the lease. A bidder may not be a qualified bidder for the purposes of (f)(1) of 05 this section if the commissioner finds that the bidder has not submitted a proposed 06 plan of development that is in the best interest of the state or that the person that 07 submitted the plan of development is not reasonably capable of implementing the plan. 08 (ii) The commissioner shall 09 (1) review each oil and gas lease or gas only lease each year for the 10 purpose of determining whether a lease is being developed in the best interest of the 11 state, whether the lessee is complying with the plan of development applicable to the 12 lease, and whether revision of a plan of development, including the planned rate of 13 development, would provide the maximum benefit to the people of the state; 14 (2) every five years, perform an economic analysis on each 15 participating area and determine whether the participating area is capable of increased 16 production in paying quantities over the current rate of production or plan of 17 development; 18 (3) enforce the terms of each oil and gas lease or gas only lease, 19 including imposing any applicable penalty or other remedy for noncompliance, within 20 a reasonable time after finding that a lessee is out of compliance with the terms of the 21 lease; 22 (4) submit a report to the legislature before the first day of each regular 23 session that lists each oil and gas or gas only lessee that is found to be out of 24 compliance and the action by the commissioner to bring the lessee back into 25 compliance or to terminate the lease. 26 (jj) For the purposes of (hh) and (ii) of this section, a plan of development for 27 a cooperative or unit under (p) of this section is the plan of development for a lease 28 within the cooperative or unit, except where a different plan of development is 29 established for a lease within the cooperative or unit. 30 (kk) For purposes of (ii) of this section, 31 (1) "participating area" means that part of an oil and gas lease unit area
01 to which production is allocated in the manner described in a unit agreement; 02 (2) "production in paying quantities" means production in quantities 03 sufficient to yield a return in excess of drilling, development, and operating costs. 04 * Sec. 5. AS 43.05.225 is amended to read: 05 Sec. 43.05.225. Interest. Unless otherwise provided, 06 (1) when a tax levied in this title becomes delinquent, it [A 07 DELINQUENT TAX UNDER THIS TITLE, 08 (A) BEFORE JANUARY 1, 2014,] bears interest in each 09 calendar quarter at the rate of five percentage points above the annual rate 10 charged member banks for advances by the 12th Federal Reserve District as of 11 the first day of that calendar quarter, or at the annual rate of 11 percent, 12 whichever is greater, compounded quarterly as of the last day of that quarter; 13 [OR 14 (B) ON AND AFTER JANUARY 1, 2014, BEARS 15 INTEREST IN EACH CALENDAR QUARTER AT THE RATE OF THREE 16 PERCENTAGE POINTS ABOVE THE ANNUAL RATE CHARGED 17 MEMBER BANKS FOR ADVANCES BY THE 12TH FEDERAL RESERVE 18 DISTRICT AS OF THE FIRST DAY OF THAT CALENDAR QUARTER;] 19 (2) the interest rate is 12 percent a year for 20 (A) delinquent fees payable under AS 05.15.095(c); and 21 (B) unclaimed property that is not timely paid or delivered, as 22 allowed by AS 34.45.470(a). 23 * Sec. 6. AS 43.55.011(e) is amended to read: 24 (e) There is levied on the producer of oil or gas a tax for all oil and gas 25 produced each calendar year from each lease or property in the state, less any oil and 26 gas the ownership or right to which is exempt from taxation or constitutes a 27 landowner's royalty interest. Except as otherwise provided under (f), (j), (k), (o), and 28 (p) of this section, the tax is equal to 29 (1) [BEFORE JANUARY 1, 2014, THE TAX IS EQUAL TO] the 30 sum of 31 [(A)] the annual production tax value of the taxable oil and gas
01 as calculated under AS 43.55.160(a)(1), as adjusted by AS 43.55.162, 02 multiplied by 25 percent; and 03 (2) [(B)] the sum, over all months of the calendar year, of the tax 04 amounts determined under (g) of this section [; 05 (2) ON AND AFTER JANUARY 1, 2014, THE TAX IS EQUAL TO 06 THE ANNUAL PRODUCTION TAX VALUE OF THE TAXABLE OIL AND GAS 07 AS CALCULATED UNDER AS 43.55.160(a)(1) MULTIPLIED BY 35 PERCENT]. 08 * Sec. 7. AS 43.55.011(f) is repealed and reenacted to read: 09 (f) Except for oil and gas subject to (i) of this section and gas subject to (o) of 10 this section, the provisions of this subsection apply to oil and gas produced from each 11 lease or property within a unit or nonunitized reservoir that has cumulatively produced 12 400,000,000 BTU equivalent barrels of oil or gas by the close of the most recent 13 calendar year and from which the average daily oil and gas production from the unit or 14 nonunitized reservoir during the most recent calendar year exceeded 100,000 BTU 15 equivalent barrels. Notwithstanding any contrary provision of law, a producer may not 16 apply tax credits to reduce its total tax liability under (e) and (g) of this section for oil 17 and gas produced from all leases or properties within the unit or nonunitized reservoir 18 below 10 percent of the total gross value at the point of production of that oil and gas. 19 If the amount of tax calculated by multiplying the tax rates in (e) and (g) of this 20 section by the total production tax value of the oil and gas taxable under (e) and (g) of 21 this section produced from all of the producer's leases or properties within the unit or 22 nonunitized reservoir is less than 10 percent of the total gross value at the point of 23 production of that oil and gas, the tax levied by (e) and (g) of this section for that oil 24 and gas is equal to 10 percent of the total gross value at the point of production of that 25 oil and gas. 26 * Sec. 8. AS 43.55.011(g) is amended to read: 27 (g) For each month of a calendar year [BEFORE 2014] for which the 28 producer's average monthly production tax value under AS 43.55.160(a)(2) of a BTU 29 equivalent barrel of the taxable oil and gas is more than $30, the amount of tax for 30 purposes of (e)(2) [(e)(1)(B)] of this section is determined by multiplying the monthly 31 production tax value of the taxable oil and gas produced during the month, as
01 adjusted by AS 43.55.162, by the tax rate calculated as follows: 02 (1) if the producer's average monthly production tax value of a BTU 03 equivalent barrel of the taxable oil and gas for the month is not more than $67.50 04 [$92.50], the tax rate is 0.4 percent multiplied by the number that represents the 05 difference between that average monthly production tax value of a BTU equivalent 06 barrel and $30; [OR] 07 (2) if the producer's average monthly production tax value of a 08 BTU equivalent barrel of the taxable oil and gas for the month is more than 09 $67.50 and not more than $87.50, the tax rate is the sum of 15 percent and the 10 product of 0.25 percent multiplied by the number that represents the difference 11 between the average monthly production tax value of a BTU equivalent barrel 12 and $67.50; or 13 (3) if the producer's average monthly production tax value of a BTU 14 equivalent barrel of the taxable oil and gas for the month is more than $87.50 15 [$92.50], the tax rate is the sum of 25 percent and the product of 0.1 percent multiplied 16 by the number that represents the difference between the average monthly production 17 tax value of a BTU equivalent barrel and $87.50 [$92.50], except that the sum 18 determined under this paragraph may not exceed 25 [50] percent. 19 * Sec. 9. AS 43.55.011(i) is amended to read: 20 (i) There is levied on the producer of oil or gas a tax for all oil and gas 21 produced each calendar year from each lease or property in the state the ownership or 22 right to which constitutes a landowner's royalty interest, except for oil and gas the 23 ownership or right to which is exempt from taxation. The provisions of this subsection 24 apply to a landowner's royalty interest as follows: 25 (1) the tax levied for oil is equal to five percent of the gross value at 26 the point of production of the oil; 27 (2) the tax levied for gas is equal to 1.667 percent of the gross value at 28 the point of production of the gas; 29 (3) if the department determines that, for purposes of reducing the 30 producer's tax liability under (1) or (2) of this subsection, the producer has received or 31 will receive consideration from the royalty owner offsetting all or a part of the
01 producer's royalty obligation, other than a deduction under AS 43.55.020(m) 02 [AS 43.55.020 RELATED TO A SETTLEMENT WITH A ROYALTY OWNER] of 03 the amount of a tax paid, then, notwithstanding (1) and (2) of this subsection, the tax is 04 equal to 25 percent of the gross value at the point of production of the oil and gas. 05 * Sec. 10. AS 43.55.011(o) is amended to read: 06 (o) Notwithstanding other provisions of this section, for a calendar year before 07 2022, the tax levied under (e) of this section for each 1,000 cubic feet of gas for gas 08 produced from a lease or property outside the Cook Inlet sedimentary basin and used 09 in the state [, OTHER THAN GAS SUBJECT TO (p) OF THIS SECTION,] may not 10 exceed the amount of tax for each 1,000 cubic feet of gas that is determined under 11 (j)(2) of this section. 12 * Sec. 11. AS 43.55.011(p) is amended to read: 13 (p) For the seven years immediately following the commencement of 14 commercial production of oil or gas produced from leases or properties in the state 15 that are outside the Cook Inlet sedimentary basin and that do not include land located 16 north of 68 degrees North latitude, where that commercial production began after 17 December 31, 2012, and before January 1, 2022 [2027], the levy of tax under (e) of 18 this section for oil and gas may not exceed four percent of the gross value at the point 19 of production. 20 * Sec. 12. AS 43.55.020(a) is amended to read: 21 (a) For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i) 22 or (p) [AS 43.55.011] shall pay the tax as follows: 23 (1) [BEFORE JANUARY 1, 2014,] an installment payment of the 24 estimated tax levied by AS 43.55.011(e), net of any tax credits applied as allowed by 25 law, is due for each month of the calendar year on the last day of the following month; 26 except as otherwise provided under (2) of this subsection, the amount of the 27 installment payment is the sum of the following amounts, less 1/12 of the tax credits 28 that are allowed by law to be applied against the tax levied by AS 43.55.011(e) for the 29 calendar year, but the amount of the installment payment may not be less than zero: 30 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 31 produced from leases or properties in the state outside the Cook Inlet
01 sedimentary basin, other than leases or properties subject to AS 43.55.011(f), 02 the greater of 03 (i) zero; or 04 (ii) the sum of 25 percent and the tax rate calculated for 05 the month under AS 43.55.011(g) multiplied by the remainder obtained 06 by subtracting 1/12 of the producer's adjusted lease expenditures for the 07 calendar year of production under AS 43.55.165 and 43.55.170 that are 08 deductible for the leases or properties [OIL AND GAS] under 09 AS 43.55.160 and 1/12 of the adjustment to the production tax 10 value for the calendar year under AS 43.55.162 from the gross value 11 at the point of production of the oil and gas produced from the leases or 12 properties during the month for which the installment payment is 13 calculated; 14 (B) for oil and gas produced from leases or properties subject 15 to AS 43.55.011(f), 10 percent of the gross value at the point of production 16 of that oil and gas [THE GREATEST OF 17 (i) ZERO; 18 (ii) ZERO PERCENT, ONE PERCENT, TWO 19 PERCENT, THREE PERCENT, OR FOUR PERCENT, AS 20 APPLICABLE, OF THE GROSS VALUE AT THE POINT OF 21 PRODUCTION OF THE OIL AND GAS PRODUCED FROM THE 22 LEASES OR PROPERTIES DURING THE MONTH FOR WHICH 23 THE INSTALLMENT PAYMENT IS CALCULATED; OR 24 (iii) THE SUM OF 25 PERCENT AND THE TAX 25 RATE CALCULATED FOR THE MONTH UNDER AS 43.55.011(g) 26 MULTIPLIED BY THE REMAINDER OBTAINED BY 27 SUBTRACTING 1/12 OF THE PRODUCER'S ADJUSTED LEASE 28 EXPENDITURES FOR THE CALENDAR YEAR OF PRODUCTION 29 UNDER AS 43.55.165 AND 43.55.170 THAT ARE DEDUCTIBLE 30 FOR THE OIL AND GAS UNDER AS 43.55.160 FROM THE 31 GROSS VALUE AT THE POINT OF PRODUCTION OF THE OIL
01 AND GAS PRODUCED FROM THOSE LEASES OR PROPERTIES 02 DURING THE MONTH FOR WHICH THE INSTALLMENT 03 PAYMENT IS CALCULATED]; 04 (C) for oil or gas subject to AS 43.55.011(j), (k), [OR] (o), or 05 (p), for each lease or property, the greater of 06 (i) zero; or 07 (ii) the sum of 25 percent and the tax rate calculated for 08 the month under AS 43.55.011(g) multiplied by the remainder obtained 09 by subtracting 1/12 of the producer's adjusted lease expenditures for the 10 calendar year of production under AS 43.55.165 and 43.55.170 that are 11 deductible under AS 43.55.160 and 1/12 of the adjustment to the 12 production tax value for the calendar year under AS 43.55.162 for 13 the oil or gas, as applicable [RESPECTIVELY], produced from the 14 lease or property from the gross value at the point of production of the 15 oil or gas, respectively, produced from the lease or property during the 16 month for which the installment payment is calculated; 17 [(D) FOR OIL AND GAS SUBJECT TO AS 43.55.011(p), 18 THE LESSER OF 19 (i) THE SUM OF 25 PERCENT AND THE TAX 20 RATE CALCULATED FOR THE MONTH UNDER AS 43.55.011(g) 21 MULTIPLIED BY THE REMAINDER OBTAINED BY 22 SUBTRACTING 1/12 OF THE PRODUCER'S ADJUSTED LEASE 23 EXPENDITURES FOR THE CALENDAR YEAR OF PRODUCTION 24 UNDER AS 43.55.165 AND 43.55.170 THAT ARE DEDUCTIBLE 25 FOR THE OIL AND GAS UNDER AS 43.55.160 FROM THE 26 GROSS VALUE AT THE POINT OF PRODUCTION OF THE OIL 27 AND GAS PRODUCED FROM THE LEASES OR PROPERTIES 28 DURING THE MONTH FOR WHICH THE INSTALLMENT 29 PAYMENT IS CALCULATED, BUT NOT LESS THAN ZERO; OR 30 (ii) FOUR PERCENT OF THE GROSS VALUE AT 31 THE POINT OF PRODUCTION OF THE OIL AND GAS
01 PRODUCED FROM THE LEASES OR PROPERTIES DURING THE 02 MONTH, BUT NOT LESS THAN ZERO;] 03 (2) an amount calculated under (1)(C) of this subsection for oil or gas 04 produced from a lease or property 05 (A) subject to AS 43.55.011(j), (k), or (o) may not exceed the 06 product obtained by carrying out the calculation set out in AS 43.55.011(j)(1) 07 or (2) or 43.55.011(o), as applicable, for gas or set out in AS 43.55.011(k)(1) 08 or (2), as applicable, for oil, but substituting in AS 43.55.011(j)(1)(A) or (2)(A) 09 or 43.55.011(o), as applicable, the amount of taxable gas produced during the 10 month for the amount of taxable gas produced during the calendar year and 11 substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the amount of 12 taxable oil produced during the month for the amount of taxable oil produced 13 during the calendar year; 14 (B) subject to AS 43.55.011(p) may not exceed four percent 15 of the gross value at the point of production of the oil or gas; 16 (3) an installment payment of the estimated tax levied by 17 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 18 on the last day of the following month; the amount of the installment payment is the 19 sum of 20 (A) the applicable tax rate for oil provided under 21 AS 43.55.011(i), multiplied by the gross value at the point of production of the 22 oil taxable under AS 43.55.011(i) and produced from the lease or property 23 during the month; and 24 (B) the applicable tax rate for gas provided under 25 AS 43.55.011(i), multiplied by the gross value at the point of production of the 26 gas taxable under AS 43.55.011(i) and produced from the lease or property 27 during the month; 28 (4) any amount of tax levied by AS 43.55.011(e) or (i) 29 [AS 43.55.011], net of any credits applied as allowed by law, that exceeds the total of 30 the amounts due as installment payments of estimated tax is due on March 31 of the 31 year following the calendar year of production [;
01 (5) ON AND AFTER JANUARY 1, 2014, AN INSTALLMENT 02 PAYMENT OF THE ESTIMATED TAX LEVIED BY AS 43.55.011(e), NET OF 03 ANY TAX CREDITS APPLIED AS ALLOWED BY LAW, IS DUE FOR EACH 04 MONTH OF THE CALENDAR YEAR ON THE LAST DAY OF THE 05 FOLLOWING MONTH; EXCEPT AS OTHERWISE PROVIDED UNDER (6) OF 06 THIS SUBSECTION, THE AMOUNT OF THE INSTALLMENT PAYMENT IS 07 THE SUM OF THE FOLLOWING AMOUNTS, LESS 1/12 OF THE TAX CREDITS 08 THAT ARE ALLOWED BY LAW TO BE APPLIED AGAINST THE TAX LEVIED 09 BY AS 43.55.011(e) FOR THE CALENDAR YEAR, BUT THE AMOUNT OF THE 10 INSTALLMENT PAYMENT MAY NOT BE LESS THAN ZERO: 11 (A) FOR OIL AND GAS NOT SUBJECT TO AS 43.55.011(o) 12 OR (p) PRODUCED FROM LEASES OR PROPERTIES IN THE STATE 13 OUTSIDE THE COOK INLET SEDIMENTARY BASIN, OTHER THAN 14 LEASES OR PROPERTIES SUBJECT TO AS 43.55.011(f), THE GREATER 15 OF 16 (i) ZERO; OR 17 (ii) 35 PERCENT MULTIPLIED BY THE 18 REMAINDER OBTAINED BY SUBTRACTING 1/12 OF THE 19 PRODUCER'S ADJUSTED LEASE EXPENDITURES FOR THE 20 CALENDAR YEAR OF PRODUCTION UNDER AS 43.55.165 AND 21 43.55.170 THAT ARE DEDUCTIBLE FOR THE OIL AND GAS 22 UNDER AS 43.55.160 FROM THE GROSS VALUE AT THE POINT 23 OF PRODUCTION OF THE OIL AND GAS PRODUCED FROM 24 THE LEASES OR PROPERTIES DURING THE MONTH FOR 25 WHICH THE INSTALLMENT PAYMENT IS CALCULATED; 26 (B) FOR OIL AND GAS PRODUCED FROM LEASES OR 27 PROPERTIES SUBJECT TO AS 43.55.011(f), THE GREATEST OF 28 (i) ZERO; 29 (ii) ZERO PERCENT, ONE PERCENT, TWO 30 PERCENT, THREE PERCENT, OR FOUR PERCENT, AS 31 APPLICABLE, OF THE GROSS VALUE AT THE POINT OF
01 PRODUCTION OF THE OIL AND GAS PRODUCED FROM THE 02 LEASES OR PROPERTIES DURING THE MONTH FOR WHICH 03 THE INSTALLMENT PAYMENT IS CALCULATED; OR 04 (iii) 35 PERCENT MULTIPLIED BY THE 05 REMAINDER OBTAINED BY SUBTRACTING 1/12 OF THE 06 PRODUCER'S ADJUSTED LEASE EXPENDITURES FOR THE 07 CALENDAR YEAR OF PRODUCTION UNDER AS 43.55.165 AND 08 43.55.170 THAT ARE DEDUCTIBLE FOR THE OIL AND GAS 09 UNDER AS 43.55.160 FROM THE GROSS VALUE AT THE POINT 10 OF PRODUCTION OF THE OIL AND GAS PRODUCED FROM 11 THOSE LEASES OR PROPERTIES DURING THE MONTH FOR 12 WHICH THE INSTALLMENT PAYMENT IS CALCULATED, 13 EXCEPT THAT, FOR THE PURPOSES OF THIS CALCULATION, 14 A REDUCTION FROM THE GROSS VALUE AT THE POINT OF 15 PRODUCTION MAY APPLY FOR OIL AND GAS SUBJECT TO 16 AS 43.55.160(f) OR (g); 17 (C) FOR OIL OR GAS SUBJECT TO AS 43.55.011(j), (k), 18 OR (o), FOR EACH LEASE OR PROPERTY, THE GREATER OF 19 (i) ZERO; OR 20 (ii) 35 PERCENT MULTIPLIED BY THE 21 REMAINDER OBTAINED BY SUBTRACTING 1/12 OF THE 22 PRODUCER'S ADJUSTED LEASE EXPENDITURES FOR THE 23 CALENDAR YEAR OF PRODUCTION UNDER AS 43.55.165 AND 24 43.55.170 THAT ARE DEDUCTIBLE UNDER AS 43.55.160 FOR 25 THE OIL OR GAS, RESPECTIVELY, PRODUCED FROM THE 26 LEASE OR PROPERTY FROM THE GROSS VALUE AT THE 27 POINT OF PRODUCTION OF THE OIL OR GAS, RESPECTIVELY, 28 PRODUCED FROM THE LEASE OR PROPERTY DURING THE 29 MONTH FOR WHICH THE INSTALLMENT PAYMENT IS 30 CALCULATED; 31 (D) FOR OIL AND GAS SUBJECT TO AS 43.55.011(p),
01 THE LESSER OF 02 (i) 35 PERCENT MULTIPLIED BY THE 03 REMAINDER OBTAINED BY SUBTRACTING 1/12 OF THE 04 PRODUCER'S ADJUSTED LEASE EXPENDITURES FOR THE 05 CALENDAR YEAR OF PRODUCTION UNDER AS 43.55.165 AND 06 43.55.170 THAT ARE DEDUCTIBLE FOR THE OIL AND GAS 07 UNDER AS 43.55.160 FROM THE GROSS VALUE AT THE POINT 08 OF PRODUCTION OF THE OIL AND GAS PRODUCED FROM 09 THE LEASES OR PROPERTIES DURING THE MONTH FOR 10 WHICH THE INSTALLMENT PAYMENT IS CALCULATED, BUT 11 NOT LESS THAN ZERO; OR 12 (ii) FOUR PERCENT OF THE GROSS VALUE AT 13 THE POINT OF PRODUCTION OF THE OIL AND GAS 14 PRODUCED FROM THE LEASES OR PROPERTIES DURING THE 15 MONTH, BUT NOT LESS THAN ZERO; 16 (6) AN AMOUNT CALCULATED UNDER (5)(C) OF THIS 17 SUBSECTION FOR OIL OR GAS SUBJECT TO AS 43.55.011(j), (k), OR (o) MAY 18 NOT EXCEED THE PRODUCT OBTAINED BY CARRYING OUT THE 19 CALCULATION SET OUT IN AS 43.55.011(j)(1) OR (2) OR 43.55.011(o), AS 20 APPLICABLE, FOR GAS OR SET OUT IN AS 43.55.011(k)(1) OR (2), AS 21 APPLICABLE, FOR OIL, BUT SUBSTITUTING IN AS 43.55.011(j)(1)(A) OR 22 (2)(A) OR 43.55.011(o), AS APPLICABLE, THE AMOUNT OF TAXABLE GAS 23 PRODUCED DURING THE MONTH FOR THE AMOUNT OF TAXABLE GAS 24 PRODUCED DURING THE CALENDAR YEAR AND SUBSTITUTING IN 25 AS 43.55.011(k)(1)(A) OR (2)(A), AS APPLICABLE, THE AMOUNT OF 26 TAXABLE OIL PRODUCED DURING THE MONTH FOR THE AMOUNT OF 27 TAXABLE OIL PRODUCED DURING THE CALENDAR YEAR]. 28 * Sec. 13. AS 43.55.020(g) is amended to read: 29 (g) Notwithstanding any contrary provision of AS 43.05.225, 30 [(1) BEFORE JANUARY 1, 2014,] an unpaid amount of an 31 installment payment required under (a)(1) - (3) of this section that is not paid when
01 due bears interest (1) [(A)] at the rate provided for an underpayment under 26 U.S.C. 02 6621 (Internal Revenue Code), as amended, compounded daily, from the date the 03 installment payment is due until March 31 following the calendar year of production, 04 and (2) [(B)] as provided for a delinquent tax under AS 43.05.225 after that March 31. 05 Interest [; INTEREST] accrued under (1) [(A)] of this subsection [PARAGRAPH] 06 that remains unpaid after that March 31 is treated as an addition to tax that bears 07 interest under (2) [(B)] of this subsection. An [PARAGRAPH; AN] unpaid amount of 08 tax due under (a)(4) of this section that is not paid when due bears interest as provided 09 for a delinquent tax under AS 43.05.225 [; 10 (2) ON AND AFTER JANUARY 1, 2014, AN UNPAID AMOUNT 11 OF AN INSTALLMENT PAYMENT REQUIRED UNDER (a)(3), (5), OR (6) OF 12 THIS SECTION THAT IS NOT PAID WHEN DUE BEARS INTEREST (A) AT 13 THE RATE PROVIDED FOR AN UNDERPAYMENT UNDER 26 U.S.C. 6621 14 (INTERNAL REVENUE CODE), AS AMENDED, COMPOUNDED DAILY, 15 FROM THE DATE THE INSTALLMENT PAYMENT IS DUE UNTIL MARCH 31 16 FOLLOWING THE CALENDAR YEAR OF PRODUCTION, AND (B) AS 17 PROVIDED FOR A DELINQUENT TAX UNDER AS 43.05.225 AFTER THAT 18 MARCH 31; INTEREST ACCRUED UNDER (A) OF THIS PARAGRAPH THAT 19 REMAINS UNPAID AFTER THAT MARCH 31 IS TREATED AS AN ADDITION 20 TO TAX THAT BEARS INTEREST UNDER (B) OF THIS PARAGRAPH; AN 21 UNPAID AMOUNT OF TAX DUE UNDER (a)(4) OF THIS SECTION THAT IS 22 NOT PAID WHEN DUE BEARS INTEREST AS PROVIDED FOR A 23 DELINQUENT TAX UNDER AS 43.05.225]. 24 * Sec. 14. AS 43.55.020(h) is amended to read: 25 (h) Notwithstanding any contrary provision of AS 43.05.280, 26 (1) an overpayment of an installment payment required under (a)(1) - 27 (3) [, (5) OR (6)] of this section bears interest at the rate provided for an overpayment 28 under 26 U.S.C. 6621 (Internal Revenue Code), as amended, compounded daily, from 29 the later of the date the installment payment is due or the date the overpayment is 30 made, until the earlier of 31 (A) the date it is refunded or is applied to an underpayment; or
01 (B) March 31 following the calendar year of production; 02 (2) except as provided under (1) of this subsection, interest with 03 respect to an overpayment is allowed only on any net overpayment of the payments 04 required under (a) of this section that remains after the later of March 31 following the 05 calendar year of production or the date that the statement required under 06 AS 43.55.030(a) is filed; 07 (3) interest is allowed under (2) of this subsection only from a date that 08 is 90 days after the later of March 31 following the calendar year of production or the 09 date that the statement required under AS 43.55.030(a) is filed; interest is not allowed 10 if the overpayment was refunded within the 90-day period; 11 (4) interest under (2) and (3) of this subsection is paid at the rate and in 12 the manner provided in AS 43.05.225(1). 13 * Sec. 15. AS 43.55.020 is amended by adding a new subsection to read: 14 (m) 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 that 19 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) - (g) on taxable 22 royalty oil and gas for a calendar year, other than oil and gas the ownership or right to 23 which constitutes a landowner's royalty interest, is considered to be the gross value at 24 the point of production of the taxable royalty oil and gas produced during the calendar 25 year multiplied by a figure that is a quotient, in which 26 (1) the numerator is the producer's total tax liability under 27 AS 43.55.011(e) - (g) for the calendar year of production; and 28 (2) the denominator is the total gross value at the point of production 29 of the oil and gas taxable under AS 43.55.011(e) - (g) produced by the producer from 30 all leases and properties in the state during the calendar year. 31 * Sec. 16. AS 43.55.023(a) is amended to read:
01 (a) A producer or explorer may take a tax credit for a qualified capital 02 expenditure as follows: 03 (1) notwithstanding that a qualified capital expenditure may be a 04 deductible lease expenditure for purposes of calculating the production tax value of oil 05 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 06 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, a producer or 07 explorer that incurs a qualified capital expenditure may also elect to apply a tax credit 08 against a tax levied by AS 43.55.011(e) in the amount of 10 [20] percent of that 09 expenditure; however, not more than half of the tax credit may be applied for a 10 single calendar year; 11 (2) a producer or explorer may take a credit for a qualified capital 12 expenditure incurred in connection with geological or geophysical exploration or in 13 connection with an exploration well only if the producer or explorer 14 (A) agrees, in writing, to the applicable provisions of 15 AS 43.55.025(f)(2); and 16 (B) submits to the Department of Natural Resources all data 17 that would be required to be submitted under AS 43.55.025(f)(2) [; 18 (3) A CREDIT FOR A QUALIFIED CAPITAL EXPENDITURE 19 INCURRED TO EXPLORE FOR, DEVELOP, OR PRODUCE OIL OR GAS 20 DEPOSITS LOCATED NORTH OF 68 DEGREES NORTH LATITUDE MAY BE 21 TAKEN ONLY IF THE EXPENDITURE IS INCURRED BEFORE JANUARY 1, 22 2014]. 23 * Sec. 17. AS 43.55.023(b) is amended to read: 24 (b) A [BEFORE JANUARY 1, 2014, A] producer or explorer may elect to 25 take a tax credit in the amount of 25 percent of a carried-forward annual loss. [FOR 26 LEASE EXPENDITURES INCURRED ON AND AFTER JANUARY 1, 2014, AND 27 BEFORE JANUARY 1, 2016, TO EXPLORE FOR, DEVELOP, OR PRODUCE OIL 28 OR GAS DEPOSITS LOCATED NORTH OF 68 DEGREES NORTH LATITUDE, 29 A PRODUCER OR EXPLORER MAY ELECT TO TAKE A TAX CREDIT IN THE 30 AMOUNT OF 45 PERCENT OF A CARRIED-FORWARD ANNUAL LOSS. FOR 31 LEASE EXPENDITURES INCURRED ON AND AFTER JANUARY 1, 2016, TO
01 EXPLORE FOR, DEVELOP, OR PRODUCE OIL OR GAS DEPOSITS LOCATED 02 NORTH OF 68 DEGREES NORTH LATITUDE, A PRODUCER OR EXPLORER 03 MAY ELECT TO TAKE A TAX CREDIT IN THE AMOUNT OF 35 PERCENT OF 04 A CARRIED-FORWARD ANNUAL LOSS. FOR LEASE EXPENDITURES 05 INCURRED ON OR AFTER JANUARY 1, 2014, TO EXPLORE FOR, DEVELOP, 06 OR PRODUCE OIL OR GAS DEPOSITS LOCATED SOUTH OF 68 DEGREES 07 NORTH LATITUDE, A PRODUCER OR EXPLORER MAY ELECT TO TAKE A 08 TAX CREDIT IN THE AMOUNT OF 25 PERCENT OF A CARRIED-FORWARD 09 ANNUAL LOSS.] A credit under this subsection may be applied against a tax levied 10 by AS 43.55.011(e). For purposes of this subsection, a carried-forward annual loss is 11 the amount of a producer's or explorer's adjusted lease expenditures under 12 AS 43.55.165 and 43.55.170 for a previous calendar year that was not deductible in 13 calculating production tax values for that calendar year under AS 43.55.160. 14 * Sec. 18. AS 43.55.023(d) is amended to read: 15 (d) A person that is entitled to take a tax credit under this section that wishes 16 to transfer the unused credit to another person or obtain a cash payment under 17 AS 43.55.028 may apply to the department for [A] transferable tax credit certificates 18 [CERTIFICATE]. An application under this subsection must be in a form prescribed 19 by the department and must include supporting information and documentation that 20 the department reasonably requires. The department shall grant or deny an application, 21 or grant an application as to a lesser amount than that claimed and deny it as to the 22 excess, not later than 120 days after the latest of (1) March 31 of the year following 23 the calendar year in which the qualified capital expenditure or carried-forward annual 24 loss for which the credit is claimed was incurred; (2) the date the statement required 25 under AS 43.55.030(a) or (e) was filed for the calendar year in which the qualified 26 capital expenditure or carried-forward annual loss for which the credit is claimed was 27 incurred; or (3) the date the application was received by the department. If, based on 28 the information then available to it, the department is reasonably satisfied that the 29 applicant is entitled to a credit, the department shall issue the applicant two [A] 30 transferable tax credit certificates, each for half of [CERTIFICATE FOR] the 31 amount of the credit. The credit shown on one of the two certificates is available
01 for immediate use. The credit shown on the second of the two certificates may not 02 be applied against a tax for a calendar year earlier than the calendar year 03 following the calendar year in which the certificate is issued, and the certificate 04 must contain a conspicuous statement to that effect. A certificate issued under this 05 subsection does not expire. 06 * Sec. 19. AS 43.55.023(g) is amended to read: 07 (g) The issuance of a transferable tax credit certificate under (d) [OF THIS 08 SECTION] or (q) [FORMER (m)] of this section or the purchase of a certificate under 09 AS 43.55.028 does not limit the department's ability to later audit a tax credit claim to 10 which the certificate relates or to adjust the claim if the department determines, as a 11 result of the audit, that the applicant was not entitled to the amount of the credit for 12 which the certificate was issued. The tax liability of the applicant under 13 AS 43.55.011(e) and 43.55.017 - 43.55.180 is increased by the amount of the credit 14 that exceeds that to which the applicant was entitled, or the applicant's available valid 15 outstanding credits applicable against the tax levied by AS 43.55.011(e) are reduced 16 by that amount. If the applicant's tax liability is increased under this subsection, the 17 increase bears interest under AS 43.05.225 from the date the transferable tax credit 18 certificate was issued. For purposes of this subsection, an applicant that is an explorer 19 is considered a producer subject to the tax levied by AS 43.55.011(e). 20 * Sec. 20. AS 43.55.023(n) is amended to read: 21 (n) For the purposes of (l) and (q) of this section, a well lease expenditure 22 incurred in the state south of 68 degrees North latitude is a lease expenditure that is 23 (1) directly related to an exploration well, a stratigraphic test well, a 24 producing well, or an injection well other than a disposal well, located in the state 25 south of 68 degrees North latitude, if the expenditure is a qualified capital expenditure 26 and an intangible drilling and development cost authorized under 26 U.S.C. (Internal 27 Revenue Code), as amended, and 26 C.F.R. 1.612-4, regardless of the elections made 28 under 26 U.S.C. 263(c); in this paragraph, an expenditure directly related to a well 29 includes an expenditure for well sidetracking, well deepening, well completion or 30 recompletion, or well workover, regardless of whether the well is or has been a 31 producing well; or
01 (2) an expense for seismic work conducted within the boundaries of a 02 production or exploration unit. 03 * Sec. 21. AS 43.55.023(o) is amended to read: 04 (o) In this section, "qualified capital expenditure" 05 (1) means, except as otherwise provided in (2) of this subsection, an 06 expenditure that is a lease expenditure under AS 43.55.165 that is directly 07 attributable to a well, well pad, processing facility, pump station, or other capital 08 construction project directly attributable to oil production; and is 09 (A) incurred for geological or geophysical exploration; or 10 (B) treated as a capitalized expenditure under 26 U.S.C. 11 (Internal Revenue Code), as amended, regardless of elections made under 26 12 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 13 (i) treated as a capitalized expenditure for federal 14 income tax reporting purposes by the person incurring the expenditure; 15 or 16 (ii) eligible to be deducted as an expense under 26 17 U.S.C. 263(c) (Internal Revenue Code), as amended; 18 (2) does not include an expenditure incurred to acquire an asset (A) the 19 cost of previously acquiring which was a lease expenditure under AS 43.55.165 or 20 would have been a lease expenditure under AS 43.55.165 if it had been incurred after 21 March 31, 2006; for purposes of this subparagraph, "asset" includes geological, 22 geophysical, and well data and interpretations; [OR] (B) that has previously been 23 placed in service in the state; or (C) an expenditure that is not directly attributable 24 to oil production, such as an expenditure for the construction or maintenance of a 25 road, airstrip, or employee housing; an expenditure to acquire an asset is not 26 excluded under this paragraph if not more than an immaterial portion of the asset 27 meets a description under this paragraph. 28 * Sec. 22. AS 43.55.023 is amended by adding a new subsection to read: 29 (q) For a lease expenditure incurred in the state south of 68 degrees North 30 latitude after June 30, 2010, that qualifies for tax credits under (a) and (b) of this 31 section, and for a well lease expenditure incurred in the state south of 68 degrees
01 North latitude that qualifies for a tax credit under (l) of this section, the department 02 shall issue a transferable tax credit certificate to the person entitled to the credit for the 03 full amount of the credit. The transferable tax credit certificate does not expire. 04 * Sec. 23. AS 43.55.024(d) is amended to read: 05 (d) A producer may not take a tax credit under (c) of this section for any 06 calendar year after the later of 07 (1) 2022 [2016]; or 08 (2) if the producer did not have commercial oil or gas production from 09 a lease or property in the state before April 1, 2006, the ninth calendar year after the 10 calendar year during which the producer first has commercial oil or gas production 11 before May 1, 2022 [2016], from at least one lease or property in the state. 12 * Sec. 24. AS 43.55.024(e) is amended to read: 13 (e) On written application by a producer that includes any information the 14 department may require, the department shall determine whether the producer 15 qualifies for a calendar year under [(a) AND (c) OF] this section. To qualify under [(a) 16 AND (c) OF] this section, a producer must demonstrate that its operation in the state 17 or its ownership of an interest in a lease or property in the state as a distinct producer 18 would not result in the division among multiple producer entities of any production tax 19 liability under AS 43.55.011(e) that reasonably would be expected to be attributed to a 20 single producer if the tax credit provisions of (a) or (c) of this section did not exist. 21 * Sec. 25. AS 43.55.025(a) is amended to read: 22 (a) Subject to the terms and conditions of this section, a credit against the 23 production tax levied by AS 43.55.011(e) is allowed for exploration expenditures that 24 qualify under (b) of this section in an amount equal to one of the following: 25 (1) 30 percent of the total exploration expenditures that qualify only 26 under (b) and (c) of this section; 27 (2) 30 percent of the total exploration expenditures that qualify only 28 under (b) and (d) of this section; 29 (3) 40 percent of the total exploration expenditures that qualify under 30 (b), (c), and (d) of this section; 31 (4) 40 percent of the total exploration expenditures that qualify only
01 under (b) and (e) of this section; 02 (5) 80, 90, or 100 percent, or a lesser amount described in (l) of this 03 section, of the total exploration expenditures described in (b)(1) and (2) of this section 04 and not excluded by (b)(3) and (4) of this section that qualify only under (l) of this 05 section; 06 (6) the lesser of $25,000,000 or 80 percent of the total exploration 07 drilling expenditures described in (m) of this section and that qualify under (b) and (c) 08 [(c)(1), (c)(2)(A), AND (c)(2)(C)] of this section; or 09 (7) the lesser of $7,500,000 or 75 percent of the total seismic 10 exploration expenditures described in (n) of this section and that qualify under (b) of 11 this section. 12 * Sec. 26. AS 43.55.025(b) is amended to read: 13 (b) To qualify for the production tax credit under (a) of this section, an 14 exploration expenditure must be incurred for work performed after June 30, 2008, and 15 before July 1, 2022 [2016], [EXCEPT THAT TO QUALIFY FOR THE 16 PRODUCTION TAX CREDIT UNDER (a)(1), (2), (3), OR (4) OF THIS SECTION 17 FOR EXPLORATION CONDUCTED OUTSIDE OF THE COOK INLET 18 SEDIMENTARY BASIN AND SOUTH OF 68 DEGREES NORTH LATITUDE, AN 19 EXPLORATION EXPENDITURE MUST BE INCURRED FOR WORK 20 PERFORMED AFTER JUNE 30, 2008, AND BEFORE JANUARY 1, 2022,] and 21 (1) may be for seismic or other geophysical exploration costs not 22 connected with a specific well; 23 (2) if for an exploration well, 24 (A) must be incurred by an explorer that holds an interest in the 25 exploration well for which the production tax credit is claimed; 26 (B) may be for either a well that encounters an oil or gas 27 deposit or a dry hole; 28 (C) must be for a well that has been completed, suspended, or 29 abandoned at the time the explorer claims the tax credit under (f) of this 30 section; and 31 (D) must be for goods, services, or rentals of personal property
01 reasonably required for the surface preparation, drilling, casing, cementing, 02 and logging of an exploration well, and, in the case of a dry hole, for the 03 expenses required for abandonment if the well is abandoned within 18 months 04 after the date the well was spudded; 05 (3) may not be for administration, supervision, engineering, or lease 06 operating costs; geological or management costs; community relations or 07 environmental costs; bonuses, taxes, or other payments to governments related to the 08 well; costs, including repairs and replacements, arising from or associated with fraud, 09 wilful misconduct, gross negligence, criminal negligence, or violation of law, 10 including a violation of 33 U.S.C. 1319(c)(1) or 1321(b)(3) (Clean Water Act); or 11 other costs that are generally recognized as indirect costs or financing costs; and 12 (4) may not be incurred for an exploration well or seismic exploration 13 that is included in a plan of exploration or a plan of development for any unit before 14 May 14, 2003. 15 * Sec. 27. AS 43.55.025(m) is amended to read: 16 (m) The persons that drill the first four exploration wells in the state and 17 within the areas described in (o) of this section on state lands, private lands, or federal 18 onshore lands for the purpose of discovering oil or gas that penetrate and evaluate a 19 prospect in a basin described in (o) of this section are eligible for a credit under (a)(6) 20 of this section. A credit under this subsection may not be taken for more than two 21 exploration wells in a single area described in (o)(1) - (6) of this section. Exploration 22 expenditures eligible for the credit in this subsection must be incurred for work 23 performed after June 1, 2012, and before July 1, 2016. A person planning to drill an 24 exploration well on private land and to apply for a credit under this subsection shall 25 obtain written consent from the owner of the oil and gas interest for the full public 26 release of all well data after the expiration of the confidentiality period applicable to 27 information collected under (f) of this section. The written consent of the owner of the 28 oil and gas interest must be submitted to the commissioner of natural resources before 29 approval of the proposed exploration well. In addition to the requirements in (c) 30 [(c)(1), (c)(2)(A), AND (c)(2)(C)] of this section and submission of the written 31 consent of the owner of the oil and gas interest, a person planning to drill an
01 exploration well shall obtain approval from the commissioner of natural resources 02 before the well is spudded. The commissioner of natural resources shall make a 03 written determination approving or rejecting an exploration well within 60 days after 04 receiving the request for approval or as soon as is practicable thereafter. Before 05 approving the exploration well, the commissioner of natural resources shall consider 06 the following: the location of the well; the proximity to a community in need of a local 07 energy source; the proximity of existing infrastructure; the experience and safety 08 record of the explorer in conducting operations in remote or roadless areas; the 09 projected cost schedule; whether seismic mapping and seismic data sufficiently 10 identify a particular trap for exploration; whether the targeted and planned depth and 11 range are designed to penetrate and fully evaluate the hydrocarbon potential of the 12 proposed prospect and reach the level below which economic hydrocarbon reservoirs 13 are likely to be found, or reach 12,000 feet or more true vertical depth; and whether 14 the exploration plan provides for a full evaluation of the wellbore below surface casing 15 to the depth of the well. Whether the exploration well for which a credit is requested 16 under this subsection is located within an area and a basin described under (o) of this 17 section shall be determined by the commissioner of natural resources and reported to 18 the commissioner. A taxpayer that obtains a credit under this subsection may not claim 19 a tax credit under AS 43.55.023 or another provision in this section for the same 20 exploration expenditure. 21 * Sec. 28. AS 43.55 is amended by adding a new section to read: 22 Sec. 43.55.026. Heavy oil research and development tax credit. (a) A 23 taxpayer may apply 20 percent of the taxpayer's expenditure attributable to this state 24 for research and development related to improving methods of producing heavy oil in 25 the state for the taxable year that exceeds the base amount, but not to exceed 26 $10,000,000, as a credit against the state tax liability imposed on the taxpayer under 27 this chapter. 28 (b) Research and development expenditures in this section are attributable to 29 this state if the research and development is being conducted in this state or the payroll 30 of employees conducting the research and development is in this state. In this 31 subsection, payroll of an employee is in this state if compensation is paid to an
01 employee in this state and reported as paid in this state in the quarterly contribution 02 report under AS 23.20 to the Department of Labor and Workforce Development. 03 (c) If the tax credit under this section exceeds the taxpayer's tax liability after 04 other tax credits are taken under this chapter for the year in which the expenditure is 05 incurred, the excess of the tax credit over the liability may be carried forward for up to 06 seven years. If an unused credit is carried forward to a tax year from an earlier year, 07 the credit arising in the earliest year is applied first against the tax liability for the year. 08 (d) A person may not claim a credit under this section for research and 09 development expenditures that were deducted in the calculation of tax liability under 10 AS 43.55.011(e). 11 (e) Each year, if three or more taxpayers claim the credit authorized under this 12 section during the immediately preceding year, the department shall report to the 13 legislature the number of taxpayers who claimed credits under this section in the prior 14 year, the total cumulative amount of credits granted to all taxpayers under this section 15 for the prior tax year, a description of the research and development projects for which 16 the credit was granted, and the total cumulative number of employees conducting the 17 research and development for which all taxpayers claim the credit. 18 (f) The commissioner shall establish in regulation a method for apportioning 19 research expenditures of a producer related to heavy oil production in and outside of 20 the state. When developing the regulations, the commissioner may consider the 21 relative amounts of heavy oil the producer is seeking to produce in areas in and 22 outside of the state or consider another reasonable basis on which fairly to apportion 23 costs for research related to in-state oil production and oil produced outside of the 24 state. 25 (g) In this section, "base amount" means the average of research and 26 development expenditures related to improving methods of producing heavy oil and 27 attributable to this state for the three tax years immediately preceding the taxable year 28 for which the credit is being claimed. 29 * Sec. 29. AS 43.55.028(e) is amended to read: 30 (e) The department, on the written application of a person to whom a 31 transferable tax credit certificate has been issued under AS 43.55.023(d) or (q)
01 [FORMER AS 43.55.023(m)] or to whom a production tax credit certificate has been 02 issued under AS 43.55.025(f), may use available money in the oil and gas tax credit 03 fund to purchase, in whole or in part, the certificate if the department finds that 04 (1) the calendar year of the purchase is not earlier than the first 05 calendar year for which the credit shown on the certificate would otherwise be allowed 06 to be applied against a tax; 07 (2) the applicant does not have an outstanding liability to the state for 08 unpaid delinquent taxes under this title; 09 (3) the applicant's total tax liability under AS 43.55.011(e), after 10 application of all available tax credits, for the calendar year in which the application is 11 made is zero; 12 (4) the applicant's average daily production of oil and gas taxable 13 under AS 43.55.011(e) during the calendar year preceding the calendar year in which 14 the application is made was not more than 50,000 BTU equivalent barrels; and 15 (5) the purchase is consistent with this section and regulations adopted 16 under this section. 17 * Sec. 30. 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(q) [FORMER AS 43.55.023(m)] or a claim for 26 a refund or payment under AS 43.20.046 or 43.20.047. 27 * Sec. 31. AS 43.55.030(a) is amended to read: 28 (a) A producer that produces oil or gas from a lease or property in the state 29 during a calendar year, whether or not any tax payment is due under AS 43.55.020(a) 30 for that oil or gas, shall file with the department on March 31 of the following year a 31 statement, under oath, in a form prescribed by the department, giving, with other
01 information required by the department under a regulation adopted by the 02 department, the following: 03 (1) a description of each lease or property from which oil or gas was 04 produced, by name, legal description, lease number, or accounting codes assigned by 05 the department; 06 (2) the names of the producer and, if different, the person paying the 07 tax, if any; 08 (3) the gross amount of oil and the gross amount of gas produced from 09 each lease or property, and the percentage of the gross amount of oil and gas owned by 10 the producer; 11 (4) the gross value at the point of production of the oil and of the gas 12 produced from each lease or property owned by the producer and the costs of 13 transportation of the oil and gas; 14 (5) the name of the first purchaser and the price received for the oil and 15 for the gas, unless relieved from this requirement in whole or in part by the 16 department; 17 (6) the producer's qualified capital expenditures, as defined in 18 AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other 19 payments or credits under AS 43.55.170; 20 (7) the production tax values of the oil and gas under 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; and 24 (10) for each expenditure that is the basis for a credit claimed 25 under AS 43.55.023 or 43.55.025, a description of the expenditure, a detailed 26 description of the purpose of the expenditure, and a description of the lease or 27 property for which the expenditure was incurred; notwithstanding 28 AS 40.25.100(a) and AS 43.05.230(a), information submitted under this 29 paragraph may be disclosed to the public and shall be disclosed to the legislature 30 in a report submitted within 10 days after the convening of the next regular 31 legislative session following the date a statement is filed under this section.
01 * Sec. 32. AS 43.55.030(e) is amended to read: 02 (e) An explorer or producer that incurs a lease expenditure under 03 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 04 year but does not produce oil or gas from a lease or property in the state during the 05 calendar year shall file with the department, on March 31 of the following year, a 06 statement, under oath, in a form prescribed by the department, giving, with other 07 information required by the department under a regulation adopted by the 08 department, the following: 09 (1) the explorer's or producer's qualified capital expenditures, as 10 defined in AS 43.55.023, other lease expenditures under AS 43.55.165, and 11 adjustments or other payments or credits under AS 43.55.170; and 12 (2) if the explorer or producer receives a payment or credit under 13 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 14 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount; and 15 (3) for each expenditure that is the basis for a credit claimed under 16 this chapter, a description of the expenditure, a detailed description of the 17 purpose of the expenditure, and a description of the lease or property for which 18 the expenditure was incurred; notwithstanding AS 40.25.100(a) and 19 AS 43.05.230(a), information submitted under this paragraph may be disclosed to 20 the public and shall be disclosed to the legislature in a report submitted within 10 21 days after the convening of the next regular legislative session following the date 22 a statement is filed under this section. 23 * Sec. 33. AS 43.55.160(a) is amended to read: 24 (a) Except as provided in (b) [, (f), AND (g)] of this section, and subject to 25 adjustment under AS 43.55.162, for the purposes of 26 (1) AS 43.55.011(e), the annual production tax value of taxable oil, 27 gas, or oil and gas produced during a calendar year in a category for which a separate 28 annual production tax value is required to be calculated under this paragraph is the 29 gross value at the point of production of that oil, gas, or oil and gas taxable under 30 AS 43.55.011(e), less the producer's lease expenditures under AS 43.55.165 for the 31 calendar year applicable to the oil, gas, or oil and gas in that category produced by the
01 producer during the calendar year, as adjusted under AS 43.55.170; a separate annual 02 production tax value shall be calculated for 03 (A) oil and gas produced from leases or properties in the state 04 that include land north of 68 degrees North latitude, other than gas produced 05 before 2022 and used in the state; 06 (B) oil and gas produced from leases or properties in the state 07 outside the Cook Inlet sedimentary basin, no part of which is north of 68 08 degrees North latitude [AND THAT QUALIFIES FOR A TAX CREDIT 09 UNDER AS 43.55.024(a) AND (b)]; this subparagraph does not apply to 10 (i) gas produced before 2022 and used in the state; or 11 (ii) oil and gas subject to AS 43.55.011(p); 12 (C) oil produced before 2022 from each lease or property in the 13 Cook Inlet sedimentary basin; 14 (D) gas produced before 2022 from each lease or property in 15 the Cook Inlet sedimentary basin; 16 (E) gas produced before 2022 from each lease or property in 17 the state outside the Cook Inlet sedimentary basin and used in the state [, 18 OTHER THAN GAS SUBJECT TO AS 43.55.011(p)]; 19 (F) oil and gas subject to AS 43.55.011(p) produced from 20 leases or properties in the state; 21 (G) oil and gas produced from leases or properties in the state 22 no part of which is north of 68 degrees North latitude, other than oil or gas 23 described in (B), (C), (D), (E), or (F) of this paragraph; 24 (2) AS 43.55.011(g), [FOR OIL AND GAS PRODUCED BEFORE 25 JANUARY 1, 2014,] the monthly production tax value of the taxable 26 (A) oil and gas produced during a month from leases or 27 properties in the state that include land north of 68 degrees North latitude is the 28 gross value at the point of production of the oil and gas taxable under 29 AS 43.55.011(e) and produced by the producer from those leases or properties, 30 less 1/12 of the producer's lease expenditures under AS 43.55.165 for the 31 calendar year applicable to the oil and gas produced by the producer from
01 those leases or properties, as adjusted under AS 43.55.170; this subparagraph 02 does not apply to gas subject to AS 43.55.011(o); 03 (B) oil and gas produced during a month from leases or 04 properties in the state outside the Cook Inlet sedimentary basin, no part of 05 which is north of 68 degrees North latitude, is the gross value at the point of 06 production of the oil and gas taxable under AS 43.55.011(e) and produced by 07 the producer from those leases or properties, less 1/12 of the producer's lease 08 expenditures under AS 43.55.165 for the calendar year applicable to the oil and 09 gas produced by the producer from those leases or properties, as adjusted under 10 AS 43.55.170; this subparagraph does not apply to gas subject to 11 AS 43.55.011(o); 12 (C) oil produced during a month from a lease or property in the 13 Cook Inlet sedimentary basin is the gross value at the point of production of 14 the oil taxable under AS 43.55.011(e) and produced by the producer from that 15 lease or property, less 1/12 of the producer's lease expenditures under 16 AS 43.55.165 for the calendar year applicable to the oil produced by the 17 producer from that lease or property, as adjusted under AS 43.55.170; 18 (D) gas produced during a month from a lease or property in 19 the Cook Inlet sedimentary basin is the gross value at the point of production 20 of the gas taxable under AS 43.55.011(e) and produced by the producer from 21 that lease or property, less 1/12 of the producer's lease expenditures under 22 AS 43.55.165 for the calendar year applicable to the gas produced by the 23 producer from that lease or property, as adjusted under AS 43.55.170; 24 (E) gas produced during a month from a lease or property 25 outside the Cook Inlet sedimentary basin and used in the state is the gross 26 value at the point of production of that gas taxable under AS 43.55.011(e) and 27 produced by the producer from that lease or property, less 1/12 of the 28 producer's lease expenditures under AS 43.55.165 for the calendar year 29 applicable to that gas produced by the producer from that lease or property, as 30 adjusted under AS 43.55.170. 31 * Sec. 34. AS 43.55 is amended by adding a new section to read:
01 Sec. 43.55.162. Reductions to production tax value. (a) The annual 02 production tax value of oil produced from a lease or property north of 68 degrees 03 North latitude by the producer is reduced, during the first seven consecutive years 04 after the start of commercial production by 20 percent of the gross value at the point of 05 production of oil produced during the calendar year. This subsection does not apply to 06 a lease or property that 07 (1) was in commercial production before January 1, 2007; 08 (2) is located within a unit area that has never had commercial 09 production; or 10 (3) is located within a unit for more than 20 years before the first 11 commercial production on the lease or property. 12 (b) The annual production tax value of oil or gas produced by a producer is 13 reduced during the first five consecutive years after the start of commercial production 14 by 10 percent if the oil or gas is produced from a participating area established after 15 December 31, 2012, that is within a unit formed under AS 38.05.180(p) before 16 January 1, 2003, if the participating area does not contain a reservoir that had 17 previously been in a participating area established before January 1, 2012. This 18 subsection does not apply to production from a lease or property located within a unit 19 for more than 20 years before the first commercial production on the lease or property. 20 (c) The annual production tax value of heavy oil produced by a producer is 21 reduced by 10 percent of the gross value at the point of production of heavy oil 22 produced, for the calendar year, from a lease or property that is located within a unit 23 area existing on January 1, 2014. 24 (d) For a calendar year after 2012, the annual production tax value of oil 25 produced by a producer that produced oil in 2012 is reduced by 10 percent of the gross 26 value at the point of production of the volume of oil produced during the calendar year 27 in excess of the total volume produced by the producer in 2012. The volume of oil 28 produced by a producer in 2012 is the average daily statewide production of the 29 producer, excluding from the calculation the days on which production is significantly 30 reduced, multiplied by the number of days in the calendar year. For the purposes of 31 this subsection, production is significantly reduced when the production volume of oil
01 for the day is less than one-half of the quotient of the total volume of oil production 02 that is produced by the producer for the year and the number of days in the calendar 03 year. A producer that increases its volume of production through the purchase, merger, 04 or other acquisition of another producer is the sum of the producer's total target 05 volume and the total target volume for the producer that is purchased, merged with, or 06 otherwise acquired; however, if the producer that is purchased, merged with, or 07 otherwise acquired did not have a target volume determined under this section, the 08 volume of the increased production that is attributable to the purchase, merger, or 09 other acquisition may not be considered for the purpose of determining whether the 10 producer that acquired the additional production has increased the volume of 11 production above its target volume. 12 (e) A reduction in production tax value provided by this section may not be 13 combined with any other reduction in production tax value provided by this section in 14 the same year. Oil or gas from a lease or property that produces oil or gas that results 15 in a production tax reduction under (a) of this section is ineligible for a production tax 16 reduction under (b) and (c) of this section and may not be used in the calculation of 17 production volume under (d) of this section. 18 (f) A reduction in production tax value provided by this section may not 19 reduce the 20 (1) production tax value of a producer below zero; or 21 (2) total tax liability of a producer below the amount specified in 22 AS 43.55.011(f). 23 (g) The rate of tax under AS 43.55.011(g) shall be determined before the 24 application of the adjustment provided by this section. 25 (h) In this section, 26 (1) "commercial production" means the production of oil for the 27 purpose of sale or other beneficial use, except when the sale or beneficial use is 28 incidental to the testing of an unproved well or unproved completion interval; 29 (2) "participating area" means that part of an oil and gas lease unit to 30 which production is allocated in the manner described in a unit agreement. 31 * Sec. 35. AS 43.55.990 is amended by adding a new paragraph to read:
01 (14) "heavy oil" means oil with an American Petroleum Institute 02 gravity of less than 18 degrees. 03 * Sec. 36. AS 43.56.160 is amended to read: 04 Sec. 43.56.160. Interest and penalty. When the tax levied by AS 43.56.010(a) 05 becomes delinquent, a penalty of 10 percent shall be added. Interest [BEFORE 06 JANUARY 1, 2014, INTEREST] on the delinquent taxes, exclusive of penalty, shall 07 be assessed at a rate of eight percent a year. [ON AND AFTER JANUARY 1, 2014, 08 INTEREST ON THE DELINQUENT TAXES, EXCLUSIVE OF PENALTY, 09 SHALL BE ASSESSED AT THE RATE SPECIFIED IN AS 43.05.225.] 10 * Sec. 37. AS 44.88.080 is amended to read: 11 Sec. 44.88.080. Powers of the authority. In furtherance of its corporate 12 purposes, the authority has the following powers in addition to its other powers: 13 (1) to sue and be sued; 14 (2) to have a seal and alter it at pleasure; 15 (3) to make and alter bylaws for its organization and internal 16 management; 17 (4) to adopt regulations governing the exercise of its corporate powers; 18 (5) to acquire an interest in a project as necessary or appropriate to 19 provide financing for the project, whether by purchase, gift, or lease; 20 (6) to lease to others a project acquired by it for the rentals and upon 21 the terms and conditions the authority may consider advisable, including, without 22 limitation, provisions for options to purchase or renew; 23 (7) to issue bonds and otherwise to incur indebtedness, in accordance 24 with AS 44.88.090, in order to pay the cost of a project or development projects or in 25 order to provide money for the authority's purposes under this chapter; the authority 26 may also secure payment of the bonds or other indebtedness as provided in this 27 chapter; 28 (8) to sell, by installment sale or otherwise, exchange, donate, convey, 29 or encumber, in any manner by mortgage or by creation of any other security interest, 30 real or personal property owned by it, or in which it has an interest, including a 31 project, when, in the judgment of the authority, the action is in furtherance of its
01 corporate purposes; 02 (9) to accept gifts, grants, or loans from, and enter into contracts or 03 other transactions regarding them with, a federal agency, an agency or instrumentality 04 of the state, a municipality, a private organization, or other source; 05 (10) to deposit or invest its funds, subject to agreements with 06 bondholders; 07 (11) to enter into contracts or agreements with respect to the exercise 08 of any of its powers, and do all things necessary or convenient to carry out its 09 corporate purposes and exercise the powers granted in this chapter; 10 (12) to purchase or insure loans to finance the costs of manufacturing, 11 industrial, and business enterprise projects; 12 (13) to enter into loan agreements with respect to one or more projects 13 upon the terms and conditions the authority considers advisable; 14 (14) to acquire, manage, and operate projects as the authority considers 15 necessary or appropriate to serve a public purpose; 16 (15) to assist private lenders to make loans to finance the costs of 17 projects through loan commitments, short-term financing, or otherwise; 18 (16) to accept gifts, grants, or loans from a federal agency, from an 19 agency or instrumentality of the state or of a municipality, or from any other source; 20 (17) to enter into contracts or other transactions with a federal agency, 21 with an agency or instrumentality of the state or of a municipality, or with a private 22 organization or other entity consistent with the exercise of any power under this 23 chapter; 24 (18) to facilitate the expansion of a secondary market for the resale of 25 federally or commercially insured loans made to finance the costs of projects in the 26 state held by federal and state chartered financial institutions or by the Alaska 27 Commercial Fishing and Agriculture Bank; 28 (19) to charge fees or other forms of remuneration for the use or 29 possession of the projects described in (14) of this section in accordance with the 30 agreements described in (11) and (17) of this section, other agreements pertaining to 31 the projects, covenants, or representations made in bond documents pertaining to the
01 projects, or regulations of the authority pertaining to the projects; 02 (20) to participate with government or private industry in programs for 03 technical assistance, loans, technology, transfer, or other programs related to the 04 exportation of goods, services, or raw materials of the state with respect to its 05 financing activities; 06 (21) to provide export finance training for office staff and other 07 individuals involved in export finance assistance, including the training sessions that 08 may be provided by the United States Export-Import Bank or other organizations; 09 (22) to coordinate to the maximum extent possible its efforts to 10 promote the export of goods, services, and raw materials of the state with programs 11 and goals of the United States Export-Import Bank, the International Trade 12 Administration of the United States Department of Commerce, the Foreign Credit 13 Insurance Association, and other private and public programs designed to provide 14 export assistance and export-related financing; 15 (23) to guarantee loans related to qualified export transactions under 16 regulations adopted by the authority; 17 (24) to provide financing assistance, in cooperation with federal, state, 18 and private institutions, as provided in this chapter for small business enterprises; 19 (25) to make cooperative agreements with the Department of 20 Transportation and Public Facilities, acting on behalf of the international airports 21 revenue fund established under AS 37.15.430, to acquire, equip, operate, maintain, 22 construct, or install facilities that will enhance the competitiveness of the international 23 airports, including a cooperative agreement to lend amounts from the international 24 airports revenue fund to finance the development or improvement of utilities serving 25 the airports; 26 (26) to screen potential applicants for a new business incentive grant 27 and recommend the award of the grants under AS 45.81.020; 28 (27) to oversee the administration of outstanding grants awarded by the 29 Alaska Science and Technology Foundation under former AS 37.17.010 - 37.17.110; 30 (28) to oversee the administration of outstanding BIDCO assistance 31 grants and loans made by the Alaska Science and Technology Foundation under
01 former AS 37.17.200 - 37.17.390; 02 (29) to guarantee loans made to the Alaska Insurance Guaranty 03 Association (AS 21.80.040), with these guarantees limited to loans necessary to make 04 the association financially able to meet cash flow needs up to a maximum outstanding 05 principal balance at any time of $30,000,000; 06 (30) with legislative approval and notwithstanding AS 44.88.060, to 07 purchase from the Alaska Energy Authority as an investment of the revolving fund, 08 loans of the power project fund established under AS 42.45.010; 09 (31) to consider, when exercising the powers listed in this section, the 10 interests of local governments affected by the authority's activities to share in the 11 benefits of these activities, with appropriate consideration of the authority's ability to 12 meet debt obligations, issue new debt, and fulfill the authority's purposes; 13 (32) to provide development project financing for all or a portion of 14 the cost of a development project as provided in AS 44.88.172; 15 (33) to acquire an interest in a project as necessary or appropriate 16 to provide working or venture capital for an oil or natural gas development 17 project under AS 44.88.800 and 44.88.810, whether by purchase, gift, or lease. 18 * Sec. 38. AS 44.88 is amended by adding a new section to read: 19 Sec. 44.88.089. Legislative approval of loan for North Slope oil processing 20 facility. (a) The Alaska Industrial Development and Export Authority may issue a loan 21 to a producer of oil or gas to finance the construction and improvement of an oil 22 processing facility on the Alaska North Slope and flow lines and other surface 23 infrastructure for the facility. A loan under this section shall 24 (1) be issued to a producer that produces less than 100,000 barrels of 25 oil a day; 26 (2) be issued for the purpose of financing a facility to facilitate 27 production from a unit established after January 1, 2015; and 28 (3) have an interest rate that does not exceed the prime rate of interest 29 plus one percent. 30 (b) In this section, "prime rate" means the lowest United States money center 31 prime rate of interest that is published in the Wall Street Journal.
01 * Sec. 39. AS 44.88 is amended by adding new sections to read: 02 Article 9A. Interest in Oil and Gas Resources. 03 Sec. 44.88.800. Acquisition of interest in businesses. (a) The authority may 04 acquire, through purchase or other means, an interest in a lease held by a corporation 05 or other business entity in an oil or natural gas field in the state that has been explored, 06 but only if the authority determines the leaseholder has made reasonable efforts to 07 obtain financing from the private sector to develop the lease and those efforts have, in 08 whole or part, been unsuccessful. The authority shall exercise due diligence in 09 acquiring a leasehold interest under this section. 10 (b) If the authority acquires a leasehold interest under this section, the 11 authority may use the authority's assets, as appropriate, to aid in the development of 12 the oil or natural gas field in which the business entity has a leasehold interest. 13 Sec. 44.88.810. Alaska resource development fund. (a) The Alaska resource 14 development fund is established in the authority for the purpose of developing oil and 15 gas resources, and consists of appropriations to the fund. The authority shall manage 16 the fund and may create separate accounts within it. Income of the fund or of 17 enterprises of the authority shall be separately accounted for and may be appropriated 18 to the fund. 19 (b) The authority may use money from the fund to carry out the purpose of the 20 fund set out in (a) of this section. 21 * Sec. 40. AS 44.88.900(11) is amended to read: 22 (11) "project" means 23 (A) a plant or facility used or intended for use in connection 24 with making, processing, preparing, transporting, or producing in any manner, 25 goods, products, or substances of any kind or nature or in connection with 26 developing or utilizing a natural resource, or extracting, smelting, transporting, 27 converting, assembling, or producing in any manner, minerals, raw materials, 28 chemicals, compounds, alloys, fibers, commodities and materials, products, or 29 substances of any kind or nature; 30 (B) a plant or facility used or intended for use in connection 31 with a business enterprise;
01 (C) commercial activity by a business enterprise; 02 (D) a plant or facility demonstrating technological advances of 03 new methods and procedures and prototype commercial applications for the 04 exploration, development, production, transportation, conversion, and use of 05 energy resources; 06 (E) infrastructure for a new tourism destination facility or for 07 the expansion of a tourism destination facility; in this subparagraph, "tourism 08 destination facility" does not include a hotel or other overnight lodging facility; 09 (F) a plant or facility, other than a plant or facility described in 10 (D) of this paragraph, for the generation, transmission, development, 11 transportation, conversion, or use of energy resources; 12 (G) a plant or facility that enhances, provides for, or promotes 13 economic development with respect to transportation, communications, 14 community public purposes, technical innovations, prototype commercial 15 applications of intellectual property, or research; 16 (H) a plant or facility used or intended for use as a federal 17 facility, including a United States military, national guard, or coast guard 18 facility; 19 (I) infrastructure for an area that is designated as a military 20 facility zone under AS 26.30; 21 (J) development of an oil and gas field by providing 22 working or venture capital in exchange for an equity interest; 23 * Sec. 41. AS 43.20.049; AS 43.55.020(l), 43.55.024(i), 43.55.024(j), 43.55.160(f), 24 43.55.160(g); AS 43.98.040, 43.98.050, 43.98.060, and 43.98.070 are repealed. 25 * Sec. 42. Sections 34 - 38, ch. 10, SLA 2013, are repealed. 26 * Sec. 43. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 APPLICABILITY. (a) Section 2 of this Act and AS 38.05.180(hh), enacted by sec. 4 29 of this Act, apply to a proposed lease sale and the renewal or extension of a lease on or after 30 the effective date of this Act. 31 (b) The reductions in production tax value under AS 43.55.162, enacted by sec. 34 of
01 this Act, apply to oil or gas produced after December 31, 2014. 02 * Sec. 44. AS 44.88.089 is repealed June 30, 2018. 03 * Sec. 45. This Act takes effect January 1, 2015.