Legislature(2005 - 2006)

2006-08-05 House Journal

Full Journal pdf

2006-08-05                     House Journal                      Page 4292
HB 3001                                                                                           
The following, which was advanced to third reading from the August                                  
4, 2006, calendar (page 4283), was read the third time:                                             
                                                                                                    
     CS FOR HOUSE BILL NO. 3001(FIN)                                                                
     "An Act relating to the production tax on oil and gas and to                                   
     conservation surcharges on oil; relating to criminal penalties for                             
     violating conditions governing access to and use of confidential                               
     information relating to the production tax; amending the definition                            
     of 'gas' as that definition applies in the Alaska Stranded Gas                                 
     Development Act; making conforming amendments; and                                             
     providing for an effective date."                                                              
                                                                                                    
Representative Kerttula moved and asked unanimous consent that                                      
CSHB 3001(FIN) be returned to second reading for the specific                                       
purpose of considering Amendment No. 1.  There being no objection,                                  
it was so ordered.                                                                                  
                                                                                                    
The Speaker stated that, without objection, CSHB 3001(FIN) would                                    
be returned to second reading for all amendments.                                                   
                                                                                                    
Amendment No. 1 was offered  by Representatives Kerttula, Gara, and                                  
Guttenberg:                                                                                         
                                                                                                    
Page 1, line 1, through Page 43, line 5 (title amendment):                                          
     Delete all material and insert:                                                                
""An Act relating to oil and gas, and to the oil and gas properties                               
production (severance) tax as it applies to oil; providing for an                                 
adjustment to increase the tax collected when oil prices exceed $20                               

2006-08-05                     House Journal                      Page 4293
per barrel and to reduce the tax collected when oil prices fall                                   
below $16 per barrel; providing for relief from the tax when the                                  
price per barrel is low or when the taxpayer demonstrates that a                                  
reduction in the tax is necessary to establish or reestablish                                     
production from an oil field or pool that would not otherwise be                                  
economically feasible; delaying until July 1, 2016, the deadline for                              
certain exploration expenditures that form the basis for a credit                                 
against the tax on oil and gas produced from a lease or property in                               
the state; relating to the conservation surcharge and additional                                  
conservation surcharge on oil; and providing for an effective                                     
date."                                                                                            
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF                                                  
ALASKA:                                                                                           
   * Section 1. AS 36.30.850(b)(33) is amended to read:                                           
              (33)  contracts between the Department of Natural                                     
     Resources or the Department of Revenue, as appropriate, and                                
     contractors qualified to evaluate hydrocarbon development,                                     
     production, transportation, and economics, to assist the                                       
     commissioner of natural resources or the commissioner of                                   
     revenue, as appropriate, in evaluating applications for                                    
                  (A)  royalty increases or decreases or other royalty                          
         adjustments, and evaluating the related financial and technical                            
         data, entered into under AS 38.05.180(j); or                                           
               (B)  tax reductions, and evaluating the related                                  
         financial and technical data, as authorized by                                         
         AS 43.55.011(i) and (j);                                                               
   * Sec. 2. AS 43.55.011(a) is amended to read:                                                  
         (a)  There is levied upon the producer of oil a tax for all oil                            
     produced from each lease or property in the state, less any oil the                            
     ownership or right to which is exempt from taxation. The tax is                                
     equal to,                                                                                  
              (1)  in the case of North Slope oil, either the percentage-                       
     of-value amount calculated under (b)(1) [(b)] of this section or the                       
     cents-per-barrel amount calculated under (c)(1) [(c)] of this                              
     section, whichever is greater; if [, MULTIPLIED BY THE                                     
     ECONOMIC LIMIT FACTOR DETERMINED FOR THE OIL                                                   
     PRODUCTION OF THE LEASE OR PROPERTY UNDER AS                                                   
     43.55.013. IF] the amounts calculated under (b)(1) and (c)(1) [(b)                         
     AND (c)] of this section are equal, the amount calculated under                                
     (b)(1) [(b)] of this section shall be treated as if it were the greater                        

2006-08-05                     House Journal                      Page 4294
     for purposes of this section;                                                                  
          (2)  in the case of oil that is not North Slope oil, either                           
     the percentage-of-value amount calculated under (b)(2) of this                             
     section or the cents-per-barrel amount calculated under (c)(2)                             
     of this section, whichever is greater, multiplied by the                                   
     economic limit factor determined for the oil production of the                             
     lease or property under AS 43.55.013; if the amounts                                       
     calculated under (b)(2) and (c)(2) of this section are equal, the                          
     amount calculated under (b)(2) of this section shall be treated                            
     as if it were the greater for purposes of this section.                                    
   * Sec. 3. AS 43.55.011(b) is amended to read:                                                  
         (b)  The percentage-of-value amount equals,                                            
          (1)  in the case of North Slope oil, the tax rate set out                             
     in (e) of this section multiplied by the gross value at the point                          
     of production of taxable oil produced from the lease or                                    
     property;                                                                                  
              (2)  in the case of oil that is not North Slope oil, [12.25                       
     PERCENT OF THE GROSS VALUE AT THE POINT OF                                                     
     PRODUCTION OF TAXABLE OIL PRODUCED ON OR                                                       
     BEFORE JUNE 30, 1981, FROM THE LEASE OR PROPERTY                                               
     AND] 15 percent of the gross value at the point of production of                               
     taxable oil produced from the lease or property, [AFTER JUNE                                   
     30, 1981;] except that [FOR A LEASE OR PROPERTY                                                
     COMING INTO COMMERCIAL OIL PRODUCTION AFTER                                                    
     JUNE 30, 1981,] the percentage-of-value amount equals 12.25                                    
     percent of the gross value at the point of production of taxable oil                           
     produced from the lease or property in the first five years after the                          
     date that is the start of commercial oil production [AND                                   
     EQUALS 15 PERCENT OF THE GROSS VALUE AT THE                                                    
     POINT OF PRODUCTION OF TAXABLE OIL PRODUCED                                                    
     THEREAFTER FROM THE LEASE OR PROPERTY].                                                        
   * Sec. 4. AS 43.55.011(c) is amended to read:                                                  
         (c)  The cents-per-barrel amount equals,                                               
          (1)  in the case of North Slope oil, $0.80 per barrel for                             
     taxable crude oil produced from the lease or property, as                                  
     adjusted by AS 43.55.012, multiplied by the economic limit                                 
     factor determined for oil production of the lease or property                              
     under AS 43.55.013 and by the price adjustment factor set out                              
     in (e)(2)(D) of this section;                                                              
          (2)  in the case of oil that is not North Slope oil, [$0.60                           

2006-08-05                     House Journal                      Page 4295
     PER BARREL OF TAXABLE OLD CRUDE OIL PRODUCED                                                   
     FROM THE LEASE OR PROPERTY, AND] $0.80 per barrel for                                          
     [ALL OTHER] taxable crude oil produced from the lease or                                   
     property, [BOTH] as adjusted by AS 43.55.012.                                                  
   * Sec. 5. AS 43.55.011 is amended by adding new subsections to                                 
read:                                                                                               
         (e)  This subsection and (f) - (k) of this section apply only to                           
     North Slope oil. Except as provided in (h) of this section for heavy                           
     oil, the tax rate is the lesser of                                                             
              (1)  30 percent; or                                                                   
              (2)  the product of the volume adjusted tax rate multiplied                           
     by the price adjustment factor; for purposes of                                                
                  (A)  this paragraph, the volume adjusted tax rate is                              
         the greater of                                                                             
                   (i)  the applicable tax rate determined under (C)                                
              of this paragraph, except that, if during a month in which                            
              the average ANS West Coast price per barrel of oil is less                            
              than $12, the applicable tax rate is zero and the volume                              
              adjusted tax rate is determined only by the application of                            
              (ii) of this subparagraph; or                                                         
                   (ii)  the economic limit factor determined for the                               
              oil production of the lease or property under AS                                      
               43.55.013 multiplied by the nominal tax rate;                                       
                  (B)  subparagraph (A) of this paragraph, the nominal                              
         tax rate is                                                                                
                   (i)  12.25 percent during the first five years from                              
              the date that is the start of commercial oil production; and                          
                   (ii)  15 percent after the first five years from the                             
              date that is the start of commercial oil production;                                  
               (C)  sub-subparagraph (A)(i) of this paragraph,                                      
         during each month in which the average ANS West Coast                                      
         price per barrel of oil averages                                                           
                   (i)  at least $16, the applicable rate is five                                   
              percent;                                                                              
                   (ii)  at least $15, but less than $16, the applicable                            
              rate is four percent;                                                                 
                   (iii)  at least $14, but less than $15, the applicable                           
              rate is three percent;                                                                
                   (iv)  at least $13, but less than $14, the applicable                            
              rate is two percent; and                                                              

2006-08-05                     House Journal                      Page 4296
                   (v)  at least $12, but less than $13, the applicable                             
              rate is one percent; and                                                              
                  (D)  this paragraph and for the purpose of                                        
         determining the cents-per-barrel amount under (c)(1) of this                               
         section, the price adjustment factor is one, except that the                               
         price adjustment factor is the average ANS West Coast price                                
         per barrel of oil for the month divided by                                                 
                       (i)  16 during each month in which the average                               
              ANS West Coast price per barrel of oil is less than $16                               
              per barrel;                                                                           
                   (ii)  20 during each month in which the average                                  
              ANS West Coast price per barrel of oil is more than $20                               
              per barrel.                                                                           
         (f)  During a month in which the average ANS West Coast                                    
    price per barrel of oil is less than $10 per barrel, the payment of                            
              (1)  one-half of the tax due and payable under this chapter                           
     is waived; and                                                                                 
              (2)  the remaining one-half of the tax due and payable                                
     under this chapter is deferred, subject to the following:                                      
                  (A)  the amount of tax payment that is deferred under                             
         this paragraph is payable by the taxpayer                                                  
                   (i)  during each month in which the average ANS                                  
              West Coast price per barrel of oil is at least $16 per                                
              barrel; and                                                                           
                   (ii)  sequentially on a month-for-month basis in                                 
              the order in which the tax payment was deferred based on                              
              payment of one month's deferred tax during each month                                 
              that the average ANS West Coast price per barrel of oil is                            
              at least $16 per barrel; and                                                          
                  (B)  amounts due and payable because of a payment                                 
         deferral under this paragraph bear interest at the rate of a 10-                           
         year note of the United States treasury at the time of the                                 
         deferral.                                                                                  
         (g)  Before February 1 of each year, the commissioner shall                                
     review the prices described in (e) and (f) of this section and the                             
     related denominators set out in (e)(2)(D)(i) and (ii) of this section                          
     and recommend to the legislature whether the prices and                                        
     denominators should be adjusted.                                                               
         (h)  Notwithstanding (e) of this section, the tax rate for heavy                           
     oil is the volume adjusted tax rate provided in this subsection. The                           

2006-08-05                     House Journal                      Page 4297
     volume adjusted tax rate for heavy oil is determined by                                        
     multiplying the economic limit factor determined for the oil                                   
     production of the lease or property under AS 43.55.013 by the tax                              
     rate set out in (e)(2)(A)(i) and (ii) of this section. In this                                 
     subsection, "heavy oil" means oil equal to or less than 20 degrees                             
     API gravity.                                                                                   
         (i)  A producer of North Slope oil may apply for a reduction                               
     of the tax due under (e), (j), and (k) of this section on the                                  
     production of North Slope oil                                                                  
              (1)  if and to the extent that the amount calculated under                            
     (A) of this paragraph is greater than the amount calculated under                              
     (B) of this paragraph, but a reduction of the tax may not result in                            
     collection of tax due under this section that is less than the amount                          
     calculated under (B) of this paragraph:                                                        
                  (A)  the amount of tax on the production of the oil                               
         that results from applying the provisions of (e) of this section;                          
                  (B)  the amount of tax on the production of the oil                               
         that would result from applying the provisions of (a)(2) and                               
         (b)(2) of this section as if the oil were not North Slope oil; and                         
              (2)  if the commissioner in consultation with the                                     
     commission of natural resources determines that the application                                
     meets the requirements of AS 38.05.180(j)(1)(A), (j)(1)(B), or                                 
     (j)(1)(C).                                                                                     
         (j)  When the commissioner receives an application under (i)                               
     of this section, the commissioner                                                              
              (1)  may not approve a tax reduction                                                  
                  (A)  unless the applicant makes a clear and                                       
         convincing showing that the tax reduction meets the                                        
         requirements of (i) of this section and this subsection and is in                          
         the best interests of the state;                                                           
               (B)  that reduces the amount of the tax recovered to                                 
         less than the amount determined under (i)(1)(B) of this                                    
         section;                                                                                   
               (C)  without including an explicit condition that the                                
         tax reduction is not assignable without the prior written                                  
         approval, which may not be unreasonably withheld, of the                                   
         commissioner; in the preliminary and final findings and                                    
         determinations prepared under this subsection, the                                         
         commissioner shall set out the conditions under which the tax                              
         reduction may be assigned;                                                                 

2006-08-05                     House Journal                      Page 4298
              (2)  shall require the applicant to submit financial and                              
     technical data that demonstrate that the requirements of (i) of this                           
     section and this subsection are met; the commissioner                                          
                  (A)  may require disclosure of only the financial and                             
         technical data related to development, production, and                                     
         transportation of oil and gas or gas only from the field or pool                           
         that are reasonably available to the applicant; and                                        
                  (B)  shall, at the request of the applicant, keep                                 
         confidential under AS 38.05.035(a)(9) and AS 43.05.230 the                                 
         dates described in (A) of this paragraph; the confidential data                            
         may be disclosed by the commissioner to legislators and to                                 
         the legislative auditor and, if authorized by the chair or vice-                           
         chair of the Legislative Budget and Audit Committee, to the                                
         director of the division of legislative finance, the permanent                             
         employees of their respective divisions who are responsible                                
         for evaluating a tax reduction, and to agents or contractors of                            
         the legislative auditor or the legislative finance director who                            
         are engaged under contract to evaluate the tax reduction if                                
           each signs an appropriate confidentiality agreement;                                    
              (3)  may require the applicant for the tax reduction under                            
     (i) of this section and this subsection to pay for the services of an                          
     independent contractor, selected by the applicant from a list of                               
     qualified consultants compiled by the commissioner, to evaluate                                
     hydrocarbon development, production, transportation, and                                       
     economics and to assist the commissioner in evaluating the                                     
     application and financial and technical data; if, under this                                   
     paragraph, the commissioner requires payment for the services of                               
     an independent contractor, the total cost of the services to be paid                           
     for by the applicant may not exceed $150,000 for each                                          
     application, and the commissioner shall determine the relevant                                 
     scope of the work to be performed by the contractor; selection of                              
     an independent contractor under this paragraph is not subject to                               
     AS 36.30;                                                                                      
              (4)  shall make and publish a preliminary findings and                                
     determination on the tax reduction application, give reasonable                                
     public notice of the preliminary findings and determination, and                               
     invite public comment on the preliminary findings and                                          
     determination during a 30-day period for receipt of public                                     
     comment;                                                                                       
              (5)  shall offer to appear before the Legislative Budget                              

2006-08-05                     House Journal                      Page 4299
     and Audit Committee, on a day that is not earlier than 10 days and                             
     not later than 20 days after giving public notice under (4) of this                            
     subsection, to provide the committee a review of the                                           
     commissioner's preliminary findings and determination on the tax                               
     reduction application and administrative process; if the Legislative                           
     Budget and Audit Committee accepts the commissioner's offer,                                   
     the committee shall give notice of the committee's meeting to all                              
     members of the legislature;                                                                    
              (6)  shall make copies of the preliminary findings and                                
     determination available to                                                                     
                  (A)  the presiding officer of each house of the                                   
         legislature;                                                                               
                  (B)  the chairs of the legislature's standing                                     
         committees on resources; and                                                               
                  (C)  the chairs of the legislature's special committees                           
         on oil and gas, if any; and                                                                
              (7)  shall, within 30 days after the close of the public                              
     comment period under (4) of this subsection,                                                   
                  (A)  prepare a summary of the public response to the                              
          commissioner's preliminary findings and determination;                                   
                  (B)  make a final findings and determination; the                                 
         commissioner's final findings and determination prepared                                   
         under this subparagraph regarding a tax reduction is final and                             
         not appealable to the court;                                                               
                  (C)  transmit a copy of the final findings and                                    
         determination to the lessee; and                                                           
                  (D)  make copies of the final findings and                                        
         determination available to each person who submitted                                       
         comment under (4) of this subsection and who has filed a                                   
         request for the copies.                                                                    
         (k)  In this section, "North Slope oil" means oil produced                                 
     from a portion of a reservoir located north of 68 degrees North                                
     latitude.                                                                                      
   * Sec. 6. AS 43.55.012(b) is amended to read:                                                  
         (b)  The cents-per-barrel amount set out in AS 43.55.011(c)(1)                         
     and (2) [AS 43.55.011(c)] applies to oil of 27 degrees API                                 
     gravity. For each degree of API gravity less than 27 degrees, the                              
     cents-per-barrel amount shall be reduced by $.005 and for each                                 
     degree of API gravity greater than 27 degrees the cents-per-barrel                             
     amount shall be increased by $.005 except that oil above 40                                    

2006-08-05                     House Journal                      Page 4300
     degrees API gravity shall be taxed as 40 degree oil. In applying                               
     the gravity adjustment under this subsection, fractional degrees of                            
     API gravity shall be disregarded.                                                              
   * Sec. 7. AS 43.55.025(b) is amended to read:                                                  
         (b)  To qualify for the production tax credit under (a) of this                            
     section, an exploration expenditure must be incurred for work                                  
     performed on or after July 1, 2003, and before July 1, 2016                                
     [2007], except that an exploration expenditure for a Cook Inlet                                
     prospect must be incurred for work performed on or after July 1,                               
     2005, [AND BEFORE JULY 1, 2010, AND EXCEPT THAT AN                                             
     EXPLORATION EXPENDITURE, IN WHOLE OR IN PART,                                                  
     SOUTH OF 68 DEGREES, 15 MINUTES, NORTH LATITUDE,                                               
     AND NOT PART OF A COOK INLET PROSPECT MUST BE                                                  
     INCURRED FOR WORK PERFORMED ON OR AFTER JULY                                                   
     1, 2003, AND BEFORE JULY 1, 2010,] and                                                         
              (1)  may be for seismic or geophysical exploration costs                              
     not connected with a specific well;                                                            
              (2)  if for an exploration well,                                                      
                  (A)  must be incurred by an explorer that holds an                                
         interest in the exploration well for which the production tax                              
         credit is claimed;                                                                         
                  (B)  may be for either an oil or gas discovery well or                            
         a dry hole; and                                                                            
                  (C)  must be for goods, services, or rentals of                                   
         personal property reasonably required for the surface                                      
         preparation, drilling, casing, cementing, and logging of an                                
         exploration well, and, in the case of a dry hole, for the                                  
         expenses required for abandonment if the well is abandoned                                 
           within 18 months after the date the well was spudded;                                   
              (3)  may not be for testing, stimulation, or completion                               
     costs; administration, supervision, engineering, or lease operating                            
     costs; geological or management costs; community relations or                                  
     environmental costs; bonuses, taxes, or other payments to                                      
     governments related to the well; or other costs that are generally                             
     recognized as indirect costs or financing costs; and                                           
              (4)  may not be incurred for an exploration well or                                   
     seismic exploration that is included in a plan of exploration or a                             
     plan of development for any unit on May 13, 2003.                                              
   * Sec. 8. AS 43.55.201(a) is amended to read:                                                  
         (a)  Every producer of oil shall pay a surcharge of $.01 [$.02]                        

2006-08-05                     House Journal                      Page 4301
     per barrel of oil produced from each lease or property in the state,                           
     less any oil the ownership or right to which is exempt from                                    
     taxation.                                                                                      
   * Sec. 9. AS 43.55.201(b) is amended to read:                                                  
         (b)  The surcharge imposed by (a) of this section is in addition                           
     to the tax imposed by AS 43.55.011 and is due on the last day of                               
     the month on oil produced from each lease or property during the                               
     preceding month. The surcharge [SHALL BE PAID IN THE                                           
     SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 -                                               
     43.55.150; AND] is in addition to the surcharge imposed by AS                                  
     43.55.300 - 43.55.310.                                                                         
   * Sec. 10. AS 43.55.201 is amended by adding a new subsection to                             
read:                                                                                               
         (d)  Oil not considered under AS 43.55.020(e) to be produced                               
     from a lease or property is not considered to be produced from a                               
     lease or property for purposes of this section.                                                
   * Sec. 11. AS 43.55.221(d) is amended to read:                                                 
         (d)  If the commissioner of administration reports that the sum                            
     reported under (b) of this section equals or exceeds $71,000,000                           
     as adjusted under AS 43.55.225 [$50,000,000], the                                          
     commissioner of revenue shall suspend imposition and collection                                
     of the surcharge levied and collected under AS 43.55.201.                                      
     Suspension of the imposition and collection of the surcharge                                   
     begins on the first day of the calendar quarter next following the                             
     commissioner's receipt of the commissioner of administration's                                 
     report under (b) of this section. Before the first day of a                                    
     suspension authorized by this subsection, the commissioner shall                               
     make a reasonable effort to notify all persons who are known to                                
     the department to be paying the surcharge under AS 43.55.201                                   
     that the surcharge will be suspended.                                                          
   * Sec. 12. AS 43.55.221(e) is amended to read:                                                 
         (e)  Except as provided in AS 43.55.231, if the commissioner                               
     of administration reports that the sum reported under (b) of this                              
     section is less than $71,000,000 as adjusted under AS 43.55.225                            
     [$50,000,000], the commissioner of revenue shall require                                       
     imposition and collection of the surcharge authorized under AS                                 
     43.55.201. If the surcharge is not in effect, reimposition of the                              
     surcharge begins on the first day of the calendar quarter next                                 
     following the commissioner's receipt of the commissioner of                                    
     administration's report under (b) of this section. Before the first                            

2006-08-05                     House Journal                      Page 4302
     day of reimposition of the surcharge authorized by this subsection,                            
     the commissioner shall make a reasonable effort to notify all                                  
     persons who are known to the department to be required to pay the                              
     surcharge under AS 43.55.201 that the surcharge will be                                        
     reimposed.                                                                                     
   * Sec. 13. AS 43.55 is amended by adding a new section to read:                                
         Sec. 43.55.225. Adjustment of dollar amounts. (a) The                                    
     dollar amounts in AS 43.55.221(d) and (e) change, as provided in                               
     this section, according to and to the extent of changes in the                                 
     Consumer Price Index for all urban consumers for the Anchorage                                 
     metropolitan area compiled by the Bureau of Labor Statistics,                                  
     United States Department of Labor (the index). The index for                                   
     January 2006 is the reference base index.                                                      
         (b)  The dollar amounts change on October 1 of each year                                   
     according to the percentage change between the index for January                               
     of that year and the most recent index used to determine whether                               
     to change the dollar amounts. After calculation of the new                                     
     amounts, the resulting amounts shall be rounded to the nearest                                 
     cent.                                                                                          
         (c)  If the index is revised, the percentage of change is                                  
     calculated on the basis of the revised index. If a revision of the                             
     index changes the reference base index, a revised reference base                               
     index is determined by multiplying the reference base index                                    
     applicable by the rebasing factor furnished by the Bureau of Labor                             
     Statistics, United States Department of Labor. If the index is                                 
     superseded, the index referred to in this section is the one                                   
     represented by the Bureau of Labor Statistics as reflecting most                               
     accurately changes in the purchasing power of the dollar for                                   
     Alaska consumers.                                                                              
         (d)  The department shall adopt a regulation announcing,                                   
              (1)  on or before June 30 of each year, the changes in                                
     dollar amounts required by (b) of this section; and                                            
              (2)  promptly after the changes occur, changes in the                                 
     index required by (c) of this section, including, if applicable, the                           
     numerical equivalent of the reference base index under a revised                               
     reference base index and the designation or title of any index                                 
     superseding the index.                                                                         
   * Sec. 14. AS 43.55.300(a) is amended to read:                                                 
         (a)  Every producer of oil shall pay a surcharge of $.05 [$.03]                        
     per barrel of oil produced from each lease or property in the state,                           

2006-08-05                     House Journal                      Page 4303
     less any oil the ownership or right to which is exempt from                                    
     taxation.                                                                                      
   * Sec. 15. AS 43.55.300(b) is amended to read:                                                 
         (b)  The surcharge imposed by (a) of this section is in addition                           
     to the tax imposed by AS 43.55.011 and is due on the last day of                               
     the month on oil produced from each lease or property during the                               
     preceding month. The surcharge [SHALL BE PAID IN THE                                           
     SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 -                                               
     43.55.150; AND] is in addition to the surcharge imposed by                                     
     AS 43.55.201 - 43.55.231.                                                                      
   * Sec. 16. AS 43.55.300 is amended by adding a new subsection to                               
read:                                                                                               
         (d)  Oil not considered under AS 43.55.020(e) to be produced                               
     from a lease or property is not considered to be produced from a                               
     lease or property for purposes of this section.                                                
   * Sec. 17. The uncodified law of the State of Alaska is amended by                             
adding a new section to read:                                                                       
     RETROACTIVITY. Sections 2 - 10 and 14 - 16 of this Act are                                     
retroactive to January 1, 2006, and apply to oil produced after                                     
December 31, 2005.                                                                                  
   * Sec. 18. This Act takes effect immediately under                                             
AS 01.10.070(c)."                                                                                   
                                                                                                    
Representative Kerttula moved and asked unanimous consent that                                      
Amendment No. 1 be adopted.                                                                         
                                                                                                    
Representative Hawker objected.                                                                     
                                                                                                    
**The presence of Representative Weyhrauch was noted.                                               
                                                                                                    
Representatives Meyer, Hawker, and Chenault moved and asked                                         
unanimous consent that they be allowed to abstain from voting                                       
because of a conflict of interest.  Objection was heard, and the                                    
members were required to vote.                                                                      
                                                                                                    
**The presence of Representative Kapsner was noted.                                                 
                                                                                                    
Representative Coghill rose to a point of order regarding impugning                                 
the motives of members of the body.                                                                 
                                                                                                    

2006-08-05                     House Journal                      Page 4304
The Speaker cautioned members to confine remarks to the                                             
amendment.                                                                                          
                                                                                                    
The question being:  "Shall Amendment No. 1 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 1                                                                                     
                                                                                                    
YEAS:  12   NAYS:  27   EXCUSED:  0   ABSENT:  1                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gruenberg,                                
Guttenberg, Joule, Kapsner, Kerttula, Salmon                                                        
                                                                                                    
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Gatto,                               
Harris, Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn,                                           
McGuire, Meyer, Neuman, Olson, Ramras, Rokeberg, Samuels,                                           
Seaton, Stoltze, Thomas, Weyhrauch, Wilson                                                          
                                                                                                    
Absent:  Moses                                                                                      
                                                                                                    
And so, Amendment No. 1 was not adopted.                                                            
HB 3001                                                                                           
CSHB 3001(FIN) was before the House in second reading for                                           
amendments (page 4292).                                                                             
                                                                                                    
Amendment No. 2 was offered  by Representatives Kerttula, Gara, and                                  
Guttenberg:                                                                                         
                                                                                                    

2006-08-05                     House Journal                      Page 4305
Page 8, line 17:                                                                                    
     Delete "AS 43.55.023(k)"                                                                       
     Insert "AS 43.55.023(l)"                                                                       
                                                                                                    
                                                                                                    
Page 12, line 16:                                                                                   
     Delete "A"                                                                                     
     Insert "Except as provided in (k) of this section, a"                                          
                                                                                                    
                                                                                                    
Page 15, line 26, following "section,":                                                             
     Insert "and except as provided in (k) of this section,"                                        
                                                                                                    
                                                                                                    
Page 16, following line 31:                                                                         
     Insert a new subsection to read:                                                               
         "(k)  A person engaged in the production of gas in the Point                               
     Thomson Unit may not take a credit under this section for a                                    
     qualified capital expenditure upstream from the point of                                       
     production of gas from the Point Thomson Unit for a gas                                        
     processing plant or a gas treatment facility. In this subsection,                              
     "Point Thomson Unit" means the land identified by the                                          
     Department of Natural Resources as the "Point Thomson Unit.""                                  
                                                                                                    
Reletter the following subsection accordingly.                                                      
                                                                                                    
                                                                                                    
Page 32, line 29, following "AS 38.05.132":                                                         
     Insert ";                                                                                      
              (19)  costs related to a gas processing plant or a gas                                
     treatment facility upstream from the point of production of gas                                
     from the Point Thomson Unit"                                                                   
                                                                                                    
                                                                                                    
Page 33, following line 25:                                                                         
     Insert a new paragraph to read:                                                                
              "(3)  "Point Thomson Unit" means the land identified by                               
     the Department of Natural Resources as the "Point Thomson                                      
     Unit";"                                                                                        
                                                                                                    

2006-08-05                     House Journal                      Page 4306
Renumber the following paragraph accordingly.                                                       
                                                                                                    
                                                                                                    
Representative Kerttula moved and asked unanimous consent that                                      
Amendment No. 2 be adopted.                                                                         
                                                                                                    
                                                                                                    
Representative Samuels objected.                                                                    
                                                                                                    
                                                                                                    
Representative Kerttula placed a call of the House and lifted the call.                             
                                                                                                    
                                                                                                    
The question being:  "Shall Amendment No. 2 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 2                                                                                     
                                                                                                    
YEAS:  13   NAYS:  27   EXCUSED:  0   ABSENT:  0                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gruenberg,                                
Guttenberg, Joule, Kapsner, Kerttula, Moses, Salmon                                                 
                                                                                                    
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Gatto,                               
Harris, Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn,                                           
McGuire, Meyer, Neuman, Olson, Ramras, Rokeberg, Samuels,                                           
Seaton, Stoltze, Thomas, Weyhrauch, Wilson                                                          
                                                                                                    
And so, Amendment No. 2 was not adopted.                                                            
                                                                                                    
                                                                                                    
Amendment No. 3 was offered  by Representatives Kerttula, Gara, and                                  
Guttenberg:                                                                                         
                                                                                                    
                                                                                                    
Page 15, line 28, following "expenditures":                                                         
 Insert "made during each April 1 through March 31 12-month                                         
period that exceeded the 12-month average expenditures for the two                                  
12-month periods immediately before April 1, 2006, that"                                            
                                                                                                    

2006-08-05                     House Journal                      Page 4307
Page 15, line 29, following "April 1, 2006,":                                                       
 Insert "and"                                                                                       
                                                                                                    
Page 15, line 30:                                                                                   
 Delete "the sum"                                                                                   
 Insert "that portion"                                                                              
                                                                                                    
Page 15, line 31, following "April 1, 2006,":                                                       
 Insert "during each 12-month period multiplied by a fraction in                                    
which the numerator is the amount of transitional investment                                        
expenditures during that 12-month period and the denominator is the                                 
total expenditures incurred during that 12-month period that would be                               
qualified capital expenditures if they were incurred after March 31,                                
2006,"                                                                                              
                                                                                                    
Page 16, lines 3 - 4:                                                                               
 Delete ", that would be qualified capital expenditures, if they were                               
incurred after March 31, 2006"                                                                      
                                                                                                    
Representative Kerttula moved and asked unanimous consent that                                      
Amendment No. 3 be adopted.                                                                         
                                                                                                    
Representative Kelly objected.                                                                      
                                                                                                    
                                                                                                    
Representative Samuels rose to a point of order.                                                    
                                                                                                    
The Speaker cautioned members to confine remarks to the                                             
amendment.                                                                                          
                                                                                                    
The question being:  "Shall Amendment No. 3 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 3                                                                                     
                                                                                                    
YEAS:  14   NAYS:  26   EXCUSED:  0   ABSENT:  0                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gruenberg,                                
Guttenberg, Joule, Kapsner, Kerttula, McGuire, Moses, Salmon                                        
                                                                                                    

2006-08-05                     House Journal                      Page 4308
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Gatto,                               
Harris, Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn, Meyer,                                    
Neuman, Olson, Ramras, Rokeberg, Samuels, Seaton, Stoltze,                                          
Thomas, Weyhrauch, Wilson                                                                           
                                                                                                    
And so, Amendment No. 3 was not adopted.                                                            
                                                                                                    
                                                                                                    
Amendment No. 4 was offered  by Representatives Kerttula, Gara, and                                  
Guttenberg:                                                                                         
                                                                                                    
Page 1, line 1, following "Act" (title amendment):                                                
     Insert "amending the powers and duties of the Alaska Oil and                                 
Gas Conservation Commission;"                                                                     
                                                                                                    
                                                                                                    
Page 2, following line 8:                                                                           
 Insert a new bill section to read:                                                                 
"* Sec. 2. AS 31.05.030(d) is amended to read:                                                    
         (d)  The commission may require                                                            
              (1)  identification of ownership of wells, producing                                  
     leases, tanks, plants, and drilling structures;                                            
              (2)  the making and filing of reports, well logs, drilling                            
     logs, electric logs, lithologic logs, directional surveys, and all                             
     other subsurface information on a well drilled for oil or gas, or for                          
     the discovery of oil or gas, or for geologic information, and the                              
     required reports and information shall be filed within 30 days after                           
     the completion, abandonment, or suspension of the well;                                        
              (3)  the drilling, casing, and plugging of wells in a manner                      
     that will prevent the escape of oil or gas out of one stratum into                             
     another, the intrusion of water into an oil or gas stratum, the                                
     pollution of fresh water supplies by oil, gas, or salt water, and                          
     prevent blowouts, cavings, seepages and fires;                                                 
              (4)  the furnishing of a reasonable bond with sufficient                              
     surety conditions for the performance of the duty to plug each dry                             
     or abandoned well or the repair of wells causing waste;                                        
              (5)  the operation of wells with efficient gas-oil and                                
     water-oil ratios, and may fix these ratios;                                                    
              (6)  the gauging or other measuring of oil and gas to                                 
     determine the quality and quantity of oil and gas;                                             

2006-08-05                     House Journal                      Page 4309
              (7)  every person who produces oil or gas in the state to                             
     keep and maintain for a period of five years in the state complete                             
     and accurate records of the quantities of oil and gas produced,                                
     which shall be available for examination by the Department of                                  
     Natural Resources or its agents at all reasonable times;                                       
              (8)  the measuring and monitoring of oil and gas pool                                 
     pressures;                                                                                     
              (9)  the filing and approval of a plan of development and                             
     operation for a field or pool in order to prevent waste, ensure                            
     [INSURE] a greater ultimate recovery of oil and gas, and protect                               
     the correlative rights of persons owning interests in the tracts of                            
     land affected;                                                                             
       (10)  working interest owners to provide, at cost plus a                                 
     reasonable rate of return determined under regulations                                     
     adopted by the commission and without causing substantial                                  
     injury to the owner, access by or for the benefit of others to                             
     production and other facilities whenever necessary; for                                    
     purposes of this paragraph, the commission's regulations must                              
     be consistent with the standards of the Regulatory                                         
     Commission of Alaska adopted to implement AS 42.05.311(a);                                 
     the commission may act under this paragraph                                                
           (A)  to                                                                              
                (i)  maximize the economic and physical                                         
              recovery of the state's oil and gas resources;                                   
                (ii)  maximize competition among parties                                        
              seeking to explore and develop the state's oil and gas                            
              resources;                                                                        
                (iii)  minimize the adverse affects of                                          
              exploration, development, production, and                                         
              transportation activity; or                                                       
                (iv)  otherwise protect the best interest of the                                
              state;                                                                            
           (B)  only if the commission finds that directing the                                 
         working interest owner to provide access by or for the                                 
         benefit of others would not materially interfere with the                              
         owner's paramount use of the facility; and                                             
           (C)  only if the commission finds that the facility                                  
         has excess capacity or that it is feasible to expand the                               
         facility with the expansion costs and any additional                                   
         operating costs to be borne by the entities that use the                               

2006-08-05                     House Journal                      Page 4310
         added capacity in proportion to the amount of use by each                              
         entity."                                                                               
                                                                                                    
Renumber the following bill sections accordingly.                                                   
                                                                                                    
Renumber internal references to bill sections in accordance with this                               
amendment.  Bill sec. 2, added in this amendment, should not be set                                 
out in any of the internal bill section references.  Below are all internal                         
bill section references in this bill to be renumbered:                                              
     Page 1, line 9                                                                                 
     Page 2, line 5                                                                                 
     Page 40, lines 9, 10, 12, 13, 17, 19, 24, and 31                                               
     Page 41, lines 3, 9, 11, 18, 21, 27, and 28                                                    
     Page 42, lines 3, 6, 7, 9, 15, and 16                                                          
     Page 43, lines 3 and 4                                                                         
                                                                                                    
Representative Kerttula moved and asked unanimous consent that                                      
Amendment No. 4 be adopted.                                                                         
                                                                                                    
Representative Chenault objected.                                                                   
                                                                                                    
                                                                                                    
The question being:  "Shall Amendment No. 4 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 4                                                                                     
                                                                                                    
YEAS:  14   NAYS:  25   EXCUSED:  0   ABSENT:  1                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gruenberg,                                
Guttenberg, Joule, Kapsner, Kerttula, Moses, Salmon, Thomas                                         
                                                                                                    
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Gatto,                               
Harris, Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn,                                           
McGuire, Neuman, Olson, Ramras, Rokeberg, Samuels, Seaton,                                          
Stoltze, Weyhrauch, Wilson                                                                          
                                                                                                    
Absent:  Meyer                                                                                      
                                                                                                    
And so, Amendment No. 4 was not adopted.                                                            
                                                                                                    

2006-08-05                     House Journal                      Page 4311
Amendment No. 5 was offered  by Representatives Kerttula, Gara,                                      
Berkowitz, Guttenberg, and Crawford:                                                                
                                                                                                    
Page 32, lines 21 - 27:                                                                             
 Delete all material and insert:                                                                    
       "(17)  costs incurred for containment, control, cleanup, or                                  
     removal in connection with any unpermitted release of oil or a                                 
     hazardous substance; any liability for damages, fines, and                                     
     penalties imposed on the producer or explorer; or the cost of                                  
     developing and maintaining an oil discharge prevention and                                     
     contingency plan under AS 46.04.030;"                                                          
                                                                                                    
Representative Kerttula moved and asked unanimous consent that                                      
Amendment No. 5 be adopted.                                                                         
                                                                                                    
Representative Weyhrauch objected.                                                                  
                                                                                                    
Representative Croft placed a call of the House on the calendar.                                    
                                                                                                    
The call was satisfied.                                                                             
                                                                                                    
The question being:  "Shall Amendment No. 5 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 5                                                                                     
                                                                                                    
YEAS:  14   NAYS:  26   EXCUSED:  0   ABSENT:  0                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gruenberg,                                
Guttenberg, Joule, Kapsner, Kerttula, Moses, Salmon, Thomas                                         
                                                                                                    
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Gatto,                               
Harris, Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn,                                           
McGuire, Meyer, Neuman, Olson, Ramras, Rokeberg, Samuels,                                           
Seaton, Stoltze, Weyhrauch, Wilson                                                                  
                                                                                                    
And so, Amendment No. 5 was not adopted.                                                            
                                                                                                    
Amendment No. 6 was offered  by Representatives Gardner and                                          
Crawford:                                                                                           
                                                                                                    

2006-08-05                     House Journal                      Page 4312
Page 2, following line 8:                                                                           
 Insert a new subsection to read:                                                                   
     "(c)  It is the intent of the legislature that all provisions in this bill                     
sunset on June 30, 2009 unless reenacted by law between January 1                                   
and June 30, 2009.  Upon the sunset of this law, statutory language                                 
shall revert to that which was in place prior to passage of the law, and                            
be replaced with the following:"                                                                    
                                                                                                    
""An Act relating to the oil and gas properties production tax;                                   
providing for a reduction in the amount of taxable production;                                    
providing for an increase in the tax rate when the average Alaska                                 
North Slope crude oil West Coast price per barrel exceeds $40;                                    
providing for tax credits based on expenditures for oil and gas                                   
exploration, gas only exploration, and development wells; and                                     
providing for an effective date."                                                                 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF                                                  
ALASKA:                                                                                           
   * Section 1. AS 43.55.011(a) is amended to read:                                               
         (a)  There is levied upon the producer of oil a tax for all oil                            
     produced from each lease or property in the Cook Inlet                                     
     sedimentary basin [STATE], less any oil the ownership or right                             
     to which is exempt from taxation or constitutes a land owner's                             
     royalty interest. The tax is equal to either the percentage-of-value                       
     amount calculated under (b) of this section or the cents-per-barrel                            
     amount calculated under (c) of this section, whichever is greater,                             
     multiplied by the economic limit factor determined for the oil                                 
     production of the lease or property under AS 43.55.013. If the                                 
     amounts calculated under (b) and (c) of this section are equal, the                            
     amount calculated under (b) of this section shall be treated as if it                          
     were the greater for purposes of this section.                                                 
   * Sec. 2. AS 43.55.011(b) is amended to read:                                                  
         (b)  The percentage-of-value amount equals [12.25                                          
     PERCENT OF THE GROSS VALUE AT THE POINT OF                                                     
     PRODUCTION OF TAXABLE OIL PRODUCED ON OR                                                       
     BEFORE JUNE 30, 1981, FROM THE LEASE OR PROPERTY                                               
     AND] 15 percent of the gross value at the point of production of                               
     taxable oil produced from the lease or property in the Cook Inlet                          
     sedimentary basin, [AFTER JUNE 30, 1981;] except that [FOR                                 
     A LEASE OR PROPERTY COMING INTO COMMERCIAL                                                     
     OIL PRODUCTION AFTER JUNE 30, 1981,] the percentage-of-                                        

2006-08-05                     House Journal                      Page 4313
     value amount equals 12.25 percent of the gross value at the point                              
     of production of taxable oil produced from the lease or property in                        
     the Cook Inlet sedimentary basin in the first five years after the                         
     start of commercial oil production [AND EQUALS 15 PERCENT                                      
     OF THE GROSS VALUE AT THE POINT OF PRODUCTION                                                  
     OF TAXABLE OIL PRODUCED THEREAFTER FROM THE                                                    
     LEASE OR PROPERTY].                                                                            
   * Sec. 3. AS 43.55.011(c) is amended to read:                                                  
         (c)  The cents-per-barrel amount equals [$0.60 PER BARREL                                  
     OF TAXABLE OLD CRUDE OIL PRODUCED FROM THE                                                     
     LEASE OR PROPERTY, AND] $0.80 per barrel for all [OTHER]                                       
     taxable oil produced from the lease or property, [BOTH] as                                     
     adjusted by AS 43.55.012.                                                                      
   * Sec. 4. AS 43.55.011 is amended by adding new subsections to                                 
read:                                                                                               
         (e)  There is levied upon the producer of oil a tax for all oil                            
     produced from each lease or property in the state outside of the                               
     Cook Inlet sedimentary basin, less any oil the ownership or right                              
     to which is exempt from taxation or constitutes a land owner's                                 
     royalty interest. The tax is equal to the greater of                                           
              (1)  the cents-per-barrel amount calculated under (c) of                              
     this section; or                                                                               
              (2)  the percentage-of-value amount calculated under (f)                              
    of this section plus the tax determined under (g) of this section.                             
         (f)  The percentage-of-value amount equals 15 percent of the                               
     gross value at the point of production of taxable oil produced from                            
     the lease or property in the state outside of the Cook Inlet                                   
     sedimentary basin, as adjusted under AS 43.55.022.                                             
         (g)  In addition to the taxes levied using the percentage-of-                              
     value amount under (e) of this section, if the average ANS West                                
     Coast price per barrel of oil during a month exceeds $40, there is                             
     levied on the producer of oil a tax for oil produced during that                               
     month from each lease or property in the state outside of the Cook                             
     Inlet sedimentary basin, less any oil the ownership or right to                                
     which is exempt from taxation. The tax levied under this                                       
     subsection is equal to                                                                         
         [([ANS West Coast price - 40] x .003) x (ANS wellhead price                                
                                  x .85)]                                                          
             x (total taxable barrels of oil at the point of production)                            
     where "ANS wellhead price" means the prevailing value for oil                                  

2006-08-05                     House Journal                      Page 4314
     produced in the Alaska North Slope area.                                                       
         (h)  For purposes of (g) of this section, the department may                               
     calculate the average price or may, by regulation, specify the                                 
     method by which the average price shall be calculated with                                     
     reference to one or more published sources of price information.                               
     If, in the department's judgment, reliable published sources of                                
     price information on Alaska North Slope crude oil cease, or                                    
     appear likely to soon cease, to be available, or if, in the                                    
     department's judgment, the price of Alaska North Slope crude oil                               
     ceases, or appears likely to soon cease, to be a reliable indicator of                         
     the general price level of crude oils, the department shall, by                                
     regulation, specify a substitute formula for computing the oil price                           
     index. The substitute formula specified by the department under                                
     this subsection must bear, as nearly as is reasonably possible, the                            
     same relationship to the general price level of crude oils as did the                          
     price of Alaska North Slope crude oil.                                                         
         (i)  There is levied on the producer of oil or gas a tax for all                           
     oil and gas produced each month from each lease or property in                                 
     the state the ownership or right to which constitutes a landowner's                            
     royalty interest, except for oil and gas the ownership or right to                             
     which is exempt from taxation. The provisions of this subsection                               
     apply to a landowner's royalty interest as follows:                                            
              (1)  the rate of tax levied on oil is equal to five percent of                        
     the gross value at the point of production of the oil;                                         
              (2)  the rate of tax levied on gas is equal to 1.667 percent                          
     of the gross value at the point of production of the gas;                                      
              (3)  if the department determines that, for purposes of                               
     reducing the producer's tax liability under (1) or (2) of this                                 
     subsection, the producer has received or will receive consideration                            
     from the royalty owner offsetting all or a part of the producer's                              
     royalty obligation, other than a deduction under AS 43.55.020(d)                               
     of the amount of a tax paid,                                                                   
                  (A)  notwithstanding (1) of this subsection, the tax is                           
         equal to                                                                                   
                (i)  for oil that is produced from a lease or                                       
              property in the Cook Inlet sedimentary basin, five percent                            
              of the gross value at the point of production of the oil;                             
                (ii)  for oil, except oil described in (i) of this                                  
              subparagraph, 22.8 percent of the gross value at the point                            
              of production of the oil; and                                                         

2006-08-05                     House Journal                      Page 4315
                  (B)  notwithstanding (2) of this subsection, for gas                              
         the tax is equal to 11.25 percent of the gross value at the point                          
         of production of the gas.                                                                  
   * Sec. 5. AS 43.55.013(j) is amended to read:                                                  
         (j)  The department may aggregate two or more leases or                                    
     properties (or portions of them), for purposes of determining                                  
     economic limit factors under this section and applying them to                                 
     AS 43.55.011(a) and 43.55.016(a) [AS 43.55.011 OR                                          
     AS 43.55.016], when economically interdependent oil or gas                                     
     production operations are not confined to a single lease or                                    
     property. The department may also segregate a lease or property                                
     into two or more parts, for purposes of determining economic                                   
     limit factors under this section and applying them under                                       
     AS 43.55.011(a) and 43.55.016(a) [AS 43.55.011 OR                                          
     AS 43.55.016], when two or more economically independent oil                                   
     or gas production operations are being conducted on it, or when                                
     old crude oil is produced from the same lease or property as other                             
     oil.                                                                                           
   * Sec. 6. AS 43.55.016(a) is amended to read:                                                  
         (a)  There is levied upon the producer of gas a tax for all gas                            
     produced from each lease or property in the Cook Inlet                                     
     sedimentary basin [STATE], less any gas the ownership or right                             
     to which is exempt from taxation. The tax is equal to either the                               
     percentage-of-value amount calculated under (b) of this section or                             
     the cents-per-Mcf amount calculated under (c) of this section,                                 
     whichever is greater, multiplied by the economic limit factor                                  
     determined for gas production of the lease or property under                                   
     AS 43.55.013. If the amounts calculated under (b) and (c) of this                              
     section are equal, the amount calculated under (b) of this section                             
     shall be treated as if it were the greater for purposes of this                                
     section.                                                                                       
   * Sec. 7. AS 43.55.016(b) is amended to read:                                                  
         (b)  The percentage-of-value amount equals 10 percent of the                               
     gross value at the point of production of the taxable gas produced                             
     from the lease or property in the Cook Inlet sedimentary basin.                            
   * Sec. 8. AS 43.55.016 is amended by adding new subsections to                                 
read:                                                                                               
         (d)  There is levied upon the producer of gas a tax for all gas                            
     produced from each lease or property in the state outside of the                               
     Cook Inlet sedimentary basin, less any gas the ownership or right                              

2006-08-05                     House Journal                      Page 4316
     to which is exempt from taxation. The tax is equal to either the                               
     cents-per-Mcf amount calculated under (c) of this section or the                               
     percentage-of-value amount calculated under (e) of this section,                               
     whichever is greater. If the amounts calculated under (c) and (e) of                           
     this section are equal, the amount calculated under (e) of this                                
     section shall be treated as if it were the greater for purposes of this                        
     section.                                                                                       
         (e)  The percentage-of-value amount equals 10 percent of the                               
     gross value at the point of production of the taxable gas produced                             
     from the lease or property in the state outside of the Cook Inlet                              
     sedimentary basin, as adjusted under AS 43.55.022.                                             
   * Sec. 9. AS 43.55 is amended by adding a new section to read:                                 
         Sec. 43.55.022. Production deduction. (a) A producer of oil                              
     subject to tax using the percentage-of-value amount in                                         
     AS 43.55.011(f) and a producer of gas using the percentage-of-                                 
     value amount in AS 43.55.016(e) may take a deduction against the                               
     gross value at the point of production as provided in this section                             
     before applying the percentage-of-value tax rate.                                              
         (b)  Each operating unit in the state may reduce the volume of                             
     taxable oil and gas produced from the operating unit by 7,500                                  
     barrels of oil equivalent for each day during which oil or gas is                              
     produced from the operating unit. The lessees who are producers                                
     having leases within an operating unit shall allocate the reduction                            
     proportionately to the production in barrels of oil equivalent of oil                          
     and gas produced from the unit and to each producer of oil and gas                             
     in proportion to the interest of the producer in the oil and gas                               
     produced from the unit.                                                                        
         (c)  Each producer of oil and each producer of gas may deduct                              
     the value of the producer's pro rata share of the reduction provided                           
     for in (b) of this section from the gross value at the point of                                
     production of oil and the gross value at the point of production of                            
     gas produced from the unit before applying the applicable                                      
     percentage-of-value tax rate.                                                                  
         (d)  The department may adopt regulations providing for the                                
     allocation of the barrels of oil equivalent production deduction                               
     within an operating unit between the oil and gas produced and                                  
     between producers having an interest in the oil and gas produced                               
     from the operating unit.                                                                       
         (e)  In this section,                                                                      
              (1)  "barrel of oil equivalent" means,                                                

2006-08-05                     House Journal                      Page 4317
                  (A)  one barrel, in the case of oil;                                              
                  (B)  the amount of gas that has an energy content of                              
         6,000,000 British thermal units, in the case of gas;                                       
              (2)  "operating unit" means all or part of an oil or gas                              
     pool, field, or like area that is the subject of a cooperative or unit                         
     plan adopted or operated that is approved by the commissioner of                               
     natural resources under AS 38.05.180(p).                                                       
   * Sec. 10. AS 43.55.025(a) is amended to read:                                                 
         (a)  Subject to the terms and conditions of this section, on oil                           
     and gas produced on or after July 1, 2004, from an oil and gas                                 
     lease, or on gas produced from a gas only lease, a credit against                              
     the production tax due under this chapter is allowed for                                       
              (1)  exploration expenditures that qualify under (b) of this                      
     section in an amount equal to one of the following:                                            
                  (A)  50 [(1) 20] percent of the total exploration                             
         expenditures that qualify only under (b) and (c) of this                                   
         section;                                                                                   
                  (B)  50 [(2) 20] percent of the total exploration                             
         expenditures for work performed before July 1, 2007, and that                              
         qualify only under (b) and (d) of this section;                                            
                  (C)  60 [(3) 40] percent of the total exploration                             
         expenditures that qualify under (b), (c), and (d) of this section;                         
         or                                                                                         
                  (D)  60 [(4) 40] percent of the total exploration                             
         expenditures that qualify only under (b) and (e) of this                                   
         section; and                                                                           
              (2)  25 percent of the actual expenditures directly                               
     related to the drilling of a development well, excluding                                   
     expenditures related to corporate overhead or for facilities                               
     other than the development well.                                                           
   * Sec. 11. AS 43.55.025(b) is amended to read:                                                 
         (b)  To qualify for the production tax credit under (a) of this                            
     section, an exploration expenditure must be incurred for work                                  
     performed on or after July 1, 2003, and before July 1, 2016                                
     [2007], except that an exploration expenditure for a Cook Inlet                                
     prospect must be incurred for work performed on or after July 1,                               
     2005, [AND BEFORE JULY 1, 2010, AND EXCEPT THAT AN                                             
     EXPLORATION EXPENDITURE, IN WHOLE OR IN PART,                                                  
     SOUTH OF 68 DEGREES, 15 MINUTES, NORTH LATITUDE,                                               
     AND NOT PART OF A COOK INLET PROSPECT MUST BE                                                  

2006-08-05                     House Journal                      Page 4318
     INCURRED FOR WORK PERFORMED ON OR AFTER JULY                                                   
     1, 2003, AND BEFORE JULY 1, 2010,] and                                                         
              (1)  may be for seismic or geophysical exploration costs                              
     not connected with a specific well;                                                            
              (2)  if for an exploration well,                                                      
                  (A)  must be incurred by an explorer that holds an                                
         interest in the exploration well for which the production tax                              
         credit is claimed;                                                                         
                  (B)  may be for either an oil or gas discovery well or                            
         a dry hole; and                                                                            
                  (C)  must be for goods, services, or rentals of                                   
         personal property reasonably required for the surface                                      
         preparation, drilling, casing, cementing, and logging of an                                
         exploration well, and, in the case of a dry hole, for the                                  
         expenses required for abandonment if the well is abandoned                                 
           within 18 months after the date the well was spudded;                                   
              (3)  may not be for testing, stimulation, or completion                               
     costs; administration, supervision, engineering, or lease operating                            
     costs; geological or management costs; community relations or                                  
     environmental costs; bonuses, taxes, or other payments to                                      
     governments related to the well; or other costs that are generally                             
     recognized as indirect costs or financing costs; and                                           
              (4)  may not be incurred for an exploration well or                                   
     seismic exploration that is included in a plan of exploration or a                             
     plan of development for any unit on May 13, 2003.                                              
   * Sec. 12. AS 43.55.025(c) is amended to read:                                                 
         (c)  To be eligible for the 50 [20] percent production tax credit                      
     authorized by (a)(1)(A) [(a)(1)] of this section or the 60 [40]                        
     percent production tax credit authorized by (a)(1)(C) [(a)(3)] of                          
     this section, exploration expenditures must                                                    
              (1)  qualify under (b) of this section; and                                           
              (2)  be for an exploration well, subject to the following:                            
                  (A)  for an exploration well other than a well that is                            
         described in (B) of this paragraph, the well must be located                               
         and drilled in such a manner that the bottom hole is located                               
         not less than three miles away from the bottom hole of a                                   
         preexisting suspended, completed, or abandoned oil or gas                                  
         well; in this subparagraph, "preexisting" means a well that                                
         was spudded more than 150 days but less than 35 years before                               
         the exploration well was spudded;                                                          

2006-08-05                     House Journal                      Page 4319
                  (B)  for an exploration well that explores a Cook Inlet                           
         prospect, the well must be located at least three miles from                               
         any other well drilled for oil and gas with all distances                                  
         measured as the horizontal distance between exploration                                    
         targets, except that the exploration well that is located within                           
         three miles of a well drilled for oil and gas qualifies for the                            
         tax credit authorized by this subsection if the exploration well                           
         tests potential hydrocarbon traps that the commissioner of                                 
         natural resources determines, after analyzing evidence                                     
         submitted by the explorer and from other information that the                              
         commissioner of natural resources determines relevant,                                     
         constitute a distinctly separate exploration target.                                       
   * Sec. 13. AS 43.55.025(d) is amended to read:                                                 
         (d)  To be eligible for the 50 [20] percent production tax                             
     credit authorized by (a)(1)(B) [(a)(2)] of this section or the 60 [40]                 
     percent production tax credit authorized by (a)(1)(C) [(a)(3)] of                          
     this section, an exploration expenditure must                                                  
              (1)  qualify under (b) of this section; and                                           
              (2)  be for an exploration well that is located not less than                         
     25 miles outside of the outer boundary, as delineated on July 1,                               
     2003, of any unit that is under a plan of development, except that                             
     for an exploration well for a Cook Inlet prospect to qualify under                             
     this paragraph, the exploration well must be located not less than                             
     10 miles outside the outer boundary, as delineated on July 1, 2003,                            
     of any unit that is under a plan of development.                                               
   * Sec. 14. AS 43.55.025(e) is amended to read:                                                 
         (e)  To be eligible for the 60 [40] percent production tax credit                      
     authorized by (a)(1)(D) [(a)(4)] of this section, the exploration                          
     expenditure must                                                                               
              (1)  qualify under (b) of this section;                                               
              (2)  be for seismic exploration; and                                                  
              (3)  have been conducted outside the boundaries of a                                  
     production unit or an exploration unit; however, the amount of the                             
     expenditure that is otherwise eligible under this subsection is                                
     reduced proportionately by the portion of the seismic exploration                              
     activity that crossed into a production unit or an exploration unit.                           
   * Sec. 15. AS 43.55.025(f) is amended to read:                                                 
         (f)  For a production tax credit under this section,                                       
              (1)  an explorer or person drilling a development well                            
     shall, in a form prescribed by the department and within six                                   

2006-08-05                     House Journal                      Page 4320
     months of the completion of the exploration activity or the                                
     development well, claim the credit and submit information                                  
     sufficient to demonstrate to the department's satisfaction that the                            
     claimed exploration expenditures and development well                                      
     expenditures qualify under this section;                                                       
              (2)  an explorer shall agree, in writing,                                             
                  (A)  to notify the Department of Natural Resources,                               
         within 30 days after completion of seismic or geophysical                                  
         data processing, completion of a well, or filing of a claim for                            
         credit, whichever is the latest, for which exploration costs are                           
         claimed, of the date of completion and submit a report to that                             
         department describing the processing sequence and providing                                
         a list of data sets available; if, under (c)(2)(B) of this section,                        
         an explorer submits a claim for a credit for expenditures for                              
         an exploration well that is located within three miles of a well                           
         already drilled for oil and gas, in addition to the submissions                            
         required under (1) of this subsection, the explorer shall submit                           
         the information necessary for the commissioner of natural                                  
         resources to evaluate the validity of the explorer's claim that                            
         the well is directed at a distinctly separate exploration target,                          
         and the commissioner of natural resources shall, upon receipt                              
         of all evidence sufficient for the commissioner to evaluate the                            
         explorer's claim, make that determination within 60 days;                                  
                  (B)  to provide to the Department of Natural                                      
         Resources, within 30 days after the date of a request, specific                            
         data sets, ancillary data, and reports identified in (A) of this                           
         paragraph;                                                                                 
                  (C)  that, notwithstanding any provision of AS 38,                                
         information provided under this paragraph will be held                                     
         confidential by the Department of Natural Resources for 10                                 
         years following the completion date, at which time that                                    
         department will release the information after 30 days' public                              
         notice;                                                                                    
              (3)  if more than one person [EXPLORER] holds an                                  
     interest in a well, [OR] seismic exploration, or development well                      
     each person [EXPLORER] may claim an amount of credit that is                               
     proportional to the [EXPLORER'S] cost incurred by that person;                             
              (4)  the department may exercise the full extent of its                               
     powers as though the explorer or the person drilling a                                     
     development well were a taxpayer under this title, in order to                             

2006-08-05                     House Journal                      Page 4321
     verify that the claimed expenditures are qualified exploration                                 
     expenditures or development well expenditures under this                                   
     section; and                                                                                   
              (5)  if the department is satisfied that the [EXPLORER'S]                             
     claimed expenditures are qualified under this section, the                                     
     department shall issue to the explorer or person drilling a                                
     development well a production tax credit certificate for the                               
     amount of credit to be allowed against production taxes due under                              
     this chapter; however, notwithstanding any other provision of this                             
     section, the department may not issue [TO AN EXPLORER] a                                       
     production tax credit certificate under this section if the total of                       
     production tax credits submitted for Cook Inlet production, based                              
     on exploration expenditures and development well expenditures                              
     for work performed during the period described in (b) of this                                  
     section for that production, that have been approved by the                                    
     department exceeds $20,000,000.                                                                
   * Sec. 16. AS 43.55.025(g) is amended to read:                                                 
         (g)  A person receiving a production tax credit certificate                            
     under this section [AN EXPLORER] may transfer, convey, or                                  
     sell its production tax credit certificate to any person, and any                              
     person who receives a production tax credit certificate may also                               
     transfer, convey, or sell the certificate.                                                     
   * Sec. 17. AS 43.55.025(j) is amended to read:                                                 
         (j)  Notwithstanding any other provision of this title, of                                 
     AS 31.05, or of AS 40.25.100, the department shall provide to the                              
     Department of Natural Resources information submitted with a                                   
     claim under this section to support the eligibility of an exploration                          
     expenditure or development well expenditure, including seismic                             
     exploration data and well data, and any information described in                               
     (f)(2) of this section received by the department.                                             
   * Sec. 18. AS 43.55.025(k) is amended by adding a new paragraph                                
to read:                                                                                            
              (4)  "development well" means a well drilled to a known                               
     producing formation in a previously discovered field.                                          
   * Sec. 19. AS 43.55.900 is amended by adding a new paragraph to                                
read:                                                                                               
              (17)  "Cook Inlet sedimentary basin" has the meaning                                  
     given in regulations to implement AS 38.05.180(f)(4).                                          
   * Sec. 20. This Act takes effect on July 1, 2009."                                             
                                                                                                    

2006-08-05                     House Journal                      Page 4322
Representative Gardner moved and asked unanimous consent that                                       
Amendment No. 6 be adopted.                                                                         
                                                                                                    
There was objection.                                                                                
                                                                                                    
                                                                                                    
The question being:  "Shall Amendment No. 6 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 6                                                                                     
                                                                                                    
YEAS:  13   NAYS:  27   EXCUSED:  0   ABSENT:  0                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gruenberg,                                
Guttenberg, Joule, Kapsner, Kerttula, Moses, Salmon                                                 
                                                                                                    
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Gatto,                               
Harris, Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn,                                           
McGuire, Meyer, Neuman, Olson, Ramras, Rokeberg, Samuels,                                           
Seaton, Stoltze, Thomas, Weyhrauch, Wilson                                                          
                                                                                                    
And so, Amendment No. 6 was not adopted.                                                            
                                                                                                    
                                                                                                    
Amendment No. 7 was offered  by Representatives Croft and                                            
Crawford:                                                                                           
                                                                                                    
Page 13, lines 20 - 23:                                                                             
 Delete all material and insert:                                                                    
          "(c) A credit or portion of a credit under this section                                  
              (1) may not be used to reduce a person's tax liability                                
     under AS 43.55.011(e) for any calendar year below                                              
                  (A) four percent of the gross value at the point of                               
         production for oil and gas produced in the state lying north of                            
         68 degrees North latitude for producer of more than 75,000                                 
         barrels of oil equivalent a day; or                                                        
                  (B) zero for all regions and producers other than                                 
         those described in (A) of this paragraph; and                                              
              (2) not used under (1) of this subsection may be applied                              
     in a later calendar year."                                                                     
                                                                                                    

2006-08-05                     House Journal                      Page 4323
Page 27, line 19:                                                                                   
 Delete "zero"                                                                                      
 Insert "four percent of the gross value at the point of production                                 
for oil and gas produced in the state north of 68 degrees North latitude                            
of more than 75,000 barrels of oil equivalent a day, or less than zero                              
for all other regions and producers in the state"                                                   
                                                                                                    
Representative Croft moved and asked unanimous consent that                                         
Amendment No. 7 be adopted.                                                                         
                                                                                                    
There was objection.                                                                                
                                                                                                    
                                                                                                    
The question being:  "Shall Amendment No. 7 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 7                                                                                     
                                                                                                    
YEAS:  13   NAYS:  27   EXCUSED:  0   ABSENT:  0                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gruenberg,                                
Guttenberg, Joule, Kapsner, Kerttula, Moses, Salmon                                                 
                                                                                                    
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Gatto,                               
Harris, Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn,                                           
McGuire, Meyer, Neuman, Olson, Ramras, Rokeberg, Samuels,                                           
Seaton, Stoltze, Thomas, Weyhrauch, Wilson                                                          
                                                                                                    
And so, Amendment No. 7 was not adopted.                                                            
                                                                                                    
Amendment No. 8 was offered  by Representative Berkowitz:                                            
                                                                                                    
Page 32, line 29, following "AS 38.05.132":                                                         
 Delete "."                                                                                         
 Insert ";"                                                                                         
                                                                                                    
Page 32, following line 29:                                                                         
 Insert a new paragraph to read:                                                                    
              "(19)  costs of lobbying and advertising."                                            
                                                                                                    

2006-08-05                     House Journal                      Page 4324
Representative Berkowitz moved and asked unanimous consent that                                     
Amendment No. 8 be adopted.                                                                         
                                                                                                    
Representative Hawker objected.                                                                     
                                                                                                    
The question being:  "Shall Amendment No. 8 be adopted?"  The roll                                  
was taken with the following result:                                                                
                                                                                                    
CSHB 3001(FIN)                                                                                      
Second Reading                                                                                      
Amendment No. 8                                                                                     
                                                                                                    
YEAS:  14   NAYS:  26   EXCUSED:  0   ABSENT:  0                                                  
                                                                                                    
Yeas:  Berkowitz, Cissna, Crawford, Croft, Gara, Gardner, Gatto,                                    
Gruenberg, Guttenberg, Joule, Kapsner, Kerttula, Moses, Salmon                                      
                                                                                                    
Nays:  Anderson, Chenault, Coghill, Dahlstrom, Elkins, Foster, Harris,                              
Hawker, Holm, Kelly, Kohring, Kott, LeDoux, Lynn, McGuire,                                          
Meyer, Neuman, Olson, Ramras, Rokeberg, Samuels, Seaton, Stoltze,                                   
Thomas, Weyhrauch, Wilson                                                                           
                                                                                                    
And so, Amendment No. 8 was not adopted.                                                            
                                                                                                    
Representative Croft lifted the call.