Legislature(2007 - 2008)
2007-11-15 Senate Journal
Full Journal pdf2007-11-15 Senate Journal Page 1510 HB 2001 CS FOR HOUSE BILL NO. 2001(FIN) am "An Act relating to the production tax on oil and gas and to conservation surcharges on oil; providing a limit on the amount of tax that may be levied on the production of certain gas that is produced outside of the Cook Inlet sedimentary basin; relating to the sharing between agencies of certain information relating to the production tax and to oil and gas or gas only leases; expanding the period in which the Department of Revenue may assess the amount of oil and gas production tax and conservation surcharges; prohibiting a producer or explorer from receiving tax credits if certain judgments are not satisfied and requiring, as a condition of receiving the tax credits, the deposit of the amount of certain unpaid judgments and certain interest on those judgments in the court during an appeal and relating to that interest; relating to state oil and gas audit masters; making conforming amendments; and providing for an effective date" was read the second time. President Green placed a call on the Senate. There being no objection, it was so ordered. 2007-11-15 Senate Journal Page 1511 Senator Stedman, Chair, moved and asked unanimous consent for the adoption of the Finance Senate Committee Substitute offered on page 1508. Without objection, SENATE CS FOR CS FOR HOUSE BILL NO. 2001(FIN) "An Act relating to the production tax on oil and gas and to conservation surcharges on oil; relating to the sharing between agencies of certain information relating to the production tax and to oil and gas or gas only leases; expanding the period in which the Department of Revenue may assess the amount of oil and gas production tax and conservation surcharges; relating to state oil and gas audit masters; relating to oil and gas auditors and certain oil and gas auditor supervisors; making conforming amendments; and providing for an effective date" was adopted. Senators Thomas, Olson, Wilken, Dyson, Therriault, Ellis, Bunde, Wagoner offered Amendment No. 1 : Page 1, line 2, following "oil;": Insert "providing a limit on the amount of tax that may be levied on the production of certain gas that is produced outside of the Cook Inlet sedimentary basin;" Page 1, line 11, following "INTENT.": Insert "(a) It is the intent of the legislature that the provisions of this Act will (1) ensure a fair and equitable means of assessing and taxing Alaska's oil and gas resources; and (2) encourage the availability to Alaska's citizens of affordable gas produced, transported, and consumed within the state as one step toward reasonable and equitable energy costs throughout Alaska." Reletter the following subsections accordingly. Page 1, line 12: Delete "sec. 47" Insert "sec. 48" Page 2, line 3: Delete "sec. 68" Insert "sec. 69" 2007-11-15 Senate Journal Page 1512 Page 11, line 18: Delete "and (k)" Insert "(k), and (o)" Page 11, line 26, following "section": Insert "and gas subject to (o) of this section" Page 14, line 9: Delete "or (k)" Insert ", (k), or (o)" Page 14, line 11: Delete "and (k)" Insert ", (k), and (o)" Page 14, line 13: Delete "and (k)" Insert ", (k), and (o)" Page 14, line 14, following "AS 43.55.011(j)": Insert "or (o)" Page 14, lines 16 - 17: Delete "and (k)" Insert ", (k), and (o)" Page 14, line 20: Delete "or (k)" Insert ", (k), or (o)" Page 14, following line 20: Insert a new bill section to read: "* Sec. 21. AS 43.55.011 is amended by adding a new subsection to read: (o) Notwithstanding other provisions of this section, for a calendar year before 2022, the tax levied under (e) of this section for each 1,000 cubic feet of gas for gas produced from a lease or property outside the Cook Inlet sedimentary basin and used in the state may not exceed the amount of tax for each 1,000 cubic feet of gas that is determined under (j)(2) of this section." 2007-11-15 Senate Journal Page 1513 Renumber the following bill sections accordingly. Page 15, line 1, following "basin": Insert "or not subject to AS 43.55.011(o)" Page 15, line 28: Delete "or (k)" Insert ", (k), or (o)" Page 16, line 8: Delete "or (k)" Insert ", (k), or (o)" Page 16, line 10, following the first occurrence of "(2)": Insert "or 43.55.011(o)" Page 16, line 11, following "(2)(A)": Insert "or 43.55.011(o)" Page 37, line 15, following "AS 43.55.170;": Insert "this subparagraph does not apply to gas subject to AS 43.55.011(o);" Page 37, line 23, following "AS 43.55.170;": Insert "this subparagraph does not apply to gas subject to AS 43.55.011(o);" Page 38, following line 4: Insert new material to read: "(E) gas produced during a calendar year from a lease or property outside the Cook Inlet sedimentary basin and used in the state is the gross value at the point of production of that gas taxable under AS 43.55.011(e) and produced by the producer from that lease or property, less the producer's lease expenditures under AS 43.55.165 for the calendar year applicable to that gas produced by the producer from that lease or property, as adjusted under AS 43.55.170;" Page 39, lines 14 - 15: Delete "or (k)" Insert ", (k), or (o)" 2007-11-15 Senate Journal Page 1514 Page 39, line 17: Delete "(a)(1)(C) or (D)" Insert "(a)(1)(C), (D) or (E)" Page 39, line 20: Delete "or (k)" Insert ", (k), or (o)" Page 39, line 23: Delete "or (k)" Insert ", (k), or (o)" Page 44, line 29, following "gas": Insert ", between gas subject to AS 43.55.011(o) and other gas," Page 47, line 22, following "AS 31.05.110(b)": Insert "; (24) "used in the state" means delivered for consumption as fuel in the state, including as fuel consumed to generate electricity" Page 47, line 29: Delete "sec. 55" Insert "sec. 56" Page 47, line 30: Delete "secs. 15 - 27, 29 - 42, and 49 - 60" Insert "secs. 15 - 28, 30 - 43, and 50 - 61" Page 48, line 1: Delete "Sections 43 and 45" Insert "Sections 44 and 46" Page 48, line 2: Delete "sec. 43" Insert "sec. 44" Page 48, line 3: Delete "sec. 45" Insert "sec. 46" Delete "secs. 43 and 45" Insert "secs. 44 and 46" 2007-11-15 Senate Journal Page 1515 Page 48, line 5: Delete "Sections 34 - 37, 39, and 41" Insert "Sections 35 - 38, 40, and 42" Page 48, line 8: Delete "sec. 47" Insert "sec. 48" Page 48, line 10: Delete "47" Insert "48" Page 48, line 12: Delete "sec. 44" in both places Insert "sec. 45" in both places Page 48, line 15: Delete "sec. 46" Insert "sec. 47" Page 48, line 16: Delete "sec. 46" Insert "sec. 47" Page 49, line 11: Delete "sec. 21" in both places Insert "sec. 22" in both places Page 49, line 13: Delete "sec. 21" Insert "sec. 22" Page 49, line 15: Delete "sec. 55" Insert "sec. 56" Page 49, line 16: Delete "sec. 68" Insert "sec. 69" 2007-11-15 Senate Journal Page 1516 Page 49, line 17: Delete "secs. 15 - 27, 29 - 42, 49 - 54, and 56 - 60" Insert "secs. 15 - 28, 30 - 43, 50 - 55, and 57 - 61" Delete "sec. 55" Insert "sec. 56" Page 49, line 18: Delete "sec. 68" Insert "sec. 69" Page 49, lines 26 - 27: Delete "secs. 15 - 27, 29 - 42, and 49 - 60" Insert "secs. 15 - 28, 30 - 43, and 50 - 61" Page 49, line 29 : Delete "sec. 55" Insert "sec. 56" Page 50, lines 15 - 16: Delete "Sections 29 and 38" Insert "Sections 30 and 39" Page 50, line 17: Delete "sec. 55" Insert "sec. 56" Page 50, line 19: Delete "Sections 15 - 27, 29 - 42, and 49 - 60" Insert "Sections 15 - 28, 30 - 43, and 50 - 61" Page 50, line 21: Delete "Section 28" Insert "Section 29" Page 50, line 22: Delete "sec. 69" Insert "sec. 70" Senator Thomas moved and asked unanimous consent for the adoption of Amendment No. 1. Senator Stevens objected. The question being: "Shall Amendment No. 1 be adopted?" The roll was taken with the following result: 2007-11-15 Senate Journal Page 1517 SCS CSHB 2001(FIN) Second Reading Amendment No. 1 YEAS: 19 NAYS: 0 EXCUSED: 1 ABSENT: 0 Yeas: Bunde, Davis, Dyson, Ellis, Elton, French, Green, Hoffman, Huggins, Kookesh, McGuire, Olson, Stedman, Stevens, Therriault, Thomas, Wagoner, Wielechowski, Wilken Excused: Cowdery and so, Amendment No. 1 was adopted. Senators French, Elton offered Amendment No. 2 -A: Page 39, line 27, through page 41, line 10: Delete all material and insert: "* Sec. 53. AS 43.55.165(a) is repealed and reenacted to read: (a) Except as provided in (k) and (l) of this section, for purposes of this chapter, a producer's lease expenditures for a calendar year are (1) costs, other than items listed in (e) of this section, that are (A) incurred in the state by the producer during the calendar year after March 31, 2006, to explore for, develop, or produce oil or gas deposits located within the producer's leases or properties in the state or, in the case of land in which the producer does not own an operating right, operating interest, or working interest, to explore for oil or gas deposits within other land in the state; and (B) allowed by the department by regulation, based on the department's determination that the costs satisfy the following three requirements: (i) the costs must be incurred upstream of the point of production of oil and gas; (ii) the costs must be ordinary and necessary costs of exploring for, developing, or producing, as applicable, oil or gas deposits; and (iii) the costs must be direct costs of exploring for, developing, or producing, as applicable, oil or gas deposits; and 2007-11-15 Senate Journal Page 1518 (2) a reasonable allowance for that calendar year, as determined under regulations adopted by the department, for overhead expenses that are directly related to exploring for, developing, or producing, as applicable, the oil or gas deposits. * Sec. 54. AS 43.55.165(b) is amended to read: (b) For purposes of (a) of this section, (1) direct costs include (A) an expenditure, when incurred, to acquire an item if the acquisition cost is otherwise a direct cost, notwithstanding that the expenditure may be required to be capitalized rather than treated as an expense for financial accounting or federal income tax purposes; (B) payments of or in lieu of property taxes, sales and use taxes, motor fuel taxes, and excise taxes; [(C) A REASONABLE ALLOWANCE, AS DETERMINED UNDER REGULATIONS ADOPTED BY THE DEPARTMENT, FOR OVERHEAD EXPENSES DIRECTLY RELATED TO EXPLORING FOR, DEVELOPING, AND PRODUCING OIL OR GAS DEPOSITS LOCATED WITHIN LEASES OR PROPERTIES OR OTHER LAND IN THE STATE;] (2) an activity does not need to be physically located on, near, or within the premises of the lease or property within which an oil or gas deposit being explored for, developed, or produced is located in order for the cost of the activity to be a cost upstream of the point of production of the oil or gas; (3) in determining whether costs are lease expenditures, the department may consider, among other factors, the (A) typical industry practices and standards in the state that determine the costs, other than items listed in (e) of this section, that an operator is allowed to bill a producer that is not the operator, under unit operating agreements or similar operating agreements that were in effect before December 2, 2005, and were subject to negotiation with at least one producer with substantial bargaining power, other than the operator; and (B) standards adopted by the Department of Natural Resources that determine the costs, other than items listed in (e) of this section, that a lessee is allowed to 2007-11-15 Senate Journal Page 1519 deduct from revenue in calculating net profits under a lease issued under AS 38.05.180(f)(3)(B), (D), or (E)." Page 41, lines 23 - 26: Delete all material and insert: "(6) costs arising from fraud, wilful misconduct, [OR] gross negligence, violation of law, or failure to comply with an obligation under a lease, permit, or license issued by the state or federal government;" Page 42, lines 6 - 7: Delete all material and insert: "(12) an expenditure otherwise deductible under (b) of this section that is a result of [FOR A TRANSACTION THAT IS] an internal transfer, a transaction with an affiliate, or a transaction between related parties, or is otherwise not an arm's length transaction, unless the producer establishes to the satisfaction of the department that the amount of the expenditure does not exceed the [EXPENDITURES INCURRED THAT ARE IN EXCESS OF] fair market value of the expenditure;" Page 45, lines 7 - 8: Delete "(a) Unless the payment or credit has already been subtracted in calculating billable or billed costs under AS 43.55.165(c) [OR (d)], a" Insert "(a) A [UNLESS THE PAYMENT OR CREDIT HAS ALREADY BEEN SUBTRACTED IN CALCULATING BILLABLE OR BILLED COSTS UNDER AS 43.55.165(c) OR (d), A]" Page 47, line 23, following "43.55.160(c),": Insert "43.55.165(c)," Senator French moved and asked unanimous consent for the adoption of Amendment No. 2-A. Senator Stevens objected.