Legislature(2013 - 2014)
2013-04-13 House Journal
Full Journal pdf2013-04-13 House Journal Page 1187 SB 21 The following, which was advanced to third reading from the April 12, 2013, calendar (page 1130), was read the third time: HOUSE CS FOR CS FOR SENATE BILL NO. 21(FIN) "An Act relating to the interest rate applicable to certain amounts due for fees, taxes, and payments made and property delivered to the Department of Revenue; relating to appropriations from taxes paid under the Alaska Net Income Tax Act; providing a tax credit against the corporation income tax for qualified oil and gas service industry expenditures; relating to the oil and gas production tax rate; relating to gas used in the state; relating to monthly installment payments of the oil and gas production tax; relating to oil and gas production tax credits for certain losses and expenditures; relating to oil and gas production tax credit certificates; relating to nontransferable tax credits based on production; relating to the oil and gas tax credit fund; relating to annual statements by producers and explorers; establishing an Oil and Gas Competitiveness Review Board; relating to the determination of annual oil and gas production tax value including adjustments based on a percentage of gross value at the point of production from certain leases or properties; and making conforming amendments." 2013-04-13 House Journal Page 1188 Representative Thompson moved and asked unanimous consent that HCS CSSB 21(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, HCS CSSB 21(FIN) would be returned to second reading for Amendment Nos. 1-12. Amendment No. 1 was offered by Representatives Thompson, Costello, Feige, and Kawasaki: Page 19, line 21: Delete "(a)(5), (6), or (7) [(a)]" Insert "(a)" Page 19, lines 23 - 25: Delete "or, for work qualifying under (a)(1), (2), (3), or (4) of this section, for work performed in an area outside of the Cook Inlet sedimentary basin and south of 68 degrees North latitude," Insert "except that to qualify for the production tax credit under (a)(1), (2), (3), or (4) of this section for exploration conducted outside of the Cook Inlet sedimentary basin and south of 68 degrees North latitude, an exploration expenditure must be incurred for work performed" Representative Thompson moved and asked unanimous consent that Amendment No. 1 be adopted. Objection was heard and withdrawn. There being no further objection, Amendment No. 1 was adopted. Amendment No. 2 was offered by Representatives Seaton, Munoz, Kawasaki, and Gara: Page 2, line 1, following "properties;" (title amendment): Insert "relating to the additional conservation surcharge on oil;" Page 26, following line 16: Insert a new bill section to read: 2013-04-13 House Journal Page 1189 "* Sec. 30. AS 43.55.300(a) is amended to read: (a) Every producer of oil shall pay a surcharge of $.07 for each [$.04 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." Renumber the following bill sections accordingly. Page 30, line 11: Delete "sec. 31" Insert "sec. 32" Page 32, line 15: Delete "32" Insert "33" Representative Seaton moved and asked unanimous consent that Amendment No. 2 be adopted. Representative Stoltze objected. The question being: "Shall Amendment No. 2 be adopted?" The roll was taken with the following result: HCS CSSB 21(FIN) am H Second Reading Amendment No. 2 YEAS: 14 NAYS: 24 EXCUSED: 2 ABSENT: 0 Yeas: Drummond, Edgmon, Gara, Gruenberg, Herron, Josephson, Kawasaki, Kerttula, Kreiss-Tomkins, Munoz, Seaton, Tarr, Tuck, P.Wilson Nays: Austerman, Chenault, Costello, Feige, Foster, Gattis, Hawker, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Millett, Neuman, Olson, Pruitt, Reinbold, Saddler, Stoltze, Thompson, T.Wilson Excused: Guttenberg, Nageak And so, Amendment No. 2 was not adopted. 2013-04-13 House Journal Page 1190 Amendment No. 3 was offered by Representatives Seaton and Edgmon: Page 17, line 26, through page 18, line 28: Delete all material and insert: "(j) For each month of the calendar year for which a producer's average monthly gross value at the point of production of a barrel of taxable oil and gas is less than $150, a producer may apply against the producer's tax liability for the calendar year under AS 43.55.011(e) a tax credit in the amount specified in this subsection for each barrel of taxable oil under AS 43.55.011(e) that does not meet any of the criteria in AS 43.55.160(f) and that is produced during a calendar year after December 31, 2013, from leases or properties north of 68 degrees North latitude. A tax credit under this section may not reduce a producer's tax liability for a calendar year under AS 43.55.011(e) below zero. The amount of the tax credit for a barrel of taxable oil subject to this subsection is (1) if the producer's average monthly gross value at the point of production of a barrel of taxable oil and gas is less than or equal to $100, $5 for each barrel of taxable oil; or (2) if the producer's average monthly gross value at the point of production of a barrel of taxable oil and gas is more than $100 and less than $150, $5 for each barrel of taxable oil, reduced by one-tenth of the difference between that average monthly gross value at the point of production of a barrel of oil and $100." Representative Seaton moved and asked unanimous consent that Amendment No. 3 be adopted. Representative Feige objected. The question being: "Shall Amendment No. 3 be adopted?" The roll was taken with the following result: HCS CSSB 21(FIN) am H Second Reading Amendment No. 3 YEAS: 15 NAYS: 23 EXCUSED: 2 ABSENT: 0 2013-04-13 House Journal Page 1191 Yeas: Austerman, Drummond, Edgmon, Foster, Gara, Gruenberg, Herron, Josephson, Kawasaki, Kerttula, Kreiss-Tomkins, Munoz, Seaton, Tarr, Tuck Nays: Chenault, Costello, Feige, Gattis, Hawker, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Millett, Neuman, Olson, Pruitt, Reinbold, Saddler, Stoltze, Thompson, P.Wilson, T.Wilson Excused: Guttenberg, Nageak And so, Amendment No. 3 was not adopted. Amendment No. 4 was offered by Representatives Seaton and Kawasaki: Page 25, line 18, through page 26, line 4: Delete all material and insert: "(f) Except as provided in (g) of this section, on and after January 1, 2014, in the calculation of an annual production tax value of a producer under (a)(1) of this section, the gross value at the point of production of oil or gas meeting one or more of the following criteria is reduced by 20 percent: (1) the oil or gas is produced from a lease or property that does not contain a lease that was within a unit on January 1, 2003; (2) the oil or gas is produced from a participating area established after December 31, 2011, that is within a unit formed under AS 38.05.180(p) before January 1, 2003, if the participating area does not contain a reservoir that had previously been in a participating area established before December 31, 2011; (3) the oil or gas is produced from acreage that was added to an existing participating area by the Department of Natural Resources on and after January 1, 2014, and the producer demonstrates to the department that the volume of oil or gas produced is from acreage added to an existing participating area. (g) A reduction under (f) of this section may not reduce the gross value at the point of production below zero." Reletter the following subsection accordingly. 2013-04-13 House Journal Page 1192 Page 26, following line 16: Insert a new subsection to read: "(i) In this section, "participating area" means a reservoir or portion of a reservoir producing or contributing to production as approved by the Department of Natural Resources." Page 29, following line 24: Insert new bill sections to read: "* Sec. 34. AS 43.55.024(j) is repealed January 1, 2019. * Sec. 35. AS 43.55.160(f)(3) is repealed January 1, 2021." Renumber the following bill sections accordingly. Page 30, following line 17: Insert a new bill section to read: "* Sec. 41. The uncodified law of the State of Alaska is amended by adding a new section to read: CONDITIONAL EFFECT. (a) Section 34 of this Act takes effect only if the volume of oil production for calendar year 2018 does not exceed the volume of oil produced for calendar year 2012. The commissioner of natural resources shall notify the lieutenant governor and the revisor of statutes before January 1, 2019, or as soon as practicable thereafter, if the volume of oil production for calendar year 2018 is greater than the volume of oil produced during calendar year 2012. (b) Section 35 of this Act takes effect only if the volume of oil production for calendar year 2020 does not exceed the volume of oil produced for calendar year 2012. The commissioner of natural resources shall notify the lieutenant governor and the revisor of statutes before January 1, 2021, or as soon as practicable thereafter, if the volume of oil production for calendar year 2020 is greater than the volume of oil produced during calendar year 2012." Representative Seaton moved and asked unanimous consent that Amendment No. 4 be adopted. Representative Costello objected. 2013-04-13 House Journal Page 1193 The question being: "Shall Amendment No. 4 be adopted?" The roll was taken with the following result: HCS CSSB 21(FIN) am H Second Reading Amendment No. 4 YEAS: 16 NAYS: 22 EXCUSED: 2 ABSENT: 0 Yeas: Austerman, Drummond, Edgmon, Foster, Gara, Gruenberg, Herron, Josephson, Kawasaki, Kerttula, Kreiss-Tomkins, Munoz, Seaton, Tarr, Tuck, P.Wilson Nays: Chenault, Costello, Feige, Gattis, Hawker, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Millett, Neuman, Olson, Pruitt, Reinbold, Saddler, Stoltze, Thompson, T.Wilson Excused: Guttenberg, Nageak And so, Amendment No. 4 was not adopted. Amendment No. 5 was offered by Representatives Gara, Kerttula, Tuck, Kawasaki, Tarr, Gruenberg, Josephson, Drummond, and Kreiss-Tomkins: Page 1, line 1, through page 2, line 2 (title amendment): Delete all material and insert: ""An Act relating to the oil and gas production tax; relating to oil and gas production tax credits; amending the minimum tax on oil and gas production; relating to the determination of the production tax value of oil and gas; relating to the financing of oil processing facilities on the North Slope by the Alaska Industrial Development and Export Authority; and providing for an effective date."" Page 2, line 4, through page 30, line 17: Delete all material and insert: "* Section 1. AS 43.55.011(e) is amended to read: (e) There is levied on the producer of oil or gas a tax for all oil and gas produced each calendar year from each lease or property in the state, less any oil and gas the ownership or right to which is exempt from taxation or constitutes a landowner's royalty interest. Except as otherwise provided under (f), (j), (k), (o), and 2013-04-13 House Journal Page 1194 (p) of this section, the tax is equal to the sum of (1) the annual production tax value of the taxable oil and gas as calculated under AS 43.55.160(a)(1), as adjusted by AS 43.55.162, multiplied by 25 percent; and (2) the sum, over all months of the calendar year, of the tax amounts determined under (g) of this section. * Sec. 2. AS 43.55.011(f) is repealed and reenacted to read: (f) Except for oil and gas subject to (i) of this section and gas subject to (o) of this section, the provisions of this subsection apply to oil and gas produced from each lease or property within a unit or nonunitized reservoir that has cumulatively produced 1,000,000,000 BTU equivalent barrels of oil or gas by the close of the most recent calendar year and from which the average daily oil and gas production from the unit or nonunitized reservoir during the most recent calendar year exceeded 100,000 BTU equivalent barrels. Notwithstanding any contrary provision of law, a producer may not apply tax credits to reduce its total tax liability under (e) and (g) of this section for oil and gas produced from all leases or properties within the unit or nonunitized reservoir below 10 percent of the total gross value at the point of production of that oil and gas. If the amount of tax calculated by multiplying the tax rates in (e) and (g) of this section by the total production tax value of the oil and gas taxable under (e) and (g) of this section produced from all of the producer's leases or properties within the unit or nonunitized reservoir is less than 10 percent of the total gross value at the point of production of that oil and gas, the tax levied by (e) and (g) of this section for that oil and gas is equal to 10 percent of the total gross value at the point of production of that oil and gas. * Sec. 3. AS 43.55.011(g) is amended to read: (g) For each month of the calendar year for which the producer's average monthly production tax value under AS 43.55.160(a)(2) of a [PER] BTU equivalent barrel of the taxable oil and gas is more than $30, the amount of tax for purposes of (e)(2) of this section is determined by multiplying the monthly production tax value of the taxable oil and gas produced during the month, as adjusted by AS 43.55.162, by the tax rate calculated as follows: (1) if the producer's average monthly production tax value of a [PER] BTU equivalent barrel of the taxable oil and gas 2013-04-13 House Journal Page 1195 for the month is not more than $60 [$92.50], the tax rate is 0.4 percent multiplied by the number that represents the difference between that average monthly production tax value of a [PER] BTU equivalent barrel and $30; or (2) if the producer's average monthly production tax value of a [PER] BTU equivalent barrel of the taxable oil and gas for the month is more than $60 [$92.50], the tax rate is the sum of 12 [25] percent and the product of 0.25 [0.1] percent multiplied by the number that represents the difference between the average monthly production tax value of a [PER] BTU equivalent barrel and $60 [$92.50], except that the sum determined under this paragraph may not exceed 30 [50] percent. * Sec. 4. AS 43.55.020(a) is amended to read: (a) For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i) or (p) shall pay the tax as follows: (1) an installment payment of the estimated tax levied by AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each month of the calendar year on the last day of the following month; except as otherwise provided under (2) of this subsection, the amount of the installment payment is the sum of the following amounts, less 1/12 of the tax credits that are allowed by law to be applied against the tax levied by AS 43.55.011(e) for the calendar year, but the amount of the installment payment may not be less than zero: (A) for oil and gas produced from leases or properties in the state outside the Cook Inlet sedimentary basin but not subject to AS 43.55.011(o) or (p), other than leases or properties subject to AS 43.55.011(f), the greater of (i) zero; or (ii) the sum of 25 percent and the tax rate calculated for the month under AS 43.55.011(g) multiplied by the remainder obtained by subtracting 1/12 of the producer's adjusted lease expenditures for the calendar year of production under AS 43.55.165 and 43.55.170 that are deductible for the leases or properties under AS 43.55.160 and 1/12 of the adjustment to production tax value for the calendar year under AS 43.55.162 from the gross value at the point of production of the oil and gas produced from the leases or properties during the month for which the installment 2013-04-13 House Journal Page 1196 payment is calculated; (B) for oil and gas produced from leases or properties subject to AS 43.55.011(f), 10 percent of the gross value at the point of production of that oil and gas [THE GREATEST OF (i) ZERO; (ii) ZERO PERCENT, ONE PERCENT, TWO PERCENT, THREE PERCENT, OR FOUR PERCENT, AS APPLICABLE, OF THE GROSS VALUE AT THE POINT OF PRODUCTION OF THE OIL AND GAS PRODUCED FROM ALL LEASES OR PROPERTIES DURING THE MONTH FOR WHICH THE INSTALLMENT PAYMENT IS CALCULATED; OR (iii) THE SUM OF 25 PERCENT AND THE TAX RATE CALCULATED FOR THE MONTH UNDER AS 43.55.011(g) MULTIPLIED BY THE REMAINDER OBTAINED BY SUBTRACTING 1/12 OF THE PRODUCER'S ADJUSTED LEASE EXPENDITURES FOR THE CALENDAR YEAR OF PRODUCTION UNDER AS 43.55.165 AND 43.55.170 THAT ARE DEDUCTIBLE FOR THOSE LEASES OR PROPERTIES UNDER AS 43.55.160 FROM THE GROSS VALUE AT THE POINT OF PRODUCTION OF THE OIL AND GAS PRODUCED FROM THOSE LEASES OR PROPERTIES DURING THE MONTH FOR WHICH THE INSTALLMENT PAYMENT IS CALCULATED]; (C) for oil and gas produced from each lease or property subject to AS 43.55.011(j), (k), (o), or (p), the greater of (i) zero; or (ii) the sum of 25 percent and the tax rate calculated for the month under AS 43.55.011(g) multiplied by the remainder obtained by subtracting 1/12 of the producer's adjusted lease expenditures for the calendar year of production under AS 43.55.165 and 43.55.170 that are deductible under AS 43.55.160 and 1/12 of the adjustment to production tax value for the calendar year under AS 43.55.162 for oil or gas, as applicable [RESPECTIVELY], produced from the lease 2013-04-13 House Journal Page 1197 or property from the gross value at the point of production of the oil or gas, as applicable [RESPECTIVELY], produced from the lease or property during the month for which the installment payment is calculated; (2) an amount calculated under (1)(C) of this subsection for oil or gas produced from a lease or property (A) subject to AS 43.55.011(j), (k), or (o) may not exceed the product obtained by carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or 43.55.011(o), as applicable, for gas or set out in AS 43.55.011(k)(1) or (2), as applicable, for oil, but substituting in AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the amount of taxable gas produced during the month for the amount of taxable gas produced during the calendar year and substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the amount of taxable oil produced during the month for the amount of taxable oil produced during the calendar year; (B) subject to AS 43.55.011(p) may not exceed four percent of the gross value at the point of production of the oil or gas; (3) an installment payment of the estimated tax levied by AS 43.55.011(i) for each lease or property is due for each month of the calendar year on the last day of the following month; the amount of the installment payment is the sum of (A) the applicable tax rate for oil provided under AS 43.55.011(i), multiplied by the gross value at the point of production of the oil taxable under AS 43.55.011(i) and produced from the lease or property during the month; and (B) the applicable tax rate for gas provided under AS 43.55.011(i), multiplied by the gross value at the point of production of the gas taxable under AS 43.55.011(i) and produced from the lease or property during the month; (4) any amount of tax levied by AS 43.55.011(e) or (i), net of any credits applied as allowed by law, that exceeds the total of the amounts due as installment payments of estimated tax is due on March 31 of the year following the calendar year of production. * Sec. 5. AS 43.55.024(d) is amended to read: 2013-04-13 House Journal Page 1198 (d) A producer may not take a tax credit under (c) of this section for any calendar year after the later of (1) 2022 [2016]; or (2) if the producer did not have commercial oil or gas production from a lease or property in the state before April 1, 2006, the ninth calendar year after the calendar year during which the producer first has commercial oil or gas production before May 1, 2016, from at least one lease or property in the state. * Sec. 6. AS 43.55 is amended by adding a new section to read: Sec. 43.55.026. Heavy oil research and development tax credit. (a) A taxpayer may apply 20 percent of the taxpayer's expenditure attributable to this state for research and development related to improving methods of producing heavy oil in the state for the taxable year that exceeds the base amount, but not to exceed $10,000,000, as a credit against the state tax liability imposed on the taxpayer under this chapter. (b) Research and development expenditures in this section are attributable to this state if the research and development is being conducted in this state or the payroll of employees conducting the research and development is in this state. In this subsection, payroll of an employee is in this state if compensation is paid to an employee in this state and reported as paid in this state in the quarterly contribution report under AS 23.20 to the Department of Labor and Workforce Development. (c) If the tax credit under this section exceeds the taxpayer's tax liability after other tax credits are taken under this chapter for the year in which the expenditure is incurred, the excess of the tax credit over the liability may be carried forward for up to seven years. If an unused credit is carried forward to a tax year from an earlier year, the credit arising in the earliest year is applied first against the tax liability for the year. (d) A person may not claim a credit under this section for research and development expenditures that were deducted in the calculation of tax liability under AS 43.55.011(e). (e) Each year, if three or more taxpayers claim the credit authorized under this section during the immediately preceding year, the department shall report to the legislature the number of taxpayers who claimed credits under this section in the prior year, the total cumulative amount of credits granted to all taxpayers under this section for the prior tax year, a description of the 2013-04-13 House Journal Page 1199 research and development projects for which the credit was granted, and the total cumulative number of employees conducting the research and development for which all taxpayers claim the credit. (f) The commissioner shall establish in regulation a method for apportioning research expenditures of a producer related to heavy oil production in and outside of the state. When developing the regulations, the commissioner may consider the relative amounts of heavy oil the producer is seeking to produce in areas in and outside of the state or consider another reasonable basis on which fairly to apportion costs for research related to in-state oil production and oil produced outside of the state. (g) In this section, "base amount" means the average of research and development expenditures related to improving methods of producing heavy oil and attributable to this state for the three tax years immediately preceding the taxable year for which the credit is being claimed. * Sec. 7. AS 43.55.030(a) is amended to read: (a) A producer that produces oil or gas from a lease or property in the state during a calendar year, whether or not any tax payment is due under AS 43.55.020(a) for that oil or gas, shall file with the department on March 31 of the following year a statement, under oath, in a form prescribed by the department, giving, with other information required by the department under a regulation adopted by the department, the following: (1) a description of each lease or property from which oil or gas was produced, by name, legal description, lease number, or accounting codes assigned by the department; (2) the names of the producer and, if different, the person paying the tax, if any; (3) the gross amount of oil and the gross amount of gas produced from each lease or property, and the percentage of the gross amount of oil and gas owned by the producer; (4) the gross value at the point of production of the oil and of the gas produced from each lease or property owned by the producer and the costs of transportation of the oil and gas; (5) the name of the first purchaser and the price received for the oil and for the gas, unless relieved from this requirement in whole or in part by the department; (6) the producer's qualified capital expenditures, as 2013-04-13 House Journal Page 1200 defined in AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other payments or credits under AS 43.55.170; (7) the production tax values of the oil and gas under AS 43.55.160; (8) any claims for tax credits to be applied; [AND] (9) calculations showing the amounts, if any, that were or are due under AS 43.55.020(a) and interest on any underpayment or overpayment; and (10) for each expenditure that is the basis for a credit claimed under AS 43.55.023 or 43.55.025, a description of the expenditure, a detailed description of the purpose of the expenditure, and a description of the lease or property for which the expenditure was incurred; notwithstanding AS 40.25.100(a) and AS 43.05.230(a), information submitted under this paragraph may be disclosed to the public and shall be disclosed to the legislature in a report submitted within 10 days after the convening of the next regular legislative session following the date a statement is filed under this section. * Sec. 8. AS 43.55.030(e) is amended to read: (e) An explorer or producer that incurs a lease expenditure under AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar year but does not produce oil or gas from a lease or property in the state during the calendar year shall file with the department on March 31 of the following year a statement, under oath, in a form prescribed by the department, giving, with other information required by the department under a regulation adopted by the department, the following: (1) the producer's qualified capital expenditures, as defined in AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other payments or credits under AS 43.55.170; [AND] (2) if the explorer or producer receives a payment or credit under AS 43.55.170, calculations showing whether the explorer or producer is liable for a tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount; and (3) for each expenditure that is the basis for a credit claimed under this chapter, a description of the expenditure, a detailed description of the purpose of the expenditure, and a description of the lease or property for which the expenditure 2013-04-13 House Journal Page 1201 was incurred; notwithstanding AS 40.25.100(a) and AS 43.05.230(a), information submitted under this paragraph may be disclosed to the public and shall be disclosed to the legislature in a report submitted within 10 days after the convening of the next regular legislative session following the date a statement is filed under this section. * Sec. 9. AS 43.55.160(a) is amended to read: (a) Except as provided in (b) of this section, and subject to adjustment under AS 43.55.162, for the purposes of (1) AS 43.55.011(e), the annual production tax value of the taxable oil, gas, or oil and gas subject to this paragraph produced during a calendar year is the gross value at the point of production of the oil, gas, or oil and gas taxable under AS 43.55.011(e), less the producer's lease expenditures under AS 43.55.165 for the calendar year applicable to the oil, gas, or oil and gas, as applicable, produced by the producer from leases or properties, as adjusted under AS 43.55.170; this paragraph applies to (A) oil and gas produced from leases or properties in the state that include land north of 68 degrees North latitude, other than gas produced before 2022 and used in the state; (B) oil and gas produced from leases or properties in the state outside the Cook Inlet sedimentary basin, no part of which is north of 68 degrees North latitude; this subparagraph does not apply to gas (i) produced before 2022 and used in the state; or (ii) oil and gas subject to AS 43.55.011(p); (C) oil produced before 2022 from a lease or property in the Cook Inlet sedimentary basin; (D) gas produced before 2022 from a lease or property in the Cook Inlet sedimentary basin; (E) gas produced before 2022 from a lease or property in the state outside the Cook Inlet sedimentary basin and used in the state; (F) oil and gas subject to AS 43.55.011(p) produced from leases or properties in the state; (G) oil and gas produced from a lease or property no part of which is north of 68 degrees North latitude, other than oil or gas described in (B), (C), (D), (E), or (F) of this 2013-04-13 House Journal Page 1202 paragraph; (2) AS 43.55.011(g), the monthly production tax value of the taxable (A) oil and gas produced during a month from leases or properties in the state that include land north of 68 degrees North latitude is the gross value at the point of production of the oil and gas taxable under AS 43.55.011(e) and produced by the producer from those leases or properties, less 1/12 of the producer's lease expenditures under AS 43.55.165 for the calendar year applicable to the oil and gas produced by the producer from those leases or properties, as adjusted under AS 43.55.170; this subparagraph does not apply to gas subject to AS 43.55.011(o); (B) oil and gas produced during a month from leases or properties in the state outside the Cook Inlet sedimentary basin, no part of which is north of 68 degrees North latitude, is the gross value at the point of production of the oil and gas taxable under AS 43.55.011(e) and produced by the producer from those leases or properties, less 1/12 of the producer's lease expenditures under AS 43.55.165 for the calendar year applicable to the oil and gas produced by the producer from those leases or properties, as adjusted under AS 43.55.170; this subparagraph does not apply to gas subject to AS 43.55.011(o); (C) oil produced during a month from a lease or property in the Cook Inlet sedimentary basin is the gross value at the point of production of the oil taxable under AS 43.55.011(e) and produced by the producer from that lease or property, less 1/12 of the producer's lease expenditures under AS 43.55.165 for the calendar year applicable to the oil produced by the producer from that lease or property, as adjusted under AS 43.55.170; (D) gas produced during a month from a lease or property in the Cook Inlet sedimentary basin is the gross value at the point of production of the gas taxable under AS 43.55.011(e) and produced by the producer from that lease or property, less 1/12 of the producer's lease expenditures under AS 43.55.165 for the calendar year applicable to the gas produced by the producer from that lease or property, as adjusted under AS 43.55.170; 2013-04-13 House Journal Page 1203 (E) gas produced during a month 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 1/12 of 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. * Sec. 10. AS 43.55 is amended by adding a new section to read: Sec. 43.55.162. Adjustments to production tax value. (a) The annual production tax value of oil produced from a lease or property north of 68 degrees North latitude by the producer is reduced, during the first seven consecutive years after the start of commercial production by 20 percent of the gross value at the point of production of oil produced during the calendar year. This subsection does not apply to a lease or property that (1) was in commercial production before January 1, 2007; (2) is located within a unit area that has never had commercial production; or (3) is located within a unit for more than 20 years before the first commercial production on the lease or property. (b) The annual production tax value of oil or gas produced by a producer is reduced during the first five consecutive years after the start of commercial production by 10 percent if the oil or gas is produced from a participating area established after December 31, 2012, that is within a unit formed under AS 38.05.180(p) before January 1, 2003, if the participating area does not contain a reservoir that had previously been in a participating area established before January 1, 2012. This subsection does not apply to production from a lease or property located within a unit for more than 20 years before the first commercial production on the lease or property. (c) The annual production tax value of heavy oil produced by a producer is reduced by 10 percent of the gross value at the point of production of heavy oil produced, for the calendar year, from a lease or property that is located within a unit area existing on January 1, 2014. (d) For a calendar year after 2012, the annual production tax value of oil produced by a producer that produced oil in 2012 is 2013-04-13 House Journal Page 1204 reduced by 10 percent of the gross value at the point of production of the volume of oil produced during the calendar year in excess of the total volume produced by the producer in 2012. The volume of oil produced by a producer in 2012 is the average daily statewide production of the producer, excluding from the calculation the days on which production is significantly reduced, multiplied by the number of days in the calendar year. For the purposes of this subsection, production is significantly reduced when the production volume of oil for the day is less than one-half of the quotient of the total volume of oil production that is produced by the producer for the year and the number of days in the calendar year. A producer that increases its volume of production through the purchase, merger, or other acquisition of another producer is the sum of the producer's total target volume and the total target volume for the producer that is purchased, merged with, or otherwise acquired; however, if the producer that is purchased, merged with, or otherwise acquired did not have a target volume determined under this section, the volume of the increased production that is attributable to the purchase, merger, or other acquisition may not be considered for the purpose of determining whether the producer that acquired the additional production has increased the volume of production above its target volume. (e) A reduction in production tax value provided by this section may not be combined with any other reduction in production tax value provided by this section in the same year. Oil or gas from a lease or property that produces oil or gas that results in a production tax reduction under (a) of this section is ineligible for a production tax reduction under (b) and (c) of this section and may not be used in the calculation of production volume under (d) of this section. (f) A reduction in production tax value provided by this section may not reduce the production tax value of a producer below zero. (g) The rate of tax under AS 43.55.011(g) shall be determined before the application of the adjustment provided by this section. (h) In this section, (1) "commercial production" means the production of oil for the purpose of sale or other beneficial use, except when the 2013-04-13 House Journal Page 1205 sale or beneficial use is incidental to the testing of an unproved well or unproved completion interval; (2) "participating area" means that part of an oil and gas lease unit to which production is allocated in the manner described in a unit agreement. * Sec. 11. AS 43.55.990 is amended by adding a new paragraph to read: (14) "heavy oil" means oil with an American Petroleum Institute gravity of less than 18 degrees. * Sec. 12. AS 44.88.140(a) is amended to read: (a) Except as provided in AS 29.45.030(a)(1) and AS 44.88.168, the real and personal property of the authority and its assets, income, and receipts are declared to be the property of a political subdivision of the state and, together with any project or development project financed under AS 44.88.155 - 44.88.159 or 44.88.172 - 44.88.177, and a leasehold interest created in a project or development project financed under AS 44.88.155 - 44.88.159 or 44.88.172 - 44.88.177, devoted to an essential public and governmental function and purpose, and the property, assets, income, receipts, project, development project, and leasehold interests shall be exempt from all taxes and special assessments of the state or a political subdivision of the state, including, without limitation, all boroughs, cities, municipalities, school districts, public utility districts, and other taxing units. All bonds of the authority are declared to be issued by a political subdivision of the state and for an essential public and governmental purpose and to be a public instrumentality, and the bonds, and the interest on them, the income from them and the transfer of the bonds, and all assets, income, and receipts pledged to pay or secure the payments of the bonds, or interest on them, shall at all times be exempt from taxation by or under the authority of the state, except for inheritance and estate taxes and taxes on transfers by or in contemplation of death. Nothing in this section affects or limits an exemption from license fees, property taxes, or excise, income, or any other taxes, provided under any other law, nor does it create a tax exemption with respect to the interest of any business enterprise or other person, other than the authority, in any property, assets, income, receipts, project, development project, or lease whether or not financed under this chapter. By January 10 of each year, the authority shall submit to the governor a report 2013-04-13 House Journal Page 1206 describing the nature and extent of the tax exemption of the property, assets, income, receipts, project, development project, and leasehold interests of the authority under this section. The authority shall notify the legislature that the report is available. * Sec. 13. AS 44.88 is amended by adding a new section to read: Sec. 44.88.168. Oil and gas infrastructure fund. (a) The oil and gas infrastructure fund is established in the authority. The oil and gas infrastructure fund consists of money appropriated to the authority for deposit in the fund, and money deposited in the fund by the authority. The fund is not an account in the revolving loan fund established in AS 44.88.060, and the authority shall account for the fund separately from the revolving fund. Money in the fund may be used to finance the construction and improvement of an oil or gas processing facility on the North Slope and flow lines and other surface infrastructure for the facility. (b) Notwithstanding AS 44.88.140, the state or a political subdivision of the state may levy a tax or special assessment on an oil or gas processing facility, flow lines, and other surface infrastructure for the facility financed by the oil and gas infrastructure fund. (c) In this section, "North Slope" means that area of the state lying north of 68 degrees North latitude. * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to read: LEGISLATIVE APPROVAL; NORTH SLOPE OIL OR GAS PROCESSING FACILITY. (a) The Alaska Industrial Development and Export Authority may issue bonds to finance the construction and improvement of an oil or gas processing facility on the Alaska North Slope and flow lines and other surface infrastructure for the facility. The processing facility, flow lines, and other surface infrastructure for the facility shall be used to secure bonds issued under this section. The principal amount of the bonds provided by the authority for the facility, flow lines, and other surface infrastructure may not exceed $200,000,000 and may include the costs of funding reserves and other costs of issuing the bonds that the authority considers reasonable and appropriate. Notwithstanding AS 44.88.140, an oil or gas processing facility, flow lines, and other surface infrastructure for the facility constructed or financed by the oil and gas infrastructure fund are subject to taxes and special assessments of the state or a political subdivision of the state. 2013-04-13 House Journal Page 1207 (b) This section constitutes the legislative approval required by AS 44.88.095(g) and 44.88.690. (c) The prohibition on the issuance of bonds in an amount exceeding $400,000,000 under AS 44.88.095 does not apply to bonds issued under this section, and the principal amount of bonds issued under this section may not be considered in determining whether the limit in AS 44.88.095 has been reached. * Sec. 15. This Act takes effect January 1, 2014." Representative Gara moved and asked unanimous consent that Amendment No. 5 be adopted. Representative Hawker objected. The question being: "Shall Amendment No. 5 be adopted?" The roll was taken with the following result: HCS CSSB 21(FIN) am H Second Reading Amendment No. 5 YEAS: 9 NAYS: 29 EXCUSED: 2 ABSENT: 0 Yeas: Drummond, Gara, Gruenberg, Josephson, Kawasaki, Kerttula, Kreiss-Tomkins, Tarr, Tuck Nays: Austerman, Chenault, Costello, Edgmon, Feige, Foster, Gattis, Hawker, Herron, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Millett, Munoz, Neuman, Olson, Pruitt, Reinbold, Saddler, Seaton, Stoltze, Thompson, P.Wilson, T.Wilson Excused: Guttenberg, Nageak And so, Amendment No. 5 was not adopted.