00                             SENATE BILL NO. 290                                                                         
01 "An Act providing a credit against the tax on the production of oil and gas for drilling                                
02 certain exploration wells in the Cook Inlet sedimentary basin."                                                         
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1. AS 43.55.025(a) is amended to read:                                                                   
05            (a)  Subject to the terms and conditions of this section, a credit against the                               
06       production tax levied by AS 43.55.011(e) is allowed for exploration expenditures that                             
07       qualify under (b) of this section in an amount equal to one of the following:                                     
08                 (1)  30 percent of the total exploration expenditures that qualify only                                 
09       under (b) and (c) of this section;                                                                                
10                 (2)  30 percent of the total exploration expenditures that qualify only                                 
11       under (b) and (d) of this section;                                                                                
12                 (3)  40 percent of the total exploration expenditures that qualify under                                
13       (b), (c), and (d) of this section; [OR]                                                                           
14                 (4)  40 percent of the total exploration expenditures that qualify only                                 
01       under (b) and (e) of this section; or                                                                         
02                 (5)  50, 75, or 100 percent of the total exploration expenditures                                   
03       described in (b)(1) and (2) of this section and not excluded by (b)(3) and (4) of                             
04       this section that qualify only under (m) of this section.                                                     
05    * Sec. 2. AS 43.55.025 is amended by adding a new subsection to read:                                              
06            (m)  The first three unaffiliated persons that each bore a hole in the drilling of                           
07       an exploration well for the purpose of discovering oil or gas in a Cook Inlet prospect                            
08       in the sub-Cretaceous zone are eligible for the credit under this subsection. The person                          
09       that drills the first exploration well is entitled to a credit in the amount of 100 percent                       
10       of its exploration expenditures; the person that drills the second exploration well is                            
11       entitled to a credit in the amount of 75 percent of its exploration expenditures; and the                         
12       person that drills the third exploration well is entitled to a credit in the amount of 50                         
13       percent of its exploration expenditures. A person or an affiliate of a person drilling an                         
14       exploration well is not entitled to a credit for more than one exploration well. If more                          
15       than one person qualifies for the credit under this subsection, the commissioner shall                            
16       make a written determination identifying each person eligible for the credit and the                              
17       amount of the credit to which that person is entitled. If the exploration well for which                          
18       a credit is received under this subsection results in production in paying quantities, and                        
19       notwithstanding that the credit may have been transferred under (g) of this section, 50                           
20       percent of the amount of the credit received shall be paid in monthly installments to                             
21       the department by the person that received the credit during the 10-year period after                             
22       the first production in paying quantities. Whether the target of an exploration well for                          
23       which a credit is applied under this section is in the sub-Cretaceous zone shall be                               
24       determined by the commissioner of natural resources and reported to the                                           
25       commissioner.