00 CS FOR SENATE BILL NO. 145(RES) 01 "An Act providing for a credit against the oil and gas production tax for costs incurred 02 for conducting seismic exploration and drilling certain oil or natural gas exploration 03 wells in certain basins; relating to certain nontransferable oil and gas production tax 04 credits; and providing a special tax rate for new oil or gas production south of 68 05 degrees North latitude." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07  * Section 1. AS 43.55.011(e) is amended to read: 08 (e) There is levied on the producer of oil or gas a tax for all oil and gas 09 produced each calendar year from each lease or property in the state, less any oil and 10 gas the ownership or right to which is exempt from taxation or constitutes a 11 landowner's royalty interest. Except as otherwise provided under (f), (j), (k), [AND] 12 (o), and (p) of this section, the tax is equal to the sum of 13 (1) the annual production tax value of the taxable oil and gas as 01 calculated under AS 43.55.160(a)(1) multiplied by 25 percent; and 02 (2) the sum, over all months of the calendar year, of the tax amounts 03 determined under (g) of this section. 04  * Sec. 2. AS 43.55.011 is amended by adding a new subsection to read: 05 (p) After December 31, 2012, for the five years immediately following the 06 commencement of commercial production from a lease or property or unit that did not 07 have oil or gas production before January 1, 2013, the levy of tax under this section 08 for oil and gas produced south of 68 degrees North latitude, other than gas subject to 09 (i) or (j) of this section, gas subject to (o) of this section, or oil subject to (k) of this 10 section, is four percent of the gross value at the point of production. 11  * Sec. 3. AS 43.55.024(b) is amended to read: 12 (b) A producer may not take a tax credit under (a) of this section for any 13 calendar year after the later of 14 (1) 2021 [2016]; or 15 (2) the ninth calendar year after the calendar year during which the 16 producer first has commercial oil or gas production before May 1, 2021 [2016], from 17 at least one lease or property in the state outside the Cook Inlet sedimentary basin, no 18 part of which is north of 68 degrees North latitude, if the producer did not have 19 commercial oil or gas production from a lease or property in the state outside the Cook 20 Inlet sedimentary basin, no part of which is north of 68 degrees North latitude, before 21 April 1, 2006. 22  * Sec. 4. AS 43.55.025(a) is amended to read: 23 (a) Subject to the terms and conditions of this section, a credit against the 24 production tax levied by AS 43.55.011(e) is allowed for exploration expenditures that 25 qualify under (b) of this section in an amount equal to one of the following: 26 (1) 30 percent of the total exploration expenditures that qualify only 27 under (b) and (c) of this section; 28 (2) 30 percent of the total exploration expenditures that qualify only 29 under (b) and (d) of this section; 30 (3) 40 percent of the total exploration expenditures that qualify under 31 (b), (c), and (d) of this section; 01 (4) 40 percent of the total exploration expenditures that qualify only 02 under (b) and (e) of this section; [OR] 03 (5) 80, 90, or 100 percent, or a lesser amount described in (l) of this 04 section, of the total exploration expenditures described in (b)(1) and (2) of this section 05 and not excluded by (b)(3) and (4) of this section that qualify only under (l) of this 06 section;  07 (6) the lesser of $22,500,000 or 80 percent of the total exploration  08 drilling expenditures described in (n) of this section and that qualify under (b)  09 and (c) of this section; or  10 (7) the lesser of $7,500,000 or 75 percent of the total seismic  11 exploration expenditures described in (o) of this section and that qualify under  12 (b) of this section. 13  * Sec. 5. AS 43.55.025(c) is amended to read: 14 (c) To be eligible for a [THE 30 PERCENT] production tax credit authorized 15 by (a)(1), (3), or (6) of this section [OR THE 40 PERCENT PRODUCTION TAX 16 CREDIT AUTHORIZED BY (a)(3) OF THIS SECTION], exploration expenditures 17 must 18 (1) qualify under (b) of this section; and 19 (2) be for an exploration well, subject to the following: 20 (A) before the well is spudded, 21 (i) the explorer shall submit to the commissioner of 22 natural resources the information necessary to determine whether the 23 geological objective of the well is a potential oil or gas trap that is 24 distinctly separate from any trap that has been tested by a preexisting 25 well; 26 (ii) at the time of the submittal of information under (i) 27 of this subparagraph, the commissioner of natural resources may 28 request from the explorer that specific data sets, ancillary data, and 29 reports including all results, and copies of well data collected and data 30 analyses for the well be provided to the Department of Natural 31 Resources upon completion of the drilling; in this sub-subparagraph, 01 well data include all analyses conducted on physical material, and well 02 logs collected from the well and sample analyses; testing geophysical 03 and velocity data including vertical seismic profiles and check shot 04 surveys; testing data and analyses; age data; geochemical analyses; and 05 access to tangible material; and 06 (iii) the commissioner of natural resources must make 07 an affirmative determination as to whether the geological objective of 08 the well is a potential oil or gas trap that is distinctly separate from any 09 trap that has been tested by a preexisting well and what information 10 under (ii) of this subparagraph must be submitted by the explorer after 11 completion, abandonment, or suspension under AS 31.05.030; the 12 commissioner of natural resources shall make that determination within 13 60 days after receiving all the necessary information from the explorer 14 based on the information received and on other information the 15 commissioner of natural resources considers relevant; 16 (B) for an exploration well other than a well to explore a Cook 17 Inlet prospect, the well must be located and drilled in such a manner that the 18 bottom hole is located not less than three miles away from the bottom hole of a 19 preexisting well drilled for oil or gas, irrespective of whether the preexisting 20 well has been completed, suspended, or abandoned; 21 (C) after completion, suspension, or abandonment under 22 AS 31.05.030 of the exploration well, the commissioner of natural resources 23 must determine that the well was consistent with achieving the explorer's 24 stated geological objective. 25  * Sec. 6. AS 43.55.025 is amended by adding new subsections to read: 26 (n) The persons that drill the first four exploration wells in the state and within 27 the areas described in (p) of this section on state or private lands for the purpose of 28 discovering oil or gas that penetrate and evaluate a prospect in a basin described in (p) 29 of this section are eligible for a credit under (a)(6) of this section. A credit under this 30 subsection may not be taken for more than two exploration wells in a single area 31 described in (p)(1) - (6) of this section. Exploration expenditures eligible for the credit 01 in this subsection must be incurred for work performed after June 1, 2012. A person 02 planning to drill an exploration well on private land and to apply for a credit under this 03 subsection shall obtain written consent from the owner of the oil and gas interest for 04 the full public release of all well data after the expiration of the confidentiality period 05 applicable to information collected under (f) of this section and in conjunction with 06 and compliance with the data submission requirements in (f)(2) of this section. The 07 written consent of the owner of the oil and gas interest must be submitted to the 08 commissioner of natural resources before approval of the proposed exploration well. 09 In addition to the requirements in (c) of this section and submission of the written 10 consent of the owner of the oil and gas interest, a person planning to drill an 11 exploration well shall obtain approval from the commissioner of natural resources 12 before the well is spudded. The commissioner of natural resources shall make a 13 written determination approving or rejecting an exploration well within 60 days after 14 receiving the request for approval or as soon as is practicable thereafter. Before 15 approving the exploration well, the commissioner of natural resources shall consider 16 the following: the location of the well; the proximity to a community in need of a local 17 energy source; the proximity of existing infrastructure; the experience and safety 18 record of the explorer in conducting operations in remote or roadless areas; the 19 projected cost schedule; whether seismic mapping and seismic data sufficiently 20 identify a particular trap for exploration; whether the targeted and planned depth and 21 range are designed to penetrate and fully evaluate the hydrocarbon potential of the 22 proposed prospect and reach the level below which economic hydrocarbon reservoirs 23 are likely to be found, or reach 12,000 feet or more true vertical depth; and whether 24 the exploration plan provides for a full evaluation of the wellbore below surface casing 25 to the depth of the well. Whether the exploration well for which a credit is requested 26 under this subsection is located within an area and a basin described under (p) of this 27 section shall be determined by the commissioner of natural resources and reported to 28 the commissioner. A taxpayer that obtains a credit under this subsection may not claim 29 a tax credit under AS 43.55.023 or another provision in this section for the same 30 exploration expenditure. 31 (o) The persons that conduct the first four seismic exploration projects in the 01 state and within the areas described in (p) of this section for the purpose of discovering 02 oil or gas in a basin are eligible for the credit under (a)(7) of this section. A credit 03 under this subsection may not be taken for more than one seismic exploration project 04 in a single area described in (p)(1) - (6) of this section. Exploration expenditures 05 eligible for the credit in this subsection must be incurred for work performed after 06 June 1, 2012. A person planning to conduct a seismic exploration project on private 07 land and to apply for a credit under this subsection shall obtain written consent from 08 the owner of the oil and gas interest for the full public release of all geophysical data 09 and compliance with the data submission requirements in (f)(2) of this section. 10 Notwithstanding (f)(2)(C)(ii) of this section, to qualify for a credit under this 11 subsection, a person shall submit the written consent of the owner of the oil and gas 12 interest for the release of data if applicable, and all data required under (f)(2) of this 13 section to the Department of Natural Resources and shall agree in writing that all 14 seismic data requirements submitted under the requirements of (f)(2) of this section 15 may be made public two years after receiving a credit under this subsection. A person 16 intending to qualify for the tax credit under this subsection shall obtain approval from 17 the commissioner of natural resources before the commencement of the seismic 18 exploration activities. The commissioner of natural resources shall make a written 19 determination approving or rejecting a seismic project within 60 days after receiving 20 the request for approval or as soon as is practicable thereafter. Before approving a 21 seismic exploration project, the commissioner shall consider the following: the 22 location of the project; the projected cost schedule; the data acquisition and data 23 processing plan; the reasons for choosing the particular area for seismic exploration; 24 and the experience and safety record of the person in conducting seismic exploration 25 operations in remote or roadless areas. Whether the seismic exploration project for 26 which a credit is requested under this subsection is located in a basin described in (p) 27 of this section shall be determined by the commissioner of natural resources and 28 reported to the commissioner. A taxpayer that obtains a credit under this subsection 29 may not claim a tax credit under AS 43.55.023 or another provision in this section for 30 the same exploration expenditure. 31 (p) The activity that is the basis for a credit claimed under (a)(6) and (n) of 01 this section or (a)(7) and (o) of this section must be for the exploration of a basin and 02 within the following areas whose central points are determined using the World 03 Geographic System of 1984 datum, 04 (1) 100 miles from 66.896128 degrees North, -162.598187 degrees 05 West; 06 (2) 150 miles from 64.839474 degrees North, -147.72094 degrees 07 West; 08 (3) 50 miles from 62.776428 degrees North, -164.495201 degrees 09 West; 10 (4) 50 miles from 62.110357 degrees North, -145.530551 degrees 11 West; 12 (5) 100 miles from 58.189868 degrees North, -157.371104 degrees 13 West; 14 (6) 100 miles from 56.005988 degrees North, -160.56083 degrees 15 West.