HB 547: "An Act relating to the manner of calculating the taxable value of oil and gas for purposes of levy and collection of the oil and gas properties production tax; and providing for an effective date."
00HOUSE BILL NO. 547 01 "An Act relating to the manner of calculating the taxable value of oil and gas 02 for purposes of levy and collection of the oil and gas properties production tax; 03 and providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 43.55.020(e) is amended to read: 06 (e) Gas produced in excess of that needed for safety purposes, except gas used 07 in the operation of a lease or property in drilling for or producing oil or gas, or for 08 repressuring, is considered, for the purpose of AS 43.55.011 - 43.55.160 [AS 43.55.011 09 - 43.55.150] and in the amount used, as gas produced from a lease or property. Gas 10 flared beyond the amount authorized for safety by the Alaska Oil and Gas 11 Conservation Commission under AS 31.05 is considered as gas produced, except that 12 it is subject to a penalty equal to the tax computed under AS 43.55.016 per 1,000 13 cubic feet of gas for the month in which the gas was flared. 14 * Sec. 2. AS 43.55.080 is amended to read:
01 Sec. 43.55.080. COLLECTION AND DEPOSIT OF REVENUE. The 02 department shall deposit in the general fund the money collected by it under 03 AS 43.55.011 - 43.55.160 [AS 43.55.011 - 43.55.150]. 04 * Sec. 3. AS 43.55.135 is amended to read: 05 Sec. 43.55.135. MEASUREMENT. For the purposes of AS 43.55.011 - 06 43.55.160 [AS 43.55.011 - 43.55.150], oil shall be measured in terms of a "barrel of 07 oil" and gas shall be measured in terms of a "cubic foot of gas." 08 * Sec. 4. AS 43.55.150(a) is amended to read: 09 (a) For the purposes of AS 43.55.011 - 43.55.160 [AS 43.55.011 - 43.55.150], 10 the gross value shall be calculated using the reasonable costs of transportation of the 11 oil or gas. The reasonable costs of transportation shall be the actual costs, except 12 (1) when the parties to the transportation of oil or gas are affiliated; 13 (2) when the contract for the transportation of oil or gas is not an arm's 14 length transaction or is not representative of the market value of that transportation; 15 (3) when the method of transportation of oil or gas is not reasonable 16 in view of existing alternative methods of transportation. 17 * Sec. 5. AS 43.55 is amended by adding a new section to article 1 to read: 18 Sec. 43.55.160. DETERMINATION OF GROSS VALUE FOR OIL AND 19 GAS AFFECTED BY A ROYALTY SETTLEMENT. (a) If oil or gas from or 20 allocated to a lease or property is subject to a royalty settlement, a taxpayer may elect 21 to use as the gross value at the point of production of each barrel or Mcf of taxable 22 production from that lease or property the amount per barrel or per Mcf under the 23 royalty settlement for royalty production from that lease or property, to which amount 24 shall be 25 (1) added all field handling charges and similar charges against the 26 amount per barrel or per Mcf allowable under the royalty settlement for operations and 27 handling occurring before the point of production under AS 43.55.011 - 43.55.160; and 28 (2) subtracted, if the amount per barrel or Mcf under the royalty 29 settlement is effective at a point after the point of production under AS 43.55.011 - 30 43.55.160, 31 (A) the costs determined under the royalty settlement for
01 transportation and handling between the point of production and the point 02 where the royalty settlement amount is effective; or 03 (B) the costs of transportation under AS 43.55.150 between the 04 point of production and the point where the royalty settlement amount is 05 effective, if the costs for transportation and handling are not determined under 06 the royalty settlement. 07 (b) An election under (a) of this section is irrevocable, but may be set aside 08 by the taxpayer if the royalty agreement 09 (1) is no longer in force; or 10 (2) no longer applies to the production for which the election was 11 made. 12 * Sec. 6. AS 43.55.200(b) is amended to read: 13 (b) The surcharge imposed by (a) of this section is in addition to and shall be 14 paid in the same manner as the tax imposed by AS 43.55.011 - 43.55.160 15 [AS 43.55.011 - 43.55.150]. 16 * Sec. 7. AS 43.55.200(c) is amended to read: 17 (c) A producer of oil shall make reports of production in the same manner and 18 under the same penalties as required under AS 43.55.011 - 43.55.160 [AS 43.55.011 19 - 43.55.150]. 20 * Sec. 8. AS 43.55.900(7) is amended to read: 21 (7) "gross value at the point of production" means 22 (A) for oil, the value of the oil at the point where it is metered 23 or measured (by automatic custody transfer meter, tank gauge, or other method 24 approved by the commissioner) in a condition of pipeline quality on the 25 premises of the lease or property from which it is recovered; however, 26 (i) if the oil is not of pipeline quality when it is removed 27 from the premises of the lease or property from which it is recovered, 28 or if the oil recovered from a lease or property is not metered or 29 measured (by automatic custody transfer meter, tank gauge, or other 30 method approved by the commissioner) on the premises of the lease or 31 property from which it is recovered, then the gross value at the point
01 of production is the value of that oil at the off-premises location where 02 the oil is first metered or measured (by automatic custody transfer 03 meter, tank gauge, or other method approved by the commissioner) in 04 a condition of pipeline quality; 05 (ii) if the oil is subject to a determination of value 06 under AS 43.55.160, the gross value at the point of production of 07 that oil is the value as determined under that section; 08 (B) for gas recovered from or in association with oil, except 09 when the value of the gas is determined under AS 43.55.160, the value of 10 the gas at the point where it is accurately metered or measured after separation 11 from the oil; for gas run through a gas processing plant, the gross value at the 12 point of production is the full consideration received by the producer for the 13 gas if sold in an arm's length transaction or, in the absence of an arm's length 14 transaction, is the sum of the value of the liquids extracted from the gas at the 15 plant and the value of the residue gas, less a reasonable allowance for 16 processing the gas at the plant and for transporting the gas to the plant from 17 the premises upon which the oil production operation is conducted; and 18 (C) for gas not recovered from or in association with oil, except 19 when the value of the gas is determined under AS 43.55.160, the value of 20 the gas at the point where it is accurately metered or measured or the value of 21 the gas at the point of sale, if any, on the premises of the lease or property 22 from which the gas is recovered, whichever is the higher value; for gas run 23 through a gas processing plant, the gross value at the point of production is the 24 full consideration received by the producer for the gas if sold in an arm's 25 length transaction or, in the absence of an arm's length transaction, is the sum 26 of the value of the liquids extracted from the gas at the plant and the value of 27 the residue gas, less a reasonable allowance for processing the gas at the plant 28 and for transporting the gas to the plant from the point where it was accurately 29 metered or measured; 30 * Sec. 9. AS 43.55.900 is amended by adding a new paragraph to read: 31 (17) "royalty settlement" means an agreement between the state and a
01 lessee of a state oil and gas lease that prescribes a method for determining the price 02 of state royalty taken in value, whether or not entered into the course of settling actual 03 litigation, and whether or not applicable to a lease or property that was not subject to 04 litigation; for purposes of this paragraph, the provisions of a state oil and gas lease do 05 not, by themselves, constitute a royalty settlement. 06 * Sec. 10. APPLICATION TO PAST TAX PERIODS. (a) For production occurring 07 before the effective date of this Act, a taxpayer may elect to report and pay the tax and 08 surcharge levied by AS 43.55.011 - 43.55.160 under AS 43.55.160, enacted by sec. 5 of this 09 Act. A taxpayer making an election under this subsection must do so for all prior tax periods 10 and all production to which the royalty settlement applies. 11 (b) A taxpayer making an election under (a) of this section 12 (1) shall pay interest under AS 43.05 for all additional taxes owed as a result 13 of the election and shall be credited for interest under AS 43.05 for any tax overpayments 14 resulting from the election; 15 (2) is not subject to any penalties with respect to any additional tax that the 16 taxpayer pays. 17 (c) Within six months of a taxpayer's filing of amended tax returns under this section, 18 the Department of Revenue shall verify that the taxpayer has reported and paid tax on the 19 basis of the royalty settlement information, but the Department of Revenue may not modify 20 any royalty settlement information. When the Department of Revenue has completed its 21 verification, the taxpayer's liability under AS 43.55.011 - 43.55.160 with respect to that 22 production is fully discharged. If the Department of Revenue fails to complete its verification 23 within six months of the taxpayer's filing of amended returns under this section, the burden 24 of proof for all adjustments that the Department of Revenue may thereafter attempt to make 25 to the taxpayer's amended returns and to any penalty that the department may assess is on the 26 Department of Revenue. 27 * Sec. 11. This Act is retroactive to January 1, 1976, and applies to taxes levied under 28 AS 43.55.011 - 43.55.160 after December 31, 1975. 29 * Sec. 12. This Act takes effect immediately under AS 01.10.070(c).