Enrolled SB 185: Providing for a reduction of royalty on certain oil produced from Cook Inlet submerged land, and for a credit for certain exploration expenses against oil and gas properties production taxes on oil and gas produced from a lease or property in the state.
00Enrolled SB 185 01 Providing for a reduction of royalty on certain oil produced from Cook Inlet submerged land, 02 and for a credit for certain exploration expenses against oil and gas properties production 03 taxes on oil and gas produced from a lease or property in the state. 04 _______________ 05 * Section 1. AS 31.05.030 is amended by adding a new subsection to read: 06 (j) The commission shall certify to the Department of Natural Resources the 07 volume of oil production from a field or platform for the purposes of 08 AS 38.05.180(f)(6)(A), (C), (E), and (G). 09 * Sec. 2. AS 38.05.180(f) is amended by adding a new paragraph to read: 10 (6) notwithstanding and in lieu of a requirement in the leasing method 11 chosen of a minimum fixed royalty share, or the royalty provision of a lease, for leases 12 unitized as described in (p) of this section, leases subject to an agreement described in 13 (s) or (t) of this section, or interests unitized under AS 31.05, the lessee of all or part of
01 an oil field located offshore in Cook Inlet on which an oil production platform 02 specified in (A), (C), or (E) of this paragraph operates, or the lessee of all or part of the 03 field located offshore in Cook Inlet and described in (G) of this paragraph, 04 (A) shall pay a royalty of five percent on oil produced from the 05 platform if oil production that equaled or exceeded a volume of 1,200 barrels a 06 day declines to less than that amount for a period of at least one calendar 07 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 08 as long as the volume of oil produced from the platform remains less than 09 1,200 barrels a day; the provisions of this subparagraph apply to 10 (i) Dolly; 11 (ii) Grayling; 12 (iii) King Salmon; 13 (iv) Steelhead; and 14 (v) Monopod; 15 (B) shall pay a royalty calculated under this subparagraph if the 16 volume of oil produced from the platform that was certified by the Alaska Oil 17 and Gas Conservation Commission under (A) of this paragraph later increases 18 to 1,200 or more barrels a day and remains at 1,200 or more barrels a day for a 19 period of at least one calendar quarter; until the royalty rate determined under 20 this subparagraph applies, the royalty continues to be calculated under (A) of 21 this paragraph; on and after the first day of the month following the month the 22 increased production exceeds the period specified in this subparagraph, the 23 royalty payable under this subparagraph is 24 (i) for production of at least 1,200 barrels a day but not 25 more than 1,300 barrels a day - seven percent; 26 (ii) for production of more than 1,300 barrels a day but 27 not more than 1,400 barrels a day - 8.5 percent; 28 (iii) for production of more than 1,400 barrels a day but 29 not more than 1,500 barrels a day - 10 percent; and 30 (iv) for production of more than 1,500 barrels a day - 31 12.5 percent;
01 (C) shall pay a royalty of five percent on oil produced from the 02 platform if oil production that equaled or exceeded a volume of 975 barrels a 03 day declines to less than that amount for a period of at least one calendar 04 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for 05 as long as the volume of oil produced from the platform remains less than 975 06 barrels a day; the provisions of this subparagraph apply to 07 (i) Baker; 08 (ii) Dillon; 09 (iii) XTO.A; and 10 (iv) XTO.C; 11 (D) shall pay a royalty calculated under this subparagraph if the 12 volume of oil produced from the platform that was certified by the Alaska Oil 13 and Gas Conservation Commission under (C) of this paragraph later increases 14 to 975 or more barrels a day and remains at 975 or more barrels a day for a 15 period of at least one calendar quarter; until the royalty rate determined under 16 this subparagraph applies, the royalty continues to be calculated under (C) of 17 this paragraph; on and after the first day of the month following the month the 18 increased production exceeds the period specified in this subparagraph, the 19 royalty payable under this subparagraph is 20 (i) for production of at least 975 barrels a day but not 21 more than 1,100 barrels a day - seven percent; 22 (ii) for production of more than 1,100 barrels a day but 23 not more than 1,200 barrels a day - 8.5 percent; 24 (iii) for production of more than 1,200 barrels a day but 25 not more than 1,350 barrels a day - 10 percent; and 26 (iv) for production of more than 1,350 barrels a day - 27 12.5 percent; 28 (E) shall pay a royalty of five percent on oil produced from the 29 platform if oil production that equaled or exceeded a volume of 750 barrels a 30 day declines to less than that amount for a period of at least one calendar 31 quarter, as certified by the Alaska Oil and Gas Conservation Commission, for
01 as long as the volume of oil produced from the platform remains less than 750 02 barrels a day; the provisions of this subparagraph apply to 03 (i) Granite Point; 04 (ii) Anna; and 05 (iii) Bruce; 06 (F) shall pay a royalty calculated under this subparagraph if the 07 volume of oil produced from the platform that was certified by the Alaska Oil 08 and Gas Conservation Commission under (E) of this paragraph later increases 09 to 750 or more barrels a day and remains at 750 or more barrels a day for a 10 period of at least one calendar quarter; until the royalty rate determined under 11 this subparagraph applies, the royalty continues to be calculated under (E) of 12 this paragraph; on and after the first day of the month following the month the 13 increased production exceeds the period specified in this subparagraph, the 14 royalty payable under this subparagraph is 15 (i) for production of at least 750 barrels a day but not 16 more than 850 barrels a day - seven percent; 17 (ii) for production of more than 850 barrels a day but 18 not more than 1,000 barrels a day - 8.5 percent; 19 (iii) for production of more than 1,000 barrels a day but 20 not more than 1,200 barrels a day - 10 percent; and 21 (iv) for production of more than 1,200 barrels a day - 22 12.5 percent; 23 (G) shall pay a royalty of five percent on oil produced from the 24 field if oil production that equaled or exceeded a volume of 750 barrels a day 25 declines to less than that amount for a period of at least one calendar quarter, 26 as certified by the Alaska Oil and Gas Conservation Commission, for as long 27 as the volume of oil produced from the field remains less than 750 barrels a 28 day; the provisions of this subparagraph apply to the West McArthur River 29 field; 30 (H) shall pay a royalty calculated under this subparagraph if the 31 volume of oil produced from the field that was certified by the Alaska Oil and
01 Gas Conservation Commission under (G) of this paragraph later increases to 02 750 or more barrels a day and remains at 750 or more barrels a day for a period 03 of at least one calendar quarter; until the royalty rate determined under this 04 subparagraph applies, the royalty continues to be calculated under (G) of this 05 paragraph; on and after the first day of the month following the month the 06 increased production exceeds the period specified in this subparagraph, the 07 royalty payable under this subparagraph is 08 (i) for production of at least 750 barrels a day but not 09 more than 850 barrels a day - seven percent; 10 (ii) for production of more than 850 barrels a day but 11 not more than 1,000 barrels a day - 8.5 percent; 12 (iii) for production of more than 1,000 barrels a day but 13 not more than 1,200 barrels a day - 10 percent; and 14 (iv) for production of more than 1,200 barrels a day - 15 12.5 percent; and 16 (I) may obtain the benefits of the royalty adjustments set out in 17 (A) - (H) of this paragraph only if the commissioner determines that the 18 reduction in production from the platform or the field is 19 (i) based on the average daily production during the 20 calendar quarter based on reservoir conditions; and 21 (ii) not the result of short-term production declines due 22 to mechanical or other choke-back factors, temporary shutdowns or 23 decreased production due to environmental or facility constraints, or 24 market conditions. 25 * Sec. 3. AS 43.55 is amended by adding a new section to read: 26 Sec. 43.55.025. Oil and gas exploration tax credit. (a) Subject to the terms 27 and conditions of this section, on oil and gas produced on or after July 1, 2004, a 28 credit against the tax due under this chapter is allowed in an amount equal to 29 (1) 20 percent of the total exploration expenditures that qualify under 30 (b) and (c) of this section, 20 percent of the total exploration expenditures that qualify 31 under (b) and (d) of this section, or both, for a total credit that does not exceed 40
01 percent of the total exploration expenditures; or 02 (2) 40 percent of the total exploration expenditures that qualify under 03 (b) and (e) of this section, for a total production tax credit that does not exceed 40 04 percent of the total qualified exploration expenditures. 05 (b) To qualify for the production tax credit under (a) of this section, an 06 exploration expenditure must be incurred for work performed on or after July 1, 2003, 07 and before July 1, 2007, and 08 (1) may be for seismic or geophysical exploration costs not connected 09 with a specific well; 10 (2) if for an exploration well, 11 (A) must be incurred by an explorer that holds an interest in the 12 exploration well for which the production tax credit is claimed; 13 (B) may be for either an oil or gas discovery well or a dry hole; 14 and 15 (C) must be for goods, services, or rentals of personal property 16 reasonably required for the surface preparation, drilling, casing, cementing, 17 and logging of an exploration well, and, in the case of a dry hole, for the 18 expenses required for abandonment if the well is abandoned within 18 months 19 after the date the well was spudded; 20 (3) may not be for testing, stimulation, or completion costs; 21 administration, supervision, engineering, or lease operating costs; geological or 22 management costs; community relations or environmental costs; bonuses, taxes, or 23 other payments to governments related to the well; or other costs that are generally 24 recognized as indirect costs or financing costs; and 25 (4) may not be incurred for an exploration well or seismic exploration 26 that is included in a plan of exploration or a plan of development for any unit on 27 May 13, 2003. 28 (c) To be eligible for a 20 percent production tax credit, exploration 29 expenditures must 30 (1) qualify under (b) of this section; and 31 (2) be for an exploration well that is located and drilled in such a
01 manner that the bottom hole is located not less than three miles away from the bottom 02 hole of a preexisting suspended, completed, or abandoned oil or gas well; in this 03 paragraph, "preexisting" means a well that was spudded more than 150 days but less 04 than 35 years before the exploration well was spudded. 05 (d) To be eligible for an additional 20 percent production tax credit, an 06 exploration expenditure must 07 (1) qualify under (b) of this section; and 08 (2) be for an exploration well that is located not less than 25 miles 09 outside of the outer boundary, as delineated on July 1, 2003, of any unit that is under a 10 plan of development. 11 (e) To be eligible for the 40 percent production tax credit in (a) of this section, 12 the exploration expenditure must 13 (1) qualify under (b) of this section; 14 (2) be for seismic exploration; and 15 (3) have been conducted outside the boundaries of a production unit or 16 an exploration unit; however, the amount of the expenditure that is otherwise eligible 17 under this subsection is reduced proportionately by the portion of the seismic 18 exploration activity that crossed into a production unit or an exploration unit. 19 (f) For a production tax credit under this section, 20 (1) an explorer shall, in a form prescribed by the department and 21 within six months of the completion of the exploration activity, claim the credit and 22 submit information sufficient to demonstrate to the department's satisfaction that the 23 claimed exploration expenditures qualify under this section; 24 (2) an explorer shall agree, in writing, 25 (A) to notify the Department of Natural Resources, within 30 26 days after completion of seismic or geophysical data processing, completion of 27 a well, or filing of a claim for credit, whichever is the latest, for which 28 exploration costs are claimed, of the date of completion and submit a report to 29 that department describing the processing sequence and providing a list of data 30 sets available; 31 (B) to provide to the Department of Natural Resources, within
01 30 days after the date of a request, specific data sets, ancillary data, and reports 02 identified in (A) of this paragraph; 03 (C) that, notwithstanding any provision of AS 38, information 04 provided under this paragraph will be held confidential by the Department of 05 Natural Resources for 10 years following the completion date, at which time 06 that department will release the information after 30 days' public notice; 07 (3) if more than one explorer holds an interest in a well or seismic 08 exploration, each explorer may claim an amount of credit that is proportional to the 09 explorer's cost incurred; 10 (4) the department may exercise the full extent of its powers as though 11 the explorer were a taxpayer under this title, in order to verify that the claimed 12 expenditures are qualified exploration expenditures under this section; and 13 (5) if the department is satisfied that the explorer's claimed 14 expenditures are qualified under this section, the department shall issue to the explorer 15 a production tax credit certificate for the amount of credit to be allowed against 16 production taxes due under this chapter. 17 (g) An explorer may transfer, convey, or sell its production tax credit 18 certificate to any person, and any person who receives a production tax credit 19 certificate may also transfer, convey, or sell the certificate. 20 (h) A producer that purchases a production tax credit certificate may apply the 21 credits against its production tax liability under this chapter. Regardless of the price 22 the producer paid for the certificate, the producer may receive a credit against its 23 production tax liability for the full amount of the credit, but for not more than the 24 amount for which the certificate is issued. A production tax credit allowed under this 25 section may not be applied more than once. 26 (i) For a production tax credit under this section, 27 (1) the amount of the credit that may be applied against the production 28 tax for each tax month may not exceed the total production tax liability of the taxpayer 29 applying the credit for the same month; and 30 (2) an amount of the production tax credit that is greater than the total 31 tax liability of the taxpayer applying the credit for a tax month may be carried forward
01 and applied against the taxpayer's production tax liability in one or more immediately 02 following months. 03 (j) Notwithstanding any other provision of this title, of AS 31.05, or of 04 AS 40.25.100, the department shall provide to the Department of Natural Resources 05 information submitted with a claim under this section to support the eligibility of an 06 exploration expenditure, including seismic exploration data and well data, and any 07 information described in (f)(2) of this section received by the department. 08 (k) In this section, "explorer" means a person who, in exploring for new oil or 09 gas reserves, incurs expenditures.