CSHB 488(RES): "An Act repealing the oil production tax and gas production tax and providing for a production tax on oil and gas; relating to the relationship of that tax to other taxes, to the dates those tax payments and surcharges are due, to interest on overpayments of the tax, and to the treatment of the tax in a producer's settlement with the royalty owners; relating to flared gas, and to oil and gas used in the operation of a lease or property under the production tax; relating to the prevailing value of oil or gas under the production tax; providing for tax credits against the tax for certain expenditures and losses; amending the rates applicable to each of the two tax surcharges imposed on oil under the production tax that are used to support the oil and hazardous substance release prevention and response fund and relating to those surcharges; relating to statements or other information required to be filed with or furnished to the Department of Revenue, and relating to the penalty for failure to file certain reports, for the tax; relating to the powers of the Department of Revenue, and to the disclosure of certain information required to be furnished to the Department of Revenue, as applicable to the administration of the tax; relating to criminal penalties for violating conditions governing access to and use of confidential information relating to the tax, and to the deposit of tax money collected by the Department of Revenue; relating to the calculation of the gross value at the point of production of oil or gas; relating to the determination of the production tax value of oil and gas for purposes of a tax on the production tax value of oil and gas; relating to the definitions of 'gas,' 'oil,' and certain other terms for purposes of the production tax, and as the definition of the term 'gas' applies in the Alaska Stranded Gas Development Act; making conforming amendments; making uniform throughout the state the deadline for certain exploration expenditures used as credits against the production tax on oil and gas produced from a lease or property in the state by extending to July 1, 2016, the deadline for those expenditures and limiting use of the resultant credits; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 488(RES) 01 "An Act repealing the oil production tax and gas production tax and providing for a 02 production tax on oil and gas; relating to the relationship of that tax to other taxes, to 03 the dates those tax payments and surcharges are due, to interest on overpayments of the 04 tax, and to the treatment of the tax in a producer's settlement with the royalty owners; 05 relating to flared gas, and to oil and gas used in the operation of a lease or property 06 under the production tax; relating to the prevailing value of oil or gas under the 07 production tax; providing for tax credits against the tax for certain expenditures and 08 losses; amending the rates applicable to each of the two tax surcharges imposed on oil 09 under the production tax that are used to support the oil and hazardous substance 10 release prevention and response fund and relating to those surcharges; relating to 11 statements or other information required to be filed with or furnished to the 12 Department of Revenue, and relating to the penalty for failure to file certain reports, for
01 the tax; relating to the powers of the Department of Revenue, and to the disclosure of 02 certain information required to be furnished to the Department of Revenue, as 03 applicable to the administration of the tax; relating to criminal penalties for violating 04 conditions governing access to and use of confidential information relating to the tax, 05 and to the deposit of tax money collected by the Department of Revenue; relating to the 06 calculation of the gross value at the point of production of oil or gas; relating to the 07 determination of the production tax value of oil and gas for purposes of a tax on the 08 production tax value of oil and gas; relating to the definitions of 'gas,' 'oil,' and certain 09 other terms for purposes of the production tax, and as the definition of the term 'gas' 10 applies in the Alaska Stranded Gas Development Act; making conforming amendments; 11 making uniform throughout the state the deadline for certain exploration expenditures 12 used as credits against the production tax on oil and gas produced from a lease or 13 property in the state by extending to July 1, 2016, the deadline for those expenditures 14 and limiting use of the resultant credits; and providing for an effective date." 15 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 16 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 17 to read: 18 INTENT OF SEC. 12 OF THIS ACT. It is the intent of the legislature through sec. 12 19 of this Act to confirm by clarification the long-standing interpretation of AS 43.55.020(f) by 20 the Department of Revenue. 21 * Sec. 2. AS 43.05.230(f) is amended to read: 22 (f) A wilful violation of the provisions of this section or of a condition 23 imposed under AS 43.55.040(1)(B) is punishable by a fine of not more than $5,000, 24 or by imprisonment for not more than two years, or by both. 25 * Sec. 3. AS 43.20.031(c) is amended to read: 26 (c) In computing the tax under this chapter, the taxpayer is not entitled to
01 deduct any taxes based on or measured by net income. The taxpayer may deduct the 02 tax levied and paid under AS 43.55. 03 * Sec. 4. AS 43.20.072(b) is amended to read: 04 (b) A taxpayer's business income to be apportioned under this section to the 05 state shall be the federal taxable income of the taxpayer's consolidated business for the 06 tax period, except that 07 (1) taxes based on or measured by net income that are deducted in the 08 determination of the federal taxable income shall be added back; the tax levied and 09 paid under AS 43.55 may not be added back; 10 (2) intangible drilling and development costs that are deducted as 11 expenses under 26 U.S.C. 263(c) (Internal Revenue Code) in the determination of the 12 federal taxable income shall be capitalized and depreciated as if the option to treat 13 them as expenses under 26 U.S.C. 263(c) (Internal Revenue Code) had not been 14 exercised; 15 (3) depletion deducted on the percentage depletion basis under 26 16 U.S.C. 613 (Internal Revenue Code) in the determination of the federal taxable income 17 shall be recomputed and deducted on the cost depletion basis under 26 U.S.C. 612 18 (Internal Revenue Code); and 19 (4) depreciation shall be computed on the basis of 26 U.S.C. 167 20 (Internal Revenue Code) as that section read on June 30, 1981. 21 * Sec. 5. AS 43.55.011(a) is repealed and reenacted to read: 22 (a) There is levied on the producer of oil or gas a tax for all oil and gas 23 produced each month from each lease or property in the state less any oil and gas the 24 ownership or right to which is exempt from taxation or constitutes a lessor's royalty 25 interest under an oil and gas lease. The tax is equal to 20 percent of the production tax 26 value of the taxable oil and gas as calculated under AS 43.55.160. 27 * Sec. 6. AS 43.55.011 is amended by adding new subsections to read: 28 (e) There is levied on the producer of oil or gas a tax for all oil and gas 29 produced each month from each lease or property in the state the ownership or right to 30 which constitutes a lessor's royalty interest under an oil and gas lease, except for oil 31 and gas the ownership or right to which is exempt from taxation. The tax is equal to
01 five percent of the gross value at the point of production of the oil and gas. However, 02 if the department determines that, for purposes of reducing the producer's tax liability 03 under this subsection, the producer has received or will receive consideration from the 04 lessor offsetting all or a part of the producer's royalty obligation, the tax under this 05 subsection is equal to 20 percent of the gross value at the point of production of the oil 06 and gas. 07 (f) In addition to the taxes levied under (a) and (e) of this section, for each 08 month for which the oil price index determined under this section is greater than zero, 09 there is levied upon the producer of oil a tax for all oil produced during that month 10 from each lease or property in the state, less any oil the ownership or right to which is 11 exempt from taxation. The tax is equal to .30 percent of the gross value at the point of 12 production of the oil multiplied by the oil price index as determined under this section. 13 (g) The oil price index for a month is the number equal to the average United 14 States Gulf Coast price determined under (h) of this section for that month of West 15 Texas Intermediate crude oil in dollars per barrel, less 50, except that, if the average 16 price determined under (h) of this section is 17 (1) not more than $50 per barrel, the oil price index is zero; 18 (2) more than $110 per barrel, the oil price index is 125. 19 (h) For purposes of (g) of this section, the department may calculate the 20 average price or may, by regulation, specify the method by which the average price 21 shall be calculated with reference to one or more published sources of price 22 information. If, in the department's judgment, reliable published sources of price 23 information on West Texas Intermediate crude oil cease, or appear likely to soon 24 cease, to be available, or if, in the department's judgment, the price of West Texas 25 Intermediate crude oil ceases, or appears likely to soon cease, to be a reliable indicator 26 of the general price level of crude oils, the department shall, by regulation, specify a 27 substitute formula for computing the oil price index. The substitute formula specified 28 by the department under this subsection must bear, as nearly as is reasonably possible, 29 the same relationship to the general price level of crude oils as did the United States 30 Gulf Coast price of West Texas Intermediate crude oil. 31 (i) In addition to the taxes levied under (a), (e), and (f) of this section, for each
01 month that the gas price index determined under (j) of this section is greater than zero, 02 there is levied upon the producer of gas a tax for all gas produced during that month 03 from each lease or property in the state, less any gas the ownership or right to which is 04 exempt from taxation. The tax is equal to two percent of the gross value at the point of 05 production of the gas multiplied by the gas price index as determined under (j) of this 06 section. 07 (j) The gas price index for a month is the number equal to the average Henry 08 Hub gas price determined under (k) of this section for that month in dollars per million 09 British thermal units, less eight, except that if the average price determined under (k) 10 of this section is 11 (1) not more than $8 per million British thermal units, the gas price 12 index is zero; and 13 (2) more than $18 per million British thermal units, the gas price index 14 is 18.75. 15 (k) For purposes of (i) and (j) of this section, the department may calculate the 16 average price or may, by regulation, specify the method by which the average price 17 shall be calculated with reference to one or more published sources of price 18 information. If, in the department's judgment, reliable published sources of Henry Hub 19 gas price information cease, or appear likely to soon cease, to be available, or if, in the 20 department's judgment, the Henry Hub gas price ceases, or appears likely to soon 21 cease, to be a reliable indicator of the general price level of gas, the department shall, 22 by regulation, specify a substitute formula for computing the gas price index. The 23 substitute formula specified by the department under this subsection must bear, as 24 nearly as is reasonably possible, the same relationship to the general price level of gas 25 as did the Henry Hub gas price. 26 * Sec. 7. AS 43.55.017(a) is amended to read: 27 (a) Except as provided in this chapter, the taxes imposed by this chapter are in 28 place of all taxes now imposed by the state or any of its municipalities, and neither the 29 state nor a municipality may impose a tax on [UPON] 30 (1) producing oil or gas leases; 31 (2) oil or gas produced or extracted in the state;
01 (3) the value of intangible drilling and development costs, as 02 described in 26 U.S.C. 263(c) (Internal Revenue Code), as amended through 03 January 1, 1974 [EXPLORATION EXPENSES]. 04 * Sec. 8. AS 43.55.020(a) is repealed and reenacted to read: 05 (a) The tax levied under AS 43.55.011(a) shall be paid monthly. The tax, net 06 of any credits applied under this chapter, is due on the last day of each calendar month 07 on oil and gas produced from each lease or property during the preceding month. An 08 unpaid amount of tax that is not paid when due in accordance with this subsection 09 becomes delinquent. An overpayment of tax for a month may be applied against the 10 tax due for a later month. Notwithstanding any contrary provision of AS 43.05.280, 11 interest on an overpayment is allowed only from a date that is 90 days after the 12 statement required under AS 43.55.030(e) to be filed on or before March 31 of the 13 year following the calendar year during which the oil and gas were produced is filed. 14 However, interest is not allowed if the overpayment was refunded within the 90-day 15 period. 16 * Sec. 9. AS 43.55.020(b) is amended to read: 17 (b) The production tax on oil and [OR] gas shall be paid by or on behalf of the 18 producer. 19 * Sec. 10. AS 43.55.020(d) is amended to read: 20 (d) In making settlement with the royalty owner for oil or gas that is taxable 21 under AS 43.55.011, the producer may deduct the amount of the tax paid on taxable 22 royalty oil and [OR] gas, or may deduct taxable royalty oil or gas equivalent in value 23 at the time the tax becomes due to the amount of the tax paid. Unless otherwise 24 agreed between the producer and the royalty owner, the amount of the tax paid 25 under AS 43.55.011(a) on taxable royalty oil and gas for a month other than oil 26 or gas the ownership or right to which constitutes a lessor's royalty interest 27 under an oil or gas lease is considered to be the gross value at the point of 28 production of the taxable royalty oil and gas produced during the month 29 multiplied by a figure that is a quotient, in which 30 (1) the numerator is the producer's total tax liability under 31 AS 43.55.011(a) for the month of production; and
01 (2) the denominator is the total gross value at the point of 02 production of the oil and gas taxable under AS 43.55.011(a) produced by the 03 producer from all leases and properties in the state during the month. 04 * Sec. 11. AS 43.55.020(e) is repealed and reenacted to read: 05 (e) Gas flared, released, or allowed to escape in excess of the amount 06 authorized by the Alaska Oil and Gas Conservation Commission is considered, for the 07 purpose of AS 43.55.011 - 43.55.170, as gas produced from a lease or property. Oil or 08 gas used in the operation of a lease or property in the state in drilling for or producing 09 oil or gas, or for repressuring, except to the extent determined by the Alaska Oil and 10 Gas Conservation Commission to be waste, is not considered, for the purpose of 11 AS 43.55.011 - 43.55.170, as oil or gas produced from a lease or property. 12 * Sec. 12. AS 43.55.020(f) is amended to read: 13 (f) If oil or gas is not sold, or if oil or gas is sold under circumstances where 14 the sale price does not represent the prevailing value for oil or gas of like kind, 15 character, or quality in the field or area from which the product is produced, the 16 department may require the tax to be paid upon the basis of the value of oil or gas of 17 the same kind, quality, and character prevailing during the calendar month of 18 production for that field or area. 19 * Sec. 13. AS 43.55.020 is amended by adding new subsections to read: 20 (g) The tax levied under AS 43.55.011(e), (f), and (i) shall be paid monthly 21 and is due on the last day of each calendar month on oil and gas produced from each 22 lease or property during the preceding month, and, if not paid before the end of the 23 month in which it becomes due, the tax becomes delinquent. 24 (h) If less than 90 percent of the total tax levied under AS 43.55.011(a), (e), 25 (f), and (i) is paid when due under this section, a civil penalty of five percent of the 26 difference between the amount paid and 90 percent of the tax due shall be added to the 27 tax. The amount shall be added irrespective of whether the underpayment is also 28 subject to a penalty under AS 43.05.220. However, a penalty paid under this 29 subsection may be credited against a penalty or penalties assessed under AS 43.05.220 30 with respect to the same underpayment, but the credit may not exceed the total amount 31 of those penalties.
01 * Sec. 14. AS 43.55 is amended by adding a new section to read: 02 Sec. 43.55.024. Tax credits for certain losses and expenditures. (a) 03 Notwithstanding that a qualified capital expenditure may be a deductible lease 04 expenditure for purposes of calculating the production tax value of oil and gas under 05 AS 43.55.160(a), a producer or explorer that incurs a qualified capital expenditure 06 may also elect to take a tax credit in the amount of 20 percent of that expenditure, 07 unless a credit for that expenditure is taken under AS 43.55.025. A credit under this 08 subsection may be applied only against a tax due under AS 43.55.011(a). For a 09 calendar year for which the producer makes an election under AS 43.55.160(f), instead 10 of taking a tax credit of 20 percent of each separate qualified capital expenditure after 11 it has been incurred, a producer that incurs a qualified capital expenditure during that 12 year and that wishes to apply a credit based on that expenditure against a tax due 13 under AS 43.55.011(a) shall calculate and apply every month an annualized tax credit 14 in an amount equal to one and two-thirds percent of the total qualified capital 15 expenditures incurred during that year and for which the tax credit is taken for that 16 year. 17 (b) A producer or explorer may elect to take a tax credit in the amount of 20 18 percent of a carried-forward annual loss. A credit under this subsection may be applied 19 only against a tax due under AS 43.55.011(a). For purposes of this subsection, a 20 carried-forward annual loss is the amount of a producer's or explorer's adjusted lease 21 expenditures under AS 43.55.160 for a previous calendar year that was not deductible 22 in any month under AS 43.55.160(a) and (b). 23 (c) A credit or portion of a credit under this section may not be used to reduce 24 a person's tax liability under AS 43.55.011(a) for any month below zero, and any 25 unused credit or portion of a credit not used under this subsection may be applied in a 26 later month. 27 (d) A person entitled to take a tax credit under this section that wishes to 28 transfer the unused credit to another person or to obtain a refund under (f) of this 29 section may apply to the department for a transferable tax credit certificate. An 30 application under this subsection must be on a form prescribed by the department and 31 must include supporting information and documentation that the department
01 reasonably requires. The department shall grant or deny an application, or grant an 02 application as to a lesser amount than that claimed and deny it as to the excess, not 03 later than 60 days after the latest of (1) March 31 of the year following the calendar 04 year in which the qualified capital expenditure or carried-forward annual loss for 05 which the credit is claimed was incurred; (2) if the applicant is required under 06 AS 43.55.030(e) to file a statement on or before March 31 of the year following the 07 calendar year in which the qualified capital expenditures or carried-forward annual 08 loss for which the credit was incurred, the date the statement was filed; or (3) the date 09 the application was received by the department. If, based on the information then 10 available to it, the department is reasonably satisfied that the applicant is entitled to a 11 credit, the department shall issue the applicant a transferable tax credit certificate for 12 the amount of the credit. A certificate issued under this subsection does not expire. 13 (e) A person to which a transferable tax credit certificate is issued under (d) of 14 this section may transfer the certificate to another person, and a transferee may further 15 transfer the certificate. Subject to the limitations set out in (a) - (c) of this section, and 16 notwithstanding any action the department may take with respect to the applicant 17 under (g) of this section, the owner of a certificate may apply the credit or a portion of 18 the credit shown on the certificate only against a tax due under AS 43.55.011(a). 19 However, a credit shown on a transferable tax credit certificate may not be applied to 20 reduce a transferee's total tax due under AS 43.55.011(a) on oil and gas produced 21 during a calendar year to less than 80 percent of the tax that would otherwise be due 22 without applying that credit, and any portion of a credit not used under this subsection 23 may be applied in a later period. 24 (f) Under standards established in regulations adopted by the department and 25 subject to appropriations made by law, the department, on the written application of 26 the person to whom a transferable tax credit has been issued under (d) of this section, 27 shall issue a cash refund, in whole or in part, for the certificate if the department finds 28 (1) after investigation and audit of the tax credit claim by the 29 department, the applicant is entitled to the credit to the extent of the refund amount; 30 (2) within 24 months after having applied for the transferable tax credit 31 certificate, the applicant incurred a qualified capital expenditure or was the successful
01 bidder on a bid submitted for a lease on state land under AS 38.05.180(f); 02 (3) the amount of the refund would not exceed the total of qualified 03 capital expenditures and successful bids described in (2) of this subsection that have 04 not been the subject of a finding made under this paragraph for purposes of a previous 05 refund; 06 (4) the applicant does not have an outstanding liability to the state for 07 unpaid delinquent taxes under this title; and 08 (5) the sum of the amount of the refund applied for and amounts 09 previously refunded to the applicant during the calendar year under this subsection 10 would not exceed $10,000,000. 11 (g) The issuance of a transferable tax credit certificate under (d) of this section 12 does not limit the department's ability to later investigate or audit a tax credit claim to 13 which the certificate relates or to adjust or deny the claim if the department determines 14 that the applicant was not entitled to the amount of the credit for which the certificate 15 was issued. The tax liability of the applicant under AS 43.55.011 - 43.55.170 is 16 increased by the amount of the credit that exceeds that to which the applicant was 17 entitled. That amount bears interest under AS 43.05.225 from the date the transferable 18 tax credit certificate was issued. For purposes of this subsection, an applicant that is an 19 explorer is considered a producer subject to the tax levied under AS 43.55.011. 20 (h) The department may adopt regulations to carry out the purposes of this 21 section, including prescribing reporting, record keeping, and certification procedures 22 and requirements to verify the accuracy of credits claimed and to ensure that a credit is 23 not used more than once, and otherwise implementing this section. 24 (i) A producer or explorer may not elect to take a tax credit under this section 25 for a lease expenditure under AS 43.55.160 that is an expenditure incurred 26 (1) to acquire an asset (A) the cost of previously acquiring which was a 27 lease expenditure under AS 43.55.160(c) or would have been a lease expenditure 28 under AS 43.55.160(c) if it had been incurred on or after April 1, 2006; or (B) that has 29 previously been placed in service in the state; an expenditure to acquire an asset is not 30 excluded under this paragraph if not more than an immaterial portion of the asset 31 meets a description under (A) or (B) of this paragraph; for purposes of this paragraph,
01 "asset" includes geological, geophysical, and well data and interpretations; or 02 (2) for an extended period of disuse, dismantlement, removal, 03 surrender, or abandonment of a well, facility, pipeline, platform, or other structure, or 04 for the restoration of a lease, field, unit, area, or body of water in conjunction with an 05 extended period of disuse, dismantlement, removal, surrender, or abandonment of a 06 facility described in this paragraph. 07 (j) In this section, "qualified capital expenditure" means, except as otherwise 08 provided in (i) of this section, an expenditure that is a lease expenditure under 09 AS 43.55.160 and is 10 (1) incurred for geological or geophysical exploration; or 11 (2) treated as a capitalized expenditure under 26 U.S.C. (Internal 12 Revenue Code), as amended, regardless of elections made under 26 U.S.C. 263(c) 13 (Internal Revenue Code), as amended, and either is treated as a capitalized expenditure 14 by the person incurring the expenditure or is eligible to be deducted as an expense 15 under 26 U.S.C. 263(c) (Internal Revenue Code), as amended. 16 * Sec. 15. AS 43.55.025(a) is amended to read: 17 (a) Subject to the terms and conditions of this section, on oil and gas produced 18 on or after July 1, 2004, from an oil and gas lease, or on gas produced from a gas only 19 lease, a credit against the production tax due under AS 43.55.011(a) [THIS 20 CHAPTER] is allowed for exploration expenditures that qualify under (b) of this 21 section in an amount equal to one of the following: 22 (1) 20 percent of the total exploration expenditures that qualify only 23 under (b) and (c) of this section; 24 (2) 20 percent of the total exploration expenditures for work performed 25 before July 1, 2007, and that qualify only under (b) and (d) of this section; 26 (3) 40 percent of the total exploration expenditures that qualify under 27 (b), (c), and (d) of this section; or 28 (4) 40 percent of the total exploration expenditures that qualify only 29 under (b) and (e) of this section. 30 * Sec. 16. AS 43.55.025(b) is amended to read: 31 (b) To qualify for the production tax credit under (a) of this section, an
01 exploration expenditure must be incurred for work performed on or after July 1, 2003, 02 and before July 1, 2016 [2007], except that an exploration expenditure for a Cook Inlet 03 prospect must be incurred for work performed on or after July 1, 2005, [AND 04 BEFORE JULY 1, 2010, AND EXCEPT THAT AN EXPLORATION 05 EXPENDITURE, IN WHOLE OR IN PART, SOUTH OF 68 DEGREES, 15 06 MINUTES, NORTH LATITUDE, AND NOT PART OF A COOK INLET 07 PROSPECT MUST BE INCURRED FOR WORK PERFORMED ON OR AFTER 08 JULY 1, 2003, AND BEFORE JULY 1, 2010,] and 09 (1) may be for seismic or geophysical exploration costs not connected 10 with a specific well; 11 (2) if for an exploration well, 12 (A) must be incurred by an explorer that holds an interest in the 13 exploration well for which the production tax credit is claimed; 14 (B) may be for either an oil or gas discovery well or a dry hole; 15 and 16 (C) must be for goods, services, or rentals of personal property 17 reasonably required for the surface preparation, drilling, casing, cementing, 18 and logging of an exploration well, and, in the case of a dry hole, for the 19 expenses required for abandonment if the well is abandoned within 18 months 20 after the date the well was spudded; 21 (3) may not be for testing, stimulation, or completion costs; 22 administration, supervision, engineering, or lease operating costs; geological or 23 management costs; community relations or environmental costs; bonuses, taxes, or 24 other payments to governments related to the well; or other costs that are generally 25 recognized as indirect costs or financing costs; and 26 (4) may not be incurred for an exploration well or seismic exploration 27 that is included in a plan of exploration or a plan of development for any unit on 28 May 13, 2003. 29 * Sec. 17. AS 43.55.025(f) is amended to read: 30 (f) For a production tax credit under this section, 31 (1) an explorer shall, in a form prescribed by the department and
01 within six months of the completion of the exploration activity, claim the credit and 02 submit information sufficient to demonstrate to the department's satisfaction that the 03 claimed exploration expenditures qualify under this section; 04 (2) an explorer shall agree, in writing, 05 (A) to notify the Department of Natural Resources, within 30 06 days after completion of seismic or geophysical data processing, completion of 07 a well, or filing of a claim for credit, whichever is the latest, for which 08 exploration costs are claimed, of the date of completion and submit a report to 09 that department describing the processing sequence and providing a list of data 10 sets available; if, under (c)(2)(B) of this section, an explorer submits a claim 11 for a credit for expenditures for an exploration well that is located within three 12 miles of a well already drilled for oil and gas, in addition to the submissions 13 required under (1) of this subsection, the explorer shall submit the information 14 necessary for the commissioner of natural resources to evaluate the validity of 15 the explorer's claim that the well is directed at a distinctly separate exploration 16 target, and the commissioner of natural resources shall, upon receipt of all 17 evidence sufficient for the commissioner to evaluate the explorer's claim, make 18 that determination within 60 days; 19 (B) to provide to the Department of Natural Resources, within 20 30 days after the date of a request, specific data sets, ancillary data, and reports 21 identified in (A) of this paragraph; 22 (C) that, notwithstanding any provision of AS 38, information 23 provided under this paragraph will be held confidential by the Department of 24 Natural Resources for 10 years following the completion date, at which time 25 that department will release the information after 30 days' public notice; 26 (3) if more than one explorer holds an interest in a well or seismic 27 exploration, each explorer may claim an amount of credit that is proportional to the 28 explorer's cost incurred; 29 (4) the department may exercise the full extent of its powers as though 30 the explorer were a taxpayer under this title, in order to verify that the claimed 31 expenditures are qualified exploration expenditures under this section; and
01 (5) if the department is satisfied that the explorer's claimed 02 expenditures are qualified under this section, the department shall issue to the explorer 03 a production tax credit certificate for the amount of credit to be allowed against 04 production taxes due under AS 43.55.011(a) [THIS CHAPTER]; however, 05 notwithstanding any other provision of this section, the department may not issue to an 06 explorer a production tax credit certificate if the total of production tax credits 07 submitted for Cook Inlet production, based on exploration expenditures for work 08 performed during the period described in (b) of this section for that production, that 09 have been approved by the department exceeds $20,000,000. 10 * Sec. 18. AS 43.55.025(h) is amended to read: 11 (h) A producer that purchases a production tax credit certificate may apply the 12 credits against its production tax liability under AS 43.55.011(a) [THIS CHAPTER]. 13 Regardless of the price the producer paid for the certificate, the producer may receive 14 a credit against its production tax liability for the full amount of the credit, but for not 15 more than the amount for which the certificate is issued. A production tax credit 16 allowed under this section may not be applied more than once. 17 * Sec. 19. AS 43.55.025(i) is amended to read: 18 (i) For a production tax credit under this section, 19 (1) the amount of the credit that may be applied against the production 20 tax for each tax month may not exceed the total production tax liability under 21 AS 43.55.011(a) of the taxpayer applying the credit for the same month; and 22 (2) an amount of the production tax credit that is greater than the total 23 tax liability under AS 43.55.011(a) of the taxpayer applying the credit for a tax month 24 may be carried forward and applied against the taxpayer's production tax liability 25 under AS 43.55.011(a) in one or more immediately following months. 26 * Sec. 20. AS 43.55.030(a) is amended to read: 27 (a) The tax shall be paid to the department and the person paying the tax shall 28 file with the department at the time the tax is required to be paid a statement, under 29 oath, on forms prescribed by or acceptable to the department, giving, with other 30 information required, the following: 31 (1) a description of each [THE] lease or property from which the oil
01 and [OR] gas were [WAS] produced, by name, legal description, lease number, or 02 [BY] accounting codes [CODE NUMBERS] assigned by the department; 03 (2) the names of the producer and the person paying the tax; 04 (3) the gross amount of oil and the gross amount of [OR] gas 05 produced from each [THE] lease or property, and the percentage of the gross amount 06 of oil and gas owned by each producer for whom the tax is paid; 07 (4) the gross [TOTAL] value at the point of production of the oil 08 and of the [OR] gas produced from each [THE] lease or property owned by each 09 producer for whom the tax is paid; [AND] 10 (5) the name of the first purchaser and the price received for the oil 11 and for the [OR] gas, unless relieved from this requirement in whole or in part by 12 the department; and 13 (6) the producer's lease expenditures and adjustments as 14 calculated under AS 43.55.160 [IF SOLD IN THE STATE]. 15 * Sec. 21. AS 43.55.030(d) is amended to read: 16 (d) Reports by or on behalf of the producer are delinquent the first day 17 following the day the tax is due. [EACH PRODUCER IS SUBJECT TO A PENALTY 18 OF $25 A DAY FOR EACH LEASE OR PROPERTY UPON WHICH THE 19 REPORT IS NOT FILED. THE PENALTY FOR FAILURE TO FILE A REPORT IS 20 IN ADDITION TO THE PENALTY FOR DELINQUENT TAXES, AND IS A LIEN 21 AGAINST THE ASSETS OF THE PRODUCER.] 22 * Sec. 22. AS 43.55.030 is amended by adding a new subsection to read: 23 (e) The person paying the tax under AS 43.55.011(a) shall file a statement on 24 or before March 31 of a year showing any adjustments or corrections to the statements 25 that were required under (a) of this section to be filed for the months of the preceding 26 calendar year during which the oil or gas was produced. 27 * Sec. 23. AS 43.55.040 is amended to read: 28 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 29 AS 43.05.405 - 43.05.499, the department may 30 (1) require a person engaged in production and the agent or employee 31 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil
01 or gas to furnish, whether by the filing of regular statements or reports or 02 otherwise, additional information that is considered by the department as necessary to 03 compute the amount of the tax; notwithstanding any contrary provision of law, the 04 disclosure of additional information under this paragraph to the producer 05 obligated to pay the tax does not violate AS 40.25.100(a) or AS 43.05.230(a); 06 before disclosing information under this paragraph that is otherwise required to 07 be held confidential under AS 40.25.100(a) or AS 43.05.230(a), the department 08 shall 09 (A) provide the person that furnished the information a 10 reasonable opportunity to be heard regarding the proposed disclosure and 11 the conditions to be imposed under (B) of this paragraph; and 12 (B) impose appropriate conditions limiting 13 (i) access to the information to those legal counsel, 14 consultants, employees, officers, and agents of the producer who 15 have a need to know that information for the purpose of 16 determining or contesting the producer's tax obligation; and 17 (ii) the use of the information to use for the purpose 18 of determining or contesting the producer's tax obligation; 19 (2) examine the books, records, and files of such a person; 20 (3) conduct hearings and compel the attendance of witnesses and the 21 production of books, records, and papers of any person; and 22 (4) make an investigation or hold an inquiry that is considered 23 necessary to a disclosure of the facts as to 24 (A) the amount of production from any oil or gas location, or of 25 a company or other producer of oil or gas; and 26 (B) the rendition of the oil and gas for taxing purposes. 27 * Sec. 24. AS 43.55.080 is amended to read: 28 Sec. 43.55.080. Collection and deposit of revenue. Except as otherwise 29 provided under art. IX, sec. 17, Constitution of the State of Alaska, the [THE] 30 department shall deposit in the general fund the money collected by it under 31 AS 43.55.011 - 43.55.170 [AS 43.55.011 - 43.55.150].
01 * Sec. 25. AS 43.55.135 is amended to read: 02 Sec. 43.55.135. Measurement. For the purposes of AS 43.55.011 - 43.55.170 03 [AS 43.55.011 - 43.55.150], oil is [SHALL BE] measured in terms of a "barrel of oil" 04 and gas is [SHALL BE] measured in terms of a "cubic foot of gas." 05 * Sec. 26. AS 43.55.150(a) is amended to read: 06 (a) For the purposes of AS 43.55.011 - 43.55.170 [AS 43.55.011 - 43.55.150], 07 the gross value at the point of production is [SHALL BE] calculated using the 08 reasonable costs of transportation of the oil or gas. The reasonable costs of 09 transportation are [SHALL BE] the actual costs, except when the 10 (1) [WHEN THE] parties to the transportation of oil or gas are 11 affiliated; 12 (2) [WHEN THE] contract for the transportation of oil or gas is not an 13 arm's length transaction or is not representative of the market value of that 14 transportation; 15 (3) [WHEN THE] method of transportation of oil or gas is not 16 reasonable in view of existing alternative methods of transportation. 17 * Sec. 27. AS 43.55.150 is amended by adding a new subsection to read: 18 (d) Under regulations adopted by the department, the department may allow a 19 producer, subject to limitations prescribed by the department as to the frequency of 20 making elections, to elect prospectively to calculate the gross value at the point of 21 production of oil or gas based in whole or part on 22 (1) a royalty value determined under a royalty settlement agreement 23 between the producer and the state, with adjustments if appropriate; 24 (2) a formula prescribed by the department that uses, with adjustments 25 if appropriate, a royalty value or valuation methodology accepted by the 26 (A) Department of Natural Resources under AS 38.05, in the 27 case of oil and gas produced from a lease issued by the Department of Natural 28 Resources or produced from a lease or property that is part of a unit approved 29 by the Department of Natural Resources; or 30 (B) United States Department of the Interior under applicable 31 federal oil and gas leasing statutes, in the case of oil and gas produced from a
01 lease issued by the United States Department of the Interior that is not part of a 02 unit approved by the Department of Natural Resources, or produced from a 03 lease or property that is part of a unit approved by the United States 04 Department of the Interior but not approved by the Department of Natural 05 Resources; or 06 (3) another formula prescribed by the Department of Revenue that 07 reasonably estimates a value for the oil or gas at a specific geographical location, such 08 as the point of tender or delivery into a common carrier pipeline; the formula may use 09 factors such as published price indices for oil or gas in or outside the state, quality 10 differentials for oil or gas, transportation costs between markets, and inflation 11 adjustments. 12 * Sec. 28. AS 43.55 is amended by adding new sections to article 1 to read: 13 Sec. 43.55.160. Determination of production tax value of oil and gas. (a) 14 Except as provided in (f) of this section, for purposes of AS 43.55.011(a), the 15 production tax value of the taxable oil and gas produced during a month is the total of 16 the gross value at the point of production of the oil and gas taxable under 17 AS 43.55.011(a) and produced by the producer from all leases or properties in the 18 state, (1) less the producer's tax paid for the month under AS 43.55.011(f) and (i); and 19 (2) less the producer's lease expenditures for the month as adjusted under (e) of this 20 section. However, the production tax value calculated under this subsection may not 21 be less than zero. If a producer does not produce taxable oil or gas during a month, the 22 producer is considered to have generated a positive production tax value if the 23 calculation described in this subsection yields a positive number because the 24 producer's adjusted lease expenditures for a month are less than zero as a result of the 25 producer's receiving a payment or credit under (e) of this section or otherwise. 26 (b) For purposes of administration of (a) of this section, 27 (1) any adjusted lease expenditures that would otherwise be deductible 28 in a month but the deduction of which would cause the production tax value calculated 29 under (a) of this section of the taxable oil and gas produced during the month to be 30 less than zero may be added to the producer's adjusted lease expenditures for one or 31 more other months in the same calendar year; the total of any adjusted lease
01 expenditures that are not deductible in any month during a calendar year because their 02 deduction would cause the production tax value calculated under (a) of this section of 03 the taxable oil and gas produced during one or more months to be less than zero may 04 be used to establish a carried-forward annual loss under AS 43.55.024(b); 05 (2) an explorer that has taken a tax credit under AS 43.55.024(b) or 06 that has obtained a transferable tax credit certificate under AS 43.55.024(d) for the 07 amount of a tax credit under AS 43.55.024(b) is considered a producer, subject to the 08 tax levied under AS 43.55.011(a), to the extent that the explorer generates a positive 09 production tax value as the result of the explorer's receiving a payment or credit 10 described in (e) of this section. 11 (c) For purposes of this section, 12 (1) a producer's lease expenditures for a period are the total costs 13 upstream of the point of production of oil and gas that are incurred on or after 14 January 1, 2006, by the producer during the period and that are direct, ordinary, and 15 necessary costs of exploring for, developing, or producing oil or gas deposits located 16 within the producer's leases or properties in the state or, in the case of land in which 17 the producer does not own a working interest, direct, ordinary, and necessary costs of 18 exploring for oil or gas deposits located within other land in the state; however, lease 19 expenditures do not include the costs incurred to satisfy a work commitment under an 20 exploration license under AS 38.05.132, and do not include, in connection with a 21 catastrophic oil discharge into the marine or inland water of the state, the containment 22 and clean up expenses incurred by the producer, the incremental expenses of 23 transportation of oil due to loss or damage incurred by the producer, and any damages 24 or penalties imposed on the producer; in determining whether costs are direct, 25 ordinary, and necessary costs of exploring for, developing, or producing an oil or gas 26 deposit located within a lease or property or other land in the state, the department 27 shall give substantial weight to 28 (A) the typical industry practices and standards in the state and 29 in the United States as to costs that an operator is allowed to bill a working 30 interest owner that is not the operator, under unit operating agreements or 31 similar operating agreements that were in effect on or before December 1,
01 2005, and were subject to negotiation with working interest owners, not the 02 operator, with substantial bargaining power; and 03 (B) the standards adopted by the Department of Natural 04 Resources as to the costs, other than interest, that a lessee is allowed to deduct 05 from revenue in calculating net profits under a lease issued under 06 AS 38.05.180(f)(3)(B), (D), or (E); 07 (2) the Department of Revenue may authorize a producer, including a 08 producer that is the operator, to treat as its lease expenditures under this section the 09 costs paid by the producer that are billed to the producer by an operator in accordance 10 with the terms of a unit operating agreement or similar operating agreement if the 11 Department of Revenue finds that 12 (A) the pertinent provisions of the operating agreement are 13 substantially consistent with the Department of Revenue's determinations and 14 standards otherwise applicable under this subsection; and 15 (B) at least one working interest owner party to the agreement, 16 other than the operator, has substantial incentive and ability to effectively audit 17 billings under the agreement. 18 (d) For purposes of (c) of this section, "direct costs" 19 (1) includes 20 (A) an expenditure, when incurred, to acquire an item if the 21 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure 22 may be required to be capitalized rather than treated as an expense for financial 23 accounting or federal income tax purposes; 24 (B) payments of property taxes, sales and use taxes, motor fuel 25 taxes, and excise taxes; 26 (C) a reasonable allowance, as determined under regulations 27 adopted by the department, for overhead expenses directly related to exploring 28 for, developing, and producing oil or gas deposits located within leases or 29 properties or other land in the state; 30 (2) does not include 31 (A) depreciation or amortization;
01 (B) royalty payments for oil and gas; 02 (C) taxes based on or measured by net income; 03 (D) interest or other financing charges or costs of raising equity 04 or debt capital; 05 (E) acquisition costs for a lease or property or exploration 06 license; 07 (F) costs arising from fraud, wilful misconduct, or negligence; 08 (G) fines or penalties imposed by law; 09 (H) costs of arbitration, litigation, or other dispute resolution 10 activities that involve the state or concern the rights or obligations among 11 owners of interests in, or rights to production from, one or more leases or 12 properties or a unit; 13 (I) donations; 14 (J) costs incurred in organizing a partnership, joint venture, or 15 other business entity or arrangement; 16 (K) amounts paid to indemnify the state; the exclusion 17 provided by this paragraph does not apply to the costs of obtaining insurance 18 or a surety bond from a third-party insurer or surety; 19 (L) surcharges levied under AS 43.55.201 or 43.55.300. 20 (e) A producer's lease expenditures must be adjusted by subtracting certain 21 payments or credits received by the producer, as provided in this subsection. If, during 22 a month or, under (f) of this section, during a calendar year, a producer receives one or 23 more payments or credits subject to this subsection and if either the total amount of the 24 payments or credits exceeds the amount of the producer's lease expenditures or the 25 producer does not have any lease expenditures, the producer shall nevertheless 26 subtract the payments or credits from the lease expenditures or from zero, 27 respectively, and the producer's adjusted lease expenditures for that month or calendar 28 year are a negative number. The producer shall apply that negative number to the 29 calculation made under (a) of this section. The payments or credits that a producer 30 must subtract from the producer's lease expenditures, or from zero, under this 31 subsection are payments or credits that the producer receives for
01 (1) the use by another person of a production facility in which the 02 producer has an ownership interest; 03 (2) a reimbursement or similar payment that offsets the producer's 04 lease expenditures, including a payment from the state or federal government for 05 reimbursement of the producer's upstream costs, including costs for gathering, 06 separating, cleaning, dehydration, compressing, or other field handling associated with 07 the production of oil or gas upstream of the point of production; 08 (3) the sale or other transfer of 09 (A) an asset, including geological, geophysical, or well data or 10 interpretations, acquired by the producer as a result of a lease expenditure or an 11 expenditure that would be a lease expenditure if it were incurred on or after 12 April 1, 2006; and 13 (B) oil or gas 14 (i) that is not considered produced from a lease or 15 property under AS 43.55.020(e); and 16 (ii) the cost of acquiring which is a lease expenditure 17 incurred by the person that acquires the oil or gas. 18 (f) In place of the adjusted lease expenditures for a month under (a) of this 19 section, a producer may, at any time, elect to substitute, for every month of a calendar 20 year, one-twelfth of the producer's adjusted lease expenditures for the calendar year. 21 (g) The department shall specify or approve a reasonable allocation method 22 for determining the portion of a cost that is appropriately treated as a lease expenditure 23 under (c) of this section if a cost that would otherwise constitute a lease expenditure 24 under (c) of this section is incurred to explore for, develop, or produce 25 (1) both an oil or gas deposit located within land outside the state and 26 an oil or gas deposit located within a lease or property, or other land, in the state; or 27 (2) an oil or gas deposit located partly within land outside the state and 28 partly within a lease or property, or other land, in the state. 29 (h) The department may adopt regulations that establish additional standards 30 necessary to carrying out the purposes of this section. 31 (i) For purposes of AS 43.55.024(a) and (b) and only as to expenditures
01 incurred to explore for an oil or gas deposit located within land in which an explorer 02 does not own a working interest, the term "producer" in (b), (c), and (e) of this section 03 includes "explorer." 04 (j) For purposes of this section, 05 (1) "explore" includes conducting geological or geophysical 06 exploration, including drilling a stratigraphic test well, but the drilling of a 07 stratigraphic test well qualifies under this paragraph only if the well's target zones are 08 located in the state; 09 (2) "ordinary and necessary" has the meaning given "ordinary and 10 necessary" in 26 U.S.C. 162 (Internal Revenue Code) and regulations adopted under 11 that section; 12 (3) "stratigraphic test well" means a well drilled for the sole purpose of 13 obtaining geological information to aid in exploring for an oil or gas deposit and the 14 target zones of which are located in the state. 15 Sec. 43.55.170. Additional nontransferable credit. (a) For a month for which 16 a producer's tax liability under AS 43.55.011(a) exceeds zero before application of any 17 credits under this chapter, a producer that is qualified under (b) of this section and, 18 during the calendar year, has incurred a qualified capital expenditure, as that term is 19 defined in AS 43.55.024, may apply a tax credit, in an amount that does not exceed the 20 amount of that expenditure, against that liability under this section. An unused portion 21 of a tax credit may be applied to the extent otherwise allowed under this section for 22 one or more months during the same calendar year. The tax credit authorized by this 23 subsection may be calculated and applied so that 24 (1) the producer's tax liability under AS 43.55.011(a) for any month is 25 not reduced below zero; and 26 (2) the total of the tax credits applied under this subsection during a 27 calendar year does not exceed $12,000,000, except that the total of the tax credits 28 applied under this subsection during calendar year 2016 does not exceed $3,000,000. 29 (b) On written application by a producer, including any information the 30 department may require, the department shall determine whether the producer 31 qualifies under this section for a calendar year. To qualify under this section, a
01 producer must demonstrate that its operation in the state or its ownership of an interest 02 in a lease or property in the state as a distinct producer entity would not result in the 03 division among multiple producer entities of any production tax liability under 04 AS 43.55.011(a) that would be reasonably expected to be attributed to a single 05 producer entity if the tax credit provision of (a) of this section did not exist. 06 (c) An unused tax credit or portion of a tax credit under this section is not 07 transferable under AS 43.55.024(d) or refundable under AS 43.55.024(f), and may not 08 be carried forward to or used in a later calendar year. 09 (d) The use of a tax credit under this section does not prevent a producer from 10 taking a tax credit under AS 43.55.024(a) or 43.55.025 for the same qualified capital 11 expenditure. 12 (e) A producer may not claim a credit under this section for a qualified capital 13 expenditure incurred after March 31, 2016. 14 * Sec. 29. AS 43.55.201 is amended to read: 15 Sec. 43.55.201. Surcharge levied. (a) Every producer of oil shall pay a 16 surcharge of $.01 [$.02] per barrel of oil produced from each lease or property in the 17 state, less any oil the ownership or right to which is exempt from taxation. 18 (b) The surcharge imposed by (a) of this section is in addition to and shall be 19 paid in the same manner as the tax imposed by AS 43.55.011 - 43.55.170, 20 [AS 43.55.011 - 43.55.150;] and is in addition to the surcharge imposed by 21 AS 43.55.300 - 43.55.310. 22 (c) A producer of oil shall make reports of production in the same manner and 23 under the same penalties as required under AS 43.55.011 - 43.55.170 [AS 43.55.011 - 24 43.55.150]. 25 * Sec. 30. AS 43.55.201 is amended by adding a new subsection to read: 26 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 27 property is not considered to be produced from a lease or property for purposes of this 28 section. 29 * Sec. 31. AS 43.55.300 is amended to read: 30 Sec. 43.55.300. Surcharge levied. (a) Every producer of oil shall pay a 31 surcharge of $.04 [$.03] per barrel of oil produced from each lease or property in the
01 state, less any oil the ownership or right to which is exempt from taxation. 02 (b) The surcharge imposed by (a) of this section is in addition to and shall be 03 paid in the same manner as the tax imposed by AS 43.55.011 - 43.55.170, 04 [AS 43.55.011 - 43.55.150;] and is in addition to the surcharge imposed by 05 AS 43.55.201 - 43.55.231. 06 (c) A producer of oil shall make reports of production in the same manner and 07 under the same penalties as required under AS 43.55.011 - 43.55.170 [AS 43.55.011 - 08 43.55.150]. 09 * Sec. 32. AS 43.55.300 is amended by adding a new subsection to read: 10 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 11 property is not considered to be produced from a lease or property for purposes of this 12 section. 13 * Sec. 33. AS 43.55.900(6) is repealed and reenacted to read: 14 (6) "gas" means 15 (A) all natural, associated, or casinghead gas; 16 (B) all hydrocarbons that 17 (i) are recovered by mechanical separation of well 18 fluids or by gas processing; and 19 (ii) exist in a gaseous phase at the completion of 20 mechanical separation and any gas processing; and 21 (C) all other hydrocarbons produced from a well not defined as 22 oil; 23 * Sec. 34. AS 43.55.900(7) is repealed and reenacted to read: 24 (7) "gross value at the point of production" means 25 (A) for oil, the value of the oil at the automatic custody transfer 26 meter or device through which the oil enters into the facilities of a carrier 27 pipeline or other transportation carrier in a condition of pipeline quality; in the 28 absence of an automatic custody transfer meter or device, "gross value at the 29 point of production" means the value of the oil at the mechanism or device to 30 measure the quantity of oil that has been approved by the department for that 31 purpose, through which the oil is tendered and accepted in a condition of
01 pipeline quality into the facilities of a carrier pipeline or other transportation 02 carrier or into a field topping plant; 03 (B) for gas, other than gas described in (C) of this paragraph, 04 that is 05 (i) not subjected to or recovered by mechanical 06 separation or gas processing, the value of the gas at the first point 07 where the gas is accurately metered; 08 (ii) subjected to or recovered by mechanical separation 09 but not gas processing, the value of the gas at the first point where the 10 gas is accurately metered after completion of mechanical separation; 11 (iii) subjected to or recovered by gas processing, the 12 value of the gas at the first point where the gas is accurately metered 13 after completion of gas processing; 14 (C) for gas run through an integrated gas processing and gas 15 treatment facility that does not accurately meter the gas after the gas 16 processing and before the gas treatment, the value of the gas at the first point 17 where gas processing is completed or where gas treatment begins, whichever is 18 further upstream; 19 * Sec. 35. AS 43.55.900(10) is repealed and reenacted to read: 20 (10) "oil" means 21 (A) crude petroleum oil; and 22 (B) all liquid hydrocarbons that are recovered by mechanical 23 separation of well fluids or by gas processing; 24 * Sec. 36. AS 43.55.900 is amended by adding new paragraphs to read: 25 (17) "explorer" means a person who, in exploring for new oil or gas 26 reserves, incurs expenditures; 27 (18) "gas processing" 28 (A) means processing a gaseous mixture of hydrocarbons 29 (i) by means of absorption, adsorption, externally 30 applied refrigeration, artificial compression followed by adiabatic 31 expansion using the Joule-Thomson effect, or another physical process
01 that is not mechanical separation; 02 (ii) for the purpose of extracting and recovering liquid 03 hydrocarbons; and 04 (iii) upstream of any gas treatment and upstream of the 05 inlet of any gas pipeline system transporting gas to a market; 06 (B) does not include gas treatment; 07 (19) "gas treatment" 08 (A) means conditioning gas and removing from gas 09 nonhydrocarbon substances for the purpose of rendering the gas acceptable for 10 tender and acceptance into a gas pipeline system; and 11 (B) includes incidentally removing liquid hydrocarbons from 12 the gas. 13 * Sec. 37. AS 43.55.011(b), 43.55.011(c), 43.55.012(b), 43.55.013, 43.55.016, 14 43.55.025(k)(3), 43.55.900(1), 43.55.900(8), 43.55.900(11), 43.55.900(12), and 15 43.55.900(16) are repealed. 16 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to 17 read: 18 APPLICABILITY. (a) Sections 5, 6, 8 - 11, 13, 14, 15, 17 - 20, 22, and 26 - 37 of this 19 Act apply to oil and gas produced on or after April 1, 2006. 20 (b) Section 12 of this Act applies to oil and gas produced before, on, or after the 21 effective date of sec. 12 of this Act. 22 * Sec. 39. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 TRANSITIONAL PROVISIONS. (a) Notwithstanding any contrary provision of 25 AS 43.55.024(a), enacted by sec. 14 of this Act, a producer or explorer may apply for a credit 26 under AS 43.55.024 based on a qualified capital expenditure incurred on or after January 1, 27 2006. 28 (b) Notwithstanding any contrary provision of AS 43.55.024(a), enacted by sec. 14 of 29 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 30 phrase "every month an annualized tax credit in an amount equal to one and two-thirds 31 percent" in AS 43.55.024(a), enacted by sec. 14 of this Act, shall be replaced by the phrase
01 "every month during the period April 1, 2006, through December 31, 2006, an annualized tax 02 credit in an amount equal to 2.222 percent." 03 (c) Notwithstanding any contrary provision of AS 43.55.024(e), enacted by sec. 14 of 04 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 05 phrase "a calendar year" in AS 43.55.024(e), enacted by sec. 14 of this Act, shall be replaced 06 by the phrase "the last nine months of the calendar year." 07 (d) Notwithstanding any contrary provision of AS 43.55.160(f), enacted by sec. 28 of 08 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 09 phrase "for every month of a calendar year, one-twelfth of the producer's adjusted lease 10 expenditures for the calendar year" in AS 43.55.160(f), enacted by sec. 28 of this Act, shall be 11 replaced by the phrase "for each of the last nine months of 2006, one-ninth of the producer's 12 adjusted lease expenditures for calendar year 2006." 13 (e) Notwithstanding any contrary provision of AS 43.55.170(a), enacted by sec. 28 of 14 this Act, for oil and gas produced on or after April 1, 2006, and before January 1, 2007, the 15 amount of "$12,000,000" in AS 43.55.170(a)(2), enacted by sec. 28 of this Act, shall be 16 replaced by the amount "$9,000,000." 17 (f) For oil and gas produced before April 1, 2006, the provisions of AS 43.55, and 18 regulations adopted under AS 43.55, that were in effect before April 1, 2006, and that were 19 applicable to the oil and gas continue to apply to that oil and gas. 20 (g) Notwithstanding any contrary provision of AS 43.55.020(a), as repealed and 21 reenacted by sec. 8 of this Act, or of AS 43.55.020(g), as enacted by sec. 13 of this Act, for oil 22 and gas produced on or after April 1, 2006, and before the first day of the first month that 23 begins at least 180 days after the effective date of secs. 8 and 13 of this Act, 24 (1) the amount of the taxes that would have been levied upon the producer 25 under AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on the last 26 day of each calendar month on the oil and gas that was produced from each lease or property 27 during the preceding month; 28 (2) the portion, if any, of the taxes levied under AS 43.55.011(a), as repealed 29 and reenacted by sec. 5 of this Act, and under AS 43.55.011(e), (f), and (i), as enacted by sec. 30 6 of this Act, that remains unpaid, net of any credits applied as allowed by law, is due on the 31 last day of the second month that begins at least 180 days after the effective date of secs. 5
01 and 6 of this Act. 02 (h) Notwithstanding any contrary provision of AS 43.55.030(a), as amended by sec. 03 20 of this Act, or AS 43.55.030(e), added by sec. 22 of this Act, for oil and gas produced on 04 or after April 1, 2006, and before the first day of the first month that begins at least 180 days 05 after the effective date of secs. 20 and 22 of this Act, the person paying the tax shall file with 06 the Department of Revenue, at the time an amount of tax is due 07 (1) under (g)(1) of this section, the statement required under former 08 AS 43.55.030(a), as that subsection read on March 31, 2006; and 09 (2) under (g)(2) of this section, the statement required under AS 43.55.030(e), 10 enacted by sec. 22 of this Act. 11 (i) For purposes of taxes to be calculated and due under (g)(1) of this section and 12 statements to be filed under (h)(1) of this section, regulations that were adopted by the 13 Department of Revenue under AS 43.55, as the provisions of that chapter read on March 31, 14 2006, and that were in effect on that date apply to those taxes and statements. 15 * Sec. 40. The uncodified law of the State of Alaska is amended by adding a new section to 16 read: 17 TRANSITION: REGULATIONS AND RETROACTIVITY OF REGULATIONS. (a) 18 The Department of Revenue may proceed to adopt regulations to implement the changes 19 made by this Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), 20 but not before the effective date of the law implemented by the regulation. 21 (b) Notwithstanding any contrary provision of AS 44.62.240, a regulation adopted by 22 the Department of Revenue to implement, interpret, make specific, or otherwise carry out the 23 provisions of secs. 5, 6, 8 - 11, 13 - 15, 17 - 20, 22, and 25 - 37 of this Act may apply 24 retroactively as of April 1, 2006, if the Department of Revenue expressly designates in the 25 regulation that the regulation applies retroactively to that date. 26 * Sec. 41. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the 29 heading of 30 (1) AS 43.55 from "Oil and Gas Production Taxes and Oil Surcharge" to "Oil 31 and Gas Production Tax and Oil Surcharge";
01 (2) article 1 of AS 43.55 from "Oil and Gas Properties Production Taxes" to 02 "Oil and Gas Production Tax"; 03 (3) AS 43.55.011 from "Oil production tax" to "Oil and gas production tax"; 04 (4) AS 43.55.025 from "Tax credit for oil and gas exploration or gas only 05 exploration" to "Alternative tax credit for oil and gas exploration or gas only exploration"; 06 (5) AS 43.55.150 from "Determination of gross value" to "Determination of 07 gross value at the point of production." 08 * Sec. 42. The uncodified law of the State of Alaska is amended by adding a new section to 09 read: 10 RETROACTIVITY OF CERTAIN EXPENDITURES USED TO SUPPORT 11 PRODUCTION TAX CREDIT CLAIM AND DETERMINATION OF PRODUCTION TAX 12 VALUE OF OIL AND GAS. AS 43.55.160(c)(1), enacted by sec. 28 of this Act, applies to 13 allow a producer to claim as lease expenditures certain expenditures incurred on or after 14 January 1, 2006, and before the effective date of AS 43.55.160, added by sec. 28 of this Act, 15 and sec. 39(a) of this Act applies to authorize a producer or explorer to apply for a credit 16 under AS 43.55.024, enacted by sec. 14 of this Act, based on a qualified capital expenditure 17 incurred on or after January 1, 2006, and before the effective date of AS 43.55.024, enacted 18 by sec. 14 of this Act. To the extent these provisions give legal effect to prior conduct, they 19 are retroactive to January 1, 2006. 20 * Sec. 43. The uncodified law of the State of Alaska is amended by adding a new section to 21 read: 22 CONDITIONAL RETROACTIVITY. If the sections of this Act that, under sec. 45 of 23 this Act, are scheduled to take effect April 1, 2006, take effect on or after April 1, 2006, those 24 sections of this Act are retroactive to April 1, 2006. 25 * Sec. 44. Sections 1 - 4, 7, 12, 16, 21, 23, and 38 - 43 of this Act take effect immediately 26 under AS 01.10.070(c). 27 * Sec. 45. Except as provided in sec. 44 of this Act, this Act takes effect April 1, 2006.