HB 2004: "An Act relating to the Alaska Stranded Gas Development Act, including clarifications or provision of additional authority for the development of stranded gas fiscal contract terms; making a conforming amendment to the Revised Uniform Arbitration Act; relating to municipal impact money received under the terms of a stranded gas fiscal contract; and providing for an effective date."
00 HOUSE BILL NO. 2004 01 "An Act relating to the Alaska Stranded Gas Development Act, including clarifications 02 or provision of additional authority for the development of stranded gas fiscal contract 03 terms; making a conforming amendment to the Revised Uniform Arbitration Act; 04 relating to municipal impact money received under the terms of a stranded gas fiscal 05 contract; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. AS 43.82.010 is amended to read: 08 Sec. 43.82.010. Purpose. The purpose of this chapter is to 09 (1) encourage new investment to develop the state's stranded gas resources by 10 authorizing establishment of fiscal terms related to oil and gas agreements and taxes 11 for a qualified sponsor, the members of a qualified sponsor group, or a related 12 party and related to their oil and gas business activity in the state [THAT NEW 13 INVESTMENT WITHOUT SIGNIFICANTLY ALTERING TAX AND ROYALTY
01 METHODOLOGIES AND RATES ON EXISTING OIL AND GAS 02 INFRASTRUCTURE AND PRODUCTION]; 03 (2) allow the fiscal terms applicable to a qualified sponsor, [OR] the 04 members of a qualified sponsor group, or a related party, with respect to a qualified 05 project, to be tailored to the particular economic conditions of the project and to 06 establish those fiscal terms in advance with as much certainty as the Constitution of 07 the State of Alaska allows; and 08 (3) maximize the benefit to the people of the state of the development 09 of the state's stranded gas resources. 10 * Sec. 2. AS 43.82.020 is amended to read: 11 Sec. 43.82.020. Negotiation of contract terms [CONTRACTS FOR 12 PAYMENTS IN LIEU OF OTHER TAXES AND FOR ROYALTY 13 ADJUSTMENTS]. The commissioner may, under this chapter, negotiate terms for 14 inclusion in a proposed contract with a qualified sponsor or qualified sponsor group 15 providing for 16 (1) periodic payment in lieu of one or more taxes that otherwise would 17 be imposed by the state or a municipality on the qualified sponsor, [OR] members of 18 the qualified sponsor group, or a related party; [AS A CONSEQUENCE OF THE 19 SPONSOR'S OR GROUP'S PARTICIPATION IN AN APPROVED QUALIFIED 20 PROJECT UNDER THIS CHAPTER; AND] 21 (2) certain adjustments regarding oil and gas lease agreements, unit 22 agreements, and other agreements [ROYALTY] under AS 43.82.220; in this 23 paragraph, "oil and gas lease agreements" includes royalty provisions of those 24 agreements; 25 (3) payment of gas production tax under AS 43.55, or payment in 26 lieu of gas production tax, by delivery of gas; and 27 (4) acquisition by the state of an ownership interest in the project 28 that is the subject of the proposed contract, and terms relating to collateral 29 agreements authorized under AS 43.82.437. 30 * Sec. 3. AS 43.82.200 is amended to read: 31 Sec. 43.82.200. Contract development. If the commissioner approves an
01 application and proposed project plan under AS 43.82.140, the commissioner may 02 develop a contract that may include 03 (1) terms concerning modifications of taxes on oil and gas, including 04 terms providing for periodic payment in lieu of one or more taxes as provided in 05 AS 43.82.210, and terms related to credits for investment in a project that is the 06 subject of a contract developed under this chapter; 07 (2) terms developed under AS 43.82.220 concerning oil and gas 08 leases, unit agreements, and other agreements under AS 38, including terms 09 relating to 10 (A) timing and notice of the state's right to take royalty in kind 11 or in value; and 12 (B) royalty value; 13 (3) terms regarding the hiring of Alaska residents and contracting with 14 Alaska businesses under AS 43.82.230; 15 (4) terms regarding periodic payment to, or an equity or other interest 16 in a project for, municipalities under AS 43.82.500; 17 (5) terms regarding arbitration or alternative dispute resolution 18 procedures; 19 (6) terms and conditions for [ADMINISTRATIVE] termination of a 20 contract [UNDER AS 43.82.445]; and 21 (7) other terms or conditions that the commissioner determines are 22 (A) reasonable and promote [NECESSARY TO FURTHER] 23 the purposes of this chapter, including the implementation of AS 43.82.020 - 24 43.82.270; or 25 (B) in the long-term fiscal [BEST] interests of the state. 26 * Sec. 4. AS 43.82.200 is amended by adding a new subsection to read: 27 (b) Terms relating to arbitration and alternate dispute resolution may provide 28 for a waiver, with the concurrence of the attorney general, of the state's immunity from 29 suit. The waiver may include waiver of the state's sovereign or other immunity and 30 consent to entrance and enforcement of an arbitration award in any state court in the 31 United States that has jurisdiction over the state. The authority granted in this
01 subsection is effective only after the arbitration award is entered and enforcement is 02 sought in the superior court of the state. 03 * Sec. 5. AS 43.82.210(a) is amended to read: 04 (a) If the commissioner approves an application and proposed project plan 05 under AS 43.82.140, the commissioner may develop proposed terms for inclusion in a 06 contract under AS 43.82.020 for periodic payment in lieu of one or more of the 07 following taxes that otherwise would be imposed by the state or a municipality on the 08 qualified sponsor, [OR] member of a qualified sponsor group, or a related party [AS 09 A CONSEQUENCE OF PARTICIPATING IN AN APPROVED QUALIFIED 10 PROJECT]: 11 (1) oil and gas production taxes and oil surcharges under AS 43.55; 12 (2) oil and gas exploration, production, and pipeline transportation 13 property taxes under AS 43.56; 14 (3) [REPEALED 15 (4)] Alaska net income tax under AS 43.20; 16 (4) [(5)] municipal sales and use tax under AS 29.45.650 - 29.45.710; 17 (5) [(6)] municipal property tax under AS 29.45.010 - 29.45.250 or 18 29.45.550 - 29.45.600; 19 (6) [(7)] municipal special assessments under AS 29.46; 20 (7) [(8)] a comparable tax or levy imposed by the state or a 21 municipality after June 18, 1998; 22 (8) [(9)] other state or municipal taxes or categories of taxes identified 23 by the commissioner. 24 * Sec. 6. AS 43.82.220(a) is amended to read: 25 (a) Notwithstanding any contrary provisions of AS 38, or regulations 26 adopted under that title, the commissioner of natural resources, with the concurrence 27 of the commissioner of revenue and, if necessary, the affected parties holding a state 28 lease or unit agreement, may develop proposed terms for inclusion in a contract under 29 AS 43.82.020 that modify [THE TIMING AND NOTICE] provisions of the applicable 30 oil and gas leases, [AND] unit agreements, and other agreements under AS 38, 31 including provisions
01 (1) pertaining to the state's rights to receive its royalty on gas in kind 02 or in value if 03 (A) [(1)] the viability of the approved qualified project depends 04 on long-term gas shipping commitments [PURCHASE AND SALE 05 AGREEMENTS]; 06 (B) [(2)] certainty over time regarding the quantity of royalty 07 gas that the state may be taking in kind is needed to enter into long-term gas 08 shipping commitments or marketing agreements [SECURE THE LONG- 09 TERM PURCHASE AND SALE AGREEMENTS]; 10 [(3) THE SPECIFIED PERIOD OF THE STATE'S COMMITMENT 11 TO TAKE ITS ROYALTY SHARE IN VALUE OR IN KIND DOES NOT EXCEED 12 THE TERM OF THE PURCHASE AND SALE AGREEMENTS;] and 13 (C) [(4)] the modification does not impair the ability of 14 the approved qualified project or the state to meet the reasonably 15 foreseeable demand in this state for gas within economic proximity of 16 the project during the term of the contract developed under 17 AS 43.82.020; and 18 (2) relating to lease or unit expenses for separation, cleaning, 19 dehydration, gathering, salt water disposal, and preparation for transportation 20 on or off the lease. 21 * Sec. 7. AS 43.82.220(c) is amended to read: 22 (c) The commissioner of revenue shall include any proposed terms 23 [RELATING TO ROYALTY] developed in accordance with this section in the 24 proposed contract under AS 43.82.400. 25 * Sec. 8. AS 43.82.220 is amended by adding a new subsection to read: 26 (e) An agreement by the state to take royalty gas in kind as part of a contract 27 developed under this chapter that satisfies (a)(1)(A) - (C) of this section is not subject 28 to the provisions of AS 38, or regulations adopted under that title, relating to decisions 29 to take royalty in kind. 30 * Sec. 9. AS 43.82.250 is amended to read: 31 Sec. 43.82.250. Term of contract; effective date. The term of a contract
01 developed under AS 43.82.020 [MAY BE FOR NO LONGER THAN IS 02 NECESSARY TO DEVELOP THE STRANDED GAS THAT IS SUBJECT TO THE 03 CONTRACT; HOWEVER, THE TERM OF THE CONTRACT] may not exceed 35 04 years from the commencement of commercial operations of the approved qualified 05 project, excluding suspensions of contract obligations that are covered by the 06 force majeure terms of any contract developed under this chapter. However, the 07 term of contract may not exceed 45 years from the effective date of a contract 08 approved under AS 43.82.435. 09 * Sec. 10. AS 43.82.270 is amended to read: 10 Sec. 43.82.270. Project plans and work commitments. A contract under 11 AS 43.82.020 must include provisions for implementation of the qualified project 12 plan approved under AS 43.82.140, as may be modified as a result of the 13 development of a contract under this chapter, and provisions for updating the plan 14 at reasonable intervals until the commencement of commercial operations of the 15 approved qualified project. The commissioner of revenue, in consultation with the 16 commissioner of natural resources, may, as a term in a contract under AS 43.82.020, 17 include work commitments or other obligations in the contract to be accomplished 18 before the commencement of commercial operations of the approved qualified project. 19 * Sec. 11. AS 43.82 is amended by adding a new section to read: 20 Sec. 43.82.437. Collateral agreements. (a) The commissioner of revenue, 21 with the concurrence of the commissioner of natural resources, may negotiate 22 collateral agreements that are required to implement the state's acquisition of an 23 ownership interest in the project that is the subject of a proposed contract developed 24 under this chapter. The authority of the commissioner of revenue to negotiate 25 collateral agreements on behalf of the state lapses 180 days after the effective date of 26 the law authorizing the contract under AS 43.82.435. 27 (b) A collateral agreement negotiated by the commissioner on behalf of a 28 public corporation that is established by law to enter into agreements to acquire an 29 ownership interest in the project to be developed under the authorized contract may be 30 executed and implemented by the board of directors of the public corporation. 31 Notwithstanding any other provision of law, the commissioner members of the board
01 constitute a quorum for doing the business of the corporation for the first 120 days 02 following the effective date of a law establishing the public corporation. During this 03 transition period, actions by the board must be approved (A) by unanimous 04 commissioner member approval, or (B) if some or all of the public members of the 05 board have been appointed at the time of the action, by a majority of all the board 06 members existing as of the date the action is taken. 07 (c) A collateral agreement executed by the members of the board of a public 08 corporation under (b) of this section is binding only on the public corporation and does 09 not make the state a party to the collateral agreement. 10 (d) Except as provided in this section and in AS 43.82.310, a collateral 11 agreement necessary to implement a contract that has been authorized by the 12 legislature under the terms of AS 43.82.435 is not subject to any of the provisions of 13 this chapter. 14 (e) In this section, "collateral agreement" includes agreements between either 15 the state or entities established by the state, and a qualified sponsor or qualified 16 sponsor group, or affiliates of those entities, to form limited liability companies, 17 limited liability partnerships, or any other recognized form of business association, 18 whether incorporated or unincorporated, that would own or operate any portion of the 19 project that is the subject of a proposed contract developed under this chapter. 20 * Sec. 12. AS 43.82.500 is amended to read: 21 Sec. 43.82.500. Obligation to share payments with municipalities. If the 22 commissioner develops a contract under AS 43.82.020 that includes terms that exempt 23 a qualified sponsor, the members of a qualified sponsor group, or a related party 24 to the contract, and the property, gas, products, and activities associated with the 25 approved qualified project that is subject to the contract, from a municipal tax or 26 assessment in accordance with AS 29.45.810 or AS 29.46.010(b), or AS 43.82.200 27 and 43.82.210, the commissioner shall include a term in the contract that provides for 28 [THE PARTY PAY] a portion of the periodic payments to be made payable [DUE 29 UNDER THE CONTRACT] to the revenue-affected municipality. 30 * Sec. 13. AS 43.82.505 is amended to read: 31 Sec. 43.82.505. Payments to economically affected municipalities. If the
01 commissioner executes a contract under AS 43.82.020 that will produce one or more 02 economically affected municipalities, the commissioner shall include a term in the 03 contract that provides for [A PORTION OF THE] periodic impact payments to the 04 state that may be appropriated to the Alaska Natural Gas Pipeline Construction 05 Impact Fund established in (c) of this section to benefit the economically affected 06 municipalities under the principles in AS 43.82.520. 07 * Sec. 14. AS 43.82.505 is amended by adding new subsections to read: 08 (b) A special account is established in the general fund into which the 09 Department of Revenue shall deposit impact payments received by the state under (a) 10 of this section. 11 (c) The Alaska Natural Gas Pipeline Construction Impact Fund is established 12 in the Department of Commerce, Community, and Economic Development. The 13 legislature may appropriate money deposited in the special account established in (b) 14 of this section, as well as any additional money considered necessary, to the Alaska 15 Natural Gas Pipeline Construction Impact Fund to address the economic and social 16 impacts incurred by an economically affected municipality, or incurred by a nonprofit 17 organization serving the unorganized borough, during the construction of a project that 18 is the subject of a proposed contract developed under this chapter. 19 (d) The Department of Commerce, Community, and Economic Development 20 shall adopt regulations under which economically affected municipalities and 21 nonprofit organizations may apply for and be eligible to receive grants to alleviate 22 impact caused by construction of a gas pipeline. The department shall give priority in 23 the allocation of grants to municipalities and organizations that are experiencing or 24 will experience the most direct or severe impact from gas pipeline construction. The 25 department shall finance under (e) of this section all meritorious grant applications 26 each year, to the extent money is available in the Alaska Natural Gas Pipeline 27 Construction Impact Fund. Within 10 days after the convening of each regular session 28 of the legislature, the department shall submit to the legislature a list of all 29 municipalities and organizations that have received grants, a list of all municipalities 30 and organizations determined by the department to be eligible for further grants, a 31 recommendation of the amount of money to be granted for those additional
01 applications, and written justification of each past and potential grant. 02 (e) The commissioner of commerce, community, and economic development, 03 in consultation with the relevant municipal advisory group established under 04 AS 43.82.510, shall use money appropriated to the Alaska Natural Gas Pipeline 05 Construction Impact Fund to make grants to municipalities, and to nonprofit 06 organizations serving the unorganized borough, for impacts on transportation, 07 infrastructure, law enforcement, emergency services, health and human services, 08 education, labor force, population, wages, and subsistence, and for socio-cultural 09 impacts, brought about by the construction of the gas pipeline. In determining whether 10 an expenditure or proposed expenditure by a municipality or nonprofit organization is 11 eligible for a grant under this subsection, and in allocating available money among 12 grant proposals, the commissioner shall consider the recommendations of the relevant 13 municipal advisory group established under AS 43.82.510 and whether the proposed 14 expenditure meets the purposes of this section. 15 (f) Grant money received under this section may not be used for the retirement 16 of municipal debt. 17 (g) Amounts appropriated to the Alaska Natural Gas Pipeline Construction 18 Impact Fund under (c) of this section for a fiscal year that are not used for grants to 19 municipalities and organizations under (d) and (e) of this section shall be retained in 20 the Alaska Natural Gas Pipeline Construction Impact fund and remain available for 21 distribution as grants under this section in succeeding fiscal years. 22 (h) Nothing in this chapter exempts money deposited into the special account 23 in the general fund established in (b) of this section from the requirements of AS 37.07 24 (Executive Budget Act) or dedicates that money, or money appropriated to the Alaska 25 Natural Gas Pipeline Construction Impact Fund, for a specific purpose. 26 * Sec. 15. AS 43.82.510(c) is amended to read: 27 (c) Each municipal advisory group serves until the later of 90 days after 28 final distribution of impact payment money under AS 43.82.505, or 29 commencement of operations of the qualified project. Expenses of a municipal 30 advisory group are eligible for reimbursement under a grant made under 31 AS 43.82.505 [A FINAL ACTION IS TAKEN ON THE APPLICATION FOR
01 WHICH THE GROUP WAS APPOINTED]. 02 * Sec. 16. AS 43.82.900 is amended by adding a new paragraph to read: 03 (14) "related party" means an entity, including a limited liability 04 company or similar incorporated or unincorporated entity, that 05 (A) is affiliated with a qualified sponsor or qualified sponsor 06 group; 07 (B) owns or operates a qualified project or any segment of a 08 qualified project; and 09 (C) is an intended beneficiary of the fiscal terms included in a 10 contract developed under this chapter. 11 * Sec. 17. AS 09.43.300(a) is amended to read: 12 (a) AS 09.43.300 - 09.43.595 govern an agreement to arbitrate made on or 13 after January 1, 2005, except as otherwise provided in a contract term developed 14 under AS 43.82.200(a)(5) and (b). 15 * Sec. 18. AS 43.82.445 is repealed. 16 * Sec. 19. The uncodified law of the State of Alaska is amended by adding a new section to 17 read: 18 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the 19 section heading of AS 43.82.220 from "Contract terms relating to royalty" to "Contract terms 20 relating to oil and gas lease, royalty provisions, and other agreements." 21 * Sec. 20. The uncodified law of the State of Alaska is amended by adding a new section to 22 read: 23 RETROACTIVITY. (a) Sections 1 - 12, 15, 16, and 18 of this Act are retroactive to 24 January 1, 2004. 25 (b) Section 17 of this Act is retroactive to January 1, 2005. 26 * Sec. 21. This Act takes effect immediately under AS 01.10.070(c).