CSSB 2001(FIN): "An Act relating to the production tax on oil and gas and to conservation surcharges on oil; relating to criminal penalties for violating conditions governing access to and use of confidential information relating to the production tax; amending the definition of 'gas' as that definition applies in the Alaska Stranded Gas Development Act; making conforming amendments; and providing for an effective date."
00 CS FOR SENATE BILL NO. 2001(FIN) 01 "An Act relating to the production tax on oil and gas and to conservation surcharges on 02 oil; relating to criminal penalties for violating conditions governing access to and use of 03 confidential information relating to the production tax; amending the definition of 'gas' 04 as that definition applies in the Alaska Stranded Gas Development Act; making 05 conforming amendments; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 08 to read: 09 LEGISLATIVE INTENT. (a) It is the intent of the legislature through sec. 11 of this 10 Act to confirm by clarification the long-standing interpretation of AS 43.55.020(f) by the 11 Department of Revenue. 12 (b) It is the intent of the legislature that the division or other unit of the Department of 13 Environmental Conservation assigned responsibility for administration of the programs under
01 AS 46.08 that are principally supported by the conservation surcharges on oil levied under 02 AS 43.55.201 - 43.55.299 and 43.55.300 - 43.55.310 03 (1) reduce program costs, including personnel costs, as necessary to operate 04 within the revenue anticipated to be generated by those surcharges, in the amounts of those 05 surcharges as amended by secs. 26 and 28 of this Act; and 06 (2) request appropriations for exceptional program needs and expansions 07 beyond what can be provided from the estimated amounts collected from those surcharges 08 from alternative funding sources. 09 * Sec. 2. AS 43.05.230(f) is amended to read: 10 (f) A wilful violation of the provisions of this section or of a condition 11 imposed under AS 43.55.040(1)(B) is punishable by a fine of not more than $5,000, 12 or by imprisonment for not more than two years, or by both. 13 * Sec. 3. AS 43.20.031(c) is amended to read: 14 (c) In computing the tax under this chapter, the taxpayer is not entitled to 15 deduct any taxes based on or measured by net income. The taxpayer may deduct the 16 tax levied and paid under AS 43.55. 17 * Sec. 4. AS 43.20.072(b) is amended to read: 18 (b) A taxpayer's business income to be apportioned under this section to the 19 state shall be the federal taxable income of the taxpayer's consolidated business for the 20 tax period, except that 21 (1) taxes based on or measured by net income that are deducted in the 22 determination of the federal taxable income shall be added back; the tax levied and 23 paid under AS 43.55 may not be added back; 24 (2) intangible drilling and development costs that are deducted as 25 expenses under 26 U.S.C. 263(c) (Internal Revenue Code) in the determination of the 26 federal taxable income shall be capitalized and depreciated as if the option to treat 27 them as expenses under 26 U.S.C. 263(c) (Internal Revenue Code) had not been 28 exercised; 29 (3) depletion deducted on the percentage depletion basis under 26 30 U.S.C. 613 (Internal Revenue Code) in the determination of the federal taxable income 31 shall be recomputed and deducted on the cost depletion basis under 26 U.S.C. 612
01 (Internal Revenue Code); and 02 (4) depreciation shall be computed on the basis of 26 U.S.C. 167 03 (Internal Revenue Code) as that section read on June 30, 1981. 04 * Sec. 5. AS 43.55.011 is amended by adding new subsections to read: 05 (e) There is levied on the producer of oil or gas a tax for all oil and gas 06 produced each month from each lease or property in the state, less any oil and gas the 07 ownership or right to which is exempt from taxation or constitutes a landowner's 08 royalty interest. Except as otherwise provided under (i) of this section, the tax is equal 09 to 22.5 percent of the production tax value of the taxable oil and gas as calculated 10 under AS 43.55.160. 11 (f) There is levied on the producer of oil or gas a tax for all oil and gas 12 produced each month from each lease or property in the state the ownership or right to 13 which constitutes a landowner's royalty interest, except for oil and gas the ownership 14 or right to which is exempt from taxation. The provisions of this subsection apply to a 15 landowner's royalty interest as follows: 16 (1) the rate of tax levied on oil is equal to five percent of the gross 17 value at the point of production of the oil; 18 (2) the rate of tax levied on gas is equal to 1.667 percent of the gross 19 value at the point of production of the gas; 20 (3) if the department determines that, for purposes of reducing the 21 producer's tax liability under (1) or (2) of this subsection, the producer has received or 22 will receive consideration from the royalty owner offsetting all or a part of the 23 producer's royalty obligation, other than a deduction under AS 43.55.020(d) of the 24 amount of a tax paid, 25 (A) notwithstanding (1) of this subsection, the tax is equal to 26 (i) for oil that is produced from a lease or property in 27 the Cook Inlet sedimentary basin, five percent of the gross value at the 28 point of production of the oil; 29 (ii) for oil, except oil described in (i) of this 30 subparagraph, 22.5 percent of the gross value at the point of production 31 of the oil; and
01 (B) notwithstanding (2) of this subsection, for gas the tax is 02 equal to 11.25 percent of the gross value at the point of production of the gas. 03 (g) In addition to the taxes levied under (e) and (f) of this section, during each 04 month for which the price index determined under (h) of this section is greater than 05 zero, there is levied on the producer of oil or gas a tax for all oil and gas produced 06 during that month from each lease or property in the state, less any oil and gas the 07 ownership or right to which is exempt from taxation or constitutes a landowner's 08 royalty interest. Except as otherwise provided under (i) of this section, the tax levied 09 under this subsection is equal to .1 percent of the production tax value of the taxable 10 oil and gas as calculated under AS 43.55.160, multiplied by the price index 11 determined under (h) of this section. However, application of this subsection may not, 12 when added to the tax levied under (e) of this section, impose a tax levy of more than 13 50 percent of the production tax value of taxable oil and gas as calculated under 14 AS 43.55.160. 15 (h) For purposes of (g) of this section, the price index for a month is calculated 16 by subtracting 35 from the number that is equal to the quotient of the production tax 17 value of the taxable oil and gas produced during that month, as calculated under 18 AS 43.55.160, divided by the sum of (1) the number of barrels of that oil less three- 19 quarters of the number of barrels of the taxable oil produced during that month from 20 leases or properties in the Cook Inlet sedimentary basin, and (2) two-thirds of the 21 number of barrels of oil equivalent of that gas, less (A) one-sixth of the number of 22 barrels of oil equivalent of the taxable gas produced during that month from leases or 23 properties in the state located south of 68 degrees 15 minutes North latitude outside 24 the Cook Inlet sedimentary basin, and less (B) one-third of the number of barrels of oil 25 equivalent of the taxable gas produced during that month from leases or properties in 26 the Cook Inlet sedimentary basin. For purposes of this subsection, "barrel of oil 27 equivalent" means the amount of gas that has an energy content of 6,000,000 British 28 thermal units. The department by regulation shall establish sampling, testing, and 29 averaging methods for determining the energy content of a producer's gas produced 30 during a month. 31 (i) For a month that ends before April 1, 2021, the total tax levied by (e) and
01 (g) of this section on gas produced from a lease or property in the Cook Inlet 02 sedimentary basin may not exceed 03 (1) for a lease or property that first commenced commercial production 04 of gas before April 1, 2006, the product obtained by multiplying (A) the amount of gas 05 produced during that month from the lease or property, times (B) the average rate of 06 tax that was imposed under this chapter on gas produced from the lease or property for 07 the 12-month period ending on March 31, 2006, times (C) the average prevailing value 08 for gas delivered in the Cook Inlet area for the 12-month period ending March 31, 09 2006, as determined by the department under AS 43.55.020(f); 10 (2) for a lease or property that first commences commercial production 11 of gas after March 31, 2006, the product obtained by multiplying (A) the amount of 12 gas produced during that month from the lease or property, times (B) the average rate 13 of tax that was imposed under this chapter on gas produced from all leases or 14 properties in the Cook Inlet sedimentary basin for the 12-month period ending on 15 March 31, 2006, times (C) the average prevailing value for gas delivered in the Cook 16 Inlet area for the 12-month period ending March 31, 2006, as determined by the 17 department under AS 43.55.020(f). 18 * Sec. 6. AS 43.55.017(a) is amended to read: 19 (a) Except as provided in this chapter, the taxes imposed by this chapter are in 20 place of all taxes now imposed by the state or any of its municipalities, and neither the 21 state nor a municipality may impose a tax on [UPON] 22 (1) producing oil or gas leases; 23 (2) oil or gas produced or extracted in the state; 24 (3) the value of intangible drilling and development costs, as 25 described in 26 U.S.C. 263(c) (Internal Revenue Code), as amended through 26 January 1, 1974 [EXPLORATION EXPENSES]. 27 * Sec. 7. AS 43.55.020(a) is repealed and reenacted to read: 28 (a) Ninety-five percent of the total tax levied by AS 43.55.011(e) - (g), net of 29 any credits applied under this chapter, is due on the last day of each calendar month on 30 oil and gas produced from each lease or property during the preceding month. The 31 remaining portion of the tax levied by AS 43.55.011(e) - (g), net of any credits applied
01 under this chapter, is due on March 31 of the year following the calendar year during 02 which the oil and gas were produced. An unpaid amount of tax that is not paid when 03 due in accordance with this subsection becomes delinquent. An overpayment of tax 04 with respect to a month may be applied against the tax due for any later month. 05 Notwithstanding any contrary provision of AS 43.05.280, interest on an overpayment 06 is allowed only from a date that is 90 days after the later of (1) the March 31 described 07 in this subsection, or (2) the date that the statement required under AS 43.55.030(a) 08 and (e) to be filed on or before that March 31 is filed. Interest is not allowed if the 09 overpayment was refunded within the 90-day period. 10 * Sec. 8. AS 43.55.020(b) is amended to read: 11 (b) The production tax on oil and [OR] gas shall be paid by or on behalf of the 12 producer. 13 * Sec. 9. AS 43.55.020(d) is amended to read: 14 (d) In making settlement with the royalty owner for oil and gas that is 15 taxable under AS 43.55.011, the producer may deduct the amount of the tax paid on 16 taxable royalty oil and [OR] gas, or may deduct taxable royalty oil or gas equivalent 17 in value at the time the tax becomes due to the amount of the tax paid. Unless 18 otherwise agreed between the producer and the royalty owner, the amount of the 19 tax paid under AS 43.55.011(e) and (g) on taxable royalty oil and gas for a month, 20 other than oil and gas the ownership or right to which constitutes a landowner's 21 royalty interest, is considered to be the gross value at the point of production of 22 the taxable royalty oil and gas produced during the month multiplied by a figure 23 that is a quotient, in which 24 (1) the numerator is the producer's total tax liability under 25 AS 43.55.011(e) and (g) for the month of production; and 26 (2) the denominator is the total gross value at the point of 27 production of the oil and gas taxable under AS 43.55.011(e) and (g) produced by 28 the producer from all leases and properties in the state during the month. 29 * Sec. 10. AS 43.55.020(e) is repealed and reenacted to read: 30 (e) Gas flared, released, or allowed to escape in excess of the amount 31 authorized by the Alaska Oil and Gas Conservation Commission is considered, for the
01 purpose of AS 43.55.011 - 43.55.180, as gas produced from a lease or property. Oil or 02 gas used in the operation of a lease or property in the state in drilling for or producing 03 oil or gas, or for repressuring, except to the extent determined by the Alaska Oil and 04 Gas Conservation Commission to be waste, is not considered, for the purpose of 05 AS 43.55.011 - 43.55.180, as oil or gas produced from a lease or property. 06 * Sec. 11. AS 43.55.020(f) is amended to read: 07 (f) If oil or gas is produced but not sold, or if oil or gas is produced and 08 sold under circumstances where the sale price does not represent the prevailing value 09 for oil or gas of like kind, character, or quality in the field or area from which the 10 product is produced, the department may require the tax to be paid upon the basis of 11 the value of oil or gas of the same kind, quality, and character prevailing for that field 12 or area during the calendar month of production or sale [FOR THAT FIELD OR 13 AREA]. 14 * Sec. 12. AS 43.55 is amended by adding a new section to read: 15 Sec. 43.55.024. Tax credits for certain losses and expenditures. (a) A 16 producer or explorer may take a tax credit for a qualified capital expenditure as 17 follows: 18 (1) notwithstanding that a qualified capital expenditure may be a 19 deductible lease expenditure for purposes of calculating the production tax value of oil 20 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under 21 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025, 22 (A) a producer or explorer that incurs a qualified capital 23 expenditure may also elect to take a tax credit against a tax due under 24 AS 43.55.011(e) in the amount of 20 percent of that expenditure; 25 (B) for a calendar year for which the producer makes an 26 election under AS 43.55.160(f), instead of taking a tax credit at a rate 27 authorized by (A) of this paragraph as to each separate qualified capital 28 expenditure after it has been incurred, a producer that incurs a qualified capital 29 expenditure during that year and that wishes to apply a credit based on that 30 expenditure against a tax due under AS 43.55.011(e) shall calculate and apply 31 every month an annualized tax credit in an amount equal to 1 2/3 percent of the
01 total qualified capital expenditures incurred during that year and for which the 02 tax credit is taken for that year; 03 (2) a producer or explorer may take a credit for a qualified capital 04 expenditure incurred in connection with geological or geophysical exploration or in 05 connection with an exploration well only if the producer or explorer provides to the 06 department, as part of the statement required under AS 43.55.030(a) for the month for 07 which the credit is sought to be taken, the producer's or explorer's written agreement 08 (A) to notify the Department of Natural Resources, within 30 09 days after completion of the geological or geophysical data processing or 10 completion of the well, or within 30 days after the statement is filed, whichever 11 is the latest, of the date of completion and to submit a report to that department 12 describing the processing sequence and provide a list of data sets available; 13 (B) to provide to the Department of Natural Resources, within 14 30 days after the date of a request, specific data sets, ancillary data, and reports 15 identified in (A) of this paragraph; 16 (C) that, notwithstanding any provision of AS 38, the 17 Department of Natural Resources shall hold confidential the information 18 provided to that department under this paragraph for 10 years following the 19 completion date, after which the department shall publicly release the 20 information after 30 days' public notice. 21 (b) A producer or explorer may elect to take a tax credit in the amount of 22.5 22 percent of a carried-forward annual loss. A credit under this subsection may be applied 23 against a tax due under AS 43.55.011(e) and may be applied irrespective of whether 24 the producer or explorer also claims a credit for transitional investment expenditures 25 authorized by (j) of this section. For purposes of this subsection, a carried-forward 26 annual loss is the amount of a producer's or explorer's adjusted lease expenditures 27 under AS 43.55.160 for a previous calendar year that was not deductible in any month 28 under AS 43.55.160(a) and (b). 29 (c) A credit or portion of a credit under this section may not be used to reduce 30 a person's tax liability under AS 43.55.011(e) for any month below zero, and any 31 unused credit or portion of a credit not used under this subsection may be applied in a
01 later month. 02 (d) Except as limited by (j) of this section, a person entitled to take a tax credit 03 under this section that wishes to transfer the unused credit to another person may 04 apply to the department for a transferable tax credit certificate. An application under 05 this subsection must be on a form prescribed by the department and must include 06 supporting information and documentation that the department reasonably requires. 07 The department shall grant or deny an application, or grant an application as to a lesser 08 amount than that claimed and deny it as to the excess, not later than 60 days after the 09 latest of (1) March 31 of the year following the calendar year in which the qualified 10 capital expenditure or carried-forward annual loss for which the credit is claimed was 11 incurred; (2) if the applicant is required under AS 43.55.030(a) and (e) to file a 12 statement on or before March 31 of the year following the calendar year in which the 13 qualified capital expenditures or carried-forward annual loss for which the credit is 14 claimed was incurred, the date the statement was filed; or (3) the date the application 15 was received by the department. If, based on the information then available to it, the 16 department is reasonably satisfied that the applicant is entitled to a credit, the 17 department shall issue the applicant a transferable tax credit certificate for the amount 18 of the credit. A certificate issued under this subsection does not expire. 19 (e) A person to which a transferable tax credit certificate is issued under (d) of 20 this section may transfer the certificate to another person, and a transferee may further 21 transfer the certificate. Subject to the limitations set out in (a) - (c) of this section, and 22 notwithstanding any action the department may take with respect to the applicant 23 under (g) of this section, the owner of a certificate may apply the credit or a portion of 24 the credit shown on the certificate only against a tax due under AS 43.55.011(e). 25 However, a credit shown on a transferable tax credit certificate may not be applied to 26 reduce a transferee's total tax due under AS 43.55.011(e) on oil and gas produced 27 during a calendar year to less than 80 percent of the tax that would otherwise be due 28 without applying that credit. Any portion of a credit not used under this subsection 29 may be applied in a later period. 30 (f) Under standards established in regulations adopted by the department and 31 subject to appropriations made by law, the department, on the written application of
01 the person to whom a transferable tax credit has been issued under (d) of this section 02 and whose average amount of oil and gas produced a day taxable under 03 AS 43.55.011(e) is not more than 50,000 barrels of oil equivalent a day for the 04 preceding calendar year, shall issue a cash refund, in whole or in part, for the 05 certificate if the department finds 06 (1) after investigation and audit of the tax credit claim by the 07 department, that the applicant is entitled to the credit to the extent of the refund 08 amount; 09 (2) within 24 months after having applied for the transferable tax credit 10 certificate, that the applicant incurred a qualified capital expenditure or was the 11 successful bidder on a bid submitted for a lease on state land under AS 38.05.180(f); 12 (3) that the amount of the refund would not exceed the total of 13 qualified capital expenditures and successful bids described in (2) of this subsection 14 that have not been the subject of a finding made under this paragraph for purposes of a 15 previous refund; 16 (4) that the applicant does not have an outstanding liability to the state 17 for unpaid delinquent taxes under this title; and 18 (5) that the sum of the amount of the refund applied for and amounts 19 previously refunded to the applicant during the calendar year under this subsection 20 would not exceed $25,000,000. 21 (g) The issuance of a transferable tax credit certificate under (d) of this section 22 does not limit the department's ability to later audit a tax credit claim to which the 23 certificate relates or to adjust the claim if the department determines that the applicant 24 was not entitled to the amount of the credit for which the certificate was issued. The 25 tax liability of the applicant under AS 43.55.011(e) and 43.55.017 - 43.55.180 is 26 increased by the amount of the credit that exceeds that to which the applicant was 27 entitled, or the applicant's available valid outstanding credits applicable against the tax 28 levied by AS 43.55.011(e) are reduced by that amount. If the applicant's tax liability is 29 increased under this subsection, the increase bears interest under AS 43.05.225 from 30 the date the transferable tax credit certificate was issued. For purposes of this 31 subsection, an applicant that is an explorer is considered a producer subject to the tax
01 levied by AS 43.55.011(e). 02 (h) The department may adopt regulations to carry out the purposes of this 03 section, including prescribing reporting, record keeping, and certification procedures 04 and requirements to verify the accuracy of credits claimed and to ensure that a credit is 05 not used more than once, and otherwise implementing this section. 06 (i) A person may not elect to take a tax credit under (a) or (j) of this section for 07 an expenditure incurred to acquire an asset (1) the cost of previously acquiring which 08 was a lease expenditure under AS 43.55.160(c) or would have been a lease 09 expenditure under AS 43.55.160(c) if it had been incurred on or after April 1, 2006; or 10 (2) that has previously been placed in service in the state. An expenditure to acquire an 11 asset is not excluded under this subsection if not more than an immaterial portion of 12 the asset meets a description under (1) or (2) of this subsection. For purposes of this 13 subsection, "asset" includes geological, geophysical, and well data and interpretations. 14 (j) For the purposes of this section, 15 (1) a producer's or explorer's transitional investment expenditures are 16 the sum of the expenditures the producer or explorer incurred on or after April 1, 17 2001, and before April 1, 2006, that would be qualified capital expenditures if they 18 were incurred on or after April 1, 2006, less the sum of the payments or credits the 19 producer or explorer received before April 1, 2006, for the sale or other transfer of 20 assets, including geological, geophysical, or well data or interpretations, acquired by 21 the producer or explorer as a result of expenditures the producer or explorer incurred 22 before April 1, 2006, that would be qualified capital expenditures, if they were 23 incurred on or after April 1, 2006; 24 (2) a producer or explorer may elect to take a tax credit against a tax 25 due under AS 43.55.011(e) in the amount of 20 percent of the producer's or explorer's 26 transitional investment expenditures, but only to the extent that the amount does not 27 exceed 28 (A) one-half of the producer's or explorer's qualified capital 29 expenditures that are incurred during the month for which the credit is taken, if 30 the producer or explorer does not make an election under AS 43.55.160(f); 31 (B) 1/24 of the producer's or explorer's qualified capital
01 expenditures that are incurred during the calendar year that includes the month 02 for which the credit is taken, if the producer or explorer makes an election 03 under AS 43.55.160(f); 04 (3) a producer or explorer may not take a tax credit for a transitional 05 investment expenditure 06 (A) for any month that ends the later of 07 (i) April 30, 2013; or 08 (ii) the seventh anniversary of the last day of the month 09 for which the producer first applies a credit under this subsection 10 against a tax due under AS 43.55.011(e), if the producer did not have 11 commercial production of oil or gas from a lease or property in the state 12 before April 1, 2006; 13 (B) more than once; or 14 (C) if a credit for that expenditure was taken under 15 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 16 (4) notwithstanding (d), (e), and (g) of this section, a producer or 17 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for a 18 transitional investment expenditure. 19 (k) As a condition of receiving a tax credit under this section, a producer or 20 explorer that obtains the tax credit for or directly related to a pipeline, facility, or other 21 asset that is or becomes subject to regulation by the Federal Energy Regulatory 22 Commission or the Regulatory Commission of Alaska, or a successor regulatory body 23 shall at all times support and in all rate proceedings file to flow through 100 percent of 24 the tax credits to ratepayers as a reduction in the costs of service for the pipeline, 25 facility, or other asset. 26 (l) In this section, 27 (1) "barrel of oil equivalent" means one barrel, in the case of oil, or 28 6,000 cubic feet, in the case of gas; 29 (2) "qualified capital expenditure" means, except as otherwise 30 provided in (i) of this section, an expenditure that is a lease expenditure under 31 AS 43.55.160 and is
01 (A) incurred for geological or geophysical exploration; or 02 (B) treated as a capitalized expenditure under 26 U.S.C. 03 (Internal Revenue Code), as amended, regardless of elections made under 26 04 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 05 (i) treated as a capitalized expenditure for federal 06 income tax reporting purposes by the person incurring the expenditure; 07 or 08 (ii) eligible to be deducted as an expense under 26 09 U.S.C. 263(c) (Internal Revenue Code), as amended. 10 * Sec. 13. AS 43.55.025(a) is amended to read: 11 (a) Subject to the terms and conditions of this section, [ON OIL AND GAS 12 PRODUCED ON OR AFTER JULY 1, 2004, FROM AN OIL AND GAS LEASE, 13 OR ON GAS PRODUCED FROM A GAS ONLY LEASE,] a credit against the 14 production tax due under AS 43.55.011(e) [THIS CHAPTER] is allowed for 15 exploration expenditures that qualify under (b) of this section in an amount equal to 16 one of the following: 17 (1) 20 percent of the total exploration expenditures that qualify only 18 under (b) and (c) of this section; 19 (2) 20 percent of the total exploration expenditures for work performed 20 before July 1, 2007, and that qualify only under (b) and (d) of this section; 21 (3) 40 percent of the total exploration expenditures that qualify under 22 (b), (c), and (d) of this section; or 23 (4) 40 percent of the total exploration expenditures that qualify only 24 under (b) and (e) of this section. 25 * Sec. 14. AS 43.55.025(b) is amended to read: 26 (b) To qualify for the production tax credit under (a) of this section, an 27 exploration expenditure must be incurred for work performed on or after July 1, 2003, 28 and before July 1, 2016 [2007], except that an exploration expenditure for a Cook Inlet 29 prospect must be incurred for work performed on or after July 1, 2005, [AND 30 BEFORE JULY 1, 2010, AND EXCEPT THAT AN EXPLORATION 31 EXPENDITURE, IN WHOLE OR IN PART, SOUTH OF 68 DEGREES, 15
01 MINUTES, NORTH LATITUDE, AND NOT PART OF A COOK INLET 02 PROSPECT MUST BE INCURRED FOR WORK PERFORMED ON OR AFTER 03 JULY 1, 2003, AND BEFORE JULY 1, 2010,] and 04 (1) may be for seismic or geophysical exploration costs not connected 05 with a specific well; 06 (2) if for an exploration well, 07 (A) must be incurred by an explorer that holds an interest in the 08 exploration well for which the production tax credit is claimed; 09 (B) may be for either an oil or gas discovery well or a dry hole; 10 and 11 (C) must be for goods, services, or rentals of personal property 12 reasonably required for the surface preparation, drilling, casing, cementing, 13 and logging of an exploration well, and, in the case of a dry hole, for the 14 expenses required for abandonment if the well is abandoned within 18 months 15 after the date the well was spudded; 16 (3) may not be for testing, stimulation, or completion costs; 17 administration, supervision, engineering, or lease operating costs; geological or 18 management costs; community relations or environmental costs; bonuses, taxes, or 19 other payments to governments related to the well; or other costs that are generally 20 recognized as indirect costs or financing costs; and 21 (4) may not be incurred for an exploration well or seismic exploration 22 that is included in a plan of exploration or a plan of development for any unit on 23 May 13, 2003. 24 * Sec. 15. AS 43.55.025(f) is amended to read: 25 (f) For a production tax credit under this section, 26 (1) an explorer shall, in a form prescribed by the department and 27 within six months of the completion of the exploration activity, claim the credit and 28 submit information sufficient to demonstrate to the department's satisfaction that the 29 claimed exploration expenditures qualify under this section; 30 (2) an explorer shall agree, in writing, 31 (A) to notify the Department of Natural Resources, within 30
01 days after completion of seismic or geophysical data processing, completion of 02 a well, or filing of a claim for credit, whichever is the latest, for which 03 exploration costs are claimed, of the date of completion and submit a report to 04 that department describing the processing sequence and providing a list of data 05 sets available; if, under (c)(2)(B) of this section, an explorer submits a claim 06 for a credit for expenditures for an exploration well that is located within three 07 miles of a well already drilled for oil and gas, in addition to the submissions 08 required under (1) of this subsection, the explorer shall submit the information 09 necessary for the commissioner of natural resources to evaluate the validity of 10 the explorer's claim that the well is directed at a distinctly separate exploration 11 target, and the commissioner of natural resources shall, upon receipt of all 12 evidence sufficient for the commissioner to evaluate the explorer's claim, make 13 that determination within 60 days; 14 (B) to provide to the Department of Natural Resources, within 15 30 days after the date of a request, specific data sets, ancillary data, and reports 16 identified in (A) of this paragraph; 17 (C) that, notwithstanding any provision of AS 38, information 18 provided under this paragraph will be held confidential by the Department of 19 Natural Resources for 10 years following the completion date, at which time 20 that department will release the information after 30 days' public notice; 21 (3) if more than one explorer holds an interest in a well or seismic 22 exploration, each explorer may claim an amount of credit that is proportional to the 23 explorer's cost incurred; 24 (4) the department may exercise the full extent of its powers as though 25 the explorer were a taxpayer under this title, in order to verify that the claimed 26 expenditures are qualified exploration expenditures under this section; and 27 (5) if the department is satisfied that the explorer's claimed 28 expenditures are qualified under this section, the department shall issue to the explorer 29 a production tax credit certificate for the amount of credit to be allowed against 30 production taxes due under AS 43.55.011(e) [THIS CHAPTER; HOWEVER, 31 NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, THE
01 DEPARTMENT MAY NOT ISSUE TO AN EXPLORER A PRODUCTION TAX 02 CREDIT CERTIFICATE IF THE TOTAL OF PRODUCTION TAX CREDITS 03 SUBMITTED FOR COOK INLET PRODUCTION, BASED ON EXPLORATION 04 EXPENDITURES FOR WORK PERFORMED DURING THE PERIOD 05 DESCRIBED IN (b) OF THIS SECTION FOR THAT PRODUCTION, THAT HAVE 06 BEEN APPROVED BY THE DEPARTMENT EXCEEDS $20,000,000]. 07 * Sec. 16. AS 43.55.025(h) is amended to read: 08 (h) A producer that purchases a production tax credit certificate may apply the 09 credits against its production tax liability under AS 43.55.011(e) [THIS CHAPTER]. 10 Regardless of the price the producer paid for the certificate, the producer may receive 11 a credit against its production tax liability for the full amount of the credit, but for not 12 more than the amount for which the certificate is issued. A production tax credit 13 allowed under this section may not be applied more than once. 14 * Sec. 17. AS 43.55.025(i) is amended to read: 15 (i) For a production tax credit under this section, 16 (1) the amount of the credit that may be applied against the production 17 tax for each tax month may not exceed the total production tax liability under 18 AS 43.55.011(e) of the taxpayer applying the credit for the same month; and 19 (2) an amount of the production tax credit that is greater than the total 20 tax liability under AS 43.55.011(e) of the taxpayer applying the credit for a tax month 21 may be carried forward and applied against the taxpayer's production tax liability 22 under AS 43.55.011(e) in one or more immediately following months. 23 * Sec. 18. AS 43.55.030(a) is amended to read: 24 (a) The tax shall be paid to the department, and the person paying the tax shall 25 file with the department at the time the tax or a portion of the tax is required to be 26 paid a statement, under oath, on forms prescribed by or acceptable to the department, 27 giving, with other information required, the following: 28 (1) a description of each [THE] lease or property from which the oil 29 and [OR] gas were [WAS] produced, by name, legal description, lease number, or 30 [BY] accounting codes [CODE NUMBERS] assigned by the department; 31 (2) the names of the producer and the person paying the tax;
01 (3) the gross amount of oil and the gross amount of [OR] gas 02 produced from each [THE] lease or property, and the percentage of the gross amount 03 of oil and gas owned by each producer for whom the tax is paid; 04 (4) the gross [TOTAL] value at the point of production of the oil 05 and of the [OR] gas produced from each [THE] lease or property owned by each 06 producer for whom the tax is paid; [AND] 07 (5) the name of the first purchaser and the price received for the oil 08 and for the [OR] gas, unless relieved from this requirement in whole or in part by 09 the department; and 10 (6) the producer's lease expenditures and adjustments as 11 calculated under AS 43.55.160 [IF SOLD IN THE STATE]. 12 * Sec. 19. AS 43.55.030(d) is amended to read: 13 (d) Reports by or on behalf of the producer are delinquent the first day 14 following the day the tax is due. [EACH PRODUCER IS SUBJECT TO A PENALTY 15 OF $25 A DAY FOR EACH LEASE OR PROPERTY UPON WHICH THE 16 REPORT IS NOT FILED. THE PENALTY FOR FAILURE TO FILE A REPORT IS 17 IN ADDITION TO THE PENALTY FOR DELINQUENT TAXES, AND IS A LIEN 18 AGAINST THE ASSETS OF THE PRODUCER.] 19 * Sec. 20. AS 43.55.030 is amended by adding a new subsection to read: 20 (e) In addition to other required information, the statement required to be filed 21 on or before March 31 of a year must show any adjustments or corrections to the 22 statements that were required under (a) of this section to be filed for the months of the 23 preceding calendar year during which the oil or gas was produced. 24 * Sec. 21. AS 43.55.040 is amended to read: 25 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 26 AS 43.05.405 - 43.05.499, the department may 27 (1) require a person engaged in production and the agent or employee 28 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 29 or gas to furnish, whether by the filing of regular statements or reports or 30 otherwise, additional information that is considered by the department as necessary to 31 compute the amount of the tax; notwithstanding any contrary provision of law, the
01 disclosure of additional information under this paragraph to the producer 02 obligated to pay the tax does not violate AS 40.25.100(a) or AS 43.05.230(a); 03 before disclosing information under this paragraph that is otherwise required to 04 be held confidential under AS 40.25.100(a) or AS 43.05.230(a), the department 05 shall 06 (A) provide the person that furnished the information a 07 reasonable opportunity to be heard regarding the proposed disclosure and 08 the conditions to be imposed under (B) of this paragraph; and 09 (B) impose appropriate conditions limiting 10 (i) access to the information to those legal counsel, 11 consultants, employees, officers, and agents of the producer who 12 have a need to know that information for the purpose of 13 determining or contesting the producer's tax obligation; and 14 (ii) the use of the information to use for that 15 purpose; 16 (2) examine the books, records, and files of such a person; 17 (3) conduct hearings and compel the attendance of witnesses and the 18 production of books, records, and papers of any person; and 19 (4) make an investigation or hold an inquiry that is considered 20 necessary to a disclosure of the facts as to 21 (A) the amount of production from any oil or gas location, or of 22 a company or other producer of oil or gas; and 23 (B) the rendition of the oil and gas for taxing purposes. 24 * Sec. 22. AS 43.55.080 is amended to read: 25 Sec. 43.55.080. Collection and deposit of revenue. Except as otherwise 26 provided under art. IX, sec. 17, Constitution of the State of Alaska, the [THE] 27 department shall deposit in the general fund the money collected by it under 28 AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150]. 29 * Sec. 23. AS 43.55.135 is amended to read: 30 Sec. 43.55.135. Measurement. For the purposes of AS 43.55.011 - 43.55.180 31 [AS 43.55.011 - 43.55.150], oil is [SHALL BE] measured in terms of a "barrel of oil"
01 and gas is [SHALL BE] measured in terms of a "cubic foot of gas." 02 * Sec. 24. AS 43.55.150(a) is amended to read: 03 (a) For the purposes of AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150], 04 the gross value at the point of production is [SHALL BE] calculated using the 05 reasonable costs of transportation of the oil or gas. The reasonable costs of 06 transportation are [SHALL BE] the actual costs, except when the 07 (1) [WHEN THE] parties to the transportation of oil or gas are 08 affiliated; 09 (2) [WHEN THE] contract for the transportation of oil or gas is not an 10 arm's length transaction or is not representative of the market value of that 11 transportation; and 12 (3) [WHEN THE] method of transportation of oil or gas is not 13 reasonable in view of existing alternative methods of transportation. 14 * Sec. 25. AS 43.55 is amended by adding new sections to article 1 to read: 15 Sec. 43.55.160. Determination of production tax value of oil and gas. (a) 16 Except as provided in (f) of this section, for purposes of AS 43.55.011(e) and (g), the 17 production tax value of the taxable oil and gas produced during a month, other than 18 gas produced from leases or properties in the Cook Inlet sedimentary basin, is (1) the 19 total of (A) the gross value at the point of production of the oil taxable under 20 AS 43.55.011(e) and (g) and produced by the producer from all leases or properties in 21 the state, less three-quarters of the gross value at the point of production of the oil 22 taxable under AS 43.55.011(e) and (g) and produced by the producer from leases or 23 properties in the Cook Inlet sedimentary basin, and (B) two-thirds of the gross value at 24 the point of production of the gas taxable under AS 43.55.011(e) and (g) and produced 25 by the producer from all leases or properties in the state outside the Cook Inlet 26 sedimentary basin, less one-sixth of the gross value at the point of production of the 27 gas taxable under AS 43.55.011(e) and (g) and produced by the producer from all 28 leases or properties in the state located south of 68 degrees 15 minutes North latitude 29 outside the Cook Inlet sedimentary basin, (2) less the producer's lease expenditures for 30 the month as adjusted under (e) of this section, other than lease expenditures 31 applicable to gas produced from leases or properties in the Cook Inlet sedimentary
01 basin. Except as provided in (f) of this section, for purposes of AS 43.55.011(e) and 02 (g), the production tax value of the taxable gas produced during a month from leases 03 or properties in the Cook Inlet sedimentary basin is one-third of the gross value at the 04 point of production of the gas taxable under AS 43.55.011(e) and (g) and produced by 05 the producer from those leases or properties, less the producer's lease expenditures for 06 the month applicable to gas produced from leases or properties in the Cook Inlet 07 sedimentary basin, as adjusted under (e) of this section. However, a production tax 08 value calculated under this subsection may not be less than zero. If a producer does 09 not produce taxable oil or gas during a month, the producer is considered to have 10 generated a positive production tax value if a calculation described in this subsection 11 yields a positive number because the producer's adjusted lease expenditures for a 12 month are less than zero as a result of the producer's receiving a payment or credit 13 under (e) of this section or otherwise. 14 (b) For purposes of administration of (a) of this section, 15 (1) any adjusted lease expenditures that would otherwise be deductible 16 in a month but whose deduction would cause a production tax value calculated under 17 (a) of this section of taxable oil or gas produced during the month to be less than zero 18 may be added to the producer's adjusted lease expenditures for one or more other 19 months in the same calendar year; the total of any adjusted lease expenditures that are 20 not deductible in any month during a calendar year because their deduction would 21 cause a production tax value calculated under (a) of this section of taxable oil or gas 22 produced during one or more months to be less than zero may be used to establish a 23 carried-forward annual loss under AS 43.55.024(b); 24 (2) an explorer that has taken a tax credit under AS 43.55.024(b) or 25 that has obtained a transferable tax credit certificate under AS 43.55.024(d) for the 26 amount of a tax credit under AS 43.55.024(b) is considered a producer, subject to the 27 tax levied under AS 43.55.011(e), to the extent that the explorer generates a positive 28 production tax value as the result of the explorer's receiving a payment or credit 29 described in (e) of this section. 30 (c) For purposes of this section, 31 (1) a producer's lease expenditures for a period are the costs upstream
01 of the point of production of oil and gas that are incurred on or after April 1, 2006, by 02 the producer during the period and that are direct and ordinary and necessary costs of 03 exploring for, developing, or producing oil or gas deposits located within the 04 producer's leases or properties in the state or, in the case of land in which the producer 05 does not own a working interest, direct and ordinary and necessary costs of exploring 06 for oil or gas deposits located within other land in the state; in determining whether 07 costs are direct and ordinary and necessary costs of exploring for, developing, or 08 producing oil or gas deposits located within a lease or property or other land in the 09 state, 10 (A) the department shall give substantial weight to the typical 11 industry practices and standards in the state that determine the costs that an 12 operator is allowed to bill a working interest owner that is not the operator, 13 under unit operating agreements or similar operating agreements that were in 14 effect on or before December 1, 2005, and were subject to negotiation with at 15 least one working interest owner with substantial bargaining power, other than 16 the operator; and 17 (B) as to matters that are not addressed by the industry 18 practices and standards described in (A) of this paragraph or as to which those 19 practices and standards are not clear or are not uniform, the department shall 20 give substantial weight to the standards adopted by the Department of Natural 21 Resources that determine the costs, other than interest, that a lessee is allowed 22 to deduct from revenue in calculating net profits under a lease issued under 23 AS 38.05.180(f)(3)(B), (D), or (E); 24 (2) the Department of Revenue may authorize a producer, including a 25 producer that is an operator, to treat as its lease expenditures under this section the 26 costs paid by the producer that are billed to the producer by an operator in accordance 27 with the terms of a unit operating agreement or similar operating agreement if the 28 Department of Revenue finds that 29 (A) the pertinent provisions of the operating agreement are 30 substantially consistent with the Department of Revenue's determinations and 31 standards otherwise applicable under this subsection; and
01 (B) at least one working interest owner party to the agreement, 02 other than the operator, has substantial incentive and ability to effectively audit 03 billings under the agreement; 04 (3) an activity does not need to be physically located on, near, or 05 within the premises of the lease or property within which an oil or gas deposit being 06 explored for, developed, or produced is located in order for the cost of the activity to 07 be a cost upstream of the point of production of the oil or gas; 08 (4) the lease expenditures that are applicable to gas produced from 09 leases or properties in the Cook Inlet sedimentary basin and the lease expenditures that 10 are applicable to oil and other gas shall be determined under regulations adopted by 11 the department that provide for reasonable methods of allocating costs between oil and 12 gas and between the Cook Inlet sedimentary basin and the rest of the state; 13 (5) "direct costs" include 14 (A) an expenditure, when incurred, to acquire an item if the 15 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure 16 may be required to be capitalized rather than treated as an expense for financial 17 accounting or federal income tax purposes; 18 (B) payments of or in lieu of property taxes, sales and use 19 taxes, motor fuel taxes, and excise taxes; 20 (C) a reasonable allowance, as determined under regulations 21 adopted by the department, for overhead expenses directly related to exploring 22 for, developing, and producing oil or gas deposits located within leases or 23 properties or other land in the state. 24 (d) For purposes of (c) of this section, lease expenditures do not include 25 (1) depreciation, depletion, or amortization; 26 (2) oil or gas royalty payments, production payments, lease profit 27 shares, or other payments or distributions of a share of oil or gas production, profit, or 28 revenue; 29 (3) taxes based on or measured by net income; 30 (4) interest or other financing charges or costs of raising equity or debt 31 capital;
01 (5) acquisition costs for a lease or property or exploration license; 02 (6) costs arising from fraud, wilful misconduct, or gross negligence; 03 (7) fines or penalties imposed by law; 04 (8) costs of arbitration, litigation, or other dispute resolution activities 05 that involve the state or concern the rights or obligations among owners of interests in, 06 or rights to production from, one or more leases or properties or a unit; 07 (9) donations; 08 (10) costs incurred in organizing a partnership, joint venture, or other 09 business entity or arrangement; 10 (11) amounts paid to indemnify the state; the exclusion provided by 11 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 12 a third-party insurer or surety; 13 (12) surcharges levied under AS 43.55.201 or 43.55.300; 14 (13) for a transaction that is an internal transfer or is otherwise not an 15 arm's length transaction, expenditures incurred that are in excess of fair market value; 16 (14) an expenditure incurred to purchase an interest in any corporation, 17 partnership, limited liability company, business trust, or any other business entity, 18 whether or not the transaction is treated as an asset sale for federal income tax 19 purposes; 20 (15) a tax levied under AS 43.55.011; 21 (16) the portion of costs incurred for dismantlement, removal, 22 surrender, or abandonment of a facility, pipeline, well pad, platform, or other 23 structure, or for the restoration of a lease, field, unit, area, body of water, or right-of- 24 way in conjunction with dismantlement, removal, surrender, or abandonment, that is 25 attributable to production of oil or gas occurring before April 1, 2006; the portion is 26 calculated as a ratio of the amount of oil and gas production associated with the 27 facility, pipeline, well pad, platform, or other structure, lease, field, unit, area, body of 28 water, or right-of-way occurring before April 1, 2006, to the total amount of oil and 29 gas production associated with that facility, pipeline, well pad, platform, or other 30 structure, lease, field, unit, area, body of water, or right-of-way through the end of the 31 calendar month before commencement of the dismantlement, removal, surrender, or
01 abandonment; for purposes of the ratio calculated under this paragraph, 6,000 cubic 02 feet of gas is considered to be equivalent to one barrel of oil; a cost is not excluded 03 under this paragraph if the dismantlement, removal, surrender, or abandonment for 04 which the cost is incurred is undertaken for the purpose of replacing, renovating, or 05 improving the facility, pipeline, well pad, platform, or other structure; 06 (17) losses or damages resulting from an unpermitted oil discharge that 07 is not confined to a gravel pad, or costs to contain, clean up, or remediate such an 08 unpermitted oil discharge to the extent that those costs exceed the routine costs of 09 operation for a producer or explorer that would otherwise be incurred as lease 10 expenditures in the absence of the unpermitted oil discharge; this paragraph does not 11 apply to the cost of developing and maintaining an oil discharge prevention and 12 contingency plan under AS 46.04.030; 13 (18) costs incurred to satisfy a work commitment under an exploration 14 license under AS 38.05.132. 15 (e) Unless the payment or credit has already been subtracted in calculating 16 billed costs under (c)(2) of this section, a producer's lease expenditures must be 17 adjusted by subtracting certain payments or credits received by the producer or by an 18 operator acting for the producer, as provided in this subsection. If one or more 19 payments or credits subject to this subsection are received by a producer or by an 20 operator acting for the producer during a month or, under (f) of this section, during a 21 calendar year, and if either the total amount of the payments or credits exceeds the 22 amount of the producer's lease expenditures or the producer has no lease expenditures, 23 the producer shall nevertheless subtract those payments or credits from the lease 24 expenditures or from zero, respectively, and the producer's adjusted lease expenditures 25 for that month or calendar year are a negative number and shall be applied to the 26 calculation under (a) of this section as a negative number. The payments or credits that 27 a producer shall subtract from the producer's lease expenditures, or from zero, under 28 this subsection are payments or credits, other than tax credits, received by the producer 29 or by an operator acting for the producer for 30 (1) the use by another person of a production facility in which the 31 producer has an ownership interest or the management by the producer of a production
01 facility under a management agreement providing for the producer to receive a 02 management fee; 03 (2) a reimbursement or similar payment that offsets the producer's 04 lease expenditures, including an insurance recovery from a third-party insurer and a 05 payment from the state or federal government for reimbursement of the producer's 06 upstream costs, including costs for gathering, separating, cleaning, dehydration, 07 compressing, or other field handling associated with the production of oil or gas 08 upstream of the point of production; 09 (3) the sale or other transfer of 10 (A) an asset, including geological, geophysical, or well data or 11 interpretations, acquired by the producer as a result of a lease expenditure or an 12 expenditure that would be a lease expenditure if it were incurred on or after 13 April 1, 2006; for purposes of this subparagraph, 14 (i) if a producer removes from the state, for use outside 15 the state, an asset described in this subparagraph, the value of the asset 16 at the time it is removed is considered a payment received by the 17 producer for sale or transfer of the asset; 18 (ii) for a transaction that is an internal transfer or is 19 otherwise not an arm's length transaction, if the sale or transfer of the 20 asset is made for less than fair market value, the amount subtracted 21 must be the fair market value; and 22 (B) oil or gas 23 (i) that is not considered produced from a lease or 24 property under AS 43.55.020(e); and 25 (ii) the cost of acquiring which is a lease expenditure 26 incurred by the person that acquires the oil or gas. 27 (f) In place of the adjusted lease expenditures for a month under (a) of this 28 section, a producer may, at any time, elect to substitute, for every month of a calendar 29 year, 1/12 of the producer's adjusted lease expenditures for the calendar year. An 30 election made under this subsection applies to the calculation of the tax under 31 AS 43.55.011(e) and (g).
01 (g) The department shall specify or approve a reasonable allocation method 02 for determining the portion of a cost that is appropriately treated as a lease expenditure 03 under (c) of this section if a cost that would otherwise constitute a lease expenditure 04 under (c) of this section is incurred to explore for, develop, or produce 05 (1) both an oil or gas deposit located within land outside the state and 06 an oil or gas deposit located within a lease or property, or other land, in the state; or 07 (2) an oil or gas deposit located partly within land outside the state and 08 partly within a lease or property, or other land, in the state. 09 (h) For purposes of AS 43.55.024(a) and (b) and only as to expenditures 10 incurred to explore for an oil or gas deposit located within land in which an explorer 11 does not own a working interest, the term "producer" in (b), (c), and (e) of this section 12 includes "explorer." 13 (i) The department may adopt regulations that establish additional standards 14 necessary to carrying out the purposes of this section, including the incorporation of 15 the concepts of 26 U.S.C. 482 (Internal Revenue Code), as amended, the related or 16 accompanying regulations of that section, and any ruling or guidance issued by the 17 United States Internal Revenue Service that relates to that section. 18 (j) For purposes of this section, 19 (1) "explore" includes conducting geological or geophysical 20 exploration, including drilling a stratigraphic test well; 21 (2) "ordinary and necessary" has the meaning given in 26 U.S.C. 162 22 (Internal Revenue Code), as amended, and regulations adopted under that section; 23 (3) "stratigraphic test well" means a well drilled for the sole purpose of 24 obtaining geological information to aid in exploring for an oil or gas deposit and the 25 target zones of which are located in the state. 26 Sec. 43.55.170. Additional nontransferable tax credit. (a) For a month for 27 which a producer's tax liability under AS 43.55.011(e) exceeds zero before application 28 of any credits under this chapter, a producer that is qualified under (c) of this section 29 may apply a tax credit under this section of up to $1,000,000 against that liability. 30 (b) A producer may not take a tax credit under this section for any month that 31 ends the later of
01 (1) March 31, 2016; or 02 (2) the 10th anniversary of the last day of the month for which the 03 producer first has commercial oil or gas production from at least one lease or property 04 in the state, if the producer did not have commercial oil or gas production from a lease 05 or property in the state before April 1, 2006. 06 (c) On written application by a producer, including any information the 07 department may require, the department shall determine whether the producer 08 qualifies under this section for a calendar year. To qualify under this section, a 09 producer must demonstrate that its operation in the state or its ownership of an interest 10 in a lease or property in the state as a distinct producer entity would not result in the 11 division among multiple producer entities of any production tax liability under 12 AS 43.55.011(e) that would be reasonably expected to be attributed to a single 13 producer entity if the tax credit provision of (a) of this section did not exist. 14 (d) A tax credit authorized by this section may not be applied to reduce a 15 producer's tax liability under AS 43.55.011(e) for any month below zero. An unused 16 portion of a tax credit that could otherwise be applied for a month but whose 17 application would cause the producer's tax liability under AS 43.55.011(e) for the 18 month to be less than zero may be applied for one or more other months in the same 19 calendar year to the extent otherwise allowed under this section. 20 (e) An unused tax credit or portion of a tax credit under this section is not 21 transferable and may not be carried forward to or used in a later calendar year. 22 Sec. 43.55.180. Required reports. (a) The Department of Revenue shall 23 (1) study 24 (A) the effects of the tax rates under AS 43.55.011(f) and of 25 potential changes in those tax rates on state revenue and on oil and gas 26 exploration, development, and production on private land; and 27 (B) the fairness of the tax rates under AS 43.55.011(f) and of 28 potential changes in those tax rates for private landowners; and 29 (2) prepare a report on or before the first day of the 2013 regular 30 session of the legislature on the results of the study made under (1) of this subsection, 31 including a recommendation as to whether those tax rates should be changed; the
01 department shall notify the legislature that the report prepared under this paragraph is 02 available. 03 (b) The Department of Revenue shall 04 (1) study the effects of the credits authorized by AS 43.55.025 and 05 43.55.170 on state revenue, on the encouragement of exploration, development, and 06 production of oil and gas deposits located in the state, and on the encouragement of 07 new entrants into the oil and gas industry in the state; and 08 (2) prepare a report on or before the first day of the 2015 regular 09 session of the legislature on the results of the study made under (1) of this subsection, 10 and shall include with the report a recommendation as to whether the legislature 11 should extend the availability of the credits under AS 43.55.025 and 43.55.170; the 12 department shall notify the legislature that the report prepared under this paragraph is 13 available. 14 * Sec. 26. 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 the tax 19 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 20 from each lease or property during the preceding month. The surcharge [SHALL 21 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 22 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.300 - 23 43.55.310. 24 (c) A producer of oil shall make reports of production in the same manner and 25 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 26 43.55.150]. 27 * Sec. 27. AS 43.55.201 is amended by adding a new subsection to read: 28 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 29 property is not considered to be produced from a lease or property for purposes of this 30 section. 31 * Sec. 28. AS 43.55.300 is amended to read:
01 Sec. 43.55.300. Surcharge levied. (a) Every producer of oil shall pay a 02 surcharge of $.04 [$.03] per barrel of oil produced from each lease or property in the 03 state, less any oil the ownership or right to which is exempt from taxation. 04 (b) The surcharge imposed by (a) of this section is in addition to the tax 05 imposed by AS 43.55.011 and is due on the last day of the month on oil produced 06 from each lease or property during the preceding month. The surcharge [SHALL 07 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 - 08 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.201 - 09 43.55.231. 10 (c) A producer of oil shall make reports of production in the same manner and 11 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 - 12 43.55.150]. 13 * Sec. 29. AS 43.55.300 is amended by adding a new subsection to read: 14 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or 15 property is not considered to be produced from a lease or property for purposes of this 16 section. 17 * Sec. 30. AS 43.55.900(6) is repealed and reenacted to read: 18 (6) "gas" means 19 (A) all natural, associated, or casinghead gas; 20 (B) all hydrocarbons that 21 (i) are recovered by mechanical separation of well 22 fluids or by gas processing in a gas processing plant; and 23 (ii) exist in a gaseous phase at the completion of 24 mechanical separation and any gas processing in a gas processing plant; 25 and 26 (C) all other hydrocarbons produced from a well not defined as 27 oil; 28 * Sec. 31. AS 43.55.900(7) is repealed and reenacted to read: 29 (7) "gross value at the point of production" means 30 (A) for oil, the value of the oil at its point of production 31 without deduction of any costs upstream of that point of production;
01 (B) for gas, the value of the gas at its point of production 02 without deduction of any costs upstream of that point of production; 03 * Sec. 32. AS 43.55.900(10) is repealed and reenacted to read: 04 (10) "oil" means 05 (A) crude petroleum oil; and 06 (B) all liquid hydrocarbons that are recovered by mechanical 07 separation of well fluids or by gas processing in a gas processing plant; 08 * Sec. 33. AS 43.55.900 is amended by adding new paragraphs to read: 09 (17) "Cook Inlet sedimentary basin" has the meaning given in 10 regulations adopted to implement AS 38.05.180(f)(4); 11 (18) "explorer" means a person who, in exploring for new oil or gas 12 reserves, incurs expenditures; 13 (19) "gas processing" 14 (A) means processing a gaseous mixture of hydrocarbons 15 (i) by means of absorption, adsorption, externally 16 applied refrigeration, artificial compression followed by adiabatic 17 expansion using the Joule-Thomson effect, or another physical process 18 that is not mechanical separation; and 19 (ii) for the purpose of extracting and recovering liquid 20 hydrocarbons; 21 (B) does not include gas treatment; 22 (20) "gas processing plant" means a facility that 23 (A) extracts and recovers liquid hydrocarbons from a gaseous 24 mixture of hydrocarbons by gas processing; and 25 (B) is located upstream of any gas treatment and upstream of 26 the inlet of any gas pipeline system transporting gas to a market; 27 (21) "gas treatment" 28 (A) means conditioning gas and removing from gas 29 nonhydrocarbon substances for the purpose of rendering the gas acceptable for 30 tender and acceptance into a gas pipeline system; 31 (B) includes incidentally removing liquid hydrocarbons from
01 the gas; 02 (C) does not include 03 (i) dehydration required to facilitate the movement of 04 gas from the well to the point where gas processing takes place; 05 (ii) the scrubbing of liquids from gas to facilitate gas 06 processing; 07 (22) "landowner's royalty interest" means 08 (A) a lessor's royalty interest under an oil and gas lease; or 09 (B) a royalty interest that is 10 (i) held by a surface owner of land from which oil or 11 gas is produced; and 12 (ii) granted in exchange for the right to use the surface 13 of that land or as compensation for damage to the surface of that land; 14 (23) "oil and gas lease" includes an oil and gas lease, a gas only lease, 15 and an oil only lease; 16 (24) "point of production" means 17 (A) for oil, the automatic custody transfer meter or device 18 through which the oil enters into the facilities of a carrier pipeline or other 19 transportation carrier in a condition of pipeline quality; in the absence of an 20 automatic custody transfer meter or device, "point of production" means the 21 mechanism or device to measure the quantity of oil that has been approved by 22 the department for that purpose, through which the oil is tendered and accepted 23 in a condition of pipeline quality into the facilities of a carrier pipeline or other 24 transportation carrier or into a field topping plant; 25 (B) for gas, other than gas described in (C) of this paragraph, 26 that is 27 (i) not subjected to or recovered by mechanical 28 separation or run through a gas processing plant, the first point where 29 the gas is accurately metered; 30 (ii) subjected to or recovered by mechanical separation 31 but not run through a gas processing plant, the first point where the gas
01 is accurately metered after completion of mechanical separation; 02 (iii) run through a gas processing plant, the first point 03 where the gas is accurately metered downstream of the plant; 04 (C) for gas run through an integrated gas processing plant and 05 gas treatment facility that does not accurately meter the gas after the gas 06 processing and before the gas treatment, the first point where gas processing is 07 completed or where gas treatment begins, whichever is further upstream. 08 * Sec. 34. AS 43.55.011(a), 43.55.011(b), 43.55.011(c), 43.55.012, 43.55.013, 43.55.016, 09 43.55.025(k)(1), 43.55.025(k)(3), 43.55.900(1), 43.55.900(8), 43.55.900(11), 43.55.900(12), 10 and 43.55.900(16) are repealed. 11 * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to 12 read: 13 APPLICABILITY. (a) Sections 5, 7 - 10, 12, 13, 15 - 18, 20, 24, 26 - 29, and 30 - 34 14 of this Act and AS 43.55.160 and 43.55.170, enacted by sec. 25 of this Act, apply to oil and 15 gas produced after March 31, 2006. 16 (b) Section 11 of this Act applies to oil and gas produced before, on, or after the 17 effective date of sec. 11 of this Act. 18 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to 19 read: 20 TRANSITIONAL PROVISIONS. (a) Notwithstanding any contrary provision of 21 AS 43.55.024(a), enacted by sec. 12 of this Act, for oil and gas produced after March 31, 22 2006, and before January 1, 2007, the phrase "every month an annualized tax credit in an 23 amount equal to 1 2/3 percent" in AS 43.55.024(a)(1)(B), enacted by sec. 12 of this Act, shall 24 be replaced by the phrase "every month during the period April 1, 2006, through 25 December 31, 2006, an annualized tax credit in an amount equal to 2.222 percent." 26 (b) Notwithstanding any contrary provision of AS 43.55.024(e), enacted by sec. 12 of 27 this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007, the 28 phrase "a calendar year" in AS 43.55.024(e), enacted by sec. 12 of this Act, shall be replaced 29 by the phrase "the last nine months of the calendar year." 30 (c) Notwithstanding any contrary provision of AS 43.55.024(j)(2), enacted by sec. 12 31 of this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007,
01 (1) the number "1/24" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of this 02 Act, shall be replaced by the number "1/18"; 03 (2) the phrase "calendar year" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of 04 this Act, shall be replaced by the phrase "last nine months of the calendar year." 05 (d) Notwithstanding any contrary provision of AS 43.55.160(f), enacted by sec. 25 of 06 this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007, the 07 phrase "for every month of a calendar year, 1/12 of the producer's adjusted lease expenditures 08 for the calendar year" in AS 43.55.160(f), enacted by sec. 25 of this Act, shall be replaced by 09 the phrase "for each of the last nine months of 2006, one-ninth of the producer's adjusted lease 10 expenditures for that nine-month period." 11 (e) For oil and gas produced before April 1, 2006, the provisions of AS 43.55, and 12 regulations adopted under AS 43.55, that were in effect before April 1, 2006, and that were 13 applicable to the oil and gas continue to apply to that oil and gas. 14 (f) Notwithstanding any contrary provision of AS 43.55.020(a), as repealed and 15 reenacted by sec. 7 of this Act, for oil and gas produced after March 31, 2006, and before the 16 first day of the first month that begins at least 10 months after the effective date of sec. 7 of 17 this Act, 18 (1) the amount of the taxes that would have been levied on the producer by 19 AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on the last day of 20 each calendar month on the oil and gas that was produced from each lease or property during 21 the preceding month; 22 (2) the portion, if any, of the taxes levied by AS 43.55.011(e) - (g), enacted by 23 sec. 5 of this Act, that is due under AS 43.55.020(a), as repealed and reenacted by sec. 7 of 24 this Act, and that remains unpaid, net of any credits applied as allowed by law, is due on the 25 last day of the first month that begins at least 10 months after the effective date of sec. 5 of 26 this Act. 27 (g) Notwithstanding any contrary provision of AS 43.55.030(a), as amended by sec. 28 18 of this Act, for oil and gas produced after March 31, 2006, and before the first day of the 29 first month that begins at least 10 months after the effective date of sec. 18 of this Act, the 30 person paying the tax shall file with the Department of Revenue, at the time an amount of tax 31 is due
01 (1) under (f)(1) of this section, the statement required under former 02 AS 43.55.030(a), as that subsection read on March 31, 2006; and 03 (2) under (f)(2) of this section, the statements required under AS 43.55.030(a), 04 as amended by sec. 18 of this Act. 05 (h) Notwithstanding any contrary provision of AS 43.55.201(a) or (b), as amended by 06 sec. 26 of this Act, or AS 43.55.300(a) or (b), as amended by sec. 28 of this Act, for oil 07 produced after March 31, 2006, and before the first day of the first month that begins at least 08 10 months after the effective date of secs. 26 and 28 of this Act, 09 (1) the amount of the surcharges that would have been imposed on the 10 producer under AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on 11 the last day of each calendar month on oil produced from each lease or property during the 12 preceding month; 13 (2) the portion, if any, of the surcharges imposed under AS 43.55.201(a), as 14 amended by sec. 26 of this Act, and AS 43.55.300(a), as amended by sec. 28 of this Act, and 15 that remains unpaid is due on the last day of the first month that begins at least 10 months 16 after the effective date of secs. 26 and 28 of this Act. 17 (i) Notwithstanding any contrary provision of AS 43.55.201(c), as amended by sec. 18 26 of this Act, or AS 43.55.300(c), as amended by sec. 28 of this Act, for oil produced after 19 March 31, 2006, and before the first day of the first month that begins at least 10 months after 20 the effective date of secs. 26 and 28 of this Act, at the time an amount of surcharge is due 21 (1) under (h)(1) of this section, the producer shall file the report of production 22 required under former AS 43.55.201(c) and 43.55.300(c), as those provisions read on 23 March 31, 2006; and 24 (2) under (h)(2) of this section, the producer shall file the report of production 25 required under AS 43.55.201(c), as amended by sec. 26 of this Act, and AS 43.55.300(c), as 26 amended by sec. 28 of this Act. 27 (j) For purposes of taxes to be calculated and due under (f)(1) of this section and 28 statements to be filed under (g)(1) of this section, regulations that were adopted by the 29 Department of Revenue under AS 43.55, as the provisions of that chapter read on March 31, 30 2006, and that were in effect on that date apply to those taxes and statements. 31 * Sec. 37. The uncodified law of the State of Alaska is amended by adding a new section to
01 read: 02 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 03 contrary provision of AS 44.62.240, a regulation adopted by the Department of Revenue to 04 implement, interpret, make specific, or otherwise carry out the provisions of secs. 5, 7 - 10, 05 12, 13, 15 - 18, 20, 24 - 29, 30 - 34, and 36 of this Act may apply retroactively as of April 1, 06 2006, if the Department of Revenue expressly designates in the regulation that the regulation 07 applies retroactively to that date. 08 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to 09 read: 10 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the 11 heading of 12 (1) AS 43.55 from "Oil and Gas Production Taxes and Oil Surcharge" to "Oil 13 and Gas Production Tax and Oil Surcharge"; 14 (2) article 1 of AS 43.55 from "Oil and Gas Properties Production Taxes" to 15 "Oil and Gas Production Tax"; 16 (3) AS 43.55.011 from "Oil production tax" to "Oil and gas production tax"; 17 (4) AS 43.55.025 from "Tax credit for oil and gas exploration or gas only 18 exploration" to "Alternative tax credit for oil and gas exploration"; 19 (5) AS 43.55.150 from "Determination of gross value" to "Determination of 20 gross value at the point of production." 21 * Sec. 39. The uncodified law of the State of Alaska is amended by adding a new section to 22 read: 23 RETROACTIVITY OF PROVISIONS OF ACT. Sections 5, 7 - 10, 12, 13, 15 - 18, 24 24 - 29, and 30 - 38 of this Act are retroactive to April 1, 2006. 25 * Sec. 40. This Act takes effect immediately under AS 01.10.070(c).