CSSB 2004(NGD): "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; relating to determination of full and true value of property and required contributions for education in municipalities affected by stranded gas fiscal contracts; and providing for an effective date."
00 CS FOR SENATE BILL NO. 2004(NGD) 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; relating to determination of full and true value of property and required 06 contributions for education in municipalities affected by stranded gas fiscal contracts; 07 and providing for an effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. AS 09.43.300(a) is amended to read: 10 (a) AS 09.43.300 - 09.43.595 govern an agreement to arbitrate made on or 11 after January 1, 2005, except as otherwise provided in a contract term developed 12 under AS 43.82.200(a)(5) and (b). 13 * Sec. 2. AS 43.82.010 is amended to read:
01 Sec. 43.82.010. Purpose. The purpose of this chapter is to 02 (1) encourage new investment to develop the state's stranded gas 03 resources by authorizing establishment of fiscal terms related to oil and gas 04 agreements and taxes for a qualified sponsor, the members of a qualified sponsor 05 group, or a related party and related to their oil and gas business activity in the 06 state, including gas pipeline expansion pricing that encourages further gas 07 exploration [THAT NEW INVESTMENT WITHOUT SIGNIFICANTLY 08 ALTERING TAX AND ROYALTY METHODOLOGIES AND RATES ON 09 EXISTING OIL AND GAS INFRASTRUCTURE AND PRODUCTION]; 10 (2) allow the fiscal terms applicable to a qualified sponsor or the 11 members of a qualified sponsor group, or a related party, with respect to a qualified 12 project, to be tailored to the particular economic conditions of the project and to 13 establish those fiscal terms in advance with as much certainty as the Constitution of 14 the State of Alaska allows; and 15 (3) maximize the benefit to the people of the state of the development 16 of the state's stranded gas resources. 17 * Sec. 3. AS 43.82.020 is amended to read: 18 Sec. 43.82.020. Negotiation of contract terms [CONTRACTS FOR 19 PAYMENTS IN LIEU OF OTHER TAXES AND FOR ROYALTY 20 ADJUSTMENTS]. The commissioner may, under this chapter, negotiate terms for 21 inclusion in a proposed contract with a qualified sponsor or qualified sponsor group 22 providing for 23 (1) periodic payment in lieu of one or more taxes that otherwise would 24 be imposed by the state or a municipality on the qualified sponsor, [OR] members of 25 the qualified sponsor group, or a related party; [AS A CONSEQUENCE OF THE 26 SPONSOR'S OR GROUP'S PARTICIPATION IN AN APPROVED QUALIFIED 27 PROJECT UNDER THIS CHAPTER; AND] 28 (2) certain adjustments regarding oil and gas lease agreements, unit 29 agreements, and other agreements [ROYALTY] under AS 43.82.220; in this 30 paragraph, "oil and gas lease agreements" includes royalty provisions of those 31 agreements; and
01 (3) payment of the gas production tax under AS 43.55, or payment 02 in lieu of the gas production tax, by delivery of gas. 03 * Sec. 4. AS 43.82.200 is amended to read: 04 Sec. 43.82.200. Contract development. If the commissioner approves an 05 application and proposed project plan under AS 43.82.140, the commissioner may 06 develop a contract that may include 07 (1) terms concerning periodic payment in lieu of one or more taxes on 08 oil or gas or both as provided in AS 43.82.210, and terms related to credits for 09 investment in a project that is the subject of a contract developed under this 10 chapter; 11 (2) terms developed under AS 43.82.220 concerning oil and gas 12 leases, unit agreements, and other agreements under AS 38, including terms 13 relating to 14 (A) timing and notice of the state's right to take royalty in kind 15 or in value; and 16 (B) royalty value; 17 (3) terms regarding the hiring of Alaska residents and contracting with 18 Alaska businesses under AS 43.82.230; 19 (4) terms regarding periodic payment to, or an equity or other interest 20 in a project for, municipalities under AS 43.82.500; 21 (5) terms regarding arbitration or alternative dispute resolution 22 procedures; 23 (6) terms and conditions for [ADMINISTRATIVE] termination of a 24 contract [UNDER AS 43.82.445]; and 25 (7) other terms or conditions that the commissioner determines are 26 (A) reasonable and promote [NECESSARY TO FURTHER] 27 the purposes of this chapter, including the implementation of AS 43.82.020 - 28 43.82.270; or 29 (B) in the long-term fiscal [BEST] interests of the state. 30 * Sec. 5. AS 43.82.200 is amended by adding a new subsection to read: 31 (b) Terms relating to arbitration and alternate dispute resolution may provide
01 for a waiver, with the concurrence of the attorney general, of the state's immunity from 02 suit. The waiver may include waiver of the state's sovereign or other immunity and 03 consent to entrance and enforcement of an arbitration award in any state court in the 04 United States that has jurisdiction over the State of Alaska. The authority granted in 05 this subsection is effective only after the arbitration award is entered and enforcement 06 is sought in the superior court of the state. 07 * Sec. 6. AS 43.82.210(a) is amended to read: 08 (a) If the commissioner approves an application and proposed project plan 09 under AS 43.82.140, the commissioner may develop proposed terms for inclusion in a 10 contract under AS 43.82.020 for periodic payment in lieu of one or more of the 11 following taxes that otherwise would be imposed by the state or a municipality on the 12 qualified sponsor, a [OR] member of a qualified sponsor group, or a related party 13 [AS A CONSEQUENCE OF PARTICIPATING IN AN APPROVED QUALIFIED 14 PROJECT]: 15 (1) oil and gas production taxes and oil surcharges under AS 43.55; 16 (2) oil and gas exploration, production, and pipeline transportation 17 property taxes under AS 43.56; 18 (3) [REPEALED 19 (4)] Alaska net income tax under AS 43.20; 20 (4) [(5)] municipal sales and use tax under AS 29.45.650 - 29.45.710; 21 (5) [(6)] municipal property tax under AS 29.45.010 - 29.45.250 or 22 29.45.550 - 29.45.600; 23 (6) [(7)] municipal special assessments under AS 29.46; 24 (7) [(8)] a comparable tax or levy imposed by the state or a 25 municipality after June 18, 1998; 26 (8) [(9)] other state or municipal taxes or categories of taxes identified 27 by the commissioner. 28 * Sec. 7. AS 43.82.220(a) is amended to read: 29 (a) Notwithstanding any contrary provisions of AS 38 or regulations adopted 30 under that title, the commissioner of natural resources, with the concurrence of the 31 commissioner of revenue and, if necessary, the affected parties holding a state lease or
01 unit agreement, may develop proposed terms for inclusion in a contract under 02 AS 43.82.020 that modify [THE TIMING AND NOTICE] provisions of the applicable 03 oil and gas leases, [AND] unit agreements, and other agreements under AS 38, 04 including provisions 05 (1) pertaining to the state's rights to receive its royalty on gas in kind 06 or in value if 07 (A) [(1)] the viability of the approved qualified project depends 08 on long-term gas shipping commitments [PURCHASE AND SALE 09 AGREEMENTS]; 10 (B) [(2)] certainty over time regarding the quantity of royalty 11 gas that the state may be taking in kind is needed to enter into long-term gas 12 shipping commitments or marketing agreements [SECURE THE LONG- 13 TERM PURCHASE AND SALE AGREEMENTS; 14 (3) THE SPECIFIED PERIOD OF THE STATE'S COMMITMENT 15 TO TAKE ITS ROYALTY SHARE IN VALUE OR IN KIND DOES NOT EXCEED 16 THE TERM OF THE PURCHASE AND SALE AGREEMENTS]; and 17 (C) [(4)] the modification does not impair the ability of the 18 approved qualified project or the state to meet the reasonably foreseeable 19 demand in this state for gas within economic proximity of the project during 20 the term of the contract developed under AS 43.82.020; and 21 (2) relating to lease or unit expenses for separation, cleaning, 22 dehydration, gathering, salt water disposal, and preparation for transportation 23 on or off the lease. 24 * Sec. 8. AS 43.82.220(c) is amended to read: 25 (c) The commissioner of revenue shall include any proposed terms 26 [RELATING TO ROYALTY] developed in accordance with this section in the 27 proposed contract under AS 43.82.400. 28 * Sec. 9. AS 43.82.220 is amended by adding a new subsection to read: 29 (e) An agreement by the state to take royalty gas in kind as part of a contract 30 developed under this chapter that satisfies (a)(1)(A) - (C) of this section is not subject 31 to the provisions of AS 38, or regulations adopted under that title, relating to decisions
01 to take royalty in kind. 02 * Sec. 10. AS 43.82.250 is amended to read: 03 Sec. 43.82.250. Term of contract; effective date. The term of a contract 04 developed under AS 43.82.020 [MAY BE FOR NO LONGER THAN IS 05 NECESSARY TO DEVELOP THE STRANDED GAS THAT IS SUBJECT TO THE 06 CONTRACT; HOWEVER, THE TERM OF THE CONTRACT] may not exceed 35 07 years from the commencement of commercial operations of the approved qualified 08 project, excluding suspensions of contract obligations that are covered by the 09 force majeure terms of any contract developed under this chapter. However, the 10 term of contract may not exceed 45 years from the effective date of a contract 11 approved under AS 43.82.435. 12 * Sec. 11. AS 43.82 is amended by adding a new section to read: 13 Sec. 43.82.255. Terms of contract provisions related to oil. (a) The 14 provisions of this section apply to a contract developed under AS 43.82.020 that 15 provides for periodic payment in lieu of taxes on oil under AS 43.55. 16 (b) For the period of the contract term beginning immediately after the date of 17 full project funding or the date of issuance of a certificate of public convenience and 18 necessity for construction and initial operation of the Alaska Natural Gas Pipeline, 19 whichever date is later, and ending 14 years after that date, the commissioner may 20 modify those terms of the contract relating to payments in lieu of the taxes on oil set 21 out in AS 43.55. For the period of the contract term covered by this subsection, the 22 payments in lieu of taxes may be established with as much certainty as the 23 Constitution of the State of Alaska allows. 24 (c) For the period of the contract term beginning immediately after the period 25 described in (b) of this section, and ending on a date not later than 25 years after the 26 effective date of the contract, the amount of the payment in lieu of tax on oil under 27 AS 43.55 must be equal to the amount of the tax levied by law. However, the 28 commissioner may develop a contract term that, in the event of a material change in 29 the taxes enacted after the effective date of the contract, establishes a procedure for 30 restoring the parties to substantially the same economic position they had as of the end 31 of the period described in (b) of this section immediately before the change.
01 (d) Implementation of a contract provision authorized in (c) of this section 02 may be made subject to the dispute resolution procedures of the contract. 03 * Sec. 12. AS 43.82.270 is amended to read: 04 Sec. 43.82.270. Project plans and work commitments. A contract under 05 AS 43.82.020 must include provisions for implementation of the qualified project 06 plan approved under AS 43.82.140, as may be modified as a result of the 07 development of a contract under this chapter, and provisions for updating the plan 08 at reasonable intervals until the commencement of commercial operations of the 09 approved qualified project. The commissioner of revenue, in consultation with the 10 commissioner of natural resources, may, as a term in a contract under AS 43.82.020, 11 include work commitments or other obligations in the contract to be accomplished 12 before the commencement of commercial operations of the approved qualified project. 13 * Sec. 13. AS 43.82.410 is amended to read: 14 Sec. 43.82.410. Notice and comment regarding the contract. The 15 commissioner shall 16 (1) give reasonable public notice of the preliminary findings and 17 determination made under AS 43.82.400; 18 (2) make copies of the proposed contract, the commissioner's 19 preliminary findings and determination, and, to the extent the information is not 20 required to be kept confidential under AS 43.82.310, the supporting financial, 21 technical, and market data, including the work papers, analyses, and recommendations 22 of any independent contractors used under AS 43.82.240 available to the public and to 23 (A) the presiding officer of each house of the legislature; 24 (B) the chairs of the finance and resources committees of the 25 legislature; and 26 (C) the chairs of the special committees on oil and gas, if any, 27 of the legislature; 28 (3) offer to appear before the Legislative Budget and Audit Committee 29 to provide the committee a review of the commissioner's preliminary findings and 30 determination, the proposed contract, and the supporting financial, technical, and 31 market data; if the Legislative Budget and Audit Committee accepts the
01 commissioner's offer, the committee shall give notice of the committee's meeting to 02 the public and all members of the legislature; if the financial, technical, and market 03 data that is to be provided must be kept confidential under AS 43.82.310, the 04 commissioner may not release the confidential information during a public portion of 05 a committee meeting; and 06 (4) establish a period of at least 60 [30] days for the public and 07 members of the legislature to comment on the proposed contract and the preliminary 08 findings and determination made under AS 43.82.400. 09 * Sec. 14. AS 43.82.500 is amended to read: 10 Sec. 43.82.500. Obligation to share payments with municipalities. If the 11 commissioner develops a contract under AS 43.82.020 that includes terms that exempt 12 a qualified sponsor, the members of a qualified sponsor group, or a related party 13 to the contract, and the property, gas, products, and activities associated with the 14 approved qualified project that is subject to the contract, from a municipal tax or 15 assessment in accordance with AS 29.45.810 or AS 29.46.010(b), or AS 43.82.200 16 and 43.82.210, the commissioner shall include a term in the contract that provides for 17 [THE PARTY PAY] a portion of the periodic payments to be made payable [DUE 18 UNDER THE CONTRACT] to the revenue-affected municipality. 19 * Sec. 15. AS 43.82.505 is amended to read: 20 Sec. 43.82.505. Payments to economically affected municipalities. If the 21 commissioner executes a contract under AS 43.82.020 that will produce one or more 22 economically affected municipalities, the commissioner shall include a term in the 23 contract that provides for [A PORTION OF THE] periodic impact payments to the 24 state that may be appropriated to the Alaska natural gas pipeline construction 25 impact fund established in (c) of this section to benefit the economically affected 26 municipalities under the principles in AS 43.82.520. 27 * Sec. 16. AS 43.82.505 is amended by adding new subsections to read: 28 (b) A special account is established in the general fund into which the 29 Department of Revenue shall deposit impact payments received by the state under (a) 30 of this section. 31 (c) The Alaska natural gas pipeline construction impact fund is established in
01 the Department of Commerce, Community, and Economic Development. The 02 legislature may appropriate money deposited in the special account established in (b) 03 of this section, as well as any additional money considered necessary, to the Alaska 04 natural gas pipeline construction impact fund to address the economic and social 05 impacts incurred by an economically affected municipality, or incurred by a nonprofit 06 organization serving the unorganized borough, during the construction of a project that 07 is the subject of a proposed contract developed under this chapter. 08 (d) The Department of Commerce, Community, and Economic Development 09 shall adopt regulations under which economically affected municipalities and 10 nonprofit organizations may apply for and be eligible to receive grants to alleviate 11 impact caused by construction of a gas pipeline. The department shall give priority in 12 the allocation of grants to municipalities and organizations that are experiencing or 13 will experience the most direct or severe impact from gas pipeline construction. The 14 department shall finance, under (e) of this section, all meritorious grant applications 15 each year, to the extent money is available in the Alaska natural gas pipeline 16 construction impact fund. Within 10 days after the convening of each regular session 17 of the legislature, the department shall submit to the legislature a list of all 18 municipalities and organizations that have received grants, a list of all municipalities 19 and organizations determined by the department to be eligible for further grants, a 20 recommendation of the amount of money to be granted for those additional 21 applications, and written justification of each past and potential grant. 22 (e) The commissioner of commerce, community, and economic development, 23 in consultation with the relevant municipal advisory group established under 24 AS 43.82.510, shall use money appropriated to the Alaska natural gas pipeline 25 construction impact fund to make grants to municipalities, and to nonprofit 26 organizations serving the unorganized borough, for impacts on transportation, 27 infrastructure, law enforcement, emergency services, health and human services, 28 education, the labor force, population, wages, and subsistence and for socio-cultural 29 impacts, brought about by the construction of the gas pipeline. In determining whether 30 an expenditure or proposed expenditure by a municipality or nonprofit organization is 31 eligible for a grant under this subsection and in allocating available money among
01 grant proposals, the commissioner shall consider the recommendations of the relevant 02 municipal advisory group established under AS 43.82.510 and whether the proposed 03 expenditure meets the purposes of this section. 04 (f) Before making awards of grants under this section for a fiscal year, the 05 commissioner of commerce, community, and economic development shall provide 06 reasonable public notice of all grant applications received, the recommendations of the 07 relevant municipal advisory group, preliminary determinations made concerning the 08 eligibility of each municipality or organization for a grant, the eligibility of each 09 expenditure or proposed expenditure for a grant, and the proposed allocation of 10 available money among grant proposals. The public notice must specify a time and 11 place for a public hearing during which the commissioner will receive comments 12 concerning the preliminary determinations and allocations of the department. The 13 commissioner shall give reasonable public notice of the final awards of grants made 14 under this section. Thirty days after such public notice is given, final awards take 15 effect and may be paid to the grantees according to procedures established by 16 regulation. 17 (g) Grant money received under this section may not be used for the 18 retirement of municipal debt. 19 (h) Amounts appropriated to the Alaska natural gas pipeline construction 20 impact fund under (c) of this section for a fiscal year that are not used for grants to 21 municipalities and organizations under (d) and (e) of this section shall be retained in 22 the Alaska natural gas pipeline construction impact fund and remain available for 23 distribution as grants under this section in succeeding fiscal years. 24 (i) Nothing in this chapter exempts money deposited into the special account 25 in the general fund established in (b) of this section from the requirements of AS 37.07 26 (Executive Budget Act) or dedicates that money, or money appropriated to the Alaska 27 natural gas pipeline construction impact fund, for a specific purpose. 28 (j) In this section, "direct or severe impact" means a clearly demonstrable 29 effect on a community that proximately contributes to a material change to 30 transportation, infrastructure, law enforcement, emergency services, health and human 31 services, education, the labor force, population, wages, subsistence, or for socio-
01 cultural impacts brought about by the construction of a gas pipeline. 02 * Sec. 17. AS 43.82.510(c) is amended to read: 03 (c) Each municipal advisory group serves until the later of 90 days after 04 final distribution of impact payment money under AS 43.82.505, or 05 commencement of operations of the qualified project. Expenses of a municipal 06 advisory group are eligible for reimbursement under a grant made under 07 AS 43.82.505 [A FINAL ACTION IS TAKEN ON THE APPLICATION FOR 08 WHICH THE GROUP WAS APPOINTED]. 09 * Sec. 18. AS 43.82 is amended by adding a new section to article 7 to read: 10 Sec. 43.82.650. Calculations of education funding. To determine the amount 11 of required local contribution under AS 14.17.410(b)(2) and (c) for a school district in 12 a revenue-affected municipality, and to perform its duties under AS 14.17.510, the 13 Department of Commerce, Community, and Economic Development shall adopt 14 regulations. The regulations must establish assessment standards for any property that 15 would have been assessed under AS 43.56 but is instead generating a payment to a 16 revenue-affected municipality in lieu of a municipal property tax as provided in a 17 contract developed under this chapter. The regulations must ensure that the property is 18 included in the full and true value of the city or borough school district for the purpose 19 of determining required local contributions for education funding under 20 AS 14.17.410(b)(2) and (c). 21 * Sec. 19. AS 43.82.900 is amended by adding a new paragraph to read: 22 (14) "related party" means an entity, including a limited liability 23 company or similar incorporated or unincorporated entity, that 24 (A) is affiliated with a qualified sponsor or qualified sponsor 25 group; 26 (B) owns or operates a qualified project or any segment of a 27 qualified project; and 28 (C) is an intended beneficiary of the fiscal terms included in a 29 contract developed under this chapter. 30 * Sec. 20. AS 43.82.445 is repealed. 31 * Sec. 21. The uncodified law of the State of Alaska is amended by adding a new section to
01 read: 02 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the 03 section heading of AS 43.82.220 from "Contract terms relating to royalty" to "Contract terms 04 relating to oil and gas lease, royalty provisions, and other agreements." 05 * Sec. 22. The uncodified law of the State of Alaska is amended by adding a new section to 06 read: 07 RETROACTIVITY. (a) Sections 2 - 14 and 17 - 20 of this Act are retroactive to 08 January 1, 2004. 09 (b) Section 1 of this Act is retroactive to January 1, 2005. 10 * Sec. 23. This Act takes effect immediately under AS 01.10.070(c).