CSSB 2001(RES): "An Act relating to the production tax on oil and gas and to conservation surcharges on oil; relating to the sharing between agencies of certain information relating to the production tax and to oil and gas or gas only leases; amending the State Personnel Act to place in the exempt service certain state oil and gas auditors and their immediate supervisors; providing for retroactive application of certain statutory and regulatory provisions relating to the production tax on oil and gas; making conforming amendments; and providing for an effective date."
00 CS FOR SENATE BILL NO. 2001(RES) 01 "An Act relating to the production tax on oil and gas and to conservation surcharges on 02 oil; relating to the sharing between agencies of certain information relating to the 03 production tax and to oil and gas or gas only leases; amending the State Personnel Act 04 to place in the exempt service certain state oil and gas auditors and their immediate 05 supervisors; providing for retroactive application of certain statutory and regulatory 06 provisions relating to the production tax on oil and gas; making conforming 07 amendments; and providing for an effective date." 08 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 09 * Section 1. AS 38.05.035(a) is amended to read: 10 (a) The director shall 11 (1) have general charge and supervision of the division and may 12 exercise the powers specifically delegated to the director; the director may employ 13 and fix the compensation of assistants and employees necessary for the operations of
01 the division; the director [AND] is the certifying officer of the division, with the 02 consent of the commissioner, and may approve vouchers for disbursements of money 03 appropriated to the division; 04 (2) manage, inspect, and control state land and improvements on it 05 belonging to the state and under the jurisdiction of the division; 06 (3) execute laws, rules, regulations, and orders adopted by the 07 commissioner; 08 (4) prescribe application procedures and practices for the sale, lease, 09 or other disposition of available land, resources, property, or interest in them; 10 (5) prescribe fees or service charges, with the consent of the 11 commissioner, for any public service rendered; 12 (6) under the conditions and limitations imposed by law and the 13 commissioner, issue deeds, leases, or other conveyances disposing of available land, 14 resources, property, or any interests in them; 15 (7) have jurisdiction over state land, except that land acquired by the 16 Alaska World War II Veterans Board and the Agricultural Loan Board or the 17 departments or agencies succeeding to their respective functions through foreclosure 18 or default; to this end, the director possesses the powers and, with the approval of the 19 commissioner, shall perform the duties necessary to protect the state's rights and 20 interest in state land, including the taking of all necessary action to protect and 21 enforce the state's contractual or other property rights; 22 (8) [REPEALED 23 (9)] maintain the [SUCH] records [AS] the commissioner considers 24 necessary, administer oaths, and do all things incidental to the authority imposed; the 25 following records and files shall be kept confidential upon request of the person 26 supplying the information: 27 (A) the name of the person nominating or applying for the 28 sale, lease, or other disposal of land by competitive bidding; 29 (B) before the announced time of opening, the names of the 30 bidders and the amounts of the bids; 31 (C) all geological, geophysical, and engineering data supplied,
01 whether or not concerned with the extraction or development of natural 02 resources; 03 (D) except as provided in AS 38.05.036, cost data and 04 financial information submitted in support of applications, bonds, leases, and 05 similar items; 06 (E) applications for rights-of-way or easements; 07 (F) requests for information or applications by public agencies 08 for land that [WHICH] is being considered for use for a public purpose; 09 (9) [(10)] account for the fees, licenses, taxes, or other money 10 received in the administration of this chapter including the sale or leasing of land, 11 identify their source, and promptly transmit them to the proper fiscal department after 12 crediting them to the proper fund; receipts from land application filing fees and 13 charges for copies of maps and records shall be deposited immediately in the general 14 fund of the state by the director; 15 (10) [(11)] select and employ or obtain at reasonable compensation 16 cadastral, appraisal, or other professional personnel the director considers necessary 17 for the proper operation of the division; 18 (11) [(12)] be the certifying agent of the state to select, accept, and 19 secure by whatever action is necessary in the name of the state, by deed, sale, gift, 20 devise, judgment, operation of law, or other means any land, of whatever nature or 21 interest, available to the state; and be the certifying agent of the state, to select, 22 accept, or secure by whatever action is necessary in the name of the state any land, or 23 title or interest to land available, granted, or subject to being transferred to the state 24 for any purpose; 25 (12) on request, furnish records, files, and other information 26 related to the administration of AS 38.05.180 to the Department of Revenue for 27 use in forecasting state revenue under or administering AS 43.55, whether or not 28 those records, files, and other information are required to be kept confidential 29 under (8) of this subsection; in the case of records, files, or other information 30 required to be kept confidential under (8) of this subsection, the Department of 31 Revenue shall maintain the confidentiality that the Department of Natural
01 Resources is required to extend to records, files, and other information under (8) 02 of this subsection 03 [(13) REPEALED 04 (14) REPEALED]. 05 * Sec. 2. AS 38.05.036(b) is amended to read: 06 (b) The Department of Revenue may obtain from the department information 07 relating to royalty and net profits payments and to exploration incentive credits under 08 this chapter or under AS 41.09, whether or not that information is confidential. The 09 Department of Revenue may use the information in carrying out its functions and 10 responsibilities under AS 43, and shall hold that information confidential to the extent 11 required by an agreement with the department or by AS 38.05.035(a)(8) 12 [AS 38.05.035(a)(9)], AS 41.09.010(d), or AS 43.05.230. 13 * Sec. 3. AS 38.05.036(f) is amended to read: 14 (f) Except as otherwise provided in this section or in connection with official 15 investigations or proceedings of the department, it is unlawful for a current or former 16 officer, employee, or agent of the state to divulge information obtained by the 17 department as a result of an audit under this section that is required by an agreement 18 with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or 19 AS 41.09.010(d) to be kept confidential. 20 * Sec. 4. AS 38.05.036(g) is amended to read: 21 (g) Nothing in this section prohibits the publication of statistics in a manner 22 that maintains the confidentiality of information to the extent required by an 23 agreement with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or 24 AS 41.09.010(d). 25 * Sec. 5. AS 38.05.123(f) is amended to read: 26 (f) As part of the timber sale negotiations authorized by this section, the 27 commissioner may require a prospective purchaser negotiating a timber sale contract 28 to submit financial and technical data that demonstrates that the requirements of this 29 section have been or will be met. Upon the prospective purchaser's request, the 30 commissioner shall keep data provided by the purchaser confidential in accordance 31 with the requirements of AS 38.05.035(a)(8) [AS 38.05.035(a)(9)].
01 * Sec. 6. AS 38.05.133(e) is amended to read: 02 (e) The commissioner may make a written request to a prospective licensee 03 for additional information on the prospective licensee's proposal. The commissioner 04 shall keep confidential information described in AS 38.05.035(a)(8) 05 [AS 38.05.035(a)(9)] that is voluntarily provided if the prospective licensee has made 06 a written request that the information remain confidential. 07 * Sec. 7. AS 38.05.180(j) is amended to read: 08 (j) The commissioner 09 (1) may provide for modification of royalty on individual leases, 10 leases unitized as described in (p) of this section, leases subject to an agreement 11 described in (s) or (t) of this section, or interests unitized under AS 31.05 12 (A) to allow for production from an oil or gas field or pool if 13 (i) the oil or gas field or pool has been sufficiently 14 delineated to the satisfaction of the commissioner; 15 (ii) the field or pool has not previously produced oil or 16 gas for sale; and 17 (iii) oil or gas production from the field or pool would 18 not otherwise be economically feasible; 19 (B) to prolong the economic life of an oil or gas field or pool 20 as per barrel or barrel equivalent costs increase or as the price of oil or gas 21 decreases, and the increase or decrease is sufficient to make future production 22 no longer economically feasible; or 23 (C) to reestablish production of shut-in oil or gas that would 24 not otherwise be economically feasible; 25 (2) may not grant a royalty modification unless the lessee or lessees 26 requesting the change make a clear and convincing showing that a modification of 27 royalty meets the requirements of this subsection and is in the best interests of the 28 state; 29 (3) shall provide for an increase or decrease or other modification of 30 the state's royalty share by a sliding scale royalty or other mechanism that shall be 31 based on a change in the price of oil or gas and may also be based on other relevant
01 factors such as a change in production rate, projected ultimate recovery, development 02 costs, and operating costs; 03 (4) may not grant a royalty reduction for a field or pool 04 (A) under (1)(A) of this subsection if the royalty modification 05 for the field or pool would establish a royalty rate of less than five percent in 06 amount or value of the production removed or sold from a lease or leases 07 covering the field or pool; 08 (B) under (1)(B) or (1)(C) of this subsection if the royalty 09 modification for the field or pool would establish a royalty rate of less than 10 three percent in amount or value of the production removed or sold from a 11 lease or leases covering the field or pool; 12 (5) may not grant a royalty reduction under this subsection without 13 including an explicit condition that the royalty reduction is not assignable without the 14 prior written approval, which may not be unreasonably withheld, by the 15 commissioner; the commissioner shall, in the preliminary and final findings and 16 determinations, set out the conditions under which the royalty reduction may be 17 assigned; 18 (6) shall require the lessee or lessees to submit, with the application 19 for the royalty reduction, financial and technical data that demonstrate that the 20 requirements of this subsection are met; the commissioner 21 (A) may require disclosure of only the financial and technical 22 data related to development, production, and transportation of oil and gas or 23 gas only from the field or pool that are reasonably available to the applicant; 24 and 25 (B) shall keep the data confidential under AS 38.05.035(a)(8) 26 [AS 38.05.035(a)(9)] at the request of the lessee or lessees making application 27 for the royalty reduction; the confidential data may be disclosed by the 28 commissioner to legislators and to the legislative auditor and as directed by 29 the chair or vice-chair of the Legislative Budget and Audit Committee to the 30 director of the division of legislative finance, the permanent employees of 31 their respective divisions who are responsible for evaluating a royalty
01 reduction, and to agents or contractors of the legislative auditor or the 02 legislative finance director who are engaged under contract to evaluate the 03 royalty reduction, if they sign an appropriate confidentiality agreement; 04 (7) may 05 (A) require the lessee or lessees making application for the 06 royalty reduction under (1)(A) of this subsection to pay for the services of an 07 independent contractor, selected by the lessee or lessees from a list of 08 qualified consultants compiled by the commissioner, to evaluate hydrocarbon 09 development, production, transportation, and economics and to assist the 10 commissioner in evaluating the application and financial and technical data; 11 if, under this subparagraph, the commissioner requires payment for the 12 services of an independent contractor, the total cost of the services to be paid 13 for by the lessee or lessees may not exceed $150,000 for each application, and 14 the commissioner shall determine the relevant scope of the work to be 15 performed by the contractor; selection of an independent contractor under this 16 subparagraph is not subject to AS 36.30; 17 (B) with the mutual consent of the lessee or lessees making 18 application for the royalty reduction under (1)(B) or (1)(C) of this subsection, 19 request payment for the services of an independent contractor, selected from a 20 list of qualified consultants to evaluate hydrocarbon development, production, 21 transportation, and economics by the commissioner to assist the commissioner 22 in evaluating the application and financial and technical data; if, under this 23 subparagraph, the commissioner requires payment for the services of an 24 independent contractor, the total cost of the services that may be paid for by 25 the lessee or lessees may not exceed $150,000 for each application, and the 26 commissioner shall determine the relevant scope of the work to be performed 27 by the contractor; selection of an independent contractor under this 28 subparagraph is not subject to AS 36.30; 29 (8) shall make and publish a preliminary findings and determination 30 on the royalty reduction application, give reasonable public notice of the preliminary 31 findings and determination, and invite public comment on the preliminary findings
01 and determination during a 30-day period for receipt of public comment; 02 (9) shall offer to appear before the Legislative Budget and Audit 03 Committee, on a day that is not earlier than 10 days and not later than 20 days after 04 giving public notice under (8) of this subsection, to provide the committee a review of 05 the commissioner's preliminary findings and determination on the royalty reduction 06 application and administrative process; if the Legislative Budget and Audit 07 Committee accepts the commissioner's offer, the committee shall give notice of the 08 committee's meeting to all members of the legislature; 09 (10) shall make copies of the preliminary findings and determination 10 available to 11 (A) the presiding officer of each house of the legislature; 12 (B) the chairs of the legislature's standing committees on 13 resources; and 14 (C) the chairs of the legislature's special committees on oil and 15 gas, if any; 16 (11) shall, within 30 days after the close of the public comment period 17 under (8) of this subsection, 18 (A) prepare a summary of the public response to the 19 commissioner's preliminary findings and determination; 20 (B) make a final findings and determination; the 21 commissioner's final findings and determination prepared under this 22 subparagraph regarding a royalty reduction is final and not appealable to the 23 court; 24 (C) transmit a copy of the final findings and determination to 25 the lessee; 26 (D) with the applicant's consent, amend the applicant's lease or 27 unitization agreement consistent with the commissioner's final decision; and 28 (E) make copies of the final findings and determination 29 available to each person who submitted comment under (8) of this subsection 30 and who has filed a request for the copies; 31 (12) is not limited by the provisions of AS 38.05.134(3) or (f) of this
01 section in the commissioner's determination under this subsection. 02 * Sec. 8. AS 38.05.275(c) is amended to read: 03 (c) Subsection (b) of this section may not be construed to limit the director in 04 the exercise of authority granted by AS 38.05.035(a)(11) [AS 38.05.035(a)(12)]. 05 * Sec. 9. AS 39.25.110 is amended by adding a new paragraph to read: 06 (42) oil and gas auditors performing 07 (A) production tax audits, and their immediate supervisors, in 08 the Department of Revenue; 09 (B) royalty audits, including net profit share audits, and their 10 immediate supervisors, in the Department of Natural Resources. 11 * Sec. 10. AS 41.09.010(d) is amended to read: 12 (d) Data derived from drilling a stratigraphic test well or exploratory well that 13 is provided to the commissioner under (c)(3) of this section shall be kept confidential 14 for 24 months after receipt by the commissioner unless the owner of the well gives 15 written permission to the state to release the well data at an earlier date, and, 16 notwithstanding AS 31.05.035(c), confidentiality may not be extended beyond 24 17 months. The provisions of AS 38.05.035(a)(8)(C) [AS 38.05.035(a)(9)(C)] apply to 18 other data provided to the commissioner under (c)(3) of this section, except that the 19 commissioner, under appropriate confidentiality provisions and without preference or 20 discrimination, may display to all interested third parties, but may not distribute or 21 transfer in hard copy or electronic form, those data with respect to all land if the 22 commissioner determines that the limited disclosure is necessary to further the 23 interest of the state in evaluating or developing its land. 24 * Sec. 11. AS 43.05.230(a) is amended to read: 25 (a) It is unlawful for a current or former officer, employee, or agent of the 26 state to divulge the amount of income or the particulars set out or disclosed in a report 27 or return made under this title, except 28 (1) in connection with official investigations or proceedings of the 29 department, whether judicial or administrative, involving taxes due under this title; 30 (2) in connection with official investigations or proceedings of the 31 child support enforcement agency, whether judicial or administrative, involving child
01 support obligations imposed or imposable under AS 25 or AS 47; 02 (3) as provided in AS 38.05.036 pertaining to audit functions of the 03 Department of Natural Resources; 04 (4) as provided in AS 43.05.405 - 43.05.499; and 05 (5) as otherwise provided in this section or AS 43.55.890. 06 * Sec. 12. AS 43.05.230(h) is amended to read: 07 (h) The commissioner shall, upon request, furnish to the Department of 08 Natural Resources copies of tax returns, reports, and other documents filed under 09 AS 43.55 or AS 43.65, and the Department of Revenue's determinations and 10 workpapers under those chapters. The Department of Natural Resources shall 11 maintain the confidentiality that the Department of Revenue is required to extend to 12 the returns, reports, documents, determinations, and workpapers furnished to the 13 Department of Natural Resources under this subsection. 14 * Sec. 13. AS 43.55.023(i) is amended to read: 15 (i) For the purposes of this section, 16 (1) a producer's or explorer's transitional investment expenditures are 17 the sum of the expenditures the producer or explorer incurred after March 31, 2001, 18 and before April 1, 2006, that would be qualified capital expenditures if they were 19 incurred after March 31, 2006, less the sum of the payments or credits the producer or 20 explorer received before April 1, 2006, for the sale or other transfer of assets, 21 including geological, geophysical, or well data or interpretations, acquired by the 22 producer or explorer as a result of expenditures the producer or explorer incurred 23 before April 1, 2006, that would be qualified capital expenditures, if they were 24 incurred after March 31, 2006; 25 (2) a producer or explorer that did not have commercial production 26 of oil or gas from a lease or property in the state before January 1, 2008, may 27 elect to take a tax credit against a tax levied by [DUE UNDER] AS 43.55.011(e) in 28 the amount of 20 percent of the producer's or explorer's transitional investment 29 expenditures, but only to the extent that the amount does not exceed 1/10 of the 30 producer's or explorer's qualified capital expenditures that were incurred after 31 March 31, 2006, and before January 1, 2008 [ARE INCURRED DURING THE
01 CALENDAR YEAR FOR WHICH THE CREDIT IS TAKEN]; 02 (3) a producer or explorer may not take a tax credit for a transitional 03 investment expenditure 04 (A) for any calendar year after [THE LATER OF 05 (i)] 2013; [OR 06 (ii) THE SIXTH CALENDAR YEAR AFTER THE 07 CALENDAR YEAR FOR WHICH THE PRODUCER FIRST 08 APPLIES A CREDIT UNDER THIS SUBSECTION AGAINST A 09 TAX DUE UNDER AS 43.55.011(e), IF THE PRODUCER DID NOT 10 HAVE COMMERCIAL PRODUCTION OF OIL OR GAS FROM A 11 LEASE OR PROPERTY IN THE STATE BEFORE APRIL 1, 2006;] 12 (B) more than once; or 13 (C) if a credit for that expenditure was taken under 14 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025; 15 (4) notwithstanding (d), (e), and (g) of this section, a producer or 16 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for 17 a transitional investment expenditure. 18 * Sec. 14. AS 43.55.030(a) is amended to read: 19 (a) A producer that produces oil or gas from a lease or property in the 20 state during a calendar year, whether or not any tax payment is due under 21 AS 43.55.020(a) for that oil or gas, [THE PERSON PAYING THE TAX] shall file 22 with the department on March 31 of the following year [FOLLOWING THE 23 CALENDAR YEAR FOR WHICH THE TAX WAS LEVIED] a statement, under 24 oath, in a form prescribed by the department, giving, with other information required, 25 the following: 26 (1) a description of each lease or property from which [THE] oil or 27 [AND] gas was [WERE] produced, by name, legal description, lease number, or 28 accounting codes assigned by the department; 29 (2) the names of the producer and, if different, the person paying the 30 tax, if any; 31 (3) the gross amount of oil and the gross amount of gas produced from
01 each lease or property, and the percentage of the gross amount of oil and gas owned 02 by the [EACH] producer [FOR WHOM THE TAX IS PAID]; 03 (4) the gross value at the point of production of the oil and of the gas 04 produced from each lease or property owned by the [EACH] producer and the costs 05 of transportation of the oil and gas [FOR WHOM THE TAX IS PAID]; 06 (5) the name of the first purchaser and the price received for the oil 07 and for the gas, unless relieved from this requirement in whole or in part by the 08 department; [AND] 09 (6) the producer's qualified capital expenditures, as defined in 10 AS 43.55.023, other lease expenditures [AND ADJUSTMENTS AS 11 CALCULATED] under AS 43.55.165, and adjustments or other payments or 12 credits under AS 43.55.170; 13 (7) the production tax values of the oil and gas under 14 AS 43.55.160; 15 (8) any claims for tax credits to be applied; and 16 (9) calculations showing the amounts, if any, that were or are due 17 under AS 43.55.020(a) and interest on any underpayment or overpayment 18 [AS 43.55.160 - 43.55.170]. 19 * Sec. 15. AS 43.55.030(d) is amended to read: 20 (d) Reports required under this section [BY OR ON BEHALF OF THE 21 PRODUCER] are delinquent the first day following the day the report is due. The 22 person required to file the report is liable for a penalty, as determined by the 23 department under standards adopted in regulation by the department, of not 24 more than $1,000 for each day the person fails to file the report at the time 25 required. The penalty is in addition to the penalties in AS 43.05.220 and 26 43.05.290 and is assessed, collected, and paid in the same manner as a tax 27 deficiency under this title. In this subsection, "report" includes a statement. 28 * Sec. 16. AS 43.55.030 is amended by adding new subsections to read: 29 (e) An explorer or producer that incurs a lease expenditure under 30 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 31 year but does not produce oil or gas from a lease or property in the state during the
01 calendar year shall file with the department on March 31 of the following year a 02 statement, under oath, in a form prescribed by the department, giving, with other 03 information required, the following: 04 (1) the producer's qualified capital expenditures, as defined in 05 AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other 06 payments or credits under AS 43.55.170; and 07 (2) if the explorer or producer receives a payment or credit under 08 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 09 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount. 10 (f) The department may require a producer, an explorer, or an operator of a 11 lease or property to file monthly reports, as applicable, of 12 (1) the amounts and gross value at the point of production of oil and 13 gas produced; 14 (2) transportation costs of the oil and gas; 15 (3) any unscheduled interruption of, or reduction in the rate of, oil or 16 gas production; 17 (4) lease expenditures and adjustments under AS 43.55.165 and 18 43.55.170; 19 (5) joint interest billings; 20 (6) contracts for the sale or transportation of oil or gas; 21 (7) information and calculations used in determining monthly 22 installment payments of estimated tax under AS 43.55.020(a); and 23 (8) other records and information the department considers necessary 24 for the administration of this chapter. 25 * Sec. 17. AS 43.55.040 is amended to read: 26 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in 27 AS 43.05.405 - 43.05.499, the department may 28 (1) require a person engaged in production and the agent or employee 29 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil 30 or gas to furnish, whether by the filing of regular statements or reports or otherwise, 31 additional information that is considered by the department as necessary to compute
01 the amount of the tax; notwithstanding any contrary provision of law, the disclosure 02 of additional information under this paragraph to the producer obligated to pay the tax 03 does not violate AS 40.25.100(a) or AS 43.05.230(a); before disclosing information 04 under this paragraph that is otherwise required to be held confidential under 05 AS 40.25.100(a) or AS 43.05.230(a), the department shall 06 (A) provide the person that furnished the information a 07 reasonable opportunity to be heard regarding the proposed disclosure and the 08 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 have 12 a need to know that information for the purpose of determining or 13 contesting the producer's tax obligation; and 14 (ii) the use of the information to use for that purpose; 15 (2) examine the books, records, and files of the [SUCH A] person; 16 (3) conduct hearings and compel the attendance of witnesses and the 17 production of books, records, and papers of any person; [AND] 18 (4) make an investigation or hold an inquiry that is considered 19 necessary to a disclosure of the facts as to 20 (A) the amount of production from any oil or gas location, or 21 of a company or other producer of oil or gas; and 22 (B) the rendition of the oil and gas for taxing purposes; 23 (5) require a producer, an explorer, or an operator of a lease or 24 property to file reports and copies of records that the department considers 25 necessary to forecast state revenue under this chapter; in the case of reports and 26 copies of records relating to proposed, expected, or approved unit expenditures 27 for a unit for which one or more working interest owners other than the 28 operator have authority to approve unit expenditures, the required reports and 29 copies of records are limited to those reports or copies of records that constitute 30 or disclose communications between the operator and the working interest 31 owners relating to unit budget matters; and
01 (6) assess against a person required under this section to file a 02 report, statement, or other document a penalty, as determined by the 03 department under standards adopted in regulation by the department, of not 04 more than $1,000 for each day the person fails to file the report, statement, or 05 other document at the time required; the penalty is in addition to the penalties in 06 AS 43.05.220 and 43.05.290 and is assessed, collected, and paid in the same 07 manner as a tax deficiency under this title. 08 * Sec. 18. AS 43.55.110 is amended by adding new subsections to read: 09 (e) The department may require that returns, statements, reports, notifications, 10 and applications filed under this chapter be filed electronically in a form and manner 11 approved or prescribed by the department. 12 (f) The department may require that payments required under this chapter be 13 made electronically in a form and manner approved or prescribed by the department. 14 (g) Notwithstanding AS 44.62, the department may issue, for the information 15 and guidance of producers, explorers, and other interested persons, advisory bulletins 16 stating the department's interpretation of provisions of this chapter and of regulations 17 adopted under this chapter. Unless otherwise provided by the department by 18 regulation, interpretations stated in the advisory bulletins are not binding on the 19 department or others. 20 * Sec. 19. AS 43.55.165(a) is repealed and reenacted to read: 21 (a) For purposes of this chapter, a producer's lease expenditures for a calendar 22 year are 23 (1) costs, other than items listed in (e) of this section, that are 24 (A) incurred by the producer during the calendar year after 25 March 31, 2006, to explore for, develop, or produce oil or gas deposits located 26 within the producer's leases or properties in the state or, in the case of land in 27 which the producer does not own an operating right, operating interest, or 28 working interest, to explore for oil or gas deposits within other land in the 29 state; and 30 (B) allowed by the department by regulation, based on the 31 department's determination that the costs satisfy the following three
01 requirements: 02 (i) the costs must be incurred upstream of the point of 03 production of oil and gas; 04 (ii) the costs must be ordinary and necessary costs of 05 exploring for, developing, or producing, as applicable, oil or gas 06 deposits; and 07 (iii) the costs must be direct costs of exploring for, 08 developing, or producing, as applicable, oil or gas deposits; and 09 (2) a reasonable allowance for that calendar year, as determined under 10 regulations adopted by the department, for overhead expenses that are directly related 11 to exploring for, developing, or producing, as applicable, the oil or gas deposits. 12 * Sec. 20. AS 43.55.165(b) is amended to read: 13 (b) For purposes of (a) of this section, 14 (1) direct costs include 15 (A) an expenditure, when incurred, to acquire an item if the 16 acquisition cost is otherwise a direct cost, notwithstanding that the 17 expenditure may be required to be capitalized rather than treated as an 18 expense for financial accounting or federal income tax purposes; 19 (B) payments of or in lieu of property taxes, sales and use 20 taxes, motor fuel taxes, and excise taxes; 21 [(C) A REASONABLE ALLOWANCE, AS DETERMINED 22 UNDER REGULATIONS ADOPTED BY THE DEPARTMENT, FOR 23 OVERHEAD EXPENSES DIRECTLY RELATED TO EXPLORING FOR, 24 DEVELOPING, AND PRODUCING OIL OR GAS DEPOSITS LOCATED 25 WITHIN LEASES OR PROPERTIES OR OTHER LAND IN THE STATE;] 26 (2) an activity does not need to be physically located on, near, or 27 within the premises of the lease or property within which an oil or gas deposit being 28 explored for, developed, or produced is located in order for the cost of the activity to 29 be a cost upstream of the point of production of the oil or gas; 30 (3) in determining whether costs are lease expenditures, the 31 department shall consider, among other factors, the
01 (A) typical industry practices and standards in the state 02 that determine the costs, other than items listed in (e) of this section, that 03 an operator is allowed to bill a producer that is not the operator, under 04 unit operating agreements or similar operating agreements that were in 05 effect before December 2, 2005, and were subject to negotiation with at 06 least one producer with substantial bargaining power, other than the 07 operator; and 08 (B) standards adopted by the Department of Natural 09 Resources that determine the costs, other than items listed in (e) of this 10 section, that a lessee is allowed to deduct from revenue in calculating net 11 profits under a lease issued under AS 38.05.180(f)(3)(B), (D), or (E). 12 * Sec. 21. AS 43.55.165(e) is amended to read: 13 (e) For purposes of this section, lease expenditures do not include 14 (1) depreciation, depletion, or amortization; 15 (2) oil or gas royalty payments, production payments, lease profit 16 shares, or other payments or distributions of a share of oil or gas production, profit, or 17 revenue; 18 (3) taxes based on or measured by net income; 19 (4) interest or other financing charges or costs of raising equity or 20 debt capital; 21 (5) acquisition costs for a lease or property or exploration license; 22 (6) costs arising from fraud, wilful misconduct, [OR] gross 23 negligence, violation of law, or failure to comply with an obligation under a lease, 24 permit, or license issued by the state or federal government; 25 (7) fines or penalties imposed by law; 26 (8) costs of arbitration, litigation, or other dispute resolution activities 27 that involve the state or concern the rights or obligations among owners of interests 28 in, or rights to production from, one or more leases or properties or a unit; 29 (9) costs incurred in organizing a partnership, joint venture, or other 30 business entity or arrangement; 31 (10) amounts paid to indemnify the state; the exclusion provided by
01 this paragraph does not apply to the costs of obtaining insurance or a surety bond 02 from a third-party insurer or surety; 03 (11) surcharges levied under AS 43.55.201 or 43.55.300; 04 (12) for a transaction that is an internal transfer or is otherwise not an 05 arm's length transaction, expenditures incurred that are in excess of fair market value; 06 (13) an expenditure incurred to purchase an interest in any 07 corporation, partnership, limited liability company, business trust, or any other 08 business entity, whether or not the transaction is treated as an asset sale for federal 09 income tax purposes; 10 (14) a tax levied under AS 43.55.011; 11 (15) [THE PORTION OF] costs incurred for dismantlement, removal, 12 surrender, or abandonment of a facility, pipeline, well pad, platform, or other 13 structure, or for the restoration of a lease, field, unit, area, tract of land, body of 14 water, or right-of-way in conjunction with dismantlement, removal, surrender, or 15 abandonment [, THAT IS ATTRIBUTABLE TO PRODUCTION OF OIL OR GAS 16 OCCURRING BEFORE APRIL 1, 2006; THE PORTION IS CALCULATED AS A 17 RATIO OF THE AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF 18 OIL EQUIVALENT, ASSOCIATED WITH THE FACILITY, PIPELINE, WELL 19 PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY 20 OF WATER, OR RIGHT-OF-WAY OCCURRING BEFORE APRIL 1, 2006, TO 21 THE TOTAL AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF 22 OIL EQUIVALENT, ASSOCIATED WITH THAT FACILITY, PIPELINE, WELL 23 PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY 24 OF WATER, OR RIGHT-OF-WAY THROUGH THE END OF THE CALENDAR 25 MONTH BEFORE COMMENCEMENT OF THE DISMANTLEMENT, 26 REMOVAL, SURRENDER, OR ABANDONMENT]; a cost is not excluded under 27 this paragraph if the dismantlement, removal, surrender, or abandonment for which 28 the cost is incurred is undertaken for the purpose of replacing, renovating, or 29 improving the facility, pipeline, well pad, platform, or other structure; [FOR THE 30 PURPOSES OF THIS PARAGRAPH, "BARREL OF OIL EQUIVALENT" MEANS 31 (A) IN THE CASE OF OIL, ONE BARREL;
01 (B) IN THE CASE OF GAS, 6,000 CUBIC FEET;] 02 (16) costs incurred for containment, control, cleanup, or removal in 03 connection with any unpermitted release of oil or a hazardous substance and any 04 liability for damages imposed on the producer or explorer for that unpermitted 05 release; this paragraph does not apply to the cost of developing and maintaining an oil 06 discharge prevention and contingency plan under AS 46.04.030; 07 (17) costs incurred to satisfy a work commitment under an exploration 08 license under AS 38.05.132; 09 (18) that portion of expenditures, that would otherwise be qualified 10 capital expenditures, as defined in AS 43.55.023 [AS 43.55.023(k)], incurred during a 11 calendar year that are less than the product of $0.30 multiplied by the total taxable 12 production from each lease or property, in BTU equivalent barrels, during that 13 calendar year, except that, when a portion of a calendar year is subject to this 14 provision, the expenditures and volumes shall be prorated within that calendar year; 15 (19) costs incurred for repair, replacement, or deferred 16 maintenance of a facility, a pipeline, a structure, or equipment, other than a well, 17 that results in or is undertaken in response to a failure, problem, or event that 18 results in an unscheduled interruption of, or reduction in the rate of, oil or gas 19 production; or costs incurred for repair, replacement, or deferred maintenance 20 of a facility, a pipeline, a structure, or equipment, other than a well, that is 21 undertaken in response to, or is otherwise associated with, an unpermitted 22 release of a hazardous substance or of gas; however, costs under this paragraph 23 that would otherwise constitute lease expenditures under (a) of this section may 24 be treated as lease expenditures if the department determines that the repair or 25 replacement is solely necessitated by an act of war, by an unanticipated grave 26 natural disaster or other natural phenomenon of an exceptional, inevitable, and 27 irresistible character, the effects of which could not have been prevented or 28 avoided by the exercise of due care or foresight, or by an intentional or negligent 29 act or omission of a third party, other than a party or its agents in privity of 30 contract with, or employed by, the producer or an operator acting for the 31 producer, but only if the producer or operator, as applicable, exercised due care
01 in operating and maintaining the facility, pipeline, structure, or equipment, and 02 took reasonable precautions against the act or omission of the third party and 03 against the consequences of the act or omission; in this paragraph, 04 (A) "costs incurred for repair, replacement, or deferred 05 maintenance of a facility, a pipeline, a structure, or equipment" includes 06 costs to dismantle and remove the facility, pipeline, structure, or 07 equipment that is being replaced; 08 (B) "hazardous substance" has the meaning given in 09 AS 46.03.826; 10 (C) "replacement" includes renovation or improvement; 11 (20) costs incurred to construct, acquire, or operate a refinery or 12 crude oil topping plant, regardless of whether the products of the refinery or 13 topping plant are used in oil or gas exploration, development, or production 14 operations; however, if a producer owns a refinery or crude oil topping plant 15 that is located on or near the premises of the producer's lease or property in the 16 state and that processes the producer's oil produced from that lease or property 17 into a product that the producer uses in the operation of the lease or property in 18 drilling for or producing oil or gas, the producer's lease expenditures include the 19 amount calculated by subtracting from the fair market value of the product used 20 the prevailing value, as determined under AS 43.55.020(f), of the oil that is 21 processed. 22 * Sec. 22. AS 43.55.170(a) is amended to read: 23 (a) A [UNLESS THE PAYMENT OR CREDIT HAS ALREADY BEEN 24 SUBTRACTED IN CALCULATING BILLABLE OR BILLED COSTS UNDER 25 AS 43.55.165(c) OR (d), A] producer's lease expenditures under AS 43.55.165 must 26 be adjusted by subtracting payments or credits, other than tax credits, received by the 27 producer or by an operator acting for the producer for 28 (1) the use by another person of a production facility in which the 29 producer has an ownership interest or the management by the producer of a 30 production facility under a management agreement providing for the producer to 31 receive a management fee;
01 (2) a reimbursement or similar payment that offsets the producer's 02 lease expenditures, including an insurance recovery from a third-party insurer and a 03 payment from the state or federal government for reimbursement of the producer's 04 upstream costs, including costs for gathering, separating, cleaning, dehydration, 05 compressing, or other field handling associated with the production of oil or gas 06 upstream of the point of production; 07 (3) the sale or other transfer of 08 (A) an asset, including geological, geophysical, or well data or 09 interpretations, acquired by the producer as a result of a lease expenditure or 10 an expenditure that would be a lease expenditure if it were incurred after 11 March 31, 2006; for purposes of this subparagraph, 12 (i) if a producer removes from the state, for use outside 13 the state, an asset described in this subparagraph, the value of the asset 14 at the time it is removed is considered a payment received by the 15 producer for sale or transfer of the asset; 16 (ii) for a transaction that is an internal transfer or is 17 otherwise not an arm's length transaction, if the sale or transfer of the 18 asset is made for less than fair market value, the amount subtracted 19 must be the fair market value; and 20 (B) oil or gas 21 (i) that is not considered produced from a lease or 22 property under AS 43.55.020(e); and 23 (ii) the cost of acquiring which is a lease expenditure 24 incurred by the person that acquires the oil or gas. 25 * Sec. 23. AS 43.55 is amended by adding a new section to article 4 to read: 26 Sec. 43.55.890. Disclosure of tax information. Notwithstanding any contrary 27 provision of AS 40.25.100, and regardless of whether the information is considered 28 under AS 43.05.230(e) to constitute statistics classified to prevent the identification of 29 particular returns or reports, the department may publish the following information 30 under this chapter, if aggregated among three or more producers or explorers, 31 showing by month or calendar year and by lease or property, unit, or area of the state:
01 (1) the amount of oil or gas production; 02 (2) the amount of taxes levied under this chapter or paid under this 03 chapter; 04 (3) the effective tax rates under this chapter; 05 (4) the gross value of oil or gas at the point of production; 06 (5) the transportation costs for oil or gas; 07 (6) qualified capital expenditures under AS 43.55.023(k); 08 (7) exploration expenditures under AS 43.55.025; 09 (8) production tax values of oil or gas under AS 43.55.160; 10 (9) lease expenditures under AS 43.55.165; 11 (10) adjustments to lease expenditures under AS 43.55.170; 12 (11) tax credits applicable or potentially applicable against taxes 13 levied by this chapter. 14 * Sec. 24. AS 43.55.900 is amended by adding new paragraphs to read: 15 (22) "producer" means an owner of an operating right, operating 16 interest, or working interest in a mineral interest in oil or gas; 17 (23) "unit" means a group of tracts of land that is 18 (A) subject to a cooperative or a unit plan of development or 19 operation that has been certified by the commissioner of natural resources 20 under AS 38.05.180(p); 21 (B) subject to a cooperative or a unit plan of development or 22 operation that has been certified by the United States Secretary of the Interior 23 under 30 U.S.C. 226(m); 24 (C) subject to an agreement of the owners of interests in the 25 tracts of land to validly integrate their interests to provide for the unitized 26 management, development, and operation of the tracts of land as a unit, within 27 the meaning of AS 31.05.110(a); or 28 (D) within the unit area of a unit created by order of the 29 Alaska Oil and Gas Conservation Commission under AS 31.05.110(b). 30 * Sec. 25. AS 43.55.165(c) and 43.55.165(d) are repealed. 31 * Sec. 26. AS 43.55.011(l) is repealed.
01 * Sec. 27. The uncodified law of the State of Alaska is amended by adding a new section to 02 read: 03 APPLICABILITY. (a) Sections 21, 22, and 25 of this Act apply to oil and gas 04 produced after March 31, 2006. 05 (b) Sections 19, 20, and 26 of this Act apply to oil and gas produced after 06 December 31, 2007. 07 (c) Sections 14 and 16 of this Act apply to statements and reports under 08 AS 43.55.030(a), as amended by sec. 14 of this Act, and AS 43.55.030(e) and (f), as added 09 by sec. 16 of this Act, required to be filed after December 31, 2007. 10 * Sec. 28. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 TRANSITION: ASSIGNMENT OF OIL AND GAS AUDITORS IN THE 13 DEPARTMENT OF REVENUE AND DEPARTMENT OF NATURAL RESOURCES. 14 Notwithstanding any contrary provision of law, employees employed as oil and gas auditors 15 performing production tax audits or as their immediate supervisors in the Department of 16 Revenue and employees employed as oil and gas auditors performing royalty audits, 17 including net profit share audits, or as their immediate supervisors in the Department of 18 Natural Resources are assigned to the exempt service in accordance with AS 39.25.110(42), 19 added by sec. 9 of this Act, and may not be included in the general government or 20 supervisory collective bargaining units of state employees except as provided in this section. 21 All oil and gas auditors performing production tax audits or royalty audits and their 22 immediate supervisors hired before the effective date of sec. 9 of this Act have the option of 23 (1) continuing in the general government or supervisory collective bargaining units and being 24 subject to their respective collective bargaining agreements; or (2) being removed from those 25 bargaining units. Those employees have 90 days from the effective date of sec. 9 of this Act 26 to exercise the option to continue in the collective bargaining units. The option taken under 27 this section by the employee is irrevocable. The employees choosing to be removed from 28 those bargaining units are removed after any notice period required by a collective 29 bargaining agreement. 30 * Sec. 29. The uncodified law of the State of Alaska is amended by adding a new section to 31 read:
01 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any 02 contrary provision of AS 44.62.240, 03 (1) if the Department of Revenue expressly designates in the regulation that 04 the regulation applies retroactively to that date, a regulation adopted by the Department of 05 Revenue to implement, interpret, make specific, or otherwise carry out 06 (A) secs. 21, 22, and 25 of this Act may apply retroactively to April 1, 07 2006; 08 (B) secs. 13, 14, 16, 19, 20, and 26 of this Act may apply retroactively 09 to January 1, 2008; 10 (2) a regulation adopted by the Department of Natural Resources to 11 implement, interpret, make specific, or otherwise carry out statutory provisions for the 12 administration of oil and gas leases issued under AS 38.05.180(f)(3)(B), (D), or (E), to the 13 extent the regulation deals with the treatment of oil and gas production taxes in determining 14 net profits under those leases, may apply retroactively to April 1, 2006, if the Department of 15 Natural Resources expressly designates in the regulation that the regulation applies 16 retroactively to that date. 17 * Sec. 30. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 TRANSITION: REGULATIONS. The Department of Natural Resources and the 20 Department of Revenue may proceed to adopt regulations to implement this Act. The 21 regulations take effect under AS 44.62 (Administrative Procedure Act), but not before the 22 effective date of the law implemented by the regulation. 23 * Sec. 31. The uncodified law of the State of Alaska is amended by adding a new section to 24 read: 25 RETROACTIVITY OF CERTAIN PROVISIONS OF THIS ACT. Sections 21, 22, 26 25, and 29 of this Act are retroactive to April 1, 2006. 27 * Sec. 32. Sections 13, 14, 16, 19, 20, and 26 of this Act take effect January 1, 2008. 28 * Sec. 33. Except as provided in sec. 32 of this Act, this Act takes effect immediately under 29 AS 01.10.070(c).