CSHB 217(RES): "An Act relating to the tax applicable to the production of certain natural gas used in the state."
00 CS FOR HOUSE BILL NO. 217(RES) 01 "An Act relating to the tax applicable to the production of certain natural gas used in 02 the state." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 43.55.011(e) is amended to read: 05 (e) There is levied on the producer of oil or gas a tax for all oil and gas 06 produced each calendar year from each lease or property in the state, less any oil and 07 gas the ownership or right to which is exempt from taxation or constitutes a 08 landowner's royalty interest. Except as otherwise provided under (f), (j), and (k) of 09 this section and AS 43.55.014 [(f), (j), (k), AND (o) OF THIS SECTION], the tax is 10 equal to the sum of 11 (1) the annual production tax value of the taxable oil and gas as 12 calculated under AS 43.55.160(a)(1) multiplied by 25 percent; and 13 (2) the sum, over all months of the calendar year, of the tax amounts 14 determined under (g) of this section.
01 * Sec. 2. AS 43.55.011(f) is amended to read: 02 (f) The levy of tax under this section for oil and gas produced north of 68 03 degrees North latitude, other than oil and gas production subject to (i) of this section 04 and gas subject to an election made under AS 43.55.014 [(o) OF THIS SECTION], 05 may not be less than 06 (1) four percent of the gross value at the point of production when the 07 average price per barrel for Alaska North Slope crude oil for sale on the United States 08 West Coast during the calendar year for which the tax is due is more than $25; 09 (2) three percent of the gross value at the point of production when the 10 average price per barrel for Alaska North Slope crude oil for sale on the United States 11 West Coast during the calendar year for which the tax is due is over $20 but not over 12 $25; 13 (3) two percent of the gross value at the point of production when the 14 average price per barrel for Alaska North Slope crude oil for sale on the United States 15 West Coast during the calendar year for which the tax is due is over $17.50 but not 16 over $20; 17 (4) one percent of the gross value at the point of production when the 18 average price per barrel for Alaska North Slope crude oil for sale on the United States 19 West Coast during the calendar year for which the tax is due is over $15 but not over 20 $17.50; or 21 (5) zero percent of the gross value at the point of production when the 22 average price per barrel for Alaska North Slope crude oil for sale on the United States 23 West Coast during the calendar year for which the tax is due is $15 or less. 24 * Sec. 3. AS 43.55.011(m) is amended to read: 25 (m) Notwithstanding any contrary provision of AS 38.05.180(i), 26 AS 41.09.010, AS 43.55.024, or 43.55.025, the department shall provide by regulation 27 a method to ensure that, for a calendar year for which a producer's tax liability is 28 limited by (j) or (k) of this section or by an election made under AS 43.55.014 [(j), 29 (k), OR (o) OF THIS SECTION], tax credits otherwise available under 30 AS 38.05.180(i), AS 41.09.010, AS 43.55.024, or 43.55.025 and allocated to gas 31 subject to the limitations in (j) and (k) of this section and an election made under
01 AS 43.55.014 [(j), (k), AND (o) OF THIS SECTION] are accounted for as though the 02 credits had been applied first against a tax liability calculated without regard to the 03 limitations under (j) and (k) of this section and an election made under 04 AS 43.55.014 [(j), (k), AND (o) OF THIS SECTION] so as to reduce the tax liability 05 to the maximum amount provided for under (j) of this section or applicable to an 06 election made under AS 43.55.014 [(j) OR (o) OF THIS SECTION] for the 07 production of gas or (k) of this section for the production of oil. The regulation must 08 provide for a reasonable method to allocate tax credits to gas subject to (j) of this 09 section and subject to an election made under AS 43.55.014 [(j) AND (o) OF THIS 10 SECTION]. Only the amount of a tax credit remaining after the accounting provided 11 for under this subsection may be used for a later calendar year, transferred to another 12 person, or applied against a tax levied on the production of oil or gas not subject to (j) 13 or (k) of this section or an election made under AS 43.55.014 [(j), (k), OR (o) OF 14 THIS SECTION] to the extent otherwise allowed. 15 * Sec. 4. AS 43.55 is amended by adding a new section to read: 16 Sec. 43.55.014. Special election for gas used in the state. (a) 17 Notwithstanding the provisions of AS 43.55.011, a person producing gas that is used 18 in the state from a lease or property outside the Cook Inlet sedimentary basin during a 19 calendar year before 2022 may elect to limit the amount of tax due on the production 20 of that gas, as provided in this section. 21 (b) The maximum amount of tax applicable to the production of each 1,000 22 cubic feet of gas that is subject to the election authorized by this section may not 23 exceed the maximum amount of tax applicable to the production of each 1,000 cubic 24 feet of gas determined under AS 43.55.011(j)(2). 25 (c) A person choosing to make the election authorized by this section shall 26 make the election at the time the first monthly installment payment is due under 27 AS 43.55.020(a) for the calendar year for which the election is made. 28 (d) The provisions of AS 43.55.011(m), 43.55.160(a)(1)(E), 29 43.55.160(a)(2)(E), and 43.55.160(e) apply to the production of gas for which an 30 election is made under this section. 31 * Sec. 5. AS 43.55.020(a) is amended to read:
01 (a) For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i) 02 shall pay the tax as follows: 03 (1) an installment payment of the estimated tax levied by 04 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 05 month of the calendar year on the last day of the following month; except as otherwise 06 provided under (2) of this subsection, the amount of the installment payment is the 07 sum of the following amounts, less 1/12 of the tax credits that are allowed by law to be 08 applied against the tax levied by AS 43.55.011(e) for the calendar year, but the amount 09 of the installment payment may not be less than zero: 10 (A) for oil and gas produced from leases or properties in the 11 state outside the Cook Inlet sedimentary basin but not subject to an election 12 made under AS 43.55.014 [AS 43.55.011(o)], other than leases or properties 13 subject to AS 43.55.011(f), the greater of 14 (i) zero; or 15 (ii) the sum of 25 percent and the tax rate calculated for 16 the month under AS 43.55.011(g) multiplied by the remainder obtained 17 by subtracting 1/12 of the producer's adjusted lease expenditures for the 18 calendar year of production under AS 43.55.165 and 43.55.170 that are 19 deductible for the leases or properties under AS 43.55.160 from the 20 gross value at the point of production of the oil and gas produced from 21 the leases or properties during the month for which the installment 22 payment is calculated; 23 (B) for oil and gas produced from leases or properties subject 24 to AS 43.55.011(f), the greatest of 25 (i) zero; 26 (ii) zero percent, one percent, two percent, three 27 percent, or four percent, as applicable, of the gross value at the point of 28 production of the oil and gas produced from all leases or properties 29 during the month for which the installment payment is calculated; or 30 (iii) the sum of 25 percent and the tax rate calculated for 31 the month under AS 43.55.011(g) multiplied by the remainder obtained
01 by subtracting 1/12 of the producer's adjusted lease expenditures for the 02 calendar year of production under AS 43.55.165 and 43.55.170 that are 03 deductible for those leases or properties under AS 43.55.160 from the 04 gross value at the point of production of the oil and gas produced from 05 those leases or properties during the month for which the installment 06 payment is calculated; 07 (C) for oil and gas produced from each lease or property 08 subject to AS 43.55.011(j) or (k) or an election made under AS 43.55.014 09 [AS 43.55.011(j), (k), OR (o)], the greater of 10 (i) zero; or 11 (ii) the sum of 25 percent and the tax rate calculated for 12 the month under AS 43.55.011(g) multiplied by the remainder obtained 13 by subtracting 1/12 of the producer's adjusted lease expenditures for the 14 calendar year of production under AS 43.55.165 and 43.55.170 that are 15 deductible under AS 43.55.160 for oil or gas, respectively, produced 16 from the lease or property from the gross value at the point of 17 production of the oil or gas, respectively, produced from the lease or 18 property during the month for which the installment payment is 19 calculated; 20 (2) an amount calculated under (1)(C) of this subsection for oil or gas 21 produced from a lease or property subject to AS 43.55.011(j) or (k) or an election 22 made under AS 43.55.014 [AS 43.55.011(j), (k), OR (o)] may not exceed the product 23 obtained by carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or the 24 election made under AS 43.55.014 [43.55.011(o)], as applicable, for gas or set out in 25 AS 43.55.011(k)(1) or (2), as applicable, for oil, but substituting in 26 AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.014 [43.55.011(o)], as applicable, the 27 amount of taxable gas produced during the month for the amount of taxable gas 28 produced during the calendar year and substituting in AS 43.55.011(k)(1)(A) or 29 (2)(A), as applicable, the amount of taxable oil produced during the month for the 30 amount of taxable oil produced during the calendar year; 31 (3) an installment payment of the estimated tax levied by
01 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 02 on the last day of the following month; the amount of the installment payment is the 03 sum of 04 (A) the applicable tax rate for oil provided under 05 AS 43.55.011(i), multiplied by the gross value at the point of production of the 06 oil taxable under AS 43.55.011(i) and produced from the lease or property 07 during the month; and 08 (B) the applicable tax rate for gas provided under 09 AS 43.55.011(i), multiplied by the gross value at the point of production of the 10 gas taxable under AS 43.55.011(i) and produced from the lease or property 11 during the month; 12 (4) any amount of tax levied by AS 43.55.011(e) or (i), net of any 13 credits applied as allowed by law, that exceeds the total of the amounts due as 14 installment payments of estimated tax is due on March 31 of the year following the 15 calendar year of production. 16 * Sec. 6. AS 43.55.160(a) is amended to read: 17 (a) Except as provided in (b) of this section, for the purposes of 18 (1) AS 43.55.011(e), the annual production tax value of the taxable 19 (A) oil and gas produced during a calendar year from leases or 20 properties in the state that include land north of 68 degrees North latitude is the 21 gross value at the point of production of the oil and gas taxable under 22 AS 43.55.011(e) and produced by the producer from those leases or properties, 23 less the producer's lease expenditures under AS 43.55.165 for the calendar year 24 applicable to the oil and gas produced by the producer from those leases or 25 properties, as adjusted under AS 43.55.170; this subparagraph does not apply 26 to gas subject to an election made under AS 43.55.014 [AS 43.55.011(o)]; 27 (B) oil and gas produced during a calendar year from leases or 28 properties in the state outside the Cook Inlet sedimentary basin, no part of 29 which is north of 68 degrees North latitude, is the gross value at the point of 30 production of the oil and gas taxable under AS 43.55.011(e) and produced by 31 the producer from those leases or properties, less the producer's lease
01 expenditures under AS 43.55.165 for the calendar year applicable to the oil and 02 gas produced by the producer from those leases or properties, as adjusted under 03 AS 43.55.170; this subparagraph does not apply to gas subject to an election 04 made under AS 43.55.014 [AS 43.55.011(o)]; 05 (C) oil produced during a calendar year from a lease or 06 property in the Cook Inlet sedimentary basin is the gross value at the point of 07 production of the oil taxable under AS 43.55.011(e) and produced by the 08 producer from that lease or property, less the producer's lease expenditures 09 under AS 43.55.165 for the calendar year applicable to the oil produced by the 10 producer from that lease or property, as adjusted under AS 43.55.170; 11 (D) gas produced during a calendar year from a lease or 12 property in the Cook Inlet sedimentary basin is the gross value at the point of 13 production of the gas taxable under AS 43.55.011(e) and produced by the 14 producer from that lease or property, less the producer's lease expenditures 15 under AS 43.55.165 for the calendar year applicable to the gas produced by the 16 producer from that lease or property, as adjusted under AS 43.55.170; 17 (E) gas produced during a calendar year from a lease or 18 property outside the Cook Inlet sedimentary basin and used in the state is the 19 gross value at the point of production of that gas taxable under 20 AS 43.55.011(e) and produced by the producer from that lease or property, less 21 the producer's lease expenditures under AS 43.55.165 for the calendar year 22 applicable to that gas produced by the producer from that lease or property, as 23 adjusted under AS 43.55.170; 24 (2) AS 43.55.011(g), the monthly production tax value of the taxable 25 (A) oil and gas produced during a month from leases or 26 properties in the state that include land north of 68 degrees North latitude is the 27 gross value at the point of production of the oil and gas taxable under 28 AS 43.55.011(e) and produced by the producer from those leases or properties, 29 less 1/12 of the producer's lease expenditures under AS 43.55.165 for the 30 calendar year applicable to the oil and gas produced by the producer from 31 those leases or properties, as adjusted under AS 43.55.170; this subparagraph
01 does not apply to gas subject to an election made under AS 43.55.014 02 [AS 43.55.011(o)]; 03 (B) oil and gas produced during a month from leases or 04 properties in the state outside the Cook Inlet sedimentary basin, no part of 05 which is north of 68 degrees North latitude, is the gross value at the point of 06 production of the oil and gas taxable under AS 43.55.011(e) and produced by 07 the producer from those leases or properties, less 1/12 of the producer's lease 08 expenditures under AS 43.55.165 for the calendar year applicable to the oil and 09 gas produced by the producer from those leases or properties, as adjusted under 10 AS 43.55.170; this subparagraph does not apply to gas subject to an election 11 made under AS 43.55.014 [AS 43.55.011(o)]; 12 (C) oil produced during a month from a lease or property in the 13 Cook Inlet sedimentary basin is the gross value at the point of production of 14 the oil taxable under AS 43.55.011(e) and produced by the producer from that 15 lease or property, less 1/12 of the producer's lease expenditures under 16 AS 43.55.165 for the calendar year applicable to the oil produced by the 17 producer from that lease or property, as adjusted under AS 43.55.170; 18 (D) gas produced during a month from a lease or property in 19 the Cook Inlet sedimentary basin is the gross value at the point of production 20 of the gas taxable under AS 43.55.011(e) and produced by the producer from 21 that lease or property, less 1/12 of the producer's lease expenditures under 22 AS 43.55.165 for the calendar year applicable to the gas produced by the 23 producer from that lease or property, as adjusted under AS 43.55.170; 24 (E) gas produced during a month from a lease or property 25 outside the Cook Inlet sedimentary basin and used in the state is the gross 26 value at the point of production of that gas taxable under AS 43.55.011(e) and 27 produced by the producer from that lease or property, less 1/12 of the 28 producer's lease expenditures under AS 43.55.165 for the calendar year 29 applicable to that gas produced by the producer from that lease or property, as 30 adjusted under AS 43.55.170. 31 * Sec. 7. AS 43.55.160(e) is amended to read:
01 (e) Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that 02 would otherwise be deductible by a producer in a calendar year but whose deduction 03 would cause an annual production tax value calculated under (a)(1) of this section of 04 taxable oil or gas produced during the calendar year to be less than zero may be used 05 to establish a carried-forward annual loss under AS 43.55.023(b). However, the 06 department shall provide by regulation a method to ensure that, for a period for which 07 a producer's tax liability is limited by AS 43.55.011(j) or (k) or an election made 08 under AS 43.55.014 [AS 43.55.011(j), (k), OR (o)], any adjusted lease expenditures 09 under AS 43.55.165 and 43.55.170 that would otherwise be deductible by a producer 10 for that period but whose deduction would cause a production tax value calculated 11 under (a)(1)(C), (D), or (E) of this section to be less than zero are accounted for as 12 though the adjusted lease expenditures had first been used as deductions in calculating 13 the production tax values of oil or gas subject to any of the limitations under 14 AS 43.55.011(j) or (k) or an election made under AS 43.55.014 [AS 43.55.011(j), 15 (k), OR (o)] that have positive production tax values so as to reduce the tax liability 16 calculated without regard to the limitation to the maximum amount provided for under 17 the applicable provisions [PROVISION] of AS 43.55.011(j) or (k) or 43.55.014 18 [AS 43.55.011(j), (k), OR (o)]. Only the amount of those adjusted lease expenditures 19 remaining after the accounting provided for under this subsection may be used to 20 establish a carried-forward annual loss under AS 43.55.023(b). In this subsection, 21 "producer" includes "explorer." 22 * Sec. 8. AS 43.55.165(h) is amended to read: 23 (h) The department shall adopt regulations that provide for reasonable 24 methods of allocating costs between oil and gas, between gas subject to the election 25 made under AS 43.55.014 [AS 43.55.011(o)] and other gas, and between leases or 26 properties in those circumstances where an allocation of costs is required to determine 27 lease expenditures that are costs of exploring for, developing, or producing oil 28 deposits or costs of exploring for, developing, or producing gas deposits, or that are 29 costs of exploring for, developing, or producing oil or gas deposits located within 30 different leases or properties. 31 * Sec. 9. AS 43.55.900(24) is amended to read:
01 (24) "used in the state" means delivered for consumption as fuel in the 02 state, including as fuel consumed to generate electricity, or used as fuel or feedstock 03 in a manufacturing process creating an end product in the state, regardless of the 04 final disposition of the manufactured end product. 05 * Sec. 10. AS 43.55.900 is amended by adding a new paragraph to read: 06 (25) "manufacturing process" means the process of forming a valuable 07 compound by chemically converting gas or components of gas or chemically 08 combining gas or components of gas with other substances; "manufacturing process" 09 does not include gas processing, gas treatment, dehydration, fractionation, 10 compression, or liquefaction. 11 * Sec. 11. AS 43.55.011(o) is repealed.