CSHB 276(FIN): "An Act providing for a credit against the oil and gas production tax for costs incurred for conducting seismic exploration and drilling certain oil or natural gas exploration wells in certain basins; relating to the determination of the production tax value of oil and gas production; and relating to a special tax rate for new oil or gas production south of 68 degrees North latitude."
00 CS FOR HOUSE BILL NO. 276(FIN) 01 "An Act providing for a credit against the oil and gas production tax for costs incurred 02 for conducting seismic exploration and drilling certain oil or natural gas exploration 03 wells in certain basins; relating to the determination of the production tax value of oil 04 and gas production; and relating to a special tax rate for new oil or gas production south 05 of 68 degrees North latitude." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. AS 43.55.011(e) is amended to read: 08 (e) There is levied on the producer of oil or gas a tax for all oil and gas 09 produced each calendar year from each lease or property in the state, less any oil and 10 gas the ownership or right to which is exempt from taxation or constitutes a 11 landowner's royalty interest. Except as otherwise provided under (f), (j), (k), [AND] 12 (o), and (p) of this section, the tax is equal to the sum of 13 (1) the annual production tax value of the taxable oil and gas as
01 calculated under AS 43.55.160(a)(1) multiplied by 25 percent; and 02 (2) the sum, over all months of the calendar year, of the tax amounts 03 determined under (g) of this section. 04 * Sec. 2. AS 43.55.011 is amended by adding a new subsection to read: 05 (p) For the seven years immediately following the commencement of 06 commercial production of oil or gas produced from leases or properties in the state 07 that are outside the Cook Inlet sedimentary basin and that do not include land located 08 north of 68 degrees North latitude, where that commercial production began after 09 December 31, 2012, and before January 1, 2022, the levy of tax under (e) of this 10 section for oil and gas may not exceed four percent of the gross value at the point of 11 production. 12 * Sec. 3. AS 43.55.020(a) is amended to read: 13 (a) For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i) 14 or (p) shall pay the tax as follows: 15 (1) an installment payment of the estimated tax levied by 16 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 17 month of the calendar year on the last day of the following month; except as otherwise 18 provided under (2) of this subsection, the amount of the installment payment is the 19 sum of the following amounts, less 1/12 of the tax credits that are allowed by law to be 20 applied against the tax levied by AS 43.55.011(e) for the calendar year, but the amount 21 of the installment payment may not be less than zero: 22 (A) for oil and gas produced from leases or properties in the 23 state outside the Cook Inlet sedimentary basin but not subject to 24 AS 43.55.011(o) or (p), other than leases or properties subject to 25 AS 43.55.011(f), the greater of 26 (i) zero; or 27 (ii) the sum of 25 percent and the tax rate calculated for 28 the month under AS 43.55.011(g) multiplied by the remainder obtained 29 by subtracting 1/12 of the producer's adjusted lease expenditures for the 30 calendar year of production under AS 43.55.165 and 43.55.170 that are 31 deductible for the leases or properties under AS 43.55.160 from the
01 gross value at the point of production of the oil and gas produced from 02 the leases or properties during the month for which the installment 03 payment is calculated; 04 (B) for oil and gas produced from leases or properties subject 05 to AS 43.55.011(f), the greatest of 06 (i) zero; 07 (ii) zero percent, one percent, two percent, three 08 percent, or four percent, as applicable, of the gross value at the point of 09 production of the oil and gas produced from all leases or properties 10 during the month for which the installment payment is calculated; or 11 (iii) 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 for those leases or properties under AS 43.55.160 from the 16 gross value at the point of production of the oil and gas produced from 17 those leases or properties during the month for which the installment 18 payment is calculated; 19 (C) for oil and gas produced from each lease or property 20 subject to AS 43.55.011(j), (k), [OR] (o), or (p), the greater of 21 (i) zero; or 22 (ii) the sum of 25 percent and the tax rate calculated for 23 the month under AS 43.55.011(g) multiplied by the remainder obtained 24 by subtracting 1/12 of the producer's adjusted lease expenditures for the 25 calendar year of production under AS 43.55.165 and 43.55.170 that are 26 deductible under AS 43.55.160 for oil or gas, as applicable 27 [RESPECTIVELY], produced from the lease or property from the 28 gross value at the point of production of the oil or gas, as applicable 29 [RESPECTIVELY], produced from the lease or property during the 30 month for which the installment payment is calculated; 31 (2) an amount calculated under (1)(C) of this subsection for oil or gas
01 produced from a lease or property 02 (A) subject to AS 43.55.011(j), (k), or (o) may not exceed the 03 product obtained by carrying out the calculation set out in AS 43.55.011(j)(1) 04 or (2) or 43.55.011(o), as applicable, for gas or set out in AS 43.55.011(k)(1) 05 or (2), as applicable, for oil, but substituting in AS 43.55.011(j)(1)(A) or (2)(A) 06 or 43.55.011(o), as applicable, the amount of taxable gas produced during the 07 month for the amount of taxable gas produced during the calendar year and 08 substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the amount of 09 taxable oil produced during the month for the amount of taxable oil produced 10 during the calendar year; 11 (B) subject to AS 43.55.011(p) may not exceed four percent 12 of the gross value at the point of production of the oil or gas; 13 (3) an installment payment of the estimated tax levied by 14 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 15 on the last day of the following month; the amount of the installment payment is the 16 sum of 17 (A) the applicable tax rate for oil provided under 18 AS 43.55.011(i), multiplied by the gross value at the point of production of the 19 oil taxable under AS 43.55.011(i) and produced from the lease or property 20 during the month; and 21 (B) the applicable tax rate for gas provided under 22 AS 43.55.011(i), multiplied by the gross value at the point of production of the 23 gas taxable under AS 43.55.011(i) and produced from the lease or property 24 during the month; 25 (4) any amount of tax levied by AS 43.55.011(e) or (i), net of any 26 credits applied as allowed by law, that exceeds the total of the amounts due as 27 installment payments of estimated tax is due on March 31 of the year following the 28 calendar year of production. 29 * Sec. 4. AS 43.55.025(a) is amended to read: 30 (a) Subject to the terms and conditions of this section, a credit against the 31 production tax levied by AS 43.55.011(e) is allowed for exploration expenditures that
01 qualify under (b) of this section in an amount equal to one of the following: 02 (1) 30 percent of the total exploration expenditures that qualify only 03 under (b) and (c) of this section; 04 (2) 30 percent of the total exploration expenditures that qualify only 05 under (b) and (d) of this section; 06 (3) 40 percent of the total exploration expenditures that qualify under 07 (b), (c), and (d) of this section; 08 (4) 40 percent of the total exploration expenditures that qualify only 09 under (b) and (e) of this section; [OR] 10 (5) 80, 90, or 100 percent, or a lesser amount described in (l) of this 11 section, of the total exploration expenditures described in (b)(1) and (2) of this section 12 and not excluded by (b)(3) and (4) of this section that qualify only under (l) of this 13 section; 14 (6) the lesser of $25,000,000 or 80 percent of the total exploration 15 drilling expenditures described in (n) of this section and that qualify under (b) 16 and (c) of this section; or 17 (7) the lesser of $7,500,000 or 75 percent of the total seismic 18 exploration expenditures described in (o) of this section and that qualify under 19 (b) of this section. 20 * Sec. 5. AS 43.55.025(c) is amended to read: 21 (c) To be eligible for a [THE 30 PERCENT] production tax credit authorized 22 by (a)(1), (3), or (6) of this section [OR THE 40 PERCENT PRODUCTION TAX 23 CREDIT AUTHORIZED BY (a)(3) OF THIS SECTION], exploration expenditures 24 must 25 (1) qualify under (b) of this section; and 26 (2) be for an exploration well, subject to the following: 27 (A) before the well is spudded, 28 (i) the explorer shall submit to the commissioner of 29 natural resources the information necessary to determine whether the 30 geological objective of the well is a potential oil or gas trap that is 31 distinctly separate from any trap that has been tested by a preexisting
01 well; 02 (ii) at the time of the submittal of information under (i) 03 of this subparagraph, the commissioner of natural resources may 04 request from the explorer that specific data sets, ancillary data, and 05 reports including all results, and copies of well data collected and data 06 analyses for the well be provided to the Department of Natural 07 Resources upon completion of the drilling; in this sub-subparagraph, 08 well data include all analyses conducted on physical material, and well 09 logs collected from the well and sample analyses; testing geophysical 10 and velocity data including vertical seismic profiles and check shot 11 surveys; testing data and analyses; age data; geochemical analyses; and 12 access to tangible material; and 13 (iii) the commissioner of natural resources must make 14 an affirmative determination as to whether the geological objective of 15 the well is a potential oil or gas trap that is distinctly separate from any 16 trap that has been tested by a preexisting well and what information 17 under (ii) of this subparagraph must be submitted by the explorer after 18 completion, abandonment, or suspension under AS 31.05.030; the 19 commissioner of natural resources shall make that determination within 20 60 days after receiving all the necessary information from the explorer 21 based on the information received and on other information the 22 commissioner of natural resources considers relevant; 23 (B) for an exploration well other than a well to explore a Cook 24 Inlet prospect, the well must be located and drilled in such a manner that the 25 bottom hole is located not less than three miles away from the bottom hole of a 26 preexisting well drilled for oil or gas, irrespective of whether the preexisting 27 well has been completed, suspended, or abandoned; 28 (C) after completion, suspension, or abandonment under 29 AS 31.05.030 of the exploration well, the commissioner of natural resources 30 must determine that the well was consistent with achieving the explorer's 31 stated geological objective.
01 * Sec. 6. AS 43.55.025 is amended by adding new subsections to read: 02 (n) The persons that drill the first four exploration wells in the state and within 03 the areas described in (p) of this section on state lands, private lands, or federal 04 onshore lands for the purpose of discovering oil or gas that penetrate and evaluate a 05 prospect in a basin described in (p) of this section are eligible for a credit under (a)(6) 06 of this section. A credit under this subsection may not be taken for more than two 07 exploration wells in a single area described in (p)(1) - (6) of this section. Exploration 08 expenditures eligible for the credit in this subsection must be incurred for work 09 performed after June 1, 2012, and before July 1, 2016. A person planning to drill an 10 exploration well on private land and to apply for a credit under this subsection shall 11 obtain written consent from the owner of the oil and gas interest for the full public 12 release of all well data after the expiration of the confidentiality period applicable to 13 information collected under (f) of this section. The written consent of the owner of the 14 oil and gas interest must be submitted to the commissioner of natural resources before 15 approval of the proposed exploration well. In addition to the requirements in (c) of this 16 section and submission of the written consent of the owner of the oil and gas interest, a 17 person planning to drill an exploration well shall obtain approval from the 18 commissioner of natural resources before the well is spudded. The commissioner of 19 natural resources shall make a written determination approving or rejecting an 20 exploration well within 60 days after receiving the request for approval or as soon as is 21 practicable thereafter. Before approving the exploration well, the commissioner of 22 natural resources shall consider the following: the location of the well; the proximity 23 to a community in need of a local energy source; the proximity of existing 24 infrastructure; the experience and safety record of the explorer in conducting 25 operations in remote or roadless areas; the projected cost schedule; whether seismic 26 mapping and seismic data sufficiently identify a particular trap for exploration; 27 whether the targeted and planned depth and range are designed to penetrate and fully 28 evaluate the hydrocarbon potential of the proposed prospect and reach the level below 29 which economic hydrocarbon reservoirs are likely to be found, or reach 12,000 feet or 30 more true vertical depth; and whether the exploration plan provides for a full 31 evaluation of the wellbore below surface casing to the depth of the well. Whether the
01 exploration well for which a credit is requested under this subsection is located within 02 an area and a basin described under (p) of this section shall be determined by the 03 commissioner of natural resources and reported to the commissioner. A taxpayer that 04 obtains a credit under this subsection may not claim a tax credit under AS 43.55.023 05 or another provision in this section for the same exploration expenditure. 06 (o) The persons that conduct the first four seismic exploration projects in the 07 state and within the areas described in (p) of this section for the purpose of discovering 08 oil or gas in a basin are eligible for the credit under (a)(7) of this section. A credit 09 under this subsection may not be taken for more than one seismic exploration project 10 in a single area described in (p)(1) - (6) of this section. Exploration expenditures 11 eligible for the credit in this subsection must be incurred for work performed after 12 June 1, 2012, and before July 1, 2016. A person planning to conduct a seismic 13 exploration project on private land and to apply for a credit under this subsection shall 14 obtain written consent from the owner of the oil and gas interest for the full public 15 release of all geophysical data and compliance with the data submission requirements 16 in (f)(2) of this section. Notwithstanding (f)(2)(C)(ii) of this section, to qualify for a 17 credit under this subsection, a person shall submit the written consent of the owner of 18 the oil and gas interest for the release of data if applicable, and all data required under 19 (f)(2) of this section to the Department of Natural Resources and shall agree in writing 20 that all seismic data requirements submitted under the requirements of (f)(2) of this 21 section may be made public two years after receiving a credit under this subsection. A 22 person intending to qualify for the tax credit under this subsection shall obtain 23 approval from the commissioner of natural resources before the commencement of the 24 seismic exploration activities. The commissioner of natural resources shall make a 25 written determination approving or rejecting a seismic project within 60 days after 26 receiving the request for approval or as soon as is practicable thereafter. Before 27 approving a seismic exploration project, the commissioner shall consider the 28 following: the location of the project; the projected cost schedule; the data acquisition 29 and data processing plan; the reasons for choosing the particular area for seismic 30 exploration; and the experience and safety record of the person in conducting seismic 31 exploration operations in remote or roadless areas. Whether the seismic exploration
01 project for which a credit is requested under this subsection is located in a basin 02 described in (p) of this section shall be determined by the commissioner of natural 03 resources and reported to the commissioner. A taxpayer that obtains a credit under this 04 subsection may not claim a tax credit under AS 43.55.023 or another provision in this 05 section for the same exploration expenditure. 06 (p) The activity that is the basis for a credit claimed under (a)(6) and (n) of 07 this section or (a)(7) and (o) of this section must be for the exploration of a basin and 08 within the following areas whose central points are determined using the World 09 Geographic System of 1984 datum, 10 (1) 100 miles from 66.896128 degrees North, -162.598187 degrees 11 West; 12 (2) 150 miles from 64.839474 degrees North, -147.72094 degrees 13 West; 14 (3) 50 miles from 62.776428 degrees North, -164.495201 degrees 15 West; 16 (4) 50 miles from 62.110357 degrees North, -145.530551 degrees 17 West; 18 (5) 100 miles from 58.189868 degrees North, -157.371104 degrees 19 West; 20 (6) 100 miles from 56.005988 degrees North, -160.56083 degrees 21 West. 22 * Sec. 7. AS 43.55.160(a) is amended to read: 23 (a) Except as provided in (b) of this section, for the purposes of 24 (1) AS 43.55.011(e), the annual production tax value of the taxable oil, 25 gas, or [(A)] oil and gas subject to this paragraph produced during a calendar year 26 [FROM LEASES OR PROPERTIES IN THE STATE THAT INCLUDE LAND 27 NORTH OF 68 DEGREES NORTH LATITUDE] is the gross value at the point of 28 production of the oil, gas, or oil and gas taxable under AS 43.55.011(e) [AND 29 PRODUCED BY THE PRODUCER FROM THOSE LEASES OR PROPERTIES], 30 less the producer's lease expenditures under AS 43.55.165 for the calendar year 31 applicable to the oil, gas, or oil and gas, as applicable, produced by the producer from
01 [THOSE] leases or properties, as adjusted under AS 43.55.170; this paragraph 02 applies to 03 (A) oil and gas produced from leases or properties in the 04 state that include land north of 68 degrees North latitude, other than gas 05 produced before 2022 and used in the state; [THIS SUBPARAGRAPH 06 DOES NOT APPLY TO GAS SUBJECT TO AS 43.55.011(o);] 07 (B) oil and gas produced [DURING A CALENDAR YEAR] 08 from leases or properties in the state outside the Cook Inlet sedimentary basin, 09 no part of which is north of 68 degrees North latitude [, IS THE GROSS 10 VALUE AT THE POINT OF PRODUCTION OF THE OIL AND GAS 11 TAXABLE UNDER AS 43.55.011(e) AND PRODUCED BY THE 12 PRODUCER FROM THOSE LEASES OR PROPERTIES, LESS THE 13 PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE 14 CALENDAR YEAR APPLICABLE TO THE OIL AND GAS PRODUCED 15 BY THE PRODUCER FROM THOSE LEASES OR PROPERTIES, AS 16 ADJUSTED UNDER AS 43.55.170]; this subparagraph does not apply to gas 17 (i) produced before 2022 and used in the state; or 18 (ii) oil and gas subject to AS 43.55.011(p) [SUBJECT 19 TO AS 43.55.011(o)]; 20 (C) oil produced before 2022 [DURING A CALENDAR 21 YEAR] from a lease or property in the Cook Inlet sedimentary basin [IS THE 22 GROSS VALUE AT THE POINT OF PRODUCTION OF THE OIL 23 TAXABLE UNDER AS 43.55.011(e) AND PRODUCED BY THE 24 PRODUCER FROM THAT LEASE OR PROPERTY, LESS THE 25 PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE 26 CALENDAR YEAR APPLICABLE TO THE OIL PRODUCED BY THE 27 PRODUCER FROM THAT LEASE OR PROPERTY, AS ADJUSTED 28 UNDER AS 43.55.170]; 29 (D) gas produced before 2022 [DURING A CALENDAR 30 YEAR] from a lease or property in the Cook Inlet sedimentary basin [IS THE 31 GROSS VALUE AT THE POINT OF PRODUCTION OF THE GAS
01 TAXABLE UNDER AS 43.55.011(e) AND PRODUCED BY THE 02 PRODUCER FROM THAT LEASE OR PROPERTY, LESS THE 03 PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE 04 CALENDAR YEAR APPLICABLE TO THE GAS PRODUCED BY THE 05 PRODUCER FROM THAT LEASE OR PROPERTY, AS ADJUSTED 06 UNDER AS 43.55.170]; 07 (E) gas produced before 2022 [DURING A CALENDAR 08 YEAR] from a lease or property in the state outside the Cook Inlet 09 sedimentary basin and used in the state [IS THE GROSS VALUE AT THE 10 POINT OF PRODUCTION OF THAT GAS TAXABLE UNDER 11 AS 43.55.011(e) AND PRODUCED BY THE PRODUCER FROM THAT 12 LEASE OR PROPERTY, LESS THE PRODUCER'S LEASE 13 EXPENDITURES UNDER AS 43.55.165 FOR THE CALENDAR YEAR 14 APPLICABLE TO THAT GAS PRODUCED BY THE PRODUCER FROM 15 THAT LEASE OR PROPERTY, AS ADJUSTED UNDER AS 43.55.170]; 16 (F) oil and gas subject to AS 43.55.011(p) produced from 17 leases or properties in the state; 18 (G) oil and gas produced from a lease or property no part 19 of which is north of 68 degrees North latitude, other than oil or gas 20 described in (B), (C), (D), (E), or (F) of this paragraph; 21 (2) AS 43.55.011(g), the monthly production tax value of the taxable 22 (A) oil and gas produced during a month from leases or 23 properties in the state that include land north of 68 degrees North latitude is the 24 gross value at the point of production of the oil and gas taxable under 25 AS 43.55.011(e) and produced by the producer from those leases or properties, 26 less 1/12 of the producer's lease expenditures under AS 43.55.165 for the 27 calendar year applicable to the oil and gas produced by the producer from 28 those leases or properties, as adjusted under AS 43.55.170; this subparagraph 29 does not apply to gas subject to AS 43.55.011(o); 30 (B) oil and gas produced during a month from leases or 31 properties in the state outside the Cook Inlet sedimentary basin, no part of
01 which is north of 68 degrees North latitude, is the gross value at the point of 02 production of the oil and gas taxable under AS 43.55.011(e) and produced by 03 the producer from those leases or properties, less 1/12 of the producer's lease 04 expenditures under AS 43.55.165 for the calendar year applicable to the oil and 05 gas produced by the producer from those leases or properties, as adjusted under 06 AS 43.55.170; this subparagraph does not apply to gas subject to 07 AS 43.55.011(o); 08 (C) oil produced during a month from a lease or property in the 09 Cook Inlet sedimentary basin is the gross value at the point of production of 10 the oil taxable under AS 43.55.011(e) and produced by the producer from that 11 lease or property, less 1/12 of the producer's lease expenditures under 12 AS 43.55.165 for the calendar year applicable to the oil produced by the 13 producer from that lease or property, as adjusted under AS 43.55.170; 14 (D) gas produced during a month from a lease or property in 15 the Cook Inlet sedimentary basin is the gross value at the point of production 16 of the gas taxable under AS 43.55.011(e) and produced by the producer from 17 that lease or property, less 1/12 of the producer's lease expenditures under 18 AS 43.55.165 for the calendar year applicable to the gas produced by the 19 producer from that lease or property, as adjusted under AS 43.55.170; 20 (E) gas produced during a month from a lease or property 21 outside the Cook Inlet sedimentary basin and used in the state is the gross 22 value at the point of production of that gas taxable under AS 43.55.011(e) and 23 produced by the producer from that lease or property, less 1/12 of the 24 producer's lease expenditures under AS 43.55.165 for the calendar year 25 applicable to that gas produced by the producer from that lease or property, as 26 adjusted under AS 43.55.170. 27 * Sec. 8. AS 43.55.160(e) is amended to read: 28 (e) Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that 29 would otherwise be deductible by a producer in a calendar year but whose deduction 30 would cause an annual production tax value calculated under (a)(1) of this section of 31 taxable oil or gas produced during the calendar year to be less than zero may be used
01 to establish a carried-forward annual loss under AS 43.55.023(b). However, the 02 department shall provide by regulation a method to ensure that, for a period for which 03 a producer's tax liability is limited by AS 43.55.011(j), (k), [OR] (o), or (p), any 04 adjusted lease expenditures under AS 43.55.165 and 43.55.170 that would otherwise 05 be deductible by a producer for that period but whose deduction would cause a 06 production tax value calculated under (a)(1)(C), (D), [OR] (E), or (F) of this section to 07 be less than zero are accounted for as though the adjusted lease expenditures had first 08 been used as deductions in calculating the production tax values of oil or gas subject to 09 any of the limitations under AS 43.55.011(j), (k), [OR] (o), or (p) that have positive 10 production tax values so as to reduce the tax liability calculated without regard to the 11 limitation to the maximum amount provided for under the applicable provision of 12 AS 43.55.011(j), (k), [OR] (o), or (p). Only the amount of those adjusted lease 13 expenditures remaining after the accounting provided for under this subsection may be 14 used to establish a carried-forward annual loss under AS 43.55.023(b). In this 15 subsection, "producer" includes "explorer."