2d CSHB 247(RLS): "An Act relating to the powers and duties of the Alaska Oil and Gas Conservation Commission; relating to exploration incentive credits; relating to confidential information status and public record status of information in the possession of the Department of Revenue; relating to interest applicable to delinquent tax; relating to the oil and gas production tax rate for certain oil exempt from taxation or constituting a landowner's royalty interest; relating to oil and gas production tax credits; relating to tax credit certificates; relating to the calculation of the production tax value of oil and gas; relating to refunds for the gas storage facility tax credit, the liquefied natural gas storage facility tax credit, and the qualified in-state oil refinery infrastructure expenditures tax credit; relating to the purchase of tax credit certificates from the oil and gas tax credit fund; relating to lease expenditures; relating to oil and gas lease expenditures and production tax credits for municipal entities; requiring a bond or cash deposit with a business license application for an oil or gas business; establishing a legislative working group to study the fiscal regime and tax structure and rates for oil and gas produced south of 68 degrees North latitude; and providing for an effective date."
00 2d CS FOR HOUSE BILL NO. 247(RLS) 01 "An Act relating to the powers and duties of the Alaska Oil and Gas Conservation 02 Commission; relating to exploration incentive credits; relating to confidential 03 information status and public record status of information in the possession of the 04 Department of Revenue; relating to interest applicable to delinquent tax; relating to the 05 oil and gas production tax rate for certain oil exempt from taxation or constituting a 06 landowner's royalty interest; relating to oil and gas production tax credits; relating to 07 tax credit certificates; relating to the calculation of the production tax value of oil and 08 gas; relating to refunds for the gas storage facility tax credit, the liquefied natural gas 09 storage facility tax credit, and the qualified in-state oil refinery infrastructure 10 expenditures tax credit; relating to the purchase of tax credit certificates from the oil 11 and gas tax credit fund; relating to lease expenditures; relating to oil and gas lease 12 expenditures and production tax credits for municipal entities; requiring a bond or cash
01 deposit with a business license application for an oil or gas business; establishing a 02 legislative working group to study the fiscal regime and tax structure and rates for oil 03 and gas produced south of 68 degrees North latitude; and providing for an effective 04 date." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 31.05.030 is amended by adding a new subsection to read: 07 (n) Upon request of the commissioner of revenue, the commission shall 08 (1) verify regular production for the purposes of AS 43.55.023(b) and 09 (l); and 10 (2) determine the commencement of regular production from a lease or 11 property for purposes of AS 43.55.160(f) and (g). 12 * Sec. 2. AS 38.05.036(a) is amended to read: 13 (a) The department may conduct audits regarding royalty and net profits under 14 oil and gas contracts, agreements, or leases under this chapter and regarding costs 15 related to exploration licenses entered into under AS 38.05.131 - 38.05.134 and 16 exploration incentive credits under this chapter [OR UNDER AS 41.09]. For purposes 17 of an audit under this section, 18 (1) the department may examine the books, papers, records, or 19 memoranda of a person regarding matters related to the audit; and 20 (2) the records and premises where a business is conducted shall be 21 open at all reasonable times for inspection by the department. 22 * Sec. 3. AS 38.05.036(b) is amended to read: 23 (b) The Department of Revenue may obtain from the department information 24 relating to royalty and net profits payments and to exploration incentive credits under 25 this chapter [OR UNDER AS 41.09], whether or not that information is confidential. 26 The Department of Revenue may use the information in carrying out its functions and 27 responsibilities under AS 43, and shall hold that information confidential to the extent 28 required by an agreement with the department or by AS 38.05.035(a)(8) [, 29 AS 41.09.010(d),] or AS 43.05.230.
01 * Sec. 4. AS 38.05.036(c) is amended to read: 02 (c) The department may obtain from the Department of Revenue all 03 information obtained under AS 43 relating to royalty and net profits and to exploration 04 incentive credits. The department may use the information for purposes of carrying out 05 its responsibilities and functions under this chapter [AND AS 41.09]. Information 06 made available to the department that was obtained under AS 43 is confidential and 07 subject to the provisions of AS 43.05.230. 08 * Sec. 5. AS 38.05.036(f) is amended to read: 09 (f) Except as otherwise provided in this section or in connection with official 10 investigations or proceedings of the department, it is unlawful for a current or former 11 officer, employee, or agent of the state to divulge information obtained by the 12 department as a result of an audit under this section that is required by an agreement 13 with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)] to be kept 14 confidential. 15 * Sec. 6. AS 38.05.036(g) is amended to read: 16 (g) Nothing in this section prohibits the publication of statistics in a manner 17 that maintains the confidentiality of information to the extent required by an 18 agreement with the department or by AS 38.05.035(a)(8) [OR AS 41.09.010(d)]. 19 * Sec. 7. AS 40.25.100(a) is amended to read: 20 (a) Information in the possession of the Department of Revenue that discloses 21 the particulars of the business or affairs of a taxpayer or other person, including 22 information under AS 38.05.020(b)(11) that is subject to a confidentiality agreement 23 under AS 38.05.020(b)(12), is not a matter of public record, except as provided in 24 AS 43.05.230(i) - (l) [AS 43.05.230(i) OR (k)] or for purposes of investigation and 25 law enforcement. The information shall be kept confidential except when its 26 production is required in an official investigation, administrative adjudication under 27 AS 43.05.405 - 43.05.499, or court proceeding. These restrictions do not prohibit the 28 publication of statistics presented in a manner that prevents the identification of 29 particular reports and items, prohibit the publication of tax lists showing the names of 30 taxpayers who are delinquent and relevant information that may assist in the collection 31 of delinquent taxes, or prohibit the publication of records, proceedings, and decisions
01 under AS 43.05.405 - 43.05.499. 02 * Sec. 8. AS 43.05.225 is amended to read: 03 Sec. 43.05.225. Interest. Unless otherwise provided, 04 (1) a delinquent tax under this title, 05 (A) before January 1, 2014, bears interest in each calendar 06 quarter at the rate of five percentage points above the annual rate charged 07 member banks for advances by the 12th Federal Reserve District as of the first 08 day of that calendar quarter, or at the annual rate of 11 percent, whichever is 09 greater, compounded quarterly as of the last day of that quarter; [OR] 10 (B) on and after January 1, 2014, and before January 1, 2017, 11 bears interest in each calendar quarter at the rate of three percentage points 12 above the annual rate charged member banks for advances by the 12th Federal 13 Reserve District as of the first day of that calendar quarter; and 14 (C) on and after January 1, 2017, bears interest in each 15 calendar quarter at the rate of five percentage points above the annual 16 rate charged member banks for advances by the 12th Federal Reserve 17 District as of the first day of that calendar quarter, compounded quarterly 18 as of the last day of that quarter; 19 (2) the interest rate is 12 percent a year for 20 (A) delinquent fees payable under AS 05.15.095(c); and 21 (B) unclaimed property that is not timely paid or delivered, as 22 allowed by AS 34.45.470(a). 23 * Sec. 9. AS 43.05.230 is amended by adding a new subsection to read: 24 (l) For tax credit certificates purchased by the department in the preceding 25 calendar year under AS 43.55.028, the department shall make the following 26 information public by April 30 of each year: 27 (1) the name of each person from whom the department purchased a 28 transferable tax credit certificate; and 29 (2) the aggregate amount of the tax credit certificates purchased from 30 the person in the preceding calendar year. 31 * Sec. 10. AS 43.20.046(e) is amended to read:
01 (e) The department may use available money in the oil and gas tax credit fund 02 established in AS 43.55.028 to make the refund applied for under (d) of this section in 03 whole or in part if the department finds that (1) the claimant does not have an 04 outstanding liability to the state [FOR UNPAID DELINQUENT TAXES UNDER 05 THIS TITLE]; and (2) after application of all available tax credits, the claimant's total 06 tax liability under this chapter for the calendar year in which the claim is made is zero. 07 [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" MEANS AN AMOUNT 08 OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED AN ASSESSMENT 09 THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS NOT BEEN FINALLY 10 RESOLVED IN THE TAXPAYER'S FAVOR.] 11 * Sec. 11. AS 43.20.047(e) is amended to read: 12 (e) The department may use money available in the oil and gas tax credit fund 13 established in AS 43.55.028 to make a refund or payment under (d) of this section in 14 whole or in part if the department finds that (1) the claimant does not have an 15 outstanding liability to the state [FOR UNPAID DELINQUENT TAXES UNDER 16 THIS TITLE]; and (2) after application of all available tax credits, the claimant's total 17 tax liability under this chapter for the calendar year in which the claim is made is zero. 18 [IN THIS SUBSECTION, "UNPAID DELINQUENT TAX" MEANS AN AMOUNT 19 OF TAX FOR WHICH THE DEPARTMENT HAS ISSUED AN ASSESSMENT 20 THAT HAS NOT BEEN PAID AND, IF CONTESTED, HAS NOT BEEN FINALLY 21 RESOLVED IN THE TAXPAYER'S FAVOR.] 22 * Sec. 12. AS 43.20.053(e) is amended to read: 23 (e) The department may use money available in the oil and gas tax credit fund 24 established in AS 43.55.028 to make a refund or payment under (d) of this section in 25 whole or in part if the department finds that 26 (1) the claimant does not have an outstanding liability to the state 27 [FOR UNPAID DELINQUENT TAXES UNDER THIS TITLE]; and 28 (2) after application of all available tax credits, the claimant's total tax 29 liability under this chapter for the calendar year in which the claim is made is zero. 30 * Sec. 13. AS 43.55.011(i) is amended to read: 31 (i) There is levied on the producer of oil or gas a tax for all oil and gas
01 produced each calendar year from each lease or property in the state the ownership or 02 right to which constitutes a landowner's royalty interest, except for oil and gas the 03 ownership or right to which is exempt from taxation. The levy of tax under this 04 subsection may not be less than zero. The provisions of this subsection apply to a 05 landowner's royalty interest as follows: 06 (1) the tax levied for oil is equal to five percent of the gross value at 07 the point of production of the oil; 08 (2) the tax levied for gas is equal to 1.667 percent of the gross value at 09 the point of production of the gas; 10 (3) if the department determines that, for purposes of reducing the 11 producer's tax liability under (1) or (2) of this subsection, the producer has received or 12 will receive consideration from the royalty owner offsetting all or a part of the 13 producer's royalty obligation, other than a deduction under AS 43.55.020 related to a 14 settlement with a royalty owner of the amount of a tax paid, then, notwithstanding (1) 15 and (2) of this subsection, the tax is equal to 25 percent of the gross value at the point 16 of production of the oil and gas. 17 * Sec. 14. AS 43.55.011(m) is amended to read: 18 (m) Notwithstanding any contrary provision of [AS 38.05.180(i), 19 AS 41.09.010,] AS 43.55.024 [,] or 43.55.025, the department shall provide by 20 regulation a method to ensure that, for a calendar year for which a producer's tax 21 liability is limited by (j), (k), or (o) of this section, tax credits based on a lease 22 expenditure incurred before January 1, 2011, that are otherwise available under 23 [AS 38.05.180(i), AS 41.09.010,] AS 43.55.024 [,] or 43.55.025 and allocated to gas 24 subject to the limitations in (j), (k), and (o) of this section are accounted for as though 25 the credits had been applied first against a tax liability calculated without regard to the 26 limitations under (j), (k), and (o) of this section so as to reduce the tax liability to the 27 maximum amount provided for under (j) or (o) of this section for the production of gas 28 or (k) of this section for the production of oil. The regulation must provide for a 29 reasonable method to allocate tax credits to gas subject to (j) and (o) of this section. 30 Only the amount of a tax credit remaining after the accounting provided for under this 31 subsection may be used for a later calendar year, transferred to another person, or
01 applied against a tax levied on the production of oil or gas not subject to (j), (k), or (o) 02 of this section to the extent otherwise allowed. 03 * Sec. 15. AS 43.55.023(b) is amended to read: 04 (b) Before January 1, 2014, a producer or explorer may elect to take a tax 05 credit in the amount of 25 percent of a carried-forward annual loss. For lease 06 expenditures incurred on and after January 1, 2014, and before January 1, 2016, to 07 explore for, develop, or produce oil or gas deposits located north of 68 degrees North 08 latitude, a producer or explorer may elect to take a tax credit in the amount of 45 09 percent of a carried-forward annual loss. For lease expenditures incurred on and after 10 January 1, 2016, to explore for, develop, or produce oil or gas deposits located north 11 of 68 degrees North latitude, a producer or explorer may elect to take a tax credit in 12 the amount of 35 percent of a carried-forward annual loss. For lease expenditures 13 incurred on or after January 1, 2014, and before January 1, 2018, to explore for, 14 develop, or produce oil or gas deposits located south of 68 degrees North latitude, a 15 producer or explorer may elect to take a tax credit in the amount of 25 percent of a 16 carried-forward annual loss. A credit under this subsection may be applied against a 17 tax levied by AS 43.55.011(e). For purposes of this subsection, a carried-forward 18 annual loss is the amount of a producer's or explorer's adjusted lease expenditures 19 under AS 43.55.165 and 43.55.170 for a previous calendar year that was not 20 deductible in calculating production tax values for that calendar year under 21 AS 43.55.160. For lease expenditures incurred on or after January 1, 2017, any 22 reduction under AS 43.55.160(f) or (g) is added back to the calculation of 23 production tax values for that calendar year under AS 43.55.160 for the 24 determination of a carried-forward annual loss under this subsection. A credit 25 under this subsection may be taken for lease expenditures incurred after 26 December 31, 2016, 27 (1) in the Cook Inlet sedimentary basin only if, during calendar 28 year 2016, the producer or explorer had regular production of oil or gas in the 29 Cook Inlet sedimentary basin; 30 (2) north of 68 degrees North latitude only if, 31 (A) during calendar year 2016, the producer or explorer
01 had regular production of an average of less than 15,000 BTU equivalent 02 barrels a day in the state; and 03 (B) the lease expenditures were incurred under a unit plan 04 of development or a plan of exploration approved before January 1, 2017, 05 by the commissioner of natural resources consistent with AS 38.05.180. 06 * Sec. 16. AS 43.55.023(d) is amended to read: 07 (d) A person that is entitled to take a tax credit under this section that wishes 08 to transfer the unused credit to another person or obtain a cash payment under 09 AS 43.55.028 may apply to the department for a transferable tax credit certificate. An 10 application under this subsection must be in a form prescribed by the department and 11 must include supporting information and documentation that the department 12 reasonably requires. The department shall grant or deny an application, or grant an 13 application as to a lesser amount than that claimed and deny it as to the excess, not 14 later than 120 days after the latest of (1) March 31 of the year following the calendar 15 year in which the [QUALIFIED CAPITAL EXPENDITURE OR] carried-forward 16 annual loss for which the credit is claimed was incurred; (2) the date the statement 17 required under AS 43.55.030(a) or (e) was filed for the calendar year in which the 18 [QUALIFIED CAPITAL EXPENDITURE OR] carried-forward annual loss for which 19 the credit is claimed was incurred; or (3) the date the application was received by the 20 department. If, based on the information then available to it, the department is 21 reasonably satisfied that the applicant is entitled to a credit, the department shall issue 22 the applicant a transferable tax credit certificate for the amount of the credit. A 23 certificate issued under this subsection does not expire. 24 * Sec. 17. AS 43.55.023(e) is amended to read: 25 (e) A person to which a transferable tax credit certificate is issued under (d) of 26 this section may transfer the certificate to another person, and a transferee may further 27 transfer the certificate. Subject to the limitations set out in former (a) of this section 28 and (b) - (d) [(a) - (d)] of this section, and notwithstanding any action the department 29 may take with respect to the applicant under (g) of this section, the owner of a 30 certificate may apply the credit or a portion of the credit shown on the certificate only 31 against a tax levied by AS 43.55.011(e). However, a credit shown on a transferable tax
01 credit certificate may not be applied to reduce a transferee's total tax liability under 02 AS 43.55.011(e) for oil and gas produced during a calendar year to less than 80 03 percent of the tax that would otherwise be due without applying that credit. Any 04 portion of a credit not used under this subsection may be applied in a later period. 05 * Sec. 18. AS 43.55.023(l) is amended to read: 06 (l) A producer or explorer may apply for a tax credit for a well lease 07 expenditure incurred in the state south of 68 degrees North latitude after June 30, 08 2010, as follows: 09 (1) notwithstanding that a well lease expenditure incurred in the state 10 south of 68 degrees North latitude may be a deductible lease expenditure for purposes 11 of calculating the production tax value of oil and gas under AS 43.55.160(a), unless a 12 credit for that expenditure is taken under [(a) OF THIS SECTION, AS 38.05.180(i), 13 AS 41.09.010,] AS 43.20.043 [,] or AS 43.55.025, a producer or explorer that incurs a 14 well lease expenditure in the state south of 68 degrees North latitude may elect to 15 apply a tax credit against a tax levied by AS 43.55.011(e) in the amount of 16 (A) 40 percent of that expenditure incurred before calendar 17 year 2017; 18 (B) 20 percent of that expenditure incurred in calendar 19 year 2017 or 2018 [A TAX CREDIT UNDER THIS PARAGRAPH MAY BE 20 APPLIED FOR A SINGLE CALENDAR YEAR]; 21 (2) a producer or explorer may take a credit for a well lease 22 expenditure incurred 23 (A) in the state south of 68 degrees North latitude in connection 24 with geological or geophysical exploration or in connection with an 25 exploration well only if the producer or explorer 26 (i) [(A)] agrees, in writing, to the applicable provisions 27 of AS 43.55.025(f)(2); and 28 (ii) [(B)] submits to the Department of Natural 29 Resources all data that would be required to be submitted under 30 AS 43.55.025(f)(2); 31 (B) in the Cook Inlet sedimentary basin only if, during
01 calendar year 2016, the producer or explorer had regular production of 02 oil or gas in the Cook Inlet sedimentary basin. 03 * Sec. 19. AS 43.55.024(i) is amended to read: 04 (i) A producer may apply against the producer's tax liability for the calendar 05 year under AS 43.55.011(e) a tax credit of $5 for each barrel of oil taxable under 06 AS 43.55.011(e) that receives a reduction in the gross value at the point of 07 production under [MEETS ONE OR MORE OF THE CRITERIA IN] 08 AS 43.55.160(f) or (g) and that is produced during a calendar year after December 31, 09 2013. A tax credit authorized by this subsection may not reduce a producer's tax 10 liability for a calendar year under AS 43.55.011(e) below zero. 11 * Sec. 20. AS 43.55.024(j) is amended to read: 12 (j) A producer may apply against the producer's tax liability for the calendar 13 year under AS 43.55.011(e) a tax credit in the amount specified in this subsection for 14 each barrel of oil taxable under AS 43.55.011(e) that does not receive a reduction in 15 the gross value at the point of production under [MEET ANY OF THE CRITERIA 16 IN] AS 43.55.160(f) or (g) and that is produced during a calendar year after 17 December 31, 2013, from leases or properties north of 68 degrees North latitude. A tax 18 credit under this subsection may not reduce a producer's tax liability for a calendar 19 year under AS 43.55.011(e) below the amount calculated under AS 43.55.011(f). The 20 amount of the tax credit for a barrel of taxable oil subject to this subsection produced 21 during a month of the calendar year is 22 (1) $8 for each barrel of taxable oil if the average gross value at the 23 point of production for the month is less than $80 a barrel; 24 (2) $7 for each barrel of taxable oil if the average gross value at the 25 point of production for the month is greater than or equal to $80 a barrel, but less than 26 $90 a barrel; 27 (3) $6 for each barrel of taxable oil if the average gross value at the 28 point of production for the month is greater than or equal to $90 a barrel, but less than 29 $100 a barrel; 30 (4) $5 for each barrel of taxable oil if the average gross value at the 31 point of production for the month is greater than or equal to $100 a barrel, but less
01 than $110 a barrel; 02 (5) $4 for each barrel of taxable oil if the average gross value at the 03 point of production for the month is greater than or equal to $110 a barrel, but less 04 than $120 a barrel; 05 (6) $3 for each barrel of taxable oil if the average gross value at the 06 point of production for the month is greater than or equal to $120 a barrel, but less 07 than $130 a barrel; 08 (7) $2 for each barrel of taxable oil if the average gross value at the 09 point of production for the month is greater than or equal to $130 a barrel, but less 10 than $140 a barrel; 11 (8) $1 for each barrel of taxable oil if the average gross value at the 12 point of production for the month is greater than or equal to $140 a barrel, but less 13 than $150 a barrel; 14 (9) zero if the average gross value at the point of production for the 15 month is greater than or equal to $150 a barrel. 16 * Sec. 21. AS 43.55.025(m) is amended to read: 17 (m) The persons that drill the first four exploration wells in the state and 18 within the areas described in (o) of this section on state lands, private lands, or federal 19 onshore lands for the purpose of discovering oil or gas that penetrate and evaluate a 20 prospect in a basin described in (o) of this section are eligible for a credit under (a)(6) 21 of this section. A credit under this subsection may not be taken for more than two 22 exploration wells in a single area described in (o)(1) - (6) of this section. Exploration 23 expenditures eligible for the credit in this subsection in an area described in (o)(1) - 24 (3), (5), or (6) of this section must be incurred for work performed after June 1, 2012, 25 and before July 1, 2016. Notwithstanding (b) of this section, exploration 26 expenditures eligible for the credit in this subsection in the area described in 27 (o)(4) of this section must be for work performed after June 1, 2012, and before 28 January 1, 2017, except that expenditures to complete an exploration well in an 29 area described in (o)(4) of this section that was spudded but not completed before 30 January 1, 2017, are eligible for the credit under this subsection. A person 31 planning to drill an exploration well on private land and to apply for a credit under this
01 subsection shall obtain written consent from the owner of the oil and gas interest for 02 the full public release of all well data after the expiration of the confidentiality period 03 applicable to information collected under (f) of this section. The written consent of the 04 owner of the oil and gas interest must be submitted to the commissioner of natural 05 resources before approval of the proposed exploration well. In addition to the 06 requirements in (c)(1), (c)(2)(A), and (c)(2)(C) of this section and submission of the 07 written consent of the owner of the oil and gas interest, a person planning to drill an 08 exploration well shall obtain approval from the commissioner of natural resources 09 before the well is spudded. The commissioner of natural resources shall make a 10 written determination approving or rejecting an exploration well within 60 days after 11 receiving the request for approval or as soon as is practicable thereafter. Before 12 approving the exploration well, the commissioner of natural resources shall consider 13 the following: the location of the well; the proximity to a community in need of a local 14 energy source; the proximity of existing infrastructure; the experience and safety 15 record of the explorer in conducting operations in remote or roadless areas; the 16 projected cost schedule; whether seismic mapping and seismic data sufficiently 17 identify a particular trap for exploration; whether the targeted and planned depth and 18 range are designed to penetrate and fully evaluate the hydrocarbon potential of the 19 proposed prospect and reach the level below which economic hydrocarbon reservoirs 20 are likely to be found, or reach 12,000 feet or more true vertical depth; and whether 21 the exploration plan provides for a full evaluation of the wellbore below surface casing 22 to the depth of the well. Whether the exploration well for which a credit is requested 23 under this subsection is located within an area and a basin described under (o) of this 24 section shall be determined by the commissioner of natural resources and reported to 25 the commissioner. A taxpayer that obtains a credit under this subsection may not claim 26 a tax credit under AS 43.55.023 or another provision in this section for the same 27 exploration expenditure. 28 * Sec. 22. AS 43.55.025(m), as amended by sec. 21 of this Act, is amended to read: 29 (m) The persons that drill the first four exploration wells in the state and 30 within the areas described in (o) of this section on state lands, private lands, or federal 31 onshore lands for the purpose of discovering oil or gas that penetrate and evaluate a
01 prospect in a basin described in (o) of this section are eligible for a credit under (a)(6) 02 of this section. A credit under this subsection may not be taken for more than two 03 exploration wells in a single area described in (o)(1) - (6) of this section. Exploration 04 expenditures eligible for the credit in this subsection in an area described in (o)(1) - 05 (3), (5), or (6) of this section must be incurred for work performed after June 1, 2012, 06 and before July 1, 2016. Notwithstanding (b) of this section, exploration expenditures 07 eligible for the credit in this subsection in the area described in (o)(4) of this section 08 must be for work performed after June 1, 2012, and before January 1, 2017, except 09 that expenditures to complete an exploration well in an area described in (o)(4) of this 10 section that was spudded but not completed before January 1, 2017, are eligible for the 11 credit under this subsection. A person planning to drill an exploration well on private 12 land and to apply for a credit under this subsection shall obtain written consent from 13 the owner of the oil and gas interest for the full public release of all well data after the 14 expiration of the confidentiality period applicable to information collected under (f) of 15 this section. The written consent of the owner of the oil and gas interest must be 16 submitted to the commissioner of natural resources before approval of the proposed 17 exploration well. In addition to the requirements in (c)(1), (c)(2)(A), and (c)(2)(C) of 18 this section and submission of the written consent of the owner of the oil and gas 19 interest, a person planning to drill an exploration well shall obtain approval from the 20 commissioner of natural resources before the well is spudded. The commissioner of 21 natural resources shall make a written determination approving or rejecting an 22 exploration well within 60 days after receiving the request for approval or as soon as is 23 practicable thereafter. Before approving the exploration well, the commissioner of 24 natural resources shall consider the following: the location of the well; the proximity 25 to a community in need of a local energy source; the proximity of existing 26 infrastructure; the experience and safety record of the explorer in conducting 27 operations in remote or roadless areas; the projected cost schedule; whether seismic 28 mapping and seismic data sufficiently identify a particular trap for exploration; 29 whether the targeted and planned depth and range are designed to penetrate and fully 30 evaluate the hydrocarbon potential of the proposed prospect and reach the level below 31 which economic hydrocarbon reservoirs are likely to be found, or reach 12,000 feet or
01 more true vertical depth; and whether the exploration plan provides for a full 02 evaluation of the wellbore below surface casing to the depth of the well. Whether the 03 exploration well for which a credit is requested under this subsection is located within 04 an area and a basin described under (o) of this section shall be determined by the 05 commissioner of natural resources and reported to the commissioner. A taxpayer that 06 obtains a credit under this subsection may not claim a tax credit under [AS 43.55.023 07 OR] another provision in this section for the same exploration expenditure. 08 * Sec. 23. AS 43.55.025(o) is amended to read: 09 (o) The activity that is the basis for a credit claimed under (a)(6) and (m) of 10 this section [OR (a)(7) AND (n) OF THIS SECTION] must be for the exploration of a 11 basin and within the following areas whose central points are determined using the 12 World Geographic System of 1984 datum, 13 (1) 100 miles from 66.896128 degrees North, -162.598187 degrees 14 West; 15 (2) 150 miles from 64.839474 degrees North, -147.72094 degrees 16 West; 17 (3) 50 miles from 62.776428 degrees North, -164.495201 degrees 18 West; 19 (4) 50 miles from 62.110357 degrees North, -145.530551 degrees 20 West; 21 (5) 100 miles from 58.189868 degrees North, -157.371104 degrees 22 West; 23 (6) 100 miles from 56.005988 degrees North, -160.56083 degrees 24 West. 25 * Sec. 24. AS 43.55.028(a) is amended to read: 26 (a) The oil and gas tax credit fund is established as a separate fund of the state. 27 The purpose of the fund is to purchase transferable tax credit certificates issued under 28 former AS 43.55.023 and production tax credit certificates issued under AS 43.55.025 29 and to pay refunds and payments claimed under AS 43.20.046, 43.20.047, or 30 43.20.053. 31 * Sec. 25. AS 43.55.028(e) is amended to read:
01 (e) The department, on the written application of a person to whom a 02 transferable tax credit certificate has been issued under AS 43.55.023(d) or former 03 AS 43.55.023(m) or to whom a production tax credit certificate has been issued under 04 AS 43.55.025(f), may use available money in the oil and gas tax credit fund to 05 purchase, in whole or in part, the certificate. The department may not purchase a 06 total of more than $75,000,000 in tax credit certificates from a person in a 07 calendar year. The department may purchase a certificate or part of a certificate 08 only if the department finds that 09 (1) the calendar year of the purchase is not earlier than the first 10 calendar year for which the credit shown on the certificate would otherwise be allowed 11 to be applied against a tax; 12 (2) the application is not the result of the division of a single entity 13 into multiple entities that would reasonably be expected to apply as a single entity 14 if the $75,000,000 limitation in this subsection did not exist [APPLICANT DOES 15 NOT HAVE AN OUTSTANDING LIABILITY TO THE STATE FOR UNPAID 16 DELINQUENT TAXES UNDER THIS TITLE]; 17 (3) the applicant's total tax liability under AS 43.55.011(e), after 18 application of all available tax credits, for the calendar year in which the application is 19 made is zero; 20 (4) the applicant's average daily production of oil and gas taxable 21 under AS 43.55.011(e) during the calendar year preceding the calendar year in which 22 the application is made was not more than 50,000 BTU equivalent barrels; and 23 (5) the purchase is consistent with this section and regulations adopted 24 under this section. 25 * Sec. 26. AS 43.55.028(e), as amended by sec. 25 of this Act, is amended to read: 26 (e) The department, on the written application of a person to whom a 27 transferable tax credit certificate has been issued under former AS 43.55.023(d) or 28 (m) [FORMER AS 43.55.023(m)] or to whom a production tax credit certificate has 29 been issued under AS 43.55.025(f), may use available money in the oil and gas tax 30 credit fund to purchase, in whole or in part, the certificate. The department may not 31 purchase a total of more than $75,000,000 in tax credit certificates from a person in a
01 calendar year. The department may purchase a certificate or part of a certificate only if 02 the department finds that 03 (1) the calendar year of the purchase is not earlier than the first 04 calendar year for which the credit shown on the certificate would otherwise be allowed 05 to be applied against a tax; 06 (2) the application is not the result of the division of a single entity into 07 multiple entities that would reasonably be expected to apply as a single entity if the 08 $75,000,000 limitation in this subsection did not exist; 09 (3) the applicant's total tax liability under AS 43.55.011(e), after 10 application of all available tax credits, for the calendar year in which the application is 11 made is zero; 12 (4) the applicant's average daily production of oil and gas taxable 13 under AS 43.55.011(e) during the calendar year preceding the calendar year in which 14 the application is made was not more than 50,000 BTU equivalent barrels; and 15 (5) the purchase is consistent with this section and regulations adopted 16 under this section. 17 * Sec. 27. AS 43.55.028(g) is amended to read: 18 (g) The department shall [MAY] adopt regulations to carry out the purposes 19 of this section, including standards and procedures to allocate available money among 20 applications for purchases under this chapter and claims for refunds and payments 21 under AS 43.20.046, 43.20.047, or 43.20.053 when the total amount of the 22 applications for purchase and claims for refund exceed the amount of available money 23 in the fund. The regulations adopted by the department, when allocating available 24 money in the fund under this section, 25 (1) may not [, WHEN ALLOCATING AVAILABLE MONEY IN 26 THE FUND UNDER THIS SECTION,] distinguish an application for the purchase of 27 a credit certificate issued under former AS 43.55.023(m) or a claim for a refund or 28 payment under AS 43.20.046, 43.20.047, or 43.20.053; 29 (2) must grant a preference to an applicant if at least 80 percent of 30 the applicant's workforce in the state in the previous calendar year was 31 composed of resident workers; in this paragraph, "resident worker" has the
01 meaning given in AS 43.40.092(b). 02 * Sec. 28. AS 43.55.028 is amended by adding a new subsection to read: 03 (j) If an applicant has an outstanding liability to the state directly related to the 04 applicant's oil or gas exploration, development, or production that has not previously 05 been the basis of a reduction by the department under this subsection, the department 06 may purchase only that portion of a certificate that exceeds the outstanding liability. 07 The department may apply the amount by which the department reduced its purchase 08 of a certificate because of an outstanding liability to satisfy the outstanding liability, 09 except that, if the outstanding liability is contested through an appeal or adjudicatory 10 proceeding already established by law, the department may apply the amount to satisfy 11 the outstanding liability only with the applicant's consent. Satisfaction of an 12 outstanding liability under this subsection does not affect the applicant's ability to 13 contest that liability. The department may enter into contracts or agreements with 14 another department to which the outstanding liability is owed. 15 * Sec. 29. AS 43.55.029(a) is amended to read: 16 (a) An explorer or producer that has applied for a production tax credit under 17 AS 43.55.023(b) [AS 43.55.023(a), (b),] or (l), [OR] 43.55.025(a), or former 18 AS 43.55.023(a) may make a present assignment of the production tax credit 19 certificate expected to be issued by the department to a third-party assignee. The 20 assignment may be made either at the time the application is filed with the department 21 or not later than 30 days after the date of filing with the department. Once a notice of 22 assignment in compliance with this section is filed with the department, the 23 assignment is irrevocable and cannot be modified by the explorer or producer without 24 the written consent of the assignee named in the assignment. If a production tax credit 25 certificate is issued to the explorer or producer, the notice of assignment remains 26 effective and shall be filed with the department by the explorer or producer together 27 with any application for the department to purchase the certificate under 28 AS 43.55.028(e). 29 * Sec. 30. AS 43.55.029(a), as amended by sec. 29 of this Act, is amended to read: 30 (a) An explorer or producer that has applied for a production tax credit under 31 AS 43.55.023(b) [OR (l)], 43.55.025(a), or former AS 43.55.023(a) or (l) may make a
01 present assignment of the production tax credit certificate expected to be issued by the 02 department to a third-party assignee. The assignment may be made either at the time 03 the application is filed with the department or not later than 30 days after the date of 04 filing with the department. Once a notice of assignment in compliance with this 05 section is filed with the department, the assignment is irrevocable and cannot be 06 modified by the explorer or producer without the written consent of the assignee 07 named in the assignment. If a production tax credit certificate is issued to the explorer 08 or producer, the notice of assignment remains effective and shall be filed with the 09 department by the explorer or producer together with any application for the 10 department to purchase the certificate under AS 43.55.028(e). 11 * Sec. 31. AS 43.55.029(a), as amended by secs. 29 and 30 of this Act, is amended to read: 12 (a) An explorer or producer that has applied for a production tax credit under 13 AS 43.55.025(a) [AS 43.55.023(b), 43.55.025(a),] or former AS 43.55.023(a), (b), or 14 (l) may make a present assignment of the production tax credit certificate expected to 15 be issued by the department to a third-party assignee. The assignment may be made 16 either at the time the application is filed with the department or not later than 30 days 17 after the date of filing with the department. Once a notice of assignment in compliance 18 with this section is filed with the department, the assignment is irrevocable and cannot 19 be modified by the explorer or producer without the written consent of the assignee 20 named in the assignment. If a production tax credit certificate is issued to the explorer 21 or producer, the notice of assignment remains effective and shall be filed with the 22 department by the explorer or producer together with any application for the 23 department to purchase the certificate under AS 43.55.028(e). 24 * Sec. 32. AS 43.55.030(a) is amended to read: 25 (a) A producer that produces oil or gas from a lease or property in the state 26 during a calendar year, whether or not any tax payment is due under AS 43.55.020(a) 27 for that oil or gas, shall file with the department on March 31 of the following year a 28 statement, under oath, in a form prescribed by the department, giving, with other 29 information required, the following: 30 (1) a description of each lease or property from which oil or gas was 31 produced, by name, legal description, lease number, or accounting codes assigned by
01 the department; 02 (2) the names of the producer and, if different, the person paying the 03 tax, if any; 04 (3) the gross amount of oil and the gross amount of gas produced from 05 each lease or property, separately identifying the gross amount of gas produced from 06 each oil and gas lease to which an effective election under AS 43.55.014(a) applies, 07 the amount of gas delivered to the state under AS 43.55.014(b), and the percentage of 08 the gross amount of oil and gas owned by the producer; 09 (4) the gross value at the point of production of the oil and of the gas 10 produced from each lease or property owned by the producer and the costs of 11 transportation of the oil and gas; 12 (5) the name of the first purchaser and the price received for the oil and 13 for the gas, unless relieved from this requirement in whole or in part by the 14 department; 15 (6) the producer's qualified capital expenditures, [AS DEFINED IN 16 AS 43.55.023,] other lease expenditures under AS 43.55.165, and adjustments or other 17 payments or credits under AS 43.55.170; 18 (7) the production tax values of the oil and gas under AS 43.55.160(a) 19 or of the oil under AS 43.55.160(h), as applicable; 20 (8) any claims for tax credits to be applied; and 21 (9) calculations showing the amounts, if any, that were or are due 22 under AS 43.55.020(a) and interest on any underpayment or overpayment. 23 * Sec. 33. AS 43.55.030(e) is amended to read: 24 (e) An explorer or producer that incurs a lease expenditure under 25 AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar 26 year but does not produce oil or gas from a lease or property in the state during the 27 calendar year shall file with the department, on March 31 of the following year, a 28 statement, under oath, in a form prescribed by the department, giving, with other 29 information required, the following: 30 (1) the explorer's or producer's qualified capital expenditures, [AS 31 DEFINED IN AS 43.55.023,] other lease expenditures under AS 43.55.165, and
01 adjustments or other payments or credits under AS 43.55.170; and 02 (2) if the explorer or producer receives a payment or credit under 03 AS 43.55.170, calculations showing whether the explorer or producer is liable for a 04 tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount. 05 * Sec. 34. AS 43.55.160(d) is amended to read: 06 (d) Irrespective of whether a producer produces taxable oil or gas during a 07 calendar year or month, the producer is considered to have generated a positive 08 production tax value if a calculation described in (a) of this section yields a positive 09 number because the producer's adjusted lease expenditures for a calendar year under 10 AS 43.55.165 and 43.55.170 are less than zero as a result of the producer's receiving a 11 payment or credit under AS 43.55.170. [AN EXPLORER THAT HAS TAKEN A 12 TAX CREDIT UNDER AS 43.55.023(b) OR THAT HAS OBTAINED A 13 TRANSFERABLE TAX CREDIT CERTIFICATE UNDER AS 43.55.023(d) FOR 14 THE AMOUNT OF A TAX CREDIT UNDER AS 43.55.023(b) IS CONSIDERED A 15 PRODUCER, SUBJECT TO THE TAX LEVIED UNDER AS 43.55.011(e), TO THE 16 EXTENT THAT THE EXPLORER GENERATES A POSITIVE PRODUCTION 17 TAX VALUE AS THE RESULT OF THE EXPLORER'S RECEIVING A 18 PAYMENT OR CREDIT UNDER AS 43.55.170.] 19 * Sec. 35. AS 43.55.160(e) is amended to read: 20 (e) Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that 21 would otherwise be deductible by a producer in a calendar year but whose deduction 22 would cause an annual production tax value calculated under (a)(1) or (h) of this 23 section of taxable oil or gas produced during the calendar year to be less than zero 24 may be used to establish a carried-forward annual loss under AS 43.55.023(b) or 25 43.55.165(a)(3). However, the department shall provide by regulation a method to 26 ensure that, for a period for which a producer's tax liability is limited by 27 AS 43.55.011(j), (k), (o), or (p), any adjusted lease expenditures under AS 43.55.165 28 and 43.55.170 that would otherwise be deductible by a producer for that period but 29 whose deduction would cause a production tax value calculated under (a)(1)(C), (D), 30 (E), or (F), or (h)(3) of this section to be less than zero are accounted for as though the 31 adjusted lease expenditures had first been used as deductions in calculating the
01 production tax values of oil or gas subject to any of the limitations under 02 AS 43.55.011(j), (k), (o), or (p) that have positive production tax values so as to 03 reduce the tax liability calculated without regard to the limitation to the maximum 04 amount provided for under the applicable provision of AS 43.55.011(j), (k), (o), or (p). 05 Only the amount of those adjusted lease expenditures remaining after the accounting 06 provided for under this subsection may be used to establish a carried-forward annual 07 loss under AS 43.55.023(b) or 43.55.165(a)(3). For lease expenditures incurred on 08 or after January 1, 2017, a reduction in gross value at the point of production 09 under (f) or (g) of this section shall be added back to the calculation of 10 production tax value for the determination of a carried-forward annual loss. In 11 this subsection, "producer" includes "explorer." 12 * Sec. 36. AS 43.55.160(e), as amended by sec. 35 of this Act, is amended to read: 13 (e) Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that 14 would otherwise be deductible by a producer in a calendar year but whose deduction 15 would cause an annual production tax value calculated under (a)(1) or (h) of this 16 section of taxable oil or gas produced during the calendar year to be less than zero 17 may be used to establish a carried-forward annual loss under AS 43.55.165(a)(3) 18 [AS 43.55.023(b) OR 43.55.165(a)(3)]. However, the department shall provide by 19 regulation a method to ensure that, for a period for which a producer's tax liability is 20 limited by AS 43.55.011(j), (k), (o), or (p), any adjusted lease expenditures under 21 AS 43.55.165 and 43.55.170 that would otherwise be deductible by a producer for that 22 period but whose deduction would cause a production tax value calculated under 23 (a)(1)(C), (D), (E), or (F), or (h)(3) of this section to be less than zero are accounted 24 for as though the adjusted lease expenditures had first been used as deductions in 25 calculating the production tax values of oil or gas subject to any of the limitations 26 under AS 43.55.011(j), (k), (o), or (p) that have positive production tax values so as to 27 reduce the tax liability calculated without regard to the limitation to the maximum 28 amount provided for under the applicable provision of AS 43.55.011(j), (k), (o), or (p). 29 Only the amount of those adjusted lease expenditures remaining after the accounting 30 provided for under this subsection may be used to establish a carried-forward annual 31 loss under AS 43.55.165(a)(3) [AS 43.55.023(b) OR 43.55.165(a)(3)]. For lease
01 expenditures incurred on or after January 1, 2017, a reduction in gross value at the 02 point of production under (f) or (g) of this section shall be added back to the 03 calculation of production tax value for the determination of a carried-forward annual 04 loss. In this subsection, "producer" includes "explorer." 05 * Sec. 37. AS 43.55.160(f) is amended to read: 06 (f) On and after January 1, 2014, in the calculation of an annual production tax 07 value of a producer under (a)(1)(A) or (h)(1) of this section, the gross value at the 08 point of production of oil or gas produced from a lease or property north of 68 degrees 09 North latitude meeting one or more of the following criteria is reduced by 20 percent: 10 (1) the oil or gas is produced from a lease or property that does not contain a lease that 11 was within a unit on January 1, 2003; (2) the oil or gas is produced from a 12 participating area established after December 31, 2011, that is within a unit formed 13 under AS 38.05.180(p) before January 1, 2003, if the participating area does not 14 contain a reservoir that had previously been in a participating area established before 15 December 31, 2011; (3) the oil or gas is produced from acreage that was added to an 16 existing participating area by the Department of Natural Resources on and after 17 January 1, 2014, and the producer demonstrates to the department that the volume of 18 oil or gas produced is from acreage added to an existing participating area. This 19 subsection does not apply to gas produced before 2022 that is used in the state or to 20 gas produced on and after January 1, 2022. For oil or gas first produced after 21 December 31, 2016, a reduction allowed under this subsection applies to oil or gas 22 produced from a lease or property for the first 10 years after the commencement 23 of regular production of oil or gas from that lease or property. For oil or gas first 24 produced before January 1, 2017, a reduction allowed under this subsection for a 25 lease or property expires January 1, 2026. The Alaska Oil and Gas Conservation 26 Commission shall determine the commencement of regular production for 27 purposes of this subsection. A reduction under this subsection may not reduce the 28 gross value at the point of production below zero. In this subsection, "participating 29 area" means a reservoir or portion of a reservoir producing or contributing to 30 production as approved by the Department of Natural Resources. 31 * Sec. 38. AS 43.55.160(g) is amended to read:
01 (g) On and after January 1, 2014, in addition to the reduction under (f) of this 02 section, in the calculation of an annual production tax value of a producer under 03 (a)(1)(A) or (h)(1) of this section, the gross value at the point of production of oil or 04 gas produced from a lease or property north of 68 degrees North latitude that does not 05 contain a lease that was within a unit on January 1, 2003, is reduced by 10 percent if 06 the oil or gas is produced from a unit made up solely of leases that have a royalty 07 share of more than 12.5 percent in amount or value of the production removed or sold 08 from the lease as determined under AS 38.05.180(f). This subsection does not apply if 09 the royalty obligation for one or more of the leases in the unit has been reduced to 12.5 10 percent or less under AS 38.05.180(j) for all or part of the calendar year for which the 11 annual production tax value is calculated. This subsection does not apply to gas 12 produced before 2022 that is used in the state or to gas produced on and after 13 January 1, 2022. For oil or gas first produced after December 31, 2016, a 14 reduction allowed under this subsection applies to oil or gas produced from a 15 lease or property for the first 10 years after the commencement of regular 16 production of oil or gas from that lease or property. For oil or gas first produced 17 before January 1, 2017, a reduction allowed under this subsection for a lease or 18 property expires January 1, 2026. The Alaska Oil and Gas Conservation 19 Commission shall determine the commencement of regular production for 20 purposes of this subsection. A reduction under this subsection may not reduce the 21 gross value at the point of production below zero. 22 * Sec. 39. AS 43.55.165(a) is amended to read: 23 (a) For the [EXCEPT AS PROVIDED IN (j) AND (k) OF THIS SECTION, 24 FOR] purposes of this chapter, a producer's lease expenditures for a calendar year are 25 (1) costs, other than items listed in (e) of this section, that are 26 (A) incurred by the producer during the calendar year after 27 March 31, 2006, to explore for, develop, or produce oil or gas deposits located 28 within the producer's leases or properties in the state or, in the case of land in 29 which the producer does not own an operating right, operating interest, or 30 working interest, to explore for oil or gas deposits within other land in the 31 state; and
01 (B) allowed by the department by regulation, based on the 02 department's determination that the costs satisfy the following three 03 requirements: 04 (i) the costs must be incurred upstream of the point of 05 production of oil and gas; 06 (ii) the costs must be ordinary and necessary costs of 07 exploring for, developing, or producing, as applicable, oil or gas 08 deposits; and 09 (iii) the costs must be direct costs of exploring for, 10 developing, or producing, as applicable, oil or gas deposits; [AND] 11 (2) a reasonable allowance for that calendar year, as determined under 12 regulations adopted by the department, for overhead expenses that are directly related 13 to exploring for, developing, or producing, as applicable, the oil or gas deposits; and 14 (3) lease expenditures incurred in a previous year that 15 (A) met the requirements of AS 43.55.160(e) in the year in 16 which the lease expenditures were incurred; 17 (B) have not been deducted in the determination of the 18 production tax value of oil and gas under AS 43.55.160(a) in a previous 19 calendar year; 20 (C) were not the basis of a credit under this title; and 21 (D) were incurred to explore for, develop, or produce oil or 22 gas deposits located north of 68 degrees North latitude. 23 * Sec. 40. AS 43.55.165(e) is amended to read: 24 (e) For purposes of this section, lease expenditures do not include 25 (1) depreciation, depletion, or amortization; 26 (2) oil or gas royalty payments, production payments, lease profit 27 shares, or other payments or distributions of a share of oil or gas production, profit, or 28 revenue, except that a producer's lease expenditures applicable to oil and gas produced 29 from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net 30 profit paid to the state under that lease; 31 (3) taxes based on or measured by net income;
01 (4) interest or other financing charges or costs of raising equity or debt 02 capital; 03 (5) acquisition costs for a lease or property or exploration license; 04 (6) costs arising from fraud, wilful misconduct, gross negligence, 05 violation of law, or failure to comply with an obligation under a lease, permit, or 06 license issued by the state or federal government; 07 (7) fines or penalties imposed by law; 08 (8) costs of arbitration, litigation, or other dispute resolution activities 09 that involve the state or concern the rights or obligations among owners of interests in, 10 or rights to production from, one or more leases or properties or a unit; 11 (9) costs incurred in organizing a partnership, joint venture, or other 12 business entity or arrangement; 13 (10) amounts paid to indemnify the state; the exclusion provided by 14 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 15 a third-party insurer or surety; 16 (11) surcharges levied under AS 43.55.201 or 43.55.300; 17 (12) an expenditure otherwise deductible under (b) of this section that 18 is a result of an internal transfer, a transaction with an affiliate, or a transaction 19 between related parties, or is otherwise not an arm's length transaction, unless the 20 producer establishes to the satisfaction of the department that the amount of the 21 expenditure does not exceed the fair market value of the expenditure; 22 (13) an expenditure incurred to purchase an interest in any corporation, 23 partnership, limited liability company, business trust, or any other business entity, 24 whether or not the transaction is treated as an asset sale for federal income tax 25 purposes; 26 (14) a tax levied under AS 43.55.011 or 43.55.014; 27 (15) costs incurred for dismantlement, removal, surrender, or 28 abandonment of a facility, pipeline, well pad, platform, or other structure, or for the 29 restoration of a lease, field, unit, area, tract of land, body of water, or right-of-way in 30 conjunction with dismantlement, removal, surrender, or abandonment; a cost is not 31 excluded under this paragraph if the dismantlement, removal, surrender, or
01 abandonment for which the cost is incurred is undertaken for the purpose of replacing, 02 renovating, or improving the facility, pipeline, well pad, platform, or other structure; 03 (16) costs incurred for containment, control, cleanup, or removal in 04 connection with any unpermitted release of oil or a hazardous substance and any 05 liability for damages imposed on the producer or explorer for that unpermitted release; 06 this paragraph does not apply to the cost of developing and maintaining an oil 07 discharge prevention and contingency plan under AS 46.04.030; 08 (17) costs incurred to satisfy a work commitment under an exploration 09 license under AS 38.05.132; 10 (18) that portion of expenditures, that would otherwise be qualified 11 capital expenditures [, AS DEFINED IN AS 43.55.023,] incurred during a calendar 12 year that are less than the product of $0.30 multiplied by the total taxable production 13 from each lease or property, in BTU equivalent barrels, during that calendar year, 14 except that, when a portion of a calendar year is subject to this provision, the 15 expenditures and volumes shall be prorated within that calendar year; 16 (19) costs incurred for repair, replacement, or deferred maintenance of 17 a facility, a pipeline, a structure, or equipment, other than a well, that results in or is 18 undertaken in response to a failure, problem, or event that results in an unscheduled 19 interruption of, or reduction in the rate of, oil or gas production; or costs incurred for 20 repair, replacement, or deferred maintenance of a facility, a pipeline, a structure, or 21 equipment, other than a well, that is undertaken in response to, or is otherwise 22 associated with, an unpermitted release of a hazardous substance or of gas; however, 23 costs under this paragraph that would otherwise constitute lease expenditures under (a) 24 and (b) of this section may be treated as lease expenditures if the department 25 determines that the repair or replacement is solely necessitated by an act of war, by an 26 unanticipated grave natural disaster or other natural phenomenon of an exceptional, 27 inevitable, and irresistible character, the effects of which could not have been 28 prevented or avoided by the exercise of due care or foresight, or by an intentional or 29 negligent 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 producer, but 31 only if the producer or operator, as applicable, exercised due care in operating and
01 maintaining the facility, pipeline, structure, or equipment, and took reasonable 02 precautions against the act or omission of the third party and against the consequences 03 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 costs 06 to dismantle and remove the facility, pipeline, structure, or equipment that is 07 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 crude 12 oil topping plant, regardless of whether the products of the refinery or topping plant 13 are used in oil or gas exploration, development, or production operations; however, if 14 a producer owns a refinery or crude oil topping plant that is located on or near the 15 premises of the producer's lease or property in the state and that processes the 16 producer's oil produced from that lease or property into a product that the producer 17 uses in the operation of the lease or property in drilling for or producing oil or gas, the 18 producer's lease expenditures include the amount calculated by subtracting from the 19 fair market value of the product used the prevailing value, as determined under 20 AS 43.55.020(f), of the oil that is processed; 21 (21) costs of lobbying, public relations, public relations advertising, or 22 policy advocacy. 23 * Sec. 41. AS 43.55.165(f) is amended to read: 24 (f) For purposes of AS 43.55.023(b) [AS 43.55.023(a) AND (b)] and only as 25 to expenditures incurred to explore for an oil or gas deposit located within land in 26 which an explorer does not own a working interest, the term "producer" in this section 27 includes "explorer." 28 * Sec. 42. AS 43.55.170(c) is amended to read: 29 (c) For purposes of AS 43.55.023(b) [AS 43.55.023(a) AND (b)] and only as 30 to expenditures incurred to explore for an oil or gas deposit located within land in 31 which an explorer does not own a working interest, the term "producer" in this section
01 includes "explorer." 02 * Sec. 43. AS 43.55.180(a) is amended to read: 03 (a) The department shall study 04 (1) the effects of the provisions of this chapter on oil and gas 05 exploration, development, and production in the state, on investment expenditures for 06 oil and gas exploration, development, and production in the state, on the entry of new 07 producers into the oil and gas industry in the state, on state revenue, and on tax 08 administration and compliance, giving particular attention to the tax rates provided 09 under AS 43.55.011, the tax credits provided under AS 43.55.024, 43.55.025, and 10 former AS 43.55.023 [AS 43.55.023 - 43.55.025], and the deductions for and 11 adjustments to lease expenditures provided under AS 43.55.160 - 43.55.170; and 12 (2) the effects of the tax rates under AS 43.55.011(i) on state revenue 13 and on oil and gas exploration, development, and production on private land, and the 14 fairness of those tax rates for private landowners. 15 * Sec. 44. AS 43.55.890 is amended to read: 16 Sec. 43.55.890. Disclosure of tax information. Notwithstanding any contrary 17 provision of AS 40.25.100, and regardless of whether the information is considered 18 under AS 43.05.230(e) to constitute statistics classified to prevent the identification of 19 particular returns or reports, the department may publish the following information 20 under this chapter, if aggregated among three or more producers or explorers, showing 21 by month or calendar year and by lease or property, unit, or area of the state: 22 (1) the amount of oil or gas production; 23 (2) the amount of taxes levied under this chapter or paid under this 24 chapter; 25 (3) the effective tax rates under this chapter; 26 (4) the gross value of oil or gas at the point of production; 27 (5) the transportation costs for oil or gas; 28 (6) qualified capital expenditures [, AS DEFINED IN AS 43.55.023]; 29 (7) exploration expenditures under AS 43.55.025; 30 (8) production tax values of oil or gas under AS 43.55.160; 31 (9) lease expenditures under AS 43.55.165;
01 (10) adjustments to lease expenditures under AS 43.55.170; 02 (11) tax credits applicable or potentially applicable against taxes levied 03 by this chapter. 04 * Sec. 45. AS 43.55.895(b) is amended to read: 05 (b) A municipal entity subject to taxation because of this section 06 (1) is eligible for [ALL] tax credits proportionate to its production 07 taxable under AS 43.55.011(e); and 08 (2) shall allocate its lease expenditures in proportion to its 09 production taxable under AS 43.55.011(e) [UNDER THIS CHAPTER TO THE 10 SAME EXTENT AS ANY OTHER PRODUCER]. 11 * Sec. 46. AS 43.55.900 is amended by adding new paragraphs to read: 12 (26) "qualified capital expenditure" 13 (A) means, except as otherwise provided in (B) of this 14 paragraph, an expenditure that is a lease expenditure under AS 43.55.165 and 15 is 16 (i) incurred for geological or geophysical exploration; 17 (ii) treated as a capitalized expenditure under 26 U.S.C. 18 (Internal Revenue Code), as amended, regardless of elections made 19 under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 20 treated as a capitalized expenditure for federal income tax reporting 21 purposes by the person incurring the expenditure; or 22 (iii) treated as a capitalized expenditure under 26 U.S.C. 23 (Internal Revenue Code), as amended, regardless of elections made 24 under 26 U.S.C. 263(c) (Internal Revenue Code), as amended, and is 25 eligible to be deducted as an expense under 26 U.S.C. 263(c) (Internal 26 Revenue Code), as amended; 27 (B) does not include an expenditure incurred to acquire an asset 28 the cost of previously acquiring which was a lease expenditure under 29 AS 43.55.165 or would have been a lease expenditure under AS 43.55.165 if it 30 had been incurred after March 31, 2006, or that has previously been placed in 31 service in the state; an expenditure to acquire an asset is not excluded under
01 this subparagraph if not more than an immaterial portion of the asset meets a 02 description under this subparagraph; for purposes of this subparagraph, "asset" 03 includes geological, geophysical, and well data and interpretations; 04 (27) "regular production" has the meaning given in AS 31.05.170. 05 * Sec. 47. AS 43.70 is amended by adding new sections to read: 06 Sec. 43.70.025. Bond or cash deposit required for an oil or gas business. (a) 07 At the time of applying for a license under this chapter, an applicant engaged in the 08 business of oil or gas exploration, development, or production shall file a surety bond 09 in the amount of $250,000 running to the state, conditioned upon the applicant's 10 promise to pay 11 (1) taxes and contributions due the state and political subdivisions; 12 (2) persons furnishing labor or material or renting or supplying 13 equipment to the applicant; and 14 (3) costs of repairs to public facilities. 15 (b) In lieu of the surety bond required under this section, the applicant may 16 file with the commissioner a cash deposit or other negotiable security acceptable to the 17 commissioner in the amount of $250,000. 18 (c) The bond required by this section remains in effect until cancelled by 19 action of the surety, the principal, or, if the commissioner finds that the business is 20 producing oil or gas in commercial quantities, by the commissioner. 21 Sec. 43.70.028. Claims against an oil or gas business. (a) A person having a 22 claim against a person required to file a surety bond under AS 43.70.025 because of 23 the failure to pay a liability described in AS 43.70.025(a) may bring suit upon the 24 bond. A copy of the complaint shall be served by registered or certified mail on the 25 commissioner at the time suit is filed, and the commissioner shall maintain a record, 26 available for public inspection, of all suits commenced. This service on the 27 commissioner shall constitute service on the surety, and the commissioner shall 28 transmit the complaint or a copy of it to the surety within 72 hours after it is received. 29 The surety on the bond is not liable in an aggregate amount in excess of that named in 30 the bond, but, if claims pending at any one time exceed the amount of the bond, the 31 claims shall be satisfied from the bond in the following order:
01 (1) material, equipment, and supplies delivered in the state; 02 (2) labor, including employee benefits; 03 (3) taxes and other amounts due to the city and borough, in that order; 04 (4) repair of public facilities; 05 (5) taxes and other amounts due to the state. 06 (b) If a judgment is entered against a cash deposit, the commissioner, upon 07 receipt of a certified copy of a final judgment, shall pay the judgment from the amount 08 of the deposit in accordance with the priorities set out in (a) of this section. 09 (c) An action described in (a) of this section may not be commenced on the 10 bond more than three years after the bond's cancellation. 11 * Sec. 48. AS 43.99.950 is amended by adding a new paragraph to read: 12 (3) "outstanding liability to the state" means an amount of tax, interest, 13 penalty, fee, rental, royalty, or other charge for which the state has issued a demand 14 for payment that has not been paid when due and, if contested, has not been finally 15 resolved against the state. 16 * Sec. 49. AS 38.05.180(i); AS 41.09.010, 41.09.020, 41.09.030, 41.09.090; 17 AS 43.20.053(j)(4); AS 43.55.023(a), 43.55.023(o), 43.55.025(a)(5), 43.55.025(a)(7), 18 43.55.025(l), 43.55.025(n), 43.55.028(i), 43.55.075(d)(1), 43.55.165(j), and 43.55.165(k) are 19 repealed January 1, 2017. 20 * Sec. 50. AS 43.55.023(l) and 43.55.023(n) are repealed January 1, 2019. 21 * Sec. 51. AS 43.55.023, 43.55.165(f), and 43.55.170(c) are repealed January 1, 2020. 22 * Sec. 52. The uncodified law of the State of Alaska is amended by adding a new section to 23 read: 24 LEGISLATIVE WORKING GROUP. (a) A legislative working group is established 25 to analyze the Cook Inlet fiscal regime for oil and gas, review the state's tax structure and 26 rates on oil and gas produced south of 68 degrees North latitude, recommend changes to the 27 legislature for consideration during the First Regular Session of the Thirtieth Alaska State 28 Legislature, and develop terms for a comprehensive fiscal regime to take effect January 1, 29 2019, including, 30 (1) a tax structure that accounts for the unique circumstances for each oil and 31 gas producing area south of 68 degrees North latitude;
01 (2) incentives other than direct monetary support from the state for the 02 exploration, development, and production of oil and gas south of 68 degrees North latitude; 03 (3) consideration of the competitiveness of the area south of 68 degrees North 04 latitude to attract new oil and gas development; 05 (4) consideration of the unique market considerations of the Cook Inlet 06 sedimentary basin and the need to support energy supply security for communities in 07 Southcentral Alaska; 08 (5) alternative means of state support for the exploration, development, and 09 production of oil and gas in the Cook Inlet sedimentary basin, including loan guarantees or 10 other financial support through the Alaska Industrial Development and Export Authority or 11 other state corporation or entity. 12 (b) The working group consists of 13 (1) two co-chairs, one of whom is a member of the house of representatives 14 appointed by the speaker of the house of representatives, and one of whom is a member of the 15 senate appointed by the president of the senate; and 16 (2) members appointed by the co-chairs; members must be legislators and 17 must include members of the majority and minority caucuses. 18 (c) The co-chairs of the working group may form an advisory group to the working 19 group, composed of members who are not legislators and who have expertise and skills to 20 assist in the review and development of a new plan for the tax structure and rates on oil and 21 gas produced south of 68 degrees North latitude. The members of an advisory group may 22 include commissioners or employees of state departments, members of the oil and gas 23 industry or trade associations, and economists. 24 (d) The working group may be supported by legislative consultants under contract 25 through the Legislative Budget and Audit Committee. 26 * Sec. 53. The uncodified law of the State of Alaska is amended by adding a new section to 27 read: 28 APPLICABILITY. (a) AS 43.55.028(e), as amended by sec. 25 of this Act, 29 AS 43.55.028(j), added by sec. 28 of this Act, and regulations related to a tax credit certificate 30 purchase preference for applicants with a workforce of resident workers, adopted under 31 AS 43.55.028(g), as amended by sec. 27 of this Act, apply to a purchase applied for on or
01 after the effective date of secs. 25, 27, and 28 of this Act. 02 (b) AS 43.55.165(a), as amended by sec. 39 of this Act, applies to lease expenditures 03 calculated for a calendar year after December 31, 2016. 04 * Sec. 54. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 TRANSITION: QUALIFIED CAPITAL EXPENDITURES. (a) Notwithstanding the 07 repeal of AS 43.55.023(a) and (o) by sec. 49 of this Act, and the amendments to 08 AS 45.55.023(d) by sec. 16 of this Act, AS 43.55.029(a) by sec. 29 of this Act, 09 AS 43.55.030(a) and (e) by secs. 32 and 33 of this Act, AS 43.55.165(f) by sec. 41 of this Act, 10 and AS 43.55.170(c) by sec. 42 of this Act, a taxpayer who incurs a qualified capital 11 expenditure before the repeal of AS 43.55.023(a) and (o) by sec. 49 of this Act that qualifies 12 for a qualified capital expenditure credit under AS 43.55.023(a) may apply for a credit or tax 13 credit certificate under AS 43.55.023(d) and, as applicable, assign the tax credit under 14 AS 43.55.029, as those sections read on the day before the repeal of AS 43.55.023(a) by sec. 15 49 of this Act. 16 (b) The Department of Revenue may continue to apply and enforce AS 43.55.023(a) 17 and (o) and 43.55.029, as those sections read on the day before the repeal of AS 43.55.023(a) 18 by sec. 49 of this Act, for qualified capital expenditures incurred before the repeal of 19 AS 43.55.023(a) by sec. 49 of this Act. 20 * Sec. 55. The uncodified law of the State of Alaska is amended by adding a new section to 21 read: 22 TRANSITION: WELL LEASE EXPENDITURES. (a) Notwithstanding the repeal of 23 AS 43.55.023(l) and (n) by sec. 50 of this Act, and the amendment of AS 43.55.029(a) by sec. 24 30 of this Act, a taxpayer who incurs a well lease expenditure before the repeal of 25 AS 43.55.023(l) and (n) by sec. 50 of this Act that qualifies for a well lease expenditure credit 26 under AS 43.55.023(l) may apply for a credit or transferable tax credit certificate under 27 AS 43.55.023 and assign the tax credit under AS 43.55.029, as those sections read on the day 28 before the repeal of AS 43.55.023(l) and (n) by sec. 50 of this Act. 29 (b) The Department of Revenue may continue to apply and enforce AS 43.55.023(l), 30 as that subsection read on the day before the repeal of AS 43.55.023(l) by sec. 50 of this Act, 31 for well lease expenditures incurred before the repeal of AS 43.55.023(l) by sec. 50 of this
01 Act. 02 * Sec. 56. The uncodified law of the State of Alaska is amended by adding a new section to 03 read: 04 TRANSITION: CARRIED-FORWARD ANNUAL LOSSES. (a) Notwithstanding the 05 repeal of AS 43.55.023, 43.55.165(f), and 43.55.170(c) by sec. 51 of this Act, and the 06 amendments of AS 43.55.029(a) by sec. 31 of this Act, AS 43.55.160(d) by sec. 34 of this 07 Act, and AS 43.55.160(e) by sec. 36 of this Act, a taxpayer who incurs a carried-forward 08 annual loss before the repeal of AS 43.55.023 by sec. 51 of this Act that qualifies for a 09 carried-forward annual loss credit under AS 43.55.023(b) may apply for a credit or tax credit 10 certificate under AS 43.55.023(d) and assign the tax credit under AS 43.55.029, subject to the 11 requirements of AS 43.55.160(d) and (e), as those sections read on the day before the repeal 12 of AS 43.55.023 by sec. 51 of this Act. 13 (b) The Department of Revenue may continue to apply and enforce AS 43.55.023(b), 14 as that section read on the day before the repeal of AS 43.55.023(b) by sec. 51 of this Act, for 15 a carried-forward annual loss incurred before the repeal of AS 43.55.023(b) by sec. 51 of this 16 Act. 17 * Sec. 57. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 TRANSITION: AS 43.55.023 CREDITS. Notwithstanding the repeal of 20 AS 43.55.023, 43.55.165(f), and 43.55.170(c) by sec. 51 of this Act, and the amendments to 21 AS 43.55.025(m) by sec. 22 of this Act, AS 43.55.028(a) and (e) by secs. 24 and 26 of this 22 Act, AS 43.55.029(a) by sec. 31 of this Act, AS 43.55.160(d) by sec. 34 of this Act, and 23 AS 43.55.180(a) by sec. 43 of this Act, the Department of Revenue may continue to apply and 24 enforce AS 43.55.023, as that section read on the day before the repeal of AS 43.55.023 by 25 sec. 51 of this Act, for a credit earned before the repeal of AS 43.55.023 by sec. 51 of this 26 Act. 27 * Sec. 58. The uncodified law of the State of Alaska is amended by adding a new section to 28 read: 29 TRANSITION: LEASE EXPENDITURES FOR A CALENDAR YEAR AFTER 30 2006 AND BEFORE 2010. Notwithstanding AS 43.55.165(a), as amended by sec. 39 of this 31 Act, and the repeal of AS 43.55.165(j) and (k) by sec. 49 of this Act, AS 43.55.165(j) and (k)
01 apply to a producer's total lease expenditures for a calendar year after 2006 and before 2010 02 under AS 43.55.165, as that section read on the day before the repeal of AS 43.55.165(j) and 03 (k) by sec. 49 of this Act. 04 * Sec. 59. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 TRANSITION: EXPLORATION EXPENDITURES AND SEISMIC 07 EXPLORATION EXPENDITURES. (a) Notwithstanding the repeal of AS 43.55.025(a)(5), 08 (a)(7), (l), and (n) by sec. 49 of this Act, a taxpayer who incurs an exploration expenditure or 09 seismic exploration expenditure before the repeal of AS 43.55.025(a)(5), (a)(7), (l), and (n) by 10 sec. 49 of this Act that qualifies for an exploration or seismic exploration expenditure credit 11 under AS 43.55.025(a)(5) or (a)(7) may apply for a credit or production tax credit certificate 12 under AS 43.55.025 and assign the tax credit under AS 43.55.029, as those sections read on 13 the day before the repeal of AS 43.55.025(a)(5), (a)(7), (l), and (n) by sec. 49 of this Act. 14 (b) The Department of Revenue may continue to apply and enforce 15 AS 43.55.025(a)(5), (a)(7), (l), and (n), as those sections read on the day before the repeal of 16 AS 43.55.025(a)(5), (a)(7), (l), and (n) by sec. 49 of this Act, for exploration expenditures and 17 seismic exploration expenditures incurred before the repeal of AS 43.55.025(a)(5), (a)(7), (l), 18 and (n) by sec. 49 of this Act. 19 * Sec. 60. The uncodified law of the State of Alaska is amended by adding a new section to 20 read: 21 TRANSITION: REGULATIONS. The Department of Revenue, the Department of 22 Natural Resources, the Department of Commerce, Community, and Economic Development, 23 and the Alaska Oil and Gas Conservation Commission may adopt regulations necessary to 24 implement the changes made by this Act. The regulations take effect under AS 44.62 25 (Administrative Procedure Act), but not before the effective date of the law implemented by 26 the regulation. The Department of Revenue shall adopt regulations governing the use of tax 27 credits under AS 43.55 for a calendar year for which the applicable tax credit provisions of 28 AS 43.55 differ as between parts of the year as a result of this Act. 29 * Sec. 61. The uncodified law of the State of Alaska is amended by adding a new section to 30 read: 31 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any
01 contrary provision of AS 44.62.240, 02 (1) if the Department of Revenue expressly designates in a regulation that the 03 regulation applies retroactively, a regulation adopted by the Department of Revenue to 04 implement, interpret, make specific, or otherwise carry out this Act may apply retroactively to 05 the effective date of the law implemented by the regulation; 06 (2) if the Department of Natural Resources expressly designates in the 07 regulation that the regulation applies retroactively, a regulation adopted by the Department of 08 Natural Resources to implement, interpret, make specific, or otherwise carry out the statutory 09 amendments in this Act affecting the administration of oil and gas leases issued under 10 AS 38.05.180(f)(3)(B), (D), or (E), to the extent the regulation relates to the treatment of oil 11 and gas production taxes in determining net profits under those leases, may apply 12 retroactively to the effective date of the law implemented by the regulation. 13 * Sec. 62. Sections 21, 52, 60, and 61 of this Act take effect immediately under 14 AS 01.10.070(c). 15 * Sec. 63. Sections 30, 50, and 55 of this Act take effect January 1, 2019. 16 * Sec. 64. Sections 22, 24, 26, 31, 34, 36, 43, 51, 56, and 57 of this Act take effect 17 January 1, 2020. 18 * Sec. 65. Except as provided in secs. 62 - 64 of this Act, this Act takes effect January 1, 19 2017.