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HB 411: "An Act relating to the oil and gas production tax, tax payments, and credits; and providing for an effective date."

00 HOUSE BILL NO. 411 01 "An Act relating to the oil and gas production tax, tax payments, and credits; and 02 providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 43.55.011(e) is amended to read: 05 (e) There is levied on the producer of oil or gas a tax for all oil and gas 06 produced each calendar year from each lease or property in the state, less any oil and 07 gas the ownership or right to which is exempt from taxation or constitutes a 08 landowner's royalty interest or for which a tax is levied by AS 43.55.014. Except as 09 otherwise provided under (f), (j), (k), (o), and (p) of this section, for oil and gas 10 produced 11 (1) before January 1, 2014, the tax is equal to the sum of 12 (A) the annual production tax value of the taxable oil and gas 13 as calculated under AS 43.55.160(a)(1) multiplied by 25 percent; and 14 (B) the sum, over all months of the calendar year, of the tax

01 amounts determined under (g) of this section; 02 (2) on and after January 1, 2014, and before July 1, 2018 [JANUARY 03 1, 2022], the tax is equal to the annual production tax value of the taxable oil and gas 04 as calculated under AS 43.55.160(a)(1) multiplied by 35 percent; 05 (3) on and after July 1, 2018, and before January 1, 2022, the tax is 06 equal to the sum of 07 (A) the annual production tax value of the taxable oil and 08 gas as calculated under AS 43.55.160(a)(1) multiplied by 25 percent; and 09 (B) the sum, over all the months of the calendar year, of the 10 amounts determined under (g) of this section; 11 (4) on and after January 1, 2022, the tax for 12 (A) oil is equal to the sum of 13 (i) the annual production tax value of the taxable oil as 14 calculated under AS 43.55.160(h)(1) [AS 43.55.160(h)] multiplied by 15 25 [35] percent; and 16 (ii) the sum, over all the months of the calendar 17 year, of the amounts determined under (g) of this section; 18 (B) gas is equal to 13 percent of the gross value at the point of 19 production of the taxable gas; if the gross value at the point of production of 20 gas produced from a lease or property is less than zero, that gross value at the 21 point of production is considered zero for purposes of this subparagraph. 22 * Sec. 2. AS 43.55.011(g) is amended to read: 23 (g) For purposes of (e) of this section, 24 (1) before January 1, 2014, for [FOR] each month of a calendar year 25 [BEFORE 2014] for which the producer's average monthly production tax value under 26 AS 43.55.160(a)(2) of a BTU equivalent barrel of the taxable oil and gas is more than 27 $30, the amount of tax for purposes of (e)(1)(B) of this section is determined by 28 multiplying the monthly production tax value of the taxable oil and gas produced 29 during the month by the tax rate calculated as follows: 30 (A) [(1)] if the producer's average monthly production tax 31 value of a BTU equivalent barrel of the taxable oil and gas for the month is not

01 more than $92.50, the tax rate is 0.4 percent multiplied by the number that 02 represents the difference between that average monthly production tax value of 03 a BTU equivalent barrel and $30; or 04 (B) [(2)] if the producer's average monthly production tax value 05 of a BTU equivalent barrel of the taxable oil and gas for the month is more 06 than $92.50, the tax rate is the sum of 25 percent and the product of 0.1 percent 07 multiplied by the number that represents the difference between the average 08 monthly production tax value of a BTU equivalent barrel and $92.50, except 09 that the sum determined under this subparagraph [PARAGRAPH] may not 10 exceed 50 percent; 11 (2) on or after July 1, 2018, and before January 1, 2022, for each 12 month of a calendar year for which the producer's average monthly production 13 tax value under AS 43.55.160(a)(2) of a BTU equivalent barrel of the taxable oil 14 and gas is more than $40, the tax amount is the sum of the following: 15 (A) the difference between the monthly production tax 16 value of a BTU equivalent barrel and $40 multiplied by the volume of oil 17 and gas produced by the producer for the month multiplied by five 18 percent; 19 (B) if applicable, the difference between the monthly 20 production tax value of a BTU equivalent barrel and $50 multiplied by the 21 volume of oil and gas produced by the producer for the month multiplied 22 by five percent; 23 (C) if applicable, the difference between the monthly 24 production tax value of a BTU equivalent barrel and $60 multiplied by the 25 volume of oil and gas produced by the producer for the month multiplied 26 by five percent; 27 (3) on or after January 1, 2022, for each month of a calendar year 28 for which the producer's average monthly production tax value under 29 AS 43.55.160(h)(2) of a BTU equivalent barrel of taxable oil and gas is more than 30 $40, the tax amount is the sum of the following: 31 (A) the difference between the monthly production tax

01 value of a BTU equivalent barrel and $40 multiplied by the volume of oil 02 and gas produced by the producer for the month multiplied by five 03 percent; 04 (B) if applicable, the difference between the monthly 05 production tax value of a BTU equivalent barrel and $50 multiplied by the 06 volume of oil and gas produced by the producer for the month multiplied 07 by five percent; 08 (C) if applicable, the difference between the monthly 09 production tax value of a BTU equivalent barrel and $60 multiplied by the 10 volume of oil and gas produced by the producer for the month multiplied 11 by five percent. 12 * Sec. 3. AS 43.55.014(b) is amended to read: 13 (b) A production tax levied by this section is equal to 13 percent of the gas 14 otherwise taxable under AS 43.55.011(e)(4) [AS 43.55.011(e)(3)] produced from each 15 oil and gas lease to which an effective election under (a) of this section applies, when 16 and as that gas is produced. The producer shall pay the tax in gas by delivering that 13 17 percent of the gas to the state at the point of production. 18 * Sec. 4. AS 43.55.020(a) is amended to read: 19 (a) For a calendar year, a producer subject to tax under AS 43.55.011 shall pay 20 the tax as follows: 21 (1) for oil and gas produced before January 1, 2014, an installment 22 payment of the estimated tax levied by AS 43.55.011(e), net of any tax credits applied 23 as allowed by law, is due for each month of the calendar year on the last day of the 24 following month; except as otherwise provided under (2) of this subsection, the 25 amount of the installment payment is the sum of the following amounts, less 1/12 of 26 the tax credits that are allowed by law to be applied against the tax levied by 27 AS 43.55.011(e) for the calendar year, but the amount of the installment payment may 28 not be less than zero: 29 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 30 produced from leases or properties in the state outside the Cook Inlet 31 sedimentary basin, other than leases or properties subject to AS 43.55.011(f),

01 the greater of 02 (i) zero; or 03 (ii) the sum of 25 percent and the tax rate calculated for 04 the month under AS 43.55.011(g) multiplied by the remainder obtained 05 by subtracting 1/12 of the producer's adjusted lease expenditures for the 06 calendar year of production under AS 43.55.165 and 43.55.170 that are 07 deductible for the oil and gas under AS 43.55.160 from the gross value 08 at the point of production of the oil and gas produced from the leases or 09 properties during the month for which the installment payment is 10 calculated; 11 (B) for oil and gas produced from leases or properties subject 12 to AS 43.55.011(f), the greatest of 13 (i) zero; 14 (ii) zero percent, one percent, two percent, three 15 percent, or four percent, as applicable, of the gross value at the point of 16 production of the oil and gas produced from the leases or properties 17 during the month for which the installment payment is calculated; or 18 (iii) the sum of 25 percent and the tax rate calculated for 19 the month under AS 43.55.011(g) multiplied by the remainder obtained 20 by subtracting 1/12 of the producer's adjusted lease expenditures for the 21 calendar year of production under AS 43.55.165 and 43.55.170 that are 22 deductible for the oil and gas under AS 43.55.160 from the gross value 23 at the point of production of the oil and gas produced from those leases 24 or properties during the month for which the installment payment is 25 calculated; 26 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for 27 each lease or property, the greater of 28 (i) zero; or 29 (ii) the sum of 25 percent and the tax rate calculated for 30 the month under AS 43.55.011(g) multiplied by the remainder obtained 31 by subtracting 1/12 of the producer's adjusted lease expenditures for the

01 calendar year of production under AS 43.55.165 and 43.55.170 that are 02 deductible under AS 43.55.160 for the oil or gas, respectively, 03 produced from the lease or property from the gross value at the point of 04 production of the oil or gas, respectively, produced from the lease or 05 property during the month for which the installment payment is 06 calculated; 07 (D) for oil and gas subject to AS 43.55.011(p), the lesser of 08 (i) the sum of 25 percent and the tax rate calculated for 09 the month under AS 43.55.011(g) multiplied by the remainder obtained 10 by subtracting 1/12 of the producer's adjusted lease expenditures for the 11 calendar year of production under AS 43.55.165 and 43.55.170 that are 12 deductible for the oil and gas under AS 43.55.160 from the gross value 13 at the point of production of the oil and gas produced from the leases or 14 properties during the month for which the installment payment is 15 calculated, but not less than zero; or 16 (ii) four percent of the gross value at the point of 17 production of the oil and gas produced from the leases or properties 18 during the month, but not less than zero; 19 (2) an amount calculated under (1)(C) of this subsection for oil or gas 20 subject to AS 43.55.011(j), (k), or (o) may not exceed the product obtained by 21 carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or 43.55.011(o), as 22 applicable, for gas or set out in AS 43.55.011(k) for oil, but substituting in 23 AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the amount of taxable 24 gas produced during the month for the amount of taxable gas produced during the 25 calendar year and substituting in AS 43.55.011(k) the amount of taxable oil produced 26 during the month for the amount of taxable oil produced during the calendar year; 27 (3) an installment payment of the estimated tax levied by 28 AS 43.55.011(i) for each lease or property is due for each month of the calendar year 29 on the last day of the following month; the amount of the installment payment is the 30 sum of 31 (A) the applicable tax rate for oil provided under

01 AS 43.55.011(i), multiplied by the gross value at the point of production of the 02 oil taxable under AS 43.55.011(i) and produced from the lease or property 03 during the month; and 04 (B) the applicable tax rate for gas provided under 05 AS 43.55.011(i), multiplied by the gross value at the point of production of the 06 gas taxable under AS 43.55.011(i) and produced from the lease or property 07 during the month; 08 (4) any amount of tax levied by AS 43.55.011, net of any credits 09 applied as allowed by law, that exceeds the total of the amounts due as installment 10 payments of estimated tax is due on March 31 of the year following the calendar year 11 of production; 12 (5) for oil and gas produced on and after January 1, 2014, and before 13 July 1, 2018 [JANUARY 1, 2022], an installment payment of the estimated tax levied 14 by AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 15 month of the calendar year on the last day of the following month; except as otherwise 16 provided under (7) [(6)] of this subsection, the amount of the installment payment is 17 the sum of the following amounts, less 1/12 of the tax credits that are allowed by law 18 to be applied against the tax levied by AS 43.55.011(e) for the calendar year, but the 19 amount of the installment payment may not be less than zero: 20 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 21 produced from leases or properties in the state outside the Cook Inlet 22 sedimentary basin, other than leases or properties subject to AS 43.55.011(f), 23 the greater of 24 (i) zero; or 25 (ii) 35 percent multiplied by the remainder obtained by 26 subtracting 1/12 of the producer's adjusted lease expenditures for the 27 calendar year of production under AS 43.55.165 and 43.55.170 that are 28 deductible for the oil and gas under AS 43.55.160 from the gross value 29 at the point of production of the oil and gas produced from the leases or 30 properties during the month for which the installment payment is 31 calculated;

01 (B) for oil and gas produced from leases or properties subject 02 to AS 43.55.011(f), the greatest of 03 (i) zero; 04 (ii) the percentage applicable under AS 43.55.011(f) 05 [ZERO PERCENT, ONE PERCENT, TWO PERCENT, THREE 06 PERCENT, OR FOUR PERCENT, AS APPLICABLE,] of the gross 07 value at the point of production of the oil and gas produced from the 08 leases or properties during the month for which the installment 09 payment is calculated; or 10 (iii) 35 percent multiplied by the remainder obtained by 11 subtracting 1/12 of the producer's adjusted lease expenditures for the 12 calendar year of production under AS 43.55.165 and 43.55.170 that are 13 deductible for the oil and gas under AS 43.55.160 from the gross value 14 at the point of production of the oil and gas produced from those leases 15 or properties during the month for which the installment payment is 16 calculated, except that, for the purposes of this calculation, a reduction 17 from the gross value at the point of production may apply for oil and 18 gas subject to AS 43.55.160(f) [OR (g)]; 19 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for 20 each lease or property, the greater of 21 (i) zero; or 22 (ii) 35 percent multiplied by the remainder obtained by 23 subtracting 1/12 of the producer's adjusted lease expenditures for the 24 calendar year of production under AS 43.55.165 and 43.55.170 that are 25 deductible under AS 43.55.160 for the oil or gas, respectively, 26 produced from the lease or property from the gross value at the point of 27 production of the oil or gas, respectively, produced from the lease or 28 property during the month for which the installment payment is 29 calculated; 30 (D) for oil and gas subject to AS 43.55.011(p), the lesser of 31 (i) 35 percent multiplied by the remainder obtained by

01 subtracting 1/12 of the producer's adjusted lease expenditures for the 02 calendar year of production under AS 43.55.165 and 43.55.170 that are 03 deductible for the oil and gas under AS 43.55.160 from the gross value 04 at the point of production of the oil and gas produced from the leases or 05 properties during the month for which the installment payment is 06 calculated, but not less than zero; or 07 (ii) four percent of the gross value at the point of 08 production of the oil and gas produced from the leases or properties 09 during the month, but not less than zero; 10 (6) for oil and gas produced on and after July 1, 2018, and before 11 January 1, 2022, an installment payment of the estimated tax levied by 12 AS 43.55.011(e), net of any tax credits applied as allowed by law, is due for each 13 month of the calendar year on the last day of the following month; except as 14 otherwise provided under (7) of this subsection, the amount of the installment 15 payment is the sum of the following amounts, less 1/12 of the tax credits that are 16 allowed by law to be applied against the tax levied by AS 43.55.011(e) for the 17 calendar year, but the amount of the installment payment may not be less than 18 zero: 19 (A) for oil and gas not subject to AS 43.55.011(o) or (p) 20 produced from leases or properties in the state outside the Cook Inlet 21 sedimentary basin, other than leases or properties subject to 22 AS 43.55.011(f), the greater of 23 (i) zero; or 24 (ii) the amount calculated for the month under 25 AS 43.55.011(g), as applicable, and 25 percent multiplied by the 26 remainder obtained by subtracting 1/12 of the producer's adjusted 27 lease expenditures for the calendar year of production under 28 AS 43.55.165 and 43.55.170 that are deductible for the oil and gas 29 under AS 43.55.160 from the gross value at the point of production 30 of the oil and gas produced from the leases or properties during the 31 month for which the installment payment is calculated;

01 (B) for oil and gas produced from leases or properties 02 subject to AS 43.55.011(f), the greatest of 03 (i) zero; 04 (ii) the percentage applicable under AS 43.55.011(f) 05 of the gross value at the point of production of the oil and gas 06 produced from the leases or properties during the month for which 07 the installment payment is calculated; or 08 (iii) the amount calculated for the month under 09 AS 43.55.011(g), as applicable, and 25 percent multiplied by the 10 remainder obtained by subtracting 1/12 of the producer's adjusted 11 lease expenditures for the calendar year of production under 12 AS 43.55.165 and 43.55.170 that are deductible for the oil and gas 13 under AS 43.55.160 from the gross value at the point of production 14 of the oil and gas produced from those leases or properties during 15 the month for which the installment payment is calculated, except 16 that, for the purposes of this calculation, a reduction from the gross 17 value at the point of production may apply for oil and gas subject 18 to AS 43.55.160(f); 19 (C) for oil or gas subject to AS 43.55.011(j), (k), or (o), for 20 each lease or property, the greater of 21 (i) zero; or 22 (ii) the amount calculated for the month under 23 AS 43.55.011(g), as applicable, and 25 percent multiplied by the 24 remainder obtained by subtracting 1/12 of the producer's adjusted 25 lease expenditures for the calendar year of production under 26 AS 43.55.165 and 43.55.170 that are deductible under AS 43.55.160 27 for the oil or gas, respectively, produced from the lease or property 28 from the gross value at the point of production of the oil or gas, 29 respectively, produced from the lease or property during the 30 month for which the installment payment is calculated; 31 (D) for oil and gas subject to AS 43.55.011(p), the lesser of

01 (i) the amount calculated for the month under 02 AS 43.55.011(g), as applicable, and 25 percent multiplied by the 03 remainder obtained by subtracting 1/12 of the producer's adjusted 04 lease expenditures for the calendar year of production under 05 AS 43.55.165 and 43.55.170 that are deductible for the oil and gas 06 under AS 43.55.160 from the gross value at the point of production 07 of the oil and gas produced from the leases or properties during the 08 month for which the installment payment is calculated, but not less 09 than zero; or 10 (ii) four percent of the gross value at the point of 11 production of the oil and gas produced from the leases or 12 properties during the month, but not less than zero; 13 (7) [(6)] an amount calculated under (5)(C) or (6)(C) of this subsection 14 for oil or gas subject to AS 43.55.011(j), (k), or (o) may not exceed the product 15 obtained by carrying out the calculation set out in AS 43.55.011(j)(1) or (2) or 16 43.55.011(o), as applicable, for gas or set out in AS 43.55.011(k) for oil, but 17 substituting in AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the 18 amount of taxable gas produced during the month for the amount of taxable gas 19 produced during the calendar year and substituting in AS 43.55.011(k) the amount of 20 taxable oil produced during the month for the amount of taxable oil produced during 21 the calendar year; 22 (8) [(7)] for oil and gas produced on or after January 1, 2022, an 23 installment payment of the estimated tax levied by AS 43.55.011(e), net of any tax 24 credits applied as allowed by law, is due for each month of the calendar year on the 25 last day of the following month; except as otherwise provided under (11) [(10)] of this 26 subsection, the amount of the installment payment is the sum of the following 27 amounts, less 1/12 of the tax credits that are allowed by law to be applied against the 28 tax levied by AS 43.55.011(e) for the calendar year, but the amount of the installment 29 payment may not be less than zero: 30 (A) for oil produced from leases or properties subject to 31 AS 43.55.011(f), the greatest of

01 (i) zero; 02 (ii) the percentage applicable under AS 43.55.011(f) 03 [ZERO PERCENT, ONE PERCENT, TWO PERCENT, THREE 04 PERCENT, OR FOUR PERCENT, AS APPLICABLE,] of the gross 05 value at the point of production of the oil produced from the leases or 06 properties during the month for which the installment payment is 07 calculated; or 08 (iii) the amount calculated for the month under 09 AS 43.55.011(g), as applicable, and 25 [35] percent multiplied by the 10 remainder obtained by subtracting 1/12 of the producer's adjusted lease 11 expenditures for the calendar year of production under AS 43.55.165 12 and 43.55.170 that are deductible for the oil under 13 AS 43.55.160(h)(1)(A) [AS 43.55.160(h)(1)] from the gross value at 14 the point of production of the oil produced from those leases or 15 properties during the month for which the installment payment is 16 calculated, except that, for the purposes of this calculation, a reduction 17 from the gross value at the point of production may apply for oil 18 subject to AS 43.55.160(f) or 43.55.160(f) and (g); 19 (B) for oil produced before or during the last calendar year 20 under AS 43.55.024(b) for which the producer could take a tax credit under 21 AS 43.55.024(a), from leases or properties in the state outside the Cook Inlet 22 sedimentary basin, no part of which is north of 68 degrees North latitude, other 23 than leases or properties subject to AS 43.55.011(o) or (p), the greater of 24 (i) zero; or 25 (ii) the amount calculated for the month under 26 AS 43.55.011(g), as applicable, and 25 [35] percent multiplied by the 27 remainder obtained by subtracting 1/12 of the producer's adjusted lease 28 expenditures for the calendar year of production under AS 43.55.165 29 and 43.55.170 that are deductible for the oil under 30 AS 43.55.160(h)(1)(B) [AS 43.55.160(h)(2)] from the gross value at 31 the point of production of the oil produced from the leases or properties

01 during the month for which the installment payment is calculated; 02 (C) for oil and gas produced from leases or properties subject 03 to AS 43.55.011(p), except as otherwise provided under (9) [(8)] of this 04 subsection, the sum of 05 (i) the amount calculated for the month under 06 AS 43.55.011(g), as applicable, and 25 [35] percent multiplied by the 07 remainder obtained by subtracting 1/12 of the producer's adjusted lease 08 expenditures for the calendar year of production under AS 43.55.165 09 and 43.55.170 that are deductible for the oil under 10 AS 43.55.160(h)(1)(C) [AS 43.55.160(h)(3)] from the gross value at 11 the point of production of the oil produced from the leases or properties 12 during the month for which the installment payment is calculated, but 13 not less than zero; and 14 (ii) 13 percent of the gross value at the point of 15 production of the gas produced from the leases or properties during the 16 month, but not less than zero; 17 (D) for oil produced from leases or properties in the state, no 18 part of which is north of 68 degrees North latitude, other than leases or 19 properties subject to (B), (C), or (F) of this paragraph, the greater of 20 (i) zero; or 21 (ii) the amount calculated for the month under 22 AS 43.55.011(g), as applicable, and 25 [35] percent multiplied by the 23 remainder obtained by subtracting 1/12 of the producer's adjusted lease 24 expenditures for the calendar year of production under AS 43.55.165 25 and 43.55.170 that are deductible for the oil under 26 AS 43.55.160(h)(1)(D) [AS 43.55.160(h)(4)] from the gross value at 27 the point of production of the oil produced from the leases or properties 28 during the month for which the installment payment is calculated; 29 (E) for gas produced from each lease or property in the state 30 outside the Cook Inlet sedimentary basin, other than a lease or property subject 31 to AS 43.55.011(o) or (p), 13 percent of the gross value at the point of

01 production of the gas produced from the lease or property during the month for 02 which the installment payment is calculated, but not less than zero; 03 (F) for oil subject to AS 43.55.011(k), for each lease or 04 property, the greater of 05 (i) zero; or 06 (ii) the amount calculated for the month under 07 AS 43.55.011(g), as applicable, and 25 [35] percent multiplied by the 08 remainder obtained by subtracting 1/12 of the producer's adjusted lease 09 expenditures for the calendar year of production under AS 43.55.165 10 and 43.55.170 that are deductible under AS 43.55.160 for the oil 11 produced from the lease or property from the gross value at the point of 12 production of the oil produced from the lease or property during the 13 month for which the installment payment is calculated; 14 (G) for gas subject to AS 43.55.011(j) or (o), for each lease or 15 property, the greater of 16 (i) zero; or 17 (ii) 13 percent of the gross value at the point of 18 production of the gas produced from the lease or property during the 19 month for which the installment payment is calculated; 20 (9) [(8)] an amount calculated under (8)(C) [(7)(C)] of this subsection 21 may not exceed four percent of the gross value at the point of production of the oil and 22 gas produced from leases or properties subject to AS 43.55.011(p) during the month 23 for which the installment payment is calculated; 24 (10) [(9)] for purposes of the calculation under (1)(B)(ii), (5)(B)(ii), 25 (6)(B)(ii), and (8)(A)(ii) [(7)(A)(ii)] of this subsection, the applicable percentage of 26 the gross value at the point of production is determined under AS 43.55.011(f)(1) or 27 (2) but substituting the phrase "month for which the installment payment is calculated" 28 in AS 43.55.011(f)(1) and (2) for the phrase "calendar year for which the tax is due"; 29 (11) [(10)] an amount calculated under (8)(F) or (G) [(7)(F) OR (G)] 30 of this subsection for oil or gas subject to AS 43.55.011(j), (k), or (o) may not exceed 31 the product obtained by carrying out the calculation set out in AS 43.55.011(j)(1) or

01 (2) or 43.55.011(o), as applicable, for gas, or set out in AS 43.55.011(k) for oil, but 02 substituting in AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the 03 amount of taxable gas produced during the month for the amount of taxable gas 04 produced during the calendar year and substituting in AS 43.55.011(k) the amount of 05 taxable oil produced during the month for the amount of taxable oil produced during 06 the calendar year. 07 * Sec. 5. AS 43.55.020(g) is amended to read: 08 (g) Notwithstanding any contrary provision of AS 43.05.225, 09 (1) before January 1, 2014, an unpaid amount of an installment 10 payment required under (a)(1) - (3) of this section that is not paid when due bears 11 interest (A) at the rate provided for an underpayment under 26 U.S.C. 6621 (Internal 12 Revenue Code), as amended, compounded daily, from the date the installment 13 payment is due until March 31 following the calendar year of production, and (B) as 14 provided for a delinquent tax under AS 43.05.225 after that March 31; interest accrued 15 under (A) of this paragraph that remains unpaid after that March 31 is treated as an 16 addition to tax that bears interest under (B) of this paragraph; an unpaid amount of tax 17 due under (a)(4) of this section that is not paid when due bears interest as provided for 18 a delinquent tax under AS 43.05.225; 19 (2) on and after January 1, 2014, an unpaid amount of an installment 20 payment required under (a)(3), (5), (6), [OR] (7), or (8) of this section that is not paid 21 when due bears interest (A) at the rate provided for an underpayment under 26 U.S.C. 22 6621 (Internal Revenue Code), as amended, compounded daily, from the date the 23 installment payment is due until March 31 following the calendar year of production, 24 and (B) as provided for a delinquent tax under AS 43.05.225 after that March 31; 25 interest accrued under (A) of this paragraph that remains unpaid after that March 31 is 26 treated as an addition to tax that bears interest under (B) of this paragraph; an unpaid 27 amount of tax due under (a)(4) of this section that is not paid when due bears interest 28 as provided for a delinquent tax under AS 43.05.225. 29 * Sec. 6. AS 43.55.020(h) is amended to read: 30 (h) Notwithstanding any contrary provision of AS 43.05.280, 31 (1) an overpayment of an installment payment required under (a)(1),

01 (2), (3), (5), (6), [OR] (7), or (8) of this section bears interest at the rate provided for 02 an overpayment under 26 U.S.C. 6621 (Internal Revenue Code), as amended, 03 compounded daily, from the later of the date the installment payment is due or the date 04 the overpayment is made, until the earlier of 05 (A) the date it is refunded or is applied to an underpayment; or 06 (B) March 31 following the calendar year of production; 07 (2) except as provided under (1) of this subsection, interest with 08 respect to an overpayment is allowed only on any net overpayment of the payments 09 required under (a) of this section that remains after the later of March 31 following the 10 calendar year of production or the date that the statement required under 11 AS 43.55.030(a) is filed; 12 (3) interest is allowed under (2) of this subsection only from a date that 13 is 90 days after the later of March 31 following the calendar year of production or the 14 date that the statement required under AS 43.55.030(a) is filed; interest is not allowed 15 if the overpayment was refunded within the 90-day period; 16 (4) interest under (2) and (3) of this subsection is paid at the rate and in 17 the manner provided in AS 43.05.225(1). 18 * Sec. 7. AS 43.55.020(k) is amended to read: 19 (k) For oil and gas produced on and after January 1, 2014, and before 20 January 1, 2022, in making settlement with the royalty owner for oil and gas that is 21 taxable under AS 43.55.011, the producer may deduct the amount of the tax paid on 22 taxable royalty oil and gas, or may deduct taxable royalty oil or gas equivalent in 23 value at the time the tax becomes due to the amount of the tax paid. If the total 24 deductions of installment payments of estimated tax for a calendar year exceed the 25 actual tax for that calendar year, the producer shall, before April 1 of the following 26 year, refund the excess to the royalty owner. Unless otherwise agreed between the 27 producer and the royalty owner, the amount of the tax paid under AS 43.55.011(e) on 28 taxable royalty oil and gas for a calendar year, other than oil and gas the ownership or 29 right to which constitutes a landowner's royalty interest, is considered to be the gross 30 value at the point of production of the taxable royalty oil and gas produced during the 31 calendar year multiplied by a figure that is a quotient, in which

01 (1) the numerator is the producer's total tax liability under 02 AS 43.55.011(e) [AS 43.55.011(e)(2)] for the calendar year of production; and 03 (2) the denominator is the total gross value at the point of production 04 of the oil and gas taxable under AS 43.55.011(e) produced by the producer from all 05 leases and properties in the state during the calendar year. 06 * Sec. 8. AS 43.55.020(l) is amended to read: 07 (l) For oil and gas produced on and after January 1, 2022, in making 08 settlement with the royalty owner for oil and gas that is taxable under AS 43.55.011, 09 the producer may deduct the amount of the tax paid on taxable royalty oil and gas, or 10 may deduct taxable royalty oil or gas equivalent in value at the time the tax becomes 11 due to the amount of the tax paid. If the total deductions of installment payments of 12 estimated tax for a calendar year exceed the actual tax for that calendar year, the 13 producer shall, before April 1 of the following year, refund the excess to the royalty 14 owner. In making settlement with the royalty owner for gas that is taxable under 15 AS 43.55.014, the producer may deduct the amount of the gas paid as in-kind tax on 16 taxable royalty gas or may deduct the gross value at the point of production of the gas 17 paid as in-kind tax on taxable royalty gas. Unless otherwise agreed between the 18 producer and the royalty owner, the amount of the tax paid under AS 43.55.011(e) on 19 taxable royalty oil for a calendar year, other than oil the ownership or right to which 20 constitutes a landowner's royalty interest, is considered to be the gross value at the 21 point of production of the taxable royalty oil produced during the calendar year 22 multiplied by a figure that is a quotient, in which 23 (1) the numerator is the producer's total tax liability under 24 AS 43.55.011(e)(4)(A) [AS 43.55.011(e)(3)(A)] for the calendar year of production; 25 and 26 (2) the denominator is the total gross value at the point of production 27 of the oil taxable under AS 43.55.011(e) produced by the producer from all leases and 28 properties in the state during the calendar year. 29 * Sec. 9. AS 43.55.160(a) is amended to read: 30 (a) For oil and gas produced before January 1, 2022, except as provided in (b), 31 (f), and (g) of this section, for the purposes of

01 (1) AS 43.55.011(e)(1) - (3) [AS 43.55.011(e)(1) AND (2)], the annual 02 production tax value of taxable oil, gas, or oil and gas produced during a calendar year 03 in a category for which a separate annual production tax value is required to be 04 calculated under this paragraph is the gross value at the point of production of that oil, 05 gas, or oil and gas taxable under AS 43.55.011(e), less the producer's lease 06 expenditures under AS 43.55.165 for the calendar year applicable to the oil, gas, or oil 07 and gas in that category produced by the producer during the calendar year, as 08 adjusted under AS 43.55.170; a separate annual production tax value shall be 09 calculated for 10 (A) oil and gas produced from leases or properties in the state 11 that include land north of 68 degrees North latitude, other than gas produced 12 before 2022 and used in the state; 13 (B) oil and gas produced from leases or properties in the state 14 outside the Cook Inlet sedimentary basin, no part of which is north of 68 15 degrees North latitude and that qualifies for a tax credit under AS 43.55.024(a) 16 and (b); this subparagraph does not apply to 17 (i) gas produced before 2022 and used in the state; or 18 (ii) oil and gas subject to AS 43.55.011(p); 19 (C) oil produced before 2022 from each lease or property in the 20 Cook Inlet sedimentary basin; 21 (D) gas produced before 2022 from each lease or property in 22 the Cook Inlet sedimentary basin; 23 (E) gas produced before 2022 from each lease or property in 24 the state outside the Cook Inlet sedimentary basin and used in the state, other 25 than gas subject to AS 43.55.011(p); 26 (F) oil and gas subject to AS 43.55.011(p) produced from 27 leases or properties in the state; 28 (G) oil and gas produced from leases or properties in the state 29 no part of which is north of 68 degrees North latitude, other than oil or gas 30 described in (B), (C), (D), (E), or (F) of this paragraph; 31 (2) AS 43.55.011(g), for oil and gas produced before January 1, 2014,

01 or on or after July 1, 2018, the monthly production tax value of the taxable 02 (A) oil and gas produced during a month from leases or 03 properties in the state that include land north of 68 degrees North latitude is the 04 gross value at the point of production of the oil and gas taxable under 05 AS 43.55.011(e) and produced by the producer from those leases or properties, 06 less 1/12 of the producer's lease expenditures under AS 43.55.165 for the 07 calendar year applicable to the oil and gas produced by the producer from 08 those leases or properties, as adjusted under AS 43.55.170; this subparagraph 09 does not apply to gas subject to AS 43.55.011(o); 10 (B) oil and gas produced during a month from leases or 11 properties in the state outside the Cook Inlet sedimentary basin, no part of 12 which is north of 68 degrees North latitude, is the gross value at the point of 13 production of the oil and gas taxable under AS 43.55.011(e) and produced by 14 the producer from those leases or properties, less 1/12 of the producer's lease 15 expenditures under AS 43.55.165 for the calendar year applicable to the oil and 16 gas produced by the producer from those leases or properties, as adjusted under 17 AS 43.55.170; this subparagraph does not apply to gas subject to 18 AS 43.55.011(o); 19 (C) oil produced during a month from a lease or property in the 20 Cook Inlet sedimentary basin is the gross value at the point of production of 21 the oil taxable under AS 43.55.011(e) and produced by the producer from that 22 lease or property, less 1/12 of the producer's lease expenditures under 23 AS 43.55.165 for the calendar year applicable to the oil produced by the 24 producer from that lease or property, as adjusted under AS 43.55.170; 25 (D) gas produced during a month from a lease or property in 26 the Cook Inlet sedimentary basin is the gross value at the point of production 27 of the gas taxable under AS 43.55.011(e) and produced by the producer from 28 that lease or property, less 1/12 of the producer's lease expenditures under 29 AS 43.55.165 for the calendar year applicable to the gas produced by the 30 producer from that lease or property, as adjusted under AS 43.55.170; 31 (E) gas produced during a month from a lease or property

01 outside the Cook Inlet sedimentary basin and used in the state is the gross 02 value at the point of production of that gas taxable under AS 43.55.011(e) and 03 produced by the producer from that lease or property, less 1/12 of the 04 producer's lease expenditures under AS 43.55.165 for the calendar year 05 applicable to that gas produced by the producer from that lease or property, as 06 adjusted under AS 43.55.170. 07 * Sec. 10. AS 43.55.160(e) is amended to read: 08 (e) Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 09 incurred to explore for, develop, or produce oil or gas from a lease or property outside 10 the Cook Inlet sedimentary basin that would otherwise be deductible by a producer in 11 a calendar year but whose deduction would cause an annual production tax value 12 calculated under (a)(1) or (h)(1) [(h)] of this section of taxable oil or gas produced 13 during the calendar year to be less than zero may be used to establish a carried- 14 forward annual loss under AS 43.55.165(a)(3). A reduction under (f) or (g) of this 15 section must be added back to the calculation of production tax values for that 16 calendar year before the determination of a carried-forward annual loss under this 17 subsection. However, the department shall provide by regulation a method to ensure 18 that, for a period for which a producer's tax liability is limited by AS 43.55.011(o) or 19 (p), any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that would 20 otherwise be deductible by a producer for that period but whose deduction would 21 cause a production tax value calculated under (a)(1)(E) or (F) or (h)(1)(C) [(h)(3)] of 22 this section to be less than zero are accounted for as though the adjusted lease 23 expenditures had first been used as deductions in calculating the production tax values 24 of oil or gas subject to any of the limitations under AS 43.55.011(o) or (p) that have 25 positive production tax values so as to reduce the tax liability calculated without 26 regard to the limitation to the maximum amount provided for under the applicable 27 provision of AS 43.55.011(o) or (p). Only the amount of those adjusted lease 28 expenditures remaining after the accounting provided for under this subsection may be 29 used to establish a carried-forward annual loss under AS 43.55.165(a)(3). In this 30 subsection, "producer" includes "explorer." 31 * Sec. 11. AS 43.55.160(f) is amended to read:

01 (f) On and after January 1, 2014, in the calculation of an annual production tax 02 value of a producer under (a)(1)(A) or (h)(1)(A) [(h)(1)] of this section, the gross 03 value at the point of production of oil or gas produced from a lease or property north 04 of 68 degrees North latitude meeting one or more of the following criteria is reduced 05 by 20 percent: (1) the oil or gas is produced from a lease or property that does not 06 contain a lease that was within a unit on January 1, 2003; (2) the oil or gas is produced 07 from a participating area established after December 31, 2011, that is within a unit 08 formed under AS 38.05.180(p) before January 1, 2003, if the participating area does 09 not contain a reservoir that had previously been in a participating area established 10 before December 31, 2011; (3) the oil or gas is produced from acreage that was added 11 to an existing participating area by the Department of Natural Resources on and after 12 January 1, 2014, and the producer demonstrates to the department that the volume of 13 oil or gas produced is from acreage added to an existing participating area. This 14 subsection does not apply to gas produced before 2022 that is used in the state or to 15 gas produced on and after January 1, 2022. For oil and gas first produced from a lease 16 or property after December 31, 2016, a reduction allowed under this subsection 17 applies from the date of commencement of regular production of oil and gas from that 18 lease or property and expires after three years, consecutive or nonconsecutive, in 19 which the average annual price per barrel for Alaska North Slope crude oil for sale on 20 the United States West Coast is more than $70 or after seven years, whichever occurs 21 first. For oil and gas first produced from a lease or property before January 1, 2017, a 22 reduction allowed under this subsection expires on the earlier of January 1, 2023, or 23 January 1 following three years, consecutive or nonconsecutive, in which the average 24 annual price per barrel for Alaska North Slope crude oil for sale on the United States 25 West Coast is more than $70. The Alaska Oil and Gas Conservation Commission shall 26 determine the commencement of regular production of oil and gas for purposes of this 27 subsection. A reduction under this subsection may not reduce the gross value at the 28 point of production below zero. In this subsection, "participating area" means a 29 reservoir or portion of a reservoir producing or contributing to production as approved 30 by the Department of Natural Resources. 31 * Sec. 12. AS 43.55.160(h) is amended to read:

01 (h) For oil produced on and after January 1, 2022, except as provided in (b), 02 (f), and (g) of this section, for the purposes of 03 (1) AS 43.55.011(e)(4) [AS 43.55.011(e)(3)], the annual production 04 tax value of oil taxable under AS 43.55.011(e) produced by a producer during a 05 calendar year 06 (A) [(1)] from leases or properties in the state that include land 07 north of 68 degrees North latitude is the gross value at the point of production 08 of that oil, less the producer's lease expenditures under AS 43.55.165 for the 09 calendar year incurred to explore for, develop, or produce oil and gas deposits 10 located in the state north of 68 degrees North latitude or located in leases or 11 properties in the state that include land north of 68 degrees North latitude, as 12 adjusted under AS 43.55.170; 13 (B) [(2)] before or during the last calendar year under 14 AS 43.55.024(b) for which the producer could take a tax credit under 15 AS 43.55.024(a), from leases or properties in the state outside the Cook Inlet 16 sedimentary basin, no part of which is north of 68 degrees North latitude, other 17 than leases or properties subject to AS 43.55.011(p), is the gross value at the 18 point of production of that oil, less the producer's lease expenditures under 19 AS 43.55.165 for the calendar year incurred to explore for, develop, or produce 20 oil and gas deposits located in the state outside the Cook Inlet sedimentary 21 basin and south of 68 degrees North latitude, other than oil and gas deposits 22 located in a lease or property that includes land north of 68 degrees North 23 latitude or that is subject to AS 43.55.011(p) or, before January 1, 2027, from 24 which commercial production has not begun, as adjusted under AS 43.55.170; 25 (C) [(3)] from leases or properties subject to AS 43.55.011(p) 26 is the gross value at the point of production of that oil, less the producer's lease 27 expenditures under AS 43.55.165 for the calendar year incurred to explore for, 28 develop, or produce oil and gas deposits located in leases or properties subject 29 to AS 43.55.011(p) or, before January 1, 2027, located in leases or properties 30 in the state outside the Cook Inlet sedimentary basin, no part of which is north 31 of 68 degrees North latitude from which commercial production has not begun,

01 as adjusted under AS 43.55.170; 02 (D) [(4)] from leases or properties in the state no part of which 03 is north of 68 degrees North latitude, other than leases or properties subject to 04 (B) or (C) of this paragraph [(2) OR (3) OF THIS SUBSECTION], is the 05 gross value at the point of production of that oil less the producer's lease 06 expenditures under AS 43.55.165 for the calendar year incurred to explore for, 07 develop, or produce oil and gas deposits located in the state south of 68 08 degrees North latitude, other than oil and gas deposits located in a lease or 09 property in the state that includes land north of 68 degrees North latitude, and 10 excluding lease expenditures that are deductible under (B) or (C) of this 11 paragraph [(2) OR (3) OF THIS SUBSECTION] or would be deductible 12 under (B) or (C) of this paragraph [(2) OR (3) OF THIS SUBSECTION] if 13 not prohibited by (b) of this section, as adjusted under AS 43.55.170; a 14 separate annual production tax value shall be calculated for 15 (i) [(A)] oil produced from each lease or property in the 16 Cook Inlet sedimentary basin; 17 (ii) [(B)] oil produced from each lease or property 18 outside the Cook Inlet sedimentary basin, no part of which is north of 19 68 degrees North latitude, other than leases or properties subject to (C) 20 of this paragraph; 21 (2) AS 43.55.011(g)(3), the monthly production tax value of oil 22 taxable under AS 43.55.011(e) produced by a producer during a month 23 (A) from leases or properties in the state that include land 24 north of 68 degrees North latitude is the gross value at the point of 25 production of that oil, less 1/12 the producer's lease expenditures under 26 AS 43.55.165 for the calendar year incurred to explore for, develop, or 27 produce oil and gas deposits located in the state north of 68 degrees North 28 latitude or located in leases or properties in the state that include land 29 north of 68 degrees North latitude, as adjusted under AS 43.55.170; 30 (B) in a calendar year that is before or during the last 31 calendar year under AS 43.55.024(b) for which the producer could take a

01 tax credit under AS 43.55.024(a), from leases or properties in the state 02 outside the Cook Inlet sedimentary basin, no part of which is north of 68 03 degrees North latitude, other than leases or properties subject to 04 AS 43.55.011(p), is the gross value at the point of production of that oil, 05 less 1/12 the producer's lease expenditures under AS 43.55.165 for the 06 calendar year incurred to explore for, develop, or produce oil and gas 07 deposits located in the state outside the Cook Inlet sedimentary basin and 08 south of 68 degrees North latitude, other than oil and gas deposits located 09 in a lease or property that includes land north of 68 degrees North latitude 10 or that is subject to AS 43.55.011(p) or, before January 1, 2027, from 11 which commercial production has not begun, as adjusted under 12 AS 43.55.170; 13 (C) from leases or properties subject to AS 43.55.011(p) is 14 the gross value at the point of production of that oil, less 1/12 the 15 producer's lease expenditures under AS 43.55.165 for the calendar year 16 incurred to explore for, develop, or produce oil and gas deposits located in 17 leases or properties subject to AS 43.55.011(p) or, before January 1, 2027, 18 located in leases or properties in the state outside the Cook Inlet 19 sedimentary basin, no part of which is north of 68 degrees North latitude 20 from which commercial production has not begun, as adjusted under 21 AS 43.55.170; 22 (D) from leases or properties in the state no part of which is 23 north of 68 degrees North latitude, other than leases or properties subject 24 to (B) or (C) of this paragraph, is the gross value at the point of 25 production of that oil less 1/12 the producer's lease expenditures under 26 AS 43.55.165 for the calendar year incurred to explore for, develop, or 27 produce oil and gas deposits located in the state south of 68 degrees North 28 latitude, other than oil and gas deposits located in a lease or property in 29 the state that includes land north of 68 degrees North latitude, and 30 excluding lease expenditures that are deductible under (B) or (C) of this 31 paragraph or would be deductible under (B) or (C) of this paragraph if

01 not prohibited by (b) of this section, as adjusted under AS 43.55.170; a 02 separate monthly production tax value shall be calculated for 03 (i) oil produced from each lease or property in the 04 Cook Inlet sedimentary basin; 05 (ii) oil produced from each lease or property outside 06 the Cook Inlet sedimentary basin, no part of which is north of 68 07 degrees North latitude, other than leases or properties subject to 08 (C) of this paragraph [(3) OF THIS SUBSECTION]. 09 * Sec. 13. AS 43.55.024(i) and 43.55.024(j) are repealed. 10 * Sec. 14. The uncodified law of the State of Alaska is amended by adding a new section to 11 read: 12 TRANSITION: PAYMENT OF TAX; FILING. (a) Notwithstanding the amendments 13 to AS 43.55.020 by secs. 4 - 8 of this Act, a person subject to tax under AS 43.55 that is 14 required to make one or more installment payments of estimated tax or other payments of tax 15 under AS 43.55.020 for production before the effective date of secs. 4 - 8 of this Act shall pay 16 the tax under AS 43.55.020, as that section read on the day before the effective date of secs. 4 17 - 8 of this Act. 18 (b) The Department of Revenue may continue to apply and enforce AS 43.55.020, as 19 that section read on the day before the effective date of secs. 4 - 8 of this Act, for a tax or 20 installment payment for production before the effective date of secs. 4 - 8 of this Act. 21 * Sec. 15. The uncodified law of the State of Alaska is amended by adding a new section to 22 read: 23 TRANSITION: REGULATIONS; RETROACTIVITY OF REGULATIONS. (a) The 24 Department of Revenue may adopt regulations necessary to implement the changes made by 25 this Act. The regulations take effect under AS 44.62 (Administrative Procedure Act), but not 26 before the effective date of the law implemented by the regulation. 27 (b) Notwithstanding any contrary provision of AS 44.62.240, if the Department of 28 Revenue expressly designates in a regulation that the regulation applies retroactively, a 29 regulation adopted by the Department of Revenue to implement, interpret, make specific, or 30 otherwise carry out this Act may apply retroactively to the effective date of the law 31 implemented by the regulation.

01 * Sec. 16. Section 15 of this Act takes effect immediately under AS 01.10.070(c). 02 * Sec. 17. Except as provided in sec. 16 of this Act, this Act takes effect July 1, 2018.