Enrolled SB 48: Relating to the powers and duties of the Alaska Oil and Gas Conservation Commission; authorizing the Department of Natural Resources to lease land for carbon management purposes; establishing a carbon offset program for state land; authorizing the sale of carbon offset credits; authorizing the use of land and water within the Haines State Forest Resource Management Area for a carbon offset project; authorizing the undertaking of carbon offset projects on land in legislatively designated state forests; relating to oil and gas lease expenditures; and providing for an effective date.
00Enrolled SB 48 01 Relating to the powers and duties of the Alaska Oil and Gas Conservation Commission; 02 authorizing the Department of Natural Resources to lease land for carbon management 03 purposes; establishing a carbon offset program for state land; authorizing the sale of carbon 04 offset credits; authorizing the use of land and water within the Haines State Forest Resource 05 Management Area for a carbon offset project; authorizing the undertaking of carbon offset 06 projects on land in legislatively designated state forests; relating to oil and gas lease 07 expenditures; and providing for an effective date. 08 _______________ 09 * Section 1. AS 31.05.030(h) is amended to read: 10 (h) The commission may take all actions necessary to allow the state to 11 acquire primary enforcement responsibility under 42 U.S.C. 300h-1 and 42 U.S.C. 12 300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300f - 300j-26), for 13 the control of underground injection related to the recovery and production of oil and
01 natural gas and the control of underground injection in Class I wells, as defined in 40 02 C.F.R. 144.6, as amended, and the control of underground injection in Class VI 03 wells, as defined in 40 C.F.R. 144.6, as amended. 04 * Sec. 2. AS 36.30.850(b) is amended by adding a new paragraph to read: 05 (51) contracts between a registry and the Department of Natural 06 Resources under AS 38.95.400 - 38.95.499; in this paragraph, "registry" has the 07 meaning given in AS 38.95.499. 08 * Sec. 3. AS 37.05.146(c) is amended by adding a new paragraph to read: 09 (85) revenue from the carbon offset program under AS 38.95.400 - 10 38.95.499. 11 * Sec. 4. AS 38.05.075(a) is amended to read: 12 (a) Except as provided in AS 38.05.035, 38.05.070, 38.05.073, 38.05.081, 13 38.05.082, 38.05.083, 38.05.087, 38.05.102, 38.05.565, 38.05.600, 38.05.810, and this 14 section, when competitive interest has been demonstrated or the commissioner 15 determines that it is in the state's best interests, leasing shall be made at public auction 16 or by sealed bid, at the discretion of the director, to the highest qualified bidder as 17 determined by the commissioner. A bidder may be represented by an attorney or agent 18 at a public auction. In the public notice of a lease to be offered at public auction or by 19 sealed bid, the commissioner shall specify a minimum acceptable bid and the lease 20 compensation method. The lease compensation method shall be designed to maximize 21 the return on the lease to the state and shall be a form of compensation set out in 22 AS 38.05.073(m). An aggrieved bidder may appeal to the commissioner within five 23 days for a review of the determination. The leasing shall be conducted by the 24 commissioner, and the successful bidder shall deposit at the public auction or with the 25 sealed bid the first year's rental or other lease compensation as specified by the 26 commissioner, or that portion of it that the commissioner requires in accordance with 27 the bid. The commissioner shall require, under AS 38.05.860, qualified bidders to 28 deposit a sum equal to any survey or appraisal costs reasonably incurred by another 29 qualified bidder acting in accordance with the regulations of the commissioner or 30 incurred by the department under AS 38.04.045 and AS 38.05.840. If a bidder making 31 a deposit of survey or appraisal costs is determined by the commissioner to be the
01 highest qualified bidder under this subsection, the deposit shall be paid to the 02 unsuccessful bidder who incurred those costs or to the department if the department 03 incurred the costs. All costs for survey and appraisal shall be approved in advance in 04 writing by the commissioner. The commissioner shall immediately issue a receipt 05 containing a description of the land or interest leased, the price bid, and the terms of 06 the lease to the successful qualified bidder. If the receipt is not accepted in writing by 07 the bidder under this subsection, the commissioner may offer the land for lease again 08 under this subsection. A lease, on a form approved by the attorney general, shall be 09 signed by the successful bidder and by the commissioner. 10 * Sec. 5. AS 38.05 is amended by adding a new section to read: 11 Sec. 38.05.081. Leases of state land for carbon management purposes. (a) 12 The commissioner may lease state land for carbon management purposes. A lease 13 agreement under this section must include land use restrictions and authorizations 14 consistent with the carbon management purpose of the lease. 15 (b) A person may apply to lease land for a carbon management purpose by 16 submitting an application to the department. An application to lease land must include 17 (1) the specific location, description, and amount of land the applicant 18 wants to lease; 19 (2) a detailed summary of the proposed purpose the land will be used 20 for; and 21 (3) additional information and requirements established by the 22 department in regulation, including any application fees. 23 (c) Upon receiving an application, the department shall solicit competitive 24 interest by issuing a public notice in the manner prescribed in AS 38.05.945. The 25 notice must contain an announcement seeking competitive interest. If competing 26 carbon management applications are received following notice, the applications will 27 be awarded under (d) of this section. 28 (d) If the director receives two or more applications for the same land, the 29 director shall consider reasonable factors in awarding the lease, including proposed 30 monetary consideration, the value to the state, the potential revenue to the state, and 31 the qualifications of the applicant, including whether the applicant has previous
01 experience with carbon management, the anticipated lease term, how the proposed use 02 would accommodate concurrent use of the land, consistency with existing state area or 03 management plans, and any additional requirement established by the department in 04 regulation. If one or more applicants have proposed different carbon management 05 purposes, the director shall consider each applicant's proposal and determine which 06 proposed use is more appropriate for the selected state land. An application for a lease 07 of state land under this section, including supporting documentation submitted to the 08 department for review, is a public record subject to AS 40.25.110 - 40.25.220. An 09 aggrieved applicant may appeal to the commissioner for a review of the director's 10 determination within 20 days after receiving notice of the determination. 11 (e) A lease under this section may not exceed a period of 55 years. The lease 12 must contain terms and conditions for performance, including benchmarks, and must 13 require the lessee to make progress toward development or continual maintenance of 14 the leased land sufficient to meet the carbon management purpose of the lease. During 15 the term of the lease, the commissioner shall terminate the lease if 16 (1) the commissioner determines that the land is not being used for the 17 carbon management purpose approved by the commissioner; or 18 (2) the lessee fails to meet the requirements of the lease and, after 19 being given a reasonable opportunity by the commissioner to comply with the lease, 20 the commissioner determines that the lessee has still failed to comply with the lease. 21 (f) A lessee under this section is not entitled to a preference right to purchase 22 the leased land. 23 (g) Compensation for a lease under this section 24 (1) shall be designed to maximize the return to the state and be a form 25 of compensation provided under AS 38.05.073(m); 26 (2) shall be separately accounted for under AS 37.05.142; and 27 (3) may be used by the legislature to make appropriations to the 28 department to carry out the purposes of this section. 29 (h) The provisions of AS 38.05.070 and 38.05.095 concerning subleasing, 30 assignment, lease renewals, and lease extensions apply to leasing under this section. 31 (i) Before entering into a lease of land under this section, the director must
01 (1) evaluate information received during a solicitation of competitive 02 interest under (c) of this section; and 03 (2) find under AS 38.05.035(e) that leasing the land for the proposed 04 carbon management purpose is in the best interests of the state; the findings must 05 include 06 (A) reasonably foreseeable effects that a project may have on 07 the state or local economy, including potential effects on mining, timber, and 08 other resource development sectors; 09 (B) anticipated annual revenue that the lease will yield to the 10 state; 11 (C) an assessment and consideration of the known mineral 12 potential, including current claim status, within the project area; 13 (D) the proposed monetary consideration under the agreement, 14 the value to the state, and the potential revenue to the state; and 15 (E) a summary of public comments received in response to the 16 solicitation of competitive interest required under (c) of this section and the 17 department's response to those comments. 18 (j) State land used for carbon management purposes must, to the extent 19 practicable, remain open to 20 (1) the public for access, hunting, fishing, and other generally allowed 21 uses as determined by the department; and 22 (2) other resource development, including mining. 23 (k) Notwithstanding AS 38.05.300, state land used for carbon management 24 purposes must remain open to mineral exploration and development. A lease under 25 this section does not constitute an exception to the requirements of AS 38.05.300(a). 26 (l) By February 1 of each year, the commissioner shall prepare a report on the 27 lease agreements entered into under this section, transmit the report to the senate 28 secretary and the chief clerk of the house of representatives, and notify the legislature 29 that the report is available. The report must contain the following information: 30 (1) the number of total leases entered into each fiscal year from the 31 fiscal year ending June 30, 2024, until the present;
01 (2) a complete list of lease information for each ongoing lease that 02 includes 03 (A) a general description of the location of the lease; 04 (B) the date the lease was executed; 05 (C) the identity of each person on the lease; 06 (D) a summary of the underlying carbon management purpose; 07 (E) the current status of the leased land with regard to the 08 carbon management purpose; 09 (F) the amount of carbon offset credits generated and sold 10 under the lease cumulatively and during the current fiscal year; 11 (G) a summary of the compensation agreed on for the lease and 12 an explanation of how the amount was determined; and 13 (H) the identity of each individual having an ownership interest 14 in an entity on the lease; 15 (3) a complete list of leases that expired or were terminated during the 16 preceding or current fiscal year and the reason the lease expired or was terminated; 17 and 18 (4) a description of the cumulative revenue received by the state from 19 leases, the revenue received by the state from leases during the preceding fiscal year, 20 and the anticipated revenue the state will receive from leases in the current fiscal year. 21 (m) In this section, "carbon management" means a greenhouse gas mitigation 22 measure or nongeologic carbon sequestration project. 23 * Sec. 6. AS 38.05.102 is amended to read: 24 Sec. 38.05.102. Lessee preference. Except for a lease under AS 38.05.081, if 25 [IF] land within a leasehold created under AS 38.05.070 - 38.05.105 is offered for sale 26 or long-term lease at the termination of the existing leasehold, the director may, upon 27 a finding that it is in the best interest of the state, allow a [THE] holder in good 28 standing of the existing [THAT] leasehold to purchase or lease the land for its 29 appraised fair market value at the time of the sale or long-term lease. 30 * Sec. 7. AS 38.05.945(a) is amended to read: 31 (a) This section establishes the requirements for notice given by the
01 department for the following actions: 02 (1) classification or reclassification of state land under AS 38.05.300 03 and the closing of land to mineral leasing or entry under AS 38.05.185; 04 (2) zoning of land under applicable law; 05 (3) issuance of a 06 (A) preliminary written finding under AS 38.05.035(e)(5)(A) 07 regarding the sale, lease, or disposal of an interest in state land or resources for 08 oil and gas, or for gas only, subject to AS 38.05.180(b); 09 (B) written finding for the sale, lease, or disposal of an interest 10 in state land or resources under AS 38.05.035(e)(6), except a lease sale 11 described in AS 38.05.035(e)(6)(F) for which the director must provide 12 opportunity for public comment under the provisions of that subparagraph; 13 (4) a competitive disposal of an interest in state land or resources after 14 final decision under AS 38.05.035(e); 15 (5) a preliminary finding under AS 38.05.035(e) concerning sites for 16 aquatic farms and related hatcheries; 17 (6) a decision under AS 38.05.132 - 38.05.134 regarding the sale, 18 lease, or disposal of an interest in state land or resources; 19 (7) an exchange of state land under AS 38.50; 20 (8) solicitation of competitive interest under AS 38.05.081(c). 21 * Sec. 8. AS 38.95 is amended by adding new sections to read: 22 Article 8. Carbon Offset Program. 23 Sec. 38.95.400. Carbon offset program. (a) A carbon offset program is 24 established in the department to undertake carbon offset projects on state land. 25 (b) The commissioner shall adopt regulations to implement AS 38.95.400 - 26 38.95.499. 27 (c) Nothing in AS 38.95.400 - 38.95.499 may be construed to prevent a 28 private landowner from participating in a registry or exchange or to impose additional 29 legal requirements on a private landowner undertaking the landowner's own carbon 30 offset project. 31 Sec. 38.95.410. Carbon offset project criteria; evaluation; best interest
01 finding. (a) The commissioner shall adopt criteria for evaluation of a proposed carbon 02 offset project on state land. The evaluation criteria must include, if applicable, 03 (1) consideration of a project's baseline and predicted additionality; 04 (2) whether registry protocols are consistent with applicable state law; 05 (3) whether a project would be consistent with AS 38.95.400 - 06 38.95.499 and applicable regulations; 07 (4) an assessment and consideration of the known mineral potential, 08 including current claim status, within the project area; 09 (5) reasonably foreseeable effects that a project may have on the state 10 or local economy, including potential effects on mining, timber, and other resource 11 development sectors; 12 (6) consideration of the effect of the project on the state's timber 13 industry; and 14 (7) the proposed monetary consideration under the project, the value to 15 the state, and the potential revenue to the state. 16 (b) Except as otherwise provided in statute or regulation, state land shall be 17 available for carbon offset projects. 18 (c) Legislatively withdrawn land may not be used for a carbon offset project 19 without approval by the legislature or as otherwise provided by law. In this subsection, 20 "legislatively withdrawn land" means land set aside by the legislature under 21 AS 16.20.010 - 16.20.162, 16.20.300 - 16.20.360, AS 41.21, or AS 41.23. 22 (d) A carbon offset project may be undertaken on state land if the director, 23 with the consent of the commissioner, makes a written finding that the project will 24 best serve the interests of the state under AS 38.05.035(e). 25 (e) A carbon offset project term may not exceed 55 years. 26 (f) State land used for a carbon offset project must, to the extent practicable, 27 remain open to 28 (1) the public for access, hunting, fishing, and other generally allowed 29 uses as determined by the department; and 30 (2) other resource development, including mining. 31 (g) Notwithstanding AS 38.05.300, state land used for a carbon offset project
01 must remain open to mineral exploration and development. A carbon offset project 02 under AS 38.95.400 - 38.95.499 does not constitute an exception to the requirements 03 of AS 38.05.300(a). 04 Sec. 38.95.420. Registration and sale of carbon offset credits; records. (a) 05 After a written finding under AS 38.95.410(d), the director may enter into an 06 agreement to register the carbon offset project to generate revenue from the sale of 07 carbon offset credits. 08 (b) The department shall maintain records for a carbon offset project 09 undertaken by the department under AS 38.95.400 - 38.95.499 for the project term and 10 any additional amount of time required by the registry. The records must include, for 11 each carbon offset project, 12 (1) the project term; 13 (2) the anticipated annual carbon offset credits that the carbon offset 14 project will yield; 15 (3) registry agreements; and 16 (4) project administration and technical documentation, including 17 documentation related to project implementation, monitoring, and reporting. 18 Sec. 38.95.430. Carbon offset revenue. Twenty percent of the revenue 19 generated from the carbon offset program shall be deposited into the renewable energy 20 grant fund (AS 42.45.045). The remaining 80 percent of the revenue from the carbon 21 offset program shall be separately accounted for under AS 37.05.142 and may be 22 appropriated by the legislature. 23 Sec. 38.95.440. Contracts. (a) Subject to AS 36.30, the department may enter 24 into a contract to carry out the purposes of AS 38.95.400 - 38.95.499. 25 (b) In evaluating a proposal for a contract, including competing proposals, the 26 department shall consider 27 (1) the criteria included in the request for proposals; 28 (2) the proposal's cost to the state; 29 (3) the revenue the carbon offset project associated with the proposal is 30 expected to generate; and 31 (4) the anticipated terms, including monetary terms, of a contract under
01 the proposal. 02 (c) The department may not accept a proposed commission contract that 03 involves a commission that exceeds 30 percent of the revenue generated by the carbon 04 offset project. 05 Sec. 38.95.450. Annual report. By February 1 of each year, the commissioner 06 shall prepare a report on the carbon offset program established in AS 38.95.400 - 07 38.95.499, transmit the report to the senate secretary and the chief clerk of the house 08 of representatives, and notify the legislature that the report is available. The report 09 must contain the following information: 10 (1) a list of all carbon offset projects that are generating or eligible to 11 generate carbon offset credits, or that are in development, that includes 12 (A) a general description of each project location; 13 (B) the date a contract for a project was executed and the 14 duration of the project; 15 (C) the identity of each person who contracted with the state 16 for a project; 17 (D) a summary of each carbon offset project; 18 (E) the status of each carbon offset project; 19 (F) the amount of carbon offset credits generated and sold 20 cumulatively and anticipated during the current fiscal year for each carbon 21 offset project; 22 (G) for a project that is in development but is not yet generating 23 carbon offset credits, the anticipated timeline for when the project is expected 24 to generate credits; 25 (H) a summary of the monetary compensation agreed on for a 26 contract or project and an explanation of how the amount was determined; and 27 (I) the identity of each individual having an ownership interest 28 in an entity that has contracted with the state for a project; 29 (2) a complete list of projects that expired or were terminated during 30 the preceding or current fiscal year and the reason the project expired or was 31 terminated;
01 (3) a description of revenue generated by program receipts from the 02 carbon offset program during the preceding fiscal year, cumulatively over the life of 03 the program, and the anticipated revenue that will be generated in program receipts in 04 the current fiscal year; and 05 (4) a list of all other individuals or entities with an ongoing contract 06 with the state under AS 38.95.400 - 38.95.499 that includes, for each contract, the 07 term length of the contract, the compensation agreed on under the contract, and a 08 summary of the service or product provided under the contract. 09 Sec. 38.95.499. Definitions. In AS 38.95.400 - 38.95.499, unless the context 10 requires otherwise, 11 (1) "additionality" means the reduction in greenhouse gas emissions or 12 increase in carbon storage represented by a carbon offset project that is in addition to 13 the baseline; 14 (2) "baseline" means the anticipated amount of carbon sequestration 15 that would occur in the absence of a carbon offset project; 16 (3) "carbon offset credit" means a transferrable instrument that 17 represents an emission reduction of one metric ton of carbon dioxide or other 18 greenhouse gases; 19 (4) "carbon offset project" includes seaweed farming, afforestation, 20 reforestation, and similar land and resource management measures that mitigate 21 greenhouse gases by maintaining or increasing the carbon stock on state land; 22 (5) "commissioner" means the commissioner of natural resources; 23 (6) "department" means the Department of Natural Resources; 24 (7) "director" means the director of the division of lands; 25 (8) "greenhouse gas" includes carbon dioxide, methane, nitrous oxide, 26 hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other gases that trap 27 and emit radiant energy in the earth's atmosphere; 28 (9) "project term" means the duration of the commitment made by the 29 department for a carbon offset project, ending when the state has no continuing 30 obligation related to the project; 31 (10) "registry" means an organization or program that registers and
01 issues carbon offset credits for carbon offset projects; 02 (11) "shoreland" means land belonging to the state that is covered by 03 nontidal water and is navigable under the laws of the United States up to ordinary high 04 water mark as modified by accretion, erosion, or reliction; 05 (12) "state land" means all land, including shoreland, tideland, and 06 submerged land, or resources belonging to or acquired by the state; 07 (13) "submerged land" means land that is covered by tidal water 08 between the line of mean low water and seaward to a distance of three geographical 09 miles or farther as may be properly claimed by the state; 10 (14) "tideland" means land that is periodically covered by tidal water 11 between the elevation of mean high water and mean low water. 12 * Sec. 9. AS 41.15.300 is amended by adding a new subsection to read: 13 (c) The state land and water designated within the Haines State Forest 14 Resource Management Area under AS 41.15.305(a) may be used for a carbon offset 15 project under AS 38.95.400 - 38.95.499. 16 * Sec. 10. AS 41.15.315(d) is amended to read: 17 (d) The state land and water described in AS 41.15.305(a) are closed to sale 18 under state land disposal laws. The commissioner may lease the land described in 19 AS 41.15.305(a) under AS 38.05.070 - 38.05.105 for a purpose consistent with 20 AS 41.15.300(a) and a municipality may select land in the Haines State Forest 21 Resource Management Area under law. The commissioner may manage the land 22 and water described in AS 41.15.305(a) for purposes consistent with AS 38.95.400 23 - 38.95.499. 24 * Sec. 11. AS 41.15.315 is amended by adding a new subsection to read: 25 (e) A carbon offset project under AS 38.95.400 - 38.95.499 undertaken on 26 land identified in AS 41.15.305 must be consistent with the applicable management 27 plan under AS 41.15.320, and the management plan must identify the land appropriate 28 for the carbon offset project. The department may amend a management plan under 29 AS 41.15.320 to allow for a carbon offset project. 30 * Sec. 12. AS 41.17.200 is amended by adding a new subsection to read: 31 (c) A carbon offset project under AS 38.95.400 - 38.95.499 may be
01 undertaken on land identified in AS 41.17.200 - 41.17.230. 02 * Sec. 13. AS 41.17.220 is amended to read: 03 Sec. 41.17.220. Management of state forests. Land within a state forest or 04 within a unit of a state forest shall be managed under 05 (1) the sustained yield principle; 06 (2) this chapter; [AND] 07 (3) a forest management plan prepared by the department; and 08 (4) if applicable, a carbon offset project undertaken by the 09 department under AS 38.95.400 - 38.95.499. 10 * Sec. 14. AS 41.17.230(a) is amended to read: 11 (a) The commissioner shall prepare a forest management plan consistent with 12 AS 38.04.005 and this chapter for each state forest and for each unit of a state forest to 13 assist in meeting the requirements of this chapter. An operational level forest 14 inventory shall be completed before a forest management plan for the state forest or 15 the unit of a state forest is adopted. The forest management plan shall be adopted, 16 implemented, and maintained within three years of the establishment of a state forest 17 by the legislature. To the extent they are found to be compatible with the primary 18 purpose of state forests under AS 41.17.200, the forest management plan must 19 consider and permit uses of forest land for other [NONTIMBER] purposes, including 20 a carbon offset project under AS 38.95.400 - 38.95.499, recreation, tourism, mining, 21 mineral exploration, mineral leasing, material extraction, consumptive and 22 nonconsumptive uses of wildlife and fish, grazing and other agricultural activities, and 23 other traditional uses. If the commissioner finds that a permitted use is incompatible 24 with one or more other uses in a portion of a state forest, the commissioner shall 25 affirmatively state in the management plan that finding of incompatibility for the 26 specific area where the incompatibility is anticipated to exist and the time period when 27 the incompatibility is anticipated to exist together with the reasons and benefits for 28 each finding. 29 * Sec. 15. AS 41.17.230 is amended by adding a new subsection to read: 30 (g) A carbon offset project undertaken under AS 38.95.400 - 38.95.499 within 31 a state forest must be consistent with the applicable forest management plan, and the
01 applicable forest management plan must identify the land appropriate for the carbon 02 offset project. The department may amend a forest management plan to allow for a 03 carbon offset project. 04 * Sec. 16. AS 43.55.165(e) is amended to read: 05 (e) For purposes of this section, lease expenditures do not include 06 (1) depreciation, depletion, or amortization; 07 (2) oil or gas royalty payments, production payments, lease profit 08 shares, or other payments or distributions of a share of oil or gas production, profit, or 09 revenue, except that a producer's lease expenditures applicable to oil and gas produced 10 from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net 11 profit paid to the state under that lease; 12 (3) taxes based on or measured by net income; 13 (4) interest or other financing charges or costs of raising equity or debt 14 capital; 15 (5) acquisition costs for a lease or property or exploration license; 16 (6) costs arising from fraud, wilful misconduct, gross negligence, 17 violation of law, or failure to comply with an obligation under a lease, permit, or 18 license issued by the state or federal government; 19 (7) fines or penalties imposed by law; 20 (8) costs of arbitration, litigation, or other dispute resolution activities 21 that involve the state or concern the rights or obligations among owners of interests in, 22 or rights to production from, one or more leases or properties or a unit; 23 (9) costs incurred in organizing a partnership, joint venture, or other 24 business entity or arrangement; 25 (10) amounts paid to indemnify the state; the exclusion provided by 26 this paragraph does not apply to the costs of obtaining insurance or a surety bond from 27 a third-party insurer or surety; 28 (11) surcharges levied under AS 43.55.201 or 43.55.300; 29 (12) an expenditure otherwise deductible under (b) of this section that 30 is a result of an internal transfer, a transaction with an affiliate, or a transaction 31 between related parties, or is otherwise not an arm's length transaction, unless the
01 producer establishes to the satisfaction of the department that the amount of the 02 expenditure does not exceed the fair market value of the expenditure; 03 (13) an expenditure incurred to purchase an interest in any corporation, 04 partnership, limited liability company, business trust, or any other business entity, 05 whether or not the transaction is treated as an asset sale for federal income tax 06 purposes; 07 (14) a tax levied under AS 43.55.011 or 43.55.014; 08 (15) costs incurred for dismantlement, removal, surrender, or 09 abandonment of a facility, pipeline, well pad, platform, or other structure, or for the 10 restoration of a lease, field, unit, area, tract of land, body of water, or right-of-way in 11 conjunction with dismantlement, removal, surrender, or abandonment; a cost is not 12 excluded under this paragraph if the dismantlement, removal, surrender, or 13 abandonment for which the cost is incurred is undertaken for the purpose of replacing, 14 renovating, or improving the facility, pipeline, well pad, platform, or other structure; 15 (16) costs incurred for containment, control, cleanup, or removal in 16 connection with any unpermitted release of oil or a hazardous substance and any 17 liability for damages imposed on the producer or explorer for that unpermitted release; 18 this paragraph does not apply to the cost of developing and maintaining an oil 19 discharge prevention and contingency plan under AS 46.04.030; 20 (17) costs incurred to satisfy a work commitment under an exploration 21 license under AS 38.05.132; 22 (18) that portion of expenditures, that would otherwise be qualified 23 capital expenditures, as defined in AS 43.55.023, incurred during a calendar year that 24 are less than the product of $0.30 multiplied by the total taxable production from each 25 lease or property, in BTU equivalent barrels, during that calendar year, except that, 26 when a portion of a calendar year is subject to this provision, the expenditures and 27 volumes shall be prorated within that calendar year; 28 (19) costs incurred for repair, replacement, or deferred maintenance of 29 a facility, a pipeline, a structure, or equipment, other than a well, that results in or is 30 undertaken in response to a failure, problem, or event that results in an unscheduled 31 interruption of, or reduction in the rate of, oil or gas production; or costs incurred for
01 repair, replacement, or deferred maintenance of a facility, a pipeline, a structure, or 02 equipment, other than a well, that is undertaken in response to, or is otherwise 03 associated with, an unpermitted release of a hazardous substance or of gas; however, 04 costs under this paragraph that would otherwise constitute lease expenditures under (a) 05 and (b) of this section may be treated as lease expenditures if the department 06 determines that the repair or replacement is solely necessitated by an act of war, by an 07 unanticipated grave natural disaster or other natural phenomenon of an exceptional, 08 inevitable, and irresistible character, the effects of which could not have been 09 prevented or avoided by the exercise of due care or foresight, or by an intentional or 10 negligent act or omission of a third party, other than a party or its agents in privity of 11 contract with, or employed by, the producer or an operator acting for the producer, but 12 only if the producer or operator, as applicable, exercised due care in operating and 13 maintaining the facility, pipeline, structure, or equipment, and took reasonable 14 precautions against the act or omission of the third party and against the consequences 15 of the act or omission; in this paragraph, 16 (A) "costs incurred for repair, replacement, or deferred 17 maintenance of a facility, a pipeline, a structure, or equipment" includes costs 18 to dismantle and remove the facility, pipeline, structure, or equipment that is 19 being replaced; 20 (B) "hazardous substance" has the meaning given in 21 AS 46.03.826; 22 (C) "replacement" includes renovation or improvement; 23 (20) costs incurred to construct, acquire, or operate a refinery or crude 24 oil topping plant, regardless of whether the products of the refinery or topping plant 25 are used in oil or gas exploration, development, or production operations; however, if 26 a producer owns a refinery or crude oil topping plant that is located on or near the 27 premises of the producer's lease or property in the state and that processes the 28 producer's oil produced from that lease or property into a product that the producer 29 uses in the operation of the lease or property in drilling for or producing oil or gas, the 30 producer's lease expenditures include the amount calculated by subtracting from the 31 fair market value of the product used the prevailing value, as determined under
01 AS 43.55.020(f), of the oil that is processed; 02 (21) costs of lobbying, public relations, public relations advertising, or 03 policy advocacy; 04 (22) costs incurred as part of a capital expenditure or other action 05 taken for a carbon management purpose under AS 38.05.081 or a carbon offset 06 project under AS 38.95.400 - 38.95.499. 07 * Sec. 17. This Act takes effect immediately under AS 01.10.070(c).