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28th Legislature(2013-2014)

Bill Text 28th Legislature

00 Enrolled HB 287                                                                                                         
01 Relating to the determination of the royalty received by the state on oil production refined or                         
02 processed in the state; providing tax credits for qualified infrastructure expenditures for in-                         
03 state refineries; approving and ratifying the sale of royalty oil by the State of Alaska to Tesoro                      
04 Corporation and Tesoro Refining and Marketing Company LLC; and providing for an                                         
05 effective date.                                                                                                         
06                           _______________                                                                               
07    * Section 1. AS 38.05.180(cc) is amended to read:                                                                  
08            (cc)  The provisions of (aa), [AND] (ee), and (hh) of this section do not                            
09       prohibit the commissioner from accepting any payment on a federal lease tendered by                               
10       the federal agency responsible for determination and transmittal of the payment to the                            
11       state under 30 U.S.C. 191 or otherwise due the state as the state's royalty share of gas                          
12       production or the state's royalty share of oil production irrespective of the state's                         
13       acceptance of an amount that is different than the amount due under the lease for                                 
01       purposes of determining royalty share on oil and gas production under that subsection.                        
02    * Sec. 2. AS 38.05.180 is amended by adding new subsections to read:                                               
03            (hh)  Upon written request of a lessee of a lease issued under this section or of                            
04       a lessee of federal land from which the state is entitled to receive a share of the royalty                       
05       on oil production, the commissioner may enter into an agreement with the lessee to                                
06       accept, as a value for the state's royalty share of oil production sold to an in-state                            
07       refiner, an amount that is not less than the price established in a contract between the                          
08       lessee and the in-state refiner but not exceeding the amount that would otherwise be                              
09       due under the lease. This subsection applies to a contract entered into after                                     
10       December 31, 2014. The commissioner shall respond to a request received under this                                
11       subsection within 90 days after the receipt of the request by the department. The                                 
12       commissioner may enter into an agreement under this subsection if                                                 
13                 (1)  the commissioner issues a written finding that                                                     
14                      (A)  the agreement is in the best interest of the state;                                           
15                      (B)  the parties to the contract between the lessee and the in-                                    
16            state refiner are not affiliated under (2) of this subsection; and                                           
17                      (C)  based on clear and convincing evidence,                                                       
18                           (i)  the contract price is not unreasonably low; and                                          
19                           (ii)  the prospective reduction in royalty receipts will be                                   
20                 balanced by employment opportunities or other tangible benefits to the                                  
21                 state; and                                                                                              
22                 (2)  the primary function of the in-state refiner's contracting with the                                
23       lessee is to engage in the manufacture of refined petroleum products in the state, and                            
24       the in-state refiner is not affiliated with the lessee or with a subsequent purchaser of                          
25       more than 10 percent of the in-state refiner's product; the parties to a contract or                              
26       purchase are affiliated if, in the judgment of the commissioner, one of the parties to                            
27       the contract or purchase exercises substantial influence over the policies and actions of                         
28       the other as evidenced by a relationship based on common ownership or family                                      
29       interest or by action taken in concert whether or not that influence is based on                                  
30       stockholdings, stockholders, officers, or directors.                                                              
31            (ii)  In (cc) and (hh) of this section,                                                                      
01                 (1)  "in-state refiner" means a person engaged in the manufacture of                                    
02       refined petroleum products in the state;                                                                          
03                 (2)  "price established in a contract between the lessee and the in-state                               
04       refiner" includes tax reimbursement amounts, deliverability and other charges, and                                
05       other forms of consideration paid by the in-state refiner, as appropriate, under the                              
06       contract;                                                                                                         
07                 (3)  "state's royalty share of oil production" includes payments on                                     
08       federal leases made to the state under 30 U.S.C. 191.                                                             
09    * Sec. 3. AS 43.20 is amended by adding a new section to read:                                                   
10            Sec. 43.20.053. Qualified in-state oil refinery infrastructure expenditures                                
11       tax credit. (a) A taxpayer that owns an in-state oil refinery whose primary function is                         
12       the manufacturing and sale of refined petroleum products to third parties in arm's                                
13       length transactions may apply a credit against the tax due under this chapter for a                               
14       qualified infrastructure expenditure incurred in the state for a tax year beginning after                         
15       December 31, 2014, and before January 1, 2020. The total amount of credit a taxpayer                              
16       may receive under this section may not exceed the lesser of 40 percent of qualified                               
17       infrastructure expenditures incurred in the state during the tax year or $10,000,000 for                          
18       each in-state refinery for which qualified expenditures are incurred.                                             
19            (b)  A taxpayer applying the credit under this section against a liability under                             
20       this chapter shall claim the credit on the taxpayer's return. A tax credit or portion of a                        
21       tax credit under this section may not be used to reduce the taxpayer's tax liability                              
22       under this chapter below zero. Any unused tax credit or portion of a tax credit under                             
23       this section may be carried forward to the five tax years immediately following the tax                           
24       year in which the qualified infrastructure expenditures were incurred.                                            
25            (c)  An expenditure that is the basis of the credit under this section may not be                            
26       the basis for                                                                                                     
27                 (1)  a deduction against the tax levied under this chapter;                                             
28                 (2)  a credit or deduction under another provision of this title; or                                    
29                 (3)  any federal credit claimed under this title.                                                       
30            (d)  A person entitled to a tax credit under this section that is greater than the                           
31       person's tax liability under this chapter may request a refund or payment in the amount                           
01       of the unused portion of the tax credit.                                                                          
02            (e)  The department may use money available in the oil and gas tax credit fund                               
03       established in AS 43.55.028 to make a refund or payment under (d) of this section in                              
04       whole or in part if the department finds that                                                                     
05                 (1)  the claimant does not have an outstanding liability to the state for                               
06       unpaid delinquent taxes under this title; and                                                                     
07                 (2)  after application of all available tax credits, the claimant's total tax                           
08       liability under this chapter for the calendar year in which the claim is made is zero.                            
09            (f)  A refund under this section does not bear interest.                                                     
10            (g)  If an oil refinery ceases commercial operation during the nine calendar                                 
11       years immediately following the calendar year in which a credit under this section was                            
12       received, regardless of whether commercial operation later resumes, the taxpayer's tax                            
13       liability under this chapter will be increased. The tax liability increase is equal to the                        
14       total amount of credit taken multiplied by a fraction                                                             
15                 (1)  the numerator of which is the difference between 10 and the                                        
16       number of calendar years for which the oil refinery was eligible for a credit under this                          
17       section; and                                                                                                      
18                 (2)  the denominator of which is 10.                                                                    
19            (h)  A person claiming a tax credit under this section for an oil refinery that                              
20       ceases commercial operation or is sold during the nine calendar years immediately                                 
21       following the calendar year in which a credit under this section was received shall                               
22       notify the department in writing of the date the oil refinery ceased commercial                                   
23       operation or was sold. The notice must be filed with the return for the tax year in                               
24       which the oil refinery ceases commercial operation or was sold.                                                   
25            (i)  The issuance of a refund under this section does not limit the department's                             
26       ability to later audit or adjust the claim as provided in AS 43.05 if the department                              
27       determines that the taxpayer claiming the credit was not entitled to the amount of the                            
28       credit.                                                                                                           
29            (j)  In this section,                                                                                        
30                 (1)  "modification" means an adjustment or other alteration to existing                                 
31       tangible personal property that has a useful life of three years or more;                                         
01                 (2)  "qualified infrastructure expenditure" means an expenditure for the                                
02       in-state purchase, installation, or modification of tangible personal property for the in-                        
03       state manufacture or in-state transport of refined petroleum products, or petroleum-                              
04       based feedstock;                                                                                                  
05                 (3)  "refined petroleum products" means separate marketable elements,                                   
06       compounds, or mixtures of oil in liquid form, including gasoline, diesel, jet fuel, gas                           
07       oil, heating oil, and kerosene;                                                                                   
08                 (4)  "unpaid delinquent tax" means an amount of tax for which the                                       
09       department has issued an assessment that has not been paid and, if contested, has not                             
10       been finally resolved in the taxpayer's favor.                                                                    
11    * Sec. 4. AS 43.55.028(a) is amended to read:                                                                      
12            (a)  The oil and gas tax credit fund is established as a separate fund of the state.                         
13       The purpose of the fund is to purchase transferable tax credit certificates issued under                          
14       AS 43.55.023 and production tax credit certificates issued under AS 43.55.025 and to                              
15       pay refunds and payments claimed under AS 43.20.046, [OR] 43.20.047, or                                   
16       43.20.053.                                                                                                    
17    * Sec. 5. AS 43.55.028(g) is amended to read:                                                                      
18            (g)  The department may adopt regulations to carry out the purposes of this                                  
19       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, [OR] 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 may not, when allocating                                   
24       available money in the fund under this section, distinguish an application for the                                
25       purchase of a credit certificate issued under former AS 43.55.023(m) or a claim for a                             
26       refund or payment under AS 43.20.046, [OR] 43.20.047, or 43.20.053.                                     
27    * Sec. 6. The uncodified law of the State of Alaska is amended by adding a new section to                          
28 read:                                                                                                                   
29       ROYALTY OIL SALE CONTRACT WITH TESORO CORPORATION AND                                                             
30 TESORO REFINING AND MARKETING COMPANY LLC APPROVED AND                                                                  
31 RATIFIED. In accordance with AS 38.06.055, the legislature approves and ratifies the                                    
01 proposed Amendment to Agreement for the Sale of Royalty Oil attached as Exhibit 1 to the                                
02 final best interest finding and determination executed January 9, 2014, by the Department of                            
03 Natural Resources regarding the amendment of the Agreement for the Sale of Royalty Oil                                  
04 between and among the State of Alaska and Tesoro Corporation, a Delaware Corporation, and                               
05 Tesoro Refining and Marketing Company LLC, a Delaware Limited Liability Company,                                        
06 October 25, 2013.                                                                                                       
07    * Sec. 7. Sections 1 - 5 of this Act take effect January 1, 2015.                                                
08    * Sec. 8. Except as provided in sec. 7 of this Act, this Act takes effect immediately under                        
09 AS 01.10.070(c).                                                                                                        
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