Bill Text 28th Legislature
- Session Laws
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.
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
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
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
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
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).
New Text Underlined [DELETED TEXT BRACKETED]