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25th Legislature(2007-2008)

Bill Text 25th Legislature


00                       CS FOR HOUSE BILL NO. 2001(FIN)                                                                   
01 "An Act relating to the production tax on oil and gas and to conservation surcharges on                                 
02 oil; providing a limit on the amount of tax that may be levied on the production of                                     
03 certain gas that is produced outside of the Cook Inlet sedimentary basin; relating to the                               
04 sharing between agencies of certain information relating to the production tax and to                                   
05 oil and gas or gas only leases; expanding the period in which the Department of                                         
06 Revenue may assess the amount of oil and gas production tax and conservation                                            
07 surcharges; prohibiting a producer or explorer from receiving tax credits if certain                                    
08 judgments are not satisfied and requiring, as a condition of receiving the tax credits, the                             
09 deposit of the amount of certain unpaid judgments and certain interest on those                                         
10 judgments in the court during an appeal and relating to that interest; relating to state                                
11 oil and gas auditors and their immediate supervisors; making conforming amendments;                                     
12 and providing for an effective date."                                                                                   
01 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
02    * Section 1. The uncodified law of the State of Alaska is amended by adding a new section                          
03 to read:                                                                                                                
04       LEGISLATIVE INTENT. (a) It is the intent of the legislature that the provisions of                                
05 this Act will                                                                                                           
06            (1)  ensure a fair and equitable means of assessing and taxing Alaska's oil and                              
07 gas resources; and                                                                                                      
08            (2)  encourage the availability to Alaska's citizens of affordable gas produced,                             
09 transported, and consumed within the state.                                                                             
10       (b)  It is the intent of the legislature that AS 43.55.075(b), enacted by sec. 40 of this                         
11 Act, relating to the limitation of assessments for the production tax on oil and gas and                                
12 conservation surcharges on oil, confirms by clarification the long-standing interpretation of                           
13 AS 43.05.260 by the Department of Revenue.                                                                              
14       (c)  It is the intent of the legislature that costs disallowed in accordance with                                 
15 AS 43.55.165(e)(6), as amended by sec. 46 of this Act, include costs, subsequent to the                                 
16 effective date of the enactment of AS 43.55.165(e)(6), incurred as a result of monitoring and                           
17 management decisions that fail to properly consider risks posed by changing operating                                   
18 conditions and result in failure to take necessary actions to prevent a pipeline spill,                                 
19 interruption of service, or shutdown.                                                                                   
20    * Sec. 2. AS 38.05.035(a) is amended to read:                                                                      
21            (a)  The director shall                                                                                      
22                 (1)  have general charge and supervision of the division and may                                        
23       exercise the powers specifically delegated to the director; the director may employ                           
24       and fix the compensation of assistants and employees necessary for the operations of                              
25       the division; the director [AND] is the certifying officer of the division, with the                          
26       consent of the commissioner, and may approve vouchers for disbursements of money                                  
27       appropriated to the division;                                                                                     
28                 (2)  manage, inspect, and control state land and improvements on it                                     
29       belonging to the state and under the jurisdiction of the division;                                                
30                 (3)  execute laws, rules, regulations, and orders adopted by the                                        
31       commissioner;                                                                                                     
01                 (4)  prescribe application procedures and practices for the sale, lease,                                
02       or other disposition of available land, resources, property, or interest in them;                                 
03                 (5)  prescribe fees or service charges, with the consent of the                                         
04       commissioner, for any public service rendered;                                                                    
05                 (6)  under the conditions and limitations imposed by law and the                                        
06       commissioner, issue deeds, leases, or other conveyances disposing of available land,                          
07       resources, property, or any interests in them;                                                                
08                 (7)  have jurisdiction over state land, except that land acquired by the                                
09       Alaska World War II Veterans Board and the Agricultural Loan Board or the                                         
10       departments or agencies succeeding to their respective functions through foreclosure                              
11       or default; to this end, the director possesses the powers and, with the approval of the                      
12       commissioner, shall perform the duties necessary to protect the state's rights and                                
13       interest in state land, including the taking of all necessary action to protect and                               
14       enforce the state's contractual or other property rights;                                                         
15                 (8)  [REPEALED                                                                                          
16                 (9)]  maintain the [SUCH] records [AS] the commissioner considers                                   
17       necessary, administer oaths, and do all things incidental to the authority imposed; the                           
18       following records and files shall be kept confidential upon request of the person                                 
19       supplying the information:                                                                                        
20                      (A)  the name of the person nominating or applying for the                                         
21            sale, lease, or other disposal of land by competitive bidding;                                               
22                      (B)  before the announced time of opening, the names of the                                        
23            bidders and the amounts of the bids;                                                                         
24                      (C)  all geological, geophysical, and engineering data supplied,                                   
25            whether or not concerned with the extraction or development of natural                                       
26            resources;                                                                                                   
27                      (D)  except as provided in AS 38.05.036, cost data and                                             
28            financial information submitted in support of applications, bonds, leases, and                               
29            similar items;                                                                                               
30                      (E)  applications for rights-of-way or easements;                                                  
31                      (F)  requests for information or applications by public agencies                                   
01            for land that [WHICH] is being considered for use for a public purpose;                                  
02                 (9) [(10)]  account for the fees, licenses, taxes, or other money                                   
03       received in the administration of this chapter including the sale or leasing of land,                             
04       identify their source, and promptly transmit them to the proper fiscal department after                           
05       crediting them to the proper fund; receipts from land application filing fees and                                 
06       charges for copies of maps and records shall be deposited immediately in the general                              
07       fund of the state by the director;                                                                                
08                 (10) [(11)]  select and employ or obtain at reasonable compensation                                 
09       cadastral, appraisal, or other professional personnel the director considers necessary                            
10       for the proper operation of the division;                                                                         
11                 (11) [(12)]  be the certifying agent of the state to select, accept, and                            
12       secure by whatever action is necessary in the name of the state, by deed, sale, gift,                             
13       devise, judgment, operation of law, or other means any land, of whatever nature or                                
14       interest, available to the state; and be the certifying agent of the state, to select,                            
15       accept, or secure by whatever action is necessary in the name of the state any land, or                           
16       title or interest to land available, granted, or subject to being transferred to the state                        
17       for any purpose;                                                                                                  
18                 (12)  on request, furnish records, files, and other information                                     
19       related to the administration of AS 38.05.180 to the Department of Revenue for                                
20       use in forecasting state revenue under or administering AS 43.55, whether or not                              
21       those records, files, and other information are required to be kept confidential                              
22       under (8) of this subsection; in the case of records, files, or other information                             
23       required to be kept confidential under (8) of this subsection, the Department of                              
24       Revenue shall maintain the confidentiality that the Department of Natural                                     
25       Resources is required to extend to records, files, and other information under (8)                            
26       of this subsection                                                                                            
27                 [(13)  REPEALED                                                                                         
28                 (14)  REPEALED].                                                                                        
29    * Sec. 3. AS 38.05.036(b) is amended to read:                                                                      
30            (b)  The Department of Revenue may obtain from the department information                                    
31       relating to royalty and net profits payments and to exploration incentive credits under                           
01       this chapter or under AS 41.09, whether or not that information is confidential. The                              
02       Department of Revenue may use the information in carrying out its functions and                                   
03       responsibilities under AS 43, and shall hold that information confidential to the extent                          
04       required by an agreement with the department or by AS 38.05.035(a)(8)                                         
05       [AS 38.05.035(a)(9)], AS 41.09.010(d), or AS 43.05.230.                                                           
06    * Sec. 4. AS 38.05.036(f) is amended to read:                                                                      
07            (f)  Except as otherwise provided in this section or in connection with official                             
08       investigations or proceedings of the department, it is unlawful for a current or former                           
09       officer, employee, or agent of the state to divulge information obtained by the                                   
10       department as a result of an audit under this section that is required by an agreement                            
11       with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or                                          
12       AS 41.09.010(d) to be kept confidential.                                                                          
13    * Sec. 5. AS 38.05.036(g) is amended to read:                                                                      
14            (g)  Nothing in this section prohibits the publication of statistics in a manner                             
15       that maintains the confidentiality of information to the extent required by an                                    
16       agreement with the department or by AS 38.05.035(a)(8) [AS 38.05.035(a)(9)] or                                
17       AS 41.09.010(d).                                                                                                  
18    * Sec. 6. AS 38.05.123(f) is amended to read:                                                                      
19            (f)  As part of the timber sale negotiations authorized by this section, the                                 
20       commissioner may require a prospective purchaser negotiating a timber sale contract                               
21       to submit financial and technical data that demonstrates that the requirements of this                            
22       section have been or will be met. Upon the prospective purchaser's request, the                                   
23       commissioner shall keep data provided by the purchaser confidential in accordance                                 
24       with the requirements of AS 38.05.035(a)(8) [AS 38.05.035(a)(9)].                                             
25    * Sec. 7. AS 38.05.133(e) is amended to read:                                                                      
26            (e)  The commissioner may make a written request to a prospective licensee                                   
27       for additional information on the prospective licensee's proposal. The commissioner                               
28       shall keep confidential information described in AS 38.05.035(a)(8)                                           
29       [AS 38.05.035(a)(9)] that is voluntarily provided if the prospective licensee has made                            
30       a written request that the information remain confidential.                                                       
31    * Sec. 8. AS 38.05.180(j) is amended to read:                                                                      
01            (j)  The commissioner                                                                                        
02                 (1)  may provide for modification of royalty on individual leases,                                      
03       leases unitized as described in (p) of this section, leases subject to an agreement                               
04       described in (s) or (t) of this section, or interests unitized under AS 31.05                                     
05                      (A)  to allow for production from an oil or gas field or pool if                                   
06                           (i)  the oil or gas field or pool has been sufficiently                                       
07                 delineated to the satisfaction of the commissioner;                                                     
08                           (ii)  the field or pool has not previously produced oil or                                    
09                 gas for sale; and                                                                                       
10                           (iii)  oil or gas production from the field or pool would                                     
11                 not otherwise be economically feasible;                                                                 
12                      (B)  to prolong the economic life of an oil or gas field or pool                                   
13            as per barrel or barrel equivalent costs increase or as the price of oil or gas                              
14            decreases, and the increase or decrease is sufficient to make future production                              
15            no longer economically feasible; or                                                                          
16                      (C)  to reestablish production of shut-in oil or gas that would                                    
17            not otherwise be economically feasible;                                                                      
18                 (2)  may not grant a royalty modification unless the lessee or lessees                                  
19       requesting the change make a clear and convincing showing that a modification of                                  
20       royalty meets the requirements of this subsection and is in the best interests of the                             
21       state;                                                                                                            
22                 (3)  shall provide for an increase or decrease or other modification of                                 
23       the state's royalty share by a sliding scale royalty or other mechanism that shall be                             
24       based on a change in the price of oil or gas and may also be based on other relevant                              
25       factors such as a change in production rate, projected ultimate recovery, development                             
26       costs, and operating costs;                                                                                       
27                 (4)  may not grant a royalty reduction for a field or pool                                              
28                      (A)  under (1)(A) of this subsection if the royalty modification                                   
29            for the field or pool would establish a royalty rate of less than five percent in                            
30            amount or value of the production removed or sold from a lease or leases                                     
31            covering the field or pool;                                                                                  
01                      (B)  under (1)(B) or (1)(C) of this subsection if the royalty                                      
02            modification for the field or pool would establish a royalty rate of less than                               
03            three percent in amount or value of the production removed or sold from a                                    
04            lease or leases covering the field or pool;                                                                  
05                 (5)  may not grant a royalty reduction under this subsection without                                    
06       including an explicit condition that the royalty reduction is not assignable without the                          
07       prior written approval, which may not be unreasonably withheld, by the                                            
08       commissioner; the commissioner shall, in the preliminary and final findings and                                   
09       determinations, set out the conditions under which the royalty reduction may be                                   
10       assigned;                                                                                                         
11                 (6)  shall require the lessee or lessees to submit, with the application                                
12       for the royalty reduction, financial and technical data that demonstrate that the                                 
13       requirements of this subsection are met; the commissioner                                                         
14                      (A)  may require disclosure of only the financial and technical                                    
15            data related to development, production, and transportation of oil and gas or                                
16            gas only from the field or pool that are reasonably available to the applicant;                              
17            and                                                                                                          
18                      (B)  shall keep the data confidential under AS 38.05.035(a)(8)                                 
19            [AS 38.05.035(a)(9)] at the request of the lessee or lessees making application                              
20            for the royalty reduction; the confidential data may be disclosed by the                                     
21            commissioner to legislators and to the legislative auditor and as directed by                                
22            the chair or vice-chair of the Legislative Budget and Audit Committee to the                                 
23            director of the division of legislative finance, the permanent employees of                                  
24            their respective divisions who are responsible for evaluating a royalty                                      
25            reduction, and to agents or contractors of the legislative auditor or the                                    
26            legislative finance director who are engaged under contract to evaluate the                                  
27            royalty reduction, if they sign an appropriate confidentiality agreement;                                    
28                 (7)  may                                                                                                
29                      (A)  require the lessee or lessees making application for the                                      
30            royalty reduction under (1)(A) of this subsection to pay for the services of an                              
31            independent contractor, selected by the lessee or lessees from a list of                                     
01            qualified consultants compiled by the commissioner, to evaluate hydrocarbon                                  
02            development, production, transportation, and economics and to assist the                                     
03            commissioner in evaluating the application and financial and technical data;                                 
04            if, under this subparagraph, the commissioner requires payment for the                                       
05            services of an independent contractor, the total cost of the services to be paid                             
06            for by the lessee or lessees may not exceed $150,000 for each application, and                               
07            the commissioner shall determine the relevant scope of the work to be                                        
08            performed by the contractor; selection of an independent contractor under this                               
09            subparagraph is not subject to AS 36.30;                                                                     
10                      (B)  with the mutual consent of the lessee or lessees making                                       
11            application for the royalty reduction under (1)(B) or (1)(C) of this subsection,                             
12            request payment for the services of an independent contractor, selected from a                               
13            list of qualified consultants to evaluate hydrocarbon development, production,                               
14            transportation, and economics by the commissioner to assist the commissioner                                 
15            in evaluating the application and financial and technical data; if, under this                               
16            subparagraph, the commissioner requires payment for the services of an                                       
17            independent contractor, the total cost of the services that may be paid for by                               
18            the lessee or lessees may not exceed $150,000 for each application, and the                                  
19            commissioner shall determine the relevant scope of the work to be performed                                  
20            by the contractor; selection of an independent contractor under this                                         
21            subparagraph is not subject to AS 36.30;                                                                     
22                 (8)  shall make and publish a preliminary findings and determination                                    
23       on the royalty reduction application, give reasonable public notice of the preliminary                            
24       findings and determination, and invite public comment on the preliminary findings                                 
25       and determination during a 30-day period for receipt of public comment;                                           
26                 (9)  shall offer to appear before the Legislative Budget and Audit                                      
27       Committee, on a day that is not earlier than 10 days and not later than 20 days after                             
28       giving public notice under (8) of this subsection, to provide the committee a review of                           
29       the commissioner's preliminary findings and determination on the royalty reduction                                
30       application and administrative process; if the Legislative Budget and Audit                                       
31       Committee accepts the commissioner's offer, the committee shall give notice of the                                
01       committee's meeting to all members of the legislature;                                                            
02                 (10)  shall make copies of the preliminary findings and determination                                   
03       available to                                                                                                      
04                      (A)  the presiding officer of each house of the legislature;                                       
05                      (B)  the chairs of the legislature's standing committees on                                        
06            resources; and                                                                                               
07                      (C)  the chairs of the legislature's special committees on oil and                                 
08            gas, if any;                                                                                                 
09                 (11)  shall, within 30 days after the close of the public comment period                                
10       under (8) of this subsection,                                                                                     
11                      (A)  prepare a summary of the public response to the                                               
12            commissioner's preliminary findings and determination;                                                       
13                      (B)  make a final findings and determination; the                                                  
14            commissioner's final findings and determination prepared under this                                          
15            subparagraph regarding a royalty reduction is final and not appealable to the                                
16            court;                                                                                                       
17                      (C)  transmit a copy of the final findings and determination to                                    
18            the lessee;                                                                                                  
19                      (D)  with the applicant's consent, amend the applicant's lease or                                  
20            unitization agreement consistent with the commissioner's final decision; and                                 
21                      (E)  make copies of the final findings and determination                                           
22            available to each person who submitted comment under (8) of this subsection                                  
23            and who has filed a request for the copies;                                                                  
24                 (12)  is not limited by the provisions of AS 38.05.134(3) or (f) of this                                
25       section in the commissioner's determination under this subsection.                                                
26    * Sec. 9. AS 38.05.275(c) is amended to read:                                                                      
27            (c)  Subsection (b) of this section may not be construed to limit the director in                            
28       the exercise of authority granted by AS 38.05.035(a)(11) [AS 38.05.035(a)(12)].                               
29    * Sec. 10. AS 41.09.010(d) is amended to read:                                                                     
30            (d)  Data derived from drilling a stratigraphic test well or exploratory well that                           
31       is provided to the commissioner under (c)(3) of this section shall be kept confidential                           
01       for 24 months after receipt by the commissioner unless the owner of the well gives                                
02       written permission to the state to release the well data at an earlier date, and,                                 
03       notwithstanding AS 31.05.035(c), confidentiality may not be extended beyond 24                                    
04       months. The provisions of AS 38.05.035(a)(8)(C) [AS 38.05.035(a)(9)(C)] apply to                              
05       other data provided to the commissioner under (c)(3) of this section, except that the                             
06       commissioner, under appropriate confidentiality provisions and without preference or                              
07       discrimination, may display to all interested third parties, but may not distribute or                            
08       transfer in hard copy or electronic form, those data with respect to all land if the                              
09       commissioner determines that the limited disclosure is necessary to further the                                   
10       interest of the state in evaluating or developing its land.                                                       
11    * Sec. 11. AS 42.45 is amended by adding a new section to read:                                                    
12            Sec. 42.45.045. Appropriations for the low income heating energy                                           
13       assistance program. (a) By February 1 each year, the Department of Revenue shall                                
14       determine whether the state received for the general fund, during the immediately                                 
15       preceding calendar year, an amount of money from the tax levied under                                             
16       AS 43.55.011(e) because the price index calculated under AS 43.55.011(h) was                                      
17       greater than zero. If the state received an amount of money because the price index                               
18       calculated under AS 43.55.011(h) was greater than zero, the department shall notify                               
19       the legislature of that amount.                                                                                   
20            (b)  The legislature may annually appropriate up to $50,000,000 of the amount                                
21       reported under (a) of this section for the low income heating energy assistance                                   
22       program.                                                                                                          
23            (c)  Nothing in this section requires that money be appropriated or creates a                                
24       dedicated fund.                                                                                                   
25            (d)  For purposes of this section, "low income heating energy assistance                                     
26       program" means the program created by 7 AAC 44.010 to implement the federal                                       
27       Low-Income Home Energy Assistance Act of 1981, as amended (42 U.S.C. 8621 et                                      
28       seq.).                                                                                                            
29    * Sec. 12. AS 43.05.230(h) is amended to read:                                                                     
30            (h)  The commissioner shall, upon request, furnish to the Department of                                      
31       Natural Resources copies of tax returns, reports, and other documents filed under                             
01       AS 43.55 or AS 43.65, and the Department of Revenue's determinations and                                      
02       workpapers under those chapters. The Department of Natural Resources shall                                    
03       maintain the confidentiality that the Department of Revenue is required to extend to                              
04       the returns, reports, documents, determinations, and workpapers furnished to the                                  
05       Department of Natural Resources under this subsection.                                                            
06    * Sec. 13. AS 43.05.260(a) is amended to read:                                                                     
07            (a)  Except as provided in (c) of this section, [AND] AS 43.20.200(b), and                           
08       AS 43.55.075, the amount of a tax imposed by this title must be assessed within three                         
09       years after the return was filed, whether or not a return was filed on or after the date                          
10       prescribed by law. If the tax is not assessed before the expiration of the applicable                         
11       [THREE-YEAR] period, proceedings may not be instituted in court for the collection                                
12       of the tax.                                                                                                       
13    * Sec. 14. AS 43.55.011(e) is repealed and reenacted to read:                                                      
14            (e)  There is levied on the producer of oil or gas a tax for all oil and gas                                 
15       produced each calendar year from each lease or property in the state, less any oil and                            
16       gas the ownership or right to which is exempt from taxation or constitutes a                                      
17       landowner's royalty interest. Except as otherwise provided under (f), (j), (k), and (o)                           
18       of this section, the tax is equal to the sum of                                                                   
19                 (1)  the production tax value of the taxable oil and gas as calculated                                  
20       under AS 43.55.160 multiplied by 22.5 percent; and                                                                
21                 (2)  the sum, over all months of the calendar year, of the tax amounts                                  
22       calculated under (g) of this section.                                                                             
23    * Sec. 15. AS 43.55.011(f) is amended to read:                                                                     
24            (f)  The levy of tax under this section for [ON A PRODUCER OF] oil and gas                               
25       produced from leases or properties that include land north of 68 degrees North                                
26       latitude, other than oil and gas subject to (i) of this section and gas subject to (o)                        
27       of this section, may not be less than                                                                         
28                 (1)  four percent of the gross value at the point of production when the                                
29       average price per barrel for Alaska North Slope crude oil for sale on the United States                           
30       West Coast during the calendar year for which the tax is due is more than $25;                                    
31                 (2)  three percent of the gross value at the point of production when the                               
01       average price per barrel for Alaska North Slope crude oil for sale on the United States                           
02       West Coast during the calendar year for which the tax is due is over $20 but not over                             
03       $25;                                                                                                              
04                 (3)  two percent of the gross value at the point of production when the                                 
05       average price per barrel for Alaska North Slope crude oil for sale on the United States                           
06       West Coast during the calendar year for which the tax is due is over $17.50 but not                               
07       over $20;                                                                                                         
08                 (4)  one percent of the gross value at the point of production when the                                 
09       average price per barrel for Alaska North Slope crude oil for sale on the United States                           
10       West Coast during the calendar year for which the tax is due is over $15 but not over                             
11       $17.50; or                                                                                                        
12                 (5)  zero percent of the gross value at the point of production when the                                
13       average price per barrel for Alaska North Slope crude oil for sale on the United States                           
14       West Coast during the calendar year for which the tax is due is $15 or less.                                      
15    * Sec. 16. AS 43.55.011(g) is repealed and reenacted to read:                                                      
16            (g)  For each month for which the price index determined under (h) of this                                   
17       section is greater than zero, the amount of tax for purposes of (e)(2) of this section is                         
18       calculated as follows: (1) for oil and gas produced from each lease or property, the                              
19       monthly production tax value is calculated in the manner described in                                             
20       AS 43.55.160(a) and (b), except that the gross value at the point of production for the                           
21       month is substituted for the gross value at the point of production for the calendar                              
22       year and 1/12 of the applicable adjusted lease expenditures for the calendar year is                              
23       substituted for the applicable adjusted lease expenditures for the calendar year; (2) the                         
24       monthly production tax value determined under (1) of this subsection is multiplied by                             
25       the progressivity tax rate for the month. The progressivity tax rate for a month is the                           
26       product of 0.4 percent multiplied by the price index for the month determined under                               
27       (h) of this section, except that the progressivity tax rate for a month may not exceed                            
28       25 percent. Notwithstanding any contrary provision of AS 43.55.150, for purposes of                               
29       calculating a monthly production tax value under this subsection, the gross value at                              
30       the point of production of the oil and gas is calculated under regulations adopted by                             
31       the department that provide for using an appropriate monthly share of the producer's                              
01       costs of transportation for the calendar year.                                                                    
02    * Sec. 17. AS 43.55.011(h) is repealed and reenacted to read:                                                      
03            (h)  For purposes of (g) of this section, the price index for a month is                                     
04       calculated by subtracting 30 from the number that is equal to the total of the monthly                            
05       production tax values, as calculated under (g) of this section, of the taxable oil and                            
06       gas produced by the producer from all leases and properties in the state during that                              
07       month, divided by the total amount of taxable oil and gas produced by the producer                                
08       from all leases and properties in the state during that month, in BTU equivalent                                  
09       barrels. However, a price index calculated under this subsection may not be less than                             
10       zero.                                                                                                             
11    * Sec. 18. AS 43.55.011(j) is amended to read:                                                                     
12            (j)  For a calendar year before 2022, the [TOTAL] tax levied by (e) [AND (g)]                                
13       of this section for [ON] gas produced from a lease or property in the Cook Inlet                              
14       sedimentary basin may not exceed                                                                                  
15                 (1)  for a lease or property that first commenced commercial                                            
16       production of gas before April 1, 2006, the product obtained by multiplying (A) the                               
17       amount of taxable gas produced during the calendar year from the lease or property,                               
18       times (B) the average rate of tax that was imposed under this chapter for [ON]                                
19       taxable gas produced from the lease or property for the 12-month period ending on                                 
20       March 31, 2006, times (C) the quotient obtained by dividing the total gross value at                              
21       the point of production of the taxable gas produced from the lease or property during                             
22       the 12-month period ending on March 31, 2006, by the total amount of that gas;                                    
23                 (2)  for a lease or property that first commences commercial                                            
24       production of gas after March 31, 2006, the product obtained by multiplying (A) the                               
25       amount of taxable gas produced during the calendar year from the lease or property,                               
26       times (B) the average rate of tax that was imposed under this chapter for [ON]                                
27       taxable gas produced from all leases or properties in the Cook Inlet sedimentary basin                            
28       for the 12-month period ending on March 31, 2006, times (C) the average prevailing                                
29       value for gas delivered in the Cook Inlet area for the 12-month period ending                                     
30       March 31, 2006, as determined by the department under AS 43.55.020(f).                                            
31    * Sec. 19. AS 43.55.011(k) is amended to read:                                                                     
01            (k)  For a calendar year before 2022, the [TOTAL] tax levied by (e) [AND                                     
02       (g)] of this section for [ON] oil produced from a lease or property in the Cook Inlet                         
03       sedimentary basin may not exceed                                                                                  
04                 (1)  for a lease or property that first commenced commercial                                            
05       production of oil before April 1, 2006, the product obtained by multiplying (A) the                               
06       amount of taxable oil produced during the calendar year from the lease or property,                               
07       times (B) the average rate of tax that was imposed under this chapter for [ON]                                
08       taxable oil produced from the lease or property for the 12-month period ending on                                 
09       March 31, 2006, times (C) the quotient obtained by dividing the total gross value at                              
10       the point of production of the taxable oil produced from the lease or property during                             
11       the 12-month period ending on March 31, 2006, by the total amount of that oil;                                    
12                 (2)  for a lease or property that first commences commercial                                            
13       production of oil after March 31, 2006, the product obtained by multiplying (A) the                               
14       amount of taxable oil produced during the calendar year from the lease or property,                               
15       times (B) the average rate of tax that was imposed under this chapter for [ON]                                
16       taxable oil produced from all leases or properties in the Cook Inlet sedimentary basin                            
17       for the 12-month period ending on March 31, 2006, times (C) the average prevailing                                
18       value for oil produced and delivered in the Cook Inlet area for the 12-month period                               
19       ending on March 31, 2006, as determined by the department under AS 43.55.020(f).                                  
20    * Sec. 20. AS 43.55.011(m) is amended to read:                                                                     
21            (m)  Notwithstanding any contrary provision of AS 38.05.180(i),                                              
22       AS 41.09.010, AS 43.20.043, AS 43.55.024, or 43.55.025, tax credits under                                         
23       AS 38.05.180(i), AS 41.09.010, AS 43.20.043, AS 43.55.024, and 43.55.025 that are                                 
24       allocated to gas produced from leases or properties in the Cook Inlet sedimentary                                 
25       basin and that are available to be applied against a tax levied by (e) of this section for                    
26       [ON] gas produced from leases or properties in the Cook Inlet sedimentary basin                                   
27       during a calendar year may be applied only against the tax levied by (e) of this section                          
28       for [ON] that gas. The amount by which the amount of tax credits that are allocated                           
29       to gas produced from leases or properties in the Cook Inlet sedimentary basin and that                            
30       the producer would otherwise be allowed to use for a later calendar year or transfer to                           
31       another person exceeds the amount of tax credits whose application would reduce the                               
01       tax levied by (e) of this section for [ON] that gas to zero, if any, is considered the                        
02       amount of excess tax credits, and the excess tax credits are subject to the following:                            
03                 (1)  for each lease or property for which a limitation under (j) or (k) of                              
04       this section on the tax levied by (e) [AND (g)] of this section has the effect of                                 
05       reducing the producer's tax below the amount of tax that would be levied in the                                   
06       absence of that limitation, the producer shall calculate the amount of that reduction;                            
07                 (2)  the producer shall calculate the total of the reductions calculated                                
08       under (1) of this subsection for all affected leases or properties;                                               
09                 (3)  the producer shall reduce the amount of excess tax credits by the                                  
10       total calculated under (2) of this subsection, but not to less than zero;                                         
11                 (4)  any amount of excess tax credits remaining after reduction under                                   
12       (3) of this subsection may be used for a later calendar year, transferred to another                              
13       person, or applied against a tax levied for [ON] oil or gas produced from a lease or                          
14       property located anywhere in the state to the extent otherwise allowed under                                      
15       applicable law governing the tax credits.                                                                         
16    * Sec. 21. AS 43.55.011 is amended by adding a new subsection to read:                                             
17            (o)  Notwithstanding other provisions of this section, for a calendar year                                   
18       before 2022, the tax levied under (e) of this section for each 1,000 cubic feet of gas                            
19       for gas produced from a lease or property outside the Cook Inlet sedimentary basin                                
20       and used in the state may not exceed the amount of tax for each 1,000 cubic feet of                               
21       gas that is determined under (j)(2) of this section.                                                              
22    * Sec. 22. AS 43.55.020(a) is repealed and reenacted to read:                                                      
23            (a)  For a calendar year, a producer subject to tax under AS 43.55.011(e) - (i)                              
24       shall pay the tax as follows:                                                                                     
25                 (1)  an installment payment of the estimated tax levied by                                              
26       AS 43.55.011(e) - (g), net of any tax credits applied as allowed by law, is due for                               
27       each month of the calendar year on the last day of the following month; except as                                 
28       otherwise provided under (2) of this subsection, the amount of the installment                                    
29       payment is the sum of the following amounts, less 1/12 of the tax credits that are                                
30       allowed by law to be applied against the tax levied by AS 43.55.011(e) - (g) for the                              
31       calendar year, but the amount of the installment payment may not be less than zero:                               
01                      (A)  for oil and gas produced from leases or properties in the                                     
02            state outside the Cook Inlet sedimentary basin or not subject to                                             
03            AS 43.55.011(o), other than leases or properties subject to AS 43.55.011(f),                                 
04            the greater of                                                                                               
05                           (i)  zero; or                                                                                 
06                           (ii)  the sum of 22.5 percent and the progressivity tax                                       
07                 rate calculated under AS 43.55.011(g) multiplied by the remainder                                       
08                 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 for the leases or properties under                                    
11                 AS 43.55.160 from the gross value at the point of production of the oil                                 
12                 and gas produced from the leases or properties during the month for                                     
13                 which the installment payment is calculated;                                                            
14                      (B)  for oil and gas produced from leases or properties subject                                    
15            to AS 43.55.011(f), the greatest of                                                                          
16                           (i)  zero;                                                                                    
17                           (ii)  zero percent, one percent, two percent, three                                           
18                 percent, or four percent, as applicable, of the gross value at the point of                             
19                 production of the oil and gas produced from those properties; or                                        
20                           (iii)  the sum of 22.5 percent and the progressivity tax                                      
21                 rate calculated under AS 43.55.011(g) multiplied by the remainder                                       
22                 obtained by subtracting 1/12 of the producer's adjusted lease                                           
23                 expenditures for the calendar year of production under AS 43.55.165                                     
24                 and 43.55.170 that are deductible for those leases or properties under                                  
25                 AS 43.55.160 from the gross value at the point of production of the oil                                 
26                 and gas produced from those leases or properties during the month for                                   
27                 which the installment payment is calculated;                                                            
28                      (C)  for oil and gas produced from each lease or property                                          
29            subject to AS 43.55.011(j), (k), or (o), the greater of                                                      
30                           (i)  zero; or                                                                                 
31                           (ii)  the sum of 22.5 percent and the progressivity tax                                       
01                 rate calculated under AS 43.55.011(g) multiplied by the remainder                                       
02                 obtained by subtracting 1/12 of the producer's adjusted lease                                           
03                 expenditures for the calendar year of production under AS 43.55.165                                     
04                 and 43.55.170 that are deductible under AS 43.55.160 for oil or gas,                                    
05                 respectively, produced from the lease or property from the gross value                                  
06                 at the point of production of the oil or gas, respectively, produced from                               
07                 the lease or property during the month for which the installment                                        
08                 payment is calculated;                                                                                  
09                 (2)  an amount calculated under (1)(C) of this subsection for oil or gas                                
10       produced from a lease or property subject to AS 43.55.011(j), (k), or (o) may not                                 
11       exceed the product obtained by carrying out the calculation set out in                                            
12       AS 43.55.011(j)(1) or (2) or 43.55.011(o), as applicable, for gas or set out in                                   
13       AS 43.55.011(k)(1) or (2), as applicable, for oil, but substituting in                                            
14       AS 43.55.011(j)(1)(A) or (2)(A) or 43.55.011(o), as applicable, the amount of taxable                             
15       gas produced during the month for the amount of taxable gas produced during the                                   
16       calendar year and substituting in AS 43.55.011(k)(1)(A) or (2)(A), as applicable, the                             
17       amount of taxable oil produced during the month for the amount of taxable oil                                     
18       produced during the calendar year;                                                                                
19                 (3)  an installment payment of the estimated tax levied by                                              
20       AS 43.55.011(i) for each lease or property is due for each month of the calendar year                             
21       on the last day of the following month; the amount of the installment payment is the                              
22       sum of                                                                                                            
23                      (A)  the applicable tax rate for oil provided under                                                
24            AS 43.55.011(i), multiplied by the gross value at the point of production of                                 
25            the oil taxable under AS 43.55.011(i) and produced from the lease or property                                
26            during the month; and                                                                                        
27                      (B)  the applicable tax rate for gas provided under                                                
28            AS 43.55.011(i), multiplied by the gross value at the point of production of                                 
29            the gas taxable under AS 43.55.011(i) and produced from the lease or property                                
30            during the month;                                                                                            
31                 (4)  any amount of tax levied by AS 43.55.011(e) - (i), net of any                                      
01       credits applied as allowed by law, that exceeds the total of the amounts due as                                   
02       installment payments of estimated tax is due on March 31 of the year following the                                
03       calendar year of production.                                                                                      
04    * Sec. 23. AS 43.55.020(g) is amended to read:                                                                     
05            (g)  Notwithstanding any contrary provision of AS 43.05.225, an unpaid                                       
06       amount of an installment payment required under (a)(1) - (3) [(a)(1) - (4)] of this                           
07       section that is not paid when due bears interest (1) at the rate provided for an                                  
08       underpayment under 26 U.S.C. 6621 (Internal Revenue Code), as amended,                                            
09       compounded daily, from the date the installment payment is due until [THE]                                        
10       March 31 following the calendar year of production [DESCRIBED IN                                              
11       AS 43.55.030(a)], and (2) as provided for a delinquent tax under AS 43.05.225 after                               
12       that March 31. Interest accrued under (1) of this subsection that remains unpaid after                            
13       that March 31 is treated as an addition to tax that bears interest under (2) of this                              
14       subsection. An unpaid amount of tax due under (a)(4) [(a)(5)] of this section that is                         
15       not paid when due bears interest as provided for a delinquent tax under AS 43.05.225.                             
16    * Sec. 24. AS 43.55.020(h) is amended to read:                                                                     
17            (h)  Notwithstanding any contrary provision of AS 43.05.280,                                                 
18                 (1)  an overpayment of an installment payment required under (a)(1) -                               
19       (3) [(a)(1) - (4)] of this section bears interest at the rate provided for an overpayment                     
20       under 26 U.S.C. 6621 (Internal Revenue Code), as amended, compounded daily, from                                  
21       the later of the date the installment payment is due or the date the overpayment is                               
22       made, until the earlier of                                                                                        
23                      (A)  the date it is refunded or is applied to an underpayment; [,]                             
24            or                                                                                                           
25                      (B)  [THE] March 31 following the calendar year of                                             
26            production [DESCRIBED IN AS 43.55.030(a)];                                                               
27                 (2)  except as provided under (1) of this subsection, interest with                                     
28       respect to an overpayment is allowed only on any net overpayment of the payments                                  
29       required under (a) of this section that remains after the later of [THE] March 31                                 
30       following the calendar year of production [DESCRIBED IN AS 43.55.030(a)] or                                   
31       the date that the statement required under AS 43.55.030(a) is filed;                                              
01                 (3)  interest is allowed under (2) of this subsection only from a date                                  
02       that is 90 days after the later of [THE] March 31 following the calendar year of                              
03       production [DESCRIBED IN AS 43.55.030(a)] or the date that the statement                                      
04       required under AS 43.55.030(a) is filed; interest is not allowed if the overpayment                               
05       was refunded within the 90-day period;                                                                            
06                 (4)  interest under (2) and (3) of this subsection is paid at the rate and                              
07       in the manner provided in AS 43.05.225(1).                                                                        
08    * Sec. 25. AS 43.55.023(b) is amended to read:                                                                     
09            (b)  A producer or explorer may elect to take a tax credit in the amount of 22.5                         
10       [20] percent of a carried-forward annual loss. A credit under this subsection may be                              
11       applied against a tax levied by [DUE UNDER] AS 43.55.011(e). For purposes of this                             
12       subsection, a carried-forward annual loss is the amount of a producer's or explorer's                             
13       adjusted lease expenditures under AS 43.55.165 and 43.55.170 for a previous                                       
14       calendar year that was not deductible in calculating production tax values for that                           
15       calendar year under AS 43.55.160 [AS 43.55.160(b) AND (e)].                                                   
16    * Sec. 26. AS 43.55.023(i) is amended to read:                                                                     
17            (i)  For the purposes of this section,                                                                       
18                 (1)  a producer's or explorer's transitional investment expenditures are                                
19       the sum of the expenditures the producer or explorer incurred after March 31, 2003                            
20       [2001], and before April 1, 2006, that would be qualified capital expenditures if they                            
21       were incurred after March 31, 2006, less the sum of the payments or credits the                                   
22       producer or explorer received before April 1, 2006, for the sale or other transfer of                             
23       assets, including geological, geophysical, or well data or interpretations, acquired by                           
24       the producer or explorer as a result of expenditures the producer or explorer incurred                            
25       before April 1, 2006, that would be qualified capital expenditures, if they were                                  
26       incurred after March 31, 2006;                                                                                    
27                 (2)  a producer or explorer may elect to take a tax credit against a tax                                
28       due under AS 43.55.011(e) in the amount of 20 percent of the producer's or explorer's                             
29       transitional investment expenditures, but only to the extent that the amount does not                             
30       exceed 1/10 of the producer's or explorer's qualified capital expenditures that are                               
31       incurred during the calendar year for which the credit is taken;                                                  
01                 (3)  a producer or explorer may not take a tax credit for a transitional                                
02       investment expenditure                                                                                            
03                      (A)  for any calendar year after the later of                                                      
04                           (i)  2013; or                                                                                 
05                           (ii)  the sixth calendar year after the calendar year for                                     
06                 which the producer first applies a credit under this subsection against a                               
07                 tax due under AS 43.55.011(e), if the producer did not have                                             
08                 commercial production of oil or gas from a lease or property in the                                     
09                 state before April 1, 2006;                                                                             
10                      (B)  more than once; or                                                                            
11                      (C)  if a credit for that expenditure was taken under                                              
12            AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025;                                                
13                 (4)  notwithstanding (d), (e), and (g) of this section, a producer or                                   
14       explorer may not transfer a tax credit or obtain a transferable tax credit certificate for                        
15       a transitional investment expenditure.                                                                            
16    * Sec. 27. AS 43.55.023 is amended by adding a new subsection to read:                                             
17            (l)  Notwithstanding the limitation on the use of a transferable tax credit by a                             
18       transferee under (e) of this section and subject to appropriations made by law, if and                            
19       to the extent that purchase of transferable tax credits by the Alaska Retirement                                  
20       Management Board is authorized by law, the department shall issue a cash refund to                                
21       the Alaska Retirement Management Board for a transferable tax credit originally                                   
22       issued to a person under (d) of this section and purchased by the Alaska Retirement                               
23       Management Board.                                                                                                 
24    * Sec. 28. AS 43.55.025(a) is amended to read:                                                                     
25            (a)  Subject to the terms and conditions of this section, a credit against the                               
26       production tax levied by [DUE UNDER] AS 43.55.011(e) or (f) is allowed for                                    
27       exploration expenditures that qualify under (b) of this section in an amount equal to                             
28       one of the following:                                                                                             
29                 (1)  30 [20] percent of the total exploration expenditures that qualify                             
30       only under (b) and (c) of this section;                                                                           
31                 (2)  30 [20] PERCENT of the total exploration expenditures [FOR                                     
01       WORK PERFORMED BEFORE JULY 1, 2007, AND] that qualify only under (b)                                              
02       and (d) of this section;                                                                                          
03                 (3)  40 percent of the total exploration expenditures that qualify under                                
04       (b), (c), and (d) of this section; or                                                                             
05                 (4)  40 percent of the total exploration expenditures that qualify only                                 
06       under (b) and (e) of this section.                                                                                
07    * Sec. 29. AS 43.55.025(b) is amended to read:                                                                     
08            (b)  To qualify for the production tax credit under (a) of this section, an                                  
09       exploration expenditure must be incurred for work performed [ON OR] after                                         
10       December 31, 2006 [JULY 1, 2003], and before July 1, 2016, [EXCEPT THAT AN                                    
11       EXPLORATION EXPENDITURE FOR A COOK INLET PROSPECT MUST BE                                                         
12       INCURRED FOR WORK PERFORMED ON OR AFTER JULY 1, 2005,] and                                                        
13                 (1)  may be for seismic or other geophysical exploration costs not                                  
14       connected with a specific well;                                                                                   
15                 (2)  if for an exploration well,                                                                        
16                      (A)  must be incurred by an explorer that holds an interest in                                     
17            the exploration well for which the production tax credit is claimed;                                         
18                      (B)  may be for either a [AN OIL OR GAS DISCOVERY]                                             
19            well that encounters an oil or gas deposit or a dry hole; [AND]                                          
20                      (C)  must be for a well that has been completed, suspended,                                    
21            or abandoned under AS 31.05.030 at the time the explorer claims the tax                                  
22            credit under (f) of this section; and                                                                    
23                      (D)  must be for goods, services, or rentals of personal                                       
24            property reasonably required for the surface preparation, drilling, casing,                                  
25            cementing, and logging of an exploration well, and, in the case of a dry hole,                               
26            for the expenses required for abandonment if the well is abandoned within 18                                 
27            months after the date the well was spudded;                                                                  
28                 (3)  may not be for [TESTING, STIMULATION, OR COMPLETION                                                
29       COSTS;] administration, supervision, engineering, or lease operating costs;                                       
30       geological or management costs; community relations or environmental costs;                                       
31       bonuses, taxes, or other payments to governments related to the well; costs arising                           
01       from fraud, wilful misconduct, gross negligence, criminal negligence, violation of                            
02       law, including a violation of 33 U.S.C. 1319(c)(1) or 1321(b)(3) (Clean Water                                 
03       Act), or failure to comply with an obligation under a lease, permit, or license                               
04       issued by the state or federal government, or other costs that are generally                                  
05       recognized as indirect costs or financing costs; and                                                              
06                 (4)  may not be incurred for an exploration well or seismic exploration                                 
07       that is included in a plan of exploration or a plan of development for any unit on                                
08       May 13, 2003.                                                                                                     
09    * Sec. 30. AS 43.55.025(c) is repealed and reenacted to read:                                                      
10            (c)  To be eligible for the 30 percent production tax credit authorized by (a)(1)                            
11       of this section or the 40 percent production tax credit authorized by (a)(3) of this                              
12       section, exploration expenditures must                                                                            
13                 (1)  qualify under (b) of this section; and                                                             
14                 (2)  be for an exploration well, subject to the following:                                              
15                      (A)  before spudding the well, (i) the explorer shall submit to                                    
16            the commissioner of natural resources the information necessary to determine                                 
17            whether the geological objective of the well is a potential oil or gas trap that is                          
18            distinctly separate from any trap that has been tested by a preexisting well;                                
19            and (ii) the commissioner of natural resources must make an affirmative                                      
20            determination on that question; the commissioner of natural resources shall                                  
21            decide whether to make that determination within 60 days after receiving all                                 
22            the necessary information from the explorer and based on the information                                     
23            received and on other information the commissioner of natural resources may                                  
24            consider relevant;                                                                                           
25                      (B)  for an exploration well other than a well to explore a Cook                                   
26            Inlet prospect, the well must be located and drilled in such a manner that the                               
27            bottom hole is located not less than three miles away from the bottom hole of                                
28            a preexisting well drilled for oil or gas, irrespective of whether the preexisting                           
29            well has been completed, suspended, or abandoned;                                                            
30                      (C)  after completion, abandonment, or suspension under                                            
31            AS 31.05.030 of the exploration well, the commissioner of natural resources                                  
01            must determine that the well was consistent with achieving the explorer's                                    
02            stated geological objective.                                                                                 
03    * Sec. 31. AS 43.55.025(f) is amended to read:                                                                     
04            (f)  For a production tax credit under this section,                                                         
05                 (1)  an explorer shall, in a form prescribed by the department and,                                 
06       except for a credit under (l) of this section, within six months of the completion of                         
07       the exploration activity, claim the credit and submit information sufficient to                                   
08       demonstrate to the department's satisfaction that the claimed exploration expenditures                            
09       qualify under this section; in addition, the explorer shall submit information                                
10       necessary for the commissioner of natural resources to evaluate the validity of                               
11       the explorer's compliance with the requirements of this section;                                              
12                 (2)  an explorer shall agree, in writing,                                                               
13                      (A)  to notify the Department of Natural Resources, within 30                                      
14            days after completion of seismic or geophysical data processing, completion                                  
15            of [A] well drilling, or filing of a claim for credit, whichever is the latest, for                      
16            which exploration costs are claimed, of the date of completion and submit a                                  
17            report to that department describing the processing sequence and providing a                                 
18            list of data sets available; [IF, UNDER (c)(2)(B) OF THIS SECTION, AN                                        
19            EXPLORER SUBMITS A CLAIM FOR A CREDIT FOR EXPENDITURES                                                       
20            FOR AN EXPLORATION WELL THAT IS LOCATED WITHIN THREE                                                         
21            MILES OF A WELL ALREADY DRILLED FOR OIL AND GAS, IN                                                          
22            ADDITION TO THE SUBMISSIONS REQUIRED UNDER (1) OF THIS                                                       
23            SUBSECTION, THE EXPLORER SHALL SUBMIT THE INFORMATION                                                        
24            NECESSARY FOR THE COMMISSIONER OF NATURAL RESOURCES                                                          
25            TO EVALUATE THE VALIDITY OF THE EXPLORER'S CLAIM THAT                                                        
26            THE WELL IS DIRECTED AT A DISTINCTLY SEPARATE                                                                
27            EXPLORATION TARGET, AND THE COMMISSIONER OF NATURAL                                                          
28            RESOURCES SHALL, UPON RECEIPT OF ALL EVIDENCE                                                                
29            SUFFICIENT FOR THE COMMISSIONER TO EVALUATE THE                                                              
30            EXPLORER'S CLAIM, MAKE THAT DETERMINATION WITHIN 60                                                          
31            DAYS;]                                                                                                       
01                      (B)  to provide to the Department of Natural Resources, within                                     
02            30 days after the date of a request, unless a longer period is provided by the                           
03            Department of Natural Resources, specific data sets, ancillary data, and                                 
04            reports identified in (A) of this paragraph; in this subparagraph, a seismic                             
05            or geophysical data set includes the data for an entire seismic survey,                                  
06            irrespective of whether the survey areas cover nonstate land in addition                                 
07            to state land or land in a unit in addition to land outside a unit;                                      
08                      (C)  that, notwithstanding any provision of AS 38, information                                     
09            provided under this paragraph will be held confidential by the Department of                                 
10            Natural Resources                                                                                            
11                           (i)  in the case of well data, until the expiration of the                                
12                 24-month period of confidentiality described in AS 31.05.035(c)                                     
13                 [FOR 10 YEARS FOLLOWING THE COMPLETION DATE], at                                                        
14                 which time the Department of Natural Resources [THAT                                                
15                 DEPARTMENT] will release the information after 30 days' public                                          
16                 notice unless, in the discretion of the commissioner of natural                                     
17                 resources, it is necessary to protect information relating to the                                   
18                 valuation of unleased acreage in the same vicinity, or unless the                                   
19                 well is on private land and the owner, including the lessor but not                                 
20                 the lessee, of the oil and gas resources has not given permission to                                
21                 release the well data;                                                                              
22                           (ii)  in the case of seismic or other geophysical data,                                   
23                 other than seismic data acquired by seismic exploration subject to                                  
24                 (l) of this section, for 10 years following the completion date, at                                 
25                 which time the Department of Natural Resources will release the                                     
26                 information after 30 days' public notice, except as to seismic or                                   
27                 other geophysical data acquired from private land, unless the                                       
28                 owner, including a lessor but not a lessee, of the oil and gas                                      
29                 resources in the private land gives permission to release the                                       
30                 seismic or other geophysical data associated with the private land;                                 
31                           (iii)  in the case of seismic data obtained by seismic                                    
01                 exploration subject to (l) of this section, only until the expiration of                            
02                 30 days' public notice issued on or after the date the production                                   
03                 tax credit certificate is issued under (5) of this subsection;                                    
04                 (3)  if more than one explorer holds an interest in a well or seismic                                   
05       exploration, each explorer may claim an amount of credit that is proportional to the                              
06       explorer's cost incurred;                                                                                         
07                 (4)  the department may exercise the full extent of its powers as though                                
08       the explorer were a taxpayer under this title, in order to verify that the claimed                                
09       expenditures are qualified exploration expenditures under this section; and                                       
10                 (5)  if the department is satisfied that the explorer's claimed                                         
11       expenditures are qualified under this section and that all data required to be                                
12       submitted under this section have been submitted, the department shall issue to the                           
13       explorer a production tax credit certificate for the amount of credit to be allowed                               
14       against production taxes levied by AS 43.55.011(e) or (f); the credit is available for                        
15       immediate use; notwithstanding any contrary provision of AS 38, AS 40.25.100,                                 
16       or AS 43.05.230, the following information is not confidential:                                               
17                      (A)  the explorer's name;                                                                      
18                      (B)  the date of the application;                                                              
19                      (C)  the location of the well or seismic exploration;                                          
20                      (D)  the date of the department's issuance of the certificate;                                 
21            and                                                                                                      
22                      (E)  the date on which the information required to be                                          
23            submitted under this section will be released [DUE UNDER                                                 
24            AS 43.55.011(e) OR (f)].                                                                                     
25    * Sec. 32. AS 43.55.025(i) is repealed and reenacted to read:                                                      
26            (i)  For a production tax credit under this section,                                                         
27                 (1)  a credit may not be applied to reduce a taxpayer's tax liability                                   
28       under AS 43.55.011(e) or (f) below zero for a calendar year; and                                                  
29                 (2)  an amount of the production tax credit in excess of the amount that                                
30       may be applied for a calendar year under this subsection may be carried forward and                               
31       applied against the taxpayer's tax liability under AS 43.55.011(e) or (f) in one or more                          
01       later calendar years.                                                                                             
02    * Sec. 33. AS 43.55.025(k) is amended by adding a new paragraph to read:                                           
03                 (4)  "preexisting well" means a well that was spudded more than 540                                     
04       days but less than 35 years before the date on which the exploration well to which it                             
05       is compared is spudded.                                                                                           
06    * Sec. 34. AS 43.55.025 is amended by adding new subsections to read:                                              
07            (l)  Subject to the terms and conditions of this section, if a claim is filed under                          
08       (f)(1) of this section before January 1, 2016, a credit against the production tax levied                         
09       by AS 43.55.011(e) or (f) is allowed in an amount equal to five percent of an eligible                            
10       expenditure under this subsection incurred for seismic exploration performed before                               
11       July 1, 2003. To be eligible under this subsection, an expenditure must                                           
12                 (1)  have been for seismic exploration that                                                             
13                      (A)  obtained data that the commissioner of natural resources                                      
14            considers to be in the best interest of the state to acquire for public                                      
15            distribution; and                                                                                            
16                      (B)  was conducted outside the boundaries of a production unit;                                    
17            however, the amount of the expenditure that is otherwise eligible under this                                 
18            section is reduced proportionately by the portion of the seismic exploration                                 
19            activity that crossed into a production unit; and                                                            
20                 (2)  qualify under (b)(3) of this section.                                                              
21            (m)  Subject to appropriations made by law, if and to the extent that purchase                               
22       of transferable tax credits by the Alaska Retirement Management Board is authorized                               
23       by law, the department shall issue a cash refund to the Alaska Retirement                                         
24       Management Board for a transferable tax credit originally issued to an explorer under                             
25       (f) of this section and purchased by the Alaska Retirement Management Board.                                      
26    * Sec. 35. AS 43.55.030(a) is amended to read:                                                                     
27            (a)  A producer that produces oil or gas from a lease or property in the                                 
28       state during a calendar year, whether or not any tax payment is due under                                     
29       AS 43.55.020(a) for that oil or gas, [THE PERSON PAYING THE TAX] shall file                                 
30       with the department on March 31 of the following year [FOLLOWING THE                                          
31       CALENDAR YEAR FOR WHICH THE TAX WAS LEVIED] a statement, under                                                    
01       oath, in a form prescribed by the department, giving, with other information required,                            
02       the following:                                                                                                    
03                 (1)  a description of each lease or property from which [THE] oil or                                
04       [AND] gas was [WERE] produced, by name, legal description, lease number, or                                   
05       accounting codes assigned by the department;                                                                      
06                 (2)  the names of the producer and, if different, the person paying the                             
07       tax, if any;                                                                                                  
08                 (3)  the gross amount of oil and the gross amount of gas produced from                                  
09       each lease or property, and the percentage of the gross amount of oil and gas owned                               
10       by the [EACH] producer [FOR WHOM THE TAX IS PAID];                                                            
11                 (4)  the gross value at the point of production of the oil and of the gas                               
12       produced from each lease or property owned by the [EACH] producer and the costs                           
13       of transportation of the oil and gas [FOR WHOM THE TAX IS PAID];                                              
14                 (5)  the name of the first purchaser and the price received for the oil                                 
15       and for the gas, unless relieved from this requirement in whole or in part by the                                 
16       department; [AND]                                                                                                 
17                 (6)  the producer's qualified capital expenditures, as defined in                                   
18       AS 43.55.023, other lease expenditures [AND ADJUSTMENTS AS                                                    
19       CALCULATED] under AS 43.55.165, and adjustments or other payments or                                          
20       credits under AS 43.55.170;                                                                                   
21                 (7)  the production tax values of the oil and gas under                                             
22       AS 43.55.160;                                                                                                 
23                 (8)  any claims for tax credits to be applied; and                                                  
24                 (9)  calculations showing the amounts, if any, that were or are due                                 
25       under AS 43.55.020(a) and interest on any underpayment or overpayment                                         
26       [AS 43.55.160 - 43.55.170].                                                                                       
27    * Sec. 36. AS 43.55.030(d) is amended to read:                                                                     
28            (d)  Reports required under this section [BY OR ON BEHALF OF THE                                         
29       PRODUCER] are delinquent the first day following the day the report is due. The                               
30       person required to file the report is liable for a penalty, as determined by the                              
31       department under standards adopted in regulation by the department, of not                                    
01       more than $1,000 for each day the person fails to file the report at the time                                 
02       required. The penalty is in addition to the penalties in AS 43.05.220 and                                     
03       43.05.290 and is assessed, collected, and paid in the same manner as a tax                                    
04       deficiency under this title. In this subsection, "report" includes a statement.                               
05    * Sec. 37. AS 43.55.030 is amended by adding new subsections to read:                                              
06            (e)  An explorer or producer that incurs a lease expenditure under                                           
07       AS 43.55.165 or receives a payment or credit under AS 43.55.170 during a calendar                                 
08       year but does not produce oil or gas from a lease or property in the state during the                             
09       calendar year shall file with the department on March 31 of the following year a                                
10       statement, under oath, in a form prescribed by the department, giving, with other                                 
11       information required, the following:                                                                              
12                 (1)  the producer's qualified capital expenditures, as defined in                                       
13       AS 43.55.023, other lease expenditures under AS 43.55.165, and adjustments or other                               
14       payments or credits under AS 43.55.170; and                                                                       
15                 (2)  if the explorer or producer receives a payment or credit under                                     
16       AS 43.55.170, calculations showing whether the explorer or producer is liable for a                               
17       tax under AS 43.55.160(d) or 43.55.170(b) and, if so, the amount.                                                 
18            (f)  The department may require a producer, an explorer, or an operator of a                                 
19       lease or property to file monthly reports, as applicable, of                                                      
20                 (1)  the amounts and gross value at the point of production of oil and                                  
21       gas produced;                                                                                                     
22                 (2)  transportation costs of the oil and gas;                                                           
23                 (3)  any unscheduled interruption of, or reduction in the rate of, oil or                               
24       gas production;                                                                                                   
25                 (4)  lease expenditures and adjustments under AS 43.55.165 and                                          
26       43.55.170;                                                                                                        
27                 (5)  joint interest billings;                                                                           
28                 (6)  contracts for the sale or transportation of oil or gas;                                            
29                 (7)  information and calculations used in determining monthly                                           
30       installment payments of estimated tax under AS 43.55.020(a); and                                                  
31                 (8)  other records and information the department considers necessary                                   
01       for the administration of this chapter.                                                                           
02    * Sec. 38. AS 43.55.040 is amended to read:                                                                        
03            Sec. 43.55.040. Powers of Department of Revenue. Except as provided in                                     
04       AS 43.05.405 - 43.05.499, the department may                                                                      
05                 (1)  require a person engaged in production and the agent or employee                                   
06       of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil                         
07       or gas to furnish, whether by the filing of regular statements or reports or otherwise,                           
08       additional information that is considered by the department as necessary to compute                               
09       the amount of the tax; notwithstanding any contrary provision of law, the disclosure                              
10       of additional information under this paragraph to the producer obligated to pay the tax                           
11       does not violate AS 40.25.100(a) or AS 43.05.230(a); before disclosing information                                
12       under this paragraph that is otherwise required to be held confidential under                                     
13       AS 40.25.100(a) or AS 43.05.230(a), the department shall                                                          
14                      (A)  provide the person that furnished the information a                                           
15            reasonable opportunity to be heard regarding the proposed disclosure and the                                 
16            conditions to be imposed under (B) of this paragraph; and                                                    
17                      (B)  impose appropriate conditions limiting                                                        
18                           (i)  access to the information to those legal counsel,                                        
19                 consultants, employees, officers, and agents of the producer who have                                   
20                 a need to know that information for the purpose of determining or                                       
21                 contesting the producer's tax obligation; and                                                           
22                           (ii)  the use of the information to use for that purpose;                                     
23                 (2)  examine the books, records, and files of the [SUCH A] person;                                  
24                 (3)  conduct hearings and compel the attendance of witnesses and the                                    
25       production of books, records, and papers of any person; [AND]                                                     
26                 (4)  make an investigation or hold an inquiry that is considered                                        
27       necessary to a disclosure of the facts as to                                                                      
28                      (A)  the amount of production from any oil or gas location, or                                     
29            of a company or other producer of oil or gas; and                                                            
30                      (B)  the rendition of the oil and gas for taxing purposes;                                     
31                 (5)  require a producer, an explorer, or an operator of a lease or                                  
01       property to file reports and copies of records that the department considers                                  
02       necessary to forecast state revenue under this chapter; in the case of reports and                            
03       copies of records relating to proposed, expected, or approved unit expenditures                               
04       for a unit for which one or more working interest owners other than the                                       
05       operator have authority to approve unit expenditures, the required reports and                                
06       copies of records are limited to those reports or copies of records that constitute                           
07       or disclose communications between the operator and the working interest                                      
08       owners relating to unit budget matters; and                                                                   
09                 (6)  assess against a person required under this section to file a                                  
10       report, statement, or other document a penalty, as determined by the                                          
11       department under standards adopted in regulation by the department, of not                                    
12       more than $1,000 for each day the person fails to file the report, statement, or                              
13       other document after notice by the department; the penalty is in addition to any                              
14       penalties under AS 43.05.220 and 43.05.290 and is assessed, collected, and paid                               
15       in the same manner as a tax deficiency under this title; the penalty shall bear                               
16       interest at the rate specified under AS 43.05.225(1).                                                         
17    * Sec. 39. AS 43.55 is amended by adding a new section to read:                                                    
18            Sec. 43.55.055. Penalty for understatement of tax. (a) In addition to other                              
19       penalties prescribed by law, if there is a substantial understatement of tax required to                          
20       be shown on a statement required under AS 43.55.030(a), there shall be added to the                               
21       tax an amount equal to 10 percent of the substantial understatement of tax.                                       
22            (b)  In addition to other penalties prescribed by law, if there is a gross                                   
23       understatement of tax required to be shown on a statement required under                                          
24       AS 43.55.030(a), there shall be added to the tax an amount equal to 20 percent of the                             
25       gross understatement of tax.                                                                                      
26            (c)  In addition to the penalties imposed under (a) or (b) of this section, a                                
27       person who has made a substantial or gross understatement of tax is liable to the state                           
28       for the reasonable costs of the state's enforcement action, including auditing costs.                             
29            (d)  For purposes of this section,                                                                           
30                 (1)  a substantial understatement of tax for any calendar year exists if                                
31       the amount of the understatement for the calendar year exceeds the lesser of 10                                   
01       percent of the tax required to be shown on the statement for the calendar year or                                 
02       $10,000,000;                                                                                                      
03                 (2)  a gross understatement of tax for any calendar year exists if the                                  
04       amount of the understatement for the calendar year exceeds the lesser of 20 percent of                            
05       the tax required to be shown on the statement for the calendar year or $20,000,000;                               
06                 (3)  "understatement" means the amount by which the tax required to                                     
07       be shown on the statement for the calendar year exceeds the amount of the tax                                     
08       reported as due by the taxpayer as shown on the statement.                                                        
09    * Sec. 40. AS 43.55 is amended by adding new sections to read:                                                     
10            Sec. 43.55.075. Limitation on assessment and amended returns. (a) Except                                   
11       as provided in AS 43.05.260(c), the amount of a tax imposed by this chapter must be                               
12       assessed within four years after the latest return was filed.                                                     
13            (b)  A decision of a regulatory agency, court, or other body with authority to                               
14       resolve disputes that results in a retroactive change to a lease expenditure, to an                               
15       adjustment to a lease expenditure, to costs of transportation, to sale price, to                                  
16       prevailing value, or to consideration of quality differentials relating to the                                    
17       commingling of oils has a corresponding effect, either an increase or decrease, as                                
18       applicable, on the production tax value of oil or gas or the amount or availability of a                          
19       tax credit as determined under this chapter. For purposes of this section, a change to a                          
20       lease expenditure includes a change in the categorization of a lease expenditure as a                             
21       qualified capital expenditure or as not a qualified capital expenditure. The producer                             
22       shall                                                                                                             
23                 (1)  within 60 days after the change, notify the department in writing;                                 
24       and                                                                                                               
25                 (2)  within 120 days after the change, file amended returns covering all                                
26       periods affected by the change, unless the department agrees otherwise or a stay is in                            
27       place that affects the filing or payment, regardless of the pendency of appeals of the                            
28       decision.                                                                                                         
29            (c)  If an alteration in or modification of a producer's federal income tax return                           
30       or a recomputation of the producer's federal income tax or determination of                                       
31       deficiency occurs that affects the amount of a tax imposed on the producer under this                             
01       chapter, the producer shall                                                                                       
02                 (1)  within 60 days after the final determination of the alteration,                                    
03       modification, recomputation, or deficiency, notify the department in writing; and                                 
04                 (2)  within 120 days after the final determination of the alteration,                                   
05       modification, recomputation, or deficiency, file amended returns covering all affected                            
06       periods.                                                                                                          
07            (d)  In this section,                                                                                        
08                 (1)  "qualified capital expenditure" has the meaning given in                                           
09       AS 43.55.023;                                                                                                     
10                 (2)  "return" includes a report, a statement, and an amended return,                                    
11       report, or statement.                                                                                             
12            Sec. 43.55.078. Exceptions to tax credits. (a) For a calendar year after 2007,                             
13       a producer or explorer may not take a tax credit under AS 43.55.023, 43.55.024, or                                
14       43.55.025 against a tax levied under this chapter if a state court or administrative                              
15       agency or federal court that has subject matter jurisdiction has entered a judgment in                            
16       favor of the state or a political subdivision of the state in an amount greater than                              
17       $100,000 against the producer or explorer, the producer or explorer has not satisfied                             
18       the judgment, and the judgment concerns a matter having connections with this state                               
19       that are sufficient to satisfy constitutional jurisdictional requirements.                                        
20            (b)  Notwithstanding (a) of this section, the producer or explorer may receive                               
21       a tax credit described in (a) of this section if                                                                  
22                 (1)  the judgment is appealed but the appeal has not been decided; and                                  
23                 (2)  the producer or explorer deposits in the court where the judgment                                  
24       was entered or the appeal is pending, in the form of cash, bond, or other security,                               
25                      (A)  the full amount of the judgment; and                                                          
26                      (B)  post-judgment interest on the judgment amount described                                       
27            in (A) of this paragraph; notwithstanding another provision of law, the post-                                
28            judgment interest rate compounded quarterly on a judgment the amount of                                      
29            which is deposited under (a) of this paragraph is equal to the greater of                                    
30                           (i)  the applicable statutory rate; or                                                        
31                           (ii)  the rate of return on the producer's or explorer's                                      
01                 equity as shown on the producer's or explorer's most recent quarterly                                   
02                 earnings report as of the date of the notice of appeal.                                                 
03            (c)  In this section,                                                                                        
04                 (1)  "judgment" means any final administrative determination or                                         
05       judgment in favor of the state or a political subdivision of the state;                                           
06                 (2)  "producer or explorer" includes an affiliate of a producer or                                      
07       explorer.                                                                                                         
08    * Sec. 41. AS 43.55.110 is amended by adding new subsections to read:                                              
09            (e)  The department may require that returns, statements, reports, notifications,                            
10       and applications filed under this chapter be filed electronically in a form and manner                            
11       approved or prescribed by the department.                                                                         
12            (f)  The department may require that payments required under this chapter be                                 
13       made electronically in a form and manner approved or prescribed by the department.                                
14            (g)  Notwithstanding AS 44.62, the department may issue, for the information                                 
15       and guidance of producers, explorers, and other interested persons, advisory bulletins                            
16       stating the department's interpretation of provisions of this chapter and of regulations                          
17       adopted under this chapter. Unless otherwise provided by the department by                                        
18       regulation, interpretations stated in the advisory bulletins are not binding on the                               
19       department or others.                                                                                             
20            (h)  Subject to legislative appropriation, the department may compensate a                                   
21       person who provides information to the department about noncompliance with the                                    
22       provisions of this chapter by an explorer or a producer of oil or gas if that information                         
23       leads to the collection of additional taxes, penalties, or interest from the producer. The                        
24       amount of compensation under this subsection may not exceed the lesser of                                         
25       $1,000,000 or 10 percent of the additional tax, penalty, or interest collected as a result                        
26       of the information. A state employee or an agent of the state is not eligible for                                 
27       compensation under this subsection.                                                                               
28    * Sec. 42. AS 43.55.160(a) is amended to read:                                                                     
29            (a)  Except as provided in (b) of this section, for the purposes of                                          
30                 [(1)]  AS 43.55.011(e), the [ANNUAL] production tax value of the                                        
31       taxable                                                                                                           
01                 (1) [(A)]  oil and gas produced during a calendar year from leases or                               
02       properties in the state that include land north of 68 degrees North latitude is the gross                         
03       value at the point of production of the oil and gas taxable under AS 43.55.011(e) and                             
04       produced by the producer from those leases or properties, less the producer's lease                               
05       expenditures under AS 43.55.165 for the calendar year applicable to the oil and gas                               
06       produced by the producer from those leases or properties, as adjusted under                                       
07       AS 43.55.170; this subparagraph does not apply to gas subject to                                              
08       AS 43.55.011(o);                                                                                              
09                 (2) [(B)]  oil and gas produced during a calendar year from leases or                               
10       properties in the state outside the Cook Inlet sedimentary basin, no part of which is                             
11       north of 68 degrees North latitude, is the gross value at the point of production of the                          
12       oil and gas taxable under AS 43.55.011(e) and produced by the producer from those                                 
13       leases or properties, less the producer's lease expenditures under AS 43.55.165 for the                           
14       calendar year applicable to the oil and gas produced by the producer from those leases                            
15       or properties, as adjusted under AS 43.55.170; this subparagraph does not apply to                            
16       gas subject to AS 43.55.011(o);                                                                               
17                 (3) [(C)]  oil produced during a calendar year from a lease or property                             
18       in the Cook Inlet sedimentary basin is the gross value at the point of production of the                          
19       oil taxable under AS 43.55.011(e) and produced by the producer from that lease or                                 
20       property, less the producer's lease expenditures under AS 43.55.165 for the calendar                              
21       year applicable to the oil produced by the producer from that lease or property, as                               
22       adjusted under AS 43.55.170;                                                                                      
23                 (4) [(D)]  gas produced during a calendar year from a lease or property                             
24       in the Cook Inlet sedimentary basin is the gross value at the point of production of the                          
25       gas taxable under AS 43.55.011(e) and produced by the producer from that lease or                                 
26       property, less the producer's lease expenditures under AS 43.55.165 for the calendar                              
27       year applicable to the gas produced by the producer from that lease or property, as                               
28       adjusted under AS 43.55.170;                                                                                      
29                 (5)  gas produced during a calendar year from a lease or property                                   
30       outside the Cook Inlet sedimentary basin and used in the state is the gross value                             
31       at the point of production of that gas taxable under AS 43.55.011(e) and                                      
01       produced by the producer from that lease or property, less the producer's lease                               
02       expenditures under AS 43.55.165 for the calendar year applicable to that gas                                  
03       produced by the producer from that lease or property, as adjusted under                                       
04       AS 43.55.170                                                                                                  
05                 [(2)  AS 43.55.011(g), THE MONTHLY PRODUCTION TAX                                                       
06       VALUE OF THE TAXABLE                                                                                              
07                      (A)  OIL AND GAS PRODUCED DURING A MONTH                                                           
08            FROM LEASES OR PROPERTIES IN THE STATE THAT INCLUDE                                                          
09            LAND NORTH OF 68 DEGREES NORTH LATITUDE IS THE GROSS                                                         
10            VALUE AT THE POINT OF PRODUCTION OF THE OIL AND GAS                                                          
11            TAXABLE UNDER AS 43.55.011(g) AND PRODUCED BY THE                                                            
12            PRODUCER FROM THOSE LEASES OR PROPERTIES, LESS 1/12 OF                                                       
13            THE PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR                                                     
14            THE CALENDAR YEAR APPLICABLE TO THE OIL AND GAS                                                              
15            PRODUCED BY THE PRODUCER FROM THOSE LEASES OR                                                                
16            PROPERTIES, AS ADJUSTED UNDER AS 43.55.170;                                                                  
17                      (B)  OIL AND GAS PRODUCED DURING A MONTH                                                           
18            FROM LEASES OR PROPERTIES IN THE STATE OUTSIDE THE COOK                                                      
19            INLET SEDIMENTARY BASIN, NO PART OF WHICH IS NORTH OF 68                                                     
20            DEGREES NORTH LATITUDE, IS THE GROSS VALUE AT THE POINT                                                      
21            OF PRODUCTION OF THE OIL AND GAS TAXABLE UNDER                                                               
22            AS 43.55.011(g) AND PRODUCED BY THE PRODUCER FROM THOSE                                                      
23            LEASES OR PROPERTIES, LESS 1/12 OF THE PRODUCER'S LEASE                                                      
24            EXPENDITURES UNDER AS 43.55.165 FOR THE CALENDAR YEAR                                                        
25            APPLICABLE TO THE OIL AND GAS PRODUCED BY THE PRODUCER                                                       
26            FROM THOSE LEASES OR PROPERTIES, AS ADJUSTED UNDER                                                           
27            AS 43.55.170;                                                                                                
28                      (C)  OIL PRODUCED DURING A MONTH FROM A                                                            
29            LEASE OR PROPERTY IN THE COOK INLET SEDIMENTARY BASIN                                                        
30            IS THE GROSS VALUE AT THE POINT OF PRODUCTION OF THE OIL                                                     
31            TAXABLE UNDER AS 43.55.011(g) AND PRODUCED BY THE                                                            
01            PRODUCER FROM THAT LEASE OR PROPERTY, LESS 1/12 OF THE                                                       
02            PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE                                                     
03            CALENDAR YEAR APPLICABLE TO THE OIL PRODUCED BY THE                                                          
04            PRODUCER FROM THAT LEASE OR PROPERTY, AS ADJUSTED                                                            
05            UNDER AS 43.55.170;                                                                                          
06                      (D)  GAS PRODUCED DURING A MONTH FROM A                                                            
07            LEASE OR PROPERTY IN THE COOK INLET SEDIMENTARY BASIN                                                        
08            IS THE GROSS VALUE AT THE POINT OF PRODUCTION OF THE GAS                                                     
09            TAXABLE UNDER AS 43.55.011(g) AND PRODUCED BY THE                                                            
10            PRODUCER FROM THAT LEASE OR PROPERTY, LESS 1/12 OF THE                                                       
11            PRODUCER'S LEASE EXPENDITURES UNDER AS 43.55.165 FOR THE                                                     
12            CALENDAR YEAR APPLICABLE TO THE GAS PRODUCED BY THE                                                          
13            PRODUCER FROM THAT LEASE OR PROPERTY, AS ADJUSTED                                                            
14            UNDER AS 43.55.170].                                                                                         
15    * Sec. 43. AS 43.55.160(e) is amended to read:                                                                     
16            (e)  Any adjusted lease expenditures under AS 43.55.165 and 43.55.170 that                                   
17       would otherwise be deductible by a producer in a calendar year but whose deduction                                
18       would cause a [AN ANNUAL] production tax value calculated under (a) [(a)(1)] of                           
19       this section of taxable oil or gas produced during the calendar year to be less than                              
20       zero may be used to establish a carried-forward annual loss under AS 43.55.023(b). In                             
21       this subsection, "producer" includes "explorer."                                                                  
22    * Sec. 44. AS 43.55.165(a) is repealed and reenacted to read:                                                      
23            (a)  For purposes of this chapter, a producer's lease expenditures for a calendar                            
24       year are                                                                                                          
25                 (1)  costs, other than items listed in (e) of this section, that are                                    
26                      (A)  incurred in the state by the producer during the calendar                                     
27            year after March 31, 2006, to explore for, develop, or produce oil or gas                                    
28            deposits located within the producer's leases or properties in the state or, in the                          
29            case of land in which the producer does not own an operating right, operating                                
30            interest, or working interest, to explore for oil or gas deposits within other                               
31            land in the state; and                                                                                       
01                      (B)  allowed by the department by regulation, based on the                                         
02            department's determination that the costs satisfy the following three                                        
03            requirements:                                                                                                
04                           (i)  the costs must be incurred upstream of the point of                                      
05                 production of oil and gas;                                                                              
06                           (ii)  the costs must be ordinary and necessary costs of                                       
07                 exploring for, developing, or producing, as applicable, oil or gas                                      
08                 deposits; and                                                                                           
09                           (iii)  the costs must be direct costs of exploring for,                                       
10                 developing, or producing, as applicable, oil or gas deposits; and                                       
11                 (2)  a reasonable allowance for that calendar year, as determined under                                 
12       regulations adopted by the department, for overhead expenses that are directly related                            
13       to exploring for, developing, or producing, as applicable, the oil or gas deposits.                               
14    * Sec. 45. AS 43.55.165(b) is amended to read:                                                                     
15            (b)  For purposes of (a) of this section,                                                                    
16                 (1)  direct costs include                                                                               
17                      (A)  an expenditure, when incurred, to acquire an item if the                                      
18            acquisition cost is otherwise a direct cost, notwithstanding that the                                        
19            expenditure may be required to be capitalized rather than treated as an                                      
20            expense for financial accounting or federal income tax purposes;                                             
21                      (B)  payments of or in lieu of property taxes, sales and use                                       
22            taxes, motor fuel taxes, and excise taxes;                                                                   
23                      [(C)  A REASONABLE ALLOWANCE, AS DETERMINED                                                        
24            UNDER REGULATIONS ADOPTED BY THE DEPARTMENT, FOR                                                             
25            OVERHEAD EXPENSES DIRECTLY RELATED TO EXPLORING FOR,                                                         
26            DEVELOPING, AND PRODUCING OIL OR GAS DEPOSITS LOCATED                                                        
27            WITHIN LEASES OR PROPERTIES OR OTHER LAND IN THE STATE;]                                                     
28                 (2)  an activity does not need to be physically located on, near, or                                    
29       within the premises of the lease or property within which an oil or gas deposit being                             
30       explored for, developed, or produced is located in order for the cost of the activity to                          
31       be a cost upstream of the point of production of the oil or gas;                                              
01                 (3)  in determining whether costs are lease expenditures, the                                       
02       department may consider, among other factors, the                                                             
03                      (A)  typical industry practices and standards in the state                                     
04            that determine the costs, other than items listed in (e) of this section, that                           
05            an operator is allowed to bill a producer that is not the operator, under                                
06            unit operating agreements or similar operating agreements that were in                                   
07            effect before December 2, 2005, and were subject to negotiation with at                                  
08            least one producer with substantial bargaining power, other than the                                     
09            operator; and                                                                                            
10                      (B)  standards adopted by the Department of Natural                                            
11            Resources that determine the costs, other than items listed in (e) of this                               
12            section, that a lessee is allowed to deduct from revenue in calculating net                              
13            profits under a lease issued under AS 38.05.180(f)(3)(B), (D), or (E).                                   
14    * Sec. 46. AS 43.55.165(e) is amended to read:                                                                     
15            (e)  For purposes of this section, lease expenditures do not include                                         
16                 (1)  depreciation, depletion, or amortization;                                                          
17                 (2)  oil or gas royalty payments, production payments, lease profit                                     
18       shares, or other payments or distributions of a share of oil or gas production, profit, or                        
19       revenue;                                                                                                          
20                 (3)  taxes based on or measured by net income;                                                          
21                 (4)  interest or other financing charges or costs of raising equity or                                  
22       debt capital;                                                                                                     
23                 (5)  acquisition costs for a lease or property or exploration license;                                  
24                 (6)  costs arising from fraud, wilful misconduct, [OR] gross                                            
25       negligence, criminal negligence, violation of law, including a violation of 33                                
26       U.S.C. 1319(c)(1) or 1321(b)(3) (Clean Water Act), or failure to comply with an                               
27       obligation under a lease, permit, or license issued by the state or federal                                   
28       government;                                                                                                   
29                 (7)  fines or penalties imposed by law;                                                                 
30                 (8)  costs of arbitration, litigation, or other dispute resolution activities                           
31       that involve the state or concern the rights or obligations among owners of interests                             
01       in, or rights to production from, one or more leases or properties or a unit;                                     
02                 (9)  costs incurred in organizing a partnership, joint venture, or other                                
03       business entity or arrangement;                                                                                   
04                 (10)  amounts paid to indemnify the state; the exclusion provided by                                    
05       this paragraph does not apply to the costs of obtaining insurance or a surety bond                                
06       from a third-party insurer or surety;                                                                             
07                 (11)  surcharges levied under AS 43.55.201 or 43.55.300;                                                
08                 (12)  an expenditure incurred for a transaction that is an internal                                 
09       transfer or is otherwise not an arm's length transaction, unless the producer                                 
10       establishes to the satisfaction of the department that the expenditure is not                                 
11       [EXPENDITURES INCURRED THAT ARE] in excess of fair market value;                                                  
12                 (13)  an expenditure incurred to purchase an interest in any                                            
13       corporation, partnership, limited liability company, business trust, or any other                                 
14       business entity, whether or not the transaction is treated as an asset sale for federal                           
15       income tax purposes;                                                                                              
16                 (14)  a tax levied under AS 43.55.011;                                                                  
17                 (15)  [THE PORTION OF] costs incurred for dismantlement, removal,                                       
18       surrender, or abandonment of a facility, pipeline, well pad, platform, or other                                   
19       structure, or for the restoration of a lease, field, unit, area, tract of land, body of                       
20       water, or right-of-way in conjunction with dismantlement, removal, surrender, or                                  
21       abandonment [, THAT IS ATTRIBUTABLE TO PRODUCTION OF OIL OR GAS                                                   
22       OCCURRING BEFORE APRIL 1, 2006; THE PORTION IS CALCULATED AS A                                                    
23       RATIO OF THE AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF                                                      
24       OIL EQUIVALENT, ASSOCIATED WITH THE FACILITY, PIPELINE, WELL                                                      
25       PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY                                                    
26       OF WATER, OR RIGHT-OF-WAY OCCURRING BEFORE APRIL 1, 2006, TO                                                      
27       THE TOTAL AMOUNT OF OIL AND GAS PRODUCTION, IN BARRELS OF                                                         
28       OIL EQUIVALENT, ASSOCIATED WITH THAT FACILITY, PIPELINE, WELL                                                     
29       PAD, PLATFORM, OTHER STRUCTURE, LEASE, FIELD, UNIT, AREA, BODY                                                    
30       OF WATER, OR RIGHT-OF-WAY THROUGH THE END OF THE CALENDAR                                                         
31       MONTH BEFORE COMMENCEMENT OF THE DISMANTLEMENT,                                                                   
01       REMOVAL, SURRENDER, OR ABANDONMENT]; a cost is not excluded under                                                 
02       this paragraph if the dismantlement, removal, surrender, or abandonment for which                                 
03       the cost is incurred is undertaken for the purpose of replacing, renovating, or                                   
04       improving the facility, pipeline, well pad, platform, or other structure; [FOR THE                                
05       PURPOSES OF THIS PARAGRAPH, "BARREL OF OIL EQUIVALENT" MEANS                                                      
06                      (A)  IN THE CASE OF OIL, ONE BARREL;                                                               
07                      (B)  IN THE CASE OF GAS, 6,000 CUBIC FEET;]                                                        
08                 (16)  costs incurred for containment, control, cleanup, or removal in                                   
09       connection with any unpermitted release of oil or a hazardous substance and any                                   
10       liability for damages imposed on the producer or explorer for that unpermitted                                    
11       release; this paragraph does not apply to the cost of developing and maintaining an oil                           
12       discharge prevention and contingency plan under AS 46.04.030;                                                     
13                 (17)  costs incurred to satisfy a work commitment under an exploration                                  
14       license under AS 38.05.132;                                                                                       
15                 (18)  that portion of expenditures, that would otherwise be qualified                                   
16       capital expenditures, as defined in AS 43.55.023 [AS 43.55.023(k)], incurred during a                     
17       calendar year that are less than the product of $0.30 multiplied by the total taxable                             
18       production from each lease or property, in BTU equivalent barrels, during that                                    
19       calendar year, except that, when a portion of a calendar year is subject to this                                  
20       provision, the expenditures and volumes shall be prorated within that calendar year;                          
21                 (19)  costs incurred to construct, acquire, or operate a refinery or                                
22       crude oil topping plant, regardless of whether the products of the refinery or                                
23       topping plant are used in oil or gas exploration, development, or production                                  
24       operations; however, if a producer owns a refinery or crude oil topping plant                                 
25       that is located on or near the premises of the producer's lease or property in the                            
26       state and that processes the producer's oil produced from that lease or property                              
27       into a product that the producer uses in the operation of the lease or property in                            
28       drilling for or producing oil or gas, the producer's lease expenditures include the                           
29       amount calculated by subtracting from the fair market value of the product used                               
30       the prevailing value, as determined under AS 43.55.020(f), of the oil that is                                 
31       processed;                                                                                                    
01                 (20)  costs of lobbying, public relations, public relations                                         
02       advertising, or policy advocacy.                                                                              
03    * Sec. 47. AS 43.55.165(h) is amended to read:                                                                     
04            (h)  The department shall adopt regulations that provide for reasonable                                      
05       methods of allocating costs between oil and gas, between gas subject to                                       
06       AS 43.55.011(o) and other gas, and between leases or properties in those                                      
07       circumstances where an allocation of costs is required to determine [THE                                      
08       DETERMINATION OF THE] lease expenditures that are costs of exploring for,                                     
09       developing, or producing oil deposits or costs of exploring for, developing, or                               
10       producing gas deposits [APPLICABLE TO OIL OR TO GAS], or that are costs of                                
11       exploring for, developing, or producing oil or gas deposits located within                                    
12       [APPLICABLE TO OIL AND GAS PRODUCED FROM] different leases or                                                     
13       properties [, REQUIRES AN ALLOCATION OF COSTS].                                                                   
14    * Sec. 48. AS 43.55.170(a) is amended to read:                                                                     
15            (a)  A [UNLESS THE PAYMENT OR CREDIT HAS ALREADY BEEN                                                    
16       SUBTRACTED IN CALCULATING BILLABLE OR BILLED COSTS UNDER                                                          
17       AS 43.55.165(c) OR (d), A] producer's lease expenditures under AS 43.55.165 must                                  
18       be adjusted by subtracting payments or credits, other than tax credits, received by the                           
19       producer or by an operator acting for the producer for                                                            
20                 (1)  the use by another person of a production facility in which the                                    
21       producer has an ownership interest or the management by the producer of a                                         
22       production facility under a management agreement providing for the producer to                                    
23       receive a management fee;                                                                                         
24                 (2)  a reimbursement or similar payment that offsets the producer's                                     
25       lease expenditures, including an insurance recovery from a third-party insurer and a                              
26       payment from the state or federal government for reimbursement of the producer's                                  
27       upstream costs, including costs for gathering, separating, cleaning, dehydration,                                 
28       compressing, or other field handling associated with the production of oil or gas                                 
29       upstream of the point of production;                                                                              
30                 (3)  the sale or other transfer of                                                                      
31                      (A)  an asset, including geological, geophysical, or well data or                                  
01            interpretations, acquired by the producer as a result of a lease expenditure or                              
02            an expenditure that would be a lease expenditure if it were incurred after                                   
03            March 31, 2006; for purposes of this subparagraph,                                                           
04                           (i)  if a producer removes from the state, for use outside                                    
05                 the state, an asset described in this subparagraph, the value of the asset                              
06                 at the time it is removed is considered a payment received by the                                       
07                 producer for sale or transfer of the asset;                                                             
08                           (ii)  for a transaction that is an internal transfer or is                                    
09                 otherwise not an arm's length transaction, if the sale or transfer of the                               
10                 asset is made for less than fair market value, the amount subtracted                                    
11                 must be the fair market value; and                                                                      
12                      (B)  oil or gas                                                                                    
13                           (i)  that is not considered produced from a lease or                                          
14                 property under AS 43.55.020(e); and                                                                     
15                           (ii)  the cost of acquiring which is a lease expenditure                                      
16                 incurred by the person that acquires the oil or gas.                                                    
17    * Sec. 49. AS 43.55 is amended by adding a new section to article 4 to read:                                       
18            Sec. 43.55.890. Disclosure of tax information. Subject to AS 40.25.100 and                                 
19       AS 43.05.230(e), the department may publish the following information under this                                  
20       chapter, if aggregated among three or more producers or explorers, showing by month                               
21       or calendar year and by lease or property, unit, or area of the state:                                            
22                 (1)  the amount of oil or gas production;                                                               
23                 (2)  the amount of taxes levied under this chapter or paid under this                                   
24       chapter;                                                                                                          
25                 (3)  the effective tax rates under this chapter;                                                        
26                 (4)  the gross value of oil or gas at the point of production;                                          
27                 (5)  the transportation costs for oil or gas;                                                           
28                 (6)  qualified capital expenditures as defined in AS 43.55.023;                                         
29                 (7)  exploration expenditures under AS 43.55.025;                                                       
30                 (8)  production tax values of oil or gas under AS 43.55.160;                                            
31                 (9)  lease expenditures under AS 43.55.165;                                                             
01                 (10)  adjustments to lease expenditures under AS 43.55.170;                                             
02                 (11)  tax credits applicable or potentially applicable against taxes                                    
03       levied by this chapter.                                                                                           
04    * Sec. 50. AS 43.55.900 is amended by adding new paragraphs to read:                                               
05                 (22)  "producer" means an owner of an operating right, operating                                        
06       interest, or working interest in a mineral interest in oil or gas;                                                
07                 (23)  "progressivity tax rate" means that part of the tax rate in                                       
08       AS 43.55.011(g) that exceeds 22.5 percent;                                                                        
09                 (24)  "unit" means a group of tracts of land that is                                                    
10                      (A)  subject to a cooperative or a unit plan of development or                                     
11            operation that has been certified by the commissioner of natural resources                                   
12            under AS 38.05.180(p);                                                                                       
13                      (B)  subject to a cooperative or a unit plan of development or                                     
14            operation that has been certified by the United States Secretary of the Interior                             
15            under 30 U.S.C. 226(m);                                                                                      
16                      (C)  subject to an agreement of the owners of interests in the                                     
17            tracts of land to validly integrate their interests to provide for the unitized                              
18            management, development, and operation of the tracts of land as a unit, within                               
19            the meaning of AS 31.05.110(a); or                                                                           
20                      (D)  within the unit area of a unit created by order of the                                        
21            Alaska Oil and Gas Conservation Commission under AS 31.05.110(b);                                            
22                 (25)  "used in the state" means delivered for consumption as fuel in the                                
23       state, including as fuel consumed to generate electricity.                                                        
24    * Sec. 51. AS 43.55.160(c), 43.55.165(c), and 43.55.165(d) are repealed.                                           
25    * Sec. 52. The uncodified law of the State of Alaska is amended by adding a new section to                         
26 read:                                                                                                                   
27       APPLICABILITY. (a) Sections 14 - 35, 37, 42 - 48, and 51 of this Act apply to oil                                 
28 and gas produced after December 31, 2007.                                                                               
29       (b)  Sections 35 and 37 of this Act apply to statements and reports under                                         
30 AS 43.55.030(a), as amended by sec. 35 of this Act, and AS 43.55.030(e) and (f), as added                               
31 by sec. 37 of this Act, required to be filed after December 31, 2007.                                                   
01       (c)  Sections 28 - 31 and 33 of this Act apply to exploration expenditures incurred for                           
02 work performed after December 31, 2006, that are the basis of tax credits that may be                                   
03 claimed against taxes levied for oil and gas produced after December 31, 2007.                                          
04       (d)  AS 43.55.055, enacted by sec. 39 of this Act, applies to understatements made                                
05 after the effective date of sec. 39 of this Act.                                                                        
06       (e)  AS 43.55.075(a), enacted by sec. 40 of this Act, applies to any tax liability under                          
07 AS 43.55 with respect to which the period of limitations on assessment under AS 43.05.260                               
08 had not expired before the effective date of secs. 13 and 40 of this Act.                                               
09       (f)  The penalty in AS 43.55.030(d), enacted by the amendment to AS 43.55.030(d) in                               
10 sec. 36 of this Act, applies to any report required to be filed after the effective date of sec. 36                     
11 of this Act that is not filed timely.                                                                                   
12       (g)  The penalty in AS 43.55.040(6), enacted by the amendment to AS 43.55.040 in                                  
13 sec. 38 of this Act, applies to any report, statement, or other document required to be filed                           
14 after the effective date of sec. 38 of this Act.                                                                      
15    * Sec. 53. The uncodified law of the State of Alaska is amended by adding a new section to                         
16 read:                                                                                                                   
17       OIL AND GAS AUDITORS; CLASSIFICATION AND PAY PLANS.                                                               
18 Notwithstanding AS 39.25.150(2), the Department of Administration shall develop and                                     
19 implement a distinct position classification plan and a distinct pay plan for oil and gas                               
20 auditors and their immediate supervisors that perform                                                                   
21            (1)  production tax audits in the Department of Revenue;                                                     
22            (2)  royalty audits, including net profit share audits, in the Department of                                 
23 Natural Resources.                                                                                                      
24    * Sec. 54. The uncodified law of the State of Alaska is amended by adding a new section to                         
25 read:                                                                                                                   
26       TRANSITION: DEPARTMENT OF NATURAL RESOURCES REGULATIONS.                                                          
27 Notwithstanding any contrary provision of AS 44.62.240, a regulation adopted by the                                     
28 Department of Natural Resources to implement, interpret, make specific, or otherwise carry                              
29 out statutory provisions for the administration of oil and gas leases issued under                                      
30 AS 38.05.180(f)(3)(B), (D), or (E), to the extent the regulation deals with the treatment of oil                        
31 and gas production taxes in determining net profits under those leases, may apply                                       
01 retroactively to April 1, 2006, if the Department of Natural Resources expressly designates in                          
02 the regulation that the regulation applies retroactively to that date.                                                  
03    * Sec. 55. The uncodified law of the State of Alaska is amended by adding a new section to                         
04 read:                                                                                                                   
05       TRANSITION: REGULATIONS. The Department of Natural Resources and the                                              
06 Department of Revenue may proceed to adopt regulations to implement this Act. The                                       
07 regulations take effect under AS 44.62 (Administrative Procedure Act), but not before the                               
08 effective date of the law implemented by the regulation.                                                                
09    * Sec. 56. Sections 14 - 35, 37, 42 - 48, and 51 of this Act take effect January 1, 2008.                          
10    * Sec. 57. Except as provided in sec. 56 of this Act, this Act takes effect immediately under                      
11 AS 01.10.070(c).                                                                                                        
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