24th Legislature(2005-2006)
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00 CS FOR SENATE BILL NO. 2001(FIN)
01 "An Act relating to the production tax on oil and gas and to conservation surcharges on
02 oil; relating to criminal penalties for violating conditions governing access to and use of
03 confidential information relating to the production tax; amending the definition of 'gas'
04 as that definition applies in the Alaska Stranded Gas Development Act; making
05 conforming amendments; and providing for an effective date."
06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:
07 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section
08 to read:
09 LEGISLATIVE INTENT. (a) It is the intent of the legislature through sec. 11 of this
10 Act to confirm by clarification the long-standing interpretation of AS 43.55.020(f) by the
11 Department of Revenue.
12 (b) It is the intent of the legislature that the division or other unit of the Department of
13 Environmental Conservation assigned responsibility for administration of the programs under
01 AS 46.08 that are principally supported by the conservation surcharges on oil levied under
02 AS 43.55.201 - 43.55.299 and 43.55.300 - 43.55.310
03 (1) reduce program costs, including personnel costs, as necessary to operate
04 within the revenue anticipated to be generated by those surcharges, in the amounts of those
05 surcharges as amended by secs. 26 and 28 of this Act; and
06 (2) request appropriations for exceptional program needs and expansions
07 beyond what can be provided from the estimated amounts collected from those surcharges
08 from alternative funding sources.
09 * Sec. 2. AS 43.05.230(f) is amended to read:
10 (f) A wilful violation of the provisions of this section or of a condition
11 imposed under AS 43.55.040(1)(B) is punishable by a fine of not more than $5,000,
12 or by imprisonment for not more than two years, or by both.
13 * Sec. 3. AS 43.20.031(c) is amended to read:
14 (c) In computing the tax under this chapter, the taxpayer is not entitled to
15 deduct any taxes based on or measured by net income. The taxpayer may deduct the
16 tax levied and paid under AS 43.55.
17 * Sec. 4. AS 43.20.072(b) is amended to read:
18 (b) A taxpayer's business income to be apportioned under this section to the
19 state shall be the federal taxable income of the taxpayer's consolidated business for the
20 tax period, except that
21 (1) taxes based on or measured by net income that are deducted in the
22 determination of the federal taxable income shall be added back; the tax levied and
23 paid under AS 43.55 may not be added back;
24 (2) intangible drilling and development costs that are deducted as
25 expenses under 26 U.S.C. 263(c) (Internal Revenue Code) in the determination of the
26 federal taxable income shall be capitalized and depreciated as if the option to treat
27 them as expenses under 26 U.S.C. 263(c) (Internal Revenue Code) had not been
28 exercised;
29 (3) depletion deducted on the percentage depletion basis under 26
30 U.S.C. 613 (Internal Revenue Code) in the determination of the federal taxable income
31 shall be recomputed and deducted on the cost depletion basis under 26 U.S.C. 612
01 (Internal Revenue Code); and
02 (4) depreciation shall be computed on the basis of 26 U.S.C. 167
03 (Internal Revenue Code) as that section read on June 30, 1981.
04 * Sec. 5. AS 43.55.011 is amended by adding new subsections to read:
05 (e) There is levied on the producer of oil or gas a tax for all oil and gas
06 produced each month from each lease or property in the state, less any oil and gas the
07 ownership or right to which is exempt from taxation or constitutes a landowner's
08 royalty interest. Except as otherwise provided under (i) of this section, the tax is equal
09 to 22.5 percent of the production tax value of the taxable oil and gas as calculated
10 under AS 43.55.160.
11 (f) There is levied on the producer of oil or gas a tax for all oil and gas
12 produced each month from each lease or property in the state the ownership or right to
13 which constitutes a landowner's royalty interest, except for oil and gas the ownership
14 or right to which is exempt from taxation. The provisions of this subsection apply to a
15 landowner's royalty interest as follows:
16 (1) the rate of tax levied on oil is equal to five percent of the gross
17 value at the point of production of the oil;
18 (2) the rate of tax levied on gas is equal to 1.667 percent of the gross
19 value at the point of production of the gas;
20 (3) if the department determines that, for purposes of reducing the
21 producer's tax liability under (1) or (2) of this subsection, the producer has received or
22 will receive consideration from the royalty owner offsetting all or a part of the
23 producer's royalty obligation, other than a deduction under AS 43.55.020(d) of the
24 amount of a tax paid,
25 (A) notwithstanding (1) of this subsection, the tax is equal to
26 (i) for oil that is produced from a lease or property in
27 the Cook Inlet sedimentary basin, five percent of the gross value at the
28 point of production of the oil;
29 (ii) for oil, except oil described in (i) of this
30 subparagraph, 22.5 percent of the gross value at the point of production
31 of the oil; and
01 (B) notwithstanding (2) of this subsection, for gas the tax is
02 equal to 11.25 percent of the gross value at the point of production of the gas.
03 (g) In addition to the taxes levied under (e) and (f) of this section, during each
04 month for which the price index determined under (h) of this section is greater than
05 zero, there is levied on the producer of oil or gas a tax for all oil and gas produced
06 during that month from each lease or property in the state, less any oil and gas the
07 ownership or right to which is exempt from taxation or constitutes a landowner's
08 royalty interest. Except as otherwise provided under (i) of this section, the tax levied
09 under this subsection is equal to .1 percent of the production tax value of the taxable
10 oil and gas as calculated under AS 43.55.160, multiplied by the price index
11 determined under (h) of this section. However, application of this subsection may not,
12 when added to the tax levied under (e) of this section, impose a tax levy of more than
13 50 percent of the production tax value of taxable oil and gas as calculated under
14 AS 43.55.160.
15 (h) For purposes of (g) of this section, the price index for a month is calculated
16 by subtracting 35 from the number that is equal to the quotient of the production tax
17 value of the taxable oil and gas produced during that month, as calculated under
18 AS 43.55.160, divided by the sum of (1) the number of barrels of that oil less three-
19 quarters of the number of barrels of the taxable oil produced during that month from
20 leases or properties in the Cook Inlet sedimentary basin, and (2) two-thirds of the
21 number of barrels of oil equivalent of that gas, less (A) one-sixth of the number of
22 barrels of oil equivalent of the taxable gas produced during that month from leases or
23 properties in the state located south of 68 degrees 15 minutes North latitude outside
24 the Cook Inlet sedimentary basin, and less (B) one-third of the number of barrels of oil
25 equivalent of the taxable gas produced during that month from leases or properties in
26 the Cook Inlet sedimentary basin. For purposes of this subsection, "barrel of oil
27 equivalent" means the amount of gas that has an energy content of 6,000,000 British
28 thermal units. The department by regulation shall establish sampling, testing, and
29 averaging methods for determining the energy content of a producer's gas produced
30 during a month.
31 (i) For a month that ends before April 1, 2021, the total tax levied by (e) and
01 (g) of this section on gas produced from a lease or property in the Cook Inlet
02 sedimentary basin may not exceed
03 (1) for a lease or property that first commenced commercial production
04 of gas before April 1, 2006, the product obtained by multiplying (A) the amount of gas
05 produced during that month from the lease or property, times (B) the average rate of
06 tax that was imposed under this chapter on gas produced from the lease or property for
07 the 12-month period ending on March 31, 2006, times (C) the average prevailing value
08 for gas delivered in the Cook Inlet area for the 12-month period ending March 31,
09 2006, as determined by the department under AS 43.55.020(f);
10 (2) for a lease or property that first commences commercial production
11 of gas after March 31, 2006, the product obtained by multiplying (A) the amount of
12 gas produced during that month from the lease or property, times (B) the average rate
13 of tax that was imposed under this chapter on gas produced from all leases or
14 properties in the Cook Inlet sedimentary basin for the 12-month period ending on
15 March 31, 2006, times (C) the average prevailing value for gas delivered in the Cook
16 Inlet area for the 12-month period ending March 31, 2006, as determined by the
17 department under AS 43.55.020(f).
18 * Sec. 6. AS 43.55.017(a) is amended to read:
19 (a) Except as provided in this chapter, the taxes imposed by this chapter are in
20 place of all taxes now imposed by the state or any of its municipalities, and neither the
21 state nor a municipality may impose a tax on [UPON]
22 (1) producing oil or gas leases;
23 (2) oil or gas produced or extracted in the state;
24 (3) the value of intangible drilling and development costs, as
25 described in 26 U.S.C. 263(c) (Internal Revenue Code), as amended through
26 January 1, 1974 [EXPLORATION EXPENSES].
27 * Sec. 7. AS 43.55.020(a) is repealed and reenacted to read:
28 (a) Ninety-five percent of the total tax levied by AS 43.55.011(e) - (g), net of
29 any credits applied under this chapter, is due on the last day of each calendar month on
30 oil and gas produced from each lease or property during the preceding month. The
31 remaining portion of the tax levied by AS 43.55.011(e) - (g), net of any credits applied
01 under this chapter, is due on March 31 of the year following the calendar year during
02 which the oil and gas were produced. An unpaid amount of tax that is not paid when
03 due in accordance with this subsection becomes delinquent. An overpayment of tax
04 with respect to a month may be applied against the tax due for any later month.
05 Notwithstanding any contrary provision of AS 43.05.280, interest on an overpayment
06 is allowed only from a date that is 90 days after the later of (1) the March 31 described
07 in this subsection, or (2) the date that the statement required under AS 43.55.030(a)
08 and (e) to be filed on or before that March 31 is filed. Interest is not allowed if the
09 overpayment was refunded within the 90-day period.
10 * Sec. 8. AS 43.55.020(b) is amended to read:
11 (b) The production tax on oil and [OR] gas shall be paid by or on behalf of the
12 producer.
13 * Sec. 9. AS 43.55.020(d) is amended to read:
14 (d) In making settlement with the royalty owner for oil and gas that is
15 taxable under AS 43.55.011, the producer may deduct the amount of the tax paid on
16 taxable royalty oil and [OR] gas, or may deduct taxable royalty oil or gas equivalent
17 in value at the time the tax becomes due to the amount of the tax paid. Unless
18 otherwise agreed between the producer and the royalty owner, the amount of the
19 tax paid under AS 43.55.011(e) and (g) on taxable royalty oil and gas for a month,
20 other than oil and gas the ownership or right to which constitutes a landowner's
21 royalty interest, is considered to be the gross value at the point of production of
22 the taxable royalty oil and gas produced during the month multiplied by a figure
23 that is a quotient, in which
24 (1) the numerator is the producer's total tax liability under
25 AS 43.55.011(e) and (g) for the month of production; and
26 (2) the denominator is the total gross value at the point of
27 production of the oil and gas taxable under AS 43.55.011(e) and (g) produced by
28 the producer from all leases and properties in the state during the month.
29 * Sec. 10. AS 43.55.020(e) is repealed and reenacted to read:
30 (e) Gas flared, released, or allowed to escape in excess of the amount
31 authorized by the Alaska Oil and Gas Conservation Commission is considered, for the
01 purpose of AS 43.55.011 - 43.55.180, as gas produced from a lease or property. Oil or
02 gas used in the operation of a lease or property in the state in drilling for or producing
03 oil or gas, or for repressuring, except to the extent determined by the Alaska Oil and
04 Gas Conservation Commission to be waste, is not considered, for the purpose of
05 AS 43.55.011 - 43.55.180, as oil or gas produced from a lease or property.
06 * Sec. 11. AS 43.55.020(f) is amended to read:
07 (f) If oil or gas is produced but not sold, or if oil or gas is produced and
08 sold under circumstances where the sale price does not represent the prevailing value
09 for oil or gas of like kind, character, or quality in the field or area from which the
10 product is produced, the department may require the tax to be paid upon the basis of
11 the value of oil or gas of the same kind, quality, and character prevailing for that field
12 or area during the calendar month of production or sale [FOR THAT FIELD OR
13 AREA].
14 * Sec. 12. AS 43.55 is amended by adding a new section to read:
15 Sec. 43.55.024. Tax credits for certain losses and expenditures. (a) A
16 producer or explorer may take a tax credit for a qualified capital expenditure as
17 follows:
18 (1) notwithstanding that a qualified capital expenditure may be a
19 deductible lease expenditure for purposes of calculating the production tax value of oil
20 and gas under AS 43.55.160(a), unless a credit for that expenditure is taken under
21 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025,
22 (A) a producer or explorer that incurs a qualified capital
23 expenditure may also elect to take a tax credit against a tax due under
24 AS 43.55.011(e) in the amount of 20 percent of that expenditure;
25 (B) for a calendar year for which the producer makes an
26 election under AS 43.55.160(f), instead of taking a tax credit at a rate
27 authorized by (A) of this paragraph as to each separate qualified capital
28 expenditure after it has been incurred, a producer that incurs a qualified capital
29 expenditure during that year and that wishes to apply a credit based on that
30 expenditure against a tax due under AS 43.55.011(e) shall calculate and apply
31 every month an annualized tax credit in an amount equal to 1 2/3 percent of the
01 total qualified capital expenditures incurred during that year and for which the
02 tax credit is taken for that year;
03 (2) a producer or explorer may take a credit for a qualified capital
04 expenditure incurred in connection with geological or geophysical exploration or in
05 connection with an exploration well only if the producer or explorer provides to the
06 department, as part of the statement required under AS 43.55.030(a) for the month for
07 which the credit is sought to be taken, the producer's or explorer's written agreement
08 (A) to notify the Department of Natural Resources, within 30
09 days after completion of the geological or geophysical data processing or
10 completion of the well, or within 30 days after the statement is filed, whichever
11 is the latest, of the date of completion and to submit a report to that department
12 describing the processing sequence and provide a list of data sets available;
13 (B) to provide to the Department of Natural Resources, within
14 30 days after the date of a request, specific data sets, ancillary data, and reports
15 identified in (A) of this paragraph;
16 (C) that, notwithstanding any provision of AS 38, the
17 Department of Natural Resources shall hold confidential the information
18 provided to that department under this paragraph for 10 years following the
19 completion date, after which the department shall publicly release the
20 information after 30 days' public notice.
21 (b) A producer or explorer may elect to take a tax credit in the amount of 22.5
22 percent of a carried-forward annual loss. A credit under this subsection may be applied
23 against a tax due under AS 43.55.011(e) and may be applied irrespective of whether
24 the producer or explorer also claims a credit for transitional investment expenditures
25 authorized by (j) of this section. For purposes of this subsection, a carried-forward
26 annual loss is the amount of a producer's or explorer's adjusted lease expenditures
27 under AS 43.55.160 for a previous calendar year that was not deductible in any month
28 under AS 43.55.160(a) and (b).
29 (c) A credit or portion of a credit under this section may not be used to reduce
30 a person's tax liability under AS 43.55.011(e) for any month below zero, and any
31 unused credit or portion of a credit not used under this subsection may be applied in a
01 later month.
02 (d) Except as limited by (j) of this section, a person entitled to take a tax credit
03 under this section that wishes to transfer the unused credit to another person may
04 apply to the department for a transferable tax credit certificate. An application under
05 this subsection must be on a form prescribed by the department and must include
06 supporting information and documentation that the department reasonably requires.
07 The department shall grant or deny an application, or grant an application as to a lesser
08 amount than that claimed and deny it as to the excess, not later than 60 days after the
09 latest of (1) March 31 of the year following the calendar year in which the qualified
10 capital expenditure or carried-forward annual loss for which the credit is claimed was
11 incurred; (2) if the applicant is required under AS 43.55.030(a) and (e) to file a
12 statement on or before March 31 of the year following the calendar year in which the
13 qualified capital expenditures or carried-forward annual loss for which the credit is
14 claimed was incurred, the date the statement was filed; or (3) the date the application
15 was received by the department. If, based on the information then available to it, the
16 department is reasonably satisfied that the applicant is entitled to a credit, the
17 department shall issue the applicant a transferable tax credit certificate for the amount
18 of the credit. A certificate issued under this subsection does not expire.
19 (e) A person to which a transferable tax credit certificate is issued under (d) of
20 this section may transfer the certificate to another person, and a transferee may further
21 transfer the certificate. Subject to the limitations set out in (a) - (c) of this section, and
22 notwithstanding any action the department may take with respect to the applicant
23 under (g) of this section, the owner of a certificate may apply the credit or a portion of
24 the credit shown on the certificate only against a tax due under AS 43.55.011(e).
25 However, a credit shown on a transferable tax credit certificate may not be applied to
26 reduce a transferee's total tax due under AS 43.55.011(e) on oil and gas produced
27 during a calendar year to less than 80 percent of the tax that would otherwise be due
28 without applying that credit. Any portion of a credit not used under this subsection
29 may be applied in a later period.
30 (f) Under standards established in regulations adopted by the department and
31 subject to appropriations made by law, the department, on the written application of
01 the person to whom a transferable tax credit has been issued under (d) of this section
02 and whose average amount of oil and gas produced a day taxable under
03 AS 43.55.011(e) is not more than 50,000 barrels of oil equivalent a day for the
04 preceding calendar year, shall issue a cash refund, in whole or in part, for the
05 certificate if the department finds
06 (1) after investigation and audit of the tax credit claim by the
07 department, that the applicant is entitled to the credit to the extent of the refund
08 amount;
09 (2) within 24 months after having applied for the transferable tax credit
10 certificate, that the applicant incurred a qualified capital expenditure or was the
11 successful bidder on a bid submitted for a lease on state land under AS 38.05.180(f);
12 (3) that the amount of the refund would not exceed the total of
13 qualified capital expenditures and successful bids described in (2) of this subsection
14 that have not been the subject of a finding made under this paragraph for purposes of a
15 previous refund;
16 (4) that the applicant does not have an outstanding liability to the state
17 for unpaid delinquent taxes under this title; and
18 (5) that the sum of the amount of the refund applied for and amounts
19 previously refunded to the applicant during the calendar year under this subsection
20 would not exceed $25,000,000.
21 (g) The issuance of a transferable tax credit certificate under (d) of this section
22 does not limit the department's ability to later audit a tax credit claim to which the
23 certificate relates or to adjust the claim if the department determines that the applicant
24 was not entitled to the amount of the credit for which the certificate was issued. The
25 tax liability of the applicant under AS 43.55.011(e) and 43.55.017 - 43.55.180 is
26 increased by the amount of the credit that exceeds that to which the applicant was
27 entitled, or the applicant's available valid outstanding credits applicable against the tax
28 levied by AS 43.55.011(e) are reduced by that amount. If the applicant's tax liability is
29 increased under this subsection, the increase bears interest under AS 43.05.225 from
30 the date the transferable tax credit certificate was issued. For purposes of this
31 subsection, an applicant that is an explorer is considered a producer subject to the tax
01 levied by AS 43.55.011(e).
02 (h) The department may adopt regulations to carry out the purposes of this
03 section, including prescribing reporting, record keeping, and certification procedures
04 and requirements to verify the accuracy of credits claimed and to ensure that a credit is
05 not used more than once, and otherwise implementing this section.
06 (i) A person may not elect to take a tax credit under (a) or (j) of this section for
07 an expenditure incurred to acquire an asset (1) the cost of previously acquiring which
08 was a lease expenditure under AS 43.55.160(c) or would have been a lease
09 expenditure under AS 43.55.160(c) if it had been incurred on or after April 1, 2006; or
10 (2) that has previously been placed in service in the state. An expenditure to acquire an
11 asset is not excluded under this subsection if not more than an immaterial portion of
12 the asset meets a description under (1) or (2) of this subsection. For purposes of this
13 subsection, "asset" includes geological, geophysical, and well data and interpretations.
14 (j) For the purposes of this section,
15 (1) a producer's or explorer's transitional investment expenditures are
16 the sum of the expenditures the producer or explorer incurred on or after April 1,
17 2001, and before April 1, 2006, that would be qualified capital expenditures if they
18 were incurred on or after April 1, 2006, less the sum of the payments or credits the
19 producer or explorer received before April 1, 2006, for the sale or other transfer of
20 assets, including geological, geophysical, or well data or interpretations, acquired by
21 the producer or explorer as a result of expenditures the producer or explorer incurred
22 before April 1, 2006, that would be qualified capital expenditures, if they were
23 incurred on or after April 1, 2006;
24 (2) a producer or explorer may elect to take a tax credit against a tax
25 due under AS 43.55.011(e) in the amount of 20 percent of the producer's or explorer's
26 transitional investment expenditures, but only to the extent that the amount does not
27 exceed
28 (A) one-half of the producer's or explorer's qualified capital
29 expenditures that are incurred during the month for which the credit is taken, if
30 the producer or explorer does not make an election under AS 43.55.160(f);
31 (B) 1/24 of the producer's or explorer's qualified capital
01 expenditures that are incurred during the calendar year that includes the month
02 for which the credit is taken, if the producer or explorer makes an election
03 under AS 43.55.160(f);
04 (3) a producer or explorer may not take a tax credit for a transitional
05 investment expenditure
06 (A) for any month that ends the later of
07 (i) April 30, 2013; or
08 (ii) the seventh anniversary of the last day of the month
09 for which the producer first applies a credit under this subsection
10 against a tax due under AS 43.55.011(e), if the producer did not have
11 commercial production of oil or gas from a lease or property in the state
12 before April 1, 2006;
13 (B) more than once; or
14 (C) if a credit for that expenditure was taken under
15 AS 38.05.180(i), AS 41.09.010, AS 43.20.043, or AS 43.55.025;
16 (4) notwithstanding (d), (e), and (g) of this section, a producer or
17 explorer may not transfer a tax credit or obtain a transferable tax credit certificate for a
18 transitional investment expenditure.
19 (k) As a condition of receiving a tax credit under this section, a producer or
20 explorer that obtains the tax credit for or directly related to a pipeline, facility, or other
21 asset that is or becomes subject to regulation by the Federal Energy Regulatory
22 Commission or the Regulatory Commission of Alaska, or a successor regulatory body
23 shall at all times support and in all rate proceedings file to flow through 100 percent of
24 the tax credits to ratepayers as a reduction in the costs of service for the pipeline,
25 facility, or other asset.
26 (l) In this section,
27 (1) "barrel of oil equivalent" means one barrel, in the case of oil, or
28 6,000 cubic feet, in the case of gas;
29 (2) "qualified capital expenditure" means, except as otherwise
30 provided in (i) of this section, an expenditure that is a lease expenditure under
31 AS 43.55.160 and is
01 (A) incurred for geological or geophysical exploration; or
02 (B) treated as a capitalized expenditure under 26 U.S.C.
03 (Internal Revenue Code), as amended, regardless of elections made under 26
04 U.S.C. 263(c) (Internal Revenue Code), as amended, and is
05 (i) treated as a capitalized expenditure for federal
06 income tax reporting purposes by the person incurring the expenditure;
07 or
08 (ii) eligible to be deducted as an expense under 26
09 U.S.C. 263(c) (Internal Revenue Code), as amended.
10 * Sec. 13. AS 43.55.025(a) is amended to read:
11 (a) Subject to the terms and conditions of this section, [ON OIL AND GAS
12 PRODUCED ON OR AFTER JULY 1, 2004, FROM AN OIL AND GAS LEASE,
13 OR ON GAS PRODUCED FROM A GAS ONLY LEASE,] a credit against the
14 production tax due under AS 43.55.011(e) [THIS CHAPTER] is allowed for
15 exploration expenditures that qualify under (b) of this section in an amount equal to
16 one of the following:
17 (1) 20 percent of the total exploration expenditures that qualify only
18 under (b) and (c) of this section;
19 (2) 20 percent of the total exploration expenditures for work performed
20 before July 1, 2007, and that qualify only under (b) and (d) of this section;
21 (3) 40 percent of the total exploration expenditures that qualify under
22 (b), (c), and (d) of this section; or
23 (4) 40 percent of the total exploration expenditures that qualify only
24 under (b) and (e) of this section.
25 * Sec. 14. AS 43.55.025(b) is amended to read:
26 (b) To qualify for the production tax credit under (a) of this section, an
27 exploration expenditure must be incurred for work performed on or after July 1, 2003,
28 and before July 1, 2016 [2007], except that an exploration expenditure for a Cook Inlet
29 prospect must be incurred for work performed on or after July 1, 2005, [AND
30 BEFORE JULY 1, 2010, AND EXCEPT THAT AN EXPLORATION
31 EXPENDITURE, IN WHOLE OR IN PART, SOUTH OF 68 DEGREES, 15
01 MINUTES, NORTH LATITUDE, AND NOT PART OF A COOK INLET
02 PROSPECT MUST BE INCURRED FOR WORK PERFORMED ON OR AFTER
03 JULY 1, 2003, AND BEFORE JULY 1, 2010,] and
04 (1) may be for seismic or geophysical exploration costs not connected
05 with a specific well;
06 (2) if for an exploration well,
07 (A) must be incurred by an explorer that holds an interest in the
08 exploration well for which the production tax credit is claimed;
09 (B) may be for either an oil or gas discovery well or a dry hole;
10 and
11 (C) must be for goods, services, or rentals of personal property
12 reasonably required for the surface preparation, drilling, casing, cementing,
13 and logging of an exploration well, and, in the case of a dry hole, for the
14 expenses required for abandonment if the well is abandoned within 18 months
15 after the date the well was spudded;
16 (3) may not be for testing, stimulation, or completion costs;
17 administration, supervision, engineering, or lease operating costs; geological or
18 management costs; community relations or environmental costs; bonuses, taxes, or
19 other payments to governments related to the well; or other costs that are generally
20 recognized as indirect costs or financing costs; and
21 (4) may not be incurred for an exploration well or seismic exploration
22 that is included in a plan of exploration or a plan of development for any unit on
23 May 13, 2003.
24 * Sec. 15. AS 43.55.025(f) is amended to read:
25 (f) For a production tax credit under this section,
26 (1) an explorer shall, in a form prescribed by the department and
27 within six months of the completion of the exploration activity, claim the credit and
28 submit information sufficient to demonstrate to the department's satisfaction that the
29 claimed exploration expenditures qualify under this section;
30 (2) an explorer shall agree, in writing,
31 (A) to notify the Department of Natural Resources, within 30
01 days after completion of seismic or geophysical data processing, completion of
02 a well, or filing of a claim for credit, whichever is the latest, for which
03 exploration costs are claimed, of the date of completion and submit a report to
04 that department describing the processing sequence and providing a list of data
05 sets available; if, under (c)(2)(B) of this section, an explorer submits a claim
06 for a credit for expenditures for an exploration well that is located within three
07 miles of a well already drilled for oil and gas, in addition to the submissions
08 required under (1) of this subsection, the explorer shall submit the information
09 necessary for the commissioner of natural resources to evaluate the validity of
10 the explorer's claim that the well is directed at a distinctly separate exploration
11 target, and the commissioner of natural resources shall, upon receipt of all
12 evidence sufficient for the commissioner to evaluate the explorer's claim, make
13 that determination within 60 days;
14 (B) to provide to the Department of Natural Resources, within
15 30 days after the date of a request, specific data sets, ancillary data, and reports
16 identified in (A) of this paragraph;
17 (C) that, notwithstanding any provision of AS 38, information
18 provided under this paragraph will be held confidential by the Department of
19 Natural Resources for 10 years following the completion date, at which time
20 that department will release the information after 30 days' public notice;
21 (3) if more than one explorer holds an interest in a well or seismic
22 exploration, each explorer may claim an amount of credit that is proportional to the
23 explorer's cost incurred;
24 (4) the department may exercise the full extent of its powers as though
25 the explorer were a taxpayer under this title, in order to verify that the claimed
26 expenditures are qualified exploration expenditures under this section; and
27 (5) if the department is satisfied that the explorer's claimed
28 expenditures are qualified under this section, the department shall issue to the explorer
29 a production tax credit certificate for the amount of credit to be allowed against
30 production taxes due under AS 43.55.011(e) [THIS CHAPTER; HOWEVER,
31 NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, THE
01 DEPARTMENT MAY NOT ISSUE TO AN EXPLORER A PRODUCTION TAX
02 CREDIT CERTIFICATE IF THE TOTAL OF PRODUCTION TAX CREDITS
03 SUBMITTED FOR COOK INLET PRODUCTION, BASED ON EXPLORATION
04 EXPENDITURES FOR WORK PERFORMED DURING THE PERIOD
05 DESCRIBED IN (b) OF THIS SECTION FOR THAT PRODUCTION, THAT HAVE
06 BEEN APPROVED BY THE DEPARTMENT EXCEEDS $20,000,000].
07 * Sec. 16. AS 43.55.025(h) is amended to read:
08 (h) A producer that purchases a production tax credit certificate may apply the
09 credits against its production tax liability under AS 43.55.011(e) [THIS CHAPTER].
10 Regardless of the price the producer paid for the certificate, the producer may receive
11 a credit against its production tax liability for the full amount of the credit, but for not
12 more than the amount for which the certificate is issued. A production tax credit
13 allowed under this section may not be applied more than once.
14 * Sec. 17. AS 43.55.025(i) is amended to read:
15 (i) For a production tax credit under this section,
16 (1) the amount of the credit that may be applied against the production
17 tax for each tax month may not exceed the total production tax liability under
18 AS 43.55.011(e) of the taxpayer applying the credit for the same month; and
19 (2) an amount of the production tax credit that is greater than the total
20 tax liability under AS 43.55.011(e) of the taxpayer applying the credit for a tax month
21 may be carried forward and applied against the taxpayer's production tax liability
22 under AS 43.55.011(e) in one or more immediately following months.
23 * Sec. 18. AS 43.55.030(a) is amended to read:
24 (a) The tax shall be paid to the department, and the person paying the tax shall
25 file with the department at the time the tax or a portion of the tax is required to be
26 paid a statement, under oath, on forms prescribed by or acceptable to the department,
27 giving, with other information required, the following:
28 (1) a description of each [THE] lease or property from which the oil
29 and [OR] gas were [WAS] produced, by name, legal description, lease number, or
30 [BY] accounting codes [CODE NUMBERS] assigned by the department;
31 (2) the names of the producer and the person paying the tax;
01 (3) the gross amount of oil and the gross amount of [OR] gas
02 produced from each [THE] lease or property, and the percentage of the gross amount
03 of oil and gas owned by each producer for whom the tax is paid;
04 (4) the gross [TOTAL] value at the point of production of the oil
05 and of the [OR] gas produced from each [THE] lease or property owned by each
06 producer for whom the tax is paid; [AND]
07 (5) the name of the first purchaser and the price received for the oil
08 and for the [OR] gas, unless relieved from this requirement in whole or in part by
09 the department; and
10 (6) the producer's lease expenditures and adjustments as
11 calculated under AS 43.55.160 [IF SOLD IN THE STATE].
12 * Sec. 19. AS 43.55.030(d) is amended to read:
13 (d) Reports by or on behalf of the producer are delinquent the first day
14 following the day the tax is due. [EACH PRODUCER IS SUBJECT TO A PENALTY
15 OF $25 A DAY FOR EACH LEASE OR PROPERTY UPON WHICH THE
16 REPORT IS NOT FILED. THE PENALTY FOR FAILURE TO FILE A REPORT IS
17 IN ADDITION TO THE PENALTY FOR DELINQUENT TAXES, AND IS A LIEN
18 AGAINST THE ASSETS OF THE PRODUCER.]
19 * Sec. 20. AS 43.55.030 is amended by adding a new subsection to read:
20 (e) In addition to other required information, the statement required to be filed
21 on or before March 31 of a year must show any adjustments or corrections to the
22 statements that were required under (a) of this section to be filed for the months of the
23 preceding calendar year during which the oil or gas was produced.
24 * Sec. 21. AS 43.55.040 is amended to read:
25 Sec. 43.55.040. Powers of Department of Revenue. Except as provided in
26 AS 43.05.405 - 43.05.499, the department may
27 (1) require a person engaged in production and the agent or employee
28 of the person, and the purchaser of oil or gas, or the owner of a royalty interest in oil
29 or gas to furnish, whether by the filing of regular statements or reports or
30 otherwise, additional information that is considered by the department as necessary to
31 compute the amount of the tax; notwithstanding any contrary provision of law, the
01 disclosure of additional information under this paragraph to the producer
02 obligated to pay the tax does not violate AS 40.25.100(a) or AS 43.05.230(a);
03 before disclosing information under this paragraph that is otherwise required to
04 be held confidential under AS 40.25.100(a) or AS 43.05.230(a), the department
05 shall
06 (A) provide the person that furnished the information a
07 reasonable opportunity to be heard regarding the proposed disclosure and
08 the conditions to be imposed under (B) of this paragraph; and
09 (B) impose appropriate conditions limiting
10 (i) access to the information to those legal counsel,
11 consultants, employees, officers, and agents of the producer who
12 have a need to know that information for the purpose of
13 determining or contesting the producer's tax obligation; and
14 (ii) the use of the information to use for that
15 purpose;
16 (2) examine the books, records, and files of such a person;
17 (3) conduct hearings and compel the attendance of witnesses and the
18 production of books, records, and papers of any person; and
19 (4) make an investigation or hold an inquiry that is considered
20 necessary to a disclosure of the facts as to
21 (A) the amount of production from any oil or gas location, or of
22 a company or other producer of oil or gas; and
23 (B) the rendition of the oil and gas for taxing purposes.
24 * Sec. 22. AS 43.55.080 is amended to read:
25 Sec. 43.55.080. Collection and deposit of revenue. Except as otherwise
26 provided under art. IX, sec. 17, Constitution of the State of Alaska, the [THE]
27 department shall deposit in the general fund the money collected by it under
28 AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150].
29 * Sec. 23. AS 43.55.135 is amended to read:
30 Sec. 43.55.135. Measurement. For the purposes of AS 43.55.011 - 43.55.180
31 [AS 43.55.011 - 43.55.150], oil is [SHALL BE] measured in terms of a "barrel of oil"
01 and gas is [SHALL BE] measured in terms of a "cubic foot of gas."
02 * Sec. 24. AS 43.55.150(a) is amended to read:
03 (a) For the purposes of AS 43.55.011 - 43.55.180 [AS 43.55.011 - 43.55.150],
04 the gross value at the point of production is [SHALL BE] calculated using the
05 reasonable costs of transportation of the oil or gas. The reasonable costs of
06 transportation are [SHALL BE] the actual costs, except when the
07 (1) [WHEN THE] parties to the transportation of oil or gas are
08 affiliated;
09 (2) [WHEN THE] contract for the transportation of oil or gas is not an
10 arm's length transaction or is not representative of the market value of that
11 transportation; and
12 (3) [WHEN THE] method of transportation of oil or gas is not
13 reasonable in view of existing alternative methods of transportation.
14 * Sec. 25. AS 43.55 is amended by adding new sections to article 1 to read:
15 Sec. 43.55.160. Determination of production tax value of oil and gas. (a)
16 Except as provided in (f) of this section, for purposes of AS 43.55.011(e) and (g), the
17 production tax value of the taxable oil and gas produced during a month, other than
18 gas produced from leases or properties in the Cook Inlet sedimentary basin, is (1) the
19 total of (A) the gross value at the point of production of the oil taxable under
20 AS 43.55.011(e) and (g) and produced by the producer from all leases or properties in
21 the state, less three-quarters of the gross value at the point of production of the oil
22 taxable under AS 43.55.011(e) and (g) and produced by the producer from leases or
23 properties in the Cook Inlet sedimentary basin, and (B) two-thirds of the gross value at
24 the point of production of the gas taxable under AS 43.55.011(e) and (g) and produced
25 by the producer from all leases or properties in the state outside the Cook Inlet
26 sedimentary basin, less one-sixth of the gross value at the point of production of the
27 gas taxable under AS 43.55.011(e) and (g) and produced by the producer from all
28 leases or properties in the state located south of 68 degrees 15 minutes North latitude
29 outside the Cook Inlet sedimentary basin, (2) less the producer's lease expenditures for
30 the month as adjusted under (e) of this section, other than lease expenditures
31 applicable to gas produced from leases or properties in the Cook Inlet sedimentary
01 basin. Except as provided in (f) of this section, for purposes of AS 43.55.011(e) and
02 (g), the production tax value of the taxable gas produced during a month from leases
03 or properties in the Cook Inlet sedimentary basin is one-third of the gross value at the
04 point of production of the gas taxable under AS 43.55.011(e) and (g) and produced by
05 the producer from those leases or properties, less the producer's lease expenditures for
06 the month applicable to gas produced from leases or properties in the Cook Inlet
07 sedimentary basin, as adjusted under (e) of this section. However, a production tax
08 value calculated under this subsection may not be less than zero. If a producer does
09 not produce taxable oil or gas during a month, the producer is considered to have
10 generated a positive production tax value if a calculation described in this subsection
11 yields a positive number because the producer's adjusted lease expenditures for a
12 month are less than zero as a result of the producer's receiving a payment or credit
13 under (e) of this section or otherwise.
14 (b) For purposes of administration of (a) of this section,
15 (1) any adjusted lease expenditures that would otherwise be deductible
16 in a month but whose deduction would cause a production tax value calculated under
17 (a) of this section of taxable oil or gas produced during the month to be less than zero
18 may be added to the producer's adjusted lease expenditures for one or more other
19 months in the same calendar year; the total of any adjusted lease expenditures that are
20 not deductible in any month during a calendar year because their deduction would
21 cause a production tax value calculated under (a) of this section of taxable oil or gas
22 produced during one or more months to be less than zero may be used to establish a
23 carried-forward annual loss under AS 43.55.024(b);
24 (2) an explorer that has taken a tax credit under AS 43.55.024(b) or
25 that has obtained a transferable tax credit certificate under AS 43.55.024(d) for the
26 amount of a tax credit under AS 43.55.024(b) is considered a producer, subject to the
27 tax levied under AS 43.55.011(e), to the extent that the explorer generates a positive
28 production tax value as the result of the explorer's receiving a payment or credit
29 described in (e) of this section.
30 (c) For purposes of this section,
31 (1) a producer's lease expenditures for a period are the costs upstream
01 of the point of production of oil and gas that are incurred on or after April 1, 2006, by
02 the producer during the period and that are direct and ordinary and necessary costs of
03 exploring for, developing, or producing oil or gas deposits located within the
04 producer's leases or properties in the state or, in the case of land in which the producer
05 does not own a working interest, direct and ordinary and necessary costs of exploring
06 for oil or gas deposits located within other land in the state; in determining whether
07 costs are direct and ordinary and necessary costs of exploring for, developing, or
08 producing oil or gas deposits located within a lease or property or other land in the
09 state,
10 (A) the department shall give substantial weight to the typical
11 industry practices and standards in the state that determine the costs that an
12 operator is allowed to bill a working interest owner that is not the operator,
13 under unit operating agreements or similar operating agreements that were in
14 effect on or before December 1, 2005, and were subject to negotiation with at
15 least one working interest owner with substantial bargaining power, other than
16 the operator; and
17 (B) as to matters that are not addressed by the industry
18 practices and standards described in (A) of this paragraph or as to which those
19 practices and standards are not clear or are not uniform, the department shall
20 give substantial weight to the standards adopted by the Department of Natural
21 Resources that determine the costs, other than interest, that a lessee is allowed
22 to deduct from revenue in calculating net profits under a lease issued under
23 AS 38.05.180(f)(3)(B), (D), or (E);
24 (2) the Department of Revenue may authorize a producer, including a
25 producer that is an operator, to treat as its lease expenditures under this section the
26 costs paid by the producer that are billed to the producer by an operator in accordance
27 with the terms of a unit operating agreement or similar operating agreement if the
28 Department of Revenue finds that
29 (A) the pertinent provisions of the operating agreement are
30 substantially consistent with the Department of Revenue's determinations and
31 standards otherwise applicable under this subsection; and
01 (B) at least one working interest owner party to the agreement,
02 other than the operator, has substantial incentive and ability to effectively audit
03 billings under the agreement;
04 (3) an activity does not need to be physically located on, near, or
05 within the premises of the lease or property within which an oil or gas deposit being
06 explored for, developed, or produced is located in order for the cost of the activity to
07 be a cost upstream of the point of production of the oil or gas;
08 (4) the lease expenditures that are applicable to gas produced from
09 leases or properties in the Cook Inlet sedimentary basin and the lease expenditures that
10 are applicable to oil and other gas shall be determined under regulations adopted by
11 the department that provide for reasonable methods of allocating costs between oil and
12 gas and between the Cook Inlet sedimentary basin and the rest of the state;
13 (5) "direct costs" include
14 (A) an expenditure, when incurred, to acquire an item if the
15 acquisition cost is otherwise a direct cost, notwithstanding that the expenditure
16 may be required to be capitalized rather than treated as an expense for financial
17 accounting or federal income tax purposes;
18 (B) payments of or in lieu of property taxes, sales and use
19 taxes, motor fuel taxes, and excise taxes;
20 (C) a reasonable allowance, as determined under regulations
21 adopted by the department, for overhead expenses directly related to exploring
22 for, developing, and producing oil or gas deposits located within leases or
23 properties or other land in the state.
24 (d) For purposes of (c) of this section, lease expenditures do not include
25 (1) depreciation, depletion, or amortization;
26 (2) oil or gas royalty payments, production payments, lease profit
27 shares, or other payments or distributions of a share of oil or gas production, profit, or
28 revenue;
29 (3) taxes based on or measured by net income;
30 (4) interest or other financing charges or costs of raising equity or debt
31 capital;
01 (5) acquisition costs for a lease or property or exploration license;
02 (6) costs arising from fraud, wilful misconduct, or gross negligence;
03 (7) fines or penalties imposed by law;
04 (8) costs of arbitration, litigation, or other dispute resolution activities
05 that involve the state or concern the rights or obligations among owners of interests in,
06 or rights to production from, one or more leases or properties or a unit;
07 (9) donations;
08 (10) costs incurred in organizing a partnership, joint venture, or other
09 business entity or arrangement;
10 (11) amounts paid to indemnify the state; the exclusion provided by
11 this paragraph does not apply to the costs of obtaining insurance or a surety bond from
12 a third-party insurer or surety;
13 (12) surcharges levied under AS 43.55.201 or 43.55.300;
14 (13) for a transaction that is an internal transfer or is otherwise not an
15 arm's length transaction, expenditures incurred that are in excess of fair market value;
16 (14) an expenditure incurred to purchase an interest in any corporation,
17 partnership, limited liability company, business trust, or any other business entity,
18 whether or not the transaction is treated as an asset sale for federal income tax
19 purposes;
20 (15) a tax levied under AS 43.55.011;
21 (16) the portion of costs incurred for dismantlement, removal,
22 surrender, or abandonment of a facility, pipeline, well pad, platform, or other
23 structure, or for the restoration of a lease, field, unit, area, body of water, or right-of-
24 way in conjunction with dismantlement, removal, surrender, or abandonment, that is
25 attributable to production of oil or gas occurring before April 1, 2006; the portion is
26 calculated as a ratio of the amount of oil and gas production associated with the
27 facility, pipeline, well pad, platform, or other structure, lease, field, unit, area, body of
28 water, or right-of-way occurring before April 1, 2006, to the total amount of oil and
29 gas production associated with that facility, pipeline, well pad, platform, or other
30 structure, lease, field, unit, area, body of water, or right-of-way through the end of the
31 calendar month before commencement of the dismantlement, removal, surrender, or
01 abandonment; for purposes of the ratio calculated under this paragraph, 6,000 cubic
02 feet of gas is considered to be equivalent to one barrel of oil; a cost is not excluded
03 under this paragraph if the dismantlement, removal, surrender, or abandonment for
04 which the cost is incurred is undertaken for the purpose of replacing, renovating, or
05 improving the facility, pipeline, well pad, platform, or other structure;
06 (17) losses or damages resulting from an unpermitted oil discharge that
07 is not confined to a gravel pad, or costs to contain, clean up, or remediate such an
08 unpermitted oil discharge to the extent that those costs exceed the routine costs of
09 operation for a producer or explorer that would otherwise be incurred as lease
10 expenditures in the absence of the unpermitted oil discharge; this paragraph does not
11 apply to the cost of developing and maintaining an oil discharge prevention and
12 contingency plan under AS 46.04.030;
13 (18) costs incurred to satisfy a work commitment under an exploration
14 license under AS 38.05.132.
15 (e) Unless the payment or credit has already been subtracted in calculating
16 billed costs under (c)(2) of this section, a producer's lease expenditures must be
17 adjusted by subtracting certain payments or credits received by the producer or by an
18 operator acting for the producer, as provided in this subsection. If one or more
19 payments or credits subject to this subsection are received by a producer or by an
20 operator acting for the producer during a month or, under (f) of this section, during a
21 calendar year, and if either the total amount of the payments or credits exceeds the
22 amount of the producer's lease expenditures or the producer has no lease expenditures,
23 the producer shall nevertheless subtract those payments or credits from the lease
24 expenditures or from zero, respectively, and the producer's adjusted lease expenditures
25 for that month or calendar year are a negative number and shall be applied to the
26 calculation under (a) of this section as a negative number. The payments or credits that
27 a producer shall subtract from the producer's lease expenditures, or from zero, under
28 this subsection are payments or credits, other than tax credits, received by the producer
29 or by an operator acting for the producer for
30 (1) the use by another person of a production facility in which the
31 producer has an ownership interest or the management by the producer of a production
01 facility under a management agreement providing for the producer to receive a
02 management fee;
03 (2) a reimbursement or similar payment that offsets the producer's
04 lease expenditures, including an insurance recovery from a third-party insurer and a
05 payment from the state or federal government for reimbursement of the producer's
06 upstream costs, including costs for gathering, separating, cleaning, dehydration,
07 compressing, or other field handling associated with the production of oil or gas
08 upstream of the point of production;
09 (3) the sale or other transfer of
10 (A) an asset, including geological, geophysical, or well data or
11 interpretations, acquired by the producer as a result of a lease expenditure or an
12 expenditure that would be a lease expenditure if it were incurred on or after
13 April 1, 2006; for purposes of this subparagraph,
14 (i) if a producer removes from the state, for use outside
15 the state, an asset described in this subparagraph, the value of the asset
16 at the time it is removed is considered a payment received by the
17 producer for sale or transfer of the asset;
18 (ii) for a transaction that is an internal transfer or is
19 otherwise not an arm's length transaction, if the sale or transfer of the
20 asset is made for less than fair market value, the amount subtracted
21 must be the fair market value; and
22 (B) oil or gas
23 (i) that is not considered produced from a lease or
24 property under AS 43.55.020(e); and
25 (ii) the cost of acquiring which is a lease expenditure
26 incurred by the person that acquires the oil or gas.
27 (f) In place of the adjusted lease expenditures for a month under (a) of this
28 section, a producer may, at any time, elect to substitute, for every month of a calendar
29 year, 1/12 of the producer's adjusted lease expenditures for the calendar year. An
30 election made under this subsection applies to the calculation of the tax under
31 AS 43.55.011(e) and (g).
01 (g) The department shall specify or approve a reasonable allocation method
02 for determining the portion of a cost that is appropriately treated as a lease expenditure
03 under (c) of this section if a cost that would otherwise constitute a lease expenditure
04 under (c) of this section is incurred to explore for, develop, or produce
05 (1) both an oil or gas deposit located within land outside the state and
06 an oil or gas deposit located within a lease or property, or other land, in the state; or
07 (2) an oil or gas deposit located partly within land outside the state and
08 partly within a lease or property, or other land, in the state.
09 (h) For purposes of AS 43.55.024(a) and (b) and only as to expenditures
10 incurred to explore for an oil or gas deposit located within land in which an explorer
11 does not own a working interest, the term "producer" in (b), (c), and (e) of this section
12 includes "explorer."
13 (i) The department may adopt regulations that establish additional standards
14 necessary to carrying out the purposes of this section, including the incorporation of
15 the concepts of 26 U.S.C. 482 (Internal Revenue Code), as amended, the related or
16 accompanying regulations of that section, and any ruling or guidance issued by the
17 United States Internal Revenue Service that relates to that section.
18 (j) For purposes of this section,
19 (1) "explore" includes conducting geological or geophysical
20 exploration, including drilling a stratigraphic test well;
21 (2) "ordinary and necessary" has the meaning given in 26 U.S.C. 162
22 (Internal Revenue Code), as amended, and regulations adopted under that section;
23 (3) "stratigraphic test well" means a well drilled for the sole purpose of
24 obtaining geological information to aid in exploring for an oil or gas deposit and the
25 target zones of which are located in the state.
26 Sec. 43.55.170. Additional nontransferable tax credit. (a) For a month for
27 which a producer's tax liability under AS 43.55.011(e) exceeds zero before application
28 of any credits under this chapter, a producer that is qualified under (c) of this section
29 may apply a tax credit under this section of up to $1,000,000 against that liability.
30 (b) A producer may not take a tax credit under this section for any month that
31 ends the later of
01 (1) March 31, 2016; or
02 (2) the 10th anniversary of the last day of the month for which the
03 producer first has commercial oil or gas production from at least one lease or property
04 in the state, if the producer did not have commercial oil or gas production from a lease
05 or property in the state before April 1, 2006.
06 (c) On written application by a producer, including any information the
07 department may require, the department shall determine whether the producer
08 qualifies under this section for a calendar year. To qualify under this section, a
09 producer must demonstrate that its operation in the state or its ownership of an interest
10 in a lease or property in the state as a distinct producer entity would not result in the
11 division among multiple producer entities of any production tax liability under
12 AS 43.55.011(e) that would be reasonably expected to be attributed to a single
13 producer entity if the tax credit provision of (a) of this section did not exist.
14 (d) A tax credit authorized by this section may not be applied to reduce a
15 producer's tax liability under AS 43.55.011(e) for any month below zero. An unused
16 portion of a tax credit that could otherwise be applied for a month but whose
17 application would cause the producer's tax liability under AS 43.55.011(e) for the
18 month to be less than zero may be applied for one or more other months in the same
19 calendar year to the extent otherwise allowed under this section.
20 (e) An unused tax credit or portion of a tax credit under this section is not
21 transferable and may not be carried forward to or used in a later calendar year.
22 Sec. 43.55.180. Required reports. (a) The Department of Revenue shall
23 (1) study
24 (A) the effects of the tax rates under AS 43.55.011(f) and of
25 potential changes in those tax rates on state revenue and on oil and gas
26 exploration, development, and production on private land; and
27 (B) the fairness of the tax rates under AS 43.55.011(f) and of
28 potential changes in those tax rates for private landowners; and
29 (2) prepare a report on or before the first day of the 2013 regular
30 session of the legislature on the results of the study made under (1) of this subsection,
31 including a recommendation as to whether those tax rates should be changed; the
01 department shall notify the legislature that the report prepared under this paragraph is
02 available.
03 (b) The Department of Revenue shall
04 (1) study the effects of the credits authorized by AS 43.55.025 and
05 43.55.170 on state revenue, on the encouragement of exploration, development, and
06 production of oil and gas deposits located in the state, and on the encouragement of
07 new entrants into the oil and gas industry in the state; and
08 (2) prepare a report on or before the first day of the 2015 regular
09 session of the legislature on the results of the study made under (1) of this subsection,
10 and shall include with the report a recommendation as to whether the legislature
11 should extend the availability of the credits under AS 43.55.025 and 43.55.170; the
12 department shall notify the legislature that the report prepared under this paragraph is
13 available.
14 * Sec. 26. AS 43.55.201 is amended to read:
15 Sec. 43.55.201. Surcharge levied. (a) Every producer of oil shall pay a
16 surcharge of $.01 [$.02] per barrel of oil produced from each lease or property in the
17 state, less any oil the ownership or right to which is exempt from taxation.
18 (b) The surcharge imposed by (a) of this section is in addition to the tax
19 imposed by AS 43.55.011 and is due on the last day of the month on oil produced
20 from each lease or property during the preceding month. The surcharge [SHALL
21 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 -
22 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.300 -
23 43.55.310.
24 (c) A producer of oil shall make reports of production in the same manner and
25 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 -
26 43.55.150].
27 * Sec. 27. AS 43.55.201 is amended by adding a new subsection to read:
28 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or
29 property is not considered to be produced from a lease or property for purposes of this
30 section.
31 * Sec. 28. AS 43.55.300 is amended to read:
01 Sec. 43.55.300. Surcharge levied. (a) Every producer of oil shall pay a
02 surcharge of $.04 [$.03] per barrel of oil produced from each lease or property in the
03 state, less any oil the ownership or right to which is exempt from taxation.
04 (b) The surcharge imposed by (a) of this section is in addition to the tax
05 imposed by AS 43.55.011 and is due on the last day of the month on oil produced
06 from each lease or property during the preceding month. The surcharge [SHALL
07 BE PAID IN THE SAME MANNER AS THE TAX IMPOSED BY AS 43.55.011 -
08 43.55.150; AND] is in addition to the surcharge imposed by AS 43.55.201 -
09 43.55.231.
10 (c) A producer of oil shall make reports of production in the same manner and
11 under the same penalties as required under AS 43.55.011 - 43.55.180 [AS 43.55.011 -
12 43.55.150].
13 * Sec. 29. AS 43.55.300 is amended by adding a new subsection to read:
14 (d) Oil not considered under AS 43.55.020(e) to be produced from a lease or
15 property is not considered to be produced from a lease or property for purposes of this
16 section.
17 * Sec. 30. AS 43.55.900(6) is repealed and reenacted to read:
18 (6) "gas" means
19 (A) all natural, associated, or casinghead gas;
20 (B) all hydrocarbons that
21 (i) are recovered by mechanical separation of well
22 fluids or by gas processing in a gas processing plant; and
23 (ii) exist in a gaseous phase at the completion of
24 mechanical separation and any gas processing in a gas processing plant;
25 and
26 (C) all other hydrocarbons produced from a well not defined as
27 oil;
28 * Sec. 31. AS 43.55.900(7) is repealed and reenacted to read:
29 (7) "gross value at the point of production" means
30 (A) for oil, the value of the oil at its point of production
31 without deduction of any costs upstream of that point of production;
01 (B) for gas, the value of the gas at its point of production
02 without deduction of any costs upstream of that point of production;
03 * Sec. 32. AS 43.55.900(10) is repealed and reenacted to read:
04 (10) "oil" means
05 (A) crude petroleum oil; and
06 (B) all liquid hydrocarbons that are recovered by mechanical
07 separation of well fluids or by gas processing in a gas processing plant;
08 * Sec. 33. AS 43.55.900 is amended by adding new paragraphs to read:
09 (17) "Cook Inlet sedimentary basin" has the meaning given in
10 regulations adopted to implement AS 38.05.180(f)(4);
11 (18) "explorer" means a person who, in exploring for new oil or gas
12 reserves, incurs expenditures;
13 (19) "gas processing"
14 (A) means processing a gaseous mixture of hydrocarbons
15 (i) by means of absorption, adsorption, externally
16 applied refrigeration, artificial compression followed by adiabatic
17 expansion using the Joule-Thomson effect, or another physical process
18 that is not mechanical separation; and
19 (ii) for the purpose of extracting and recovering liquid
20 hydrocarbons;
21 (B) does not include gas treatment;
22 (20) "gas processing plant" means a facility that
23 (A) extracts and recovers liquid hydrocarbons from a gaseous
24 mixture of hydrocarbons by gas processing; and
25 (B) is located upstream of any gas treatment and upstream of
26 the inlet of any gas pipeline system transporting gas to a market;
27 (21) "gas treatment"
28 (A) means conditioning gas and removing from gas
29 nonhydrocarbon substances for the purpose of rendering the gas acceptable for
30 tender and acceptance into a gas pipeline system;
31 (B) includes incidentally removing liquid hydrocarbons from
01 the gas;
02 (C) does not include
03 (i) dehydration required to facilitate the movement of
04 gas from the well to the point where gas processing takes place;
05 (ii) the scrubbing of liquids from gas to facilitate gas
06 processing;
07 (22) "landowner's royalty interest" means
08 (A) a lessor's royalty interest under an oil and gas lease; or
09 (B) a royalty interest that is
10 (i) held by a surface owner of land from which oil or
11 gas is produced; and
12 (ii) granted in exchange for the right to use the surface
13 of that land or as compensation for damage to the surface of that land;
14 (23) "oil and gas lease" includes an oil and gas lease, a gas only lease,
15 and an oil only lease;
16 (24) "point of production" means
17 (A) for oil, the automatic custody transfer meter or device
18 through which the oil enters into the facilities of a carrier pipeline or other
19 transportation carrier in a condition of pipeline quality; in the absence of an
20 automatic custody transfer meter or device, "point of production" means the
21 mechanism or device to measure the quantity of oil that has been approved by
22 the department for that purpose, through which the oil is tendered and accepted
23 in a condition of pipeline quality into the facilities of a carrier pipeline or other
24 transportation carrier or into a field topping plant;
25 (B) for gas, other than gas described in (C) of this paragraph,
26 that is
27 (i) not subjected to or recovered by mechanical
28 separation or run through a gas processing plant, the first point where
29 the gas is accurately metered;
30 (ii) subjected to or recovered by mechanical separation
31 but not run through a gas processing plant, the first point where the gas
01 is accurately metered after completion of mechanical separation;
02 (iii) run through a gas processing plant, the first point
03 where the gas is accurately metered downstream of the plant;
04 (C) for gas run through an integrated gas processing plant and
05 gas treatment facility that does not accurately meter the gas after the gas
06 processing and before the gas treatment, the first point where gas processing is
07 completed or where gas treatment begins, whichever is further upstream.
08 * Sec. 34. AS 43.55.011(a), 43.55.011(b), 43.55.011(c), 43.55.012, 43.55.013, 43.55.016,
09 43.55.025(k)(1), 43.55.025(k)(3), 43.55.900(1), 43.55.900(8), 43.55.900(11), 43.55.900(12),
10 and 43.55.900(16) are repealed.
11 * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to
12 read:
13 APPLICABILITY. (a) Sections 5, 7 - 10, 12, 13, 15 - 18, 20, 24, 26 - 29, and 30 - 34
14 of this Act and AS 43.55.160 and 43.55.170, enacted by sec. 25 of this Act, apply to oil and
15 gas produced after March 31, 2006.
16 (b) Section 11 of this Act applies to oil and gas produced before, on, or after the
17 effective date of sec. 11 of this Act.
18 * Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to
19 read:
20 TRANSITIONAL PROVISIONS. (a) Notwithstanding any contrary provision of
21 AS 43.55.024(a), enacted by sec. 12 of this Act, for oil and gas produced after March 31,
22 2006, and before January 1, 2007, the phrase "every month an annualized tax credit in an
23 amount equal to 1 2/3 percent" in AS 43.55.024(a)(1)(B), enacted by sec. 12 of this Act, shall
24 be replaced by the phrase "every month during the period April 1, 2006, through
25 December 31, 2006, an annualized tax credit in an amount equal to 2.222 percent."
26 (b) Notwithstanding any contrary provision of AS 43.55.024(e), enacted by sec. 12 of
27 this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007, the
28 phrase "a calendar year" in AS 43.55.024(e), enacted by sec. 12 of this Act, shall be replaced
29 by the phrase "the last nine months of the calendar year."
30 (c) Notwithstanding any contrary provision of AS 43.55.024(j)(2), enacted by sec. 12
31 of this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007,
01 (1) the number "1/24" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of this
02 Act, shall be replaced by the number "1/18";
03 (2) the phrase "calendar year" in AS 43.55.024(j)(2)(B), enacted by sec. 12 of
04 this Act, shall be replaced by the phrase "last nine months of the calendar year."
05 (d) Notwithstanding any contrary provision of AS 43.55.160(f), enacted by sec. 25 of
06 this Act, for oil and gas produced after March 31, 2006, and before January 1, 2007, the
07 phrase "for every month of a calendar year, 1/12 of the producer's adjusted lease expenditures
08 for the calendar year" in AS 43.55.160(f), enacted by sec. 25 of this Act, shall be replaced by
09 the phrase "for each of the last nine months of 2006, one-ninth of the producer's adjusted lease
10 expenditures for that nine-month period."
11 (e) For oil and gas produced before April 1, 2006, the provisions of AS 43.55, and
12 regulations adopted under AS 43.55, that were in effect before April 1, 2006, and that were
13 applicable to the oil and gas continue to apply to that oil and gas.
14 (f) Notwithstanding any contrary provision of AS 43.55.020(a), as repealed and
15 reenacted by sec. 7 of this Act, for oil and gas produced after March 31, 2006, and before the
16 first day of the first month that begins at least 10 months after the effective date of sec. 7 of
17 this Act,
18 (1) the amount of the taxes that would have been levied on the producer by
19 AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on the last day of
20 each calendar month on the oil and gas that was produced from each lease or property during
21 the preceding month;
22 (2) the portion, if any, of the taxes levied by AS 43.55.011(e) - (g), enacted by
23 sec. 5 of this Act, that is due under AS 43.55.020(a), as repealed and reenacted by sec. 7 of
24 this Act, and that remains unpaid, net of any credits applied as allowed by law, is due on the
25 last day of the first month that begins at least 10 months after the effective date of sec. 5 of
26 this Act.
27 (g) Notwithstanding any contrary provision of AS 43.55.030(a), as amended by sec.
28 18 of this Act, for oil and gas produced after March 31, 2006, and before the first day of the
29 first month that begins at least 10 months after the effective date of sec. 18 of this Act, the
30 person paying the tax shall file with the Department of Revenue, at the time an amount of tax
31 is due
01 (1) under (f)(1) of this section, the statement required under former
02 AS 43.55.030(a), as that subsection read on March 31, 2006; and
03 (2) under (f)(2) of this section, the statements required under AS 43.55.030(a),
04 as amended by sec. 18 of this Act.
05 (h) Notwithstanding any contrary provision of AS 43.55.201(a) or (b), as amended by
06 sec. 26 of this Act, or AS 43.55.300(a) or (b), as amended by sec. 28 of this Act, for oil
07 produced after March 31, 2006, and before the first day of the first month that begins at least
08 10 months after the effective date of secs. 26 and 28 of this Act,
09 (1) the amount of the surcharges that would have been imposed on the
10 producer under AS 43.55, as the provisions of that chapter read on March 31, 2006, is due on
11 the last day of each calendar month on oil produced from each lease or property during the
12 preceding month;
13 (2) the portion, if any, of the surcharges imposed under AS 43.55.201(a), as
14 amended by sec. 26 of this Act, and AS 43.55.300(a), as amended by sec. 28 of this Act, and
15 that remains unpaid is due on the last day of the first month that begins at least 10 months
16 after the effective date of secs. 26 and 28 of this Act.
17 (i) Notwithstanding any contrary provision of AS 43.55.201(c), as amended by sec.
18 26 of this Act, or AS 43.55.300(c), as amended by sec. 28 of this Act, for oil produced after
19 March 31, 2006, and before the first day of the first month that begins at least 10 months after
20 the effective date of secs. 26 and 28 of this Act, at the time an amount of surcharge is due
21 (1) under (h)(1) of this section, the producer shall file the report of production
22 required under former AS 43.55.201(c) and 43.55.300(c), as those provisions read on
23 March 31, 2006; and
24 (2) under (h)(2) of this section, the producer shall file the report of production
25 required under AS 43.55.201(c), as amended by sec. 26 of this Act, and AS 43.55.300(c), as
26 amended by sec. 28 of this Act.
27 (j) For purposes of taxes to be calculated and due under (f)(1) of this section and
28 statements to be filed under (g)(1) of this section, regulations that were adopted by the
29 Department of Revenue under AS 43.55, as the provisions of that chapter read on March 31,
30 2006, and that were in effect on that date apply to those taxes and statements.
31 * Sec. 37. The uncodified law of the State of Alaska is amended by adding a new section to
01 read:
02 TRANSITION: RETROACTIVITY OF REGULATIONS. Notwithstanding any
03 contrary provision of AS 44.62.240, a regulation adopted by the Department of Revenue to
04 implement, interpret, make specific, or otherwise carry out the provisions of secs. 5, 7 - 10,
05 12, 13, 15 - 18, 20, 24 - 29, 30 - 34, and 36 of this Act may apply retroactively as of April 1,
06 2006, if the Department of Revenue expressly designates in the regulation that the regulation
07 applies retroactively to that date.
08 * Sec. 38. The uncodified law of the State of Alaska is amended by adding a new section to
09 read:
10 REVISOR'S INSTRUCTION. The revisor of statutes is instructed to change the
11 heading of
12 (1) AS 43.55 from "Oil and Gas Production Taxes and Oil Surcharge" to "Oil
13 and Gas Production Tax and Oil Surcharge";
14 (2) article 1 of AS 43.55 from "Oil and Gas Properties Production Taxes" to
15 "Oil and Gas Production Tax";
16 (3) AS 43.55.011 from "Oil production tax" to "Oil and gas production tax";
17 (4) AS 43.55.025 from "Tax credit for oil and gas exploration or gas only
18 exploration" to "Alternative tax credit for oil and gas exploration";
19 (5) AS 43.55.150 from "Determination of gross value" to "Determination of
20 gross value at the point of production."
21 * Sec. 39. The uncodified law of the State of Alaska is amended by adding a new section to
22 read:
23 RETROACTIVITY OF PROVISIONS OF ACT. Sections 5, 7 - 10, 12, 13, 15 - 18, 24
24 - 29, and 30 - 38 of this Act are retroactive to April 1, 2006.
25 * Sec. 40. This Act takes effect immediately under AS 01.10.070(c).
