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CS FOR SENATE BILL NO. 48(RES)
IN THE LEGISLATURE OF THE STATE OF ALASKA
THIRTY-THIRD LEGISLATURE - FIRST SESSION
BY THE SENATE RESOURCES COMMITTEE
Offered: 5/5/23
Referred: Finance
Sponsor(s): SENATE RULES COMMITTEE BY REQUEST OF THE GOVERNOR
A BILL
FOR AN ACT ENTITLED
"An Act authorizing the Department of Natural Resources to lease land for carbon 1
management purposes; establishing a carbon offset program for state land; authorizing 2
the sale of carbon offset credits; authorizing the use of land and water within the Haines 3
State Forest Resource Management Area for a carbon offset project; authorizing the 4
undertaking of carbon offset projects on land in legislatively designated state forests; 5
relating to oil and gas lease expenditures; and providing for an effective date." 6
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 7
* Section 1. AS 36.30.850(b) is amended by adding a new paragraph to read: 8
(51) contracts between third parties and the Department of Natural 9
Resources under AS 38.95.400 - 38.95.499, unless the Department of Natural 10
Resources elects to use this chapter and announces at the time it solicits a contract that 11
this chapter will apply to the contract. 12
* Sec. 2. AS 37.05.146(c) is amended by adding a new paragraph to read: 13 33-GS1372\S
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(85) revenue from the carbon offset program under AS 38.95.400 - 1
38.95.499. 2
* Sec. 3. AS 38.05.075(a) is amended to read: 3
(a) Except as provided in AS 38.05.035, 38.05.070, 38.05.073, 38.05.081, 4
38.05.082, 38.05.083, 38.05.087, 38.05.102, 38.05.565, 38.05.600, 38.05.810, and this 5
section, when competitive interest has been demonstrated or the commissioner 6
determines that it is in the state's best interests, leasing shall be made at public auction 7
or by sealed bid, at the discretion of the director, to the highest qualified bidder as 8
determined by the commissioner. A bidder may be represented by an attorney or agent 9
at a public auction. In the public notice of a lease to be offered at public auction or by 10
sealed bid, the commissioner shall specify a minimum acceptable bid and the lease 11
compensation method. The lease compensation method shall be designed to maximize 12
the return on the lease to the state and shall be a form of compensation set out in 13
AS 38.05.073(m). An aggrieved bidder may appeal to the commissioner within five 14
days for a review of the determination. The leasing shall be conducted by the 15
commissioner, and the successful bidder shall deposit at the public auction or with the 16
sealed bid the first year's rental or other lease compensation as specified by the 17
commissioner, or that portion of it that the commissioner requires in accordance with 18
the bid. The commissioner shall require, under AS 38.05.860, qualified bidders to 19
deposit a sum equal to any survey or appraisal costs reasonably incurred by another 20
qualified bidder acting in accordance with the regulations of the commissioner or 21
incurred by the department under AS 38.04.045 and AS 38.05.840. If a bidder making 22
a deposit of survey or appraisal costs is determined by the commissioner to be the 23
highest qualified bidder under this subsection, the deposit shall be paid to the 24
unsuccessful bidder who incurred those costs or to the department if the department 25
incurred the costs. All costs for survey and appraisal shall be approved in advance in 26
writing by the commissioner. The commissioner shall immediately issue a receipt 27
containing a description of the land or interest leased, the price bid, and the terms of 28
the lease to the successful qualified bidder. If the receipt is not accepted in writing by 29
the bidder under this subsection, the commissioner may offer the land for lease again 30
under this subsection. A lease, on a form approved by the attorney general, shall be 31 33-GS1372\S
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signed by the successful bidder and by the commissioner. 1
* Sec. 4. AS 38.05 is amended by adding a new section to read: 2
Sec. 38.05.081. Leases of state land for carbon management purposes. (a) 3
The commissioner may lease state land for carbon management purposes. A lease 4
agreement under this section must include land use restrictions and authorizations 5
consistent with the carbon management purpose of the lease. 6
(b) A person may apply to lease land for a carbon management purpose by 7
submitting an application to the department. An application to lease land must include 8
(1) the specific location, description, and amount of land the applicant 9
wants to lease; 10
(2) a detailed summary of the proposed purpose the land will be used 11
for; and 12
(3) additional information and requirements established by the 13
department in regulation, including any application fees. 14
(c) If the director receives two or more applications for the same land, the 15
director shall award the lease to the most qualified applicant. In determining the most 16
qualified applicant, the director shall consider whether the applicant has previous 17
experience with carbon management, the anticipated lease term, how the proposed use 18
would accommodate concurrent use of the land, consistency with existing state area or 19
management plans, and any additional requirement established by the department in 20
regulation. If one or more applicants have proposed different carbon management 21
purposes, the director may evaluate each applicant's proposal and determine which 22
proposed use is more appropriate for the selected state land. An aggrieved applicant 23
may appeal to the commissioner for a review of the director's determination within 20 24
days after receiving notice of the determination. 25
(d) A lease under this section may not exceed a period of 55 years. The lease 26
must contain terms and conditions for performance, including benchmarks, and must 27
require the lessee to make progress toward development or continual maintenance of 28
the leased land sufficient to meet the carbon management purpose of the lease. During
29
the term of the lease, the commissioner shall terminate the lease if 30
(1) the commissioner determines that the land is not being used for the 31 33-GS1372\S
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carbon management purpose approved by the commissioner; or 1
(2) the lessee fails to meet the requirements of the lease and, after 2
being given a reasonable opportunity by the commissioner to comply with the lease, 3
the commissioner determines that the lessee has still failed to comply with the lease. 4
(e) A lessee under this section is not entitled to a preference right to purchase 5
the leased land. 6
(f) Compensation for a lease under this section 7
(1) shall be designed to maximize the return to the state and be a form 8
of compensation provided under AS 38.05.073(m); 9
(2) shall be separately accounted for under AS 37.05.142; and 10
(3) may be used by the legislature to make appropriations to the 11
department to carry out the purposes of this section. 12
(g) The provisions of AS 38.05.070 and 38.05.095 concerning subleasing, 13
assignment, lease renewals, and lease extensions apply to leasing under this section. 14
(h) Before entering into a lease of land under this section, the director must 15
find under AS 38.05.035(e) that leasing the land for the proposed carbon management 16
purpose is in the best interests of the state. The findings must include 17
(1) reasonably foreseeable effects that a project may have on the state 18
or local economy; and 19
(2) anticipated annual revenue that the lease will yield to the state. 20
(i) State land used for carbon management purposes must, to the extent 21
practicable, remain open to the public for access, hunting, fishing, and other generally 22
allowed uses as determined by the department. 23
(j) By February 1 of each year, the commissioner shall prepare a report on the 24
lease agreements entered into under this section, transmit the report to the senate 25
secretary and the chief clerk of the house of representatives, and notify the legislature 26
that the report is available. The report must contain the following information: 27
(1) the number of total leases entered into each fiscal year from the 28
fiscal year ending June 30, 2024, until the present; 29
(2) a complete list of lease information for each ongoing lease that 30
includes 31 33-GS1372\S
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(A) a general description of the location of the lease; 1
(B) the date the lease was executed; 2
(C) the identity of each person on the lease; 3
(D) a summary of the underlying carbon management purpose; 4
(E) the current status of the leased land with regard to the 5
carbon management purpose; 6
(F) the amount of carbon offset credits generated and sold 7
under the lease cumulatively and during the current fiscal year; 8
(G) a summary of the compensation agreed on for the lease and 9
an explanation of how the amount was determined; and 10
(H) the identity of each individual having an ownership interest 11
in an entity on the lease; 12
(3) a complete list of leases that expired or were terminated during the 13
preceding or current fiscal year and the reason the lease expired or was terminated; 14
and 15
(4) a description of the cumulative revenue received by the state from 16
leases, the revenue received by the state from leases during the preceding fiscal year, 17
and the anticipated revenue the state will receive from leases in the current fiscal year. 18
(k) In this section, "carbon management" means a greenhouse gas mitigation 19
measure or nongeologic carbon sequestration project. 20
* Sec. 5. AS 38.05.102 is amended to read: 21
Sec. 38.05.102. Lessee preference. Except for a lease under AS 38.05.081, if 22
[IF] land within a leasehold created under AS 38.05.070 - 38.05.105 is offered for sale 23
or long-term lease at the termination of the existing leasehold, the director may, upon 24
a finding that it is in the best interest of the state, allow a [THE] holder in good 25
standing of the existing [THAT] leasehold to purchase or lease the land for its 26
appraised fair market value at the time of the sale or long-term lease. 27
* Sec. 6. AS 38.95 is amended by adding new sections to read: 28
Article 8. Carbon Offset Program. 29
Sec. 38.95.400. Carbon offset program. (a) A carbon offset program is 30
established in the department to undertake carbon offset projects on state land. 31 33-GS1372\S
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(b) The commissioner shall adopt regulations to implement AS 38.95.400 - 1
38.95.499. 2
(c) Subject to the provisions of AS 38.95.440, the commissioner may enter 3
into a contract with third parties to carry out the purposes of AS 38.95.400 - 4
38.95.499. Under a commission in which a third party sells, markets, or otherwise 5
facilitates a carbon offset project for a percentage of the revenue generated, the cost to 6
the state of the commission may not exceed 30 percent of the revenue generated by the 7
carbon offset project. 8
(d) Nothing in AS 38.95.400 - 38.95.499 may be construed to prevent a 9
private landowner from participating in a registry or exchange or to impose additional 10
legal requirements on a private landowner undertaking the landowner's own carbon 11
offset project. 12
Sec. 38.95.410. Carbon offset project criteria; evaluation; best interest 13
finding. (a) The commissioner shall adopt criteria for evaluation of a proposed carbon 14
offset project on state land. The evaluation criteria must include, if applicable, 15
(1) consideration of a project's baseline and predicted additionality; 16
(2) whether registry protocols, including validation and verification 17
requirements, are consistent with applicable state law; 18
(3) whether a project would be consistent with AS 38.95.400 - 19
38.95.499 and applicable regulations; and 20
(4) reasonably foreseeable effects that a project may have on the state 21
or local economy. 22
(b) Except as otherwise provided in statute or regulation, state land shall be 23
available for carbon offset projects. 24
(c) Legislatively withdrawn land may not be used for a carbon offset project 25
without approval by the legislature or as otherwise provided by law. In this subsection, 26
"legislatively withdrawn land" means land set aside by the legislature under 27
AS 16.20.010 - 16.20.162, 16.20.300 - 16.20.360, AS 41.21, or AS 41.23. 28
(d) A carbon offset project may be undertaken on state land if the director, 29
with the consent of the commissioner, makes a written finding that the project will 30
best serve the interests of the state under AS 38.05.035(e). 31 33-GS1372\S
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(e) A carbon offset project term may not exceed 55 years. 1
(f) State land used for a carbon offset project must remain open to the public 2
for access, hunting, fishing, and other generally allowed uses as determined by the 3
department. 4
Sec. 38.95.420. Registration and sale of carbon offset credits; records. (a) 5
After a written finding under AS 38.95.410(d), the director may enter into an 6
agreement to register the carbon offset project to generate revenue from the sale of 7
carbon offset credits. 8
(b) The department shall maintain records for a carbon offset project 9
undertaken by the department under AS 38.95.400 - 38.95.499 for the project term and 10
any additional amount of time required by the registry. The records must include, for 11
each carbon offset project, 12
(1) the project term; 13
(2) the anticipated annual carbon offset credits that the carbon offset 14
project will yield; 15
(3) registry agreements; and 16
(4) project administration and technical documentation associated with 17
the valuation of baseline, valuation of additionality, project validation, and project 18
verification. 19
Sec. 38.95.430. Carbon offset revenue fund. (a) The carbon offset revenue 20
fund is established as a separate fund outside the general fund for the purpose of 21
providing funding for the carbon offset program. Revenue from the carbon offset 22
program shall be deposited in the carbon offset revenue fund. The carbon offset 23
revenue fund consists of money appropriated to the fund by the legislature and 24
program receipts from the sale of verified carbon offset credits. Appropriations to the 25
fund do not lapse. 26
(b) The commissioner may spend money appropriated to the fund for the 27
purposes of the carbon offset program and to pay the costs of administering the 28
program. 29
Sec. 38.95.440. Legislative approval for contracts over $10,000,000. (a) If 30
the commissioner intends to enter into a contract under AS 38.95.400(c) that has the 31 33-GS1372\S
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potential to exceed $10,000,000 in costs to one of the parties over the life of the 1
contract, the commissioner shall submit the contract to the legislature for approval. 2
The commissioner shall provide a legislative committee any information that the 3
committee requests during its review of the contract. 4
(b) A contract submitted under this section 5
(1) during a regular session may be executed only if the legislature 6
approves the contract by law within 45 days after submission; 7
(2) when the legislature is not in a regular session may be executed 8
only if the legislature approves the contract by law during the first 45 days of the next 9
regular session or during a special session convened to address the contract, whichever 10
occurs first. 11
(c) The cost to a party over the life of a contract includes the 12
(1) value of option provisions; 13
(2) value of known or reasonably foreseeable contract addenda or 14
additional durational terms or time extensions; and 15
(3) combined value of two or more contracts that are reasonably 16
related to one another based on contractor, subject matter, or locale. 17
Sec. 38.95.450. Annual report. By February 1 of each year, the commissioner 18
shall prepare a report on the carbon offset program established in AS 38.95.400 - 19
38.95.499, transmit the report to the senate secretary and the chief clerk of the house 20
of representatives, and notify the legislature that the report is available. The report 21
must contain the following information: 22
(1) a list of all carbon offset projects that are generating or eligible to 23
generate carbon offset credits, or that are in development, that includes 24
(A) a general description of each project location; 25
(B) the date a contract for a project was executed and the 26
duration of the project; 27
(C) the identity of each person who contracted with the state 28
for a project; 29
(D) a summary of each carbon offset project; 30
(E) the status of each carbon offset project; 31 33-GS1372\S
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(F) the amount of carbon offset credits generated and sold 1
cumulatively and anticipated during the current fiscal year for each carbon 2
offset project; 3
(G) for a project that is in development but is not yet generating 4
carbon offset credits, the anticipated timeline for when the project is expected 5
to generate credits; 6
(H) a summary of the monetary compensation agreed on for a 7
contract or project and an explanation of how the amount was determined; and 8
(I) the identity of each individual having an ownership interest 9
in an entity that has contracted with the state for a project; 10
(2) a complete list of projects that expired or were terminated during 11
the preceding or current fiscal year and the reason the project expired or was 12
terminated; 13
(3) a description of revenue generated to the carbon offset revenue 14
fund (AS 38.95.430) cumulatively over the life of the fund, during the preceding fiscal 15
year, and the anticipated revenue that will be generated to the fund in the current fiscal 16
year; and 17
(4) a list of all other individuals or entities with an ongoing contract 18
with the state under AS 38.95.400 - 38.95.499 that includes, for each contract, the 19
term length of the contract, the compensation agreed on under the contract, and a 20
summary of the service or product provided under the contract. 21
Sec. 38.95.499. Definitions. In AS 38.95.400 - 38.95.499, unless the context 22
requires otherwise, 23
(1) "additionality" means the reduction in greenhouse gas emissions or 24
increase in carbon storage represented by a carbon offset project that is in addition to 25
the baseline; 26
(2) "baseline" means the amount of carbon sequestration that would 27
occur if the present situation is maintained in the absence of a carbon offset project; 28
(3) "carbon offset credit" means a transferrable instrument issued by a 29
registry for a validated and verified project that represents an emission reduction of 30
one metric ton of carbon dioxide or other greenhouse gases; 31 33-GS1372\S
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(4) "carbon offset project" includes seaweed farming, afforestation, 1
reforestation, and similar land and resource management measures that mitigate 2
greenhouse gases by increasing the carbon stock on state land; 3
(5) "commissioner" means the commissioner of natural resources; 4
(6) "department" means the Department of Natural Resources; 5
(7) "director" means the director of the division of lands; 6
(8) "greenhouse gas" includes carbon dioxide, methane, nitrous oxide, 7
hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other gases that trap 8
and emit radiant energy in the earth's atmosphere; 9
(9) "project term" means the length of time required by a registry for a 10
carbon offset project to yield carbon offset credits; 11
(10) "registry" means an organization or program that brokers carbon 12
offset credits and develops standardized protocols for 13
(A) registering, validating, and verifying carbon offset projects; 14
and 15
(B) issuing carbon offset credits for validated and verified 16
carbon offset projects; 17
(11) "shoreland" means land covered by nontidal water that is 18
navigable under the laws of the United States up to ordinary highwater mark as 19
modified by accretion, erosion, or reliction; 20
(12) "state land" means all land, including shoreland, tideland, and 21
submerged land, or resources belonging to or acquired by the state; 22
(13) "submerged land" means land that is covered by tidal water 23
between the line of mean low water and seaward to a distance of three geographical 24
miles or further as may be properly claimed by the state; 25
(14) "tideland" means land that is periodically covered by tidal water 26
between the elevation of mean high water and mean low water; 27
(15) "validate" or "validation" means a registry's initial approval of a 28
project plan before verification of the project; 29
(16) "verify" or "verification" means a third party's review of a 30
validated project to confirm the project's greenhouse gas net emission reduction or 31 33-GS1372\S
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removals for the issuance of carbon offset credits by the registry that has validated the 1
project. 2
* Sec. 7. AS 41.15.300 is amended by adding a new subsection to read: 3
(c) The state land and water designated within the Haines State Forest 4
Resource Management Area under AS 41.15.305(a) may be used for a carbon offset 5
project under AS 38.95.400 - 38.95.499. 6
* Sec. 8. AS 41.15.315(d) is amended to read: 7
(d) The state land and water described in AS 41.15.305(a) are closed to sale 8
under state land disposal laws. The commissioner may lease the land described in 9
AS 41.15.305(a) under AS 38.05.070 - 38.05.105 for a purpose consistent with 10
AS 41.15.300(a) and a municipality may select land in the Haines State Forest 11
Resource Management Area under law. The commissioner may manage the land 12
and water described in AS 41.15.305(a) for purposes consistent with AS 38.95.400 13
- 38.95.499. 14
* Sec. 9. AS 41.15.315 is amended by adding a new subsection to read: 15
(e) A carbon offset project under AS 38.95.400 - 38.95.499 undertaken on 16
land identified in AS 41.15.305 must be consistent with the applicable management 17
plan under AS 41.15.320, and the management plan must identify the land appropriate 18
for the carbon offset project. The department may amend a management plan under 19
AS 41.15.320 to allow for a carbon offset project. 20
* Sec. 10. AS 41.17.200 is amended by adding a new subsection to read: 21
(c) A carbon offset project under AS 38.95.400 - 38.95.499 may be 22
undertaken on land identified in AS 41.17.200 - 41.17.230. 23
* Sec. 11. AS 41.17.220 is amended to read: 24
Sec. 41.17.220. Management of state forests. Land within a state forest or 25
within a unit of a state forest shall be managed under 26
(1) the sustained yield principle; 27
(2) this chapter; [AND] 28
(3) a forest management plan prepared by the department; and 29
(4) if applicable, a carbon offset project undertaken by the 30
department under AS 38.95.400 - 38.95.499. 31 33-GS1372\S
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* Sec. 12. AS 41.17.230(a) is amended to read: 1
(a) The commissioner shall prepare a forest management plan consistent with 2
AS 38.04.005 and this chapter for each state forest and for each unit of a state forest to 3
assist in meeting the requirements of this chapter. An operational level forest 4
inventory shall be completed before a forest management plan for the state forest or 5
the unit of a state forest is adopted. The forest management plan shall be adopted, 6
implemented, and maintained within three years of the establishment of a state forest 7
by the legislature. To the extent they are found to be compatible with the primary 8
purpose of state forests under AS 41.17.200, the forest management plan must 9
consider and permit uses of forest land for other [NONTIMBER] purposes, including 10
a carbon offset project under AS 38.95.400 - 38.95.499, recreation, tourism, mining, 11
mineral exploration, mineral leasing, material extraction, consumptive and 12
nonconsumptive uses of wildlife and fish, grazing and other agricultural activities, and 13
other traditional uses. If the commissioner finds that a permitted use is incompatible 14
with one or more other uses in a portion of a state forest, the commissioner shall 15
affirmatively state in the management plan that finding of incompatibility for the 16
specific area where the incompatibility is anticipated to exist and the time period when 17
the incompatibility is anticipated to exist together with the reasons and benefits for 18
each finding. 19
* Sec. 13. AS 41.17.230 is amended by adding a new subsection to read: 20
(g) A carbon offset project undertaken under AS 38.95.400 - 38.95.499 within 21
a state forest must be consistent with the applicable forest management plan, and the 22
applicable forest management plan must identify the land appropriate for the carbon 23
offset project. The department may amend a forest management plan to allow for a 24
carbon offset project. 25
* Sec. 14. AS 43.55.165(e) is amended to read: 26
(e) For purposes of this section, lease expenditures do not include 27
(1) depreciation, depletion, or amortization; 28
(2) oil or gas royalty payments, production payments, lease profit 29
shares, or other payments or distributions of a share of oil or gas production, profit, or 30
revenue, except that a producer's lease expenditures applicable to oil and gas produced 31 33-GS1372\S
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from a lease issued under AS 38.05.180(f)(3)(B), (D), or (E) include the share of net 1
profit paid to the state under that lease; 2
(3) taxes based on or measured by net income; 3
(4) interest or other financing charges or costs of raising equity or debt 4
capital; 5
(5) acquisition costs for a lease or property or exploration license; 6
(6) costs arising from fraud, wilful misconduct, gross negligence, 7
violation of law, or failure to comply with an obligation under a lease, permit, or 8
license issued by the state or federal government; 9
(7) fines or penalties imposed by law; 10
(8) costs of arbitration, litigation, or other dispute resolution activities 11
that involve the state or concern the rights or obligations among owners of interests in, 12
or rights to production from, one or more leases or properties or a unit; 13
(9) costs incurred in organizing a partnership, joint venture, or other 14
business entity or arrangement; 15
(10) amounts paid to indemnify the state; the exclusion provided by 16
this paragraph does not apply to the costs of obtaining insurance or a surety bond from 17
a third-party insurer or surety; 18
(11) surcharges levied under AS 43.55.201 or 43.55.300; 19
(12) an expenditure otherwise deductible under (b) of this section that 20
is a result of an internal transfer, a transaction with an affiliate, or a transaction 21
between related parties, or is otherwise not an arm's length transaction, unless the 22
producer establishes to the satisfaction of the department that the amount of the 23
expenditure does not exceed the fair market value of the expenditure; 24
(13) an expenditure incurred to purchase an interest in any corporation, 25
partnership, limited liability company, business trust, or any other business entity, 26
whether or not the transaction is treated as an asset sale for federal income tax 27
purposes; 28
(14) a tax levied under AS 43.55.011 or 43.55.014; 29
(15) costs incurred for dismantlement, removal, surrender, or 30
abandonment of a facility, pipeline, well pad, platform, or other structure, or for the 31 33-GS1372\S
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restoration of a lease, field, unit, area, tract of land, body of water, or right-of-way in 1
conjunction with dismantlement, removal, surrender, or abandonment; a cost is not 2
excluded under this paragraph if the dismantlement, removal, surrender, or 3
abandonment for which the cost is incurred is undertaken for the purpose of replacing, 4
renovating, or improving the facility, pipeline, well pad, platform, or other structure; 5
(16) costs incurred for containment, control, cleanup, or removal in 6
connection with any unpermitted release of oil or a hazardous substance and any 7
liability for damages imposed on the producer or explorer for that unpermitted release; 8
this paragraph does not apply to the cost of developing and maintaining an oil 9
discharge prevention and contingency plan under AS 46.04.030; 10
(17) costs incurred to satisfy a work commitment under an exploration 11
license under AS 38.05.132; 12
(18) that portion of expenditures, that would otherwise be qualified 13
capital expenditures, as defined in AS 43.55.023, incurred during a calendar year that 14
are less than the product of $0.30 multiplied by the total taxable production from each 15
lease or property, in BTU equivalent barrels, during that calendar year, except that, 16
when a portion of a calendar year is subject to this provision, the expenditures and 17
volumes shall be prorated within that calendar year; 18
(19) costs incurred for repair, replacement, or deferred maintenance of 19
a facility, a pipeline, a structure, or equipment, other than a well, that results in or is 20
undertaken in response to a failure, problem, or event that results in an unscheduled 21
interruption of, or reduction in the rate of, oil or gas production; or costs incurred for 22
repair, replacement, or deferred maintenance of a facility, a pipeline, a structure, or 23
equipment, other than a well, that is undertaken in response to, or is otherwise 24
associated with, an unpermitted release of a hazardous substance or of gas; however, 25
costs under this paragraph that would otherwise constitute lease expenditures under (a) 26
and (b) of this section may be treated as lease expenditures if the department 27
determines that the repair or replacement is solely necessitated by an act of war, by an 28
unanticipated grave natural disaster or other natural phenomenon of an exceptional,
29
inevitable, and irresistible character, the effects of which could not have been 30
prevented or avoided by the exercise of due care or foresight, or by an intentional or 31 33-GS1372\S
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negligent act or omission of a third party, other than a party or its agents in privity of 1
contract with, or employed by, the producer or an operator acting for the producer, but 2
only if the producer or operator, as applicable, exercised due care in operating and 3
maintaining the facility, pipeline, structure, or equipment, and took reasonable 4
precautions against the act or omission of the third party and against the consequences 5
of the act or omission; in this paragraph, 6
(A) "costs incurred for repair, replacement, or deferred 7
maintenance of a facility, a pipeline, a structure, or equipment" includes costs 8
to dismantle and remove the facility, pipeline, structure, or equipment that is 9
being replaced; 10
(B) "hazardous substance" has the meaning given in 11
AS 46.03.826; 12
(C) "replacement" includes renovation or improvement; 13
(20) costs incurred to construct, acquire, or operate a refinery or crude 14
oil topping plant, regardless of whether the products of the refinery or topping plant 15
are used in oil or gas exploration, development, or production operations; however, if 16
a producer owns a refinery or crude oil topping plant that is located on or near the 17
premises of the producer's lease or property in the state and that processes the 18
producer's oil produced from that lease or property into a product that the producer 19
uses in the operation of the lease or property in drilling for or producing oil or gas, the 20
producer's lease expenditures include the amount calculated by subtracting from the 21
fair market value of the product used the prevailing value, as determined under 22
AS 43.55.020(f), of the oil that is processed; 23
(21) costs of lobbying, public relations, public relations advertising, or 24
policy advocacy; 25
(22) costs incurred as part of a capital expenditure or other action 26
taken for a carbon management purpose under AS 38.05.081 or a carbon offset 27
project under AS 38.95.400 - 38.95.499. 28
* Sec. 15. This Act takes effect immediately under AS 01.10.070(c). 29