Applicability of lease expenditures

# (a)

For purposes of AS 43.55.160, a lease expenditure for a calendar year that is a cost of

# (1)

exploring for, developing, or producing oil or gas deposits located within a lease or property is considered a lease expenditure applicable to

(A) oil or gas produced from that lease or property during that calendar year for a calendar year before 2022, irrespective of whether any oil or gas is actually produced from that lease or property during that calendar year;

(B) oil produced from that lease or property during that calendar year for a calendar year after 2021, irrespective of whether any oil or gas is actually produced from that lease or property during that calendar year;

# (2)

exploring for oil or gas deposits located within land in the state other than a lease or property is considered a lease expenditure applicable to oil or gas produced from leases or properties during that calendar year in the area of the state explored, irrespective of whether any oil or gas is actually produced from leases or properties in that area during that calendar year; for purposes of this paragraph, for a calendar year

(A) to which (B) of this paragraph does not apply, an area of the state is either

(i) land north of 68 degrees North latitude;

(ii) land outside the Cook Inlet sedimentary basin not including any land north of 68 degrees North latitude; or

(iii) the Cook Inlet sedimentary basin;

(B) after the latest of 2021, the last calendar year under AS 43.55.024(b) for which the producer could take a tax credit under AS 43.55.024(a), or the last calendar year for which AS 43.55.011(p) could limit the levy of tax under AS 43.55.011(e) for any of the producer's oil or gas, an area of the state is either

(i) land north of 68 degrees North latitude; or

(ii) land south of 68 degrees North latitude.

# (b)

A producer's lease expenditure

# (1)

incurred before 2022 that is a cost of exploring for, developing, or producing oil or gas deposits located within a lease or property in the Cook Inlet sedimentary basin from which both oil and gas are produced by the producer during the calendar year that the lease expenditure is incurred, is allocated between the oil and gas proportionally to the respective amounts of oil and gas in BTU equivalent barrels produced by the producer from the lease or property during the calendar year and taxable under AS 43.55.011(e); a producer's lease expenditure incurred before 2022 that is a cost of exploring for oil or gas deposits located within land in the Cook Inlet sedimentary basin that is not a lease or property is allocated among leases or properties in the Cook Inlet sedimentary basin and between oil and gas produced from each of those leases or properties proportionally to the respective amounts, if any, of oil and gas in BTU equivalent barrels produced by the producer from those leases or properties during the calendar year the lease expenditure is incurred and taxable under AS 43.55.011(e);

# (2)

incurred after 2021 that is a cost of exploring for, developing, or producing oil or gas deposits is applicable to the calculation of production tax value for oil produced by the producer in that area of the state described in (a)(2)(B)(i) or (ii) of this section, as applicable, during the calendar year that the lease expenditure is incurred or as provided in AS 43.55.160(e) or 43.55.165.

# (c)

The applicability of a lease expenditure with respect to a geographic location is determined by the location of the oil or gas deposit that is explored for, developed, or produced, and not by the location where the cost in question is incurred.

# (d)

A producer's lease expenditure that is a cost of exploring for, developing, or producing oil or gas deposits located within a lease or property, other than a lease or property subject to AS 43.55.011(p), outside the Cook Inlet sedimentary basin

# (1)

incurred before January 1, 2022, from which both gas used in the state and oil or other gas are produced by the producer during the calendar year after June 30, 2007 in which the lease expenditure is incurred, is allocated between gas used in the state and oil or other gas, proportionally to the respective amounts of each, in BTU equivalent barrels, produced by the producer from the lease or property during the calendar year and taxable under AS 43.55.011(e);

# (2)

incurred on and after January 1, 2022, or as provided in AS 43.55.160(e) for a carried-forward annual loss under AS 43.55.165(a)(3), is attributable to the production tax value of oil for leases or properties outside the Cook Inlet sedimentary basin, other than leases or leases or properties subject to AS 43.55.011(p).

# (e)

A producer's lease expenditure that is a cost of exploring for oil or gas deposits located within land that is not a lease or property and is in an area of the state described in

# (1)

(a)(2)(A)(i) or (ii) of this section is allocated among gas used in the state produced from each lease or property in that area, other than gas subject to AS 43.55.011(p), and oil and other gas produced from leases or properties in that area, proportionally to the respective amounts, if any, of gas used in the state and of oil or other gas, in BTU equivalent barrels, produced by the producer from the leases or properties during the calendar year after June 30, 2007 and before 2022 in which the lease expenditure is incurred and taxable under AS 43.55.011(e);

# (2)

(a)(2)(B) of this section on and after January 1, 2022 is included in calculating the production tax value of oil applicable to the area of the state described in (a)(2)(B)(i) or (ii) of this section and as provided in AS 43.55.160(h).

# (f)

Repealed 1/1/2022.

# (g)

A producer's lease expenditure incurred during a calendar year during which the producer produces oil or gas that is subject to AS 43.55.011(p), that is a cost of exploring for oil or gas deposits located within land that is not a lease or property and is in the area of the state described in (a)(2)(A)(ii) of this section is allocated among (1) oil and gas produced from the leases or properties from which oil and gas subject to AS 43.55.011(p) are produced; and (2) oil and gas produced from other leases or properties in that area, proportionally to the respective amounts, if any, of the oil and gas described in (1) of this subsection and of the oil and gas described in (2) of this subsection, in BTU equivalent barrels, produced by the producer during the calendar year in which the lease expenditure is incurred and taxable under AS 43.55.011(e).

# (h)

Except to the extent provided under 15 AAC 55.217(f), this section does not apply to carried-forward annual losses.
(Eff. 5/3/2007, Register 182; am 10/21/2009, Register 192; am 12/25/2013, Register 208; am 12/6/2018, Register 228; am 9/20/2020, Register 235; am 1/1/2022, Register 240) Statutory Authority:
Authority:
AS 43.05.080 AS 43.55.024 AS 43.55.160
AS 43.55.011 AS 43.55.110 AS 43.55.165