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(a) In valuing property upon the basis of actual cost or replacement cost, the department will exclude the value of intangible drilling expenses.
(b) For purposes of AS 43.56 and this chapter, "intangible drilling expenses" means the intangible drilling expenses defined under 26 U.S.C. 263(c) (Internal Revenue Code) in effect on January 1, 1974, and includes only expenditures for items that do not have a salvage value even if those items are used in connection with the construction or installation of physical property that has a salvage value. "Intangible drilling expenses" includes expenditures made by an operator, or under contract to an operator, for labor, fuel, repairs, hauling, and supplies incident and necessary to
(1) drilling wells;
(2) clearing ground, draining, road making, surveying, and geological works necessary to drilling wells; and
(3) construction of derricks, tanks, pipelines, and other physical structures necessary to drilling wells.
(c) "Intangible drilling expenses" does not include
(1) intangible development expenses;
(2) expenditures for tangible property ordinarily considered to have a salvage value, such as drilling tools, pipe, casing, tubing, tanks, engines, boilers, machines, and the actual materials used in the construction or installation of physical structures in the wells or on the property;
(3) expenditures made by an operator, or under contract to an operator,
(A) for wages, fuel, repairs, hauling, and supplies that are not incident and necessary to drilling wells; or
(B) that are properly allocable to the cost of depreciable property ordinarily considered to have a salvage value.
(d) In addition to the expenditure items described in (b) of this section, intangible drilling expenses for offshore oil platforms include expenditures incident and necessary to transport the platform to the well site and to position, erect, and permanently anchor the platform to the ocean floor.
History: Eff. 3/1/75, Register 53; am 1/1/2003, Register 164
Authority: AS 43.05.080
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Last modified 7/05/2006