2006-07-12                     House Journal                      Page 4220
HB 3001                                                                                           
HOUSE BILL NO. 3001 by the House Rules Committee by request of                                      
the Governor, entitled:                                                                             
                                                                                                    
     "An Act relating to the production tax on oil and gas and to                                   
     conservation surcharges on oil; relating to criminal penalties for                             
     violating conditions governing access to and use of confidential                               
     information relating to the production tax; amending the definition                            
     of 'gas' as that definition applies in the Alaska Stranded Gas                                 
     Development Act; making conforming amendments; and                                             
     providing for an effective date."                                                              
                                                                                                    
was read the first time and referred to the Finance Committee.                                      
                                                                                                    
The following fiscal note(s) apply:                                                                 
                                                                                                    
1.  Zero, Dept. of Natural Resources                                                                
2.  Fiscal, Dept. of Revenue                                                                        
                                                                                                    
The Governor's transmittal letter dated July 12, 2006, follows:                                     
                                                                                                    
"Dear Speaker Harris:                                                                               
                                                                                                    
Under the authority of article III, section 18, of the Alaska                                       
Constitution, I am transmitting a bill relating to the oil and gas                                  
production tax.                                                                                     
                                                                                                    

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This bill is similar to previous versions of oil and gas production tax                             
legislation that the Legislature has considered during both the regular                             
and special sessions this year.  I appreciate that legislators have                                 
devoted sustained and serious attention and concern to this subject,                                
and there is therefore no need for me to repeat in detail here the                                  
reasons why this legislation is urgently needed or how the new tax                                  
system set out in this legislation would work.  Legislators well                                    
understand that the existing production tax law is not adequately                                   
serving the interests of Alaskans and that the approach taken by this                               
bill would provide the state with a fairer share of the value of oil and                            
gas production while encouraging vital investment in future                                         
production.                                                                                         
                                                                                                    
I also appreciate that the legislative process this year has led to                                 
numerous improvements in the bills that were originally submitted,                                  
resulting in increased clarity, predictability, and ease of                                         
administration.  The bill I am transmitting takes advantage of these                                
improvements by using as its model the most recent versions that were                               
passed by the House and Senate, HCS CSSB 2001(FIN) am H and                                         
CCS SB 2001.  The following two changes from those versions are                                     
reflected in the bill:                                                                              
                                                                                                    
     1. Because I still believe that a 20 percent tax rate on net value                             
     represents a more appropriate balance than either of the higher                                
     rates contained in HCS CSSB 2001(FIN) am H or CCS SB 2001,                                     
     my bill returns to a 20 percent rate.                                                          
                                                                                                    
     2. For the same reason, my bill eliminates the additional                                      
       "progressivity" tax provisions that were in the other versions.                             
                                                                                                    
     3. Similarly, because I believe that the four percent of gross                                 
     value tax floor on North Slope production that was added by HCS                                
     CSSB 2001(FIN) am H and the similar three percent floor that                                   
     was contained in CCS SB 2001 are inconsistent with the concept                                 
     of a progressive net value tax system, my bill eliminates that tax                             
     floor provision.                                                                               
                                                                                                    
As explained more fully in my transmittal letter accompanying the                                   
original administration bills, this bill will greatly improve Alaska's oil                          
and gas tax system, encouraging investment in the state, making tax                                 

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administration more predictable, and better reflecting the variable                                 
economics of oil and gas development.  This bill will provide                                       
Alaskans with a fairer share of the value of the oil and gas taken out of                           
the ground in our state and provide fiscal certainty for future                                     
generations of Alaskans.                                                                            
                                                                                                    
I urge your prompt and favorable action on the bill.                                                
                                                                                                    
                                 Sincerely yours,                                                   
                                 /s/                                                                
                                 Frank H. Murkowski                                                 
                                  Governor"