Legislature(2011 - 2012)

2011-03-31 House Journal

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2011-03-31                     House Journal                      Page 0688
HB 110                                                                                                                        
The following was before the House with Amendment No. 4 (page                                                                   
683) moved and pending:                                                                                                         
                                                                                                                                
    CS FOR HOUSE BILL NO. 110(FIN)                                                                                              
    "An Act relating to the interest rate applicable to certain amounts                                                         
    due for fees, taxes, and payments made and property delivered to                                                            
    the Department of Revenue; relating to the oil and gas production                                                           
    tax rate; relating to monthly installment payments of the oil and                                                           
    gas production tax; relating to oil and gas production tax credits,                                                         
    including qualified capital credits for exploration, development,                                                           
    and production; relating to certain additional nontransferable oil                                                          
    and gas production tax credits; relating to the disclosure of certain                                                       
    tax information; making conforming amendments; and providing                                                                
    for an effective date."                                                                                                     
                                                                                                                                

2011-03-31                     House Journal                      Page 0689
The question being:  "Shall Amendment No. 4 be adopted?"  The roll                                                              
was taken with the following result:                                                                                            
                                                                                                                                
CSHB 110(FIN)                                                                                                                   
Second Reading                                                                                                                  
Amendment No. 4                                                                                                                 
                                                                                                                                
YEAS:  11   NAYS:  27   EXCUSED:  2   ABSENT:  0                                                                              
                                                                                                                                
Yeas:  Doogan, Gara, Gardner, Gruenberg, Guttenberg, Holmes,                                                                    
Kawasaki, Kerttula, Miller, Petersen, Tuck                                                                                      
                                                                                                                                
Nays:  Austerman, Chenault, Costello, Dick, Edgmon, Fairclough,                                                                 
Feige, Foster, Gatto, Hawker, Herron, Johansen, Johnson, Joule,                                                                 
Keller, Lynn, Millett, Munoz, Olson, Pruitt, Saddler, Seaton, Stoltze,                                                          
Thomas, Thompson, P.Wilson, T.Wilson                                                                                            
                                                                                                                                
Excused:  Cissna, Neuman                                                                                                        
                                                                                                                                
And so, Amendment No. 4 was not adopted.                                                                                        
                                                                                                                                
Amendment No. 5 was offered by Representative Gara:                                                                             
                                                                                                                                
Page 1, lines 1 - 8 (title amendment):                                                                                          
    Delete all material and insert:                                                                                             
    ""An Act providing for a tax credit applicable to the oil and                                                             
gas production tax based on capital expenditures for a production                                                             
facility for new oil and gas production; and providing for an                                                                 
effective date.""                                                                                                             
                                                                                                                                
Page 1, line 10, through page 20, line 26:                                                                                      
    Delete all material and insert:                                                                                             
"* Section 1. AS 43.20.043(g) is amended to read:                                                                             
         (g)  A taxpayer that obtains a credit for a qualified capital                                                          
    investment or cost incurred for qualified services under this                                                               
    section may not also claim a tax credit or royalty modification for                                                         
    the same qualified capital investment or cost incurred for qualified                                                        
    services under AS 38.05.180(i), AS 41.09.010, AS 43.55.023,                                                                 
    [OR] 43.55.025, or 43.55.026. However, a taxpayer may elect not                                                         
    to obtain a credit under this section in order to qualify for a credit                                                      
    provided under AS 38.05.180(i), AS 41.09.010, AS 43.55.023,                                                                 
    [OR] 43.55.025, or 43.55.026.                                                                                           
   * Sec. 2. AS 43.55.023(a) is amended to read:                                                                              

2011-03-31                     House Journal                      Page 0690
         (a)  A producer or explorer may take a tax credit for a                                                                
    qualified capital expenditure as follows:                                                                                   
             (1)  except as limited by (p) of this section,                                                                 
    notwithstanding that a qualified capital expenditure may be a                                                               
    deductible lease expenditure for purposes of calculating the                                                                
    production tax value of oil and gas under AS 43.55.160(a), unless                                                           
    a credit for that expenditure is taken under AS 38.05.180(i),                                                               
    AS 41.09.010, AS 43.20.043, [OR] AS 43.55.025, or 43.55.026, a                                                          
    producer or explorer that incurs a qualified capital expenditure                                                            
    may also elect to apply a tax credit against a tax levied by                                                                
    AS 43.55.011(e) in the amount of 20 percent of that expenditure;                                                            
    however, not more than half of the tax credit may be applied for a                                                          
    single calendar year;                                                                                                       
             (2)  a producer or explorer may take a credit for a                                                                
    qualified capital expenditure incurred in connection with                                                                   
    geological or geophysical exploration or in connection with an                                                              
    exploration well only if the producer or explorer                                                                           
                  (A)  agrees, in writing, to the applicable provisions of                                                      
         AS 43.55.025(f)(2);                                                                                                    
                  (B)  submits to the Department of Natural Resources                                                           
         all data that would be required to be submitted under                                                                  
         AS 43.55.025(f)(2).                                                                                                    
   * Sec. 3. AS 43.55.023(d) is amended to read:                                                                              
         (d)  Except as limited by (i) and (p) of this section, a person                                                    
    that is entitled to take a tax credit under this section that wishes to                                                     
    transfer the unused credit to another person or obtain a cash                                                               
    payment under AS 43.55.028 may apply to the department for                                                                  
    transferable tax credit certificates. An application under this                                                             
    subsection must be in a form prescribed by the department and                                                               
    must include supporting information and documentation that the                                                              
    department reasonably requires. The department shall grant or                                                               
    deny an application, or grant an application as to a lesser amount                                                          
    than that claimed and deny it as to the excess, not later than 120                                                          
    days after the latest of (1) March 31 of the year following the                                                             
    calendar year in which the qualified capital expenditure or carried-                                                        
    forward annual loss for which the credit is claimed was incurred;                                                           
    (2) the date the statement required under AS 43.55.030(a) or (e)                                                            
    was filed for the calendar year in which the qualified capital                                                              
    expenditure or carried-forward annual loss for which the credit is                                                          
    claimed was incurred; or (3) the date the application was received                                                          

2011-03-31                     House Journal                      Page 0691
    by the department. If, based on the information then available to                                                           
    it, the department is reasonably satisfied that the applicant is                                                            
    entitled to a credit, the department shall issue the applicant two                                                          
    transferable tax credit certificates, each for half of the amount of                                                        
    the credit. The credit shown on one of the two certificates is                                                              
    available for immediate use. The credit shown on the second of                                                              
    the two certificates may not be applied against a tax for a calendar                                                        
    year earlier than the calendar year following the calendar year in                                                          
    which the certificate is issued, and the certificate must contain a                                                         
    conspicuous statement to that effect. A certificate issued under                                                            
    this subsection does not expire.                                                                                            
   * Sec. 4. AS 43.55.023 is amended by adding a new subsection to                                                            
read:                                                                                                                           
         (p)  The amount of credit for a capital expenditure under (a)                                                          
    of this section for an expenditure that is also a lease expenditure                                                         
    under AS 43.55.165 is reduced by the amount necessary so that                                                               
    the tax benefit percentage is not more than 85 percent of the                                                               
    capital expenditure. The amount of credit for a capital expenditure                                                         
    under (a) of this section that may not be taken because of the                                                              
    limitation in this subsection may not be applied in a later calendar                                                        
    year under (c) of this section and may not be included in an                                                                
    application for a tax credit certificate under (d) of this section. In                                                      
    this subsection, "tax benefit percentage" means the sum of the                                                              
    average monthly tax rate under AS 43.55.011(e) for the calendar                                                             
    year in which the credit is taken and the percentage of the capital                                                         
    expenditure that may be taken as a credit under (a) of this section.                                                        
   * Sec. 5. AS 43.55 is amended by adding a new section to read:                                                             
         Sec. 43.55.026. Production facility cost credit. (a) This                                                            
    section applies to a credit for a qualified production facility                                                             
    expenditure incurred before the date of production of oil or gas in                                                         
    paying quantities for a lease or property that is taxable under                                                             
    AS 43.55.011(e) and that contains land that, as of December 31,                                                             
    2010, is not or previously had not been within a unit or produced                                                           
    oil or gas in paying quantities.                                                                                            
         (b)  Except as limited by (g) of this section, the amount of the                                                       
    credit under this section is equal to 50 percent of the qualified                                                           
    production facility expenditures that are incurred after the                                                                
    completion of the first well drilled that discovers a pool capable of                                                       
    commercial production from the lease or property and before the                                                             
    commencement of production in paying quantities. The                                                                        

2011-03-31                     House Journal                      Page 0692
    department, in consultation with the                                                                                        
             (1)  Alaska Oil and Gas Conservation Commission, shall                                                             
    determine the date on which the first well drilled discovered a                                                             
    pool capable of production from a lease or property for which the                                                           
    credit is taken; and                                                                                                        
             (2)  Department of Natural Resources, shall determine the                                                          
    date of the commencement of production in paying quantities                                                                 
    from the lease or property for which the credit is taken.                                                                   
         (c)  The credit under this section may be applied against the                                                          
    tax due under AS 43.55.011(e) during the two-year period                                                                    
    immediately following the date of the commencement of                                                                       
    production in paying quantities.                                                                                            
         (d)  A qualified production facility expenditure that is taken as                                                      
    a credit under this section may not be used as an expenditure for                                                           
    which a credit may be taken under AS 43.20.043 or AS 43.55.023.                                                             
    A credit under AS 43.55.023 for a qualified production facility                                                             
    expenditure may not be taken against the tax due under                                                                      
    AS 43.55.011(e) during the same month in which a credit is taken                                                            
    or purchased by the department under this section.                                                                          
         (e)  A credit or portion of a credit under this section may not                                                        
    be used to reduce a taxpayer's tax liability under AS 43.55.011(e)                                                          
    below zero for any calendar month. A person eligible for the                                                                
    credit under this section that does not take the credit within the                                                          
    two-year period immediately following the date of the                                                                       
    commencement of production in paying quantities may apply to                                                                
    the department for a cash payment under AS 43.55.028. An                                                                    
    application under this subsection must be in a form prescribed by                                                           
    the department and must include supporting information and                                                                  
    documentation that the department reasonably requires. The                                                                  
    department shall grant or deny an application, or grant an                                                                  
    application as to a lesser amount than that claimed and deny it as                                                          
    to the excess, not later than 120 days after the date the department                                                        
    receives the application. If, based on the information then                                                                 
    available to it, the department is reasonably satisfied that the                                                            
    applicant is entitled to a payment, the department shall issue the                                                          
    cash payment or a lesser amount after applying all or a portion of                                                          
    the credit to any outstanding unpaid balance of a tax owed by the                                                           
    applicant under this title.                                                                                                 
         (f)  The department shall adopt regulations describing the                                                             
    procedures for determining the amount of the credit, record                                                                 

2011-03-31                     House Journal                      Page 0693
    keeping, verification of the accuracy of the credit claimed, and                                                            
    other regulations necessary to administer this section.                                                                     
         (g)  The amount of credit for a qualified production facility                                                          
    expenditure under this section for an expenditure that is also a                                                            
    lease expenditure under AS 43.55.165 is reduced by the amount                                                               
    necessary so that the tax benefit percentage is not more than 85                                                            
    percent of the qualified production facility expenditure. The                                                               
    amount of credit for a qualified production facility expenditure                                                            
    under this section that may not be taken because of the limitation                                                          
    in this subsection may not be included in an application for a cash                                                         
    payment under (e) of this section. In this subsection, "tax benefit                                                         
    percentage" means the sum of the average monthly tax rate under                                                             
    AS 43.55.011(e) for the calendar year in which the credit is taken                                                          
    and the percentage of the qualified production facility expenditure                                                         
    that may be taken as a credit under this section.                                                                           
         (h)  In this section,                                                                                                  
             (1)  "production facility" means a facility that is upstream                                                       
    from the point of production and is a flow station, a gathering                                                             
    center, a pump station, a storage tank, and a related appurtenance,                                                         
    or other facility that gathers, cleans, dehydrates, conditions, or                                                          
    stores crude oil, natural gas, or associated hydrocarbons and that is                                                       
    located on a lease or property leased from the state;                                                                       
             (2)  "production in paying quantities" means production                                                            
    of oil and gas in quantities sufficient to recover the cost of                                                              
    operating, although the quantity may be insufficient to recover the                                                         
    cost of drilling;                                                                                                           
             (3)  "qualified production facility expenditure" means an                                                          
    expenditure for a production facility that may be recognized as a                                                           
    qualified capital expenditure as defined in AS 43.55.023.                                                                   
   * Sec. 6. AS 43.55.028(a) is amended to read:                                                                              
         (a)  The oil and gas tax credit fund is established as a separate                                                      
    fund of the state. The purpose of the fund is to purchase                                                                   
    transferable tax credit certificates issued under AS 43.55.023 and                                                          
    production tax credit certificates issued under AS 43.55.025 and                                                            
    to pay for unused credits under AS 43.55.026 that qualify for a                                                         
    cash payment and  refunds claimed under AS 43.20.046.                                                                   
   * Sec. 7. AS 43.55.028(g) is amended to read:                                                                              
         (g)  The department may adopt regulations to carry out the                                                             
    purposes of this section, including standards and procedures to                                                             
    allocate available money among applications for purchases and                                                           

2011-03-31                     House Journal                      Page 0694
    payments for unused credits under this chapter and claims for                                                           
    refunds under AS 43.20.046 when the total amount of the                                                                     
    applications for purchase and claims for refund exceed the amount                                                           
    of available money in the fund. The regulations adopted by the                                                              
    department may not, when allocating available money in the fund                                                             
    under this section, distinguish an application for the purchase of a                                                        
    credit certificate issued under AS 43.55.023(m), a payment for                                                          
    an unused credit that qualifies for a cash payment under                                                                
    AS 43.55.026, or a claim for refund under AS 43.20.046.                                                                 
   * Sec. 8. AS 43.55.028 is amended by adding a new subsection to                                                            
read:                                                                                                                           
         (j)  The department, on the written application of a person for                                                        
    the payment of an unused credit that qualifies for a cash payment                                                           
    under AS 43.55.026 after the end of the two-year period                                                                     
    immediately following the date of the commencement of                                                                       
    production in paying quantities, may use available money in the                                                             
    oil and gas tax credit fund to purchase, in whole or in part, the                                                           
    certificate if the department finds that                                                                                    
             (1)  the applicant does not have an outstanding liability to                                                       
    the state for unpaid delinquent taxes under this title;                                                                     
             (2)  the applicant's total tax liability under                                                                     
    AS 43.55.011(e) for the calendar year in which the application is                                                           
   made, after application of all available tax credits, is zero; and                                                          
             (3)  the purchase is consistent with this section and                                                              
    regulations adopted under this section.                                                                                     
   * Sec. 9. AS 43.55.180(a) is amended to read:                                                                              
         (a)  The department shall study                                                                                        
             (1)  the effects of the provisions of this chapter on oil and                                                      
    gas exploration, development, and production in the state, on                                                               
    investment expenditures for oil and gas exploration, development,                                                           
    and production in the state, on the entry of new producers into the                                                         
    oil and gas industry in the state, on state revenue, and on tax                                                             
    administration and compliance, giving particular attention to the                                                           
    tax rates provided under AS 43.55.011, the tax credits provided                                                             
    under AS 43.55.023 - 43.55.026 [AS 43.55.023 - 43.55.025], and                                                          
    the deductions for and adjustments to lease expenditures provided                                                           
    under AS 43.55.160 - 43.55.170; and                                                                                         
             (2)  the effects of the tax rates under AS 43.55.011(i) on                                                         
    state revenue and on oil and gas exploration, development, and                                                              
    production on private land, and the fairness of those tax rates for                                                         

2011-03-31                     House Journal                      Page 0695
    private landowners.                                                                                                         
   * Sec. 10. This Act takes effect January 1, 2012."                                                                         
                                                                                                                                
Representative Gara moved and asked unanimous consent that                                                                      
Amendment No. 5 be adopted.                                                                                                     
                                                                                                                                
Representative Millett objected.                                                                                                
                                                                                                                                
The question being:  "Shall Amendment No. 5 be adopted?"  The roll                                                              
was taken with the following result:                                                                                            
                                                                                                                                
CSHB 110(FIN)                                                                                                                   
Second Reading                                                                                                                  
Amendment No. 5                                                                                                                 
                                                                                                                                
YEAS:  11   NAYS:  27   EXCUSED:  2   ABSENT:  0                                                                              
                                                                                                                                
Yeas:  Doogan, Gara, Gardner, Gruenberg, Guttenberg, Holmes,                                                                    
Kawasaki, Kerttula, Miller, Petersen, Tuck                                                                                      
                                                                                                                                
Nays:  Austerman, Chenault, Costello, Dick, Edgmon, Fairclough,                                                                 
Feige, Foster, Gatto, Hawker, Herron, Johansen, Johnson, Joule,                                                                 
Keller, Lynn, Millett, Munoz, Olson, Pruitt, Saddler, Seaton, Stoltze,                                                          
Thomas, Thompson, P.Wilson, T.Wilson                                                                                            
                                                                                                                                
Excused:  Cissna, Neuman                                                                                                        
                                                                                                                                
Gardner changed from "Nay" to "Yea".                                                                                            
                                                                                                                                
And so, Amendment No. 5 was not adopted.                                                                                        
                                                                                                                                
Amendment No. 6 was offered by Representatives Herron, Edgmon,                                                                  
and Joule:                                                                                                                      
                                                                                                                                
Page 5, line 13, following "$92.50":                                                                                            
    Insert "but not more than $105"                                                                                             
                                                                                                                                
Page 5, following line 25:                                                                                                      
    Insert new material to read:                                                                                                
                  "(G)  if the producer's average monthly production                                                            
         tax value of a BTU equivalent barrel of the taxable oil and gas                                                        
         for the month is more than $105 but not more than $117.50,                                                             
         the tax rates are                                                                                                      

2011-03-31                     House Journal                      Page 0696
                      (i)  2.5 percent on the first $12.50 of monthly                                                           
             production tax value for each BTU equivalent barrel that                                                           
             is greater than $30;                                                                                               
                      (ii)  7.5 percent of the next higher $12.50 of                                                            
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (iii)  12.5 percent of the next higher $12.50 of                                                          
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (iv)  17.5 percent of the next higher $12.50 of                                                           
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (v)  22.5 percent of the next higher $12.50 of                                                            
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (vi)  25 percent of the next higher $12.50 of                                                             
             monthly production tax value for each BTU equivalent                                                               
             barrel; and                                                                                                        
                      (vii)  30 percent of the monthly production tax                                                           
             value for each BTU equivalent barrel that is greater than                                                          
             $105;                                                                                                              
                  (H)  if the producer's average monthly production tax                                                         
         value of a BTU equivalent barrel of the taxable oil and gas for                                                        
         the month is more than $117.50, the tax rates are                                                                      
                      (i)  2.5 percent on the first $12.50 of monthly                                                           
             production tax value for each BTU equivalent barrel that                                                           
             is greater than $30;                                                                                               
                      (ii)  7.5 percent of the next higher $12.50 of                                                            
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (iii)  12.5 percent of the next higher $12.50 of                                                          
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (iv)  17.5 percent of the next higher $12.50 of                                                           
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (v)  22.5 percent of the next higher $12.50 of                                                            
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (vi)  25 percent of the next higher $12.50 of                                                             

2011-03-31                     House Journal                      Page 0697
             monthly production tax value for each BTU equivalent                                                               
             barrel;                                                                                                            
                      (vii)  30 percent of the next higher $12.50 of                                                            
             monthly production tax value for each BTU equivalent                                                               
             barrel; and                                                                                                        
                      (viii)  35 percent of the monthly production tax                                                          
             value for each BTU equivalent barrel that is greater than                                                          
             $117.50;"                                                                                                          
                                                                                                                                
Representative Herron moved and asked unanimous consent that                                                                    
Amendment No. 6 be adopted.                                                                                                     
                                                                                                                                
Representative Kerttula objected.                                                                                               
                                                                                                                                
The question being:  "Shall Amendment No. 6 be adopted?"  The roll                                                              
was taken with the following result:                                                                                            
                                                                                                                                
CSHB 110(FIN)                                                                                                                   
Second Reading                                                                                                                  
Amendment No. 6                                                                                                                 
                                                                                                                                
YEAS:  14   NAYS:  24   EXCUSED:  2   ABSENT:  0                                                                              
                                                                                                                                
Yeas:  Dick, Edgmon, Foster, Gara, Gatto, Herron, Holmes, Joule,                                                                
Kawasaki, Munoz, Petersen, Seaton, Thomas, T.Wilson                                                                             
                                                                                                                                
Nays:  Austerman, Chenault, Costello, Doogan, Fairclough, Feige,                                                                
Gardner, Gruenberg, Guttenberg, Hawker, Johansen, Johnson, Keller,                                                              
Kerttula, Lynn, Miller, Millett, Olson, Pruitt, Saddler, Stoltze,                                                               
Thompson, Tuck, P.Wilson                                                                                                        
                                                                                                                                
Excused:  Cissna, Neuman                                                                                                        
                                                                                                                                
And so, Amendment No. 6 was not adopted.                                                                                        
                                                                                                                                
CSHB 110(FIN) was automatically in third reading.                                                                               
                                                                                                                                
The question being:  "Shall CSHB 110(FIN) pass the House?"  The                                                                 
roll was taken with the following result:                                                                                       
                                                                                                                                
CSHB 110(FIN)                                                                                                                   
Third Reading                                                                                                                   
Final Passage                                                                                                                   
                                                                                                                                
YEAS:  22   NAYS:  16   EXCUSED:  2   ABSENT:  0                                                                              

2011-03-31                     House Journal                      Page 0698
Yeas:  Chenault, Costello, Dick, Fairclough, Feige, Foster, Gatto,                                                              
Hawker, Johansen, Johnson, Keller, Lynn, Millett, Munoz, Olson,                                                                 
Pruitt, Saddler, Stoltze, Thomas, Thompson, P.Wilson, T.Wilson                                                                  
                                                                                                                                
Nays:  Austerman, Doogan, Edgmon, Gara, Gardner, Gruenberg,                                                                     
Guttenberg, Herron, Holmes, Joule, Kawasaki, Kerttula, Miller,                                                                  
Petersen, Seaton, Tuck                                                                                                          
                                                                                                                                
Excused:  Cissna, Neuman                                                                                                        
                                                                                                                                
And so, CSHB 110(FIN) passed the House.                                                                                         
                                                                                                                                
Representative Austerman moved the effective date clause.                                                                       
                                                                                                                                
The question being:  "Shall the effective date clause be adopted?"  The                                                         
roll was taken with the following result:                                                                                       
                                                                                                                                
CSHB 110(FIN)                                                                                                                   
Third Reading                                                                                                                   
Effective Date                                                                                                                  
                                                                                                                                
YEAS:  36   NAYS:  0   EXCUSED:  2   ABSENT:  2                                                                               
                                                                                                                                
Yeas:  Austerman, Chenault, Costello, Dick, Doogan, Edgmon,                                                                     
Fairclough, Feige, Foster, Gara, Gardner, Gatto, Gruenberg,                                                                     
Guttenberg, Hawker, Herron, Holmes, Johansen, Johnson, Kawasaki,                                                                
Keller, Kerttula, Lynn, Miller, Millett, Munoz, Olson, Petersen, Pruitt,                                                        
Saddler, Seaton, Stoltze, Thomas, Thompson, Tuck, P.Wilson                                                                      
                                                                                                                                
Excused:  Cissna, Neuman                                                                                                        
                                                                                                                                
Absent:  Joule, T.Wilson                                                                                                        
                                                                                                                                
And so, the effective date clause was adopted.                                                                                  
                                                                                                                                
Representative Kerttula gave notice of reconsideration of the vote on                                                           
CSHB 110(FIN).