Legislature(2013 - 2014)
2014-04-19 House Journal
Full Journal pdf2014-04-19 House Journal Page 2641 SB 138 The following, which was moved to the bottom of the calendar (page 2631), was before the House in second reading: HOUSE CS FOR CS FOR SENATE BILL NO. 138(FIN) "An Act relating to the Alaska Gasline Development Corporation; relating to an in-state natural gas pipeline, an Alaska liquefied natural gas project, and associated funds; requiring state agencies and other entities to expedite reviews and actions related to natural gas pipelines and projects; making certain contracts by the Department of Natural Resources and the Department of Law not subject to the State Procurement Code; relating to the authorities and duties of the commissioner of natural resources relating to a North Slope natural gas project, oil and gas and gas only leases, and royalty gas and other gas received by the state including gas received as payment for the production tax on gas; relating to a report and recommendations by the commissioner of natural resources regarding the delivery and availability of North Slope natural gas in the state, including the identification of risks and recommendations for mitigation; relating to the tax on oil and gas production, on oil production, and on gas production; relating to the duties of the commissioner of revenue relating to a North Slope natural gas project and gas received as payment for tax; relating to confidential information and public record status of information provided to or in the custody of the Department of Natural Resources and the Department of Revenue; relating to 2014-04-19 House Journal Page 2642 apportionment factors of the Alaska Net Income Tax Act; amending the definition of gross value at the 'point of production' for gas for purposes of the oil and gas production tax; clarifying that the exploration incentive credit, the oil or gas producer education credit, and the film production tax credit may not be taken against the gas production tax paid in gas; relating to the oil or gas producer education credit; requiring the commissioner of revenue to provide a report to the legislature on financing options for state ownership and participation in a North Slope natural gas project; requesting the governor to establish an advisory planning group to advise the governor on municipal involvement in a North Slope natural gas project; relating to the development of a plan by the Alaska Energy Authority for developing infrastructure to deliver affordable energy to areas of the state that will not have direct access to a North Slope natural gas pipeline and a recommendation of a funding source for energy infrastructure development; establishing the Alaska affordable energy fund; requiring the Department of Transportation and Public Facilities to evaluate certain bridges and infrastructure related to an Alaska liquefied natural gas project; requiring the commissioner of revenue to develop a plan and suggest legislation for municipalities, regional corporations, and residents of the state to acquire ownership interests in a North Slope natural gas pipeline project; relating to the duties of the Oil and Gas Competitiveness Review Board; making conforming amendments; and providing for an effective date." (HCR 28 - title change resolution) Amendment No. 1 was offered by Representative Gara: Page 18, following line 26: Insert a new subsection to read: "(e) An agreement or contract in which the state or an entity of the state is a party that provides for the midstream transportation by a third party of natural gas received by the state as royalty or payment of tax may not require the state to reimburse the third party an amount for funds used during construction that is calculated using a rate that is more than one percent higher than the five-year constant maturity treasury rate reported by the 2014-04-19 House Journal Page 2643 federal reserve as of the date the agreement or contract is terminated. In this subsection, "midstream" means that part of a North Slope natural gas project that is upstream of a natural gas liquefaction facility." Representative Gara moved and asked unanimous consent that Amendment No. 1 be adopted. Representative Hawker objected. The question being: "Shall Amendment No. 1 be adopted?" The roll was taken with the following result: HCS CSSB 138(FIN) Second Reading Amendment No. 1 YEAS: 10 NAYS: 29 EXCUSED: 0 ABSENT: 1 Yeas: Drummond, Gara, Gruenberg, Guttenberg, Josephson, Kawasaki, Kito III, Kreiss-Tomkins, Tarr, Tuck Nays: Austerman, Chenault, Costello, Edgmon, Feige, Foster, Gattis, Hawker, Herron, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Millett, Munoz, Nageak, Neuman, Olson, Pruitt, Saddler, Seaton, Stoltze, Thompson, P.Wilson, T.Wilson Absent: Reinbold And so, Amendment No. 1 was not adopted. Amendment No. 2 was offered by Representative Gara: Page 31, line 15: Delete "13" Insert "16" Page 31, line 16, following "gas": Insert "or three percent of the gross value at the point of production of the taxable gas that is subject to the election in AS 43.55.014" 2014-04-19 House Journal Page 2644 Page 33, lines 11 - 12: Delete "lieu of the tax otherwise" Insert "addition to the three percent tax of the gross value at the point of production" Page 33, line 17: Delete "otherwise" Page 43, line 6: Delete "13 percent" Insert "three percent or 16 percent, as applicable," Page 43, line 21: Delete "13 percent" Insert "three percent or 16 percent, as applicable," Representative Gara moved and asked unanimous consent that Amendment No. 2 be adopted. Representative Feige objected. The question being: "Shall Amendment No. 2 be adopted?" The roll was taken with the following result: HCS CSSB 138(FIN) Second Reading Amendment No. 2 YEAS: 9 NAYS: 29 EXCUSED: 0 ABSENT: 2 Yeas: Drummond, Gara, Gruenberg, Josephson, Kawasaki, Kito III, Kreiss-Tomkins, Tarr, Tuck Nays: Austerman, Chenault, Costello, Edgmon, Feige, Foster, Gattis, Guttenberg, Hawker, Herron, Higgins, Holmes, Hughes, Isaacson, Keller, LeDoux, Lynn, Millett, Munoz, Nageak, Neuman, Olson, Pruitt, Reinbold, Saddler, Seaton, Stoltze, P.Wilson, T.Wilson Absent: Johnson, Thompson And so, Amendment No. 2 was not adopted. 2014-04-19 House Journal Page 2645 Amendment No. 3 was offered by Representative Tarr: Page 17, line 30: Delete "a new section" Insert "new sections" Page 18, following line 26: Insert a new section to read: "Sec. 38.05.024. Prohibited agreement or contract term relating to the tax on oil production. An agreement or contract negotiated under AS 38.05.020(b)(11) or other agreement or contract in which the state or an entity of the state is a party and that is associated with a North Slope natural gas project may not include a provision that reduces the tax levied on oil production under AS 43.55.011 or that requires compensation to a producer for future changes in the tax levied on oil production under AS 43.55.011." Representative Tarr moved and asked unanimous consent that Amendment No. 3 be adopted. Representative Feige objected. Representative Tarr moved and asked unanimous consent to withdraw Amendment No. 3. There being no objection, it was so ordered. Amendment No. 4 was offered by Representative Gara: Page 18, following line 26: Insert a new subsection to read: "(e) An agreement or contract negotiated under AS 38.05.020(b)(11) or other agreement or contract in which the state or an entity of the state is a party and that is associated with a North Slope natural gas project may allow all parties the benefit of equalized capital costs that result from the expansion of the project. However, the agreement or contract must provide for an expansion to transport additional natural gas produced from a lease or property subject to the tax levied under AS 43.55.011(e) that may increase the average capital cost for each 1,000 cubic feet of natural gas above the level before the expansion; however, 2014-04-19 House Journal Page 2646 the cost of the expansion may not increase the equalized capital costs for a party that does not participate in the expansion above the highest capital cost for each 1,000 cubic feet of natural gas before the expansion." Representative Gara moved and asked unanimous consent that Amendment No. 4 be adopted. Representative Saddler objected. The question being: "Shall Amendment No. 4 be adopted?" The roll was taken with the following result: HCS CSSB 138(FIN) Second Reading Amendment No. 4 YEAS: 9 NAYS: 30 EXCUSED: 0 ABSENT: 1 Yeas: Drummond, Gara, Gruenberg, Josephson, Kawasaki, Kito III, Kreiss-Tomkins, Tarr, Tuck Nays: Austerman, Chenault, Costello, Edgmon, Feige, Foster, Gattis, Guttenberg, Hawker, Herron, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Millett, Munoz, Nageak, Neuman, Olson, Pruitt, Reinbold, Saddler, Seaton, Stoltze, Thompson, T.Wilson Absent: P.Wilson And so, Amendment No. 4 was not adopted. Amendment No. 5 was offered by Representative Tarr: Page 51, line 25: Delete "a new subsection" Insert "new subsections" Page 52, line 2: Delete "and gas" Page 52, line 11: Delete "and gas" 2014-04-19 House Journal Page 2647 Page 52, line 13: Delete "and gas" Page 52, lines 18 - 19: Delete "and gas" Page 52, line 27: Delete "and gas" Page 52, line 28: Delete "and gas" Page 53, following line 1: Insert a new subsection to read: "(i) For purposes of (h) of this section, for a lease or property that produces both oil and gas, the portion of the (1) operating costs that are lease expenditures attributable to oil incurred to explore for, develop, or produce an oil and gas deposit is a fraction the numerator of which is the production of oil expressed in BTU equivalent barrels and the denominator of which is the total production of oil and gas expressed in BTU equivalent barrels; and (2) capital costs that are lease expenditures attributable to oil incurred to explore for, develop, or produce an oil and gas deposit is a fraction the numerator of which is the total proven reserves of oil of the lease or property expressed in barrels and the denominator of which is the total proven reserves of oil and gas of the lease or property expressed in BTU equivalent barrels." Representative Tarr moved and asked unanimous consent that Amendment No. 5 be adopted. Representative Saddler objected. The question being: "Shall Amendment No. 5 be adopted?" The roll was taken with the following result: HCS CSSB 138(FIN) Second Reading Amendment No. 5 YEAS: 10 NAYS: 29 EXCUSED: 0 ABSENT: 1 2014-04-19 House Journal Page 2648 Yeas: Drummond, Gara, Gruenberg, Guttenberg, Josephson, Kawasaki, Kito III, Kreiss-Tomkins, Tarr, Tuck Nays: Austerman, Chenault, Costello, Edgmon, Feige, Foster, Gattis, Hawker, Herron, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Munoz, Nageak, Neuman, Olson, Pruitt, Reinbold, Saddler, Seaton, Stoltze, Thompson, P.Wilson, T.Wilson Absent: Millett And so, Amendment No. 5 was not adopted. Amendment No. 6 was not offered. Amendment No. 7 was offered by Representative Tuck: Page 2, line 22, following "project;" (title amendment): Insert "creating an Alaska Due Diligence Task Force;" Page 3, following line 1: Insert a new bill section to read: "* Section 1. The uncodified law of the State of Alaska is amended by adding a new section to read: LEGISLATIVE FINDINGS FOR SEC. 69 OF THIS ACT. In the creation of an Alaska Due Diligence Task Force under sec. 69 of this Act, the legislature finds that (1) the Constitution of the State of Alaska mandates the resources of the state be managed for the maximum benefit of the state's people; (2) the sale of state-owned resources in a manner that maximizes the revenue received by the state, adjusted for inflation, over the life of the project generates the greatest economic value for residents of the state; (3) the North Slope of the state holds 35,000,000,000,000 cubic feet of proven natural gas reserves, and, for each one dollar increase in the wellhead price of 1,000 cubic feet of gas, the potential state revenue increases by $35,000,000,000; (4) the state loses a potential $35,000,000,000 for each dollar spent on unnecessary resource transportation and production costs; (5) the most significant means of maximizing the benefit of the state's North Slope energy resources is to deliver energy produced 2014-04-19 House Journal Page 2649 in the state in the most economical manner possible to as many residents of the state as possible; (6) keeping transportation and production costs as low as possible will ensure the lowest energy costs to residents of the state; (7) the Alaska State Legislature finds the following strategic values to be of critical importance to achieving maximum value from the natural gas reserves of the state and finds that those values should be satisfied before the state considers the extraction and use of its resources: (A) commitments to purchase large volumes of natural gas should be made from creditworthy buyers for a price at which producers are willing to sell; (B) the wellhead value of natural gas must be sufficiently high to provide adequate revenue to the state; (C) tariffs and transportation costs must be low enough to guarantee residents of the state low energy costs, now and into the future; (D) if the state takes an equity position in a natural gas treatment and transportation system, the state must retain the economic rights and benefits commensurate with the equity contribution of the state and must maintain a proportional share of the governance rights through board participation." Page 3, line 2: Delete "Section 1" Insert "Sec. 2" Renumber the following bill sections accordingly. Page 15, line 26: Delete "sec. 18" Insert "sec. 19" Page 23, line 23: Delete "sec. 31" Insert "sec. 32" Page 27, line 16: Delete "sec. 34" Insert "sec. 35" 2014-04-19 House Journal Page 2650 Page 35, line 23: Delete "sec. 42" Insert "sec. 43" Page 62, line 13: Delete "sec. 27" Insert "sec. 28" Page 63, line 16: Delete "sec. 27" Insert "sec. 28" Page 63, following line 16: Insert a new bill section to read: "* Sec. 69. ALASKA DUE DILIGENCE TASK FORCE. (a) The Alaska Gas Due Diligence Task Force is established for the purposes of analyzing options to maximize oil and gas revenue for the state, decreasing energy costs for residents of the state, and lowering resource distribution and infrastructure costs. (b) the Alaska Gas Due Diligence Task Force shall perform a 30- year cost-benefit and cash flow analysis for the state, resource owners, and residents, in which it reports capital costs and absorption rates, estimates the energy savings to residents in each region of the state, and stress tests each of the following: (1) any capital project being pursued with the expectation that the state will later import natural gas for utilities in the southcentral region of the state; (2) continued development and expanded gas exploration, including exploration by jack-up rig, in the Cook Inlet region; (3) a large-diameter pipe along the Parks Highway to multiple ports in the south-central region of the state coupled with a liquefied natural gas terminal in Cook Inlet; (4) a large-diameter pipe along the Richardson Highway and a liquefied natural gas terminal in Valdez; (5) a small-diameter pipe carrying 500,000,000 cubic feet of gas or less from the North Slope to the utility grid of the south-central region of the state with remaining capacity available for export or industrial projects; (6) a small-diameter pipe connecting Fairbanks to the utility grid of the south-central region of the state; 2014-04-19 House Journal Page 2651 (7) a gas-to-liquid project on the North Slope with transportation of the resulting product through the existing Trans Alaska Pipeline System; and (8) a North Slope-oriented liquefied natural gas terminal with liquefied natural gas storage facilities to accommodate seasonal shipping limitations. (c) The Alaska Gas Due Diligence Task Force shall be made up of experts in the various technical fields for each option investigated who are able to assist in reasonable project analysis including costs, revenue, demand, and operating expenses. (d) The Alaska Gas Due Diligence Task Force consists of (1) two members of the senate appointed by the president of the senate, including one member of the minority caucus; (2) two members of the house of representatives appointed by the speaker of the house of representatives, including one member of the minority caucus; (3) eight public members who are residents of the state, appointed jointly by the president of the senate and the speaker of the house of representatives, as follows: (A) one member representing a tribal entity; (B) one member representing the oil and gas industry; (C) one member from an accredited university or college who specializes in energy economics; (D) one member from a local government or association of local governments; (E) one member from a conservation group; (F) one member representing a Native corporation organized under the Alaska Native Claims Settlement Act; (G) one member representing a statewide labor organization; (H) one member representing an electrical or gas utility that purchases a significant amount of natural gas and is located in the Railbelt region of the state; (4) one member from the executive branch appointed by the governor. (e) The Alaska Gas Due Diligence Task Force may retain a nationally respected contractor capable of creating the custom financial models necessary to perform the analytics required by the task force and to report the results of the analysis to the legislature before deliberations on commercial contracts for a large-diameter 2014-04-19 House Journal Page 2652 liquefied natural gas project at the completion of the pre-front-end engineering and basic engineering design study." Renumber the following bill sections accordingly. Page 64, line 22: Delete "sec. 27" Insert "sec. 28" Page 64, line 27: Delete "sec. 18" Insert "sec. 19" Page 64, line 29: Delete "sec. 18" Insert "sec. 19" Page 67, following line 2: Insert a new bill section to read: "* Sec. 74. Section 69 of this Act is repealed December 31, 2015." Page 67, line 3: Delete "Sections 1 - 18, 21, 27 - 31, 33, 34, 42, 44, and 60 - 71" Insert "Sections 2 - 19, 22, 28 - 32, 34, 35, 43, 45, and 61 - 73" Renumber the following bill sections accordingly. Page 67, line 5: Delete "Section 43" Insert "Section 44" Page 67, line 6: Delete "secs. 72 and 73" Insert "secs. 75 and 76" Representative Tuck moved and asked unanimous consent that Amendment No. 7 be adopted. Representative Feige objected. 2014-04-19 House Journal Page 2653 The question being: "Shall Amendment No. 7 be adopted?" The roll was taken with the following result: HCS CSSB 138(FIN) Second Reading Amendment No. 7 YEAS: 10 NAYS: 29 EXCUSED: 0 ABSENT: 1 Yeas: Drummond, Gara, Gruenberg, Guttenberg, Josephson, Kawasaki, Kito III, Kreiss-Tomkins, Tarr, Tuck Nays: Austerman, Chenault, Costello, Edgmon, Feige, Foster, Gattis, Hawker, Herron, Higgins, Holmes, Hughes, Isaacson, Johnson, Keller, LeDoux, Lynn, Millett, Munoz, Nageak, Neuman, Olson, Pruitt, Reinbold, Saddler, Seaton, Thompson, P.Wilson, T.Wilson Absent: Stoltze And so, Amendment No. 7 was not adopted. Representative Pruitt moved and asked unanimous consent that HCS CSSB 138(FIN) be considered engrossed, advanced to third reading, and placed on final passage. There was objection. HCS CSSB 138(FIN) will advance to third reading on tomorrow's calendar.