Legislature(2011 - 2012)HOUSE FINANCE 519
03/13/2012 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB252 | |
| HB9 | |
| HB289 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 9 | TELECONFERENCED | |
| + | HB 289 | TELECONFERENCED | |
| += | HB 170 | TELECONFERENCED | |
| += | HB 252 | TELECONFERENCED | |
| += | HCR 24 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 289
"An Act relating to a gas storage facility; relating
to the tax credit for a gas storage facility; relating
to the powers and duties of the Alaska Oil and Gas
Conservation Commission; relating to the regulation of
natural gas storage as a utility; relating to the
powers and duties of the director of the division of
lands and to lease fees for a gas storage facility on
state land; and providing for an effective date."
Vice-chair Fairclough MOVED to ADOPT proposed committee
substitute for HB 289, Work Draft 27-LS1216\X (Bullock,
3/12/12).
Co-Chair Stoltze OBJECTED for the purpose of discussion.
There being NO further OBJECTION, Work Draft 27-LS1216\X
was ADOPTED.
JANE PEARSON, STAFF, REPRESENTATIVE STEVE JOHNSON, referred
to the sponsor statement (copy on file):
The cost of energy is crippling a good portion of
Interior Alaska's economy. The ever increasing expense
of heating homes and operating businesses during the
long, cold, dark winter hurts the ability of Interior
Alaskans to put food on the table today and plan for
the future. The Fairbanks community spends over $600
million per year on space heating, pays the highest
natural gas process in the country and does not
receive the state energy incentives of subsidies
available to residents and communities in other
regions of our state.
Ms. Pearson opined that she would spend all of her
disposable cash for the year on energy bills. She suspected
that buy end of the year she will have spent $8000 on home
energy bills. She stated that and infusion of gas to
Fairbanks would reduce energy costs to end users and
restore Fairbank's ability to grow its economic base. She
said that HB 289 would incent the private sector's delivery
of lower cost natural gas to Interior Alaska by extending
tax credits for liquid natural gas storage facilities that
were necessary for natural gas projects. She stated that a
new credit for construction of an above ground liquefied
gas storage tanks, with a volume of 25,000 gallons, would
make the program flexible enough to fit the varying needs
of gas delivery throughout the state. She furthered that
the legislation would allow eligible, above ground,
liquefied gas natural storage facilities cited on state
lands to request an exemption from rental payments. She
said that the exemption could extend for up to ten years
following the commencement of commercial operations. She
stated that the bill defined how the credits would be
distributed, both as tax credits and payments to non-
taxable entities. She described the safeguards in the bill;
the liquefied natural gas storage facility must be
regulated by the Regulatory Commission of Alaska (RCA), and
the incentives must be passed onto customers. She explained
that the bill set forth how a person who received a credit
or payment should repay the credit or payments if the
facility ceased commercial operation within the 9 calendar
years immediately following the calendar year in which the
facility commenced commercial operations. She noted that
the bill defined liquefied natural gas storage facilities
under the RCA.
10:26:04 AM
Ms. Pearson walked the committee through the sectional
analysis (copy on file):
Section 1. AS 38.05.096 Creates a new section under AS
38.05 that allows eligible above ground liquefied
natural gas tank storage facilities, sited on state
lands, to request an exemption from rental payments.
The exemption could extend for up to ten years
following the commencement of commercial operations as
long as the facility continues to operate. Information
regarding the rental exemption is deemed to be "public"
and is available to the RCA upon request. A person
receiving a rental exemption must adjust the storage
charge downward to reflect this state benefit and pass
it through to the storage customers.
Section 2. AS 42.05.381(k) Amends the statute to state
that payments or tax credits granted under this bill
shall be reflected in the utility's rates.
Section 3. AS 42.05.990(5) Amends the definitions
"public utility" or "utility" to include furnishing
liquefied natural gas to the public.
Section 4. AS 42.05.990(11)-(13) Adds the definitions
of "liquefied natural gas storage facility" and
"reservoir" and "service of liquefied natural gas
storage" to apply to liquefied natural gas.
Section 5. Adds a new section to AS 43.20
AS 43.20.047. Creates a new credit for a
liquefied natural gas storage facility of 25,000
gallons or more or an expansion of an existing facility
of 25,000 gallons or more. The credit is capped at
fifteen million dollars or 50 percent of the
development cost whichever is less. This credit is in
addition to any other credits for which the storage
facility is eligible under this chapter. States that
the liquefied natural gas storage facility must be
regulated by the Regulatory Commission of Alaska and
establishes how the credit or payment shall be
disbursed. Sets forth how a person who has received a
credit shall repay the credit if the facility ceases
commercial operations within the nine calendar years
immediately following the calendar year in which the
facility commenced commercial operations. This section
also defines "liquefied natural gas storage facility",
"ceases commercial operation" and "commences commercial
operation".
Sections 6 & 7. Make conforming amendments to
accommodate the new tax credits under AS 43.20.047.
Section 8. Establishes an immediate effective date for
the legislation.
Co-Chair Stoltze OPENED public testimony.
10:32:35 AM
BARBARA HUFF TUCKNESS, DIRECTOR, LEGISLATIVE AND
GOVERNMENTAL AFFAIRS, TEAMSTERS LOCAL 959, spoke in favor
of HB 289. She stated that the high cost of home heating
was driving young people to the Lower 48. She said that
those that have stayed, and who were attempting to build a
life in Alaska, were paying high fuel costs that made it
difficult to save money. She urged passage of the
legislation.
GENE THERRIAULT, VICE PRESIDENT, RESOURCE DEVELOPMENT,
GOLDEN VALLEY ELECTRIC ASSOCIATION, testified in support of
the HB 289. He stated that the legislation would help to
achieve parity with the credit that was allowed for the
addition of storage in the natural gas distribution supply
chain, which had been established by the Cook Inlet
Recovery Act. He relayed that methane expanded 600 times
when going from a liquid to a gas, illustrating the
dynamics of storing the same resource in different forms.
He hoped that a threshold could be created in statute that
applied for the storage of the methane in liquid state,
under a sensible threshold. He stated that in a previous
committee the threshold had been reduced to 25,000 with the
idea that the resource would be available to communities on
the highway system. He shared that the Golden Valley Board
of Directors was focused on building an initial plant that
would aggregate the largest possible demand and drive the
per unit costs down as far as possible. Additionally, the
association was requesting parity on the forgiveness of
state land lease payments. He shared that when the act was
passed there had been little thought given concerning the
different routes that could be taken when leasing state
lands. He said that the association was asking to be given
the same terms as the recovery act concerning the wavier of
state land lease payments.
10:38:53 AM
Mr. Therriault relayed the importance that the legislation
reflect that Golden Valley was a tax exempt entity. He
stated that the legislation suggested a window opportunity
that would be open until 2020 for the addition of the
storage. He informed the committee that the association was
moving forward with the trucking operation, working out the
details, and working with the large industrial users in
Fairbanks to make trucking gas an economic reality. He
said that knowing this year whether the storage credit
would be available for the project would be helpful.
Co-Chair Stoltze hoped Mr. Therriault would return for
further discussion of the legislation.
Mr. Terriault informed the committee that a 2009 review of
the trucking concept written by AIDEA was available upon
request. He said that the report indicated that trucking
would make economic sense as long as it served the needs of
the two identified industrial users: Flint Hills and Golden
Valley.
JERRY CLEWORTH, MAYOR, FAIRBANKS (via teleconference),
explained that energy problems were abundant in Fairbanks.
He stressed that the amount of money residents paid for
heat in the interior was at crisis level. He stated that it
cost $8,000 to $10,000 per year to heat his small, energy
efficient home; that cost was double in rural Alaska. He
urged passage of the legislation.
10:44:17 AM
Co-Chair Stoltze CLOSED public testimony.
Vice-chair Fairclough pointed to Page 6, line 6. She
understood that the term "person's corporate returns" in
the bill referred businesses, corporations, and non-
profits.
Ms. Pearson responded in the affirmative.
Vice-chair Fairclough requested further explanation of
refund requests. She expressed concern that a refund could
be requested that might exceed the requester tax liability.
She noted that qualifying costs were not listed in the
legislation. She directed attention to Line 25:
"A person may not receive a credit under this section
for the acquisition of a liquefied natural gas storage
facility for which a credit has been taken already."
Vice-chair Fairclough asked if the language meant that the
person could receive a credit for purchasing a facility.
She wondered whether Golden Valley had an asset available
for purchase. She requested further explanation concerning
the interest applied to refunds mentioned on Page 8.
Co-Chair Stoltze handed the gavel to Vice-chair Fairclough.
Ms. Pearson replied that interest would be accruing if a
credit or payment were to be given in error.
Vice-chair Fairclough stated that it was important that the
state protect itself from lawsuits pertaining to incurring
interest on refund payments.
10:48:11 AM
Representative Wilson asked whether the bill would extend
credits to enlarge the natural gas storage facility in her
area.
Ms. Pearson replied in the affirmative.
Representative Wilson reiterated the need for a natural gas
pipeline.
Representative Neuman pointed to Page 5 of the bill. He
understood that the credits were for tax liability owed to
the state. He wondered if the credits would be applied
against corporate taxes owed to the state.
Ms. Pearson answered that the credits could be applied
against corporate taxes if corporate taxes were not due.
Representative Neuman discussed the taxable year in which
the liquefied natural gas storage facility commenced
commercial operations. He understood that the refunding of
the costs incurred could be applied for only once.
Ms. Pearson responded that an additional expansion, over
25,000 gallons, would also allow for an application.
Vice-chair Fairclough thought that it was imperative that
"qualified expenses" be clearly defined in the bill.
Representative Costello requested further explanation about
the money for the credits being under the oversight of the
RCA. She queried weather the naturally occurring storage
fell under the oversight of the RCA as well.
10:51:50 AM
Ms. Pearson explained that any credits taken, or payments
made, would be passed on to the consumer, and would be
overseen by the RCA.
Representative Costello asked if the bill achieved the
parity voiced by Mr. Terriault, or were there areas that
needed more work.
Ms. Pearson replied that the bill worked to achieve equal
parity.
Representative Neuman wondered whether the facility was
meant to be above ground.
Ms. Pearson responded in the affirmative.
Representative Neuman wondered about opportunities for
subsurface storage. He said that there were various
opportunities for subsurface storage facilities around the
state that should be recognized.
Ms. Pearson replied that she did not know enough about
below ground storage to answer.
Representative Neuman believed it was important because it
could open up a variety of opportunities statewide.
10:55:01 AM
Representative Doogan highlighted the indeterminate fiscal
note. He suggested that the committee was receiving an
increasing amount of indeterminate notes. He opined that
the finance committee could not craft good policy without
knowing what the cost would be to the state. He believed
that DNR and DOR should be able to provide educated cost
estimates to the committee.
Vice-chair Fairclough agreed. She expressed concern that
the committee passed legislation without knowing the actual
fiscal implications to the state.
Vice-chair Fairclough explained that, for reasons related
to safety, Anchorage had done everything it could to get
rid of above ground gas storage. She wondered if the same
safety issues could be applied to Fairbanks.
Ms. Pearson would get back to the committee with responses.
Representative Neuman directed attention to Page 6, which
spoke to refunds on the unused portion of the tax credit.
He worried about credits being incurred that were beyond
the corporation's tax liability to the state.
Ms. Pearson replied that some of the corporations were non-
profits, or had become LLC corporations, which were non-
taxable entities. She believed that the savings to the
state would be passed onto the consumers.
Representative Neuman understood that the $15 million tax
credit could be given to anyone who applied.
Vice-chair Fairclough agreed that the bill could be made
clearer. She clarified that the number was $15 million or
less, up to 50 percent of qualified costs. She noted that
the sponsor had been careful to assure that with RCA
oversight and auditing, the savings would be reflected in a
rate reduction to consumers in the Fairbanks area.
HB 289 was HEARD and HELD in Committee for further
consideration.