Legislature(2017 - 2018)BARNES 124
03/09/2018 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB27 | |
| HB355 | |
| HB330 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 27 | TELECONFERENCED | |
| + | HB 330 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 355 | TELECONFERENCED | |
HB 330-DNR: DISCLOSURE OF CONFIDENTIAL INFO
2:54:35 PM
CO-CHAIR TARR announced that the final order of business would
be CS FOR HOUSE BILL NO. 330(JUD), "An Act authorizing the
commissioner of natural resources to disclose confidential
information during a royalty or net profit share audit or appeal
and issue a protective order limiting the persons who have
access to the confidential information."
2:55:19 PM
TIM BISSON, Audit Section Manager, Central Office, Division of
Oil and Gas, Department of Natural Resources, shared a
PowerPoint titled "Protective Orders." He stated that he works
with a team of nine auditors to audit state royalties, net
profit share payments, and federal royalties for the Alaska
Department of Revenue.
2:55:38 PM
MR. BISSON reviewed slide 3, "Royalty Audit Section," which read
as follows [original punctuation provided]:
? The Royalty Audit Section conducts audits of state
royalty and net profit payments, as well as Federal
royalties received from leases within Alaska.
? Since FY03, the section has conducted 91 audits and
collected an additional $270.6 million as a result of
audited payments
? The most common audit issues found during a royalty
audit include incorrect marine/pipeline deductions,
incorrect starting values, and "higher of" calculation
MR. BISSON said that the "higher of" calculation was the reason
for HB 330.
2:56:11 PM
MR. BISSON referred to slide 3, "Computing Royalties," which
read as follows [original punctuation provided]:
? Oil and Gas leases determine the royalty rate and
the method for calculating royalty payments to the
state
? Statutory minimum royalty rate is 12.5%
? All leases define value in relation to the sales of
other producers'
? DNR's royalty is the higher of several values under
the lease terms, including the lessee's field price,
the posted field price and an average value which
includes other lessees' field prices.
? Higher of calculations use other producers
confidential sales information
MR. BISSON stated that in order to arrive at the average of the
other producer's field prices, the division uses confidential
sales information.
2:57:00 PM
MR. BISSON referred to slide 4, "WHY HB 330," which read as
follows [original punctuation provided]:
? Royalty Audit Section relies on confidential price
information from other producers
? Lease provisions require producers to share price
information with the Division
? When an audit is appealed to the Commissioner,
access to confidential sales information by the
audited producer is necessary to provide the auditee
with the higher of audit calculation
? Other producers have refused to voluntarily allow
the Division to share confidential price information
with the audited producer in connection with audits
even when a confidentiality agreement would protect
the information and limits its disclosure
? Currently seven royalty audits totaling $39.2
million are pending due to confidentiality concerns
2:57:26 PM
MR. BISSON reviewed slide 4, noting that the Royalty Audit
Section used confidential price information from producers
when it conducted audits. The lease provisions require
producers to submit their sales contract invoices and other
data to be verified. Once the audit was finished, if it
had a "higher up" claim, the audited lessee would naturally
ask to examine the supporting audit information, which
often contained confidential sales data in the calculation,
he said. He indicated he would refer to the audited
producer as the "audited lessee" and to the other producers
as the "disclosing lessee," since it is the disclosing
lessee's information that the division will be disclosing.
MR. BISSON described the audit process, such that the
division would talk to the disclosing lessee and ask them
if the division can disclose the information using a
confidentiality agreement to the audited lessee. Often
times the [disclosing lessee] would object. He said the
division does not have a really great way forward from
there. The audit division believes that HB 330 would
provide the division with a good solution, he said.
MR. BISSON reported that currently, the division has seven
royalty audits in the appeal process with "higher up"
claims of roughly $39.2 million and as more audits are
completed, the figures will increase.
2:58:34 PM
MR. BISSON referred to slide 5, "What are Protective Orders,"
which read as follows [original punctuation provided]:
? Protective orders are common tools used by courts,
arbitrators, and certain agencies (Administration,
Revenue)
? A typical protective order limits:
o Access who can view/access the information
o Use what the specific use of the information
may be
o Distribution narrows distribution of the
information
o Disposition at the end of use directs return
or destruction of information
? Under HB330:
o Commissioner determines disclosure is necessary
o Notice is given to the owner of the information
o Commissioner issues protective order w/ limits
MR. BISSON said the solution was a protective order to be
issued by the commissioner of the Department of Natural
Resources. He read slide 5, which discusses protective
orders. He explained that the Department of Revenue (DOR),
for oil and gas tax production purposes has a similar right
to issue protective orders with similar lessees.
MR. BISSON added that the protective order would be limited
to providing a solution to the audit with a narrow scope to
those working on the resolution. At the end the
information would be sent back or destroyed, he said.
Under HB 330, the commissioner would determine disclosure
was needed, when an audited lessee wanted to see backup
used for the "higher up" claim. The audit division would
give notice to the disclosing lessee informing the lessee
the information the audit division intended to disclose.
It would give the disclosing lessee an opportunity to be
heard, he said. The disclosing lessee would file any
objections and the audit section of the oil and gas
division would work through them. The commissioner would
ultimately issue the protective order describing any
limits, he said.
3:00:01 PM
MR. BISSON referred to slide 6, "HJUD Amendments," which read as
follows [original punctuation provided]:
Two amendments were adopted in the House Judiciary
committee
1. Technical changes, to
? limit the applicability of this power to oil
and gas issues,
? to clarify that the word "lease" does not
modify the words "appeal" or "request for
reconsideration," (this change was mooted by
amendment 2) and
? to ensure that net profit share audits are
captured by this section, as net profit share
payments are not considered royalty payments
2. Narrowed the scope of the bill to royalty audits
only.
? The bill previously included geologic and
geophysical data under protective order
MR. BISSON reviewed slide 6, stating that the initial bill
was for the whole department and the House Judiciary
Committee adopted two amendments. The House Judiciary
Committee narrowed the scope in Amendment 1 to oil and gas
issues. It clarified the meaning of "lease" to ensure it
did not modify "appeal" or "request for reconsideration."
It added the term "net profit share payments" to be certain
those were also captured.
MR. BISSON stated that Amendment 2 narrowed the scope of
the bill to royalty audits only. Previously it could have
been used for geological or physical data, he said.
3:00:51 PM
MR. BISSON referred to slide 7, "HB330," which read as follows
[original punctuation provided]:
Section 1:
New provision adding to the Commissioner of Natural
Resources duties and powers to include determining
whether a disclosure is required for a royalty or NPSL
audit, appeal or reconsideration
Mandates that if the commissioner determines
disclosure is necessary, notice and opportunity to be
heard must be provided to those affected Allows the
commissioner to issue a protective order limiting the
persons who may have access to the information and the
purposes for which it must be used
Section 2:
Conforming language to allow protective order to be
issued as it relates to cost data and financial
information submitted in support of applications,
bonds, leases and similar items
Section 3:
Conforming language to statutes dealing with
punishment for divulging confidential information
allowing for protective orders to view confidential
information during royalty or NPSL audits or appeals
MR. BISSON paraphrased the section-by-section analysis of the
bill as reflected on slide 7.
3:01:44 PM
REPRESENTATIVE BIRCH asked how the calculation worked for
"royalty in kind." He related his understanding that the state
reserves an option to have barrels of oil rather than a check.
MR. BISSON explained that this only applied to royalty-in-value
barrels. The royalty-in-kind was totally separate and covered
by contract.
3:02:19 PM
REPRESENTATIVE BIRCH mused that it was a different arrangement
depending on the location, contract, and producer.
MR. BISSON responded that the royalty-in-kind contract requires
the division to do nominations for those barrels; and everything
remaining outside the royalty-in-kind contract would be taken in
value. The companies sell the barrels and pay the state its
royalties, he said.
3:02:46 PM
CO-CHAIR JOSEPHSON directed attention to slide 4, bullet 4,
which read as follows [original punctuation provided]:
? Other producers have refused to voluntarily allow
the Division to share confidential price information
with the audited producer in connection with audits
even when a confidentiality agreement would protect
the information and limits its disclosure
CO-CHAIR JOSEPHSON recalled him stating that other producers
have not voluntarily allowed the sharing of confidential price
information. He asked if they could be compelled or was the
bill about assuaging their concerns with proprietary
information, so everyone agrees by consent to do so.
MR. BISSON responded that the solutions the Royalty Audit
Section currently has would require them to obtain a protective
order in court and the audit section of the oil and gas division
does not want to do so because it takes up the court, the
division, and the company's time. The proposed HB 330 provides
the preferred method, he said.
3:03:58 PM
CO-CHAIR JOSEPHSON asked if everyone was on the same page. He
asked whether there was any prearrangement as to the language.
MR. BISSON explained that the audit section of the oil and gas
division has used some confidentiality agreements in the past
and has used language that has been acceptable to companies.
3:04:42 PM
REPRESENTATIVE PARISH asked about the $39.2 million in pending
audits on slide 4 and if any were concerned about geological or
geophysical data.
MR. BISSON answered no; that the auditors do not use geological
or geophysical data for the "higher up" claims.
3:05:07 PM
REPRESENTATIVE DRUMMOND asked if the state would realize more
revenue if the bill passed and issue was resolved.
MR. BISSON answered that the bill would create an opportunity to
resolve the audits. He acknowledged that other issues exist, so
he could not answer. He offered his belief that the bill would
remove a current hurdle for auditors.
REPRESENTATIVE DRUMMOND acknowledged that HB 330 would help
resolve audits.
MR. BISSON said he hoped so.
3:05:53 PM
REPRESENTATIVE PARISH asked if outstanding royalty monies
collected interest.
MR. BISSON answered yes.
3:06:19 PM
KARA MORIARTY, President/CEO, Alaska Oil & Gas Association
(AOGA), stated that AOGA, a private trade association,
represented the majority of oil and gas producers, explorers,
refiners and transporters of oil and gas. She said AOGA
recognizes the administration's efforts to address the potential
issues surrounding royalty audits and appeals.
3:07:09 PM
MS. MORIARTY said unfortunately, the AOGA does not support HB
330 in its current form and has conveyed the two concerns to the
Department of Natural Resources. If these concerns were
addressed, it would provide further clarity for the stakeholders
while preserving the administration's intent as expressed in the
transmittal letter and by today's presentation, she said.
MS. MORIARTY highlighted two concerns: HB 330 should have
language to exempt royalty settlement agreements from being
included as part of these efforts. The reason AOGA would like
this was because these agreements are contractual agreements
between the state and the company and vary based on terms of
agreement. Royalty settlement agreements often contain other
legal restrictions regarding the disclosure of confidential
information to a party not subject to the contractual agreement.
She offered her belief that exempting royalty settlement
agreements would not interfere with what DNR is trying to
achieve.
3:08:31 PM
MS. MORIARTY explained the second concern, such that it was in
regard to which individuals from the parties involved under the
protective order would have access to confidential information
during a royalty audit or appeal. The AOGA believes that HB 330
should limit release of confidential information to only those
individuals who are directly involved in the royalty audit or
appeal and not those individuals who may work outside of such
matters. She suggested that the language should be tightened up
to limit the release of the confidential information during
these types of audits or appeals to those people who are
actually working on the protective order. The AOGA has kept an
open dialogue with the DNR since the bill was introduced. She
reiterated that AOGA cannot support the current version of the
bill but would like to continue to work toward resolution of
these two issues, she said.
3:09:52 PM
CO-CHAIR JOSEPHSON asked if those concerns had been brought to
House Judiciary Standing Committee.
MS. MORIARTY answered no; because the House Judiciary Standing
Committee hearing happened pretty quickly, and the member
companies had not fully analyzed the bill at that time public
testimony was scheduled.
CO-CHAIR JOSEPHSON understood how that could happen.
[HB 330 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 355 Amendment Four - D.6 - Rep. Rauscher 3.2.18.pdf |
HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Five - D.7 - 3.2.18.pdf |
HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Seven - Rep. Rauscher 3.7.18.pdf |
HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Sectional Analysis 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Sponsor Statement 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Supporting Document- Expanded One Pager 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Ver A 2.21.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| Law Fiscal Note, HB 355.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Supporting Document- Alaska Fire Chiefs Letter of Support 2.28.18.pdf |
HRES 2/28/2018 1:00:00 PM HRES 2/28/2018 6:00:00 PM HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Opposition-Squyres Graphic.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Opposition-Squyres Testimony.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB330 ver A 2.16.18.pdf |
HJUD 2/16/2018 1:00:00 PM HJUD 2/21/2018 1:00:00 PM HJUD 2/23/2018 1:30:00 PM HJUD 2/26/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM HRES 3/12/2018 1:00:00 PM HRES 3/14/2018 1:00:00 PM |
HB 330 |
| HB330 Transmittal Letter 2.16.18.pdf |
HJUD 2/16/2018 1:00:00 PM HJUD 2/21/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM HRES 3/12/2018 1:00:00 PM HRES 3/14/2018 1:00:00 PM |
HB 330 |
| HB330 Fiscal Note DNR-DOG 2.16.18.pdf |
HJUD 2/16/2018 1:00:00 PM HJUD 2/21/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM HRES 3/12/2018 1:00:00 PM HRES 3/14/2018 1:00:00 PM |
HB 330 |
| HB330 Opposing Document-UCM Letter 2.21.18.pdf |
HJUD 2/21/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM HRES 3/12/2018 1:00:00 PM HRES 3/14/2018 1:00:00 PM |
HB 330 |
| HB330 Proposed Amendment 2.23.18.pdf |
HJUD 2/23/2018 1:30:00 PM HRES 3/9/2018 1:00:00 PM HRES 3/14/2018 1:00:00 PM |
HB 330 |
| HB330 Amendments #1-2 2.26.18.pdf |
HJUD 2/26/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 330 |
| HB330 Amendments #1-2 HJUD Final Vote 2.26.18.pdf |
HJUD 2/26/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM HRES 3/12/2018 1:00:00 PM HRES 3/14/2018 1:00:00 PM |
HB 330 |
| HB 27 Sponsor Statement 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/4/2018 1:00:00 PM |
HB 27 |
| HB 27 Ver. D bill 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/4/2018 1:00:00 PM |
HB 27 |
| HB 27 Version A 1.18.17.PDF |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 4/4/2018 1:00:00 PM |
HB 27 |
| HB 27 Version D Sectional Analysis 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/4/2018 1:00:00 PM |
HB 27 |
| HB 27 Fiscal Note DEC 3-2-18 HIGH-RISK CHEMICALS FOR CHILD EXPOSURE 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/4/2018 1:00:00 PM |
HB 27 |
| HB 27 Flame Retardents - Consumer Product Safety Commission 9-28-17.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |
| HB 27 Supporting Document - Consumer Product Chemicals in Indoor Dust Analysis 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |
| HB 27 Supporting Document - Household dust factsheet 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |
| HB 27 Supporting Document 5 Support Emails 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |
| HB 27 Supporting Document -20 Support Letters 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |
| HB 355 Supporting Document - Letter DOF Fire Program Mgt 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 330 Overview Presentation by DNR 3.8.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/12/2018 1:00:00 PM HRES 3/14/2018 1:00:00 PM |
HB 330 |
| HB 355 Amendment One - D.2 - Rep. Rauscher 3.1.18.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Two - D.3 - Rep Rauscher 3.1.18.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Three - D.4 - Rep. Rauscher 3.1.18.pdf |
HRES 3/5/2018 1:00:00 PM HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 355 Amendment Six - Rep. Rauscher 3.7.18.pdf |
HRES 3/9/2018 1:00:00 PM |
HB 355 |
| HB 27 Flame Retardants Presentation.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |
| HB 27 Supporting Document - Testimony - Talley 3.9.18.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |
| HB 27 Supporting Document - Safer States laws.pdf |
HRES 3/9/2018 1:00:00 PM HRES 3/19/2018 1:00:00 PM HRES 3/26/2018 1:00:00 PM |
HB 27 |