Legislature(2005 - 2006)HOUSE FINANCE 519

07/26/2006 10:00 AM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB3001 OIL/GAS PROD. TAX TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
*+ HB3003 OIL AND GAS TAXES/ADJUSTMENTS/ELF TELECONFERENCED
Scheduled But Not Heard
-- Testimony <Invitation Only> --
*+ HB3004 OIL AND GAS TAX TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
HOUSE BILL NO. 3001                                                                                                           
                                                                                                                                
     An Act  relating to  the production tax  on oil  and gas                                                                   
     and  to  conservation  surcharges  on oil;  relating  to                                                                   
     criminal  penalties for  violating conditions  governing                                                                   
     access to  and use of confidential  information relating                                                                   
     to the production tax; amending  the definition of 'gas'                                                                   
     as that  definition applies  in the Alaska  Stranded Gas                                                                   
     Development  Act;  making   conforming  amendments;  and                                                                   
     providing for an effective date.                                                                                           
                                                                                                                                
10:13:37 AM                                                                                                                   
                                                                                                                                
Representative   Hawker   declared  potential   conflict   of                                                                   
interest because  a member of  his family is employed  by the                                                                   
oil and  gas industry in Alaska;  he requested to  be excused                                                                   
from   participating  &   voting.     Representative   Foster                                                                   
OBJECTED.                                                                                                                       
                                                                                                                                
Representative Hawker  asked that a  roll call vote  be taken                                                                   
regarding his vote  exclusion on HB 3001.   Co-Chair Chenault                                                                   
said  it was  not his  intent  to vote  on any  bills at  the                                                                   
current meeting.                                                                                                                
                                                                                                                                
Co-Chair Meyer noted  his own conflict of interest  but since                                                                   
it  is not  the intent  to  move the  bill,  he reserved  the                                                                   
motion until the vote.                                                                                                          
                                                                                                                                
Representative Hawker  withdrew his request, noting  he would                                                                   
not participate  in the hearings  until a Committee  vote was                                                                   
taken.                                                                                                                          
                                                                                                                                
Representative Foster commented  that it is inappropriate for                                                                   
a member of  the Finance Committee not to  participate during                                                                   
discussions on complex issues.                                                                                                  
                                                                                                                                
Representative  Holm   agreed,  relating  the   oil  industry                                                                   
history with most legislative members.                                                                                          
                                                                                                                                
10:19:24 AM                                                                                                                   
                                                                                                                                
Co-Chair Chenault  declared his own conflict,  yet encouraged                                                                   
members  to participate  during  the committee  process.   He                                                                   
encouraged     Representative     Hawker's     participation.                                                                   
Representative Hawker voiced his appreciation.                                                                                  
                                                                                                                                
10:20:59 AM                                                                                                                   
                                                                                                                                
ROBYNN  WILSON,  DIRECTOR,  DIVISION OF  TAX,  DEPARTMENT  OF                                                                   
REVENUE, referred  to a comparison matrix meant  to highlight                                                                   
two approaches to the Petroleum  Production Tax (PPT).  (Copy                                                                   
on File.)                                                                                                                       
                                                                                                                                
Ms. Wilson explained the four columns:                                                                                          
                                                                                                                                
   ·    CSSB 2001(FIN), version F;                                                                                              
   ·    HCS SB 2001 (FIN), version X.A,                                                                                         
   ·    Conference CS SB 2001, version C.A;                                                                                     
   ·    Governor's bill, version A.                                                                                             
                                                                                                                                
Ms. Wilson pointed out that the  handout provides a "limited"                                                                   
matrix highlighting  the differences  between those  versions                                                                   
and discussing  the ramifications.    She indicated  that the                                                                   
bill is consistent  with the Conference  Committee substitute                                                                   
and instead  of using  a statewide system,  there would  be a                                                                   
few slightly  different areas -  the North Slope,  Cook Inlet                                                                   
special  treatment  and  the   'other'  areas.    The  matrix                                                                   
identifies  the tax  rate, progressivity  surcharge,  credits                                                                   
for annual  loss, credit  usage floor,  gas (GRE)  transition                                                                   
credit, base  allowance credit, new area  development credit,                                                                   
sunset  of  new  area  development  credit,  oil  spill,  and                                                                   
transition payment for each.                                                                                                    
                                                                                                                                
Ms.  Wilson  discussed  the separate  Economic  Limit  Factor                                                                   
(ELF) rate  for Cook Inlet  oil & gas.   The Governor's  bill                                                                   
contains  no  progressivity  surcharge;   the  Administration                                                                   
believes that progressivity is not needed.                                                                                      
                                                                                                                                
10:25:24 AM                                                                                                                   
                                                                                                                                
Ms.  Wilson referenced  the  annual  credit loss  at  various                                                                   
rates.    She  highlighted  the  credit  usage  floor  &  the                                                                   
differences resulting, which the  Conference Committee placed                                                                   
at 22.8%.   That version  also provides  for a 3%  floor; the                                                                   
cap credits could  not be used to reduce the tax  below 3% of                                                                   
the gross & North Slope region.   The floor was eliminated in                                                                   
the Governor's version.   She pointed out that  gas (GRE) had                                                                   
not been a feature in recent versions of the bill.                                                                              
                                                                                                                                
Ms.  Wilson  explained  the  transitional  investment  credit                                                                   
(TIE).  The Governor's bill maintains  the language indicated                                                                   
in the Conference Committee version  and provides for reviews                                                                   
of the 2 for 1.                                                                                                                 
                                                                                                                                
10:28:28 AM                                                                                                                   
                                                                                                                                
Ms.  Wilson related  that the  base allowance  credit of  $12                                                                   
million  dollars, based  on production,  varies depending  on                                                                   
which bill version is considered.   She pointed out that only                                                                   
Version F (CSSB 2001 (FIN)) is not based on production.                                                                         
                                                                                                                                
10:29:52 AM                                                                                                                   
                                                                                                                                
Ms. Wilson  discussed development  credits for some  parts of                                                                   
the  State,  not Cook  Inlet.    That  credit amounts  to  $6                                                                   
million  dollars,  available  at $500  thousand  dollars  per                                                                   
month, for  areas not in the  North Slope or Cook  Inlet; the                                                                   
language   is  consistent  with   the  Conference   Committee                                                                   
substitute.   The credit  has a  rolling ten-year sunset  for                                                                   
new area development.                                                                                                           
                                                                                                                                
Ms.  Wilson  addressed  the  oil   spill  component  and  the                                                                   
transition  payment,  which is  the  same as  the  Conference                                                                   
Committee version.   She noted  that the graph  clarifies the                                                                   
amendment.                                                                                                                      
                                                                                                                                
10:31:49 AM                                                                                                                   
                                                                                                                                
Co-Chair  Chenault inquired  about the  difference about  the                                                                   
TIE  credit  in  the  Governor's   bill  and  the  Conference                                                                   
Committee version.   Ms. Wilson  said there is  no difference                                                                   
and highlighted why it should  be "corrected".  A page number                                                                   
change  resulted  with  no  progressivity   included  in  the                                                                   
Governor's bill.                                                                                                                
                                                                                                                                
Co-Chair  Chenault requested  Ms. Wilson  explain the  fiscal                                                                   
impact.                                                                                                                         
                                                                                                                                
10:33:54 AM                                                                                                                   
                                                                                                                                
Ms. Wilson  explained that fiscal  note #2 by  the Department                                                                   
of  Revenue includes  funding  for regulation  &  contractual                                                                   
regulation  writing  for  ten   positions.    During  various                                                                   
revisions,  the number  of  audit positions  has  fluctuated.                                                                   
Co-Chair Chenault  asked about the  increase to the  new note                                                                   
as compared  to the others.   Ms. Wilson offered  to research                                                                   
that information.                                                                                                               
                                                                                                                                
10:35:23 AM                                                                                                                   
                                                                                                                                
Co-Chair  Chenault  pointed  out  that the  plan  before  the                                                                   
Committee  brings the  bill  back to  the  original 20/20  as                                                                   
proposed  by  the Governor  and  excludes  the  progressivity                                                                   
surcharge.                                                                                                                      
                                                                                                                                
HB 3001 was HELD in Committee for further consideration.                                                                        
                                                                                                                                

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