Legislature(2005 - 2006)
08/03/2006 11:44 AM House FIN
| Audio | Topic |
|---|---|
| Start | |
| HB3001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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.
11:45:00 AM
Co-Chair Chenault noted that conceptual Amendment #2 was on
the table for consideration [the motion to adopt was made by
Representative Chenault on 8/2/06 and objected by
Representative Stoltze on 8/2/06].
11:45:53 AM
Co-Chair Chenault MOVED to WITHDRAW the original Amendment
#2 & and replace it with Amendment #2A. There being NO
OBJECTION, it was replaced.
11:46:25 AM
Co-Chair Chenault MOVED to ADOPT Amendment #2A.
Representative Hawker OBJECTED for discussion purposes.
ROBYNN WILSON, DIRECTOR, DIVISION OF TAX, DEPARTMENT OF
REVENUE, explained the changes made to the amendment. She
pointed out that in modeling the formula an error was
discovered. She went on to say that both industry and the
Department realized that at the marginal point there was the
possibility that the tax rate could exceed 100-200%. The
nNew language was added to clarify completely the intent
that the tax rate does would not go higher than 25% or and
not lower than 20%. She provided examples to illustrate the
tax rate as calculated in that language. She noted that if
calculations differ in paragraph 1 from paragraph 3, the
higher of the two would be the rate, not exceeding 25%.
11:50:15 AM
Representative Kerttula asked if the lower rate would be
taken rather than the rate that exceeded 25%. Ms. Wilson
responded that the 25% rate would be taken.
Ms. Wilson pointed out that in order to be technically
perfect it would need an algabraic equation to solve for R.
The sponsor felt that having the correct algebra in
regulations is the way to handle this because the formula
provides the parts.
11:51:40 AM
Representative Kerttula asked if the actual equation would
be available before the floor vote. Ms. Wilson stated that
the formula in the amendment would be the equation.
Representative Hawker stated it is the correct formula to
put in statute because itobserved that the formula
identifies the elements that create the limit. The algebra
is available and will be available before the vote on the
floor.
11:53:24 AM
Representative Kerttula asked for clarification. Ms. Wilson
stated it is the correctexplained that the equation used to
isolates "R". The algebralgebraic formulaa isolating "R"
for that would be placed in regulations.
11:53:58 AM
Representative Kerttula noted that she did have questions on
the amendment.
11:54:33 AM
Representative Kerttula referenced production decline and
voiced concern regarding a scenario in which a company does
not spend more money but they have declininghas declining
production without increasing expenditures. She noted that
in this scenario the company would get the 5% decline credit
without but it would not result in greater an increase in
production. Ms. Wilson requested that Mr. Dickinson come
forward.
11:55:34 AM
DAN DICKINSON, CONSULTANT, TAX DIVISION, DEPARTMENT OF
REVENUE, replied that heragreed with Ms. Wilson's assessment
was correct and emphasized that there could be a numerator
effect. He said that though the scenario presented is a
mathematical possibility, it is an unlikely combination to
drive the tax rate down.
Representative Kerttula emphasized that the scenario was
possible and asked if there was a way to correct that
situation. Mr. Dickinson replied that the rate could not
drop lower than the 20% tax rate.
11:58:36 AM
Representative Hawker added,added that though the posing of
this hypothetical situation was important, it overlooks the
reality of the circumstances now existing in Alaska. He
went on to say, with vast known reserves, the mechanism is
targeted toward for developingment of those resources to
maintain the pipeline.
12:01:13 PM
Mr. Dickinson acknowledged that Representative Kerttula's
concerns were accurate. He went on to say that in doing the
modeling, problems arose from the inability to predict how
much production would be incentivized.
12:02:46 PM
Representative Kelly stated that there are two things that
can protect against inflation. The first is a "2011 study,"
which will allow for review and the provide an opportunity
to make changes if necessary. The second is the general
agreement among members that oil should not be tied in
between now and project sanctions. He felt these two things
provided the needed security for members.
12:05:12 PM
Representative Kerttula voiced concern with the 2006
investment rate of 4.6. Referring to the chart sShe noted
that, based on the chart, the tax rate in 2006 would be
21.5%. Mr. Dickinson said that, though mechanically that
assumption is correct, the 5-year average is what will
determine the rate. Representative Kerttula asked if there
were calculations based on what was previously passed by the
House. Mr. Dickinson stated that he didn't have them
presently, but could provide them to the committee in a day
or two.
12:07:04 PM
Representative Hawker pointed out that the numbers indicate
capital expenditure from 2006. He went on to say that only
upstream expenditures apply for the tax credit. In closing
he noted that Representative Kerttula's concern was valid,
but emphasized that he gained comfort from the five-year
trend line for establishing the base.
12:08:41 PM
Representative Kerttula asked if all expenditures, such as
feeder lines and transportation, are included in the
investment credit. Mr. Dickinson stated that the numbers do
not include down stream transportation. Upstream
investments will be included up to the point of production.
The definitions of what would qualify as an investment
expense have not changed.
Representative Kerttula asked about the cap at 25%. Mr.
Dickinson observed that it moves from 20% to 25%. Elsewhere
in the bill, there is a separate calculation fromor
progressivity, which is also capped at 25%. He noted that
the investment incentive percentage is completely separate
from progressivity. Mr. Dickenson clarified that with the
amendment the tax rate would be capped at 25% and the
progressivity would be capped at 25%.
12:12:29 PM
In response to a question by Representative Kerttula, asked
what the percentage ends up being after the incentive, the
credit and the decline rate with the new gas fields.
[L1]MMr. Dickinson responded explained that at the extreme,
75% of the investment could be underwritten by the state and
federal governments combined would cover 75% of the
investment and companies would put in 25% out of pocket.
The eExpenditures underwritten by the state and federal
government can never reach higher than 75%.
12:15:00 PM
Representative Kerttula requested a monetary example of the
20% rate. Mr. Dickinson stated that the limit @ at 75%, it
would be ½ half a billion dollars, assuming that prices stay
in the range that they are today. If there is a price
correction, the number will drop.
12:16:36 PM
Representative Hawker explained how much industry pays
versus government. He clarified that the state "pays"
nothing and that the industry pays to the state. The state
is just providing the incentive in terms of a tax credit.
12:18:41 PM
Mr. Dickinson confirmed RepresentativeRep Hawker's comments
and went on to say that the financing of the credit is
through the additional taxes that are earned.
Co-Chair Meyer asked if there should be a cap for
investments. He went on to inquire if a cap would deter
investments. Mr. Dickinson stated that at a certain point
an investor can get no more than a 20% break and therefore
can make investment decisions accordingly. He acknowledged
that companies would look at the tax effect when determining
investment strategy, which is the intention of the bill.
With regards to whether there should be a cap for
investments, he said that would be a policy call. He went
on to say that the table suggests there would have to be
extreme investment before getting to the 20% floor.
12:22:24 PM
Representative Kerttula asked if the formula could be
manipulated to reflect the 23.5% passed by the house. Mr.
Dickinson stated that the mechanical readjustment of the
midpoint could be done with the formula.
Representative Kerttula mentioned Pt. Thompson & and noted
taxation and the amount coming back to the State of Alaska.
Mr. Dickinson stated that there is a huge amount coming back
to the State if Pt. Thompson is developed and prices stay
where they are. Representative Kerttula asked for
clarification that these are future gains. She went on to
question whether in the near future the State would be
paying development costs. Mr. Dickinson confirmed that this
was correct, but noted that there is no development right
now.
12:24:54 PM
Representative Holm reiterated comments made by
Representative Meyer regarding the floor and whether that
minimized the incentive for industry to put more money into
the fields. He commented on the philosophical approaches
and balance of maximizing the dollar thru through maximum
extraction, which would lessen the decline and the risk of
incanting too much and draining the resource. Mr. Dickinson
noted that the conservation Conservation Ccommission has
restrictions regarding how much extraction can happen at one
time without damaging the reservoir. He noted that the
question of development is 10-20 years from now.
12:28:26 PM
Mr. Dickinson explained the a handout on the severance tax
under the Produce or Pay Plan (POP) and various Petroleum
Production Tax (PPT) proposals at $20/bbl; $40/bbl & $60/bbl
{(Copy on File)}.
12:33:07 PM
Representative Hawker pointed out that all models were
predicated on one set of investment level assumptions. He
asked if those assumptions could be characterized. Mr.
Dickenson noted that the models were calculated with light
oil, heavy oil and an exploration component. He noted that
it is a set of investments that are higher than they are
today because we are continuing to show oil being produced.
Representative Hawker advised that the charts are a
mechanical illustration of the best behavior to secure
additional investment. He went on to say that it is
possible that the tax collection could prove to be higher
than the chart illustrates, if the legislature is successful
in providing an environment that secures the desired
behavior. The charts are a benchmark.
Representative Kelly noted that the charts show investment
has been frozen as well as production. It does not show the
whole situation.
Representative Kerttula pointed out that it did not show a
prediction of deductions or credits. Mr. Dickinson noted
that it does show a baseline of investment and is reflected
in the fiscal note.
Representative Kerttula wanted to better understand the
figures. Mr. Dickinson stated that the same credits and
deductions were being shown. Representative Hawker stated
that only in the future would the State be able to analyze
the consequences of current actions. He went on to say that
the need to reflect on the results of creating the law was
the reason for establishing the 2011 revaluation report as
part of the bill.
12:39:06 PM
Mr. Dickinson continued the overview of the handout:
Cumulative severance Severance Ttax, 2007-2030 POP and
various PPT proposals. The final pages look at the entire
State share. This assumes royalties, taxes and the thorough
tax piece and total government share and what is left for
the companies.
AT EASE: 12:42:20 PM
RECONVENE: 1:03:36 PM
Co-Chair Meyer stated that HB 3006 would not be heard at
this meeting.
TOM WILLIAMS, TAX ATTORNEY, BRITISH PETROLEUM (BP), did not
support Amendment 2A. He stated that BP supports the 20/20
agreement. He noted his gratitude for previous concerns
being addressed in the amendment. He went on to say that
the variable rate mechanism allows the company to buy down
the rate to the 20/20 and BP appreciates the efforts there.
The problem, he noted, was with the progressivity. Mr.
Williams pointed out that the industry is based on three
elements:; conventional oil, heavy oil and gas. He asserted
that none of those are strong enough by themselves to
sustain business on the North Slope for 40-50 years. He
described the three elements as a structure of with three
legs. He opined that progressivity makes the structure
weaker, including the gas. He noted that under this system
the industry could see their rate go up to 45%, which and
that would weaken the oil industry.
1:10:13 PM
Representative Kelly pointed out that, since negotiations
began, oil has doubled in price. He asserted that
governments all around the world are attempting to determine
how to address the commodity. He argued in favor of adding
the progressivity element. He stressed the need for net
profit versus gross profit.
1:14:55 PM
BRIAN WENZEL, VICE PRESIDENT, FINANCE AND PLANNING, CONOCO-
ALASKA, noted his earlier testimony regarding 3 concerns:
· Inconsistencies with good fiscal policy;.
· Concerns about unnecessary complexity and the risk of
false economies and unintended consequences;. and
· The fundamental shortsightedness on taxation implied in
the CS.
He noted that amendment #2A addresses policy concerns as
well as making a step forward with progressivity by raising
the trigger price. Mr. Wenzel agreed with Mr. Williams:
that progressivity at any level does effects investment. He
went on to say that because of this Concoco Phillips has
serious concerns of with overall taxation applied by the
amendment. He further commented on 2noted concerns with:
a reintroduction of the base allowance in the amount of $12
million dollars. He stated that it is inconsistent to
incentivize new investors at a different rate. He felt the
State should strive for alignment of all bases and treat all
investors equally. Mr. Wenzel voiced another concern about
the speed at which the legislation is moving. He urged that
time be allowed for testimony to consider different
scenarios.
1:19:23 PM
Co-Chair Chenault noted that the amendment has been in
process for a considerable amount of time. The idea was to
look at industry and the severance tax increase. He
furthered the point by stating that in order to move
forward, something had to be crafted. The House Finance
Committee (HFC) has looked at many scenarios and agreed that
unintended consequences should be addressed. He hoped for a
perfect bill but questioned if that was possible. He hoped
for something that could bridge the gap between the State
and the industry. He further maintained that today there is
a huge demand on the resource and it is important to move
forward on the issue.
1:24:35 PM
PATRICK FOLEY, MANAGER OF LAND AND EXTERNAL AFFAIRS,
PIONEER, applauded the House Finance Committee for listening
to the concerns of the new investors in the State of Alaska.
He commented that Amendment #2A is an improvement especially
with the credit of the $12 million credit. The new investor
does not have facility access or existing infrastructure
that larger companies have in place. The current PPT bill
has a tax rate of 25%; in general, the total package of the
bill continues to provide a modest incentive.
Mr. Foley urged consideration of the mechanism by which the
production tax rate is bought down from 25% to 20%. The
development project for Pioneer is ugeric[L2];Oooguruk it and
can be categorized development per barrel in excess of $7
dollars capex. [L3]The investment incentive is maxed out by
the $6 dollar investment and is designed to reward a level
investor. He went on to say that Pioneer will invest
millions of dollars, but emphasized that the production at
the start will be modest. The first year of production,
Pioneer expects to make approximately $3 million, but the
investment could be $90 million dollars.
Mr. Foley continued with suggestions on how to deal with
these unintended consequences. He recommended consideration
of a rolling average to amortize or allow a company who has
the unused capex to carry it forward. Or, he suggested, use
it in future periods to buy down the tax rate. He commented
on the gold platting deterrent in the bill and advised that
it had the effect of a substantially higher tax rate than
the 25%. In the period of performing in the way the state
is motivating a company to perform, investing large amounts
of money, theHe felt that newer companies were not able to
maximize the incentive due to the amount of time it takes to
show production. are not being rewarded but are being
punished.
1:31:38 PM
Representative Kerttula referenced a previous committee
substitute, which alloweding carry forward credit until
after production and question if this was Mr. Foley's
recommendation. Mr. Foley replied that was correct and
emphasized; however that he hoped the capital could be
carried forward.
1:33:11 PM
Representative Hawker argued that the proposed bill strikes
a rate balance thru through the mechanism with the
deductions and the credits. He stated that the $12 million
dollars credit was a significant advantage to small
companies like Pioneer; . Iit provides an opportunity to
help the small companies compete with the larger companies.
He reiterated the benefits for industry.
1:37:14 PM
Representative Hawker WITHDREW his OBJECTION to Amendment
#2A. There being NO further OBJECTION, it was adopted.
AT EASE: 1:37:45 PM
RECONVENE: 3:21:59 PM
Mr. Dickinson referred reviewedto a series of spreadsheets
entitled: "Five Step Calculation of Tax Rate Under Amendment
2A ".(copy on file.) He explained that the first page sets
up the range of the the net production tax value per barrel.
He shared various examples to get per barrel wellhead value
with extremes from $100 to $11.[L4]
3:24:43 PM
Mr. Dickinson explained referred to charts illustrating how
to move tax rate down. (Copy on file)
Step One, which examined the ability to decrease the tax
rate through investment. At zero investment there would be a
25% tax rate per barrel. A six dollar per barrel investment
would result in a 20 percent tax rate. He concluded that
investors are able to move their tax rate down through
investment: "Invest Down" of Tax Rate (independent of
price)"
.
Step Two addressed the gold plating problem by the
calculation adding a calculation of the of "R" factor or
rate. The tax rate would be at 25 percent cap if there is
no investment. The number that flows from the R factor is
only important if it is above 20 or below 25 percent, since
there are caps on either end. The point is that if the
percentage goes below 20% it is still 20%, if it goes above
25% it is still capped at 25%. Step 2 is the calculation.
Step Three, the color graph, demonstrates that investments
of between $6 and $7 dollars would buy the tax rate down to
20 percent; investments of $1.50 or less would result in a
25 percent tax rate. illustrates what happens when both the
investment and price are combined. At the lower lower
investment range the R factor is not in play and the rate is
the same as in step one. At the higher prices the rate does
not reach to the 20%. Mr. Dickinson pointed out the
difficulty of buying down the tax rate at higher oil prices;
aMr. Dickinson gave an example of prices at $100 per barrel
oil ; the lowest and an investment rate of $7 dollars the
tax rate would still be at the percentage gets is 23%. The
interaction between the two shows that at low prices and
high investments the 20 percent tax rate would occur, but it
would be more difficult to reach 20 percent at higher
prices. the 20% cannot be maintained. He noted that this
limits the effectiveness of the buyback. He candidly
commented that it puts a brake on the tax break.
3:29:34 PM
Step Four: Prop Version (prior to credits) with variable
rate. Mr. Dickinson noted an error in the chart and noted
that the numbers were off by a half a column [1.5%]. of
1.5%. He observed that progressivity is calculated after
the base rate. He noted progressivity is increases with
price. the chart illustrates that when prices are high the
more progressivity there is.
Step Five: Net Tax Rate Plus Progressivity. This chart adds
the base and progressivity to illustrate the effective tax
rate applied to the production tax value under section 170.
3:31:31 PM
Clearer
Co-Chair Meyer questioned the numbers at $70 and investment
at 3.50 the graph shows 28%. He thought it closer to 26%.
In response to a question by Vice-Chair Meyer, Mr.
Dickienson reiterated that the graph was slightly off by
1.5%.
In response to a question by Representative Kerttula, Mr.
Dickinson clarified that progressivity depends on the net
value defined as the selling price, less operating costs of
getting the oil out, transportation costs and upstream
investments. He further commented that the 26% is the
correct number.
3:32:56 PM
Representative Kerttula MOVED to ADOPT Amendment 3.
Representative Stoltze objected.
Representative Kerttula noted that all the amendments are
conceptual because they were drafted to the original bill.
She explained that Amendment 3 would remove Point Thompson
from out of the bill. She said this is an attempt to move
gas out of the bill and thus out of the allowance for
deductions and credits. She opined these should be bourn by
the company. She stressed that companies are responsible for
developing under the current lease. She noted that at high
prices the state would be responsible for 75% of Pt.
Thompson's development.
3:35:47 PM
***Representative Les Gara related maintained that some
things should not be incentivized. He noted upstream costs
for Point Thompson are going to range between $2 and $3
billion dollars. In October of 2005, the State ordered the
owners of the Point Thompson field to develop that fieldit
for its oil and gas properties. The amendment addresses this
by removing Pt. Thompson so that the oil companies like
Exxon and other owners are not rewarded with the credits and
deduction for developing what they already have and
obligation to develop. The amendment would return a
potential of a billion dollars in tax reduction to the Point
Thompson holders back to the state of Alaska. He asserted
that they have not earned the tax break or credits.
Co-Chair Chenault asked where the issue currently stands.
Representative Kerttula said the lease has been extended for
6 months. Co-Chair Chenault asked then,questioned if they
are not in default. Representative Reprentative Kerttulla
explained that they are not in default under the
Commissioner's ruling, but stressed that it is not possible
to know what a court would rule. responded by saying,
technically they are not in default.
3:38:39 PM
Representative Hawker argued against the amendment. He
mentioned a roadblock by raising the taxes.
Representative Kerttula pointed out that there is a 75%
write-off.
3:40:27 PM
Representative Kelly related that he understands
theacknowledged the idea behind the amendment, but . He
added that the intent expressed might be premature. He went
on to say there is activity at Pt. Thompson and there is
also time to address it in the future.
Representative Kerttula responded by saying that she hopes
that it will be addressed in the future but is doubtful
about that reality.
Representative Stoltze maintained his objection.
A roll call vote was taken on the motion to adopt Amendment
3.
IN FAVOR: Kerttula, Joule
OPPOSED: Foster, Hawker, Holm, Kelly, Stoltze, Weyhrauch,
Meyer, Chenault
The MOTION FAILED (2-8).
Representative Moses was absent from the vote.
3:42:49 PM
Representative Kerttula MOVED to ADOPT Amendment 4.
Representative Stoltze objected.
Representative Kerttula explained that the amendment was an
effort to craft something closer to what the house passed in
the previous session; . Iit was also an attempt to be in
line with the world rate. The amendment would set the
start rate at 23.5% and go up to 27%.
Co-Chair Chenault commented that the past legislative time
has been spent trying to determine the right rate. He went
on to say that it is important to look at the tax package as
a whole, not just a severance tax take. He also felt that
there is a misconception in the general public that the tax
rate is 20%. He further noted that he didn't thinkfelt the
rate should not be raisedbe higher just to get more money
out of the industry. He requested members not supportspoke
against Amendment #4.
Representative Kerttula agreed that the tax rate it is not a
20%, but rate. She went on to sayemphasized that Alaska has
been way below the world average. She added that having been
under the average for so long, the State should get a larger
take now for the benefit of Alaskans.
A roll call vote was taken on the motion to adopt Amendment
4.
IN FAVOR: Kerttula, Joule
OPPOSED: Foster, Hawker, Holm, Kelly, Stoltze, Weyhrauch,
Meyer, Chenault
The MOTION FAILED (2-8).
Representative Moses was absent from the vote.
AT EASE: 3:48:30 PM
RECONVENED: 3:50:26 PM
Representative Kerttula moved to adoptMOVED to ADOPT
Amendment 5. Representative Stoltze objected.
Representative Kerttula explained that the amendment was an
increase in the progressivity rate; . Iit retains the 25%
slope, but raises the cap from 25% to 50%. Progressivity and
would start at $35 rather than $40 in the bildollars per
barrel of oill. This is an effort to gain increase state
revenues when prices are high.
Representative Hawker noted that the progressivity language
has been in existence from the beginning of the discussion.
It is the culmination of a deliberate process. He opined
that the numbers should be allowed to stand.
***Representative Kerttula agreed that it has been
discussed, but not in its current form. She went on to
saystressed the importance of that dealing with the issue
of progressivity for the benefit of Alaska's future. and
rate is one of the most important things for the future.
[L5]SShe went on to say observed that the State's consultants
have underlined this point.
3:54:28 PM
Co-Chair Meyer pointed out that the number varied based on
which consultant you listen too. What has been consistent
is the voice of industry saying progressivity is totoo high.
He further commented onobserved that the amendment that
there is a manipulatesion of the dollar amount, but not the
curve.
3:55:24 PM
Representative Joule noted that though Dr. Van Meurs did not
include progressivity, he did say it that it was a very
creative initiative.
Co-Chair Chenault commented that the previous comments were
not necessarily to disagree with progressivity but to point
out that a balance has been struck between those differing
in opinion.
A roll call vote was taken on the motion.
IN FAVOR: Kerttula, Joule
OPPOSED: Foster, Hawker, Holm, Kelly, Stoltze, Weyhrauch,
Meyer, Chenault
The MOTION FAILED (2-8).
Representative Moses was absent from the vote.
3:57:22 PM
Representative Kerttula MOVED to ADOPT Amendment 6.
Representative Stoltze objected.
Representative Kerttula explained that the amendment is
wouldto remove the allowance of a worldwide cost may be
deductionsed from the new tax. She further clarified that
it the amendment allows for expenses made within the State,
but disallows tax credits for expenses outside the State.
Co-Chair Chenault asked if all dollars spentexpenditures
have to be spent in the state of AlaskaState. He gave an
example of costs associated with construction.
Representative Kerttula explained thatit is the intent of
the amendment is to accommodate those expenses that have
been incurred in the State and have direct relationship to
the stateState. Co-Chair Chenault felt that the noted that
he thought the intent was already clear and maintained that
all costs outside the state could not be excluded.in the
bill.
Representative Kerttula explained that her intent is to
preventsaid she is trying costs that do not directly
[pertain to oil and gas production in the State] as
allowable deductions. She to prevent costs that would not
apply. She went on to say that the intent is there but she
wanted to stressed the desire to take it a step further
provide for absolute clarity.
4:00:07 PM
Representative Hawker noted that "incurred in the state" had
its own set of problems and provided examples. As the bill
is crafted there is a substantial increase in the powers of
the Department of Natural Resources and Department of
Revenue in making determinations and interpretations of what
is and is not allowable costs. He addressed the possibility
of a constitutional issue in establishing a disadvantage to
other states. He opined that the bill is written with
adequate protection of and for Alaskans.
4:01:46 PM
Representative Kelly said thought the definition of
allowances had been tightened up with the debate of gross
and net, the definition of allowances had been tightened up.
He noted Dr. Van Meurs' comment regarding the rules that
they are the tightest set of rules he has seen.
4:03:34 PM
Representative Weyhrauch stated he would vote noindicated he
would oppose the amendment and referred to page 27-8 that
outlines allowable costs. He felt this addressed the
concern regarding allowable expenditures.
4:05:21 PM
Representative Kerttula agreed with Representative
Weyhrauch, but wanted the additional language for
clarification.
A roll call vote was taken on the motion.
IN FAVOR: Kerttula, Joule
OPPOSED: Foster, Hawker, Holm, Kelly, Stoltze, Weyhrauch,
Meyer, Chenault
The MOTION FAILED (2-8).
Representative Moses was absent from the vote.
4:06:40 PM
Representative Kerttula moved MOVED to ADOPT Amendment 7.
She stated that this amendment was the broader version of
amendment Amendment 3. Representative Stoltze objected.
Representative Kerttula explained the that the amendment
would take gas completely out of the bill and allow the bill
to be simply an oil tax bill. This would allow gas to be
considered separately, so that the oil tax is not used to
pay for gas development. reasoning behind the amendment.
Representative Kerttula withdrew WITHDREW Amendment 7 due to
the vote on amendment 3.
Representative Kerttula moved MOVED to ADOPT Amendment 8.
Representative Stoltze objected. She Representative
askedKerttula asked Representative Gara to help explain the
amendment adding that it had to do with clawback on
expenditures.
4:08:42 PM
***Representative Gara discussed the purpose of the
amendment. He stated that the bill currently gives
companies that have invested in the state a tax credit for
past investments made over the past 5 years. He noted that
those investments were offered within a system that provided
a very generous tax rate. He maintained that rewarding
companies with the a 20% tax credit is inappropriate. The
amendment is a compromise to the extent that when a
company's investments are greater than the prior year
investments, it can be written off at the 20%. He spoke of
retroactive rewards vs. retroactive tax.
4:10:48 PM
Representative Kelly noted that this came from the
governor's Governor's office months ago and was dealt with
by the 2 for 1 compromise. He suggested that the bill as it
currently stands is a good compromise with the possibility
of passing both bodies.
Representative Hawker concurred with Representative Kelly's
remarks. He related that this new tax proposal is a massive
increase in taxes for the industry. He maintained the
current proposal is a fair balance when moving from the old
tax regime into the new one.
4:14:26 PM
Representative Kelly pointed out that the bill from the
governor's Governor's office was a result of rigorous
negotiations with the oil companies.
Representative Gara disagreed with a comment made by
Representative Hawker that the new tax bill would create a
considerable amount of new revenue. He noted that at $40
per barrel all the revenue coming into the state, if North
Slope gas is developed, would go out in gas field
deductions. He furthered his point illustrating what the
actual dollar amount would represent over the next 10 years.
He reiterated that the state of Alaska has been being below
[L6]the world average in oil tax rates.
Representative Hawker acknowledged world oil prices, but
emphasized that Alaska is not an average place in the
world.commented.
A roll call vote was taken on the motion.
IN FAVOR: Kerttula, Joule
OPPOSED: Foster, Hawker, Holm, Kelly, Stoltze, Weyhrauch,
Meyer, Chenault
The MOTION FAILED (2-8).
Representative Moses was absent from the vote.
AT EASE: 4:18:47 PM
RECONVENE: 4:30:03 PM
Representative Kerttula WITHDREW Amendment #9.
Representative Kerttula WITHDREW Amendment #10.
Representative Kerttula MOVED to ADOPT Amendment #11.
Representative Stoltze OBJECTED.
Representative Kerttula explained that the amendment[L7]
disallows any costs incurred for oil discharge cleanup,
other than routine maintenance to be used toward a
deduction.. She maintained that she didn't think that any
un-permitted oil discharge clean up costs should not be
allowed as a deduction.
4:32:39 PM
Representative Kelly stated that the amendment had
previously been before the Committee and felt it needed
further clarification and still he does not quite understand
it. He noted his concerned with the wording of the
amendment.
Representative Hawker concurred with Representative Kelly.
He stated that he was confused with Department of
Environmental Conservation regulations and Department of
Revenue tax law. He spoke against the amendment.
4:34:40 PM
Representative Weyhrauch noted that there was an amendment
on the House Floor dealing with spills. He noted he would
be a no vote, but reserve the right to change his opinion.
A roll call vote was taken on the motion.
IN FAVOR: Kerttula, Joule
OPPOSED: Foster, Hawker, Holm, Kelly, Stoltze, Weyhrauch,
Meyer, Chenault
The MOTION FAILED (2-8).
Representative Moses was absent from the vote.
4:35:58 PM
Representative Stoltze MOVED to REPORT CS HB 3001 (FIN) out
of Committee with individual recommendation and with the
attached fiscal note.
Co-Chair Chenault interjected that there was a pending new
fiscal note forthcoming to the House floor.
Representative Kerttula OBJECTED.
4:37:24 PM
Representative Kerttula spoke to the objection. She
maintained that tThe current bill does not address the real
concerns of the State of Alaska.
Representative Joule added his concerns with the proposed
legislation. He encouraged further review byvoice from the
lLegislative consultants.; hHe asked that the bill receive
final hearing in the House Rules Committee.
4:40:26 PM
Co-Chair Chenault responded that they hadaobserved that a
requested was made of EconOne to provide information to the
committee before the floor vote. Trespond. [L8]The
Department has run the needed numbers. It is the intent
to have the drafts before the body before the final vote.
4:42:11 PM
Representative Hawker added noted that there has been more
than 6 months to review and compare results of EconOne and
the department's findings. Due to the fact that the
information closely correlates he felt comfortable using the
department's numbers. comments[L9]. He concluded his
comments by saying he feltthat the bill should be moved to
the floor.
4:43:19 PM
Co-Chair Chenault pointed out that Governor Hickel sat
before the Committee.
A roll call vote was taken on the motion.
IN FAVOR: Foster, Hawker, Holm, Kelly, Stoltze, Joule,
Weyhrauch, Meyer, Chenault
OPPOSED: Kerttula
The MOTION PASSED (9-1).
Representative Moses was absent from the vote.
4:44:28 PM
Co-Chair Chenault acknowledged that much work had been done
on the bill in the House Finance committee as well as other
committees. He thanked members of the committee for their
work.made final comments[L10].
CS HB 3001 (FIN) was reported out of Committee with a "do
pass" recommendation and with a new fiscal impact note from
Department of Revenue.
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