Legislature(2011 - 2012)HOUSE FINANCE 519
04/06/2012 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB276 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 276 | TELECONFERENCED | |
HOUSE BILL NO. 276
"An Act providing for a credit against the oil
and gas production tax for costs incurred in
drilling certain oil or natural gas exploration
wells in the Nenana Basin."
1:47:56 PM
Co-Chair Stoltze signified that Amendment 1 had been MOVED
during the morning session, but had been interrupted to the
Call of the Chair.
Amendment 1
Page 5, line 14, following "of"
Delete [$22,500,000] insert "$25,000,000"
Representative Neuman stated that he had checked in statute
regarding credits for the jack-up rig in Cook Inlet. He
indicated that he had no opposition to Amendment 1.
Co-Chair Stoltze expressed that the committee had wanted to
address Amendment 1 properly.
Representative Neuman signified that his concern had been
that credits for a jack-up rig seemed like a race to drill
the first dry well.
Representative Doogan asked what would be the total cost of
the increase.
JANE PIERSON, STAFF, REPRESENTATIVE THOMPSON explained that
the total cost of the increase would be the difference
between $25 million and $22.5 million. The amount could be
spread over four wells at $2.5 million per well.
Representative Doogan commented that would be a total of
$10 million. Ms. Pierson said that was correct.
Co-Chair Stoltze asked if the Department of Revenue would
like to make a statement.
MATTHEW FONDER, DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE (via teleconference) confirmed that the amendment
would increase the fiscal impact by $10 million.
Co-Chair Stoltze appreciated the verification from the
department.
Representative Gara asked if the amount was per field or
statewide. Ms. Pierson indicated that would be statewide.
Co-Chair Stoltze WITHDREW his objection. There being NO
OBJECTION, Amendment 1 was adopted.
1:53:14 PM
Representative Gara MOVED to ADOPT Amendment 2:
Page 2, line 6, following "state':
Insert "that are outside the Cook Inlet
sedimentary basin and"
Page 2, lines 9-10:
Delete ",other than gas subject to (j) of this
section or oil subject to (k) of this section,"
Co-Chair Stoltze OBJECTED for discussion.
Representative Gara noted that Amendment 2 concerned the
designated area issue. He asked Representative Thompson's
aid to explain if the amendment was appropriate for the
bill.
Ms. Pierson indicated that the sponsor agreed that
Amendment 2 was a clean-up to hold the bill strictly to the
designated section. The amendment would not allow for any
new production in Cook Inlet to fall into the production
tax under subsection (p).
Co-Chair Stoltze WITHDREW his objection. There being NO
further OBJECTION Amendment 2 was adopted.
1:54:59 PM
AT EASE
1:55:12 PM
RECONVENED
Vice-chair Fairclough reported that the two new fiscal
notes replaced two older ones. The Department of Revenue is
a zero fiscal note. The Department of Natural Resources
fiscal note reflects $211,400 in FY 13, $204,400 for each
year from FY 14 through FY 16, and $102,200 in FY 17. There
are two new full time positions added.
Representative Wilson questioned if the department would
wait until a company came for the tax credit before hiring
the two new positions.
PAUL DECKER, GEOLOGIST, DIVISION OF OIL AND GAS, DEPARTMENT
OF NATURAL RESOURCES (via teleconference) remarked that if
the department knew that a company was going to file an
application then the positions would be fill immediately.
Representative Wilson questioned how many wells would it
take to make a difference between hiring one or two people.
Mr. Decker replied that there were two different positions.
One position would be in the "best interest findings"
category which would be needed first, and then the other
position would be a Natural Resource Specialist in the
resource evaluation section to handle correspondence and
coordinate information between the all the involved
parties.
2:00:14 PM
Vice-chair Fairclough mentioned on the Department of
Natural Resources, Oil and Gas fiscal note that in FY 17
the amount drops to one full time position and in FY 18
there are zero positions.
Representative Neuman noted that a bill was passed recently
that helped the Department of Natural Resources streamline
their permitting activities and the committee had asked
about a reduction of personnel for savings. He questioned
the need for two more positions and all the equipment.
Co-Chair Thomas interjected that if the department does not
hire the employees after the bill is passed, then the
unused money is swept back into general funds.
Representative Neuman commented that he was sure the
department would hire the employees. Co-Chair Thomas
remarked that money as a rule is swept out of the
department if they do not hire additional employees.
Co-Chair Stoltze commented there would probably be further
fiscal note discussions.
2:02:31 PM
Representative Doogan signified that he was trying to
understand what problem was being solved in the bill. He
wondered if there was a lot of oil and gas, but the costs
of exploring was too high or the state did not know if
there was any gas and wanted to subsidize wildcatting.
Ms. Pierson stated that the answer was both. There are some
underexplored areas that the state would like more
information about and some areas already explored where the
state would like to encourage drilling. She believed that
more information on the underexplored and explored
identified basins would provide a greater chance to bring a
discovery to production for royalty taxes.
Co-Chair Stoltze believed that the bill provided a far
better approach to finding a natural gas field of
marketable value close to the Interior rather than using
short term vouchers or some other proposals.
Representative Neuman remarked that the bill would provide
a race with the other options to see who could offer gas to
Fairbanks first.
Ms. Pierson disclosed that there might be other avenues if
gas was discovered. She noted there could be a power plant
or gas moved out to western Alaska. She judged local use is
preferable, but other uses are possible.
2:06:25 PM
Representative Guttenberg commented it was amazing what is
not known about the state. He thought it remarkable how
different things are discovered. He believed it to be a
good thing that the state be more proactive.
Representative Joule reported that he had been on the
Nenana Board of Directors when looking to develop the Red
Dog Mine. Early in the 70s Nenana had entered into an
agreement with an oil company to do some research and
exploration and believed the bill to be a follow up and
continuation. The bill has the full support of the Nenana
Board of Directors as well as all the regional
organizations in the surrounding areas. They all hope it
will result in a find so consumers could start paying a
lower rate for gas.
Representative Doogan voiced his concern about bill in two
ways. He believed it put the state in the wildcatting and
production business that does not do anything for the state
as a whole. Some of the areas are on private land and could
cost more than might actually be produced. He complained
that both fiscal notes are indeterminate. The committee is
in the process of passing a bill where the base is $120
million and could possibly cost more without knowing
exactly how much. He indicated he would not keep the bill
from going forward, but he did not plan to vote for it. He
warned that a lot of money was being thrown out with no
idea what the total costs would be or what the state would
get out of it.
2:11:51 PM
Vice-chair Fairclough MOVED to report CSHB 276(FIN) as
amended out of committee with individual recommendations
and the accompanying fiscal note (s).
Co-Chair Stoltze OBJECTED for discussion.
Representative Edgmon indicated that he was supportive of
the bill, but did recognize the concerns of Representative
Doogan. He questioned if there were any scenarios where a
similar credit could be applied to geo-thermal drilling.
Ms. Pierson reported that geo-thermal had not been touched
in the bill. She reported six hearings on the bill in the
Resources Committee. There was an indication that some
other things could be added to the bill, but the tight
window was agreed on because, if the plan proved
successful, other ideas would be considered. Representative
Edgmon pointed out the two or three geo-thermal projects in
his region and the potential energy benefit.
Ms. Person remarked that geo-thermal had not been brought
up with the bill, but it was something to further explore.
Co-Chair Stoltze remarked that he would like a geologist to
put his ideas on the record. He asked for an identification
of land ownerships involved in the potential exploration
areas.
Mr. Swenson replied that land ownership consisted of state
land across the Nenana basin, Alaska Native-owned and
federal land in the Yukon Flats and Kotzebue area, and a
mix of federal, state, and Alaska Native land in the
Bristol Bay area.
Co-Chair Stoltze asked who owned the subsurface rights. Mr.
Swenson replied that the sub-surface rights were tied to
the surface owners.
2:16:43 PM
Co-Chair Thomas announced a potential conflict since he was
on the shareholder in Sealaska. Representative Joule
offered that he was Nenana shareholder and a regional
corporation shareholder. Representative Edgmon remarked he
was a Bristol Bay shareholder.
Co-Chair Thomas disclosed that any natural resources
developed and found on regional corporation land is shared
with other regions in Alaska.
Co-Chair Stoltze WITHDREW his objection.
CSHB 276 (FIN) was REPORTED out of committee with a "do
pass" recommendation and accompanying new fiscal notes from
the Department of Natural Resources and the Department of
Revenue.
2:19:12 PM
Representative Gara thanked his staff and all the
hardworking people behind the scenes.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB276 Amendment #2 Gara.pdf |
HFIN 4/6/2012 1:30:00 PM |
HB 276 |