Legislature(2011 - 2012)HOUSE FINANCE 519

03/13/2012 08:30 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
+ HB 9 IN-STATE GASLINE DEVELOPMENT CORP TELECONFERENCED
Heard & Held
+ HB 289 NATURAL GAS STORAGE TAX CREDIT/REGULATION TELECONFERENCED
Heard & Held
+= HB 170 MUNI TAX EXEMPTION FOR CERTAIN VOLUNTEERS TELECONFERENCED
Scheduled But Not Heard
+= HB 252 INCOME TAX EXEMPTION TELECONFERENCED
Moved CSHB 252(FIN) Out of Committee
+= HCR 24 STATE FOOD RESOURCE DEVELOPMENT GROUP TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled 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.                                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
HB9 Taxable Property.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB9 Sponsor Statement-HRES.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB9 Sectional Analysis-HRES.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB9 Mat-Su Resolution.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB9 HB 369.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB 369
HB9 ARDOR Support.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB9 ANGDA Initiative.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB9 AGDC Legislative Recommendations.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
Supporting HB 289 storage tanks 030212.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
Small Scale LNG.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
Sectional Analysis for HB 289.D 2.29.12.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
Reso 4516 Support HB 289 SB 153 Extending Tax Credits for NG Storage.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
SB 153
HB289LNG Svgs UAF FMH 2011 3 2.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HB289 Support Letter.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HB289 - Fuel Price Comparison.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HB 289 Sponsor Statement ver D.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HB 170 Mil Rates for Municipalities.pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB 170 AS 29.45.050. Optional exemptions and exclusions..pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB 170 AS 29.45.030 Required exemptions..pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB 170 AS 29.35.450 Service Areas.pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB 170 AS 18.15.250 Vaccination program for volunteer emergency personnel..pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB 170 CS WORKDRAFT 27-LS0562-T.pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB 170 CS Ver 27-LS0562T Sectional with Changes .pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HCR 24 Sponsor Statement2pdf.pdf HFIN 3/13/2012 8:30:00 AM
HCR 24
Explanation of Changes HB289 Version A to Version X 3.12.12.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HB 289 Sponsor Statement ver X 3.12.12.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HB289 CS WORKDRAFT 27-LS1216-X.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
Sectional Analysis for HB 289.X 3.12.12.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HCR 24 CS WORKDRAFT-B version.pdf HFIN 3/13/2012 8:30:00 AM
HCR 24
HCR 24 Summary of changes.pdf HFIN 3/13/2012 8:30:00 AM
HCR 24
AHA HCR24.pdf HFIN 3/13/2012 8:30:00 AM
HCR 24
HB9 Leg Research Memo Neuman.pdf HFIN 3/13/2012 8:30:00 AM
HB 9
HB 170 Exemptions- Mandated and Optional- 2012.pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB 170 Exemptions- Mandated and Optional- 2012.pdf HFIN 3/13/2012 8:30:00 AM
HB 170
HB289 Answers to HFIN questions.docx HFIN 3/13/2012 8:30:00 AM
HB 289
SUPPORTLETTER AP&T HB289.pdf HFIN 3/13/2012 8:30:00 AM
HB 289
HB 289 CVEA Support ltr 3 27 2012.pdf HFIN 3/13/2012 8:30:00 AM
HB 289