Legislature(2011 - 2012)HOUSE FINANCE 519

03/30/2012 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 289 NATURAL GAS STORAGE TAX CREDIT/REGULATION TELECONFERENCED
Moved CSHB 289(FIN) Out of Committee
+= HB 296 CRIME OF ESCAPE/DEF. OF CORRECT. FACILITY TELECONFERENCED
Heard & Held
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."                                                                          
                                                                                                                                
1:39:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STEVE THOMPSON,  SPONSOR,  relayed that  the                                                                    
legislation  would incentivize  private  sector delivery  of                                                                    
lower-cost  natural gas  in the  state by  extending credits                                                                    
for above-ground  liquefied natural gas  storage facilities.                                                                    
He  elaborated  that  the  bill created  a  new  credit  for                                                                    
construction of  above-ground liquefied natural  gas storage                                                                    
tanks  with a  volume of  25  thousand gallons  or more.  He                                                                    
furthered  that  the  amount  of the  credit  was  would  be                                                                    
limited to  50 percent of  the construction costs, or  up to                                                                    
$15 million, whichever was less.  He said that the bill also                                                                    
allowed  for  an  eligible  above-ground  liquefied  storage                                                                    
facility cited on  state lands to request  an exemption from                                                                    
rental payments; the  exemption would extend up  to 10 years                                                                    
following commencement of  commercial operations. He pointed                                                                    
to   letters  of   support   from   multiple  agencies   and                                                                    
organizations (copy on file.)                                                                                                   
                                                                                                                                
1:41:46 PM                                                                                                                    
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,                                                                             
highlighted the changes in version X of the legislation:                                                                        
                                                                                                                                
     Section 1. AS 38.05 is  amended by adding a new section                                                                
     to read:                                                                                                                 
                                                                                                                            
     Sec. 38.05.096. Exemption from  rental payments on land                                                                
     leased  for  certain   liquefied  natural  gas  storage                                                              
     facilities.  (a)   A person  leasing state  land for  a                                                                
     liquefied  natural gas  storage facility  other than  a                                                                  
     gas  storage facility  subject to  AS 38.05.180(u)  may                                                                  
     request an  exemption from  lease payments  as provided                                                                  
     in this  section. The exemption  is applicable  for the                                                                  
     periods described in (b) of this section.                                                                                
      (b)   The exemption is available for the calendar year                                                                  
     in  which the  liquefied natural  gas storage  facility                                                                  
     commences  commercial operation  and  for  each of  the                                                                  
     nine  calendar years  immediately  following the  first                                                                  
     year of commercial operation.  However, an exemption is                                                                  
     not  applicable   for  the  calendar  year   after  the                                                                  
     facility  ceases   commercial  operation  or   for  any                                                                  
     subsequent calendar year.  (c)     The   lessee   shall                                                                  
     provide the director with  any information the director                                                                  
     requests to determine whether  the lessee qualifies for                                                                  
     the exemption.                                                                                                           
      (d)   Information related  to state land leased  for a                                                                  
     liquefied natural  gas storage facility  qualifying for                                                                  
     the  exemption in  this section  is public  information                                                                  
     and may  be furnished  to the Regulatory  Commission of                                                                  
     Alaska.  On request,  the  director  shall provide  the                                                                  
     name  of each  person  using state  land  leased for  a                                                                  
     liquefied natural  gas storage facility, the  years for                                                                  
     which an exemption  was granted, and the  amount of the                                                                  
     exemption.                                                                                                               
      (e)   A  person receiving an  exemption for  a payment                                                                  
     under this  section that  contracts to  store liquefied                                                                  
     natural  gas for  a utility  regulated  under AS  42.05                                                                  
     shall reduce the storage price  to reflect the value of                                                                  
     the exemption.                                                                                                           
      (f)  In this section,                                                                                                   
             (1)  "ceases commercial operation" and                                                                           
     "commences  commercial  operation"  have  the  meanings                                                                  
     given in AS 31.05.032;                                                                                                   
             (2)  "liquefied natural gas storage facility"                                                                    
     has the meaning given in AS 42.05.990.                                                                                   
                                                                                                                              
     Sec. 2. AS 42.05.381(k) is amended to read:                                                                              
      (k)   The cost to the utility of storing  gas in a gas                                                                  
     storage facility or storing liquefied  natural gas in a                                                              
     liquefied natural gas storage  facility that is allowed                                                                
     in  determining  a  just   and  reasonable  rate  shall                                                                  
     reflect  the  reduction  in cost  attributable  to  any                                                                  
     exemption  from a  payment due  under  AS 38.05.096  or                                                                
     38.05.180(u), as applicable,  [AS 38.05.180(u)] and the                                                                
     value  of  a tax  credit  that  the  owner of  the  gas                                                                  
     storage  facility   received  under  AS   43.20.046  or                                                                
     43.20.047,  as applicable.  The commission  may request                                                                
     the  (1) commissioner  of natural  resources to  report                                                                  
     the value of the exemption  from a payment due under AS                                                                
     38.05.096   or   38.05.180(u),   as   applicable,   [AS                                                              
     38.05.180(u)] that  the gas storage  facility received;                                                                  
     and (2)  commissioner of revenue to  report information                                                                  
     on  the   amount  of  tax  credits   claimed  under  AS                                                                  
     43.20.046  and 43.20.047,  as applicable,  for the  gas                                                                
     storage  facility  or  liquefied  natural  gas  storage                                                              
     facility. In this subsection,                                                                                          
      (1)   "gas storage facility" has the  meaning given in                                                                
     AS 31.05.032;                                                                                                         
      (2)   "liquefied natural gas storage facility" has the                                                                
     meaning given                                                                                                         
     in AS 42.05.990                                                                                                       
                                                                                                                              
     Sec. 3. AS 42.05.990(5) is amended to read:                                                                            
      (5)    "public utility"  or  "utility" includes  every                                                                  
     corporation whether public,  cooperative, or otherwise,                                                                  
     company,  individual,  or association  of  individuals,                                                                  
     their lessees,  trustees, or  receivers appointed  by a                                                                  
     court, that  owns, operates,  manages, or  controls any                                                                  
     plant, pipeline, or system for                                                                                           
             (A)  furnishing, by generation, transmission,                                                                    
     or distribution,  electrical service to the  public for                                                                  
     compensation;                                                                                                            
             (B)  furnishing telecommunications service to                                                                    
     the public for compensation;                                                                                             
             (C)  furnishing water, steam, or sewer service                                                                   
     to the public for compensation;                                                                                          
             (D)  furnishing by transmission or distribution                                                                  
     of  natural  or  manufactured  gas to  the  public  for                                                                  
     compensation;                                                                                                            
             (E)  furnishing for distribution or by                                                                           
     distribution  petroleum or  petroleum  products to  the                                                                  
     public for compensation when the consumer has no                                                                         
     alternative in  the choice of supplier  of a comparable                                                                  
     product and service at an equal or lesser price;                                                                           
             (F)  furnishing collection and disposal service                                                                  
     of garbage,  refuse, trash, or other  waste material to                                                                  
     the public for compensation;                                                                                             
             (G)  furnishing the service of natural gas                                                                       
     storage to the public for compensation;                                                                                  
             (H)  furnishing the service of liquefied                                                                       
    natural gas storage to the public for compensation;                                                                  
                                                                                                                              
     Sec.  4.   AS  42.05.990  is  amended   by  adding  new                                                                
     paragraphs to read:                                                                                                      
      (11)   "liquefied natural gas  storage facility" means                                                                  
     a  facility  that receives  natural  gas  volumes in  a                                                                  
     liquid or  gaseous state from customers,  holds the gas                                                                  
     volumes in a liquid state  in a reservoir, and delivers                                                                  
     the gas  volumes in  a liquid or  gaseous state  to the                                                                  
     customer; in this paragraph, "facility" includes                                                                         
             (A)  all parts of the facility from the point                                                                    
     at which  the natural gas  volumes are received  by the                                                                  
     facility from  the customer to  the point at  which the                                                                  
     natural gas  volumes are delivered  by the  facility to                                                                  
     the customer;                                                                                                            
             (B)  a facility consisting of a reservoir,                                                                       
     either underground  or aboveground, and one  or more of                                                                  
     the following components of the facility:                                                                                
                   (i)  pipe;                                                                                                 
                   (ii)  compressor stations;                                                                                 
                   (iii)  station equipment;                                                                                  
           (iv)  liquefaction plant or facility;                                                                              
           (v)  gasification plant or facility;                                                                               
                   (vi)  on-site or remote monitoring,                                                                        
     supervision, and control  facilities;                                                                                    
                   (vii)  gas processing plants and gas                                                                       
     treatment  plants, but  not  including a  manufacturing                                                                  
     plant or facility;                                                                                                       
                   (viii)  other equipment necessary to                                                                       
     receive,  place  into  the reservoir,  monitor,  remove                                                                  
     from the reservoir, process, and deliver natural gas;                                                                    
      (12)    "reservoir"  means  a receptacle  or  chamber,                                                                  
     either natural  or man-made, holding  a gas  or liquid,                                                                  
     and includes  a tank or  a depleted or  nearly depleted                                                                  
     pool;   (13)    "service   of  liquefied   natural  gas                                                                  
     storage"  means the  operation of  a liquefied  natural                                                                  
     gas  storage facility;  "service  of liquefied  natural                                                                  
     gas storage" does not include  the storage of liquefied                                                                  
     natural gas                                                                                                                
             (A)  owned by or contractually obligated to the                                                                  
     owner, operator,  or manager  of the  liquefied natural                                                                  
     gas storage facility;                                                                                                    
             (B)  that is incidental to the production or                                                                     
     sale  of  natural  gas  to   one  or  more  third-party                                                                  
     customers; or                                                                                                            
             (C)  for which the price of storage is not                                                                       
     separately itemized.                                                                                                     
                                                                                                                            
     Sec. 5. AS 43.20 is amended  by adding a new section to                                                                
     article 1 to read:                                                                                                       
     Sec. 43.20.047. Liquefied  natural gas storage facility                                                                
     tax  credit.  (a)  A  person  that is  an  owner  of  a                                                                
     liquefied  natural gas  storage  facility described  in                                                                  
     (b)   of  this   section   that  commences   commercial                                                                  
     operation  before   January  1,   2020,  may   apply  a                                                                  
     refundable credit  against a tax liability  that may be                                                                  
     imposed  on the  person under  this chapter  or receive                                                                  
     the amount of  the credit in the form of  a payment for                                                                  
     the  taxable year  in which  the liquefied  natural gas                                                                  
     storage  facility commences  commercial operation.  The                                                                  
     tax  credit  or  payment  under this  section  may  not                                                                  
     exceed the lesser  of $15,000,000 or 50  percent of the                                                                  
     costs  incurred to  establish or  expand the  liquefied                                                                  
     natural gas  storage facility. The  tax credit  in this                                                                  
     section is in  addition to any other  credit under this                                                                  
     chapter for which the person is eligible.                                                                                
      (b)   To  qualify for  the credit  in this  section, a                                                                  
     liquefied natural gas storage facility                                                                                   
             (1) must have a liquefied natural gas storage                                                                    
     volume  of not  less than  25,000 gallons  of liquefied                                                                  
     natural  gas,  or, if  the  credit  is claimed  for  an                                                                  
     expansion,  the  expansion   must  have  increased  the                                                                  
     capacity of  an existing liquefied natural  gas storage                                                                  
     facility by more than 25,000 gallons;                                                                                    
             (2)  may not have been in operation as a                                                                         
     liquefied natural  gas storage facility  before January                                                                  
     1,  2011, unless  the  tax credit  in  this section  is                                                                  
     based  on the  expansion of  the liquefied  natural gas                                                                  
     storage facility after December 31, 2011;                                                                                
             (3)  must be regulated under AS 42.05 as a                                                                       
     utility  and be  available  to furnish  the service  of                                                                  
     liquefied natural gas  storage to customers, utilities,                                                                  
     or industrial  facilities; in this  paragraph, "service                                                                  
     of  liquefied  natural  gas storage"  has  the  meaning                                                                  
     given in AS 42.05.990;                                                                                                     
             (4)  if located on state land and leased or                                                                      
     subject  to  a  lease  under   AS  38.05,  must  be  in                                                                  
     compliance with the terms of the lease; and                                                                              
             (5)  must have commenced commercial operation                                                                    
     on or before  the date the person takes  a credit under                                                                  
     (a) of this section or  applies for a payment under (a)                                                                  
     of this section.                                                                                                         
      (c)    To claim  the credit  or request  a payment,  a                                                                  
     person shall  submit to the department  a certification                                                                  
     of the  capacity of the  liquefied natural  gas storage                                                                  
     facility  measured in  gallons  or the  capacity of  an                                                                  
     expansion to an existing  liquefied natural gas storage                                                                  
     facility  measured  in  gallons,   the  date  that  the                                                                  
     liquefied  natural   gas  storage   facility  commenced                                                                  
     commercial operation,  the date  that any  expansion to                                                                  
     the  liquefied natural  gas storage  facility commenced                                                                  
     commercial  operation, and  other information  required                                                                  
     by the department.                                                                                                       
      (d)   A person applying the credit  under this section                                                                  
     against a liability under this  chapter shall claim the                                                                  
     credit on the  person's return. A person  entitled to a                                                                  
     tax credit under this section  that is greater than the                                                                  
     person's tax  liability under this chapter  may request                                                                  
     a  refund  or  payment  in the  amount  of  the  unused                                                                  
     portion of the tax credit.                                                                                               
      (e)   The  department may use  money available  in the                                                                  
     oil  and   gas  tax  credit  fund   established  in  AS                                                                  
     43.55.028  to make  a refund  or payment  under (d)  of                                                                  
     this  section in  whole or  in part  if the  department                                                                  
     finds  that   (1)  the  claimant   does  not   have  an                                                                  
     outstanding   liability  to   the   state  for   unpaid                                                                  
     delinquent  taxes  under  this  title;  and  (2)  after                                                                  
     application   of  all   available   tax  credits,   the                                                                  
     claimant's total  tax liability under this  chapter for                                                                  
     the calendar year  in which the claim is  made is zero.                                                                  
     In this  subsection, "unpaid  delinquent tax"  means an                                                                  
     amount of  tax for which  the department has  issued an                                                                  
     assessment that  has not been  paid and,  if contested,                                                                  
     has not been finally resolved in the taxpayer's favor.                                                                   
      (f)   For the purpose of determining the amount of the                                                                  
     credit  under  this  section,  the  costs  incurred  to                                                                  
     establish a  liquefied natural gas storage  facility or                                                                  
     to  expand a  liquefied  natural  gas storage  facility                                                                  
     shall be submitted to  the department with verification                                                                  
     by   an   independent  certified   public   accountant,                                                                  
     licensed in the state.  The volume of working liquefied                                                                  
     natural gas  storage or volume  of the expansion  to an                                                                    
     existing liquefied  natural gas storage  facility shall                                                                  
     be verified by a  professional engineer licensed in the                                                                  
     state with relevant experience.  (g)   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 under this                                                                  
     section.                                                                                                                 
      (h)   If  the liquefied  natural gas  storage facility                                                                  
     for  which a  credit  was received  under this  section                                                                  
     ceases  commercial operation  during the  nine calendar                                                                  
     years immediately following the  calendar year in which                                                                  
     the  liquefied natural  gas storage  facility commences                                                                  
     commercial  operation,  the  tax liability  under  this                                                                  
     chapter of the  person who claimed the  credit shall be                                                                  
     increased, and  a person not  subject to the  tax under                                                                  
     this chapter that received a  payment under (d) and (e)                                                                  
     of this  section shall  be liable to  the state  in the                                                                  
     amount  determined in  this subsection.  The amount  of                                                                  
     the  increase  in tax  liability  or  liability to  the                                                                  
     state                                                                                                                    
             (1)  for a person subject to the tax under this                                                                  
     chapter,  shall  be  determined and  assessed  for  the                                                                  
     taxable  year  in  which   the  liquefied  natural  gas                                                                  
     storage    facility   ceases    commercial   operation,                                                                  
     regardless  of   whether  the  liquefied   natural  gas                                                                  
     storage   facility   subsequently  resumes   commercial                                                                  
     operation;                                                                                                               
             (2)  for a person not subject to the tax due                                                                     
     under this  chapter, shall  be determined  and assessed                                                                  
     as of  December 31  of the calendar  year in  which the                                                                  
     liquefied   natural   gas   storage   facility   ceases                                                                  
     commercial   operation,  regardless   of  whether   the                                                                  
     liquefied  natural  gas storage  facility  subsequently                                                                  
     resumes commercial operation; and                                                                                        
             (3)  is equal to the total amount of the credit                                                                  
     taken  or  received as  a  payment  under (d)  of  this                                                                  
     section, as  applicable, multiplied by a  fraction, the                                                                  
     numerator  of which  is the  difference between  10 and                                                                  
     the number  of calendar  years for which  the liquefied                                                                  
     natural  gas storage  facility was  eligible for  a tax                                                                  
     credit under this section and  the denominator of which                                                                  
     is 10.                                                                                                                   
      (i)   The issuance of a refund under this section does                                                                  
     not limit  the department's  ability to later  audit or                                                                  
     adjust  the claim  if the  department determines,  as a                                                                  
     result of the  audit, that the person  that claimed the                                                                  
     credit was  not entitled to  the amount of  the credit.                                                                    
     The tax  liability of the  person receiving  the credit                                                                  
     under this  chapter is increased  by the amount  of the                                                                  
     credit  that  exceeds  that to  which  the  person  was                                                                  
     entitled. If the tax liability  is increased under this                                                                  
     subsection,  the increase  bears interest  at the  rate                                                                  
     set  by  AS 43.05.225  from  the  date the  refund  was                                                                  
     issued.                                                                                                                  
      (j)    A  person  claiming  a tax  credit  under  this                                                                  
     section for  a liquefied  natural gas  storage facility                                                                  
     that ceases  commercial operation within  nine calendar                                                                  
     years immediately following the  calendar year in which                                                                  
     the  liquefied natural  gas storage  facility commences                                                                  
     commercial  operation shall  notify  the department  in                                                                  
     writing of  the date the liquefied  natural gas storage                                                                  
     facility ceased  commercial operation. The  notice must                                                                  
     be filed with the return  for the taxable year in which                                                                  
     the  liquefied  natural  gas  storage  facility  ceases                                                                  
     commercial operation.                                                                                                    
      (k)    A  refund  under  this section  does  not  bear                                                                  
     interest.                                                                                                                
      (l)  In this section,                                                                                                   
             (1)  "ceases commercial operation" means that                                                                    
     the  liquefied natural  gas storage  facility fails  to                                                                  
     add  or withdraw  20  percent or  more  of its  working                                                                  
     capacity  of liquefied  natural gas  during a  calendar                                                                  
     year  after the  calendar year  in which  the liquefied                                                                  
     natural  gas  storage   facility  commences  commercial                                                                  
     operation;                                                                                                               
             (2)  "commences commercial operation" means the                                                                  
     first input  of liquefied natural gas  into a liquefied                                                                  
     natural gas  storage facility  for purposes  other than                                                                  
     testing;                                                                                                                 
             (3)  "liquefied natural gas storage facility"                                                                    
     has the meaning given in AS 42.05.990.                                                                                   
                                                                                                                              
     Sec. 6. AS 43.55.028(a) is amended to read:                                                                            
      (a)   The oil and  gas tax credit fund  is established                                                                  
     as a separate fund of the state.                                                                                         
     The  purpose of  the fund  is to  purchase transferable                                                                  
     tax credit  certificates issued under AS  43.55.023 and                                                                  
     production  tax  credit  certificates issued  under  AS                                                                  
     43.55.025  and  to  pay refunds  and  payments  claimed                                                                
     under AS 43.20.046 or 43.20.047.                                                                                       
                                                                                                                              
     Sec. 7. AS 43.55.028(g) is amended to read:                                                                            
      (g)   The  department may  adopt regulations  to carry                                                                  
     out the  purposes of this section,  including standards                                                                    
     and  procedures  to   allocate  available  money  among                                                                  
     applications  for  purchases  under  this  chapter  and                                                                  
     claims for  refunds and payments under  AS 43.20.046 or                                                              
     43.20.047  when the  total amount  of the  applications                                                                
     for purchase  and claims for  refund exceed  the amount                                                                  
     of  available  money  in   the  fund.  The  regulations                                                                  
     adopted  by the  department  may  not, when  allocating                                                                  
     available  money  in  the   fund  under  this  section,                                                                  
     distinguish  an  application  for  the  purchase  of  a                                                                  
     credit certificate  issued under  AS 43.55.023(m)  or a                                                                  
     claim for refund under AS 43.20.046 or AS 43.20.047.                                                                   
                                                                                                                            
     Sec.  8. This  Act  takes effect  immediately under  AS                                                                
     01.10.070(c).                                                                                                            
                                                                                                                              
1:46:42 PM                                                                                                                    
                                                                                                                                
Representative Neuman  pointed to  page 7. He  asked whether                                                                    
the fund  to purchase transferrable tax  credits had already                                                                    
been established, or would a new fund be created.                                                                               
                                                                                                                                
Ms.  Pierson  responded  that  the  fund  had  already  been                                                                    
established and had been set in statute.                                                                                        
                                                                                                                                
Representative  Neuman asked  if  propane  was considered  a                                                                    
natural gas under the legislation.                                                                                              
                                                                                                                                
Ms. Pierson  responded in the  negative. She  furthered that                                                                    
the  storage  of propane  differed  from  that of  liquefied                                                                    
natural gas.                                                                                                                    
                                                                                                                                
Representative Neuman  asserted that  propane was  a natural                                                                    
gas liquid  and wondered  why it was  not covered  under the                                                                    
bill.                                                                                                                           
                                                                                                                                
Ms. Pierson replied that adding  propane to the language had                                                                    
been  considered and  ultimately disregarded.  She furthered                                                                    
that  it  was  cheaper  to   store  propane  than  to  store                                                                    
liquefied natural gas.                                                                                                          
                                                                                                                                
Representative   Neuman  queried   the  end   goal  of   the                                                                    
legislation.                                                                                                                    
                                                                                                                                
Representative  Thompson  responded   that  the  bill  would                                                                    
create  storage  tanks  that   could  be  used  by  multiple                                                                    
businesses and in various locations.                                                                                            
                                                                                                                                
Co-Chair Stoltze passed the gavel to Co-Chair Thomas.                                                                           
                                                                                                                                
1:49:23 PM                                                                                                                    
                                                                                                                                
Representative  Gara  asked  whether the  bill  would  apply                                                                    
statewide.                                                                                                                      
                                                                                                                                
Ms. Pierson responded in the affirmative.                                                                                       
                                                                                                                                
Representative   Gara   understood  that   the   legislation                                                                    
pertained  to  above-ground  storage  only,  and  would  not                                                                    
duplicate  the credit  already  available  for below  ground                                                                    
storage.                                                                                                                        
                                                                                                                                
Ms. Pierson said that was correct.                                                                                              
                                                                                                                                
Representative  Gara  asked  whether  the  credit  could  be                                                                    
duplicated above another credit.                                                                                                
                                                                                                                                
Ms. Pierson responded  that she did not believe  it could be                                                                    
added to another credit. She  noted that the credit would be                                                                    
the only one available for liquefied natural gas storage.                                                                       
                                                                                                                                
Representative Gara understood that  if a credit did already                                                                    
exist,  the  bill was  not  meant  to create  an  additional                                                                    
credit.                                                                                                                         
                                                                                                                                
Representative Thompson replied in the affirmative.                                                                             
                                                                                                                                
Ms. Pierson clarified that there  was a leasing provision in                                                                    
the bill which created two types of available credits.                                                                          
                                                                                                                                
Representative   Costello  referred   to  language   in  the                                                                    
sectional analysis  that stated that any  cost savings would                                                                    
be passed  on to  the storage  customer. She  wondered where                                                                    
the language was located in the bill.                                                                                           
                                                                                                                                
Ms. Pierson responded that it was located in Section 2.                                                                         
                                                                                                                                
1:51:51 PM                                                                                                                    
                                                                                                                                
Representative Costello requested the exact location.                                                                           
                                                                                                                                
Ms. Pierson read from Section 2:                                                                                                
                                                                                                                              
Sec. 2. AS 42.05.381(k) is amended to read:                                                                                   
          (k)  The cost to the utility of storing gas in a                                                                      
     gas storage  facility or storing liquefied  natural gas                                                              
     in  a liquefied  natural gas  storage facility  that is                                                                
     allowed  in  determining  a just  and  reasonable  rate                                                                    
     shall  reflect the  reduction in  cost attributable  to                                                                    
     any exemption from a payment  due under AS 38.05.096 or                                                                
     38.05.180(u), as applicable,  [AS 38.05.180(u)] and the                                                                
     value  of  a tax  credit  that  the  owner of  the  gas                                                                    
     storage  facility   received  under  AS   43.20.046  or                                                                
     43.20.047, as applicable.                                                                                              
                                                                                                                                
Ms. Pierson  explained that any savings  that occurred under                                                                    
the legislation must be passed onto the consumer.                                                                               
                                                                                                                                
Representative  Doogan  surmised  that the  bill  created  a                                                                    
subsidy to build the storage containers.                                                                                        
                                                                                                                                
Ms. Pierson responded in the affirmative.                                                                                       
                                                                                                                                
Representative  Doogan pointed  out  that the  bill was  the                                                                    
29th piece of legislation that  the committee had heard that                                                                    
included a tax credit.                                                                                                          
                                                                                                                                
Co-Chair Thomas  reminded the committee that  the bill would                                                                    
apply statewide.                                                                                                                
                                                                                                                                
Representative  Thompson suggested  that liquefied  gas from                                                                    
Cook Inlet  could be barged  to Bethel  and up and  down the                                                                    
Yukon River.                                                                                                                    
                                                                                                                                
Co-Chair  Thomas wondered  whether the  tax credit  would be                                                                    
needed if a gas pipeline was built.                                                                                             
                                                                                                                                
Representative Thompson  thought that the gasline  would not                                                                    
be running for at least 15  years. He said that the bill was                                                                    
an attempt to create a  "bridge" project until a gasline was                                                                    
established.                                                                                                                    
                                                                                                                                
Representative Wilson hypothesized that  the bill would help                                                                    
in Fairbanks with utilities that were using diesel.                                                                             
                                                                                                                                
Representative  Thompson responded  in  the affirmative.  He                                                                    
expounded that using natural  gas for electrical production,                                                                    
and at the refinery, would improve air quality.                                                                                 
                                                                                                                                
Representative  Wilson  asked  who would  benefit  from  the                                                                    
savings  if Flint  Hills shared  the storage  unit with  the                                                                    
major utility in Fairbanks.                                                                                                     
                                                                                                                                
Ms.  Pierson replied  that  under  the proposed  legislation                                                                    
Flint Hills would not receive the benefit.                                                                                      
                                                                                                                                
Co-Chair Thomas  asked how the  gas would be  delivered from                                                                    
the storage facility to homes.                                                                                                  
                                                                                                                                
Representative  Thompson explained  that there  were already                                                                    
1100  different locations  in Fairbanks  hooked  up for  the                                                                    
distribution of natural gas, and  more were planned once the                                                                    
gas became available. He stated  that electrical users would                                                                    
immediately  see  lower  electric   rates,  and  lower  home                                                                    
heating rates would follow.                                                                                                     
                                                                                                                                
1:56:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Thomas  referenced a circulating  supplemental bill                                                                    
that would  allow communities to receive  low-interest loans                                                                    
for natural gas. He wondered  if Fairbanks would be included                                                                    
in  the  loan program.  He  believed  the loans  could  help                                                                    
expedite the  process of bringing  homes online  for natural                                                                    
gas heating.                                                                                                                    
                                                                                                                                
Representative  Thompson stated  that  he  was not  familiar                                                                    
with the legislation.                                                                                                           
                                                                                                                                
Representative  Gara  surmised  that  the  bill  could  help                                                                    
subsidize  programs such  as bringing  natural gas  from the                                                                    
North Slope to Fairbanks by truck.                                                                                              
                                                                                                                                
Representative  Thompson  answered  in the  affirmative.  He                                                                    
said that he paid $23.35 per  1000 cubic feet of natural gas                                                                    
for his rental home in Fairbanks,  compared with $8 to $9 in                                                                    
Anchorage. He asserted that whatever  could be done to lower                                                                    
heating costs would be beneficial.                                                                                              
                                                                                                                                
Representative Doogan  wondered if there would  be more than                                                                    
one 25,000 gallon unit of  liquefied natural gas stored at a                                                                    
time.                                                                                                                           
                                                                                                                                
Ms. Pierson  believed that  there would  be high  demand for                                                                    
the  units and  that  gas would  be  flowing throughout  the                                                                    
state.  She  said  that currently  in  Fairbanks  there  was                                                                    
discussion of  putting in an approximately  3 million gallon                                                                    
tank. She added  that the main utility  company in Fairbanks                                                                    
believed that the component would  be necessary to make sure                                                                    
there was enough gas to fulfill customer's needs.                                                                               
                                                                                                                                
Representative  Doogan understood  that the  subsidies could                                                                    
total $30 million.                                                                                                              
                                                                                                                                
Ms. Pierson replied yes.                                                                                                        
                                                                                                                                
2:00:35 PM                                                                                                                    
                                                                                                                                
Vice-chair  Fairclough  discussed   the  fiscal  notes:  FN6                                                                    
(DOA), FN7 (DCCED), FN10 (DNR), FN9 (DOR).                                                                                      
                                                                                                                                
2:02:53 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:07:20 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-chair  Fairclough  clarified  that there  was  a  fifth                                                                    
fiscal note: FN8 (DOR).                                                                                                         
                                                                                                                                
Representative   Doogan  voiced   a  complaint   related  to                                                                    
indeterminate  fiscal notes.  He  opined that  it seemed  to                                                                    
have   become  policy   for   the   departments  to   attach                                                                    
indeterminate fiscal  notes to legislation.  He communicated                                                                    
that the finance  committee could not do  the most important                                                                    
part  of its  job  without accurate  information related  to                                                                    
costs.                                                                                                                          
                                                                                                                                
Co-Chair  Thomas agreed.  He hoped  that the  administration                                                                    
understood  the difficulty  the committee  faced; attempting                                                                    
to craft policy with indeterminate fiscal notes.                                                                                
                                                                                                                                
Representative Gara  echoed the  complaint and  believed the                                                                    
problem was  more extensive. He surmised  that Department of                                                                    
Revenue  (DOR)  was  waiting  for bills  to  report  out  of                                                                    
committee before determining what  their fiscal impact would                                                                    
be.                                                                                                                             
                                                                                                                                
Representative Wilson  MOVED to report CSHB  289(FIN) out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
CSHB  289(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass"  recommendation and  with one  new fiscal  impact note                                                                    
and one  new indeterminate  note from Department  of Natural                                                                    
Resources,   one  new   indeterminate  note   Department  of                                                                    
Revenue,  one  new  zero  impact  note  from  Department  of                                                                    
Administration,   and  one   new  zero   impact  note   from                                                                    
Department of Commerce, Community and Economic Development.                                                                     
                                                                                                                                
2:10:56 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:15:17 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects