Legislature(2015 - 2016)HOUSE FINANCE 519

04/03/2015 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 80 REPEAL COLLEGE/CAREER READINESS ASSESS. TELECONFERENCED
<Bill Hearing Canceled>
+ HB 15 CREDITS FOR TIME SERVED/GOOD TIME TELECONFERENCED
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
*+ HB 155 FEES; WAIVERS; CREDITS; DEDUCTIONS;TAXES TELECONFERENCED
<Bill Hearing Canceled>
*+ HB 100 UREA/AMMONIA FACILITY TAX CREDIT TELECONFERENCED
Heard & Held
+= HB 41 SPORT FISHING SERVICES TELECONFERENCED
Moved CSHB 41(FIN) Out of Committee
+= HB 49 BENEFIT CORPORATIONS TELECONFERENCED
Moved CSHB 49(L&C) Out of Committee
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 3, 2015                                                                                            
                         1:31 p.m.                                                                                              
                                                                                                                                
1:31:59 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 1:31 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Mike  Chenault,   Sponsor;  Donald  Bullock,                                                                    
council,  Alaska Legislature  House  Majority; Steve  Wendt,                                                                    
Manager,   Kenai  Agrium   Plant;  Adam   Diamond,  Manager,                                                                    
Government  Relations, Agrium  U.S.; Mr.  Alan Tamaki,  Vice                                                                    
President, Tax,  Agrium; David Izett, Senior  Legal Counsel,                                                                    
Agrium; Jane Pierson,  Staff, Representative Steve Thompson;                                                                    
Representative Cathy Tilton,  Sponsor; Heath Hilyard, Staff,                                                                    
Representative  Cathy Tilton;  Tom Brookover,  Department of                                                                    
Fish and Game; Representative  Paul Seaton, Sponsor; Taneeka                                                                    
Hansen,  Staff, Representative  Paul  Seaton; Eric  Trojian,                                                                    
Director of Policy, B-Labs.                                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Ryan   Makinster,   Director,    Southeast   Alaska   Guides                                                                    
Organization;  Andy  Mezirow,  Governor's  Appointee,  North                                                                    
Pacific Fishery Management Council.                                                                                             
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 41     SPORT FISHING SERVICES                                                                                                
                                                                                                                                
          CSHB 41(FIN) was REPORTED out  of committee with a                                                                    
          "no recommendation" recommendation  and with a new                                                                    
          fiscal  impact note  from the  Department of  Fish                                                                    
          and Game.                                                                                                             
                                                                                                                                
HB 49     BENEFIT CORPORATIONS                                                                                                  
                                                                                                                                
          CSHB 49(L&C) was REPORTED out  of committee with a                                                                    
          "do  pass" recommendation  and with  a new  fiscal                                                                    
          impact  note  from  the  Department  of  Commerce,                                                                    
          Community and Economic Development.                                                                                   
                                                                                                                                
HB 100    UREA/AMMONIA FACILITY TAX CREDIT                                                                                      
                                                                                                                                
          HB  100  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
                                                                                                                                
HOUSE BILL NO. 100                                                                                                            
                                                                                                                                
     "An Act  establishing a credit  against the  net income                                                                    
     tax   for   an   in-state  processing   facility   that                                                                    
     manufactures  urea or  ammonia;  and  providing for  an                                                                    
     effective date."                                                                                                           
                                                                                                                                
1:31:59 PM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for  HB  100, Work  Draft  29-LS0423\N,  Nauman,                                                                    
3/31/15. There being NO OBJECTION, it was so ordered.                                                                           
                                                                                                                                
REPRESENTATIVE MIKE CHENAULT, SPONSOR, introduced himself.                                                                      
                                                                                                                                
DONALD BULLOCK, COUNCIL,  ALASKA LEGISLATURE HOUSE MAJORITY,                                                                    
indicated there  were changes  between the  original version                                                                    
of the bill and the work draft.                                                                                                 
                                                                                                                                
Co-Chair  Thompson   recommended  and  explanation   of  the                                                                    
differences between the two documents.                                                                                          
                                                                                                                                
Mr. Bullock explained  that there were three  changes in the                                                                    
proposed committee substitute:  it addressed multiple owners                                                                    
of the urea  and ammonia plant; it clarified  that the gases                                                                    
delivered to the facility must  be used by the facility; and                                                                    
it addressed an affiliation issue  to determine the value of                                                                    
the gas for  royalty purposes. He looked at page  2, lines 9                                                                    
through  17,  which  was  new language  to  state  that  the                                                                    
Commissioner of  the Department  of Natural  Resources (DNR)                                                                    
would determine  whether the lessee was  affiliated with the                                                                    
processing  plant, owner  of the  processing  plant, or  the                                                                    
purchaser of  the gas  produced by  the plant.  He explained                                                                    
that Section 1  provided the establishment of  the value for                                                                    
royalty purposes, which was the  contract between the lessee                                                                    
and the plant. The language  was similar to existing law for                                                                    
sales to  utilities and other  fertilizer plants,  and would                                                                    
enhance the  support that it was  an objectively established                                                                    
price.                                                                                                                          
                                                                                                                                
1:37:42 PM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman asked  about the  use of  the manufacturing                                                                    
component of  the facility. Mr.  Bullock responded  that the                                                                    
credit may be  used for either the  product or manufacturing                                                                    
process.                                                                                                                        
                                                                                                                                
Co-Chair Neuman  wondered if  the credit  could be  used for                                                                    
heating   of  the   plant.  Mr.   Bullock  replied   in  the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Co-Chair  Neuman asked  if  the state  had  a definition  of                                                                    
"manufacturing." Mr. Bullock was  unsure whether there was a                                                                    
definition of "manufacturing.                                                                                                   
                                                                                                                                
Co-Chair Neuman  responded that he believed  that the intent                                                                    
of the word "manufacturing"  indicated a molecular change in                                                                    
the gas  used in the  facility. He stressed that  the credit                                                                    
must not  be used  for an LNG  export facility.  Mr. Bullock                                                                    
responded  that the  discussion had  related to  whether gas                                                                    
continued to  be gas in  the manufacturing process,  or what                                                                    
the  gas made  into a  different substance.  The tax  credit                                                                    
related to  gas delivered  to the  plant which  was combined                                                                    
with nitrogen to  produce the Urea and  Ammonia. He stressed                                                                    
that  a  liquefaction process  would  produce  the same  gas                                                                    
components, however it would be in a liquid state.                                                                              
                                                                                                                                
Co-Chair  Neuman  indicated  that  his  staff  had  produced                                                                    
information from February 23, 2010.  He read from a prepared                                                                    
definition of "manufacturing":                                                                                                  
                                                                                                                                
     Manufacturing  means   chemically  converting   gas  or                                                                    
     components  of gas  or chemically  combining components                                                                    
     of  gas   with  other   substances  to   form  valuable                                                                    
     compound.   Manufacturing   does    not   include   gas                                                                    
     processing,  gas  treatment, dehydration,  fracknation,                                                                    
     compression, or liquefaction.                                                                                              
                                                                                                                                
Representative Chenault read from a prepared statement:                                                                         
                                                                                                                                
     House  Bill  100 creates  a  new  corporate income  tax                                                                    
     credit for owners of  facilities using a manufacturer's                                                                    
     sale of Urea or Ammonia.  When the gas is produced from                                                                    
     a state lease, the state  receives a royalty, and if in                                                                    
     instate processing facility  that manufactures or sells                                                                    
     urea or ammonia purchases the  gas as feed stock from a                                                                    
     state lease,  the credit is established.  The amount of                                                                    
     the credit  is the  amount of the  royalty paid  to the                                                                    
     state, the credit  could be used to  abate state income                                                                    
     taxes under  AS 43.20, but  of the credit could  not be                                                                    
     used to  reduce the  tax payer's liability  below zero.                                                                    
     According  to  a  McDowell  study,  a  reopened  Agrium                                                                    
     facility   using   a   single  train,   would   consume                                                                    
     approximately 28 BCF a year  of gas, with 21 BCF coming                                                                    
     from state  leases. It was  anticipated that  the total                                                                    
     royalty payments  to the  state would  be approximately                                                                    
     $15 million annually. The benefits  from a single train                                                                    
     production  would result  in  approximately 140  direct                                                                    
     jobs with  a payroll of approximately  $14 million, and                                                                    
     approximately  340   total  jobs  to   include  direct,                                                                    
     indirect, and  induced within the state  with a payroll                                                                    
     of approximately  $30 million. It was  anticipated that                                                                    
     all of  the employees  would be Alaskan  residents. The                                                                    
     plant rehabilitation would cost  about $75 million, and                                                                    
     would  require  a  temporary  workforce  of  about  440                                                                    
     workers, which  translates into a payroll  of about $75                                                                    
     million over the two year  estimate to rehabilitate the                                                                    
     facility.  It would  place Agrium  among the  top local                                                                    
     tax  payers  in  the   Kenai  Peninsula  Borough,  with                                                                    
     approximately  $42.2   million  in  tax   revenue,  not                                                                    
     including the sales tax revenue  and new jobs. In light                                                                    
     of  the Cook  Inlet tax  credits that  are expiring  in                                                                    
     2016, the  new user  Cook Inlet  gas would  continue to                                                                    
     encourage additional exploration  and developing of the                                                                    
     gas fields in Cook Inlet.                                                                                                  
                                                                                                                                
1:44:31 PM                                                                                                                    
                                                                                                                                
Representative Gara  wanted to  hear from the  Department of                                                                    
Revenue (DOR) about the foregone  tax liability. He remarked                                                                    
that  the  credits paid  to  Agrium  would equal  their  tax                                                                    
liability.                                                                                                                      
                                                                                                                                
Co-Chair Thompson stated that DOR  would be available at the                                                                    
bill's next scheduled hearing.                                                                                                  
                                                                                                                                
Representative Gara understood that  the Agrium plant was an                                                                    
important job  producer on the Kenai  Peninsula. He wondered                                                                    
why the Kenai  Peninsula Borough did not  waive the property                                                                    
taxes   on  Agrium,   rather   than   the  state   providing                                                                    
approximately  $3 million  in  foregone  state tax  revenue.                                                                    
Representative  Chenault responded  that he  was unsure.  He                                                                    
indicated  that the  intent to  bring  jobs back  and to  do                                                                    
further exploration.                                                                                                            
                                                                                                                                
Representative Gara wanted to  explore why the borough would                                                                    
not   contribute,   because   they   would   be   the   main                                                                    
beneficiaries.                                                                                                                  
                                                                                                                                
1:47:05 PM                                                                                                                    
                                                                                                                                
Representative  Wilson  asked  if the  plant  was  currently                                                                    
open.  Representative Chenault  replied that  the plant  was                                                                    
not open.                                                                                                                       
                                                                                                                                
Representative Wilson  wondered if  the state  was currently                                                                    
losing  money. Representative  Chenault  responded that  the                                                                    
state  was  not  losing  money,  and  was  not  gaining  any                                                                    
revenue.                                                                                                                        
                                                                                                                                
Representative  Wilson  queried  the benefit  to  the  state                                                                    
related  to  the  reopening  of  the  plant.  Representative                                                                    
Chenault replied that if Agrium  used gas from state leases,                                                                    
the state would receive royalty.                                                                                                
                                                                                                                                
Co-Chair Thompson asked that someone  from Agrium come up to                                                                    
answer questions.                                                                                                               
                                                                                                                                
STEVE WENDT, MANAGER, KENAI AGRIUM  PLANT, placed himself on                                                                    
the record.                                                                                                                     
                                                                                                                                
ADAM  DIAMOND, MANAGER,  GOVERNMENT RELATIONS,  AGRIUM U.S.,                                                                    
placed himself on the record.                                                                                                   
                                                                                                                                
Representative  Wilson wanted  to  understand what  benefits                                                                    
were  lost because  of the  plant closure.  She specifically                                                                    
queried   the  plant's   contribution  to   the  state   and                                                                    
community. Mr. Diamond responded that  at the time the plant                                                                    
was  open there  were approximately  300 employees,  and the                                                                    
state received royalty revenue from gas.                                                                                        
                                                                                                                                
Mr.  Wendt  furthered  that  at  the  height  of  the  plant                                                                    
operation,  Agrium  employed  over  30  employees;  used  in                                                                    
excess of 15 billion cubic  feet annually; paid royalties on                                                                    
the  great  majority  of  the gas  on  anything  from  state                                                                    
leases; and used nearly 400  in state vendors, and spent $15                                                                    
million annually.                                                                                                               
                                                                                                                                
Representative Wilson wondered if  there was any other state                                                                    
revenue, besides  the revenue from  the gas, as a  result of                                                                    
reopening  the plant.  Mr. Diamond  responded that  the over                                                                    
300 contractors  would provide between  $15 million  and $20                                                                    
million to the state.                                                                                                           
                                                                                                                                
Co-Chair  Thompson   asked  Agrium   reps  to   discuss  the                                                                    
fertilizer usage  for farmers.  He stated  that the  cost of                                                                    
fertilizer quadrupled  after the plant's closure.  Mr. Wendt                                                                    
responded  that they  had provided  fertilizer for  in state                                                                    
agricultural usage. He stated that  it was important for the                                                                    
local  fertilizer  users,  however  was a  small  impact  on                                                                    
Agrium itself.                                                                                                                  
                                                                                                                                
1:52:04 PM                                                                                                                    
                                                                                                                                
Representative Pruitt asked why  Agrium shut down. Mr. Wendt                                                                    
responded that it was due to a lack of gas.                                                                                     
                                                                                                                                
Representative  Pruitt  noted  that there  was  currently  a                                                                    
surplus  of gas,  but wondered  if Agrium  would be  able to                                                                    
stay open  if there was  suddenly a  lack of gas.  Mr. Wendt                                                                    
responded   that    through   previous    legislation   that                                                                    
successfully incentivized capital  investment in Cook Inlet.                                                                    
He stated  that there were continually  new gas discoveries,                                                                    
and he believed that the  discoveries were enough to reopen.                                                                    
He stated  that Agrium  would invest  $275 million  to bring                                                                    
the plant back to near new condition for a 20 year run.                                                                         
                                                                                                                                
Representative Pruitt  asked what would prevent  Agrium from                                                                    
reopening, without  the tax credit,  if there was  plenty of                                                                    
gas in the basin. Mr. Diamond  replied that there would be a                                                                    
significant capital expenditure to  reopen the plant. Agrium                                                                    
had a  limited capital budget,  and there had  been internal                                                                    
dialogue regarding which projects  would bring the best rate                                                                    
of return.  He stressed that  the company was  attempting to                                                                    
provide  the most  attractive offer,  in order  to make  the                                                                    
project as attractive as possible for a reopening.                                                                              
                                                                                                                                
Representative  Gara  queried  the estimated  corporate  tax                                                                    
under  legislation; the  corporate tax  that was  previously                                                                    
paid on  an annual basis;  and the corporate tax  that would                                                                    
have been  paid without  the bill.  Mr. Diamond  deferred to                                                                    
Mr. Tamaki.                                                                                                                     
                                                                                                                                
MR. ALAN  TAMAKI, VICE PRESIDENT,  TAX, AGRIUM,  stated that                                                                    
the plant  had been closed  for so  many years, that  he did                                                                    
not have  that information available. He  estimated that the                                                                    
tax saved under the credits  was approximately $2 million to                                                                    
$3 million, and he assumed that  sum was similar to what was                                                                    
paid under  previous operation. He  stated that  the current                                                                    
payment was approximately $40,000 to $50,000.                                                                                   
                                                                                                                                
Representative  Gara  recalled  that  the  estimated  unpaid                                                                    
generated corporate  tax was  $3 million  to $4  million. He                                                                    
wondered if that  was incorrect. Mr. Tamaki  deferred to Mr.                                                                    
Diamond. Mr.  Diamond responded  that the  previous estimate                                                                    
was  $3  million to  $4  million  annually, and  the  Alaska                                                                    
Division of Tax had agreed with that estimate.                                                                                  
                                                                                                                                
1:57:26 PM                                                                                                                    
                                                                                                                                
Representative  Gara  stated that  there  were  a number  of                                                                    
other ways that businesses  finance projects, other than tax                                                                    
waivers. He wondered  why Agrium did not  request a property                                                                    
tax waiver from the borough.  Mr. Diamond stated that Agrium                                                                    
was looking  for a  positive benefit to  both the  state and                                                                    
Agrium.                                                                                                                         
                                                                                                                                
Co-Chair Neuman asked how much  gas would be used. Mr. Wendt                                                                    
indicated 28 bcf would be  used annually, and three-quarters                                                                    
of that gas  would come from state leases.  The state leased                                                                    
gas  would  generate  $12  million to  $15  million  in  new                                                                    
revenue from the state.                                                                                                         
                                                                                                                                
Co-Chair Neuman queried the daily  rate. Mr. Wendt responded                                                                    
that it would be 80 million cubic feet (MCF) per day.                                                                           
                                                                                                                                
Co-Chair Neuman queried current  royalty rate in Cook Inlet.                                                                    
Mr. Wendt responded that it was approximately 12.5 percent.                                                                     
                                                                                                                                
Representative   Gara   did   not   approve   of   lobbyists                                                                    
approaching  the   table  to  provide   responses.  Co-Chair                                                                    
Thompson  announced that  he would  ensure that  it did  not                                                                    
occur.                                                                                                                          
                                                                                                                                
Representative Wilson noted that  there was currently no gas                                                                    
produced from  the plant.  She wondered  if the  state would                                                                    
simply  not receive  as much  tax from  the production.  Mr.                                                                    
Diamond responded  affirmatively. He reported that  the bill                                                                    
did not  require any  expenditures from  the state,  and did                                                                    
not reduce any existing state revenue stream from Agrium. T                                                                     
                                                                                                                                
Representative  Wilson noted  that the  state was  currently                                                                    
receiving zero revenue from Agrium. Mr. Diamond agreed.                                                                         
                                                                                                                                
Representative Wilson queried the  number of years the plant                                                                    
was hoping to remain open.  Mr. Diamond responded that there                                                                    
was an estimate of a 20 year run.                                                                                               
                                                                                                                                
2:03:24 PM                                                                                                                    
                                                                                                                                
Representative   Pruitt  asked   if  Agrium's   opening  was                                                                    
dependent on  the legislation. Mr. Diamond  replied that the                                                                    
credit would not guarantee that  the plant would reopen, and                                                                    
would  inhibit the  plant  from  reopening. The  legislation                                                                    
would  only provide  an attractive  factor  in the  decision                                                                    
making.  He  hoped that  the  legislation  would provide  an                                                                    
attractive investment for the company.                                                                                          
                                                                                                                                
Representative  Pruitt  surmised  that the  legislation  was                                                                    
only a  factor in considering reopening  Agrium. Mr. Diamond                                                                    
agreed with that summation.                                                                                                     
                                                                                                                                
Representative Gara asked if the  plant may open without the                                                                    
tax credit. Mr. Diamond responded affirmatively.                                                                                
                                                                                                                                
Representative  Gara asked  if there  was investment  monies                                                                    
available inside the company.                                                                                                   
                                                                                                                                
DAVID IZETT,  SENIOR LEGAL  COUNSEL, AGRIUM,  responded that                                                                    
Agrium  was currently  looking at  a number  of alternatives                                                                    
for capital.                                                                                                                    
                                                                                                                                
Co-Chair  Thompson  assumed  that  the  credit  would  be  a                                                                    
positive  factor in  determining  the  plant reopening.  Mr.                                                                    
Izett replied in the affirmative.                                                                                               
                                                                                                                                
2:07:03 PM                                                                                                                    
                                                                                                                                
Representative  Gara   wondered  if  Agrium   would  respond                                                                    
positively to an only 50  percent tax discount.  Mr. Diamond                                                                    
responded that he would put  the most attractive position in                                                                    
front of Agrium.  He could not indicate what  would or would                                                                    
not  enhance the  decision. He  reiterated  that the  credit                                                                    
would have a  positive impact on the decision  to reopen the                                                                    
plant.                                                                                                                          
                                                                                                                                
Co-Chair Thompson wondered how long  the plant would need to                                                                    
reopen, if the  legislation passed in the  current year. Mr.                                                                    
Wendt replied that  there was a hope to  begin production on                                                                    
July 1, 2017.                                                                                                                   
                                                                                                                                
Representative Guttenberg asked how  Agrium was assured that                                                                    
they  were not  repeating  its previous  mistake. Mr.  Wendt                                                                    
responded that  it was being  very careful in  examining the                                                                    
reopening.  The  evaluation  team  was  looking  at  reserve                                                                    
reports.                                                                                                                        
                                                                                                                                
Representative Guttenberg wondered if  the company was still                                                                    
concerned  whether  there was  enough  gas  to produce.  Mr.                                                                    
Wendt replied in the affirmative.                                                                                               
                                                                                                                                
Representative  Guttenberg  asked  that   if  the  bill  was                                                                    
passed,  he wanted  to know  the  earliest start  date of  a                                                                    
reopening. Mr. Wendt responded July 1, 2015.                                                                                    
                                                                                                                                
HB  100  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 41                                                                                                             
                                                                                                                                
     "An Act relating to sport fishing services, sport                                                                          
     fishing operators, and sport fishing guides; and                                                                           
     providing for an effective date."                                                                                          
                                                                                                                                
2:12:54 PM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for  HB  41,  Work  Draft  29-LS0238\,  Bullard,                                                                    
3/25/15. There being NO OBJECTION, it was so ordered.                                                                           
                                                                                                                                
JANE   PIERSON,   STAFF,  REPRESENTATIVE   STEVE   THOMPSON,                                                                    
explained  the  changes  in the  committee  substitute.  She                                                                    
stated that Sections 1 and  2 were eliminated in the current                                                                    
version.                                                                                                                        
                                                                                                                                
Co-Chair  Neuman  wondered if  the  elimination  of the  two                                                                    
sections  resulted in  a positive  fiscal note.  Ms. Pierson                                                                    
responded affirmatively.                                                                                                        
                                                                                                                                
REPRESENTATIVE  CATHY TILTON,  SPONSOR,  explained that  the                                                                    
bill was a  sunset repealer of the  sport fishing licensure.                                                                    
She  spoke  in  support  of the  committee  substitute,  and                                                                    
appreciated the work to make a positive fiscal note.                                                                            
                                                                                                                                
Co-Chair Neuman queried  the issue of federal  log books and                                                                    
whether  electronic monitoring  would occur  in the  current                                                                    
year. Representative Tilton responded  that the bill did not                                                                    
cover the issue of federal log books. .                                                                                         
                                                                                                                                
HEATH HILYARD, STAFF,  REPRESENTATIVE CATHY TILTON, referred                                                                    
to  Mr. Johnson  who  had  come in  front  of the  committee                                                                    
regarding the federal issue as  related to the log books. He                                                                    
agreed with  Mr. Johnson's concerns,  but stressed  that the                                                                    
bill could not fix those concerns.                                                                                              
                                                                                                                                
2:17:37 PM                                                                                                                    
                                                                                                                                
Representative   Munoz  asked   about  the   issue  of   the                                                                    
electronic  submission  of the  data,  and  wondered if  the                                                                    
system would work in concert  with the federal programs. Mr.                                                                    
Hilyard responded that the log  books were interrelated. The                                                                    
Department  of Fish  and Game  (DFG)  collected the  halibut                                                                    
data and submitted  the data to the  National Marine Fishery                                                                    
Service. That  data would  then influence  determinations on                                                                    
annual harvest measures.                                                                                                        
                                                                                                                                
Representative Munoz asked if the  goal was to keep the data                                                                    
limited to one-time input. Mr. Hilyard deferred to DFG.                                                                         
                                                                                                                                
TOM  BROOKOVER, DEPARTMENT  OF FISH  AND GAME,  replied that                                                                    
the log book program was  intended to cover both the federal                                                                    
and  state requirements.  The  electronic  log book  program                                                                    
would  expand its  license  modernization  effort through  a                                                                    
pilot electronic log book program on the Kenai River.                                                                           
                                                                                                                                
Representative Munoz asked about the  issue of bear boats as                                                                    
an  exemption from  the charter  requirements. She  wondered                                                                    
how  that  activity  was in  the  charter  regulations.  Mr.                                                                    
Hilyard replied that  the issue was about the  point at what                                                                    
constitutes a  "charter." He explained that  there were some                                                                    
various business models  that may or may  not provide guides                                                                    
on those  boats. He  stated that the  council had  adopted a                                                                    
new  regulation  that  only  incentivized  operators  to  be                                                                    
cleverer  about  how  to   structure  their  operation.  The                                                                    
current  regulation  stipulated  that an  outfit  could  not                                                                    
provide further assistance, once the  angler line was in the                                                                    
water.                                                                                                                          
                                                                                                                                
2:23:22 PM                                                                                                                    
                                                                                                                                
Representative  Munoz was  concerned with  anglers in  small                                                                    
boats  that belong  to lodges.  She  wondered how  to get  a                                                                    
handle  on the  out  of state  fish  shipments. Mr.  Hilyard                                                                    
pointed out  that salmon  was a  state-managed fish,  so the                                                                    
state  could  put  a  limitation   based  on  residency.  He                                                                    
furthered that  halibut was a  federally regulated  fish, so                                                                    
there was no  limitation based on residency.  He stated that                                                                    
the  federal government  put  limitations  on guided  versus                                                                    
unguided fish.                                                                                                                  
                                                                                                                                
Representative Wilson  asked what  would happen if  the bill                                                                    
does not pass.  Mr. Hilyard responded that  DPS was offering                                                                    
stopgap  permits,  but  did  not  receive  any  revenue.  He                                                                    
deferred to Mr. Brookover.                                                                                                      
                                                                                                                                
Mr. Brookover  said that without  the bill, a fee  could not                                                                    
be required.                                                                                                                    
                                                                                                                                
Representative  Wilson  wanted  to  understand  all  of  the                                                                    
requirements  of  the  permit.  She  wondered  if  the  bill                                                                    
disadvantaged those people who were  only trying to fish for                                                                    
personal reasons.                                                                                                               
                                                                                                                                
Co-Chair  Thompson  commented  about  the  definition  of  a                                                                    
friend.  He  stressed there  should  be  safety measures  in                                                                    
place.                                                                                                                          
                                                                                                                                
2:28:49 PM                                                                                                                    
                                                                                                                                
Representative Wilson wanted to  hear the difference between                                                                    
someone who  wanted to fish  for food, but could  not afford                                                                    
their  own boat;  versus  a visitor  who  wanted an  Alaskan                                                                    
experience.                                                                                                                     
                                                                                                                                
                                                                                                                                
Representative Kawasaki  asked about the original  intent of                                                                    
the bill. He surmised that there  was a growth in sport fish                                                                    
charter operators. Mr. Hilyard  responded that regardless of                                                                    
the significant  restrictions on harvest levels  for charter                                                                    
fishing, the  charter fishery did  exceed its  allocation of                                                                    
halibut  by  a very  significant  margin.  He stressed  that                                                                    
there was  still a concern  about the fishery  continuing to                                                                    
exceed its harvest.                                                                                                             
                                                                                                                                
Representative Kawasaki  queried the original intent  of the                                                                    
original 2004 legislation. Mr.  Brookover responded that the                                                                    
information on  guide numbers  and their  fishing activities                                                                    
was  very limited  or not  available  in many  parts of  the                                                                    
state.  There was  a registration  requirement at  the time,                                                                    
but anyone  could come  in and  register. It  was discovered                                                                    
that  a licensing  requirement  providing information  about                                                                    
who was actively participating in the fishery.                                                                                  
                                                                                                                                
2:33:02 PM                                                                                                                    
                                                                                                                                
Representative  Kawasaki asked  why  there  was a  five-year                                                                    
sunset placed on the original  legislation, and another five                                                                    
years in  2009. Mr. Brookover  replied that he did  not know                                                                    
the reason for the five-year sunset.                                                                                            
                                                                                                                                
Representative  Kawasaki  recalled  a discussion  about  the                                                                    
need for  some receipts  to enact the  log book  program. He                                                                    
explained  that there  was a  discussion in  2009 about  DFG                                                                    
needing  a revenue  stream  to continue  the  log book.  Mr.                                                                    
Hilyard replied that he was not aware of that conversation.                                                                     
                                                                                                                                
Co-Chair  Neuman said  that he  had spent  some time  on the                                                                    
legislation, so he offered some  responses to some committee                                                                    
members'  inquiries.   In  response   to  a   question  from                                                                    
Representative  Kawasaki,  he said  that  DFG  did not  need                                                                    
additional funds to fully implement  and expand the log book                                                                    
program.  The   department  had  completed   the  electronic                                                                    
licensing program,  so no further  funds were  necessary. He                                                                    
stated that  the program was initially  formulated to ensure                                                                    
safety.                                                                                                                         
                                                                                                                                
Representative Gattis  looked at  it from the  standpoint of                                                                    
how it affected  her district. She did not  feel it affected                                                                    
the  Mat-Su.  She  stressed  that it  was  truly  about  the                                                                    
electronic log book.                                                                                                            
                                                                                                                                
2:39:26 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt wanted  to  return to  the bare  boat                                                                    
situation.  He wanted  to  know if  those  were exempt.  Mr.                                                                    
Hilyard replied that they may or may not be exempt.                                                                             
                                                                                                                                
Representative  Pruitt wondered  if  there were  individuals                                                                    
who   were  taking   money  from   other  Alaskans   by  not                                                                    
participating in  the program. Mr. Hilyard  replied that the                                                                    
ethical businesses were  paying their taxes, but  may not be                                                                    
licensed to guide.                                                                                                              
                                                                                                                                
Co-Chair  Neuman shared  that  there were  skiff rentals  in                                                                    
Southeast Alaska that did not require guides.                                                                                   
                                                                                                                                
2:42:51 PM                                                                                                                    
                                                                                                                                
RYAN   MAKINSTER,   DIRECTOR,    SOUTHEAST   ALASKA   GUIDES                                                                    
ORGANIZATION  (via teleconference),  spoke in  favor of  the                                                                    
bill.  He stated  that the  program had  worked well  in the                                                                    
past, and  was beneficial to his  organization's members and                                                                    
the industry. He stated that  the industry standards, safety                                                                    
requirements, insurance,  and ability  to track data  in the                                                                    
log book were all beneficial to the industry.                                                                                   
                                                                                                                                
2:45:00 PM                                                                                                                    
                                                                                                                                
ANDY  MEZIROW, GOVERNOR'S  APPOINTEE, NORTH  PACIFIC FISHERY                                                                    
MANAGEMENT COUNCIL  (via teleconference), spoke in  favor of                                                                    
the bill.  He understood that  there was some  resistance to                                                                    
doubling  the fee,  but  felt that  the  fee increase  would                                                                    
stabilize the  program to  2026. He  felt that  the industry                                                                    
would help the  current budget crisis. He  remarked that the                                                                    
log  books   were  used  to  determine   the  guided  angler                                                                    
participation,  catch levels,  and  release mortality.  Each                                                                    
guide must  be identified  in order  to proper  regulate the                                                                    
industry.                                                                                                                       
                                                                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
                                                                                                                                
2:47:41 PM                                                                                                                    
                                                                                                                                
Representative  Munoz  queried  the difference  between  the                                                                    
nonresident  and  resident  fishing limits  on  salmon.  She                                                                    
wondered if  a person  on a bare  boat would  have different                                                                    
fishing  limits   than  a  guided  operation.   Mr.  Hilyard                                                                    
responded  the  salmon limit  was  based  on residency,  not                                                                    
whether  the  angler  was  with  a guide  or  no  guide.  He                                                                    
believed that the  limit for king salmon in  Southeast was 3                                                                    
per day for a resident, and 2 per  day - with a maximum of 6                                                                    
annually - for a nonresident.                                                                                                   
                                                                                                                                
Co-Chair Neuman  remarked that it  was anticipated  that the                                                                    
regulations be implemented March  31, 2016. He remarked that                                                                    
staff  must be  in  place  to work  on  the  log books.  Mr.                                                                    
Brookover agreed. He stated that  the department was issuing                                                                    
log  books  in  2015,  and proceeding  accordingly.  He  was                                                                    
confident  that the  regulations could  be in  place by  the                                                                    
deadline.                                                                                                                       
                                                                                                                                
2:51:34 PM                                                                                                                    
                                                                                                                                
Co-Chair  Neuman asked  Representative  Tilton about  making                                                                    
sure  there was  not a  gap with  funding and  the effective                                                                    
date.                                                                                                                           
                                                                                                                                
Co-Chair Neuman discussed the fiscal note.                                                                                      
                                                                                                                                
Co-Chair  Neuman  MOVED  to  report   CSHB  41(FIN)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
There being NO  OBJECTION, CSHB 41(FIN) was  REPORTED out of                                                                    
committee  with  a  "no recommendation"  recommendation  and                                                                    
with a  new fiscal impact  note from the Department  of Fish                                                                    
and Game.                                                                                                                       
                                                                                                                                
2:55:14 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:57:05 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 49                                                                                                             
                                                                                                                                
     "An Act relating to corporations, including benefit                                                                        
     corporations, and other entities; and providing for an                                                                     
     effective date."                                                                                                           
                                                                                                                                
2:57:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PAUL SEATON, SPONSOR,  explained the bill. He                                                                    
stated  that   HB  49  expands   the  options   for  Alaskan                                                                    
entrepreneurs  and  investors  by  placing  a  new  type  of                                                                    
corporate  entity,  the   benefit  corporation,  in  Alaskan                                                                    
statute. A  benefit corporation is a  for-profit corporation                                                                    
which   incorporates    public   benefits    and   community                                                                    
improvement  into  its  business practices,  no  matter  the                                                                    
principal   service  or   product  provided.   Allowing  the                                                                    
creation of  benefit corporations will give  business owners                                                                    
more choice in  how to run their business and  will bring to                                                                    
Alaska  a  slice  of  the $6.6  trillion  that  is  invested                                                                    
nationally in similar  corporations. Corporate law generally                                                                    
requires a  corporation to consider the  financial impact to                                                                    
their  shareholders   as  the   top  priority   when  making                                                                    
decisions.  Under the  benefit  corporate structure,  owners                                                                    
and  boards   have  the  freedom   to  take   actions  which                                                                    
positively   impact  their   communities  without   fear  of                                                                    
violating a fiduciary duty.  Benefit corporations are formed                                                                    
voluntarily and have  the same tax status of  any other for-                                                                    
profit  corporation.  By  electing   in  their  articles  of                                                                    
incorporation to  become a  benefit corporation,  a business                                                                    
simply gains  the flexibility to include  mission and social                                                                    
impact  in  their  business  practices.  Twenty-seven  other                                                                    
states have passed benefit  corporation legislation and many                                                                    
more  have  benefit  bills in  process.  Over  1400  benefit                                                                    
corporations  have incorporated  in those  states, including                                                                    
Ben &  Jerry's, Patagonia,  Rasmussen College,  Epic Coffee,                                                                    
and  King  Arthur  Flour  Company  (America's  oldest  flour                                                                    
company).  Each  of these  companies  works  to benefit  the                                                                    
public and  their communities in  the way that  matters most                                                                    
to   them.  HB   49   also  includes   measures  to   ensure                                                                    
accountability  and  transparency.  Just  as  a  traditional                                                                    
corporation  provides  their   shareholders  with  financial                                                                    
reports, a benefit corporation  will additionally create and                                                                    
publish  a  biennial  benefit   report  describing  how  the                                                                    
company  has  pursued  the   general  public  benefit.  This                                                                    
report,  which  is  held against  a  third  party  standard,                                                                    
allows   shareholders,   investors,   and  the   public   to                                                                    
confidently invest in benefit  corporations that share their                                                                    
values.                                                                                                                         
                                                                                                                                
3:00:36 PM                                                                                                                    
                                                                                                                                
Representative  Wilson  wondered  why  the  legislation  was                                                                    
needed. Co-Chair Thompson provided  his understanding of the                                                                    
current system  related to corporations. He  stated that the                                                                    
shareholders  currently   had  a  sizeable  profit   in  the                                                                    
corporation,  but the  corporation  gave 80  percent of  its                                                                    
earning to  charity. The bill would  protect the corporation                                                                    
from being sued by a shareholder.                                                                                               
                                                                                                                                
Representative  Seaton agreed,  but felt  it was  an extreme                                                                    
example.  The  legislation  was   intended  to  benefit  the                                                                    
community.                                                                                                                      
                                                                                                                                
Co-Chair Neuman  asked if corporations could  currently give                                                                    
a  percentage  of  their profits  to  other  entities,  even                                                                    
though there was  a risk of being sued  by the shareholders.                                                                    
Representative Seaton replied in the affirmative.                                                                               
                                                                                                                                
Co-Chair Neuman pointed out how  this legislation could be a                                                                    
"two-edged sword."  He felt that  there could be  a conflict                                                                    
of   interest.  He   furthered  that   the  bill   made  the                                                                    
corporation identify who receives  the benefit, and how much                                                                    
was   given.   Representative    Seaton   replied   in   the                                                                    
affirmative.  He stated  that  the corporation  must file  a                                                                    
benefit report.                                                                                                                 
                                                                                                                                
Co-Chair Neuman asked  if they had to pay  any taxes, before                                                                    
the benefits  were paid. Representative Seaton  replied that                                                                    
it was like a C corporation.                                                                                                    
                                                                                                                                
3:06:28 PM                                                                                                                    
                                                                                                                                
Representative   Pruitt   queried    the   rights   of   the                                                                    
shareholders. Representative  Seaton looked at page  14, and                                                                    
noted the stockholders dissent language.                                                                                        
                                                                                                                                
TANEEKA   HANSEN,   STAFF,   REPRESENTATIVE   PAUL   SEATON,                                                                    
responded that the shareholders  had the ability to dissent,                                                                    
at the  time a  corporation may decide  to become  a benefit                                                                    
corporation. Establishing  a benefit corporation  requires a                                                                    
two-thirds  vote  of  the  board   of  directors  to  become                                                                    
established.  She  looked  at a  section  that  allowed  the                                                                    
shareholders the  right to bring  action, as related  to the                                                                    
specific benefit purpose. If that  shareholder felt that the                                                                    
benefit  corporation was  not  perusing  its public  benefit                                                                    
purpose, they could bring corrective action.                                                                                    
                                                                                                                                
3:09:16 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt surmised  that the  shareholder could                                                                    
sue,  if they  felt that  the corporation  had not  provided                                                                    
enough  benefit. Mr.  Hansen  replied  that the  shareholder                                                                    
could  bring  action, but  not  for  monetary damages.  They                                                                    
could only bring corrective action.                                                                                             
                                                                                                                                
3:10:26 PM                                                                                                                    
                                                                                                                                
ERIC TROJIAN, DIRECTOR OF POLICY,  B-LABS, explained that B-                                                                    
Labs worked to bring  investors and social entrepreneurs. He                                                                    
stated that  there was an  impediment in corporate  law that                                                                    
inhibited the stakeholders from  receiving the full revenue.                                                                    
He  stressed  that  the purpose  of  the  legislation  would                                                                    
protect  the legislature,  by  allowing  the shareholder  to                                                                    
sue, if the company was  not considering the social mission.                                                                    
He  stated  that  Idaho  had   recently  enacted  an  almost                                                                    
identical  bill. He  shared that  there were  currently 2200                                                                    
benefit  corporations  nationwide,  and there  were  several                                                                    
million dollar  deals within those  companies. He  felt that                                                                    
the bill  was a deregulation  of a purpose of  a corporation                                                                    
from a sole requirement  to maximize profits to deregulating                                                                    
by  allowing the  market direct  the  company's action.  The                                                                    
shareholder  will  then  understand  the  direction  of  the                                                                    
company,  via  the  specific style  of  the  corporation  as                                                                    
outlined in  the corporation  certificate. He  stressed that                                                                    
there were some benefit corporations that were thriving.                                                                        
                                                                                                                                
3:17:22 PM                                                                                                                    
                                                                                                                                
Co-Chair Thompson asked if the  federal government treated a                                                                    
B corporation  any differently than the  C corporations. Mr.                                                                    
Trojian responded in the negative,  because the bill did not                                                                    
address any tax issues.                                                                                                         
                                                                                                                                
Representative Wilson  wondered what would occur  if only 60                                                                    
percent of the shareholders wanted  to contribute to a local                                                                    
nonprofit. She asked if the other  40 percent had a right to                                                                    
sue. Mr. Trojian responded that  the board of directors made                                                                    
those decisions.  The shareholders had  a right to  vote out                                                                    
the  board  of  directors.  He explained  that  the  benefit                                                                    
corporations  did  not  give   large  amounts  of  money  to                                                                    
nonprofits.  The benefit  corporations wanted  to instill  a                                                                    
certain moral  or mission  within the  company. He  used the                                                                    
example  of Patagonia  and King  Arthur Flour  using organic                                                                    
materials.  He stated  that  the  benefit corporations  made                                                                    
decisions with the community and shareholders in mind.                                                                          
                                                                                                                                
Representative  Wilson wondered  if the  same concept  could                                                                    
occur within  the shareholders, versus creating  an entirely                                                                    
new corporation. Mr. Trojian indicated  no. He reported that                                                                    
no because the  purpose of that corporation  was to maximize                                                                    
profits.                                                                                                                        
                                                                                                                                
Representative  Pruitt  queried  the  goal  of  B-Labs.  Mr.                                                                    
Trojian responded that  his entity's mission was  to use the                                                                    
power  of   business  to  solve  social   and  environmental                                                                    
problems.  His organization  felt that  there were  too many                                                                    
problems in the world for only government to solve.                                                                             
                                                                                                                                
Representative Pruitt asked for  examples of companies where                                                                    
shareholders  may have  sued, because  they did  not believe                                                                    
that the company  went far enough to  contribute to society.                                                                    
Mr. Trojian  responded that  there was not  any case  law at                                                                    
present related to the legislation.                                                                                             
                                                                                                                                
3:24:13 PM                                                                                                                    
                                                                                                                                
Representative Gara stressed that the  law did not require a                                                                    
specific  social   cause.  Mr.  Trojian  responded   in  the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Representative Gattis  surmised that the bill  allowed for a                                                                    
greater  participation by  the consumer  to contribute  to a                                                                    
greater  cause. Representative  Seaton agreed,  but stressed                                                                    
that  the  corporations  would pay  taxes  and  benefit  the                                                                    
community.                                                                                                                      
                                                                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
                                                                                                                                
Co-Chair  Neuman  MOVED  to  report   CSHB  49(L&C)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
Representative  Pruitt OBJECTED.  He  felt as  if the  state                                                                    
would  be opening  up  the  doors to  a  problem to  greater                                                                    
environmental attacks on Alaska.  He focused his concerns on                                                                    
environmental taxes.                                                                                                            
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN  FAVOR:   Gara,  Guttenberg,  Kawasaki,   Munoz,  Neuman,                                                                    
Thompson                                                                                                                        
OPPOSED: Gattis, Pruitt, Wilson                                                                                                 
                                                                                                                                
The MOTION PASSED (6/3).                                                                                                        
                                                                                                                                
CSHB 49(L&C) was REPORTED out of committee with a "do pass"                                                                     
recommendation and with a new fiscal impact note from the                                                                       
Department of Commerce, Community and Economic Development.                                                                     
                                                                                                                                
Co-Chair Thompson discussed the agenda for the following                                                                        
meeting.                                                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:31:29 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:31 p.m.                                                                                          

Document Name Date/Time Subjects
CSHB 15 Sponsor Statement.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
CSHB 15 Ver. JUD Explanation of Changes.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
CSHB 15 Ver. JUD Sectional.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 1 - BITAD Alcohol monitoring technology utilized by Alaska DOC.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 2 - US Dept. of Justice Electronic monitoring and recidivism.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 3 - Electronic Monitoring Requirements.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 4 - Electronic Monitoring Terms and Conditions.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 5 - DOC House arrest and EM program indigent form.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB15 Supporting Document 6 - Use of electronic monitoring in the Alaska.pdf HFIN 4/3/2015 1:30:00 PM
HB 15
HB80_Sectional_Letterhead.docx HFIN 4/3/2015 1:30:00 PM
HB 80
HB80_Sponsor Statement.pdf HFIN 4/3/2015 1:30:00 PM
HB 80
HB80_Testing Requirement Briefing Memo.pdf HFIN 4/3/2015 1:30:00 PM
HB 80
HB 41 NEW FN DFG Sport Fisheries.pdf HFIN 4/3/2015 1:30:00 PM
HB 41
HB 100 Support additional.pdf HFIN 4/3/2015 1:30:00 PM
HB 100
HB 41 Letters.pdf HFIN 4/3/2015 1:30:00 PM
HB 41