Legislature(2015 - 2016)HOUSE FINANCE 519

03/24/2016 09:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time --
+= HB 77 DISABILITY:ID/LICENSE AND TRAINING RQMTS. TELECONFERENCED
Moved CSHB 77(FIN) Out of Committee
-- Public Testimony --
+= HB 231 EXTEND BOARD OF PAROLE TELECONFERENCED
Moved CSHB 231(FIN) Out of Committee
-- Public Testimony --
+= HB 222 INCREASE OF APPROPRIATION ITEM TELECONFERENCED
Moved CSHB 222(FIN) Out of Committee
-- Public Testimony --
+ HB 247 TAX;CREDITS;INTEREST;REFUNDS;O & G TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 247                                                                                                            
                                                                                                                                
     "An  Act relating  to  confidential information  status                                                                    
     and  public   record  status  of  information   in  the                                                                    
     possession of  the Department  of Revenue;  relating to                                                                    
     interest  applicable  to  delinquent tax;  relating  to                                                                    
     disclosure  of  oil  and   gas  production  tax  credit                                                                    
     information; relating  to refunds  for the  gas storage                                                                    
     facility tax credit, the  liquefied natural gas storage                                                                    
     facility  tax credit,  and the  qualified in-state  oil                                                                    
     refinery   infrastructure   expenditures  tax   credit;                                                                    
     relating to  the minimum  tax for  certain oil  and gas                                                                    
     production;  relating to  the  minimum tax  calculation                                                                    
     for  monthly  installment  payments of  estimated  tax;                                                                    
     relating  to interest  on monthly  installment payments                                                                    
     of  estimated  tax;  relating to  limitations  for  the                                                                    
     application  of tax  credits; relating  to oil  and gas                                                                    
     production   tax  credits   for   certain  losses   and                                                                    
     expenditures;     relating    to     limitations    for                                                                    
     nontransferable  oil  and  gas production  tax  credits                                                                    
     based on oil production  and the alternative tax credit                                                                    
     for oil  and gas  exploration; relating to  purchase of                                                                    
     tax  credit  certificates  from the  oil  and  gas  tax                                                                    
     credit fund; relating  to a minimum for  gross value at                                                                    
     the   point   of    production;   relating   to   lease                                                                    
     expenditures  and tax  credits for  municipal entities;                                                                    
     adding    a   definition    for   "qualified    capital                                                                    
     expenditure";  adding  a  definition  for  "outstanding                                                                    
     liability  to   the  state";  repealing  oil   and  gas                                                                    
     exploration    incentive    credits;   repealing    the                                                                    
     limitation on  the application  of credits  against tax                                                                    
     liability  for   lease  expenditures   incurred  before                                                                    
     January 1,  2011; repealing  provisions related  to the                                                                    
     monthly installment payments for  estimated tax for oil                                                                    
     and gas produced before January  1, 2014; repealing the                                                                    
     oil  and  gas  production   tax  credit  for  qualified                                                                    
     capital  expenditures  and certain  well  expenditures;                                                                    
     repealing   the    calculation   for    certain   lease                                                                    
     expenditures applicable before  January 1, 2011; making                                                                    
     conforming amendments;  and providing for  an effective                                                                    
     date."                                                                                                                     
                                                                                                                                
Co-Chair Thompson  indicated that Commissioner  Hoffbeck and                                                                    
Mr. Alper would be providing  a 30 thousand foot overview of                                                                    
oil and gas tax credits.  The committee would not be hearing                                                                    
the bill  sectional in the  current meeting. There  would be                                                                    
an  overview of  issues that  generated the  legislation. He                                                                    
offered that there would be  several meetings on the bill at                                                                    
which time there would several  opportunities to discuss the                                                                    
bill and to ask questions at future meetings.                                                                                   
                                                                                                                                
10:36:38 AM                                                                                                                   
                                                                                                                                
RANDALL  HOFFBECK,  COMMISSIONER,   DEPARTMENT  OF  REVENUE,                                                                    
provided a  PowerPoint presentation titled "Oil  and Gas Tax                                                                    
Credit Reform: HB 247" dated  March 24, 2016 (copy on file).                                                                    
He began by providing a  couple of brief opening statements.                                                                    
He  opined  that  HB  247   was  a  critical  piece  of  the                                                                    
governor's  overall fiscal  plan  for the  current year  and                                                                    
into the  future. The administration  saw a  sustainable oil                                                                    
and  gas  tax credit  program  as  vital  for the  State  of                                                                    
Alaska. He pointed out that  the key word was "sustainable."                                                                    
The  plan would  have to  be sustainable  going forward.  He                                                                    
reported that  when the bill  was first introduced  in House                                                                    
Resources Committee  it was presented primarily  as a budget                                                                    
issue. The  House Resources Committee  found the bill  to be                                                                    
much more of an oil and gas tax policy issue.                                                                                   
                                                                                                                                
Commissioner Hoffbeck  reported that the hearing  focused on                                                                    
both budget  issues and oil  and gas tax policy  issues. The                                                                    
administration saw  that both needed  to be dealt  with. The                                                                    
state could not  offer any certainty to the  industry on the                                                                    
tax credit program if the credits  were paid at a level that                                                                    
the state could not sustain  or afford. He thought there had                                                                    
to be a balance between  the credits the industry desired or                                                                    
needed  and  what  the  state  was  capable  of  paying.  He                                                                    
mentioned  the overview  of the  preliminary spring  revenue                                                                    
forecast  presented   earlier  in   the  current   week.  He                                                                    
highlighted that  the department  was looking at  oil prices                                                                    
that were essentially range-bound  somewhere between $35 and                                                                    
$60 per  barrel. He  remarked that  if prices  dropped below                                                                    
$35 per  barrel drilling would essentially  cease. Oil would                                                                    
likely come off  the market and oil  prices would eventually                                                                    
rebound. If the  price of oil were to reach  much beyond $60                                                                    
per barrel a significant amount  of oil would hit the market                                                                    
causing  a   brief  spike.   Eventually  the   supply  would                                                                    
overwhelm  demand  causing  the  price  to  drop  again.  He                                                                    
suggested that  it was pretty  consistent with  the thinking                                                                    
across  the board  as  far as  what people  saw  in the  oil                                                                    
industry. In terms of talking  about a rebound and hoping to                                                                    
get $100 per  barrel it did not appear to  be in the future.                                                                    
He added that the state's  credit program was being paid out                                                                    
at a level more consistent with  $100 per barrel to $110 per                                                                    
barrel oil. The  governor felt that it was  a critical thing                                                                    
to  deal  with if  the  state  were  to  have some  kind  of                                                                    
certainty within  the oil and  gas tax credit  program. What                                                                    
he put forward in the bill  was to reduce the state's annual                                                                    
outlay. He wanted  to protect the net  operating loss credit                                                                    
program  within  the  bill  which  he  added  was  the  most                                                                    
critical  piece  of  the  credit program.  It  was  a  field                                                                    
leveler between  the legacy producers and  the newcomers. He                                                                    
furthered that the  state needed to have a way  to limit the                                                                    
amount of repurchases in any  given year in order to control                                                                    
the state's outlay.                                                                                                             
                                                                                                                                
10:40:30 AM                                                                                                                   
                                                                                                                                
Commissioner  Hoffbeck explained  that the  state needed  to                                                                    
strengthen  the minimum  tax because  in  the current  price                                                                    
environment  Alaska was  essentially a  4 percent  gross tax                                                                    
state. The  price of oil needed  to be above $80  per barrel                                                                    
before  that would  change. The  administration did  not see                                                                    
the price  increasing above $80  per barrel any time  in the                                                                    
future.  The  minimum  tax  really   became  "the"  tax.  He                                                                    
mentioned that  the administration sought  more transparency                                                                    
in   the  credit   program   to   facilitate  more   dynamic                                                                    
discussions. The credits were a  large outlay and he thought                                                                    
it  was important  for the  people of  Alaska to  know where                                                                    
their  money was  being spent  and what  returns were  being                                                                    
received.   Lastly,  due   to  the   repercussions  of   the                                                                    
governor's  veto  from  the previous  year,  the  department                                                                    
thought it  was very  important the state  had some  kind of                                                                    
visible  commitment  to  paying the  existing  credits.  The                                                                    
state  wanted  to avoid  any  uncertainty  in the  financial                                                                    
markets  that the  credits  that had  been  earned would  be                                                                    
paid. He  concluded that he  had highlighted  the underlying                                                                    
components of  the decision making  process in  crafting the                                                                    
legislation    currently   before    the   committee.    The                                                                    
administration  hoped  the  final  version  reflected  these                                                                    
components once it went through the legislative process.                                                                        
                                                                                                                                
KEN ALPER,  DIRECTOR, TAX  DIVISION, DEPARTMENT  OF REVENUE,                                                                    
introduced  the PowerPoint  presentation: "Oil  and Gas  Tax                                                                    
Credit Reform: CS  HB247 (RES)." He indicated  he would only                                                                    
be focusing  on the  highlights of the  bill in  the current                                                                    
meeting. He  hoped there  would be  additional opportunities                                                                    
to  delve into  the  deep  details of  the  bill in  another                                                                    
meeting.                                                                                                                        
                                                                                                                                
10:42:36 AM                                                                                                                   
                                                                                                                                
Mr.  Apler advanced  to slide  2:  "History of  Oil and  Gas                                                                    
Production Tax Credits":                                                                                                        
                                                                                                                                
     FY 2007 thru 2015, $7.4 Billion in Credits                                                                                 
     North Slope                                                                                                                
       · $4.3 billion credits against tax liability                                                                             
             · Major producers; mostly 20% capital credit                                                                       
               in ACES and per-taxable-barrel credit in                                                                         
               SB21                                                                                                             
        · $2.1 billion refunded credits                                                                                         
             · New producers and explorers developing new                                                                       
               fields                                                                                                           
     Non-North Slope (Cook Inlet & Middle Earth)                                                                                
       · $100 million credits against tax liability                                                                             
             · Another $500 to $800 million Cook Inlet tax                                                                      
               reductions (through 2013) due to the tax cap                                                                     
               still tied to ELF                                                                                                
        · $900 million refunded credits (most since 2013)                                                                       
                                                                                                                                
Mr. Alper explained that Alaska  had been in the business of                                                                    
paying  tax  credits by  statute  since  2007. In  the  time                                                                    
period  between FY  07 and  the end  of the  previous fiscal                                                                    
year  [2015] about  $7.4 billion  worth of  oil and  gas tax                                                                    
credits had  been paid or  paid through reduced  taxation by                                                                    
the State  of Alaska. The  largest share was from  the North                                                                    
Slope where the  bulk of the production and  value was, with                                                                    
the  majority   used  against  tax  liability,   about  $4.3                                                                    
billion. He explained that the  major producers were able to                                                                    
subtract certain  credits against their tax  payments before                                                                    
writing any  checks to the  state. Previously under  the era                                                                    
of  Alaska's  Clear  and  Equitable   Share  (ACES)  it  was                                                                    
primarily the  20 percent capital expenditure  credit. Since                                                                    
the  transition  to   SB  21  [Short  Title:   OIL  AND  GAS                                                                    
PRODUCTION TAX  - legislation  passed in  2013] it  had been                                                                    
the  per  taxable  barrel credit,  a  sliding  scale  credit                                                                    
between zero and $8 dollars.                                                                                                    
                                                                                                                                
Mr. Alper also pointed out a  very large number on the North                                                                    
slope  of $2.1  billion that  had been  refunded (the  state                                                                    
wrote checks  and the  legislature appropriated  money every                                                                    
year  to  repurchase  tax credits  primarily  going  to  new                                                                    
players in the  field - the new producers  and the explorers                                                                    
that were looking for and developing new oil).                                                                                  
                                                                                                                                
Mr.  Alper  continued  to the  non-North  Slope  area  which                                                                    
included  Cook Inlet  and  Middle  Earth (Interior  Alaska).                                                                    
There  was  no current  production  in  Interior Alaska  but                                                                    
there was  some exploration. However, the  number of players                                                                    
and the  numbers of  credits were too  small to  be released                                                                    
without  violating confidentiality  law which  accounted for                                                                    
lumping  all of  the non-North  Slope together.  He reported                                                                    
that only $100  million had been used  against tax liability                                                                    
because of less  work and because there  were statutory caps                                                                    
(maximum taxes  in the Cook  Inlet that were put  into place                                                                    
in  2006  as  part  of  the  PPT  bill).  There  was  not  a                                                                    
significant  amount of  tax liability  in  the first  place,                                                                    
therefore there was  not to offset. He  furthered that about                                                                    
$900 million through  the previous year had  been refunded -                                                                    
repurchased in tax credits in the previous several years.                                                                       
                                                                                                                                
10:45:00 AM                                                                                                                   
                                                                                                                                
Mr. Alper pointed  to the graph on slide 3:  "History of Oil                                                                    
and  Gas Production  Tax Credits:  Refunded  Tax Credits  by                                                                    
Region." He explained  that the most obvious  feature in the                                                                    
graph was the growing red  wedge representing the Cook Inlet                                                                    
and other  non-North Slope areas.  It used to  be relatively                                                                    
small but  had started  growing in  2012 or  2013. It  was a                                                                    
response to  the additional  work that  had been  done since                                                                    
the  passage of  the  Cook Inlet  Recovery  Act and  related                                                                    
legislation in 2010. He reported  a large ramping up of work                                                                    
some  of which  resulted  in resolving  some  of the  supply                                                                    
uncertainty  that  South  central was  experiencing  at  the                                                                    
time. It  had grown to where,  of the money the  state spent                                                                    
in the previous year, over  60 percent was outside the North                                                                    
Slope  in terms  of refundable  tax credits.  The state  was                                                                    
seeing similar numbers were seen for FY 16.                                                                                     
                                                                                                                                
Mr. Alper  turned to slide  4: "Forecast of O&G  Revenue and                                                                    
Tax Credits." He explained that  the first of the three bars                                                                    
was  all  unrestricted oil  and  gas  revenue prior  to  any                                                                    
credits.  The   number  was  theoretical.  The   middle  bar                                                                    
represented in dark  green was the actual  money received by                                                                    
the  state, the  difference between  the two  was the  money                                                                    
taken  as  credits  against  tax   liability.  The  red  bar                                                                    
reflected  the  revenue   after  subtracting  the  repayment                                                                    
checks for tax  credits. Suddenly in FY 15  the oil revenue,                                                                    
which  had  decreased  from   $2.3  billion  before  credits                                                                    
against  liability  to $1.7  billion,  was  only about  $1.0                                                                    
billion. He was only talking  about unrestricted oil and gas                                                                    
revenues  which included  royalties,  corporate income  tax,                                                                    
property tax, and  the production tax. He  thought the graph                                                                    
made it look like FY 15 was  a good year and did not reflect                                                                    
back  far enough.  If a  person were  to look  at FY  12 the                                                                    
state  had about  $8  billion  to $9  billion  worth of  oil                                                                    
revenue. The  reduction was a  major shift  of consciousness                                                                    
for  the  state  forming  a budget,  while  switching  to  a                                                                    
climate of  structural deficits.  Going down  from FY  15 to                                                                    
the present things  were getting even worse,  likely tied to                                                                    
the further reduction in the price  of oil and the growth in                                                                    
the  tax credit  program. The  forecasted tax  credit number                                                                    
for FY 17  was about $825 million. He reported  that for the                                                                    
first time  the amount was a  larger number than all  of the                                                                    
state's  unrestricted oil  and gas  tax revenues.  The state                                                                    
would be functionally  negative on oil and gas in  FY 17 for                                                                    
the first time ever.                                                                                                            
                                                                                                                                
10:48:10 AM                                                                                                                   
                                                                                                                                
Mr.  Alper  advanced  to  slide 5:  "Work  Done  Since  Last                                                                    
Session":                                                                                                                       
                                                                                                                                
        · Governor's line-item veto capped FY16 spending at                                                                     
          $500 million                                                                                                          
             · Temporary liquidity crisis; many meetings                                                                        
               with industry and others to help reassure                                                                        
               lenders                                                                                                          
        · Multiple presentations with history, current                                                                          
          practice, and possible changes                                                                                        
            · Joint Resources in Kenai, June 17                                                                                 
             · Three "regional" presentations to Senate                                                                         
               Working Group September through November                                                                         
             · All presentations on BASIS; we're prepared                                                                       
               to go through similar information for the                                                                        
               committee                                                                                                        
        · Development of reform legislation including plan                                                                      
          for transition from current system                                                                                    
                                                                                                                                
Mr. Alper explained that the  results of the governor's line                                                                    
item veto limiting spending to  $500 million helped to cover                                                                    
everything that was  in the cue at the  time. The governor's                                                                    
primary mission  was to start  a conversation. He  was aware                                                                    
that  it was  a big  issue  that needed  addressing. He  did                                                                    
something dramatic in  order to put a process  in place that                                                                    
lead to  legislation in  the 2016  session. He  relayed that                                                                    
the administration was  taken by surprise by  the degree the                                                                    
industry  reacted, stopping  lending  because of  a fear  of                                                                    
even  greater cutbacks  and spending  in  future years.  The                                                                    
commissioner  of  DOR  and  other   senior  members  of  the                                                                    
administration had  met with industry assuring  repayment of                                                                    
the  state's   obligations.  He  stated  that   there  could                                                                    
possibly  be slight  delays  during  the transition  period.                                                                    
However, the state  was working towards a  system that would                                                                    
keep everyone  whole. Any changes  to the statutes  would be                                                                    
forward looking  rather than  retroactive. He  mentioned the                                                                    
liquidity  crisis  being  resolved. Loans  were  being  made                                                                    
again  and   everyone  was   going  about   their  business.                                                                    
Meanwhile, through  the previous interim there  were several                                                                    
meetings  and  presentations.  The  first one  was  a  Joint                                                                    
Resources Meeting in  Kenai in June where  the Department of                                                                    
Revenue  made  a  major presentation.  Senator  Giessel  put                                                                    
together  a  working  group  of   Senators  and  members  of                                                                    
industry.  The  group  had  a  series  of  hearings  in  the                                                                    
previous fall  providing very detailed presentations  on the                                                                    
credit structure on the North  Slope, Cook Inlet, and in the                                                                    
middle earth area.  Each of the presentations  were on BASIS                                                                    
through the  Senate tax credit working  group. He encouraged                                                                    
members of  the committee  to review  them. He  relayed that                                                                    
they could  be brought  before the  committee as  well. They                                                                    
provided a  significant amount of detail.  He furthered that                                                                    
out of the hearings  and discussions with the administration                                                                    
a reform  package in the  form of legislation  that included                                                                    
the plan  for transition from  the current system  to ensure                                                                    
enough money  would be  available to  keep the  system whole                                                                    
through that  time. The legislation  had been  introduced at                                                                    
the  beginning  of session  as  HB  247 (Short  Title:  TAX;                                                                    
CREDITS; INTEREST; REFUNDS; O & G).                                                                                             
                                                                                                                                
10:50:37 AM                                                                                                                   
                                                                                                                                
Mr. Alper moved on to slide 6: "Major Bill Themes":                                                                             
                                                                                                                                
        1. Reduce the state's annual cash outlay                                                                                
        2. Protect Net Operating Loss credits as a playing                                                                      
          field leveler between legacy producers and                                                                            
          newcomers                                                                                                             
        3. Limit repurchases                                                                                                    
        4. Strengthen the minimum tax                                                                                           
        5. Be more open and transparent                                                                                         
        6. Honor and pay credits earned to date and through                                                                     
          any transition period                                                                                                 
                                                                                                                                
Mr.   Alper  indicated   that   the   slide  reflected   the                                                                    
commissioner's  introduction which  outlined the  themes the                                                                    
governor  hoped to  accomplish through  a tax  credit reform                                                                    
package. He read the list.                                                                                                      
                                                                                                                                
10:51:06 AM                                                                                                                   
                                                                                                                                
Mr.  Alper  turned  to  slide 7:  "Major  Bill  Concepts  in                                                                    
Governor's Proposal":                                                                                                           
                                                                                                                                
       1. Exploration Credits- sunset and transition                                                                            
        2. Cook Inlet Drilling Credits- phase out while                                                                         
          retaining operating loss credits                                                                                      
        3. Repurchase Limits- limit cash outlay                                                                                 
        4. Remove Exceptions / Loopholes                                                                                        
        5. Strengthen Minimum Tax- prevent certain credits                                                                      
          from going below the floor, plus increase to 5%                                                                       
        6. Other Provisions- technical cleanup,                                                                                 
          transparency, interest rate reform                                                                                    
                                                                                                                                
Mr. Alper explained that the  slide went into greater detail                                                                    
of the  concepts that  were in  HB 247.  He would  not drill                                                                    
down into  the details in  the current hearing.  There would                                                                    
be time to  discuss them in other hearings.  He reviewed the                                                                    
list.  He explained  that many  of  the exploration  credits                                                                    
were nearing  sunset. The intent  would be to allow  them to                                                                    
sunset   and  transition   away  from   direct  support   of                                                                    
exploration.  The  Cook  Inlet drilling  credits  were  very                                                                    
large  and were  created to  resolve the  Cook Inlet  supply                                                                    
crisis.  The  proposal  included  phasing  those  out  while                                                                    
retaining  the operating  loss  credits.  The proposal  also                                                                    
included  placing   some  sort  of  caps   on  the  physical                                                                    
repurchases,  specifically  dollar  values per  company.  He                                                                    
furthered  that  there  were  a  number  of  exceptions  and                                                                    
loopholes in  the statutes  that became  apparent in  a low-                                                                    
price environment that needed to be cleaned up.                                                                                 
                                                                                                                                
Mr.   Alper    continued   that   the    proposal   included                                                                    
strengthening the  minimum tax.  However, it  was discovered                                                                    
that, although the 4 percent  floor governed tax payments by                                                                    
the major  producers, as the  state got  into a period  of a                                                                    
sustained low  prices there  were other  circumstances where                                                                    
tax payments could  go below the 4 percent  number. The most                                                                    
prominent one  began in  January 2016:  If a  major producer                                                                    
had an  operating loss they  could use their  operating loss                                                                    
credits to  reduce their  payments below  the floor  all the                                                                    
way to zero.  The legislation was looking  to strengthen the                                                                    
minimum  tax and  to bump  up the  minimum tax  rate from  4                                                                    
percent to  5 percent. He  relayed that there were  a number                                                                    
of other  provisions in the legislation  including technical                                                                    
cleanup of  existing law, the  concept of  transparency, and                                                                    
reform to the interest  rate structure for delinquent taxes.                                                                    
He concluded that he had presented the guts of the bill.                                                                        
                                                                                                                                
Mr.  Alper   scrolled  to  slide   8:  "Content   of  Future                                                                    
Presentations":                                                                                                                 
                                                                                                                                
        · We provided five different presentations to the                                                                       
          prior committee; all are on BASIS                                                                                     
        · History and development of our credit system                                                                          
       · History and application of the minimum tax                                                                             
        · Various credits and how they have been used,                                                                          
          which ones haven't been, and what is sun setting                                                                      
        · Detailed forecasts and scenario analysis                                                                              
       · Details and modeling of specific provisions                                                                            
        · Explanation of changes made in prior committee                                                                        
        · Life cycle modeling of typical new projects, with                                                                     
          impact of legislation                                                                                                 
                                                                                                                                
Mr. Alper  mentioned that the House  Resources Committee had                                                                    
met 24 times on the subject of HB  247 over a period of 6 to                                                                    
7 weeks.  The Department  of Revenue provided  the committee                                                                    
with  five   different  presentations  all  of   which  were                                                                    
available   on  BASIS.   He  wanted   to  be   working  with                                                                    
legislators   and  staff   to   determine  the   appropriate                                                                    
information  and the  order in  which it  should be  brought                                                                    
before  the  House Finance  Committee.  Some  of the  larger                                                                    
concepts in the previous  presentations included the history                                                                    
and development of Alaska's credit  system going back to the                                                                    
early 2000's,  how the  minimum tax  evolved over  the years                                                                    
going back  to the 1970's  during the Economic  Limit Factor                                                                    
(ELF) era, how  the various credits worked,  how the credits                                                                    
had  been used,  which  credits were  never  used, and  what                                                                    
credits  would sunset.  Additional content  included looking                                                                    
at  scenario  analysis  and what  might  happen  if  certain                                                                    
changes  were  made.  He  elaborated that  DOR  had  done  a                                                                    
significant  amount   of  modeling  of  specific   and  more                                                                    
mathematically complicated  provisions of the bill.  He also                                                                    
informed committee  members that  he would be  reviewing the                                                                    
changes  made by  the House  Resource  Committee which  were                                                                    
reflected in the  committee substitute and how  the bill had                                                                    
evolved.                                                                                                                        
                                                                                                                                
Mr.  Alper  reported that  DOR  had  developed a  new  model                                                                    
called  a  "Life  Cycle" model  that  looked  at  individual                                                                    
fields. He cited the example of  a new player coming to town                                                                    
wanting  to  develop  a  50 million  barrel  field  with  an                                                                    
assumption  for capital  spending, a  certain timing,  and a                                                                    
certain  set of  credits. He  wondered if  the state's  cash                                                                    
flow could  be determined.  He was  interested to  know what                                                                    
the  state's cash  flow would  look like  and what  the cash                                                                    
flow of  the producers  would look like.  He also  wanted to                                                                    
know how the  changes in the current  legislation affect the                                                                    
profitability and the state's  cash flow. The department was                                                                    
capable of  generating new scenarios  at the request  of the                                                                    
committee.                                                                                                                      
                                                                                                                                
Mr.  Alper  concluded  his  presentation  and  made  himself                                                                    
available for questions.                                                                                                        
                                                                                                                                
HB  247  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair  Thompson   indicated  the  committee   would  have                                                                    
several  additional  meetings  in  order  to  dig  into  the                                                                    
details  of  the  bill.  He  reviewed  the  agenda  for  the                                                                    
afternoon.