Legislature(2007 - 2008)BARNES 124
05/02/2007 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB121 | |
| HB128 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 15 | TELECONFERENCED | |
| + | SB 121 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 128 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
May 2, 2007
1:11 p.m.
MEMBERS PRESENT
Representative Carl Gatto, Co-Chair
Representative Craig Johnson, Co-Chair
Representative Bob Roses
Representative Paul Seaton
Representative Peggy Wilson
Representative Bryce Edgmon
Representative David Guttenberg
Representative Scott Kawasaki
MEMBERS ABSENT
Representative Vic Kohring
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 121(L&C)
"An Act relating to discharge from small commercial passenger
vessels; relating to information-gathering requirements for
small commercial passenger vessels; providing for an effective
date by repealing the delayed effective date found in sec. 16,
ch. 153, SLA 2004; and providing for an effective date."
- MOVED CSSB 121(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 128
"An Act relating to allowable lease expenditures for the purpose
of determining the production tax value of oil and gas for the
purposes of the oil and gas production tax; and providing for an
effective date."
- FAILED TO MOVE OUT OF COMMITTEE
HOUSE BILL NO. 15
"An Act relating to participation in matters before the Board of
Fisheries by members of the board; and providing for an
effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 121
SHORT TITLE: CRUISE SHIP DISCHARGE & INFO
SPONSOR(s): SENATOR(s) SENATOR ELTON
03/14/07 (S) READ THE FIRST TIME - REFERRALS
03/14/07 (S) L&C
03/20/07 (S) L&C AT 1:30 PM BELTZ 211
03/20/07 (S) Heard & Held
03/20/07 (S) MINUTE(L&C)
03/22/07 (S) L&C AT 1:30 PM BELTZ 211
03/22/07 (S) Moved CSSB 121(L&C) Out of Committee
03/22/07 (S) MINUTE(L&C)
03/23/07 (S) L&C RPT CS 2DP 3NR NEW TITLE
03/23/07 (S) DP: ELLIS, DAVIS
03/23/07 (S) NR: BUNDE, STEVENS, HOFFMAN
04/04/07 (S) TRANSMITTED TO (H)
04/04/07 (S) VERSION: CSSB 121(L&C)
04/05/07 (H) READ THE FIRST TIME - REFERRALS
04/05/07 (H) RES, JUD
05/02/07 (H) RES AT 1:00 PM BARNES 124
BILL: HB 128
SHORT TITLE: OIL & GAS PRODUCTION TAX: EXPENDITURES
SPONSOR(s): REPRESENTATIVE(s) OLSON
02/12/07 (H) READ THE FIRST TIME - REFERRALS
02/12/07 (H) O&G, RES, FIN
02/22/07 (H) O&G AT 3:00 PM CAPITOL 124
02/22/07 (H) Heard & Held
02/22/07 (H) MINUTE(O&G)
03/01/07 (H) O&G AT 3:00 PM CAPITOL 124
03/01/07 (H) Moved CSHB 128(O&G) Out of Committee
03/01/07 (H) MINUTE(O&G)
03/05/07 (H) O&G RPT CS(O&G) 3DP 1NR
03/05/07 (H) DP: DOOGAN, RAMRAS, OLSON
03/05/07 (H) NR: SAMUELS
03/19/07 (H) RES AT 1:00 PM BARNES 124
03/19/07 (H) Heard & Held
03/19/07 (H) MINUTE(RES)
03/21/07 (H) RES AT 1:00 PM BARNES 124
03/21/07 (H) Heard & Held
03/21/07 (H) MINUTE(RES)
03/23/07 (H) RES AT 1:00 PM BARNES 124
03/23/07 (H) Heard & Held
03/23/07 (H) MINUTE(RES)
03/26/07 (H) RES AT 1:00 PM BARNES 124
03/26/07 (H) -- MEETING CANCELED --
03/28/07 (H) RES AT 1:00 PM BARNES 124
03/28/07 (H) Heard & Held; Assigned to Subcommittee
03/28/07 (H) MINUTE(RES)
05/01/07 (H) RES AT 9:00 AM BARNES 124
05/01/07 (H) Subcommittee Meeting
05/02/07 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
SENATOR KIM ELTON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 121, as the sponsor.
BRYCE BROCKWAY, Vice President of Operations
Cruise West
Seattle, Washington
POSITION STATEMENT: During testimony on SB 121, answered
questions and supported SB 121.
MICHAEL JONES, Director of Marine Operations
Lindblad Expeditions
New York, New York
POSITION STATEMENT: During testimony on SB 121, answered
questions and supported SB 121.
LYNN TOMICH KENT, Director
Division of Water
Department of Environmental Conservation (DEC)
Juneau, Alaska
POSITION STATEMENT: During discussion of SB 121, responded to
questions and provided comments.
REPRESENTATIVE KURT OLSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered a statement as the sponsor of HB
128.
KONRAD JACKSON, Staff
to Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 128, responded to
questions on behalf of the bill sponsor, Representative Olson.
JONATHAN IVERSEN, Director
Anchorage Office
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 128, responded to
questions and provided comments.
KEVIN BANKS, Acting Director
Central Office
Division of Oil & Gas
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 128, responded to
questions and provided comments.
ACTION NARRATIVE
CO-CHAIR CARL GATTO called the House Resources Standing
Committee meeting to order at 1:11:06 PM. Representatives
Gatto, Johnson, Seaton, Roses, Guttenberg, Edgmon, and Kawasaki
were present at the call to order. Representative Wilson
arrived as the meeting was in progress.
SB 121-CRUISE SHIP DISCHARGE & INFO
1:11:19 PM
CO-CHAIR GATTO announced that the first order of business would
be CS FOR SENATE BILL NO. 121(L&C), "An Act relating to
discharge from small commercial passenger vessels; relating to
information-gathering requirements for small commercial
passenger vessels; providing for an effective date by repealing
the delayed effective date found in sec. 16, ch. 153, SLA 2004;
and providing for an effective date."
1:11:47 PM
SENATOR KIM ELTON, Alaska State Legislature, said that SB 121
restores the alternate compliance discharge protocols that were
passed unanimously by the House and the Senate with HB 522, in
2004. He explained that this is the alternate compliance for
small cruise ships because the smaller size of the ships
precludes the same protocols as the larger cruise ships. The
cruise ship ballot initiative inadvertently repealed the section
that had been changed by HB 522. He emphasized that this is not
the fault of the initiative sponsors.
1:13:35 PM
CO-CHAIR GATTO asked for a definition of cruise ships.
SENATOR ELTON clarified that the definition in the bill is for
small cruise ships. He added that the sponsors of the cruise
ship ballot initiative support this bill. He noted that, as in
HB 522, the provisions for the alternative compliance protocols
for small cruise ships will be repealed on January 1, 2016, with
the assumption that technology will have improved.
CO-CHAIR GATTO noted that the members' packets include a letter
in support of SB 121 from Joseph Geldhof, co-sponsor of the
cruise ship ballot initiative, dated March 16, 2007.
1:15:40 PM
BRYCE BROCKWAY, Vice President of Operations, Cruise West,
explained that Cruise West is a small, family owned cruise ship
operator, founded by an Alaskan. He expressed his belief that
Department of Environmental Conservation (DEC) supports this
bill and the best management practices of Cruise West.
CO-CHAIR GATTO noted that the Cruise West ship capacity is 78-
138 passengers and he asked if there is a defined limit for the
small ship category.
MR. BROCKWAY offered his belief that a small cruise ship is
defined as up to 249 passengers on board.
1:17:22 PM
MICHAEL JONES, Director of Marine Operations, Lindblad
Expeditions, reported that Lindblad Expeditions has been
operating two small 62 passenger vessels in Southeast Alaska
since 1989. He expressed his support for SB 121.
CO-CHAIR GATTO asked about the disposal system for the
accumulated waste water on board the ship.
MR. JONES explained that the ships have blackwater tanks and
graywater tanks and that each is treated by a Coast Guard
approved marine sanitation device.
CO-CHAIR GATTO asked if the ship passengers disembark while in
port.
MR. JONES replied that passengers are offered tours in Sitka,
Juneau, and Petersburg.
1:19:34 PM
CO-CHAIR GATTO asked if the graywater is discharged at a
dockside facility or at sea.
MR. JONES responded that the graywater is discharged at sea per
the DEC approved best management practices.
CO-CHAIR GATTO asked for a description of the blackwater
treatment.
MR. JONES explained that the system is manufactured by Omnipure,
an electronic cell that includes treatment with chlorine. The
system includes pumps, settling systems, and oxidization so that
the blackwater can be discharged after treatment.
CO-CHAIR GATTO asked if the discharge contains chlorine.
MR. JONES responded that the dechlorination system removes
chlorine to the acceptable standards.
1:21:12 PM
LYNN TOMICH KENT, Director, Division of Water, Department of
Environmental Conservation (DEC), clarified that the DEC has not
taken a formal position on SB 121.
CO-CHAIR GATTO asked if the DEC has looked at the bill.
MS. KENT replied that SB 121 does exactly as the sponsor states
which is to reinstate provisions that the Legislature has
passed.
SENATOR ELTON, in response to an earlier question, clarified
that small cruise ships are defined as having overnight
accommodations for 249 or fewer passengers.
1:22:25 PM
REPRESENTATIVE SEATON asked Ms. Kent to clarify that page 2,
line 2, refers only to the discharge of domestic wastewater.
MS. KENT explained that this includes other wastewater
discharges from commercial passenger vessels.
REPRESENTATIVE SEATON asked for a definition of "other
wastewater."
MS. KENT replied that other wastewater includes ballast and
bilge water. She reported that a permit is required for the
wastewater discharge, but this permit requirement only pertains
to the large commercial passenger vessels.
REPRESENTATIVE SEATON said he is trying to get a better
understanding for the breadth of the wastewater that this bill
will allow a small vessel to discharge.
MS. KENT requested the opportunity to review the bill.
1:24:59 PM
SENATOR ELTON explained that Section 2 references existing law,
and this bill is not changing existing law. He noted that there
are current definitions for graywater and other wastewater in
statute.
REPRESENTATIVE SEATON said that he is asking for assurance from
DEC that, as SB 121 is going to exempt small commercial
passenger vessels from the current regulations, the alternative
regulations don't allow the management of oily bilge water and
domestic wastewater in the same way.
1:26:17 PM
REPRESENTATIVE EDGMON noted that page 2, line 2, refers to "into
the marine waters" and he commented that another bill refers to
"waters of the United States." He asked if there is any
difference.
SENATOR ELTON replied that a change in wording is possible, but
as these vessels only operate in marine waters, a change may not
be necessary.
CHAIR GATTO asked if the commercial passenger vessels ever go
into fresh water.
SENATOR ELTON responded that this question is best answered by a
ship captain, though he allowed that the small passenger vessels
will go into estuaries.
1:28:47 PM
MS. KENT, in response to Representative Seaton, said that she is
not able to determine whether the best management practices plan
that is currently in place covers [discharge] other than
domestic wastewater discharge from the vessels. She explained
that Section 3 reinstates the same conditions that were
inadvertently repealed by the cruise ship ballot initiative.
REPRESENTATIVE SEATON replied that this answers his earlier
question.
1:29:27 PM
CO-CHAIR GATTO closed public testimony.
CO-CHAIR JOHNSON voiced his concern with making changes to
initiatives. He expressed his desire for the consistency to
either allow or disallow changes to initiatives, but not to
respond to every whim for an issue. He stated that legislators
make important policy decisions on the best course of action for
the state, and he requested the same respect from initiative
writers to not just amend statutes for their own needs. He
commented that the committee process of hearing and vetting is
not available for initiatives. He encouraged future initiative
writers to "get it right."
1:31:47 PM
CO-CHAIR GATTO noted that [HB 522} previously passed both the
House and the Senate unanimously.
REPRESENTATIVE KAWASAKI pointed out that the memorandum from
Alpheus Bullard, Division of Legal and Research Services, dated
March 26, 2007, affirms that CSSB 121 is constitutional.
1:32:20 PM
CO-CHAIR JOHNSON expressed his belief that although the legal
opinions on initiatives allow an entitlement for change, it does
not always make it acceptable.
REPRESENTATIVE ROSES stated that he supports this bill, but he
voiced his concern that "people seem to pick and choose when
they want to break away from an initiative and when they don't."
1:34:07 PM
REPRESENTATIVE GUTTENBERG said, as a sponsor of three
initiatives, that amending initiatives is taken very seriously.
He stated his concern that amendments can mask revisions. He
explained that he reviews an initiative amendment to ensure that
the spirit of the original initiative is retained. He noted
that this is the first time he has seen the need for a change
that is truly beyond the scope of predication. He expressed his
belief that the Alaska State Constitution provides for
initiative amendments similar to SB 121.
REPRESENTATIVE SEATON moved to report CSSB 121(L&C) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 121(L&C) was
reported from the House Resources Standing Committee.
HB 128-OIL & GAS PRODUCTION TAX: EXPENDITURES
1:37:14 PM
CO-CHAIR GATTO announced that the next order of business would
be HOUSE BILL NO. 128, "An Act relating to allowable lease
expenditures for the purpose of determining the production tax
value of oil and gas for the purposes of the oil and gas
production tax; and providing for an effective date." [Before
the committee was CSHB 128(O&G), as amended at the March 23,
2007, hearing.]
CO-CHAIR GATTO explained that HB 128 is now back from the
subcommittee. He stated that the bill has had more than six
hours of discussion before the committee, so it is as vetted as
can be expected. He said that there are some amendments to be
introduced.
1:38:12 PM
REPRESENTATIVE KURT OLSON, Alaska State Legislature, said that
the bill addresses who should pay for bad maintenance, the
citizens of Alaska or the responsible party. He said that every
day there is more information about the flaws in British
Petroleum's North Slope [maintenance] program. He said that he
is not proud of this bill, but that he believes in it.
REPRESENTATIVE OLSON said that support of HB 128 makes the
statement that proper maintenance is rewarded and that improper
maintenance is not. He urged support for HB 128, and he
deferred questions to his aide, Konrad Jackson.
1:39:57 PM
KONRAD JACKSON, Staff to Representative Kurt Olson, Alaska State
Legislature, offered to explain the three amendments that he is
going to introduce.
CO-CHAIR GATTO asked to first discuss a news release and an e-
mail.
1:40:27 PM
CO-CHAIR GATTO read the e-mail from John Todd, dated 6/4/99:
Due to budgetary constraints, the decision has been
made to discontinue the PW inhibitor (EC 1081A)
currently being injected at GC 2 and GC 3.
CO-CHAIR GATTO said that he assumes GC to mean Gathering Center.
He then read from a letter by U.S. Representative John Dingell,
Chairman of the House Committee on Energy and Commerce, dated
May 2, 2007:
We know that BP proceeded with cost cutting measures
that may have compromised pipeline safety while
earning $22 billion in profits, but what we don't know
is why.
These documents appear to show a severe cost cutting
environment with respect to corrosion mitigation in
the Prudhoe Bay field.
CO-CHAIR GATTO said that he wants this on the record as
documents that he has received.
1:42:17 PM
MR. JACKSON replied that Senator Wagoner distributed the e-mail
to the Senate Resources Standing Committee on April 20, 2007 and
that the letter was distributed earlier today [May 2, 2007],
also by Senator Wagoner.
1:42:55 PM
CO-CHAIR GATTO clarified that the letter from U.S.
Representative Dingell was released today and he asked the
committee if they had any comments on the documents.
REPRESENTATIVE ROSES said that this e-mail indicates there is
proof of negligence. He emphasized that he does not support
retroactively changing language to address negligence. He will
support the bill if it is written to be effective from this day
forward.
1:45:15 PM
JONATHAN IVERSEN, Director, Anchorage Office, Tax Division,
Department of Revenue (DOR), said that the retroactivity is fine
from a taxation standpoint. He stated that the Petroleum
Systems Integrity Office (PSIO) will be a good guide for
determining a definition for proper maintenance. He stated that
the amendments passed today will provide different tools and
organizations to use and look at for their standards, in order
to get a better understanding of retroactivity.
1:47:01 PM
REPRESENTATIVE ROSES asked for clarification that by including
the retroactivity section, this will make it easier to define
negligence in the past or in the future.
MR. IVERSEN explained that the future benefit will be review of
the standards set up by the PSIO. He said that looking backward
must rely on other guidelines and standards, which may not be as
clear.
1:47:44 PM
CO-CHAIR GATTO expressed his belief that this is a one-time bill
to address a past issue. He allowed that the PSIO will address
future issues.
MR. IVERSEN replied that this is not a one-time bill, it is a
law of general application that will have future impact. In the
future, there is the benefit of the PSIO determining the
maintenance plans.
1:48:29 PM
REPRESENTATIVE SEATON opined that the PSIO will establish a set
of regulations.
MR. IVERSEN agreed.
1:48:47 PM
REPRESENTATIVE SEATON remarked that the PSIO will develop a
series of regulations. He offered his understanding that during
an audit a large expenditure will flag possible improper
maintenance. He asked how a large expenditure that has not
violated any regulations will be treated if it appears that
there is improper maintenance.
MR. IVERSEN said that the audit process is going to be the
primary means of recognition. He allowed that the news systems
will also be a means of monitoring possible infractions. He
said that it is necessary to be able to ask the right questions
to determine upstream costs. He said that DOR will review the
claims and consult with Department of Natural Resources (DNR),
to determine the proper questions to ask. He noted that DNR
will decide whether something is a good oil field practice.
1:51:49 PM
REPRESENTATIVE SEATON posed that DOR has the statutory authority
to challenge any expense that is deemed to be improper
maintenance.
MR. IVERSEN explained that this is not just a matter of looking
at a large cost, but it is the context of that cost. He stated
that DOR does not have the personnel to investigate every cost
in an audit, so it will be the auditor's discretion to determine
what is not in compliance.
1:53:57 PM
REPRESENTATIVE SEATON asked how DOR will be able to determine
whether a cost in the field is due to improper maintenance. He
cited earlier testimony stating that the cost amount will be a
main criterion.
MR. IVERSEN agreed. He explained that all 19 items in Section 1
of the bill will be reviewed. He allowed that gross negligence
will be reviewed even though it is not a specific item. He said
that litigation may reveal improper maintenance or gross
negligence that is not revealed in an audit.
1:56:23 PM
REPRESENTATIVE SEATON asked how improper maintenance, which may
not be simple or gross negligence, will be treated under the
bill.
MR. IVERSEN stated that an issue will be noted for later review
during the audit cycle and then DNR will determine if it is
improperly maintained.
1:57:46 PM
REPRESENTATIVE ROSES asked when the PSIO regulations will be
available.
MR. IVERSEN responded that is best be answered by DNR.
1:58:23 PM
KEVIN BANKS, Acting Director, Central Office, Division of Oil &
Gas, Department of Natural Resources (DNR), said that the PSIO
will be working on the regulations and coordinating this with
other participating agencies, including Department of
Environmental Conservation (DEC) and Alaska Oil and Gas
Conservation Commission (AOGCC). He related that much of the
PSIO authority will originate with the [oil] lease contract, and
he expressed that the challenge will be to define in statute the
regulations which originate in the lease contract, yet not
impair the contract.
2:00:11 PM
REPRESENTATIVE SEATON asked about the procedure should someone
violate the PSIO regulations.
MR. BANKS said that the regulations governing the PSIO will
focus on systems integrity, and the physical maintenance of
records related to company plans for quality assurance. He
explained that DNR will focus on violations of regulations or
maintenance per the lease contract. He mentioned that DOR will
focus on the question of deductibility. He reported that if DOR
is concerned that costs have been deducted with relation to a
failure of maintenance, they will consult with DNR and PSIO, who
will go to the records and opine whether it was improper
maintenance.
2:02:28 PM
REPRESENTATIVE SEATON asked to clarify that a company can be
following the regulations for pipeline integrity and can still
fall under the improper maintenance category.
MR. BANKS replied that if an operator meets the rules and
demonstrates that they have met the quality assurance
regulations, then this is evidence of proper maintenance. If
this is the case, DNR will tell DOR that the cost is deductible.
2:04:00 PM
REPRESENTATIVE SEATON asked if it is willful misconduct when a
company does not follow the regulations.
MR. BANKS responded that this is a legal question.
2:05:23 PM
REPRESENTATIVE SEATON moved to adopt Amendment 1, which read
[original punctuation provided]:
Page 3, lines 21-22:
Delete "Alaska Oil and Gas Conservation
Commission"
Insert "person in the Department of Natural
Resources who is the lead person for exercising
oversight over the maintenance of oil and gas
facilities, equipment, and infrastructure in the
state"
CO-CHAIR JOHNSON objected.
2:05:39 PM
REPRESENTATIVE SEATON said that this amendment is to ensure the
right people are in the discussion.
The committee took an at-ease from 2:05:55 PM to 2:17:25 PM.
2:17:26 PM
CO-CHAIR JOHNSON asked for the sponsor to explain Amendment 1.
MR. JACKSON explained that this same amendment was added to SB
80 (the Senate Version of HB 128). He said that Amendment 1
will include the PSIO coordinator in the consultation group.
MR. JACKSON relayed that an e-mail from John Norman, Chairman of
AOGCC, dated April 25, 2007, stating support for the amendment
is in the members' packets. He mentioned that Administrative
Order 234 to authorize the PSIO is also included.
CO-CHAIR JOHNSON withdrew his objection.
There being no objection, Amendment 1 was adopted.
2:19:09 PM
REPRESENTATIVE SEATON moved to adopt Conceptual Amendment 2,
which read [original punctuation provided]:
Add a new paragraph (4) to AS 43.55.165(j):
(4) "improper maintenance" is defined as any
maintenance that is not consistent with good oil field
practice.
Add a new paragraph (5) to AS 43.55.165(j):
(5) "good oil field practice" is defined as a
practice that is generally accepted to be good, safe
and efficient in carrying out oil field operations,
including, but is not limited to, the design,
construction, testing, operating, and maintaining of
production, processing and transportation facilities
and equipment, consistent with standards such as the
American Petroleum Institute (API) or American Society
for Testing and Materials (ASTM), federal regulations,
maintenance programs consistent with the program
requirements set forth by the person in the Department
of Natural Resources who is the lead person for
exercising oversight over the maintenance of oil and
gas facilities, equipment, and infrastructure in the
state, or other applicable standards for the
production, processing and transportation of oil, gas,
produced water, and other fluids.
CO-CHAIR JOHNSON objected.
2:19:21 PM
REPRESENTATIVE SEATON asked to clarify that as design,
construction, testing, and operating are included in the
definition of "good oil field practice", are these also included
in the definition of "improper maintenance."
MR. JACKSON explained that Conceptual Amendment 2 is cobbled
together from a variety of sources, and that Legislative Legal
and Research Services has not yet reviewed it. He suggested
that "design" might not be included in the definition of
"improper maintenance" and that some other terms may need to be
added.
2:21:13 PM
REPRESENTATIVE SEATON moved to adopt Amendment 1 to Conceptual
Amendment 2, as follows:
Line 8:
Delete ",but is not limited to, the design,
construction, testing, operating, and"
MR. JACKSON expressed his concern with eliminating the words
"but is not limited to". He recommended that the definition
should not be so focused to exclude any new advances.
2:22:34 PM
CO-CHAIR GATTO relayed that Mr. Bullock from Legislative Legal
and Research Services has previously stated that "but is not
limited to" is not necessary.
REPRESENTATIVE WILSON expressed her belief that "testing" and
"operating" should remain in Amendment 2.
2:23:29 PM
REPRESENTATIVE SEATON asked if "maintenance" is expanded to now
include operations of the pipeline, or if "maintenance" means
maintaining production, processing and transportation facilities
and equipment.
MR. JACKSON responded that the only reason "operating" is
included in the definition is that part of the operation would
be the testing, or pigging, of the line.
2:24:30 PM
CO-CHAIR GATTO asked where the definition derived from.
MR. JACKSON described the definition as an attempt to be
reasonably broad and include a reference to the PSIO.
CO-CHAIR GATTO asked if Mr. Jackson drafted Amendment 2.
MR. JACKSON said that he did.
2:25:13 PM
REPRESENTATIVE GUTTENBERG said that he supports maintaining "not
limited to" as this will cover aspects that the PSIO might not
cover in the earlier referenced analysis.
CO-CHAIR GATTO objected to Amendment 1 to Conceptual Amendment
2.
A roll call vote was taken. Representatives Seaton, Roses, and
Johnson voted in favor of Amendment 1 to Conceptual Amendment 2.
Representatives Guttenberg, Edgmon, Kawasaki, Wilson, and Gatto
voted against it. Therefore, the Amendment 1 to Conceptual
Amendment 2 failed by a vote of 3-5.
2:28:35 PM
REPRESENTATIVE WILSON moved to adopt Amendment 2 to Conceptual
Amendment 2, as follows:
Line 8:
Delete "the design, construction,"
CO-CHAIR GATTO objected.
2:29:30 PM
CO-CHAIR JOHNSON asked for an explanation.
CO-CHAIR GATTO explained that he has another amendment he is
going to offer.
[The committee treated Co-Chair Gatto's objection as if it was
withdrawn.]
A roll call vote was taken. Representatives Roses, Guttenberg,
Edgmon, Kawasaki, Wilson, Seaton, Johnson voted in favor of
Amendment 2 to Conceptual Amendment 2. Representative Gatto
voted against it. Therefore, Amendment 2 to Conceptual
Amendment 2 passed by a vote of 7-1.
2:32:11 PM
REPRESENTATIVE SEATON asked if Conceptual Amendment 2 as amended
is still answering the sponsor intent.
MR. JACKSON responded that not following those good, safe and
efficient practices is "improper maintenance."
2:32:59 PM
REPRESENTATIVE SEATON asked if not following good, safe and
efficient testing and operation is defined as "improper
maintenance."
MR. JACKSON agreed that "improper maintenance" is defined by
going to the definition, and if the maintenance is not
consistent with testing and operating, and the "good oil field
practice" has not been followed, there is improper maintenance.
2:34:14 PM
REPRESENTATIVE SEATON asked to clarify that if a [pipe]line is
improperly operated, is that defined as improper maintenance, or
is improper maintenance only if some work is not done on the
[pipe]line.
MR. JACKSON said that if the [operators] are not operating
properly as recognized by the American Petroleum Institute (API)
or the American Society for Testing and Materials (ASTM), then
this is "improper maintenance."
2:35:49 PM
REPRESENTATIVE SEATON expressed his desire to define the
parameters of the definition. He asked if an improper
operation, for example too much pressure in an oil pipeline, is
also defined as "improper maintenance."
MR. JACKSON allowed that Mr. Banks might be best suited to
answer.
2:37:00 PM
CO-CHAIR GATTO offered that intentional improper operation would
be different than "improper maintenance."
MR. BANKS agreed with Chair Gatto. If someone is intentionally
operating improperly, this is a gross negligence violation. If
equipment fails because it is not properly maintained, the
standards of API and ASTM or any qualified assurance plan will
dictate improper maintenance.
2:38:36 PM
CO-CHAIR GATTO moved to adopt Conceptual Amendment 3 to
Conceptual Amendment 2, as follows:
Line 8:
Delete " operating, and maintaining"
Add "operation, and maintenance"
REPRESENTATIVE SEATON advised that further tenses in the
amendment will also need to be adjusted.
There being no objection, Conceptual Amendment 3 to Conceptual
Amendment 2 was passed.
CO-CHAIR JOHNSON withdrew his objection to Conceptual Amendment
2.
There being no objection, Conceptual Amendment 2 as amended was
passed.
2:40:21 PM
CO-CHAIR GATTO brought attention to the amendment labeled 25-
LS0561\K.2, Bullock, 3/21/07, and labeled this as Amendment 3.
REPRESENTATIVE KAWASAKI moved to adopt Amendment 3, which read:
Page 4, lines 9 - 10:
Delete "lease expenditures that may not be
deducted"
Insert "costs that may not be treated as lease
expenditures or claimed as a credit based on costs
that may not be claimed as lease expenditures"
Page 4, line 10:
Delete "AS 43.55.165(e), as amended"
Insert "AS 43.55.165(e)(19), as enacted"
Page 4, line 13, following "AS 43.55.020(a)":
Insert "before the effective date of this Act"
Page 4, line 15:
Delete "lease expenditures that may not be
deducted"
Insert "costs that may not be treated as lease
expenditures or attributable to a credit based on
costs that may not be claimed as lease expenditures"
Delete "AS 43.55.165(e) as amended"
Insert "AS 43.55.165(e)(19), as enacted"
Page 4, following line 17:
Insert a new subsection to read:
"(c) Interest on an additional amount of tax due
under (a) of this section or on the amount of the
underpayment of an installment under (b) of this
section does not begin to accrue until 90 days after
the effective date of this Act."
CO-CHAIR GATTO objected.
CO-CHAIR JOHNSON objected.
2:41:30 PM
MR. JACKSON explained that Amendment 3 is drafted by Mr. Don
Bullock, Division of Legal and Research Services, and is a
technical change for the transitional language on Page 4 of HB
128. He noted that a memorandum from Mr. Bullock, Division of
Legal and Research Services, dated April 4, 2007, is also
included in the members' packets. He pointed out that page 3 of
the memorandum explains that the amendment changes are
"technical and not substantive corrections to the bill."
CO-CHAIR GATTO pointed out that the referenced amendment on page
3 of the memorandum, is labeled M.2.
MR. JACKSON explained that the amendment labeled K.2, currently
in front of the committee, is identical to an earlier Senate
bill amendment labeled M.2. He reported that he attached this
earlier memorandum from Mr. Bullock that explains amendment M.2,
as it is the identical explanation for amendment K.2.
2:42:42 PM
CO-CHAIR GATTO noted that Mr. Bullock is essentially saying "not
substantive."
MR. JACKSON clarified that Mr. Bullock's memorandum is referring
to page 1 of the amendment, not page 1 of the bill.
2:44:15 PM
CO-CHAIR GATTO withdrew his objection.
CO-CHAIR JOHNSON maintained his objection.
2:44:35 PM
REPRESENTATIVE ROSES asked for the effective date of the bill.
MR. JACKSON responded that page 4, line 20, of the bill states
the effective date to be retroactive to April 1, 2006.
CO-CHAIR GATTO asked if the Senate version of the bill also
included retroactivity.
MR. JACKSON said yes.
2:45:33 PM
REPRESENTATIVE ROSES asked to clarify that the amendment will
now state "common negligence" instead of "gross negligence,"
will be retroactive to April 1, 2006, and will not charge
interest until July 1, 2006.
MR. JACKSON explained that he misspoke, and the effective date
is stated on page 4, line 21 of the bill, which is 90 days after
the bill passes.
2:46:24 PM
REPRESENTATIVE ROSES asked to clarify that retroactivity is not
being determined on the money due, but on the determination of
negligence.
CO-CHAIR JOHNSON expressed his belief that the effective date is
April 1, 2006, and that the interest begins to accrue 90 days
later.
2:47:08 PM
MR. IVERSEN explained that the 90-day provision is coordinated
with transition provisions of the PPT to allow companies time to
adjust to the bill. He said that prior to 2007 all the payments
were made under the Economic Limit Factor (ELF). The payments
are not accruing interest under the Production Profits Tax
(PPT).
CO-CHAIR JOHNSON asked when the interest will start accruing if
this bill passes.
MR. IVERSEN replied that interest will begin 90 days after the
bill passes.
2:49:27 PM
REPRESENTATIVE SEATON offered his belief that the retroactive
date is only for Section 1 of the bill.
CO-CHAIR GATTO agreed with Representative Seaton.
2:50:23 PM
CO-CHAIR JOHNSON withdrew his objection to Amendment 3.
There being no objection, Amendment 3 was passed.
CO-CHAIR GATTO clarified that HB 128 requires five votes to
report it from the committee.
2:50:50 PM
REPRESENTATIVE SEATON moved to adopt Conceptual Amendment 4, as
follows:
Page 2, line 3:
Insert "(8) costs incurred as a result of an
action or inaction in violation of regulations or
procedures adopted by the pipeline safety integrity
organization or other appropriate agency."
Renumber accordingly.
REPRESENTATIVE SEATON explained that it is unclear whether a
violation of the PSIO regulations will fall under willful
misconduct. He expressed his desire for regulations that
clarify both operations and the penalties for violation of the
regulations.
2:53:19 PM
REPRESENTATIVE WILSON objected to Conceptual Amendment 4.
REPRESENTATIVE SEATON restated Conceptual Amendment 4.
REPRESENTATIVE WILSON removed her objection.
There being no objection, Conceptual Amendment 4 was passed.
2:54:28 PM
CO-CHAIR JOHNSON moved to adopt Amendment 5, as follows:
Page 4, line 20:
Delete all material
CO-CHAIR GATTO objected.
CO-CHAIR JOHNSON explained that he is deleting the retroactivity
clause.
2:55:00 PM
REPRESENTATIVE GUTTENBERG asked for clarification of the intent.
CO-CHAIR JOHNSON explained that the regulations to be drafted by
DOR and PSIO will still allow collection of any funds.
2:56:12 PM
REPRESENTATIVE ROSES said that deductions are not allowed for
negligence. This bill lowers the burden of proof for
negligence. He emphasized that he has a serious problem with
"reactive" legislation as well as "retroactivity," as he doesn't
support a change to the rules after the fact.
A roll call vote was taken. Representatives Roses, Wilson, and
Johnson voted in favor of Amendment 5. Representatives
Guttenberg, Edgmon, Kawasaki, Seaton, and Gatto voted against
it. Therefore, Amendment 5 failed by a vote of 3-5.
2:59:46 PM
REPRESENTATIVE SEATON stated that PPT has two goals: encourage
investment and raise more money for the state. He said that
encouraging investment requires certainty on investment, but
that this bill allows a lot of risk, as no standard has been
set. He reported that the definition of "improper maintenance"
has not been tested in court and is not even contained in law.
He pointed out that it does not have to include negligence. He
emphasized that changing the standard for the entire industry
across Alaska, and removing the certainty for investment that is
so critical for the PPT, goes against his feelings.
REPRESENTATIVE WILSON agreed with Representative Seaton.
3:02:23 PM
CO-CHAIR JOHNSON offered a synopsis of the subcommittee report.
He said that there is a recommendation for this bill to go to
House Judiciary Standing Committee because there are legal
issues involved. He said that retroactivity is a concern, but
the amendments solve some of those issues. He said that he
supports the concept, but he offered his belief that a better
job needs to be done with the definitions. He stressed that he
does not want to sacrifice quality legislation for expediency.
REPRESENTATIVE GUTTENBERG said that the concern of the
legislature is reflected by the number of co-sponsors on the
bill. He ascertained that the oil industry makes every decision
based on maximizing returns, and that no matter what is done,
the oil industry will take the state to court. He expressed his
belief that the committee owes it to the people of the state to
move this bill from committee.
3:06:02 PM
CO-CHAIR GATTO offered his opinion, summarizing that the bill
addresses the responsibility to monitor what is defined as a
deduction against revenue, in order to protect the net tax.
A roll call vote was taken. Representatives Guttenberg, Edgmon,
Kawasaki, and Gatto voted in favor of CSHB 128(O&G).
Representatives Wilson, Seaton, Roses and Johnson voted against
it. Therefore, CSHB 128(O&G) failed to be reported out of the
House Resources Standing Committee by a vote of 4-4.
3:07:32 PM
CO-CHAIR GATTO announced that the committee may look at the
subcommittee report and hear the bill again.
CO-CHAIR JOHNSON said that this bill has potential, but it needs
some work, and he asked to hear the bill again.
3:08:12 PM
CO-CHAIR GATTO asked if Co-Chair Johnson will reconsider his
vote if there is a referral to House Judiciary Standing
Committee.
CO-CHAIR JOHNSON said that he will reconsider his vote.
REPRESENTATIVE ROSES said he will reconsider his vote, as well.
3:09:02 PM
REPRESENTATIVE GUTTENBERG moved to rescind the committee's
action on CSHB 128(O&G).
CO-CHAIR JOHNSON objected and allowed that the Speaker of the
House is the only person who can change the committee assignment
for the bill.
REPRESENTATIVE GUTTENBERG withdrew his motion to rescind the
vote.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:10 p.m.
| Document Name | Date/Time | Subjects |
|---|