Legislature(2013 - 2014)
04/04/2013 12:01 AM House RES
| Audio | Topic |
|---|---|
| Start | |
| SB21 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 21-OIL AND GAS PRODUCTION TAX
[This is a continuation of the April 3, 2013, meeting during the
course of the discussion of Amendment 31, the text for which is
provided at the end of this document.]
12:00:23 AM
MATTHEW FONDER, Director, Anchorage Office, Tax Division,
Department of Revenue (DOR), agreed with Ms. Pollard's
testimony, although he said he would have to research the
question to provide an answer with 100 percent confidence.
CO-CHAIR SADDLER asked what the actual fiscal impact of this
would be.
MICHAEL PAWLOWSKI, Oil & Gas Development Project Manager, Office
of the Commissioner, Department of Revenue (DOR), replied he
does not believe DOR has a "fiscal impact understanding around
this particular provision." The central issue is about the
treatment of transportation costs for a taxpayer that is also an
owner and an affiliated shipper on a pipeline. An example would
be when one of the taxpayers owns a piece of the pipeline or
transportation system used for shipping the oil; this is the
issue in the current law.
CO-CHAIR SADDLER recalled the contentiousness of the Trans-
Alaska Pipeline System (TAPS) tariff case.
REPRESENTATIVE TUCK noted there has been no testimony on this
issue and over several years no concerns have been raised;
therefore, he said he would vote against the amendment.
REPRESENTATIVE TARR asked under what circumstances the state
would be able to collect taxes if an adjustment was warranted.
12:03:34 AM
SUSAN POLLARD, Assistant Attorney General, Oil, Gas & Mining
Section, Civil Division (Juneau), Department of Law, restated
Representative Tarr's question: If a tariff is later adjusted
and then the transportation costs change, can the state collect
the adjusted amount? She said the answer is yes.
LENNIE DEES, Audit Master, Production Audit Group, Tax Division,
Department of Revenue (DOR), further explained that if a tariff
changes after a taxpayer has filed, as authorized by AS
43.55.075, the taxpayer is required to refile if there is a
change in the tax due, which is a common occurrence when a
tariff has been disputed before the Federal Energy Regulatory
Commission (FERC) or the Regulatory Commission of Alaska (RCA).
A ruling from either commission to lower the tariff will impact
the taxable value of the oil. He described the current process
of calculation under ACES, and advised that an effect of
Amendment 31 would be a decrease in the amount of taxes.
CO-CHAIR FEIGE asked whether reasonable costs of transportation
have typically been lower or higher.
MR. DEES clarified that the taxpayer deducts the lower of actual
or reasonable costs; if the reasonable cost of transportation
calculated by DOR is lower than actual cost, taxpayers are only
allowed to deduct the reasonable cost. This only occurs with
taxpayers that have affiliated carriers. As referred to by
Representative Hawker, prior to ACES, three conditions were
required to be true for reasonable costs of transportation to
apply; however, under ACES only one condition has to be true. A
number of taxpayers in Alaska have ownership in pipelines, and
are required to meet the "reasonable cost of transportation
test."
12:07:41 AM
REPRESENTATIVE SEATON directed attention to Amendment 31, page
2, line 5, which directs that transportation costs will be fixed
by what is on file, instead of what has been adjudicated as just
and reasonable by RCA or another agency. He surmised this means
if a company is shipping on its own pipeline, it can "jack up
the rate in the pipeline" and pay the rate, thereby reducing the
value of the oil and lowering taxes. Or, if one owns the
tankers, instead of paying what another would pay for shipping,
the owner could pay more and subtract the higher "supposed
value." This would artificially create a higher transportation
cost. Representative Seaton recalled this is the situation that
cost the state about $6 billion in the settlement of TAPS tariff
litigation. He said allowing companies to have higher rates on
file for affiliates, allows them to value their oil lower at the
wellhead. He said he would vote against adopting the amendment.
12:10:14 AM
CO-CHAIR FEIGE agreed that owners of the pipeline could increase
their actual costs; the amendment says that the reasonable costs
of transportation are actual costs, except when the parties are
affiliated, or when the contract is not an arm's-length
transaction. For example, BP Exploration Alaska Inc. has an
ownership share in the pipeline, and if shipping its oil,
reasonable costs would rule, as opposed to actual costs.
REPRESENTATIVE HAWKER said he did not believe the circumstances
as previously described are accurate, and invited testimony from
an expert witness to explain the industry's perspective on - and
rationale for - the amendment.
12:12:24 AM
MARIE EVANS, Tax Counsel, ConocoPhillips Alaska, Inc., recalled
a long-standing practice that existed in law under the Economic
Limit Factor (ELF) [enacted in 1977] and the Petroleum
Production Tax (PPT) bill [enacted in August 2006] changed under
Alaska's Clear and Equitable Share (ACES) [enacted in November
2007]. At the time of the ELF and PPT statutes, the requirement
to refile was in regulation, but was moved from regulation into
AS 43.55.075. If a company were to "jack up the tariff," the
state and shippers have the right to protest the rates, and
after the rates are settled or adjudicated, the taxpayer is
required to refile taxes. Interest is paid from the date due,
even though the litigation process may be very long. Ms. Evans
urged the committee to keep in mind that this situation creates
uncertainty at the time taxes are filed. As a taxpayer, there
is no choice other than to deduct what is paid and, if prices
are changed, refile relative to the refund from the carrier
companies to the shippers. Also, although DOR was diligent
during the regulation process, the regulations are long and
extremely difficult to understand, which leaves the final
interpretation open to DOR's discretion. She concluded that,
ideally, a self-assessed tax should be known and calculable by
the taxpayer at the time it is due.
12:17:14 AM
CO-CHAIR FEIGE asked whether Ms. Evans worked for ConocoPhillips
Alaska under the previous set of statutes.
MS. EVANS said she came to work for ConocoPhillips Alaska as in-
house counsel after ACES passed, thus her experience with the
previous tax policy was gleaned while working on appeals. In
further response to Co-Chair Feige, she opined that adopting the
amendment will result in less challenge and more certainty when
the tax is calculated.
REPRESENTATIVE HAWKER expressed his concern that the bill is
asking taxpayers to file taxes - that are subject to audits -
following regulations "nobody quite understands." He restated
that prior to ACES there was a mechanism in place that worked
for everyone; this amendment replaces that mechanism. The
amount that a taxpayer actually pays is a reasonable amount to
pay for a transportation deduction, and pointed out the
exception that certain circumstances will lead to a rate that is
on file with a regulatory body, and that is subject to change by
a regulatory body.
12:19:47 AM
REPRESENTATIVE SEATON urged the committee to consider that the
language deleted is "adjudicated as just and reasonable," and is
being replaced with "what you pay yourself." He suggested more
testimony is needed from legislative attorneys to advise on tax
liability and calculations, and also to advise on the prior
litigation that showed that higher charges, in order to reduce
gross value at the point of production, occurred.
REPRESENTATIVE HAWKER questioned the aforementioned
characterization of the issues surrounding the tax settlement.
REPRESENTATIVE TARR maintained her objection, and said her staff
estimates that the cost of the amendment may be over $150
million per year. She requested DOR to comment on the potential
fiscal impact.
MR. PAWLOWSKI indicated that without knowing the actual
calculations around the particular tax rate and per barrel
allowances in the bill, he was hesitant to respond.
12:22:35 AM
DAN STICKLE, Assistant Chief Economist, Anchorage Office, Tax
Division, Department of Revenue (DOR), said to calculate the
fiscal impact he needed to know the potential change in the
tariff.
REPRESENTATIVE TARR, in response to Co-Chair Feige, said her
estimate was based on information from her staff. She said she
is requesting this information because it would be helpful to
have some idea of the impact in order to protect the state's
interests.
MR. STICKLE, referring to Representative Tarr's estimate, said,
"My gut feeling is that's probably on the high end of the range
that we would arrive at if we did do a detailed analysis."
MR. PAWLOWSKI asked whether the Tax Division in Anchorage knows
what is currently deemed as reasonable transportation cost
versus actual transportation cost.
MR. FONDER said his division is unable to run numbers at this
time because the employees who work with the reasonable cost of
transportation are not present and would need additional time to
delve into this issue.
12:24:33 AM
A roll call vote was taken. Representatives Hawker, Olson,
Johnson, and Feige voted in favor of Amendment 31.
Representatives Tuck, Seaton, Tarr, P. Wilson, and Saddler voted
against it. Therefore, Amendment 31 failed by a vote of 4-5.
12:26:25 AM
REPRESENTATIVE HAWKER moved to adopt Amendment 32 [text provided
at the end of this document].
REPRESENTATIVE TARR objected.
REPRESENTATIVE TUCK asked whether Amendment 32 was drafted by
Legislative Legal and Research Services.
REPRESENTATIVE HAWKER said the structure of the amendment
drafted by Legislative Legal and Research Services was
unsatisfactory; therefore, Amendment 32 is presented with the
same language, but "the organization of the language is
different." He asked for Amendment 32 to be considered a
conceptual amendment and said the purpose of the change in the
structure of the amendment is to ensure that this [subsection]
of statute is placed as [subsection] (a) instead of [subsection]
(m).
REPRESENTATIVE TARR stated that during this session the
committee has been following a policy that all amendments must
come from Legislative Legal and Research Services. On two
occasions she offered amendments that were not accepted by the
committee for this reason. At this critical time, she urged
that the rule not be broken.
REPRESENTATIVE TUCK recalled he offered an amendment to correct
a small drafting error which was denied for the same reason and
he was directed to offer an amendment to the amendment. He
urged that the committee not accept this conceptual amendment.
REPRESENTATIVE HAWKER said New Amendment 32 is forthcoming.
12:29:03 AM
The committee took an at-ease from 12:29 a.m. to 12:41 a.m.
12:41:25 AM
REPRESENTATIVE HAWKER withdrew Amendment 32 as offered. He
moved to adopt New Amendment 32, labeled 28-GS1647\K.34,
Nauman/Bullock, 4/3/13, [text provided at the end of this
document].
REPRESENTATIVE TUCK objected.
12:42:10 AM
REPRESENTATIVE HAWKER moved to adopt Amendment 1 to New
Amendment 32. He explained the purpose of Amendment 1 to New
Amendment 32 is to replace New Amendment 32 with the document
that was provided to committee members labeled Amendment 32.
REPRESENTATIVE TUCK objected.
REPRESENTATIVE HAWKER expressed his preference for the language
in Amendment 32 because it preserves the sequential order of
statute, it is more legible and understandable, and it is easier
to interpret. The substance of the language in Amendment 32 is
identical to the language in New Amendment 32.
REPRESENTATIVE TUCK maintained his objection, saying there have
been amendments drafted by Legislative Legal and Research
Services that had simple mistakes, but attempts to offer
amendments to correct the mistakes were denied. He said
Amendment 1 to New Amendment 32 is a way to get around what has
been denied to other committee members. Representative Tuck
asked for comments from Representative Johnson, chair of the
House Rules Standing Committee.
REPRESENTATIVE JOHNSON asked whether Representative Tuck was
requested to amend his amendment at the time of the
aforementioned incident.
12:44:49 AM
REPRESENTATIVE TUCK relayed that after the introduction of his
amendment was denied, he suggested amending the amendment.
However, his suggestion was also denied.
REPRESENTATIVE JOHNSON said the procedure to amend an amendment
is proper, and the decision to accept or deny an amendment rests
with each individual committee chair.
REPRESENTATIVE SEATON drew attention to Amendment 32, page 1,
line 7, with a date of March 31, 2006, and to New Amendment 32,
page 1, line 10, with a date of January 1, 2014, and pointed out
that the amendments were described as identical.
REPRESENTATIVE HAWKER acknowledged the January 1, 2014, date in
the document drafted by Legislative Legal and Research Services
is incorrect.
REPRESENTATIVE SEATON said there is also a title change in the
document drafted by Legislative Legal and Research Services, and
questioned whether there are other substantive changes.
REPRESENTATIVE HAWKER said no.
REPRESENTATIVE TARR asked whether the chair has ruled that the
previous requirements of "24-hours" and that all amendments must
be drafted by Legislative Legal and Research Services are no
longer in place.
CO-CHAIR FEIGE noted the original amendment was drafted by
Legislative Legal and Research Services, and the sponsor has
offered an amendment to the amendment. This is proper
procedure, he said.
REPRESENTATIVE TUCK maintained his objection, pointing out that
the amendment was drafted on 4/3/13. To comply with the 24-hour
rule, the amendment would have had to be drafted on 4/2/13.
CO-CHAIR FEIGE explained that all of the amendments were
returned to Legislative Legal and Research Services to be
conformed to the committee substitute, Version K.
12:48:03 AM
A roll call vote was taken. Representatives Johnson, Olson,
Seaton, P. Wilson, Hawker, Saddler, and Feige voted in favor of
Amendment 1 to New Amendment 32. Representatives Tarr and Tuck
voted against it. Therefore, Amendment 1 to New Amendment 32
was adopted by a vote of 7-2.
12:48:50 AM
REPRESENTATIVE HAWKER explained that New Amendment 32, as
amended, addresses the issue of joint interest billings. The
amendment would restore language in AS 43.55.165, on lease
expenditures, to what the language was for [subparagraphs] (A),
(B), (C), and (D), prior to the passage of ACES. "So we are
simply going back to language that was established to define
lease expenditures when the original PPT legislation passed," he
said. One of the significant changes, for example, is that on
page 1, line 12, the language from PPT is restored to "the
department shall consider, among other factors," instead of "may
consider," which was the language under ACES. He advised that
the changes preface allowable lease expenditures to include the
ordinary and necessary costs upstream of the point of
production, and this relates to the language that says the
department "shall consider, among other factors, typical
industry practices and standards in the state that determine
costs." He directed attention to [subsection] (c), on page 2,
beginning at line 17, and paraphrased as follows:
if the department finds that the pertinent provisions
of a unit operating agreement or similar operating
agreement are substantially consistent with the
department's determinations and standards under (a) of
this section concerning whether costs are lease
expenditures, the department may authorize or require
a producer, subject to conditions prescribed under
regulations adopted by the department, to treat as
that portion of its lease expenditures ...
12:51:34 AM
REPRESENTATIVE HAWKER continued to explain that the amendment
will enable companies to utilize costs that are incurred by the
operator and that are billed from one to another, or that would
be billed. As an aside, he characterized the costs that are
billed from one operator to another as a reasonable and
fundamental determination of the costs of operating in the oil
fields. Directing attention to Section 37 of the bill, which is
adding (d) back into statute, on page 3, beginning at line 15,
he paraphrased as follows:
... if the department makes the finding described in
(c) of this section with respect to a unit operating
agreement or similar operating agreement and, in
addition, finds that at least one working interest
party to the agreement, other than the operator, with
substantial incentive and ability to effectively audit
billings, under the agreement in fact is effectively
auditing billings under the agreement, the department
may authorize or require a producer, subject to
conditions prescribed under regulations adopted by the
department, to treat as that portion of its lease
expenditures for a calendar year applicable to oil and
gas produced from a lease or property in the state
only ...
12:54:45 AM
REPRESENTATIVE HAWKER further explained that the language
applies if the department finds that the unit operating
agreements are substantially consistent with the department's
determinations and standards, and further determines that one
party who is not the operator, but that has the incentive and
ability to audit the billings, is doing so. He clarified that
the agency must find that the agreements are substantially
similar, and then that the audit process underway is effective
and in place. If the aforementioned two requirements are met,
the department may adopt regulations to treat - as a portion of
a party's lease expenditures in a calendar year - those costs
that are billed in the working interest agreements. He reminded
the committee that working interest agreements are the
foundation of how the industry on the North Slopes works: two
or three producers operate together, with one running a
particular development and billing its partners. He said these
billings are audited, and there can be no collusion between the
parties, because these billings are the manner by which the
industry defines and details the sharing of the expenses for
operating the fields. In fact, the amendment puts back in place
the ability of the department to utilize the audits and consider
them among typical industry practices; this is done by replacing
"may" with "shall." He restated that the language is not new
and was legally crafted and existed in the original PPT
legislation. Furthermore, the joint interest billings are used
by the oil and gas industry to file federal income tax returns,
thus this information is also audited internally, subject to
audit by the Internal Revenue Service (IRS), and is certified by
senior management of the companies. If the companies agree that
these are the correct costs of operating, he suggested that the
legislature is overstepping its authority if the state writes a
regulation that does not allow the state to use the costs as a
basis to audit producer tax returns. Representative Hawker
noted testimony by the oil and gas industry seeking consistent,
one-time filing, without multiple sets of books driven by
department regulations that are not relevant. He opined the
department has been unable to complete audits in a timely manner
because it does not rely upon the work of other auditors as was
done under PPT. Restoring the prefacing language back into
statute on what constitutes a lease expenditure as established
in the PPT legislation before ACES will tell the department that
it is required to use operating agreements - under the
conditions allowed - as guidance for what is typical industry
practice for ordinary and necessary costs upstream of the point
of production.
1:01:21 AM
REPRESENTATIVE HAWKER continued, saying when ACES passed, the
department's interpretation was that it would not use the
billings, and that was a change that created a great deal of
confusion, multiple bookkeeping, and inconsistency. The present
language does not capture typical industry practice, or allow
appropriate deductions of ordinary and necessary costs by an
operator. He stressed New Amendment 32, as amended, is not a
nullification of present regulations, but does require a review
of present regulations for consistency, and a recognition and
greater acceptance of joint interest billings as a standard upon
which to look at costs of production in an easier, more
efficient, and more effective way for all of the parties
involved. The amendment puts back in place the language in the
original PPT legislation, which would be effective from the date
of the original PPT legislation.
1:03:32 AM
REPRESENTATIVE P. WILSON ascertained that the current procedure
is for the department to audit the operator and each party, but
with the passage of this amendment, the department will only
audit the operator.
REPRESENTATIVE HAWKER stated that joint interest billings are
agreed to and audited amongst the participants. The amendment
would allow the department to decide that if the audit is
properly executed by a party that is not the operator, the audit
can be accepted as a basis of the oil and gas production tax
return.
CO-CHAIR SADDLER asked the Tax Division for the advantages and
disadvantages of the current system.
1:06:08 AM
JOHN LARSEN, Audit Master, Anchorage Office, Tax Division, DOR,
addressed the statement that the department's regulations have
no bearing on how industry functions, and the statement
regarding the lease expenditure statute. The legislature
repealed AS 43.55.165 (c) and (d) as of 7/1/07, thus the
department wrote a set of regulations for determining the
reasonable costs of allowable lease expenditures. In addition,
regulations were necessary in the case of a single operator with
no third party auditing of the agreement. Turning to the use of
typical industry practices, his professional opinion is that the
regulations do account for ordinary and necessary costs of oil
field operations for exploration, development, and production.
As the regulations were being developed, the department analyzed
and compared unit operating agreements, because the joint
interest billing is the invoice for the shared cost, which is an
industry standard. He pointed out that the department sought to
look not only at standard industry practices in Alaska, but also
relied on interpretations by the Council of Petroleum
Accountants Societies (COPAS), a nationwide organization of
companies throughout the industry. The organization is
dedicated to the promulgation of fair accounting standards for
all companies. Specifically, a COPAS model-form accounting
procedure was used as a baseline for the regulations. Mr.
Larsen said the department also used the Department of Natural
Resources (DNR), Division of Oil & Gas (DOG), net profit share
lease (NPSL) regulations. He offered to prepare a matrix that
demonstrates the symmetry between the department's regulations
and COPAS standards. One of the goals of the department was to
establish a single standard of lease expenditure regulations
that could be applied throughout the state. Turning to
Representative Hawker's comment on IRS filings, he acknowledged
that there are IRS standards; however, he pointed out, the IRS
audits for income tax and not for oil and gas production taxes.
MR. LARSEN advised that joint venture audits, which are
performed by the companies, are audits in the interest of the
company, not in the interest of the state, and if the state is
bound by the joint interest agreement, it is bound to an
agreement of which it is not a party.
1:13:01 AM
CO-CHAIR SADDLER restated his question.
MR. LARSEN said one advantage of using the state's regulations
is that a single standard is established throughout the state.
He said he would give more thought to the disadvantages of the
current system. One advantage to the system proposed by the
amendment is the convenience of using joint interest billings;
however, he reiterated, the auditors are auditing for the
interest of their companies. He further opined the IRS
determines allowable costs for income tax, not production audit
tax, and there is quite a difference.
1:15:33 AM
CO-CHAIR FEIGE asked whether the division will be able to audit
as effectively on behalf of the state, if New Amendment 32, as
amended, is adopted.
MR. LARSEN replied no, because the audit authority is being
removed from the department and placed in the hands of the
parties of interest.
CO-CHAIR FEIGE understood the amendment provides that the
department would be able to audit the books of the operator of a
particular development and determine which expenses are
allowable, which would pass to the other leaseholders.
1:17:03 AM
MR. DEES said that is one of the approaches the department could
take in the case of joint venture operating agreements; however,
there has been resistance from the partners to this approach
because each individual company is being assessed a production
tax based on its own filing. Therefore, a company may be a
partner in several joint ventures, and also have activities in
stand-alone operations. The department looks at each company
individually in order to maintain confidentiality during an
audit. Changing to net tax in a situation where there are
taxpayers that are not operators presents challenges, as the
details are on the joint interest billings. He opined the
amendment does not change current procedures because department
regulations do consider several operating agreements within the
state. Furthermore, using the department's standards for
allowable lease expenditures is to maintain the same set of
standards for each taxpayer for consistency. For example, in
statute, certain expenditures are not allowable, even though
they are shared costs billed between partners in a joint
operating agreement, such as those defined in AS 43.55.165
[subsection] (e). Mr. Dees concluded that the approach taken by
the department best serves the statute as written.
1:20:37 AM
CO-CHAIR FEIGE asked whether the department would be able to
process audits more efficiently if the amendment is adopted.
MR. DEES pointed out that lease expenditures are just one part
of the activities perused in an audit; other activities audited
are revenues and transportation costs. He acknowledged that
this approach may accelerate the lease expenditure part of the
audit.
REPRESENTATIVE HAWKER disagreed with the implication that the
amendment will "allow unallowable expenditures." He said the
amendment changes in statute "the department may consider among
other factors," and drew attention to the amendment on page 1,
line 12, which read:
department shall consider, among other factors,
(1) the typical industry practices and standards in
the state that determine the costs, other than items
listed in (e) of this section, ...
1:23:47 AM
REPRESENTATIVE HAWKER explained that [subsection] (e) includes
the disallowed costs. He then turned attention to page 3, and
said the language directs the department to review and ensure
that there is at least one working interest owner party to the
agreement, thus there is no issue regarding a single operator.
On page 3, beginning at line 18, he paraphrased as follows:
... other than the operator, with substantial
incentive and ability to effectively audit and is in
fact effectively auditing ... subject to ...
regulations adopted by the department, ... other than
items listed in (e) of this section
REPRESENTATIVE HAWKER urged that the department should implement
the standards the legislature has determined - rather than its
own set of standards - on what are allowable lease expenditures.
He restated that the mechanism worked well before it was changed
under ACES without scrutiny, and said, "We didn't contemplate
that we would be in fact, the legislature, abrogating our
policy-making role to regulators in the Department of Revenue."
Although still leaving a great deal of power with the
department, the amendment directs that the "working billings"
will be used as a place to begin an audit, and that they will
not be discounted. On page 2, beginning on line 17, he
paraphrased as follows:
... if the department finds that the pertinent
provisions of a unit operating agreement or similar
operating agreement are substantially consistent with
the department's determinations and standards under
(a) of this section concerning whether costs are lease
expenditures, ...
1:26:28 AM
EPRESENTATIVE HAWKER said (a) is the policy provision that
reflects the legislature's intention: Lease expenditures are
ordinary and necessary costs upstream of the point of production
incurred by a calendar year ... that are direct costs of
exploring for, developing, or producing oil or gas deposits
located within the producer's leases or properties in the state
or, in the case of land in which the producer does not own a
working interest, that are direct costs of exploring for oil or
gas deposits located within other land in the state.
1:28:08 AM
REPRESENTATIVE TARR said she objects to the amendment because
the state will no longer get needed information from the audit.
She compared the effect of the amendment to negotiating on taxes
with one's self, which would result in a better position than
negotiating with the IRS. She understood that the reason for
the change in ACES was because under the PPT tax, the tax
revenue was $800 million less than expected, partly due to
larger than expected lease deductions. Therefore, ACES
legislation was written to prevent a reoccurrence.
MR. DEES, although he did not have direct experience, agreed the
aforementioned may have been a factor. He opined what led to
the changes in ACES was related to costs from failures due to
deferred maintenance in 2006. In response to Co-Chair Feige, he
said the impact of lease expenditures that are higher than
expected would be that production tax values are lower than
expected.
CO-CHAIR FEIGE said his question is whether the difference was
due to the definition of lease expenditure or because of
auditing practices.
MR. DEES opined it was not due to auditing practices but to the
actual reported expenditures.
REPRESENTATIVE HAWKER noted that the amendment was drafted to
include every change to subsection (e) that was made in the ACES
legislation. "I'm not trying to go back and change that," he
said.
1:31:51 AM
REPRESENTATIVE TARR asked Mr. Dees for clarification on whether
the proposed process would become more complicated when one sole
venture operator is in partnership with others in a joint
venture, and some exceptions apply but others do not.
MR. DEES suggested that a set of standards for lease
expenditures that are applicable to all parties affected by a
tax structure is better for the state and the auditors. If the
state establishes standards, just because parties to an
operating agreement agree to certain costs, would not mean that
the costs are lease allowable expenditures.
CO-CHAIR FEIGE expressed his understanding that an auditor who
is auditing the operator would make the determination on whether
a cost is a deductible cost.
MR. DEES observed that the department audits the operator as a
taxpayer, not as an operator. Thus, if a cost is not allowable,
it affects that particular taxpayer's assessment, but not that
of all of the partners. He relayed companies are resistant to
the "operator approach" because taxes are proprietary, and
companies do not want the department to apply others' tax
assessments on them. He explained that with joint operated
costs, one company may capitalize a cost and another may treat
it as an expense; therefore, in response to the wishes of the
companies, the department audits each taxpayer separately.
1:35:44 AM
CO-CHAIR FEIGE questioned why there are differences in
accounting and how costs are accounted for, when all parties are
paying based on the same tax code.
MR. DEES said the IRS views a partnership as a taxable entity;
however, in production tax the state does not tax partnerships,
and each taxpayer, explorer, or producer is assessed as an
individual entity.
REPRESENTATIVE TARR gave an example that an individual taxpayer
would have different accounting because of differing state and
federal tax codes.
MR. DEES said no; but it could be an internal accounting policy
that differs between the joint interest partners.
REPRESENTATIVE TUCK inquired as to the "push back" the
department receives from companies.
MR. DEES said he was referring to push back from companies that
do not want the department to audit an operator, and then use
the results of that audit for assessing others.
1:38:35 AM
REPRESENTATIVE SEATON was surprised to hear that the audit
process worked well under PPT, because no audits were completed.
He said his first concern is that the effective date of the
amendment is 3/31/06, and questioned whether the developed
auditing scheme and regulations, and the recently funded
computer system, will have to be revised to apply to joint
operating agreements. In addition, he asked whether audits will
apply to all parties at once because "we're auditing a company -
not a ring-fence operation." In fact, all of the information is
needed, thus all of the operators may have to be audited first
in order to decide from the joint operating agreements what was
disbursed to each individual company.
MR. DEES responded that the operator does not have to be audited
first. The department audits all of the activity for that
taxpayer and looks at all of its joint interest billings. A
reconciliation document between the billings and the lease
expenditures that are being deducted, including the excluded
costs in accordance with AS 43.55.165 (e), is requested. The
tax is not calculated on individual joint ventures; for example,
the tax structure identifies segments by areas of the state, and
the North Slope is a single segment. So, for a company in
several joint ventures that produce oil on the North Slope, the
tax is calculated on the totality of its activity. In further
response to Representative Seaton, Mr. Dees said two years ago,
the department was approved for a tax revenue management system
in order to help the department catch up with voluminous amounts
of data, and that system will be operational in two years.
1:43:43 AM
REPRESENTATIVE HAWKER closed, saying the intent of the amendment
is to allow appropriate regulatory oversight for the use of
joint interest billings in order to determine how costs are
allocated amongst partners in the oil fields. He said one of
the reasons to go back to using the billings as an auditing tool
is due to the failures and weaknesses that exist in the state
internal accounting control systems. He referred to state
single audit findings for the fiscal year (FY) ending 6/30/12,
[document not provided to the committee] and said:
[The report found] audit findings of material internal
accounting control weaknesses in the Department of
Revenue. These are considered significant
deficiencies and that is, that in years fiscal 08 to
11, significant deficiencies ... in the controls over
the Tax Division, severance tax audits, were reported.
Control deficiencies included: insufficient audit
oversight, lack of standard procedures guiding the
audit process, inadequate audit reviews, and untimely
tax return reviews and reconciliation. Additionally,
the Tax Division lacks standardized templates for the
annual tax return. The current position - this is a
year later - the Tax Division management has made
improvements in audit oversight, written standard
procedures, and audit reviews, yes, nevertheless, the
control deficiencies identified in prior audits have
not been fully addressed.
1:45:39 AM
EPRESENTATIVE HAWKER then pointed out that although the written
standards were implemented in FY 11, the state auditor could not
confirm the full implementation of recommended procedures and,
as of FY 12, no audits were completed under the new procedures.
Also, the audit plan guiding the auditors for tax systems under
PPT and ACES legislation was not fully designed at the end of FY
12. He read [from a document not provided to the committee] as
follows:
Tax Division management expects the audit plan to be
completed in FY 13 and used for audits starting in
that year. Although ... no tax return audits were
completed in FY 12 under the new procedures, the
division did complete an audit of a 2006 tax return
and audits of tax credits.
REPRESENTATIVE HAWKER said legislative assessments found that
supervisory reviews by the audit tax master were not documented,
and the audit supervisor review checklist was not consistently
completed. Further, he said the report he cited also noted that
money has been appropriated for management and improvements, and
the agency response to the report was that it agreed with the
findings. He said the audit division is understaffed and does
not have adequate resources to complete its task; the amendment
will provide a tool to allow the taxpayer and the tax auditor to
work together in a reasonable and responsible manner.
1:48:14 AM
REPRESENTATIVE TARR maintained her objection, and expressed her
understanding that some of the delay was caused by the change to
ACES just as the regulations for PPT were developed. She asked
whether the delays are due to a failure of the audit department,
or because of the course of time needed to facilitate two
substantial changes in legislation. She said she was told that
"once they get the first year done, then they're going to be
able to catch up very quickly."
MR. FONDER agreed. He said his division is currently finalizing
2007 audits; part of the complexity of the 2007 audits is that
one-half of the year is computed under the provisions of PPT and
one-half of the year is computed under the provisions of ACES.
Additionally, the Tax Division has begun audits on 2008 and
2009, and is planning on combining two years at a time when its
resources allow.
1:52:18 AM
A roll call vote was taken. Representatives Hawker, Johnson,
Olson, P. Wilson, Seaton, Saddler, and Feige voted in favor of
New Amendment 32, as amended. Representatives Tarr and Tuck
voted against it. Therefore, New Amendment 32, as amended, was
adopted by a vote of 7-2.
A brief at-ease was taken.
1:52:20 AM
CO-CHAIR FEIGE moved to adopt Conceptual Amendment 33 [text
provided at end of this document].
REPRESENTATIVE HAWKER objected for the purpose of discussion.
CO-CHAIR FEIGE remarked:
When we instituted the floating per barrel credit, one
of the results was that the tax below [$60 per barrel]
- if you remember from the [Econ One Research] slide
Mr. Pulliam showed yesterday evening - the tax
actually went to zero. What this amendment will do is
make sure that the floating per barrel credit does
not, because it is applied after the tax is assessed
and calculated, this will make sure that the floating
per barrel credit does not run the total tax bill
below the minimum tax. So it ensures that our 4
percent minimum tax on the gross is retained - no
matter what - within the legacy fields.
1:54:01 AM
REPRESENTATIVE HAWKER observed that the amendment is clarifying
language, and removed his objection. There being no further
objection, Conceptual Amendment 33 was adopted.
1:54:54 AM
REPRESENTATIVE P. WILSON moved to adopt Amendment 34 [text
provided at end of this document].
REPRESENTATIVE TARR objected.
REPRESENTATIVE P. WILSON explained Amendment 34 would change the
proposed tax rate of 35 percent to 33 percent.
REPRESENTATIVE TARR pointed out that Amendment 34 would also
adjust the net operating loss credit down to 33 percent, which,
she argued, would disadvantage small producers.
MR. PAWLOWSKI agreed with Representative Tarr that the amendment
would adjust the loss carry forward credit. However, he said,
it is consistent with previous policy to maintain parity between
that and the base rate from which a taxpayer with a tax
obligation gets a benefit for their expenditures. The loss
carry forward credit also gives the same benefit to a new or
incumbent producer. Regarding its effect the economics of a
small producer, the department would have to look at the total
economics of the proposed committee substitute to know the
impact or to take a position.
1:57:56 AM
REPRESENTATIVE TARR clarified she meant to say "a non-taxpayer
so, a small producer or an explorer in that context. So ... by
lowering a tax rate for a taxpayer, that advantages them, but
simultaneously disadvantages by lowering the credit for the non-
taxpayer."
CO-CHAIR SADDLER surmised the amendment directs adjustments in
the base rate for production tax, except on lines 21-23, which
direct a change to the net operating loss carry forward.
MR. PAWLOWSKI said correct.
REPRESENTATIVE TARR maintained her objection.
1:59:13 AM
MR. PAWLOWSKI remarked:
Before we move too far with this I'd just like to
point out that we need to reserve the ability to go
back and rerun these economics considering the
totality of the amendments that have been passed
tonight including, in particular, the impact of the 4
percent gross minimum on column (8) [on a slide
provided by Econ One Research entitled, "Average
Government Take for All Existing Producers (FY2015-
FY2019"], which I believe reflects the ... proposed
amendment in front of you, which is 33 percent with
the sliding scale. But it would have a different
impact at the lower prices, given the adoption of the
minimum tax."
1:59:41 AM
A roll call vote was taken. Representatives Olson, P. Wilson,
Hawker, Johnson, Saddler, and Feige voted in favor of Amendment
34. Representatives Seaton, Tarr, and Tuck voted against it.
Therefore, Amendment 34 was adopted by a vote of 6-3.
2:00:43 AM
CO-CHAIR SADDLER moved to report House Committee Substitute
(HCS) for CSSB 21, Version 28-GS1647\K, as amended, out of
committee with individual recommendations and attached fiscal
notes.
REPRESENTATIVE TUCK objected.
2:01:07 AM
The committee took a brief at-ease.
2:01:38 AM
CO-CHAIR SADDLER withdrew his previous motion.
2:01:41 AM
CO-CHAIR SADDLER moved to report HCS CSSB 21, Version 28-
GS1647\K, as amended, out of committee with individual
recommendations and forthcoming fiscal notes.
2:02:06 AM
REPRESENTATIVE TUCK objected, saying more work needs to be done
on the bill. Many hours have been spent in committee hearings
and floor sessions, but there has not been an opportunity to
think things through. His said his objection to moving the bill
is that it has been rushed. In addition, there is other
forthcoming legislation on state oil tax policy to consider.
REPRESENTATIVE TARR said her objection to moving the bill is
that substantial changes have been made in the early hours of
the morning, even though these changes will affect every Alaskan
for many years to come. Most of the fiscal impacts are unknown,
except for the effect of the committee substitute, which is
estimated to be almost $1 billion in FY 14. However, there is
no information on the fiscal impact of the other provisions.
She pointed out there are errors in some amendments, and more
care should be taken. Finally, the committee has not had an
opportunity to hear from its constituents regarding these
changes due to the late hour. She opined the public is not well
served by these circumstances.
REPRESENTATIVE SEATON appreciated the opportunity to have long
discussions on the amendments, although changes may still be
incorporated in the future. He said he wanted to ensure that
the previously discussed report includes the language related to
the Alaska Industrial Development and Export Authority (AIDEA).
2:06:29 AM
CO-CHAIR SADDLER expressed his belief that the committee has
made good changes from the ACES tax system through the committee
process of deliberation. The bill will be further examined in
the next committee of referral and on the House floor. He said
the need for tax reform in Alaska is clear and the stakes are
high.
CO-CHAIR FEIGE thanked members of the committee for their work
on tax law, beginning with HB 72. The process has been an
exhaustive amount of work for members and their staff, and for
Legislative Legal and Research Services, and he deeply commended
their efforts.
REPRESENTATIVE TUCK maintained his objection.
2:09:28 AM
A roll call vote was taken. Representatives Seaton, P. Wilson,
Hawker, Johnson, Olson, Saddler, and Feige voted in favor of
reporting HCS CSSB 21, Version K, as amended, out of committee.
Representatives Tarr and Tuck voted against it. Therefore, HCS
CSSB 21(RES) was reported out of the House Resources Standing
Committee by a vote of 7-2.
2:09:27 AM
CO-CHAIR FEIGE announced that Legislative Legal and Research
Services has the authority to make technical and conforming
amendments to the bill as necessary.
Following are Amendments 31, 32, New 32, Conceptual 33, and 34:
Amendment 31, labeled GS-1647\K.4, Nauman/Bullock, 4/2/13:
Page 1, line 8, following "production;":
Insert "relating to the determination of gross
value at the point of production;"
Page 22, following line 5:
Insert new bill sections to read:
"* Sec. 31. AS 43.55.150(a) is amended to read:
(a) For the purposes of AS 43.55.011 -
43.55.180, the gross value at the point of production
is calculated using the reasonable [ACTUAL] costs of
transportation of the oil or gas. The reasonable
costs of transportation are the actual costs, except
when the
(1) parties to the transportation [SHIPPER]
of oil or gas are [IS] affiliated [WITH THE
TRANSPORTATION CARRIER OR WITH A PERSON THAT OWNS AN
INTEREST IN THE TRANSPORTATION FACILITY];
(2) contract for the transportation of oil
or gas is not an arm's length transaction [;] or is
not representative of the market value of that
transportation; and
(3) method [OR TERMS] of transportation of
oil or gas is [ARE] not reasonable in view of existing
alternative methods of transportation [OPTIONS].
* Sec. 32. AS 43.55.150(b) is amended to read:
(b) If the department finds that the conditions
[A CONDITION] in (a)(1), (2), and [OR] (3) of this
section are [IS] present, the [GROSS VALUE AT THE
POINT OF PRODUCTION IS CALCULATED USING THE ACTUAL
COSTS OF TRANSPORTATION, OR THE REASONABLE COSTS OF
TRANSPORTATION AS DETERMINED UNDER THIS SUBSECTION,
WHICHEVER IS LOWER. THE] department shall determine
the reasonable costs of transportation, using the fair
market value of like transportation, the fair market
value of equally efficient and available alternative
modes of transportation, or other reasonable methods.
Transportation costs fixed by tariff rates properly on
file with [THAT HAVE BEEN ADJUDICATED AS JUST AND
REASONABLE BY] the Regulatory Commission of Alaska or
other [ANOTHER] regulatory agency [AND TRANSPORTATION
COSTS IN AN ARM'S LENGTH TRANSACTION PAID BY PARTIES
NOT AFFILIATED WITH AN OWNER OF THE METHOD OF
TRANSPORTATION] shall be considered prima facie
reasonable."
Renumber the following bill sections accordingly.
Page 29, line 6:
Delete "sec. 31"
Insert "sec. 33"
Page 29, following line 10:
Insert a new subsection to read:
"(d) Sections 31 and 32 of this Act apply to the
transportation of oil and gas produced on and after
January 1, 2014."
Page 29, line 20:
Delete "sec. 36"
Insert "sec. 38"
Page 29, line 24:
Delete "37"
Insert "39"
Page 29, line 25:
Delete "sec. 31"
Insert "sec. 33"
Amendment 32
Page 25, following line 20
Insert new subsections to read:
* Sec. 34. AS 43.55.165 (a) is repealed and
reenacted to read:
(a) Except as provided under (c) - (e) of this
section, for the purposes of AS 43.55.160, a
producer's lease expenditures for a calendar year are
the ordinary and necessary costs upstream of the point
of production of oil and gas that are incurred during
the calendar year by the producer after March 31,
2006, and that are direct costs of exploring for,
developing, or producing oil or gas deposits located
within the producer's leases or properties in the
state or, in the case of land in which the producer
does not own a working interest, that are direct costs
of exploring for oil or gas deposits located within
other land in the state. In determining whether costs
are lease expenditures, the department shall consider,
among other factors,
(1) the typical industry practices and standards
in the state that determine the costs, other than
items listed in (e) of this section, that an operator
is allowed to bill a working interest owner that is
not the operator, under unit operating agreements or
similar operating agreements that were in effect
before December 2, 2005, and were subject to
negotiation with at least one working interest owner
with substantial bargaining power, other than the
operator; and
(2) the standards adopted by the Department of
Natural Resources that determine the costs, other than
items listed in (e) of this section, that a lessee is
allowed to deduct from revenue in calculating net
profits under a lease issued under AS
38.05.180(f)(3)(B), (D), or (E).
* Sec. 35. AS 43.55.165 (b) is repealed and
reenacted to read:
(b) For purposes of (a) of this section,
(1) direct costs include
(A) an expenditure, when incurred, to acquire an
item if the acquisition cost is otherwise a direct
cost, notwithstanding that the expenditure may be
required to be capitalized rather than treated as an
expense for financial accounting or federal income tax
purposes;
(B) payments of or in lieu of property taxes,
sales and use taxes, motor fuel taxes, and excise
taxes;
(C) a reasonable allowance, as determined under
regulations adopted by the department, for overhead
expenses directly related to exploring for,
developing, and producing oil or gas deposits located
within leases or properties or other land in the
state;
(2) an activity does not need to be physically
located on, near, or within the premises of the lease
or property within which an oil or gas deposit being
explored for, developed, or produced is located in
order for the cost of the activity to be a cost
upstream of the point of production of the oil or gas.
* Sec. 36. AS 43.55.165 (c) is repealed and
reenacted to read:
(c) Subject to (g) and (h) of this section, if
the department finds that the pertinent provisions of
a unit operating agreement or similar operating
agreement are substantially consistent with the
department's determinations and standards under (a) of
this section concerning whether costs are lease
expenditures, the department may authorize or require
a producer, subject to conditions prescribed under
regulations adopted by the department, to treat as
that portion of its lease expenditures for a calendar
year applicable to oil and gas produced from a lease
or property in the state only
(1) the costs, other than items listed in (e) of
this section, that are incurred by the operator during
the calendar year and that
(A) are billable to the producer by the operator
in accordance with the terms of the agreement to which
that lease or property is subject;
(B) for a producer that is the operator, would be
billable to the producer by the operator in accordance
with the terms of the agreement to which that lease or
property is subject if the producer were not the
operator;
(C) would be billable to the producer by the
operator in accordance with the terms of the agreement
if that lease or property were subject to the
agreement; or
(D) for a producer that is the operator, would be
billable to the producer by the operator in accordance
with the terms of the agreement if that lease or
property were subject to the agreement and if the
producer were not the operator; and
(2) a reasonable percentage, as determined under
regulations adopted by the department, of the costs
that are billable under (1) of this subsection as an
allowance for overhead expenses directly related to
exploring for, developing, and producing oil or gas
deposits located within the lease or property, to the
extent those expenses are not billable under the
agreement.
* Sec. 37. AS 43.55.165 (d) is repealed and
reenacted to read:
(d) Subject to (g) and (h) of this section, if
the department makes the finding described in (c) of
this section with respect to a unit operating
agreement or similar operating agreement and, in
addition, finds that at least one working interest
owner party to the agreement, other than the operator,
with substantial incentive and ability to effectively
audit billings under the agreement in fact is
effectively auditing billings under the agreement, the
department may authorize or require a producer,
subject to conditions prescribed under regulations
adopted by the department, to treat as that portion of
its lease expenditures for a calendar year applicable
to oil and gas produced from a lease or property in
the state only
(1) the costs, other than items listed in (e) of
this section, that are incurred by the operator during
the calendar year and that
(A) are billed to the producer by the operator
under the agreement to which that lease or property is
subject and are either not disputed by a working
interest owner party to the agreement or are finally
determined to be properly billable as a result of
dispute resolution; or
(B) for a producer that is the operator, would be
billable to the producer by the operator in accordance
with the terms of the agreement to which that lease or
property is subject if the producer were not the
operator; and
(2) a reasonable percentage, as determined under
regulations adopted by the department, of the costs
that are billed under (1) of this subsection as an
allowance for overhead expenses directly related to
exploring for, developing, and producing oil or gas
deposits located within the lease or property, to the
extent those expenses are not billable under the
agreement
Renumber following sections accordingly
Page 29, line 20 following "sec."
Delete "36"
Insert "40"
Page 29, line 24 following "and"
Delete "37"
Insert "41"
New Amendment 32, labeled 28-GS1647\K.34, Nauman/Bullock,
4/3/13:
Page 1, line 11, following "properties;":
Insert "relating to the calculation of lease
expenditures"
Page 25, following line 20:
Insert a new bill section to read:
"* Sec. 33. AS 43.55.165 is amended by adding new
subsections to read:
(m) Except as provided under (e), (o), and (p) of
this section, for the purposes of AS 43.55.160, a
producer's lease expenditures for a calendar year are
the ordinary and necessary costs upstream of the point
of production of oil and gas that are incurred during
the calendar year by the producer on or after
January 1, 2014, and that are direct costs of
exploring for, developing, or producing oil or gas
deposits located within the producer's leases or
properties in the state or, in the case of land in
which the producer does not own a working interest,
that are direct costs of exploring for oil or gas
deposits located within other land in the state. In
determining whether costs are lease expenditures, the
department shall consider, among other factors,
(1) the typical industry practices and
standards in the state that determine the costs, other
than items listed in (e) of this section, that an
operator is allowed to bill a working interest owner
that is not the operator, under unit operating
agreements or similar operating agreements that were
in effect before December 2, 2005, and were subject to
negotiation with at least one working interest owner
with substantial bargaining power, other than the
operator; and
(2) the standards adopted by the Department
of Natural Resources that determine the costs, other
than items listed in (e) of this section, that a
lessee is allowed to deduct from revenue in
calculating net profits under a lease issued under
AS 38.05.180(f)(3)(B), (D), or (E).
(n) For purposes of (m) of this section,
(1) direct costs include
(A) an expenditure, when incurred, to
acquire an item if the acquisition cost is otherwise a
direct cost, notwithstanding that the expenditure may
be required to be capitalized rather than treated as
an expense for financial accounting or federal income
tax purposes;
(B) payments of or in lieu of property
taxes, sales and use taxes, motor fuel taxes, and
excise taxes;
(C) a reasonable allowance, as determined
under regulations adopted by the department, for
overhead expenses directly related to exploring for,
developing, and producing oil or gas deposits located
within leases or properties or other land in the
state;
(2) an activity does not need to be
physically located on, near, or within the premises of
the lease or property within which an oil or gas
deposit being explored for, developed, or produced is
located in order for the cost of the activity to be a
cost upstream of the point of production of the oil or
gas.
(o) On or after January 1, 2014, subject to (g)
and (h) of this section, if the department finds that
the pertinent provisions of a unit operating agreement
or similar operating agreement are substantially
consistent with the department's determinations and
standards under (m) of this section concerning whether
costs are lease expenditures, the department may
authorize or require a producer, subject to conditions
prescribed under regulations adopted by the
department, to treat as that portion of its lease
expenditures for a calendar year applicable to oil and
gas produced from a lease or property in the state
only
(1) the costs, other than items listed in
(e) of this section, that are incurred by the operator
during the calendar year and that
(A) are billable to the producer by the
operator in accordance with the terms of the agreement
to which that lease or property is subject;
(B) for a producer that is the operator,
would be billable to the producer by the operator in
accordance with the terms of the agreement to which
that lease or property is subject if the producer were
not the operator;
(C) would be billable to the producer by
the operator in accordance with the terms of the
agreement if that lease or property were subject to
the agreement; or
(D) for a producer that is the operator,
would be billable to the producer by the operator in
accordance with the terms of the agreement if that
lease or property were subject to the agreement and if
the producer were not the operator; and
(2) a reasonable percentage, as determined
under regulations adopted by the department, of the
costs that are billable under (1) of this subsection
as an allowance for overhead expenses directly related
to exploring for, developing, and producing oil or gas
deposits located within the lease or property, to the
extent those expenses are not billable under the
agreement.
(p) Subject to (g) and (h) of this section, if
the department makes the finding described in (o) of
this section with respect to a unit operating
agreement or similar operating agreement and, in
addition, finds that at least one working interest
owner party to the agreement, other than the operator,
with substantial incentive and ability to effectively
audit billings under the agreement in fact is
effectively auditing billings under the agreement, the
department may authorize or require a producer,
subject to conditions prescribed under regulations
adopted by the department, to treat as that portion of
its lease expenditures for a calendar year applicable
to oil and gas produced from a lease or property in
the state only
(1) the costs, other than items listed in
(e) of this section, that are incurred by the operator
during the calendar year and that
(A) are billed to the producer by the
operator under the agreement to which that lease or
property is subject and are either not disputed by a
working interest owner party to the agreement or are
finally determined to be properly billable as a result
of dispute resolution; or
(B) for a producer that is the operator,
would be billable to the producer by the operator in
accordance with the terms of the agreement to which
that lease or property is subject if the producer were
not the operator; and
(2) a reasonable percentage, as determined
under regulations adopted by the department, of the
costs that are billed under (1) of this subsection as
an allowance for overhead expenses directly related to
exploring for, developing, and producing oil or gas
deposits located within the lease or property, to the
extent those expenses are not billable under the
agreement."
Renumber the following bill sections accordingly.
Page 29, line 1:
Delete "and 43.55.160(c)"
Insert "43.55.160(c), 43.55.165(a), 43.55.165(b),
43.55.165(c), and 43.55.165(d)"
Page 29, line 20:
Delete "sec. 36"
Insert "sec. 37"
Page 29, line 24:
Delete "37"
Insert "38"
Conceptual Amendment 33:
Page 18, line 1, following "2013"
Insert "from leases or properties north of 68
degrees North latitude."
Page 18, line 1, following "not"
Insert "be applied against the tax calculated
under AS 43.55.011(f). A tax credit authorized by the
subsection may not"
Page 18, line 2, following "below"
Insert "the amount calculated under AS
43.55.011(f)"
Delete "zero"
Amendment 34:
Page 6, line 8:
Delete "35"
Insert "33"
Page 10, line 17:
Delete "35"
Insert "33"
Page 11, line 1:
Delete "35"
Insert "33"
Page 11, line 14:
Delete "35"
Insert "33"
Page 11, line 23:
Delete "35"
Insert "33"
Page 15, line 10:
Delete "35"
Insert "33"
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