Legislature(2009 - 2010)BARNES 124

04/10/2010 10:00 AM RESOURCES


Download Mp3. <- Right click and save file as

Audio Topic
10:18:14 AM Start
10:18:37 AM SB305
08:43:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 12:00 pm on 4/11/10 --
+ SB 301 POWER PROJECT FUND TELECONFERENCED
Scheduled But Not Heard
+= HB 365 FISH PROCESSOR FEES, LICENSES, RECORDS TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 305 SEPARATE OIL & GAS PRODUCTION TAX TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 10, 2010                                                                                         
                           10:18 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Craig Johnson, Co-Chair                                                                                          
Representative Mark Neuman, Co-Chair                                                                                            
Representative Bryce Edgmon                                                                                                     
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Chris Tuck                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Peggy Wilson                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 305(FIN)(TITLE AM)                                                                     
"An Act providing that the  tax rate applicable to the production                                                               
of  oil   as  the   average  on  oil   and  gas   production  for                                                               
appropriation to  the community revenue sharing  fund; production                                                               
tax  value of  oil, gas  produced in  the Cook  Inlet sedimentary                                                               
basin, and gas  relating to the allocation  of lease expenditures                                                               
and adjustments  to lease expenditures;  produced outside  of the                                                               
Cook Inlet sedimentary basin and  used in the state increases and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 301                                                                                                             
"An  Act relating  to  the power  project  fund; authorizing  the                                                               
Alaska Energy  Authority to charge  and collect fees  relating to                                                               
the power  project fund; authorizing the  Alaska Energy Authority                                                               
to  sell and  authorizing the  Alaska Industrial  Development and                                                               
Export Authority  to purchase  loans of  the power  project fund;                                                               
providing  legislative  approval for  the  sale  and purchase  of                                                               
loans  of  the  power  project   fund  under  the  memorandum  of                                                               
understanding  dated  February 17,  2010;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
HOUSE BILL NO. 365                                                                                                              
"An  Act relating  to  the power  project  fund; authorizing  the                                                               
Alaska Energy  Authority to charge  and collect fees  relating to                                                               
the power  project fund; authorizing the  Alaska Energy Authority                                                               
to  sell and  authorizing the  Alaska Industrial  Development and                                                               
Export Authority  to purchase  loans of  the power  project fund;                                                               
providing  legislative  approval for  the  sale  and purchase  of                                                               
loans  of  the  power  project   fund  under  the  memorandum  of                                                               
understanding  dated  February 17,  2010;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 305                                                                                                                  
SHORT TITLE: SEPARATE OIL & GAS PROD. TAX/ DEDUCTIONS                                                                           
SPONSOR(s): FINANCE                                                                                                             
                                                                                                                                
03/08/10       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/08/10       (S)       FIN                                                                                                    
03/09/10       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/09/10       (S)       Heard & Held                                                                                           
03/09/10       (S)       MINUTE(FIN)                                                                                            
03/10/10       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/10/10       (S)       <Bill Hearing Canceled>                                                                                
03/11/10       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/11/10       (S)       -- MEETING CANCELED --                                                                                 
03/12/10       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/12/10       (S)       Heard & Held                                                                                           
03/12/10       (S)       MINUTE(FIN)                                                                                            
03/18/10       (S)       FIN AT 3:00 PM SENATE FINANCE 532                                                                      
03/18/10       (S)       Heard & Held                                                                                           
03/18/10       (S)       MINUTE(FIN)                                                                                            
03/29/10       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/29/10       (S)       <Bill Hearing Postponed>                                                                               
03/31/10       (S)       FIN RPT CS  6DP 1AM    NEW TITLE                                                                       
03/31/10       (S)       DP: HOFFMAN, STEDMAN, THOMAS, EGAN,                                                                    
                         OLSON, ELLIS                                                                                           
03/31/10       (S)       AM: HUGGINS                                                                                            
03/31/10       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/31/10       (S)       Moved CSSB 305(FIN) Out of Committee                                                                   
03/31/10       (S)       MINUTE(FIN)                                                                                            
04/01/10       (S)       TRANSMITTED TO (H)                                                                                     
04/01/10       (S)       VERSION: CSSB 305(FIN)(TITLE AM)                                                                       
04/05/10       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/05/10       (H)       RES, FIN                                                                                               
04/07/10       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/07/10       (H)       Heard & Held                                                                                           
04/07/10       (H)       MINUTE(RES)                                                                                            
04/09/10       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/09/10       (H)       Heard & Held                                                                                           
04/09/10       (H)       MINUTE(RES)                                                                                            
04/10/10       (H)       RES AT 10:00 AM BARNES 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
PAT GALVIN, Commissioner                                                                                                        
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     During  hearing  of   SB  305,  answered                                                             
questions.                                                                                                                      
                                                                                                                                
DONALD BULLOCK JR., Attorney                                                                                                    
Legislative Legal Counsel                                                                                                       
Legislative Legal and Research Services                                                                                         
Legislative Affairs Agency                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   During the  hearing on  SB 305,  explained                                                             
Amendment 4.                                                                                                                    
                                                                                                                                
ROGER MARKS, Consulting Petroleum Economist                                                                                     
Logsdon & Associates                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Reviewed  the document  entitled "SB  305:                                                             
Flowchart: 26-LS1577\WA.6".                                                                                                     
                                                                                                                                
SENATOR JOE PASKVAN                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided comments on SB 305.                                                                             
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:18:14 AM                                                                                                                 
                                                                                                                              
CO-CHAIR  MARK   NEUMAN  called  the  House   Resources  Standing                                                             
Committee meeting to  order at 10:18 a.m.   Representatives Tuck,                                                               
Seaton,  Olson,  Johnson,  Guttenberg, Edgmon,  and  Neuman  were                                                               
present at  the call to  order.  Representative  Kawasaki arrived                                                               
as the meeting was in progress.                                                                                                 
                                                                                                                                
        SB 305-SEPARATE OIL & GAS PROD. TAX/ DEDUCTIONS                                                                     
                                                                                                                                
10:18:37 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN announced that the  first order of business is CS                                                               
FOR SENATE  BILL NO. 305(FIN)(title  am), "An Act  providing that                                                               
the tax rate  applicable to the production of oil  as the average                                                               
production  tax value  of oil,  gas  produced in  the Cook  Inlet                                                               
sedimentary basin,  and gas  produced outside  of the  Cook Inlet                                                               
sedimentary  basin and  used  in the  state  increases above  $30                                                               
shall be  0.4 percent  multiplied by  the number  that represents                                                               
the difference between that average  monthly production tax value                                                               
and $30, or the sum of 25  percent and the product of 0.1 percent                                                               
multiplied by  the number that represents  the difference between                                                               
that  average monthly  production  tax value  and $92.50,  except                                                               
that the total rate determined  in the calculation may not exceed                                                               
50 percent; providing  for an increase in the rate  of tax on the                                                               
production of  gas as the average  production tax value on  a BTU                                                               
equivalent  barrel basis  of  gas produced  outside  of the  Cook                                                               
Inlet  sedimentary basin  and  not used  in  the state  increases                                                               
above $30;  relating to  payments of the  oil and  gas production                                                               
tax; relating to availability of  a portion of the money received                                                               
from the tax  on oil and gas production for  appropriation to the                                                               
community  revenue sharing  fund; relating  to the  allocation of                                                               
lease  expenditures and  adjustments to  lease expenditures;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
10:18:55 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN   focused  the  committee's  attention   on  the                                                               
amendments in the committee packet.                                                                                             
                                                                                                                                
10:19:42 AM                                                                                                                   
                                                                                                                                
The committee took an at-ease from 10:19 a.m. to 10:23 a.m.                                                                     
                                                                                                                                
10:24:06 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON moved  Amendment 1, labeled 26-LS1577\WA.2,                                                               
Bullock, 4/5/10,  the text for  which is  provided at the  end of                                                               
the minutes.                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN and REPRESENTATIVE OLSON objected.                                                                              
                                                                                                                                
10:24:22 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON  pointed  out that  the  committee  packet                                                               
includes an  explanation of Amendment 1  entitled "Explanation of                                                               
Amendment  WA.2  to  CSSB 305(FIN)(title  am)."    Representative                                                               
Seaton  explained   that  Amendment   1  addresses   the  concern                                                               
regarding the  existing exemption for  in-state gas sold  off the                                                               
North Slope.  The  concern is that having a gas  tax rate off the                                                               
North Slope  for citizens of  Alaska that is different  than that                                                               
for citizens  of any  other state  would be  in violation  of the                                                               
Commerce  Clause in  the U.S.  Constitution, which  doesn't allow                                                               
differential  taxation based  on  the state  of  residency.   The                                                               
intent is to  review a situation in which a  producer or consumer                                                               
sued after the  open season.  The suit would  be in federal court                                                               
and the remedy  requested would be for the  non Alaskan residents                                                               
or  producers  to have  the  lower  tax  rate that  was  afforded                                                               
Alaskans.    If the  federal  court  accepted the  aforementioned                                                               
remedy,  the  pipeline's 10  years  of  operation would  generate                                                               
almost no production  tax for the State of Alaska.   On the other                                                               
hand, the federal court could  nullify Alaska's exemption for in-                                                               
state gas use.  Representative  Seaton opined that if a plaintiff                                                               
can assert  damage after gas flows  due to the higher  gas price,                                                               
the likely  result would be to  lower those costs.   If the court                                                               
raised the cost  for Alaskans, it would be a  precedent in that a                                                               
suit  could result  in  a  remedy that  isn't  beneficial to  the                                                               
[plaintiff].  Since the existing  statute says "the tax system in                                                               
place at the start of open  season", Amendment 1 would remove the                                                               
in-state  exemption and  a forthcoming  amendment to  Amendment 1                                                               
would specify  that change would only  be in effect for  30 days.                                                               
The  aforementioned would  resolve the  potential bind  described                                                               
above and  the Alaska  Gasline Inducement  Act (AGIA)  terms that                                                               
specify the tax rate is guaranteed  for the first 10 years of gas                                                               
flowing through  the pipeline.   Representative  Seaton clarified                                                               
that Amendment 1  with the proposed amendment to  it would result                                                               
in the in-state gas tax not  being applicable until 30 days after                                                               
the  effective date  of  the legislation.    The legislation,  he                                                               
reminded the  committee, is only  useful if it's signed  prior to                                                               
the start of open season  and re-implements the existing tax code                                                               
after 30 days.                                                                                                                  
                                                                                                                                
10:29:40 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  moved Conceptual Amendment 2  to Amendment                                                               
1, as follows [original punctuation provided]:                                                                                  
                                                                                                                                
      The tax provisions for in-state sale of gas from the                                                                      
      North Slope and other fields are re-enacted 30-days                                                                       
     after the effective date of this act                                                                                       
                                                                                                                                
10:30:00 AM                                                                                                                   
                                                                                                                                
CO-CHAIR   NEUMAN   clarified    that   the   document   entitled                                                               
"Explanation  of  Amendment  WA.2  to  CSSB  305(FIN)(title  am)"                                                               
applies if  Conceptual Amendment 2  to Amendment 1 passes.   Upon                                                               
determining  there was  no objection,  announced that  Conceptual                                                               
Amendment 2 to Amendment 1  was adopted.  Therefore, Amendment 1,                                                               
as amended, was before the committee.                                                                                           
                                                                                                                                
10:31:15 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN  inquired as to  why the producers would  sue the                                                               
state if the tax is lower.                                                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON  opined  that a  contract  provision  that                                                               
specifies an almost  0 percent tax on the gas  for 10 years could                                                               
be advantageous  for a  company.  Furthermore,  it could  be that                                                               
when  taxes are  negotiated, after  that open  season, the  state                                                               
could negotiate a provision that  guarantees the [producers] will                                                               
not sue.   However, the  potential of  a suit being  brought from                                                               
consumers  or  an electricity  generator  in  other states  would                                                               
remain.    He  acknowledged  that   whether  the  suit  would  be                                                               
successful or not is unknown.                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN remarked that he  couldn't see why the producers,                                                               
when they're  paying a lower tax,  would sue the state.   He said                                                               
he just didn't believe that would happen.                                                                                       
                                                                                                                                
10:33:42 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN related  that a  lot of  electrical and  utility                                                               
generating companies  are counting on  this first open  season in                                                               
order to  create the necessary economies  of scale to bid  on in-                                                               
state  capacity of  the pipeline.   He  highlighted that  if this                                                               
proposal  was  in  place,  the   taxes  that  [the  residents  of                                                               
Fairbanks]  would pay  for electrical  generation  would be  much                                                               
higher because during the initial  open season [the tax] would be                                                               
the current 25  percent plus productivity rather  than 5 percent.                                                               
The  aforementioned  would  result  in higher  electric  and  gas                                                               
bills.  A spur  line going to Valdez, he opined,  with a route to                                                               
South Central would impact the  residents in South Central Alaska                                                               
similarly.                                                                                                                      
                                                                                                                                
10:35:19 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON explained  that Amendment  1, as  amended,                                                               
specifies  that  30   days  after  the  effective   date  of  the                                                               
legislation, [the tax] would return  to the existing situation in                                                               
which there's an  exemption for in-state use.   He clarified that                                                               
Amendment 1, as amended, clarifies  that there's no need to worry                                                               
that  the export  gas will  qualify for  the in-state  gas break.                                                               
Although  there would  be  no  effect on  any  in-state user,  it                                                               
doesn't mean  that in the future,  if there's a gas  sale, a suit                                                               
under   the   Commerce  Clause   wouldn't   be   brought.     The                                                               
aforementioned  could  occur anyway,  he  said.   However,  there                                                               
could be no claim that under  AGIA they are entitled to the lower                                                               
tax  rate for  10  years.   Representative  Seaton  said that  he                                                               
didn't believe  [under Amendment  1, as  amended] there  would be                                                               
any impact on in-state use.                                                                                                     
                                                                                                                                
CO-CHAIR NEUMAN interjected, "But we, certainly don't know."                                                                    
                                                                                                                                
10:37:06 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GUTTENBERG   asked  who  else,   including  legal                                                               
counsel, is present to answer questions.                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON   related  that  Don   Bullock,  Attorney,                                                               
Legislative Legal Services, is the drafter.                                                                                     
                                                                                                                                
10:38:16 AM                                                                                                                   
                                                                                                                                
PAT  GALVIN, Commissioner,  Department of  Revenue (DOR),  stated                                                               
that  [the  administration]  is aware  of  the  constitutionality                                                               
issues related to  the in-state gas provisions  of the production                                                               
tax.   Regarding the  concern with Amendment  1, as  amended, the                                                               
Department of Law doesn't view the  remedy for a challenge to the                                                               
favorable in-state  tax treatment  as eliminating  the underlying                                                               
base tax and imposing the favorable  exception as the rule.  That                                                               
is, if it  was challenged, it would be challenged  based upon the                                                               
favorable  treatment given  to a  small portion  of the  gas used                                                               
within  the state.   The  DOL couldn't  think of  a situation  in                                                               
which the  court had taken  an unconstitutional exception  to the                                                               
rule for  which the remedy was  to eliminate the rule  and impose                                                               
the exception on everyone.                                                                                                      
                                                                                                                                
10:40:24 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN surmised then that  a lock-in for in-state use is                                                               
not seen as a risk.                                                                                                             
                                                                                                                                
COMMISSIONER  GALVIN  noted  his  agreement,  adding  that  if  a                                                               
subsequent  legal challenge  is successful,  it's not  seen as  a                                                               
risk that the  low tax rate that's the exception  to the existing                                                               
rule would  be imposed  on everyone.   The aforementioned  is the                                                               
advice from DOL.                                                                                                                
                                                                                                                                
CO-CHAIR NEUMAN further surmised, "You  don't think it will be an                                                               
issue."                                                                                                                         
                                                                                                                                
COMMISSIONER GALVIN replied  yes, but if the  committee still has                                                               
concern he  suggested that the  effective date for  the provision                                                               
start at the  beginning of a month, even if  it is retroactive to                                                               
the beginning of the month in which the legislation is passed.                                                                  
                                                                                                                                
10:41:57 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON related his  understanding that the lawyers                                                               
don't believe there  is risk of a lawsuit from  another state and                                                               
that the federal court would only  impose a higher tax on Alaskan                                                               
gas.  He related his  further understanding that the courts won't                                                               
give favorable treatment to the  plaintiffs, residents of Chicago                                                               
claiming they were paying a higher price, in the case.                                                                          
                                                                                                                                
COMMISSIONER GALVIN  clarified that the question  wasn't asked in                                                               
the context  of a  risk percentage,  but rather  in terms  of the                                                               
potential  outcome.     The  determination   was  there   was  no                                                               
identified precedent  in which the  court imposed  the exception,                                                               
which  is the  concern being  expressed,  in order  to rectify  a                                                               
constitutional challenge.   The standard practice  when there's a                                                               
constitutional  challenge   to  an   exception  of   an  existing                                                               
structure,  the court  rules that  that exceptional  treatment is                                                               
unconstitutional  and returns  it  to the  state  to rectify  the                                                               
exceptional treatment.   He  suggested that if  the desire  is to                                                               
"take it  off the  table," then  do so in  a manner  that doesn't                                                               
create an administrative problem.                                                                                               
                                                                                                                                
10:44:30 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON  inquired as  to  how  much and  how  many                                                               
people are paying a production tax on the North Slope currently.                                                                
                                                                                                                                
COMMISSIONER GALVIN  answered that he  wasn't sure he is  able to                                                               
reveal that information.                                                                                                        
                                                                                                                                
CO-CHAIR NEUMAN surmised that it would  be a minimal amount as it                                                               
would only  refer to some of  the pump stations and  what is sold                                                               
at Kuparuk.                                                                                                                     
                                                                                                                                
10:44:59 AM                                                                                                                   
                                                                                                                                
COMMISSIONER GALVIN  related that he  is aware of gas  being sold                                                               
for  the purpose  of  power  that is  being  used between  units.                                                               
However, he didn't know whether  the gas being used between units                                                               
is being claimed as a taxable  event.  He restated that he didn't                                                               
believe he could reveal what taxpayers  are involved in that.  In                                                               
response to Co-Chair Johnson,  Commissioner Galvin specified that                                                               
he can't answer these questions because of confidentiality.                                                                     
                                                                                                                                
10:45:37 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN  noted his  assumption  that  the pump  stations                                                               
probably use  a small  amount of  electrical generation  and move                                                               
over to  Kuparuk for  electrical generation and  use some  of the                                                               
waste heat.  However, he assumed that a minimal amount is used.                                                                 
                                                                                                                                
10:45:58 AM                                                                                                                   
                                                                                                                                
COMMISSIONER  GALVIN  related  that  when  the  issue  was  first                                                               
identified, the  impact in  dollar value between  the gas  in the                                                               
Cook Inlet  area and the gas  in the North Slope  ranged from $40                                                               
million a  year to approaching  $200 million a year  when there's                                                               
high progressivity.  The predominant  portion of that is from the                                                               
Cook Inlet area.                                                                                                                
                                                                                                                                
10:46:48 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN asked  if  it  would be  safe  to  say that  the                                                               
miscible gases that are injected or  mixed with the oils that are                                                               
going through  the Trans-Alaska Pipeline System  (TAPS) are worth                                                               
much more to the state  than the electrical generation being used                                                               
[at the pump stations].                                                                                                         
                                                                                                                                
COMMISSIONER GALVIN answered  that it's safe to say  the gas that                                                               
is  used  for  other  purposes within  the  field,  whether  it's                                                               
reinjected  or  used  as  a  miscible  injectant,  is  much  more                                                               
valuable than what's used for  [electrical generation at the pump                                                               
stations].                                                                                                                      
                                                                                                                                
10:47:23 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK related his  understanding that DOL is saying                                                               
that there  is the potential  during this first open  season when                                                               
the tax  rate is locked  in that the state  could be sued  due to                                                               
inter-state commerce laws and the  exemption for power generation                                                               
and fuel for  heating would be removed.  Therefore,  there is the                                                               
potential for consumers  to face higher utility  rates.  However,                                                               
the revenue  side is protected  with the  gas going to  the Lower                                                               
48.                                                                                                                             
                                                                                                                                
COMMISSIONER GALVIN said that's correct.                                                                                        
                                                                                                                                
10:48:30 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG,  returning to  AGIA as a  whole, asked                                                               
if  the  department explored  the  possibility  of a  suit  being                                                               
brought by Chicago ratepayers  or Chicago's regulatory commission                                                               
in response to the open season  and as an attempt to receive that                                                               
lower rate.                                                                                                                     
                                                                                                                                
COMMISSIONER GALVIN  answered that at  the time the  AGIA statute                                                               
was put in place, it  was evaluated regarding potential claims of                                                               
equal  protection  or  other  constitutional  violations  due  to                                                               
providing favorable  treatment of  those who participated  in the                                                               
open season versus those who  didn't.  The determination was that                                                               
it wouldn't create a constitutional issue.                                                                                      
                                                                                                                                
10:49:56 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG  opined that the effects  [of Amendment                                                               
1,  as  amended]  on  the Fairbanks  Natural  Gas  (FNG)  bonding                                                               
project  are  significant.   Therefore,  he  inquired as  to  the                                                               
effect provisions  that open and  close exceptions would  have on                                                               
the bonding market.                                                                                                             
                                                                                                                                
COMMISSIONER  GALVIN responded  that  the  bonding market  reacts                                                               
unfavorably to  uncertainty, in general.   Moreover,  the bonding                                                               
market  takes  into  account  the  relative  likelihood  of  that                                                               
uncertainty taking place.                                                                                                       
                                                                                                                                
10:51:04 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON then  offered  Conceptual  Amendment 3  to                                                               
Amendment 1,  as amended, such  that the effective date  would be                                                               
retroactive to April 1 through May 31.                                                                                          
                                                                                                                                
10:54:12 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  explained that  he is  offering Conceptual                                                               
Amendment  3  to   Amendment  1,  as  amended,   in  response  to                                                               
Commissioner Galvin's  statement that there are  some small sales                                                               
off the  North Slope.   Specifying  a date  would make  it easier                                                               
administratively for the taxpayers that  are incurring the taxes.                                                               
To be effective, it must start  of the first binding open season.                                                               
He  noted that  the  [proposed retroactive  effective date]  does                                                               
refer to the year 2010.                                                                                                         
                                                                                                                                
CO-CHAIR JOHNSON objected to Conceptual  Amendment 3 to Amendment                                                               
1, as amended.                                                                                                                  
                                                                                                                                
10:55:32 AM                                                                                                                   
                                                                                                                                
CO-CHAIR JOHNSON then  withdrew his objection, but  added that he                                                               
doesn't intend to vote for [Amendment 1, as amended].                                                                           
                                                                                                                                
There  being  no further  objection,  Conceptual  Amendment 3  to                                                               
Amendment 1, as amended, was adopted.                                                                                           
                                                                                                                                
10:56:10 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  TUCK   surmised  that   with  [Amendment   1,  as                                                               
amended], any of the advantages  for in-state use will be removed                                                               
for the  first open season.   However, the aforementioned  can be                                                               
re-implemented  to protect  [the state]  against potential  suits                                                               
that may increase consumers' utility  bills since they would lose                                                               
the tax breaks for in-state use.                                                                                                
                                                                                                                                
10:56:59 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  highlighted that in actuality  there is no                                                               
way to protect against that  because that's a U.S. constitutional                                                               
problem.   However, it protects  against having the  10-year AGIA                                                               
lock-in of  that rate  for exported gas.   Although  the in-state                                                               
rate may have  to be changed, [Amendment 1,  as amended] protects                                                               
against the possibility of a lawsuit  for which the remedy is the                                                               
plaintiff receiving  the lower tax  rate.   Representative Seaton                                                               
said  that  Representative  Tuck   is  effectively  correct,  but                                                               
pointed  out   that  [Amendment  1,  as   amended]  prevents  the                                                               
possibility of the state having an  extremely low tax rate for 10                                                               
years on  gas that's exported to  the Lower 48.   He reminded the                                                               
committee that  [Amendment 1,  as amended]  does reenact  the in-                                                               
state gas exemption 60 days later.                                                                                              
                                                                                                                                
10:58:18 AM                                                                                                                   
                                                                                                                                
CO-CHAIR   NEUMAN   interjected   that  the   aforementioned   is                                                               
Representative Seaton's  opinion and Commissioner  Galvin doesn't                                                               
hold   the  same   opinion  for   the  reasons   stated  earlier.                                                               
Therefore, Co-Chair Neuman maintained  his objection to Amendment                                                               
1, as amended.                                                                                                                  
                                                                                                                                
10:59:41 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON related his  belief that the lower in-state                                                               
tax  does pose  a risk  of legal  action, which  he opined  could                                                               
likely be  found if one were  to research the Tonnage  Clause and                                                               
the Commerce Clause in the U.S. Constitution.                                                                                   
                                                                                                                                
11:00:35 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE    GUTTENBERG   expressed    concern   with    the                                                               
constitutional  question [related  to  the  lower in-state  tax],                                                               
which deserves more analysis.   He expressed further concern with                                                               
the affect  [of Amendment  1, as  amended] on  FNG bonding.   The                                                               
project  in  Fairbanks is  a  bridge  between now  and  tomorrow.                                                               
Representative Guttenberg said that  he's not comfortable passing                                                               
Amendment    1,   as    amended,   without    understanding   the                                                               
aforementioned ramifications.                                                                                                   
                                                                                                                                
11:01:55 AM                                                                                                                   
                                                                                                                                
CO-CHAIR JOHNSON called the question.                                                                                           
                                                                                                                                
11:02:07 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN,  in   response  to  Representative  Guttenberg,                                                               
clarified  that  the roll  will  be  called  on Amendment  1,  as                                                               
amended.                                                                                                                        
                                                                                                                                
11:02:31 AM                                                                                                                   
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
11:03:38 AM                                                                                                                   
                                                                                                                                
CO-CHAIR JOHNSON withdrew his call for the question.                                                                            
                                                                                                                                
11:04:02 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN  related his understanding  that Amendment  1, as                                                               
amended, wouldn't  allow a  discount for a  lower [tax]  rate for                                                               
work FNG performed during April 1 to May 31.                                                                                    
                                                                                                                                
11:04:27 AM                                                                                                                   
                                                                                                                                
COMMISSIONER GALVIN reminded the committee  that at this time FNG                                                               
is  utilizing gas  from Cook  Inlet, and  therefore enjoying  the                                                               
benefits of  a tax  that wouldn't be  impacted by  this proposal.                                                               
He pointed out that [Amendment  1, as amended] only addresses the                                                               
portion  of the  law  dealing  with gas  used  within the  state.                                                               
Fairbanks Natural Gas  interest is in ensuring that  gas from the                                                               
North  Slope  and used  within  the  state  is protected.    This                                                               
proposal would  eliminate the lower  tax rate for two  months and                                                               
then  reinstate it.    Therefore,  by the  time  FNG is  actually                                                               
shipping gas  the lower tax rate  would be in place.   He related                                                               
his  understanding that  Representative Guttenberg's  question is                                                               
whether  eliminating the  lower tax  and reinstating  it multiple                                                               
times creates  an issue  for FNG's financing,  which is  really a                                                               
question for FNG.                                                                                                               
                                                                                                                                
11:05:55 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON  told the  committee  that  he understood  that                                                               
Representative Kelly has received calls  of concern from FNG.  He                                                               
then called the question.                                                                                                       
                                                                                                                                
11:06:31 AM                                                                                                                   
                                                                                                                                
A  roll call  vote was  taken.   Representative  Seaton voted  in                                                               
favor  of  adopting Amendment  1,  as  amended.   Representatives                                                               
Edgmon, Guttenberg,  Kawasaki, Tuck,  Olson, Neuman,  and Johnson                                                               
voted against it.  Therefore,  Amendment 1, as amended, failed to                                                               
be adopted by a vote of 1-7.                                                                                                    
                                                                                                                                
11:07:45 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG  announced that he would  not offer his                                                               
amendment in the committee packet.                                                                                              
                                                                                                                                
11:08:18 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON  moved  Amendment  4,  labeled  26-LS1577\WA.6,                                                               
Bullock, 4/10/10,  the text for which  is provided at the  end of                                                               
this document.                                                                                                                  
                                                                                                                                
11:09:24 AM                                                                                                                   
                                                                                                                                
CO-CHAIR JOHNSON explained  that the intent of Amendment  4 is to                                                               
enact  on   April  29  the  decoupling   legislation  before  the                                                               
committee and then  repeal it two days later.   Therefore, on May                                                               
1 the  law would  be a  decoupled oil and  gas provision  and the                                                               
current law would be in effect.   Amendment 4 would alleviate all                                                               
the   cost  allocation,   eliminate  the   additional  need   for                                                               
regulations,  and  satisfy the  concerns  of  one of  the  Senate                                                               
Finance  Committee co-chairs.   Co-Chair  Johnson clarified  that                                                               
Amendment  4  would  eliminate  the  May  1  deadline,  the  cost                                                               
allocation concerns, and  lock the state in for  a certain amount                                                               
of  tax.   According  to  the  revisor,  Amendment 4  is  lengthy                                                               
because it  contains the proposed  legislation, the  new proposal                                                               
of Amendment 4, and the  current [law].  Co-Chair Johnson offered                                                               
that Amendment 4 simply provides, for  two days, the cover of the                                                               
$2 billion potential loss while  maintaining the status quo.  Co-                                                               
Chair Johnson  characterized Amendment 4 as  "an elegant solution                                                               
to a  very complicated  problem."   He noted  that he  has talked                                                               
with Senators Paskvan  and Stedman as well as the  members of the                                                               
House  Finance  Committee.   The  members  of the  House  Finance                                                               
Committee  related   that  they  would  prefer   to  receive  the                                                               
legislation with  Amendment 4 adopted  because they  would prefer                                                               
to eliminate whatever is wrong.                                                                                                 
                                                                                                                                
11:13:26 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  objected to  Amendment  4.   He  then                                                               
asked if  when the 24-hour rule  for the House went  into effect,                                                               
the  24-hour  [policy]  for amendments  to  the  House  Resources                                                               
Standing Committee was abolished.                                                                                               
                                                                                                                                
CO-CHAIR  JOHNSON said  he  had no  problem  waiting to  consider                                                               
Amendment 4.  He then apologized  for not adhering to the 24-hour                                                               
rule,  but noted  that the  drafter  was working  on Amendment  4                                                               
until 1:00 a.m.                                                                                                                 
                                                                                                                                
11:14:32 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN  expressed interest  in the committee  doing what                                                               
it  can  to  address  SB  305 today.    Therefore,  he  said  his                                                               
preference is  for the committee  to act on  SB 305 today  if the                                                               
committee is comfortable with Amendment  4 after some explanation                                                               
from Don Bullock, Legislative Legal Services.                                                                                   
                                                                                                                                
11:15:21 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GUTTENBERG acknowledged  that  amendments at  the                                                               
last  minute are  often  the  case, particularly  at  the end  of                                                               
session.                                                                                                                        
                                                                                                                                
11:16:10 AM                                                                                                                   
                                                                                                                                
The committee took an at-ease from 11:16 a.m. to 11:23 a.m.                                                                     
                                                                                                                                
11:24:00 AM                                                                                                                   
                                                                                                                                
DONALD   BULLOCK  JR.,   Attorney,  Legislative   Legal  Counsel,                                                               
Legislative  Legal  and  Research Services,  Legislative  Affairs                                                               
Agency,  explained  that, provided  SB  305  takes effect  before                                                               
April 30,  the adoption  of Amendment  4 would  mean that  SB 305                                                               
would take effect then and be  applicable on the first day of the                                                               
open  season,  which  lines  up   with  the  timing  of  the  tax                                                               
exemptions under  AGIA and  AS 43.90.300 and  AS 43.90.320.   The                                                               
day after  open season the law  would return to the  current law.                                                               
In  the future,  he noted,  there's  another trigger.   When  1.5                                                               
billion cubic  feet a day of  gas is placed in  a pipeline system                                                               
for delivery to  market in the 48 contiguous states  or Canada or                                                               
to a liquefied  natural gas (LNG) facility for export  out of the                                                               
state, the  provisions in  SB 305  that separate  the progressive                                                               
tax  on oil  and the  progressive tax  on gas  take effect.   Mr.                                                               
Bullock  clarified  that  SB 305  provisions  won't  take  effect                                                               
unless the  legislation is  in effect prior  to the  open season.                                                               
If  the aforementioned  is  the  case, the  law  would return  to                                                               
current law  after the day open  season starts and in  the future                                                               
the progressivity split would occur when  1.5 bcf a day of gas is                                                               
placed in a transportation system for delivery to market.                                                                       
                                                                                                                                
11:26:40 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN,  regarding the  [progressivity split],  asked if                                                               
there has to be more than 1.5 bcf of gas a day exported.                                                                        
                                                                                                                                
MR. BULLOCK  answered yes, and clarified  that the gas has  to be                                                               
put  into a  pipeline  to go  either  to an  LNG  facility or  to                                                               
market.  The trigger, he further  clarified, is the volume of 1.5                                                               
bcf a day of gas.                                                                                                               
                                                                                                                                
11:27:19 AM                                                                                                                   
                                                                                                                                
MR. BULLOCK continued  by pointing out that Amendment  4, on page                                                               
1, lines  1-11, trims the  title of SB 305  in order to  make the                                                               
legislation more general  and encompass what the act does.   As a                                                               
result of Amendment 4, the  legislation wouldn't be as limited as                                                               
is  specified in  the title  of  SB 305.   The  title change,  he                                                               
highlighted, also makes a reference  to the tax on the production                                                               
of gas  and effects the start  of the first binding  open season.                                                               
That part of  the title is a reference to  the condition that has                                                               
to be  met for the  separation of  the oil progressivity  and the                                                               
gas progressivity to take effect.                                                                                               
                                                                                                                                
11:28:03 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN  surmised that assumes  the open season on  May 1                                                               
by TransCanada is considered a binding open season.                                                                             
                                                                                                                                
MR. BULLOCK  informed the  committee that  TransCanada's proposal                                                               
specifies  an open  season starting  on  April 30.   Although  he                                                               
acknowledged  the  earlier   comments  from  Commissioner  Galvin                                                               
regarding  splitting  months, the  law  says  start of  the  open                                                               
season.  The legislation includes  a provision that specifies the                                                               
commissioner  of  the Department  of  Revenue  is to  notify  the                                                               
revisor of statutes  of the date the open season  starts in order                                                               
that  the  revisor  would  know whether  the  provisions  in  the                                                               
legislation before the committee can take effect.                                                                               
                                                                                                                                
11:29:04 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN  asked then  if it's  Mr. Bullock's  opinion that                                                               
the state would be protected  by any potential revenue losses, as                                                               
predicted by Senator Stedman.                                                                                                   
                                                                                                                                
MR.  BULLOCK  responded  that  he   can  tell  members  what  the                                                               
legislation says.   Although  the legislation  may be  subject to                                                               
litigation, it would only be  an issue if binding commitments are                                                               
received during the first open season.                                                                                          
                                                                                                                                
11:30:34 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON   inquired  as   to  the  purpose   of  AS                                                               
43.93.020.                                                                                                                      
                                                                                                                                
MR. BULLOCK  explained that the  inducement that is offered  to a                                                               
producer  that  commits  during the  first  binding  open  season                                                               
basically grants that producer an  exemption.  The exemption from                                                               
the tax is equal to the  difference between what the tax would be                                                               
under the laws in effect at the  start of the open season and the                                                               
tax liability at  a future date.  The exemption  was utilized per                                                               
Article 9,  which allows  the state to  use exemptions  since the                                                               
state  can't  contract  away  its   power  to  tax.    The  other                                                               
inducement offered to those who  commit during the open season is                                                               
a royalty exemption, which is a matter of contract.                                                                             
                                                                                                                                
11:32:28 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  surmised then that the  effect and purpose                                                               
of the statute  was that there would likely be  a higher tax rate                                                               
in place at  the start of open season and  a negotiated tax would                                                               
be negotiated later.  He  further surmised that the inducement is                                                               
the difference between the tax rate  in effect at open season and                                                               
the  negotiated tax  rate, which  can't be  greater than  the tax                                                               
rate at open season.                                                                                                            
                                                                                                                                
MR. BULLOCK agreed, adding that  the inducement only has value if                                                               
taxes increase.   If taxes fall below what they  are at the start                                                               
of open  season, all  producers benefit.   The  inducement allows                                                               
the period in which the inducement  is live and the producers are                                                               
able to  take the exemption  to be the  highest rate of  tax they                                                               
will pay  regardless of  the future.   For  instance, if  the tax                                                               
rate  on gas  increases in  the  future, those  who received  the                                                               
inducement wouldn't have to pay the extra amount.                                                                               
                                                                                                                                
11:33:50 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  if   the  term  "binding  open                                                               
season" is defined with starting and ending dates.                                                                              
                                                                                                                                
MR. BULLOCK answered  that he didn't know how  flexible the start                                                               
is, but TransCanada's filings with  the Federal Energy Regulatory                                                               
Commission  (FERC)  state  that TransCanada's  open  season  will                                                               
start April  30 and go  through July.   Again, he said  he didn't                                                               
know how likely the aforementioned dates would be to change.                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG  surmised that  the state is  locked in                                                               
to those dates regardless of a change.                                                                                          
                                                                                                                                
MR. BULLOCK specified that it's a  date that's out of the state's                                                               
control because  it's the federal  rules governing  open seasons.                                                               
In  further response  to Representative  Guttenberg, Mr.  Bullock                                                               
explained that the conditional effects  of the sections of SB 305                                                               
that  would take  effect  at the  start of  the  open season  are                                                               
written with  the expectation  that TransCanada  will do  what it                                                               
said and  the open  season will  start [April] 30.   On  page 23,                                                               
line  6  of  Amendment  4  there is  a  provision  requiring  the                                                               
commissioner of  DOR to notify  the revisor of statutes  the date                                                               
of  the start  of  the first  binding open  season  for the  AGIA                                                               
project.   The  purpose  of  the aforementioned  is  to keep  the                                                               
revisor abreast of the  laws that are in effect.   The risk is if                                                               
these provisions  take effect on April  29, but the start  of the                                                               
open  season  is  delayed  for  a  month.    In  that  case,  the                                                               
provisions will be in effect until  the day after the open season                                                               
starts.                                                                                                                         
                                                                                                                                
11:37:27 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON  asked if  it  would  be problematic  to  amend                                                               
Amendment 4  such that the  language refers to whenever  the open                                                               
season starts or is a specific date necessary.                                                                                  
                                                                                                                                
MR.  BULLOCK pointed  out  that  the problem  is  this must  take                                                               
effect  the day  before [the  day when  the open  season starts].                                                               
"There's no certainty  that would be any more  certain about that                                                               
date if  we left it  open than we do  now," he said.   Currently,                                                               
there  are filings  with FERC  that specify  [TransCanada's] open                                                               
season will start April 30.                                                                                                     
                                                                                                                                
11:38:21 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON, regarding  TransCanada's filings  that specify                                                               
open  season will  start  April 30,  asked if  there  would be  a                                                               
violation  under  AGIA if  TransCanada  changes  the open  season                                                               
date.                                                                                                                           
                                                                                                                                
MR. BULLOCK  stated that AGIA  references the first  binding open                                                               
season, whenever it  is.  Whenever the first  binding open season                                                               
is  determined, the  aforementioned  inducements  are offered  to                                                               
those committing during that open season.                                                                                       
                                                                                                                                
11:39:07 AM                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN  clarified that  the intent  is to  avoid locking                                                               
the state into a certain tax rate when an open season starts.                                                                   
                                                                                                                                
MR.  BULLOCK  pointed out  that  certain  provisions take  effect                                                               
April 29,  regardless of when  the open season starts.   However,                                                               
when the open  season starts what is in current  law is reenacted                                                               
and takes  effect the  day after  the start  of the  binding open                                                               
season.                                                                                                                         
                                                                                                                                
11:40:04 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE P.  WILSON asked if  the language is  referring to                                                               
the first open season.                                                                                                          
                                                                                                                                
MR.  BULLOCK outlined  that both  AS 43.90.300  and AS  43.90.320                                                               
refer  to  the first  binding  open  season  as the  period  when                                                               
someone must commit to firm  transportation and capacity in order                                                               
to receive the tax exemption.                                                                                                   
                                                                                                                                
11:41:01 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  P. WILSON  then  inquired as  to  the meaning  of                                                               
"binding?"                                                                                                                      
                                                                                                                                
MR.  BULLOCK  deferred to  Commissioner  Galvin  because DOR  has                                                               
adopted  regulations regarding  qualifying  for the  inducements.                                                               
He recalled  that the regulations  also specify the  timeframe in                                                               
which a firm commitment can be  made.  A firm commitment means to                                                               
commit to a certain capacity and it is unconditional.                                                                           
                                                                                                                                
REPRESENTATIVE  P. WILSON  explained  she wanted  to ensure  that                                                               
it's clear what the binding open season is.                                                                                     
                                                                                                                                
MR. BULLOCK  deferred to the  commissioners of the  Department of                                                               
Natural  Resources  (DNR)  and DOR  to  provide  that  assurance.                                                               
However,  he pointed  out that  the AGIA  statute contemplates  a                                                               
first  binding open  season for  the inducements.   If  the first                                                               
binding  open  season  doesn't produce  firm  transportation  and                                                               
there's  a second  open  season, then  there  are no  inducements                                                               
under AGIA.                                                                                                                     
                                                                                                                                
11:42:51 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG inquired as  to the significance of the                                                               
date on page 9, line 9, of Amendment 4.                                                                                         
                                                                                                                                
MR. BULLOCK  specified that the  2022 date  is the date  the Cook                                                               
Inlet tax  caps expire for  oil and gas and  when the tax  cap on                                                               
gas used in  the state expires.   Those dates can be  found in AS                                                               
43.55.011(j), (k),  and (o).   Therefore, after [2022]  there are                                                               
no tax caps.                                                                                                                    
                                                                                                                                
11:43:49 AM                                                                                                                   
                                                                                                                                
MR.  BULLOCK,  in  response  to   questions,  offered  to  review                                                               
Amendment 4.   He pointed  out that the 2022  date is in  SB 305,                                                               
but it's taken  out during the period of time  when the [current]                                                               
law is  in effect for  only a few days  and then returns  when it                                                               
does become an  issue.  He then turned  the committee's attention                                                               
to the  bottom of page 1  of Amendment 4, which  amends Section 1                                                               
of CSSB 305(FIN)(title am) that  refers to "and (p)".  Subsection                                                           
(p)  is the  new progressivity  section for  gas after  the split                                                               
between  oil and  gas.   Section 1  of the  legislation specifies                                                               
that money from  the progressive tax in both  AS 43.55.011(g) and                                                               
"(p)" are  available for appropriation  to the  community revenue                                                           
sharing  fund.    If  this   legislation  is  enacted,  April  29                                                               
subsection  (p)   revenue,  the   gas  progressivity,   would  be                                                               
available.  The bottom of page  1 of Amendment 4 undoes Section 1                                                               
of CSSB  305(FIN)(title am) and  thus returns to current  law and                                                               
eliminates the  reference to subsection (p).   However, reference                                                               
to  subsection (p),  the progressivity  for oil  and some  of the                                                               
gas,  returns  in  Section  3  of Amendment  4  when  the  future                                                               
condition of 1.5 bcf a day  being tendered for shipment to market                                                               
is met.  The aforementioned  structure is throughout Amendment 4.                                                               
Mr. Bullock clarified  that the structure in Amendment  4 is such                                                               
that  the legislation  amends current  law, an  amendment to  the                                                               
provision in  the legislation  that returns  what happened  in SB
305 back  to current law,  followed by a provision  that reenacts                                                               
the   provisions   in   the   legislation   that   separate   the                                                               
progressivity factors.                                                                                                          
                                                                                                                                
MR. BULLOCK  moved on to page  2 of Amendment 4,  which refers to                                                               
Section 5 that is Section 2  of CSSB 305(FIN)(title am).  Section                                                               
2  refers to  the new  progressivity tax  on gas.   Section  5 in                                                               
Amendment  4 eliminates  the reference  to  the progressivity  on                                                               
gas.   The aforementioned  is followed by  Section 6,  which then                                                               
returns that separate progressivity into the legislation.                                                                       
                                                                                                                                
11:46:59 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK expressed confusion  because he recalled that                                                               
Representative  Seaton  related  that   under  Amendment  4  [the                                                               
scenario] would be one in which  the order would be old, new, and                                                               
then old  law.  However, the  drafter seems to indicate  that the                                                               
order would be new, old, new.                                                                                                   
                                                                                                                                
MR. BULLOCK  clarified that there  is existing law, which  SB 305                                                               
amends.   Subsequently, there's a new  body of law.   Amendment 4                                                               
reenacts number  (1) and thus the  situation is one in  which the                                                               
law returns to  current law.  In  the future, when the  1.5 bcf a                                                               
day  of tendering  gas is  met, the  situation returns  to number                                                               
(2).   Mr. Bullock specified,  "So, it's current  law, amendments                                                               
by  [SB] 305  undoing  the amendments  for SB  305  to return  to                                                               
current law  the day after  the open season.   And then,  at some                                                               
time in  the future,  when significant gas  is shipped,  then the                                                               
provisions in  [SB] 305 take effect  again."  He noted  that when                                                               
he refers to  SB 305 he is referring to  CSSB 305(FIN)(title am).                                                               
"So,  current  law, new  changes  to  separate the  progressivity                                                               
factors, undoing  the separation of the  progressivity factors to                                                               
return to  what we  have now,  and then in  the future  when that                                                               
condition of  transportation capacity  and shipping is  met, then                                                               
we  go   back  to  separating  the   progressivity  factors,"  he                                                               
explained.                                                                                                                      
                                                                                                                                
11:49:11 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  related his  understanding that  Section 9                                                               
of Amendment  4 eliminates the  exemption for the time  period in                                                               
Cook Inlet as well.                                                                                                             
                                                                                                                                
MR. BULLOCK  directed the committee's  attention to Section  3 of                                                               
CSSB  305(FIN)(title  am),  which  becomes  Section  7  upon  the                                                               
adoption  of Amendment  4.   Proposed  Section 8  of Amendment  4                                                               
would  then return  to  the existing  law.   Therefore,  proposed                                                               
Section 9 of Amendment 4 re-institutes  what is Section 3 of CSSB
305(FIN)(title am)  and thus returns  to the proposed  changes in                                                               
CSSB 305 (FIN)(title am).                                                                                                       
                                                                                                                                
11:50:26 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  surmised then that Section  9 of Amendment                                                               
4 is going to charge Cook  Inlet gas at progressivity and doesn't                                                               
include  the  ELF exemption  calculation.    Therefore, for  some                                                               
portion  of  time  the  exemption available  in  the  Cook  Inlet                                                               
Sedimentary Basin will be limited.                                                                                              
                                                                                                                                
MR. BULLOCK  explained that Cook  Inlet gas  is subject to  a tax                                                               
cap, which is determined after  considering what the tax would be                                                               
without the  cap.  Therefore, when  determining the progressivity                                                               
factor, the  production tax  value of  the gas  in Cook  Inlet is                                                               
reviewed.    The  aforementioned  is  included  in  the  average,                                                               
combined with gas produced outside  of the Cook Inlet Sedimentary                                                               
Basin as well  as oil produced throughout the state.   The values                                                               
are averaged  in order  to obtain the  number that's  compared to                                                               
$30, which determines the tax rate.   The tax rate is applied and                                                               
AS 43.55.011(m) specifies that the  credits must be taken against                                                               
gas that's subject to the cap.   "So, you figure out the tax, you                                                               
look at  the cap, and the  cap sets the maximum  amount that will                                                               
be  paid on  that gas  and  oil in  Cook Inlet  and gas  produced                                                               
outside  of Cook  Inlet and  used in  the state,"  he summarized.                                                               
Therefore,  the full  value  of Cook  Inlet,  the production  tax                                                               
value,  isn't subject  to  a cap,  which is  what's  used in  the                                                               
progressivity factor of  SB 305.  Mr. Bullock  clarified that the                                                               
cap is a tax cap not a value cap.                                                                                               
                                                                                                                                
11:52:29 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN asked  if the  aforementioned provision  applies                                                               
only to gas produced north of the 68th parallel.                                                                                
                                                                                                                                
MR.  BULLOCK  explained  that  gas produced  north  of  the  68th                                                               
parallel  and used  in the  state  is subject  to the  cap in  AS                                                               
43.55.011(o), which  is used  under SB 305  to determine  the tax                                                               
rate  in  AS   43.55.011(g).    He  further   explained  that  AS                                                               
43.55.011(g) "under  SB 305, uses oil  everywhere, including Cook                                                               
Inlet - gas  produced in Cook Inlet and gas  produced outside the                                                               
Cook Inlet and used in the state."                                                                                              
                                                                                                                                
11:53:26 AM                                                                                                                   
                                                                                                                                
MR. BULLOCK,  in response to Representative  Tuck, clarified that                                                               
the production tax value of the oil  and gas is what the tax rate                                                               
is applied  to.  The  25 percent tax rate  is applied to  all oil                                                               
and  gas, while  the progressive  tax  rate is  determined.   The                                                               
progressive tax rate  is also applied to production  tax value of                                                               
the gas.   Therefore, the  tax percentage is applied  to whatever                                                               
the production tax value is, which  is how the tax is determined.                                                               
When determining the progressive  tax, the average production tax                                                               
value  is  determined  and  it's  compared  to  $30.    The  rate                                                               
increases  to the  extent that  value increases  above $30.   Mr.                                                               
Bullock explained:                                                                                                              
                                                                                                                                
     So,  you start  with production  tax value,  you figure                                                                    
     out your tax  rates, you apply the rates.   And I'm not                                                                    
     talking about credits;  credits come at the  end of the                                                                    
     line and  reduce whatever  the tax  liability is.   So,                                                                    
     you figure  out what the tax  is.  You figure  out what                                                                    
     the tax  would be  without the caps  on Cook  Inlet oil                                                                    
     and gas,  gas produced  outside of  Cook Inlet  used in                                                                    
     the state.   You figure out  what the tax is,  you look                                                                    
     at the  caps and figure  out whether the  amount that's                                                                    
     determined after  you do the  tax calculation  is above                                                                    
     or below the cap.  If  it's above the cap, the cap sets                                                                    
     the maximum  amount.   If it's below  that, the  cap is                                                                    
     not an issue - you just  pay the tax.  Except that, ...                                                                    
     sometimes  [AS 43.55.011(o)]  requires  the  cap to  be                                                                    
     applied even  if the tax calculation  itself may result                                                                    
     in a lower value.                                                                                                          
                                                                                                                                
11:56:34 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  EDGMON said  he would  like to  see a  flow chart                                                               
that would  allow members to  walk through the provisions  of the                                                               
legislation.   He  opined that  the committee  is being  asked to                                                               
make  a very  complicated policy  decision that  has far-reaching                                                               
impacts in a short period of time.                                                                                              
                                                                                                                                
11:57:49 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN  indicated that  perhaps  some  charts could  be                                                               
generated.     He  reiterated   his  earlier   comment  regarding                                                               
[forwarding  this legislation]  if the  committee is  comfortable                                                               
with it.  He then recessed to a call of the chair at 11:58 a.m.                                                                 
                                                                                                                                
7:04:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  called the  meeting back to  order at  7:04 p.m.                                                               
Representatives Johnson,  Neuman, Olson, Seaton, and  Edgmon were                                                               
present at the  call back to order.   Representatives Guttenberg,                                                               
Kawasaki, and Tuck arrived as the meeting was in progress.                                                                      
                                                                                                                                
7:05:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  informed the committee  that during  the recess,                                                               
Amendment 4  was incorporated into  [CSSB 305(FIN)(title  am), as                                                               
amended], which  is a proposed committee  substitute (CS) labeled                                                               
26-LS1577\M, Bullock,  4/10/10.   He also informed  the committee                                                               
that  the  committee  packet  should   also  include  a  document                                                               
entitled "SB 305: Flowchart: 26-LS1577\WA.6".                                                                                   
                                                                                                                                
7:06:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  withdrew Amendment 4.   He then moved  that the                                                               
committee  adopt  HCS  CSSB 305,  Version  26-LS1577\M,  Bullock,                                                               
4/10/10,  as the  working document.   There  being no  objection,                                                               
Version M was before the committee.                                                                                             
                                                                                                                                
7:07:25 PM                                                                                                                    
                                                                                                                                
ROGER   MARKS,   Consulting   Petroleum  Economist,   Logsdon   &                                                               
Associates, opined that SB 305,  the decoupling, actually changes                                                               
only one  small part of the  tax, although that could  make a big                                                               
difference.  With [the adoption] of  Amendment 4, the result is a                                                               
flipping back  and forth  between a  tax under SB  305 and  a tax                                                               
under the current tax provisions.   He opined that it's important                                                               
to understand the small change  the legislation makes requires an                                                               
understanding  of the  tax.   He then  proceeded to  the document                                                               
entitled  "SB   305:  Flowchart:  26-LS1577\WA.6"   and  directed                                                               
attention to  slide 2  entitled "Mechanics of  Tax (Current  & SB
305).   Slide  2 reviews  the seven  steps of  the tax  under the                                                               
current provisions  of the  tax as  well as SB  305.   "The basic                                                               
mechanics of  how the  tax works  is not  being changed  under SB
305," he stated.  He then reviewed the seven steps.                                                                             
                                                                                                                                
7:10:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON recalled  from earlier  presentations that                                                               
the  existing   tax  isn't  allocated   on  per  barrel   of  oil                                                               
equivalents (BOEs) but rather on a total gross value comparison.                                                                
                                                                                                                                
MR.  MARKS  explained that  under  SB  305,  if  oil and  gas  is                                                               
decoupled,  the upstream  lease capital  and operating  costs are                                                               
seen in  step 4.  As  discussed earlier, the cost  to produce oil                                                               
and gas is  difficult to separate.  However,  to enact decoupling                                                               
the  cost between  oil and  gas needs  to be  allocated using  an                                                               
allocation  methodology.   A separate  issue, he  highlighted, is                                                               
that under AGIA the oil and gas  tax as is in effect on the first                                                               
day  of  the   binding  open  season  is   stabilized.    Without                                                               
decoupling, the tax is one big tax.   To enact AGIA when only the                                                               
gas not  the oil is being  stabilized, how much of  the total tax                                                               
is oil  versus gas has to  be determined.  The  aforementioned is                                                               
allocating  the tax,  which is  different than  allocating costs.                                                               
In order  to allocate the  tax, DOR recently  adopted regulations                                                               
regarding  how to  allocate the  total tax  between oil  and gas,                                                               
which uses the relative gross value.                                                                                            
                                                                                                                                
7:12:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  opined  that  although  it  makes  sense,                                                               
different results are achieved under  the current tax regime that                                                               
allocates costs  to gas at  the total gross value  versus another                                                               
system that allocates  costs on BOEs.  In  fact, allocating costs                                                               
on BOEs results in  a lower tax for gas.   He emphasized, "I want                                                               
to make  sure that we're not  going back and fudging  the current                                                               
system and saying, 'If we were  calculating that on barrel of oil                                                               
equivalent it would  be something' because that's  not what we're                                                               
doing."   He recalled that on  April 9, 2010, it  was represented                                                               
that 22  percent of the tax  was attributable to the  gas whereas                                                               
under the decoupled  amount it was much less than  the 22 percent                                                               
of the tax.                                                                                                                     
                                                                                                                                
MR. MARKS  said that there are  two different issues.   First, he                                                               
posed a situation in which SB  305 doesn't exist, the current tax                                                               
un-decoupled was  the tax in  effect during the open  season, and                                                               
first  gas is  in 2020.   Per  AGIA, the  gas tax  is stabilized.                                                               
Therefore, the  question is how much  of the combined tax  is gas                                                               
versus oil.   The DOR regulations  allocate the total tax  to gas                                                               
based on  the relative gross  value, which was the  22 percent/78                                                               
percent.   The  aforementioned,  he reminded  the committee,  was                                                               
allocating the  tax.  The other  issue is found in  step 4, which                                                               
is allocating  the upstream capital  and operating  costs between                                                               
oil and  gas.  Therefore,  under step 4, under  decoupling, costs                                                               
are allocated.  Current law says  DOR shall determine a method to                                                               
allocate costs  between oil  and gas.   Proposed SB  305 suggests                                                               
that the department should consider  the BOE method, although the                                                               
department isn't compelled to do so.                                                                                            
                                                                                                                                
7:16:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON surmised  then that  current law  requires                                                               
the production tax  on gas at the start of  open season, and thus                                                               
the  comparison will  be  between  the tax  value  at 22  percent                                                               
versus the tax value that's generated by decoupling.                                                                            
                                                                                                                                
MR. MARKS said yes, but added  that the numbers he used yesterday                                                               
were using  DOR's regulations  on allocating  tax based  on gross                                                               
value.  He specified that he used BOE method to allocate cost.                                                                  
                                                                                                                                
CO-CHAIR NEUMAN  interjected that  the 22  percent was  used only                                                               
because of the  numbers used; it doesn't mean that  the tax is 22                                                               
percent.                                                                                                                        
                                                                                                                                
7:17:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON remarked  that DOR  has spreadsheets  that                                                               
haven't been  provided to the  committee yet.  Therefore,  he has                                                               
only cited the  materials that the committee  has received, which                                                               
have been models from Mr. Marks.                                                                                                
                                                                                                                                
MR. MARKS informed  the committee that he focused  on the example                                                               
[laid out in  the document entitled "Notes on  Operation of Tax"]                                                               
in order  to illustrate the dilution  effect.   He  noted that he                                                               
could  have used  any  of  the four  examples  to illustrate  the                                                               
dilution effect.                                                                                                                
                                                                                                                                
REPRESENTATIVE  SEATON  recalled  testimony from  DOR  specifying                                                               
that the same  relationship of lowering the  attributable tax was                                                               
present  in  every  case,  regardless of  whether  the  point  of                                                               
production (PoP) or BOE was used.                                                                                               
                                                                                                                                
7:18:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK asked  if there are any  other methods beyond                                                               
BOE and point of production to determine the cost allocation.                                                                   
                                                                                                                                
MR.  MARKS  answered  that  all  kinds of  methods  are  used  to                                                               
allocate,  although it  generally  depends upon  for  what it  is                                                               
being used.  Therefore, the  Senate Finance Committee felt it was                                                               
appropriate to  leave the current  statute in place so  that DOR,                                                               
which  has  better access  to  cost  data  and more  time,  could                                                               
determine the most appropriate way  to allocate cost.  In further                                                               
response  to  Representative  Tuck,  Mr.  Marks  said  he  didn't                                                               
believe any  method is particularly simpler  than another because                                                               
the  methods  cause problems  under  different  conditions.   The                                                               
goal, he  indicated, is to  find a  method that works  under most                                                               
circumstances.                                                                                                                  
                                                                                                                                
7:21:01 PM                                                                                                                    
                                                                                                                                
MR. MARKS returned  to his review of slide  2 entitled "Mechanics                                                               
of Tax  (Current & SB  305)".  He  directed attention to  step 5,                                                               
which divides the  production tax value by the total  oil and gas                                                               
BOEs  to  produce  the  per   BOE  production  tax  value.    The                                                               
aforementioned  is   the  basis  of  progressivity.     Once  the                                                               
progressivity factor  is added to  the 25 percent base  rate, the                                                               
total tax rate is  known.  The total tax rate  is then applied to                                                               
the production  tax value  in order  to determine  the tax.   Mr.                                                               
Marks  then   moved  on  to   slide  3   entitled  "Progressivity                                                               
Calculation (Current &  SB 305)".  Under the  current statute the                                                               
trigger for  progressivity is $30  per BOE production  tax value.                                                               
The progressivity calculation, he  reminded the committee, is the                                                               
same under  both the current  law and SB 305.   The slope  is how                                                               
fast  progressivity  increases as  the  value  increases.   Under                                                               
current  statute the  slope  is 0.4  percent,  and therefore  for                                                               
every dollar  increase at  the production tax  value per  BOE the                                                               
progressivity will  increase 0.4  percent.  Thus,  the production                                                               
tax  value per  BOE less  $30 is  the amount  over $30,  which is                                                               
subject  to progressivity.   That  amount is  then multiplied  by                                                               
0.004 percent.   He then reviewed  the example on slide  3, which                                                               
utilizes an $80 West Coast  price with $5 for transportation, the                                                               
gross value would be $75.   If the upstream operating and capital                                                               
costs were  $25, the production tax  value would be $50.   With a                                                               
base tax rate  of 25 percent, the calculation would  be such that                                                               
the production  tax value of  $50 less  the $30 trigger  would be                                                               
multiplied  by 0.004  percent  to amount  to 8  percent.   The  8                                                               
percent added to the 25 percent,  the base tax rate, results in a                                                               
total tax of 33  percent on net value.  Then  the total tax rate,                                                               
33 percent,  would be multiplied  by the production tax  value to                                                               
determine the tax.                                                                                                              
                                                                                                                                
7:24:08 PM                                                                                                                    
                                                                                                                                
MR.  MARKS continued  with slide  4  entitled "How  Progressivity                                                               
Operates Now".    He noted that SB 305  changes one small portion                                                               
of  [how  progressivity  currently operates].    Currently,  each                                                               
company calculates one statewide  progressivity rate based on all                                                               
combined oil  and gas activity,  which will later be  referred to                                                               
as a  bucket.  The company  then divides its operations  into one                                                               
of five  segments:  each  Cook Inlet  oil lease, each  Cook Inlet                                                               
gas  lease, North  Slope oil  and gas  except gas  used in-state,                                                               
non-North Slope/non-Cook  Inlet oil and  gas except gas  used in-                                                               
state, and non-Cook  Inlet gas used in-state.   For each segment,                                                               
the company calculates  its tax liability based on  the total tax                                                               
and  multiplies that  times the  segment's production  tax value.                                                               
The  aforementioned calculation  results in  the tax,  except for                                                               
segments  1,  2, and  5  for  which  the  tax liability  is  also                                                               
determined under the  ELF.  Whichever tax  [calculation] is lower                                                               
is what's paid [for segments 1, 2,  and 5].  He noted that almost                                                               
always the ELF  will be lower, and thus is  the tax [for segments                                                               
1, 2,  and 5].  Still,  statute requires both calculations  to be                                                               
made  to determine  the  tax.   Moving  on  to  slide 5  entitled                                                               
"Currently:  One Progressivity  Bucket",  Mr.  Marks opined  that                                                               
there is one  progressivity bucket that includes  oil, Cook Inlet                                                               
gas, and  other in-state gas.   All the activity in  the state is                                                               
either oil,  Cook Inlet gas, or  other in-state gas and  it's all                                                               
in  the   bucket  and   is  used   to  calculate   one  statewide                                                               
progressivity  tax.   He noted  that later  on he  will refer  to                                                               
current statute as the "one bucket world" as described above.                                                                   
                                                                                                                                
7:28:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN   noted  that  the  committee   packet  includes                                                               
information   from   DOR   that   illustrates   different   model                                                               
assumptions that review gas and oil  prices and their parity.  He                                                               
noted that actual numbers [are used].                                                                                           
                                                                                                                                
7:29:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON,   returning  to  slide  4,   related  his                                                               
understanding that  DOR's regulations calculate the  tax based on                                                               
total gross value at the point of production.                                                                                   
                                                                                                                                
MR. MARKS clarified  that DOR's regulations do  not calculate the                                                               
tax; rather, the  department allocates the total  tax between oil                                                               
and gas.                                                                                                                        
                                                                                                                                
7:30:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  surmised  then that  the  methodology  of                                                               
calculating this tax on oil and  gas is not what is getting fixed                                                               
at open season, rather it's the tax allocated to gas.                                                                           
                                                                                                                                
MR.  MARKS returned  to the  example he  provided yesterday,  and                                                               
said that the  22 percent of the total tax  that was allocated to                                                               
gas is what's fixed at open season under current statute.                                                                       
                                                                                                                                
7:31:24 PM                                                                                                                    
                                                                                                                                
MR. MARKS turned to the one change  made by SB 305.  He explained                                                               
that  currently there's  one statewide  progressivity calculation                                                               
or  one  progressivity  bucket.     The  legislation  before  the                                                               
committee, however, creates  two buckets such that  there are two                                                               
progressivity  calculations.    The aforementioned  achieves  the                                                               
decoupling effect.  The first  bucket is the same activity that's                                                               
in  the original  bucket  that is  the  current activity  bucket.                                                               
Therefore, the  first bucket  includes oil,  Cook Inlet  gas, and                                                               
other  in-state gas.    Under SB  305  the aforementioned  bucket                                                               
includes   the  aforementioned,   calculates  the   progressivity                                                               
together, and  treats the five segments  as they are now.   Also,                                                               
under  SB 305  there  is  no tax  increase  on current  activity,                                                               
depending upon  how the regulations  are interpreted and  how the                                                               
department would  change its current regulations.   Therefore, as                                                               
the Alaska Oil and Gas  Association (AOGA) pointed out yesterday,                                                               
the current  regulations are giving the  department the authority                                                               
to change  regulations and thus  it could  result in a  change in                                                               
the tax.   For understanding what  SB 305 does, the  first bucket                                                               
is the way it is under current law.                                                                                             
                                                                                                                                
7:34:14 PM                                                                                                                    
                                                                                                                                
MR.  MARKS explained  that if  SB 305  didn't exist,  current law                                                               
remains in  effect and there is  only one bucket.   Therefore, if                                                               
there  is  a major  gas  sale,  the gas  would  go  into the  one                                                               
statewide bucket.  The aforementioned  creates a dilution effect,                                                               
which was discussed yesterday.   However, SB 305 creates a second                                                               
bucket into  which the  export gas  would be  placed in  order to                                                               
avoid diluting  the value of  the oil.   In a situation  in which                                                               
there are two buckets and a  major gas sale, the progressivity of                                                               
all the current activity would  be calculated in the first bucket                                                               
and  the progressivity  for any  export gas  would be  calculated                                                               
separately using  the same  formula.   Again, such  a methodology                                                               
wouldn't dilute the oil progressivity.                                                                                          
                                                                                                                                
7:36:12 PM                                                                                                                    
                                                                                                                                
MR. MARKS  then directed attention  to slide  8, which is  a flow                                                               
chart  illustrating how  the earlier  proposed Amendment  4 would                                                               
work.   Under  proposed Amendment  4, between  now and  April 28,                                                               
2010, it would  be a one bucket  world.  On April  29, 2010, thru                                                               
the  first day  of the  binding open  season, it  would be  a two                                                               
bucket  world.   The aforementioned  would be  locked in  for the                                                               
AGIA stability  provisions.  The  second day of the  binding open                                                               
season would  be a return  to the one  bucket world, that  is the                                                               
current system, and  remain there until there is a  time in which                                                               
more than 1.5  bcf/d of gas is first tendered  into a pipeline or                                                               
LNG facility  for export shipment.   Once more than 1.5  bcf/d is                                                               
tendered  for  pipeline  or  LNG   shipment  out  of  state,  the                                                               
situation returns  to a two  bucket world.   In between  the time                                                               
when  the second  day of  binding open  season and  the time  the                                                               
situation would return  to a two bucket world, there  would be an                                                               
opportunity to negotiate  another system.  In  summary, Mr. Marks                                                               
clarified that  under Amendment  4 the situation  would be  a two                                                               
bucket world unless negotiations changed that.                                                                                  
                                                                                                                                
7:38:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  surmised that  when gas starts  flowing in                                                               
an  export  gasline,  a  two-bucket world  would  be  in  effect.                                                               
Whereas, the  AGIA terms guarantee  that the tax in  place during                                                               
the first  day of  binding open  season would  be in  effect, and                                                               
thus a two-bucket world would be in effect.                                                                                     
                                                                                                                                
MR. MARKS noted his agreement  with that summarization.  However,                                                               
he clarified  that upon  entering the  two-bucket world  on April                                                               
29,  2010, that  is what's  stabilized  per AGIA.   Still,  there                                                               
could be  a negotiation  and terms could  change such  that there                                                               
are new  tax terms.   If  those tax terms  provided a  higher tax                                                               
than what existed in the two-bucket  world on April 29, 2010, the                                                               
taxpayer could take a tax  exemption, the difference between what                                                               
happened after  the negotiation  and what was  in place  on April                                                               
29, 2010.                                                                                                                       
                                                                                                                                
7:40:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON,  referring to  Mr. Marks'  presentation on                                                               
April  9, 2010,  returned attention  to the  [example cases]  and                                                               
slide 6  that addresses the oil  and gas taxes decoupled.   Under                                                               
the BOE, as recommended  in SB 305, the tax rate  on gas would be                                                               
approximately 3.7 percent.                                                                                                      
                                                                                                                                
MR. MARKS asked, "The $333 million is 3.7 percent of what?"                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  explained that  the calculation  should be                                                               
such  that the  $333 million  [in tax]  is divided  by the  total                                                               
gross  value of  $5.748 billion,  which would  amount to  about 6                                                               
percent.                                                                                                                        
                                                                                                                                
7:45:05 PM                                                                                                                    
                                                                                                                                
MR.  MARKS surmised  then that  Representative Seaton  is meaning                                                               
the 3.7 percent is the tax as a percent of gross value.                                                                         
                                                                                                                                
REPRESENTATIVE SEATON  calculated that  [dividing the tax  by the                                                               
total  gross   value  on   slide  6  of   the  April   29,  2010,                                                               
presentation] amounts  to 5.78  percent.   Therefore, if  oil and                                                               
gas were decoupled,  the state would, no  matter the negotiation,                                                               
guarantee that  whoever bid  at open season  would only  pay 5.78                                                               
percent of the total gross value  of gas, for that portion of gas                                                               
flowing  at  open  season,  during  the first  10  years  of  gas                                                               
flowing.                                                                                                                        
                                                                                                                                
MR. MARKS stated  his agreement that under the  scenario laid out                                                               
in [slide 6], it turns out to be about 6 percent of gross.                                                                      
                                                                                                                                
7:45:40 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN remarked, "Again,  because of the dilution effect                                                               
of the oil in the progressivity  factor is the differences in the                                                               
total value to the state that we're seeing."                                                                                    
                                                                                                                                
MR.  MARKS  commented  that  there is  no  question  under  these                                                               
scenarios that  with decoupling the  gas tax would be  lower than                                                               
if oil  and gas were  combined.  As explained  on slide 7  of the                                                               
April  9,  2010,  presentation  under  the  current  system  that                                                               
combines oil  and gas, gas with  a value of $1.66  would be taxed                                                               
as if  it had a value  of $7.83.   On the oil side,  he cautioned                                                               
the  committee  to  beware  that under  the  current  system,  as                                                               
illustrated on slide  6, oil that's worth $102 would  be taxed as                                                               
if it were worth $46.                                                                                                           
                                                                                                                                
7:47:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON emphasized  that  the problem  is that  AS                                                               
43.90.320 fixes,  at the start of  the open season, the  gas tax,                                                               
not   the   oil   tax.      He   opined   that   there   can   be                                                               
discussions/negotiations of combining it,  but it's not necessary                                                               
to leave  it combined.   If the oil  and gas [tax]  are separated                                                               
under the model provided as  a reasonable-price scenario, the gas                                                               
tax  would be  changed from  the  current system,  which per  Mr.                                                               
Marks' calculations would be 22  percent, degrade it to the state                                                               
and                                                     guarantee                                                               
for the first  10 years of gas flow that  companies wouldn't have                                                               
to pay over  5.78 percent.  The aforementioned  percentage may be                                                               
well below a negotiated  gas price.  If  a gas  price is the only                                                               
thing that's legally being fixed at  the start of open season and                                                               
it's  not coupled  or decoupled  being fixed  at open  season, he                                                               
questioned  why  the  state  would  want to  place  itself  in  a                                                               
position  that  guarantees it  will  receive  no more  than  5.78                                                               
percent for the first 10 years of gas flow.                                                                                     
                                                                                                                                
MR.  MARKS   remarked  that  it's  the   legislature's  decision.                                                               
However, he explained that by  decoupling, the substance is taxed                                                               
based  upon its  worth.    When the  substance  is combined  with                                                               
another substance  that's worth much  more, the value  upon which                                                               
the  lower worth  substance is  taxed is  inflated.   Whether the                                                               
aforementioned is  healthy for  the project  is the  decision the                                                               
committee faces.                                                                                                                
                                                                                                                                
7:50:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked whether a lower  tax would be more or less                                                               
likely to  provide an  incentive to  bid their  gas into  an open                                                               
season.                                                                                                                         
                                                                                                                                
MR. MARKS responded  that all other things equal, a  lower tax is                                                               
a larger incentive.                                                                                                             
                                                                                                                                
7:50:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON opined  that it seems the 10  years of stability                                                               
being offered  would be an  incentive to assist the  producers to                                                               
bid their gas into a pipeline.  "Is the difference in the numbers                                                               
that Representative Seaton  has outlined and the  ability to lock                                                               
the tax  in at whatever  rate he came  up with versus  the future                                                               
worth the $2  billion gamble ... to  be able to get  a higher gas                                                               
tax to shift  that money around; to jeopardize  that $2 billion,"                                                               
he asked.   He surmised then that the policy  question is whether                                                               
to decouple  and gamble on  the $2  billion or lock  something in                                                               
and decouple and likely guarantee a lower gas tax for 10 years.                                                                 
                                                                                                                                
MR.  MARKS said  that he  didn't disagree  with that  assessment.                                                               
However,  from his  personal judgment,  he opined  that once  gas                                                               
taxes are discussed  it won't be possible to  separate oil taxes.                                                               
He opined  that the oil  and gas taxes  will have to  be reviewed                                                               
together.  The  frame of reference will likely be  the status quo                                                               
and  the question  is  what  the status  quo  should  be, the  $5                                                               
billion world  or the $8 billion  world.  In further  response to                                                               
Co-Chair  Johnson, Mr.  Marks confirmed  that the  $5 billion  is                                                               
what  the  state  could  obtain without  decoupling  and  the  $8                                                               
billion is  what the state  could gain by  decoupling, regardless                                                               
of the gas tax during the 10-year period.                                                                                       
                                                                                                                                
7:52:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EDGMON   said  he  is  hearing   three  different                                                               
arguments:     the   department  discussed   the  complexity   of                                                               
separating the  accounting versus  the cost  allocations; Senator                                                               
Stedman introduced the  oil tax as a way to  obtain more revenue;                                                               
and now there's  discussion that this creates  incentives for the                                                               
gas tax  development.  "Where  are we  going with this  bill," he                                                               
asked.                                                                                                                          
                                                                                                                                
MR. MARKS explained that cost allocation  is an issue that has to                                                               
be addressed  when decoupling.  He  noted that it's done  all the                                                               
time around  the world  and there are  provisions in  statute for                                                               
the  department to  adopt  regulations to  do  it. Under  current                                                               
statute,  there are  reasons to  allocate costs  between oil  and                                                               
gas.   The  aforementioned has  been performed  just fine.   With                                                               
regard  to what  happens with  gas versus  oil, he  explained the                                                               
following.   Given  the relative  values and  volumes of  oil and                                                               
gas, when  they are  decoupled gas taxes  decrease and  oil taxes                                                               
increase by more  than the decrease in gas taxes.   Therefore, on                                                               
net the  state makes more  money.   "By not decoupling,  when you                                                               
combine  these  substances  of different  values,  the  gas  gets                                                               
sucked up,  the oil gets  sucked down.   By decoupling,  oil goes                                                               
back up,  gas goes back  down because  that's the nature  of what                                                               
they're worth," he clarified.                                                                                                   
                                                                                                                                
7:54:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EDGMON asked  if  Mr. Marks  agreed with  Senator                                                               
Stedman's presentation  of a dramatic  increase that  would occur                                                               
due to decoupling the oil revenue side.                                                                                         
                                                                                                                                
MR. MARKS replied  yes, noting that is exactly  what he presented                                                               
yesterday.   He  reminded  the committee  that  he believes  such                                                               
would happen  because under the  current system the gas  is being                                                               
taxed at  a vastly overrated  value relative to what  it's worth,                                                               
which is when it's combined with oil.                                                                                           
                                                                                                                                
REPRESENTATIVE EDGMON surmised then  that the department needs to                                                               
come forward and walk through the various scenarios.                                                                            
                                                                                                                                
CO-CHAIR NEUMAN remarked  that the commission would  love to know                                                               
what the oil and gas futures will be.                                                                                           
                                                                                                                                
REPRESENTATIVE EDGMON opined that's why this is difficult.                                                                      
                                                                                                                                
7:56:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN, referencing slide 8  of the Logsdon & Associates                                                               
April 10, 2010, presentation, opined  that he views the situation                                                               
as the  two bucket world  because AGIA guarantees a  10-year lock                                                               
in  of the  tax  rates.   He recalled  that  the numbers  Senator                                                               
Stedman  referenced  were  numbers  that were  projected  by  the                                                               
Department  of Energy  as  the  actual cost  to  the  state.   He                                                               
expressed concern that the state  could be locked into that rate.                                                               
The aforementioned  is avoided by  [going from the one  bucket to                                                               
the two bucket  world], but it leaves open the  ability to review                                                               
tax structures on gas.                                                                                                          
                                                                                                                                
CO-CHAIR JOHNSON pointed  out that before the  committee today is                                                               
fixing  a   problem,  cost  allocation,   which  exists   if  the                                                               
legislature chooses to decouple.   The large policy call, whether                                                               
to  decouple or  not, will  not come  today with  the passage  of                                                               
Version M.                                                                                                                      
                                                                                                                                
REPRESENTATIVE EDGMON  said that  he understands that,  but would                                                               
wait to hear from the department.                                                                                               
                                                                                                                                
8:00:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON inquired as to  what will be the status quo                                                               
when  negotiations  occur at  the  end  of  the open  season,  if                                                               
[Version M] is passed.                                                                                                          
                                                                                                                                
MR. MARKS  answered that the status  quo will be in  place when a                                                               
gasline is in place, which will  be a two bucket decoupled world.                                                               
If nothing else changes, the  aforementioned would start when 1.5                                                               
bcf/d is exported.                                                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON related  his  understanding  that one  day                                                               
after that,  when negotiations  begin, that it  returns to  a one                                                               
bucket  world  in which  oil  and  gas  are  combined.   The  tax                                                               
consequences will be  based on the status quo,  which is combined                                                               
oil  and  gas  for  at  least 10  years  until  gas  would  flow.                                                               
Therefore, the  negotiations will  likely be based  on everything                                                               
that's  on  the  table,  he  surmised.    In  any  case,  whether                                                               
something  is in  place or  not, negotiations  on tax  rates will                                                               
include  time, rates,  progressivity, and  what progressivity  is                                                               
based  upon.   He  asked  if passage  of  this legislation  would                                                               
eliminate the aforementioned options from negotiations.                                                                         
                                                                                                                                
MR. MARKS replied no.                                                                                                           
                                                                                                                                
8:02:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG related  his  understanding that  upon                                                               
passage  of SB  305, the  only thing  that is  fixed and  doesn't                                                               
change is  that 5.7 percent.   The  gas rate becomes  fixed after                                                               
dropping from 22 percent to 5.7 percent.                                                                                        
                                                                                                                                
MR. MARKS said that's correct.                                                                                                  
                                                                                                                                
REPRESENTATIVE  GUTTENBERG then  questioned why  the state  would                                                               
negotiate against itself this far in advance.                                                                                   
                                                                                                                                
MR.  MARKS stated  that basic  negotiating theory  is based  upon                                                               
knowing the  value of  what one  has.  He  suggested that  if the                                                               
state negotiates with  the thought that its gas is  worth $8, but                                                               
it is really worth only  $1.60, it's very likely the negotiations                                                               
won't go very far, very fast.                                                                                                   
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  said  that he  understands  that  the                                                               
relative  value  of  oil  and  gas will  shift.    Therefore,  he                                                               
questioned why the state should decrease the value now.                                                                         
                                                                                                                                
MR. MARKS  explained that under  decoupling, the value of  gas is                                                               
determined   and   an   appropriate    tax   rate   is   applied.                                                               
Additionally, when  tax terms are  discussed with  the producers,                                                               
the  issue of  being unable  to only  talk about  gas will  arise                                                               
because if the  state doesn't like the deal with  gas, it will be                                                               
addressed with oil.   Therefore, oil has to be  discussed as well                                                               
and  thus this  dilution  effect is  part of  the  equation.   He                                                               
opined that the  aforementioned must be included  in the equation                                                               
as well.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GUTTENBERG remarked that he didn't disagree.                                                                     
                                                                                                                                
8:09:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  surmised that this  isn't an attempt  to fix                                                               
the value of  gas but rather to  fix the ceiling of  the rate for                                                               
tax revenue.  "I think what it  comes down to is what we're going                                                               
to be  locking in  for gas,  that's going to  be determined  by a                                                               
combination of  oil and gas in  that first open season,  and then                                                               
what   you  do   from   there  can   be   changed,"  he   opined.                                                               
Representative  Tuck then  turned  attention to  slide  2 of  the                                                               
Logsdon  & Associates  presentation  dated April  9,  2010.   The                                                               
slide illustrates two scenarios:  one  with the BOE and the other                                                               
with  PoP.    In  the  example  cases  of  the  status  quo,  the                                                               
[difference in  the state's  production tax  revenue for  oil and                                                               
for gas]  is very similar.   However, the example cases  under SB
305  significantly changes  [the  tax revenue].   Upon  recalling                                                               
that the  BOE and  PoP are  merely two  methods to  determine the                                                               
value relationship between  oil and gas for  the cost allocation,                                                               
he  inquired as  to the  most common  method for  determining the                                                               
value relationship between oil and gas for the cost allocation.                                                                 
                                                                                                                                
MR. MARKS responded  that from his research he  believes the most                                                               
common method is the BOE method.                                                                                                
                                                                                                                                
8:12:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK directed attention to  slide 4 of the Logsdon                                                               
& Associates presentation dated April 10,  2010.  From slide 4 he                                                               
understood that  segments 3 and  4 are typically  calculated with                                                               
ELF because  once everything  is determined,  the ELF  is usually                                                               
the lower  of the two  methods.  If the  ELF isn't lower,  then a                                                               
progressivity  factor is  being used.   Under  the aforementioned                                                               
scenario, would the dilution effect result, he asked.                                                                           
                                                                                                                                
MR.  MARKS explained  that when  progressivity  is included,  one                                                               
statewide factor of  all activity is being used.   Therefore, the                                                               
dilution effect carries through all segments.                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  posed a scenario  in which under  the status                                                               
quo that  exists today that ELF  wasn't lower for segments  3 and                                                               
4, and asked whether the  progressivity would create the dilution                                                               
effect.                                                                                                                         
                                                                                                                                
MR.  MARKS answered,  "Most  definitely."   He  pointed out  that                                                               
segment 3 is the  North Slope oil and gas.   In fact, currently a                                                               
mini-dilution  effect is  occurring because  some producers  have                                                               
North  Slope oil  and  Cook  Inlet gas  and  the  Cook Inlet  gas                                                               
dilutes  the North  Slope oil  progressivity factor.   Under  the                                                               
status quo for  segment 3, 4.5 bcf/d for export  gas would be the                                                               
basic dilution effect that has been discussed.                                                                                  
                                                                                                                                
8:15:18 PM                                                                                                                    
                                                                                                                                
SENATOR  JOE PASKVAN,  Alaska State  Legislature, upon  a request                                                               
from  Co-Chair Neuman,  offered some  clarifications for  SB 305.                                                               
He related  his belief that the  22 percent is the  allocation of                                                               
the lower  revenues that would  be received under a  combined tax                                                               
system.    By regulation  the  commissioner  has put  together  a                                                               
formula  for  imputing  to  the  lower  tax  received  under  the                                                               
combined  tax structure.   He  recalled  that the  commissioner's                                                               
slides related  that under the formula  it was 22 percent  of the                                                               
$5.5 billion  and the loss  was essentially  $2 billion.   The 22                                                               
percent  is the  allocation of  gas  within the  $5.5 billion  in                                                               
revenues.  He  further recalled that Mr. Marks has  said that the                                                               
tax structure remains the same  going forward under the decoupled                                                               
system.    The triggers,  the  slopes,  and entire  progressivity                                                               
structure remains the  same.  If the situation was  such that gas                                                               
was more valuable than oil,  the progressivity would apply to the                                                               
gas at the  higher value because the tax  structures would remain                                                               
the  same.    Senator  Paskvan,  [referring to  slide  3  of  the                                                               
presentation  entitled   "CSSB  305(FIN)  MODELING   RUNS"  dated                                                               
4/7/10],  opined  that  what's  important for  the  committee  to                                                               
consider is  the total tax take  comparison.  This is  a one-year                                                               
assumption with 4.5 bcf/d and 500,000  barrels a day.  On slide 3                                                               
entitled  "Total  Tax CSSB  305(FIN)  less  Status Quo  BOE  Cost                                                               
Allocation"  the total  tax was  compared assuming  CSSB 305(FIN)                                                               
less the status quo, under various  scenarios.  From the chart on                                                               
slide 3, he  surmised that in a situation in  which there's $80 a                                                               
barrel oil  and a gas parity  of 20:1, the state  would lose $2.2                                                               
billion per year  if [oil and gas] wasn't decoupled.   He pointed                                                               
out that the  green squares on the  aforementioned chart indicate                                                               
when it's  in the  state's best interest  to be  decoupled versus                                                               
the red squares, which illustrate when  the state is at risk when                                                               
not  decoupled.   Senator Paskvan  ascertained that  under a  BOE                                                               
cost  allocation   method  it's  substantially  in   the  state's                                                               
interest  to decouple.   He  then  opined that  the magnitude  of                                                               
losing the $2.2  billion in any one  year completely destabilizes                                                               
the recovery ability of the  downside risk.  Senator Paskvan said                                                               
that he wanted to be sure  that the committee understood that the                                                               
tax rates stay the same.                                                                                                        
                                                                                                                                
8:21:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  referred to the  April 9, 2010,  Logsdon &                                                               
Associates  presentation.   He  then  pointed  out that  slide  4                                                               
relates a  status quo situation  in which  the oil and  gas taxes                                                               
are  combined and  result  in  an attributed  gas  tax of  $1.199                                                               
million.  However, in a situation  in which the oil and gas taxes                                                               
are  decoupled, as  illustrated on  slide  6, the  gas tax  alone                                                               
amounts to $333.5  million that equates to a 5.8  percent tax.  A                                                               
5.8 percent tax is very similar  to the Cook Inlet exclusion.  If                                                               
the desire is to  fix a tax rate for 10 years  of first gas flow,                                                               
Representative Seaton then  asked if it would make  sense for the                                                               
state  to  back  off  and   guarantee  that  no  matter  what  is                                                               
negotiated that  [the producers]  could have  almost the  ELF tax                                                               
rate for gas for 10 years.   That's what would be guaranteed in a                                                               
decoupled environment  with the presented scenarios  in the April                                                               
9,  2010,  Logsdon  & Associates  presentation.    Therefore,  he                                                               
questioned  whether it's  sensible for  the state  to enter  into                                                               
negotiations with that guarantee on the table.                                                                                  
                                                                                                                                
SENATOR PASKVAN opined that all  these slides illustrate that "we                                                               
live in  an oil world  and we should  keep our  eye on oil."   In                                                               
fact, on  slide 6  the $8.6 billion  in oil  revenues illustrates                                                               
that  the policy  focus  should  be on  the  oil.   Referring  to                                                               
[slide] 2, he pointed out that  the stack of money in the state's                                                               
control  is  always  better  with  decoupling  than  without  out                                                               
regardless  of which  cost allocation  is used.   The  22 percent                                                               
isn't  a   tax  rate,  he   clarified,  but  rather   an  imputed                                                               
allocation.     He  explained  that  the   progressivity  formula                                                               
determines the tax rate, post decoupling.                                                                                       
                                                                                                                                
8:27:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON expressed  concern  that at  the start  of                                                               
open season nothing  is being guaranteed in terms of  the oil tax                                                               
rate, rather only the gas tax  is being guaranteed.  He clarified                                                               
that only the gas production  tax obligation calculated under the                                                               
gas production  tax in effect at  the start of the  first binding                                                               
open  season is  being  guaranteed, not  the gas  tax  rate.   He                                                               
expressed  concern that  the  [imputed] amount  of  tax based  on                                                               
total gross  value is  the existing tax  system, the  status quo.                                                               
He asked if that's correct.                                                                                                     
                                                                                                                                
SENATOR PASKVAN  recalled that Commissioner Galvin  has said that                                                               
Alaska's tax  can go up to  the 1.99 figure.   If on [slide  6 of                                                               
the April  9, 2010, Logsdon  & Associates presentation]  the $300                                                               
million,  then  Alaska  could  increase   the  tax  another  $800                                                               
million.    However, the  net  value  on  the  gas will  be  $2.4                                                               
billion.  He reiterated that it's an oil world.                                                                                 
                                                                                                                                
8:30:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON pointed  out that  the gas  tax production                                                               
tax exemption statute  guarantees that the tax rate  at the start                                                               
is what's  guaranteed.  That  rate, he reiterated, is  almost the                                                               
Cook Inlet ELF  tax rate.  He noted that  the state only receives                                                               
$4 million from  all the tax produced in Cook  Inlet.  Therefore,                                                               
if this  rate is guaranteed  for 10 years  of gas flow,  it would                                                               
amount  to only  a few  multiple  times of  the $4  million.   He                                                               
remarked that the  state may receive $40 million a  year in total                                                               
tax if the state guarantees 5.8 percent maximum tax rate.                                                                       
                                                                                                                                
8:32:03 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 8:32 p.m. to 8:42 p.m.                                                                       
                                                                                                                                
8:42:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN announced that Commissioner Galvin has                                                                          
information for the committee to consider and he can discuss it                                                                 
with the committee at another time.                                                                                             
                                                                                                                                
Text for Amendment 1, labeled 26-LS1577\WA.2, Bullock, 4/5/10,                                                                  
which read:                                                                                                                     
                                                                                                                                
     Page 1, line 2:                                                                                                            
          Delete "oil,"                                                                                                       
          Insert "oil produced in the state and"                                                                              
                                                                                                                                
     Page 1, lines 2 - 3:                                                                                                       
          Delete ", and gas produced outside of the Cook                                                                      
     Inlet sedimentary basin and used in the state"                                                                           
                                                                                                                                
     Page 1, lines 10 - 11:                                                                                                     
          Delete "and not used in the state"                                                                                  
                                                                                                                                
     Page 2, line 17:                                                                                                           
          Delete "(f), (j), (k), and (o)"                                                                                       
          Insert "(f), (j), and (k) [(f), (j), (k), AND                                                                     
     (o)]                                                                                                                       
                                                                                                                                
     Page 2, following line 24:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 3. AS 43.55.011(f) is amended to read:                                                                      
          (f)  The levy of tax under this section for oil                                                                       
     and gas  produced north of  68 degrees  North latitude,                                                                    
     other than  oil and  gas production  subject to  (i) of                                                                    
     this section [AND GAS SUBJECT  TO (o) OF THIS SECTION],                                                                    
     may not be less than                                                                                                       
               (1)  four percent of the gross value at the                                                                      
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is more than $25;                                                                                     
               (2)  three percent of the gross value at the                                                                     
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is over $20 but not over $25;                                                                         
               (3)  two percent of the gross value at the                                                                       
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is over $17.50 but not over $20;                                                                      
               (4)  one percent of the gross value at the                                                                       
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax  is due is over $15 but  not over $17.50;                                                                    
     or                                                                                                                         
               (5)  zero percent of the gross value at the                                                                      
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is $15 or less."                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 2, line 27:                                                                                                           
          Delete "AS 43.55.160(a)(2)(A) - (E)"                                                                              
          Insert "AS 43.55.160(a)(2)(A) - (D)"                                                                              
                                                                                                                                
     Page 3, line 1:                                                                                                            
          Delete ","                                                                                                        
          Insert "and"                                                                                                      
                                                                                                                                
     Page 3, lines 2 - 4:                                                                                                       
          Delete ", and gas produced during the month from                                                                  
     a lease or property  outside the Cook Inlet sedimentary                                                                
     basin and used in the state"                                                                                           
                                                                                                                                
     Page 3, line 6:                                                                                                            
          Delete "AS 43.55.160(a)(2)(A) - (E)"                                                                              
          Insert "AS 43.55.160(a)(2)(A) - (D)"                                                                              
                                                                                                                                
     Page 3, line 9:                                                                                                            
          Delete "AS 43.55.160(a)(2)(A) - (E)"                                                                              
          Insert "AS 43.55.160(a)(2)(A) - (D)"                                                                              
                                                                                                                                
     Page 3, line 12:                                                                                                           
          Delete "AS 43.55.160(a)(2)(A) - (E)"                                                                              
          Insert "AS 43.55.160(a)(2)(A) - (D)"                                                                              
                                                                                                                                
     Page 3, line 16:                                                                                                           
          Delete "AS 43.55.160(a)(2)(A) - (E)"                                                                              
          Insert "AS 43.55.160(a)(2)(A) - (D)"                                                                              
                                                                                                                                
     Page 3, following line 18:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 5. AS 43.55.011(m) is amended to read:                                                                      
          (m)  Notwithstanding any contrary provision of                                                                        
     AS 38.05.180(i),    AS 41.09.010,   AS 43.55.024,    or                                                                    
     43.55.025, the  department shall provide  by regulation                                                                    
     a method to ensure that,  for a calendar year for which                                                                    
     a producer's  tax liability  is limited  by (j)  or (k)                                                                
     [(j),  (k),  OR  (o)]  of  this  section,  tax  credits                                                                    
     otherwise     available      under     AS 38.05.180(i),                                                                    
     AS 41.09.010, AS 43.55.024, or  43.55.025 and allocated                                                                    
     to gas subject  to the limitations in (j)  or (k) [(j),                                                                
     (k),  AND (o)]  of this  section are  accounted for  as                                                                    
     though  the credits  had been  applied first  against a                                                                    
     tax   liability  calculated   without  regard   to  the                                                                    
     limitations under  (j) or  (k) [(j),  (k), AND  (o)] of                                                                
     this section so  as to reduce the tax  liability to the                                                                    
     maximum amount provided  for under (j) [(j)  OR (o)] of                                                                
     this section for  the production of gas or  (k) of this                                                                    
     section for the production  of oil. The regulation must                                                                    
     provide  for  a  reasonable   method  to  allocate  tax                                                                    
     credits to  gas subject  to (j) [(j)  AND (o)]  of this                                                                
     section.  Only the  amount of  a  tax credit  remaining                                                                    
     after   the   accounting   provided  for   under   this                                                                    
     subsection  may  be used  for  a  later calendar  year,                                                                    
     transferred  to another  person, or  applied against  a                                                                    
     tax levied on the production  of oil or gas not subject                                                                    
     to (j)  or (k) [(j),  (k), OR  (o)] of this  section to                                                                
     the extent otherwise allowed."                                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 3, line 21:                                                                                                           
          Delete "AS 43.55.160(a)(2)(F) and (G)"                                                                                
          Insert "AS 43.55.160(a)(2)(E) and (F)"                                                                                
                                                                                                                                
     Page 3, lines 25 - 26:                                                                                                     
          Delete "or gas produced outside the Cook Inlet                                                                        
     sedimentary basin and used in the state"                                                                                   
                                                                                                                                
     Page 3, line 29:                                                                                                           
          Delete "AS 43.55.160(a)(2)(F) and (G)"                                                                                
          Insert "AS 43.55.160(a)(2)(E) and (F)"                                                                                
                                                                                                                                
     Page 4, line 1:                                                                                                            
          Delete "AS 43.55.160(a)(2)(F) and (G)"                                                                                
          Insert "AS 43.55.160(a)(2)(E) and (F)"                                                                                
                                                                                                                                
     Page 4, line 4:                                                                                                            
          Delete "AS 43.55.160(a)(2)(F) and (G)"                                                                                
          Insert "AS 43.55.160(a)(2)(E) and (F)"                                                                                
                                                                                                                                
     Page 4, line 7:                                                                                                            
          Delete "AS 43.55.160(a)(2)(F) and (G)"                                                                                
          Insert "AS 43.55.160(a)(2)(E) and (F)"                                                                                
                                                                                                                                
     Page 4, lines 21 - 22:                                                                                                     
          Delete "but not subject to AS 43.55.011(o)"                                                                           
         Insert "[BUT NOT SUBJECT TO AS 43.55.011(o)]"                                                                          
                                                                                                                                
     Page 6, line 9:                                                                                                            
          Delete "AS 43.55.011(j), (k), or (o)"                                                                                 
          Insert "AS 43.55.011(j) or (k) [AS 43.55.011(j),                                                                  
     (k), OR (o)]"                                                                                                              
                                                                                                                                
     Page 6, line 31:                                                                                                           
          Delete "AS 43.55.011(j), (k), or (o)"                                                                                 
          Insert "AS 43.55.011(j) or (k) [AS 43.55.011(j),                                                                  
     (k), OR (o)]"                                                                                                              
                                                                                                                                
     Page 7, line 2:                                                                                                            
          Delete "or 43.55.011(o)"                                                                                              
          Insert "[OR 43.55.011(o)]"                                                                                            
                                                                                                                                
     Page 7, line 4:                                                                                                            
          Delete "or 43.55.011(o)"                                                                                              
          Insert "[OR 43.55.011(o)]"                                                                                            
                                                                                                                                
     Page 9, lines 14 - 21:                                                                                                     
          Delete "gas produced during a calendar year from                                                                      
     a lease or property  outside the Cook Inlet sedimentary                                                                    
     basin and used  in the state is the gross  value at the                                                                    
     point  of   production  of   that  gas   taxable  under                                                                    
     AS 43.55.011(e) and produced by  the producer from that                                                                    
     lease   or   property,   less  the   producer's   lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable to  that gas produced  by the  producer from                                                                    
     that   lease    or   property,   as    adjusted   under                                                                    
     AS 43.55.170;                                                                                                              
               (F)"                                                                                                         
                                                                                                                                
     Page 9, lines 27 - 28:                                                                                                     
          Delete "this subparagraph does not apply to gas                                                                   
     used in the state;"                                                                                                    
                                                                                                                                
     Page 9, line 29:                                                                                                           
          Delete "(G)"                                                                                                      
          Insert "(F)"                                                                                                      
                                                                                                                                
     Page 10, lines 5 - 6:                                                                                                      
          Delete "; this subparagraph does not apply to gas                                                                 
     used in the state;"                                                                                                    
          Insert "[GAS PRODUCED DURING A CALENDAR YEAR FROM                                                                     
     A LEASE OR PROPERTY  OUTSIDE THE COOK INLET SEDIMENTARY                                                                    
     BASIN AND USED  IN THE STATE IS THE GROSS  VALUE AT THE                                                                    
     POINT  OF   PRODUCTION  OF   THAT  GAS   TAXABLE  UNDER                                                                    
     AS 43.55.011(e) AND PRODUCED BY  THE PRODUCER FROM THAT                                                                    
     LEASE   OR   PROPERTY,   LESS  THE   PRODUCER'S   LEASE                                                                    
     EXPENDITURES UNDER  AS 43.55.165 FOR THE  CALENDAR YEAR                                                                    
     APPLICABLE TO  THAT GAS PRODUCED  BY THE  PRODUCER FROM                                                                    
     THAT   LEASE    OR   PROPERTY,   AS    ADJUSTED   UNDER                                                                    
     AS 43.55.170];"                                                                                                            
                                                                                                                                
     Page 11, lines 8 - 15:                                                                                                     
          Delete "gas produced during a month from a lease                                                                      
     or property  outside the  Cook Inlet  sedimentary basin                                                                    
     and used in  the state is the gross value  at the point                                                                    
     of    production   of    that    gas   taxable    under                                                                    
     AS 43.55.011(e) and produced by  the producer from that                                                                    
     lease or  property, less 1/12  of the  producer's lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable to  that gas produced  by the  producer from                                                                    
     that   lease    or   property,   as    adjusted   under                                                                    
     AS 43.55.170;                                                                                                          
               (F)"                                                                                                         
                                                                                                                                
     Page 11, line 22:                                                                                                          
          Delete all material.                                                                                                  
                                                                                                                                
     Page 11, line 23:                                                                                                          
          Delete "(G)"                                                                                                      
          Insert "(F)"                                                                                                      
                                                                                                                                
     Page 11, lines 30 - 31:                                                                                                    
          Delete "; this subparagraph does not apply to gas                                                                 
     used in the state"                                                                                                     
          Insert "[GAS PRODUCED DURING A MONTH FROM A LEASE                                                                     
     OR PROPERTY  OUTSIDE THE  COOK INLET  SEDIMENTARY BASIN                                                                    
     AND USED IN  THE STATE IS THE GROSS VALUE  AT THE POINT                                                                    
     OF    PRODUCTION   OF    THAT    GAS   TAXABLE    UNDER                                                                    
     AS 43.55.011(e) AND PRODUCED BY  THE PRODUCER FROM THAT                                                                    
     LEASE OR  PROPERTY, LESS 1/12  OF THE  PRODUCER'S LEASE                                                                    
     EXPENDITURES UNDER  AS 43.55.165 FOR THE  CALENDAR YEAR                                                                    
     APPLICABLE TO  THAT GAS PRODUCED  BY THE  PRODUCER FROM                                                                    
     THAT   LEASE    OR   PROPERTY,   AS    ADJUSTED   UNDER                                                                    
     AS 43.55.170]"                                                                                                             
                                                                                                                                
     Page 11, following line 31:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec. 10. AS 43.55.160(e) is amended to read:                                                                     
          (e)  Any adjusted lease expenditures under                                                                            
     AS 43.55.165  and  43.55.170  that would  otherwise  be                                                                    
     deductible by a  producer in a calendar  year but whose                                                                    
     deduction would  cause an  annual production  tax value                                                                    
     calculated under (a)(1) of this  section of taxable oil                                                                    
     or gas  produced during  the calendar  year to  be less                                                                    
     than zero  may be  used to establish  a carried-forward                                                                    
     annual   loss  under   AS 43.55.023(b).  However,   the                                                                    
     department  shall provide  by  regulation  a method  to                                                                    
     ensure that,  for a period  for which a  producer's tax                                                                    
     liability   is  limited   by  AS 43.55.011(j)   or  (k)                                                                
     [AS 43.55.011(j),  (k),  OR  (o)], any  adjusted  lease                                                                    
     expenditures  under  AS 43.55.165  and  43.55.170  that                                                                    
     would otherwise  be deductible by  a producer  for that                                                                    
     period  but whose  deduction would  cause a  production                                                                    
     tax   value   calculated   under   (a)(1)(C)   or   (D)                                                                
     [(a)(1)(C), (D),  OR (E)]  of this  section to  be less                                                                    
     than  zero are  accounted  for as  though the  adjusted                                                                    
     lease expenditures  had first  been used  as deductions                                                                    
     in calculating the production tax  values of oil or gas                                                                    
     subject    to   any    of    the   limitations    under                                                                    
     AS 43.55.011(j) or  (k) [AS 43.55.011(j), (k),  OR (o)]                                                                
     that  have  positive production  tax  values  so as  to                                                                    
     reduce the  tax liability calculated without  regard to                                                                    
     the  limitation  to  the maximum  amount  provided  for                                                                    
     under  the applicable  provision of  AS 43.55.011(j) or                                                                
     (k) [AS 43.55.011(j), (k), OR  (o)]. Only the amount of                                                                
     those adjusted  lease expenditures remaining  after the                                                                    
     accounting provided  for under  this subsection  may be                                                                    
     used to  establish a carried-forward annual  loss under                                                                    
     AS 43.55.023(b).   In   this   subsection,   "producer"                                                                    
     includes "explorer.""                                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 12, lines 3 - 4:                                                                                                      
          Delete ", between gas subject to AS 43.55.011(o)                                                                      
     and other gas,"                                                                                                            
          Insert "[, BETWEEN GAS SUBJECT TO AS 43.55.011(o)                                                                     
     AND OTHER GAS,]"                                                                                                           
                                                                                                                                
     Page 12, line 17:                                                                                                          
          Delete ", between gas subject to AS 43.55.011(o)                                                                      
     and other gas,"                                                                                                            
                                                                                                                                
     Page 12, following line 27:                                                                                                
          Insert a new bill section to read:                                                                                    
        "*  Sec.  13. AS 43.55.011(o)  and  AS 43.55.900(24)                                                                
     are repealed."                                                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 13, line 2:                                                                                                           
          Delete "secs. 2 - 4 and 7"                                                                                            
          Insert "secs. 2, 4, 6, and 9"                                                                                         
                                                                                                                                
     Page 13, line 5:                                                                                                           
          Delete "secs. 2 - 4 and 7"                                                                                            
          Insert "secs. 2, 4, 6, and 9"                                                                                         
                                                                                                                                
     Page 13, line 10:                                                                                                          
          Delete "Sections 2 - 4 and 7"                                                                                         
          Insert "Sections 2, 4, 6, and 9"                                                                                      
                                                                                                                                
Text for Amendment 4, labeled 26-LS1577\WA.6, Bullock, 4/10/10,                                                                 
which read:                                                                                                                     
                                                                                                                                
     Page 1, lines 1 - 11:                                                                                                      
          Delete "providing that the tax rate applicable to                                                                   
     the  production of  oil as  the average  production tax                                                                  
     value  of   oil,  gas  produced   in  the   Cook  Inlet                                                                  
     sedimentary  basin, and  gas  produced  outside of  the                                                                  
     Cook  Inlet sedimentary  basin and  used  in the  state                                                                  
     increases above $30 shall be  0.4 percent multiplied by                                                                  
     the number that represents  the difference between that                                                                  
     average monthly  production tax value  and $30,  or the                                                                  
     sum  of  25 percent  and  the  product of  0.1  percent                                                                  
     multiplied   by   the   number  that   represents   the                                                                  
     difference between that  average monthly production tax                                                                  
     value   and  $92.50,   except  that   the  total   rate                                                                  
     determined  in  the  calculation   may  not  exceed  50                                                                  
     percent; providing for  an increase in the  rate of tax                                                                  
     on the production of gas  as the average production tax                                                                  
     value on a BTU equivalent  barrel basis of gas produced                                                                  
     outside  of the  Cook Inlet  sedimentary basin  and not                                                                  
     used in the state increases above $30"                                                                                   
          Insert "relating to that part of the tax on the                                                                     
     production  of  oil  and  gas  that  increases  as  the                                                                  
     average  production  tax  value  of  the  oil  and  gas                                                                  
     increases above $30"                                                                                                     
                                                                                                                                
     Page 2, line 2, following "expenditures;":                                                                               
          Insert "relating to the tax on the production of                                                                    
     gas in  effect at the  start of the first  binding open                                                                  
     season held  for the project licensed  under the Alaska                                                                  
     Gasline Inducement Act;"                                                                                                 
                                                                                                                                
     Page 2, following line 12:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 2. AS 29.60.850(b), as  amended by sec. 1 of                                                                
     this Act, is amended to read:                                                                                              
          (b)  Each fiscal year, the legislature may                                                                            
     appropriate to  the community  revenue sharing  fund an                                                                    
     amount equal  to 20  percent of  the money  received by                                                                    
     the  state  during  the previous  calendar  year  under                                                                    
     AS 43.55.011(g) [AND (p)]. The amount may not exceed                                                                       
               (1)  $60,000,000; or                                                                                             
               (2)  the amount that, when added to the fund                                                                     
     balance on June 30 of the  previous fiscal year, equals                                                                    
     $180,000,000.                                                                                                              
        * Sec. 3.  AS 29.60.850(b), as amended by  sec. 2 of                                                                  
     this Act, is amended to read:                                                                                              
          (b)  Each fiscal year, the legislature may                                                                            
     appropriate to  the community  revenue sharing  fund an                                                                    
     amount equal  to 20  percent of  the money  received by                                                                    
     the  state  during  the previous  calendar  year  under                                                                    
     AS 43.55.011(g) and (p). The amount may not exceed                                                                     
               (1)  $60,000,000; or                                                                                             
               (2)  the amount that, when added to the fund                                                                     
     balance on June 30 of the  previous fiscal year, equals                                                                    
     $180,000,000."                                                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 2, following line 24:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 5. AS 43.55.011(e), as  amended by sec. 4 of                                                                
     this Act, is amended to read:                                                                                              
          (e)  There is levied on the producer of oil or                                                                        
     gas a  tax for all  oil and gas produced  each calendar                                                                    
     year from  each lease  or property  in the  state, less                                                                    
     any  oil and  gas the  ownership or  right to  which is                                                                    
     exempt  from  taxation  or  constitutes  a  landowner's                                                                    
     royalty  interest. Except  as otherwise  provided under                                                                    
     (f),  (j), (k),  and (o)  of this  section, the  tax is                                                                    
     equal to the sum of                                                                                                        
               (1)  the annual production tax value of the                                                                      
     taxable    oil   and    gas    as   calculated    under                                                                    
     AS 43.55.160(a)(1) multiplied by 25 percent; and                                                                           
               (2)  the sum, over all months of the                                                                             
     calendar year, of the tax amounts determined under                                                                         
               [(A)  SUBSECTION] (g) of this section [; AND                                                                   
               (B)  SUBSECTION (p) OF THIS SECTION].                                                                          
        * Sec. 6. AS 43.55.011(e) as amended to read:                                                                         
          (e)  There is levied on the producer of oil or                                                                        
     gas a  tax for all  oil and gas produced  each calendar                                                                    
     year from  each lease  or property  in the  state, less                                                                    
     any  oil and  gas the  ownership or  right to  which is                                                                    
     exempt  from  taxation  or  constitutes  a  landowner's                                                                    
     royalty  interest. Except  as otherwise  provided under                                                                    
     (f),  (j), (k),  and (o)  of this  section, the  tax is                                                                    
     equal to the sum of                                                                                                        
               (1)  the annual production tax value of the                                                                      
     taxable    oil   and    gas    as   calculated    under                                                                    
     AS 43.55.160(a)(1) multiplied by 25 percent; and                                                                           
               (2)  the sum, over all months of the                                                                             
     calendar year, of the tax amounts determined under                                                                         
               (A)  subsection (g) of this section; and                                                                 
               (B)  subsection (p) of this section."                                                                        
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 3, following line 18:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 8. AS 43.55.011(g), as  amended by sec. 7 of                                                                
     this Act, is amended to read:                                                                                              
          (g)  For each month of the calendar year for                                                                          
     which  the producer's  average  monthly production  tax                                                                    
     value  under AS 43.55.160(a)(2)  [AS 43.55.160(a)(2)(A)                                                                
     - (E)]  of a BTU  equivalent barrel of taxable  oil and                                                                
     gas is  more than $30,  the amount of tax  for purposes                                                                    
     of (e)(2) [(e)(2)(A)] of this  section is determined by                                                                
     multiplying  the monthly  production tax  value of  the                                                                    
     taxable oil  and gas produced  during the month  [, GAS                                                                
     PRODUCED DURING THE  MONTH FROM A LEASE  OR PROPERTY IN                                                                    
     THE  COOK INLET  SEDIMENTARY  BASIN,  AND GAS  PRODUCED                                                                    
     DURING THE MONTH  FROM A LEASE OR  PROPERTY OUTSIDE THE                                                                    
     COOK INLET SEDIMENTARY BASIN AND  USED IN THE STATE] by                                                                    
     the tax rate calculated as follows:                                                                                        
               (1)  if the producer's average monthly                                                                           
     production  tax  value [UNDER  AS 43.55.160(a)(2)(A)  -                                                                    
     (E)] of a BTU equivalent  barrel of taxable oil and gas                                                                  
     for the month is not more  than $92.50, the tax rate is                                                                    
     0.4 percent  multiplied by  the number  that represents                                                                    
     the difference  between the producer's  average monthly                                                                    
     production  tax  value [UNDER  AS 43.55.160(a)(2)(A)  -                                                                    
     (E)] of a BTU equivalent  barrel of taxable oil and gas                                                                  
     and $30; or                                                                                                                
               (2)  if the producer's average monthly                                                                           
     production  tax  value [UNDER  AS 43.55.160(a)(2)(A)  -                                                                    
     (E)] of a BTU equivalent  barrel of taxable oil and gas                                                                  
     for the month is more than  $92.50, the tax rate is the                                                                    
     sum  of  25 percent  and  the  product of  0.1  percent                                                                    
     multiplied   by   the   number  that   represents   the                                                                    
     difference  between  the   producer's  average  monthly                                                                    
     production  tax  value [UNDER  AS 43.55.160(a)(2)(A)  -                                                                    
     (E)] of a BTU equivalent  barrel of taxable oil and gas                                                                    
     and $92.50,  except that the sum  determined under this                                                                    
     paragraph may not exceed 50 percent.                                                                                       
        * Sec. 9.  AS 43.55.011(g), as amended by  sec. 8 of                                                                  
     this Act, is amended to read:                                                                                              
          (g)  For each month of the calendar year for                                                                          
     which  the producer's  average  monthly production  tax                                                                    
     value     under     AS 43.55.160(a)(2)(A)     -     (E)                                                                
     [AS 43.55.160(a)(2)]  of  a  BTU equivalent  barrel  of                                                                    
     taxable oil  and gas  is more than  $30, the  amount of                                                                    
     tax for purposes of (e)(2)(A)  [(e)(2)] of this section                                                                
     is  determined by  multiplying  the monthly  production                                                                    
     tax value of the taxable  oil [AND GAS] produced during                                                                    
     the month, gas  produced during the month  from a lease                                                                
     or property  in the  Cook Inlet sedimentary  basin, and                                                                
     gas produced during the month  from a lease or property                                                                
     outside the  Cook Inlet sedimentary  basin and  used in                                                                
     the state by the tax rate calculated as follows:                                                                       
               (1)  if the producer's average monthly                                                                           
     production tax value  under AS 43.55.160(a)(2)(A) - (E)                                                                
     of a BTU  equivalent barrel of taxable oil  and gas for                                                                  
     the month is not more than  $92.50, the tax rate is 0.4                                                                    
     percent multiplied  by the  number that  represents the                                                                    
     difference  between  the   producer's  average  monthly                                                                    
     production tax value  under AS 43.55.160(a)(2)(A) - (E)                                                                
     of a BTU  equivalent barrel of taxable oil  and gas and                                                                    
     $30; or                                                                                                                    
               (2)  if the producer's average monthly                                                                           
     production tax value  under AS 43.55.160(a)(2)(A) - (E)                                                                
     of a BTU  equivalent barrel of taxable oil  and gas for                                                                    
     the month is more than $92.50,  the tax rate is the sum                                                                    
     of  25   percent  and  the   product  of   0.1  percent                                                                    
     multiplied   by   the   number  that   represents   the                                                                    
     difference  between  the   producer's  average  monthly                                                                    
     production tax value  under AS 43.55.160(a)(2)(A) - (E)                                                                
     of a BTU  equivalent barrel of taxable oil  and gas and                                                                    
     $92.50,  except  that  the sum  determined  under  this                                                                    
     paragraph may not exceed 50 percent."                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 4, following line 9:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Sec. 11. AS 43.55.011 is  amended by adding a new                                                                
     subsection to read:                                                                                                        
          (p)  For each month of the calendar year for                                                                          
     which  the producer's  average  monthly production  tax                                                                    
     value  under AS 43.55.160(a)(2)(F)  and  (G)  of a  BTU                                                                    
     equivalent barrel of taxable gas  is more than $30, the                                                                    
     amount of tax on the  production of gas for purposes of                                                                    
     (e)(2)(B) of this section  is determined by multiplying                                                                    
     the  monthly production  tax value  of the  taxable gas                                                                    
     produced during the month other  than gas produced from                                                                    
     a  lease  or property  in  the  Cook Inlet  sedimentary                                                                    
     basin   or  gas   produced  outside   the  Cook   Inlet                                                                    
     sedimentary  basin and  used in  the state  by the  tax                                                                    
     rate calculated as follows:                                                                                                
               (1)  if the producer's average monthly                                                                           
     production  tax value  under AS 43.55.160(a)(2)(F)  and                                                                    
     (G) of a  BTU equivalent barrel of taxable  gas for the                                                                    
     month  is not  more than  $92.50, the  tax rate  is 0.4                                                                    
     percent multiplied  by the  number that  represents the                                                                    
     difference  between  the   producer's  average  monthly                                                                    
     production  tax value  under AS 43.55.160(a)(2)(F)  and                                                                    
     (G) of a BTU equivalent barrel of gas and $30; or                                                                          
               (2)  if the producer's average monthly                                                                           
     production  tax value  under AS 43.55.160(a)(2)(F)  and                                                                    
     (G) of a  BTU equivalent barrel of taxable  gas for the                                                                    
     month is more  than $92.50, the tax rate is  the sum of                                                                    
     25 percent  and the  product of 0.1  percent multiplied                                                                    
     by the  number that  represents the  difference between                                                                    
     the  producer's average  monthly  production tax  value                                                                    
     under   AS 43.55.160(a)(2)(F)   and   (G)  of   a   BTU                                                                    
     equivalent barrel  of gas and  $92.50, except  that the                                                                    
     sum determined  under this paragraph may  not exceed 50                                                                    
     percent."                                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 6, line 31:                                                                                                           
          Delete "before 2022"                                                                                              
                                                                                                                                
     Page 7, following line 24:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec.  13. AS 43.55.020(a), as amended  by sec. 12                                                                
     of this Act, is amended to read:                                                                                           
          (a)  For a calendar year, a producer subject to                                                                       
     tax  under AS 43.55.011(e)  - (i)  [AND (p)]  shall pay                                                                    
     the tax as follows:                                                                                                        
               (1)  an installment payment of the estimated                                                                     
     tax levied  by AS 43.55.011(e), net of  any tax credits                                                                    
     applied as  allowed by  law, is due  for each  month of                                                                    
     the  calendar year  on the  last day  of the  following                                                                    
     month; except  as otherwise provided under  (2) of this                                                                    
     subsection, the  amount of  the installment  payment is                                                                    
     the sum of the following  amounts, less 1/12 of the tax                                                                    
     credits that are  allowed by law to  be applied against                                                                    
     the  tax levied  by  AS 43.55.011(e)  for the  calendar                                                                    
     year,  but the  amount of  the installment  payment may                                                                    
     not be less than zero:                                                                                                     
               (A)  for oil and gas produced from leases or                                                                     
     properties  in   the  state  outside  the   Cook  Inlet                                                                    
     sedimentary basin  but not subject  to AS 43.55.011(o),                                                                    
     other   than   leases    or   properties   subject   to                                                                    
     AS 43.55.011(f), the greater of                                                                                            
               (i)  zero; or                                                                                                    
               (ii)  [AN AMOUNT EQUAL TO] the sum of 25                                                                         
     percent  and  the tax  rate  calculated  for the  month                                                                    
     under  AS 43.55.011(g)  multiplied   by  the  remainder                                                                    
     obtained   by  subtracting   1/12  of   the  producer's                                                                    
     adjusted lease  expenditures for  the calendar  year of                                                                    
     production  [APPLICABLE  TO  THE OIL  PRODUCED  BY  THE                                                                    
     PRODUCER  FROM  THOSE   LEASES  AND  PROPERTIES]  under                                                                    
     AS 43.55.165 and 43.55.170 that  are deductible for the                                                                    
     leases or  properties under  AS 43.55.160 [,]  from the                                                                    
     gross value at  the point of production of  the oil and                                                                
     gas produced  from the leases or  properties during the                                                                
     month for  which the installment payment  is calculated                                                                    
     [ADDED  TO THE  SUM  OF  25 PERCENT  AND  THE TAX  RATE                                                                    
     CALCULATED   FOR   THE  MONTH   UNDER   AS 43.55.011(p)                                                                    
     MULTIPLIED  BY THE  REMAINDER  OBTAINED BY  SUBTRACTING                                                                    
     1/12 OF THE PRODUCER'S  ADJUSTED LEASE EXPENDITURES FOR                                                                    
     THE CALENDAR  YEAR OF PRODUCTION APPLICABLE  TO THE GAS                                                                    
     PRODUCED  BY   THE  PRODUCER  FROM  THOSE   LEASES  AND                                                                    
     PROPERTIES  UNDER AS 43.55.165  AND 43.55.170  THAT ARE                                                                    
     DEDUCTIBLE   FOR  THE   LEASES   OR  PROPERTIES   UNDER                                                                    
     AS 43.55.160  FROM  THE GROSS  VALUE  AT  THE POINT  OF                                                                    
     PRODUCTION  OF  THE GAS  PRODUCED  FROM  THE LEASES  OR                                                                    
     PROPERTIES DURING  THE MONTH FOR WHICH  THE INSTALLMENT                                                                    
     PAYMENT IS CALCULATED];                                                                                                    
               (B)  for oil and gas produced from leases or                                                                     
     properties subject to AS 43.55.011(f), the greatest of                                                                     
               (i)  zero;                                                                                                       
               (ii)  zero percent, one percent, two                                                                             
     percent,   three   percent,   or   four   percent,   as                                                                    
     applicable,  of  the  gross   value  at  the  point  of                                                                    
     production of the oil and  gas produced from all leases                                                                    
     or   properties  during   the  month   for  which   the                                                                    
     installment payment is calculated; or                                                                                      
               (iii)  [AN AMOUNT EQUAL TO] the sum of 25                                                                        
     percent  and  the tax  rate  calculated  for the  month                                                                    
     under  AS 43.55.011(g)  multiplied   by  the  remainder                                                                    
     obtained   by  subtracting   1/12  of   the  producer's                                                                    
     adjusted lease  expenditures for  the calendar  year of                                                                    
     production  [APPLICABLE  TO  THE OIL  PRODUCED  BY  THE                                                                    
     PRODUCER  FROM  THOSE   LEASES  AND  PROPERTIES]  under                                                                    
     AS 43.55.165  and  43.55.170  that are  deductible  for                                                                    
     those leases or properties  under AS 43.55.160 [,] from                                                                    
     the gross value  at the point of production  of the oil                                                                    
     and  gas  produced  from  those  leases  or  properties                                                                
     during the  month for which the  installment payment is                                                                    
     calculated [ADDED TO THE SUM  OF 25 PERCENT AND THE TAX                                                                    
     RATE  CALCULATED FOR  THE  MONTH UNDER  AS 43.55.011(p)                                                                    
     MULTIPLIED  BY THE  REMAINDER  OBTAINED BY  SUBTRACTING                                                                    
     1/12 OF THE PRODUCER'S  ADJUSTED LEASE EXPENDITURES FOR                                                                    
     THE CALENDAR  YEAR OF PRODUCTION APPLICABLE  TO THE GAS                                                                    
     PRODUCED  BY   THE  PRODUCER  FROM  THOSE   LEASES  AND                                                                    
     PROPERTIES  UNDER AS 43.55.165  AND 43.55.170  THAT ARE                                                                    
     DEDUCTIBLE  FOR   THOSE  LEASES  OR   PROPERTIES  UNDER                                                                    
     AS 43.55.160  FROM  THE GROSS  VALUE  AT  THE POINT  OF                                                                    
     PRODUCTION  OF THE  GAS PRODUCED  FROM THOSE  LEASES OR                                                                    
     PROPERTIES DURING  THE MONTH FOR WHICH  THE INSTALLMENT                                                                    
     PAYMENT IS CALCULATED];                                                                                                    
               (C)  for oil and gas produced from each                                                                          
     lease or  property subject to AS 43.55.011(j),  (k), or                                                                    
     (o), the greater of                                                                                                        
               (i)  zero; or                                                                                                    
               (ii)  [AN AMOUNT EQUAL TO] the sum of 25                                                                         
     percent  and  the tax  rate  calculated  for the  month                                                                    
     under  AS 43.55.011(g)  multiplied   by  the  remainder                                                                    
     obtained   by  subtracting   1/12  of   the  producer's                                                                    
     adjusted lease  expenditures for  the calendar  year of                                                                    
     production  [APPLICABLE  TO  THE OIL  PRODUCED  BY  THE                                                                    
     PRODUCER  FROM  THOSE   LEASES  AND  PROPERTIES]  under                                                                    
     AS 43.55.165  and 43.55.170  that are  deductible under                                                                    
     AS 43.55.160  for oil  or  gas, respectively,  produced                                                                
     from the lease or property  [,] from the gross value at                                                                    
     the   point  of   production  of   the   oil  or   gas,                                                                
     respectively,  produced  from  the  lease  or  property                                                                
     during the  month for which the  installment payment is                                                                    
     calculated [ADDED TO THE SUM  OF 25 PERCENT AND THE TAX                                                                    
     RATE  CALCULATED FOR  THE  MONTH UNDER  AS 43.55.011(g)                                                                    
     MULTIPLIED  BY THE  REMAINDER  OBTAINED BY  SUBTRACTING                                                                    
     1/12 OF THE PRODUCER'S  ADJUSTED LEASE EXPENDITURES FOR                                                                    
     THE CALENDAR  YEAR OF PRODUCTION APPLICABLE  TO THE GAS                                                                    
     PRODUCED  BY THE  PRODUCER FROM  THE LEASE  OR PROPERTY                                                                    
     UNDER  AS 43.55.165 AND  43.55.170 THAT  ARE DEDUCTIBLE                                                                    
     UNDER AS 43.55.160  FOR GAS PRODUCED FROM  THE LEASE OR                                                                    
     PROPERTY,  FROM  THE  GROSS   VALUE  AT  THE  POINT  OF                                                                    
     PRODUCTION  OF  THE  GAS PRODUCED  FROM  THE  LEASE  OR                                                                    
     PROPERTY  DURING THE  MONTH FOR  WHICH THE  INSTALLMENT                                                                    
     PAYMENT IS CALCULATED];                                                                                                    
               (2)  an amount calculated under (1)(C) of                                                                        
     this  subsection for  oil or  gas produced  before 2022                                                                
     from a  lease or  property subject  to AS 43.55.011(j),                                                                    
     (k),  or (o)  may not  exceed the  product obtained  by                                                                    
     carrying    out   the    calculation    set   out    in                                                                    
     AS 43.55.011(j)(1)   or   (2)   or   43.55.011(o),   as                                                                    
     applicable, for  gas or  set out  in AS 43.55.011(k)(1)                                                                    
     or  (2), as  applicable, for  oil, but  substituting in                                                                    
     AS 43.55.011(j)(1)(A)  or  (2)(A) or  43.55.011(o),  as                                                                    
     applicable, the  amount of taxable gas  produced during                                                                    
     the  month  for  the  amount of  taxable  gas  produced                                                                    
     during   the   calendar   year  and   substituting   in                                                                    
     AS 43.55.011(k)(1)(A)  or  (2)(A), as  applicable,  the                                                                    
     amount  of taxable  oil produced  during the  month for                                                                    
     the amount of taxable  oil produced during the calendar                                                                    
     year;                                                                                                                      
               (3)  an installment payment of the estimated                                                                     
     tax  levied  by  AS 43.55.011(i)   for  each  lease  or                                                                    
     property is due for each  month of the calendar year on                                                                    
     the last day of the  following month; the amount of the                                                                    
     installment payment is the sum of                                                                                          
               (A)  the applicable tax rate for oil                                                                             
     provided  under  AS 43.55.011(i),   multiplied  by  the                                                                    
     gross  value at  the  point of  production  of the  oil                                                                    
     taxable  under AS 43.55.011(i)  and  produced from  the                                                                    
     lease or property during the month; and                                                                                    
               (B)  the applicable tax rate for gas                                                                             
     provided  under  AS 43.55.011(i),   multiplied  by  the                                                                    
     gross  value at  the  point of  production  of the  gas                                                                    
     taxable  under AS 43.55.011(i)  and  produced from  the                                                                    
     lease or property during the month;                                                                                        
               (4)  any amount of tax levied by                                                                                 
     AS 43.55.011(e) or  (i), net of any  credits applied as                                                                    
     allowed by law,  that exceeds the total  of the amounts                                                                    
     due as installment payments of  estimated tax is due on                                                                    
     March 31  of the  year following  the calendar  year of                                                                    
     production.                                                                                                                
        * Sec.  14. AS 43.55.020(a),  as amended by  sec. 13                                                                  
     of this Act, is amended to read:                                                                                           
          (a)  For a calendar year, a producer subject to                                                                       
     tax under AS 43.55.011(e)  - (i) and (p)  shall pay the                                                                
     tax as follows:                                                                                                            
               (1)  an installment payment of the estimated                                                                     
     tax levied  by AS 43.55.011(e), net of  any tax credits                                                                    
     applied as  allowed by  law, is due  for each  month of                                                                    
     the  calendar year  on the  last day  of the  following                                                                    
     month; except  as otherwise provided under  (2) of this                                                                    
     subsection, the  amount of  the installment  payment is                                                                    
     the sum of the following  amounts, less 1/12 of the tax                                                                    
     credits that are  allowed by law to  be applied against                                                                    
     the  tax levied  by  AS 43.55.011(e)  for the  calendar                                                                    
     year,  but the  amount of  the installment  payment may                                                                    
     not be less than zero:                                                                                                     
               (A)  for oil and gas produced from leases or                                                                     
     properties  in   the  state  outside  the   Cook  Inlet                                                                    
     sedimentary basin  but not subject  to AS 43.55.011(o),                                                                    
     other   than   leases    or   properties   subject   to                                                                    
     AS 43.55.011(f), the greater of                                                                                            
               (i)  zero; or                                                                                                    
               (ii)  an amount equal to the sum of 25                                                                       
     percent  and  the tax  rate  calculated  for the  month                                                                    
     under  AS 43.55.011(g)  multiplied   by  the  remainder                                                                    
     obtained   by  subtracting   1/12  of   the  producer's                                                                    
     adjusted lease  expenditures for  the calendar  year of                                                                    
     production  applicable  to  the  oil  produced  by  the                                                                
     producer  from   those  leases  and   properties  under                                                                
     AS 43.55.165 and 43.55.170 that  are deductible for the                                                                    
     leases  or  properties  under  AS 43.55.160,  from  the                                                                
     gross value at the point  of production of the oil [AND                                                                    
     GAS] produced from the leases  or properties during the                                                                    
     month for  which the installment payment  is calculated                                                                    
     added  to  the sum  of  25  percent  and the  tax  rate                                                                
     calculated   for   the  month   under   AS 43.55.011(p)                                                                
     multiplied  by the  remainder  obtained by  subtracting                                                                
     1/12 of the producer's  adjusted lease expenditures for                                                                
     the calendar  year of production applicable  to the gas                                                                
     produced  by   the  producer  from  those   leases  and                                                                
     properties  under AS 43.55.165  and 43.55.170  that are                                                                
     deductible   for  the   leases   or  properties   under                                                                
     AS 43.55.160  from  the gross  value  at  the point  of                                                                
     production  of  the gas  produced  from  the leases  or                                                                
     properties during  the month for which  the installment                                                                
     payment is calculated;                                                                                                 
               (B)  for oil and gas produced from leases or                                                                     
     properties subject to AS 43.55.011(f), the greatest of                                                                     
               (i)  zero;                                                                                                       
               (ii)  zero percent, one percent, two                                                                             
     percent,   three   percent,   or   four   percent,   as                                                                    
     applicable,  of  the  gross   value  at  the  point  of                                                                    
     production of the oil and  gas produced from all leases                                                                    
     or   properties  during   the  month   for  which   the                                                                    
     installment payment is calculated; or                                                                                      
               (iii)  an amount equal to the sum of 25                                                                      
     percent  and  the tax  rate  calculated  for the  month                                                                    
     under  AS 43.55.011(g)  multiplied   by  the  remainder                                                                    
     obtained   by  subtracting   1/12  of   the  producer's                                                                    
     adjusted lease  expenditures for  the calendar  year of                                                                    
     production  applicable  to  the  oil  produced  by  the                                                                
     producer  from   those  leases  and   properties  under                                                                
     AS 43.55.165  and  43.55.170  that are  deductible  for                                                                    
     those  leases or  properties  under AS 43.55.160,  from                                                                
     the gross value  at the point of production  of the oil                                                                    
     [AND  GAS] produced  from  those  leases or  properties                                                                    
     during the  month for which the  installment payment is                                                                    
     calculated added to  the sum of 25 percent  and the tax                                                                
     rate  calculated for  the  month under  AS 43.55.011(p)                                                                
     multiplied  by the  remainder  obtained by  subtracting                                                                
     1/12 of the producer's  adjusted lease expenditures for                                                                
     the calendar  year of production applicable  to the gas                                                                
     produced  by   the  producer  from  those   leases  and                                                                
     properties  under AS 43.55.165  and 43.55.170  that are                                                                
     deductible  for   those  leases  or   properties  under                                                                
     AS 43.55.160  from  the gross  value  at  the point  of                                                                
     production  of the  gas produced  from those  leases or                                                                
     properties during  the month for which  the installment                                                                
     payment is calculated;                                                                                                 
               (C)  for oil and gas produced from each                                                                          
     lease or  property subject to AS 43.55.011(j),  (k), or                                                                    
     (o), the greater of                                                                                                        
               (i)  zero; or                                                                                                    
               (ii)  an amount equal to the sum of 25                                                                       
     percent  and  the tax  rate  calculated  for the  month                                                                    
     under  AS 43.55.011(g)  multiplied   by  the  remainder                                                                    
     obtained   by  subtracting   1/12  of   the  producer's                                                                    
     adjusted lease  expenditures for  the calendar  year of                                                                    
     production  applicable  to  the  oil  produced  by  the                                                                
     producer  from   those  leases  and   properties  under                                                                
     AS 43.55.165  and 43.55.170  that are  deductible under                                                                    
     AS 43.55.160 for  oil [OR GAS,  RESPECTIVELY,] produced                                                                    
     from the  lease or  property, from  the gross  value at                                                                
     the   point  of   production  of   the  oil   [OR  GAS,                                                                    
     RESPECTIVELY,]  produced  from  the lease  or  property                                                                    
     during the  month for which the  installment payment is                                                                    
     calculated added to  the sum of 25 percent  and the tax                                                                
     rate  calculated for  the  month under  AS 43.55.011(g)                                                                
     multiplied  by the  remainder  obtained by  subtracting                                                                
     1/12 of the producer's  adjusted lease expenditures for                                                                
     the calendar  year of production applicable  to the gas                                                                
     produced  by the  producer from  the lease  or property                                                                
     under  AS 43.55.165 and  43.55.170 that  are deductible                                                                
     under AS 43.55.160  for gas produced from  the lease or                                                                
     property,  from  the  gross   value  at  the  point  of                                                                
     production  of  the  gas produced  from  the  lease  or                                                                
     property  during the  month for  which the  installment                                                                
     payment is calculated;                                                                                                 
               (2)  an amount calculated under (1)(C) of                                                                        
     this  subsection for  oil or  gas produced  before 2022                                                                    
     from a  lease or  property subject  to AS 43.55.011(j),                                                                    
     (k),  or (o)  may not  exceed the  product obtained  by                                                                    
     carrying    out   the    calculation    set   out    in                                                                    
     AS 43.55.011(j)(1)   or   (2)   or   43.55.011(o),   as                                                                    
     applicable, for  gas or  set out  in AS 43.55.011(k)(1)                                                                    
     or  (2), as  applicable, for  oil, but  substituting in                                                                    
     AS 43.55.011(j)(1)(A)  or  (2)(A) or  43.55.011(o),  as                                                                    
     applicable, the  amount of taxable gas  produced during                                                                    
     the  month  for  the  amount of  taxable  gas  produced                                                                    
     during   the   calendar   year  and   substituting   in                                                                    
     AS 43.55.011(k)(1)(A)  or  (2)(A), as  applicable,  the                                                                    
     amount  of taxable  oil produced  during the  month for                                                                    
     the amount of taxable  oil produced during the calendar                                                                    
     year;                                                                                                                      
               (3)  an installment payment of the estimated                                                                     
     tax  levied  by  AS 43.55.011(i)   for  each  lease  or                                                                    
     property is due for each  month of the calendar year on                                                                    
     the last day of the  following month; the amount of the                                                                    
     installment payment is the sum of                                                                                          
               (A)  the applicable tax rate for oil                                                                             
     provided  under  AS 43.55.011(i),   multiplied  by  the                                                                    
     gross  value at  the  point of  production  of the  oil                                                                    
     taxable  under AS 43.55.011(i)  and  produced from  the                                                                    
     lease or property during the month; and                                                                                    
               (B)  the applicable tax rate for gas                                                                             
     provided  under  AS 43.55.011(i),   multiplied  by  the                                                                    
     gross  value at  the  point of  production  of the  gas                                                                    
     taxable  under AS 43.55.011(i)  and  produced from  the                                                                    
     lease or property during the month;                                                                                        
               (4)  any amount of tax levied by                                                                                 
     AS 43.55.011(e) or  (i), net of any  credits applied as                                                                    
     allowed by law,  that exceeds the total  of the amounts                                                                    
     due as installment payments of  estimated tax is due on                                                                    
     March 31  of the  year following  the calendar  year of                                                                    
     production."                                                                                                               
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 8, line 11:                                                                                                           
     Insert new bill sections to read:                                                                                          
        "* Sec.  16. AS 43.55.020(d), as amended  by sec. 15                                                                
     of this Act, is amended to read:                                                                                           
          (d)  In making settlement with the royalty owner                                                                      
     for  oil and  gas that  is taxable  under AS 43.55.011,                                                                    
     the producer may  deduct the amount of the  tax paid on                                                                    
     taxable  royalty oil  and gas,  or  may deduct  taxable                                                                    
     royalty oil or gas equivalent  in value at the time the                                                                    
     tax becomes due  to the amount of the tax  paid. If the                                                                    
     total deductions  of installment payments  of estimated                                                                    
     tax for a calendar year  exceed the actual tax for that                                                                    
     calendar year,  the producer  shall, before  April 1 of                                                                    
     the following  year, refund the  excess to  the royalty                                                                    
     owner.  Unless otherwise  agreed  between the  producer                                                                    
     and  the royalty  owner,  the amount  of  the tax  paid                                                                    
     under  AS 43.55.011(e)  -  (g)  [AND  (p)]  on  taxable                                                                    
     royalty oil  and gas  for a  calendar year,  other than                                                                    
     oil   and  gas   the  ownership   or  right   to  which                                                                    
     constitutes   a   landowner's  royalty   interest,   is                                                                    
     considered  to  be the  gross  value  at the  point  of                                                                    
     production of the taxable royalty  oil and gas produced                                                                    
     during the  calendar year multiplied  by a  figure that                                                                    
     is a quotient, in which                                                                                                    
               (1)  the numerator is the producer's total                                                                       
     tax  liability under  AS 43.55.011(e) -  (g) [AND  (p)]                                                                    
     for the calendar year of production; and                                                                                   
               (2)  the denominator is the total gross                                                                          
     value at  the point  of production of  the oil  and gas                                                                    
     taxable under AS 43.55.011(e) -  (g) [AND (p)] produced                                                                    
     by the producer  from all leases and  properties in the                                                                    
     state during the calendar year.                                                                                            
        * Sec.  17. AS 43.55.020(d),  as amended by  sec. 16                                                                  
     of this Act, is amended to read:                                                                                           
          (d)  In making settlement with the royalty owner                                                                      
     for  oil and  gas that  is taxable  under AS 43.55.011,                                                                    
     the producer may  deduct the amount of the  tax paid on                                                                    
     taxable  royalty oil  and gas,  or  may deduct  taxable                                                                    
     royalty oil or gas equivalent  in value at the time the                                                                    
     tax becomes due  to the amount of the tax  paid. If the                                                                    
     total deductions  of installment payments  of estimated                                                                    
     tax for a calendar year  exceed the actual tax for that                                                                    
     calendar year,  the producer  shall, before  April 1 of                                                                    
     the following  year, refund the  excess to  the royalty                                                                    
     owner.  Unless otherwise  agreed  between the  producer                                                                    
     and  the royalty  owner,  the amount  of  the tax  paid                                                                    
     under AS 43.55.011(e) - (g) and  (p) on taxable royalty                                                                
     oil and  gas for  a calendar year,  other than  oil and                                                                    
     gas  the  ownership or  right  to  which constitutes  a                                                                    
     landowner's royalty  interest, is considered to  be the                                                                    
     gross value at  the point of production  of the taxable                                                                    
     royalty oil  and gas produced during  the calendar year                                                                    
     multiplied by a figure that is a quotient, in which                                                                        
               (1)  the numerator is the producer's total                                                                       
     tax liability  under AS 43.55.011(e) - (g)  and (p) for                                                                
     the calendar year of production; and                                                                                       
               (2)  the denominator is the total gross                                                                          
     value at  the point  of production of  the oil  and gas                                                                    
     taxable under  AS 43.55.011(e) -  (g) and  (p) produced                                                                
     by the producer  from all leases and  properties in the                                                                    
     state during the calendar year."                                                                                           
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 11, following line 31:                                                                                                
     Insert new bill sections to read:                                                                                          
        "* Sec.  19. AS 43.55.160(a), as amended  by sec. 18                                                                
     of this Act, is amended to read:                                                                                           
          (a)  Except as provided in (b) of this section,                                                                       
     for the purposes of                                                                                                        
               (1)  AS 43.55.011(e), the annual production                                                                      
     tax value of the taxable                                                                                                   
               (A)  oil and gas produced during a calendar                                                                  
     year  from  leases  or properties  in  the  state  that                                                                    
     include land north of 68  degrees North latitude is the                                                                    
     gross value at  the point of production of  the oil and                                                                
     gas taxable  under AS 43.55.011(e) and produced  by the                                                                
     producer  from those  leases  or  properties, less  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar  year  applicable  to  the  oil  and  gas                                                                
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as   adjusted  under   AS 43.55.170;  this                                                                
     subparagraph  does   not  apply   to  gas   subject  to                                                                
     AS 43.55.011(o);                                                                                                       
               (B)  oil and gas produced during a calendar                                                                  
     year  from leases  or properties  in the  state outside                                                                    
     the Cook Inlet  sedimentary basin, no part  of which is                                                                    
     north of 68 degrees North  latitude, is the gross value                                                                    
     at the point  of production of the oil  and gas taxable                                                                
     under  AS 43.55.011(e)  and  produced by  the  producer                                                                    
     from those  leases or  properties, less  the producer's                                                                    
     lease expenditures under  AS 43.55.165 for the calendar                                                                    
     year  applicable to  the oil  and gas  produced by  the                                                                
     producer from  those leases or properties,  as adjusted                                                                    
     under  AS 43.55.170; this  subparagraph does  not apply                                                                
     to gas subject to AS 43.55.011(o);                                                                                     
               (C)  oil produced during a calendar year                                                                         
     from a lease or property  in the Cook Inlet sedimentary                                                                    
     basin is the gross value  at the point of production of                                                                    
     the oil  taxable under AS 43.55.011(e) and  produced by                                                                    
     the  producer from  that lease  or  property, less  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the oil  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (D)  gas produced during a calendar year                                                                         
     from a lease or property  in the Cook Inlet sedimentary                                                                    
     basin is the gross value  at the point of production of                                                                    
     the gas  taxable under AS 43.55.011(e) and  produced by                                                                    
     the  producer from  that lease  or  property, less  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the gas  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (E)  gas produced during a calendar year                                                                         
     from  a  lease  or  property  outside  the  Cook  Inlet                                                                    
     sedimentary basin  and used in  the state is  the gross                                                                    
     value at  the point of  production of that  gas taxable                                                                    
     under  AS 43.55.011(e)  and  produced by  the  producer                                                                    
     from that lease or  property, less the producer's lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable to  that gas produced  by the  producer from                                                                    
     that   lease    or   property,   as    adjusted   under                                                                    
     AS 43.55.170;                                                                                                              
               [(F)  GAS PRODUCED DURING A CALENDAR YEAR                                                                        
     FROM  LEASES OR  PROPERTIES IN  THE STATE  THAT INCLUDE                                                                    
     LAND NORTH  OF 68 DEGREES  NORTH LATITUDE IS  THE GROSS                                                                    
     VALUE AT  THE POINT  OF PRODUCTION  OF THE  GAS TAXABLE                                                                    
     UNDER  AS 43.55.011(e)  AND  PRODUCED BY  THE  PRODUCER                                                                    
     FROM THOSE  LEASES OR  PROPERTIES, LESS  THE PRODUCER'S                                                                    
     LEASE EXPENDITURES UNDER  AS 43.55.165 FOR THE CALENDAR                                                                    
     YEAR  APPLICABLE TO  THE GAS  PRODUCED BY  THE PRODUCER                                                                    
     FROM  THOSE LEASES  OR  PROPERTIES,  AS ADJUSTED  UNDER                                                                    
     AS 43.55.170; THIS  SUBPARAGRAPH DOES NOT APPLY  TO GAS                                                                    
     USED IN THE STATE;                                                                                                         
               (G)  GAS PRODUCED DURING A CALENDAR YEAR                                                                         
     FROM  LEASES OR  PROPERTIES  IN THE  STATE OUTSIDE  THE                                                                    
     COOK  INLET  SEDIMENTARY BASIN,  NO  PART  OF WHICH  IS                                                                    
     NORTH OF 68 DEGREES NORTH  LATITUDE, IS THE GROSS VALUE                                                                    
     AT THE  POINT OF  PRODUCTION OF  THE GAS  TAXABLE UNDER                                                                    
     AS 43.55.011(e)  AND  PRODUCED  BY  THE  PRODUCER  FROM                                                                    
     THOSE LEASES  OR PROPERTIES, LESS THE  PRODUCER'S LEASE                                                                    
     EXPENDITURES UNDER  AS 43.55.165 FOR THE  CALENDAR YEAR                                                                    
     APPLICABLE  TO THE  GAS PRODUCED  BY THE  PRODUCER FROM                                                                    
     THOSE   LEASES  OR   PROPERTIES,   AS  ADJUSTED   UNDER                                                                    
     AS 43.55.170; THIS  SUBPARAGRAPH DOES NOT APPLY  TO GAS                                                                    
     USED IN THE STATE;]                                                                                                        
               (2)  AS 43.55.011(g) [AND (p)], the monthly                                                                      
     production tax value of the taxable                                                                                        
               (A)  oil and gas produced during a month                                                                     
     from  leases or  properties in  the state  that include                                                                    
     land north  of 68 degrees  North latitude is  the gross                                                                    
     value at  the point  of production of  the oil  and gas                                                                
     taxable  under  AS 43.55.011(e)  and  produced  by  the                                                                    
     producer from those leases or  properties, less 1/12 of                                                                    
     the  producer's lease  expenditures under  AS 43.55.165                                                                    
     for the  calendar year  applicable to  the oil  and gas                                                                
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as   adjusted  under   AS 43.55.170;  this                                                                
     subparagraph  does   not  apply   to  gas   subject  to                                                                
     AS 43.55.011(o);                                                                                                       
               (B)  oil and gas produced during a month                                                                     
     from  leases or  properties  in the  state outside  the                                                                    
     Cook  Inlet  sedimentary basin,  no  part  of which  is                                                                    
     north of 68 degrees North  latitude, is the gross value                                                                    
     at the point  of production of the oil  and gas taxable                                                                
     under  AS 43.55.011(e)  and  produced by  the  producer                                                                    
     from  those  leases or  properties,  less  1/12 of  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar  year  applicable  to  the  oil  and  gas                                                                
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as   adjusted  under   AS 43.55.170;  this                                                                
     subparagraph  does   not  apply   to  gas   subject  to                                                                
     AS 43.55.011(o);                                                                                                       
               (C)  oil produced during a month from a                                                                          
     lease or  property in the Cook  Inlet sedimentary basin                                                                    
     is the  gross value at  the point of production  of the                                                                    
     oil taxable  under AS 43.55.011(e) and produced  by the                                                                    
     producer from that lease or  property, less 1/12 of the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the oil  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (D)  gas produced during a month from a                                                                          
     lease or  property in the Cook  Inlet sedimentary basin                                                                    
     is the  gross value at  the point of production  of the                                                                    
     gas taxable  under AS 43.55.011(e) and produced  by the                                                                    
     producer from that lease or  property, less 1/12 of the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the gas  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (E)  gas produced during a month from a                                                                          
     lease or  property outside  the Cook  Inlet sedimentary                                                                    
     basin and used  in the state is the gross  value at the                                                                    
     point  of   production  of   that  gas   taxable  under                                                                    
     AS 43.55.011(e) and produced by  the producer from that                                                                    
     lease or  property, less 1/12  of the  producer's lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable to  that gas produced  by the  producer from                                                                    
     that lease or property,  as adjusted under AS 43.55.170                                                                    
     [;                                                                                                                         
               (F)  GAS PRODUCED DURING A MONTH FROM LEASES                                                                     
     OR PROPERTIES IN  THE STATE THAT INCLUDE  LAND NORTH OF                                                                    
     68 DEGREES  NORTH LATITUDE  IS THE  GROSS VALUE  AT THE                                                                    
     POINT   OF  PRODUCTION   OF  THE   GAS  TAXABLE   UNDER                                                                    
     AS 43.55.011(e)  AND  PRODUCED  BY  THE  PRODUCER  FROM                                                                    
     THOSE   LEASES  OR   PROPERTIES,  LESS   1/12  OF   THE                                                                    
     PRODUCER'S  LEASE EXPENDITURES  UNDER AS 43.55.165  FOR                                                                    
     THE  CALENDAR YEAR  APPLICABLE TO  THE GAS  PRODUCED BY                                                                    
     THE  PRODUCER  FROM  THOSE  LEASES  OR  PROPERTIES,  AS                                                                    
     ADJUSTED  UNDER  AS 43.55.170; THIS  SUBPARAGRAPH  DOES                                                                    
     NOT APPLY TO GAS USED IN THE STATE;                                                                                        
               (G)  GAS PRODUCED DURING A MONTH FROM LEASES                                                                     
     OR  PROPERTIES  IN THE  STATE  OUTSIDE  THE COOK  INLET                                                                    
     SEDIMENTARY  BASIN, NO  PART OF  WHICH IS  NORTH OF  68                                                                    
     DEGREES  NORTH  LATITUDE, IS  THE  GROSS  VALUE AT  THE                                                                    
     POINT   OF  PRODUCTION   OF  THE   GAS  TAXABLE   UNDER                                                                    
     AS 43.55.011(e)  AND  PRODUCED  BY  THE  PRODUCER  FROM                                                                    
     THOSE   LEASES  OR   PROPERTIES,  LESS   1/12  OF   THE                                                                    
     PRODUCER'S  LEASE EXPENDITURES  UNDER AS 43.55.165  FOR                                                                    
     THE  CALENDAR YEAR  APPLICABLE TO  THE GAS  PRODUCED BY                                                                    
     THE  PRODUCER  FROM  THOSE  LEASES  OR  PROPERTIES,  AS                                                                    
     ADJUSTED  UNDER  AS 43.55.170; THIS  SUBPARAGRAPH  DOES                                                                    
     NOT APPLY TO GAS USED IN THE STATE].                                                                                       
        * Sec.  20. AS 43.55.160(a),  as amended by  sec. 19                                                                  
     of this Act, is amended to read:                                                                                           
          (a)  Except as provided in (b) of this section,                                                                       
     for the purposes of                                                                                                        
               (1)  AS 43.55.011(e), the annual production                                                                      
     tax value of the taxable                                                                                                   
               (A)  oil [AND GAS] produced during a                                                                             
     calendar year  from leases or  properties in  the state                                                                    
     that include  land north of  68 degrees  North latitude                                                                    
     is the  gross value at  the point of production  of the                                                                    
     oil  [AND   GAS]  taxable  under   AS 43.55.011(e)  and                                                                    
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  less  the  producer's  lease  expenditures                                                                    
     under AS 43.55.165 for the  calendar year applicable to                                                                    
     the oil [AND  GAS] produced by the  producer from those                                                                    
     leases or  properties, as adjusted  under AS 43.55.170;                                                                    
     [THIS  SUBPARAGRAPH DOES  NOT APPLY  TO GAS  SUBJECT TO                                                                    
     AS 43.55.011(o);]                                                                                                          
               (B)  oil [AND GAS] produced during a                                                                             
     calendar year  from leases or  properties in  the state                                                                    
     outside the  Cook Inlet sedimentary  basin, no  part of                                                                    
     which is  north of  68 degrees  North latitude,  is the                                                                    
     gross value at the point  of production of the oil [AND                                                                    
     GAS] taxable under AS 43.55.011(e)  and produced by the                                                                    
     producer  from those  leases  or  properties, less  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar  year applicable  to  the  oil [AND  GAS]                                                                    
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as  adjusted   under  AS 43.55.170;  [THIS                                                                    
     SUBPARAGRAPH  DOES   NOT  APPLY   TO  GAS   SUBJECT  TO                                                                    
     AS 43.55.011(o);]                                                                                                          
               (C)  oil produced during a calendar year                                                                         
     from a lease or property  in the Cook Inlet sedimentary                                                                    
     basin is the gross value  at the point of production of                                                                    
     the oil  taxable under AS 43.55.011(e) and  produced by                                                                    
     the  producer from  that lease  or  property, less  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the oil  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (D)  gas produced during a calendar year                                                                         
     from a lease or property  in the Cook Inlet sedimentary                                                                    
     basin is the gross value  at the point of production of                                                                    
     the gas  taxable under AS 43.55.011(e) and  produced by                                                                    
     the  producer from  that lease  or  property, less  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the gas  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (E)  gas produced during a calendar year                                                                         
     from  a  lease  or  property  outside  the  Cook  Inlet                                                                    
     sedimentary basin  and used in  the state is  the gross                                                                    
     value at  the point of  production of that  gas taxable                                                                    
     under  AS 43.55.011(e)  and  produced by  the  producer                                                                    
     from that lease or  property, less the producer's lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable to  that gas produced  by the  producer from                                                                    
     that   lease    or   property,   as    adjusted   under                                                                    
     AS 43.55.170;                                                                                                              
               (F)  gas produced during a calendar year                                                                     
     from  leases or  properties in  the state  that include                                                                
     land north  of 68 degrees  North latitude is  the gross                                                                
     value at  the point  of production  of the  gas taxable                                                                
     under  AS 43.55.011(e)  and  produced by  the  producer                                                                
     from those  leases or  properties, less  the producer's                                                                
     lease expenditures under  AS 43.55.165 for the calendar                                                                
     year  applicable to  the gas  produced by  the producer                                                                
     from  those leases  or  properties,  as adjusted  under                                                                
     AS 43.55.170; this  subparagraph does not apply  to gas                                                                
     used in the state;                                                                                                     
               (G)  gas produced during a calendar year                                                                     
     from  leases or  properties  in the  state outside  the                                                                
     Cook  Inlet  sedimentary basin,  no  part  of which  is                                                                
     north of 68 degrees North  latitude, is the gross value                                                                
     at the  point of  production of  the gas  taxable under                                                                
     AS 43.55.011(e)  and  produced  by  the  producer  from                                                                
     those leases  or properties, less the  producer's lease                                                                
     expenditures under  AS 43.55.165 for the  calendar year                                                                
     applicable  to the  gas produced  by the  producer from                                                                
     those   leases  or   properties,   as  adjusted   under                                                                
     AS 43.55.170; this  subparagraph does not apply  to gas                                                                
     used in the state;                                                                                                     
               (2)  AS 43.55.011(g) and (p), the monthly                                                                    
     production tax value of the taxable                                                                                        
               (A)  oil [AND GAS] produced during a month                                                                       
     from  leases or  properties in  the state  that include                                                                    
     land north  of 68 degrees  North latitude is  the gross                                                                    
     value at the  point of production of the  oil [AND GAS]                                                                    
     taxable  under  AS 43.55.011(e)  and  produced  by  the                                                                    
     producer from those leases or  properties, less 1/12 of                                                                    
     the  producer's lease  expenditures under  AS 43.55.165                                                                    
     for the calendar  year applicable to the  oil [AND GAS]                                                                    
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as  adjusted   under  AS 43.55.170;  [THIS                                                                    
     SUBPARAGRAPH  DOES   NOT  APPLY   TO  GAS   SUBJECT  TO                                                                    
     AS 43.55.011(o);]                                                                                                          
               (B)  oil [AND GAS] produced during a month                                                                       
     from  leases or  properties  in the  state outside  the                                                                    
     Cook  Inlet  sedimentary basin,  no  part  of which  is                                                                    
     north of 68 degrees North  latitude, is the gross value                                                                    
     at  the  point  of  production of  the  oil  [AND  GAS]                                                                    
     taxable  under  AS 43.55.011(e)  and  produced  by  the                                                                    
     producer from those leases or  properties, less 1/12 of                                                                    
     the  producer's lease  expenditures under  AS 43.55.165                                                                    
     for the calendar  year applicable to the  oil [AND GAS]                                                                    
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as  adjusted   under  AS 43.55.170;  [THIS                                                                    
     SUBPARAGRAPH  DOES   NOT  APPLY   TO  GAS   SUBJECT  TO                                                                    
     AS 43.55.011(o);]                                                                                                          
               (C)  oil produced during a month from a                                                                          
     lease or  property in the Cook  Inlet sedimentary basin                                                                    
     is the  gross value at  the point of production  of the                                                                    
     oil taxable  under AS 43.55.011(e) and produced  by the                                                                    
     producer from that lease or  property, less 1/12 of the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the oil  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (D)  gas produced during a month from a                                                                          
     lease or  property in the Cook  Inlet sedimentary basin                                                                    
     is the  gross value at  the point of production  of the                                                                    
     gas taxable  under AS 43.55.011(e) and produced  by the                                                                    
     producer from that lease or  property, less 1/12 of the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the gas  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (E)  gas produced during a month from a                                                                          
     lease or  property outside  the Cook  Inlet sedimentary                                                                    
     basin and used  in the state is the gross  value at the                                                                    
     point  of   production  of   that  gas   taxable  under                                                                    
     AS 43.55.011(e) and produced by  the producer from that                                                                    
     lease or  property, less 1/12  of the  producer's lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable to  that gas produced  by the  producer from                                                                    
     that   lease    or   property,   as    adjusted   under                                                                    
     AS 43.55.170;                                                                                                          
               (F)  gas produced during a month from leases                                                                 
     or properties in  the state that include  land north of                                                                
     68 degrees  North latitude  is the  gross value  at the                                                                
     point   of  production   of  the   gas  taxable   under                                                                
     AS 43.55.011(e)  and  produced  by  the  producer  from                                                                
     those   leases  or   properties,  less   1/12  of   the                                                                
     producer's  lease expenditures  under AS 43.55.165  for                                                                
     the  calendar year  applicable to  the gas  produced by                                                                
     the  producer  from  those  leases  or  properties,  as                                                                
     adjusted  under  AS 43.55.170; this  subparagraph  does                                                                
     not apply to gas used in the state;                                                                                    
               (G)  gas produced during a month from leases                                                                 
     or  properties  in the  state  outside  the Cook  Inlet                                                                
     sedimentary  basin, no  part of  which is  north of  68                                                                
     degrees  North  latitude, is  the  gross  value at  the                                                                
     point   of  production   of  the   gas  taxable   under                                                                
     AS 43.55.011(e)  and  produced  by  the  producer  from                                                                
     those   leases  or   properties,  less   1/12  of   the                                                                
     producer's  lease expenditures  under AS 43.55.165  for                                                                
     the  calendar year  applicable to  the gas  produced by                                                                
     the  producer  from  those  leases  or  properties,  as                                                                
     adjusted  under  AS 43.55.170; this  subparagraph  does                                                                
     not apply to gas used in the state."                                                                                   
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 12, line 28, through page 13, line 11:                                                                                
          Delete all material and insert:                                                                                       
        "* Sec. 23. AS 43.55.011(p) is repealed.                                                                            
        *  Sec. 24.   The  uncodified  law of  the State  of                                                                  
     Alaska is amended by adding a new section to read:                                                                         
          TRANSITION; REGULATIONS; PAYMENT OF TAX; FILING                                                                       
     OF REPORTS.  If secs. 1,  4, 7, 10,  12, 15, and  18 of                                                                    
     this Act  take effect, the Department  of Revenue shall                                                                    
     adopt regulations providing for  the payment of tax and                                                                    
     the filing of reports required  for the period in which                                                                    
     secs. 1, 4,  7, 10, 12, 15,  and 18 of this  Act are in                                                                    
     effect.                                                                                                                    
        *  Sec. 25.   The  uncodified  law of  the State  of                                                                  
     Alaska is amended by adding a new section to read:                                                                         
          CONDITIONAL EFFECT OF SECS. 1, 2, 4, 5, 7, 8, 10,                                                                     
     12, 13,  15, 16, 18,  19, AND  23 OF THIS  ACT; NOTICE.                                                                    
     (a) Sections 1, 2, 4, 5, 7,  8, 10, 12, 13, 15, 16, 18,                                                                    
     19, and  23 of this  Act take  effect only if  secs. 21                                                                    
     and 22 of this Act take effect before April 29, 2010.                                                                      
          (b)  The commissioner of revenue shall notify the                                                                     
     revisor of  statutes of  the date of  the start  of the                                                                    
     first  binding open  season  for  the project  licensed                                                                    
     under AS 43.90 (Alaska Gasline Inducement Act).                                                                            
        *  Sec. 26.   The  uncodified  law of  the State  of                                                                  
     Alaska is amended by adding a new section to read:                                                                         
          CONDITIONAL EFFECT OF SECS. 3, 6, 9, 11, 14, 17,                                                                      
     AND 20 OF  THIS ACT; NOTICE. (a) Sections 3,  6, 9, 11,                                                                    
     14, 17,  and 20 of  this Act  take effect only  if more                                                                    
     than  1,500,000,000 cubic  feet  of natural  gas a  day                                                                    
     that is produced in the  state is tendered for shipment                                                                    
     through a natural gas pipeline  project in the state to                                                                    
     a market in  Canada or the 48 contiguous  states, or to                                                                    
     a gas  liquefaction facility in the  state for shipment                                                                    
     in  a liquefied  state  by marine  transportation to  a                                                                    
     market outside of the state.                                                                                               
          (b)  The commissioner of revenue shall notify the                                                                     
     revisor of  statutes of the  date that natural  gas was                                                                    
     first  tendered for  shipment  under the  circumstances                                                                    
     described in (a) of this section.                                                                                          
        * Sec. 27.  If secs. 1, 4,  7, 10, 12, 15, and 18 of                                                                  
     this Act take effect, they take effect April 29, 2010.                                                                     
        * Sec. 28.  If secs. 2, 5,  8, 13, 16, 19, and 23 of                                                                  
     this Act  take effect,  they take  effect on  the first                                                                    
     day immediately  following the date  on which  the open                                                                    
     season starts for the project licensed under AS 43.90.                                                                     
        * Sec.  29.  If  secs. 3, 6, 9,  11, 14, 17,  and 20                                                                  
     take effect, they  take effect on the first  day of the                                                                    
     month  immediately  following  the date  on  which  the                                                                    
     condition in sec. 26(a) of this Act is met.                                                                                
        * Sec. 30.   Except as provided in secs.  27 - 29 of                                                                  
     this  Act,  this  Act takes  effect  immediately  under                                                                    
     AS 01.10.070(c)."                                                                                                          
                                                                                                                                
8:43:05 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN announced that the committee was recessed to a                                                                  
call of the chair at 8:43 p.m.[SB 305 was left pending.] [This                                                                  
meeting reconvened on April 11, 2010.]                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
HB 365 amendment A.3.pdf HRES 4/10/2010 10:00:00 AM
HB 365
SB 305 Amendment WA.6.pdf HRES 4/10/2010 10:00:00 AM
SB 305
SB 305 Concept Amend 4.10.10.pdf HRES 4/10/2010 10:00:00 AM
SB 305
SB 305 Amend WA.2 Explanation.pdf HRES 4/10/2010 10:00:00 AM
SB 305
LogsdonAssocHRES Flow SB305 41010.pdf HRES 4/10/2010 10:00:00 AM
SB 305
SB 305 work draft v.M.pdf HRES 4/10/2010 10:00:00 AM
SB 305
CSSB 305 (FIN) Modeling Runs - Back-Up - Final.pptx HRES 4/10/2010 10:00:00 AM
SB 305
SB 305 wdraft v. M 4.10.10.pdf HRES 4/10/2010 10:00:00 AM
SB 305