Legislature(2011 - 2012)BARNES 124

02/25/2011 01:00 PM RESOURCES


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01:11:58 PM Start
01:12:23 PM HB110
02:57:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 110 PRODUCTION TAX ON OIL AND GAS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
              HB 110-PRODUCTION TAX ON OIL AND GAS                                                                          
                                                                                                                                
1:12:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE announced  that  the only  order  of business  is                                                               
HOUSE  BILL  NO. 110,  "An  Act  relating  to the  interest  rate                                                               
applicable to certain  amounts due for fees,  taxes, and payments                                                               
made  and  property  delivered  to  the  Department  of  Revenue;                                                               
relating  to the  oil and  gas production  tax rate;  relating to                                                               
monthly installment payments of  estimated oil and gas production                                                               
tax; relating to  oil and gas production tax  credits for certain                                                               
expenditures,   including    qualified   capital    credits   for                                                               
exploration,  development,   and  production;  relating   to  the                                                               
limitation  on  assessment  of  oil  and  gas  production  taxes;                                                               
relating  to the  determination  of oil  and  gas production  tax                                                               
values;  making  conforming  amendments;  and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
1:12:46 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE   moved  to  adopt   Amendment  1,   labeled  27-                                                               
GH1007\A.2, Bullock, 2/22/11, which read:                                                                                       
                                                                                                                                
     Page 3, line 10:                                                                                                           
          Delete "as of December 31, 2010, was or had                                                                       
     previously been"                                                                                                       
          Insert "on December 31, 2008, was"                                                                                
                                                                                                                                
REPRESENTATIVE P. WILSON objected for discussion.                                                                               
                                                                                                                                
1:13:28 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  explained that HB  110 would divide  the unitized                                                               
and non-unitized  areas as  a means  to apply  a lower  base rate                                                               
with progressivity  for the non-unitized  areas.  He  offered his                                                               
belief that the  intent of the governor was to  offer a lower tax                                                               
rate  to  induce more  exploration  and  future production.    He                                                               
pointed out  that some areas  were already unitized, but  did not                                                               
yet  have  any production  or  exploration.   He  explained  that                                                               
Amendment 1 would adjust the date  on page 3, line 10, to include                                                               
these units in the lower non-unitized base tax rate.                                                                            
                                                                                                                                
1:15:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  noted that the  Point Thomson unit  is currently                                                               
under  contest and  may be  de-unitized; if  it was  re-unitized,                                                               
would the 15 percent [tax] rate be permanent, he asked.                                                                         
                                                                                                                                
CO-CHAIR FEIGE replied  that because Point Thomson was  a unit on                                                               
that date it would not receive the 15 percent rate.                                                                             
                                                                                                                                
CO-CHAIR  SEATON,  referring  to   proposed  Amendment  1,  asked                                                               
whether  the deletion  of "or  had previously  been" would  allow                                                               
leases that  were de-unitized,  and then  re-unitized at  a later                                                               
date, to qualify for the 15 percent tax rate.                                                                                   
                                                                                                                                
CO-CHAIR FEIGE offered  his belief that it would not.   He stated                                                               
that "if they were a unit  on that date [December 31, 2008], they                                                               
would fall under the higher base rate."                                                                                         
                                                                                                                                
1:17:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON   expressed  concern   with  removing   "or  had                                                               
previously been" from proposed Amendment  1.  He explained that a                                                               
unit  could  be  de-unitized,  and  then,  if  re-unitized  after                                                               
December 31,  2010, it  would be  recognized as  a new  unit, and                                                               
qualify for the lower tax rate of 15 percent.                                                                                   
                                                                                                                                
JOE  BALASH, Deputy  Commissioner,  Office  of the  Commissioner,                                                               
Department  of   Natural  Resources  (DNR)  explained   that  the                                                               
language in proposed  Amendment 1, "or had  previously been," was                                                               
speaking   to  individual   leases,   and   would  preserve   the                                                               
designations as of  December 31, 2008.  Directing  his remarks to                                                               
Point Thomson,  he stated that  designations would  be determined                                                               
by what existed on December 31, 2008.                                                                                           
                                                                                                                                
1:20:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON  offered his  belief  that  removal of  "or  had                                                               
previously  been" would  allow units  to re-unitize  in order  to                                                               
qualify for the 15 percent tax  rate, as it removed the statutory                                                               
restriction.                                                                                                                    
                                                                                                                                
MR. BALASH  pointed out  that many  individual land  parcels had,                                                               
over the past  35 years, been in  a unit at one  time or another.                                                               
He  explained   that  leases  were  initially   individual,  were                                                               
unitized,  and then  were contracted  out.   He  noted that  many                                                               
leases, currently  not in  a unit,  had been  in another  unit at                                                               
some point  in the last 35  years.  He offered  his understanding                                                               
that the intent  of proposed Amendment 1 was to  ensure that when                                                               
a  lease was  returned for  re-leasing, the  process would  begin                                                               
again, and the lease was eligible for the lower tax rate.                                                                       
                                                                                                                                
1:22:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON allowed that proposed  Amendment 1 was a possible                                                               
solution  for that  issue, but  surmised that  it could  open the                                                               
potential problem he described earlier.   He stated his desire to                                                               
avoid this "loophole" problem.                                                                                                  
                                                                                                                                
MR. BALASH  responded that DNR did  not see any legal  problem or                                                               
concern with the language as written for proposed Amendment 1.                                                                  
                                                                                                                                
1:24:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  cited an example of  expansion to a unit  with a                                                               
subsequent re-unitizing,  and asked  if this  would qualify  as a                                                               
new unit, eligible for the lower tax rate.                                                                                      
                                                                                                                                
MR. BALASH offered his belief that  this was not the case because                                                               
all the  leases that were  in those units  would be static  as of                                                               
the amended date.                                                                                                               
                                                                                                                                
CO-CHAIR SEATON expressed his disagreement with this assessment.                                                                
                                                                                                                                
REPRESENTATIVE MUNOZ  agreed with Representative Seaton  that the                                                               
language was confusing.                                                                                                         
                                                                                                                                
1:27:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  stated that proposed  Amendment 1 would  amend HB                                                               
110 to  read that "if  a piece of property  was within a  unit on                                                               
December  31, 2008,  it gets  taxed at  ... the  base rate  of 25                                                               
percent  plus progressivity.   Places  that  weren't unitized  on                                                               
that date  do not;  they get  taxed at the  lower rate,  which is                                                               
designed to  encourage production."   He  pointed out  that units                                                               
existing  prior  to  December  31,   2008,  which  did  not  have                                                               
production,  were areas  of exploration,  with the  potential for                                                               
oil.                                                                                                                            
                                                                                                                                
MR. BALASH expressed his agreement with Co-Chair Feige.                                                                         
                                                                                                                                
CO-CHAIR FEIGE  stated that throughout  Alaska history  there had                                                               
been many  leases that were  parts of  units, and these  had been                                                               
released for whatever  reason.  He ascertained  that inclusion of                                                               
"had previously been" in proposed  Amendment 1 would maintain the                                                               
higher tax rate for all of  these leases, and would not encourage                                                               
additional exploration.                                                                                                         
                                                                                                                                
1:30:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON asked what the  tax rate would be if the                                                               
lease was dissolved for Point Thomson.                                                                                          
                                                                                                                                
MR. BALASH  declined to speak  about the Point Thomson  lease due                                                               
to the  current litigation.   However, he offered  the Rockflower                                                               
Unit as  an example, which  was a  collection of leases  south of                                                               
Prudhoe  Bay.   The unit  was formed  by Eni,  which subsequently                                                               
released  the leases,  all of  which  had been  in a  unit as  of                                                               
December 31,  2008.  He  shared that Great Bear  Petroleum picked                                                               
up  these leases  at the  lease sale  in the  fall of  2010.   He                                                               
pointed out the  intent to ensure these leases  were available at                                                               
the lower tax rate, as they were  not part of a unit currently in                                                               
production.  In  further response, he agreed that  the Great Bear                                                               
Petroleum leases  would be taxed  at the lower rate,  if proposed                                                               
Amendment 1 was approved.                                                                                                       
                                                                                                                                
1:33:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON asked when Point Thomson was unitized.                                                                          
                                                                                                                                
MR. BALASH offered his belief that it was unitized in 1981.                                                                     
                                                                                                                                
CO-CHAIR  SEATON,  referring   to  "was  within  a   unit  or  in                                                               
commercial  production,"  asked  if  this  pertained  to  a  non-                                                               
producing lease within a unit.                                                                                                  
                                                                                                                                
MR. BALASH explained that, as  HB 110 would be applied statewide,                                                               
it was necessary to draft language  to address all scenarios.  He                                                               
agreed  that individual  leases producing  prior to  the date  in                                                               
statute would be taxed at the higher tax rate.                                                                                  
                                                                                                                                
1:35:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE moved to adopt Amendment 1.                                                                                      
                                                                                                                                
REPRESENTATIVE P. WILSON  removed her objection.   There being no                                                               
further objection, it was so ordered.                                                                                           
                                                                                                                                
1:35:36 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
1:36:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON moved to adopt Amendment 2, labeled 27-                                                                         
GH1007\A.36, Bullock, 2/24/11, which read:                                                                                      
                                                                                                                                
     Page 1, line 6, following "production":                                                                                  
          Insert    "relating    to    certain    additional                                                                  
     nontransferable oil and gas production tax credits;"                                                                     
                                                                                                                                
     Page 12, following line 5:                                                                                                 
          Insert new bill sections to read:                                                                                     
        "* Sec. 17. AS 43.55.024(b) is amended to read:                                                                     
          (b)  A producer may not take a tax credit under                                                                       
     (a) of  this section  for any  calendar year  after the                                                                    
     later of                                                                                                                   
               (1)  2021 [2016]; or                                                                                         
               (2)  the ninth calendar year after the                                                                           
     calendar  year  during  which the  producer  first  has                                                                    
     commercial  oil or  gas production  before May 1,  2021                                                                
     [2016],  from at  least one  lease or  property in  the                                                                    
     state  outside the  Cook  Inlet  sedimentary basin,  no                                                                    
     part of  which is north  of 68 degrees  North latitude,                                                                    
     if  the producer  did not  have commercial  oil or  gas                                                                    
     production  from  a  lease or  property  in  the  state                                                                    
     outside the  Cook Inlet sedimentary  basin, no  part of                                                                    
     which  is north  of 68  degrees North  latitude, before                                                                    
     April 1, 2006.                                                                                                             
        * Sec. 18. AS 43.55.024(d) is amended to read:                                                                        
          (d)  A producer may not take a tax credit under                                                                       
     (c) of  this section  for any  calendar year  after the                                                                    
     later of                                                                                                                   
               (1)  2021 [2016]; or                                                                                         
               (2)  if the producer did not have commercial                                                                     
     oil or gas  production from a lease or  property in the                                                                    
     state  before April 1,  2006, the  ninth calendar  year                                                                    
     after  the  calendar  year during  which  the  producer                                                                    
     first  has  commercial  oil or  gas  production  before                                                                    
     May 1,  2021  [2016],  from  at   least  one  lease  or                                                                
     property in the state."                                                                                                    
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, line 10:                                                                                                          
          Delete "Sections 6 - 9 and 20"                                                                                        
          Insert "Sections 6 - 9 and 22"                                                                                        
                                                                                                                                
     Page 16, line 12:                                                                                                          
          Delete "Section 19"                                                                                                   
          Insert "Section 21"                                                                                                   
                                                                                                                                
     Page 16, line 20:                                                                                                          
          Delete "Sections 11, 12, 14 - 18, 24, and 25(a)"                                                                      
          Insert "Sections 11, 12, 14 - 16, 19, 20, 26, and                                                                     
          27(a)"                                                                                                                
                                                                                                                                
     Page 16, line 21:                                                                                                          
          Delete "Sections 6 - 9, 20, and 25(b)"                                                                                
          Insert "Sections 6 - 9, 22, and 27(b)"                                                                                
                                                                                                                                
     Page 16, line 22:                                                                                                          
          Delete "Sections 19 and 25(c)"                                                                                        
          Insert "Sections 21 and 27(c)"                                                                                        
                                                                                                                                
     Page 16, line 23:                                                                                                          
          Delete "secs. 27 - 29"                                                                                                
          Insert "secs. 29 - 31"                                                                                                
                                                                                                                                
1:37:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON objected for discussion.                                                                               
                                                                                                                                
CO-CHAIR SEATON  explained that proposed  Amendment 2  related to                                                               
the  small  producer  tax  credits,  a  $12  million  credit  for                                                               
producers  of less  than 100,000  barrels per  day.   He declared                                                               
that  the proposed  amendment extended  the sunset  date of  this                                                               
credit for an additional five years, from 2016 to 2021.                                                                         
                                                                                                                                
REPRESENTATIVE P. WILSON understood that proposed Amendment 2                                                                   
extended the tax credit period from 5 years to 10 years.                                                                        
                                                                                                                                
CO-CHAIR SEATON agreed.                                                                                                         
                                                                                                                                
REPRESENTATIVE P. WILSON removed her objection.                                                                                 
                                                                                                                                
1:39:07 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 1:39 p.m. to 1:41 p.m.                                                                       
                                                                                                                                
1:41:05 PM                                                                                                                    
                                                                                                                                
There being no objection, Amendment 2 was adopted.                                                                              
                                                                                                                                
CO-CHAIR SEATON moved to adopt Amendment 3, labeled 27-                                                                         
GH1007\A.3, Mischel/Bullock, 2/23/11, which read:                                                                               
                                                                                                                                
     Page 1, lines 4 - 5:                                                                                                       
          Delete "for certain expenditures"                                                                                   
                                                                                                                                
     Page 12, following line 5:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 17. AS 43.55.024(c) is amended to read:                                                                     
          (c)  For a calendar year for which a producer's                                                                       
     tax  liability   under  AS 43.55.011(e)   exceeds  zero                                                                    
     before application  of any credits under  this chapter,                                                                    
     other  than a  credit  under (a)  of  this section  but                                                                    
     after  application  of any  credit  under  (a) of  this                                                                    
     section,  a producer  that is  qualified  under (e)  of                                                                    
     this section  and whose average  amount of oil  and gas                                                                    
     produced  a day  and taxable  under AS 43.55.011(e)  is                                                                    
     less  than 100,000  BTU equivalent  barrels  a day  may                                                                    
     apply a  tax credit under this  subsection against that                                                                    
     liability. A  producer whose average amount  of oil and                                                                    
     gas produced  a day  and taxable  under AS 43.55.011(e)                                                                    
     is                                                                                                                         
               (1)  not more than 50,000 BTU equivalent                                                                         
     barrels  may  apply  a  tax credit  of  not  more  than                                                                    
     $15,000,000 [$12,000,000] for the calendar year;                                                                       
               (2)  more than 50,000 and less than 100,000                                                                      
     BTU equivalent  barrels may apply  a tax credit  of not                                                                    
     more than  $15,000,000 [$12,000,000] multiplied  by the                                                                
     following fraction for the calendar year:                                                                                  
                   1 - [2 X (AP - 50,000)] / 100,000                                                                            
     where AP  = the average  amount of oil and  gas taxable                                                                    
     under  AS 43.55.011(e),  produced   a  day  during  the                                                                    
     calendar year in BTU equivalent barrels."                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, line 10:                                                                                                          
          Delete "Sections 6 - 9 and 20"                                                                                        
          Insert "Sections 6 - 9 and 21"                                                                                        
                                                                                                                                
     Page 16, line 12:                                                                                                          
          Delete "Section 19"                                                                                                   
          Insert "Section 20"                                                                                                   
                                                                                                                                
     Page 16, line 20:                                                                                                          
          Delete "Sections 11, 12, 14 - 18, 24, and 25(a)"                                                                      
          Insert "Sections 11, 12, 14 - 16, 18, 19, 25, and                                                                     
     26(a)"                                                                                                                     
                                                                                                                                
     Page 16, line 21:                                                                                                          
          Delete "Sections 6 - 9, 20, and 25(b)"                                                                                
          Insert "Sections 6 - 9, 21, and 26(b)"                                                                                
                                                                                                                                
     Page 16, line 22:                                                                                                          
          Delete "Sections 19 and 25(c)"                                                                                        
          Insert "Sections 20 and 26(c)"                                                                                        
                                                                                                                                
     Page 16, line 23:                                                                                                          
          Delete "secs. 27 - 29"                                                                                                
          Insert "secs. 28 - 30"                                                                                                
                                                                                                                                
REPRESENTATIVE P. WILSON objected for discussion.                                                                               
                                                                                                                                
1:41:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  reported that proposed Amendment  3, relating to                                                               
the credits extended  in Amendment 2, would insert  Section 17 in                                                               
proposed HB 110.  He  explained that the proposed amendment would                                                               
increase  the small  producer tax  credits,  which producers  had                                                               
declared  important   for  the   financing  of   exploration  and                                                               
development,  from $12  million to  $15 million.   He  emphasized                                                               
that these annual  credits could not be sold, could  only be used                                                               
if there was  oil production, and were applied  to any production                                                               
under  100,000 barrels  per  day.   He shared  that  this was  an                                                               
existing law,  which merely changed  the credit from  $12 million                                                               
annually to $15 million annually.                                                                                               
                                                                                                                                
CO-CHAIR  FEIGE asked  why it  was necessary  to change  the bill                                                               
title.                                                                                                                          
                                                                                                                                
CO-CHAIR SEATON replied  that the bill did not  address the small                                                               
producer tax credit.   He referred to the  testimony stating that                                                               
the  short date  on  the  tax credits  was  delaying the  project                                                               
financing.  In response to  Representative Herron, he pointed out                                                               
that the producers  had indicated that an increase  in the credit                                                               
amount would be helpful.                                                                                                        
                                                                                                                                
1:44:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ  reflected that  the primary  criticism from                                                               
the small  producers had been  for the tax credit  extension over                                                               
two years, instead of one year.                                                                                                 
                                                                                                                                
CO-CHAIR FEIGE agreed that was one criticism.                                                                                   
                                                                                                                                
REPRESENTATIVE MUNOZ asked  if the small producers  had offered a                                                               
suggestion for a specific credit amount.                                                                                        
                                                                                                                                
CO-CHAIR    SEATON   referred    to   a    conversation   between                                                               
Representative Herron and  the producers for the  increase in the                                                               
tax credit.   He indicated that the earlier amount  had needed an                                                               
adjustment for  inflation.  He  stated that a committee  goal was                                                               
to offer  reasonable support for  the small producers  to attract                                                               
investment capital.                                                                                                             
                                                                                                                                
BRYAN BUTCHER, Acting Commissioner,  Department of Revenue (DOR),                                                               
replied  that  DOR  did  not  have  any  concerns  with  proposed                                                               
Amendment 3.                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON  removed her objection.   There being no                                                               
further objection, it was so ordered.                                                                                           
                                                                                                                                
1:47:31 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON   moved  to  adopt  Amendment   4,  labeled  27-                                                               
GH1007\A.4, Mischel/Bullock, 2/23/11, which read:                                                                               
                                                                                                                                
     Page 12, following line 5:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 17. AS 43.55.025(b) is amended to read:                                                                     
          (b)  To qualify for the production tax credit                                                                         
     under (a)  of this section, an  exploration expenditure                                                                    
     must  be incurred  for  work  performed after  June 30,                                                                    
     2008, and before July 1, 2021 [2016], and                                                                              
               (1)  may be for seismic or other geophysical                                                                     
     exploration costs not connected with a specific well;                                                                      
               (2)  if for an exploration well,                                                                                 
                    (A)  must be incurred by an explorer                                                                        
     that  holds an  interest  in the  exploration well  for                                                                    
     which the production tax credit is claimed;                                                                                
                    (B)  may be for either a well that                                                                          
     encounters an oil or gas deposit or a dry hole;                                                                            
                    (C)  must be for a well that has been                                                                       
     completed,  suspended, or  abandoned  at  the time  the                                                                    
     explorer  claims  the  tax credit  under  (f)  of  this                                                                    
     section; and                                                                                                               
                    (D)  must be for goods, services, or                                                                        
     rentals  of personal  property reasonably  required for                                                                    
     the surface  preparation, drilling,  casing, cementing,                                                                    
     and logging  of an exploration  well, and, in  the case                                                                    
     of  a   dry  hole,   for  the  expenses   required  for                                                                    
     abandonment if  the well is abandoned  within 18 months                                                                    
     after the date the well was spudded;                                                                                       
               (3)  may not be for administration,                                                                              
     supervision,  engineering,  or lease  operating  costs;                                                                    
     geological or management  costs; community relations or                                                                    
     environmental costs; bonuses,  taxes, or other payments                                                                    
     to governments  related to  the well;  costs, including                                                                    
     repairs  and replacements,  arising from  or associated                                                                    
     with  fraud,   wilful  misconduct,   gross  negligence,                                                                    
     criminal negligence,  or violation of law,  including a                                                                    
     violation of 33 U.S.C.  1319(c)(1) or 1321(b)(3) (Clean                                                                    
     Water  Act);   or  other   costs  that   are  generally                                                                    
     recognized as indirect costs or financing costs; and                                                                       
               (4)  may not be incurred for an exploration                                                                      
     well or seismic exploration that  is included in a plan                                                                    
     of exploration  or a plan  of development for  any unit                                                                    
     before May 14, 2003.                                                                                                       
        * Sec. 18. AS 43.55.025(k) is amended to read:                                                                        
          (k)  Subject to the terms and conditions of this                                                                      
     section,  if a  claim  is filed  under  (f)(1) of  this                                                                    
     section  before   January 1,  2021  [2016],   a  credit                                                                
     against  the production  tax levied  by AS 43.55.011(e)                                                                    
     is allowed  in an  amount equal to  five percent  of an                                                                    
     eligible  expenditure  under this  subsection  incurred                                                                    
     for seismic exploration  performed before July 1, 2003.                                                                    
     To be  eligible under  this subsection,  an expenditure                                                                    
     must                                                                                                                       
               (1)  have been for seismic exploration that                                                                      
                    (A)       obtained    data   that    the                                                                    
     commissioner of  natural resources  considers to  be in                                                                    
     the best  interest of the  state to acquire  for public                                                                    
     distribution; and                                                                                                          
                    (B)      was   conducted   outside   the                                                                    
     boundaries of  a production  unit; however,  the amount                                                                    
     of  the expenditure  that is  otherwise eligible  under                                                                    
     this section is reduced  proportionately by the portion                                                                    
     of the  seismic exploration activity that  crossed into                                                                    
     a production unit; and                                                                                                     
               (2)  qualify under (b)(3) of this section."                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, line 10:                                                                                                          
          Delete "Sections 6 - 9 and 20"                                                                                        
          Insert "Sections 6 - 9 and 22"                                                                                        
                                                                                                                                
     Page 16, line 12:                                                                                                          
          Delete "Section 19"                                                                                                   
          Insert "Section 21"                                                                                                   
                                                                                                                                
     Page 16, line 20:                                                                                                          
          Delete "Sections 11, 12, 14 - 18, 24, and 25(a)"                                                                      
          Insert "Sections 11, 12, 14 - 16, 19, 20, 26, and                                                                     
     27(a)"                                                                                                                     
                                                                                                                                
     Page 16, line 21:                                                                                                          
          Delete "Sections 6 - 9, 20, and 25(b)"                                                                                
          Insert "Sections 6 - 9, 22, and 27(b)"                                                                                
                                                                                                                                
     Page 16, line 22:                                                                                                          
          Delete "Sections 19 and 25(c)"                                                                                        
          Insert "Sections 21 and 27(c)"                                                                                        
                                                                                                                                
     Page 16, line 23:                                                                                                          
          Delete "secs. 27 - 29"                                                                                                
          Insert "secs. 29 - 31"                                                                                                
                                                                                                                                
REPRESENTATIVE P. WILSON objected for discussion.                                                                               
                                                                                                                                
CO-CHAIR SEATON explained that proposed  Amendment 4 extended the                                                               
production tax credit date from 2016 to 2021.                                                                                   
                                                                                                                                
1:48:40 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 1:48 p.m. to 1:50 p.m.                                                                       
                                                                                                                                
1:50:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  requested an  explanation of  proposed                                                               
Amendment 4.                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON explained that proposed  Amendment 4 would extend                                                               
the sunset date  for exploration tax credits by  five years, from                                                               
2016  to  2021, with  the  goal  of  enhancing exploration.    In                                                               
further response, he  confirmed that the only  change effected by                                                               
proposed Amendment 4  would be an addition of five  years for the                                                               
exploration tax credits.                                                                                                        
                                                                                                                                
REPRESENTATIVE P. WILSON removed her objection.                                                                                 
                                                                                                                                
1:52:28 PM                                                                                                                    
                                                                                                                                
ACTING COMMISSIONER BUTCHER, in response to Co-Chair Feige, said                                                                
that proposed Amendment 4 was "a policy call for the committee                                                                  
and the Department of Revenue is fine either way."                                                                              
                                                                                                                                
There being no further objection, Amendment 4 was adopted.                                                                      
                                                                                                                                
1:53:07 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
1:53:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON moved to adopt Amendment 5, labeled 27-                                                                         
GH1007\A.6, Mischel/Bullock, 2/23/11, which read:                                                                               
                                                                                                                                
     Page 16, line 8:                                                                                                           
          Delete "Sections 11, 12, 15, and 16"                                                                                  
          Insert "Sections 15 and 16"                                                                                           
                                                                                                                                
     Page 16, line 20:                                                                                                          
          Delete "Sections 11, 12, 14 - 18, 24, and 25(a)"                                                                      
          Insert "Sections 14 - 18, 24, and 25(a)"                                                                              
                                                                                                                                
     Page 16, following line 22:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec. 30. Sections 11 and 12 of this Act take                                                                       
     effect immediately under AS 01.10.070(c)."                                                                                 
                                                                                                                                
     Renumber the following bill section accordingly.                                                                           
                                                                                                                                
     Page 16, line 23:                                                                                                          
          Delete "secs. 27 - 29"                                                                                                
          Insert "secs. 27 - 30"                                                                                                
                                                                                                                                
REPRESENTATIVE P. WILSON objected for discussion.                                                                               
                                                                                                                                
CO-CHAIR SEATON explained that proposed Amendment 5 would modify                                                                
the refundable tax credits given to explorers and small                                                                         
producers to be immediately effective.                                                                                          
                                                                                                                                
1:56:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON asked whether this affected DOR.                                                                       
                                                                                                                                
ACTING COMMISSIONER BUTCHER said it was more difficult for DOR                                                                  
to administer tax credits in the middle of a year.  He suggested                                                                
making the date retroactive to January 1, 2011.                                                                                 
                                                                                                                                
CO-CHAIR  SEATON  moved  to  adopt   Conceptual  Amendment  1  to                                                               
Amendment 5,  which would change  the effective  date retroactive                                                               
to January 1, 2011.                                                                                                             
                                                                                                                                
There being no  objection, Conceptual Amendment 1  to Amendment 5                                                               
was approved.                                                                                                                   
                                                                                                                                
CO-CHAIR FEIGE asked for an  explanation of lines 1-3 of proposed                                                               
Amendment 5.                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON replied  that this  would reorder  the sections,                                                               
and move Sections  11 and 12 to  the new Section 30  of the bill,                                                               
making  them  effective  immediately.   He  said  there  were  no                                                               
substantive changes to the amounts of credit.                                                                                   
                                                                                                                                
1:58:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ  requested  an interpretation  of  proposed                                                               
Amendment 5  by an attorney  from Legislative Legal  and Research                                                               
Services.                                                                                                                       
                                                                                                                                
REPRESENTATIVE P. WILSON explained  that proposed Amendment 5 did                                                               
not  remove  Sections  11  and 12,  but  merely  reinserted  them                                                               
elsewhere.                                                                                                                      
                                                                                                                                
REPRESENTATIVE MUNOZ agreed to this interpretation.                                                                             
                                                                                                                                
CO-CHAIR  FEIGE restated  that proposed  Amendment  5 would  make                                                               
Sections 11 and 12 retroactive to January 1, 2011.                                                                              
                                                                                                                                
CO-CHAIR SEATON  confirmed, noting  that this  was only  the case                                                               
for the one tax credit.                                                                                                         
                                                                                                                                
2:00:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  understood that  proposed Amendment  5                                                               
would move  Sections 11 and 12  into Section 30 of  the bill, and                                                               
would change the effective date to  January 1, 2011.  She removed                                                               
her objection.                                                                                                                  
                                                                                                                                
CO-CHAIR FEIGE  moved to  adopt Amendment 5,  as amended.   There                                                               
being no objection, it was so ordered.                                                                                          
                                                                                                                                
2:01:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON moved to adopt Amendment 6, labeled 27-                                                                         
GH1007\A.19, Bullock, 2/23/11, which read:                                                                                      
                                                                                                                                
     Page 12, following line 5:                                                                                                 
          Insert new bill sections to read:                                                                                     
        "* Sec. 17. AS 43.55.025(a) is amended to read:                                                                     
          (a)  Subject to the terms and conditions of this                                                                      
     section, a credit against the  production tax levied by                                                                    
     AS 43.55.011(e)    is     allowed    for    exploration                                                                    
     expenditures that qualify under  (b) of this section in                                                                    
     an amount equal to one of the following:                                                                                   
               (1)   30  percent  of  the total  exploration                                                                    
     expenditures  that qualify  only under  (b) and  (c) of                                                                    
     this section;                                                                                                              
               (2)   30  percent  of  the total  exploration                                                                    
     expenditures  that qualify  only under  (b) and  (d) of                                                                    
     this section;                                                                                                              
               (3)   40  percent  of  the total  exploration                                                                    
     expenditures that  qualify under  (b), (c), and  (d) of                                                                    
     this section;                                                                                                              
               (4)   40  percent  of  the total  exploration                                                                    
     expenditures  that qualify  only under  (b) and  (e) of                                                                    
     this section; [OR]                                                                                                         
               (5)   80,  90, or  100 percent,  or a  lesser                                                                    
     amount described in  (l) of this section,  of the total                                                                    
     exploration  expenditures described  in (b)(1)  and (2)                                                                    
     of this section  and not excluded by (b)(3)  and (4) of                                                                    
     this  section  that  qualify only  under  (l)  of  this                                                                    
     section; or                                                                                                            
               (6)   30  percent  of  the total  exploration                                                                
     expenditures  that qualify  only under  (b) and  (n) of                                                                
     this section.                                                                                                          
        * Sec. 18.  AS 43.55.025 is amended by  adding a new                                                                  
     subsection to read:                                                                                                        
          (n)  To be eligible for the 30 percent production                                                                     
     tax  credit  authorized  by  (a)(6)  of  this  section,                                                                    
     exploration  expenditures must  be for  a well  drilled                                                                    
     north of 68 degrees North latitude that is                                                                                 
               (1)  outside of a unit; or                                                                                       
               (2)   within  a  unit  formed after  June 30,                                                                    
     2008,  and the  exploration  expenditures are  incurred                                                                    
     before the later  of the date that is  four years after                                                                    
     the date the                                                                                                               
                    (A)  unit is formed; or                                                                                     
                    (B)  first exploration well is drilled                                                                      
          on a lease or property that is within the unit."                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, line 8:                                                                                                           
          Delete "Sections 11, 12, 15, and 16"                                                                                  
          Insert "Sections 11, 12, and 15 - 18"                                                                                 
                                                                                                                                
     Page 16, line 10:                                                                                                          
          Delete "Sections 6 - 9 and 20"                                                                                        
          Insert "Sections 6 - 9 and 22"                                                                                        
                                                                                                                                
     Page 16, line 12:                                                                                                          
          Delete "Section 19"                                                                                                   
          Insert "Section 21"                                                                                                   
                                                                                                                                
     Page 16, line 20:                                                                                                          
          Delete "Sections 11, 12, 14 - 18, 24, and 25(a)"                                                                      
          Insert "Sections 11, 12, 14 - 20, 26, and 27(a)"                                                                      
                                                                                                                                
     Page 16, line 21:                                                                                                          
          Delete "Sections 6 - 9, 20, and 25(b)"                                                                                
          Insert "Sections 6 - 9, 22, and 27(b)"                                                                                
                                                                                                                                
     Page 16, line 22:                                                                                                          
          Delete "Sections 19 and 25(c)"                                                                                        
          Insert "Sections 21 and 27(c)"                                                                                        
                                                                                                                                
     Page 16, line 23:                                                                                                          
          Delete "secs. 27 - 29"                                                                                                
          Insert "secs. 29 - 31"                                                                                                
                                                                                                                                
REPRESENTATIVE P. WILSON objected for discussion.                                                                               
                                                                                                                                
2:02:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON noting  that the  exploration  tax credits  were                                                               
extended to  2021, directed  attention to the  Division of  Oil &                                                               
Gas drilling  technology handout [included in  members' packets].                                                               
He explained  that wells were previously  drilled vertically, but                                                               
that current technology  allows for lateral drilling.   He stated                                                               
that  the current  limitation on  exploration required  a minimum                                                               
three mile  distance from the  bottom of another well.   Proposed                                                               
Amendment  6  would  allow the  30  percent  exploration  credits                                                               
within  or  outside  a  unit,   and  would  remove  the  distance                                                               
requirement.   It would apply to  wells outside a unit  and wells                                                               
within a  unit for 4 years  after the first well  was drilled and                                                               
would  therefore  not create  a  permanent  obligation for  a  30                                                               
percent tax  credit.   He stated  that this  was an  incentive to                                                               
drill more  rapidly, to  stimulate production,  and to  not limit                                                               
proximate exploration.                                                                                                          
                                                                                                                                
2:06:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON read line  19 of proposed  Amendment 6:                                                               
"30 percent  of the total  exploration expenditures  that qualify                                                               
only under (b)...."  She asked to what (b) referred.                                                                            
                                                                                                                                
CO-CHAIR SEATON explained  that "(b) says you're  drilling a well                                                               
and it's not in a producing field."                                                                                             
                                                                                                                                
REPRESENTATIVE P. WILSON asked if it was in a unit.                                                                             
                                                                                                                                
CO-CHAIR SEATON replied  that it was not in a  producing field or                                                               
unit.                                                                                                                           
                                                                                                                                
2:07:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON, directing  attention  to  line 20  of                                                               
proposed Amendment 6, asked for an explanation of (n).                                                                          
                                                                                                                                
CO-CHAIR  SEATON  explained that  (n)  was  the new  Section  18,                                                               
starting on  line 21, which  stated that eligibility  was limited                                                               
to the North  Slope, north of 68 degrees, and  required a well to                                                               
be  outside a  unit, or  within a  unit formed  after June  [30],                                                               
2008.                                                                                                                           
                                                                                                                                
REPRESENTATIVE P.  WILSON understood it  was in a  currently non-                                                               
producing field, or on the North  Slope that is outside of a unit                                                               
or within a unit formed after June [30], 2008.                                                                                  
                                                                                                                                
CO-CHAIR  SEATON  replied  correct.    He  elaborated  that  this                                                               
eliminated the requirement for spacing and distance.                                                                            
                                                                                                                                
2:09:08 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:09 p.m. to 2:13 p.m.                                                                       
                                                                                                                                
2:13:20 PM                                                                                                                    
                                                                                                                                
ACTING COMMISSIONER BUTCHER, in  response to Co-Chair Feige, said                                                               
DOR and DNR were comfortable with proposed Amendment 6.                                                                         
                                                                                                                                
REPRESENTATIVE P. WILSON  removed her objection.   There being no                                                               
further objection, Amendment 6 was adopted.                                                                                     
                                                                                                                                
2:14:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON moved to adopt Amendment 7, labeled 27-                                                                
GH1007\A.38, Bullock, 2/25/11, which read:                                                                                      
                                                                                                                                
     Page 1, line 7, following "values;":                                                                                     
          Insert "relating to the disclosure of certain tax                                                                   
     information;"                                                                                                            
                                                                                                                                
     Page 15, following line 15:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec. 21. AS 43.55.890 is amended to read:                                                                        
               Sec.    43.55.890.    Disclosure    of    tax                                                                  
          information.    Notwithstanding    any    contrary                                                                  
          provision of AS 40.25.100, and regardless of                                                                          
          whether the information is considered under                                                                           
          AS 43.05.230(e)    to     constitute    statistics                                                                    
          classified to prevent the identification of                                                                           
          particular returns or reports, the department may                                                                     
          publish the following information under this                                                                          
          chapter, if aggregated among three or more                                                                            
          producers or explorers, showing, by month or                                                                      
          calendar year and by lease or property, unit, or                                                                      
          area of the state:                                                                                                    
               (1)  the amount of oil or gas production;                                                                        
               (2)   the amount  of taxes levied  under this                                                                    
          chapter or paid under this chapter;                                                                                   
               (3)    the  effective tax  rates  under  this                                                                    
          chapter;                                                                                                              
               (4)   the gross  value of oil  or gas  at the                                                                    
          point of production;                                                                                                  
               (5)   the  transportation  costs  for oil  or                                                                    
          gas;                                                                                                                  
               (6)    qualified   capital  expenditures,  as                                                                    
          defined in AS 43.55.023;                                                                                              
               (7)       exploration    expenditures   under                                                                    
          AS 43.55.025;                                                                                                         
               (8)   production  tax values  of  oil or  gas                                                                    
          under AS 43.55.160;                                                                                                   
               (9)  lease expenditures under AS 43.55.165;                                                                      
               (10)    adjustments   to  lease  expenditures                                                                    
          under AS 43.55.170;                                                                                                   
               (11)   tax credits applicable  or potentially                                                                    
          applicable against taxes levied by this chapter;                                                                  
     the  information relating  to  tax  credits under  this                                                                
     paragraph, to  the extent the information  is available                                                                
     to   the  department,   must   include  the   statutory                                                                
     authority for each type of  credit taken, the amount of                                                                
     credits  taken under  each  statute  authorizing a  tax                                                                
     credit, and  whether the credit  is for  an expenditure                                                                
     related  to oil  or  gas  exploration, development,  or                                                                
     production,   including   the    drilling   of   wells;                                                                
     performing   work   on   existing   wells;   conducting                                                                
     geological   or  geophysical   exploration;  acquiring,                                                                
     constructing,   or   installing   new   facilities   or                                                                
     equipment;  and  maintaining, repairing,  or  replacing                                                                
     existing facilities or equipment."                                                                                     
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, following line 19:                                                                                                
          Insert a new bill section to read:                                                                                    
        "*  Sec. 28.  Section 21  of this  Act takes  effect                                                                
     immediately under AS 01.10.070(c)."                                                                                        
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, line 20:                                                                                                          
          Delete "Sections 11, 12, 14 - 18, 24, and 25(a)"                                                                      
          Insert "Sections 11, 12, 14 - 18, 25, and 26(a)"                                                                      
                                                                                                                                
     Page 16, line 21:                                                                                                          
          Delete "Sections 6 - 9, 20, and 25(b)"                                                                                
          Insert "Sections 6 - 9, 20, and 26(b)"                                                                                
                                                                                                                                
     Page 16, line 22:                                                                                                          
          Delete "Sections 19 and 25(c)"                                                                                        
          Insert "Sections 19 and 26(c)"                                                                                        
                                                                                                                                
     Page 16, line 23:                                                                                                          
          Delete "secs. 27 - 29"                                                                                                
          Insert "secs. 28 - 31"                                                                                                
                                                                                                                                
CO-CHAIR SEATON objected for discussion.                                                                                        
                                                                                                                                
2:14:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON pointed out  that Alaska statute did not                                                               
allow  state auditors  to share  financial  information with  the                                                               
legislature.  She  noted that this tax credit  information had to                                                               
include the  statutory authority for  each type of  credit taken.                                                               
She read from page 2, lines  2-10, of proposed Amendment 7:  "the                                                               
amount  of credits  taken under  each statute  authorizing a  tax                                                               
credit, and whether  the credit is for an  expenditure related to                                                               
oil or gas exploration, development,  or production including the                                                               
drilling of wells; performing work  on existing wells; conducting                                                               
geological or  geophysical exploration;  acquiring, constructing,                                                               
or  installing  new  facilities or  equipment;  and  maintaining,                                                               
repairing, or  replacing existing facilities or  equipment."  She                                                               
opined  that this  would reveal  how the  tax credits  were being                                                               
used.                                                                                                                           
                                                                                                                                
2:18:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  presumed the intention  of proposed  Amendment 7                                                               
was for different  categories of information and  did not require                                                               
that the information be aggregated.                                                                                             
                                                                                                                                
REPRESENTATIVE P.  WILSON replied that  her desire was  to ensure                                                               
that this did not include any proprietary information.                                                                          
                                                                                                                                
2:20:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.   WILSON,  in  response  to   Co-Chair  Feige,                                                               
confirmed  that aggregating  the  information  would destroy  the                                                               
individuality   of  that   information,  but   would  allow   the                                                               
legislature to know what the credits  were taken for.  In further                                                               
response, she  confirmed that it  would allow the  legislature to                                                               
know the information as it applies to the credit as a whole.                                                                    
                                                                                                                                
CO-CHAIR  SEATON said  he  would like  to  hear from  Legislative                                                               
Legal and Research  Services to ensure that  proposed Amendment 7                                                               
would fully accomplish the intention.                                                                                           
                                                                                                                                
2:21:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE  referred  to  page   2,  line  16,  of  proposed                                                               
Amendment 7 and asked about the best effective date.                                                                            
                                                                                                                                
ACTING COMMISSIONER BUTCHER deferred to the DOR auditor.                                                                        
                                                                                                                                
2:22:35 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:22 p.m. to 2:24 p.m.                                                                       
                                                                                                                                
2:24:09 PM                                                                                                                    
                                                                                                                                
ACTING  COMMISSIONER   BUTCHER  related  that  the   DOR  auditor                                                               
suggested  an effective  date of  January  1, 2012,  as it  would                                                               
require new regulations be written.                                                                                             
                                                                                                                                
REPRESENTATIVE P.  WILSON said her understanding  from talks with                                                               
DOR   auditors  was   that  the   department  already   has  this                                                               
information.   Her intention was for  the legislature's immediate                                                               
receipt of this information for use in times like this.                                                                         
                                                                                                                                
ACTING  COMMISSIONER BUTCHER  replied it  would not  make a  huge                                                               
difference either way  because it was still necessary  for DOR to                                                               
write regulations for the bill and its amendments.                                                                              
                                                                                                                                
REPRESENTATIVE P.  WILSON said she  was hesitant to  postpone the                                                               
effective date.                                                                                                                 
                                                                                                                                
2:26:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON asked  whether  there were  any regulations  for                                                               
information which was already being reported to the legislature.                                                                
                                                                                                                                
ACTING  COMMISSIONER BUTCHER  replied  that DOR  did receive  the                                                               
information, but it was  not in a form that would  allow it to be                                                               
reported to the legislature.                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON  understood   that  DOR  had  recently                                                               
revised the  forms on which  the producers report.   She surmised                                                               
these  new  forms  could  be   used  to  gather  the  information                                                               
requested by the legislature.                                                                                                   
                                                                                                                                
ACTING COMMISSIONER BUTCHER offered his agreement.                                                                              
                                                                                                                                
2:27:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON asked whether  the effective date change                                                               
was still necessary.                                                                                                            
                                                                                                                                
LENNIE DEES, Audit Master, Production  Audit Group, Tax Division,                                                               
Department of Revenue, replied that  DOR did request information,                                                               
but it  was summarized, with  expenditures by region, and  it was                                                               
not presented in  the categories listed in  proposed Amendment 7.                                                               
He opined  that it  would be necessary  to define  the categories                                                               
through regulations.                                                                                                            
                                                                                                                                
2:28:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON surmised  that  DOR  does not  require                                                               
taxpayers to specify what the tax credit was spent on.                                                                          
                                                                                                                                
MR.  DEES  replied  that  only the  total  amount  was  submitted                                                               
annually on the March 31 true-up for the preceding year.                                                                        
                                                                                                                                
REPRESENTATIVE P. WILSON  stated that by all means  she wants DOR                                                               
to be able  to [require taxpayers to specify what  the tax credit                                                               
was spent  on] so in the  future the legislature can  see whether                                                               
the credits went to where the legislature intended.                                                                             
                                                                                                                                
2:28:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.   WILSON  moved  Conceptual  Amendment   1  to                                                               
Amendment 7, which would state:                                                                                                 
                                                                                                                                
     Page 2, line 16:                                                                                                           
          Delete "immediately"                                                                                              
          Insert "January 1, 2012"                                                                                          
                                                                                                                                
There being no  objection, Conceptual Amendment 1  to Amendment 7                                                               
was adopted.                                                                                                                    
                                                                                                                                
2:29:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON   requested  clarification  of   the  categories                                                               
included on page 2, [lines 5-10], of Amendment 7.                                                                               
                                                                                                                                
DONALD   BULLOCK  JR.,   Attorney,  Legislative   Legal  Counsel,                                                               
Legislative  Legal  and  Research Services,  Legislative  Affairs                                                               
Agency,  explained that  the semicolons  separated the  groups of                                                               
similar types of  expenditures.  So, what is  separated by commas                                                               
within  a semicolon  is one  group of  expenditures.   In further                                                               
response, he said  that oil and gas  exploration, production, and                                                               
development  included  all  the  well work,  and  were  types  of                                                               
expenditures in this category.                                                                                                  
                                                                                                                                
2:32:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON asked whether this was a reporting category.                                                                    
                                                                                                                                
MR. BULLOCK pointed out that  this section, AS 43.55.890, did not                                                               
impose  any obligation  on taxpayers  to report  information, but                                                               
rather  stated  the  information  which DOR  had  that  could  be                                                               
published.    He acknowledged  that  there  was some  information                                                               
which was required by statute to be submitted.                                                                                  
                                                                                                                                
2:33:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  opined that the problem  was determining capital                                                               
expenditures and how  much was used for maintenance  and how much                                                               
is used in  the drilling of wells.  He  understood Mr. Bullock to                                                               
be saying  that, statutorily, Alaska  did not require  a separate                                                               
reporting for maintenance and for well drilling.                                                                                
                                                                                                                                
MR.  BULLOCK  explained  that  each  [tax]  credit  had  specific                                                               
requirements  under statute,  and it  was incumbent  upon DOR  to                                                               
determine that  the money  was spent  for the  appropriate thing.                                                               
He  noted that  DOR could  supplement the  statutory requirements                                                               
with    additional    reasonable   information    requests    and                                                               
requirements.    He  pointed  out  the  necessity  for  initially                                                               
receiving as much information as  possible to the amount of audit                                                               
time later.                                                                                                                     
                                                                                                                                
2:35:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON  offered  his  belief that  DOR  was  unable  to                                                               
discriminate  between the  capital  expenditures for  maintenance                                                               
and capital  expenditures for well  drilling and production.   He                                                               
pointed  out that  the reason  for  proposed Amendment  7 was  to                                                               
delineate  more  discreet  categories   of  expenses,  and  asked                                                               
whether the proposed amendment's wording would accomplish this.                                                                 
                                                                                                                                
MR.  BULLOCK   replied  that  proposed  Amendment   7  would  not                                                               
specifically accomplish  this.   He suggested  that DOR  be asked                                                               
whether  it was  getting  this information.    He explained  that                                                               
taxpayers had  to account for  these expenses  during application                                                               
for the tax credit so DOR would have this information.                                                                          
                                                                                                                                
REPRESENTATIVE P. WILSON asked that Mr. Dees return to testify.                                                                 
                                                                                                                                
MR.  BULLOCK clarified  that existing  law  only specified  which                                                               
information  on hand  could be  published.   The requirement  for                                                               
what  information  must be  provided  by  the taxpayer  would  be                                                               
elsewhere.                                                                                                                      
                                                                                                                                
2:37:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON  explained that the DOR  response to her                                                               
request for information  was that the department  could not share                                                               
the information.   She asked  whether proposed Amendment  7 would                                                               
now allow this information to be shared with the legislature.                                                                   
                                                                                                                                
MR. DEES offered  his belief that the  amended AS.43.55.890 would                                                               
allow  DOR   to  distribute  the   information  for   the  listed                                                               
categories.  He explained that there  were two ways for a company                                                               
to  acquire [tax]  credits:   one  was  to apply  to  DOR and  to                                                               
provide   detailed  expenditure   information  for   the  credit.                                                               
However,  for  a company  taking  the  expenditures off  its  tax                                                               
liability, DOR only  required that the company  report the amount                                                               
of the capital expenditures and  the amount of credit the company                                                               
was using, without the detail  of the expenditures.  He explained                                                               
that the details  were not forthcoming until an audit  of the tax                                                               
filings.   The changes in  AS 43.55.890, coupled with  changes in                                                               
other  regulations,   would  allow   for  more  details   on  the                                                               
expenditures.   The  future  effective date  for  the bill  would                                                               
allow DOR to determine the  categories, and the activities within                                                               
each  category,  to  be  reported.     This  would  provide  more                                                               
expenditure detail prior to an audit.                                                                                           
                                                                                                                                
2:42:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  asked  if proposed  Amendment 7  would                                                               
allow  DOR  to  develop  a  form  which  provided  the  necessary                                                               
information for the legislature.                                                                                                
                                                                                                                                
MR. DEES replied that this would be the goal.                                                                                   
                                                                                                                                
CO-CHAIR  SEATON  asked  whether a  reporting  requirement  would                                                               
accomplish  the goal  of requiring  companies to  submit detailed                                                               
information by specific category.                                                                                               
                                                                                                                                
MR. DEES offered  his belief that DOR,  through existing statute,                                                               
had the authority to require this information.                                                                                  
                                                                                                                                
2:45:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON  surmised  that   although  the  state  had  the                                                               
authority, it  had not required  these details for  past reports,                                                               
and  it  would   now  be  able  to   distribute  this  aggregated                                                               
information in each category to the legislature.                                                                                
                                                                                                                                
MR. DEES responded that that was his belief.                                                                                    
                                                                                                                                
ACTING  COMMISSIONER   BUTCHER  added   that  according   to  the                                                               
Department of  Law (DOL),  DOR had the  authority to  collect the                                                               
information being discussed, and DOR intended to do so.                                                                         
                                                                                                                                
2:46:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE  asked  if  proposed   Amendment  7  would  place                                                               
additional reporting requirements on the taxpayers.                                                                             
                                                                                                                                
ACTING COMMISSIONER  BUTCHER reported that under  current statute                                                               
DOR could gather  this information, although it had  not done so.                                                               
He noted that proposed Amendment  7 pertained to the reporting of                                                               
information, and allowed this.                                                                                                  
                                                                                                                                
CO-CHAIR FEIGE asked what additional  requirements were placed on                                                               
the taxpayers.                                                                                                                  
                                                                                                                                
ACTING  COMMISSIONER BUTCHER  replied that  DOR did  not consider                                                               
this to  be an  onerous amount  of work  as this  information was                                                               
already reported and  was made available during the  audit.  This                                                               
information would  be provided to the  legislature under proposed                                                               
Amendment 7.                                                                                                                    
                                                                                                                                
2:47:59 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  asked whether this information  could be released                                                               
prior to the audit.                                                                                                             
                                                                                                                                
ACTING COMMISSIONER BUTCHER responded  that the information could                                                               
be  released before  the audit.   He  said the  issue here  was a                                                               
matter of timing and  getting an idea of what was  going on as it                                                               
was going  on or soon  after, as  opposed to waiting  three years                                                               
for  the  audits  to  be  finished.    In  further  response,  he                                                               
concurred  that proposed  Amendment  7 would  facilitate a  rapid                                                               
dispersal of information to the legislature.                                                                                    
                                                                                                                                
CO-CHAIR  SEATON understood  Acting  Commissioner  Butcher to  be                                                               
saying that when a taxpayer  completes its monthly application of                                                               
capital credits  against its  taxes, those will  be put  into the                                                               
categories and  reported to DOR at  the time the credit  is taken                                                               
on the company's taxes.                                                                                                         
                                                                                                                                
ACTING  COMMISSIONER  BUTCHER  said   [the  department]  has  not                                                               
discussed in  detail whether  it would  be monthly  or quarterly,                                                               
but it would be something in that general area.                                                                                 
                                                                                                                                
2:50:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  asked  whether,  given the  discussion                                                               
here and  the current statutes,  this would be  accomplished with                                                               
proposed Amendment 7.                                                                                                           
                                                                                                                                
MR. BULLOCK  answered he believes  legislators can get  the facts                                                               
to see  what the expenditures  were for because the  statutes say                                                               
that  to  qualify for  an  expenditure  the  taxpayer must  do  a                                                               
certain  thing  and   the  taxpayer  must  be   able  to  provide                                                               
documentation if  challenged.  This  same thing would apply  to a                                                               
company  taking   a  credit   for  a   well-related  expenditure.                                                               
However,  what   legislators  will  not  know   is  whether  that                                                               
expenditure  would  have been  incurred  without  the credit,  so                                                               
legislators  will  never  really  know whether  giving  a  credit                                                               
actually caused the activity.                                                                                                   
                                                                                                                                
2:51:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON  opined that  having  the  information                                                               
would still make analysis easier.                                                                                               
                                                                                                                                
MR. BULLOCK offered his agreement.                                                                                              
                                                                                                                                
CO-CHAIR SEATON  removed his objection  to proposed  Amendment 7.                                                               
There being  no further objection,  Amendment 7, as  amended, was                                                               
adopted.                                                                                                                        
                                                                                                                                
2:53:20 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
2:54:29 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON pointed  out that DNR was working  on the request                                                               
for applicable data  similar to DOR.  He said  work on additional                                                               
amendments  would   be  ongoing   with  Mr.  Bullock   and  those                                                               
amendments would be distributed as soon as available.                                                                           
                                                                                                                                
[HB 110 was held over.]